T h i s d o c u m e n t i s s c h e d u l e d t o b e p u b l i s h e d i n t h e F e d e r a l R e g i s t e r o n 1 1 / 1 0 / 2 0 1 4 a n d a v a i l a b l e o n l i n e a t h t t p : / / f e d e r a l r e g i s t e r . g o v / a / 2 0 1 4 - 2 6 1 4 6 , a n d o n F D s y s . g o vCMS-1613-FC 2

In this document, we also are making changes to the data sources permitted for expansion requests for physician-owned hos pitals under the physician self-referral regulations; changes to the underlying aut hority for the requirement of an admission order for all hospital inpatient admissions a nd changes to require physician certification for hospital inpatient admissions only for long- stay cases and outlier cases; and changes to establish a formal process, including a three-level appeals process, to recoup overpayments that result from the submissi on of erroneous payment data by Medicare Advantage (MA) organizations and Part D s ponsors in the limited circumstances in which the organization or sponsor fa ils to correct these data.

DATES : Effective Date: This final rule with comment period is effective on January 1, 2015.

Comment Period: To be assured consideration, comments on the payment classifications assigned to HCPCS codes iden tified in Addenda B, AA, and BB to this final rule with comment period with the “NI” comment indicator, and on other areas specified throughout this final rule with comm ent period must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on [Insert date 60 days after date of display for public in spection by the Offi ce of the Federal Register]. Application Deadline—New Class of New Technology Intraocular Lenses: Requests for review of applications for a ne w class of new technology intraocular lenses must be received by 5 p.m. EST on Marc h 2, 2015, at the following address: ASC/NTIOL, Division of Outp atient Care, Mailstop C4-05- 17, Centers for Medicare and Medicaid Services, 7500 SecurityBoulevard, Baltimore, MD 21244-1850.CMS-1613-FC 3

ADDRESSES: In commenting, please refer to file code CMS-1613-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (no duplicates, please): 1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov

. Follow the instructions

under the “submit a comment” tab. 2. By regular mail. You may mail wr itten comments to the following address

ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1613-FC, P.O. Box 8013, Baltimore, MD 21244-1850.

Please allow sufficient time for mailed co mments 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-1613-FC, Mail Stop C4-26-05, 7500 Security Boulevard,CMS-1613-FC 4

Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your

written comments before the close of the comment period to either of the following

addresses: a. For delivery in Washington, DC—

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, S.W., Washington, DC 20201. (Because access to the interior of the H ubert H. Humphrey Building is not readily available to persons without Federal G overnment 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 fo r persons wishing to re tain 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.CMS-1613-FC 5

Comments mailed to the addresses indicat ed as appropriate for hand or courier delivery may be delayed and rece ived after the comment period. For information on viewing public comments, we refer readers to the beginning of

the “ SUPPLEMENTARY INFORMATION ” section. FOR FURTHER INFORMATION, CONTACT: Marjorie Baldo, (410) 786-4617, for issu es related to new CPT and Level II HCPCS codes, revised process for soliciting comments related to new Category I and III CPT codes, and exceptions to the 2 times rule. Elizabeth Bainger, (410) 786-0529, for issu es related to the Hospital Outpatient Quality Reporting - Program Administrati on, Validation, and Reconsideration Issues. Anita Bhatia, (410) 786-7236, for issues related to the Ambulatory Surgical Center Quality Reporting (ASCQR) Pr ogram – Program Administration and

Reconsideration Issues. Chuck Braver, (410) 786-9379, for issues related to the CMS Web posting of the OPPS and ASC payment files. Anne Calinger, (410) 786-3396, for issues related to Medicare Advantage (MA) organizations and Medicare Pa rt D sponsor overpayments. Elisabeth Daniel, (410) 786-0237, for issues related to OPPS drugs, radiopharmaceuticals, biologica ls, blood clotting factors, p ackaged items/services, and brachytherapy sources payment

. Dexter Dickey, (410) 78 6-6856, or Dorothy Myrick, (410) 786-9671, for issues related to partial hospitalization and commun ity mental health center (CMHC) issues.CMS-1613-FC 6

Eva Fung, (410) 786-7539, or Vinitha Me yyur, (410) 786-8819, for issues related to Hospital OQR Program and ASCQR measures issues and publication of Hospital OQR Program data issues. Twi Jackson, (410) 786-1159, for issues related to device-dependent APCs, composite APCs (extended assessment and management, low dose brachytherapy, multiple imaging), hospital outpatient visits, inpatient procedures list, and no cost/full credit and partial credit devices. Marina Kushnirova, (410) 786-2682, for i ssues related to OPPS status indicators

and comment indicators. John McInnes, (410) 786-0791, for issues related to new technology intraocular lenses (NTIOLs). Esther Markowitz, (410) 786-4595, for issues related to comprehensive APCs and ambulatory surgical center (ASC) payments. David Rice, (410) 786-6004, for issues related to APC wei ghts, blood and blood products, cancer hospital payments, conversion f actor, copayments, cost-to-charge ratios (CCRs), data claims, geometric mean calculati on, off-campus provide r-based issues, rural hospital payments, outlier payments, and wage index. Daniel Schroder, (410) 786-4487, for issues related to physiciancertification of hospital inpatient services. Carol Schwartz, (410) 786-0576, for issu es related to the Advisory Panel on Hospital Outpatient Payment (HOP Panel) and OPPS pass-through devices.CMS-1613-FC 7

Teresa Walden, (410) 786-3755, or Patr icia Taft, (410) 786-4561, for issues related to the physician self -referral law/physician-owned hospital expansion exception

process. Marjorie Baldo, (410) 786-4617, for all othe r issues related to hospital outpatient and ambulatory surgical center paym ents not previously identified.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comm ents received before the close of the comment period are available for viewi ng by the public, including any personally

identifiable or confidential business informa tion 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 th ey have been received: http://www.regulations.gov. Follow

the search instructions on that We b site to view public comments. Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publicati on 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 appoint ment 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 Sy stem (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/

.CMS-1613-FC 8

Addenda Available Only Through th e Internet on the CMS Web Site In the past, a majority of the Addenda referred to in our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 OPPS/AS C proposed rule, all of the Addenda no longer appear in the Federal Register as part of the annua l OPPS/ASC proposed and

final rules to decrease admi nistrative burden and reduce cost s associated with publishing lengthy tables. Instead, these Addenda are published and available only on the CMS Web site. The Addenda relating to the OPPS are available at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The Addenda relating to the ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/index.html

. Alphabetical List of Acronyms Appearin g in This Federal Register Document AHA American Hospital Association

AMA American Medical Association AMI Acute myocardial infarction APC Ambulatory Payment Classification ASC Ambulatory surgical center ASCQR Ambulatory Surgical Center Quality Reporting ASP Average sales price AWP Average wholesale price BBA Balanced Budget Act of 1997, Pub. L. 105-33CMS-1613-FC 9

BBRA Medicare, Medicaid, and SCHIP [S tate Children's Health Insurance Program] Balanced Budget Refi nement Act of 1999, Pub. L. 106-113 BIPA Medicare, Medicai d, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 106-554

BLS Bureau of Labor Statistics CAH Critical access hospital

CAHPS Consumer Assessment of H ealthcare Providers and Systems CAP Competitive Acquisition Program C-APC Comprehensive Ambulatory Payment Classification CASPER Certification and SurveyProvider 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 CED Coverage with Evidence Development CERT Comprehensive Error Rate Testing CFR Code of Federal Regulations

CI Comment indicator CLABSI Central Line [Catheter] Associated Blood Stream Infection CLFS Clinical Laboratory Fee Schedule CMHC Community mental health center

CMS Centers for Medicare & Medicaid ServicesCMS-1613-FC 10

CoP Condition of participation

CPI-U Consumer Price Inde x for All Urban Consumers CPT Current Procedural Terminology (c opyrighted by the American Medical Association) CR Change request

CRC Colorectal cancer CSAC Consensus Standards Approval Committee CT Computed tomography

CV Coefficient of variation CY Calendar year DFO Designated Federal Official

DIR Direct or indi rect remuneration DME Durable medical equipment DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and Supplies DRA Deficit Reduction Act of 2005, Pub. L. 109-171 DSH Disproportionate share hospital EACH Essential access community hospital EAM Extended assessment and management ECG Electrocardiogram ED Emergency department E/M Evaluation and management

EHR Electronic health record ESRD End-stage renal diseaseCMS-1613-FC 11

ESRD QIP End-Stage Renal Disease Quality Improvement Program FACA Federal Advisory Committee Act, Pub. L. 92-463 FDA Food and Drug Administration FFS [Medicare] Fee-for-service FY Fiscal year GAO Government Accountability Office

GI Gastrointestinal

HAI Healthcare-associated infection HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

HCERA Health Care and Education R econciliation Act of 2010, Pub. L. 111-152 HCP Health care personnel

HCPCS Healthcare Common Procedure Coding System HCRIS Healthcare Cost Report Information System HCUP Healthcare Cost and Utilization Project HH QRP Home Health Quality Reporting Program HHS Department of Health and Human Services HIE Health information exchange HEU Highly enriched uranium

HIPAA Health Insurance Portabi lity and Accountability Act of 1996,

Pub. L. 104-191 HOP Hospital Outpatient Payment [Panel] HOPD Hospital outpatient department HOP QDRP Hospital Outpatient Quality Data Reporting ProgramCMS-1613-FC 12

HPMS Health Plan Management System IBD Inflammatory bowel disease

ICC Interclass correlation coefficient ICD Implantable cardioverter defibrillator

ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical

Modification ICH In-center hemodialysis IDTF Independent diagnostic testing facility IGI IHS Global Insight, Inc.

IHS Indian Health Service I/OCE Integrated Outpatient Code Editor

IOL Intraocular lens IORT Intraoperative radiation treatment IPFQR Inpatient Psychiatric Facility Quality Reporting IPPS [Hospital] Inpatient Prospective Payment System IQR [Hospital] Inpatient Quality Reporting IRF Inpatient rehabilitation facility IRF QRP Inpatient Rehabilitati on Facility Quality Reporting IT Information technology LCD Local coverage determination

LDR Low dose rate LTCH Long-term care hospital LTCHQR Long-Term Care Hospital Quality ReportingCMS-1613-FC 13

MAC Medicare Administrative Contractor MAP Measure Application Partnership MedPAC Medicare Payment Advisory Commission MEG Magnetoencephalography MFP Multifactor productivity MGCRB Medicare Geographic Cl assification Review Board MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432 MIPPA Medicare Improvements for Patients and Providers Act of 2008,

Pub. L. 110-275

MLR Medical loss ratio MMA Medicare Prescription Drug, Impr ovement, and Modernization Act of 2003, Pub. L. 108-173

MMEA Medicare and Medicaid Ex tenders Act of 2010, Pub. L. 111-309 MMSEA Medicare, Medicaid, and SCHI P Extension Act of 2007, Pub. L. 110-173 MPFS Medicare Phys ician Fee Schedule

MR Medical review MRA Magnetic resonance angiography MRgFUS Magnetic Resonance Im age Guided Focused Ultrasound MRI Magnetic resonance imaging MRSA Methicillin-Resistant Staphylococcus Aures MS-DRG Medicare severity diagnosis-related group MSIS Medicaid Statistical Information SystemCMS-1613-FC 14

MUC Measure under consideration NCCI National Correct Coding Initiative NDC National Drug Code NHSN National Healthcare Safety Network NOS Not otherwise specified NPWT Negative Pressure Wound Therapy NPI National provider identification NQF National Quality Forum NQS National Quality Strategy NTIOL New technology intraocular lens NUBC National Uniform Billing Committee OACT [CMS] Office of the Actuary OBRA Omnibus Budget Reconcili ation Act of 1996, Pub. L. 99-509 OIG [HHS] Office of the Inspector General OMB Office of Management and Budget

ONC Office of the National Coordinato r for Health Information Technology OPD [Hospital] Outpatient Department OPO Organ Procurement Organization OPPS [Hospital] Outpatient Prospective Payment System OPSF Outpatient Provider-Specific File OQR [Hospital] Outpatient Quality Reporting OT Occupational therapy PBD Provider-Based DepartmentCMS-1613-FC 15

PCHQR PPS-Exempt Cancer Hospital Quality Reporting PCR Payment-to-cost ratio PDE Prescription Drug Event PE Practice expense PEPPER Program Evaluation Paym ent Patterns Electronic Report PHP Partial hospitalization program PHSA Public Health Service Act, Pub. L. 96-88 PMA Premarket approval

PN Pneumonia

POS Place of service

PPI Producer Price Index PPS Prospective payment system PQRI Physician Quality Reporting Initiative PQRS Physician Quality Reporting System QDC Quality data code QIO Quality Improvement Organization RAC Recovery Audit Contractor RADV Risk Adjustment Data Validation RFA Regulatory Flexibility Act RHQDAPU Reporting Hospital Quality Data for Annual Payment Update RTI Research Triangle In stitute, International

RVU Relative value unit SAMS Secure Access Management ServicesCMS-1613-FC 16

SCH Sole community hospital SCOD Specified covered outpatient drugs

SES Socioeconomic status

SI Status indicator

SIR Standardized infection ratio SNF Skilled nursing facility SRS Stereotactic radiosurgery SSA Social Security Administration SSI Surgical site infection TEP Technical Expert Panel TIP Transprostatic implant procedure TMS Transcranial Magnetic Stimulation [Therapy] TOPs Transitional Outpatient Payments

USPSTF United States Preventive Services Task Force VBP Value-based purchasing WAC Wholesale acquisition cost

Table of Contents I. Summary and Background A. Executive Summary of This Document 1. Purpose 2. Summary of the Major Provisions 3. Summary of Costs and Benefits B. Legislative and Regulator y Authority for the Hospital OPPSCMS-1613-FC 17

C. Excluded OPPS Services and Hospitals D. Prior Rulemaking E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel) 1. Authority of the Panel

2. Establishment of the Panel 3. Panel Meetings and Organizational Structure

F. Public Comments Received on the CY 2015 OPPS/AS C Proposed Rule

G. Public Comments Received on the CY 2014 OPPS/ASC Final Rule with

Comment Period II. Updates Affecting OPPS Payments A. Recalibration of APC Relative Payment Weights

1. Database Construction a. Database Source and Methodology b. Use of Single and Multiple Procedure Claims

c. Calculation and Use of Cost-to-Charge Ratios (CCRs) 2. Data Development Process and Calculation of Costs Used for Ratesetting a. Claims Preparation b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims (1) Splitting Claims (2) Creation of “Pseudo” Single Procedure Claims c. Completion of Claim Records an d Geometric Mean Cost Calculations (1) General Process (2) Recommendations of the Pa nel Regarding Data DevelopmentCMS-1613-FC 18

d. Calculation of Single Pro cedure APC Criteria-Based Costs (1) Device-Dependent APCs (2) Blood and Blood Products (3) Brachytherapy Source Payment e. Establishment of Comprehensive APCs (1) Background (2) CY 2015 Policy for C-APCs (3) Public Comments (4) Statement of Final Policy and List of CY 2015 C-APCs f. Calculation of Compos ite APC Criteria-Based Costs (1) Extended Assessment and Mana gement Composite APCs (APC 8009) (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) (3) Mental Health Services Composite APC (APC 0034) (4) Multiple Imaging Compos ite APCs (APCs 8004, 8005, 8006, 8007, and 8008) 3. Changes to Packaged Items and Services a. Background and Rationale for Packaging in the OPPS b. Revision of a Packaging Policy Established in CY 2014—Procedures Described by Add-On Codes c. Packaging Policies for CY 2015 (1) Ancillary Services (2) Prosthetic Supplies 4. Calculation of OPPS Scaled Payment WeightsCMS-1613-FC 19

B. Conversion Factor Update C. Wage Index Changes D. Statewide Average Default CCRs E. Adjustment for Rural SCHs and EA CHs under Section 1833(t)(13)(B) of the

Act F. OPPS Payment to Certain Can cer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act 1. Background 2. Payment Adjustment for Certain Cancer Hospitals for CY 2015 G. Hospital Outpatient Outlier Payments 1. Background

2. Outlier Calculation

3. Final Outlier Calculation H. Calculation of an Adjusted Medicare Payment from the National Unadjusted Medicare Payment I. Beneficiary Copayments 1. Background 2. OPPS Copayment Policy 3. Calculation of an Adjusted Copayment Amount for an APC Group III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. OPPS Treatment of New CPT and Level II HCPCS CodesCMS-1613-FC 20

1. Treatment of New CY 2014 Level II HCPCS and CPT Codes Effective April 1, 2014 and July 1, 2014 for Which We Solicited Public Comments in the CY 2015 OPPS/ASC Proposed Rule

2. Process for New Level II HCPCS Codes That Will Be Effective October 1, 2014 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2015 for Which We Are Solici ting Public Comments in this CY 2015

OPPS/ASC Final Rule w ith Comment Period 3. Process for Soliciting Public Comments for New and Revised CPT Codes Released by the AMA a. Current Process for Accepting Co mments on New and Revised CPT Codes for

a Year

b. Modification of Process for New a nd Revised CPT Codes That Are Effective January 1 B. OPPS Changes--Variations within APCs 1. Background 2. Application of the 2 Times Rule 3. Exceptions to the 2 Times Rule C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Se rvices: Cardiac Telemetry (APC 0213) 2. Gastrointestinal (GI) Services : Upper GI Procedures (APCs 0142, 0361, 0419, and 0422) 3. Genitourinary Services a. Gynecologic Procedures (APCs 0188, 0189, 0192, 0193, and 0202)CMS-1613-FC 21

b. Cystourethroscopy, Transprostat ic Implant Procedures, and Other Genitourinary Procedures (APCs 0160, 0161, 0162, 0163, and 1564

c. Level IV Anal/Rect al Procedures (APC 0150)

d. Percutaneous Renal Cryoablation (APC 0423) 4. Nervous System Services a. Chemodenervation (APC 0206) b. Epidural Lysis (APCs 0203 and 0207) c. Transcranial Magnetic Stim ulation Therapy (TMS) (APC 0218) 5. Ocular Services: Ophthalm ic Procedures and Services 6. Imaging a. Echocardiography (APCs 0269, 0270, and 0697) b. Optical Coherence Tomography Procedures of the Breast c. Parathyroid Planar Imaging (APCs 0263, 0317, 0406, 0414) 7. Radiology Oncology a. Proton Beam Therapy and Magnetoe ncephalography (MEG) Services (APCs 0065, 0412, 0446, 0664, and 0667) b. Stereotactic Radiosurgery Servic es (SRS) and Magnetic Resonance Image Guided Focused Ultrasound (MRgFUS) (APC 0066) 8. Respiratory Services: Level II Endoscopy Lower Airway (APC 0415)

9. Other Services a. Epidermal Autograft (APC 0327) b. Image-Guided Breast Biopsy Procedur es and Image-Guided Abscess Drainage Procedures (APCs 0005 and 0007) c. Negative Pressure Wound Therapy (NPWT) (APCs 0012 and 0015)CMS-1613-FC 22

d. Platelet Rich Plasma (PRP) (APC 0327) IV. OPPS Payment for Devices A. Pass-Through Payments for Devices 1. Expiration of Transitional Pass- Through Payments for Certain Devices a. Background b. CY 2015 Policy 2. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background b. CY 2015 Policy B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit

Devices 1. Background 2. Policy for CY 2015 V. OPPS Payment Changes for Drugs , Biologicals, and Radiopharmaceuticals A. OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background 2. Drugs and Biologicals with E xpiring Pass-Through Status in CY 2014 3. Drugs, Biologicals, and Radiopharm aceuticals with New or Continuing Pass-Through Status in CY 2015 4. Provisions for Reducing Tran sitional Pass-Through Payments for Policy-Packaged Drugs and Biologicals to Offset Costs Packaged into APC GroupsCMS-1613-FC 23

a. Background b. Payment Offset Policy for Diagnostic Radiopharmaceuticals c. Payment Offset Policy for Contrast Agents d. Payment Offset Policy for Drugs, Bi ologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Dia gnostic Test or Pro cedure and Drugs and Biologicals That Function as Supplies When Used in a Su rgical Procedure B. OPPS Payment for Drugs, Biolog icals, and Radiopharmaceuticals without Pass-Through Status 1. Background 2. Criteria for Packaging Paym ent for Drugs, Biologicals, and Radiopharmaceuticals a. Background b. Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biol ogicals, and Therapeutic Radiopharmaceuticals (“ThresholdPackaged Drugs”) c. High Cost/Low Cost Threshol d for Packaged Skin Substitutes d. Pass-Through Evaluation Process for Skin Substitutes e. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological But Different Dosages 3. Payment for Drugs and Biologicals without Pass-Through St atus That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and BiologicalsCMS-1613-FC 24

b. CY 2015 Payment Policy 4. Payment Policy for Therapeutic Radiopharmaceuticals 5. Payment Adjustment Policy for Ra dioisotopes Derived From Non-Highly

Enriched Uranium Sources 6. Payment for Blood Clotting Factors 7. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals

with HCPCS Codes but withoutOPPS Hospital Claims Data

VI. Estimate of OPPS Transitional Pass- Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background B. Estimate of Pass-Through Spending VII. OPPS Payment for Ho spital Outpatient Visits A. Payment for Hospital Outpatient C linic and Emergency Department Visits B. Payment for Critical Care Services VIII. Payment for Partial Hospitalization Services A. Background B. PHP APC Update for CY 2015 C. Separate Threshold for Outlier Payments to CMHCs IX. Procedures That Will Be Paid Only as Inpatient Procedures A. Background B. Changes to the Inpatient List X. Nonrecurring Policy Changes: Collecting Data on Services Furnished in Off-Campus Provider-Based Departments of HospitalsCMS-1613-FC 25

XI. CY 2015 OPPS Payment Status and Comment Indicators A. CY 2015 OPPS Payment Status Indicator Definitions

B. CY 2015 Comment Indicator Definitions XII. Updates to the Ambulatory Surg ical Center (ASC) Payment System A. Background 1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System 2. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services

B. Treatment of New Codes 1. Process for Recognizing New Cate gory I and Category III CPT Codes and

Level II HCPCS Codes 2. Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April 2014 and July 2014 for Which We Solicited Public Comments in the CY 2015 OPPS/ASC Proposed Rule 3. Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments in this CY 2015 OPPS/ASC Final

Rule with Comment Period C. Update to the Lists of ASC C overed Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Additions to the List of ASC Covered Surgical Procedures b. Covered Surgical Procedur es Designated as Office-BasedCMS-1613-FC 26

(1) Background (2) Changes for CY 2015 to Covere d Surgical Procedures Designated as

Office-Based c. ASC Covered Surgical Proce dures Designated as Device-Intensive (1) Background (2) Changes to List of Covered AS C Surgical Procedures Designated as

Device-Intensive for CY 2015 d. Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit

Devices e. ASC Treatment of Surgical Procedur es Removed from the OPPS Inpatient List

for CY 2015 2. Covered Ancillary Services D. ASC Payment for Covered Surgi cal Procedures and Covered Ancillary

Services 1. ASC Payment for Covered Surgical Procedures a. Background b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2015

c. Waiver of Coinsurance and Deductible for Certain Preventive Services d. Payment for Cardiac Resynchronization Therapy Services e. Payment for Low Dose Rate (L DR) Prostate Brachytherapy Composite 2. Payment for Covered Ancillary Services a. Background b. Payment for Covered Ancillary Services for CY 2015CMS-1613-FC 27

E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle 2. Requests to Establish New NTIOL Classes for CY 2015 3. Payment Adjustment

4. Announcement of CY 2015 Deadlin e for Submitting Requests for CMS Review of Applications for a New Class of NTIOLs F. ASC Payment and Comment Indicators 1. Background 2. ASC Payment and Comment Indicators

G. Calculation of the ASC Convers ion Factor and the ASC Payment Rates 1. Background 2. Calculation of the ASC Payment Rates a. Updating the ASC Relative Paymen t Weights for CY 2015 and Future Years

b. Transition Period to New OM B Delineations for ASC Wage Index c. Updating the ASC Conversion Factor 3. Display of CY 2015 ASC Payment Rates XIII. Hospital Outpatient Quality Reporting Program Updates A. Background

1. Overview 2. Statutory History of the Hospital OQR Program 3. Measure Updates and Data Publication a. Maintenance of Technical Specifications for Quality Measures b. Public Display of Quality MeasuresCMS-1613-FC 28

B. Process for Retention of Hosp ital OQR Program Measures Adopted in Previous Payment Determinations C. Removal of Quality Measures fr om the Hospital OQR Program Measure Set 1. Considerations in Removing Quality Measures from the Hospital OQR Program 2. Criteria for Removal of “Topped-Out” Measures 3. Removal of Measures from the Hospital OQR Program for the CY 2017 Payment Determination and Subsequent Years D. Quality Measures Previously Adopted for the CY 2016 Payment Determination and Subsequent Years 1. Data Submission Requirements for OP -27: Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) Reported via NHSN for the CY 2017 Payment Determination and Subsequent Years

a. Clarification of Submission Deadline and Data Submitted b. Clarification on Reporting by CMS Certification Number (CCN) 2. Delayed Data Collection for OP-29 and OP-30 3. OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery a. Correction of Respon se to Public Comments b. Delayed Data Collection for OP-31 and Exclusion from the CY 2016 Payment

Determination Measure Set c. Voluntary Collection of Data for OP-31 for the CY 2017 Payment Determination and Subsequent YearsCMS-1613-FC 29

E. New Quality Measure for the CY 2018 Payment Determination and Subsequent Years F. Possible Hospital OQR Program Measures and Topics for Future

Consideration 1. Electronic Clinical Quality Measures 2. Partial Hospitaliza tion Program Measures

3. Behavioral Health Measures 4. National Quality Strategy and CMS Quality Strategy Measure Domains G. Payment Reduction for Hospitals That Fail to Meet the Hospital Outpatient Quality Reporting (OQR) Program Requirements for the CY 2015 Payment Update 1. Background 2. Reporting Ratio Application and A ssociated Adjustment Policy for CY 2015 H. Requirements for Reporting Hospital OQR Program Data for the CY 2017 Payment Determination and Subsequent Years 1. Administrative Requirements for the CY 2017 Payment Determination and Subsequent Years 2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program

a. General Pro cedural Requirements b. Requirements for Chart-Abstracted Measures Where Data Are Submitted Directly to CMS for the CY 2017 Paymen t Determination and Subsequent Years c. Claims-Based Measure Data Requirements for the CY 2017 and CY 2018 Payment Determination and Subsequent YearsCMS-1613-FC 30

d. Data Submission Requirements for Measure Data Submitted via the CMS Web-Based Tool for the CY 2017 Payment Determination and Subsequent Years e. Population and Sampling Data Requirements for the CY 2017 Payment Determination and Subsequent Years

f. Review and Corrections Period for Chart-Abstracted Measures 3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years a. Background b. Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2017 Payment Determination and Subsequent Years c. Targeting Criteria for Data Valid ation Selection for the CY 2017 Payment Determination and Subsequent Years d. Methodology for Encounter Selecti on for the CY 2017 Payment Determination and Subsequent Years

e. Medical Record Documentation Re quests for Validation and Validation Score Calculation for the CY 2017 Payment De termination and Subsequent Years I. Hospital OQR Program Reconsider ation and Appeals Procedures for the CY 2017 Payment Determination and Subsequent Years J. Extension or Exception Process for the CY 2017 Payment Determination and Subsequent Years XIV. Requirements for the Ambulatory Su rgical Center Quality Reporting (ASCQR) ProgramCMS-1613-FC 31

A. Background

1. Overview 2. Statutory History of the Ambulat ory Surgical Center Quality Reporting (ASCQR) Program 3. Regulatory History of the ASCQR Program B. ASCQR Program Quality Measures

1. Considerations in the Selecti on of ASCQR Program Quality Measures 2. Policy for Removal of Quality Measures from the ASCQR Program 3. Criteria for Removal of “Topped-Out” Measures 4. ASCQR Program Qual ity Measures Adopted in Previous Rulemaking 5. New ASCQR Program Quality Measure for the CY 2018 Payment Determination and Subsequent Years 6. ASCQR Program Measures for Future Consideration 7. Maintenance of Technical Specifications for Quality Measures 8. Public Reporting of ASCQR Program Data C. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements 1. Statutory Background 2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for a Payment Determination Year D. Administrative Requirements 1. Requirements Regarding QualityNet Account and Security Administrator 2. Requirements Regarding Participation StatusCMS-1613-FC 32

E. Form, Manner, and Timing of Data Submitted for the ASCQR Program 1. Requirements Regarding Data Proce ssing and Collection Periods for ClaimsBased Measures Using Quality Data Codes (QDCs) 2. Minimum Threshold, Minimum Case Volume, and Data Completeness for Claims-Based Measures Using QDCs 3. Requirements for Data Submitted Via a CMS Online Data Submission Tool

a. Data Collection for ASC-6 and ASC-7 b. Delayed Data Collection for ASC-9 and ASC-10 c. Delayed Data Collection and Exclusion for ASC-11 for the CY 2016 Payment Determination and Voluntary Data Collection for ASC-11 for the CY 2017 Payment Determination and Subsequent Years 4. Claims-Based Measure Data Requirements for the New Measure for the CY 2018 Payment Determination and Subsequent Years 5. Data Submission Requirements for ASC-8 (Influenza Vaccination Coverage Among Healthcare Personnel) Reported via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination and Subsequent Years a. Previously Adopted Requirements for the CY 2016 Payment Determination b. Data Collection Timeframes for the CY 2017 Payment Determination and Subsequent Years and Submission Deadlines for the CY 2016 Payment Determination and Subsequent Years 6. ASCQR Program Validation of Clai ms-Based and CMS Web-Based Measures 7. Extraordinary Circumstances Exte nsions or Exemptions for the CY 2017 Payment Determination and Subsequent YearsCMS-1613-FC 33

8. ASCQR Program Reconsideration Procedures for the CY 2017 Payment Determination and Subsequent Years XV. Changes to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law: Expansion Exception Process A. Background 1. Statutory Basis

2. Affordable Care Act Amendments to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law B. Limitations Identified by Stakeholde rs Regarding the Required Use of HCRIS

Data C. Changes to the Physician-Owned Hospital Expansion Exception Process 1. Supplemental Data Sources

a. Internal Data Sources

b. External Data Sources c. Completeness of Supplemental Data Sources d. Other Issues Related to Supplemental Data Sources e. Summary of Final Provisions Re garding Supplemental Data Sources

2. Fiscal Year Standard a. Summary of Public Comments and Our Response Regarding the Fiscal Year

Standard b. Summary of Final Provisions Re garding the Fiscal Year Standard 3. Community Input and Ti ming of a Complete RequestCMS-1613-FC 34

a. Summary of Public Comments and Our Responses Regarding Community Input and Timing of a Complete Request b. Final Provisions Regarding Community Input and Timing of a Complete Request

D. Additional Considerations E. Summary of the Final Provisions Regarding the Expansion Exception Process under the Rural Provider and Hospital Ownership Exceptions to the Physician

Self-Referral Law XVI. Revision of the Requirements fo r Physician Certification of Hospital Inpatient Services Other Than Psychiatric Inpatient Services XVII. CMS-Identified Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors (§§ 422.330 and 423.352) A. Background 1. Medicare Part C Payment Background 1. Medicare Part D Payment Background B. Provisions of the Propos ed Rule and Final Policies 1. Definitions of “Payment Data” and “Applicable Reconciliation Date” 2. Request for Corrections of Payment Data 3. Payment Offset

a. Offset Amount b. Payment Offset Notification 4. Appeals Process for MA Or ganizations and Part D SponsorsCMS-1613-FC 35

a. Reconsideration b. Informal Hearing c. Review by Administrator 5. Matters Subject to Appeal and Burden of Proof 6. Effective Date of Appeals Process Provisions

XVIII. Files Available to the Public Via the Internet XIX. Collection of Information Requirements A. Legislative Requirement s for Solicitation of Comments B. Requirements in Regulation Text: Changes to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-R eferral Law: Expansion Exception Process (§ 411.362)

C. Associated Information Collectio ns Not Specified in Regulatory Text 1. Hospital OQR Program

a. Revisions to the CY 2016 Payment Determination Estimates b. Hospital OQR Program Requirements for the CY 2017 Payment Determination and Subsequent Years

c. Review and Corrections Peri od Requirements for the CY 2017 Payment Determination and Subsequent Years d. Hospital OQR Program Validation Requirements for the CY 2017 Payment Determination and Subsequent Years e. Extraordinary Circumstances Extensions or Exemptions Process f. Reconsideration and Appeals 2. ASCQR Program RequirementsCMS-1613-FC 36

a. Background

b. Revisions to the CY 2016 Pa yment Determination Estimates c. Claims-Based Measures for the CY 2014 Payment Determination and Subsequent Years d. Web-Based Measures for the CY 2017 Payment Determination and Subsequent Years e. Extraordinary Circumstances Extension or Exemptions Process f. Reconsiderations and Appeals XX. Waiver of Proposed Rulemaking and Response to Comments A. Waiver of Proposed Rulemaking B. Response to Comments XXI. Economic Analyses A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need 3. Overall Impacts for the OPPS and ASC Payment Provisions 4. Detailed Economic Analyses a. Estimated Effects of OPPS Changes in this Final Rule with Comment Period (1) Limitations of Our Analysis (2) Estimated Effects of OPPS Changes on Hospitals (3) Estimated Effects of OPPS Changes on CMHCs (4) Estimated Effect of OPPS Changes on Beneficiaries (5) Estimated Effects of OPPS Changes on Other ProvidersCMS-1613-FC 37

(6) Estimated Effects of OPPS Change s on the Medicare an d Medicaid Programs (7) Alternative O PPS Policies Considered b. Estimated Effects of CY 2015 ASC Payment System Policies (1) Limitations of Our Analysis (2) Estimated Effects of CY 2015ASC Payment System Policies on ASCs (3) Estimated Effects of ASC Paym ent System Policies on Beneficiaries (4) Alternative ASC Payment Policies Considered c. Accounting Statements and Tables d. Effects of Requirements for the Hospital OQR Program

e. Effects of CY 2014 Po licies for the ASCQR Program f. Effects of Changes to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law g. Effects of Policies Related to CMS-Id entified Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors B. Regulatory Flexibility Act (RFA) Analysis C. Unfunded Mandates Reform Act Analysis

D. Conclusion XXII. Federalism AnalysisCMS-1613-FC 38

I. Summary and Background A. Executive Summary of This Document 1. Purpose In this final rule with comment perio d, we are updating the payment policies and payment rates for services furnished to Me dicare beneficiaries in hospital outpatient departments and Ambulatory Surgical Ce nters (ASCs) beginning January 1, 2015. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the relative payment weights and the conversion factor for services payable under the Outpatient Prospective Payment System (OPPS). Under secti on 1833(i) of the Act, we annually review and update the ASC paymen t rates. We describe these and various other statutory authorities in th e relevant sections of this fi nal rule with comment period. In addition, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. In this document, we also are making changes to the data sources permitted for expansion requests for physician-owned hos pitals under the physician self-referral regulations; changes to the underlying aut hority for the requirement of an admission order for all hospital inpatient admissions a nd changes to require physician certification for hospital inpatient admissions only for long- stay cases and outlier cases; and changes to establish a formal process, including a three-level appeals process, to recoup overpayments that result from the submissi on of erroneous payment data by Medicare Advantage (MA) organizations and Part D s ponsors in the limited circumstances in which the organization or sponsor fa ils to correct these data.CMS-1613-FC 39

2. Summary of the Major Provisions

● OPPS Update: For CY 2015, we are increasi ng the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 2.2 percent. This increase is based on the final hospital inpa tient market basket pe rcentage increase of 2.9 percent for inpatient servic es paid under the hospital in patient prospective payment system (IPPS), minus the multifactor productiv ity (MFP) adjustment of 0.5 percentage point, and minus a 0.2 percentage point adjustment required by the Affordable Care Act. Under this final rule with comment period, we estimate that total payments for CY 2015, including beneficiary cost-s haring, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children’s hospitals, cancer hospitals, and community mental health centers (CMHCs)), will be approximately $56.1 billion, an increase of approximately $5.1 billion compared to CY 2014 payments, or $900 million excluding our estimated changes in en rollment, utilization, and case-mix. We are continuing to implement the stat utory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporting fact or of 0.980 to the OPPS payments and copayments for all applicable services.

● Rural Adjustment: We are continuing the adjust ment of 7.1 percent to the OPPS payments to certain rural sole commun ity hospitals (SCHs), including essential access community hospitals (EACHs). This adju stment will apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost.CMS-1613-FC 40

● Cancer Hospital Payment Adjustment: For CY 2015, we are continuing to provide additional payments to cancer hos pitals so that the cancer hospital’s payment-to-cost ratio (PCR) after the additi onal payments is equal to the weighted average PCR for the other OPPS hospitals usi ng the most recently submitted or settled cost report data. Based on those data, a ta rget PCR of 0.89 will be used to determine the CY 2015 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustments will be the addi tional payments needed to result in a PCR equal to 0.89 for each cancer hospital.

● Payment of Drugs, Biologicals , and Radiopharmaceuticals: For CY 2015, payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass- through status are set at the statutory default of average sales price (ASP) plus 6 percent.

● Packaging Policies: We are conditionally packaging certain ancillary services when they are integral, ancillary, supportiv e, dependent, or adj unctive to a primary service. The initial set of services packag ed under this ancillary service policy are the services assigned to APCs having an APC geom etric mean cost (prior to application of status indicator Q1) of less than or equal to $100. This $100 geometric mean cost limit for the APC is part of the methodology of establishing an initial set of conditionally packaged ancillary service APCs, and is not meant to represent a threshold above which a given ancillary service will not be packaged, but as a basis for selecting an initial set of APCs that will likely be updated and expanded in future years.

● Implementation of Comprehensive APCs: For CY 2015, we are implementing, with several modifications, the policy for comprehensive APCs (C-APCs) that wasCMS-1613-FC 41

finalized in the CY 2014 O PPS/ASC final rule with comment period effective January 1, 2015. We are continuing to defi ne the services assigned to C-APCs as primary services, and to define a C-APC as a classification for the provision of a primary service and all adjunctive se rvices and supplies provided to support the delivery of the primary service. We continue to consider th e entire hospital stay, defined as all services reported on the hospital claim reporting the pr imary service, to be one comprehensive service for the provision of a primary servic e into which all other services appearing on the claim would be packaged. This results in a single Medicare payment and a single beneficiary copayment under the OPPS for the comprehensive service based on all included charges on the claim. We are establishing a total of 25 C- APCs for CY 2015, including all of the formerly device-dependent APCs remaining afte r some restructuring and consolidation of these APCs (except for APCs 0427, 0622, and 0652) and two C-APCs for other procedures that are either largely device-de pendent or represent single session services with multiple components (single-session cranial stereotactic radiosurgery and intraocular telescope implantation). We are modifying the complexity adjustment criteria finalized last year by lowering volume and cost thres hold criteria for complexity adjustments. Finally, we are packaging all add-on codes furn ished as part of a comprehensive service, which is consistent with our general add-on code packaging policy. However, the add-on codes assigned to the CY 2014 device-depende nt APCs will be being evaluated with a primary service for a potential complexity adjustment.

● Ambulatory Surgical Center Payment Update: For CY 2015, we are increasing payment rates under the ASC payment system by 1.4 percent. This increase is based on aCMS-1613-FC 42

projected CPI–U update of 1.9 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.5 percentage point. Based on this update, we estimate that total pa yments to ASCs (including beneficiary cost-sharing and estimated changes in enroll ment, utilization, and case-mix), for CY 2015 will be approximately $4.147 billion, anincrease of approximately $236 million compared to estimated CY 2014 Medicare payments.

● Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are adding one claims-based quality measure for the CY 2018 payment determination and subsequent years instead of the CY 2017 payment determination and subsequent years as propos ed. However, prior to publicly reporting this measure, we plan to conduct a dry run (a preliminary analysis) fo r hospitals to review their performance and provide feedback usi ng the most recently available data. There will be no payment impact during this dry-r un period, and the results of the dry run will not be publicly reported. We are refini ng the criteria for determining “topped-out” measures, and we are removing the OP-6 and OP -7 measures due to “topped-out” status. In addition, we are updating several previously adopted measures. We are clarifying data submission requirements for OP-27 and are not ing a delayed data collection for OP-29 and OP-30. We are excluding one previ ously adopted measure (OP-31) from the measure set for the CY 2016 payment determ ination and changing this measure from required to voluntary for the CY 2017 payment determination and subsequent years. We will not subject hospitals to payment reducti ons with respect to the OP-31 measure for the CY 2016 payment determination or during the period of voluntary reporting. In addition, we are formalizing a review and corrections period fo r chart-abstractedCMS-1613-FC 43

measures. We also are updating validation proc edures and changes to regulation text to correct typographical errors. We are changi ng the eligibility criteria for validation; a hospital will only be eligible for random selection for validation if it submits at least 12 cases to the Hospital OQR Program Clinical Data Warehouse during the quarter with the most recently available data. Hospitals also will have the option to submit validation data using electronic methods and must identify the medical record staff responsible for submission of records to the designated CMS contractor. Finally, we are clarifying how we refer to the extraordinary circumstan ces extensions or exemptions process.

● Ambulatory Surgical Center Qual ity Reporting (ASCQR) Program: For the ASCQR Program, we are adopting one new quality measure (ASC-12) for the CY 2018 payment determination and subsequent years. This measure will be computed using paid Medicare fee-for-service (FFS) claims data and will not impose any additional burden on ASCs. We also are excluding one measur e (ASC-11) previously adopted for the CY 2016 payment determination and providing that this measure may be voluntarily rather than mandatorily reported for the CY 2017 payment determination and subsequent years. We will not subject ASCs to payment reductions with respect to this measure for the CY 2016 payment determination or during the period of voluntary reporting. In addition, we are establishing a measure rem oval process and criteria, defining data

collection timeframes and submission deadlin es, and clarifying how we refer to the extraordinary circumstances extensions or exemptions process. 3. Summary of Costs and BenefitsCMS-1613-FC 44

In sections XXI. and XXII. of this fina l rule with comment period, we set forth a detailed analysis of the regulatory and federalism impacts that the changes will have on

affected entities and beneficiaries. Ke y estimated impacts are described below. a. Impacts of the OPPS Update (1) Impacts of All OPPS Changes

Table 49 in section XXI. of this final rule with comment period displays the distributional impact of all the OPPS changes on various grou ps of hospitals and CMHCs for CY 2015 compared to all estimated OPPS payments in CY 2014. We estimate that the policies in this final rule with comment period will result in a 2.3 percent overall increase in OPPS payments to providers. We estimate that total OPPS payments for CY 2015, including beneficiary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children’ s hospitals, cancer hospitals, and CMHCs) will be approximately$56.1 billion, an increase of approximately $5.1 billion compared to CY 2014 payments, or $900 million, excluding our estimated changes in enrollment, utilization, and case-mix. We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs are only paid for partia l hospitalization services under the OPPS. Continuing the provider-specific structure that we adopt ed beginning in CY 2011 and basing payment fully on the type of provider furnishing the se rvice, we estimate a 1.3 percent increase in CY 2015 payments to CMHCs relative to their CY 2014 payments. (2) Impacts of the Updated Wage Indexes We estimate that our update of the wage indexes and applicat ion of the frontier State wage index, including changes resulti ng from the adoption of the new OMB laborCMS-1613-FC 45

market area delineations and the transitional 1-year, 50/50 blended wage index, will mitigate any negative changes due to the new CBSA delineations. (3) Impacts of the Rural Adjustment and the Cancer Hospital Payment Adjustment There are no significant impacts of our CY 2015 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not making any change in policies fo r determining the rural and cancer hospital payment adjustments, and the adjustment am ounts do not significantly impact the budget neutrality adjustments for these policies. (4) Impacts of the OPD F ee Schedule Increase Factor We estimate that, for most hospitals, the application of the OPD fee schedule increase factor of 2.2 percen t to the conversion factor fo r CY 2015 will mitigate the small negative impacts of the budget ne utrality adjustments. As a result of the OPD fee

schedule increase factor and ot her budget neutrality adjustments, we estimate that urban and rural hospitals will e xperience increases of approxi mately 2.3 percent for urban hospitals and 1.9 percent for ru ral hospitals. Classifying hos pitals by teaching status or type of ownership suggests that these hospitals will receive similar increases. b. Impacts of the ASC Payment Update For impact purposes, the surgical pr ocedures 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 paymen ts by specialty groups under the CY 2015 payment rates compared to estimated CY 2014 payment rates ranges between -4.0 percent for ancillary items and services and 14 percent for hematologic and lymphatic system procedures.CMS-1613-FC 46

c. Impacts of the Hospital OQR Program We do not expect our CY 2015 policies to significantly affect the number of hospitals that do not receiv e a full annual payment update. d. Impacts of the ASCQR Program We do not expect our CY 2015 proposed policies to signific antly affect the

number of ASCs that do not rece ive a full annual payment update. B. Legislative and Regulatory Authority for the Hospital OPPS When Title XVIII of the Social Security Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specif ic costs. In an effort to ensure that Medicare and its beneficiaries pay appropr iately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a pros pective 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 hospita l 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 O PPS: 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 Improvement s and Extension Act under Division B ofCMS-1613-FC 47

Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Me dicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enac ted 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 Pr otection 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 co llectively 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 (T PTCCA, Pub. L. 112-78), enacted on December 23, 2011; the Middle Class Ta x Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on Febr uary 22, 2012; and the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013. Under the OPPS, we pay for hospital Part B services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to iden tify and group the services within each APC. The OPPS includes payment for most hospital outpatient se rvices, except those

identified in section I.C. of this final rule with comment period. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS fo r hospital outpatient se rvices designated by the Secretary (which includes partial hos pitalization services furnished by CMHCs), and certain inpatient hos pital services that ar e paid under Part B.CMS-1613-FC 48

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-relat ed amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.

All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2 )(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, it ems 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 servi ce within the same APC group (referred to as the “2 times rule”). In implementing this prov ision, we generally use the cost of the item or service assigned to an APC group. For new technology items and services, sp ecial payments under the OPPS may be made in one of two ways. Section 1833( t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-thr ough payments,” for at least 2 but not more than 3 years for certa in drugs, biological agents, brachytherapy

devices used for the treatment of cancer, and categories of other medical devices. For new technology services that ar e not eligible for transiti onal pass-through payments, and

for which we lack sufficient clinical inform ation and cost data to appropriately assign them to a clinical APC group, we have esta blished special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs areCMS-1613-FC 49

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 te mporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinical ly appropriate APC group. C. Excluded OPPS Services and Hospitals Section 1833(t)(1)(B)(i) of the Act aut horizes the Secretary to designate the hospital outpatient services th at are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, sect ion 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, dia gnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized pr evention plan services. The Secretary exercises the authority grante d under the statute to also exclude from the OPPS certain services that are paid under fee schedules or other payment systems. Such excluded services include, for exampl e, the professional services of physicians and nonphysician practitioners paid under the Me dicare Physician Fee Schedul e (MPFS); certain laboratory services paid under the Clinical Labora tory Fee Schedule (CLFS); services for beneficiaries with end-stage renal diseas e (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that requir e an inpatient stay that are paid under the hospital IPPS. We se t forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22.CMS-1613-FC 50

Under § 419.20(b) of the regulations, we sp ecify the types of hospitals that are excluded from payment under the OPPS. Thes e excluded hospitals in clude: critical access hospitals (CAHs); hospitals located ou tside of the 50 States, the District of Columbia, and Puerto Rico; and Indi an 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 fi rst implemented for services furnished on or after August 1, 2000. Secti on 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less ofte n than annually, and to revise the groups, relative payment weights, and other adjust ments 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 re quirements and changes arising from our continuing experience with this system. These rules can be viewed on the CMS Web

site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel) 1. Authority of the Panel Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-113, requires that we consult with an external advisory panel of experts to annually review the clinicalCMS-1613-FC 51

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 discreti onary authority to the Secr etary to convene advisory councils and committees, the Secretary expanded the panel’s scope to include the supervision of hospital outpatient therapeuti c services in addition to the APC groups and weights. To reflect th is new role of the panel, the Secr etary changed the panel’s name to the Advisory Panel on Hospital Outpatient Paym ent (the HOP Panel, or the Panel). The

Panel is not restricted to using data compiled by CMS, a nd 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 Pa nel. This expert panel, which may be composed of up to 19 appropriate representa tives of providers (c urrently employed fulltime, not as consultants, in their respective ar eas of expertise), revi ews clinical data and

advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged withadvising the Secretar y on the appropriate level of supervision for indivi dual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). The current charter specifies, among other requirements, that:

the Panel continues to be tec hnical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; ha s a Designated Federal Official (DFO); andCMS-1613-FC 52

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 outpatie nt therapeutic services and therefore to add CAHs to its membership. The current Panel membership and othe r 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_AdvisoryPanel onAmbulatoryPaymentClassificationGrou ps.asp#TopOfPage

. 3. Panel Meetings and Organizational Structure The Panel has held multiple meetings, with the last meeting taking place on August 25, 2014. 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 st ructure that, in part, currently includes

the use of three subcommittees to facilitate it s required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups a nd Status Indicator (SI) Assignments. The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for reso lving them. The Visits and Observation

Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation servic es and hospital outpatient vis its paid under the OPPS (for example, APC configurations and APC rela tive payment weights). The SubcommitteeCMS-1613-FC 53

for APC Groups and SI Assignments advise s the Panel on the following issues: the appropriate SIs to be assigne d to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC placement of HCPCS codes regarding services for which separate payment is made. Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, a nd the Panel recommended at the August 2014 meeting that the subcommittees conti nue. We accepted this recommendation.

Discussions of the other recommendati ons made by the Panel at the August 2014 Panel meeting are included in the sections of this final rule with comment period that are specific to each recommendation. For disc ussions of earlier Panel meetings and recommendations, we refer readers to pr eviously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlie r in this section, and the FACA database

at: http://fido.gov/facadatabase/public.asp

. F. Public Comments Received on the CY 2015 OPPS/ASC Proposed Rule We received approximately 719 timely pieces of correspondence on the CY 2015 OPPS/ASC proposed rule that appeared in the Federal Register on July 14, 2014 (79 FR 40915). We note that we received some public comments that are outside the scope of the CY 2015 OPPS/ASC proposed rule . Out-of-scope pub lic comments are not

addressed in this CY 2015 OPPS/ASC final ru le with comment period. Summaries of those public comments that are within the sc ope of the proposed rule and our responses

are set forth in the various sections of this final rule with comment period under the appropriate headings.CMS-1613-FC 54

G. Public Comments Received on the CY 2014 OPPS/ASC Final Ru le with Comment

Period We received approximately 490 timely pieces of correspondence on the CY 2014

OPPS/ASC final rule with commen t period that appeared in the Federal Register on December 10, 2013 (78 FR 74826), some of wh ich contained comments on the interim APC assignments and/or status indicato rs of new or replacement HCPCS codes (identified with comment indicator “NI” in A ddenda B, AA, and BB to that final rule). Summaries of the public comments on new or replacement codes are set forth in this

CY 2015 OPPS/ASC final rule with comment period under the appropr iate subject-matter headings. II. Updates Affecting OPPS Payments A. Recalibration of APC Relative Payment Weights

1. Database Construction a. Database Source and Methodology Section 1833(t)(9)(A) of the Act requires that the Secretary re view not less often than annually and revise the relative paym ent 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 relativ e payment weights that were implemented on August 1, 2000 for each APC group. In the CY 2015 OPPS/ASC proposed rule (79 FR 40925), for the CY 2015 OPPS, we proposed to recalibrate the APC relative payment weights for services furnished on or after January 1, 2015, and before January 1, 2016 (CY 2015), using the same basic methodology that we described in the CY 2014 OPPS/ASC final rule with commentCMS-1613-FC 55

period. That is, we proposed to recalibra te the relative payment weights for each APC based on claims and cost report data for hosp ital outpatient departme nt (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of r ecalibrating the proposed APC relative payment weights for CY 2015, we used approximately 149 million final action claims (claims for which all disputes and adjustments have beenresolved and payment has been made) for hospital outpatient department services furn ished on or after January 1, 2013, and before January 1, 2014. For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2015, we used approximately 161 million final action claims (claims for which all disput es and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2013, and before January 1, 2014. For exact counts of clai ms used, we refer readers to the claims accounting narrative under supporting documentation for the CY 2015 OPPS/ASC proposed rule and this final rule with comment period on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. Of the approximately 161 million final ac tion claims for services provided in hospital outpatient settings us ed to calculate the CY 2015 OPPS payment rates for this final rule with comment period, approximately123 million claims were the type of bill potentially appropriate for use in setting rate s for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 123 million claims, approximately 5 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for exampl e, erroneous cost-to-ch arge ratios (CCRs)CMS-1613-FC 56

or no HCPCS codes reported on the claim) . From the remaining approximately 118 million claims, we created approximately 101 million single records, of which approximately 50 million were “pseudo” single or “single session” claims (created from approximately 22 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in

excess of +/- 3 standard de viations from the geometric mean, yielding approximately 101 million single bills for ratesetting. As descri bed in section II.A.2. of this final rule with comment period, our data development pr ocess is designed w ith the goal of using appropriate cost information in setting th e APC relative payment weights. The bypass process is described in sec tion II.A.1.b. of this final rule with comment period. This section discusses how we develop “pseudo” si ngle procedure claims (as defined below), with the intention of using mo re 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 in formation on the claim continues to be unusable. Consistent with the goal of us ing appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes.

The final APC relative weights and payments for CY 2015 in Addenda A and B to this final rule with comment period (whi ch are available via the Internet on the CMS Web site) were calculated using claims from CY 2013 that were processed through June 30, 2014. While prior to CY 2013 we historically based the payments on median hospital costs for services in the APC groups, beginning with the CY 2013 OPPS, we

established the cost-based re lative payment weights for the OPPS using geometric meanCMS-1613-FC 57

costs, as discussed in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2015 OPPS, we proposed and are using this same methodology, basing payments on geometri c mean costs. Under this methodology, we select claims for services paid under the OPPS and match these claims to the most recent cost report filed by the individual hospi tals 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 2015 payment rates. b. Use of Single and Multiple Procedure Claims For CY 2015, in general, and as we proposed, we are continuing to use single procedure claims to set the costs on which th e APC relative payment weights are based. We generally use single procedure claims to set the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one un it of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performe d on the same date of service. It is generally desirable to use the da ta from as many claims as possible to recalibrate the APC relative payment wei ghts, including those claims for multiple procedures. As we have for several years, we are continuing to use date of service

stratification and a list of c odes to be bypassed to convert mu ltiple procedure claims to “pseudo” single procedure claims. Through bypa ssing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” singleCMS-1613-FC 58

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” singl e procedure claims is well do cumented, most recently in

the CY 2014 OPPS/ASC final rule with comment period (78 FR 74849 through 74851). In addition, for CY 2008 (72 FR 66614 thr ough 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2014. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC m odel 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 2014, and as we propos ed, we are continuing this policy for

CY 2015. We refer readers to section II.A.2.f . of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74925) for a discussion of the use of claims in modeling the costs for composite APCs and to section II.A.3. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925 through 74948) for a discussion of our packaging policies for CY 2014. In additi on, as we proposed, we are establishing additional packaging policies for the CY 2015 OPPS, as discussed in section II.A.3. of this final rule with comment period.CMS-1613-FC 59

As we proposed, we are continuing to apply these processes to enable us to use as much claims data as possible for ratesett ing for the CY 2015 OPPS. This methodology enabled us to create, for this final rule with comment period, approximately 50 million “pseudo” single procedure claims, including mu ltiple imaging composite “single session” bills (we refer readers to sect ion II.A.2.f.(4) of this final rule with comment period for further discussion), to add to the approximately 51 million “natural” single procedure

claims. For CY 2015, we proposed to bypass 227 HCPCS codes that were identified in Addendum N to the CY 2015 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple pr ocedure claims to “pseudo” single procedure claims, we have calculated the percent of “nat ural” 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 code s on the previous year ’s bypass list and use the updated year’s data (for CY 2015, data available for the Marc h 10, 2014 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2013 claims processed through September 30, 2013, and CY 2012 claims data processed through June 30, 2013, used to model the payment rates for CY 2014) to determine whether it would be appropriate to add a dditional codes to the previ ous year’s bypass list. For CY 2015, we proposed to continue to bypa ss all of the HCPCS codes on the CY 2014 OPPS bypass list, with the exception of HCPC S codes that we proposed to delete for CY 2015, which were listed in Table 1 of the proposed rule (79 FR 40927 through 40929). We also proposed to remove HCPCS co des that are not separately paid under theCMS-1613-FC 60

OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. So me of the codes we proposed to remove from the CY 2015 bypass list are affected by the CY 2015 final packaging policy, discussed in section II.A.3. of this final rule with comment period. In addition, we proposed to add to the bypass list for CY 2015 HCPCS codes not on the CY 2014 bypass list that, using either the CY 2014 final rule with comment period data (CY 2012 claims) or the March 10, 2014 Panel data (first 9 months of CY 2013 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2015 proposal to continue to devel op OPPS relative payment weights based on geometric mean costs, we also proposed that the packaged cost crite rion continue to be based on the geometric mean cost. The enti re list proposed for CY 2015 (including the codes that remain on the bypass list from prio r years) was open to public comment in the CY 2015 OPPS/ASC proposed rule. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the re presentation of packaging on “natural” single procedure claims for any given code is comp arable to packaging for that code in the multiple procedure claims. The cr iteria for the bypass list are:

● There are 100 or more “n atural” single procedure clai ms for the code. This number of single procedure claims ensure s that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.

● Five percent or fewer of the “natur al” single procedure claims for the code have packaged costs on that single procedure cl aim for the code. This criterion results in limiting the amount of packaging being redistribu ted to the separately payable proceduresCMS-1613-FC 61

remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code repres ent the cost of th e bypassed service.

● The geometric mean cost of packag ing 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 asse ssment of claims against the bypass criteria, we do not know the dollar value of the pack aged cost that shoul d be appropriately attributed to the other proce dures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount a nd volume protects the validity

of cost estimates for low cost servic es billed with th e bypassed service. We note that, as we did for CY 2014, we proposed to continue to establish the CY 2015 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identify ing cost patterns, we proposed to use the geometric mean cost of packaging to identi fy potential codes to add to the bypass list. In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we consid ered whether it would be appropriate to update the $50 packaged cost threshold fo r inflation when examining potential bypass list additions. As discu ssed 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 pack aged cost threshold more restrictive over time when considering additions to the bypass li st. Therefore, adjusting the threshold by the market basket increase would prevent contin uing decline in the threshold’s real value.

Based on the same rationale described fo r the CY 2014 OPPS/ASC final rule with comment period (78 FR 74838), we proposed for CY 2015 to continue to update theCMS-1613-FC 62

packaged cost threshold by the market bask et increase. By applying the final CY 2014 market basket increase of 1.7 percent to the prior nonrounded do llar threshold of $54.73 (78 FR 74838), we determined that the threshold remains for CY 2015 at $55 ($55.66 rounded to $55, the nearest $5 increment). Th erefore, we proposed to set the geometric mean packaged cost threshold on the CY 2013 cl aims at $55 for a code to be considered for addition to the CY 2015 OPPS bypass list.

● The code is not a code for an unlisted service. Unlisted codes do not describe a specific service, and thus th eir costs would not be appropr iate for bypass list purposes. In addition, we proposed to continue to include on the bypass list HCPCS codes

that CMS medical advisors believe have mi nimal associated packaging based on their

clinical assessment of the co mplete CY 2015 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 th e packaging associated with specific services. We also proposed to continue to include certain HCPCS codes on the bypass list in order to purposefully di rect the assignment of packaged costs to a companion code where services always appear together a nd where there would ot herwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) to the b ypass list (73 FR 68513). As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pse udo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pse udo” single procedure claims, clai ms that contain “overlap bypassCMS-1613-FC 63

codes” (those HCPCS codes th at are both on the bypass list and are members of the multiple imaging composite APCs) were identif ied first. These HCPCS codes were then processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imagi ng family, thus suppressing the initial use of these codes as bypass codes. However, th ese “overlap bypass codes” were retained on the bypass list because, at the end of the “pse udo” single processing logic, we reassessed the claims without suppression of the “ overlap bypass codes” under our longstanding “pseudo” single process to determine whethe r we could convert additional claims to “pseudo” single procedure claims. (We refer read ers to section II.A.2.b. of this final rule with comment period for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging co mposite “single session” bills that could be used for calculating composite APC costs. “O verlap bypass codes” that are members of the multiple imaging composite APCs are iden tified by asterisks (*) in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site). Comment: One commenter supported th e CY 2015 proposal to remove certain codes from the bypass list, in particular for the anatomic pathology procedures, and suggested that the byp ass list undervalues codes and artifi cially lowers their estimated costs, as evidenced by the estimated increase in payment for some of those services in the CY 2015 OPPS/ASC proposed rule. Response: We appreciate the commenter’s support. The bypass list process is

used to extract more data from claims th at would otherwise be unusable. We use a variety of information in identifying codes that could be potentially added to the bypassCMS-1613-FC 64

list each year, including codes selected base d on the empirical criteria, CMS medical advisor recommendations, and co mmenter requests. In doing so, we attempt to ensure that the amount of packaged cost being redist ributed as a result of the process is limited.

After consideration of th e public comments we receive d, we are adopting as final the proposed “pseudo” single claims process. As discussed earlier in this section, there

are interactions between the application of a bypass list a nd various other OPPS payment policies. As a result of modifications to th e packaging policies described in section III. of this final rule with comment period, we are a dding codes that we had originally proposed to remove from the CY 2015 bypass list back on the CY 2015 final OPPS bypass list.

Addendum N to this final rule with co mment period (which is available via the Internet on the CMS Web site) includes the list of bypass codes for CY 2015. The list of bypass codes contains codes that were report ed on claims for services in CY 2013 and, therefore, includes codes that were in effect in CY 2013 and used for billing but were

deleted for CY 2014. We retained these deleted bypass codes on the CY 2015 bypass list

because these codes existed in CY 2013 and we re covered OPD services in that period,

and CY 2013 claims data are used to calcu late CY 2015 payment rates. Keeping these deleted bypass codes on the bypass list potentiallyallows us to create more “pseudo” single procedure claims for ratesetting purpos es. “Overlap bypass codes” that were members of the multiple imaging composite AP Cs are identified by asterisks (*) in the

third column of Addendum N to this final rule with comment period. HCPCS codes that we are adding for CY 2015 are identified by asterisks (*) in th e fourth column of

Addendum N.CMS-1613-FC 65

Table 1 of the proposed rule contained the list of codes that we proposed to remove from the CY 2015 bypass list ( 79 FR 40927 through 40929). Table 1 below

contains the list of codes that we are removing from the final CY 2015 bypass list

because these codes were either deleted fr om the HCPCS before CY 2013 (and therefore were not covered OPD services in CY 2013) or were not separately payable codes under

the CY 2015 OPPS because these codes are not used for ratesetting through the bypass process. The list of codes for removal from the bypass list includes those that will be affected by the CY 2015 OPPS packaging policy de scribed in section II.A.3. of this final rule with comment period.CMS-1613-FC 66

TABLE 1.—HCPCS CODE S REMOVED FROM THE CY 2015 BYPASS LIST

HCPCS

Code HCPCS Short Descriptor 11056 Trim skin lesions 2 to 4 11300 Shave skin lesion 0.5 cm/< 11301 Shave skin lesion 0.6-1.0 cm 11719 Trim nail(s) any number 11720 Debride nail 1-5 11721 Debride nail 6 or more 17000 Destruct premalg lesion 17110 Destruct b9 lesion 1-14 29240 Strapping of shoulder 29260 Strapping of elbow or wrist 29280 Strapping of hand or finger 29520 Strapping of hip 29530 Strapping of knee 51741 Electro-uroflowmetry first 51798 Us urine capacity measure 53601 Dilate urethra stricture 53661 Dilation of urethra 54240 Penis study 67820 Revise eyelashes 69210 Remove impacted ear wax uni 69220 Clean out mastoid cavity 70030 X-ray eye for foreign body 70100 X-ray exam of jaw <4views 70110 X-ray exam of jaw 4/> views 70120 X-ray exam of mastoids 70130 X-ray exam of mastoids 70140 X-ray exam of facial bones 70150 X-ray exam of facial bones 70160 X-ray exam of nasal bones 70200 X-ray exam of eye sockets 70210 X-ray exam of sinuses 70220 X-ray exam of sinuses 70240 X-ray exam pituitary saddle 70250 X-ray exam of skull 70260 X-ray exam of skull 70320 Full mouth x-ray of teeth 70328 X-ray exam of jaw joint 70330 X-ray exam of jaw jointsCMS-1613-FC 67

HCPCS

Code HCPCS Short Descriptor 70355 Panoramic x-ray of jaws 70360 X-ray exam of neck 71021 Chest x-ray frnt lat lordotc 71022 Chest x-ray frnt lat oblique 71023 Chest x-ray and fluoroscopy 71030 Chest x-ray 4/> views 71035 Chest x-ray special views 71100 X-ray exam ribs uni 2 views 71101 X-ray exam unilat ribs/chest 71110 X-ray exam ribs bil 3 views 71111 X-ray exam ribs/chest4/> vws 71120 X-ray exam breastbone 2/>vws 71130 X-ray strenoclavic jt 3/>vws 72020 X-ray exam of spine 1 view 72040 X-ray exam neck spine 2-3 vw 72050 X-ray exam neck spine 4/5vws 72052 X-ray exam neck spine 6/>vws 72069 X-ray exam trunk spine stand 72070 X-ray exam thorac spine 2vws 72072 X-ray exam thorac spine 3vws 72074 X-ray exam thorac spine4/>vw 72080 X-ray exam trunk spine 2 vws 72090 X-ray exam scloiosis erect 72100 X-ray exam l-s spine 2/3 vws 72110 X-ray exam l-2 spine 4/>vws 72114 X-ray exam l-s spine bending 72120 X-ray bend only l-s spine 72170 X-ray exam of pelvis 72190 X-ray exam of pelvis 72202 X-ray exam si joints 3/> vws 72220 X-ray exam sacrum tailbone 73000 X-ray exam of collar bone 73010 X-ray exam of shoulder blade 73020 X-ray exam of shoulder 73030 X-ray exam of shoulder 73050 X-ray exam of shoulders 73060 X-ray exam of humerus 73070 X-ray exam of elbow 73080 X-ray exam of elbowCMS-1613-FC 68

HCPCS

Code HCPCS Short Descriptor 73090 X-ray exam of forearm 73100 X-ray exam of wrist 73110 X-ray exam of wrist 73120 X-ray exam of hand 73130 X-ray exam of hand 73140 X-ray exam of finger(s) 73510 X-ray exam of hip 73520 X-ray exam of hips 73540 X-ray exam of pelvis & hips 73550 X-ray exam of thigh 73560 X-ray exam of knee 1 or 2 73562 X-ray exam of knee 3 73564 X-ray exam knee 4 or more 73565 X-ray exam of knees 73590 X-ray exam of lower leg 73600 X-ray exam of ankle 73610 X-ray exam of ankle 73620 X-ray exam of foot 73630 X-ray exam of foot 73650 X-ray exam of heel 73660 X-ray exam of toe(s) 74000 X-ray exam of abdomen 74010 X-ray exam of abdomen 74020 X-ray exam of abdomen 74022 X-ray exam series abdomen 76100 X-ray exam of body section 76510 Ophth us b & quant a 76514 Echo exam of eye thickness 76516 Echo exam of eye 76519 Echo exam of eye 76645 Us exam breast(s) 76816 Ob us follow-up per fetus 76882 Us xtr non-vasc lmtd 76970 Ultrasound exam follow-up 76977 Us bone density measure 77072 X-rays for bone age 77073 X-rays bone length studies 77074 X-rays bone survey limited 77076 X-rays bone survey infantCMS-1613-FC 69

HCPCS

Code HCPCS Short Descriptor 77077 Joint survey single view 77078 Ct bone density axial 77079 Ct bone density peripheral 77080 Dxa bone density axial 77081 Dxa bone density/peripheral 77082 Dxa bone density vert fx 77083 Radiographic absorptiometry 80500 Lab pathology consultation 80502 Lab pathology consultation 85097 Bone marrow interpretation 86510 Histoplasmosis skin test 86850 Rbc antibody screen 86870 Rbc antibody identification 86880 Coombs test direct 86885 Coombs test indirect qual 86886 Coombs test indirect titer 86900 Blood typing abo 86901 Blood typing rh (d) 86904 Blood typing patient serum 86905 Blood typing rbc antigens 86906 Blood typing rh phenotype 86930 Frozen blood prep 86970 Rbc pretx incubatj w/chemicl 86977 Rbc serum pretx incubj/inhib 88104 Cytopath fl nongyn smears 88106 Cytopath fl nongyn filter 88107 Cytopath fl nongyn sm/fltr 88108 Cytopath concentrate tech 88112 Cytopath cell enhance tech 88120 Cytp urne 3-5 probes ea spec 88160 Cytopath smear other source 88161 Cytopath smear other source 88162 Cytopath smear other source 88172 Cytp dx eval fna 1st ea site 88173 Cytopath eval fna report 88182 Cell marker study 88184 Flowcytometry/ tc 1 marker 88189 Flowcytometry/read 16 & > 88300 Surgical path grossCMS-1613-FC 70

HCPCS

Code HCPCS Short Descriptor 88302 Tissue exam by pathologist 88304 Tissue exam by pathologist 88305 Tissue exam by pathologist 88307 Tissue exam by pathologist 88312 Special stains group 1 88313 Special stains group 2 88321 Microslide consultation 88323 Microslide consultation 88325 Comprehensive review of data 88329 Path consult introp 88331 Path consult intraop 1 bloc 88342 Immunohisto antibody slide 88346 Immunofluorescent study 88347 Immunofluorescent study 88348 Electron microscopy 88358 Analysis tumor 88360 Tumor immunohistochem/manual 88361 Tumor immunohistochem/comput 88365 Insitu hybridization (fish) 88368 Insitu hybridization manual 88385 Eval molecul probes 51-250 88386 Eval molecul probes 251-500 89049 Chct for mal hyperthermia 89220 Sputum specimen collection 89230 Collect sweat for test 89240 Pathology lab procedure 92020 Special eye evaluation 92025 Corneal topography 92060 Special eye evaluation 92081 Visual field examination(s) 92082 Visual field examination(s) 92083 Visual field examination(s) 92133 Cmptr ophth img optic nerve 92134 Cptr ophth dx img post segmt 92136 Ophthalmic biometry 92225 Special eye exam initial 92226 Special eye exam subsequent 92230 Eye exam with photos 92250 Eye exam with photosCMS-1613-FC 71

HCPCS

Code HCPCS Short Descriptor 92285 Eye photography 92286 Internal eye photography 92520 Laryngeal function studies 92541 Spontaneous nystagmus test 92542 Positional nystagmus test 92550 Tympanometry & reflex thresh 92552 Pure tone audiometry air 92553 Audiometry air & bone 92555 Speech threshold audiometry 92556 Speech audiometry complete 92557 Comprehensive hearing test 92567 Tympanometry 92570 Acoustic immitance testing 92582 Conditioning play audiometry 92603 Cochlear implt f/up exam 7/> 92604 Reprogram cochlear implt 7/> 92626 Eval aud rehab status 93005 Electrocardiogram tracing 93017 Cardiovascular stress test 93225 Ecg monit/reprt up to 48 hrs 93226 Ecg monit/reprt up to 48 hrs 93270 Remote 30 day ecg rev/report 93278 Ecg/signal-averaged 93279 Pm device progr eval sngl 93280 Pm device progr eval dual 93281 Pm device progr eval multi 93282 Icd device progr eval 1 sngl 93283 Icd device progr eval dual 93284 Icd device progr eval mult 93285 Ilr device eval progr 93288 Pm device eval in person 93289 Icd device interrogate 93290 Icm device eval 93291 Ilr device interrogate 93292 Wcd device interrogate 93293 Pm phone r-strip device eval 93296 Pm/icd remote tech serv 93299 Icm/ilr remote tech serv 93701 Bioimpedance cv analysisCMS-1613-FC 72

HCPCS

Code HCPCS Short Descriptor 93786 Ambulatory bp recording 93788 Ambulatory bp analysis 93875 Extracranial study 94015 Patient recorded spirometry 94690 Exhaled air analysis 95803 Actigraphy testing 95869 Muscle test thor paraspinal 95900 Motor nerve conduction test 95921 Autonomic nrv parasym inervj 95970 Analyze neurostim no prog 96900 Ultraviolet light therapy 96910 Photochemotherapy with uv-b 96912 Photochemotherapy with uv-a 96920 Laser tx skin < 250 sq cm 96921 Laser tx skin 250-500 sq cm 98925 Osteopath manj 1-2 regions 98926 Osteopath manj 3-4 regions 98927 Osteopath manj 5-6 regions 98928 Osteopath manj 7-8 regions 98929 Osteopath manj 9-10 regions 98940 Chiropract manj 1-2 regions 98941 Chiropract manj 3-4 regions 98942 Chiropractic manj 5 regions G0127 Trim nail(s) G0130 Single energy x-ray study G0166 Extrnl counterpulse, per tx G0239 Oth resp proc, group G0389 Ultrasound exam aaa screen G0404 Ekg tracing for initial prev G0424 Pulmonary rehab w exer Q0091 Obtaining screen pap smearCMS-1613-FC 73

c. Calculation and Use of Cost-to-Charge Ratios (CCRs) In the CY 2015 OPPS/ASC proposed ru le (79 FR 40929), we proposed to continue to use the hospital-specific overall ancillary and departme ntal cost-to-charge ratios (CCRs) to convert charges to estimat ed costs through application of a revenue

code-to-cost center crosswalk. To calc ulate the APC costs on which the proposed CY 2015 APC payment rates were based, we calcu lated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2013 claims data by comparing these clai ms data to the most recently available hospital cost reports, which, in most cases, were from CY 2012. For the CY 2015 OPPS proposed rates, we used the set of claims processed during CY 2013. We applied the hospital-specific CCR to the hospital’s charges at the most detailed level possible, based

on a revenue code-to-cost center crosswalk th at contains a hierar chy 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 re venue code-to-cost center crosswalk, we reviewed changes to the list of revenue code s for CY 2013 (the year of claims data we used to calculate the propos ed CY 2015 OPPS payment rates) and found that the National Uniform Billing Committee ( NUBC) did not add any new revenue codes to the NUBC 2013 Data Specifications Manual. In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the elec tronic cost report database. In general,CMS-1613-FC 74

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 OP PS/ASC final rule with comment period (71 FR 67983 through 67985). The calculation of blood costs is a longstanding exception (since the CY 2005 OPPS) to this general methodology for calculation of CCRs used for converting charges to costs on each claim. Th is exception is discussed in detail in the

CY 2007 OPPS/ASC final rule with comment period and discussed further in section II.A.2.d.(2) of this final ru le with comment period. For the CCR calculation process, we used th e 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 parame dical 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 fina l rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those hospitals that filed out patient claims in CY 2013 before determining

whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each co st center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information Sy stem (HCRIS). We used the most recent available cost report data, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2012. Fo r the proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2015 OPPS payment rates. If th e most recently available cost report wasCMS-1613-FC 75

submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and co st center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We proposed to continue this longstanding methodology for

the calculation of costs for CY 2015. Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-basedweights 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-co st items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by the Research Triangle Institute, International (RTI). The RT I final report can be found on

RTI’s Web site at: http://www.rti.org/re ports/cms/HHSM-500-2005- 0029I/PDF/Refining_Cost_to_C harge_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 comm ent period (73 FR 68519 through 68527). We addressed the RTI finding that ther e 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 costCMS-1613-FC 76

center for “Medical Supplies Charged to Pati ents” 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 “Med ical Supplies Charged to Patients” and the “Implantable Devices Charged to Patients” costcenters. For a complete discussion of the

rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” a summary of public comments r eceived, and our responses to those public comments, we refer readers to the FY 2009 IPPS final rule. The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginni ng on or after May 1, 2009. In the CY 2013

OPPS/ASC final rule with comm ent period, we determined th at a significant volume of hospitals were utilizing the “Implantable De vices Charged to Patients” cost center.

Because a sufficient amount of data from whic h to generate a mean ingful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Imp lantable Devices Charged to Patients” cost center (77 FR 68225). We retained this policy for the CY 2014 OPPS and, as we proposed, we are continuing this practice for the CY 2015 OPPS.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to crea te new standard cost cente rs for “Computed TomographyCMS-1613-FC 77

(CT),” “Magnetic Resonance Imaging (MRI), ” and “Cardiac Cathet erization,” and to require that hospitals report the costs and ch arges for these services under these new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and car diac catheterization di ffer significantly from the costs and charges of other services include d in the standard associated cost center.

RTI concluded that both the IPPS and the OPPS relative payment weights would better

estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in or der 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 co st centers for CT scans, MRIs, and cardiac

catheterization. The new standard cost centers for CT scan s, MRIs, and cardiac

catheterization were effective for cost re port periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. Using the HCRIS update for the CY 2015 final rule cycle, which we used to

estimate costs in the CY 2015 OPPS ratesetti ng process, as discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40930), we were able to calculate a valid implantable device CCR for 2,895 hospitals, a valid MRI CCR for 1,934 hospitals, a valid CT scan CCR for 2,035 hospitals, and a valid Cardi ac Catheterization CCR for 1,397 hospitals. In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we noted that, for CY 2014, the estimated changes in geometric mean estimated APC cost of usingCMS-1613-FC 78

data from the new standard cost centers for CT scans and MRIs appeared consistent with RTI’s analysis of cost report and claims data in the July 2008 final report (pages 5 and 6). RTI concluded that “in hospitals that aggreg ate data for CT scanning, MRI, or nuclear

medicine services with the standard lin e for Diagnostic Radiology, costs for these services all appear substantia lly overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly un derstated.” We also noted that there were limited additional impacts in the impl antable device-related APCs from adopting the new cost report Form CMS 2552-10 because we had used data from the standard cost center for implantable medical devices beginning in CY 2013 OPPS ratesetting, as

discussed above. As we indicated in prior rulema king (77 FR 68223 through 68225), once we determined that cost report data for the ne w standard cost centers were sufficiently available, we would analyze that data and, if appropriate, we would propose to use the

distinct CCRs for new standard cost centers described abov e in the calculation of the OPPS relative payment weights. As stat ed in the CY 2014 OPPS/ASC proposed rule (78 FR 43550), we have conducted our analysis and concluded that we should develop

distinct CCRs for each of the new cost centers and use them in ratese tting. Therefore, we began in the CY 2014 OPPS, and proposed to continue for the CY 2015 OPPS, to calculate the OPPS relative payment we ights using distinct CCRs for cardiac catheterization, CT scan, MRI, and implantable medical devices. Section XXI. of this final rule with comment period includes the impacts of calcula ting the CY 2015 OPPS relative payment weights using th ese new standard cost centers.CMS-1613-FC 79

Comment: A few commenters encourag ed CMS to ensure data quality and continue to test, refine, and improve its CCR analysis for CT scans and MRI. Response: We will continue to monitor the CCRs for these services.

After consideration of th e public comments we receive d, we are finalizing our proposal to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, MRI, and implant able medical devices for CY 2015 without

modification. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we finalized a policy to remove claims from provi ders that use a cost allocation method of “square feet” to calculate CCRs used to esti mate costs associated with the CT and MRI APCs. This change allows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the CCRs on which the OPPS relative payment weights are developed. In Table 2 below, we display CCR values for providers based on various cost allocation methods.

TABLE 2.—CCR STATISTICAL VALUES BASED ON USE OF DIFFERENT COST ALLOCATION METHODS

Cost Allocation Method CT MRI Median

CCR Mean CCR Median CCR Mean CCR All Providers 0.0464 0.0608 0.0901 0.1151 Square Feet Only 0.0370 0.0502 0.0787 0.1013 Direct Assign 0.0640 0.0740 0.1063 0.1294 Dollar Value 0.0555 0.0718 0.1046 0.1298 Direct Assign and Dollar Value 0.0554 0.0715 0.1047 0.1297

As part of this transitional policy to estimate the CT and MRI APC relative payment weights using only cost data from pr oviders that do not use “square feet” as theCMS-1613-FC 80

cost allocation statistic, we adopted a policy in the CY 2014 OPPS/ASC final rule with comment period that we will sunset this pol icy in 4 years once the updated cost report data become available for ratesetting purposes. We stated that we believe 4 years is sufficient time for hospitals that have not done so to transition to a more accurate cost

allocation method and for the related data to be available for ratesetting purposes. Therefore, in CY 2018, we will estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed. In Table 3 below, we display the impact of excl uding claims based on the “square feet” cost

allocation method from estimates of CT and MRI costs in CY 2015.CMS-1613-FC 81

TABLE 3.—PERCENTAGE CHANGE IN ESTIMATED COST FOR CT AND MRI APCs WHEN EXCLUDING CL AIMS FROM PROVIDERS USING “SQUARE FEET” AS THE CO ST ALLOCATION METHOD

CY 2015 APC CY 2015 APC Descriptor Percent Change 0283 Computed Tomography with Contrast 9.6%

0284 Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast 4.0% 0331 Combined Abdomen and Pelvis CT without Contrast 12.1% 0332 Computed Tomography without Contrast 14.5% 0333 Computed Tomography without Co ntrast followed by Contrast 12.3% 0334 Combined Abdomen and Pelvis CT with Contrast 10.1%

0336 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast 7.5%

0337 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast f 6.4% 0383 Cardiac Computed Tomographic Imaging 3.6% 0662 CT Angiography 10.3% 8005 CT and CTA without Contrast Composite 12.8% 8006 CT and CTA with Contrast Composite 9.4% 8007 MRI and MRA without Contrast Composite 6.7% 8008 MRI and MRA with Contrast Composite 6.9%

Comment: A few commenters supported CMS’ proposal to continue removing claims from providers that use the “square feet” cost allocation method from the cost model. One commenter suggested that CMS continue removing claims from providers that use this method in CY 2018 and beyond. Response: We thank the commenters for their support and are finalizing this policy as proposed. We will continue to only in clude cost data from providers that do not use “square feet” as the costallocation statistic in re lative payment weights through CY 2017. For CY 2018 and beyond, we will estimate the CT and MRI APC relativeCMS-1613-FC 82

payment weights using cost data from all providers, regardless of the cost allocation statistic employed. In summary, as we proposed, we are con tinuing to use data from the “Implantable Devices Charged to Patients” and “Cardiac Cathet erization” cost centers to create distinct CCRs for use in calculating the OPPS relativ e payment weights for the CY 2015 OPPS. For the “Magnetic Resonance Imaging (MR I)” and “Computed Tomography (CT) Scan”

APCs identified in Table 3 of this final ru le with comment period, we are continuing our policy of removing claims from cost modeling for those providers using “square feet” as

the cost allocation statistic for CY 2015. 2. Data Development Process and Calculation of Costs Used for Ratesetting

In this section of this fi nal rule with comment period, we discuss the use of claims to calculate the OPPS payment rates for CY 2015. The Hospital OPPS page on the CMS

Web site on which this final rule with comment period is posted ( http://www.cms.gov/Medicare/M edicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html ) provides an accounting of claims used in the development of the final payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below

in this section we discuss the file of claims th at comprises the data set that is available for purchase under a CMS data use agreement. The CMS Web site,http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html , includes information about purchasing the “OPPS Limited Data Set,” which now include s the additional variables previously available only in the OPPS Id entifiable Data Set, includi ng ICD-9-CM diagnosis codesCMS-1613-FC 83

and revenue code payment amounts. This file is derived from the CY 2013 claims that

were used to calculate the final payment rate s for the CY 2015 OPPS. In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process

described in the CY 2012 OPPS/ASC final ru le with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this po licy changed the cost metric on which the relative payments are based, the data proce ss in general remained the same, under the methodologies that we used to obtain appr opriate claims data and accurate cost information in determining estimated service cost. For CY 2015, as we proposed, we are continuing to use geometric mean costs to calculate the relative weights on which the CY 2015 OPPS payment rates are based. We used the methodology described in s ections II.A.2.a. throu gh II.A.2.f. of this final rule with comment period to calculate the costs we used to establish the relative weights used in calculating the OPPS payment rates for CY 2015 shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We refer re aders to section II.A.4. of th is final rule with comment period for a discussion of the conversion of APC costs to scaled payment weights. a. Claims Preparation For this final rule with comment peri od, we used the CY 2013 hospital outpatient claims processed through June 30, 2014, to calcu late the geometric mean costs of APCsCMS-1613-FC 84

that underpin the relative payment weights fo r CY 2015. To begin the calculation of the relative payment weights for CY 2015, we pu lled all claims for outpatient services

furnished in CY 2013 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatien t claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory tests for persons who are neither inpatients nor outpatients of the hospital). We then excluded claims with condition codes 04, 20, 21, and 77 because these are claims that providers submitted to Me dicare knowing that no payment would be made. For example, providers submit claims w ith a condition code 21 to elicit an official

denial notice from Medicare and document th at 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 Mari ana 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 123 million claims that contain hosp ital bill types paid

under the OPPS. 1. Claims that were not bill types 12 X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (H ospital--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.CMS-1613-FC 85

2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims w ith bill type 14X are laboratory specimen

claims. 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 hos pital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this final rule with comment period. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclus ive rate; those from hos pitals with obviously erroneous CCRs (greater than 90 or less th an 0.0001); and those fr om hospitals with overall ancillary CCRs that we re identified as outliers (t hat 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 outlier s if they exceeded +/- 3 st andard deviations from the geometric mean. We used a four-tiered hi erarchy of cost center CCRs, which is the

revenue code-to-cost center cr osswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS serv ices, 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 hi erarchy could apply. If no other cost center CCR could apply to th e revenue code on the claim, we used the hospital’s overall ancillary CCR for the revenue code in question as the default CCR. ForCMS-1613-FC 86

example, if a visit was reported under the c linic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the

clinic revenue code. The revenue code-to- cost center crosswalk is available for inspection on the CMS Web site at: http://www.cms.gov/Medicar e/Medicare-Fee-forService-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 hospi tals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Ma riana 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 HC PCS code. We moved to another file claims that contained only influenza a nd pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasona ble cost; therefore, these claims are not

used to set OPPS rates. We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied ont o another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometri c mean and median cost and a per dayCMS-1613-FC 87

arithmetic and geometric mean and medi an cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment ra tes, such as a unit-to-day ratio for drugs. Prior to CY 2013, our payment policy fo r nonpass-through separately paid drugs and biologicals was based on a redistribut ion methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the O PPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute th e pharmacy overhead costs from packaged drugs to separately paid drugs. For the CY 2014 OPPS, we continued the CY 2013 payment policy for separately payable drugs and biologicals, and we are continuing this payment policy for CY 2015. We refer readers to section V.B.3. of th is final rule with comment period for a complete discussion of our CY 2015 final payment policy for separately paid drugs and biologicals.

We then removed line-items that we re not paid during claim processing, presumably for a line-item rejection or de nial. The number of edits for valid OPPS payment in the Integrated Outpatient C ode Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Codi ng Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payabl e services to set payment rates, we removed

line-items with an OPPS status indicator thatwere not paid during claims processing inCMS-1613-FC 88

the claim year, but have a status indicator of “S,” “T,” and “V” in the prospective year’s payment system. This logic preserves charges for services that woul d not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2014 that were assigned status indicator “C” in the claim year. It al so 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 sa me claim or the code otherwise violates claims processing edits. For CY 2015, as we proposed, we are c ontinuing the policy we implemented for

CY 2013 and CY 2014 to exclude line-item da ta for pass-through dr ugs and biologicals (status indicator “G” for CY 2013) and nonpa ss-through drugs and biologicals (status indicator “K” for CY 2013) where the char ges reported on the clai m for the line were either denied or rejected during claims pro cessing. Removing lines that were eligible for payment but were not paid ensures that we ar e 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 pa yment. 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 likel y 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 2014 O PPS/ASC final rule with comment period (78 FR 74849) of line-items with a status indica tor of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly re ported and, therefore, shouldCMS-1613-FC 89

not be used for ratesetting. We believe that removing lines with va lid status indicators that were edited and not paid during claims processing increase s the accuracy of the data used for ratesetting purposes. For the CY 2015 OPPS, as part of our continued packaging of clinical diagnostic laboratory tests, we also are ap plying the line item trim to these services if they did not receive payment in the claims year. Removi ng these lines ensures that, in establishing the CY 2015 OPPS relative payment weights, we appropriately allocate the costs associated with packaging these services. b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims (1) Splitting Claims For the CY 2015 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) We note that, under the proposed CY 2015 OPPS packaging policy (79 FR 40933), we proposed to delete status

indicator “X” and revise the titl e and description of status in dicator “Q1” to reflect that deletion, as discussed in secti ons II.A.3. and XI. of this final rule with comment period. We note that we also proposed to create stat us indicator “J1” to reflect the comprehensive APCs (C-APCs) discussed in section II.A.2.e. of this final rule with comment period. For CY 2015, we proposed to define major proced ures as any HCPCS code having a status indicator of “J1,” “S,” “T,” or “V,” define minor procedures as any code having a status indicator of “F,” “G,” “H,” “K ,” “L,” “R,” “U,” or “N,” a nd classify “other” procedures as any code having a status indi cator other than one that we have classified as major or minor. For CY 2015, we proposed to continue to assign status indicator “R” to blood andCMS-1613-FC 90

blood products; status indicator “U” to brachytherapy sources; st atus indicator “Q1” to all “STV-packaged codes;” status indicator “Q2” to all “T-p ackaged codes;” and status indicator “Q3” to all codes that may be paid through a composite APC based on composite-specific criteria or paid separatelythrough single code APCs when the criteria

are not met.

As discussed in the CY 2009 OPPS/AS C final rule with comment period (73 FR 68709), we established status indicato rs “Q1,” “Q2,” and “Q3” to facilitate

identification of the different categories of codes. As we proposed, we are treating these codes in the same manner for data purposes for CY 2015 as we have treated them since CY 2008. Specifically, we are continuing to ev aluate 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. Code s with status indicato r “Q1” or “Q2” are carried through the data either w ith status indicator “N” as p ackaged 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” si ngle 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 duri ng both the split and “p seudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in secti on II.A.2.f. of this final rule with comment period. Specifically, we divided the remaining claims into the following five groups:CMS-1613-FC 91

1. Single Procedure Major Claims: Cl aims with a single separately payable procedure (that is, status indicator “S,” “T ,” or “V” which includes codes with status indicator “Q3”); claims with status indicat or “J1,” which receive special processing for C-APCs, as discussed in section II.A.2.e. of th is final rule with co mment period; claims with one unit of a status indicator “Q1” c ode (“STV-packaged”) where there was no code with status indicator “S,” “T,” or “V” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“ T-packaged”) where there was no code with a

status indicator “T” on the sa me claim on the same date. 2. Multiple Procedure Major Claims: Cl aims with more than one separately payable procedure (that is, stat us indicator “S,” “T,” or “V ” 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 proc edure on the same claim with the same date of service (that is, another code with status indicator “S” or “V ”). We also include in this

set claims that contained one unit of one c ode 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: Clai ms with a single HCPCS code that was assigned status indicator “F,” “G,” “H,” “K ,” “L,” “R,” “U,” or “N” and not status indicator “Q1” (“STV-packaged”) or status indicator “Q2” (“T-packaged”) code.CMS-1613-FC 92

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 indi cator “Q1” (“STV-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” or “V” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q 1,” 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 c ontain no services pa yable under the OPPS (that is, all status indicators other than thos e listed for major or minor status). These

claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue code s 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. Clai ms that contain codes to which we have assigned status indicators “Q1” (“STV-packag ed”) 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 assi gned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major

files used in this final rule with comm ent period, depending on the specific composite

calculation.CMS-1613-FC 93

(2) Creation of “Pseudo” Single Procedure Claims To develop “pseudo” single procedure claims for this final rule with comment period, we examined both the multiple procedure major claims and the multiple procedure minor claims. We first examined the multiple major procedure claims for

dates of service to determine if we could break them into “pseudo” single procedure claims using the dates of service for all lines on the claim. If we could create claims with single major procedures by using dates of se rvice, we created a single procedure claim record for each separately payable procedure on a different date of service (that is, a “pseudo” single procedure claim). As proposed, we also use the bypass codes li sted in Addendum N to this final rule with comment period (which is available via the Internet on our Web site) and discussed

in section II.A.1.b. of this fina l rule with comment period to remove separately payable procedures which we determined contained lim ited or no packaged costs or that were otherwise suitable for inclusion on the bypass li st 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 “p seudo” single procedure claims. The final CY 2015 “overlap bypass codes” are listed in Adde ndum N to this final rule with comment period (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain pack aged services. The single procedure claim record that contained the other separate ly payable procedure (but no bypass code)CMS-1613-FC 94

retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by

the number of units on the line. If one unit of a single, separately payable procedure code

remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used. We then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.f.(5) of this final rule with comment period, were met. If the criteria for the imaging com posite APCs were met, we created a “single session” claim for the applicable imaging co mposite 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 pack aged 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 fo r use in setting the composite APC costs on which the CY 2015 OPPS relative payment weights are based. Having identified “single session ” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a singl e separately payable code remained on the claim. If so, we attributed the packaged co sts on the claim to the si ngle unit of the single remaining separately payable code other thanthe bypass code to create a “pseudo” singleCMS-1613-FC 95

procedure claim. We also identified line -items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to us e more claims data fo r ratesetting purposes. As we proposed, we also examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes withstatus indicator “Q1” (“STV-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indi cator “Q1” HCPCS code that had the highest CY 2014 relative payment weight, and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code w ith a status indicator of “Q1.” We then packaged all costs for the following into a sing le cost for the “Q1” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” si ngle procedure claim

for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2014 relative payment weight; other codes wi th 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 st atus indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for furthe r data processing and considered this claim as a major procedure clai m. We used this claim in the calculation of the APC geometric mean cost for th e status indicator “Q1” HCPCS code. Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or mu ltiple units of a single code with status indicator “Q2,” we selected the status indi cator “Q2” HCPCS code that had the highest CY 2014 relative payment weight and set the uni ts to one on that HCPCS code to reflect our policy of paying only one unit of a code w ith a status indicator of “Q2.” We thenCMS-1613-FC 96

packaged all costs for the following into a sing le cost for the “Q2” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” si ngle procedure claim

for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2014 relative payment 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 st atus indicator of “N” to the status indicator

of the APC to which the selected code was a ssigned, and we consider ed this claim as a major procedure claim. If a multiple procedure minor claim contai ned multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest re lative payment weight for CY 2014 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 proce dure claim for that code: ad ditional units of the status indicator “Q2” HCPCS code with the highe st CY 2014 relative pa yment weight; other codes with status indicator “Q2;” codes with status indicator “Q 1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2014 relative payment wei ghts. If a status indicator “Q1” HCPCS code had a higher CY 2014 relative payment we ight, it became the primary code for the simulated single bill process. We changed th e status indicator for the selected status indicator “Q2” (“T-packaged”) code from a da ta status indicator of “N” to the statusCMS-1613-FC 97

indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim. We then applied our process for creati ng “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure claims from them, if they met the criteria for single procedure claims. Conditionally packaged c odes are identified using status indicators “Q1” and “Q2,” and are described in secti on XI.A. of this final rule with comment period. Lastly, we excluded those claims that we were not able to convert to single procedure claims even after applying all of the techniques for creation of “pseudo” single procedure claims to multiple procedure majo r claims and to multiple procedure minor claims. As has been our practice in recent ye ars, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral a nd that contained the bilateral modifier (Modifier 50 (Bilateral pr ocedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that hospitals

billed the code with a unit of one. We proposed to continue to apply the methodology described above for the purpose of creating “pseudo” single pro cedure claims for the CY 2015 OPPS. We did not receive any public comment s on this proposal. Therefore, we are finalizing our proposal to c ontinue to apply the methodol ogy described above for the purpose of creating ‘‘pseudo’’ single pr ocedure claims for the CY 2015 OPPS. c. Completion of Claim Records and Geometric Mean Cost Calculations (1) General ProcessCMS-1613-FC 98

We then packaged the costs of pack aged HCPCS codes (codes with status

indicator “N” listed in Addendum B to this fi nal rule with comment period (which is

available via the Internet on the CMS Web s ite) 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 p ackaged revenue codes in Tabl e 4 below that appeared on

the claim without a HCPCS code into the costof the single major procedure remaining on the claim. For a more complete discussi on of our final CY 2015 OPPS packaging policy,

we refer readers to section II.A.3. of this final rule with comment period.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopt ed an APC Panel recommendation that

CMS should review the final lis t of packaged revenue codes for consistency with OPPS policy and ensure that future versions of th e I/OCE edit accordingly. As we have in the past, and as we proposed, we ar e continuing to compare the fina l list of packaged revenue codes that we adopt for CY 2015 to the reve nue codes that the I/OCE will package for CY 2015 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 liste d in Table 2 of the CY 2009 OPPS/ASC proposed rule with the mo st current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment on the CY 2010 proposed list of packaged revenue codes.CMS-1613-FC 99

For CY 2015, as we did for CY 2014, we reviewed the changes to revenue codes that were effective during CY 2013 for purposes of determining the charges reported with

revenue codes but without HCPCS codes thatwe proposed to package for CY 2015. We believe that the charges reported under the revenue codes listed in Table 4 of the proposed rule continue to reflect ancillar y and supportive services for which hospitals report charges without HCPCS codes. Theref ore, for CY 2015, we proposed to continue to package the costs that we derive fro m the charges reported without HCPCS codes under the revenue codes displayed in Table 4 of the proposed rule for purposes of calculating the geometric mean costs on which the final CY 2015 OPPS/ASC payment

rates are based.

Comment: One commenter recommended that CMS include, in the list of packaged revenue codes, revenue code s 0331 (Radiology- Therapeutic and/or Chemotherapy Administration; Chemothera py Admin - Injected), 0332 (RadiologyTherapeutic and/or Chemothe rapy Administration; Chemot herapy Admin - Oral), 0335 (Radiology- Therapeutic and/or Chemothe rapy Administration; Chemotherapy Admin - IV), 0360 (Operating Room Services; Gene ral Classification), 0361 (Operating Room Services; Minor Surgery), 0362 (Operating Room Services; Organ Tran splant- Other than Kidney), 0369 (Operating Room Services; Other OR Services), 0410 (Respiratory Services; General Classificati on), 0412 (Respiratory Services ; Inhalation Services), 0413 (Respiratory Services; Hype rbaric Oxygen Therapy), 0419 (Respiratory Services; Other Respiratory Services), 0722 (Labor Room/D elivery; Delivery Room), 0724 (Labor Room/Delivery; Birthing Center), 0 729 (Labor Room/Delivery; Other Labor Room/Delivery), 0760 (Specialty Services; General Classification), 0761 (SpecialtyCMS-1613-FC 100

Services; Treatment Room), 0762 (Specialty Services; Observation), 0769 (Specialty Services; Other Specialty Services), 0770 (Preventive Care Services; General Classification). The commenter stated that ch arge data on claim lines with these revenue codes is currently included in OPPS modeling, and including them when they appear without a HCPCS would more accuratelycapture the costs from these lines. Response: On the OPPS revenue code-t o-cost center modeling crosswalk that we make available online, we indicate which revenue codes we believe are appropriately used for OPPS ratesetting purposes. As the commenter noted, coded lines billed using these specific revenue codes are already cu rrently included for ratesetting purposes. While we note that including the packaged costs associated with uncoded lines billed with these revenue codes has a minimal impact on the relative payment weights, we believe that including them when establis hing the OPPS relative payment weights would better estimate the full range of costs for serv ices to which these lines are packaged. Including the uncoded lines and capturing th e costs billed using these revenue codes would generally be appropriate in establishing the OPPS relative payment weights and our ratesetting methodology. Therefore, we ha ve updated Table 4 which appeared in the proposed rule (79 FR 40935 through 40936) (also Ta ble 4 in this final rule with comment period) to reflect the additi on of these packaged revenue codes and incorporated these changes into our cost modeling logic. We will also ensure that this list corresponds with that used for I/OCE purposes.

After consideration of th e public comments we received, we are finalizing the proposed packaged revenue codes for CY 2015, which are identified in Table 4 below,

with modification to include the revenue codes described earlier in this section.CMS-1613-FC 101

TABLE 4.—CY 2015 PACKAG ED REVENUE CODES

Revenue

Code Description 250 Pharmacy; General Classification 251 Pharmacy; Generic Drugs 252 Pharmacy; Non-Generic Drugs 254 Pharmacy; Drugs Incident to Other Diagnostic Services 255 Pharmacy; Drugs Incident to Radiology 257 Pharmacy; Non-Prescription 258 Pharmacy; IV Solutions 259 Pharmacy; Other Pharmacy 260 IV Therapy; General Classification 261 IV Therapy; Infusion Pump 262 IV Therapy; IV Therapy/Pharmacy Svcs 263 IV Therapy; IV Therapy/Drug/Supply Delivery 264 IV Therapy; IV Therapy/Supplies 269 IV Therapy; Other IV Therapy 270 Medical/Surgical Supplies and Devices; General Classification 271 Medical/Surgical Supplies a nd Devices; Non-sterile Supply 272 Medical/Surgical Supplies and Devices; Sterile Supply 275 Medical/Surgical Supplies and Devices; Pacemaker 276 Medical/Surgical Supplies a nd Devices; Intraocular Lens 278 Medical/Surgical Supplies and Devices; Other Implants 279 Medical/Surgical Supplies and Devices; Other Supplies/Devices 280 Oncology; General Classification 289 Oncology; Other Oncology 331 Radiology- Therapeutic and/or Chemot herapy Administration; Chemotherapy Admin – Injected 332 Radiology- Therapeutic and/or Chemot herapy Administration; Chemotherapy Admin – Oral 335 Radiology- Therapeutic and/or Chemot herapy Administration; Chemotherapy Admin – IV 343 Nuclear Medicine; Diagnos tic Radiopharmaceuticals 344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 360 Operating Room Services; General Classification 361 Operating Room Services; Minor Surgery 362 Operating Room Services; Organ Transplant- Other than Kidney 369 Operating Room Services; Other OR Services 370 Anesthesia; General Classification 371 Anesthesia; Anesthesia Incident to Radiology 372 Anesthesia; Anesthesia Inci dent to Other DX Services 379 Anesthesia; Other Anesthesia 390 Administration, Processing and Stor age for Blood and Blood Components; General ClassificationCMS-1613-FC 102

Revenue

Code Description

392 Administration, Processing and Stor age for Blood and Blood Components; Processing and Storage 399 Administration, Processing and Stor age for Blood and Blood Components; Other Blood Handling 410 Respiratory Services; General Classification 412 Respiratory Services; Inhalation Services 413 Respiratory Services; Hyperbaric Oxygen Therapy 419 Respiratory Services; Other Respiratory Services 621 Medical Surgical Supplies – Extens ion of 027X; Supplies Incident to Radiology 622 Medical Surgical Supplies – Extensi on of 027X; Supplies Incident to Other DX Services 623 Medical Supplies – Extension of 027X, Surgical Dressings 624 Medical Surgical Supplies – Exte nsion of 027X; FDA Investigational Devices 630 Pharmacy – Extension of 025X; Reserved 631 Pharmacy – Extension of 025X; Single Source Drug 632 Pharmacy – Extension of 025X; Multiple Source Drug 633 Pharmacy – Extension of 025X; Restrictive Prescription 681 Trauma Response; Level I Trauma 682 Trauma Response; Level II Trauma 683 Trauma Response; Level III Trauma 684 Trauma Response; Level IV Trauma 689 Trauma Response; Other 700 Cast Room; General Classification 710 Recovery Room; General Classification 720 Labor Room/Delivery; General Classification 721 Labor Room/Delivery; Labor 722 Labor Room/Delivery; Delivery Room 724 Labor Room/Delivery; Birthing Center 729 Labor Room/Delivery; Ot her Labor Room/Delivery 732 EKG/ECG (Electrocardiogram); Telemetry 760 Specialty Services; General Classification 761 Specialty Services; Treatment Room 762 Specialty services; Observation Hours 769 Specialty Services; Ot her Specialty Services 770 Preventive Care Servic es; General Classification 801 Inpatient Renal Dialysis; Inpatient Hemodialysis 802 Inpatient Renal Dialysis; Inpatien t Peritoneal Dialysis (Non-CAPD) 803 Inpatient Renal Dialysis; Inpatien t Continuous Ambulatory Peritoneal Dialysis (CAPD) 804 Inpatient Renal Dialysis; Inpatient C ontinuous Cycling Peritoneal Dialysis (CCPD)CMS-1613-FC 103

Revenue

Code Description

809 Inpatient Renal Dialysis; Other Inpatient Dialysis 810 Acquisition of Body Component s; General Classification 819 Acquisition of Body Co mponents; Other Donor 821 Hemodialysis-Outpatient or Home; He modialysis Composite or Other Rate 824 Hemodialysis-Outpatient orHome; Maintenance – 100% 825 Hemodialysis-Outpatient or Home; Support Services 829 Hemodialysis-Outpatient or Home; Other OP Hemodialysis 942 Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training 943 Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation 948 Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation

In accordance with our longstanding policy, we proposed to continue to exclude: (1) claims that had zero costs after summi ng all costs on the claim; and (2) claims containing packaging flag number 3. Effectiv e for services furnished after July 1, 2014, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service withstatus indicator “S” or “T” (a major separately payable service under the OPPS) for which the Medicare Administrative Contractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the re lative payment weight of the APC to which each code was assigned. We do not believe th at 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 paymen t) on the assumption that, where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. We proposed to c ontinue these processes for the CY 2015 OPPS.CMS-1613-FC 104

For the remaining claims, we proposed to then standardize 60 pe rcent of the costs of the claim (which we have previously dete rmined 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 pr oposed rule and final rule with comment period contains the formula we use to standardiz e the total cost for the effects of the wage index. As has been our policy since the ince ption of the OPPS, we proposed to use the pre-reclassified wage indices for standardiz ation because we believe that they better

reflect the true costs of items and services in the area in which the hospital is located than the post-reclassification wage indices and, therefore, would result in the most accurate unadjusted geometric mean costs. We propos ed to use these pre-reclassified wage indices for standardization using the new OM B labor market area delineations described

in section II.C. of this fina l rule with comment period. In accordance with our longstanding practi ce, we also proposed to exclude single and “pseudo” single procedure claims for whic h 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 118 m illion claims were left. Using these approximately 118 million claims, we crea ted approximately 100 million single andCMS-1613-FC 105

“pseudo” single procedure claims, of which we used approximately 51 million single bills (after trimming out approximately 1 milli on claims as discussed in section II.A.1.a. of this final rule with comment period) in the CY 2015 geometric mean cost development and ratesetting. As discussed above, the OPPS has histor ically developed th e relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS and the CY 2014 OPPS, we calculated the APC re lative payment weights using geometric mean costs, and we are continuing this pr actice for CY 2015. Therefore, the following

discussion of the 2 times rule violation a nd the development of the relative payment weight refers to geometric means. For more detail about the CY 2015 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to

section II.A.2.f. of this fina l rule with comment period. We proposed to use these claims to cal culate the CY 2015 geometric mean costs for each separately payable HCPCS code a nd each APC. The comparison of HCPCS code-specific and APC geometric mean costs de termines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides th at, subject to certai n 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 (o r mean cost, if elected by the Secretary) for an item or service within the group is more th an 2 times greater than the lowest median cost (or mean cost, if so elec ted) for an item or service within the same group (the 2 times rule). While we have histori cally applied the 2 times rule based on median costs, in the

CY 2013 OPPS/ASC final rule with comment period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS relative payment weights based on geometric meanCMS-1613-FC 106

costs, we also applied the 2 times rule ba sed on geometric mean costs. For the CY 2015 OPPS, we are continuing to develop th e APC relative payment weights based on geometric mean costs. We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consid er codes that have more than 1,000 single major claims or codes that ha ve both greater th an 99 single major claims and contribute at least 2 percent of the singl e major claims used to establish the APC geometric mean cost to be significant. This longstanding de finition of when a HCPC S 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 si ngle 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 me thod of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our CY 2015 policy to continue to base the relative payment weights on geometric meancosts, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent w ith their use in the median-based cost methodology. Unlisted

codes are not used in establis hing the percent of claims cont ributing to the APC, nor are

their costs used in the calculation of the AP C geometric mean. Finally, we reviewed the geometric mean costs for the services for wh ich we pay separately under this final rule with comment period, and we reassigned HC PCS codes to different APCs where it wasCMS-1613-FC 107

necessary to ensure clini cal and resource homogeneity within the APCs. The APC geometric means were recalculated after we r eassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means a nd the APC geometric means were weighted

to account for the inclusion of multiple units of the bypa ss codes in the creation of “pseudo” single procedure claims. We did not receive any public co mments on our proposed CY 2015 methodology for calculating the geometric mean costs upon which the CY 2015 OPPS payment rates are based, and therefore are fina lizing our methodology as proposed. As we discuss in sections II.A.2.d., II.A.2.f ., and VIII.B. of this final rule with comment period, in some cases, APC geomet ric mean costs are calculated using variations of the process outlined above. Sp ecifically, section II.A.2.d. of this final rule with comment period addresses the calculati on of single APC criteria-based geometric

mean costs. Section II.A.2.f . of this final rule with comment period discusses the calculation of composite APC criteria-based ge ometric mean costs. Section VIII.B. of this final rule with comment period a ddresses the methodology for calculating the geometric mean costs for part ial hospitalization services. (2) Recommendations of the Pa nel Regarding Data Development At the August 2014 meeting of the Panel, we discussed changes in APC geometric mean cost between the CY 2015 Proposed OPPS and the CY 2014 Final OPPS, the CY 2015 proposed comprehensive APC policy, and a study examining the packaged codes most commonly app earing with clinic visit codes.CMS-1613-FC 108

At the August 2014 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel’s data-related recommendations and our responses

follow.

Recommendation: The Panel recommends that the work of the Data

Subcommittee continue. CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that Jim Nelson serve as the Chair of

the Data Subcommittee. CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS provide the Panel with a list

of APCs for which costs fluctu ate by more than 20 percent relative to the APCs in the most recent prior rulemaking cycle. CMS Response: We are accepting this recommendation and will provide this information regarding fluctuating APC co sts at the next HOP Panel meeting. d. Calculation of Single Pro cedure APC Criteria-Based Costs (1) Device-Dependent APCs Historically, device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implan ted or used to perform the procedure. The standard methodology for calculating device-dep endent APC costs utilizes claims data that generally reflect the full cost of the required device by us ing only the subset of single procedure claims that pass th e procedure-to-device and devi ce-to-procedure edits; do not contain token charges (less than $1.01) for devices; a nd, until January 1, 2014, did not

contain the “FB” modifier si gnifying that the device was fu rnished without cost to theCMS-1613-FC 109

provider, or where a full credit was receive d; and do not contain the “FC” modifier signifying that the hospital recei ved partial credit for the device . For a full history of how we have calculated payment rates for device -dependent APCs in previous years and a detailed discussion of how we developed th e standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to -device edits and device-to-procedure edits used in ratesetting for device-dependent APCs are available in

the CY 2005 OPPS final rule with comment period (69 FR 65761 through 65763) and the

CY 2007 OPPS/ASC final rule with co mment period (71 FR 68070 through 68071). In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74859), we finalized a policy to define 29 de vice-dependent APCs as single complete services and to assign them to comprehensiv e APCs (C-APCs) that provide all-inclusive payments for those services, but we delaye d implementation of this policy until CY 2015 (78 FR 74862). This policy is a further step toward improving the prospective nature of our payments for these services where the co st of the device is relatively high compared

to the other costs that contri bute to the cost of the serv ice. Table 5 of the CY 2014

OPPS/ASC final rule with comm ent period provided a list of the 39 APCs recognized as device-dependent APCs and identified the 29 device-dependent APCs that would have been converted to C-APCs. In addition, in the CY 2014 OPPS/ASC final rule with comment period, we finalized a policy for the treatment of the remaining 10 device-dependent APCs that applied our standard APC ratesetting methodology to calculate the CY 2014 payment rates for these APCs, but im plementation of the entire policy was delayed until CY 2015.CMS-1613-FC 110

In the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557) and in the CY 2015 OPPS/ASC proposed rule ( 79 FR 40937 through 40938), for CY 2015, we proposed to no longer implement procedure-to-d evice edits and device -to-procedure edits for any APC. Under this proposed policy, wh ich was discussed but not finalized in the

CY 2014 OPPS/ASC final rule with co mment period (78 FR 74857 through 74858), hospitals are still expected to adhere to the guidelines of correct coding and append the correct device code to the claim, when app licable. However, claims would no longer be returned to providers when specific procedur e and device code pairings do not appear on

a claim. As we stated in both the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74858), we believe that this is appropriate because of hospitals’ multiyear experience in coding and reporting charges for medical device implantation procedures. We also believe that the C-APCs will reliably reflect the cost of the devices

as the C-APCs will include all costs on the cl aim (except for the few categories of items

and services that are excluded from the co mprehensive APC policy). Therefore, we do not believe that the burden imposed upon hospita ls to adhere to th e procedure-to-device edits and device-to-procedure edits and the burden imposed upon the Medicare program

to maintain those edits continue to be neces sary. As with all other items and services recognized under the OPPS, we expect hosp itals to code and report their costs appropriately, regardless of whether ther e are claims processing edits in place. The CY 2015 comprehensive APC policy that we proposed in the CY 2015 OPPS/ASC proposed rule consolid ates and restructures the 39 current device-dependent APCs into 26 (of the total 28) proposed C-APCs, which were listed in Table 5 of theCMS-1613-FC 111

proposed rule. The final CY 2015 comprehens ive APC policy is discussed in section

II.A.2.e. of this final rule with comment period. As a result of the final CY 2015 comprehensive APC policy, only 3 of the current 39 device-dependent APCs will remain

in the CY 2015 OPPS because all other device- dependent APCs are being converted to C-APCs. All of the remaining device-depende nt APCs were either deleted due to the

consolidation and restru cturing of these APCs or they were converted to C-APCs. In conjunction with the conversion of almost a ll of the 39 device-dependent APCs into C-APCs, and as discussed in the CY 2014 O PPS/ASC final rule with comment period (78 FR 74857 through 74858), in the CY 2015 O PPS/ASC proposed rule, we proposed to no longer use procedure-to-device edits a nd device-to-procedure edits for any APC

because we continue to believe that the el imination of device-to-procedure edits and procedure-to-device edits is appropriate c onsidering the experien ce that hospitals now have in coding and reporting these claims fu lly and, for the more costly devices, the CAPCs will reliably reflect the cost of the devi ce if it is included anywhere on the claim. While we believe that device-to-procedur e edits and procedure- to-device edits are no longer necessary, we are sensitive to the conc erns raised by stakeholders in the past

about the costs of devices bei ng reported and captured. In lig ht of these concerns, in the CY 2015 OPPS/ASC proposed rule (79 FR 40937 through 40938), we proposed to create claims processing edits that require any of the device codes used in the previous device-to-procedure edits for device-depe ndent APCs to be present on the claim whenever a procedure code assigned to any of the former device-dependent APCs (most of which are being converted to C-APCs) is re ported on the claim to ensure that device costs are captured by hospitals. We stated th at we expect that hospitals would use anCMS-1613-FC 112

appropriate device code consistent with correct coding in order to ensure that device costs are always reported on the claim, so that cost s are appropriately captured in claims that CMS uses for ratesetting. Comment: The majority of commenters requested that CMS maintain device-to-procedure and procedur e-to-device edits in order to ensure continued complete and accurate cost reporting by hospi tals. One commenter recommended that CMS adopt its proposal to require any appropriate device code used in the previous device-to-procedure edits to be present on the claim, if CMS discontinues the current edits and educates hospitals on the continued need to report the actual device used in the procedure for accurate ratesetting. One comm enter was cautiously optimistic that CMS’ proposal requiring any appropria te device code used in the previous device-to-procedure edits to be present on the claim for most comprehensive APCs could promote complete reporting in a potentially less prescriptiv e way for hospitals. Another commenter believed CMS’ proposed policy change would result in “ridiculous ” combinations of device and procedure codes for some services an d thus would result in invalid mean costs for the procedures. Other commenters r ecommended that CMS modify its proposed policy to incorporate edit logic that will allo w exceptions for comprehensive APCs that do not require device codes to be reported with every assigned procedural code. One

commenter recommended that the claims edits be implemented initially on a 1-year trial/interim basis. Other commenters sugge sted that CMS eliminate the device claims processing edits altogether. Response: We continue to believe thatthe elimination of device-to-procedure edits and procedure-to-device edits is appr opriate due to the e xperience hospitals nowCMS-1613-FC 113

have in coding and reporting these claims full y. More specifically, for the more costly devices, we believe the C-APCs will reliably refl ect the cost of the device if charges for the device are included anywhere on the cl aim. We remind comme nters that, under our proposed policy, hospitals would st ill be expected to adhere to the guidelines of correct coding and append the correct device code to th e claim when applicable. We also remind commenters that, as with all other items and services recognized under the OPPS, we expect hospitals to code and report their co sts appropriately, regardless of whether there are claims processing edits in place. We do not believe that our proposed policy will

result in ridiculous combinations of device a nd procedure codes for some services, as this would require deliberate miscoding by hospita ls, which we do not believe would result from this change to the device code reporting requirements. We continue to expect that hospitals would use an appropriate device code consistent with correct coding in order to

ensure that device costs are al ways reported on the claim, so that costs are appropriately captured in claims that CMS uses for ratesetting. While we believe that device-to-procedure edits and procedure-to-device edits are no longer necessary at this time, we are sensitive to commenters’ concerns that all relevant costs for the APCs currently recognized as device -dependent APCs are appropri ately included in the claims that CMS will use for ratesetting. In light of those concerns, we be lieve creating a claims processing edit requiring a device code to be present on the claim whenever a procedure code from the APCs currently recognized as a device-dependent APCs will help to ensure continued complete and accurate cost report ing by hospitals. Device edits will not apply to procedures assigned to C-APCs that eith er do not use implantable medical devices or procedures that do not have device-to-proced ure or procedure-to-dev ice edits assigned toCMS-1613-FC 114

them currently for CY 2014. This will en sure that the proposed device edit policy (requiring only that any device code be reported on a claim containing a procedure assigned to one of the formerly device-d ependent APCs) will only apply to those procedures that currently have device-to-pro cedure or procedure-to-device edits currently assigned to them.

After consideration of th e public comments we receive d, we are finalizing our proposal to no longer implement specific pr ocedure-to-dev ice and device-to-procedure edits for any APC. We also are finalizing our proposal to create claims processing edits that require any of the device codes used in the prev ious device-to-procedure edits to be present on the claim whenever a procedur e code assigned to any of the current device-dependent APCs (that remain after th e consolidation and re structuring of these APCs) listed in Table 5 below is reported on the claim to ensure that device costs are captured by hospitals. CMS will monitor the claims data to ensure that hospitals continue reporting appropriate device codes on the cl aims for the formerly device-dependent APCs. We note that while we proposed to make all 26 of the APCs listed in Table 5 C-APCs for CY 2015, in section II.A.2.e. of th is final rule with comment period, we are not finalizing our proposal to recognize APCs 0427, 0622, and 0652 as C-APCs. While APCs 0427, 0622, and 0652 will not be recognizedas comprehensive APCs for CY 2015, our finalized device edit policy will apply to these 3 APCs, as these 3 APCs are formerly device-dependent APCs. The term “device-dependent APC” will no longer be employed beginning in CY 2015. We will refer to APCs with a device offset of more than 40 percent as “device-intensive” APCs. Device-intensive APCs will be subject to the no cost/full credit and partial credit device pol icy. For a discussion of device-intensiveCMS-1613-FC 115

APCs and the no cost/full cr edit and partial credit device policy, we refer readers to

section IV.B. of this final rule with commentperiod. For a discussion of ASC procedures designated as device intensive, we refer reader s to section XII.C.1.c. of this final rule with comment period. TABLE 5.—APCs THAT WILL REQUIRE A DEVICE CODE TO BE REPORTED ON A CLAIM WHEN A PR OCEDURE ASSIGNED TO ONE OF THESE APCs IS REPORTED

APC APC Title 0039 Level III Neurostimulator 0061 Level II Neurostimulator 0083 Level I Endovascular 0084 Level I EP 0085 Level II EP 0086 Level III EP 0089 Level III Pacemaker 0090 Level II Pacemaker 0107 Level I ICD 0108 Level II ICD 0202 Level V Female Reproductive 0227 Implantation of Drug Infusion 0229 Level II Endovascular 0259 Level VII ENT Procedures 0293 Level IV Intraocular 0318 Level IV Neurostimulator 0319 Level III Endovascular 0384 GI Procedures with Stents 0385 Level I Urogenital 0386 Level II Urogenital 0425 Level V Musculoskeletal 0427 Level II Tube/Catheter 0622 Level II Vascular Access 0648 Level IV Breast Surgery 0652 Insertion of IP/Pl. Cath. 0655 Level IV PacemakerCMS-1613-FC 116

(2) Blood and Blood Products Since the implementation of the OPPS inAugust 2000, we have made separate payments for blood and blood pr oducts through APCs rather th an packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood product s, as well as for the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs. In the CY 2015 OPPS/ASC proposed rule (79 FR 40938), for CY 2015, we proposed to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes act ual 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 b een 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 si gnificant difference in CCRs fo r those hospitals with and without blood-specific cost cen ters, and past public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimati on of the true hospital costs for blood and blood products. Specifically, inorder to address the differences in CCRs and to better reflect hospitals ’ costs, we proposed to conti nue to simulate blood CCRs for each hospital that does not report a blood cost center by calculati ng the ratio of the blood-specific CCRs to hospitals’ overall CCRs for those hospitals th at do report costs and charges for blood cost centers. We proposed to apply this mean ratio to the overall CCRs of hospitals not reporting costs and char ges for blood cost centers on their costCMS-1613-FC 117

reports in order to simulate blood-specifi c CCRs for those hospitals. We proposed to calculate the costs upon which the proposed CY 2015 payment rates for blood and blood products are based using the actual blood-spec ific 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 cost s and charges for a blood cost center. Comment: Commenters supported the proposal to continue to separately pay for blood and blood products using a blood-specific CCR methodology. Response: We appreciate the commenters’ support.

After consideration of th e public comments we receive d, we are finalizing our proposal to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes act ual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. We continue to believe that the hosp ital-specific simula ted blood-specific CCR methodology better responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulti ng to the overall hospital CCR or applying an average blood-specific CCR across hospitals . Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we believe that it yields more accurate es timated costs for these products. We continue to believe that this methodology in CY 2015 will result in costs for blood and blood products that appropriately reflect the relative estimated co sts of these products for hospitals without blood cost centers and, th erefore, for these blood products in general.CMS-1613-FC 118

We note that, as discussed in secti on II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period and this final rule with comment period, we established comprehensive APCs that will provide all-inclusive payments for certain device-dependent procedures. Under this po licy, we include the costs of blood and blood products when calculating the overall costs of these comprehensive APCs. We proposed to continue to apply the blood-specific CCR methodology described in this section when calculating the costs of the blood and blood produc ts that appear on cl aims with services assigned to the comprehensive APCs (79 FR 40939). Because the costs of blood and blood products will be reflected in the overall costs of the comprehensive APCs (and, as a result, in the final payment rates of the co mprehensive APCs), we proposed to not make separate payments for blood and blood products when they appear on the same claims as services assigned to the comprehensive APCs (79 FR 40939). We did not receive any public comments on this proposal and are finalizing the policy as proposed. We refer readers to Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) for the final CY 2015 payment rates for blood and blood products (whi ch 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 ru le (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood pr oducts, we refer readers to the CY 2008

OPPS/ASC final rule with comm ent period (72 FR 66807 through 66810). (3) Brachytherapy Sources Section 1833(t)(2)(H) of the Act mandates the creation of additional groups of

covered OPD services that cla ssify devices of brachytherapy consisting of a seed or seedsCMS-1613-FC 119

(or radioactive source) (“brachytherapy sources”) separately from other services or groups of services. The statut e provides certain criteria fo r the additional groups. For the history of OPPS payment for brachytherapy sour ces, we refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC fina l rule with comment period (77 FR 68240 through 68241). As we have stated in prio r OPPS updates, we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons (77 FR 68240). The general OPPS 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 pe r source across hospita ls by averaging the extremely high and low values, in contrast to payment based on hospitals’ charges adjusted to costs. We believe that the OPPS prospective payment methodology, as opposed to payment based on hospitals’ charge s adjusted to cost, also would provide hospitals with incentives for efficiency in the provision of brachytherapy services to Medicare beneficiaries. Moreover, this approach is consistent with our payment methodology for the vast majority of items and services paid under the OPPS. We refer

readers to the CY 2008 OPPS/ ASC final rule with comm ent period (72 FR 66779 through 66787), the CY 2009 OPPS/ASC final rule w ith comment period (73 FR 68668 through 68670, the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 through 60537), the CY 2011 OPPS/ASC final rule w ith comment period (75 FR 71978 through 71981), the CY 2012 OPPS/ASC final rule w ith comment period (76 FR 74160 through 74163), the CY 2013 OPPS/ASC final rule w ith comment period (77 FR 68240 throughCMS-1613-FC 120

68242), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74860) for further discussion of the history of OPPS payment for brachytherapy sources. In the CY 2015 OPPS/ASC proposed rule (79 FR 40939 through 40940), for CY 2015, we proposed to use the costs derive d from CY 2013 claims data to set the proposed CY 2015 payment rates for brachytherapy sources, as we proposed to use to set the proposed payment rates for most other items and services that would be paid under the CY 2015 OPPS. We based the proposed payment rates for brachytherapy sources on the geometric mean unit costs for each sour ce, consistent with the methodology proposed for other items and services paid under the OPPS, as discussed in section II.A.2. of the proposed rule. We also proposed to c ontinue the other payment policies for brachytherapy sources that we finalizedand first implemented in the CY 2010

OPPS/ASC final rule with co mment period (74 FR 60537). We proposed to pay for the stranded and non-stranded not otherwise sp ecified (NOS) codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest st randed or non-stranded prospective payment rate for such sources, respec tively, on a per source basis (a s opposed to, for example, a per mCi), which is based on the policy we established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). We also proposed to continue the policy we first implemented in the CY 2010 OPPS/ ASC final rule with comment period (74 FR 60537) regarding payment for new br achytherapy sources for which we have no claims data, based on the same reasons we discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was delayed until January 1, 2010 by section 142 of Pub. L. 110-275). That policy is intended to enable us to assign new HCPCS codes for new brachytherapy sources to their own APCs, with prospectiveCMS-1613-FC 121

payment rates set based on our considerati on of external data and other relevant information regarding the expected costs of the sources to hospitals. The proposed CY 2015 payment rates for brachytherapy sources were included in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) and were identified w ith status indicator “U.” We invited public comment on this proposed policy and also requested

recommendations for new HCPCS codes to describe new brachytherapy sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. In the CY 2015 OPPS/ASC propos ed rule, we provided an appropriate address for receipt of these recommendations; th e address is repeated at the end of this

section. We indicated that we will continue to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis. Comment: Commenters expressed a nu mber of concerns regarding CMS’ outpatient hospital claims data used to se t prospective payment rates for brachytherapy sources. Commenters stated that high dose rate (HDR) brachytherapy devices decay over a 90-day period and are used to treat multiple patients during this time period. According to the commenters, the true cost of brac hytherapy sources depends on the number of patients treated by a hospital w ithin a 90-day period, as well as the number of treatments required and the intensity of the treatments. For this reason, the commenters believed

that it is difficult to establish fair a nd adequate prospectiv e payment rates for brachytherapy sources. Commen ters also noted that the brachytherapy source payment data continue to show huge variation in pe r unit cost across hospitals. In addition, the

commenters believed that CMS’ claims data contain rank order anomalies, causing theCMS-1613-FC 122

usual cost relationship between the high activity palladium-103 source (HCPCS code C2635, Brachytherapy source, non-stranded, high activity, palladium-103, greater than 2.2 mci (NIST) per source) and the low ac tivity palladium-103 sources (HCPCS codes C2640, Brachytherapy source, strande d, palladium-103, per source and C2641, Brachytherapy source, non-stranded, palladium -103, per source) to be reversed. The commenters noted that the proposed geometri c mean costs of the brachytherapy source HCPCS codes are approximately $26, $69, and $72, respectively. The commenters stated that stranded palladium-103 sources (HCPCS code C2640) always cost more than non-stranded palladium-103 sources (HCPCS code C2641), which is not reflected in the proposed rule claims data. Response: As stated above, we beli eve that geometric mean costs based on hospital claims data for brachytherapy sour ces have produced reasonably consistent per-source cost estimates over the past several years, comparable to the patterns we have observed for many other OPPS services whos e payments are set based upon relative payment weights from claims data. We believe that our per-source payment methodology specific to each source’s radioisoto pe, radioactive intensity, and stranded or non-stranded configuration, supplemented by pa yment based on the number of sources used in a specific clinical case, adequatelyaccounts for the major expected sources of variability across treatments. (We refer r eaders to the CY 208 OPPS final rule with comment period (72 FR 66782); the CY 2010 O PPS/ASC final rule with comment period (74 FR 60534); the CY 2011 OPPS/ASC final ru le with comment period (75 FR 71979);

the CY 2012 OPPS/ASC final rule with comment period (76 FR 74161); the CY 2013 OPPS/ASC final rule with comment peri od (77 FR 68241); and the CY 2014 OPPS/ASCCMS-1613-FC 123

final rule with comment period (78 FR 74861)). We believe that the CY 2013 brachytherapy source claims data used fo r CY 2015 ratesetting produce adequate payment for these services. Also, as we have explained previously, a prospective payment system relies upon the concept of av eraging, where the payment may be more or less than the estimated cost of providing a se rvice for a particular patient. With the exception of outlier cases, the payment for se rvices is adequate to ensure access to appropriate care. In the case of brachyt herapy sources for which the law requires separate payment groups, without packaging, th e costs of these individual items could be expected to show greater variation than so me other APCs under the OPPS because higher variability in costs for some component item s and services is not balanced with lower variability in costs for others, and becau se relative payment weights are typically estimated using a smaller set of claims. Nevertheless, we believe that prospective payment for brachytherapy sources based on geometric mean costs of the services reported on claims calculated according to th e standard OPPS methodology is appropriate and provides hospitals with the greatest incentives for efficiency in furnishing brachytherapy treatment. Under the budget neutral provision for the OPPS, it is the relativ ity of costs, not the absolute costs, that is important, and we believe that brachytherapy sources are appropriately paid according to the standa rd OPPS payment approach. Furthermore, some sources may have geometric mean cost s and payment rates based on 50 or fewer providers because it is not uncommon for O PPS prospective payment rates to be based on claims from a relatively small number of hosp itals that furnished the service in the year of claims data available for the OPPS update year. Fifty hospitals may report hundreds ofCMS-1613-FC 124

brachytherapy source services on claims for many cases and comprise the universe of providers using particular low volume s ources, for which we are required to pay separately by statute. Further, our met hodology for estimating geometric mean costs for brachytherapy sources utilizes all line-item ch arges for those sources, which allows us to use all hospital reported charge and estimated cost information to set payment rates for these items. Therefore, no brachytherapy sour ce claims are excluded from the estimate of geometric means costs. We have no reas on to believe that prospective payment rates based on claims data from those provid ers furnishing a particular source do not appropriately reflect the costof that source to hospitals . As for most other OPPS services, we note that the geometric mean costs for brachytherapy sources are based upon the costs of those providers sources in CY 2013. Hospitals individually determine their charge for an item or service, and one of Medicare’s primary requirements for setting a charge is that it be reasonably and consisten tly related to the cost of the item or service for that facility. (We refer readers to th e Medicare Provider Reimbursement Manual, Part I, Section 2203, which is availa ble on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/ Guidance/Manuals/Paper-Based-ManualsItems/CMS021929.html?DLPage=1&DLSort=0&DLSortDir=ascending .) We then estimate a cost from that charge using the hospital’s mo st recent Medicare hospital cost report data in our standard OPPS ratesetting process. We acknowledge that HDR brachytherapy sources such as HDR iridium-192 have a fixed active life and must be replaced ev ery 90 days. As a re sult, a hospital’s per treatment cost for the source would be depe ndent on the number of treatments furnished per source. The source’s cost must be amortiz ed over the life of the source. Therefore, when establishing charges for HDR iridium-192, we expect hospitals to project theCMS-1613-FC 125

number of treatments that would be provide d over the life of th e source and establish charges for the source accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 74162; 77 FR 68242; and 78 FR 74861). For most payable services under the OPPS, our practice is to esta blish prospective payment rates based on the geometric mean costs determined from hospitals’ claims data to provide incentives for efficient and cost effective delivery of these services. In the case of high-activity and low- activity iodine-125 sources, our CY 2013

claims data show that the hos pitals’ relative costs for the high-activity source are greater than the costs of the low-activity sources. As we have stated in the past, we do not have any information about the expected cost differential between high-activity and low-activity sources of various isotopes other than what is available in our claims and hospital cost report data (75 FR 71979; 76 FR 74162; 77 FR 68242; and 78 FR 74861). In the case of the relationship between hi gh-activity and low-activ ity palladium-103, our claims data consistently have shown higher average costs for low-activity palladium-103. For the high-activity palladium-103 sources (HCPCS code C2635), 8 hospitals reported this service in CY 2013, compared to 104 and 159 hospitals that report ed services for the low-activity palladium-103 sources de scribed by HCPCS codes C2640 and C2641, respectively. It is clear that fewer hospita ls furnished the high-activity palladium-103 source than the low-activity palladium-103 sour ces, and we expect that the hospital cost distribution for those hospitals could be different than the co st distribution of the large numbers of hospitals reporting the low-ac tivity palladium-103 sources, as previously stated (74 FR 60535; 75 FR 71979; 76 FR 74162; 77 FR 68242; and 78 FR 74861). These varied cost distributions clearly cont ribute to the observ ed relationship inCMS-1613-FC 126

geometric mean cost between the different types of sources. Howe ver, we see no reason why our standard ratesetting methodology for br achytherapy sources that relies on all claims data from all hospitals furnishing brachytherapy sources w ould not yield valid geometric mean costs for those hospitals fu rnishing the different brachytherapy sources upon which CY 2015 prospective payments are based. Comment: One commenter, a develope r of a linear non-stranded palladium-103 source described by HCPCS code C2636 (Br achytherapy linear s ource, nonstranded, palladium-103, per 1 mm), believed that CY 2013 claims data for services furnished prior

to November 2013 used to determine the CY 2015 payment rates are invalid because the

claims data do not reflect the costs of its linear non-stranded palla dium-103 source, which became commercially available in November 2013. Further, the commenter stated that

there were no other linear non-stranded palladium-103 sour ces commercially available prior to November 2013. Therefore, the co mmenter requested that payment for HCPCS code C2636 remain at the current CY 2014 payment rate until claims data for HCPCS

code C2636 become available in CY 2016. Response: We understand the commente r’s claim that its linear non-stranded palladium-103 source described by HCPCS c ode C2636 became commercially available in November 2013. However, we disagree w ith the commenter’s a ssertion that there were no other commercially available linear non-stranded palladium-103 sources described by HCPCS code C2636 prior to N ovember 2013. We also disagree with the commenter that the CY 2013 claims data used to determine the CY 2015 payment rate for

HCPCS code C2636 are invalid. As disc ussed in the CY 2005 OPPS final rule (69 FR 65840), we established HCPCS code C2636 to uniquely identify linearCMS-1613-FC 127

non-stranded Palladium-103 brachytherapy s ources. Since the HCPCS code became effective January 1, 2005, we have used histor ical claims data to set the prospective payment rates. To determine the CY 2015 OPPS payment rate for HCPCS code C2636, we used CY 2013 claims data, which incl ude brachytherapy sources costs for linear non-stranded palladium-103 sources. Despite the date of commercial availability for the commenter’s linear non-stranded palladium-103 brachytherapy source, we do have

CY 2013 claims data for HCPCS code C2636. Therefore, in accordance with our above-mentioned methodology and consistent with our policy used to set the prospective payment rates for brachytherapy sources, we ar e finalizing our proposed payment rate for

HCPCS code C2636 based on CY 2013 claims data. Comment: One commenter expresse d concern regarding CMS’ CY 2014 payment rate for a new brachytherapy source described by HCPCS code C2644 (Brachytherapy source, cesium-131 chloride solution, per millicurrie), which became effective July 1, 2014. In the July 2014 OPPS Change Request (CR) 8776, dated May 23, 2014, CMS established a payment ra te for HCPCS code C2644 of $18.97. The commenter, who also petitioned for the ini tial establishment of HCPCS code C2644 to describe the new brachytherapy source, request ed clarification on how the payment rate was established by CMS, given that the cost of the new brachythe rapy source is $25 per millicurie and claims data are not yet available. Response: As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786), we assign new HCPCS codes that describe new brachytherapy sources to their own APCs, with prospective payment rates set based on consideration of

external data and other relevant information regarding the expected costs of the sourcesCMS-1613-FC 128

to hospitals. The commenter provided CMS with clinical information on the brachytherapy source cesium-131 chloride solution within its petition for the establishment of the new HCPCS code, and noted the source’s clinical similarities with the liquid iodine-125 solution source, which is described by HCPCS code A9527 (Iodine I-125 sodium iodide). The co mmenter stated that both iodi ne I-125 sodium iodide and

cesium-131 chloride solution “have similar ener gies, are capable of delivering the same radiation dose to the planne d treatment volume, are supplied in liquid form, and are compatible with the GliaSite RTS Catheter”. Based on clinical information provided by the commenter and a clinical review by CMS’ medical advisors, we believe that the brachytherapy sources described by HCPC S code C2644 and HCPCS code A9527 are clinical substitutes. Therefore, we set a payment rate for HCPCS code C2644 that is equal to the payment rate for HCPCS code A9527 when it became effective in CY 2014, and proposed to apply the same methodol ogy for CY 2015. We are finalizing our proposal for CY 2015 to set the payment rate for HCPCS code C2644 as the equivalent of the payment rate for HCPCS code A9527. (We refer readers to Addendum B of this final rule with comment period for the CY 2015 OPPS payment rate. Addendum B is available via the Internet on the CMS Web site.)

After consideration of th e public comments we receive d, we are finalizing our proposal to continue to set the payment rates for brachytherapy sources using our established prospective payment methodology, wh ich is based on geometric mean costs. The CY 2015 final payment rates for brachyt herapy sources are found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).CMS-1613-FC 129

As stated in the CY 2015 OPPS/ASC proposed rule ( 79 FR 40940), we continue to invite hospitals and othe r parties to submit recommendations to CMS for new HCPCS

codes that describe new br achytherapy sources consisting of a radioact ive isotope, including a detailed rationale to su pport recommended new sources. Such

recommendations should be directed to th e Division of Outpatient Care, Mail Stop C4-03-27, Centers for Medicare and Medica id Services, 7500 Security Boulevard, Baltimore, MD 21244.CMS-1613-FC 130

e. Comprehensive APCs In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), we finalized a comprehensive paym ent policy that packages payment for adjunctive and secondary items, services, and procedures into the most costly primary procedure (primarily medical device impl antation procedures) under the OPPS at the claim level, effective January 1, 2015. We defined a comprehensive APC (C-APC) as a classification for the provision of a primary se rvice and all adjunctive services provided to support the delivery of the pr imary service. We established comprehensive APCs as a category broadly for OPPS payment and estab lished 29 C-APCs to pr ospectively pay for 167 of the most costly device- dependent services assigned to these 29 APCs beginning in CY 2015 (78 FR 74910). Under this policy, we designated each serv ice described by a HCPCS code assigned to a C-APC as the pr imary service and, with few exceptions described below, consider all other services reported on a hospita l outpatient claim in combination with the primary service to be related to the delivery of the primary service (78 FR 74869). In addition, under this polic y, we calculate a single payment for the entire hospital stay, defined by a single claim, regardless of the date of service span over which the primary service and all related se rvices are delivered. This comprehensive APC packaging policy packages payment for a ll items and services typically packaged under the OPPS, but also packages payment fo r other items and services that are not typically packaged under the OPPS (78 FR 74909). Because of the overall complexity of this new policy and our introduction of complexity adjustments in the CY 2014 OPPS/ ASC final rule with comment period, we modeled the policy as if we were implementi ng it for CY 2014, but delayed the effectiveCMS-1613-FC 131

date until January 1, 2015, to allow additiona l time for further analysis, opportunity for public comment, and systems preparation. In the CY 2015 OPPS/ASC proposed rule (79 FR 40941 through 40953), we discussed our re view of the policies finalized in the

CY 2014 OPPS/ASC final rule with comment period for C-APCs, and summarized and responded to public comments received in re sponse to the CY 2014 OPPS/ASC final rule with comment period relating to the comp rehensive APC payment policy. We then outlined our proposed policy for CY 2015, whic h included several clarifications and proposed modifications in response to public co mments received. In this section, we use the terms “service” and “p rocedure” interchangeably. (1) Background In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), we finalized a policy, with a delaye d implementation date of CY 2015, that designated certain covered OPD services as primary services (identified by a new OPPS status indicator of “J1”) assi gned to C-APCs. When such a primary service is reported on a hospital outpatient claim, taking into consideration the few exceptions that are discussed below, we treat all other items and services reported on the claim as integral, ancillary, supportive, dependent , and adjunctive to the primary service (hereinafter collectively referred to as “adjunctive services”) and re presenting components of a comprehensive service (78 FR 74865). This re sults in a single pr ospective payment for the primary, comprehensive service based on the cost of all reported se rvices at the claim level. We only exclude charges for services that are statutorily ex cluded from the OPPS, such as certain mammography and ambulance services that are never covered OPD

services in accordance with section 1833(t)(1)(B)(iv) of the Act; charges forCMS-1613-FC 132

brachytherapy seeds, which must receive separate payment under section 1833(t)(2)(H) of the Act; charges for pass-through drugs and devices, which also require separate payment under section 1833(t)(6) of the Ac t; and charges for self-administered drugs (SADs) that are not otherwise packaged as supplies because they are not covered under Medicare Part B under section 1861(s )(2)(B) of the Act (78 FR 74865). The ratesetting process set forth in the CY 2014 OPPS/ASC final rule with comment period for the comprehensive APC payment policy is summarized as follows (78 FR 74887): APC assignment of primary (“J1”) services. HCPCS codes assigned to status indicator “J1” are assigned to C-APCs based on our usual APC assignment methodology of evaluating the geometric mean cost of the primary service claims to establish resource similarity and the clinical characteristics of eachprocedure to establish clinical similarity within each APC. Claims reporting multiple procedures described by HCPCS codes assigned to status indicator “J 1” are identified and the proced ures are then assigned to a C-APC based on the primary HCPCS code th at has the highest APC geometric mean cost. This ensures that multiple procedures described by HCPCS codes assigned to status indicator “J1” reported on clai ms are always paid through and assigned to the C-APC that would generate the highest APC payment. If multiple procedures described by HCPCS codes assigned to status indicator “J1” thatare reported on the same claim have the same APC geometric mean estimated cost, as would be the case when two different procedures described by HCPCS codes assigned to status indicator “J1” are assigned to the same APC, identification of the primary service is then based on the pr ocedure described by the HCPCS code assigned to status indi cator “J1” with the highest HCPCS-levelCMS-1613-FC 133

geometric mean cost. When there is no clai ms data available upon which to establish a HCPCS-level comprehensive geometric mean co st, we use the geometric mean cost for the APC to which the HCPCS code is assigned. Complexity adjustments and determ ination of final C-APC groupings. We then considered reassigning complex s ubsets of claims for each prima ry service described by a HCPCS code assigned to status indicator “J1.” All claims reporting more than one procedure described by HCPCS c odes assigned to status indi cator “J1” are evaluated for the existence of commonly occurring pairs of procedure codes reported on claims that exhibit a materially greater comprehensive geom etric mean cost relative to the geometric mean cost of the claims reporting that primary service. This indicates that the subset of procedures identified by the s econdary HCPCS code has incr eased resource requirements relative to less complex subsets of that pr imary procedure (78 FR 74887). The CY 2014 complexity adjustment criteria are as follows:

● The comprehensive geometric meancost of the claims reporting the combination of procedures is more than two times the comprehensive geometric mean cost of the single major claims reporting only the primary service;

● There are more than 100 claims in the data year reporting the specific code combination;

● The number of claims reporting th e specific code combination exceed 5 percent of the volume of a ll claims reporting the designa ted primary service; and

● There would be no violation of the “2 times” rule within the receiving C-APC (78 FR 74886).CMS-1613-FC 134

If a pair of procedure codes reported on claims is identified that meets these requirements, that is, commonly occurring a nd exhibiting materially greater resource requirements, the pair of procedure codes is further evaluated to c onfirm clinical validity as a complex subset of the primary procedur e and the pair of pro cedure codes is then identified as complex, and primary service cl aims with that comb ination of procedure codes are subsequently reassigne d as appropriate. If a pair of procedure codes does not meet the requirement for a materially great er resource requirement or does not occur commonly, the pair of procedure codes is not considered to be complex, and primary

service claims with th at combination of procedure codes are not reassigne d. All pairs of procedures described by HCPCS codes assignedto status indicator “J1” for each primary service are similarly evaluated. Once all pa irs of procedures desc ribed by HCPCS codes assigned to status indicato r “J1” have been evaluated, all claims identified for reassignment for each primary service are comb ined and the group is assigned to a higher level C-APC within a clinical family of C-AP Cs, that is, an APC with greater estimated resource requirements than the initially a ssigned C-APC and with appropriate clinical homogeneity. We assessed resource variati on for reassigned claims within the receiving APC using the geometric mean cost for all reassigned claims for the primary service relative to other services assigned to th at APC using the 2 times rule criteria (78 FR 74887). For new HCPCS codes and codes without data, we use the best information available to us to identify combinations of procedure codes that represent a more complex form of the primary service and warrant reassignment to a higher level APC. InCMS-1613-FC 135

the proposed rule, we stated that we w ould reevaluate our APC assignments and identification and APC placement of complex cl aims once claims data become available. (2) CY 2015 Policy for C-APCs (a) Methodology Basic C-APC Methodology. After consideration of the public comments we

received on the CY 2014 OPPS/ASC final ru le with comment period, in the CY 2015 OPPS/ASC proposed rule (79 FR 40941 th rough 40953), we described our proposed payment methodology for C-APCs for CY 2015. For CY 2015, we proposed to establish a policy that services assigned to C-APCs w ould be designated as the primary services for C-APCs, using new status indicator “J1” as listed in Addendum J and Addendum B to the CY 2015 OPPS/ASC proposed rule (which ar e available via the Internet on the CMS Web site). We stated that the basic steps for calculating the C-APC payments remain the same as those finalized in the CY 2014 OPPS/ASC final rule with comment period, except for the complexity adjustment cr iteria described briefly above (78 FR 74885 through 74888). For CY 2015, we proposed to re structure and conso lidate some of the current device-dependent APCs to improve both the resource and clinical homogeneity of these APCs. In addition, instead of assigning any add-on codes to stat us indicator “J1” as

finalized in the CY 2014 O PPS/ASC final rule with comment period (78 FR 74873 through 74883), we proposed to package all add-on codes, consistent with our CY 2014 OPPS policy to package add-on codes (78 FR 74942), but to allow certain add-on codes to qualify a primary J1 procedure code-a dd-on code combination for a complexity adjustment. For CY 2015, similar to other procedures described by add-on codes under the OPPS and according to 42 CFR 419.2(b)(18) , procedures descri bed by add-on codesCMS-1613-FC 136

furnished in conjunction with primary comp rehensive services would be packaged instead of being assigned to an APC with a separately payable status indicator in accordance with the CY 2014 OPPS po licy for add-on codes assigned to device-dependent APCs. However, th e add-on codes currently assigned to device-dependent APCs (that are converted to C-APCs) may qualify as a secondary code in a complexity adjustment code pair. Further, we proposed to convert all cu rrent device-dependent APCs remaining after the proposed restructuri ng and consolidation of some of these APCs to C-APCs. We also proposed to create two new C- APCs: C-APC 0067 for si ngle-session cranial stereotactic radiosurgery services (SRS) and C-APC 0351 for intraocular telescope implantation. In addition, we proposed to reassign CPT codes 77424 and 77425 that describe intraoperative radi ation therapy (IORT) to C-AP C 0648 (Level IV Breast and Skin Surgery). We discuss in detail be low our proposed new complexity adjustment criteria and our proposal to package all add-on codes, but to allow complexity adjustments for qualifying code combinati ons of primary codes and add-on codes currently assigned to device-intensive C-APCs.

As stated in the CY 2014 OPPS/ASC final rule with comment period, we define the comprehensive APC payment policy as including all covered OPD services on a hospital outpatient claim reporting a primary serv ice that is assigned to status indicator “J1,” excluding services that cannot be covered OPD services or that cannot by statute be paid under the OPPS. Services packaged for payment under the comprehensive APC payment packaging policy, that is, services that are typically integral, ancillary, supportive, dependent, or adjunctive to the pr imary service, provided during the deliveryCMS-1613-FC 137

of the comprehensive service, include diagnostic procedures, laboratory tests and other diagnostic tests and treat ments that assist in the delive ry of the primary procedure; visits and evaluation s performed in association with the procedure; uncoded services and supplies use d during the service; durable medical equipment as well as prosthetic and orthot ic items and supplies when prov ided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except excluded serv ices that are described below (78 FR 74865). In addition, payment for outpatient department services that are similar to therapy services and delivered eit her by therapists or nontherapists is packaged as par t of the comprehensive service. These services that are provided during the periope rative period are adjunctive services and not therapy services as described in section 1834(k) of th e Act, regardless of whether the services are delivered by therapists or ot her nontherapist health care work ers. We have previously noted that therapy services are those provided by therapists under a plan of care in accordance with section 1835(a)(2)(C) and sec tion 1835(a)(2)(D) of the Act and are paid under section 1834(k) of the Act subject to annual therapy caps, as applicable (78 FR 74867). However, certain other serv ices similar to therapy services are considered and paid as outpatient servi ces. Payment for these nontherapy outpatient department services that are reported with therapy codes and provided with a comprehensive service is packaged with the comprehensive service. We note that these services, even though they are reported with therapy codes, are outpatient department services and not therapy services. Therefor e, the requirement fo r functional reporting under the regulations at 42 CFR 410.59(a)(4 ) and 42 CFR 410.60(a)(4) does not apply.CMS-1613-FC 138

Items packaged for payment provided in conjunction with the primary service also include all drugs, biologicals, and radiopharmaceuticals, regardless of cost, except those drugs with pass-through payment status and those drugs that are usually selfadministered (SADs), unless they function as packaged supplies (78 FR 74868 through 74869 and 74909). We refer readers to the Me dicare Benefit Policy Manual, Chapter 15,

Covered Medical and Other H ealth Services, Section 50.2.M, for a description of our policy on self-administered drugs treated as hos pital outpatient supplie s, including lists of SADs that function as supplies and those that do not function as supplies. Services excluded from the comprehensive APC payment policy are as follows: SADs that are not considered supplies, because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act; services excluded from the OPPS according to section 1833(t)(1)(B) of the Act includi ng recurring therapy services, which we considered unrelated to the comprehensive serv ice (defined as thera py services reported on a separate facility claim for recurring services), ambulance se rvices, diagnostic and screening mammography, the annual wellness vi sit providing personalized prevention plan services, and pass-through drugs and de vices that are paid according to section 1833(t)(6) of the Act. We also exclude preventive services defined in 42 CFR 410.2, “(1) [t]he specific services listed in section 1861(ww)(2) of the Act, with the explicit exclusion of electrocardiograms; (2) [t]he Initial Preventive Physical Examination (IPPE) (as specified by section 1861(ww)(1) of the Act); and (3) Annual Wellne ss Visit (AWV), providing

Personalized Prevention Plan Services (PPPS) (as specifiedby section 1861(hhh)(1) of the Act).” These preventive services are li sted by their HCPCS codes in Addendum J toCMS-1613-FC 139

this final rule with comment period and include: annual wellness visits providing personalized prevention plan services; in itial preventive physical examinations; pneumococcal, influenza, and hepatitis B vaccines and administrations; mammography screenings; pap smear screeni ngs and pelvic examination screenings; prostate cancer screening tests; colorectal cancer screening tests; diabet es outpatient self-management training services; bone mass measurements; glaucoma screenings; medical nutrition therapy services; cardiovascu lar screening blood tests; di abetes screening tests; ultrasound screenings for abdominal aortic an eurysm; and additional preventive services as defined in section 1861(ddd)(1 ) of the Act. We defined and discussed these services in detail for hospital billing purposes in the CY 2011 OPPS/ASC final rule with comment period pursuant to coverage and payment provisions in the Affordable Care Act (75 FR 72013 through 72020). This policy is consistent with our polic y to exclude preventive services from the ancillary services packaging policy, will enco urage the provision of preventive services, and provide maximum flexibility to benefici aries across different sites of service in receiving preventive services. In addition, the statute do es not permit assessment of beneficiary cost-sharing for most preventiv e services, and some receive cost-based payment (75 FR 72013 through 72020 and 78 FR 74962). While any beneficiary cost-sharing attributable to preventive servi ces, if they were packaged, would be very small in relation to the comprehensive service overall, we believe that we should exclude these services from the OPPS beneficiary copa yment calculations, as discussed in section II.I. of this final rule with comment peri od. We note that payment for one preventive service (HCPCS code G0102 (Prostate cancer sc reening; digital rectal examination)) willCMS-1613-FC 140

continue to be packaged under the OPPS in CY 2015, both broadly a nd in the context of comprehensive services. Currently, payment for the procedure described by this HCPCS code is packaged because it is included in evaluation and management services. We note that beneficiary cost-sharing is not waived for the service described by HCPCS code

G0102. Consistent with the policy finalized in the CY 2014 OPPS/ASC final rule with comment period, we exclude brachytherapy serv ices and pass-through drugs, biologicals and devices that are separately payable by statute (78 FR 74868 a nd 74909). In addition, we exclude services assigned to OPPS status indicator “F” that are not paid under the OPPS and are instead paid on a reasonable co st basis (certain CRNA services, Hepatitis B vaccines, and corneal tissue acquisition, whic h is not part of a comprehensive service for CY 2015). In Table 6 below, we list the services that are excluded from the comprehensive APC payment policy.

TABLE 6.—COMPREHENSIVE APC PA YMENT POLICY EXCLUSIONS FOR CY 2015

Ambulance services Brachytherapy Diagnostic and mamm ography screenings Physical therapy, speech-la nguage pathology and occupation al therapy services - Therapy services reported on a separate facility claim for recurring services Pass-through drugs, bi ologicals and devices Preventive services defined in 42 CFR 410.2: • Annual wellness visits providing pers onalized prevention plan services • Initial preventive physical examinations • Pneumococcal, influenza, and hepati tis B vaccines and administrations • Mammography Screenings • Pap smear screenings and pelv ic examination screenings • Prostate cancer screening tests • Colorectal cancer screening tests • Diabetes outpatient self-management training servicesCMS-1613-FC 141

• Bone mass measurements • Glaucoma screenings • Medical nutrition th erapy services • Cardiovascular screening blood tests • Diabetes screening tests • Ultrasound screenings for abdominal aortic aneurysm • Additional preventive services (as defi ned in section 1861(ddd)(1) of the Act) Self-administered drugs - Drugs that are us ually self-administered and do not function as supplies in the provision of the comprehensive service Services assigned to OPPS st atus indicator “F” (Certain CRNA services, Hepatitis B vaccines and corneal tissue acquisition) Services assigned to OPPS status indi cator “L” (Influenza and pneumococcal pneumonia vaccines) Certain Part B inpatient serv ices – Ancillary Part B inpa tient services payable under Part B when the primary “J1” service for th e claim is not a payable Part B inpatient service (for example, exhausted Medicare Pa rt A benefits, benefi ciaries with Part B only)

We proposed to continue to define each hospital outpati ent claim reporting a single unit of a single primary service assigned to status indicator “J 1” as a single “J1” unit procedure claim (78 FR 74871). We proposed to sum all line item charges for

services included in the C-APC payment, convert the charges to costs, and calculate the “comprehensive” geometric mean cost of one unit of each service assigned to status indicator “J1.” (We note that we use the te rm “comprehensive” to describe the geometric mean cost of a claim reporting “J1” service(s) or the geometric mean cost of a C-APC,

inclusive of all of the items and services in the C- APC payment bundle). Charges for

services that would otherwise have been separately payable are added to the charges for the primary service. This process diffe rs from our traditi onal cost accounting methodology only in that all such services on the claim are packag ed (except certain services as described above). We proposed to apply our standard data trims, excluding claims with extremely high primary units or extreme costs.CMS-1613-FC 142

The comprehensive geometric mean costs ar e used to establish resource similarity and, along with clinical similarity, dictate th e assignment of the primary services to the C-APCs. We proposed to establish a ranking of each primary service (single unit only) assigned to status indicator “J 1” according to their comprehensive geometric mean costs. For the minority of claims reporting more than one primary service assigned to status indicator “J1” or units thereof (approxima tely 20 percent of CY 2013 claims), we proposed to continue to identify one “J1” se rvice as the primary service for the claim based on our cost-based ranking of primary services. We then assign these multiple “J1” procedure claims to the C-APC to which the service designated as the primary service is assigned. If the reported “J1” services reported on a claim map to different C-APCs, we designate the “J1” service assigned to the C-APC with the highest comprehensive geometric mean cost as the primary service for that claim. If the reported multiple “J1” services on a claim map to the same C-APC, we designate the most co stly service (at the HCPCS code level) as the primar y service for that claim. This process results in initial assignments of claims for the primary services assigned to status indicator “J1” to the most appropriate C-APCs based on both single and multiple procedure claims reporting these services and clinical and resource homogeneity. Complexity Adjustments. We proposed to use complexity adjustments to provide increased payment for certain comprehens ive services. We proposed to apply a complexity adjustment by promoting qualifying “J1” service code combinations or code

combinations of “J1” services and certain add-on codes (as describe d further below) from the originating C-APC (the C-APC to whic h the designated primary service is first assigned) to a higher paying C-APC in the same clinical family of C-APCs, ifCMS-1613-FC 143

reassignment is clinically appropriate and th e reassignment would not create a violation of the 2 times rule in the receiving APC (the higher paying C-APC in the same clinical family of C-APCs). We proposed to implemen t this type of complexity adjustment when the code combination represents a complex, cost ly form or version of the primary service according to the following criteria:

● Frequency of 25 or more claims re porting the code combination (frequency threshold); and

● Violation of the 2 times rule (cost threshold). In the CY 2015 OPPS/ASC proposed rule (79 FR 40947 through 40948, we explained in detail in response to a comm ent to the CY 2014 OPPS/ASC final rule with comment period the differences between the finalized CY 2014 complexity adjustment criteria and the CY 2015 proposed complexity adjustment criteria and our rationale for the proposed changes. After designating a single pr imary service for a claim, we proposed to evaluate

that service in combination with each of th e other procedure code s reported on the claim assigned to status indicator “J1” (or certain add-on codes) to determine if they meet the complexity adjustment criteria. For new HC PCS codes, we proposed to determine initial C-APC assignments and complexity adjust ments using the best data available, cross-walking the new HCPCS codes to predecessor codes wherever possible. Once we have determined that a particular code combination of “J1” services (or combinations of “J1” services reported inconjunction with certain add-on codes) represents a complex version of the primary service because it is sufficiently costly, frequent, and a subset of the primary comprehensive service overall according to theCMS-1613-FC 144

criteria described above, we proposed to promote the complex version of the primary service as described by the code combination to the next higher cost C-APC within the clinical family, unless the APC reassignm ent is not clinically appropriate, the reassignment would create a violation of the 2 times rule in the receiving APC, or the primary service is already assigned to the hi ghest cost APC within the C-APC clinical family or assigned to the only C-APC in a clinical family (79 FR 40944). We did not propose to create new APCs with a geometric me an cost that is higher than the highest cost (or only) C-APC in a clinical familyjust to accommodate potential complexity adjustments. Therefore, the highest paym ent for any code combination for services assigned to a C-APC would be the highest paying C-APC in the clinical family. As discussed below, we proposed that add-on codes reported in conjunction with a “J1” service would receive complexity ad justments when a qualifying add-on code is reported in conjunction with the primary serv ice assigned to status indicator “J1” and

satisfies the criteria described above for a co mplexity adjustment. Any combinations of HCPCS codes that fail to meet the proposed complexity adjustment criteria (frequency and cost thresholds) would not be identified as complex subsets of the primary procedure and would not be reassigned to a higher payi ng C-APC within the same clinical family of C-APCs. We provided a proposed list of qualifying code co mbinations (including add-on codes) in Addendum J to the proposed rule (w hich is available vi a the Internet on the CMS Web site). We proposed to package payment for all add-on codes into the payment for the C-APC. However, we indicated that add-on codes that are assigned to the current devicedependent APCs listed in Table 5 of the pr oposed rule (79 FR 40938) would be evaluatedCMS-1613-FC 145

for a possible complexity adjustment when they are reported in conjunction with a designated primary service assigned to stat us indicator “J1.” We proposed to only evaluate the add-on codes that are assigned to the current device-dependent APCs listed in Table 5 of the proposed rule for potentia l complexity adjustments because we believe that, in certain cases, these procedure code s may represent services with additional medical device costs that result in significantl y more complex and costly procedures. To determine which combinations of primary serv ice codes reported in conjunction with the add-on code may qualify for a complexity ad justment for CY 2015, we proposed to apply the proposed frequency and co st criteria discussed above, testing claims reporting one unit of a single primary service assigned to st atus indicator “J1” and any number of units of a single add-on code. If the frequency a nd cost criteria for a complexity adjustment were met, and reassignment to the next hi gher cost APC in the clinical family is appropriate, we proposed to make a complexity adjustment for the code combination; that is, we proposed to reassign the primary serv ice code reported in conjunction with the add-on code combination to a higher cost C-AP C within the same clinical family of CAPCs. If any add-on code combination reported in conjunction with the primary service code did not qualify for a complexity adjust ment, payment for these services would be packaged. We listed the complexity adjust ments proposed for add-on code combinations

for CY 2015, along with all of the other proposed complexity adjustments, in Addendum J to the proposed rule (which is available via the Internet on the CMS Web site). One primary service code and add-on code co mbination (CPT code 37225 and 37233) that satisfied the frequency and cost criteria wa s not proposed for a complexity adjustment

because we believe that these claims are miscoded. Of the 35 qualifying claims reportingCMS-1613-FC 146

this code combination, only 3 claims contai ned the appropriate base code (CPT code 37228) for CPT add-on code 37233. We provided in Addendum J to the proposed rule a breakdown of cost statistics for each code combination that would qualify for a complexity adjustment (including primary code and add-on code combinations ). Addendum J to the proposed rule also contained summary cost statistics for each of the code combinations proposed to be reassigned under a given primary code. Th e combined statistics for all proposed reassigned complex code combinations are re presented by an alphanumeric code with the last 4 digits of the designated primary serv ice followed by “A” (indicating “adjustment”). For example, the geometric mean cost liste d in Addendum J for the code combination described by CPT code 33208A assigned to C-APC 0655 included all code combinations that were proposed to be reassigned to C- APC 0655 when CPT code 33208 is the primary code. Providing the information contained inAddendum J in the proposed rule allowed stakeholders the opportunity to better asse ss the impact associated with the proposed reassignment of each of the code combinations eligible for a complexity adjustment. (b) Additional C-APCs

Several commenters to the CY 2014 OPPS/ASC proposed ru le questioned why CMS only converted a subset of the device-d ependent APCs to C-APCs (78 FR 74864). We responded that while we were initially a dopting a subset of the most costly devicedependent services, we may extend comprehe nsive payments to other procedures in future years as part of a broader packagi ng initiative (78 FR 74864). Upon further review for CY 2015, we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40944 through 40945) that we believe that the entire set of the currently device-dependent APCs (afterCMS-1613-FC 147

the proposed reorganization and consolidation of the current device-dependent APCs) are appropriate candidates for C-APC payment because the device-dependent APCs not included in last year’s comp rehensive APC payment proposal are similar to the original 29 device-dependent APCs that were proposed as C-APCs in CY 2014. Similar to the original 29 device-dependent APCs for CY 2014 that were converted to C-APCs, the additional device-dependent APCs that were proposed for conversion to C-APCs contain comprehensive services primarily intended for the implantation of costly medical devices. Therefore, in the CY 2015 OPPS/AS C proposed rule, we proposed to apply the comprehensive APC payment policy to the remaining device-dependent APCs for

CY 2015. In addition, since the pu blication of the CY 2014 O PPS/ASC final rule with comment period, stakeholders brought several services to our atte ntion as appropriate candidates for C-APC payment. Stakeholders recommended that we create C-APCs for these procedures and technologies or assign th em to a previously proposed C-APC. We agreed with the stakeholders. Similar to th e other services designated as comprehensive in CY 2014, these procedures are comprehensiv e single-session servic es with high-cost implantable devices or high-cost equipment. For CY 2015, we proposed to convert the following existing APCs into C-APCs: AP C 0067 (Single Session Cranial Stereotactic Radiosurgery) and APC 0351 (Level V Intraocu lar Surgery)). C-AP C 0351 only contains one procedure–CPT code 0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens). We also pr oposed to assign the CPT codes for IORT (CPT codes 77424 and 77425) to C-APC 0648 (Level IV Breast and Skin Surgery) because IORT is a single session comprehensive serv ice that includes breast surgery combinedCMS-1613-FC 148

with a special type of radiati on therapy that is delivered insi de the surgical cavity but is not technically brachytherapy. The HCPCS c odes that we proposed to assign to these C-APCs in CY 2015 would be assign ed to status indicator “J1.”CMS-1613-FC 149

(c) Reconfiguration and Restructuring of the C-APCs

Based on further examination of the stru cture of the C-APCs illustrated in the

CY 2014 OPPS/ASC final rule with comment period and an ev aluation of their comprehensive geometric mean costs (using the updated CY 2013 claims data), in the CY 2015 OPPS/ASC proposed rule (79 FR 40945), we proposed to reorganize, combine,

and restructure some of the C-APCs. The purpose of this APC restructuring is to improve resource and clinical homogeneity among the services assigned to certain

C-APCs and to eliminate APCs for clinica lly similar services, but with overlapping geometric mean costs. The services we pr oposed to assign to each of the C-APCs for CY 2015, along with the relevant cost statis tics, were provided in Addendum J to the proposed rule. Addendum J is avai lable at the CMS Web site at:http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . Table 7 of the proposed rule (79 FR 40952) listed the additional 28 APCs proposed under the CY 2015 comprehensive APC policy. In summary, our proposal to reorganize, combine, and restructure some of the C-APCs included the following proposed changes:

● Endovascular clinical family (rename d Vascular Procedures, VASCX). We proposed to combine C-APCs 0082, 0083, 0104, 0229, 0319, and 0656 illustrated for CY 2014 to form three proposed levels of comprehensive endovascular procedure APCs: C-APC 0083 (Level I Endovasc ular Procedures); C-APC 0229 (Level II Endovascular Procedures); and C-APC 0319 (Level IV Endovascular Procedures).

● Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices (AICDP). We proposed to combine C-APCs 0089, 0090, 0106, 0654, 0655, andCMS-1613-FC 150

0680 as illustrated for CY 2014 to form thr ee proposed levels of C-APCs within a broader series of APCs for pacemaker implan tation and similar procedures as follows: APC 0105 (Level I Pacemaker and Similar Procedures), a non-comprehensive APC; C-APC 0090 (Level II Pacemaker and Sim ilar Procedures); C-APC 0089 (Level III Pacemaker and Similar Procedures); and C- APC 0655 (Level IV Pacemaker and Similar Procedures).

● We proposed to delete the clinical family for Event Monitoring, which only had one C-APC (C-APC 0680 (Inse rtion of Patient Activated Event)) with a single CPT

code 33282 as illustrated for CY 2014. We also proposed to reassign CPT code 33282 to C-APC 0090, which contains clin ically similar procedures.

● In the urogenital family, we proposed two levels instead of three levels for urogenital procedures, and to reassign several codes from APC 0195 to C-APC 0202 (Level V Female Reproductive Procedures).

● We proposed to rename the arthroplasty family of APCs to “Orthopedic Surgery.” We also proposed to reassi gn several codes from APC 0052 to C-APC 0425, which we proposed to rename “Level V Mu sculoskeletal Procedures Except Hand and

Foot.”

● We proposed three levels of electr ophysiologic procedures, using the current inactive APC “0086” instead of APC 0444, to have consecutive APC grouping numbers for this clinical family and to rena me APC 0086 “Level III Electrophysiologic Procedures.” In addition, we proposed to replace composite APC 8000 with proposed

C-APC 0086 as illustrated in the CY 2014 O PPS/ASC final rule with comment period (78 FR 74870).CMS-1613-FC 151

We also proposed three new clinical families: Gastrointestinal Procedures (GIXXX) for gastrointestinal stents, Tube/Catheter Change s (CATHX) for insertion of various catheters, and Radiation Oncol ogy (RADTX), which would include C-APC 0067 for single session cranial SRS. (3) Public Comments Comment: Commenters were generally s upportive of the propos ed changes to the comprehensive APC payment policy for CY 2015 when compared to the CY 2014 final policy, and urged CMS to monitor implementation for payment adequacy and access to quality care. Some commenters requested that CMS delay implementation until at least July 1, 2015, to allow time to fully test sy stems changes. Some commenters requested that CMS delay implementation for a year or more until CMS addresses assorted concerns or so that hospitals can conti nue to analyze the policy and budget for the financial impact. Response: We appreciate the commenters ’ support. We plan to monitor the implementation of this C-APC payment polic y and will consider future revisions as necessary. We will not further delay implem entation of this policy. We have already delayed implementation of the C-APC paym ent policy for a year, which we believe provided ample time for hospita ls to evaluate the policy.

Comment: We received feedback from co mmenters regarding the data resources that CMS provided to support the proposed rule. Some commenters commended CMS for the technical support and a ssistance provided that enabled the commenters to replicate CMS’ methodology and match CMS’ results. Ot her commenters expressed concern that the data resources were insufficient, incons istent, and unclear. So me commenters alsoCMS-1613-FC 152

requested that CMS enhance transparency, expand the data resources available to the public, and engage stakeholders in fu ture comprehensive APC payment policy development. Some commenters asked that CMS provide cost data on all of the code combinations that were evaluated for the complexity adjustments, including the code combinations that qualified for a complexityadjustment. One commenter stated that discrepancies in some of the number en tries between Addendum J and Addendum B

violate the Administrative Procedures Act (APA) because these discrepancies “make it impossible to understand what CMS is proposing.” Response: We appreciate the commenters ’ support for the proposed expansion of available data resources related to the comprehensive APC payment policy methodology. In response to the commenters who expressed concern regarding the insufficiency of the data files provided, we understand that the O PPS is technically complex. However, we

believe that the data made available to th e public as part of the proposed rule were appropriate, clear, and sufficient. We ac knowledge the commenters ’ concerns regarding the transparency of related data and the desi re for additional resour ces. Therefore, for this final rule with comment period, we ar e providing additional data in Addendum J,

such as cost statistics related to code comb inations that are not eligible for complexity adjustments. Regarding any indications of di screpancies in some of the number entries between Addendum J and Addendum B, as th e commenter suggested, we understand and acknowledge that minor discrepancies may so metimes occur with complex payment rules

that include various files with many different types of data. However, we do not believe any such discrepancies would limit comment ers’ ability to understand the proposed policies or to evaluate the impacts or effects of the proposed policy changes. TheCMS-1613-FC 153

comprehensive APC payment policy has beenopen for public comment during three consecutive OPPS rulemaking cycles: the CY 2014 OPPS/ASC proposed rule; the

CY 2014 OPPS/ASC final rule with comme nt period; and the CY 2015 OPPS/ASC proposed rule. Therefore, we do not believe that we provided insufficient notice of the policies that are a part of the comprehensive APC payment policy. Comment: Commenters expressed con cern regarding the misalignment between hospitals’ billing practices and systems and th e proposal to package all services (except for the few exceptions noted above) on a claim into the payment for the comprehensive

service. The commenters observed that a significant number of comprehensive service claims spanned more than 5 days, with some claims spanning close to 30 days. The

commenters recommended that CMS limit th e payment bundle to services provided within 1 or 2 days of the primary service, or defining the bundle based on episodes of care. Commenters also requested that CM S clarify the guidance provided and educate providers on how to report comprehensive serv ices that fall within the span of a recurring service claim. Some commenters expresse d concern that policies which reduce or eliminate series billing for recurring servic es may create an operational burden for hospitals; increase claims processing activity for Medicare contractor s; and increase the amount of paperwork sent to a beneficiary. Response: Our intent is to capture all of the services associat ed with the primary service assigned to a C-APC, except those services that would still be separately paid under the OPPS, even when provided in conjunc tion with a comprehensive service. The 219 procedures assigned to the C-APCs are a sm all fraction of the tota l services provided

in HOPDs. We believe that it would not be an undue hardship for some hospitals to alterCMS-1613-FC 154

their processes such that they file separate claims for services that are unrelated both clinically and in regard to time to the comprehensive service. With regard to recurring services, we have previously issued manual guidance in the Internet Only Manual, Pub. 100-4, Chapter 1, Section 50.2.2, that provides th at only recurring services should be billed monthly. We also have specified that , in the event that a recurring service occurs on the same day as an acute service that fa lls within the span of the recurring service claim, hospitals should bill separately for recurring services on a monthly claim (repetitive billing) and submit a separate clai m for the acute service. We also do not expect that these claims for comprehensive services in the outp atient setting would extend beyond a few days because the 219 procedures assigned to the 25 C-APCs are almost entirely surgical pro cedures. If a physician determ ined that furnishing one of these services would be medically necessary for the treatment of a Medicare beneficiary and expected the beneficiary to require hosp ital care for more than 2 midnights, inpatient admission would be appropriate. Comment: Commenters generally suppor ted the proposed packaging of all addon codes reported in conjunction with compre hensive service claims with the allowance of complexity adjustments for add-on code s currently assigned to device-dependent APCs in CY 2014. One commenter requested that CMS assign add-on CPT code 57267 (Insertion of mesh or other prosthesis for repair of pelvic floor defect , each site (anterior, posterior compartment), vaginal approach (List separately in addition to code for primary procedure) to C-APC 0202 because this code has high device costs. Response: We appreciate the comm enters’ support. According to 42 CFR 419.2(b)(18), add-on codes are packaged under the OPPS. BecauseCMS-1613-FC 155

implementation of the finalized comprehensive APC payment policy was delayed until CY 2015, for CY 2014 we maintained the st ructure and code assignments for the device-dependent APCs, which continued sepa rate payment for add-on codes assigned to device-dependent APCs for CY 2014. We refer readers to Ta ble 7 of the CY 2014

OPPS/ASC final rule with co mment period (78 FR 74859). The add-on code complexity adjustment policy is limited only to certain ad d-on codes that were previously assigned to device-dependent APCs and th at, along with a primary comprehensive service, meet the complexity adjustment criteria. We refer readers to Table 9 of the CY 2015 OPPS/ASC proposed rule (79 FR 40959) for a listing of th ese add-on codes. Our intent is not to make a higher payment in every case that an add-on procedure results in higher costs. Therefore, we are finalizing the CY 2015 proposal to packag e all add-on codes reported on a claim in conjunction with a comprehens ive service, and also to allow a limited

number of add-on codes to be evaluated for a complexity adjustment when billed with a primary comprehensive service. We are no t extending the complexity adjustment policy beyond those add-on codes that were assigned to device-dependent APCs. The list of add-on codes that we evaluated for a complex ity adjustment is included later in this

section in Table 8.

Comment: Some commenter s requested that CMS divi de the restructured CAPCs into more discrete groupings to incr ease clinical coherence and resource cost homogeneity. Some commenters believed th at improved clinical coherence among the procedures within the C-APCs would increa se the stability of C-APC payments from year-to-year and decrease opportunities for “g aming” the system. Some commenters also expressed concern with the high variation in geometric mean costs for services assignedCMS-1613-FC 156

to the C-APCs that do not create a violati on of the 2 times rule, but would result in inadequate payment for the highest cost procedures assigned to the C-APC. Response: We disagree with the comment ers. We believe that the categorization of the restructured C-APCs better represen ts clinical and resource homogeneity when compared to the CY 2014 structure of the C- APCs. We also note that the OPPS is a prospective payment system that relies on groupings of procedures resulting in a weighted-average cost payment based on all of the procedures in the group. Too much discretization of APC groupings would move the OPPS more toward a fee schedule, which would have individual payments for each HCPCS code and presents an

undesirable outcome for the OPPS. In a ddition, we encourage all members of the stakeholder public to report all suspected in cidents of fraud and abuse to the Office of Inspector General or the CMS Center for Progr am Integrity. As re quired by statute, we will review and evaluate, on an annual basi s, any year-to-year changes in APC and HCPCS geometric mean costs. Comment: A few commenters disagreedwith CMS’ proposal to expand the

C-APCs to include all of the current device-d ependent APCs. The commenters noted that a significant percentage of cl aims for some of the lower paying C-APCs (specifically, C-APCs 0084 (Level I Electrophysiologic Proced ures), 0427 (Level II Tube or Catheter Changes or Repositioning), 0622 (Level II Vascular Access Procedures), and 0652 (Insertion of Intraperitoneal and Pleural Catheters) re port services assigned to noncomprehensive APCs that are significantly more costly th an the primary service that is motivating the C-APC payment. Commente rs believed that procedures assigned to these APCs are not infrequently performed as secondary procedures to other more costlyCMS-1613-FC 157

procedures that are assigned to noncomprehensive APCs. Commenters recommended various approaches for addressing this concern: (1) applying complexity adjustments to these claims; (2) excluding high-cost proce dures from the comprehensive APC packaging policy; (3) paying for the higher-cost servic e and applying a multiple procedure reduction to the C-APC; or (4) eliminating the lower paying C-APCs from the comprehensive APC payment policy methodology. Response: Our analysis shows a signif icant number of claims in APCs 0427 and 0622 that contain noncomprehensive services th at are more costly than the procedures assigned to the proposed C-APC. In a ddition, similar to APCs 0427 and 0622, APC 0652 contains a total of three catheter-insertion pr ocedures. These procedures are not similar to the other major procedures assigned to C-APCs, but are sometimes supportive of other procedures. For example, APC 0652 includes the procedure that de scribes the placement of a pleural catheter that can be used for drug delivery, bu t is not a definitive therapeutic procedure similar to most of the other proced ures assigned to that C-APC. Also, APCs 0427, 0622, and 0652 are not device-intensive APCs , meaning that the device offsets are not greater than 40 percent. Theref ore, we are accepting the commenters’ recommendation. We are not converting APCs 0427, 0622, and 0652 into C-APCs for CY 2015. In addition, because we are not converting APC 0427 into a C-APC, we will not evaluate add-on CPT code 49435 for comple xity adjustments because the APC that

contains the base codes for CPT code 49435 are assigned to APC 0427. However, we are finalizing the proposal to convert APC 0084 in to a C-APC. We did not find that a significant number of higher cost noncompr ehensive procedures are performed in conjunction with the procedures assigned to APC 0084. Unlike many of the catheterCMS-1613-FC 158

insertion procedures assigned to AP Cs 0427, 0622, and 0652, the electrophysiology procedures assigned to APC 0084 are not s upportive of other services, but are the definitive therapeutic procedures intended to treat a patient’s cardiac condition. Comment: Commenters urged CMS to de velop adjustments to C-APC payments based on patient acuity or diagnosis to account for clinical complexity and patient characteristics, which could help mitigate the negative payment impact of expanding the comprehensive APC payment policy on hospitals that treat more clinically complex patients, such as academic medical center s, cancer hospitals, and trauma centers. Response: As we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40951), section 1833(t)(2) of the Ac t provides a procedure-based payment methodology for the OPPS, which is unlike the IPPS that makes payments based on both diagnoses and procedures. Currently OPPS paym ents are not based on patient severity or diagnosis like payments under the IPPS. Ther efore, we are unable to make payment adjustments based on diagnoses. Comment: Commenters expressed concer n that not implementing C-APCs in the ASC setting distorts the payment relations hip between ASCs and HOPDs and could result in incentives to direct patients from one setting to another. Commenters recommended that CMS reprogram the ASC payment system software, as soon as possible, to allow the system to perform the complex logic needed to implement and provide adequate payment for the C-APCs for ASCs. Response: The commenters are correctthat the comprehensive APC payment policy methodology is not being adopted under the ASC payment system. However, we do not believe that this policy decision will re sult in site-of-service shifts, but we willCMS-1613-FC 159

continue to monitor procedur e volumes in both settings. Although OPPS payments for individual surgical procedures assigned to C-APCs are higher than ASC payments for the same procedures, under the standard nonc omprehensive service payment methodology that applies in the ASC for all APCs and in the OPPS for noncomprehensive services, there remains separate payment for covered procedures and covered ancillary services that are not packaged under a general packag ing policy. This con tinuation of separate payment for covered procedures and covered ancillary services pe rformed in the ASC (which is not available in the OPPS for pro cedures performed in addition to the primary procedures assigned to C-APCs) should he lp mitigate any incentive to perform procedures assigned to C-APCs in the HOPD. However, given the significant difference between ASC and OPPS payment rates, we do not believe that sepa rate payment (at the multiple procedure reduction reduced rate) for additional procedures performed in the ASC setting along with a procedure that is a ssigned to a C-APC will draw cases away from the HOPD because, in most cases, the overall HOPD will be higher than the ASC payment for the same set of procedures. We will consider the commenters’ suggestion that we develop new payment software for the ASC payment system should an opportunity to do so arise in the future. Comment: Commenters requested that CMS provide separate payment for certain services reported on a comprehensive claim. Some commenters requested that CMS exclude the following additional services from the packaging provision under the comprehensive APC payment policy:

● Dialysis and emergency dialysis services.

● Blood products.CMS-1613-FC 160

● Expensive diagnostic te sts, such as angiography.

● High-cost drugs and de vices that account for a high percentage of the geometric mean cost of a C-APC.

● Outpatient services paid under a paymen t schedule, such as laboratory services.

The commenters believed that the C-AP C payment would not adequately cover the cost of these services. One commenter believed that packaging payment for an otherwise separately payable drug when pr ovided in conjunction with a comprehensive service may cause hospitals, in consultation with physicians, to choose a less-expensive alternative drug. Response: We responded to similar comments that disagreed with CMS’ proposal to package payment for various item s and services into the C-APC payment in

the CY 2014 OPPS/ASC final rule with comment period (78 FR 74865 through 74910). As previously stated, we disagree with th e commenters. We believe that the central attribute of the comprehensive APC payment policy is the packagi ng of all adjunctive services, with the exception of those servic es described above th at, according to the statute, cannot be packaged or the list of pr eventive services that generally would not be provided at the time of a major procedure assi gned to a C-APC. We note that (as stated

above in section II.A.3.a. of this final ru le with comment period) where there are a variety of devices, drugs, items, and supplies that could be used to furnish a service, some of which are more expensive than others, pack aging encourages hospitals to use the most cost-efficient item that meets the patient’s needs, rather than routinely using a more expensive item, which often results if sepa rate payment is provided for the items. Furthermore, packaging also encourages hospitals to effectively negotiate withCMS-1613-FC 161

manufacturers and suppliers to reduce the purchase price of items and services (including drugs) or to explore alterna tive group purchasing arrangemen ts, thereby encouraging the most economical health care delivery.

Comment: Commenters asserted that th e reliance on code combinations based on cost ranking of codes would leadto instability in the complexity adjustments from year to year, and overlook a large numbe r of comprehensive claims with three or more “J1” services, which is common for the clinical co mplexity of procedures assigned to the endovascular revascularization family of APCs. Commenters suggested alternative methodologies for determining eligibility, such as applying a complexity adjustment to any claim that has three or more “J1” servi ces or applying the cost and frequency criteria

to all combinations of “J1” services. Response: We disagree with the commenters that assigning complexity adjustments based on cost ranking of primary and secondary codes is either insufficient or would result in instability of the complexity adjustments in future years. We proposed complexity adjustments for certain code pair s to provide a higher payment in the next higher APC within a clinical family for high cost procedure pairs consisting of a primary comprehensive procedure and a secondary comprehensive procedure that represent sufficiently frequent and sufficiently costly co mprehensive procedure pairs such that they are separated from and provided a higher paymen t than all of the cases that are accounted for in APC assignment of the primary serv ice. We do not belie ve that providing a complexity adjustment to any claim that has th ree or more “J1” services or to all claims reporting pairs of “J1” services that meet the cost and frequency criteria would adequately serve the stated purpose of the policy. The intent of the complexityCMS-1613-FC 162

adjustment policy is to identify a limited num ber of costly procedure pairs for a higher payment at the next higher paying C-APC w ithin the clinical family, not to unpackage and separately pay for all of th e high cost cases that are asso ciated with the primary “J1” procedure. Although such a policy as the comm enters requested coul d be beneficial to the procedures assigned to the endovascular C-APC family because of the high number of codes that can be billed pe r case, we do not believe that this approach would serve the other clinical families that do not rely on component coding to the same extent as endovascular procedures. Therefore, we are finalizing our proposal to base the complexity adjustments on code pairs that in clude the two most costly “J1” services reported on the C- APC service claim.

Comment: Commenters believed that the cost threshold is too restrictive and would cause financial hardship for hospitals and jeopardize beneficiary access to care. Commenters suggested that CMS adjust th e cost threshold to 1.5, 1.75, or within 2 percent of the 2 times rule limit. Response: In response to comments to the CY 2014 OPPS/ASC final rule with comment period, we significantly lowered the cost criterion for a co mplexity adjustment from two times the cost of the primary procedur e to two times the cost of the lowest cost procedure in the APC to which the primary pr ocedure is assigned. This change made it significantly easier for code co mbinations to qualify for a co mplexity adjustment based on higher cost. We do not believe that furthe r lowering of the cost criterion would be consistent with the objective of the comprehe nsive APC payment policy. We believe that lowering the cost criterion would result ineffectively unpackaging too many cases from the primary C-APC assignment and, therefore, defeat the purpose of the policy, which isCMS-1613-FC 163

to create a comprehensive prospective pa yment for major, prim ary device-intensive procedures. Comment: Commenters expressed concern th at claims assigned to the only level or the highest level C-APC within a clinical fa mily are ineligible to receive a complexity adjustment because there is no higher paying APC in the clinical family in which to assign these code combinations. Commenter s requested that CMS add an additional C-APC level to these clinical families to provide for more granular payment levels and accommodate potential complexity adjustments. Response: As we stated in the CY 2015 OPPS/ASC proposed rule, we would not create new APCs with a geometric mean cost that is higher than the highest cost C-APC in a clinical family just to accommodate potential complexity adjustments. Therefore, the highest payment for any code combination for services assigned to a C-APC would be the highest paying C-APC in the clinical family. We only found 7 code pairs out of the 219 procedures that are assigned to the 25 final C-APCs that would qualify for a complexity adjustment if a higher paying APC were available for assignment of the code

combination. We do not believe that this sm all number of code combinations from the highest paying APCs in the final 12 clinical families of C-APCs that satisfy the complexity adjustment criteria necessitates creating additional APCs, especially if these APCs would be populated with only a few mu ltiple procedure claims. In addition, in accordance with section 1833(t)(2 )(B) of the Act, APCs are defined as “groups of covered OPD services” that are comparable cl inically and with respect to the use of

resources. If we created an additional new higher level APC within each C-APC clinical family that did not contain any primary comprehensive services and instead onlyCMS-1613-FC 164

contained a very small volume of complexity-a djusted code pairs, we do not believe that such APCs would constitute appropriat e “groups of covered OPD services.” Comment: One commenter urged CMS to finalize the proposal to assign CPT

code 0308T to APC 0351 and to convert APC 0351 into a C-APC. Response: We appreciate the commenter’s support. For this final rule with comment period, we are finalizing our propos al to assign CPT code 0308T to APC 0351

and to convert APC 0351 into a C-APC for CY 2015. Comment: Commenters generally agreed with the proposed structure of the Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices (AICDP) C-APCs. One commenter specifica lly supported the assignment of CPT code

0319T to C-APC 108. Response: We appreciate the commenters’ support. Comment: Several commenters suppor ted CMS’ proposed assignment of CPT

codes 77424 and 77425 to C-APC 0648. Another commenter believed that the services assigned to C-APC 0648 are not similar clinically or similar in resource costs, and suggested that CMS divide th is C-APC into two levels. Response: We appreciate the commente rs’ support for our proposal regarding C-APC 0648. However, we disagree with the commenter that the services assigned to C-APC 0648 are not similar clinically or in re gard to resource costs. All of the seven services proposed to be assi gned to C-APC 0648 invol ve the breast. Th e current clinical application of intraoperativ e radiation therapy (IORT CP T codes 77424 and 77425) is for breast cancer following lumpectomy. In regard to resource costs of the services assigned to C-APC 0648, the range from the lowest costsignificant procedure to the highest costCMS-1613-FC 165

significant procedure is between approxima tely $5,584 and $9,325, which is well within the 2 times rule limit. In addition, C-APC 0648 is a small APC with only 7 services and a total of approximately 5,000 claims based on CY2013 claims data. To further divide

this C-APC would be less consistent with a prospective payment syst em than its proposed structure. Therefore, we are finalizi ng our proposal to assign CPT codes 77424 and

77425 to C-APC 0648. Comment: One commenter requested that CMS exclude C-APC 0259 from the comprehensive APC payment policy. The commenter believed that the change in the procedure-to-device claim edits policy would re sult in more incorrectly coded claims for the procedure described by CPT code 69930 (C ochlear device implantation, with or without mastoidectomy), which is th e only service assi gned to C-APC 0259. Response: We do not believe that C-APC 0259 should be excluded from the comprehensive APC payment policy. The disc ussion of the device edits policy is in

section II.A.2.d.1. of this final rule with comm ent period. We believe that hospitals will continue to report the cost of the cochlear im plant when one of these devices is implanted into a Medicare beneficiary because the cost of this device is 84 percent of the total cost of the procedure. After c onsideration of this comment, we see no reason to exempt C-APC 0259 from the comprehensive APC payment policy. We are finalizing our proposal to convert APC 0259 into a C-APC for CY 2015. Comment: Several commenters agreed with CMS’ proposed structure of the cardiac electrophysiology C-APCs: C- APC 0084 (Level I Electrophysiologic Procedures); C-APC 0085; and C-APC 0086 (Lev el III Electrophysiolo gic Procedures). One commenter requested that CMS reas sign CPT code 93603 (Right ventricularCMS-1613-FC 166

recording) from C-APC 0084 to C-APC 0085 because the commenter believed that the procedure described by CPT code 93603 is more similar to the procedures assigned to C-APC 0085 than the other proce dures assigned to C-APC 0084. Response: We appreciate the commenters ’ support. However, we disagree with

the commenter that CPT code 93603 should be reassigned from C-APC 0084 to C-APC 0085. CPT code 93603 is a very low-volume pro cedure, with a total of 12 claims for CY 2013. The geometric mean cost for CP T code 93603 (based on these 12 claims) is $1,807. The geometric mean cost of the lowest cost significant serv ice in C-APC 0085 is $4,064 (CPT code 93619). Therefore, we belie ve that CPT code 93603 lacks resource similarity to the procedures assigned to C- APC 0085. We are finaliz ing the structure of the cardiac electrophysiology C-AP Cs, as proposed for CY 2015. Comment: Several commenters agreed with CMS’ proposed structure of the

neurostimulator APCs. Two commenters beli eved that the difference in cost between CPT code 61885 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or inductive coupling; with connection to a single electrode array) and CPT code 61886 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or inductive coupling; with connection to 2 or more electrode arrays) is too low and that the device costs may not be adequately captured based on the accuracy

of the claims data. Another commente r recommended that CMS restructure the neurostimulator APCs to improve clinic al coherence by limiting C-APC 0318 to only certain full-system procedures, assigning all lead placement procedures to C-APC 0061, and assigning the remaining neurost imulator procedures to C-APC 0039.CMS-1613-FC 167

Response: We appreciate the commenters ’ support. Regarding the commenters’ concern about the geometric mean cost of CPT codes 61885 and 61886, the geometric mean cost of CPT code 61886 (dual channel procedure) is higher than CPT code 61885 (single channel procedure), which is to be expected. It is important to remember that the C-APC payment policy packages all procedures performed with the primary procedure, so the cost for the primary service in a C- APC may be higher than the cost associated with single claims for the same service. We note that APC groupings are based on two factors, clinical similarity and resource si milarity. The OPPS requires that we group services into APCs for payment purposes based on these two factors. Clinical similarity in the APC grouping context is by definition, an d by necessity, is much broader than the comparisons that distinguish individual CPT codes. All of the pr ocedures assigned to C-APCs 0061, 0039, and 0318 include the various neurostimulator-related procedures. The neurostimulator family of C-APCs groups these procedures ba sed on the geometric mean cost and clinical similarity of the prim ary service. In some cases, an APC includes implantation of a complete system of one type of neurostimulator and the implantation of either a generator alone or a complete system of other types. This is a function of the CPT coding system and the prospective nature of the comprehensive APC payment policy. Overall, we believe that the proposed structure of the neurostimulator family of C-APCs strikes the proper balance of both f actors for APC construction and resource and clinical similarity. We are finalizing th e proposed structure of the neurostimulator C-APCs, as proposed, and without modification. Comment: One commenter requested that CMS divide C-APC 0425 into two APCs because the range of procedure costs in this APC is too significant. AnotherCMS-1613-FC 168

commenter requested that CMS reassign the following CPT codes from APC 0208 to C-APC 0425 based on more appr opriate resource homogeneity to the other procedures assigned to C-APC 0425: CPT codes 22551, 22554, 22612, and 22856. Response: We disagree with the comme nters’ recommendation to divide C-APC 0425 into two C-APCs. The cost range for significant procedures within C-APC 0425 (using the proposed rule code assignments) is between approximately $9,087 (for CPT code 69714) and $15,740 (for CPT code 24363), whic h is well within the 2 times rule limit. We agree with the commenters that CPT codes 22551 (with a geometric mean cost of $10,052), 22554 (with a geometric mean cost of $8,129), 22612 (with a geometric mean cost of $8,451), and 22856 (with a geometric mean cost of $12,958) should be reassigned from APC 0208 (with a geometri c mean cost of $4,267) to C-APC 0425 (with a geometric mean cost of $10,606). We believe that assigning these four CPT codes to C-APC 0425 supports more approp riate resource and clinical similarity when compared to the current assignment to APC 0208. Ot herwise, we are finalizing the proposed

structure for C-APC 0425. With these addi tions to C-APC 0425, the cost range for significant procedures within C-APC 0425 (using the final rule code assignments) is between approximately $8,451 (for CPT c ode 22612) and $15,740 (for CPT code 24363).

Comment: One commenter believed that the proposed C-APCs that include drug pumps would provide inadequate payment for its developing therapy because the therapy uses an advanced technology drug pump a nd a very costly drug. The commenter requested that CMS either provide comple xity adjustments for high-cost drugs or unpackage the payment for certain high-cost drugs.CMS-1613-FC 169

Response: As we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74908 through 74909), we do not belie ve that drugs being supplied to the patient to fill the reservoir of a pump at the time of pump implantation should be excluded from the comprehensive APC payment policy because drugs supplied to fill the pump during implantation of the pump are adju nctive to the procedure. The costs of costly adjunctive services ar e included proportionally into the cost estimation for the primary services through our ability to use al most all claims for a service and adoption of the geometric mean cost upon which to establis h relative payment weights. In addition, we do not believe that we should make comp lexity adjustments for higher cost drugs. Complexity adjustments are for more co mplex procedure variations that differ significantly from the primary “J1” procedure. Complexity adjustments are not intended as a way to provide separate payment for adj unctive drugs and supplie s under the guise of a complexity adjustment. Therefore, we are not adopting this commenter’s suggested changes to the comprehensive APC payment policy. We will continue to monitor the development of this technology and consider fu ture revisions to this policy as needed. Comment: Commenters opinions variedregarding CMS’ proposal to include C-APCs 0202 (Level V Gyneco logic Procedures), 0385 (Level I Urogenital Procedures), and 0386 (Level II Urogenital Proc edures) in the urogenital pro cedures clinical family of C-APCs and to allow complexity adjust ments from C-APC 0202 to C-APC 0385 and complexity adjustments from C-APC 0385 to C-APC 0386. Some commenters agreed with CMS’ proposed structure of the urogeni tal procedures family of C-APCs, while other commenters opposed the proposal to reassign complexity adjustment code

combinations from C-APC 0202 to C-APC 0385. The commenters believed that theCMS-1613-FC 170

procedures assigned to C-APC 0202, which are re lated to female urogenital anatomy, are not sufficiently clinically similar to the primary procedures assigned to C-APC 0385, which relate to the male urogenital anatomy. Response: We appreciate the commenters ’ support for the proposed structure of the urogenital procedures C-APC clinical family and the proposed approach for complexity adjustments. However, we disa gree with the commenters that complexity adjustments should not be made from C-APC 0202 to C-APC 0385 because of insufficient clinical similarity between th e complex procedures with a primary code assigned to C-APC 0202 that have been reassigned according to the complexity adjustment policy to C-APC 0385 and the prim ary procedures assi gned to C-APC 0385. Although we acknowledge that there are diffe rences in the male and female human urogenital anatomy, we believe that many of these procedures involve relatively complex repairs of the urogenital region involving implantable medical devi ces and, therefore, it is appropriate to assign complexity adjusted code combinations fr om C-APC 0202 to the next higher paying APC in the urogenital procedures clinical family, which is

C-APC 0385.

Comment: Some commenters supported the proposed stru cture of the C-APCs in the endovascular clinical family. Other co mmenters noted that payments for some endovascular procedure code combinations would be negatively impacted by the proposed structure for C-APCs 0083 (Level I Endovascular Procedures), 0229 Level II Endovascular Procedures), and 0319 (Level III Endovascular Pr ocedures). The commenters recommended reviewing and re vising these C-APCs and creating more levels beyond the proposed three levels of endovascular C-APCs.CMS-1613-FC 171

Response: We appreciate the commenters ’ support for the proposed structure of the endovascular C-APC clinical family. We do not believe that additional levels of endovascular C-APCs are necessary at this time. We believe that the restructured

endovascular C-APCs better reflect res ource homogeneity than the CY 2014 final

structure of these C-APCs because the new st ructure has clearer delineations between the cost ranges of the procedures assigned to the three levels . In addition, in response to comments to the CY 2014 OPPS/ASC final rule with comment period (79 FR 40951), we proposed less stricter complexity adjustment criteria, which resulted in more code combinations qualifying for higher paymen t than would have qualified under the CY 2014 OPPS final rule complexity adjustment criteria. We also proposed evaluating certain add-on codes that are currently assigned to device-dependent APCs for complexity adjustments, and the overwhelm ing majority of these add-on codes are endovascular add-on codes. We believe that these two changes to the CY 2014 comprehensive APC payment policy sufficiently mitigate much of any negative payment impact for endovascular procedures in th is transition from the current payment methodology to the comprehensive APC payment methodology. As we do annually, we will reevaluate the need for adjustments to the endovascular family of C-APCs. Comment: In the CY 2015 OPPS/ASC proposed rule (79 FR 40950 through 40951) in response to a comment to the CY 2014 OPPS/ASC final rule with comment period, we proposed to continue to pay for st em cell transplant pro cedures as we have done for many years through APCs 0111 (Bl ood Product Exchange) and 0112 (Apheresis and Stem Cell Procedures). We stated thatwe would not create a C-APC for stem cellCMS-1613-FC 172

transplant procedures. Some commenters supported this approach. Other commenters requested that CMS create a C-APC for these procedures. Response: Based on the rationale disc ussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40950 through 40951), we will cont inue to pay for stem cell transplant procedures through APCs 0111 and 0112 in CY 2015. (4) Statement of Final Policy and List of CY 2015 C-APCs As we discussed earlier, in the CY 2015 OPPS/ASC proposed rule (79 FR 40941 through 40953), we proposed to continue to define a comprehensive service as a classification for the provision of a primar y service and all adjunctive services and supplies reported on the hospita l Medicare Part B claim, with few exceptions, resulting in a single beneficiary copayment per claim. The comprehensive APC payment bundle policy includes all hospital services re ported on the claim that are covered under Medicare Part B, except for the excluded serv ices or services requi ring separate payment by statute as noted above. We proposed to c ontinue to define a clinical family of C-APCs as a set of clinically related C-APCs that represent different resource levels of clinically comparable services.

After consideration of th e public comments we receive d, we are finalizing our proposals, with some minor modifications, for establishment of C-APCs. In this final rule with comment period, we are establishi ng a total of 25 C-APCs within 12 clinical families for CY 2015, as described below in Table 7. We are establishing a comprehensive APC payment methodology that adheres to the same basic principles as those finaliz ed in the CY 2014 OPPS/ ASC final rule with comment period, with the fo llowing changes for CY 2015:CMS-1613-FC 173

● We are reorganizing and consolidating several of the current device-dependent

APCs and the CY 2014 C-APCs.

● We are expanding the comprehensive APC payment policy to include all device-dependent APCs, except for APCs 0427, 0622, and 0652.

● We are creating two other new C-APCs (C-APC 0067 and C-APC 0351).

● We are establishing new comp lexity adjustment criteria:

▪ Frequency of 25 or more claims re porting the HCPCS code combination (the frequency threshold); and

▪ Violation of the “2 times” rule (the cost threshold).

● We are establishing a po licy to package all add-on c odes, although we evaluate claims reporting a single primary service code reported in combination with an applicable add-on code (we refer readers to Table 8 belo w for the list of app licable add-on codes) for complexity adjustments.

Addendum J to this final rule with comme nt period (which is available via the Internet on the CMS Web site) c ontains all of the data related to the comprehensive APC payment policy, including the list of complexity adjustments.

TABLE 7.—CY 2015 C-APCs Clinical Family* C-APC APC Title CY 2015 Payment AICDP 0090 Level II Pacemaker/Similar Procedures $6,542.78 AICDP 0089 Level III Pacemak er/Similar Procedures $9,489.74 AICDP 0655 Level IV Pacemak er/Similar Procedures $16,400.98 AICDP 0107 Level I ICD and Similar Procedures $22,907.64 AICDP 0108 Level II ICD and Similar Procedures $30,806.39 BREAS 0648 Level IV Breast and Skin Surgery $7,461.40 ENTXX 0259 Level VII ENT Procedures $29,706.85 EPHYS 0084 Level I Electrophysiologic Procedures $872.92 EPHYS 0085 Level II Electrophysiologic Procedures $4,633.33 EPHYS 0086 Level III Electrophysiologic Procedures $14,356.62CMS-1613-FC 174

Clinical Family* C-APC APC Title CY 2015 Payment EYEXX 0293 Level IV Intr aocular Procedures $8,446.54 EYEXX 0351 Level V Intraocular Procedures $23,075.30 GIXXX 0384 GI Procedures with Stents $3,173.83 NSTIM 0061 Level II Neurostim./Related Procedures $5,288.58 NSTIM 0039 Level III Neurostim ./Related Procedures $17,099.35 NSTIM 0318 Level IV Neurostim ./Related Procedures $26,152.16 ORTHO 0425 Level V Musculoskeletal Procedures $10,220.00 PUMPS 0227 Implantation of Drug Infusion Device $15,566.34 RADTX 0067 Single Session Cranial SRS $9,765.40 UROGN 0202 Level V Gynecologic Procedures $3,977.63 UROGN 0385 Level I Urogenital Procedures $6,822.35 UROGN 0386 Level II Urogenital Procedures $13,967.97 VASCX 0083 Level I Endovascular Procedures $4,537.45 VASCX 0229 Level II Endovascular Procedures $9,624.10 VASCX 0319 Level III Endovascular Procedures $14,840.64 *Clinical Family Descriptor Key: AICDP = Automatic Implantable Cardiac Defi brillators, Pacemakers, and Related Devices BREAS = Breast Surgery ENTXX = ENT Procedures EPHYS = Cardiac Electrophysiology EYEXX = Ophthalmic Surgery GIXXX = Gastrointestinal Procedures NSTIM = Neurostimulators ORTHO = Orthopedic Surgery PUMPS = Implantable Drug Delivery Systems RADTX = Radiation Oncology UROGN = Urogenital Procedures VASCX = Vascular Procedures TABLE 8.—CY 2015 PACKAGED CP T ADD-ON CODES THAT ARE EVALUATED FOR A COMPLEXITY ADJUSTMENT

CY 2015 CPT/HCPCS Add-On

Code CY 2015 Short Descriptor 19297 Place breast cath for rad 33225 L ventric pacing lead add-on 37222 Iliac revasc add-on 37223 Iliac revasc w/stent add-on 37232 Tib/per revasc add-on 37233 Tibper revasc w/ather add-on 37234 Revsc opn/prq tib/pero stent 37235 Tib/per revasc stnt & ather 37237 Open/perq place stent ea add 37239 Open/perq place stent ea addCMS-1613-FC 175

CY 2015 CPT/HCPCS Add-On

Code CY 2015 Short Descriptor 92921 Prq cardiac angio addl art 92925 Prq card angio/athrect addl 92929 Prq card stent w/angio addl 92934 Prq card stent/ath/angio 92938 Prq revasc byp graft addl 92944 Prq card revasc chronic addl 92998 Pul art balloon repr precut C9601 Perc drug-el cor stent bran C9603 Perc d-e cor stent ather br C9605 Perc d-e cor revasc t cabg b C9608 Perc d-e cor revasc chro add

f. Calculation of Composite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide necessary, high quality care as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple, independent services into a single OPPS payment in this way enable s hospitals to manage their resources with maximum flexibility by monitoring and adjustin g the volume and efficiency of services themselves. An additional advantage to the co mposite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, ratherthan relying upon single procedure claims which may be low in volume and/or incorr ectly coded. Under th e OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac el ectrophysiologic evaluation and ablationCMS-1613-FC 176

services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/AS C final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 thr ough 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background. In the CY 2015 OPPS/ASC proposed rule (79 FR 40953), for CY 2015, we proposed to continue our composite APC payment policies for LDR prostate brachytherapy services, mental health services, and multiple imaging services, as discussed below. In addition, we noted that we finalized a policy in the CY 2014

OPPS/ASC final rule with comm ent period to modify our lo ngstanding policy to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (78 FR 74910 through 74912). For CY 2014, we created one new composite APC, entitled “Extended Assessment and Management (EAM) Composite” (APC 8009), to provide payment for all qualifying extended assessment and management encounters rather than rec ognize two levels of EAM composite APCs (78 FR 74910 through 74912). Under this polic y, we allow any visits, a Level 4 or 5 Type A ED visit or a Level 5 Type B ED vis it furnished by a hospital in conjunction with

observation services of substantial dura tion to qualify for payment through EAM composite APC 8009. In the CY 2015 OPPS/ASC proposed rule (79 FR 40953 to 40954), we proposed to pay for qualifying exte nded assessment and management services through composite APC 8009. In the CY 2015 OPPS/ASC proposed rule (79 FR 40953), we also proposed to discontinue our composite APC payment policies for cardiac electrophysiologicCMS-1613-FC 177

evaluation and ablation services (APC 8000) , and to pay for these services through comprehensive APC 0086 (Level III Electrophysio logic Procedures), as presented in a proposal included under section II.A.2.e. of the CY 2015 OPPS/ASC proposed rule. As such, in the CY 2015 OPPS/ASC proposed ru le, we proposed to delete APC 8000 for CY 2015 (79 FR 40953). We note that we finalized a policy to discontinue and supersede the cardiac resynchronization therapy composite APC with comprehensive APC 0108 (Level II Implantation of Cardioverter-Defibrillators (IC Ds)), as discussed insection II.A.2.e. of

the CY 2014 OPPS/ASC final rule with co mment period (78 FR 74902). For CY 2014, APC 0108 is classified as a composite AP C, as discussed in the CY 2014 OPPS/ASC final rule with comment period, because comp rehensive APCs were not made effective until CY 2015 (78 FR 74925). For CY 2015, with the implementation of our new comprehensive APC policy, in the CY 2015 OPPS/ASC proposed rule, we proposed to effectuate the policy finalized in the CY 2014 OPPS/ASC final rule with comment period, and pay for cardiac resynchronizati on therapy services through comprehensive APC 0108 (proposed to be renamed “Level II ICD and Similar Procedures”), which is

discussed in section II.A.2.e. of th e CY 2015 proposed rule (79 FR 40953). (1) Extended Assessment and Mana gement Composite APC (APC 8009) Beginning in CY 2008, we included composite APC 8002 (Level I Extended Assessment and Management (EAM) Com posite) and composite APC 8003 (Level II Extended Assessment and Management (EAM ) Composite) in the OPPS to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended vi sit). In most of these circumstances,CMS-1613-FC 178

observation services are furnished in c onjunction with evaluation and management services as an integral part of a patien t’s extended encounter of care. From CY 2008 through CY 2013, in the circumstances when 8 or more hours of observation care was provided in conjunction with a high level visit, critical care , or direct referral for observation, was an integral pa rt of a patient’s extended en counter of care, and was not furnished on the same day as surgery or post-operatively, a single OPPS payment was

made for the observation and evaluation and management services 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 741 65) for a full discussion of this longstanding policy for CY 2013 and prior years. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910), we cr eated one new composite APC, APC 8009 (Extended Assessment and Management (EAM) Composite), to provide payment for all qualifying extended assessment and managementencounters rather than recognizing two levels of EAM composite services. Unde r the CY 2014 finalized policy, we no longer recognize composite APC 8002 or APC 8003. Beginning in CY 2014, we allowed services identified by the new single clinic visit HCPCS code G0463, a Level 4 or 5 Type A ED visit (CPT code 99284 or 99285), a Le vel 5 Type B ED visit (HCPCS code G0384), or critical care (CPT code 99291) provided by a hospital in conjunction with

observation services of substantial duration (8 or more hours) (provided the observation was not furnished on the same day as surger y or post-operatively) (78 FR 74910 through 74912) to qualify for payment through EAM composite APC 8009. In the CY 2015 OPPS/ASC proposed rule (79 FR 40953 through 40954), for CY 2015, we proposed to continue our CY 2014 finalized policy to provide payment forCMS-1613-FC 179

all qualifying extended assessment and mana gement encounters through composite APC 8009. As we did for CY 2014, in the CY 2015 OPPS/ASC proposed rule, for CY 2015, we proposed to allow a clinic visit and certain high level ED visits furnished by a hospital in conjunction with observation services of substantial duration (8 or more hours) to qualify for payment through the EAM composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). Spec ifically, we proposed to continue to allow a clinic visit, a Level 4 or Level 5 Type A ED visit, or a Level 5 Type B ED visit furnished by a hospital or a direct referral for observation (identified by HCPCS code G0379) performed in conjunction with observation services of substantial duration to qualify for payment through co mposite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). We note that, for CY 2015, we also proposed to continue our current policy where one service code

describes all clinic visits. We refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74912) fo r a full discussion of the creation of composite APC 8009. As we noted in the CY 2014 OPPS/ASC final rule with comment period, the

historical cost data used a nnually to calculate the geometri c mean costs and payment rate for composite APC 8009 would not reflect the si ngle clinic visit code that was new for CY 2014 (HCPCS code G0463) until our CY 2016 rulemaking cycle. We stated in the

CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74912) that when hospital claims data for the CY 2014 clin ic and ED visit codes become available, we would calculate the geometric mean cost for EAM composite APC 8009 usingCMS-1613-FC 180

CY 2014 single and “pseudo” single procedure claims that meet each of the following

criteria:

● The claims do not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By se lecting these claims from single and “pseudo” single claims, we ensure that they would not contain a code for a service with

status indicator “T” on the same date of service.)

● The claims contain 8 or more units of services desc ribed by HCPCS code G0378 (Observation services, per hour.)

● The claims contain one of the follo wing codes: HCPCS code G0379 (Direct referral of patient for hospital observation care ) on the same date of service as HCPCS code G0378; CPT code 99291 (Critical care, eval uation and management of the critically ill or critically injured patient; first 3 0–74 minutes); or HCPCS code G0463 (Hospital outpatient clinic visit for assessment and mana gement of a patient) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

Because we have no available cost da ta for HCPCS code G0463, for CY 2015, we proposed to calculate the geometric mean cost for procedures assigned to APC 8009 using CY 2013 single and “pseudo” single procedure claims that met each of the following criteria:

● The claim did not contain a HCPCS c ode to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By se lecting these claims from single andCMS-1613-FC 181

“pseudo” single claims, we assured that they would not contain a code for a service with

status indicator “T” on the same date of service.)

● The claim contained 8 or more units of services described by HCPCS code G0378 (Observation services, per hour.)

● The claim contained one of the follo wing codes: HCPCS code G0379 (Direct referral of patient for hospital observation care ) on the same date of service as HCPCS code G0378; or CPT code 99201 (Office or othe r outpatient visit fo r the evaluation and management of a new patient (Level 1)); CPT code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the ev aluation and management of a new patient (Level 3)); CPT code 99204 (Office or othe r outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient visit for the eval uation and management of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (L evel 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and manageme nt of an established patient (Level 3)); CPT code 99214 (Office or other outpatient vi sit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or other outpatient visit for the evaluation and management of an establ ished patient (Level 5)); CPT code 99284 (Emergency department visit for the evaluati on and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); HCPCS code G0384 (Type B emergency department visit (Level 5));CMS-1613-FC 182

or CPT code 99291 (Critical car e, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before the date of service for HCPCS code G0378. The proposed CY 2015 geometric mean co st resulting from this methodology for EAM composite APC 8009 was approximately $1,287. Comment: One commenter urged CMS to consider options to minimize the financial burden for the beneficiary associat ed with self-administered drugs while the beneficiary is receiving observation services . The commenter also supported efforts to count outpatient observation toward the Medicare skilled nursing facility (SNF) 3-day stay requirement. Another commenter expr essed concern that paying for all qualifying EAM encounters through a singl e composite APC is likely to penalize certain outpatient facilities, such as those that are attached to safety-net or teaching hospitals, which treat more complex patients and populations. The commenter urged CMS to monitor and accept provider feedback concerning the impact of this coding change to ensure that it does not create financial pressu re or incentives to admit borde rline cases, deny treatment, or otherwise negatively aff ect clinical decision making. Response: The comments related to be neficiary liability associated with self-administered drugs and counting outpa tient observation toward the SNF 3-day qualifying stay are outside the scope of the proposed regulati ons. We do not believe that paying for all qualifying EAM encounters thr ough a single composite APC is likely to penalize certain outpatient facilities that treat more complex patients and populations. We believe that this proposal accurately acc ounts for the cost of providing an extended assessment and management service and that th is proposal does not have any substantialCMS-1613-FC 183

impact on any particular type of facility or patient type. We also do not believe that paying for all qualifying EAM encounters through a single compos ite APC creates any financial pressure or incentives to admit borderline cases, deny treatment, or otherwise negatively affect clinical decision making. We continue to expect hospitals to provide the appropriate medical care to all beneficiaries.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to continue our CY 2014 finalized policy to provide payment for all qualifying extended assessm ent and management encounters through composite APC 8009 for CY 2015. We also are finalizing our proposal, without modification, to continue to allow a clinic vi sit and certain high level ED visits furnished by a hospital in conjunction with observation serv ices of substantial duration (8 or more hours) to qualify for payment through EAM composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). The final CY 2015 geometric mean cost resulting from this methodology for EAM composite APC 8009 is approximately $1,281. (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) LDR prostate brachytherapy is a treatm ent 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/ca theters. At least two CPT codes are used to report the composite treatme nt service because ther e are separate codes that describe placement of the needles/cathete rs and the application of the brachytherapy sources: CPT code 55875 (Transperineal placemen t of needles or catheters into prostate for interstitial radioelement application, w ith or without cystos copy) and CPT code 77778CMS-1613-FC 184

(Interstitial radiation source application; co mplex), which are genera lly 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 clinic al scenario, and to further our goal of providing payment under the OPPS for a larger b undle 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 co mposite service, reported as CPT codes 55875 and 77778, is furnished in a single hospita l encounter. We base the payment for composite APC 8001 (LDR Prostate Brachyt herapy Composite) on the geometric mean

cost derived from claims for the same date of service that contain both CPT codes 55875 and 77778 and that do not contain other separate ly 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 histor y of OPPS payment for LDR prostate brachytherapy services and a detailed descrip tion of how we developed the LDR prostate brachytherapy composite APC. In the CY 2015 OPPS/ASC proposed rule (79 FR 40955), for CY 2015, we proposed to continue to pay for LDR prostate brachytherapy services using the composite APC payment methodology proposed and impl emented for CY 2008 through CY 2014. That is, we proposed to use CY 2013 claims reporting charges for both CPT codes 55875

and 77778 on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the proposed payment rate for composite

APC 8001. Consistent with our CY 2008 th rough CY 2014 practice, in the CY 2015 OPPS/ASC proposed rule (79 FR 40955), we proposed not to use the claims that meet these criteria in the calculation of the geometric mean costs of procedures or servicesCMS-1613-FC 185

assigned to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial Radiati on Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectiv ely. We proposed to continue to calculate the geometric mean costs of proce dures or services a ssigned to APCs 0163 and 0651 using single and “pseudo” single procedure claims. We con tinue to believe that this composite APC contributes to our goal of cr eating hospital incentives for efficiency and cost containment, while providing hospitals w ith the most flexibility to manage their

resources. We also continue to believe that data from claims reporting both services required for LDR prostate brach ytherapy provide the most acc urate geometric mean cost upon which to base the proposed composite APC payment rate. Using a partial year of CY 2013 cl aims data available for the CY 2015 OPPS/ASC proposed rule, we were able to use 379 claims that contained both CPT codes 55875 and 77778 to calculate the proposed geom etric mean cost of approximately $3,669 for these procedures upon which the propos ed CY 2015 payment rate for composite

APC 8001 is based. Comment: Several commenters expre ssed concern that the proposed payment rate for APC 8001 is based only on 379 claims that reported both CPT codes 55875 and 77778 on the same date of service, a significan t decrease from the CY 2014 final rule claims data used for ratesetting when 591 clai ms were available. Commenters also noted that the proposed payment rate of $3,504.02 yi elds an 8.9 percent decrease in payment compared to the CY 2014 payment rate of $3,844.64. One commenter opined that the decrease in payment for these services is pa rtially due to the number of brachytherapy procedures provided in the hospital outpatie nt setting. A few commenters urged CMS toCMS-1613-FC 186

closely monitor the number of claims used to set the payment rate for this APC and to consider other ratesetting methodologies if the number of claims continues to decrease. Several commenters expressed that the lo w volume of claims reporting outpatient brachytherapy services also affected ot her APCs, notably APC 0312 (Radioelement Applications) and APC 0651 (Complex Intersti tial Radiation Sour ce Application), and

cited additional decreases in the volume of claims used for ratesetting for these APCs. Response: The CY 2015 final rule clai ms data show that 406 claims were available and used to set the payment rate for APC 8001, with a geometric mean cost of approximately $3,745, compared to the proposed ru le claims data that showed 379 claims available and used for ratesetting, with a ge ometric mean cost of approximately $3,669. In response to comments regarding the decrea se in the number of claims available for CY 2015 ratesetting and the geometric mean cost relative to th e number of claims available for CY 2014 ratesetting and the geom etric mean cost, we note that there is typically some fluctuation in costs from y ear to year. We acknowledge that the number

of claims available and used for ratese tting for APC 8001 has decreased over recent years. However, the percentage of single fre quency claims compared to total claims that we were able to use for ratesetting in this final rule with comment period is comparable to prior years. In addition, eval uation of the claims data for the 4 years prior to CY 2014

indicated that the mean or median costs used for ratesetting for APC 8001 were lower in those years than CY 2014 or CY 2015 cost le vels. For APC 0651, based on final rule claims data, there are 62 single frequency cl aims out of a total of 3,785 claims, with a geometric mean cost of approximately $988. For APC 0312, based on final rule claims data, there are 26 single frequency claims outof a total of 378 clai ms, with a geometricCMS-1613-FC 187

mean cost of approximately $411. We agree with the commenters’ assertion that it appears that there are an increasing number of radiation oncological technologies that are competing with prostate brachytherapy, wh ich may be contributing to a decreased number of claims available for ratesetting fo r these APCs. As we stated in the CY 2014

OPPS/ASC final rule with co mment period, we will continue to evaluate additional refinements and improvements to our rateset ting methodologies in order to maximize the use of claims data (78 FR 74913). In addi tion, we will continue to explore means by which we can use a larger volume of claims to establish the payment rate for APC 0312

and APC 0651.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to continue use of composite APC 8001 for CY 2015 and to set the payment rate for this APC using our established methodology. The final geometric mean cost for composite APC 8001 for CY 2015 is approximately $3,745. (3) Mental Health Services Composite APC (APC 0034) In the CY 2015 OPPS/ASC proposed rule (79 FR 40955), for CY 2015, we proposed to continue our longstanding polic y 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 servic es provided by a hospital, which we

consider to be the most resour ce-intensive of all outpatient mental health services. We refer readers to the April 7, 2000 OPPS fi nal rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.CMS-1613-FC 188

Specifically, in the CY 2015 OPPS/AS C proposed rule (79 FR 40955), we proposed that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates

associated with the APCs for the individua l services exceeds the maximum per diem payment rate for partial hospitalization serv ices provided by a hospital, those specified

mental health services would be assi gned to APC 0034 (Mental Health Services Composite). We also proposed to continue to set the payment rate for APC 0034 at the same payment rate that we proposed to establish for APC 0176 (Level II Partial Hospitalization (4 or more services) for hos pital-based PHPs), which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital continue to be paid one unit of APC 0034 (79 FR 40955). Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health services individually, or to make a single payment atthe same payment rate established for APC 0176 for all of the specified mental health services furnished by the hospital on that single date of service. We continue to believe that the costs associated with administering a partial hospitalization pr ogram at a hospital represent the most resource-intensive of all outpa tient mental health services. Therefore, we do not believe that we should pay more for mental hea lth services under the OPPS than the highest partial hospitalization per diem payment rate for hospitals. We did not receive any public comment s on this proposal. Therefore, we are finalizing our CY 2015 proposal, without m odification, to continue our longstanding policy of limiting the aggregat e payment for specified less resource-intensive mental

health services furnished on the same date to a single beneficiary by a hospital to theCMS-1613-FC 189

payment rate for APC 0176, which is the maximum partial hospitalization per diem payment for a hospital for CY 2015. (4) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) Effective January 1, 2009, we provide a si ngle payment each time a hospital bills more than one imaging procedure within an im aging family on the same date of service, in order to reflect and promote the efficien cies hospitals can ac hieve when performing multiple imaging procedures during a singl e 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 12 of the

CY 2014 OPPS/ASC final rule with co mment period (78 FR 74920 through 74924). While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement unde r section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging servi ces 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);CMS-1613-FC 190

● APC 8006 (CT and CTA with Contrast Composite);

● APC 8007 (MRI and MRA without Contrast Composite); and

● APC 8008 (MRI and MRA w ith Contrast Composite). We define the single imaging session fo r 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. Fo r example, if the hosp ital 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 packag ed services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging pro cedures performed across families. For a full discussion of the development of th e multiple imaging composite APC methodology,

we refer readers to the CY 2009 OPPS/A SC final rule with comment period (73 FR 68559 through 68569). In the CY 2015 OPPS/ASC proposed rule, for CY 2015, we proposed to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite APC payment methodology (79 FR 40956). We continue to believe thatthis policy will reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session. The proposed CY 2015 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) were based onCMS-1613-FC 191

geometric mean costs calculated from a partia l year of CY 2013 claims available for the proposed rule that qualified for composite pa yment under the current policy (that is, those claims with more than one procedure within th e same family on a singl e date of service). To calculate the proposed geometric mean cost s, we used the same methodology that we

used to calculate the final CY 2013 and CY 2014 geometric mean costs for these composite APCs, as described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918). The imaging HCPCS code s referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC geometric mean cost s, pursuant to our established methodology

as stated in the CY 2014 O PPS/ASC final rule with comm ent period (78 FR 74918), are identified by asterisks in Addendum N to the CY 2015 OPPS/ASC proposed rule (which

is available via the Internet on the CMS Web site) and are discussed in more detail in section II.A.1.b. of that proposed rule. For the CY 2015 OPPS/ASC proposed ru le, we were able to identify approximately 636,000 “single session” claims out of an estimated 1.6 million potential composite APC cases from our ratesetting clai ms data, approximately 40 percent of all eligible claims, to calculate the proposed CY 2015 geometric mean costs for the multiple imaging composite APCs. Table 8 of the proposed rule (79 FR 40956 through 40958) list ed the proposed HCPCS codes that would be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for

CY 2015.CMS-1613-FC 192

Comment: A few commenters expressed concern that the multiple imaging composite APCs may undercompensate prov iders for imaging procedures. These commenters recommended that CMS provide an analysis of the effects of reductions in imaging payments due to the composite APC policy on utilization. The commenters recommended that CMS provide separate payment for each imaging procedure in light of reductions to payment for imaging procedures. Response: We continue to believe that our multiple imaging composite policies reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session, and so me of those efficiencies result in lower payments due to cost savings from furnishing multiple imaging services on the same date. We will continue to monitor the multip le imaging composite APC ratesetting methodology and the cost of providing imaging services. If appropriate, we may report any information to the HOP Panel, or di scuss and propose changes to the multiple imaging composite APCs in rulemaking in the future.

After consideration of the public comments receive d, we are finalizing our proposal to continue the use of multiple im aging composites without modification. We were able to identify approximately 661,000 million “single session” claims out of an estimated 1.68 million potential composite cas es from our CY 2013 ratesetting claims data, approximately 39 percent of all eligible claims, to calculate the final CY 2015 geometric mean costs for the multiple imaging composite APCs.

Table 9 below lists the HCPCS codes that will be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for CY 2015.CMS-1613-FC 193

TABLE 9.—OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCs Family 1 – Ultrasound CY 2015 APC 8004 (Ultrasound Composite) CY 2015 Approximate APC Geometric Mean Cost = $296 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 wi th and without Contrast

CY 2015 APC 8005 (CT and CTA without Contrast Composite)* CY 2015 Approximate APC Geometric Mean Cost = $325 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 CY 2015 APC 8006 (CT and CTA with Contrast Composite) CY 2015 Approximate APC Geometric Mean Cost = $548 70487 Ct maxillofacial w/dye 70460 Ct head/brain w/dye 70470 Ct head/brain w/o & w/dyeCMS-1613-FC 194

70481 Ct orbit/ear/fossa w/dye 70482 Ct orbit/ear/fossa w/o & w/dye 70488 Ct maxillofacial w/o & w/dye 70491 Ct soft tissue neck w/dye 70492 Ct sft tsue nck w/o & w/dye 70496 Ct angiography, head 70498 Ct angiography, neck 71260 Ct thorax w/dye 71270 Ct thorax w/o & w/dye 71275 Ct angiography, chest 72126 Ct neck spine w/dye 72127 Ct neck spine w/o & w/dye 72129 Ct chest spine w/dye 72130 Ct chest spine w/o & w/dye 72132 Ct lumbar spine w/dye 72133 Ct lumbar spine w/o & w/dye 72191 Ct angiograph pelv w/o & w/dye 72193 Ct pelvis w/dye 72194 Ct pelvis w/o & w/dye 73201 Ct upper extremity w/dye 73202 Ct uppr extremity w/o & w/dye 73206 Ct angio upr extrm w/o & w/dye 73701 Ct lower extremity w/dye 73702 Ct lwr extremity w/o & w/dye 73706 Ct angio lwr extr w/o & w/dye 74160 Ct abdomen w/dye 74170 Ct abdomen w/o & w/dye 74175 Ct angio abdom w/o & w/dye 74262 Ct colonography, w/dye 75635 Ct angio abdominal arteries 74177 Ct angio abd & pelv w/contrast 74178 Ct angio abd & pelv 1+ regns * If a “without contrast” CT or CTA procedur e is performed during the same session as a “with contrast” CT or CTA procedure, th e I/OCE would assign APC 8006 rather than APC 8005. Family 3 - MRI and MRA with and without Contrast

CY 2015 APC 8007 (MRI and MRA without Contrast Composite)* CY 2015 Approximate APC Geometric Mean Cost = $631CMS-1613-FC 195

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 CY 2015 APC 8008 (MRI and MRA with Contrast Composite) CY 2015 Approximate APC Geometric Mean Cost = $945 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 70547 Mr angiography neck w/o 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/dyeCMS-1613-FC 196

72142 Mri neck spine w/dye 72147 Mri chest spine w/dye 72149 Mri lumbar spine w/dye 72156 Mri neck spine w/o & w/dye 72157 Mri chest spine w/o & w/dye 72158 Mri lumbar spine w/o & w/dye 72196 Mri pelvis w/dye 72197 Mri pelvis w/o & w/dye 73219 Mri upper extremity w/dye 73220 Mri uppr extremity w/o & w/dye 73222 Mri joint upr extrem w/dye 73223 Mri joint upr extr w/o & w/dye 73719 Mri lower extremity w/dye 73720 Mri lwr extremity w/o & w/dye 73722 Mri joint of lwr extr w/dye 73723 Mri joint lwr extr w/o & w/dye 74182 Mri abdomen w/dye 74183 Mri abdomen w/o & w/dye 75561 Cardiac mri for morph w/dye 75563 Card mri w/stress img & dye C8900 MRA w/cont, abd C8902 MRA w/o fol w/cont, abd C8903 MRI w/cont, breast, uni C8905 MRI w/o fol w/cont, brst, un C8906 MRI w/cont, breast, bi C8908 MRI w/o fol w/cont, breast, C8909 MRA w/cont, chest C8911 MRA w/o fol w/cont, chest C8912 MRA w/cont, lwr ext C8914 MRA w/o fol w/cont, lwr ext C8918 MRA w/cont, pelvis C8920 MRA w/o fol w/cont, pelvis C8931 MRA, w/dye, spinal canal C8933 MRA, w/o&w/dye, spinal canal C8934 MRA, w/dye, upper extremity C8936 MRA, w/o&w/dye, upper extr * If a “without contrast” MRI or MRA procedure is performe d during the same session as a “with contrast” MRI or MRA procedure, th e I/OCE would assign APC 8008 rather than APC 8007.CMS-1613-FC 197

3. Changes to Packaged Items and Services a. Background and Rationale for Packaging in the OPPS Like other prospective payment syst ems, the OPPS relies on the concept of averaging to establish a payment rate for se rvices. The payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services most efficiently and to manage their resources with maximum flexibility. Our packaging policies support our strategic goal of using larger paym ent bundles in the OPPS to maximize hospitals’ incentives to provide ca re in the most efficient manner. For example, where there are a variety of devices , drugs, items, and supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the most cost-effi cient item that meets the patient’s needs, rather than to routinely use a more expens ive item, which often results if separate payment is provided for the items. Packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of it ems and services or to explore alternative group purchasing arrangements, thereby encour aging the most economical health care delivery. Similarly, packaging encourages hospi tals 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 accura cy of payment forCMS-1613-FC 198

services over time. Finally, packagi ng may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and serv ices and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prosp ective payment system, packaging payment for items and services that are typically inte gral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. Over the last15 years, as we have refined our understanding of the OPPS as a prospectiv e payment system, we have packaged

numerous services that we or iginally paid as primary serv ices. As we continue to develop larger payment groups that more br oadly reflect services provided in an encounter or episode of care, we have expa nded the OPPS packaging policies. Most, but not necessarily all, items and services curre ntly packaged in the OPPS are listed in 42 CFR 419.2(b), including the five packaging policies th at were added in CY 2014 (78 FR 74925). Our overarching goal is to ma ke OPPS payments for all services paid under the OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examin e the payment for items and services provided

in the OPPS to determine which OPPS services can be packaged to achieve the objective of advancing the OPPS as a prospective payment system.

We have examined the items and serv ices currently prov ided under the OPPS, reviewing categories of integral , ancillary, supportive, depend ent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment ofCMS-1613-FC 199

the primary service they suppor t. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) to determine whether there were categories of codes for which packaging would be appropriate accord ing to existing OPPS packaging policies or a logical expansion of those existing OPPS p ackaging policies. In general, in the CY 2015 OPPS/ASC proposed rule (79 FR 40958 through 40961), we proposed to package the costs of selected HCPCS codes into payment for se rvices reported with other

HCPCS codes where we believe that one c ode reported an item or service that was integral, ancillary, suppo rtive, dependent, or adjunctive to the provision of care that was reported by another HCPCS code. Below we di scuss categories and classes of items and services that we proposed to package begi nning in CY 2015. For an extensive discussion of the history and background of the OPPS p ackaging policy, we refer readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925). b. Revisions of a Packaging Policy Establ ished in CY 2014--Procedures Described by

Add-On Codes In the CY 2014 OPPS/ASC final rule with comment period, we packaged add-on codes in the OPPS, with th e exception of add-on codes de scribing drug administration services (78 FR 74943; 42 CFR 419.2(b)(18)). With regard to the packaging of add-on procedures that use expensive medical de vices, we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74943) that the most expensive medical devices used in procedures to insert or implant devices in the hospital outpatient setting are included in procedures that are assigned to comprehensive APCs. Comprehensive APCsCMS-1613-FC 200

are discussed in section II.A.2.e. of this fi nal rule with comment period. In the CY 2014 OPPS/ASC final rule with comment pe riod (78 FR 74864), we discussed the comprehensive APC policy, which we adopted, with modification, but delayed the implementation of, until CY 2015. We stated that, for CY 2014, we would continue to pay separately for only those add-on codes (e xcept for drug administration add-on codes) that were assigned to device-dependent AP Cs in CY 2014, but that, after CY 2014, these device-dependent add-on codes would be paid under the comprehensive APC policy. According to the proposed changes to th e comprehensive APC policy described in

section II.A.2.e. of this final rule with comment period, we pr oposed to package all of the procedures described by add- on codes that are currently assigned to device-dependent APCs, which will be replaced by comprehensive APCs. The device-dependent add-on codes that are separately paid in CY 2014 th at we proposed to package in CY 2015 were

listed in Table 9 of the CY 2015 OP PS/ASC proposed rule (79 FR 40959). Comment: A few commenters disagreed with the proposal to package payment

for the add-on codes listed in Table 9 of the proposed rule for the following reasons:

● Some commenters requested that CMS delay packaging the device-dependent add-on codes remaining for CY 2015 while a dditional data analysis is performed and refinements are adopted to ensure accura te payment for the full range of add-on procedures, including those not as signed to comprehensive APCs.

● A few commenters suggested that a dd-on codes are separate and distinct clinical procedures having unique, indepe ndent values determined by the American Medical Association (AMA) and, therefore, shou ld not be treated as ancillary services.CMS-1613-FC 201

● Some commenters requested that CMS es tablish exceptions to its proposal to package add-on codes for specific add-on procedures with high cost supply items that commenters believed would be underpaid under the policy and impede patient access to

care. Response: We disagree with the commenters that oppos e packaging these remaining add-on codes. We received similar public comments during the CY 2014 rulemaking cycle and responded to those comm ents in the CY 2014 OPPS/ASC final rule with comment period. Generally, we disagree because add-on codes describe services that are integral, ancillary, suppor tive, dependent, or adjunctive to the primary service. In other words, add-on codes do not represent a stand-alone procedure and are inclusive to other procedures performed at the same time . For a full discussi on of our response to these public comments, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74942 through 74943). We also disagree with commenters’ a ssertion that add-on code services are separate and distinct clinical procedures and should not be treated as ancillary services. We received a similar public comment last year where commenters suggested that procedures described by add-on codes are no t integral, ancillary, supportive, dependent, or adjunctive to the primary service. As we noted previously (78 FR 74942 through 74943), the fundamental nature of an add-on code procedure is that ittypically describes

some form of a related extension of or a ddition to the primary procedure or service described by the primary procedure. The defi nition of an add-on code is that it is an extension of a primary, base service. CPT defines add-on codes as codes that describe “procedures [that] are commonly carried out in addition to th e primary procedureCMS-1613-FC 202

performed” (2014 CPT Codebook Professional Ed ition, page xiv). Further, CPT states

that “add-on codes describe additional intra-service work associated with the primary procedure (emphasis added) (2014 CPT Codebook Pr ofessional Edition, page xiv). We also disagree with commenters that some add-on codes are not re lated to the primary procedure but represent a sepa rate procedure that should be paid separately from the primary procedure. If such procedures were in fact separate pro cedures, they would not be described by an add-on code. Thus, we be lieve that add-on code procedures are not always separate and distinct clinical procedures, but ra ther are related extensions, supportive, integral, or adjunctive of th e primary procedure and, therefore, it is appropriate to package the cost of the add- on codes into the payment calculation for the primary procedure. Finally, in respons e to commenters who requested that CMS establish exceptions to its proposal for add-on code with high cost supply items, we are allowing certain add-on codes to be evaluated for a complexity adjustment when billed with a comprehensive APC primary procedure. We refer readers to section II.A.2.e. of this final rule with comment period for fu rther discussion of that policy. We see no reason to grant exceptions to the add-on code packaging policy to spec ifically account for add-on procedures with high cost supply items, as any associated costs are accounted for in the payment for the primary procedure. The only reason we did not package the add-on codes listed in Table 9 of the propos ed rule was that implementation of the comprehensive APC policy was delayed for 1 year (78 FR 74943). Because the comprehensive APC policy will be implement ed in CY 2015, we are packaging these remaining add-on codes.CMS-1613-FC 203

After consideration of th e public comments we receive d, we are finalizing our proposal to package all of th e procedures described by add- on codes that are currently assigned to device-dependent APCs, which will be replaced by comprehensive APCs, as

listed in Table 9 of the CY 2015 OPPS/ASC proposed rule (79 FR 40959) and included in Table 10 below. The current device-depend ent add-on codes that are separately paid in CY 2014 that will be packaged in CY 2015 are included in Table 8 under section

II.A.2.e. of this final rule with comment period, which addresses the comprehensive APC policy.CMS-1613-FC 204

TABLE 10.—ADD-ON CODES ASSIGNED TO DEVICE-DEPENDENT APCS FOR CY 2014 THAT ARE PACKAGED IN CY 2015

CY 2015 Add-on Code Short Descriptor 19297 Place breast cath for rad 33225 L ventric pacing lead add-on 37222 Iliac revasc add-on 37223 Iliac revasc w/stent add-on 37232 Tib/per revasc add-on 37233 Tibper revasc w/ather add-on 37234 Revsc opn/prq tib/pero stent 37235 Tib/per revasc stnt & ather 37237 Open/perq place stent ea add 37239 Open/perq place stent ea add 49435 Insert subq exten to ip cath 92921 Prq cardiac angio addl art 92925 Prq card angio/athrect addl 92929 Prq card stent w/angio addl 92934 Prq card stent/ath/angio 92938 Prq revasc byp graft addl 92944 Prq card revasc chronic addl 92998 Pul art balloon repr precut C9601 Perc drug-el cor stent bran C9603 Perc d-e cor stent ather br C9605 Perc d-e cor revasc t cabg b C9608 Perc d-e cor revasc chro add

c. Packaging Policies for CY 2015 (1) Ancillary Services Under the OPPS, we currently pay separate ly for certain ancillary services. Some of these ancillary services are currently assign ed to status indicator “X,” which is defined as “ancillary services,” but some other ancilla ry services are currently assigned to status

indicators other than “X.” This is because the current use of status indicator “X” in the OPPS is incomplete and imprecise. Some pro cedures and services that are ancillary, for example, a chest X-ray, are assigned to an AP C with services assi gned status indicatorCMS-1613-FC 205

“S.” As discussed in the CY 2015 O PPS/ASC proposed rule (79 FR 40959 through 40961), we reviewed all of the covered serv ices provided in the HOPD and identified those that are commonly performed when pr ovided with other HOPD services, and also provided as ancillary to a prim ary service in the HOPD. Thes e ancillary services that we identified are primarily minor diagnostic test s and procedures that are often performed with a primary service, although there are instances where hospitals prov ide such services alone and without another primary service during the same encounter.

As discussed in section II.A.3.a. of this final rule with comment period, our intent is that the OPPS be more of a prospective payment system with e xpanded packaging of items and services that are typically inte gral, ancillary, supportive, dependent, or adjunctive to a primary service. Given th at the longstanding OPPS policy is to package items and services that are integral, ancillary, supportive, dependent, or adjunctive to a primary service, we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74945) that we believe that ancillary se rvices should be packaged when they are performed with another service, but should continue to be separately paid when performed alone. We indicated that this pack aging approach is most consistent with a prospective payment system and the regula tion at 42 CFR 419.2(b) that packages many ancillary services into primary services while preserving separate payment for those instances in which one of these ancillary serv ices is provided alone (not with any other service paid under the OPPS) to a hospital outpa tient. We did not finalize the ancillary packaging policy for CY 2014 because we believed that further evaluation was necessary (78 FR 74946).CMS-1613-FC 206

In the CY 2015 OPPS/ASC proposed rule (79 FR 40959 through 40961), we proposed to conditionally package certain anci llary services for CY 2015. Specifically, we proposed to limit the initial set of APCs that contain cond itionally packaged services to those ancillary service AP Cs with a proposed geometric mean cost of less than or equal to $100 (prior to application of the conditional packaging stat us indicator). We limited this initial set of p ackaged ancillary service APCs to those with a proposed geometric mean cost of less than or equal to $100 in response to public comments on the CY 2014 ancillary service packaging proposal in which commenters expressed concern that certain low volume but relatively costly ancillary services would have been packaged into high volume but relatively inexpensive primary services (for example, a visit) (74 FR 74945). We noted that the proposed $100 geometric mean cost limit for selecting this initial group of conditionally packaged ancillary service APCs is less than the geometric mean cost of APC 0634, which cont ains the single clinic visit HCPCS code G0463, which is a single payment rate for clinic visits beginning in CY 2014, and had a CY 2015 OPPS/ASC proposed rule geometric m ean cost of approximately $103. This proposed $100 geometric mean cost limit is part of the methodology of selecting the initial set of conditionally packaged anci llary service APCs under this proposed packaging policy. It is not meant to represent a threshold above which ancillary services will not be packaged, but as a basis for selecting this initial set of APCs, which will likely be updated and expanded in future years. In future years, we may package ancillary services assigned to APCs with geometric mean costs higher than $100. In addition, geometric mean costs can change over time. An increase in the geometric mean cost of any of the proposed APCs to above $100 in future years would not change theCMS-1613-FC 207

conditionally packaged status of services assi gned to the APCs selected in CY 2015 in a future year. We would continue to consider these APCs to be c onditionally packaged. However, we would review the conditionally packaged status of ancillary services annually. We proposed to exclude certain services from this packaging policy even though they are assigned to APCs with a geometric mean cost of less than or equal to $100.

Preventive services will conti nue to be paid separately, a nd include the following services

listed in Table 11 below that would othe rwise be packaged under this policy.CMS-1613-FC 208

TABLE 11.—PREVENTIVE SERVICES EXEMPTED FROM THE ANCILLARY SERVICE PACKAGING POLICY

HCPCS

Code Short Descriptor APC 76977 Us bone density measure 0340 77078 Ct bone density axial 0260 77080 Dxa bone density axial 0261 77081 Dxa bone density/peripheral 0260 G0117 Glaucoma scrn hgh risk direc 0260 G0118 Glaucoma scrn hgh risk direc 0230 G0130 Single energy x-ray study 0230 G0389 Ultrasound exam aaa screen 0265 G0404 Ekg tracing for initial prev 0450 Q0091 Obtaining screen pap smear 0450

In addition, we did not propose to package certain psychiatry and counseling-related services as we see similariti es to a visit and, at the time of issuance of the CY 2015 OPPS/ASC proposed rule, did not cons ider them to be ancillary services. We also did not propose to p ackage certain low cost drug administration services as we are examining various altern ative payment policies for dr ug administration services, including the associated drug administration add-on codes. Finally, we proposed to de lete status indicator “X” (Ancillary Services) because the majority of the services assigned to status indicator “X” were pr oposed to be assigned to status indicator “Q1” (STV-Packaged Code s). For the services that are currently assigned status indicator “X” that were not proposed to be conditionally packaged under this policy, we proposed to a ssign those services status indicator “S” (Procedure or Service, Not Discounted When Multiple), i ndicating separate payment and that the services are not subject to the multiple pro cedure reduction. The APCs that we proposed for conditional packaging as ancillary services in CY 2015 were listed in Table 11 of the CY 2015 OPPS/ASC proposed rule (79 FR 40960 through 40961).CMS-1613-FC 209

The HCPCS codes that we proposed to c onditionally package as ancillary services for CY 2015 were displayed in Addendum B to the CY 2015 OPPS/ASC proposed rule (which is available via the Internet on th e CMS Web site). The supporting documents for the proposed rule are availabl e at the CMS Web site at:http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. We also proposed to revise the regu lations at 42 CFR 419.2(b)(7) to replace the phrase “Incidental services such as venipunc ture” with “Anc illary services” to more accurately reflect the proposed p ackaging policy discussed above. Comment: A number of commenters, which included hospital associations, health systems, and individual hospitals, s upported conditionally packaging ancillary services with a geometric mean cost of $100 prior to application of the “Q1” status

indicator. Response: We appreciate the commenters’ support. Comment: A few commenters expresse d concern that conditionally packaging ancillary services would disproportionately a ffect teaching hospitals because of the types of patients these hospitals serve and the types of serv ices that they typically provide. One commenter submitted results from its data analysis that estimated major teaching hospitals will lose approximately -0.4 percen t on average as a result of this packaging proposal, compared to nonteaching hospita ls, which would gain approximately 0.2 percent. The commenter’s concern was that the negative impact is a direct result of academic medical centers’ caring for unique and complex patient populations, for example, trauma patients who are seen in te aching hospital emergency departments. TheCMS-1613-FC 210

commenter’s analysis suggested that a large proportion of certain APCs listed on Table 11 of the proposed rule (APCs 0012, 0099, 0260, 0261, 0340, and 0420) are packaged into emergency department vi sits and related services. Response: Conditional packaging of anc illary services result s in packaging of these services when provided with other pr imary services and separate payment for the services when they are performed alone. It is possible that, as the commenter asserted, the case-mix at teaching hospitals results in greater packaging of ancillary services than at nonteaching hospitals. This may be due to teaching hospitals being more likely to provide services in addition to the ancillary service, which would result in packaging of the ancillary service into the other primary se rvice or services provi ded to the patient.

Even if the commenter’s observation is refl ective of a difference between teaching and nonteaching hospitals, we do not believe that such an observation is a sufficient reason to not package ancillary services in the OPPS. Packaging is a fundamental element of a prospective payment system. As stated a bove, in the OPPS, we packaged items and services that are typically integral, ancillar y, supportive, dependent, or adjunctive to a primary service. We believe that the ancillary services pr oposed for conditional packaging are ancillary when provided with other primary services and, therefore, are appropriately conditionally packaged in the OPPS. As for the impact of the CY 2015 OPPS policies on teaching hospitals, we refe r the commenter to the impact table (Table 49) in section XXI. of this final rule with comment period, which shows that teaching hospitals will receive an overall 2.3 percent payment update compared to a 2.0 percent payment update for nonteaching hospitals . Therefore, overall teaching hospitals stand to benefit more than nonteaching hospitals from the policies adopted in this finalCMS-1613-FC 211

rule with comment period, despite any relative negative impacts from the ancillary packaging policy. Comment: Several commenters requeste d clarification of the methodology used to identify APCs with a geometric mean cost less than or equal to $100 prior to application of the “Q1” status indicator, given that the geom etric mean cost of some of the APCs listed in Table 11 of the propos ed rule exceeds $100. Also, commenters requested that the $100 threshold be held cons tant for future years or updated annually

based on inflation akin to the drug threshold methodology. Response: As we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40960), the ancillary services APCs proposed for conditional packaging were those with a geometric mean cost of less than or equal to $100 prior to application of the “Q1” status indicator to the APC. In othe r words, it was ancillary service APCs with a geometric mean cost of $100 or less with all of the services assigned to the APC that had

either status indicator “X” or “S.” Once status indicator “Q1” was assigned, some of the geometric mean costs of some of the APCs increased to above $100 due to conditional packaging according to the “Q1” status indica tor logic. We remind the commenters that the APCs listed in Table 11 of the proposed rule (79 FR 40960 through 40961) displayed the APC geometric mean costs after applica tion of the “Q1” status indicator, which resulted in some of the APC geometric mean costs that were below $100 prior to application of the “Q1” status indicator to exceed $100 afte r application of the “Q1” status indicator. We also clarify that the $100 geometric mean cost initial selection criteria for this packaging policy is not a threshold above which an cillary services will not be conditionally packaged. As we st ated in the CY 2015 O PPS/ASC proposed rule,CMS-1613-FC 212

“[the $100 limit] is not meant to represent a threshold above which an cillary services will not be packaged, but as a basis for selecting th is initial set of APCs, which will likely be updated and expanded in future years” (79 FR 40960). As we stated in the proposed rule, in future years, we may package additional an cillary services in AP Cs with a geometric mean cost (prior to the application of th e conditional packaging st atus indicator) that exceeds $100. Comment: One commenter expressed c oncern regarding the composition of APC 0077 (Level I Pulmonary Treatment), which was proposed to be conditionally packaged.

The commenter believed that HCPCS code G0424 (Pulmonary rehabilitation, including exercise (includes monitoring), one hour, per session, up to two sessi ons per day) is not clinically similar to HCPCS c ode G0237 (Therapeutic procedures to increase strength or endurance of respiratory muscles, face to face, one on one, each 15 minutes (includes monitoring) and HCPCS code G0238 (Therapeu tic procedures to improve respiratory function, other than described by G0237, one on one, face to face, per 15 minutes (includes monitoring), which also are assigned to APC 0077. In addition, the commenter stated that the assignment of HCPCS code G0424 to APC 0077 would create a 2 times

rule violation. The commenter recommende d that CMS reassign HCPCS code G0424 to APC 0078 (Level II Pulmonary Treatment). Response: We disagree with the comme nter’s assertion that the assignment of

HCPCS code G0424 to APC 0077 would create a 2 times rule violation. Section 1833(t)(9) of the Act requires that we annually review all the items a nd services within an APC group and revise the APC structures accord ingly. Included in this review is the identification of any 2 times rule violations as provided under sect ion 1833(t)(2) of theCMS-1613-FC 213

Act and, to the extent possible, rectification of these violations. We review our claims data and determine whether we need to make changes to the current APC assignment for the following year. For HCPCS codes G0238 and G0424, we evaluated their APC assignment for the CY 2015 update and dete rmined that APC 0340 (Level II Minor Procedures) is the more appropriate assignm ent for these services based on resource similarity to the other servi ces assigned to APC 0340. In addition, with the reassignment

of HCPCS codes G0424 and G0238 to AP C 0340, only four HCPCS codes (31270, 94668, 94669, and G0237) remained in APC 0077, one (HCPCS code 94669) of which did not have any claims volume in CY 2013. The commenter suggested that we reassign

HCPCS code G0424 to APC 0078. APC 0078 ha s a mean cost of approximately $90, which is under the $100 initial selection crit eria for conditionally packaged ancillary

services. With the reduced size of APC 0077 and the mean cost of APC 0078 being less than $100, we are reassigning the procedure codes remaining in APC 0078 to APC 0077 and revising the title of APC 0077 to read “Pulmonary Treatment.” The new combined APC 0077 is assigned status indicator “Q1” under the conditional packaging policy. We

note that the mean cost of this revised APC 0077 (after application of the “Q1” status indicator) is approximately $154. Comment: One commenter requested thatCMS continue separate payment, by assigning status indicator “S,” for CPT c odes 92557 (comprehensive hearing test), 92601 through 92604 (cochlear implant programming) , and 92640 (auditory brainstem implant programming) which are assigned to APC 0364, an APC that is proposed for conditional packaging. The commenter stated that thes e CPT codes are primary audiology services and are not dependent or incident to other services in the hospital.CMS-1613-FC 214

Response: We do not believe that it is n ecessary to change the status indicator to “S” as we disagree that these CPT code s represent primary audiology services. Conditional packaging provides separate paymen t when the otherwise packaged services are provided alone without other primary se rvices. Therefore, these services will continue to be separately paid when performed without other primary services.

Comment: Some commenter s expressed concern that packaging payment for ancillary services could have a negative im pact on patient access because hospitals will not have an incentive to perform ancillary se rvices at the time of other therapeutic or evaluation/management services, even when providing such services at the same encounter would be efficient and offer patients the most appropriate and complete care. Commenters cautioned that expanded packagi ng policies will impede the accuracy and stability of future ra tesetting under the OPPS. Response: We appreciate stakeholders’ co ncerns and predictions about the effect that this conditional packaging policy may have on patient access to ancillary services.

We will continue to monitor service utilizati on trends in the HOPD. We disagree with commenters that packaging services impedes the accuracy and stability of future OPPS ratesetting. As a reminder, hospitals include HCPCS codes and charges for packaged services on their claims, and the costs asso ciated with those packaged services are included in the costs of the separately payabl e procedure on the claim. We also continue to emphasize that hospitals should report a ll HCPCS codes for all services, including those for packaged services, accord ing to correct coding principles. Comment: One commenter disagreed w ith the proposed assignment of status indicator “Q1” to CPT code 95012 (Expired nitric oxide gas determination). TheCMS-1613-FC 215

commenter requested that CMS assign status indicator “S” to CPT code 95012 because the code describes an independent, primary pr ocedure that is not ancillary to any other procedure. The commenter also requeste d that CMS reassign CPT code 95012 to APC 0078 (Level II Pulmonary Treatment) because of its clinical homogeneity to other services assigned to that APC. Response: We disagree with the comment er. We believe the procedure or service described by CPT code 95012 to be an an cillary diagnostic test and, therefore, appropriate for conditional packaging under the ancillary services policy. We believe that existing assignment to APC 0340 (Level II Minor Procedures) is appropriate in that

CPT code 95012 is a minor test and that its m ean cost of approximately $41 is similar to the mean cost of APC 0340 of approximate ly $53. Therefore, we are finalizing our proposal to maintain assignment of CPT code 95012 to APC 0340 with a “Q1” status

indicator for CY 2015. Comment: A few commenters requested that CMS make an exception to the ancillary packaging policy for pathology services , specifically those se rvices assigned to APC 0342 (Level I Pathology) and APC 0433 (Lev el II Pathology). These commenters were concerned about inadequate payment for pathology services. Response: We disagree with commenter s’ concern regarding inadequate payment for pathology services and do not believe that an exception to this packaging policy for the pathology services assigned to APCs 0342 and 0433 is appropriate at this time. We remind the commenters that this policy only a ffects the facility payment for the technical aspect of the services and does not affectthe physician fee schedule payment to the pathologist for the physician work in perfor ming pathology services. We believe thatCMS-1613-FC 216

pathology services are some of the best exampl es of ancillary servic es as they typically follow a surgical or other specimen-generati ng procedure for the purposes of diagnosis.

We also remind the commenters that in the event a patient receives a pathology test in isolation from other primary HOPD services, the test would be separately paid because the ancillary services packaging policy is a conditional packaging pol icy. Therefore, we are not creating an exception to this ancillary packaging policy for pathology services.

After consideration of th e public comments we receive d, we are finalizing our ancillary services packaging policy as proposed, including de letion of status indicator

“X.” We also are adopting as final our pr oposed revision of the regulations at 42 CFR 419.2(b)(7) to replace the phrase “Incid ental services such as venipuncture” with “Ancillary services” to more accurately reflect the final packaging policy for CY 2015. The APCs that we are conditionally pack aging as ancillary services in CY 2015

are listed in Table 12 below.

TABLE 12.--APCs FOR CONDITIO NALLY PACKAGED ANCILLARY SERVICES FOR CY 2015

APC CY 2015 OPPS Geometric Mean Cost (with application of Q1 status indicator) Final CY 2015 OPPS SI Group Title

0012 $102.18 Q1 Level I Debridement & Destruction 0060 $20.57 Q1 Manipulation Therapy 0077 $170.77 Q1 Level I Pulmonary Treatment 0099 $81.40 Q1 Electrocardiograms/Cardiography 0215 $98.52 Q1 Level I Nerve and Muscle Services 0230 $54.01 Q1 Level I Eye Tests & Treatments 0260 $61.59 Q1 Level I Plain Film Including Bone Density Measurement 0261 $98.56 Q1 Level II Plain Film Including Bone Density MeasurementCMS-1613-FC 217

APC CY 2015 OPPS Geometric Mean Cost (with application of Q1 status indicator) Final CY 2015 OPPS SI Group Title

0265 $95.12 Q1 Level I Diagnostic and Screening Ultrasound 0340 $54.33 Q1 Level II Minor Procedures 0342 $56.31 Q1 Level I Pathology 0345 $78.91 Q1 Level I Transfusion Laboratory Procedures 0364 $44.94 Q1 Level I Audiometry 0365 $122.36 Q1 Level II Audiometry 0367 $167.31 Q1 Level I Pulmonary Tests 0420 $136.66 Q1 Level III Minor Procedures 0433 $190.55 Q1 Level II Pathology 0450 $30.33 Q1 Level I Minor Procedures 0624 $81.76 Q1 Phlebotomy and Minor Vascular Access Device Procedures 0690 $36.47 Q1 Level I Electronic Analysis of Devices 0698 $104.61 Q1 Level II Eye Tests & Treatments

The HCPCS codes that we are conditiona lly package as ancillary services for CY 2015 are displayed in Addendum B to th is CY 2015 OPPS/ASC final rule with comment period (which is available via th e Internet on the CMS Web site). The supporting documents for this final rule withcomment period are available at the CMS

Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. (2) Prosthetic Supplies We have a longstanding policy of providing payment under the OPPS for implantable DME, implantable prosthetics, and medical and surgical supplies, as provided at sections 1833(t)(1 )(B)(i) and (t)(1)(B)(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). In the CY 2014 OPPS/ ASC final rule with comment period, weCMS-1613-FC 218

clarified that medical and surgical supp lies under § 419.2(b)(4) in clude (but are not limited to) all supplies on the DMEPOS F ee Schedule except prosthetic supplies (78 FR 74947). Under 42 CFR 419.22(j), prosth etic supplies are currently excluded from payment under the OPPS and are paid under the DMEPOS Fee Schedule, even when provided in the HOPD. However, as we discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40961), under secti on 1833(t)(1)(B)(i) of the Ac t, the Secretary has the authority to designate prosthetic supplies provided in the hospita l outpatient setting as covered OPD services payable under the OPPS.

As we stated in the CY 2015 OPPS/AS C proposed rule (79 FR 40961) and as mentioned above, implantable prosthetic devices are packaged in the OPPS under 42 CFR 419.2(b)(11). It is common for implanta ble prosthetic device s to be provided as a part of a device system. Such device system s include the implantable part or parts of the overall device system and also certain noni mplantable prosthetic supplies that are integral to the overall function of the medical device, part of which is implanted and part of which is external to the patient. Th ese prosthetic supplies are integral to the implantable prosthetic because typically shortly after the surgical procedure to implant the implantable prosthetic device in the hospita l, the surgeon and/or his or her colleagues will have to attach, f it, and program certain prosthetic supplies that are not surgically implanted into the patient but are a part of a system and that are essential to the overall function of an implanted device. Because these supplies are integral to the overall function of the implanted prosthetic, and becau se, as mentioned above, we package in the OPPS items and services that are typically integral, ancillary, s upportive, dependent, or adjunctive to a primary service, we believe th at it is most consistent with a prospectiveCMS-1613-FC 219

payment system to package the payment of prosthetic suppl ies (along with the implantable prosthetic device) into the surgical procedure that implants the prosthetic device, as all of the component s are typically necessary for th e performance of the system and the hospital typically purchases the syst em as a single unit. Patients requiring replacement supplies at a time later than the in itial surgical procedur e and outside of the hospital would obtain them as they typically do from a DMEPOS supplier with payment for such supplies made under the DMEPOS Fee Schedule. In addition to prosthetic supplies that ar e components of device systems, part of which are implanted, many other prosthetic supplies on the DMEPOS Fee Schedule are typical medical and surgical s upplies and of the type that are packaged in the OPPS under § 419.2(b)(4). Consistent with our change from status indicator “A” to “N” for all nonprosthetic DMEPOS supplies in the CY 2014 OPPS final rule with comment period (78 FR 74947), in the CY 2015 OPPS/ASC propos ed rule (79 FR 40961), we proposed to package and change the status indicator fr om “A” to “N” for all DMEPOS prosthetic supplies. With this proposed change, a ll medical and surgical supplies would be packaged in the OPPS. Therefore, we proposed to delete “prosthetic supplies” from the regulations at § 419.22(j) because we proposed that prosth etic supplies be packaged covered OPD

services in the OPPS for CY 2015. Prosthetic supplies provided in the HOPD would be included in “medical and surgical supplies” (as are all other supp lies currently provided in the HOPD) under § 419.2(b)(4). The HCPC S codes for prosthetic supplies that we proposed to package for CY 2015 were di splayed in Addendum B to the CY 2015 OPPS/ASC proposed rule (which is available via the Interneton the CMS Web site). TheCMS-1613-FC 220

supporting documents for the proposed rule, including but not limited to Addendum B,

are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/index.html

. Comment: Many commenters agreed w ith CMS’ proposal to conditionally package prosthetic supplies furnished in the HOPD. Response: We appreciate the commenters’ support. Comment: A few commenters requested to be informed of the fund transfer

amount from the DMEPOS Fee Schedule to the OPPS as a result of this proposed policy. Response: Our CY 2013 claims analys is shows that packaging payment for prosthetic supplies under the OPPS would redistribute approximately $1 million.

Comment: Some comment ers recommended that CMS implement an exception to the “unbundling” rule that currently ex ists for the inpatient prospective payment systems (IPPS). (We refer readers to the Medicare Claims Processing Manual, Pub. 100-04, Chapter 20 – Durable Medical Equipmen t, Prosthetics, Or thotic Devices, and Supplies, Section 110- General Billing Requirements – for DME, Prosthetics, Orthotic Devices, and Supplies.) The commenters beli eved that such an exception would allow DME suppliers to bill Medicare directly fo r prosthetic supplies furnished to patients during an outpatient visit when the supp lies are intended primarily for home use. Response: We do not believe that an additional exception to the “unbundling” rule is necessary for the provision of pros thetic supplies in the HOPD. We remind commenters that DME, prosth etics, and orthotics can be billed by hospitals for outpatients and are paid according to the DMEPOS Fee Schedule. Only prosthetic supplies are packaged in the OPPS. Unlike i npatient stays, hospital outpatient stays areCMS-1613-FC 221

typically brief and the need for replacemen t supplies during a hospital outpatient stay should be minimal. If a hospital wants to pr ovide a patient with some basic supplies for immediate home use (for example, tape, a syri nge, or gauze), such supplies are packaged into the payment for whatever service the patient received at the hospital. DME suppliers can furnish additional or replacement prosth etic supplies to the patient’s home and receive payment under the DMEPOS Fee Schedule.

After consideration of th e public comments we receive d, we are adopting as final our proposed deletion of “prosthetic supplies” from the regulations at § 419.22(j) because prosthetic supplies are pack aged covered OPD services in the OPPS for CY 2015. Prosthetic supplies provided in the HOPD will be included in the packaged category of “medical and surgical supplies” (as are al l other supplies currently provided in the HOPD) under § 419.2(b)(4). The HCPCS codes for prosthetic supplies that we are packaging for CY 2015 are displayed in A ddendum B to this CY 2015 OPPS/ASC final rule with comment period (which is availa ble via Internet on the CMS Web site). The supporting documents for this final rule withcomment period, incl uding but not limited to Addendum B, are available at the CMS Web site at:http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. 4. Calculation of OPPS Scaled Payment Weights In the CY 2015 OPPS/ASC proposed rule (79 FR 40961 through 40962), for CY 2015, we proposed to calculate the relativ e payment weights for each APC shown in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II. A.2. of the proposedCMS-1613-FC 222

rule. Prior to CY 2007, we standardized al l the relative payment weights to APC 0601 (Mid-Level Clinic Visit) because mid-level cl inic visits were among the most frequently performed services in the hos pital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the mediancost 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 standard ized all of the relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of th e clinic visit APCs. We selected APC 0606

as the base because it was the mid-level clinic visit APC (that is, Level 3 of five levels). For the CY 2013 OPPS (77 FR 68283), we esta blished a policy of using geometric

mean-based APC costs rather than median-bas ed APC costs to calculate relative payment weights. For CY 2015, we proposed to continue this policy. For the CY 2014 OPPS, we standardized all of the relative payment weights to

clinic visit APC 0634 as discussed in sect ion VII. of the CY 2015 OPPS/ASC proposed rule (79 FR 41008). For CY 2015, we proposed to continue this policy to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services. We propos ed to assign APC 0634 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for APC 0634 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative payment weights does not affect payments made under the OPPS because we scale the weights for budget neutrality.CMS-1613-FC 223

Section 1833(t)(9)(B) of the Act requ ires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures th at the estimated aggregate weight under the OPPS for CY 2015 is neither greater than nor less than the estimated aggregate weight

that would have been made without the cha nges. To comply with this requirement concerning the APC changes, we proposed to compare the estimated aggregate weight using the CY 2014 scaled relative payment we ights to the estimated aggregate weight using the proposed CY 2015 unscaled relative payment weights. We did not receive any public comme nts on our proposed policy for the CY 2015 unscaled relative payment weights. Therefore, we are finalizing our proposed policy to maintain consistency in calculating unscaled we ights that represent th e cost of some of the most frequently provided services by assigning APC 0634 a relative payment weight of 1.00 and dividing the geometric mean cost of each APC by the geometric mean cost

for APC 0634 to derive the unscaled relativ e payment weight for each APC for CY 2015. For CY 2014, we multiplied the CY 2014 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2013 claims to calculate the total relative paymen t weight for each service. We then added together the total relative paym ent weight for each of these se rvices in order to calculate an estimated aggregate weight for the year. For CY 2015, we proposed to apply the same process using the CY 2015 unscaled relative paym ent weights rather than scaled relative payment weights. We proposed to calculat e the weight scaler by dividing the CY 2014 estimated aggregate weight by the CY 2015 es timated aggregate weight (79 FR 40962).

The service-mix is the same in the current a nd prospective years because we use the sameCMS-1613-FC 224

set of claims for service volume in calculati ng the aggregate weight for each year. We

note that the CY 2014 OPPS scaled relative weights incorporate the estimated payment weight from packaged laboratory test s previously paid at CLFS rates. For a detailed discussion of the weight sc aler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. Click on the CY 2015 OPPS final rule link, then open the claims accounting documen t link at the bottom of the page. In the CY 2015 OPPS/ASC proposed rule (79 FR 40962), we proposed to include estimated payments to CMHCs in our comp arison of the estimated unscaled relative payment weights in CY 2015 to the estimatedtotal relative paymen t weights in CY 2014 using CY 2013 claims data, holding all other co mponents of the payment system constant to isolate changes in total we ight. Based on this comparis on, we proposed to adjust the proposed CY 2015 unscaled relative payment weights for purposes of budget neutrality. The proposed CY 2015 unscaled relative paymen t weights were adjusted by multiplying them by a weight scaler of 1.3220 to ensure that the proposed CY 2015 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 convers ion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefor e, the cost of those SCODs (as discussed inCMS-1613-FC 225

section V.B.3. of this final rule with comment period) is included in the budget neutrality

calculations for the CY 2015 OPPS. Comment: One commenter expressed con cern that CMS did not provide detailed data on the weight scaling pro cess. The commenter noted that it could not find the claims accounting document to which the proposed rule referenced. Response: The direct link to the pro posed rule claims accounting document is

located on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/ Downloads/CMS-1613- P-claims-accountingnarrative.pdf

. After consideration of th e public comments we receive d, we are finalizing our proposed methodology for calculating the OPPS s caled relative payment weights without modification, including updating of the budget ne utrality scaler for th is final rule with comment period. Under this methodology, the final unscaled relative payment weights were adjusted by a weight scaler of 1.2977 for this final rule with comment period. The CY 2015 unscaled relative paymen t weights listed in Addenda A and B to this final rule with comment period (which are availabl e via the Internet on the CMS Web site) incorporate the recalibration adjustments discus sed in sections II.A.1. and II.A.2. of this final rule with comment period. B. Conversion Factor Update Section 1833(t)(3)(C)(ii) of the Act requires the Secret ary to update the conversion factor used to determine the pa yment rates under the OPPS on an annual basis by applying the OPD fee schedule increas e factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, s ubject to sections 1833(t)(17) and 1833(t) (3)(F) of the Act,CMS-1613-FC 226

the OPD fee schedule increase factor is equa l 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 2015 IPPS/LTCH PPS fina l rule (79 FR 49994), consistent with current law, based on IHS Global Insight, Inc.’s second quarter 2014 forecast of the FY 2015 market basket increase, the FY 2015 IPPS market basket update is 2.9 percent. However, sections 1833(t)(3)(F ) and 1833(t)(3)(G)(iv) of th e Act, as added by section 3401(i) of the Patient Protect ion and Affordable Care Ac t of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that la w and further amended by section 1105(e) of

the Health Care and Education Reconcil iation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedu le increase factor for CY 2015. Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule incr ease factor under subpa ragraph (C)(iv) be reduced by the productivity adjustment descri bed 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 repo rting 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 2015 IPPS/LTCH PPS final rule (79 FR 49994), we discussed the calculation of the MFP adjustment for FY 2015, which is 0.5 percentage point.CMS-1613-FC 227

As we proposed, based on more recent data that became subsequently available after the publication of the CY 2015 OPPS/ASC proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we are using such updated data, if appropriate, to determine the CY 2015 market basket update and the MFP adjustment, components in calculating th e OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in this CY 2015 OP PS/ASC final rule with comment period. In addition, section 1833(t)( 3)(F)(ii) of the Act require s that, for each of years 2010 through 2019, the OPD fee sche dule increase factor unde r section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment desc ribed in section 1833(t)(3 )(G) of the Act. For CY 2015, section 1833(t)(3)(G)(iv) of the Act provides a 0.2 percentage point

reduction to the OPD fee schedule increase f actor under section 1833(t) (3)(C)(iv) of the Act. Therefore, in accordance with sectio ns 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act, as we proposed, we are applying a 0.2 percentage point reduc tion to the OPD fee

schedule increase fa ctor for CY 2015. 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 fa ctor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 percent for a year, and may result in OPPS payment rates being less th an rates for the preceding year . As described in further detail below, we are finalizing an OPD fee schedule increase factor of 2.2 percent for the CY 2015 OPPS (which is 2.9 percent, the estimat e of the hospital inpa tient market basket percentage increase, less the 0.5 percenta ge point MFP adjustment, and less the 0.2 percentage point additional adjustment).CMS-1613-FC 228

Hospitals that fail to meet the Hospit al OQR Program reporting requirements are subject to an additional reduc tion of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates for their serv ices, as required by section 1833(t)(17) of the Act. For further discussion of the Hospital OQR Program, we refer readers to section XIII. of this final rule with comment period. In the CY 2015 OPPS/ASC proposed rule (79 FR 40963), we proposed to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph ( 6 ) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, fo r CY 2015, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iv ) 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 0.2 percentage point for CY 2015. We did not receive any public comment s on our proposed adjustments to the OPD fee schedule increase factor or the pr oposed amendment to § 419.32(b)(1)(iv)(B) by adding a new paragraph ( 6 ) to reflect the requirement insection 1833(t)(3)(F)(i) of the Act. Therefore, for the reasons discussed above, we are adjusti ng the OPD fee schedule increase factor for CY 2015 as proposed. We also are finalizing the amendment to § 419.32(b)(1)(iv)(B) as proposed.

To set the OPPS conversion factor fo r CY 2015, we proposed to increase the CY 2014 conversion factor of $72.672 by 2.1 per cent. In accordance with section 1833(t)(9)(B) of the Act, we further adjusted the conversion factor for CY 2015 to ensure that any revisions made to the wage inde x and rural adjustment were made on a budgetCMS-1613-FC 229

neutral basis. We proposed a calculated overall budget neutrality factor of 0.9998 for wage index changes by comparing total estim ated payments from our simulation model using the FY 2015 IPPS wage indexes to t hose payments using the FY 2014 IPPS wage indexes, as adopted on a cale ndar year basis for the OPPS. For CY 2015, we proposed to maintain current rural adjustment policy, as

discussed in section II.E. of this final rule with comment period. Therefore, the budget neutrality factor for the ru ral adjustment would be 1.0000. For CY 2015, we proposed to continue previously established policies for implementing the cancer hospital payment adjust ment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this final rule with comment period. We calculated a CY 2015 budget neut rality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2015 payments under section 1833(t) of the Act, including the CY 2015 cancer hospital payment adjustment, to estimated CY 2015 total payments using the CY 2014 final cancer hospital payment adjustment as required under section 1833(t)(1 8)(B) of the Act. The CY 2015 estimated payments applying the CY 2015 cancer hospital payment adjustment are identical to estimated payments applying the CY 2014 final cancer hospital paymen t adjustment. Therefore, we applied a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment. For the proposed rule, we estimated that pass-through spending for drugs, biologicals, and devices fo r CY 2015 would equal approximately $15.5 million, which represented 0.03 percent of total projected CY 2015 OPPS spending. Therefore, the proposed conversion factor would be adjust ed by the difference between the 0.02 percentCMS-1613-FC 230

estimate of pass-through spending for CY 2014 and the 0.03 percent estimate of pass-through spending for CY 2015, resulting in a proposed adjustment for CY 2015 of 0.01 percent. Finally, estimated payments fo r outliers would remainat 1.0 percent of total OPPS payments for CY 2015. For the proposed rule, we proposed that hos pitals that fail to meet the reporting requirements of the Hospital OQR Program woul d continue to be subject to a further reduction of 2.0 percentage point s to the OPD fee schedule incr ease factor. For hospitals that fail to meet the requirements of the Hospital OQR Program, we would make all other adjustments discussed above, but use a re duced OPD fee schedule update factor of 0.2 percent (that is, the OPD fee schedule incr ease factor of 2.1 per cent further reduced by 2.0 percentage points). This resulted ina proposed reduced conversion factor for CY 2015 of $72.692 for hospitals that fail to meet the Hospital OQR requirements (a difference of -$1.484 in the conversion fact or relative to hosp itals that met the requirements).

Comment: MedPAC noted that CMS is required by law to implement the 2015 update to the conversion factor as stated in the Affordable Care Act. In its March 2014 Report to Congress, MedPAC recommended anupdate of 3.25 percent and Congressional action to direct the Secretary to reduce or eliminate differences in payment rates between HOPDs and physician offices, which is different from the Affordable Care Act requirement. Response: As discussed above, section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the convers ion factor used to determin e the payment rates under the OPPS on an annual basis by applying the OP D fee schedule increase factor. SectionCMS-1613-FC 231

1833(t)(3)(C)(iv) provides that the OPD fee sche dule increase factor, su bject to sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) of the Act, is equal to the hospital inpatient market basket percentage increase appli cable to hospital discharges under section 1886(b)(3)(B)(i ii) of the Act. After consideration of the public comme nt we received, we are finalizing the

calculation of the CY 2015 OPPS conversion fact or as proposed. We are finalizing the proposed amendment to § 419.32(b)(1)(iv)(B) by adding a new paragraph ( 6 ) to reflect

the reductions to the OPD fee schedule incr ease factor that are required for CY 2015 to satisfy the statutory requiremen ts of sections 1833(t)(3)(F) an d (t)(3)(G)(iv) of the Act. We are using a reduced conversion factor of $72.661 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of -$1.483 in the conversion factor relative to hospitals that met the requirements). For CY 2015, we are finalizing our proposal to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in sect ion II.F. of this fina l rule with comment period. For this final rule with comment pe riod, we estimate that pass-through spending for drugs, biologicals, and devices for CY 2015 will equal approximately $82.8 million, which represents 0.15 percent of total proj ected CY 2015 OPPS spending. Therefore, the conversion factor is also adjusted by the di fference between the 0.02 percent estimate of pass-through spending for CY 2014 and th e 0.15 percent estimate of pass-through spending for CY 2015, resulting in an adjustme nt for CY 2015 of -0.13 percent. Finally,CMS-1613-FC 232

estimated payments for outliers remain at 1.0 percent of total OPPS payments for

CY 2015. As a result of these final policies, th e OPD fee schedule incr ease factor for the CY 2015 OPPS is 2.2 percent (which is 2.9 percen t, the estimate of the hospital inpatient market basket percentage increase, less th e 0.5 percentage point MFP adjustment, and less the 0.2 percentage point additional adjustment). For CY 2015, we are using a conversion factor of $74.144 in the calculati on of the national unadjusted payment rates for those items and services for which paymen t rates are calculated using geometric mean costs, that is the OPD fee schedule incr ease factor of 2.2 percent for CY 2015, the required wage index budget neutrality adju stment of approximately 0.9996, the cancer hospital payment adjustment of 1.0000, and the adjustment of -0.13 percent of projected OPPS spending for the difference in the pass-through spending result in a conversion factor for CY 2015 of $74.144. C. Wage Index Changes Section 1833(t)(2)(D) of the Act requires the Secretary to “determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to

labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner” (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is calle d the OPPS labor-related share. Budget neutrality is discussed in section II.B. of this final rule with comment period. The OPPS labor-related share is 60 percen t of the national OPPS payment. This labor-related share is based on a regression anal ysis that determined that, for all hospitals, approximately 60 percent of the costs of serv ices paid under the OPPS were attributableCMS-1613-FC 233

to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our re gression analysis for the payment adjustment for rural hospitals

in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40964), we proposed to con tinue this policy

for the CY 2015 OPPS. We refer readers to sec tion II.H. of this final rule with comment period for a description and ex ample of how the wage index for a particular hospital is used to determine payment for the hospital.

As discussed in section II.A.2.c. of th is final rule with comment period, for estimating APC costs, we standardize 60 percen t of estimated claims costs for geographic area wage variation using the same FY 2015 pr e-reclassified wage index that the IPPS

uses to standardize costs. This standardiza tion process removes the effects of differences in area wage levels from the determinati on of a national unadjusted OPPS payment rate and copayment amount. Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS wage i ndex as the calendar year wage index for adjusting the OPPS standard payment amounts fo r labor market differences. Therefore, the wage index that applies to a particular acute care short-stay hospital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we believe that using the IPPS wage index as the source of an adjustment f actor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. InCMS-1613-FC 234

accordance with section 1886(d )(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained seve ral provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section

10324 of the Affordable Care Act added sect ion 1886(d)(3)(E)(iii)(II) to the Act, which defines a “frontier State,” and amended section 1833(t) of the Act to add new paragraph (19), which requires a “frontie r State” wage index floor of 1.00 in certain cases, and

states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements in § 419.43(c)(2 ) and (c)(3) of our regulations. In the CY 2015 OPPS/ASC proposed rule (79 FR 40964), we proposed to implement this provision in the same manner as we have sinc e CY 2011. That is, frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOP Ds that are affiliated with multicampus hospital systems, we proposed that the HOP D would receive a wage index based on the geographic location of the sp ecific inpatient hospital with which it is associated. Therefore, if the associated hospital is lo cated in a frontier St ate, the wage index adjustment applicable for the hospital also will apply for the affiliated HOPD. We refer readers to the following sections in th e FY 2011 through FY 2015 IPPS/LTCH PPS final rules for discussions regarding this pr ovision, including our methodology for identifying

which areas meet the definition of “f rontier States” as provided for in section 1886(d)(3)(E)(i ii)(II) of the Act: for FY 2011, 75 FR 50160 through 50161; forCMS-1613-FC 235

FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369 through 53370; for FY 2014, 78 FR 50590 through 50591; and for FY 2015, 79 FR 49971. In addition to the changes required by th e Affordable Care Act, we note that the FY 2015 IPPS wage indexes continue to refl ect a number of adjustments implemented over the past few years, including, but not li mited to, reclassification of hospitals to different geographic areas, th e rural and imputed floor pr ovisions, an adjustment for occupational mix, and an adjustment to th e wage index based on commuting patterns of employees (the out-migration adjustment). We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule and final rule (79 FR 28054 through 28084 and 79 FR 49950 through 49991, respectively) for a detailed discussion of all changes to the FY 2015 IPPS wage indexes. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequentOPPS rules for a detailed discussion of the history of these wage index ad justments as applied under the OPPS.

As discussed in the FY 2015 IPPS/LTC H PPS proposed rule and final rule (79 FR 28054 through 28055 and 79 FR 49951 through 49957, respectively), the Office of Management and Budget (OMB) issued re visions to the current labor market area delineations on February 28, 2013, that included a number of significant changes such as new Core Based Statistical Areas (CBSAs), urban counties that b ecome rural, rural counties that become urban, and existing CBS As that are split apart (OMB Bulletin 13-01). This bulletin can be found at: http://www.whitehouse.gov/sites/defaul t/files/omb/bulle tins/2013/b13-01.pdf . As we

stated in the FY 2014 IPPS/LTCH PPS final ru le (78 FR 50586), in order to allow for

sufficient time to assess the new revisions and their ramifications, we intended to proposeCMS-1613-FC 236

changes to the IPPS wage index based on th e newest CBSA delineations in the FY 2015 IPPS/LTCH PPS proposed rule. Similarly, inthe CY 2014 OPPS/ASC final rule with comment period (78 FR 74951), we stated that we intended to propose changes in the OPPS, which uses the IPPS wage index, ba sed on the new OMB delineations in the CY 2015 OPPS/ASC proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH PPS proposed rule. We refer read ers to proposed changes based on the new

OMB delineations in the FY 2015 IPPS/LTC H proposed rule at 79 FR 28054 through 28084 and the final changes based on the new OMB delineations in the FY 2015 IPPS/LTCH PPS final rule at 79 FR 49950 through 49966. In the CY 2015 OPPS/ASC proposed rule (79 FR 40964), we proposed to use the FY 2015 hospital IPPS wage index for urban an d rural areas as the wage index for the OPPS hospital to determine the wage adjust ments for the OPPS payment rate and the copayment standardized amount for CY 2015. (We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49850) and the final FY 2015 hospital wage index files posted on the CMS Web site.) We not e that the final FY 2015 IPPS wage indexes reflect a number of changes as a result of the new OMB delineations as well as a 1-year extension of the imputed rural floor. We proposed that the CY 2015 OPPS wage index (for hospitals paid under the IPPS and O PPS) would be the final FY 2015 IPPS wage index. Thus, any adjustments, including the adjustments related to the new OMB delineations, that were finalized for the IPPS wage index would be reflected in the OPPS wage index. As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment f actor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall.CMS-1613-FC 237

Therefore, we did not propose to change our existing regulations, wh ich require that we use the FY 2015 IPPS wage indexes for calculating OPPS payments in CY 2015. Hospitals that are paid under the OPPS but not under the IPPS do not have a hospital wage index under the IPPS. Theref ore, for non-IPPS hospitals paid under the OPPS, we assign the wage index that would be applicable if the hospi tal were paid under the IPPS, based on its geographic location and any applicable wage index adjustments. We proposed to adopt the final wage i ndex changes from the FY 2015 IPPS/LTCH PPS final rule for these hospitals. The following is a brief summary of the major changes in the FY 2015 IPPS wage indexes and any adjustme nts that we proposed to apply to these hospitals under the OPPS for CY 2015. We refer the reader to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 through 49991) for a detailed discussion of the changes to the wage indexes. For CY 2015, we proposed to continue our policy of allowing non-IPPS hospitals paid under the OPPS to qualify for the out-migra tion adjustment if th ey are located in a section 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). We stated in the proposed rule that applying this adjustment is consistent with our proposed policy of adopting IPPS wage index policies for hospita ls paid under the OPPS. We note that, because non-IPPS hospitals cannot reclassi fy, they would be eligible for the out-migration wage adjustment if they are located in a section 505 out-migration county. This is the same out-migration adjustment po licy that would apply if the hospital were paid under the IPPS. Table 4J from the FY 2015 IPPS/LTCH PPS final rule (available

via the Internet on the CMS Web site at: http://www.cms.gov/Me dicare/Medicare-Fee-CMS-1613-FC 238

for-Service-Payment/AcuteInpatientPPS/index.html ) identifies counties eligible for the out-migration adjustment and IPPS hospitals that will receive the adjustment for

FY 2015. As we have done in prior years, we are including Table 4J from the FY 2015

IPPS/LTCH PPS final rule as Addendum L to th is final rule with comment period with the addition of non-IPPS hosp itals that would receive the section 505 out-migration adjustment under the CY 2015 OPPS. Addendum L is available via the Internet on the

CMS Web site. In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to adopt the new

OMB labor market area delineations issu ed by OMB in OMB Bulletin No. 13-01 on February 28, 2013, based on standards pub lished on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data to delineate la bor market areas for purposes of the IPPS wage index. In the FY 2015 IPPS/LTCH PPS fina l rule, we finalized the adoption of the new OMB delineations. For IPPS wage index purposes, for hospitals that are designated as rural under the new OMB labor market area delineations that currently are located in urban CBSAs, we generally assigned them th e urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (79 FR 28060 through 28061 and 79 FR 49957 through 49960). To be consistent, we proposed to apply the same policy to hospitals paid under the OPPS but not under the IPPS so that such hospitals will maintain the wage index of the CBSA in which they are physically located for FY 2014 for the next 3 calendar years. As stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40965), this proposed policy would impact six hospitals for purposes of OPPS payment.CMS-1613-FC 239

We believe that adopting the new OMB labor market area delineations creates a more accurate wage index system, but we also recognize that implementing the new OMB delineations may cause some short-term instability in hospital payments. Therefore, similar to the policy we ad opted in the FY 2005 IPPS final rule (69 FR 49033), in the FY 2015 IPPS/LTCH P PS final rule (79 FR 49960 through 49962), we finalized a 1-year blended wage index for a ll hospitals that experience any decrease in their actual payment wage index exclusively due to the implementation of the new OMB delineations. Under this final IPPS policy, a po st-reclassified wage index with the rural and imputed floors applied is computed ba sed on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 consti tuent county/ies), and another post-reclassified wage index with the rural and imputed floors applied is computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituen t county/ies). We then compare these two wage indexes. If the FY 2015 wage i ndex with FY 2015 CBSAs is lower than the FY 2015 wage index with FY 2014 CBSAs, we compute a blended wage index consisting of 50 percent of each of the two wa ge indexes added together. This blended wage index will be the IPPS hospital’s wa ge index for FY 2015. In the CY 2015 OPPS/ASC proposed rule, for purposes of the OPPS, we proposed to apply this 50-percent transition blend to hospitals paid under the OPPS but not under the IPPS. We stated that we believe a 1-year, 50/50 ble nded wage index would mitigate the short-term instability and negativ e payment impacts due to the implementation of the new OMB delineations, providing hospitals with a transi tion period during which they may adjust to their new geographic CBSA. We believe that a longer transition pe riod would reduce theCMS-1613-FC 240

accuracy of the overall labor market area wage index system, and generally would not be warranted for hospitals moving from one urba n geographic labor mark et area to another. In addition, for the FY 2015 IPPS, we are continuing the extens ion of the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015 (79 FR 49969 through 49971). For purposes of the CY 2015 OPPS, we also proposed to apply th e imputed floor policy to hospitals paid

under the OPPS but not under the IPPS. For CMHCs, we proposed to continue to calculate the wage index by using the post-reclassification IPPS wage index based on the CBSA where the CMHC is located. As with OPPS hospitals and for the same r easons, we proposed to apply a 1-year, 50/50 blended wage index to CMHCs that would r eceive a lower wage index due to the new CBSA delineations. In addition, as with O PPS hospitals and for the same reasons, for CMHCs currently located in urban CBSAs th at are designated as rural under the new OMB labor market area delineations, we propos ed to maintain the urban wage index value of the CBSA in which they are physic ally located for CY 2014 for the next 3 calendar years. Consistent with our currentpolicy, the wage i ndex that applies to CMHCs includes both the imputed floor adjust ment and the rural floor adjustment, but does not include the out-migration adjustment because that adjustment only applies to hospitals. With the exception of the out-migration wage adjustment table (Addendum L to this final rule with comment period, which is available via the Internet on the CMS Web site), which includes non-IPPS hos pitals paid under the OPPS, we are not reprinting the FY 2015 IPPS wage indexes referenced in this discussion of the wage index. We referCMS-1613-FC 241

readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/index.html . At this link, readers will find a link to the final FY 2015 IPPS wage index tables. Comment: One commenter suggested th at the IPPS rural floor should utilize State-specific budget neutrality rather than national budget neutrality to prevent it from being susceptible to gaming by hospitals. The commenter suggested that, under the current policy, an urban hospital can reclassify to rural status to improve the rural wage index in the State, which in some cases is used as a floor for urban hospitals. Response: As we stated in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50370), section 3141 of Pub. L. 111-148 requires that a national budget neutrality adjustment be applied in implementing the ru ral floor policy under the IPPS. Therefore, absent a legislative change en acted by Congress, we are unabl e to change the rural floor budget neutrality adjustment from a national ad justment to a State-specific adjustment. In this final rule with comment period, we are adopting the final fiscal year IPPS wage index as the calendar year wa ge index for adjusting the OPPS standard payment amounts

for labor market differences. We refer re aders to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50370 through 50372) for further discussi on and a detailed response to a similar

comment.CMS-1613-FC 242

After considering the public commen t we received, we are finalizing our proposals to use the FY 2015 IPPS final wage index as the CY 2015 wage index for OPPS hospitals and CMHCs, as discussed above and as set forth in the CY 2015 OPPS/ASC proposed rule (79 FR 40963 through 40965), without modification. D. Statewide Average Default CCRs In addition to using CCRs to estimate cost s from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calcu lated from the hospital’s most recent cost report to determine outlier payments, paym ents for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. MACs 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 MAC is ab le to calculate the hospital’s actual CCR from its most recently submitted Medicare costreport. 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 de fault CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outsi de the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report refl ects an all-inclusive rate status (Medicare Claims Pro cessing Manual (Pub. 100-04), Chapter 4, Section 10.11). In the CY 2015 OPPS/ASC proposed rule (79 FR 40966), we proposed to update the default ratios for CY 2015 us ing the most recent cost report data. We discuss our policy for using default CCRs, in cluding setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594CMS-1613-FC 243

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 2015, we proposed to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting th e CY 2015 OPPS relative payment weights. Table 12 published in th e proposed rule (7 9 FR 40966 through 40968) listed the proposed CY 2015 default urban a nd rural CCRs by State and compared them to the CY 2014 default CCRs. These proposed CCRs represented the ra tio of total costs to total charges for those cost centers releva nt to outpatient services from each hospital’s most recently submitted cost report, weighted by Medicare Part B charges. We also proposed to adjust ratios from submitted cost re ports to reflect the final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then proposed to we ight each hospital’s CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calc ulate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment pe riod (72 FR 66680 through 66682) and prior

OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria. We did not receive any public comme nts on our CY 2015 proposal. Therefore, we are finalizing our proposal, without modi fication, to apply our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRsCMS-1613-FC 244

that we used to adjust charges to cost s on claims data for setting the CY 2015 OPPS relative payment weights. We used this me thodology to calculate th e statewide average

default CCRs listed in Table 13 below. For Maryland, we used an overall wei ghted average CCR for all hospitals in the

Nation as a substitute for Ma ryland CCRs. Few hospitals inMaryland are eligible to receive payment under the OPPS, which limits th e data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland be cause 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 longsta nding policy of using the national average CCR for Maryland. In general, observed cha nges in the statewide average default CCRs between CY 2014 and CY 2015 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 13 below lists the statewide av erage default CCRs for OPPS services furnished on or after January 1, 2015.CMS-1613-FC 245

TABLE 13.– CY 2015 STATEW IDE AVERAGE CCRs

State Urban/Rural CY 2015 Default

CCR Previous Default CCR

(CY 2014 OPPS Final Rule) ALABAMA RURAL 0.235 0.229 ALABAMA URBAN 0.186 0.188 ALASKA RURAL 0.439 0.473 ALASKA URBAN 0.294 0.302 ARIZONA RURAL 0.228 0.254 ARIZONA URBAN 0.181 0.182 ARKANSAS RURAL 0.262 0.244 ARKANSAS URBAN 0.239 0.220 CALIFORNIA RURAL 0.178 0.190 CALIFORNIA URBAN 0.196 0.206 COLORADO RURAL 0.410 0.393 COLORADO URBAN 0.219 0.221 CONNECTICUT RURAL 0.339 0.343 CONNECTICUT URBAN 0.273 0.276 DELAWARE URBAN 0.314 0.356 DISTRICT OF COLUMBIA URBAN 0.299 0.279 FLORIDA RURAL 0.180 0.160 FLORIDA URBAN 0.156 0.160 GEORGIA RURAL 0.256 0.260 GEORGIA URBAN 0.211 0.205 HAWAII RURAL 0.337 0.345 HAWAII URBAN 0.307 0.298 IDAHO RURAL 0.353 0.359 IDAHO URBAN 0.463 0.478 ILLINOIS RURAL 0.252 0.252 ILLINOIS URBAN 0.217 0.222 INDIANA RURAL 0.334 0.326 INDIANA URBAN 0.262 0.288 IOWA RURAL 0.321 0.308 IOWA URBAN 0.269 0.266 KANSAS RURAL 0.300 0.313 KANSAS URBAN 0.231 0.239 KENTUCKY RURAL 0.231 0.221CMS-1613-FC 246

State Urban/Rural CY 2015 Default

CCR Previous Default CCR

(CY 2014 OPPS Final Rule) KENTUCKY URBAN 0.212 0.225 LOUISIANA RURAL 0.272 0.257 LOUISIANA URBAN 0.209 0.222 MAINE RURAL 0.430 0.452 MAINE URBAN 0.432 0.438 MARYLAND RURAL 0.296 0.283 MARYLAND URBAN 0.244 0.248 MASSACHUSETTS RURAL 0.326 0.395 MASSACHUSETTS URBAN 0.333 0.336 MICHIGAN RURAL 0.371 0.341 MICHIGAN URBAN 0.320 0.322 MINNESOTA RURAL 0.485 0.462 MINNESOTA URBAN 0.347 0.349 MISSISSIPPI RURAL 0.247 0.233 MISSISSIPPI URBAN 0.181 0.200 MISSOURI RURAL 0.267 0.263 MISSOURI URBAN 0.274 0.280 MONTANA RURAL 0.501 0.481 MONTANA URBAN 0.386 0.384 NEBRASKA RURAL 0.290 0.323 NEBRASKA URBAN 0.255 0.243 NEVADA RURAL 0.241 0.220 NEVADA URBAN 0.149 0.154 NEW HAMPSHIRE RURAL 0.362 0.326 NEW HAMPSHIRE URBAN 0.280 0.287 NEW JERSEY URBAN 0.202 0.213 NEW MEXICO RURAL 0.296 0.291 NEW MEXICO URBAN 0.294 0.304 NEW YORK RURAL 0.333 0.345 NEW YORK URBAN 0.340 0.351 NORTH CAROLINA RURAL 0.280 0.258 NORTH CAROLINA URBAN 0.246 0.256 NORTH DAKOTA RURAL 0.660 0.661 NORTH DAKOTA URBAN 0.395 0.400 OHIO RURAL 0.317 0.327CMS-1613-FC 247

State Urban/Rural CY 2015 Default

CCR Previous Default CCR

(CY 2014 OPPS Final Rule) OHIO URBAN 0.222 0.232 OKLAHOMA RURAL 0.282 0.258 OKLAHOMA URBAN 0.203 0.205 OREGON RURAL 0.287 0.311 OREGON URBAN 0.352 0.357 PENNSYLVANIA RURAL 0.283 0.257 PENNSYLVANIA URBAN 0.197 0.198 PUERTO RICO URBAN 0.577 0.614 RHODE ISLAND URBAN 0.297 0.295 SOUTH CAROLINA RURAL 0.191 0.190 SOUTH CAROLINA URBAN 0.207 0.203 SOUTH DAKOTA RURAL 0.286 0.287 SOUTH DAKOTA URBAN 0.214 0.219 TENNESSEE RURAL 0.203 0.207 TENNESSEE URBAN 0.188 0.190 TEXAS RURAL 0.251 0.235 TEXAS URBAN 0.203 0.197 UTAH RURAL 0.481 0.474 UTAH URBAN 0.335 0.334 VERMONT RURAL 0.439 0.456 VERMONT URBAN 0.353 0.397 VIRGINIA RURAL 0.219 0.226 VIRGINIA URBAN 0.241 0.238 WASHINGTON RURAL 0.300 0.330 WASHINGTON URBAN 0.330 0.360 WEST VIRGINIA RURAL 0.312 0.283 WEST VIRGINIA URBAN 0.300 0.319 WISCONSIN RURAL 0.328 0.344 WISCONSIN URBAN 0.294 0.291 WYOMING RURAL 0.429 0.400 WYOMING URBAN 0.262 0.269CMS-1613-FC 248

E. Adjustment for Rural SCHs and EACH s under Section 1833(t)(13)(B) of the Act

In the CY 2006 OPPS final rule w ith 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, biologi cals, brachytherapy sources, and devices paid under the pass-through payment policy in a ccordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Me dicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided the Secretary the author ity 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 hospita ls in urban areas. Our analysis showed a

difference in costs for rural SCHs. Theref ore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 perc ent for all services and procedures paid under the OPPS, excluding separately paya ble drugs and biologicals, brachytherapy sources, and devices paid under the pass-th rough payment policy, in accordance with section 1833(t)(13)(B) of the Act. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) of the regulations to clarify that EA CHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, two hospitals are classified as EACHs, an d as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH.CMS-1613-FC 249

This adjustment for rural SCHs is budge t neutral and applied before calculating outlier payments and copayments. We st ated in the CY 2006 OPPS final rule with comment period (70 FR 68560) th at we would not reestablis h the adjustment amount on an annual basis, but we may review the adju stment 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 2014. Further, in the CY 2009

OPPS/ASC final rule with co mment 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. In the CY 2015 OPPS/ASC proposed rule (79 FR 40968), for the CY 2015 OPPS, we proposed to continue our policy of a 7.1 pe rcent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and item s paid at charges reduced to costs.

Comment: Several commenters supported the proposed continuation of the 7.1 percent rural SCH adjustment. Severa l commenters, including MedPAC, also recommended that CMS update the analysis in th e near future to assess if the 7.1 percent payment adjustment remains a valid figure. Response: We appreciate the commen ters’ support. We agree that it is appropriate to continue the 7.1 percent adjustment for rura l SCHs (including EACHs) as we proposed for CY 2015. As we indicated in the proposed rule (79 FR 40968), we may reassess the 7.1 percent rural ad justment in the near future by examining differencesCMS-1613-FC 250

between urban hospitals’ costs and rural hos pitals’ costs using updated claims, cost reports, and provider information.

After consideration of th e public comments we receive d, we are finalizing our CY 2015 proposal to continue our policy of a 7.1 percent payment ad justment that is done in a budget neutral manner for rural SC Hs, including EACHs, for all services and procedures paid under the OPPS, excluding se parately payable drugs and biologicals, devices paid under the pass-through payment polic y, and items paid at charges reduced to

costs. F. OPPS Payment to Certain Cancer Hospita ls Described by Secti on 1886(d)(1)(B)(v) of

the Act 1. Background Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare ha s paid the 11 hospita ls that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v ) of the Act under the OPPS for covered outpatient hospital services. These cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHI P Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), C ongress established s ection 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to determine OPPS payments to cancer and children’s hospita ls based on their pre-BBA payment amount (often referred to as “held harmless”). As required under section 1833( t)(7)(D)(ii) of the Act, a cancer hospita l receives the full amount of the difference between paym ents for covered outpatient services under the OPPS and a “pre-BBA amount.” That is , cancer hospitals ar e permanently heldCMS-1613-FC 251

harmless to their “pre-BBA amount,” and theyreceive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower under the OPPS than the payment they wo uld have received before implementation of the OPPS, as set forth in section 1833(t) (7)(F) of the Act. The “pre-BBA amount” is the product of the hospital’s reas onable costs for covered outpa tient services occurring in the current year and the base payment-to-c ost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of th e Act. The “pre-BBA amount,” including the determination of the base PCR, are defined at 42 CFR 419.70 (f). TOPs are calculated on Worksheet E, Part B, of the Hospital Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 and Form CMS-2552-10, respect ively) as applicable each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Ac t amended section 1833(t) of the Act by adding a new paragraph (18), which instru cts the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospi tals described in section 1886(d)(1)(B)(v) of the Act with respec t to APC groups exceed outpatient costs incurred by other hospitals furnishing serv ices under section 1833( t) of the Act, as determined appropriate by the Secretary. Se ction 1833(t)(18 )(A) of the Act requires the Secretary to take into consideration the co st of drugs and biologi cals incurred by cancer and other hospitals. Section 1833(t)(18)(B) of the Act provides that if the Secretary determines that cancer hospitals’ costs are greater than other hospitals’ costs, the Secretary shall provide an appropriate adju stment under section 1833(t)(2)(E) of the Act to reflect these higher costs. In 2011 , after conducting th e study required by section 1833(t)(18)(A) of the Act, we determ ined that outpatient costs incurred by theCMS-1613-FC 252

11 specified cancer hospitals were greater than the costs incu rred by other OPPS hospitals. For a complete discussion regard ing the cancer hospital cost study, we refer

readers to the CY 2012 OPPS/ ASC final rule with comm ent period (76 FR 74200 through 74201). Based on these findings, we finalized a po licy to provide a payment adjustment to the 11 specified cancer hospitals that reflects their higher outpatient costs as discussed in

the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a polic y to provide additional paymen ts to the cancer hospitals so that each cancer hospital’s final PCR for se rvices 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 cal endar 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 ho spitals. The TOPs are assessed as usual after all payments, including the cancer hospita l payment adjustment, have been made for a cost reporting period. For CYs 2012 and 2013, the target PCR for purposes of the cancer hospital payment adjustment was 0.91. For CY 2014, the target PCR for purposes of the cancer hospital payment adjustment was 0.89. 2. Payment Adjustment for Certain Cancer Hospitals for CY 2015 In the CY 2015 OPPS/ASC proposed rule (79 FR 40968), for CY 2015, we proposed to continue our policy to provide addi tional payments to cancer hospitals so thatCMS-1613-FC 253

each cancer hospital’s final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals using the most r ecent submitted or settled cost report data that were available at the time of the developm ent of the proposed rule. To calculate the proposed CY 2015 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of the proposed rule, used to estimate costs for the CY 2015 OPPS. Using these cost report data, we included data from Wo rksheet 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 datase t to the hospitals with CY 2013 claims data that we used to model the impact of the proposed CY 2015 APC relative payment weights (3,881 hospitals) because it is appropr iate to use the same set of hospitals that we used to

calibrate the modeled CY 2015 OPPS. The costreport data for the hospitals in this dataset were from cost report periods with fiscal year e nds ranging from 2012 to 2013. We then removed the cost report data of the 47 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, th eir inclusion may bias the calculation of hospital-weighted statistics. We also rem oved the cost report data of 27 hospitals because these hospitals had cost report datathat 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 f ile of 3,807 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 wereCMS-1613-FC 254

approximately 89 percent of reasonable cost (w eighted average PCR of 0.89). Therefore, we proposed that the payment amount associ ated with the can cer hospital payment adjustment to be determined at cost repor t settlement would be the additional payment needed to result in a proposed target PCR equal to 0.89 for each cancer hospital. Table 13 of the proposed rule (79 FR 40969) indicated the estimated percentage increase in OPPS payments to each cancer hospital for CY 2015 due to the cancer hospital payment adjustment policy.

Comment: Several commenters noted th at cancer hospitals have significantly higher costs than other OPPS hospitals and ag reed with CMS’ propos al to provide the proposed payment adjustment. Response: We appreciate the commenters ’ support of our proposal. As described in detail below, we performed the same analys is as in previous y ears comparing the PCR for these cancer hospitals relative to other OPPS hospitals. That study indicates that there is a difference in PCRs between these hospita l types. Accordingl y, we are finalizing a cancer hospital adjustment with a targ et PCR of 0.89 based on that analysis.

After consideration of th e public comments we receive d, we are finalizing our proposal to establish the target PCR equal to 0.89 for each cancer hospital. For this final rule with comment period, we have rerun our calculations to determine the target PCR using the latest available cost data and have determined that 0.89 is st ill the correct target

PCR. We limited the dataset to the hospitals with CY 2013 clai ms data that we used to model the impact of the final CY 2015 APC re lative payment weights (3,808 hospitals). The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2011 to 2013. We removed the cost report data of the 47CMS-1613-FC 255

hospitals located in Puerto Rico from our data set and also removed the cost report data of 14 hospitals that had cost repor t data that were not complete, leading to a final analytic file of 3,747 hospitals with cost report data. Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishi ng services under the OPPS are approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Therefore, we are finalizing that the payment amount associ ated with the cancer hospital payment adjustment to be determined at cost repor t settlement would be the additional payment

needed to result in a target PCR equal to 0.89 for each cancer hospital. Table 14 below indicates the estimated pe rcentage increase in OPPS payments to each cancer hospital for CY 2015 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2015 cancer hospi tal payment adjustment for each cancer hospital will be determined at cost report se ttlement and will de pend on each hospital’s CY 2015 payments and costs. We note thatthe changes made by section 1833(t)(18) of the Act do not affect the existing statutory pr ovisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have beenmade for a cost reporting period.

TABLE 14.—ESTIMATED CY 2015 HOSPITAL-SPECIFIC PAYMENT ADJUSTMENT FOR CANCER HOSPITALS TO BE PROVIDED AT COST REPORT SETTLEMENT

Provider Number Hospital Name Estimated Percentage Increase in OPPS Payments

for CY

2015CMS-1613-FC 256

Provider Number Hospital Name Estimated Percentage Increase in OPPS Payments

for CY

2015 050146 City of Hope Comprehensive Cancer Center 15.5 050660 USC Norris Cancer Hospital 22.0 100079 Sylvester Comprehensive Cancer Center 15.8 100271 H. Lee Moffitt Cancer Cent er & Research Institute 19.9 220162 Dana-Farber Cancer Institute 47.6 330154 Memorial Sloan-Kettering Cancer Center 46.7 330354 Roswell Park Cancer Institute 16.6 360242 James Cancer Hospital & Solove Research Institute 35.1 390196 Fox Chase Cancer Center 18.5 450076 M.D. Anderson Cancer Center 60.1 500138 Seattle Cancer Care Alliance 53.9CMS-1613-FC 257

G. Hospital Outpatient Outlier Payments 1. Background The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cos t and complex procedures, where a very costly service could present a hospital with signi ficant financial loss. As explained in the CY 2014 OPPS/ASC final rule with comment pe riod (78 FR 74958 through 74960), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for the prospect ive year. Outlier payments are provided on a service-by-service basis when the cost of a service exceeds the APC payment amount multiplier threshold (the APC payment amount multiplied by a certain amount) as well as the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain amount of dollars). In CY 2014, the outlier threshold was met when the hospital’s cost of furnishing a service exceeded 1.75 times (the multiplier threshold) the APC payment amount and exceeded the APC payment amount plus $2,900 (the fixed-dollar amount threshold). If th e cost of a service exceeds both the multiplier threshold and the fixed-dollar threshold, the ou tlier payment is calcula ted as 50 percent of the amount by which the cost of furnishi ng the service exceeds 1.75 times the APC payment amount. Beginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS ou tlier reconciliation pro cess for cost reports,

as discussed in the CY 2009 OPPS/ASC fina l rule with comment period (73 FR 68594 through 68599). It has been our policy to report the actua l amount of outlier payments as a percent of total spending in the claims being used to model the OPPS. Our current estimate ofCMS-1613-FC 258

total outlier payments as a percent of to tal CY 2013 OPPS payment, using available CY 2013 claims and the revised OPPS expend iture estimate for the FY 2015 President’s Budget Mid-Session Review, is approximately 1 .4 percent of the tota l aggregated OPPS payments. Therefore, for CY 2013, we estim ate that we paid 0.4 percent above the CY 2013 outlier target of 1.0 percent of total aggregated OPPS payments. Using CY 2013 claims data and CY 2014 payment rates, we currently estimate that the aggregate outlier payments for CY 2014 will be approximately 0.8 percent of the total CY 2014 OPPS payments. The differen ce between 0.8 percent and the 1.0 percent target is reflected in the regul atory impact analysis in section XXII. of this final rule with comment period. We provide estimated CY 2015 outlier payments for hospitals and

CMHCs with claims included in the claims da ta that we used to model impacts in the Hospital–Specific Impacts - Provider-Specific Data file on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. 2. Outlier Calculation In the CY 2015 OPPS/ASC proposed rule (79 FR 40970), for CY 2015, we proposed to continue our policy of estimati ng outlier payments to be 1.0 percent of the estimated aggregate total payments under the OP PS. We proposed that a portion of that 1.0 percent, an amount equal to 0.47 percent of outlier payments (or 0.0047 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 es timated OPPS outlier payments. As discussed in section VIII.D. of the proposed rule, for CMHCs, we proposed to continue ourCMS-1613-FC 259

longstanding policy that if a CMHC’s cost for partial hos pitalization servi ces, paid under either APC 0172 (Level I Partial Hospitaliza tion (3 services) for CMHCs) or APC 0173 (Level II Partial Hosp italization (4 or more services ) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exce eds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.D. of the proposed rule and this final rule with comment period.

To ensure that the estimated CY 2015 aggregate outlier payments would equal 1.0 percent of estimated aggregate total paym ents under the OPPS, we proposed that the hospital outlier threshold be set so that outlier payments would be triggered when a hospital’s cost of furnishi ng a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus $3,100. We calculated the proposed fixed-dolla r threshold of $3,100 using the standard methodology most recently used for CY 2014 (78 FR 74959 through 74960). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2014 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCRs, which are maintained by the MACs and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years. In order to estimate the CY 2015 hospita l outlier payments for the proposed rule, we inflated the charges on the CY 2013 clai ms using the same inflation factor of 1.1146

that we used to estimate the IPPS fixe d-dollar outlier thre shold for the FY 2015CMS-1613-FC 260

IPPS/LTCH PPS proposed rule (79 FR 28321). We used an inflation factor of 1.0557 to estimate CY 2014 charges from the CY 2013 ch arges reported on CY 2013 claims. The methodology for determining this charge infl ation factor is disc ussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321) a nd final rule (79 FR 50374). As we

stated in the CY 2005 OPPS final rule withcomment 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 co st centers, hospitals use the same ancillary and outpatient cost centers to capture cost s 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 c ould systematically overestimate the OPPS hospital outlier threshold if we did not a pply a CCR inflation adjustment factor. Therefore, we proposed to apply the same CCR inflation adjustment factor that we proposed to apply for the FY 2015 IPPS outlier ca lculation to the CCRs used to simulate the proposed CY 2015 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2015, we proposed to ap ply an adjustment factor of 0.9813 to the CCRs that were in the April 2014 OPSF to trend them forward from CY 2014 to CY 2015. The methodology for calculating this proposed adjustment was discussed in the FY 2015 IPPS/LTCH PPS proposed rule (7 9 FR 28321) and finalized in the FY 2015 IPPS/LTCH PS final rule (79 FR 50374). To model hospital outlier payments for th e proposed rule, we applied the overall CCRs from the April 2014 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9813 to approx imate CY 2015 CCRs) to charges on CY 2013CMS-1613-FC 261

claims that were adjusted (using the pr oposed charge inflatio n factor of 1.1146 to approximate CY 2015 charges). We simu lated aggregated CY 2015 hospital outlier payments using these costs for several diffe rent fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming th at 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, un til the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2015 OPPS payments. We estimated that a proposed fixed-dollar threshold of $3,100, 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. For CMHCs, we proposed that, if a CMHC’s cost for partial hospitalization servic es, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B ) of the Act, incur a 2.0 per centage 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 qu ality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet theCMS-1613-FC 262

Hospital OQR Program requirements, we pr oposed to continue the policy that we implemented in CY 2010 that the hospitals’ costs will be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we re fer readers to section XIII. of this final rule with comment period. Comment: A few commenters suggest ed that CMS not increase the outlier payment fixed dollar threshold from $2,900 to $3,100. One commenter suggested that CMS maintain the CY 2014 fixed-dollar threshold of $2,900, while another commenter suggested that CMS lower the CY 2014 fixed- dollar threshold because CMS’ projection of CY 2014 outlier payments in the proposed rule estimated that outlier payments would be below the target of 1.0 percent of OPPS payments. Response: We set the proposed CY 2015 outlier payment fixed-dollar threshold at $3,100 so that projected outlier payments would equal 1.0 percent of total OPPS payments. We projected that CY 2014 outlier payments would fall below the 1.0 percent target with the $2,900 threshold. However, we estimated that changes to recalibrate APCs and other payment policy changes would re sult in outlier payments greater than the 1.0 percent target in CY 2015 if we did not increase the fixed-do llar threshold. As discussed below, based on the more recent dataavailable for this final rule with comment period, the CY 2015 outlier payment fixe d-dollar threshold will be $2,775. When combined with the multiple threshold of 1.75 times the APC payment rate, this

fixed-dollar threshold will allo cate an estimated 1.0 per cent of projected total OPPS payments to outlier payments for CY 2015.

3. Final Outlier CalculationCMS-1613-FC 263

Consistent with historical practice, we used updated data for this final rule with comment period. For CY 2015, we are applyi ng the overall CCRs from the July 2014 OPSF file after adjustment (using the CCR inflation adjustment factor of 0.9821 to approximate CY 2015 CCRs) to charges on CY 2013 claims that were adjusted (using the charge inflation factor of 1.1044 to approximate CY 2015 charge s). These are the same CCR adjustment and charge inflation factors th at were used to se t the IPPS fixed-dollar

threshold for the FY 2015 IPPS/LTCH PPS fina l rule (79 FR 50379 through 50380). We simulated aggregated CY 2015 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments will continue to be made at 50 percent of the amount by which the cost of furnishing the servic e would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2015 OPPS payments. We estimate that a fixed-dollar threshold of $2,775, combined with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent of aggregated total OPPS payments to outlier payments. For CMHCs, if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment will be calculated as 50 percent of the amount by which the co st exceeds 3.40 times the APC 0173 payment

rate. H. Calculation of an Adjusted Medicare Payment from the National Unadjusted Medicare Payment The basic methodology for determining prospective payment rates for HOPD

services under the OPPS is set forth in ex isting regulations at 42 CFR Part 419, SubpartsCMS-1613-FC 264

C and D. For this CY 2015 OPPS/ASC final rule with comment period, the payment rate for most services and procedures for wh ich payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this final rule with comment period and the relative pa yment weight determined under section II.A.

of this final rule with comme nt period. Therefore, the na tional unadjusted payment rate

for most APCs contained in Addendum A to th is final rule with comment period (which

is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) was calculated by multiplying the CY 2015 scaled weight for the APC by the CY 2015

conversion factor. We note that section 1833(t)(17) of the Ac t, 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 f actor, 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 re quired to report outpatient qual ity data and that fail to meet the Hospital OQR Program (formerly referr ed to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requir ements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XIII. of this final rule with comment period.CMS-1613-FC 265

In the CY 2015 OPPS/ASC proposed rule (79 FR 40971 through 40972), we demonstrated the steps on 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 assignment s: “J1,” “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” or “V” (as defined in Addendum D1 to the proposed rule), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally pa ckaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We are finalizing the methodology as proposed

and demonstrate below how to calculate fi nal CY 2015 OPPS payments using the same parameters. We note that, although blood and blood pr oducts 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 hospi tal fails to meet the Hospital OQR Program requirements. We note that we are creating new status indicator “J1” to reflect the comprehensive APCs discussed in section II. A.2.e. of this final rule with comment period. We also note that we are deleting st atus indicator “X” as part of the CY 2015 packaging policy for ancillary se rvices, discussed in section II.A.3. of this final rule with comment period. We did not receive any public comme nts on the proposed calculation of an adjusted Medicare payment. Therefore, we are finalizing the calculation of an adjusted Medicare payment, where appropriate, in th e manner described as follows. Individual providers interested in calculating the pa yment amount that they will receive for aCMS-1613-FC 266

specific service from the national unadjusted payment rates presented in Addenda A and B to this final rule with comment period (whi ch are available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the na tional 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 nationa l unadjusted payment rate is calculated by multiplying the reporting ratio of 0.980 times th e “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 Ho spital OQR Program requirements in order

to receive the full CY 2015 OPPS fee sche dule increase factor of 2.2 percent. Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementati on of the OPPS, we have used 60 percent to represent our estimate of that portion of cost s attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with commentperiod (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustme nt for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate. The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service.CMS-1613-FC 267

X is the labor-related portion of the national unadjusted payment rate.

X

= .60 * (national unadjusted payment rate). Step 2. Determine the wage index ar ea in which the hospital is located and identify the wage index level that applies to the specific hospital. We note that under the CY 2015 OPPS policy for transitioning wage in dexes into the new OMB labor market area delineations, a hold harmless policy for th e wage index may apply, as discussed in

section II.C. of this final rule with comment period. The wa ge index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2015 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospi tals, 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 P ub. L. 98-21. (For further discussion of the changes to the FY 2015 IPPS wage indices, as applied to the CY 2015 OPPS, we refer

readers to section II.C. of this final rule w ith comment period.) As we proposed, we are continuing to apply a wage index floor of 1.00 to frontier States, in accordance with

section 10324 of the Affordable Care Act of 2010. Step 3. Adjust the wage index of hosp itals located in certain qualifying counties that have a relatively high percentage of hos pital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505

of Pub. L. 108-173. Addendum L to this fi nal rule with comment period (which is

available via the Internet on the CMS Web s ite) contains the qua lifying counties and the associated wage index increase developed fo r the FY 2015 IPPS and listed as Table 4J in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49854) and available vi a the Internet onCMS-1613-FC 268

the CMS Web site at: http://www.cms.gov/Medicare/Me dicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html . This step is to be followed only if the hospital is not reclassified or redesignated under secti on 1886(d)(8) or secti on 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 re presents the labor-related portion of the national unadjusted payment rate.

The formula below is a mathematical re presentation of Step 4 and adjusts the labor-related portion of the na tional unadjusted payment rate for the specific service by the wage index.

X

a is the labor-related portion of the national unadjusted payment rate (wage adjusted).

X

a = .60 * (national unadjusted payment rate) * applicable wage index. Step 5. Calculate 40 percent (the no nlabor-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 paymen t rate for the relevant wage index area.

The formula below is a mathematical re presentation of Step 5 and calculates the remaining portion of the national payment rate , the amount not attrib utable 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 + X a. Step 6. If a provider is an SCH, as se t forth in the regula tions at § 412.92, or an EACH, which is considered to be an SC H under section 1886(d)(5 )(D)(iii)(III ) of theCMS-1613-FC 269

Act, and located in a rural area, as defined in§ 412.64(b), or is treatedas 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 re presentation of Step 6 and applies the rural adjustment for rural SCHs. Adjusted Medicare Payment (SCH or EA CH) = Adjusted Medicare Payment * 1.071. We are providing examples below of th e calculation of both the full and reduced national unadjusted payment rates that will a pply to certain outpatient items and services performed by hospitals that meet and thatfail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we used a provider that is located in Brooklyn, New Yo rk that is assigned to CBSA 35614. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The CY 2015 full national unadjusted payment rate for APC 0019 is approximately $378.41. The reduced national unadjusted payment rate for APC 0019 for a hospital that fails to meet the Hospital OQR Program requirement s is approximately $370.84. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019. The FY 2015 wage index for a provider located in CBSA 35614 in New York is 1.2973. This is based on the 1-year 50/50 tr ansition blend between the wage index under the old CBSA 35644 (1.3115) and the wage index under the new CBSA 35614 (1.2831). The labor-related portion of the full nati onal unadjusted payment is approximately $294.55 (.60 * $378.41 * 1.2973). The labor-relate d portion of the reduced national unadjusted payment is approximately $288.65 (.60 * $370.84 * 1.2973). TheCMS-1613-FC 270

nonlabor-related portion of the full nationa l unadjusted payment is approximately $151.36 (.40 * $378.41). The nonlabor-related portion of the reduced national unadjusted payment is approximately $148.34 (40 * $370.84). The sum of the labor-related and nonlabor-related portions of the full nationa l adjusted payment is approximately $445.91 ($294.55 + $151.36). The sum of the reduced national adjusted payment is approximately $436.99 ($288.65 + $148.34). I. Beneficiary Copayments 1. Background Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that th e effective copayment rate (determined on a national unadjusted basis) fo r 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 provi des that, for a covered OPD service (or group of such services) furnished in a y ear, the national unadjusted copayment amount cannot be less than 20 percent of the OP D fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a y ear to the amount of the inpatient hospital deductible for that year.CMS-1613-FC 271

Section 4104 of the Affordable Care Ac t eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flex ible sigmoidoscopies and sc reening colonoscopies, and waived the Part B deductible for screening colonoscopies that b ecome diagnostic during the procedure. Our discussi on of the changes made by the Affordable Care Act with regard to copayments for pr eventive services furnished on and after January 1, 2011, may

be found in section XII.B. of the CY 2011 O PPS/ASC final rule with comment period (75 FR 72013). 2. OPPS Copayment Policy In the CY 2015 OPPS/ASC proposed rule (79 FR 40973), for CY 2015, we proposed to determine copayment amounts fo r 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 co mment period (68 FR 63458).) In addition, we proposed to use the same standard rounding pr inciples that we have historically used in instances where the app lication of our standard c opayment 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 re fer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in wh ich 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, 2015, were shown in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site). As discussed in section X II.G. of the proposed rule, for CY 2015, the Medicare beneficiary’s minimum unadjust ed copayment and national unadjustedCMS-1613-FC 272

copayment for a service to which a reduced national unadjusted pa yment rate applies equals the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimu m unadjusted copayment, respectively, for

the service. We note that OPPS copayments may incr ease or decrease each year based on changes in the calculated APC payment rates du e to updated cost report and claims data, and any changes to the OPPS cost modeling pr ocess. However, as described in the

CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves bene ficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459). We did not receive any public comme nts regarding the proposed methodology for calculating copayments for CY 2015. Therefore, fo r the reasons set forth in this final rule with comment period, we are finalizing our proposed CY 2015 copayment methodology

without modification. 3. Calculation of an Adjusted Copayment Amount for an APC Group Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a give n service provided by a hospital that met or failed to meet its Hospital OQR Program requirements shoul d follow the formulas presented in the following steps. Step 1. Calculate the beneficiary paym ent percentage for the APC by dividing the APC’s national unadjusted copayment by its payment rate. For example, using APC 0019, approximately $75.68 is 20 percent of the full national unadjusted payment rate of approximately $378.41. For APCs with only a minimum unadjusted copayment inCMS-1613-FC 273

Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site), the benefi ciary payment percentage is 20 percent.

The formula below is a mathematical re presentation of Step 1 and calculates the national copayment as a percentage of national payment for a given service. B is the beneficiary payment percentage.

B = National unadjusted copayment for APC/na tional unadjusted payment rate for APC. Step 2. Calculate the appropriate wage-a djusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this final rule with comment period. Calculate the ru ral adjustment for eligible providers as indicated in Step 6 under section II.H. of this final rule with comment period. Step 3. Multiply the percentage cal culated 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 re presentation of Step 3 and applies the beneficiary payment percentage to the adju sted payment rate for a service calculated

under section II.H. of this fi nal rule with comment period, with and without the rural adjustment, to calculate the adjusted be neficiary 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 m eet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.980.CMS-1613-FC 274

The unadjusted copayments for services payable under the OPPS that will be effective January 1, 2015, are shown in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). We note that the national unadjusted payment rates and copaym ent rates shown in Addenda A and B to this final rule with comment period reflect the full CY 2015 OPD fee schedule increase

factor discussed in section II.B. of this final rule with comment period. In addition, as noted above, section 1 833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year. III. OPPS Ambulatory Payment Cla ssification (APC) Group Policies

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

CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the hospital OPPS. Speci fically, CMS recognizes the following codes

on OPPS claims:

● Category I CPT codes, which descri be surgical procedures and medical services;

● Category III CPT codes, which desc ribe new and emerging technologies, services, and procedures; and

● Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and servic es not described by CPT codes. CPT codes are established by the Americ an Medical Associat ion (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 theCMS-1613-FC 275

OPPS are published both thr ough the annual rulemaking cy cle 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. Based on our review, we assign the new CPT and Level II HCPCS codes to interim status i ndicator (SI) and APC assignments. These interim a ssignments are finalized in th e OPPS/ASC final

rules. 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 co mments on these new codes and finalize our proposals related to thes e codes through our annual rulemaking process. We note that, under the OPPS, t he APC assignment determines th e payment rate for an item, procedure, or service. Items, procedures, or services not paid separately under the hospital O PPS are assigned to the appropri ate status

indicators. Section XI. of the CY 2015 OPPS/ASC proposed rule provided a

discussion of the various status indicators used under the OPPS . Assigning procedures to certain status indicators would generate separate payment for the service furnished, while assignme nt to other status indicators would not. In the CY 2015 OPPS/ASC proposed rule (79 FR 40974), in Table 14 (Table 15 of this final rule with comment period), we summarized our process for updating codes through our OPPS quarterly update CRs, seeki ng public comments, and finalizing their

treatment under the OPPS. We noted that be cause the payment rate s associated withCMS-1613-FC 276

codes effective July 1 were not available to us in time for incorporation into the Addenda to the proposed rule, the Level II HCPC S codes and the Category III CPT codes implemented through the July 2014 OPPS quart erly update CR were not included in Addendum B of the proposed rule (which is available via the Inte rnet on the CMS Web site), while those codes based upon the Apr il 2014 OPPS quarterly upda te were included in Addendum B. Nevertheless, we requested public comments on the codes included in the July 2014 OPPS quarterly update and includ ed these codes in the preamble of the proposed rule.

TABLE 15.—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES

OPPS Quarterly Update CR Type of Code Effective Date Comments Sought When Finalized

April l, 2014 Level II HCPCS Codes April 1, 2014 CY 2015 OPPS/ASC proposed rule CY 2015 OPPS/ASC final rule with comment period

July 1, 2014 Level II HCPCS Codes July 1, 2014 CY 2015 OPPS/ASC proposed rule CY 2015 OPPS/ASC final rule with comment period Category I (certain vaccine codes) and III CPT codes July 1, 2014 CY 2015 OPPS/ASC proposed rule CY 2015 OPPS/ASC final rule with comment period

October 1, 2014 Level II HCPCS Codes October 1, 2014 CY 2015 OPPS/ASC final rule with comment period CY 2016 OPPS/ASC final rule with comment period

January 1, 2015 Level II HCPCS Codes January 1, 2015 CY 2015 OPPS/ASC final rule with comment period CY 2016 OPPS/ASC final rule with comment periodCMS-1613-FC 277

OPPS Quarterly Update CR Type of Code Effective Date Comments Sought When Finalized Category I and III CPT Codes January 1, 2015 CY 2015 OPPS/ASC final rule with comment period CY 2016 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 solicite d public comments in the CY 2015 OPPS/ASC proposed rule or whether we will be soliciting public comments in this CY 2015

OPPS/ASC final rule with co mment period. We note that we will be seeking public comments in this CY 2015 OPPS/ASC final rule with comment period on the interim APC and status indicator assignments for new CPT and Level II HCPCS codes that will be effective January 1, 2015. In the CY 2015 OPPS/ASC proposed rule (79 FR 40977), we also noted that we sought public comments in the CY 2014 OPPS/ASC final rule with comment period on the interim APC and stat us assignments for new Level II HCPCS codes that became effective October 1, 2013, or January 1, 2014. These new and revised codes, with an effective da te of October 1, 2013, or January 1, 2014, 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 2014 OPPS/ASC final rule with comment pe riod to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, and were subject to public comment following public ation of the CY 2014 OPPS/ASC final rule with comment period. We are responding to pu blic comments and finalizing our interimCMS-1613-FC 278

OPPS treatment of these codes in this CY 2015 OPPS/ASC final rule with comment period. We received public comments on some new codes that were assigned to comment

indicator “NI” in Addendum B of the CY 2014 OPPS/ASC final rule with comment period. We respond to those comments in sections III.C. of this CY 2015 OPPS/ASC final rule with comment period. 1. Treatment of New CY 2014 Level II HCPCS and CPT Codes Effective April 1, 2014 and July 1, 2014 for Which We Solicited P ublic Comments in the CY 2015 OPPS/ASC Proposed Rule Through the April 2014 OPPS quarterly update CR (Transmittal 2903, Change Request 8653, dated March 11, 2014) and th e July 2014 OPPS quarterly update CR (Transmittal 2971, Change Request 8776, date d May 23, 2014), we recognized several new HCPCS codes for separa te payment under the OPPS. Effective April 1, 2014, we made effec tive four new Level II HCPCS codes and also assigned them to appropriate interim OP PS status indicators and APCs. Through the April 2014 OPPS quarterly update CR, we allowed separate payment for three of the four new Level II HCPCS codes. Specifically, as displayed in Table 15 in the proposed rule (79 FR 40975), we provided separate payment for HCPCS codes C9021, C9739, and C9740. HCPCS code Q2052 was assigned to status indicator “N” to i ndicate the service described by this code is packaged under the OPPS. In the CY 2015 OPPS/ASC proposed ru le (79 FR 40974), we solicited public comments on the proposed APC and status indi cator assignments, where applicable, for

the Level II HCPCS codes listed in Table 15 of that proposed rule (HCPCS codes C9021,CMS-1613-FC 279

C9739, C9740, and Q2052). We did not rece ive any public comments on the proposed APC and status indicator assignments for HCPCS codes C9021 and Q2052. Because HCPCS code Q2052 will only be billed by pharmacy suppliers, we are modifying our CY 2015 proposal to continue to assign HCPCS code Q2052 to status indicator “N.” Instead, for CY 2015, we are reassigni ng HCPCS code Q2052 from OPPS status indicator “N” to “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)). We are adopting as final, without modifi cation, the proposed APC and status indicator assign ments for HCPCS code C9021 for CY 2015. We note that we received some public comments on HCPCS codes C9739 and C9740, which we address

in section III.C.3.e. of this fi nal rule with comment period. Effective for CY 2015, the HCPCS Wo rkgroup replaced HCPCS code C9021

with HCPCS code J9301. Table 16 below s hows the complete long descriptor for

HCPCS code J9301. Consistent with our general policy of using permanent HCPCS codes (that is, “J” codes) rather than usi ng temporary HCPCS codes (that is, “C” codes and “Q” codes) for the reporting of drugs under the OPPS in order to streamline coding, we are showing the replacement HCPC S code for C9021, which is effective January 1, 2015, in Table 16. In this final rule with comment peri od, we are assigning the Level II HCPCS

codes listed in Table 16 below to the specified APCs and status indicators for CY 2015. The final payment rates for th ese codes, where applicable , can be found in Addendum B to this final rule with comment period (whi ch is available via the Internet on the CMS Web site).CMS-1613-FC 280

TABLE 16.—FINAL CY 2015 STATUS INDICATORS AND APC ASSIGNMENTS

FOR THE LEVEL II HCPCS CODES TH AT WERE NEWLY IMPLEMENTED IN APRIL 2014

CY 2014 HCPCS

Code CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015

Status Indicator Final CY 2015

APC C9021 J9301 Injection, obinutuzumab, 10mg G 1476

C9739 C9739 Cystourethroscopy, with insertion of transprostatic implant; 1 to 3 implants T 0162

C9740 C9740 Cystourethroscopy, with insertion of transprostatic implant; 4 or more implants T 1564

Q2052 Q2052 Services, supplies and accessories used in the home under the Medicare intravenous immune globulin (IVIG) demonstration E N/A

Effective July 1, 2014, we made effectiv e several new CPT and Level II HCPCS codes and also assigned them to appropriate interim OPPS status i ndicators and APCs. Through the July 2014 OPPS quarterly update CR, we allowed separate payment under the OPPS for four new Level II HCPCS codes and 17 new Category III CPT codes effective July 1, 2014. Specifically, as displa yed in Table 16 in the proposed rule, we allowed separate payment for HCPCS codes C2644, C9022, C9134, and Q9970. We note that HCPCS code Q9970 replaced HCPCS code C9441 (Injection, ferric carboxymaltose, 1 mg), beginning July 1, 2014. HCPCS code C9441 was made effective January 1, 2014, but the code was deleted J une 30, 2014, because it was replaced with HCPCS code Q9970. HCPCS code C9441 wa s granted pass-through payment status when the code was implemented on January 1, 2014. Because HCPCS code Q9970 describes the same drug as HCPCS code C9441, in the CY 2015 OPPS/ASC proposedCMS-1613-FC 281

rule (79 FR 40975), we proposed to continue the pass-through payment status for HCPCS code Q9970, and assign the HCPCS Q-code to th e same APC and status indicator as its predecessor HCPCS C-code, as shown in Table 16 of the proposed rule. Specifically, we proposed to assign HCPCS code Q9970 to APC 9441 (Inj, Ferric Ca rboxymaltose) and

status indicator “G.” In addition, the HCPCS Workgroup esta blished HCPCS code Q9974, effective July 1, 2014, to replace HCPCS codes J2271 (Injection, morphine sulfate, 100mg) and J2275 (Injection, morphine sulfat e (preservative-free sterile solution), per 10 mg). Both of these HCPCS J-codes were assigned to stat us indicator “N” (Packaged Services). As a

result of the establishment of new HC PCS code Q9974 as a replacement for HCPCS codes J2271 and J2275, the payment indicator for HCPCS codes J2271 and J2275 was changed to “E” (Not Payable by Medicare), effective July 1, 2014. Also, because HCPCS code Q9974 describes the same servi ces that were described by HCPCS codes J2271 and J2275, in the CY 2015 OPPS/ASC pr oposed rule (79 FR 40975), we proposed to continue to assign HCPCS code Q9974 to th e same status indicator as its predecessor HCPCS J-codes. Specifically, we proposed to assign HCPCS code Q9974 to status indicator “N,” effective July 1, 2014. In the CY 2015 OPPS/ASC proposed rule (79 FR 40975), we also proposed to assign the Level II HCPCS codes listed in Ta ble 16 to the specified proposed APCs and

status indicators set forth in Table 16 of the proposed ru le. This table included a complete list of the Level II HCPCS codes th at were made effective July 1, 2014. The codes that were made effective July 1, 2014, did not appear in Addendum B to the proposed rule, and as a result, the proposed payment rates along with the proposed statusCMS-1613-FC 282

indicators and proposed APC assignments, wh ere applicable, for CY 2015 were provided in Table 16 of the proposed rule. In the CY 2015 OPPS/ASC proposed ru le (79 FR 40975), we solicited public comments on the proposed status indicators and APC assignments for the HCPCS codes that were listed in Table 16 of the propos ed rule. We did not receive any public comments on the proposed APC and status indicator assignments for HCPCS codes C9022, C9134, Q9970, and Q9974 for CY 2015. Ther efore, we are adopting as final, without modification, the proposed APC and stat us indicator assignments for these four

Level II HCPCS codes for CY 2015. We not e that we received a public comment on HCPCS code C2644, which is a ddressed in section II.A.2.d.3. of this final rule with comment period. The HCPCS Workgroup replaced HCPC S code C9022 with HCPCS code J1322, effective January 1, 2015. Because HCPCS c ode J1322 describes the same drug with the same dosage descriptor as its predece ssor code, HCPCS code C9022, this drug will continue to receive pass-through payment status in CY 2015. Therefore, we are assigning HCPCS code J1322 to the same APC and status indicator as its predecessor code, HCPCS code C9022, as shown in Table 17 below. In addition, the HCPCS Workgroup repl aced HCPCS code C9134 with HCPCS code J7181, effective January 1, 2015. Becau se HCPCS code J7181 does not describe the same dosage descriptor as its pred ecessor code, HCPCS code J7181 has been assigned to a new APC. Speci fically, HCPCS code C9134 had a dosage descriptor of “10 i.u.,” while HCPCS code J7181 ha s a dosage descriptor of “i. u.” Therefore, effective January 1, 2015, we are assigning HCPCS code J7181 to APC 1746, which is a differentCMS-1613-FC 283

APC assignment than the APC assignment for HCPCS code C9134, to maintain data consistency for future rulemakings. Becau se the predecessor code, HCPCS code C9134, was granted pass-through payment status, HCPCS code J7181 will continue to be assigned to status i ndicator “G” for CY 2015.

We also note that the HCPCS Work group replaced HCPCS code Q9970 with HCPCS code J1439, effective January 1, 2015. Because HCPCS code J1439 describes the same drug with the same dosage descript or as its predecessor code, HCPCS code Q9970, this drug will continue to receive pass-through payment status in CY 2015. Therefore, we are assigning HCPCS code J1439 to the same APC and status indicator as its predecessor code, HCPCS code Q9970, as shown in Table 17 below. Further, the HCPCS Workgroup replaced HCPCS code Q9974 with HCPCS code J2274, effective January 1, 2015. Because HCPCS code J2274 describes the same drug with the same dosage descriptor as its pr edecessor code, HCPCS code Q9974, this drug will continue its packaged status indicator. Therefore, we are assigning HCPCS code

J2274 to the same status indicator as its predecessor code, HCPCS code Q9974, as also

shown in Table 17 below. Table 17 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2014, with their final status indicators a nd APC assignments for CY 2015. The final payment rates for these codes, where applicable, can be found in

Addendum B to this final rule with comment period (which is availa ble via the Internet on the CMS Web site).CMS-1613-FC 284

TABLE 17.—FINAL CY 2015 STATUS INDICATORS AND APC ASSIGNMENTS

FOR THE LEVEL II HCPCS CODES TH AT WERE NEWLY IMPLEMENTED IN JULY 2014

CY 2014 HCPCS

Code CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015

Status Indicator Final CY 2015 APC C2644 C2644 Brachytherapy source, cesium-131 chloride solution, per millicurie U 2644 C9022 J1322 Injection, elosulfase alfa, 1mg G 1480 C9134 J7181 Factor XIII A-Subun it (Recombinant), Per IU G 1746 Q9970 J1439 Injection, ferri c carboxymaltose, 1mg G 9441 Q9974 J2274 Injection, morphine sulfat e, preservative-free for epidural or intrathecal use, 10 mg N N/A

In the CY 2015 OPPS/ASC proposed rule (79 FR 40975), for CY 2015, we proposed to continue our established policy of recognizing Category I CPT vaccine codes for which FDA approval is imminent and Cate gory III CPT codes that the AMA releases in January of each year for implementati on 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 Janua ry are made effective in July of the same year through the July quarte rly update CR, consistent with the AMA’s implementation date for the codes. For the July 2014 upda te, there were no new Category I CPT vaccine

codes. Through the July 2014 OPPS quarterly update CR (Transmittal 2971, Change Request 8776, dated May 23, 2014), we assigne d interim OPPS status indicators and APCs for 17 of the 27 new Category III CPT codes that were made effective July 1, 2014. Specifically, as displayed in Table 17 in the proposed rule, we madeCMS-1613-FC 285

interim OPPS status indicators and APC a ssignments for Category III CPT codes 0347T, 0348T, 0349T, 0350T, 0355T, 0356T, 0358T, 0359T, 0360T, 0362T, 0364T, 0366T, 0368T, 0370T, 0371T, 0372T, and 0373T. Table 17 of the proposed rule listed the Category III CPT codes that were implemen ted on July 1, 2014, along with the proposed status indicators, proposed APC assignments, and proposed payment rates, where applicable, for CY 2015. We did not rece ive any public comments on the proposed APC

and status indicator as signments for Category III CPT codes 0347T, 0348T, 0349T, 0350T, 0356T, 0358T, 0359T, 0360T, 0362T, 0364T, 0366T, 0368T, 0370T, 0371T, 0372T, and 0373T. Therefore, we are adopti ng as final, without modification, the proposed APC and status indicator assignm ents for these 16 CPT codes for CY 2015. We received a public comment on CPT code s 0335T, which we address in section

III.C.2.6. of this final rule with comment period. We also received specific public comments on CPT codes 0351T, 0352T, 0353T, and 0354T, which are addressed in

section II.C.6.b. of this final rule with comment period. Table 18 below lists the Category III CPT codes that were implemented in July 2014, along with their final status indicators and APC assignments for CY 2015. The final payment rates for these codes, where applicable, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

TABLE 18.—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2014

CY 2014 CPT Code CY 2015 CPT Code CY 2015 Long Descriptor Final CY 2015

Status Indicator Final CY 2015

APCCMS-1613-FC 286

0347T 0347T Placement of interstitial device(s) in bone for radiostereometric analysis (RSA) Q1 0420

0348T 0348T Radiologic examination, radiostereometric analysis (RSA); spine, (includes, cervical, thoracic and lumbosacral, when performed) Q1 0261

0349T 0349T Radiologic examination, radiostereometric analysis (RSA); upper ex tremity(ies), (includes shoulder, elbow and wrist, when performed) Q1 0261

0350T 0350T Radiologic examination, radiostereometric analysis (RSA); lower extremity(ies), (includes hip, proximal femur, knee and ankle, when performed) Q1 0261

0351T 0351T Optical coherence tomography of breast or axillary lymph node, excised tissue, each specimen; real time intraoperative N N/A

0352T 0352T Optical coherence tomography of breast or axillary lymph node, excised tissue, each specimen; interpretation and report, real time or referred B N/A

0353T 0353T Optical coherence tomography of breast, surgical cavity; real time intraoperative N N/A

0354T 0354T Optical coherence tomography of breast, surgical cavity; interpre tation and report, real time or referred B N/A

0355T 0355T Gastrointestinal tract imaging, intraluminal (eg, capsule endoscopy), colon, with interpretation and report T 0142

0356T 0356T Insertion of drug-eluting implant (including punctal dilation and implant removal when performed) into lacrimal canaliculus, each Q1 0698

0358T 0358T Bioelectrical impedance analysis whole body composition assessment, supine position, with interpretation and report Q1 0340CMS-1613-FC 287

0359T 0359T Behavior identification assessment, by the physician or other qualified health care professional, face-to-face with patient and caregiver(s), include s administration of standardized and non-st andardized tests, detailed behavioral hist ory, patient observation and caregiver interview, interpretation of test results, discussion of findings and recommendations with the primary guardian(s)/caregiver(s), and preparation of report V 0632

0360T 0360T Observational behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by one technician; first 30 minutes of technician time, face-to-face with the patient V 0632

0361T 0361T Observational behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by one technician; each additional 30 minutes of technician time, face-to -face with the patient (List separately in addition to code for primary service) N N/A

0362T 0362T Exposure behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by physician or other qualified health care professional with the assistance of one or more technicians; first 30 minutes of technician(s) time, face-to-face with the patient V 0632CMS-1613-FC 288

0363T 0363T Exposure behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by physician or other qualified health care professional with the assistance of one or more technicians; each additional 30 minutes of technician(s) time, face-to-face with th e patient (List separately in addition to code for primary procedure) N N/A

0364T 0364T Adaptive behavior treatment by protocol, administered by technician, face-to-face with one patient; first 30 minutes of technician time S 0322

0365T 0365T Adaptive behavior treatment by protocol, administered by technician, face-to-face with one patient; each additional 30 minutes of technician time (List se parately in addition to code for primary procedure) N N/A

0366T 0366T Group adaptive behavior treatment byprotocol, administered by technician, face-toface with two or more patients; first 30 minutes of technician time S 0325

0367T 0367T Group adaptive behavior treatment byprotocol, administered by technician, face-toface with two or more patients; each additional 30 minutes of technician time (List separately in addition to code for primary procedure) N N/A

0368T 0368T Adaptive behavior treatment with protocol modification administered by physician or other qualified health car e professional withone patient; first 30 minutes of patient face-toface time S 0322

0369T 0369T Adaptive behavior treatment with protocol modification administered by physician or other qualified health car e professional with one patient; each additional 30 minutes of patient face-to-face time (List separately in addition to code for primary procedure) N N/ACMS-1613-FC 289

Further, in the CY 2015 OPPS/ASC proposed rule, we solicited public comments on the proposed CY 2015 status indicators, AP C assignments, and payment rates for the Level II HCPCS codes and the Category III CPT codes that were made effective April 1, 2014, and July 1, 2014. These codes were listed in Tables 15, 16, and 17 of the proposed rule. We also proposed to finali ze the status indicator and APC assignments and payment rates for these codes, if applic able, in this CY 2015 OPPS/ASC final rule with comment period. Because the new Category III CPT and Level II HCPCS codes that became effective for July were not availabl e to us in time for incorporation into the Addenda to the proposed rule, our policy is to include the codes, the proposed status 0370T 0370T Family adaptive behavior treatment guidance, administered by physician or other qualified health care professiona l (without the patient present) S 0324

0371T 0371T Multiple-family group adaptive behavior treatment guidance, administered by physician or other qualified h ealth care professional (without the patient present) S 0324

0372T 0372T Adaptive behavior treatment social skills group, administered by physician or other qualified health care pr ofessional face-to-face with multiple patients S 0325

0373T 0373T Exposure adaptive behavior treatment with protocol modification requiring two or more technicians for severe maladaptive behavior(s);first 60 minutes of technicians' time, face-toface with patient S 0323

0374T 0374T Exposure adaptive behavior treatment with protocol modification requiring two or more technicians for severe maladaptive behavior(s); each additional 30 minutes of technicians' time face-to-face with patient (List separately in addition to code for primary procedure) N N/ACMS-1613-FC 290

indicators, proposed APCs (where applicab le), and proposed payment rates (where applicable) in the preamble of the proposed rule, but not in the Addenda to the proposed

rule. These codes were listedin Tables 16 and 17, respectiv ely, of the proposed rule. We also proposed to incorporat e these codes into Addendum B to this CY 2015 OPPS/ASC final rule with comment period, which is c onsistent with our a nnual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2014 OPPS update CR and displayed in Table 15 were incl uded in Addendum B to the proposed rule (which is available via the Internet on th e CMS Web site), where the proposed CY 2015 payment rates for these codes were also shown. We did not receive any additional public comments on this process. The final APC and status indicator assignments and paym ent rates, if applicable, for the Level II HCPCS codes and the Category III CPT code s that were implemented or modified through the April 2014 or July 2014 OPPS update CR can be found in Tables 16, 17, and 18, or in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

2. Process for New Level II HCPCS Codes That Became Effective October 1, 2014 and

New CPT and Level II HCPCS Codes That Will Become Effective January 1, 2015 for Which We Are Soliciting Public Comments inThis CY 2015 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 AMACMS-1613-FC 291

Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In the past, we also have released new Le vel II HCPCS codes that are effective October 1 through the October OPPS quarterlyupdate CRs and incorporated these new codes in the final rule with comment peri od updating the OPPS for the following calendar year. For CY 2015, these codes are flagged with comment indicator “NI” in Addendum

B to this OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is s ubject to public comment. In addition, the CPT

and Level II HCPCS codes that will become effective January 1, 2015, are flagged with

comment indicator “NI” in Addendum B to this CY 2015 OPPS/ASC final rule with comment period. Specifically, the status in dicator and the APC assignment and payment rate, if applicable, for all such codes fla gged with comment indicator “NI” are open to public comment in this final rule with comment period, and we will respond to these public comments in the OPPS/ASC final rule with comment period fo r the next year’s OPPS/ASC update. In the CY 2015 OPPS/ ASC proposed rule (79 FR 40977), we proposed to continue this process for CY 2015. Specifically, for CY 2015, we proposed

to include in Addendum B to the CY 2015 OPPS/ASC final rule with comment period the following new HCPCS codes:

● New Level II HCPCS codes effect ive October 1, 2014, that would be incorporated in the Octobe r 2014 OPPS quarterly update CR;

● New Category I and III CPT codes e ffective January 1, 2015, that would be incorporated in the January 2015 OPPS quarterly update CR; and

● New Level II HCPCS codes effect ive January 1, 2015, that would be incorporated in the January2015 OPPS quarterly update CR.CMS-1613-FC 292

As stated above, the October 1, 2014 and January 1, 2015 codes are flagged with

comment indicator “NI” in Addendum B to this CY 2015 OPPS/ASC final rule with comment period to indicate th at we have assigned the c odes an interim OPPS payment status for CY 2015. We are inviting public co mments on the interim status indicator and APC assignments and payment rates for these codes, if applicable, that will be finalized in the CY 2016 OPPS/ASC final rule with comment period. 3. Process for Soliciting Public Comments for New and Revised CPT Codes Released by

the AMA We generally incorporate the new CPT codes that are effective January 1 in the OPPS/ASC final rule with comment period. We establish interim APC and status indicator assignments for these new codes for the coming year, and request comments on the interim assignments in the OPPS/ASC fina l rule with comment period. Similarly, we

establish interim APC and status indicator as signments for existing CPT codes that have

substantial revision to their co de descriptors that necessitate a change in the current APC assignments, and request comments on the in terim assignments in the OPPS/ASC final rule with comment period. In both cases, we assign these new and revised codes to OPPS comment indicator “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.) in the OPPS/ ASC final rule with comment period. We respond to comments and finalize the APC a nd status indicator assignments for these CPT codes in the following year’s OPPS/ ASC final rule with comment period.CMS-1613-FC 293

a. Current Process for Accepting Comment s on New and Revised CPT Codes for a Year As described above, under the hospital OPPS, our current process for both new CPT codes and existing CPT codes with substan tial revisions to the c ode descriptors that are released by the AMA for use beginning January 1 is to flag these codes with comment

indicator “NI” in Addendum B to the O PPS/ASC final rule with comment period to

indicate that the codes are new for the calen dar year and have been assigned interim APCs and status indicators, and that we are accepting public comments on the interim APC and status indicator assignments. We address public comments received and

finalize the APC and status i ndicator assignments for the codes in the next year’s

OPPS/ASC final rule with comm ent period. For example, the new CPT codes that were effective January 1, 2014, were assigned to comment indicator “NI” in Addendum B to

the CY 2014 OPPS/ASC final rule with co mment period. We respond to public

comments received on the CY 2014 OPPS/ASC final rule with comment period and

finalize the APC and status indicator assignments for th ese codes in this CY 2015 OPPS/ASC final rule with comment period. We include the final APC and status indicator assignments for these codes in A ddendum B to this final rule with comment period (which is available via th e Internet on the CMS Web site). Many stakeholders have expressed concer n with the process we use to recognize new and revised CPT codes. They believe that CMS should publish proposed APC and status indicator assignments for the new a nd revised CPT codes that will be effective January 1 in the OPPS/ASC proposed rule fo r that calendar year , and request public comments prior to finalizing th e assignments. Further, th e stakeholders believe that seeking public input on the APC and status indicator assignments for these new andCMS-1613-FC 294

revised codes would assist CMS in assigni ng the CPT codes to appropriate APCs. Similar concerns have been expressed re garding our process fo r assigning interim payment values for revalued, and new and re vised codes, under the Medicare Physician Fee Schedule (MPFS). We refer readers to the CY 2015 MPFS proposed rule for a

detailed discussion of this issue as it relates to the MPFS (79 FR 40359 through 40364). Like the MPFS, the OPPS and the ASC payment system rely principally upon the Current Procedural Terminology (CPT ® ) coding system maintained by the AMA to identify specific services for billing and paym ent purposes. CPT is th e standard code set adopted under the Health Insurance Portab ility and Accountability Act of 1996 (HIPAA) for outpatient services. The AMA CPT Editorial Panel’s coding cycle occurs concurrently with our calendar year ru lemaking cycle for the OPPS and the ASC payment system. However, the OPPS/ASC proposed rules are published prior to the publication of the CPT codes that are made publ ic in the Fall with a January 1 effective date, and we are currently unable to incl ude these codes in the OPPS/ASC proposed rules. Consequently, we establish in the final rule with comment period interim APC and status indicator assignments for new and revise d CPT codes that have an effective date of January 1, and we make payment based on thos e interim designations for one year, while accepting public comments on the final rule with comment period. We then respond to those public comments received and make final APC and status indicator assignments in the next year’s final rule with comment period.

b. Modification of Process for New and Revi sed CPT Codes That Are Effective January

1CMS-1613-FC 295

In the CY 2015 OPPS/ASC proposed rule (79 FR 40977 through 40979), we proposed to make changes in the process we use to establish APC assignments and status

indicators for new and revise d codes. We proposed that, for new and revised CPT codes

that we receive from the AMA’s CPT Editori al Panel too late for inclusion in the proposed rule for a year, we would delay adopt ion of the new and revised codes for that year, and instead, adopt coding policies and pa yment rates that conf orm, to the extent possible, to the policies and pa yment rates in place for the previous year. We proposed to adopt these conforming coding and payment policies on an interim basis pending the result of our specific proposals for status indicator and APC assignments for these new and revised codes through notice and comme nt rulemaking in the OPPS/ASC proposed rule for the following year. Because the changes in CPT codes are effective on January 1 of each year, and CMS would not have establ ished status indicator or APC assignments for these new or revised codes, it would not be practicable for Medicare to use those CPT codes. In this circumstance, we proposed to create HCPCS G-codes to describe the predecessor codes for any codes that were revi sed or deleted as part of the annual CPT coding changes, but that we did not receive in time to include proposed APC and status indicator assignments in the proposed rule. Ho wever, if certain CPT codes are revised in

a manner that would not affect the cost of inputs (for example, a minor change to CPT code descriptors), we would use these revised codes and continue to assign those codes to their current APC. For example, under this proposed process, if a single CPT code was separated into two codes and we did not receive those codes until May 2015, we would assign each of those CPT codes to status in dicator “B” in the final rule with comment period, to indicate that an alte rnate code is recognized unde r the OPPS. Hospitals couldCMS-1613-FC 296

not use those two new CPT codes to bill Medicare for outpatient services the first year

after the CPT effective date of the codes. Instead, we would create a HCPCS G-code with the same description as the single predecessor CPT code, and continue to use the

same APC and status indicator assignment for the new G-code during the year. We would propose APC and status indicator assi gnments for the two new CPT codes during rulemaking in CY 2016, accept and respond to public comments on the proposed assignments, and establish final APC and status indicator assignments for the codes in the final rule for payment beginning in CY 2017. For new codes that describe wholly ne w services, as opposed to new or revised

codes that describe services for which APC and status indicator assignments are already established, we would make ever y effort to work with the AMA’s CPT Editorial Panel to

ensure that we received the codes in time to propose payment rates in the proposed rule. However, if we do not receive the code fo r a wholly new service in time to include proposed APC and status indicator assignments in the proposed rule for a year, we would need to establish interim APC and status indicator assignments for the initial year because there would be no predecessor code we could use as a reference to establish a G-code in order to continue current payment policies for such a service. We proposed to

continue to establish the initial APC and st atus indicator assignments for these wholly

new services as interim final assignments, and to follow our current process to solicit and respond to public comments and finalize the AP C and status indicator assignments in the subsequent year. We recognize that the use of HCPCS G-codes may place an administrative burden on those providers that bill for services under the OPPS and the ASC payment system.CMS-1613-FC 297

However, the proposed use of G-codes would permit us to propose and accept public

comment on the APC and status indicator assignments for the vast majority of new and revised codes before they take effect. We are hopeful that the AMA’s CPT Editorial Panel ultimately will be able to adjust its timelines and processes so that most, if not all, of the annual coding changes can be addressed in the proposed rule before the new and revised CPT codes take effect on January 1. If the AMA’s CPT Editorial Committee can make adjustments to its schedule, we would not need to use G-code s as described above for the purpose of maintaining outdated codi ng and APC and status indicator assignments for a year until we can include proposed APC and status indicator assignments for the new and revised codes in a proposed rule. We proposed to implement the revised CMS process for establishing APC and status indi cator assignments for new and revised codes for CY 2016. However, we indicated in th e proposed rule that we would consider alternative implementation dates if that w ould allow time for the AMA’s CPT Editorial Panel to adjust its schedule in order to avoid the necessity to use numerous HCPCS

G-codes. In summary, in conjunction with th e proposals presented in the CY 2015 MPFS proposed rule to revise the process used to address new, revised, and potentially misvalued codes under the MPFS, in the CY 2015 OPPS/ASC proposed rule (79 FR 40977 through 40979), we proposed to include in the OPPS/ASC proposed rule the proposed APC and status indicator assignm ents for the vast majority of new and revised CPT codes before they are used for payment purposes under the OPPS and ASC payment system. We would address new and revised CPT codes for the upcoming year that are available in time for the proposed rule by proposing APC and status indicatorCMS-1613-FC 298

assignments for the codes. Otherwise, we will delay adoption of the new and revised codes for a year while using methods (inc luding creating G-codes that describe the predecessor codes) to maintain the existing APC and status indicator assignments until the following year when we would include pr oposed assignments for the new and revised codes in the proposed rule. We proposed to fo llow this revised process except in the case

of a new CPT code that desc ribes a wholly new service (such as a new technology or new surgical procedure) that has not previously been addressed under the OPPS. For codes that describe wholly new services for whic h we do not receive timely information from the AMA, we proposed to establish interim AP C and status indicatorassignments in the OPPS/ASC final rules with comment period, as is our current pro cess. The proposed revised process would eliminate our current pr actice of assigning interim APC and status indicators for the vast majority of new and revised CPT codes that take effect on January 1 each year. We invited public commen ts on this proposal. We indicated in the proposed rule that we were specifically interested in receiving public comments on the following topics:

● Is this proposal preferab le to the present process? Are there other alternatives?

● If we were to implemen t this proposal, is it better to move forward with the changes or is more time needed to make the transition and, ther efore, implementation should be delayed beyond CY 2016?

● Are there alternatives other than the use of HCPC S G-codes that would allow us to address the annual CPT code change s through notice and comment rather than interim final rulemaking?CMS-1613-FC 299

● Is the process we have proposed for wholly new services appropriate? How

should we define new services?

● Are there any classes of services, othe r than new services, that should remain

on an interim final schedule? Comment: The majority of the commenters supported the proposal to modify the current process of recognizing new and revi sed CPT codes because it would provide an opportunity for the public to comment on specif ic APC and status indicator assignments prior to those assignments being finalized. However, several commenters disagreed with our proposed implementation date of CY 2016 and requested that CMS work with the AMA to determine an appropriate implement ation date. Other commenters suggested that CMS finalize the proposal but urged CMS to work with the AMA on an appropriate timeline that considers the AMA’s CPT and RUC (Specialty Society Relative Value Update Committee) meeting dates as well as CMS’ OPPS and MPFS regulation schedule. The AMA supported the proposal but requested that CMS finalize the proposal for CY

2017 rather than CY 2016 because the CPT codes for the CY 2016 update are almost complete. Response: We appreciate the commenters ’ support for our proposal. We believe that publishing our proposed status indicat or and APC assignments for the new and revised CPT codes in the proposed rule w ould alleviate some concerns expressed by stakeholders in the past that some of our interim APC assignments were not appropriate, and that the APC assignment process could be improved if we had the benefit of public comments before adopting final APC and st atus indicator assignments for new and revised codes. This new process of pr oposing and requesting public comments beforeCMS-1613-FC 300

finalizing the APC and status indicator assignments for new and revised codes allows both CMS and stakeholders the benefit of pub lic notice and comment prior to the use of the new and revised codes for payment purpos es. When we receive information on the

new and revised codes from the AMA in time to include proposals for new and revised codes in the proposed rule before the code s are effective the following January 1, the revised process allows public notice and co mment before finalizing APC and status indicator assignments for the codes during the calendar year before the CPT codes become effective. In addition, this new pro cess eliminates the need to make interim APC and status indicator assign ments for new and revised CPT codes, which has been unpopular among some providers because the in terim assignments are used for payment for a year before we address public comments and make any appropr iate changes to an APC or status indicator assignment in the subsequent year’s final rule. Although the AMA and several commente rs requested that we modify our proposal by finalizing this new process for the CY 2017 OPPS update, we disagree with this recommendation. We believe the new proc ess that permits an opportunity for public comment on proposed APC and status indicator assignments for the vast majority of new and revised codes before they are finalized and used for payment purposes will be beneficial to CMS and to hospitals and othe r stakeholders, and we see no reason to delay implementation of this policy change. Th erefore, beginning w ith the CY 2016 OPPS update, we will publish proposed APC and status indicator assignments for any new and revised CPT codes for January 1, 2016 that ar e publicly released by the AMA in time for

us to consider them for inclusion in the OPPS/ASC proposed rule. After review of the public comments received on the proposed rule, we will finalize the status indicator andCMS-1613-FC 301

APC assignments for those new and revise d CPT codes in the CY 2016 OPPS/ASC final rule. Because the APC assignments woul d be final, we would no longer request

comments in the OPPS/ASC final rules for th ese new and revised CPT codes that are included in the proposed rule. For any new and revised codes released too late for us to

consider them for inclusion in the CY 2016 OPPS/ASC proposed rule, we will create

HCPCS G-codes that reflect the same desc ription(s), and APC and status indicator assignments, as their predecessor codes. These HCPCS G-codes will be used during CY 2016, and then we will include proposal s for the corresponding new and revised

codes and APC and status indicator assi gnments in the CY 2017 OPPS/ASC proposed

rule. Comment: Most commenters opposed the use of temporary HCPCS G-codes and requested that CMS not implement the HCPCS G- code process if it fi nalizes the proposal to change to process for new and revised CPT codes. The commenters recommended not establishing temporary HCPCS G-codes b ecause these codes would be extremely burdensome for providers to use. The comm enters stated that establishing HCPCS G-codes for services or procedures that are already described by existing CPT codes would be too confusing for hospitals, physic ians, and other third party insurers to accurately claim costs for these procedures, and that using two different sets of codes for the same procedure or service c ould result in erroneous claims. Response: As described above, we pl an to publish the new and revised CPT codes that are publicly available and provided to us in time for evaluation in the CY 2016 OPPS/ASC proposed rule. Sp ecifically, in the CY 2016 OPPS/ASC proposed rule, we expect to publish new and revised CPT c odes that would be effective January 1, 2016,CMS-1613-FC 302

with the proposed status i ndicator and APC assignments, and request public comments on these proposed assignments as long as we r eceive them in time for inclusion in the proposed rule. We would finalize the status indicator and APC assignments for these

new and revised CPT codes in the CY 2016 OPPS/ASC final rule. However, for those new and revised CPT codes that are not publicly available in time for the OPPS/ASC proposed rule, we w ill create HCPCS G-codes that mirror the predecessor CPT codes and retain the current APC and status indicator assignments for a year until we can include proposed status i ndicator and APC assignments in the following year’s proposed rule. These HCPCS G-codes wi ll be assigned to comment indicator “NI”

to indicate that the codes are new and open for comment for 60 days after display of the OPPS/ASC final rule with comment period. This is consistent with our current policy of seeking public comments on new CP T and Level II HCPCS codes with interim APC and status indicator assignments that we re not previously published in the proposed rule. For new and revised codes, we rec ognize that there is a trade-off between the benefit of considering public comments on the proposed APC and status indicator assignments before they take effect and the potential confusion caused by the use of HCPCS G-codes. We anticipate that the use of HCPCS G-codes will be largely a temporary solution or may not be necessary in the OPPS, and we expect to work closely

with the AMA to minimize the need for them. We note that, under the MPFS, we generally do not develop values for new and revised CPT codes until we receive recommendations provided by the AMA’s RUC. In contrast, under the OPPS, we use only the publicly available new and revised CP T codes and their descriptors to developCMS-1613-FC 303

APC and status indicator assignments. As such, we anticipate that the need to use HCPCS G-codes under the OPPS will be less frequent than under the MPFS.

After consideration of th e public comments we receive d, we are finalizing our proposal. For the new and revised CPT codes that we receive timely from the AMA’s CPT Editorial Panel, we are fi nalizing our proposal to include these codes that would be effective January 1 in th e OPPS/ASC proposed rules, along with proposed APC and status indicator assignments for them, and to finalize the APC and status indicator assignments in the OPPS/ASC final rules be ginning with the CY 2016 OPPS update. For

those new and revised CPT codes that we rece ive too late for inclusion in the OPPS/ASC proposed rule, we are finalizing our proposal to create and use HCPCS G-codes that mirror the predecessor CPT codes and retain the current APC and status indicator assignments for a year until we can propose AP C and status indicator assignments in the following year’s rulemaking cycle. We note thateven if we find that we need to create HCPCS G-codes in place of certain CPT c odes for the MPFS proposed rule, we do not anticipate that these HCPCS G-codes will alwa ys be necessary for OPPS purposes. We will make every effort to include proposed AP C and status indicator assignments for all

new and revised CPT codes that the AMA make s publicly available in time for us to include them in the proposed rule, and to avoid the reso rt to HCPCS G-codes and the resulting delay in utilization of the most curr ent CPT codes. We also are finalizing our proposal to make interim APC and status indicator assignments for CPT codes that are not available in time for the proposed rule and that describe wholly new services (such as new technologies or new surgical procedures ), solicit public comments, and finalize theCMS-1613-FC 304

specific APC and status indicator assignments for those codes in the following year’s

final rule. B. OPPS Changes--Variations within APCs 1. Background Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient departme nt services. Secti on 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 cl assified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification sy stem, referred to as Ambulatory Payment Classifications (APCs), as se t 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 hom ogeneous both clinically and in terms of resource use. Using this classification syst em, we have establishe d distinct groups of similar services. We also have develope d separate APC groups for certain medical devices, drugs, biologicals, therapeutic ra diopharmaceuticals, and brachytherapy devices that are not packaged into the payment for the procedure. We have packaged into the payment for each procedure or service within an APC group the costs associated with those items a nd services that are ty pically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. Therefor e, we do not make separate payment for these packaged items or services. In general, packaged items and services include, but are not limited to the items and services li sted in § 419.2(b) of theCMS-1613-FC 305

regulations. A further discussion of packagedservices is included in section II.A.3. of this final rule with comment period. In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are ty pically performed together duri ng a single clini cal encounter and that result in the provision of a comp lete service (72 FR 66650 through 66652). For CY 2014, we provided composite APC paymen ts for nine categories of services:

● Mental Health Services Composite (APC 0034)

● Cardiac Electrophysiologic Evaluati on and Ablation Composite (APC 8000)

● Low Dose Rate (LDR) Prostate Brachytherapy Composite (APC 8001)

● Ultrasound Composite (APC 8004)

● CT and CTA without Contrast Composite (APC 8005)

● CT and CTA with Contrast Composite (APC 8006)

● MRI and MRA without Cont rast Composite (APC 8007)

● MRI and MRA with Cont rast Composite (APC 8008)

● Extended Assessment & Mana gement Composite (APC 8009) A further discussion of composite APCs is included in section II.A.2.f. of this final rule with comment period. We not e that, as a consequence of the new comprehensive APC policy, APC 8000 (Car diac Electrophysiol ogic Evaluation and Ablation Composite) is being deleted. Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC relative payment we ight represents theCMS-1613-FC 306

hospital cost of the services included in thatAPC, relative to the hospital cost of the

services included in APC 0634 (Hospital Clinic Visits). The APC relative payment weights are scaled to APC 0634 because it is the hospital clinic visit APC and clinic visits are among the most frequently furnished serv ices in the hospital outpatient setting. Section 1833(t)(9)(A) of the Act requires the Secretary to review, no less than annually, and revise the APC 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 co st data, and other relevant information and factors. Section 1833(t)(9 )(A) of the Act also requires th e Secretary to consult with an expert outside advisory panel composed of an appropriate selec tion of representatives of providers to review (and a dvise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the Panel recommendations for specific services for the CY 2015 OPPS and our responses to them are discussed in the relevant specific sections throughout this fi nal rule with comment period). Finally, section 1833(t)(2) of the Act provi des that, subject to certain exceptions, the items and services within an APC gr oup cannot be considered comparable with respect to the use of resources if the highest cost for an item or servic e in the group is more than 2 times greater than the lowest co st for an item or service within the same group (referred to as the “2 times rule”). Th e 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 excepti on in the case of a drug or biological that has been designated as an orphan drug unde r section 526 of the Federal Food, Drug, and Cosmetic Act).CMS-1613-FC 307

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 resource s, if the cost of the highest cost item or service within an APC group is more than 2 time s 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 si gnificant based on the number of claims. We note that, for purposes of identifying significant procedur e codes for examination under the 2 times rule, we consider procedure codes that ha ve more than 1,000 single major claims or procedure codes that have both greater than 99 single major clai ms and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding definition of when a procedure code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims (or less than 1,000 claims) is negligible w ithin the set of approximately 100 million single procedure or single sessi on claims we use for establishing costs. Similarly, a procedure code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims w ithin an APC will have a negligible impact on

the APC cost. In the CY 2015 OPPS/ASC proposed rule (79 FR 40981), for CY 2015, we proposed to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low-volume items and services. In the CY 2015 OPPS/ASC proposed rule, we identified the APCs with violations of the 2 times rule for CY 2015 (79 FR 40980). Therefore, we proposed changes to the procedure codes assigned to these APCs in Addendum B to the CY 2015 OPPS/ASCCMS-1613-FC 308

proposed rule. We noted that Addendum B di d not appear in the printed version of the Federal Register as part of the CY 2015 OPPS/ASC proposed rule. Rather, it was published and made available via the Internet on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . In these cases, to eliminate a violation of the 2 times rule or to improve clinical and resource homogeneity, we proposed to reassign these procedure codes to new APCs th at contain services that are similar with regard to both their clinical and resource ch aracteristics. In many cases, the proposed procedure code reassignments and associ ated APC reconfigurations for CY 2015 included in the proposed rule are related to changes in costs of services that were observed in the CY 2013 claims data newly av ailable for CY 2015 ratesetting. We also proposed changes to the status indicators for some procedure codes that were not specifically and separately discussed in the pr oposed rule. In these cases, we proposed to change the status indicators for these pro cedure codes because we believe that another

status indicator would more accurately describe their pa yment status from an OPPS perspective based on the polic ies that we proposed for CY 2015. In addition, we proposed to rename existing APCs or create new clinical APCs to complement the proposed procedure code reassignments. Addendum B to the CY 2015 OPPS/ASC proposed rule identified with a comment indi cator “CH” those procedure codes for which we proposed a change to the APC assignment or status indicator, or both, that were initially assigned in the April 2014 Addendum B Update (available via the Internet on the

CMS Web site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html ). In contrast, Addendum B to this final ruleCMS-1613-FC 309

with comment period (available via the Internet on the CMS Web site) identifies with the

“CH” comment indicator the final CY 2015 changes compared to the HCPCS codes’

status as reflected in the October 2014 Addendum B update.CMS-1613-FC 310

3. Exceptions to the 2 Times Rule As discussed earlier, we may make excep tions to the 2 times rule 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 ch anges that we proposed for CY 2015, we

reviewed all of the APCs to determine whic h APCs would not meet the requirements of the 2 times rule. We used the following cr iteria to evaluate whether to propose exceptions to the 2 times rule for affected APCs:

● Resource homogeneity;

● Clinical homogeneity;

● Hospital outpatien t setting utilization;

● Frequency of service (volume); and

● Opportunity for upcoding and code fragments.

Based on the CY 2013 claims data available for the CY 2015 OPPS/ASC proposed rule, we found 9 APCs with violati ons of the 2 times rule. We applied the

criteria as described above to identify the APCs that we pr oposed to make exceptions for under the 2 times rule for CY 2015, and identifi ed 9 APCs that met the criteria for an exception to the 2 times rule based on the CY 2013 claims data available for the proposed

rule. We did not include in that determina tion those APCs where a 2 times rule violation was not a relevant concept, such as AP C 0375 (Ancillary Outpatient Services when Patient Expires), which has an APC cost set based on multiple procedure claims. Therefore, we only identified those APCs, incl uding those with criteria-based costs, such as device-dependent APCs, with violations of the 2 times rule. For a detailed discussionCMS-1613-FC 311

of these criteria, we refer readers to the April 7, 2000 O PPS final rule with comment period (65 FR 18457 and 18458). We note that, for cases in which a reco mmendation by the Panel appears to result

in or allow a violation of the 2 time s rule, we generally accept the Panel’s

recommendation because those recommendati ons are based on explicit consideration (that is, a review of the late st OPPS claims data and group discussion of the issue) of resource use, clinical homogene ity, site of service, and the qu ality of the claims data used to determine the APC payment rates. Table 18 of the proposed rule (79 FR 40981) listed the 9 APCs that we proposed to make exceptions for under the 2 times rule for CY 2015 based on the criteria cited above and claims data submitted between January 1, 2013, and December 31, 2013, and processed on or before December 31, 2013. Fo r the final rule with comment period, we

stated that we intend to use claims data for dates of service be tween January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014, and updated CCRs, if available. Therefore, after considering the public comments we received on the CY 2015 OPPS/ASC proposed rule and making changes to APC assignments based on those comments, we analyzed the CY 2013 claims data used for this final rule with comment period to identify the APCs with vi olations of the 2 times rule. Based on the final CY 2013 claims data, we found 12 APCs withviolations of the 2 times rule for this final rule with comment period, which is 3 mo re APCs that violated the 2 times rule compared to those indicated in the proposed rule. We applied the criteria as described earlier to identify the APCs that are excep tions to the 2 times rule for CY 2015, and

identified three new APCs that meet the crite ria for exception to the 2 times rule for thisCMS-1613-FC 312

final rule with comment period, but that di d not meet the criteria using proposed rule claims data. Specifically, we found that th e following three new APCs violated the 2

times rule:

● APC 0095 (Cardiac Rehabilitation);

● APC 0388 (Discography); and

● APC 0420 (Level III Minor Procedures).

After consideration of th e public comments we received and our review of the CY 2013 costs from hospital claims and cost report data availa ble for this final rule with comment period, we are finaliz ing our proposals with some modifications. Specifically, we are finalizing our proposal to except 7 of the 9 proposed APCs from the 2 times rule for CY 2015: APCs 0057, 0066, 0330, 0433, 0450, 0634, and 0661. In contrast, we are not finalizing our proposal to except 2 of the 9 proposed APCs from the 2 times rule: APC 0012 (Level I Debridement & Destruction) and APC 0015 (Level II Debridement & Destruction). Our data analysis for this fi nal rule with comment period revealed that these two APCs no longer violate the 2 times ru le. Table 19 below lists 10 APCs that we are excepting from the 2 times rule for CY 2015 based on the criteria above and a review of updated claims data. We note that, for cases in which a recommendation by the HOP Panel appears to result in or allow a viola tion of the 2 times rule, we generally accept the

Panel’s recommendation because those r ecommendations are based on explicit consideration of resource use, clinical homogeneity, site of se rvice, and the quality of the claims data used to determine the APC paym ent rates. The geometric mean costs for hospital outpatient services for these and all other APCs that were used in the development of this final rule with comm ent period can be found on the CMS Web siteCMS-1613-FC 313

at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Hospital-Ou tpatient-Regulations-and-Notices.html.

TABLE 19.—FINAL APC EXCEPTIO NS TO THE 2 TIMES RULE FOR CY 2015

CY 2015

APC CY 2015 APC Title 0057 Bunion Procedures 0066 Level V Radiation Therapy 0095 Cardiac Rehabilitation 0330 Dental Procedures 0388 Discography 0420 Level III Minor Procedures 0433 Level II Pathology 0450 Level I Minor Procedures 0634 Hospital Clinic Visits 0661 Level III Pathology

The final costs for hospital outpatient services for these and all other APCs that were used in the development of this fina l rule with comment period can be found on the

CMS Web site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Serv ices: Cardiac Telemetry (APC 0213) For CY 2015, we proposed to reassign CPT code 93229 (External mobile cardiovascular telemetry with electrocardiog raphic recording, concur rent computerized real time data analysis and greater th an 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered a nd patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and transmission of dailyCMS-1613-FC 314

and emergent data reports as prescribed by a physician or other qualified health care professional) from APC 0209 (Level II Ex tended EEG, Sleep, and Cardiovascular Studies), with a proposed rule payment rate of approximately $239 to APC 0213 (Level I Extended EEG, Sleep, and Cardiovascular Studies), with a proposed payment rate of approximately $175. Comment: One commenter opposed CMS’ proposal to reassign CPT code 93229 to APC 0213 and stated that the hospital co sts used to set the CY 2015 proposed payment rate is based on faulty claims data, which include miscoded claims reporting the service submitted by hospitals. The commenter indicate d that based on its internal analysis of the CY 2013 hospital claims data, which were used as the basis for the CY 2015 proposed APC reassignment, several hospi tals reported costs of under $100 for the procedure described by CPT code 93229. Th e commenter stated that the service described by CPT code 93229 involves the us e of sophisticated technology requiring attended surveillance on a 24-hour, 7 days a week basis by a technician for up to 30 days. According to the commenter, this particular service requires resources that are greater than $100. The commenter further explained that the service de scribed by CPT code 93229 requires up to 30 days of electrocardiogr am (ECG) monitoring through an external device worn by the patient at home that captu res, stores, and transmits ECG data in real-time through wireless technology to a receiving or monitoring center (the hospital outpatient facility). These data are then re viewed by certified cardiac technicians and the ordering physician is provided with daily reports. The commenter added that this procedure is performed primar ily (approximately 90 percent of the time) by independent diagnostic testing facilities (IDTFs) and infrequently perf ormed by hospitals, typicallyCMS-1613-FC 315

under arrangements with IDTFs. The co mmenter believed that the CY 2015 proposed payment rate of approximately $175 for AP C 0213 is significantly lower than the CY 2014 MPFS payment rate of $669. The commen ter stated that the actual cost of providing the service is approximately $795. Therefore, the commenter recommended that CMS either reassign CPT code 93229 to APC 0435 (Level III Extended EEG, Sleep, and Cardiovascular Studies), which has a proposed payment rate of approximately $853, or establish a new APC for outpa tient cardiac telemetry services that accurately reflects the costs associated with providing this service. Response: CPT code 93229 became effective January 1, 2009. We believe that 5 years is sufficient time to understand what procedure CPT code 93229 describes and how to appropriately report this service on hospital claims. Based on our analysis of the CY 2013 hospital outpatient claims data used fo r this final rule with comment period, we are unable to determine whether hospitals are miscoding the claims repor ting this service. For all APCs whose payment rates are based upon relative payment we ights, we note that the quality and accuracy of re ported units and charges influence the geometric mean costs that are the basis for our payment rates, es pecially the geometric mean costs for low volume items and services. Beyond our standard OPPS trimming methodology (described in section II.A.2. of this final rule with comment pe riod) that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to determine the accuracy of hosp ital coding and charging practices for the purposes of ratesetting (75 FR 71838). We re ly on hospitals to accurately report all of the services provided to bene ficiaries using the establishe d HCPCS and CPT codes that appropriately describe the procedures pe rformed in accordance with their codeCMS-1613-FC 316

descriptors and the CPT Editorial Panel’s and CMS’ instructions, as applicable, and to include these charges and costs on their Medicare hospital cost repor t appropriately. In addition, we do not specify the methodologies that hospitals must use to set charges for this or any other service. We recognize that the MPFS pays sepa rately for CPT code 93229. However, the MPFS and the OPPS are very different payment systems. Each system is established under a different set of statutory and regulat ory principles, and the policies established under the MPFS do not necessarily affect the payment policie s under the OPPS. Moreover, we do not agree with the co mmenter that CPT code 93229 should be reassigned to APC 0435. Based on the claims data available for this final rule with comment period, we believe that APC 0213 is the most appropriate APC to reassign CPT code 93229 based on the clinical homogeneity a nd resource costs in relation to the other procedures assigned to this APC. Our anal ysis of the latest ho spital outpatient CY 2013 claims data shows a final geometric mean cost of approximately $105 for CPT code 93229 based on 3,505 single claims (out of 3,579 tota l claims), which is not inconsistent with the geometric mean cost of approxi mately $183 for APC 0213, which is the lowest cost APC in the extended EEG, sleep, and cardiovascular studies series of APCs. In response to the commenter’s concern regarding miscoding of hospital claims reporting the service described by CPT code 93229, we remind hospitals that CPT code 93229 is not the appropriate procedure code to use to report Ho lter monitoring (CPT codes 93224 through 93227), or event m onitoring (CPT codes 93268 through 93278) procedures. CPT code 93229 should be used to report continuous outpatient cardiovascular monitoring that includes up to 30 consecutive days of real-time cardiacCMS-1613-FC 317

monitoring. In particular, the 2014 CPT Code Book describes the pr ocedure described by

CPT code 93229 as a mobile cardiovascular telemetry service and defines it as: “Mobile cardiovascular telemetry (M CT): continuously records the electrocardiographic rhythm from external electrodes placed on the patient's body. Segments of the ECG data are automatically (without patient intervention) transmitted to a remote surveillance location by cellular or landline telephone signal. The segments of the rhythm, selected for transmission, are triggered automatically (MCT device algorithm) by rapid and slow heart rates or by the patient during a symptomatic episode.

There is continuous real time data analysis by preprogrammed algorithms in the device and attended surveillance of the transmitted rhythm segments by a surveillance center technician to evaluate any arrhythmias and to determine signal quality. The surveillance

center technician reviews the da ta and notifies the physician or other qu alified health care professional depending on the pr escribed criteria” (2014 CPT Professional Edition; page 549). We expect that hospitals would onl y report CPT code 93229 on hospital claims for providing the mobile telemetry service that is described above. In summary, after consideration of the public comment we received, we are finalizing our CY 2015 proposal, without m odification, to reassign CPT code 93229 to

APC 0213 for CY 2015. Consistent with our policy of reviewing APC assignments annually, we will reevaluate the cost of CP T code 93229 and its APC assignment for the CY 2016 rulemaking. 2. Gastrointestinal (GI) Services: Upper GI Pr ocedures (APCs 0142, 0361, 0419, and 0422)CMS-1613-FC 318

In the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT codes 43211 (Esophagoscopy, flexible transoral; with endoscopic mucosal resection), and 43254 (Esophagogastroduodenoscopy, flexible, transoral; with endoscopic mucosal resection) to APC 0141 (Level I Upper GI Pro cedures) on an interim basis. In addition, we assigned CPT code 43240 (Upper gastroin testinal endoscopy including esophagus, stomach, and either the duodenum and/or je junum as appropriate; with transmural drainage of pseudocyst) to APC 0419 (Level II Upper GI Procedures), CPT code 91035 (Esophagus, gastroesophageal reflux test; with mucosal attached telemetry ph electrode placement, recording, analysis and interpre tation) to APC 0361 (L evel II Alimentary Tests), and CPT code 0355T (Gastrointestinal tract imaging, intraluminal (eg, capsule endoscopy), colon, with interpretation and repor t) to APC 0142 (Level I Small Intestine Endoscopy). For CY 2015, we proposed to reassign CPT codes 43211 and 43254 from APC 0141 to APC 0419. We also proposed to continue to assign CPT code 43240 to APC 0419; CPT code 91035 to APC 0361; and CPT code 0355T to APC 0142. Comment: Several commenters requ ested that CMS reassign CPT codes 43211

and 43254 from APC 0141 to APC 0419 in re sponse to the CY 2014 OPPS/ASC final rule with comment period. The commenters believed that the reassignment would be

consistent with the resource and clinical hom ogeneity principles used to assign services to appropriate classification groupings. In response to the CY 2015 OPPS/ASC proposed rule, the same commenters supported CMS’ proposal to reassign CPT codes 43211 and 43254 to APC 0419 for the CY 2015 OPPS update, and applauded CMS for considering the suggestions made in response to the commenters’ concerns. One commenterCMS-1613-FC 319

requested that CMS consider reassigni ng CPT codes 43211 and 43254 from APC 0141 to APC 0422 (Level III Upper GI Procedures) instead of from APC 0141 to APC 0419 as proposed. Based on an analysis of the CY 2013 OPPS claims data performed by the commenter, the commenter believed that the geometric mean costs associated with endoscopic mucosal resection (EMR) procedur es are more closely aligned with the geometric mean cost of APC 0422 than APC 0419. Response: EMR CPT codes 43211 and 43254 became effective January 1, 2014. As with all new codes, our policy has been to assign the service to an APC based on input from a variety of sources, including but not lim ited to, a review of the clinical similarity of the service in comparison to existing pr ocedures; input from CMS medical advisors; information from interested specialty socie ties; and a review of all other information available to us. Based on the complexity of these procedures and input from our medical advisors, we believe that APC 0419 appropriate ly reflects the clinic al homogeneity and resource costs associated with perfor ming EMR procedures. Therefore, after consideration of the public comments we received, we are finalizing our CY 2015 proposal, without modification, to reassi gn CPT codes 43211 and 43254 from APC 0141 to APC 0419 for the CY 2015 OPPS update. As we do every year, we will review our

claims data for these services for the CY 2016 OPPS rulemaking. Comment: Several commenters expre ssed concern with CMS’ proposal to continue to assign CPT code 43240 to APC 041 9, and requested that CMS reassign the CPT code to APC 0384 (GI Procedures with Sten ts) based on the clinical similarity of the service to other procedures assigned to this APC.CMS-1613-FC 320

Response: Based on our analysis of the la test hospital outpatient claims data used for this final rule with comment period, we agree with the commenters that a more appropriate APC reassignment is necessary for CPT code 43240. However, we believe that the most appropriate APC reassign ment is APC 0422 (Level III Upper GI Procedures) rather than APC 0384. Our claims data show a geometric mean cost of approximately $1,574 for CPT code 43240 based on 44 single claims (out of 142 total claims), which is more comparable to the geometric mean cost of approximately $1,987 for APC 0422 than to the geometric mean cost of approximately $3,294 for APC 0384. Therefore, after considerati on of the public comments we r eceived, we are modifying our proposal regarding the APC reassignment of CPT code 43240. Specifically, we are reassigning CPT code 43240 from AP C 0419 to APC 0422 for CY 2015. Comment: Several commenters expressed concern regarding the inadequate payment rate for CPT code 91035 under Medicare’s ASC payment system, and requested that CMS reassign CPT code 91035 from APC 0361 to APC 0142 as a means to increase the payment rate in the ASC setting. Th e commenters noted that APC 0142 includes other capsule-based procedures that are clinic ally similar to the pr ocedure described by CPT code 91035, such as the procedure desc ribed by CPT code 91112 (Gastrointestinal transit and pressure measurement, stomachthrough colon, wireless capsule, with interpretation and report). The commenters further explained that the procedures described by CPT codes 91035 and 91112 both involve the use of a capsule to collect pH and other data from the patient’s gastrointe stinal tract over a pe riod of several days. Response: Based on our analysis of the la test hospital outpatient claims data used for this final rule with comment period, we believe that CPT code 91035 is appropriatelyCMS-1613-FC 321

assigned to APC 0361 to ensure adequate payment for the service in any hospital outpatient setting. Our claims data show a geometric mean cost of approximately $466 for CPT code 91035 based on 1,272 single claims (out of 5,099 total claims), while claims data for CPT code 91112 show a ge ometric mean cost of approximately $774 based on 353 single claims (out of 412 total claims). The geometric mean cost of APC 0361 is approximately $341 and the geometric mean cost of APC 0142 is approximately $884, which is almost twice the geometric cost of CPT code 91035. In addition, assigning CPT code 91035 to APC 0142 would cr eate a violation of the 2 times rule within APC 0142 because the geometric mean cost of the highest cost significant procedure assigned to APC 0142 (CPT code 44361, with a geometric mean cost of approximately $1,019) is 2.2 times the geometric mean cost of CPT code 91035. Therefore, APC 0142 would not be an appr opriate assignment for CPT code 91035. We are finalizing our CY 2015 pr oposal to continue to assi gn CPT code 91035 to APC 0361. Comment: In response to the CY 2014 OPPS/ASC final rule with comment period, several commenters requested that CMS assign CPT code 0355T, which became effective July 1, 2014, to APC 0142 for the CY 2015 OPPS update. The commenters believed that the procedure described by CPT code 0355T is similar to the procedures described by existing GI capsule endosc opy CPT codes 91110 (Gastrointestinal tract imaging, intraluminal (eg, capsule e ndoscopy), esophagus through ileum, with interpretation and report), 91111 (Gastrointestin al tract imaging, intr aluminal (eg, capsule endoscopy), esophagus with interpretation and report), and 91112 (Gastr ointestinal transit and pressure measurement, st omach through colon, wireless capsule, with interpretation and report), which are al l assigned to APC 0142.CMS-1613-FC 322

Response: As published in Table 17 of the CY 2015 OPPS/ASC proposed rule (79 FR 40976), we proposed to continue to as sign this new code to APC 0142. We agree with the commenters that GI endoscopy CPT codes 0355T, 91110, 91111, and 91112 are clinically similar. Therefore, we are finalizing our CY 2015 proposal, without modification, to continue to assign CPT code 0355T to APC 0142, As a result, all four GI endoscopy procedures described by CPT codes 0355T, 91110, 91111, and 91112 will be assigned to APC 0142 fo r the CY 2015 OPPS update. We remind hospitals that because the pa yment rates associated with new codes that become effective July 1 are not available to us in time for incorporation into the Addenda to the proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2014 OPPS quart erly update CR were not included in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site). However, we listed the codes and thei r proposed APC assignments in the preamble of the proposed rule. The final CY 2015 payment rate for all of the CPT codes discussed can be found

in Addendum B to this CY 2015 OPPS/ASC fina l rule with comment period (which is available via the Internet on the CMS Web site). 3. Genitourinary Services a. Gynecologic Procedures (APCs 0188, 0189, 0192, 0193, and 0202) For the CY 2014 OPPS update, we made several changes to specific APC assignments, which included the female reproductive APCs; APC 0192, APC 0193, and APC 0195. These proposed changes were listed in Addendum B to the CY 2014 OPPS/ASC proposed rule (which is available via the Intern et on the CMS Web site).CMS-1613-FC 323

With respect to these three APCs, based on claims data available for the CY 2014 OPPS/ASC proposed rule, only APC 0193 showed a violation of the 2 times rule. We note that, under the OPPS, we may make ex ceptions to the 2 times rule based on the

variation of costs within each APC group in unusual cases such as low-volume items and services. In the case of APC 0193, we belie ved that it was necessary to make an exception to the 2 times rule for the CY 2014 OPPS update because this APC sufficiently

reflected the clinical and resource cohe rence of the Level V female reproductive procedures. In the CY 2015 OPPS/ASC proposed ru le (79 FR 40982), we discussed our proposal to make further changes to the existing female reproductive APCs; APC 0188, APC 0189, APC 0191, APC 0192, APC 0193, AP C 0195, and APC 0202 based on a presentation made at the March 10, 2014 Panel meeting. Specifi cally, one presenter expressed concern regarding the reassignmen t of the female reproductive procedures within existing APCs 0192 (Level IV Fema le Reproductive Procedures), 0193 (Level V Female Reproductive Procedures), and 0195 (L evel VI Female Reproductive Procedures)

that became effective with the CY 2014 OPPS update. The presenter stated that the proposed changes would compromise bene ficiary access to pelvic floor repair procedures, and urged the Pane l to request that CMS recons ider its packaging policy for the procedures assigned to APCs 0193 a nd 0195 and allow stakeholders the opportunity to work with CMS to appropriately reassign these procedures to accurately account for the clinical complexity associated with providing these services. In addition, the presenter requested that CMS delay the conversion of existing APC 0202 (Level VII Female Reproductive Procedures) to a C- APC to allow for further study of theCMS-1613-FC 324

complexity of pelvic floor repair procedures . After review of the information provided by the presenter and examination of the hospita l outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, the Pane l did not make any recommendations regarding any of the female reproductive APCs. For the CY 2015 OPPS update, based on our review of the latest hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, there were no violations of the 2 times rule within any of the female reproductive APCs (79 FR 40982). However, we proposed to restructure th e female reproductive APCs to more appropriately reflect the resource and clinical characteristics of the procedures assigned to each APC. The proposed restructuring resulted in the use of five APCs for the CY 2015 OPPS update, as compared to the seven APCs used for the CY 2014 OPPS update. We believe that the proposed five -level APC structure will provide more accurate payments for the female reproductive procedures furnished to Medicare

beneficiaries. Tables 21 and 22 of the proposed ru le (79 FR 40983) showed the current CY 2014 and proposed CY 2015 female repr oductive APCs. Specifically, Table 21 showed the female reproductive APCs, APC title s, and their status indicator assignments for CY 2014, while Table 22 showed the propos ed female reproductive APCs, APC titles, and their status indicator assignments for CY 2015. In the proposed rule, we noted that

one of the five levels of the female re productive APCs, APC 0202, is proposed to be

converted to a C-APC. We refer readers to section II.A.2.e. of th is final rule with comment period for further discussion of our comprehensive APC policy.CMS-1613-FC 325

In addition, for CY 2015, we proposed to consolidate the two existing hysteroscopy APCs; APC 0190 (Level I Hysteroscopy) and APC 0387 (Level II Hysteroscopy). Specifically, we proposed to delete APC 0387 and to reassign the procedures currently assigned to this AP C to APC 0190. In conjunction with this proposed reassignment, we proposed to rena me APC 0190 from “Level II Hysteroscopy” to “Hysteroscopy.” Based on the hospital out patient claims data available for the CY 2015 OPPS/ASC proposed rule, we believe that the two-leveled structure of the hysteroscopy APCs is no longer necessary because the single-leveled hysteroscopy APC sufficiently reflects the resources and clin ical similarities of all the hysteroscopic procedures. We note that, for CY 2014, the payment rates for APCs 0190 and 0387 are $1,763 and $2,818, respectively. For CY 2015, the proposed payment rate for APC 0190 was approximately $2,014. Comment: Many commenters supported CMS’ proposal to reassign several of the female reproductive procedures to APC 0202 and stated that the proposed restructuring of these APCs more appropriately reflects clin ical and resource homogeneity among similar procedures. Response: We appreciate the commenters’ support.

Comment: Some comment ers opposed CMS’ proposal to reassign CPT code 57155 (Insertion of uterine tandem and/or vagina l ovoids for clinical brachytherapy) from APC 0193 (Level IV Female Reproductive Proc edures) to APC 0192 (Level III Female Reproductive Procedures) for the CY 2015 OPPS update. According to the commenters, the proposed CY 2015 OPPS payment rate of approximately $501 for CPT code 57155 is significantly lower than the CY 2014 OPPS pa yment rate of approximately $1,375, whichCMS-1613-FC 326

represents a 63-percent reduction in the payment for this service. The commenters noted that the APC assignment for this procedur e has varied between APC 0192 and APC 0193 since the inception of the code, and reco mmended that CMS reexamine the procedures assigned to APCs 0192, 0193, and 0202 to ensure that the proposed structure of these APCs provides the most appropriate payment for the services assigned to each APC. Some commenters requested that CMS continue to assign CPT code 57155 to APC 0193 for the CY 2015 update. The commenters also recommended that CMS closely monitor medical practice patterns to ensure beneficiary access to this treatment if CMS finalizes the proposal to reassign CPT code 57155 to APC 0192. Response: CPT code 57155 became effective January 1, 2002. Since that time, CPT code 57155 has been assigned to either APC 0192 or APC 0193. For CYs 2002, 2003, and 2006 through 2013, CPT code 57155 was assigned to APC 0192. For CYs 2004, 2005, and 2014, CPT code 57155 was assigned to APC 0193. Consistent with CMS’ statutory requirement under section 1833(t )(9) of the Act to review and revise APC assignments annually and to construct the most appropriate APC groupings as well as, to the extent desirable, correct any 2 times rule violations, we evaluated the resource consumption and clinical coherence associated with the female reproductive APCs for the CY 2015 OPPS update. Based on an analysis of the latest hospital outpatient claims data for this final rule with comment period, CPT code 57155 has a geometric mean cost of approximately $731 based on 858 single claims (out of 2,461 total claims). The geometric mean costs for the significant proc edures assigned to APC 0192 range between approximately $398 (for CPT code 56605) and $731 (for CPT code 57155). Therefore, we believe that CPT code 57155 is appropr iately assigned to APC 0192 based on theCMS-1613-FC 327

comparable resource costs associated with th e other procedures assi gned to this APC and are not making any changes to our proposal for this final rule with comment period. We note that APC 0192 had a proposed payment rate of approximately $501, which was based on hospital outpatient claims data submitted between January 1, 2013, and December 31, 2013, and processed on or before December 31, 2013. For this final rule with comment period, the final payment rate for APC 0192 is approximately $487, which is based on hospital outpatient claims data submitted between January 1, 2013, and December 31, 2013, and processed on or before June 30, 2014.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to rea ssign CPT code 57155 from APC 0193 to

APC 0192 for CY 2015. Comment: Several commenters requested that CMS not finalize the proposal to consolidate the two existing hysteroscopy APCs. Instead, th e commenters suggested that

CMS maintain the two-leveled structure of the hysteroscopy APCs to differentiate the less costly diagnostic hyster oscopic services from the more resource-intensive hysteroscopic procedures. One commenter stated that the reconfigur ation of these APCs for CY 2015 is premature and warrants more discussion prior to finalizing a proposal regarding this issue. Another commenter beli eved that it is not clinically coherent to combine the diagnostic hysteroscopy pro cedure described by CPT code 58555 with a significant therapeutic procedure, such as a hysteroscopic myomectomy described by CPT code 58561. The commenter explained that all of the gynecology specialty societies recommend minimally invasive alternatives to hysterectomy when available. In addition,CMS-1613-FC 328

the commenter believed that the proposal to consolidate the hysteroscopy APCs would provide incentives for hospitals to encourage treatment that is not the standard of care. Response: Based on a review of the late st hospital outpatient claims data for the CY 2015 OPPS update, we believe that restru cturing and consolidating the gynecology APCs is prudent in order to improve the comp arability of resource and clinical similarity of all the hysteroscopy procedur es assigned to a specific APC. In addition, we disagree with the commenter’s assertion regarding hos pitals’ incentives to deliver substandard care for the purposes of financial gain. We believe that hospital s and physicians will offer their patients the appropriate care and treatment, which may or may not employ an expensive medical device. Comment: Several commenters suggestedthat modifications to the proposed APC assignments for certain related procedur es be considered if CMS finalizes the proposal to restructure and consolidate the female reproductive APCs. One commenter suggested that CMS reassign CPT code s 58561 and 58563 to APC 0202 instead of APC

0190 based on the clinical similarities in re lation to the other procedures assigned to

APC 0202. Response: Based on input from our medical advisors, we agree with the commenter that APC 0202 is the most appr opriate APC assignment for CPT codes 58561

and 58563 based on their clinical si milarity in relation to the other procedures assigned to this APC. We note that APC 0202 is designated as a C-APC for the CY 2015 OPPS update. Further information on C-APCs can be found in section II.A.2.e. of this final rule with comment period.CMS-1613-FC 329

Comment: One commenter suggested th at CMS reconsider the proposal to consolidate the hysteroscopy APCs and establish two se parate APCs for female reproductive procedures; one for the more re source-intensive hyste roscopic procedures

and another for the lower-cos t and less complex hysteroscopic procedures. Specifically, the commenter recommended assigning the fo llowing seven resource-intensive female reproductive procedures to a higher-paying AP C, with a geometric mean cost ranging between approximately $3,010 and $4,350: CPT codes 58353, 58356, 58561, 58563, 58565, 58559, and 58560. The commenter also s uggested assigning the following four less complex female reproductive procedures to a lower-paying APC, with a geometric mean cost ranging between approximately $1,758 and $2,099: CPT codes 58555, 58558, 58562, and 58579. Another commenter believed that the necessary resources required to provide the service described by CPT code 58555 are significantly less than the resources required to provide the service described by CPT code 58561. The commenter stated that the resource costs for providing the se rvices described by CPT codes 58353, 58561, 58563, and 58565 are similar and recommended that these procedures be assigned to the

same APC. Response: We reviewed our latest hospital outpatient cl aims data used for this final rule with comment period for all of the hysteroscopic procedures. Based on our review and after consideration of the public comments we received, we are modifying our proposal regarding the proposed APC assignm ents for several of the hysteroscopic procedures for the CY 2015 OPPS update. Specifically, we are deleting APC 0190 and reassigning the eight procedures that were proposed to be assigned to this APC to APC 0188, APC 0193, or APC 0202.CMS-1613-FC 330

In summary, after consideration of the public comments received, we are finalizing our proposals with so me modifications. For the hysteroscopy procedure APCs, we proposed to reassign all of the procedures assigned to APC 0387 to APC 0190, which

resulted in a one-leveled APC containi ng all of the hysteroscopy procedures. Specifically, we proposed to delete APC 0387 (L evel II Hysteroscopy), and to rename APC 0190 “Hysteroscopy.” However, based on our analysis of the hospital outpatient

claims data available for this final rule with comment period, we are modifying our proposal. Instead, we are r eassigning all of the hyster oscopy procedures that we proposed to assign to APC 0190 to one of the female reproductive APCs. That is, we are reassigning all of the procedures proposed for reassignment to APC 0190 to APC 0188, APC 0193, or APC 0202. Consequently, with no procedures remaining in APC 0190, we deleted this APC for CY 2015. In addition, we are finalizing our proposal to restructure the female reproductive APCs to more appr opriately reflect the resource and clinical characteristics of the procedures assigned to each APC. Specifically, we are finalizing our proposal to assign all of the female reproductive procedures to APCs 0188, 0189, 0192, 0193, or 0202. In addition, because of our revision to the hysteroscopy procedures APCs, we are revising the APC titles for the five female reproductive APCs; APC 0188, APC 0189, APC 0192, APC 0193, and APC 02 02, from “Female Reproductive Procedures” to “Gynecologic Procedures” to mo re appropriately describe the procedures assigned to these APCs. Table 20 below lists the hysteroscopic procedures CPT codes, along with their long descript ors, proposed CY 2015 OPPS st atus indicators and APC assignments, as well as their final CY 2015 OP PS status indicators and APC assignments.

Table 21 below lists the final APC titles a nd status indicators for the gynecologicCMS-1613-FC 331

procedure APCs. The final CY 2015 payment rates for the gynecologic procedures APCs, as well as the hysteroscopic procedures CPT codes listed in Table 21 can be

found in Addendum B to this CY 2 015 OPPS/ASC final rule with co mment period (which is available via the Internet on the CMS Web site).CMS-1613-FC 332

TABLE 20.—FINAL CY 2015 AP C ASSIGNMENTS FOR THE HYSTEROSCOPIC PROCEDURES

CPT Code Long Descriptor Proposed CY 2015 OPPS SI Proposed CY 2015

OPPS APC Final CY 2015 OPPS

SI Final CY 2015

OPPS APC 58353 Endometrial ablation, thermal, without hysteroscopic guidance J1 0202 J1 0202

58356 Endometrial cryoablation with ultrasonic guidance, including endometrial curettage, when performed J1 0202 J1 0202

58555 Hysteroscopy, diagnostic (separate procedure) T 0190 T 0193

58558 Hysteroscopy, surgical; with sampling (biopsy) of endometrium and/or polypectomy, with or without d & c T 0190 T 0193

58559 Hysteroscopy, surgical; with lysis of intrauterine adhesions (any method) T 0190 J1 0202

58560 Hysteroscopy, surgical; with division or resection of intrauterine septum (any method) T 0190 J1 0202

58561 Hysteroscopy, surgical; with removal of leiomyomata T 0190 J1 0202

58562 Hysteroscopy, surgical; with removal of impacted foreign body T 0190 T 0193

58563 Hysteroscopy, surgical; with endometrial ablation (eg, endometrial resection, electrosurgical ablation, thermoablation) T 0190 J1 0202

58565 Hysteroscopy, surgical; with bilateral fallopian tube cannulation to induce occlusion by placement of permanent implants J1 0202 J1 0202

58579 Unlisted hysteroscopy procedure, uterus T 0190 T 0188CMS-1613-FC 333

TABLE 21.—FINAL CY 2015 APC TITLES FOR GYNECOLOGIC PROCEDURES

CY 2015 APC Proposed CY 2015 APC Title Final CY 2015 APC Title Final CY 2015 Status Indicator

0188 Level I Female Reproductive Procedures Level I Gynecologic Procedures T

0189 Level II Female Reproductive Procedures Level II Gynecologic Procedures T

0192 Level III Female Reproductive Procedures Level III Gy necologic Procedures T

0193 Level IV Female Reproductive Procedures Level IV Gynecologic Procedures T

0202 Level V Female Reproductive Procedures Level V Gynecologic Procedures J1

b. Cystourethroscopy, Transprostatic Implant Procedures , and Other Genitourinary Procedures (APCs 0160, 0161, 0162, 0163, and 1564) For the CY 2015 OPPS update, based on our review of the latest hospital outpatient claims data available for the CY 2015 OPPS/ASC proposed rule, we proposed to restructure the APCs containing cystouret hroscopy and other geni tourinary procedures to more appropriately reflect the resource costs and clinical ch aracteristics of the procedures assigned within each APC (79 FR 40987). We note that, for the CY 2014 OPPS update, there are five levels of AP Cs that contain cystourethroscopy and genitourinary procedures. These APCs were listed in Table 26 of the CY 2015 OPPS/ASC proposed rule (79 FR 40986), along with their status indicator assignments for CY 2014. The proposed restructuring resu lted in the use of four APCs for the CY 2015 OPPS update, as compared to the five APCs used for the CY 2014 OPPS update. Specifically, based on our review and evaluation of the procedures assigned to these APCs and the latest hospital outpatie nt claims data available, in the CY 2015CMS-1613-FC 334

OPPS/ASC proposed rule, we proposed to de lete APC 0429 (Level V Cystourethroscopy and Other Genitourinary Proce dures) and reassign the proced ures that were previously assigned to this APC to either APC 0 161 (Level I Cystouret hroscopy and Other Genitourinary Procedures) or APC 0163 (L evel IV Cystourethroscopy and Other Genitourinary Procedures). We believe thatthe procedures currently assigned to APC 0429 would be more appropriately assigned to either APC 0161 or APC 0163 based on their geometric mean costs for the CY 2015 OPPS update. Further, we believe that this proposed restructuring appropriately categorizes all of th e cystourethroscopy and other genitourinary procedures that are comparable clinically and with respect to resource use within an APC group. We also proposed to delete APC 0169 (Lithotripsy) because the one procedure, specifically the proce dure described by CPT code 50590 (Lithotripsy, extracorporeal shock wave), that was assigned to this APC was proposed for reassignment to APC 0163 (79 FR 40987). Table 27 of the CY 2015 OPPS/ASC proposed rule (79 FR 40987) listed the proposed APCs that contain cystourethroscopy and other genitourinary procedures, the AP C titles, and the proposed status indicator assignments for CY 2015. The proposed paym ent rates for the specific APCs listed in

Table 27 were listed in Adde ndum A to the proposed rule. The proposed payment rates for the specific cystourethroscopy and other ge nitourinary procedure codes were listed in Addendum B to the proposed rule. (Addenda A and B to the proposed rule are available via the Internet on the CMS Web site.) Comment: Several commenters opposed CMS’ proposal to delete APC 0169 and reassign the extracorporeal shock wave li thotripsy (ESWL) CPT code 50590 to APC 0163. The commenters noted that the pr ocedure described by CPT code 50590 isCMS-1613-FC 335

classified as a noninvasive ther apy and is not similar, clin ically or with respect to resource costs, to the other more invasive surgical urological procedures that are proposed for assignment to APC 0163. One co mmenter stated that the ESWL procedure does not involve the use of an endoscope a nd, therefore, should not be assigned to APC 0163. This commenter believed that the paym ent rate for APC 0163 would be influenced by dominating the claims data for CPT code 50590 because ESWL is a commonly performed procedure resulting in a significant high volume of single frequency claims. The commenter requested that CMS delay fi nalizing this proposal or, alternatively, reassign CPT code 50590 to APC 0162 (Lev el III Cystourethroscopy and Other Genitourinary Procedures) because this AP C encompasses a broader and more diverse grouping of procedures than APC 0163. Response: As part of our standard annual OPPS update process, we review each APC assignment for the clinical similarity and resource homogeneity of the procedures assigned to each APC. An analysis of our la test hospital outpatient claims data available for this final rule with comment period reve aled a geometric mean cost of approximately $3,094 based on 32,370 single claims (out of 44,816 total claims) for CPT code 50590, which is comparable to the geometric mean cost of approximately $3,230 for APC 0163. The significant procedures assigned to AP C 0163 have geometric mean costs ranging between $2,946 and $4,088. We do not agree w ith the commenters that APC 0162 is the more appropriate APC assignment because the geometric mean cost for this APC, approximately $2,163, is significantly lower than the geometric mean cost of approximately $3,094 for CPT code 50590. In a ddition, the geometric mean cost of APC 0163 (using proposed rule data) and without CPT code 50590 assigned to this APC wasCMS-1613-FC 336

approximately $3,058, which is close to the fina l rule geometric mean cost of CPT code 50590 of $3,094. Although the ESWL procedur e does not involve the use of an endoscope, we note that not every procedure proposed for reassignment, or ultimately reassigned, to APC 0163 uses an endoscope. In addition, we do not agree with the commenters that the ESWL procedure is not cl inically similar to the other procedures assigned to APC 0163. There are no general rules for clinical si milarity that apply to all APCs. Instead, the evaluation of clinical similarity depends upon the particular

characteristics of the services being evaluated for a particul ar APC assignment. The use of single procedure APCs, like APC 0169, the APC to which CPT code 50590 is assigned for CY 2014, generally is not considered appropriate under the OPPS because payment rates based on a single procedure code’s geometric mean cost is more consistent with a fee schedule than a prospective paymen t system. However, there are limited

circumstances in which we a ssign a single procedure code to an APC; for example, the intraocular procedures assigned to an AP C series. Specifically, APC 0673 (Level III Intraocular Procedures) has a geometric mean cost of approximately $3,239. APC 0293 (Level IV Intraocular Procedures) is the next higher level APC in the intraocular procedures APC series, and it has a single procedure (CPT code 65770 (Keratoprosthesis)) assigned to it, which ha s a geometric mean cost of approximately $8,766. The highest cost procedure assigned to APC 0673 is CPT code 67113 (Repair of complex retinal detachment), which has a ge ometric mean cost of approximately $4,065. The geometric mean cost of CPT code 65770 is significantly higher, 2.2 times the geometric mean cost of CPT code 67113. Th erefore, we assigned CPT code 65770 to a

different APC because the resource costs ar e not similar. Because the procedureCMS-1613-FC 337

described by CPT code 65770 is an intraocula r surgery and there are no other APCs that contain clinically similar procedures, we assigned CPT code 65770 to APC 0293 without any other procedures. Continuing in this series, we assigned CPT code 0308T (Insertion of intraocular telescope prosthesis incl uding removal of crystalline lens) to APC 0351 (Level V Intraocular Procedures) without a ny other procedures. CPT code 0308T has a geometric mean cost of approximately $23,947, which is 2.73 times the geometric mean cost of the procedure described by CP T code 65770, which is assigned to APC 0293,

which is one level lower than APC 0351 in th e intraocular procedures APC series. CPT code 0308T is the only procedure code assi gned to APC 0351 because there are no other procedures that are similar in terms of res ource costs. We do not believe that similar APC series assignment is applicable to CPT code 50590. Therefore, we proposed to reassign CPT code 50590 to APC 0163 a nd delete APC 0169 (79 FR 40986 through 40987). In summary, based on our review of the latest hospital outpatient claims data for this final rule with comment period, we believe that CPT code 50590 would be appropriately assigned to APC 0163 based on its clin ical and resource similarity to the other procedures assigned to APC 0163, severa l of which are dedica ted to kidney stone removal. Therefore, we are finalizing our proposal, without modification, to assign CPT

code 50590 to APC 0163 for CY 2015. Comment: One commenter requested that CMS not finalize the proposal to delete APC 0429, and suggested that CMS maintain th is APC until data become available for CPT code 52356 (Cystourethroscopy, with ureteroscopy and/or pyeloscopy; with lithotripsy including insertion of indwelli ng ureteral stent (eg, Gibbons or double-J type)), which became effective January 1, 2014.CMS-1613-FC 338

Response: We believe that CPT code 52356 is appropriately categorized by APC 0163 based on its similarity to the other proce dures assigned to this APC. Because CPT code 52356 became effective January 1, 2014, we expect to have claims data for the procedure described by this code available for the CY 2016 OPPS rulemaking cycle. We note that, consistent with CMS’ policy of reviewing APC assignments annually in accordance with the statutory requirement, we will reevaluate the APC assignment for CPT code 52356 for the CY 2016 OPPS update. Th erefore, after cons ideration of the public comment we received, we are finalizi ng our proposals, without modification, to delete APC 0429 and to assign CPT code 52356 to APC 0163 for CY 2015.

Comment: Some commenter s disagreed with CMS’ pr oposal to reassign CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) from APC 0163 to APC 0162. The commenters stated that the proposal woul d result in a 28-percent reduction in the payment for this service when the CY 2014 payment rate of approximately $2,905 for APC 0163 is compared to the CY 2015 proposed payment rate of approximately $2,091

for APC 0162. The commenters noted thatCPT code 55875 has been assigned to APC 0163 since the code’s inception in CY 2007, and believed that the proposed payment rate for APC 0163 more accurately reflects the res ources necessary to provide this service. The commenters urged CMS to maintain the APC assignment of CPT code 55875 to

APC 0163. Response: Analysis of our latest hospital claims data us ed for this final rule with comment period revealed a geometric mean cost of approximately $2,501 for CPT code 55875 based on 703 single claims (out of 4,681 tota l claims), which is comparable to theCMS-1613-FC 339

geometric mean cost of approximately $2,163 for APC 0162. We do not agree with the commenters that APC 0163 is the more appropri ate APC because its geometric mean cost of approximately $3,230 is si gnificantly higher than the geometric mean cost of approximately $2,501 for CPT code 55875. We believe that CPT code 55875 is appropriately assigned to APC 0162 based on its clinical hom ogeneity and resource costs to the procedures currently assigned to this APC. Therefore, afte r consideration of the public comments we received, we are finali zing our proposal, wit hout modification, to reassign CPT code 55875 to APC 0162 for CY 2015. Comment: One commenter opposed CMS’ proposal to reassign CPT code 53850 (Transurethral destruction of prostate tissue; by microwav e thermotherapy) from APC

0429 to APC 0161. The commenter stated that the CY 2015 proposed payment rate for APC 0161 is approximately $1,235, which is significantly lower than the CY 2014 payment rate of approximately $3,304 for APC 0429. The commenter suggested that CMS reassign CPT code 53850 to APC 0163, the APC to which CPT code 53852 (Transurethral destruction of prostate tissue; by radiofrequency thermotherapy) is proposed to be reassigned. The commenter expl ained that both procedures are similar in clinical technique because both procedures us e a thermal approach as an alternative to open prostatectomy or transureth ral resection of the prostate for the treatment of benign prostatic hyperplasia (BPH). Response: As has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. Based on the la test hospital outpatient claims data used for this final rule with comment period, our analysis does not support the reassignment ofCMS-1613-FC 340

CPT code 53850 to APC 0163. Our analysis of the claims data shows a geometric mean cost of approximately $1,542 for CPT code 53850 based on 107 single claims (out of 142 total claims), which is relatively similar to the geometric mean cost of approximately $1,273 for APC 0161. While we acknowledge that both procedures are similar, our analysis of the claims data shows that th e resource costs of providing the procedure described by CPT code 53852 is significantly hi gher than the resource cost of providing the procedure described by CPT code 53850. Sp ecifically, the geometric mean cost for CPT code 53852 is approximately $3,339 based on 98 single claims (out of 156 total claims), which is comparable to the geomet ric mean cost of APC 0163 of approximately $3,230. We do not agree with the commenters that APC 0163 is the more appropriate APC assignment because its geometric mean cost is significantly higher than the geometric mean cost of CPT code 53850 of approximately $1,542. We believe that CPT code 53850 would be appropriately assi gned to APC 0161 based on its clinical homogeneity and resource costs to the proced ures currently assigned to this APC. Therefore, after consideration of the public comment we received, we are finalizing our proposal, without modification, to reassi gn CPT code 53850 from APC 0429 to APC

0161 for CY 2015. In addition, effective April 1, 2014, we created HCPCS codes C9739 (Cystourethroscopy, with inser tion of transprostatic implan t; 1 to 3 implants) and C9740 (Cystourethroscopy, with inser tion of transprostatic implan t; 4 or more implants) as a result of an application to assign the transprostatic implan t procedures (TIPs) to a New Technology APC. We assigned HCPCS c odes C9739 and C9740 to APCs 0162 (Level III Cystourethroscopy and other Genitourin ary Procedures) and 1564 (New Technology -CMS-1613-FC 341

Level XXVII), respectively, based on the estimated costs of the procedures, which include 1 to 3 implants in the case of pro cedures described by HCPCS code C9739, and 4 or more implants in the case of procedur es described by HCPCS code C9740. We based the number of implants for HCPCS codes C9739 and C9740 on the number of implant utilization data per patient that the Ne w Technology applicant provided within its approved application. The CY 2014 pa yment rates for APCs 0162 and 1564 are $2,007.32 and $4,750.00, respectively.

The AMA’s CPT Editorial Panel recen tly created two new codes for this technology, which become effective on January 1, 2015: CPT codes 52441 (Cystourethroscopy, with inserti on of permanent adjustable transprostatic implant; single implant) and 52442 (Cystourethroscopy, with insertion of permanent adjustable transprostatic implant; each additional perman ent adjustable transprostatic implant (List separately in addition to c ode for primary procedure)).

Comment: One commenter stated thatthe TIPs described by HCPCS codes C9739 and C9740 do not receive adequate paym ent under the OPPS because of the code descriptors for these procedure codes as they re late to the number of implants allowed in each respective code (1 to 3 implants for HC PCS code C9739 and 4 or more implants for HCPCS code C9740), when categorized by the APCs in which these services are assigned. The commenter also believed that the TIPs are unable to be performed in the ASC setting because of the inadequate pa yment rate for the specific APCs. The commenter believed that the procedures described by HCPCS codes C9739 and C9740 are device dependent because a majority of th e procedures’ costs are associated with the costs of the implants, with a mean of 4.9 im plants per procedure. The commenter alsoCMS-1613-FC 342

believed that there is considerable variati on in the number of implants used for each procedure. The commenter believed that th e ASC payment is extremely low because the procedures are not designated as “device intensive” in the ASC setting (that is, the procedures are not assigned to ASC paymen t indicator “J8”), nor are the procedures assigned to a C-APC under the OPPS, wh ich would most likely allow for the performance of the device-intensive treatment in the ASC setting, similar to most of the proposed C-APCs that are defined as device-i ntensive APCs. The commenter stated that the proposed OPPS payments for HCPCS codes C9739 and C9740 are inadequate to cover both the costs of the number of implants required and the cost of the procedure. The commenter recommended several possi ble APC assignments to improve the payments for TIPs. The commenter r ecommended using new CPT codes 52441 and 52442 to report the TIPs under the OPPS, a nd assigning the procedures to C-APC 0385 (Level I Urogenital Procedur es) because the proposed pa yment rate for C-APC 0385 of approximately $7,659 is comparable to the es timated cost of performing TIPs using 5 implants, which is approximately $7,519. Th e commenter’s second recommendation was to continue to report the performance of the TIPs using HCPCS codes C9739 and C9740, and to assign HCPCS code C9740 to APC 0385, as described prev iously, and HCPCS code C9739 to APC 0202 (Level V Female Reproductive Procedures) and remove

“Female” from the title of APC 0202. A ccording to the commenter, the proposed payment for APC 0202 of approximately $4,366 is e quivalent to the cost of a TIP using 2 or 3 implants. The commenter believed th at because APC 0202 is designated as a C-APC, the ASC payment for the procedure would also prove to be adequate. The

commenter’s third recommendation was to use new CPT codes 52441 and 52442 toCMS-1613-FC 343

report TIPs and to assign the procedur e codes to APC 0168 (L evel II Urethral Procedures) on an interim basis until OPPS claims data are ava ilable for these codes. The commenter believed that the proposed payment rate for APC 0168 of approximately $2,533 more appropriately equates to the cost of a single implant procedure described by CPT code 52441, while additional implant procedures described by CPT code 52442 would be paid at 50 percent, or approx imately $1,267, because APC 0168 is subject to the multiple procedure discount (that is, the APC is assigned to st atus indicator “T”), which, the commenter claimed, more appropria tely equates to the estimated cost of providing the procedure described by CPT code 52442 of approximately $1,248. However, the commenter noted that, because APC 0168 is not a C-APC, payment for the procedure may not be designated as “device in tensive” to ensure adequate ASC payment.

The commenter recommended that CMS consid er any procedure that has device costs that are greater than 40 pe rcent as device intensive. Response: We agree with the commenter th at the cost of the implants associated with the procedures described by HCPC S codes C9739 and C9740 represents the majority of the costs of the procedures. We considered those costs and the variation in the number of implants per procedure wh en we created HCPCS codes C9739 and C9740 and assigned the procedure c odes to APCs 0162 and 1564, respect ively. We believe that HCPCS codes C9739 and C9740 are preferable to the new CPT codes 52441 and 52442 with respect to OPPS and ASC payments b ecause the new codes describe complete procedures instead of the insertion of indi vidual implants, which are almost always incomplete procedures because patients us ually receive multiple implants. We do not believe that any of the APCs recomme nded by the commenter are appropriate forCMS-1613-FC 344

assignment of HCPCS codes C9739 and C9740 at this time because our usual policy with

new codes is to wait until we have OPPS cl aims data available before making an APC reassignment. In regard to the ASC paym ent for the procedures, neither APC 0162 nor APC 1564 is designated as device intensive. Therefore, the multiple procedure payment reduction under OPPS applies to the entire payment amount under the ASC payment as well. Currently, there is no policy regarding designating serv ices that are assigned to a New Technology APC as device intensive for the ASC setting. We may consider such a policy in future rulemakings. We will maintain payment for the cystourethroscopy with insertion of TIPs using

HCPCS codes C9739 and C9740 because we belie ve that the code descriptors more appropriately reflect complete procedures and the distributi on of implant utilization per patient. For CY 2015, we are maintaining our APC assignments for HCPCS codes C9739 and C9740 to APCs 0162 and 1564, resp ectively. The APC assignments for HCPCS codes C9739 and C9740 are initial APC assignments until we obtain claims data for these two codes for the CY 2016 OPPS update. The final CY 2015 geometric mean costs for APC 0162 is approximately $2,163, and the final CY 2015 payment rate (there are no geometric mean costs for New Technology APCs, only payment bands) for APC 1564 is approximately $4,750. CPT codes 52441 and 52442 will not be payable under the OPPS for CY 2015; we are assigning thes e two CPT codes to status indicator “B” (Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x)).

After consideration of th e public comments we receive d, we also are finalizing our proposal to restructure the APCs contai ning cystourethroscopy, tr ansprostatic implantCMS-1613-FC 345

procedures, and other genitourinary procedur es, and to use a four-level APC grouping to classify the procedures based on our analysis of the latest hospital outpatient claims data available for this final rule with comment period. The final payment rates for the cystourethroscopy, transprostatic implant procedures, and other genitourinary procedure codes, as well as the specific CPT codes on which we received public comments and that are discussed in this section, can be found in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site. The final payment rates for APCs 0160, 0161, 0162, and 0163, which are the final CY 2015 cystourethroscopy, transprostatic implant procedures, and other genitourinary APCs, can

be found in Addendum A to this final rule w ith comment period, whic h is also available

via the Internet on the CMS Web site. We remind commenters that every year we revise, if necessary, the APC assignments for procedure codes based on our analysis of the late st hospital outpatient claims data. We anticipate that there will be further significant revisions to the urologyrelated APCs in futures years because the current overall APC structure is suboptimal and can be improved with respect to the clinical similarity and resource similarity of the groupings. In addition, we note that section 183 3(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 othe r adjustments to take into account changes in med ical practice, changes in techn ology, the addition of new services, new cost data, and other relevant information and factors. Although we do not discuss every APC change in th e proposed and final rules with comment period, these changes are listed in Addendum B to the proposed and final rules withCMS-1613-FC 346

comment period. Specifically, procedure c odes with proposed revisions to the APC and/or status indicator assignments are a ssigned to comment indicator “CH” (Active HCPCS code in current year and next cal endar year, status in dicator and/or APC assignment has changed) in Addendum B to the proposed rule.CMS-1613-FC 347

c. Level IV Anal/Rectal Procedures (APC 0150) We created HCPCS code C9735 (Anos copy; with directed submucosal injection(s), any substance) effective Apr il 1, 2013, and assigned the service to APC 0150 (Level IV Anal/Rectal Procedures) for CY 2013, which had a payment rate of $2,365.97. We maintained the assignment of HCPC S code C9735 to APC 0150 for CY 2014, with a payment rate of $2,501.31. HCPCS code C9735 i nvolves injection of a bulking agent, L8605 (Injectable bulking agent dextranomer/hyaluronic acid copolymer implant, anal canal, 1 ml, includes shipping and necessary supplies). One commenter in response to the CY 2014 OPPS/ASC proposed rule believ ed that the proposed assignment for HCPCS code C9735 to APC 0150 was inappropriat e, and asserted that the entire HCPCS code C9735 procedure costs far more than the proposed payment rate for APC 0150. The

commenter recommended crea ting a new Level V Anal/Rectal Procedures APC, composed of HCPCS code C9735, and two ot her procedures. CMS responded in the

CY 2014 OPPS/ASC final rule with comment period that HCPCS code C9735 became effective April 1, 2013, so there were no claims data yet on this procedure, and that our longstanding policy is to wait until there ar e claims data on a new procedure before reassigning the service to another clinical APC (78 FR 74981) . We did not agree with the commenters that creating a Level V Ana l/Rectal Procedures APC was warranted for CY 2014. We believed that the suggested Level V APC would have a low volume of single frequency claims, and HCPCS code C9735 had no claims volume at that time. We

stated that the low volume of claims for such an APC would contribute to APC cost and payment volatility.CMS-1613-FC 348

For CY 2015, we proposed to maintain the assignment of HCPCS code C9735 to APC 0150, which had a proposed payment ra te of $2,612.71. The AMA’s CPT Editorial Panel created new Category III CPT code 0377T (Anoscopy with directed submucosal injection of bulking agent for fecal incon tinence), which describes the procedure performed by HCPCS code C9735, to be effective January 1, 2015.

Comment: A few commenters recomm ended that CMS divide APC 0150 into two APCs by creating a higher cost Leve l V Anal/Rectal Procedures APC. The commenters stated that there are four proce dure codes that have a geometric mean cost that is more than $500 higher than the proposed geometric mean cost of APC 0150, which is $2,735.52, and one procedure code thathas a geometric mean cost that is approximately $300 higher than the proposed geometric mean cost of APC 0150. One commenter specifically stated that the proposed payment rate for APC 0150 is insufficient to cover the cost of the pro cedure described by HCPCS code C9735, which is one of the five procedure codes recommende d for assignment to the suggested Level V Anal/Rectal Procedures APC, because the proposed payment rate for APC 0150 is lower

than the total cost of the procedure. The commenter po inted out that the proposed geometric mean cost of HCPCS code C 9735 is $3,241.32, which is considerably higher that the proposed geometric mean cost of APC 0150, which is $2,735.52. The commenter also recommended creating a Le vel V Anal/Rectal Procedures APC, and assigning HCPCS code C9735 and other codes to this recommended APC. In addition,

the commenter recommended that CMS use ne w CPT code 0377T for hospitals to report the anoscopy with directed submucosal inje ction of bulking agent fo r fecal incontinence procedure, effective January 1, 2015.CMS-1613-FC 349

Response: The claims data available for this final rule with comment period, which are used to establish final payment rates for the CY 2015 OPPS, show a geometric mean cost of approximately $2,698 for APC 0150, while the geometric mean cost for HCPCS code C9735 is approximately $2,863 base d on 56 single frequency claims. We believe that the geometric mean cost of HC PCS code C9735 is similar to the geometric mean cost of APC 0150. Further, the pro cedure described by HCPCS code C9735 is no longer one of the five highest cost procedur es assigned to APC 0150 based on claims data

available for this final rule with comment period. Similarly, there are other higher cost, lower volume procedures with geometric mean costs that are greater than the geometric mean cost of APC 0150, but do not create a viol ation of the 2 times rule because of the APC assignment. For instance, CPT code 46762 (Sphincteroplasty, anal, for incontinence, adult; implantation artificial sp hincter) has a final rule geometric mean cost of approximately $11,873 based on 9 single frequency claims. The volume of claims for

this CPT code is too low to consider this procedure significant fo r purposes of evaluating a potential violation of the 2 times rule. Th erefore, we do not believe that the range of costs for the significant procedures assi gned to APC 0150 warrants the creation of a higher level APC. Based on claims data av ailable for this final rule with comment period, the five highest cost procedures assi gned to APC 0150 have a total number of single frequency claims that equals less than 220 claims. The suggested Level V

Anal/Rectal Procedures APC w ould have a low volume of single frequency claims and would contribute to APC cost and payment volatility, as was the case when based on

CY 2014 claims data. As we stated in th e CY 2014 OPPS/ASC final rule with comment period, we are not accepting the commente r’s recommendation because a low volumeCMS-1613-FC 350

APC will contribute to the APC’s cost volati lity, which in turn contributes to payment volatility for the procedures assigne d to the low volume APC (78 FR 74981). After consideration of the public comments we received regarding the composition of APC 0150, we are finalizing our proposal to continue to assign HCPCS

code C9735 to APC 0150 for CY 2015. The CY 2015 final geometric mean cost of APC 0150 is approximately $2,698. In addition, new CPT code 0377T also is assigned to APC 0150 for CY 2015 because we agree with the commenters that HCPCS code C9735 should be deleted after December 31, 2014. We ar e instructing hospitals to use CPT code 0377T to report this service beginning with the code’s effective date, January 1, 2015.

d. Percutaneous Renal Cryoablation (APC 0423) For CY 2014, we assigned CPT codes 50593 (Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) and 0340T (Abla tion, pulmonary tumor(s), including pleura or chest wall when involved by tumor extens ion, percutaneous, cryoablation, unilateral, includes imaging guidance) to APC 0423 (Level II Percutaneous A bdominal and Biliary Procedures), which has a payment rate of $4,106.19. For CY 2015, we proposed to continue to assign these tw o CPT codes to APC 0423, with a proposed payment rate of $4,053.32.

Comment: One commenter believed that CMS’ proposal to continue to assign

CPT codes 50593 and 0340T to APC 0423 does not accurately reflect the costs incurred when performing these cryoablation proce dures. The commenter noted that APC 0423 includes several other radiofrequency ablati on and endoscopy procedures, which do not include high-cost device systems like the cryoablation procedures described by CPT codes 50593 and 0340T. Although the commen ter acknowledged that there is noCMS-1613-FC 351

violation of the 2 times rule, the commenter st ated that the proposed geometric mean cost of CPT code 50593 is significantly higher thanthe proposed geometric mean cost of APC 0423. In addition, the commenter asserted that the cryoablation procedures described by CPT codes 50593 and 0340T are not clinically si milar to other procedures assigned to

APC 0423. The commenter further noted that less than half of claims used to establish the proposed geometric mean cost of CPT code 50593 were correctly coded, and did not include the device HCPCS code C2618 (P robe, cryoablation). The commenter

recommended that CMS create a new Level III Percutaneous A bdominal and Biliary Procedures APC, and assign CPT codes 50593 and 0340T to this APC. Response: We disagree with the comme nter that the proposed geometric mean cost of CPT code 50593, which is $4,937.12 is significantly higher than the proposed geometric mean cost of APC 0423, which is $4, 243.84. The claims data available for this final rule with comment period show a geom etric mean cost of approximately $4,249 for APC 0423, and approximately $4,985 for CPT code 50593, which is based on 749 single frequency claims. The geometric mean cost of CPT code 50593 is the highest cost procedure assigned to APC 0423, but is well wi thin a normal range of costs associated with the other procedures assigned to this APC, and does not approach the 2 times limit

that would create a violation of the 2 times rule. CPT code 0340T has no claims at this time because the procedure code became eff ective beginning in CY 2014. Therefore, we

do not believe that a new Level III Percutan eous Abdominal and Bi liary Procedures APC is warranted based on the geometric mean cost of CPT code 50593 relative to the geometric mean cost of APC 0423. We also remind the commenter that we typically do not investigate allega tions of hospital cost underreporti ng or incorrect coding. As weCMS-1613-FC 352

stated in the CY 2011 OPPS/AS C final rule with comment period, “Beyond our standard OPPS trimming methodology . . . that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to judge the accuracy of hospital coding and charging for purposes of ra tesetting” (75 FR 71838). We believe that the cryoablation procedures described by CPT codes 50593 and 0340T are clinically similar to the other procedures assigned to APC 0423. Many of the procedures assigned to APC 0423 are ablative procedures, and all of the procedures assigned to this APC are abdominal or biliary. Therefore, we ar e finalizing the CY 2015 proposal, without modification, to continue to assign CP T codes 50593 and 0340T to APC 0423. We will specifically review the APC a ssignment of CPT code 0340T when claims data for this

service become available. 4. Nervous System Services a. Chemodenervation (APC 0206) For CY 2015, we proposed to continue to assign CPT code 64616 (Chemodenervation of muscle(s); neck mu scle(s), excluding muscles of the larynx, unilateral (eg, for cervical dystonia, spasmodi c torticollis)) to APC 0204 (Level I Nerve Injections), with a proposed payment rate of approximately $218. We note that CPT code 64616 became effective January 1, 2014. Comment: One commenter requested that CMS reassign CPT code 64616 from APC 0204 to APC 0206 (Level II Nerve Injectio ns), which had a proposed payment rate of approximately $375. The commenter no ted that this recommendation for APC reassignment was also submitted in response to the CY 2014 OPPS/ASC final rule with comment period. The commenter stated that APC 0206 is the APC that was assigned to CPT code 64613 (Chemodenervatio n of muscle(s); neck muscle(s) (eg, for spasmodicCMS-1613-FC 353

torticollis, spasmodic dysphonia), which is the predecessor code for CPT code 64616 in effect prior to January 1, 2014. Based on the commenter’s analysis of the CY 2013 hospital outpatient claims data that was used for the CY 2015 OPPS/ASC proposed rule,

the commenter believed that APC 0206 is the most appropriate APC assignment for CPT

code 64616 based on the resource costs and clinical homogeneity of the predecessor code, CPT code 64613, in relation to the other procedures assigned to APC 0206. Response: We reviewed the latest ho spital outpatient claims data reporting the service described by predece ssor code, CPT code 64613, and the replacement code, CPT code 64616. We acknowledge that the pr ocedure described by CPT code 64616 was previously described by CPT code 64613. Base d on our analysis of the latest hospital outpatient claims data available for this fi nal rule with comment period, we agree with the commenter’s recommendation that CPT code 64616 should be reassigned from APC 0204 to APC 0206 for the CY 2015 update. Specifically, we reviewed the latest hospital outpatient claims data for CPT code 64613 based on cla ims submitted by hospitals for dates of service between January 1, 2013, and Dec ember 31, 2013, that were processed on or be fore June 30, 2014. O ur review of the latest claims data shows a geometric mean cost of approxima tely $322 for CPT code 64613 based on 11,177 single claims (out of 13,743 total claims), wh ich is comparable to the geometric mean cost of approximately $387 for APC 0206. Th ere are 21 procedures assigned to APC 0206 and the geometric mean costs for the proc edures with significant claims data range approximately between $322 (for CPT c ode 64613) and $536 (for CPT code 62270). Based on these data, we agree with the comm enter that APC 0206 is the most appropriate APC assignment for CPT code 64616 based on clinical homogeneity to the otherCMS-1613-FC 354

procedures assigned to this APC and the res ource similarity of the predecessor code, CPT code 64613, to the other procedures assigned to APC 0206. Therefore, after consideration of th e public comment we received, we are not adopting our proposal to con tinue to assign CPT code 64616 to APC 0204. Instead, we are reassigning CPT code 64616 to APC 0206 for the CY 2015 OPPS update. The final CY 2015 payment rate for CPT cod e 64616 can be found in Addendu m B to this CY 2015 OPPS/ASC final rule with c omment period (which is avail able via the Internet on the CMS Web site). b. Epidural Lysis (APCs 0203 and 0207) For CY 2015, we proposed to continue to assign CPT code 62263 (Percutaneous lysis of epidural adhesions using solution injection (eg, hypertonic saline, enzyme) or mechanical means (eg, catheter) including radiol ogic localization (includes contrast when administered), multiple adhesiolysis sessions ; 2 or more days) to APC 0203 (Level IV Nerve Injections), with a proposed paymen t rate of approximately $1,524. We also proposed to continue to assi gn CPT code 62264 (Percutaneous lysis of epidural adhesions using solution injection (eg, hypertonic sa line, enzyme) or mechanical means (eg, catheter) including radiologic localization (includes contra st when administered), multiple adhesiolysis sessions; 1 day) to AP C 0207 (Level III Nerve Injections), with a proposed payment rate of approximately $683. Comment: One commenter opposed CMS’ proposals to continue to assign CPT

code 62263 to APC 0203 and CPT code 62264 to APC 0207. The commenter stated that CMS has overcompensated for the cost of providing the service described by CPT code 62263 by assigning the procedure to APC 0203. Alternatively, the commenter believedCMS-1613-FC 355

that CMS has undercompensated the cost of providing the service described by CPT code 62264 by assigning the procedure to APC 0207. Th e commenter stated that the resources utilized during the performa nce of the services described by both CPT codes are comparable, and each CPT code should be reassigned to a more appropriate APC to ensure adequate payment fo r the services provided. Response: We reviewed the latest hospital outpatient claims data reporting services described by CPT codes 62263 and 62264 for dates of service between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014. For CPT code 62263, our analysis of the claims data shows a geometric mean cost of approximately $1,215 based on 70 single claims (out of 88 total claims), which is comparable to the geometric mean cost of approximately $1,525 for APC 0203. For CPT code 62264, our analysis of the claims data shows a geometric mean cost of approximately $798 based on 1,971 single claims (out of 4,174 total claims), which is comparable to the geometric mean cost of approximately $697 for APC 0207. Therefore, we believe that the proc edures described by CPT code 66263 and CPT code 62264 are appropriately assigned to APCs 0203 and 0207, respectivel y, based on clinical and

resource similarities in relation to the ot her procedures assigned to these APCs. We remind the commenter that the OPPS is a syst em of averages, in which the costs of services, calculated from the most recent year’s claims data, are weighted relative to the other services in the system, for that given year. Furthermore, as has been our practice since the implementation of the OPPS, we a nnually review all the items and services within an APC group to determine, with respec t to comparability of the use of resources, any violations of the 2 times rule. In making this determination, we review our claimsCMS-1613-FC 356

data and determine whether we need to make changes to the current APC assignments for the following year. We will reevaluate the APC assignment for CPT codes 62263 and 62264 for the CY 2016 OPPS rulemaking. After consideration of the public comment that we received, we are finalizing our CY 2015 proposal, without modification, to c ontinue to assign CPT code 62263 to APC 0203 and CPT code 62264 to APC 0207. The final CY 2015 payment rates for the two procedures can be found in Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).c. Transcranial Magnetic Stimula tion (TMS) Therapy (APC 0218) Since July 2006, CPT codes have existe d to describe Transcranial Magnetic Stimulation (TMS) therapy. The initial CP T codes were temporary Category III CPT codes, specifically, CPT codes 0160T (Thera peutic repetitive transcranial magnetic stimulation treatment planning) and 0161T (T herapeutic repetitive transcranial magnetic stimulation treatment delivery and management , per session), that became effective July 1, 2006. For CY 2011, the CPT Editorial Panel deleted CPT code 0160T on December 31, 2010, and replaced this procedure code w ith CPT code 90867 (Therapeutic repetitive transcranial magnetic stimulation (tms) treat ment; initial, incl uding cortical mapping, motor threshold determination, delivery a nd management), effective January 1, 2011. Similarly, CPT code 0161T was deleted on December 31, 2010, and was replaced with CPT code 90868 (Therapeutic repetitive tr anscranial magnetic stimulation (tms) treatment; subsequent delivery and management , per session), effective January 1, 2011. In CY 2012, the CPT Editorial Panel estab lished an additional TMS therapy code, specifically, CPT code 90869 (Therapeutic repe titive transcranial magnetic stimulationCMS-1613-FC 357

(tms) treatment; subsequent motor thres hold re-determination with delivery and management), that became effective January 1, 2012. For the CY 2014 update, CPT codes 90867 and 90868 were assigned to APC 0216 (Level II Nerve and Muscle Tests), with a payment rate of $216.79, and CPT code 90869 was assigned to APC 0218 (Level II Nerve and Muscle Tests), with a payment rate of $127.75. For the CY 2015 upda te, as listed in Addendum B to the CY 2015 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 90869 to APC 0218, with a proposed payment rate of approximately $160. In addition, we proposed to reassign CPT codes 90867 and 90868 from APC 0216 to APC 0218, the same APC assignment for CPT code 90869. Comment: One commenter disagreed with CMS’ proposal to reassign CPT codes 90867 and 90868 from APC 0216 to APC 0218, and to continue to assign CPT code

90869 to APC 0218. The commenter stated that the proposed addition of certain nerve conduction study codes to APC 0218 for the CY 2015 update has negatively affected the proposed payment rate for APC 0218. The commenter believed that this proposal resulted in a decreased payment rate of approximately $160 for APC 0218, compared to the CY 2014 payment rate of approximately$217; thereby eff ectuating a potential financial loss for the provider with each treatment because a typical course of TMS therapy includes a total of 25 da ily treatment sessions. In addition, the commenter stated that assigning CPT codes 90867, 90868, a nd 90869 to APC 0218 is clinically inappropriate because these CPT codes desc ribe therapy services, whereas the other procedure codes assigned to APC 0218 de scribe diagnostic tests (simple nerve conduction and electromyography studies). To correct the perceived clinical andCMS-1613-FC 358

resource discrepancies, the commenter suggested that CMS establish a new APC specifically for the TMS therapy codes, and that CMS title the APC “Transcranial Magnetic Stimulation.” Response: We believe that APC 0218 is the most appropriate APC assignment for the three TMS therapy CPT codes. The CPT codes describing the procedures assigned to APC 0218 all describe noninvasive services that affect the nervous system. Based on the latest hospital outpatient claims data used for this final rule with comment period, our analysis revealed that the resources associated with providing the services described by CPT codes 90867, 90868, and 90869 are comparable to the other services assigned to APC 0218. Specifical ly, based on CY 2013 claims data used for this final rule with comment period, the geometric m ean cost for CPT code 90867 is approximately $210 based on 72 single claims (out of 72 total claims), the geometric mean cost for CPT code 90868 is approximately $201 based on 2,51 3 single claims (out of 2,516 total claims), and the geometric mean cost fo r CPT code 90869 is approximately $194 based on 28 single claims (out of 30 total claims). In addition, a review of the procedures assigned to APC 0218 shows that the range of geometric mean cost for the services assigned to APC 0218 is approximately betw een $95 (for CPT code 95937) and $327 (for CPT code 95875), which is comparable to th e geometric mean costs for all three TMS therapy CPT codes. Based on the clinical and resource similarities inrelation to the other procedures currently assigned to APC 0218, we believe that the TMS therapy codes would be appropriately assigned to APC 0218. After consideration of the public comme nt we received, we are finalizing our CY 2015 proposal, without modification, to reassign CPT codes 90867 and 90868 fromCMS-1613-FC 359

APC 0216 to APC 0218, and to continue to assign CPT code 90869 to APC 0218 for

CY 2015. 5. Ocular Services: Ophthalm ic Procedures and Services For the CY 2015 OPPS update, based on our evaluation of the latest hospital outpatient claims data, we proposed to restruct ure all of the ophthalmic APCs to better

reflect the costs and clinical characteristics of the procedur es within each APC. This proposed restructuring resulted in the us e of 13 APCs for the ophthalmology-related procedures for the CY 2015 OPPS update, as compared to the 24 APCs used for the CY 2014 OPPS update. We believe that this major restructuring and consolidation of APCs more appropriately categorizes all of the ophthalmology-related procedures and services within an APC group, such that the services within each newly-configured APC are more comparable clinically and with resp ect to resource use. Tables 19 and 20 in theproposed rule showed the current CY 2014 and proposed CY 2015 ophthalmologyrelated APCs. Specifically, Table 19 of the CY 2015 OPPS/ASC proposed rule (79 FR 40981) showed the CY 2014 ophthalmol ogy-related APCs and status indicator assignments, while Table 20 showed the proposed restructured ophthalmology-related APCs and their status indicator assign ments for CY 2015 (79 FR 40981 through 40982). The proposed payment rates for the ophthalmol ogy-related APCs listed in Table 20 were listed in Addendum B to the proposed rule (w hich is available vi a the Internet on the CMS Web site). In the CY 2015 OPPS/ASC proposed rule, we invited public comments on this proposal.CMS-1613-FC 360

Comment: Several commenters stated that the proposed restructuring and consolidation of the CY 2015 ophthalmic APC is substantial, and requested that CMS not finalize this proposal. The commenters al so stated that CMS has not provided information regarding the criteria used to diffe rentiate the various levels of treatments or procedures for the restructured 13 ophthalmic APCs. The commenters stated that the configuration and structure of the existing 24 APCs do not appear to be inconsistent with the requirements for clinical coherence or re source use. The commenters disagreed with CMS’ proposal to establish broa der categories within these APCs, and indicated that such a change in APC groupings has the potential to aggregate procedures that vary significantly in resource costs a nd clinical coherence. In addition, the commenters stated that some of the procedures in the rest ructured ophthalmic APCs appear to be inappropriately categorized. For example, the restructuri ng of the ophthalmic APCs has resulted in the consolidation of cornea pro cedures within one of the restructured APCs, and the procedures are no longer assigned to a separate classifi cation grouping based on the previous APC configurati ons. The commenters pointed out that the major cornea transplant codes have been reassigned to restructured APC 0673 (Level I II Intraocular Procedures), along with procedures that treat glaucoma and retina conditions. The commenters further explained that the equipment used for these services when performed in alternative settings and the depths of the condition of the eye and the appropriate treatments vastly differ, as does the time a nd other resources necessary to perform these types of surgeries. As a result, the commen ters believed that additional APCs are needed to appropriately categorize ophthalmic procedures based on clinical homogeneity and resource consumption. The commenters also requested the opportunity to work withCMS-1613-FC 361

CMS to make appropriate adjustments to th e restructured ophthalmic APC groupings to

ensure clinical coherence and to minimi ze payment variances for these procedures. Response: Consistent w ith CMS’ statutory requirement under section 1833(t)(9)

of the Act to review and revise APC assi gnments annually and to construct the most appropriate APC groupings, as well as, to the ex tent desirable, correct any 2 times rule violations, we evaluated the resource consump tion and clinical cohere nce associated with the ophthalmic APCs for the CY 2015 update. Based on our analysis of the latest hospital outpatient claims data used for this final rule with comment period and understanding of the clinical aspects of these procedures, we believe that the restructured and consolidated ophthalmic APCs more appropriately group these ophthalmology-related services according to thei r current resource cost s, as well as their clinical characteristics. The former ophtha lmic procedures APC structure unnecessarily separated, from a clinical and resource simila rity prospective, opht halmic procedures

based on disease state or traditional subdi visions within ophthalmic surgery. APC groupings were never intended to precisely tr ack traditional ophthalmology subspecialty divisions, such as cornea su rgery, retina surgery, or glaucoma surgery, as the commenters suggested. We also believe that larger APC groupings are more consistent with a prospective payment system than smaller group ings. We note that we regularly accept meetings from interested pa rties throughout the year, and we encourage stakeholders to continue a dialogue with us during the ru lemaking cycle and throughout the year on our continuing efforts to improve the co herence of the OPPS APC groupings.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to restructure and consolid ate the ophthalmic APCs.CMS-1613-FC 362

Table 22 below shows the final ophthalmology-re lated APCs and their status indicator assignments for CY 2015. The final payment rates for these APCs can be found in

Addendum B to this CY 2015 OPPS/ASC final rule with comment period (which is

available via the Internet on the CMS Web s ite). We also remind the public that we

review the OPPS and APC structures a nd assignments annually and may propose additional restructurings of th e APCs and procedure code assignments for other clinical areas and APC groupings in CY 2016 and future rulemakings.

TABLE 22.—FINAL CY 2015 APC ASSI GNMENTS FOR THE OPHTHALMIC PROCEDURES AND SERVICES

Final CY 2015

APC Final CY 2015 APC Title Description Final CY 2015

Status Indicator 0230 Level I Eye Tests & Treatments S 0231 Level III Eye Tests & Treatments S 0233 Level II Intraocular Procedures T 0238 Level I Extraocular, Repair, and Plastic Eye Procedures T 0239 Level II Extraocular, Repair, and Plastic Eye Procedures T 0240 Level III Extraocular, Repair , and Plastic Eye Procedures T 0242 Level IV Extraocular, Repair , and Plastic Eye Procedures T 0247 Laser Eye Procedures T 0255 Level I Intraocular Procedures T 0293 Level IV Intraocular Procedures J1 0351 Level V Intraocular Procedures J1 0673 Level III Intraocular Procedures T 0698 Level II Eye Tests & Treatments S

6. Imaging a. Echocardiography Services Without Contrast (APCs 0269, 0270, and 0697) We proposed to continue to use for the CY 2015 update the three APCs that describe echocardiography se rvices without contrast, AP C 0697 (Level I EchocardiogramCMS-1613-FC 363

Without Contrast), APC 0269 (Level II Echoc ardiogram Without Contrast), and APC 0270 (Level III Echocardiogram Without Contra st), and to maintain the CY 2014 HCPCS code assignments for these APCs.

Comment: One commenter requested that CMS reexamine the services assigned to the APCs for echocardiography services wit hout contrast. In part icular, the commenter requested that CMS reassign CPT codes 76825 (Echocardiography, fetal, cardiovascular system, real time with image documentation (2 D), with or without M-mode recording;) and 76826 (Echocardiography, fetal, cardiovas cular system, real time with image documentation (2D), with or without M-mode r ecording; follow-up or repeat study) from

APC 0697 to APC 0269 based on the clinical and resource similarities to the other echocardiography procedures assigned to APC 0269. Response: Based on our review of the latest hospital outpa tient claims data

available for this final rule with comment period, we agree with the commenter that CPT codes 76825 and 76826 should be reassigned to APC 0269, which more appropriately supports the clinical and resource homogeneity of the APCs rather than reassigning the procedure codes to APC 0697. The geometric mean cost of CPT code 76825 is approximately $384, and the geometric mean cost of CPT code 76826 is approximately $285. These costs are sufficiently close to the geometric mean cost of CPT code 93306 ((Echocardiography, transthoracic, real time with image documentation (2D), includes M-mode recording, when performed, comple te, with spectral D oppler echocardiography, and with color flow Doppler echocardiography) , which is approximately $430. CPT code 93306 comprises 93 percent of the service volume within APC 0269. By reassigning CPT codes 76825 and 76826 to APC 0269, only one procedure code would remain inCMS-1613-FC 364

APC 0697. Therefore, we also are rea ssigning CPT code 93308 (Echocardiography, transthoracic, real time with image documentation (2D), includes M-mode recording, when performed, follow-up or limited study) from APC 0697 to APC 0267 (Level III Diagnostic and Screening Ultrasound) for CY 2015. We are deleting APC 0697 for the CY 2015 OPPS update because all of the proc edure codes previously assigned to APC 0697 have been reassigned to more appropriate APCs to ensure adequate payment for the services provided and the clinical and resource hom ogeneity of APCs. b. Optical Coherence Tomography (OCT) Procedures of the Breast For the July 2014 quarterly update, the CP T Editorial Panel established four new Category III CPT codes to describe optical coherence tomography (OCT) procedures of the breast: CPT code 0351T (Optical cohere nce tomography of breast or axillary lymph node, excised tissue, each specimen; real tim e intraoperative); CPT code 0352T (Optical coherence tomography of breas t or axillary lymph node, exci sed tissue, each specimen; interpretation and report, r eal time or referred); CPT c ode 0353T (Optical coherence tomography of breast, surgical cavity; real time intraoperative); and CPT code 0354T (Optical coherence tomography of breast, surg ical cavity; interpreta tion and report, real time or referred). As listed in Tabl e 17 of the CY 2015 OPPS/ASC proposed rule (79 FR 40976), we proposed to assign CP T codes 0351T and 0353T to OPPS status indicator “N” (paid under OPPS; payment is packaged into payment for other services; there is no separate APC payment.), and CPT codes 0352T and 0354T to OPPS status indicator “B” (codes that are not recogni zed by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x).CMS-1613-FC 365

Comment: Some commenter s expressed concern rega rding CMS’ proposal to assign CPT codes 0351T and 0353T to OPPS status indicator “N” and noted that both procedures describe independe nt, unique services and shoul d be assigned to specific

APCs. The commenters recommended assi gning CPT codes 0351T and 0353T to any one of the following APCs: APC 0028 (Level I Breast and Skin Surgery), which had a proposed payment rate of approximately $2,176; APC 0029 (Level II Breast and Skin Surgery), which had a proposed payment rate of approximately $3,018; or APC 0030 (Level III Breast and Skin Surgery), which ha d a proposed payment rate of approximately $4,150. Response: Consistent with our packag ing policy for intraoperative procedures, we proposed to assign CPT codes 0351T a nd 0353T to OPPS status indicator “N” because both procedure codes describe supporti ve dependent services that are performed during independent procedures . As clarified in the CY 2008 OPPS final rule with comment period (72 FR 66627), we define “intraoperative” pro cedures as services that are provided during and, therefor e, on the same date of service as another procedure that is separately payable under the OPPS. We further define intr aoperative as services that support the performance of an independent procedure and are provided in the same operative session as the indepe ndent procedure. Both of the procedures described by CPT codes 0351T and 0353T must always be performed in conjunction with another procedure; specifically, the surgical proce dure is performed followed by the breast OCT to improve the surgical outcome. We believe that these procedure codes clearly describe

services that conform to th e definition of “intraoperativ e” procedures. For further information on our policy for intraoperative services under the hospital OPPS, we referCMS-1613-FC 366

readers to the CY 2008 OPPS final rule with comment period (72 FR 66627 through 66630). In summary, we believe that CPT c odes 0351T and 0353T are procedures that support the performance of an independent procedure and are provided in the same operative session as the inde pendent procedure. Specifi cally, we believe that both procedures are provided during and, therefore, on the same da te of service as another procedure that is separately payable under th e OPPS. In addition, we believe that CPT codes 0351T and 0353T are always integral to, and dependent upon, the independent procedure that they support. Therefore, payment for thes e services will be packaged because the procedures would generally be performed on the same date as another procedure that is separately payable under th e OPPS. After consid eration of the public comments we received, we ar e finalizing our proposals to assign CPT codes 0351T and

0353T to OPPS status indicator “N” and CPT codes 0352T and 0354T to OPPS status

indicator “B” for CY 2015. c. Parathyroid Planar Imaging (APCs 0263, 0317, 0406, and 0414) For CY 2015, we proposed to assign CPT code 78071 (Parathyroid planar imaging (including subtraction, when perf ormed); with tomographic (SPECT)) to APC 0263 (Level I Miscellaneous Radiology Procedures), for which we proposed a CY 2015 geometric mean cost of approximate ly $357. We also proposed to assign CPT code 78072 (Parathyroid planar imaging (including subtract ion, when performed); with tomographic (SPECT), and concurrently acquired computed tomography (CT) for anatomical localization) to APC 0317 (Level II Miscellaneous Radi ology Procedures), for which we proposed a CY 2015 geometric mean cost of approximately $577. InCMS-1613-FC 367

addition, we proposed to change the status indicators for CPT codes 78071 and 78072

from “X” to “S.” Comment: Commenters agreed with CMS’ proposal to assign CPT codes 78071

and 78072 to status indicator “S,” but opposed the proposal to assign CPT code 78071 to

APC 0263. The commenters believed that CPT codes 78071 and 78072 should be assigned to the nuclear medicine APCs in stead of the radiology APCs because the nuclear medicine APCs are more representa tive of the resources utilized in the performance of these procedures. The co mmenters suggested that CMS assign CPT codes 78071 and 78072 to either APC 0414 (Level II Tumor/Infection Imaging) or 0408 (Level III Tumor/Infection Imaging). Response: We agree with the commenter s that the resources utilized in the performance of the procedures descri bed by CPT codes 78071 and 78072 are more comparable to the procedures assigned to the nuclear medicine APCs. However, we do not agree with the commenters that CPT codes 78071 and 78072 are more appropriately assigned to either APC 0408 or APC 0414. We believe that APC 0406 (Level I Tumor/Infection Imaging) is the most appropriate APC assignment for CPT codes 78071 and 78072 because the procedures currently assigned to APC 0406 are similar to the procedures described by CPT codes 78071 a nd 78072 in clinical nature and resource utilization. The final CY 2015 APC geomet ric mean costs of approximately $362 for CPT code 78071 and approximately $427 fo r CPT code 78072 are similar to the geometric mean costs of th e significant procedures a ssigned to APC 0406, which range between approximately $307 and approximately $427.CMS-1613-FC 368

After consideration of th e public comments we receive d, we are not finalizing our CY 2015 proposal to assign CPT codes 78071 and 78072 to APCs 0263 and 0317, respectively. Instead, based on considerati on of the public comments we received, for CY 2015, we are assigning CPT codes 78071 and 78072 to APC 0406, which has a final CY 2015 APC geometric mean cost of approximately $391. 7. Radiology Oncology a. Proton Beam Therapy and Magnetoe ncephalography (MEG) Services (APCs 0065, 0412, 0446, 0664, and 0667) In the CY 2015 OPPS/ASC proposed rule (79 FR 40989), we proposed several changes to the radiation therapy APCs for CY 2015. To correct a violation of the 2 times rule within APC 0664 (Level I Proton Beam Ra diation Therapy), we proposed to reassign

CPT code 77520 from APC 0664 to APC 0412 (Level III Radiation Therapy). We believe that CPT code 77520 is both clinically similar and comparable in geometric mean

cost to the other services a ssigned to APC 0412. We also pr oposed to reassign CPT code 77522 from APC 0664 to proposed newly rena med APC 0667 (Level IV Radiation Therapy) because we believe that the pr ocedure described by CPT code 77522 is both clinically similar and comparable in geometric mean cost to the other services assigned to

APC 0667. Because there would be no other codes assigned to APC 0664 if these proposed reassignments are finalized, we al so proposed to delete APC 0664 for CY 2015 (79 FR 40989). In addition, we proposed to rename existing APC 0667 to “Level IV Radiation Therapy” (instead of using the existing title of “Level II Proton Beam Radiation Therapy”), to make the title consiste nt with other APCs in the radiation therapy series. In conjunction with this proposed ch ange, we proposed to reassign the followingCMS-1613-FC 369

three services to proposed newly rename d APC 0667 for CY 2015: CPT codes 77522, 77523, and 77525. Comment: Commenters generally su pported CMS’ proposals regarding the radiation therapy APCs, with one excepti on. The commenters suppor ted the proposal to reassign CPT code 77520 from APC 0664 to APC 0412. However, the commenters expressed concern regarding the proposal to reassign CPT code 77522 from APC 0664 to proposed newly renamed APC 0667. Commente rs disagreed with CMS’ determination that the procedure described by CPT code 77522 is clinically similar and comparable in geometric mean cost to the other services assigned to APC 0667 in 2014, specifically the procedures described by CPT codes 77523 and 77525. The commenters recommended that CMS maintain the assignment of CP T code 77522 to APC 0664 and not delete the classification grouping, which would result in CPT code 77522 being the only service assigned to this APC. Response: We appreciate the commente rs’ support for our proposals regarding the radiation therapy APCs, specifically our proposal to reassi gn CPT code 77520 from APC 0664 to APC 0412. In regard to the proposed reassignment of CPT code 77522 from APC 0664 to APC 0667, we disagree wi th the commenters for the following reasons. The three CPT codes, 77522, 77523, a nd 77525, are similar clinically. All three of these CPT codes describe procedures that involve proton beam therapy delivery services with a continuum of complexity. The procedure described by CPT code 77520 is the least complex. The procedure descri bed by CPT code 77522 is more complex than the procedure described by CPT code 77520, a nd the procedure described by CPT code 77523 is more complex than the procedure described by CPT code 77522. The procedureCMS-1613-FC 370

described by CPT code 77525 is the most comple x procedure of the series proposed to be reassigned to APC 0667. We proposed to reassign CPT code 77520 from APC 0664 to APC 0412 because of the resource comparability with respect to the other procedures involving proton beam therapy delivery servic es assigned to APC 0412, not based on the clinical dissimilarity with respect to the proc edures assigned to APC 0664. In regard to the remaining three procedures involving pr oton beam therapy delivery services (the procedures described by CPT codes 77522, 77523, and 77525), we believe that these procedures are clinically sim ilar, but each has a slightly varying level of complexity

relative to the others. The proposed configuration of APC 0667 only contains the three proton beam therapy delivery servic es described by CPT codes 77522, 77523, and 77525, and does not include any other service c odes. APC 0667 is the most clinically homogeneous APC under the OPPS to assign thes e services that would ensure adequate payment, with the exception of single serv ice APCs. With regard to the resource comparability of the procedures described by CPT codes 77522, 77523 and 77525, the lowest geometric mean cost among these proc edures is associated with the procedure described by CPT code 77522, which is appr oximately $1,033, and the highest geometric mean cost is associated with the pro cedure described by CPT code 77525, which is approximately $1,244. The statutory prong th at dictates when resources become

dissimilar between two services is the 2 times rule. Based on the limitations imposed by the 2 times rule, the highest cost significant service assigned to an APC cannot exceed the lowest cost by greater than two times. In this case, the geometric mean cost of the procedure described by CPT code 77525 is only 1.2 times the geometric mean cost of the procedure described by CPT code 77522, whic h is well within the 2 times limit.CMS-1613-FC 371

Therefore, we determined that the resource similarity among the services proposed to be reassigned to APC 0667 is comparable. In addition, we generall y prefer to assign procedures to the most appropriate APC thatwould ensure adequate payment, as opposed to using single-service APCs, which the commenters recommended for the procedure described by CPT code 77522, unless no other re asonable options exis t, because singleservice APCs are more consistent with a f ee schedule than a prosp ective payment system. Therefore, we are finalizing the follo wing proposals affecting the proton beam therapy services for CY 2015: (1) we ar e reassigning CPT c ode 77520 from APC 0664 to APC 0412; (2) we are reassigning CPT code 77522 from 0664 to APC 0667;( 3) we are reassigning CPT codes 77523 and 77525 to APC 0667; (4) we are deleting APC 0664; and (5) we are renaming APC 0667 to “Level IV Radiation Therapy.” In the CY 2015 OPPS/ASC proposed rule (79 FR 40989), we also proposed to delete APC 0065 (IORT, MRgFUS, and MEG) because we proposed to reassign the services assigned to this APC to more appropr iate APCs based on clinical similarities and comparable geometric mean cost. With respect to MEG services, we proposed to reassign the MEG CPT codes 95965 and 95966 fr om APC 0065 to APC 0446 (Level IV Nerve and Muscle Services), whic h would only contain MEG services. Comment: One commenter applauded CMS for the establishment of new APC 0446, the APC to which the MEG procedures are proposed to be reassigned. The

commenter believed that th e reassignment of CPT c odes 95965 and 95966 would produce more accurate data related to MEG usage. Alternatively, one commenter expressed concern that the current proposal does not ad equately cover the costs associated with providing MEG services, and urged CMS to workwith hospitals and other stakeholdersCMS-1613-FC 372

to ensure that HOPDs submit claims correctly to capture the full costs of providing these

services. Response: Based on our analysis of the la test hospital outpatient claims data used for this final rule with comment period, we believe that the establishment of APC 0446 is necessary to ensure clinical and resource homogeneity and adequate payment for MEG services. Therefore, after consideration of the public comments we received, we are finalizing our CY 2015 proposal without modi fication. As we do every year, we will

review our claims data for these se rvices for the CY 2016 OPPS rulemaking. b. Stereotactic Radiosurgery Services (SRS) and Magnetic Resonance Image Guided Focused Ultrasound (MRgFUS) (APC 0066) For CY 2015, for SRS, we proposed to continue to assign CPT code 77373 (Stereotactic body radiation thera py, treatment delivery, per frac tion to 1 or more lesions, including image guidance, entire course not to exceed 5 fractions) to APC 0066, with a proposed payment rate of approximately $1,893. We also proposed to rename APC 0066 from “Level I Stereotactic Radiosurge ry” to “Level V Radiation Therapy” (79 FR 40989). In addition, we proposed to continue to assign CPT codes 77371 (Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consisting of 1 session; multi-source cobalt 60 based) and 77372 (Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s ) consisting of 1 session; linear accelerator based) to APC 0067 (Single Session Cranial Stereotactic Radios urgery), with a proposed payment rate of approximately $9,768. We also proposed to rename APC 0067 from “Level IICMS-1613-FC 373

Stereotactic Radiosurgery” to “Single Session Cranial Stereotactic Radiosurgery,” which we proposed as a C-APC. For further disc ussion regarding C-APCs and SRS CPT codes 77371 and 77372 assigned to C-APC 0067, we refer readers to section II.A.2.e. of this final rule with comment period. Comment: Several commenters requeste d that CMS reinstate the use of SRS

G-codes because the SRS CPT codes do not accur ately describe current clinical practices or adequately cover the cost of pr oviding fractionated linac-based SRS. Response: For the CY 2014 update, we fi nalized our proposal to adopt the full range of SRS CPT codes and to discontinue the use of the remaining SRS G-codes under

the OPPS. HOPDs must use and re port SRS CPT codes 77371, 77372, and 77371 to describe the delivery of stereo tactic radiosurgery treatment services under the OPPS. For a full discussion of this issue, we refer re aders to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74989 through 749995). In addition, for the CY 2015 update, HCPCS code G0173 (Linear accelerator based st ereotactic radiosurgery, complete course of therapy in one session), and HCPC S code G0251 ((Linear accelerator based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per se ssion, maximum five sessions per course of treatment)) will be deleted, effective D ecember 31, 2014, because these codes will no longer be used under the MPFS. However, HCPCS code G0339 (Image-guided robotic

linear accelerator-based stereo tactic radiosurgery, complete course of therapy in one

session or first session of fractionated trea tment) and HCPCS code G0340 (Image-guided

robotic linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated trea tment, all lesions, per session, secondCMS-1613-FC 374

through fifth sessions, maximum fi ve sessions per course of tr eatment) will continue to be used under the MPFS and, therefore, will continue to be active codes for the CY 2015 MPFS update. However, HCPCS codes G0339 and G0340 will not be active codes for the CY 2015 OPPS update. Instead, HOPDs mu st use and report SRS CPT codes 77371, 77372, and 77373 to describe the delivery of ster eotactic radiosurgery treatment services

under the OPPS. Comment: Many commenters requested that CMS reassign HCPCS code G0251

to a different APC to resolve a violation of the 2 times rule within APC 0066. Several commenters recommended excluding the clai ms data for HCPCS code G0251 prior to determining the final payment rate for AP C 0066. The commenters indicated that

HCPCS code G0251 is used most often for fract ionated cranial SRS, not for stereotactic body radiation therapy (SBRT), as described by CPT code 77373. Response: Both HCPCS code G0251 a nd CPT code 77373 describe fractionated cranial stereotactic radiosurgery services that involve between 2 and 5 fractions of treatment. Single-session cranial SRS ar e reported using either CPT code 77371 or 77372. Based on the code descriptor, we beli eve that the service described by HCPCS code G0251 is appropriately crosswalked to the service described by CPT code 77373. We explained the code crosswalk in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74991). We note that, under the OPPS, we may ma ke exceptions to the 2 times rule in unusual cases, such as low-volume items or services. For the CY 2015 update (taking into consideration the APC changes that we proposed for CY 2015), we reviewed all of

the APCs to determine which APCs would not sa tisfy the requirement of the 2 times rule.CMS-1613-FC 375

In the case of APC 0066, we be lieve that it is necessary to make an exception to the 2

times rule for this APC because the three G-c odes that caused the viol ation of the 2 times

rule to occur have been crosswalked to CPT code 77373. We expect to have claims data for only CPT code 77373 available for the CY 2016 rulemaking. At that time, we will reevaluate the APC assignments for all of the SRS CPT codes. In addition to our proposal to continue to assign SRS CPT code 77373 to APC 0066, we proposed to assign all four of the MRgFUS procedures to APC 0066 because in the past MRgFUS services were assigned to the same APC as some of the

former SRS G-codes for fractionated linac-b ased SRS. Specifically, for CY 2015, we proposed to reassign HCPCS codes 0071T (F ocused ultrasound ablation of uterine leiomyomata, including mr guidance; tota l leiomyomata volume less than 200 cc of tissue), 0072T (Focused ultrasound ablation of uterine leiomyomata, including mr guidance; total leiomyomata volume greate r or equal to 200 cc of tissue), C9734 (Focused ultrasound ablation/therapeutic inte rvention, other than uterine leiomyomata, with magnetic resonance (mr) guidance), and 0301T (Destruction/reduc tion of malignant breast tumor with externally applied focuse d microwave, including interstitial placement of disposable catheter with combined te mperature monitoring probe and microwave focusing sensocatheter under ultrasound thermotherapy guidance) from APC 0065 (IORT, MRgFUS, and MEG) to APC 0066. We proposed to delete APC 0065 for

CY 2015.

Comment: Several commenters stated that the proposed payment rate for APC 0066 of approximately $1,893 does not adequately reflect the level of resources required to perform MRgFUS procedures. Instead, the commenters believed that the MRgFUSCMS-1613-FC 376

procedures are similar to the stereotactic radiosurgery proc edures that are assigned to C-APC 0067 in terms of treatment set-up, delivery of radiatio n, and post-procedure recovery. The commenters further believed th at the MRgFUS procedures would be more appropriately assigned to a C-APC from a c linical and resource perspective. The commenters explained that certain procedures are commonly reported in conjunction with MRgFUS procedures, similar to stereotactic radiosurgery procedur es. Therefore, the commenters recommended that CMS reassign the MRgFUS procedures to C-APC 0067. Response: CPT codes 0071T and 0072T became effective January 1, 2005. CPT code 0301T became effective January 1, 2012. HCPCS code C9734 became effective April 1, 2013. Currently, we do not have any single claims reporting any of the four MRgFUS procedures. However, because we are deleting APC 0065, we believe that reassigning these procedures to APC 0066 for the CY 2015 update is more appropriate because, in the past, MRgFUS services were assigned to the same APC as some of the

former fractionated linac-based SRS G-code s. We also believe that the MRgFUS procedures are clinically dissimilar to single-session cranial SRS because MRgFUS procedures may involve more than one trea tment session. However, we will review and

consider the comments related to C-APC 0067 in a future annual update.

After consideration of th e public comments we receive d, we are finalizing our proposal without modification. Specificall y, for SRS CPT code 77373, we are finalizing our proposal to continue to assign this code to APC 0066 for the CY 2015 update. In addition, we are finalizing our proposal to reassign MRgFUS HCPCS codes 0071T, 0072T, 0301T, and C9734 from APC 0065 to AP C 0066 for CY 2015. We are deleting

APC 0065 for CY 2015. Because we are dele ting APC 0065, we ar e renaming APC 0066CMS-1613-FC 377

from “Level I Stereotactic Radiosurgery” to “Level V Radiation Therapy.” The final payment rates for SRS CPT code 77373 and MRgFUS HCPCS codes 0071T, 0072T, 0301T, and C9734 can be found in Addendum B to this final rule with comment period,

which is available via the Internet on the CMS Web site. 8. Respiratory Services: Level II Endoscopy Lower Airway (APC 0415) In the CY 2015 OPPS/ASC proposed rule , we proposed to continue the APC assignment of the procedure codes that have been historically assigned to APC 0415 (Level II Endoscopy Lower Airway). Commenters responding to the CY 2014 OPPS/ASC proposed rule had recommended thatCMS split the procedure codes assigned

to APC 0415 into two levels of lower airw ay endoscopy APCs. We did not split APC 0415 into two levels for CY 2014, as the commenters suggested, because the geometric

mean costs would have been based on a rela tively low volume of single frequency claims and would have potentially effectuated APC and cost volatility (78 FR 74996). In the CY 2015 OPPS/ASC proposed rule, we did notpropose any changes to the composition

of APC 0415. There were not a ny violations of the 2 times rule for the services assigned

to APC 0415 based on claims data available for the proposed rule. The proposed geometric mean cost of APC 0415 was approximately $2,368.

Comment: Several commenters recomme nded that CMS create a Level III Lower Airway Endoscopy APC and assign the procedur e codes currently assi gned and proposed for continued assignment to APC 0415 to th is newly created APC based on geometric mean costs, procedure complexity, and clini cal similarity. Specifically, one commenter recommended that CMS assign CPT code 31647 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when pe rformed; with ball oon occlusion, when performed, assessment of air leak, airway si zing, and insertion of bronchial valve(s),CMS-1613-FC 378

initial lobe) to the recommended Level III APC. Another commenter recommended that CMS assign CPT code 31626 (Bronchoscopy, rigi d or flexible, incl uding fluoroscopic guidance, when performed; with placement of fiducial markers, single or multiple) to the recommended Level III APC. One commenter recommended that seven specific procedure codes be assigned to the newly cr eated Level III APC, namely: CPT codes 31634 (Bronchoscopy, rigid or flexible, in cluding fluoroscopic guidance, when performed; with balloon occl usion, with assessment of air leak, with administration of occlusive substance (eg, fibr in glue), if performed), 31638 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with revision of tracheal or

bronchial stent inserted at previous session (includes trac heal/bronchial dilation as required)), 31626, 31631 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with pla cement of tracheal stent(s) (includes

tracheal/bronchial d ilation as required)), 31636 (Br onchoscopy, rigid or flexible, including fluoroscopic guidance, when performe d; with placement of bronchial stent(s) (includes tracheal/bronc hial dilation as require d), initial bronchus), 31660 (Bronchoscopy, rigid or flexible, including fluor oscopic guidance, when performed; with bronchial thermoplasty, 1 lobe), and 31661 (B ronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with bronchial thermoplasty, 2 or more lobes).

The commenters believed that a new Leve l III Lower Airway Endoscopy APC would more accurately reflect the cost s of expensive lower airway procedures that utilize new technologies. Response: We believe that there is consider able clinical similar ity in regard to the procedures assigned to APC 0415. All of th e procedures are lowe r airway bronchoscopyCMS-1613-FC 379

procedures and are generally clinically more complex than the lower airway endoscopy procedures assigned to APC 0076 (Level I Endoscopy Lower Airway). We do not believe that the range of costs for the significant procedures assigned to APC 0415

warrants the creation of a Level III lower airway endoscopy APC. The final rule geometric mean cost for APC 0415 is approxi mately $2,341. Several of the procedures

that the commenters recommended for assi gnment to the recommended Level III APC have final rule geometric mean costs comp arable to the geometric mean cost of APC 0415. For CY 2015, CPT code 31634 has a final geometric mean cost of approximately $1,539; CPT code 31638 has a final geometric mean cost of approximately $2,320; and CPT code 31626 ha s a final geometric mean cost of approximately $2,897. The other CPT codes recommended by the commenters have somewhat higher approximate geometric mean costs, namely: CPT code 31631 (which has a geometric mean cost of approximately $3,488), CPT code 31661 (which has a geometric mean cost of approximately $3,789), CPT code 31660 (which has a geometric mean cost of approximately $3,840), and CP T code 31636 (which has a geometric mean cost of approximately $4,090). Assigning any of these procedures to APC 0415 does not

create a violation of the 2 times rule when compared to the geometric mean cost of the lowest significant procedure assigned to th is APC, CPT code 31629 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, wh en performed; with transbronchial needle aspiration biopsy(s), trachea, main stem and/or lobar bronchus(i)), which is approximately $2,186. Among the procedures discussed above, CPT codes 31626 and 31660 describe the only significant procedur es assigned to this APC and are the procedures that we would normally apply the 2 times rule provisions. There are not anyCMS-1613-FC 380

violations of the 2 times rule in regard to these procedures’ cost s. Although CPT code 31647 has a considerably higher geometric m ean cost of approximately $5,373 based on 11 single frequency claims, it is not a significant procedure. We would not reassign this procedure to another APC based on a viol ation of the 2 times rule. Moreover, considering the final rule claims data for th e five highest cost pr ocedures assigned to APC 0415, the total number of single frequency claims is 649. The possible composition of a Level III lower airway endoscopy AP C would still be based on a low volume of claims, similar to the low volume of claims in regard to the Level III lower airway endoscopy APC recommended by the commenters in CY 2014. As we stated in the

CY 2014 OPPS/ASC final rule with co mment period, a low-volume APC would contribute to the APC’s cost volatility, which in turn contributes to payment volatility for the procedures assigned to th e low-volume APC (78 FR 74996). After consideration of the public comments we received regarding the composition of APC 0415, we are finalizing our proposal to continue the assignment of the procedure codes that ha ve been historically assigned to APC 0415 for CY 2015. However, for CY 2016, we will explore possibl e changes to the lower airway endoscopy APCs as a part of our broader efforts to t horoughly review, revise, and consolidate APCs to improve both clinical and resource hom ogeneity. The CY 2015 final geometric mean cost of APC 0415 is approximately $2,341.

9. Other Services a. Epidermal Autograft (APC 0327)

In the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT code 15110 to APC 0329 (Level IV Skin Repai r), with a payment rate of approximatelyCMS-1613-FC 381

$2,260. The payment rate for CPT code 15110 was derived from the latest hospital outpatient claims data used for the CY 2014 ratesetting, which showed a geometric mean cost of approximately $2,174 based on 10 singl e claims (out of 29 total claims ).

As stated in section III.B. of this fi nal rule with comment period, we review, on an annual basis, the APC assignments for all services and items pa id under the OPPS. Analysis of the latest hospital outpatien t claims data available for the CY 2015 OPPS/ASC proposed rule showed a geomet ric mean cost for CPT code 15110 of approximately $774 based on 90 single claims (outof 122 total claims). Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40987) , we proposed to reassign CPT code 15110 from APC 0329 to APC 0327 (Level II SkinProcedures), which has a geometric mean cost of approximately $451. We belie ve that APC 0327 is the most appropriate APC assignment for CPT code 15110 when consider ing the similarities in relation to the other procedures assigned to this APC. In addition, we proposed to revise the APC titles for the four skin repair APCs (79 FR 40987). Specifically, we proposed to rename APC 0326 from “Level I Skin Repair” to “Level I Skin Procedures,” APC 0327 from “Level II Skin Repair” to “Level II Skin Procedures,” APC 0328 from “Level III Skin Repair” to “Level III Skin Procedures,” and APC 0329 from “Level IV Skin Repair” to “Level IV Skin Procedures.” Table 28 of the proposed rule (79 FR 40987) showed the long descriptor, as well as the proposed CY 2015 APC and status i ndicator assignment for CPT code 15110. The proposed CY 2015 payment rate for CPT code 15110 can be found in Addendum B to the proposed rule (which is available vi a the Internet on the CMS Web site).CMS-1613-FC 382

Comment: Several commenters requested that CMS reevaluate the claims data for CPT code 15110, and recommended that CM S not finalize the proposal to reassign the procedure code to APC 0327. The commente rs stated that the procedure described by CPT code 15110 allows patients with chroni c or non-healing wounds to recover much

sooner and without the use of e xpensive surgical interventions, which has resulted in cost savings for hospitals, patients, and payers . Other commenters suggested that CMS reassign CPT code 15110 to APC 0328 (Level III Skin Procedures), which has a proposed CY 2015 payment rate of approximately $1,408. The commenters believed that APC 0328 has clinically similar procedures a nd is more comparable to the geometric

mean costs of CPT code 15110. Another comme nter believed that the low volume of

claims data for CPT code 15110 is attributab le to providers and hospitals miscoding the performance of the service by not including the cost of the device. Response: We reviewed the histori cal claims data for CPT code 15110, dating back to CY 2008, which is the first year that cl aims data for this code became available. As listed in Table 23 below, for CY 2008 through CY 2013, the payment rate for CPT code 15110 has ranged between $288.30 and $393.38 based on a range of single claims between 3 and 8. In addition, for the CY 2014 update, which was based on hospital outpatient claims data that were submitted between January 1, 2012, and December 31, 2012, and processed on or befo re June 30, 2013, the payment rate for CPT code 15110 was significantly higher (a pproximately $2,260.46) based on 10 single claims. However, as has been our practi ce since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. Based on the la test hospital outpatient claims data usedCMS-1613-FC 383

for this final rule with comment period, our analysis does not support the continued assignment of CPT code 15110 to APC 0329, which is the APC to which the procedure was assigned during CY 2014, or the suggested APC 0328. We examined the latest hospital outpatient claims dat a for CPT code 15110 for dates of service between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014. Our analysis of t he claims data shows a geometr ic mean cost for CPT code 15110 of approximately $748 based on 127 single claims (ou t of 165 total claims). We do not believe that A PC 0328 is the most appropria te APC assignment because the geometric mean cost for this APC is approximately $ 1,460, which is significantly higher than the geometric mean cost for CPT code 15110, which is approximately $748. Assigning CP T code 15110 to APC 0328 would result in an overpayment for the service prov ided. We believe that APC 0327 is the most appropriate APC assignment for C PT code 15110 based on clinical homogeneity to the other skin-related procedures assigned to this APC.

TABLE 23.—HISTORICAL AND CURRENT OPPS CLAIMS AND PAYMENT INFORMATION FOR CPT CODE 15110

Calendar Year (CY) OPPS Payment Rate Single Claims Total Claims 2008 $288.30 3 16 2009 $292.68 3 15 2010 $299.19 8 22 2011 $319.74 5 16 2012 $344.98 4 19 2013 $393.38 4 30 2014 $2,260.46 10 29 2015 $429.95 127 165CMS-1613-FC 384

Further, based on our analysis of the CY 2013 hospital outpatient claims data used for this final rule with comment period, we are unable to determine whether hospitals are miscoding claims reporting this se rvice. For all APCs whose payment rates are based upon relative payment weights, we note that the quality and accuracy of reported units and charges influence the geometric mean costs that are the basis for our payment rates, especially for low-volume ite ms and services. Beyond our standard OPPS trimming methodology (described in section II. A.2. of this final rule with comment period) that we apply to those claims that have passed various types of claims processing edits, it is not our general policy to determine the accura cy of hospital coding and charging practices for purposes of ratesetti ng (75 FR 71838). We rely on hospitals to bill all HCPCS codes accurately in accordance with their code descriptors and CPT and CMS instructions, as applicable, and to report ch arges on claims and charges and costs on their Medicare hospital cost report appropriately. In addition, we do not specify the methodologies that hospitals must use to se t charges for this or any other service.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to reassign CPT code 15110 to APC 0327 for CY 2015. The final payment rate for CPT code 15110 can be found in Addendum B to this final rule with comment period, which is availa ble via the Internet on the CMS Web site. b. Image-Guided Breast Biopsy Procedures and Image-Guided Abscess Drainage Procedures (APCs 0005 and 0007) For the CY 2014 OPPS update, the AMA’ s CPT Editorial Panel deleted the image-guided breast biopsy CPT codes 19102 and 19103 and replaced these procedure

codes with six new CPT codes that “bundled” payment for associated imaging services,CMS-1613-FC 385

effective January 1, 2014. As shown in Table 23 of the proposed rule (79 FR 40983), CPT codes 19102 and 19103 described percutane ous image-guided breast biopsies using specific devices. Specifically, CPT code 19102 described a breast biopsy performed using a core needle, and CPT code 19103 de scribed a breast biopsy performed using either a vacuum-assisted or rotating device. In CY 2013, to appropriately report the performance of an image-guided breast biopsy using a core needle, an automated v acuum-assisted device, or a rotating biopsy device, multiple procedure codes were required to identify the specific service performed. That is, a procedure code describing the device-related breast biopsy procedure was required to be reported in combination with the procedure code describing the

localization device used duri ng the procedures, as well as the specific image-guidance procedure codes describing the imaging servi ce. Table 23 of the proposed rule showed how image-guided breast biopsy procedures we re reported prior to CY 2014. Table 23 of the proposed rule also showed the CY 2013 OPPS status indicators, APC assignments, and payment rates for the breas t biopsy procedure codes, th e localization devices used during the procedures, and th e specific image-guidance pr ocedure codes describing the imaging service. For the CY 2014 OPPS update, the AMA’ s CPT Editorial Panel grouped the multiple procedures that describe these im aging services into single comprehensive service codes; specifically, CPT codes 19081, 19082, 19083, 19084, 19085, and 19086. Table 24 of the proposed rule showed the si x new CPT codes that replaced obsolete CPT codes 19102 and 19103. These comprehensiv e breast biopsy procedure codes are differentiated based on the use of specifi c imaging-guidance devices--specificallyCMS-1613-FC 386

imaging services performed using stereo tactic guidance, ultrasound guidance, or magnetic-resonance guidance. As has been our practice since the implementation of the OPPS in 2000, we review all new procedure codes before assigni ng the codes to an APC. Consistent with our longstanding policy for the treatment of new codes, we assigned these new replacement CPT codes to interim APCs for CY 2014. Based on our understanding of the resources required to furnish the service as defined in the code de scriptor, as well as input from our medical advisors, we assigned replacement CPT codes 19081, 19083, and 19085 to APC 0005 (Level II Needle Biopsy/As piration Except Bone Marrow) for the CY 2014 OPPS update. In addition, we assigned new CPT codes 19081, 19083, and

19085 to comment indicator “NI” in Addendu m B to the CY 2014 OPPS/ASC final rule with comment period (which is available via th e CMS Web site) to indicate that the codes were new with an interim APC assignment thatwas subject to public comment. We note that, for the CY 2014 OPPS update, we finalized our policy to package all add-on codes (except those for drug administration), effec tive January 1, 2014. Consequently, payment for replacement CPT codes 19082, 19084, and 19086, which describe add-on procedures, was packaged for CY 2014. At the Panel’s March 10, 2014 meeti ng, one presenter requested that CMS reassign comprehensive CPT codes 19081, 19083, and 19085 from APC 0005 (Level II Needle Biopsy/Aspiration Except Bone Marrow), which has a CY 2014 OPPS payment rate of $702.08, to APC 0037 (Level IV N eedle Biopsy/Aspiration Except Bone Marrow), which has a CY 2014 OPPS payment rate of $1,223.25. The presenter indicated that it is inappropriate to comb ine all of the new replacement CPT codes intoCMS-1613-FC 387

one APC without regard for the imaging m odality or device used to perform the procedure. The presenter also requested th at CMS maintain the historic assignment of the predecessor CPT codes cost data until claims data become available for the new comprehensive CPT codes. The Panel agreed with the presenter and recommended that CMS reassign the new replacement comprehensive CPT codes, as the presenter suggested. In light of the public presentati on, the Panel’s recommendation, and our longstanding policy of reviewing, on an a nnual basis, the APC assignments for all services and items paid under the OPPS, we evaluated the geometric mean costs associated with all of the pr ocedures assigned to the exis ting four needle biopsy APCs, specifically, APCs 0004 (Level I Needle Biopsy/Aspiration Except Bone Marrow), 0005, 0685 (Level III Needle Biopsy/Aspiration Except Bone Marrow), and 0037. In the CY 2015 OPPS/ASC proposed rule (79 FR 40984) , based on our review of the latest hospital outpatient claims data available for the proposed rule, we proposed to reassign all of the procedures assigned to APCs 0685 and 0037 to either APC 0004 or APC 0005 based on clinical and resource homogeneity. If CMS finalizes this proposed revision, there would be no procedures assigned to APCs 0685 or 0037. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40984), we proposed to delete APCs 0685

and 0037 for CY 2015. Consequently, for the CY 2015 OPPS update, we proposed to only use two needle biopsy APCs, specifically, APCs 0004 and 0005. The proposed reassignment of all of the procedures assigned to APCs 0685 and 0037 results in increased payment rates for both APCs 0004 and 0005. For CY 2015, the pr oposed payment rate for APC 0004 isCMS-1613-FC 388

approximately $494, which is 20 percent highe r than the CY 2014 OPPS payment rate of approximately $411. Similarly, the proposed payment rate for APC 0005 is approximately $1,062, which is 51 percent hi gher than the CY 2014 OPPS payment rate of approximately $702. Theref ore, we proposed to conti nue to assign CPT codes 19081, 19083, and 19085 to APC 0005 for the CY 2015 OPPS update (79 FR 40985). In addition, we proposed to continue to package payment for add-on CPT codes 19082, 19084, and 19086 under the OPPS for CY 2015, consistent with our packaging policy for add-on codes that was implemented on January 1, 2014. Because we proposed to delete APC 0037 we believe that the proposed increased payment rate for APC 0005 is

consistent with the Panel’s recomme ndation to reassign CPT codes 19081, 19083, and 19085 to an appropriate APC ba sed on resource utilization and clinical coherence. Comment: Commenters supported CMS’ proposal to continue to assign CPT codes 19081, 19083, and 19085 to APC 0005. The commenters stated that the assignment of these CPT codes to APC 0005 is clinically coherent and more accurately captures the resource cost associated with pr oviding these services when compared to the CY 2014 APC assignment. Response: We appreciate the commenters’ support.

Comment: Some comment ers expressed concern re garding the inadequate payment for ancillary services associated with multiple biopsies that may be performed

on the same date of service. The commenter s indicated that patients sometimes present with multiple lesions, which requires a biopsy of each lesion. According to the commenters, prior to the establishment of the comprehensive CY 2014 breast biopsy CPT codes, hospitals would report each biopsy, im aging guidance, and marker or localizationCMS-1613-FC 389

placements separately. The commenters reque sted that CMS provide guidance on how to report multiple biopsies performed on the same date of service. Response: We expect hospitals to repor t the performance of breast biopsies using the comprehensive breast biopsy CPT codes, consistent with the latest CPT coding guidelines. As stated in the CY 2014 CPT code book, imag e-guided breast biopsies, including the placement of localization devi ces when performed, are reported using the comprehensive breast biopsy CPT codes 19081 through 19086. Image-guided placement

of localization devices withoutthe performance of a biopsy are required to be reported using CPT codes 19281 through 19288. In addition, when more than one biopsy is performed using the same imaging modality, hos pitals are required to report each biopsy using an add-on code. However, if more th an one biopsy is performed using different imaging modalities, hospitals are required to report a separate primary code for each additional imaging modality. We note that it is extremely important that hospitals use all of the required HCPCS codes to report the performance of all services they furnish, consistent with the code descriptors, CPT and/or CMS instruc tions, and correct codi ng principles, whether payment for the services is made separate ly or packaged. The accuracy of the OPPS payment rates depends on the quality and comp leteness of the claims data that hospitals submit for the services they furn ish to Medicare beneficiaries. After consideration of the public comments we received, we are finalizing our proposal to continue to assign CPT codes 19081, 19083, and 19085 to APC 0005 for CY 2015. In addition, we are finalizing our proposal to continue to package payment for add-on CPT codes 19082, 19084, and 19086 under the OPPS for CY 2015, consistentCMS-1613-FC 390

with our packaging policy for add-on codes that was implemented on January 1, 2014. Furthermore, we are finalizing our proposal to delete APC 0037 because we believe that the proposed increased payment rate for AP C 0005 is consistent with the Panel’s recommendation to reassign CPT codes 19081, 19083, and 19085 to an appropriate APC

based on resource utilization a nd clinical coherence. Tabl e 24 below shows the final status indicators, APC assignments, and payment rates for the image-guided breast biopsy CPT codes 19081 through 19086.

TABLE 24.— FINAL CY 2015 APCs TO WHICH IMAGE-GUIDED BREAST BIOPSY PROCEDUR E CODES ARE ASSIGNED

CPT Code Long Descriptor CY 2014

SI CY 2014 APC CY 2014 Paymen t Final CY 2015

SI Final CY 2015 APC Final CY 2015 Payment

19081 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; first lesion, including stereotactic guidance T 0005 $702.08 T 0005 $1,052.22

19082 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; each additional lesion, including stereotactic guidance (List separately in addition to code for primary procedure) N N/A N/A N N/A N/ACMS-1613-FC 391

CPT Code Long Descriptor CY 2014

SI CY 2014 APC CY 2014 Paymen t Final CY 2015

SI Final CY 2015 APC Final CY 2015 Payment

19083 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; first lesion, including ultrasound guidance T 0005 $702.08 T 0005 $1,052.22

19084 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; each additional lesion, including ultrasound guidance (List separately in addition to code for primary procedure) N N/A N/A N N/A N/A

19085 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; first lesion, including magnetic resonance guidance T 0005 $702.08 T 0005 $1,052.22

19086 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; each additional lesion, including magnetic resonance N N/A N/A N N/A N/ACMS-1613-FC 392

CPT Code Long Descriptor CY 2014

SI CY 2014 APC CY 2014 Paymen t Final CY 2015

SI Final CY 2015 APC Final CY 2015 Payment guidance (List separately in addition to code for primary procedure)

In addition to the proposal to maintain the APC assignment of the breast biopsy comprehensive CPT codes to APC 0005, we al so discussed in th e CY 2015 OPPS/ASC proposed rule our proposal to reassign CPT code 10030 from APC 0006 (Level I Incision & Drainage) to APC 0007 (Lev el II Incision and Drainage). We note that, for the CY 2014 OPPS update, the AMA’s CPT Editorial Panel established CPT code 10030 to report the bundled serv ice of image-guided fluid collection drainage by catheter for percutaneous soft tissue, and CPT code 49407 to report the bundledservice of imageguided fluid collection drainage by catheter for peritoneal, retr operitoneal, transvaginal or transrectal collections, effective January 1, 2014. As shown in Table 25 of the CY 2015 OPPS/ASC proposed rule, which showed the long descriptors for CPT codes 10030 and 49407, and as listed in Addendum B to the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT code 10030 to APC 0006, with a payment rate of $159.66 and CPT code 49407 to APC 0685, with a payment rate of $757.76. As listed in

Addendum B to the CY 2014 OPPS/ASC final ru le with comment period, both procedure codes were assigned to comment indicator “NI” to indicate th at the codes were new codes and assigned interim APC and status indicato r assignments that were subject to public

comment. At the Panel’s March 10, 2014 meeti ng, one presenter requested that CMS reassign CPT codes 10030 and 49407 from APC 0006 and APC 0685, respectively, toCMS-1613-FC 393

APC 0037 (Level IV Needle Biopsy/Aspira tion Except Bone Marrow), which has a CY 2014 OPPS payment rate of $1,223.25. The commenter noted that similar procedures also are assigned to APC 0037. Specificall y, the presenter indi cated that all the image-guided fluid collection drainage proced ures should be treate d as one clinically cohesive group and assigned to APC 0037. The Panel agreed with the presenter and recommended that CMS reassign CPT code 49407 to APC 0037. However, the Panel did not agree with the presenter that CPT code 10030 would be more appropriately assigned to APC 0037. Rather, the Panel believed th at the most appropriate APC assignment for CPT code 10030 would be APC 0007. We agre ed with the Panel’s recommendation that CPT code 10030 should be assigned to AP C 0007. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40986), we proposed to reassign CPT code 10030 from APC 0006 to APC 0007 for the CY 2015 OPPS update. In light of the Panel’s recommendation to reassign CPT code 49407 and the image-guided breast biopsy procedures to APC 0037 and APC 0007, resp ectively, and our longstanding policy of reviewing, on an annual basis, the APC assignm ents for all services and items paid under the OPPS, we evaluated the geometric meancosts associated with the procedures assigned to the existing four needle biopsy AP Cs, as previously stated, and proposed to reassign the procedures assigned to AP Cs 0685 and 0037 to either APC 0004 or APC

0005 based on clinical and res ource homogeneity and to delete APCs 0685 and 0037 for CY 2015. Specifically, we proposed to reassign CPT code 49407 from APC 0685 to APC 0005 for CY 2015, and to delete APCs 0037 and 0685. Table 25 of the proposed rule also showed the long descriptors for CPT codes 10030 and 49407, and their proposed status indicator and APC assignm ents for the CY 2015 OPPS update. TheCMS-1613-FC 394

proposed CY 2015 payment rate for CPT codes 10030 and 49407 can be found in Addendum B to this CY 2015 OPPS/ASC propos ed rule (which is available via the Internet on the CMS Web site).

Comment: Some comment ers recommended that CMS reassign CPT code 10030

from APC 0006 to APC 0005. The commenters stated that, according to an internal analysis, CPT code 10030 is comparable w ith respect to clinical and resource

characteristics and costs to the other absce ss drainage procedures assigned to APC 0005. Response: In light of the Panel’s reco mmendation to reassign the procedure to APC 0007 and because CPT code 10030 is a new code for CY 2014, we are not accepting the commenters’ suggestion to assign this procedure to APC 0005. Rather, we are reassigning CPT code 10030 from APC 0006 to APC 0007 for the CY 2015 OPPS update, as recommended by the Panel. We note that we will have CY 2014 hospital claims data available for CPT codes 10030 and 49407 in preparat ion for the CY 2016 OPPS rulemaking. At that time, we will reevaluate the APC assi gnments for all the abscess drainage CPT codes. Therefore, after consideration of th e public comments we received, we are finalizing our proposal, without modificat ion, to reassign CPT code 10030 from APC 0006 to APC 0007. In addition, we are finalizing our proposal to reassign the procedures assigned to APCs 0685 and 0037 to either APC 0004 or APC 0005 based on clinical and resource homogeneity. Because there would be no other procedures assigned to APCs 0685 and 0037 as a result of this reassignment, we are finalizing our proposal to delete APCs 0685 and 0037 for CY 2015. The final CY 2015 payment rate for CPT codesCMS-1613-FC 395

10030 and 49407 can be found in Addendum B to this CY 2015 OPPS/ASC final rule (which is available via the Internet on the CMS Web site). c. Negative Pressure Wound Therapy (NPWT) (APCs 0012, 0013, 0015 and 0016) For CY 2015, we proposed to assign all of the NPWT services to APC 0015 (Level II Debridement & Destruction), with a proposed payment rate of $141.66. We proposed to continue to assign CPT code 97606 (Negative pressure wound therapy (eg, vacuum assisted drainage collection), includ ing topical applicatio n(s), wound assessment, and instruction(s) for ongoing care, per session; total wound( s) surface area greater than 50 square centimeters) to APC 0015. In addition, for the CY 2015 OPPS update, we proposed to reassign CPT code 97605 (Nega tive pressure wound therapy (eg, vacuum assisted drainage collection), including t opical application(s), wound assessment, and instruction(s) for ongoing care, per session; to tal wound(s) surface area less than or equal to 50 square centimeters) from APC 0013 (L evel II Debridement & Destruction), the APC to which the procedure is assigned for CY 2014, to APC 0015. As listed in Table 29 of the CY 2015 OPPS/ASC proposed rule (79 FR 40916), we also proposed to reassign HCPCS codes G0456 (Negative pressure wound therapy (eg. vacuum assisted drainage collection) using a mechanica lly-powered device, not durable medical equipment, including provision of cartridge and dressing(s), topical application(s), wound assessment, and instructions for ongoing care, per session; total wounds(s) surface area less than or equal to 50 squa re centimeters) and G0457 (Neg ative pressure wound therapy (eg. vacuum assisted drainage collection) using a mechanically-powered device, not durable medical equipment, including provisi on of cartridge and dr essing(s), topical application(s), wound assessment, and instru ctions for ongoing care, per session; totalCMS-1613-FC 396

wounds(s) surface area greater than 50 squa re centimeters) from APC 0016 (Level III Debridement & Destruction) to APC 0015. We note that CPT codes 97605 and 97606 became effective on January 1, 2005, and describe the type of NPWT services th at employ durable medical equipment (DME). Alternatively, HCPCS codes G0456 and G0457, which are relatively new codes that became effective on January 1, 2013, were established by CMS to provide a payment mechanism for NPWT services furnished using disposable supplies instead of DME. We proposed to maintain the assignment of st atus indicator “T” to these two codes. For the CY 2013 OPPS update, we assigned CPT code 97605 to APC 0013 (Level II Debridement & Destruction), with a payment rate of $71.54 and CPT code 97606 to APC 0015 (Level III Debridement & Destruction), with a payment rate of $106.96. In addition, we assigned HCPCS codes G0456 and G0457 to APC 0016 (Level IV Debridement & Destruction), with a payment rate of $209.65. For the CY 2014 OPPS update, we con tinued to assign CPT code 97605 to

APC 0013 and CPT code 97606 to APC 0015. We also continued to assign HCPCS codes G0456 and G0457 to APC 0016, with a pa yment rate of $274.81. We note that we

stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75001) that some commenters requested the reassignm ent of HCPCS codes G0456 and G0457 to a higher paying APC, with a payment rate specifically ranging between $450 and $500. The commenters believed that a higher paying APC would be more reflective of the cost of providing NPWT services using disposable supplies. We further stated that because HCPCS codes G0456 and G0457 were new codes for the CY 2013 OPPS update, we expected to have claims data available for these codes during the CY 2015 rulemakingCMS-1613-FC 397

cycle and, at that time, we would reevaluate the APC assignments for these services in preparation for the CY 2015 OPPS update. For the CY 2015 OPPS update, we analyzed the latest hospital outpatient claims

data available for the CY 2015 OPPS/ASC proposed rule, which was based on claims submitted between January 1, 2013 and December 31, 2013, and processed on or before December 31, 2013. The data indicated that the geometri c mean cost of APC 0013 was comparable to the geometric mean cost of APC 0015. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40988), we proposed to combine these APCs by reassigning all of the procedures from APC 0013 to APC 0015; delete APC 0013, and retain APC 0015 for the CY 2015 OPPS update. In addition, we proposed to rename the Debridement and Destruction APC series (e xcluding APC 0012) as follows: APC 0015 (Level II Debridement and Destruction) ; APC 0016 (Level III Debridement and Destruction); and APC 0017 (Level IV Debridement and Destruction). Furthermore, the CY 2013 claims data available for the proposed rule also indicated that the geometric mean cost for HCPCS code G0456 was approximately $152 based on 4,509 single claims (out of 5,772 to tal claims), and approximately $193 for HCPCS code G0457 based on 386 single claims ( out of 591 total claims). The claims data also showed that the geometric mean cost for CPT code 97605 was approximately $101 based on 58,901 single claims (out of 75,378 total claims), and approximately $140 for CPT code 97606 based on 6,722 single claims (out of 9,063 total claims). The proposed geometric mean costs of HCPCS codes G0456 and G0457, and CPT codes 97605 and 97606 were all comparable to the proposed geometric mean cost for APC 0015 of approximately $148. Based on analysis of the most recent claims data availableCMS-1613-FC 398

for the proposed rule, we stated that we be lieved that the most appropriate assignment for

all of the NPWT services was APC 0015 based on the clinical and resource homogeneity of the services assi gned to this APC. The next hig her cost APC in the series, APC 0016, had a proposed geometric mean cost of approxi mately $284, which was significantly higher than the proposed geometric mean cost of any of the

NPWT services. Therefore, in the CY 2015 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 97606 to APC 0015, reassign CPT code 97605 from APC 0013 to APC 0015, and reassign HCPC S codes G0456 and G0457 from APC 0016 to APC 0015 for the CY 2015 OPPS update. Comment: Most commenters requested that CMS continue to assign the disposable NPWT HCPCS codes G0456 a nd G0457 to APC 0016 for the CY 2015 OPPS update, which is the same APC to which th ese services are assigned for CY 2014. The commenters believed that hospitals may have miscoded claims reporting these services and, consequently, the CY 2015 proposed pa yment rate of approximately $142 for

HCPCS codes G0456 and G0457 is insufficient because the CY 2013 OPPS claims data do not accurately capture the cost of the dispos able supplies that is included in providing

the service. One commenter stated that the cost of the disposable NPWT supplies range between $200 and $700 per case. The commente r provided copies of individual invoices that were forwarded to various hospitals fr om the manufacturer that showed a cost of approximately $220 for one disposable NPWT system. In addition, based on its analysis of charges reported by hospitals, the comme nter believed that hospitals failed to understand the differences between the type of NPWT services that employ DME, which are described by CPT codes 97605 and 97606, and th e type of disposable NPWT servicesCMS-1613-FC 399

described by HCPCS G-codes. The commenter stated that, acco rding to its data analysis, there was no difference in hospital charges fo r the two types of NPWT services reported on claims. The commenter believed that hospitals miscoded these claims because they may have believed that the se rvices described by the CPT codes for the type of NPWT

services that use DME are similar to the se rvices described by the disposable NPWT HCPCS G-codes. Several commenters explai ned that the cost of the type of NPWT

services that use DME does not include the cost of the devices and supplies that are used to provide the services described by the HCPCS G-codes. The commenter speculated that, although it appeared that hospitals did no t include the cost of the disposable devices when reporting their charges for the services described by the dis posable NPWT HCPCS G-codes, hospitals should have included su ch costs. Therefore, the commenters urged CMS to continue to assign HCPCS c odes G0456 and G0457 to APC 0016 for the CY 2015 OPPS update. Response: Based on the signi ficant number of claims that are available for this final rule with comment period, we believe that APC 0015 best reflects the clinical

characteristics and resource costs of HCPC S codes G0456 and G0457. In addition, we do not believe that continuing to assi gn HCPCS codes G0456 and G0457 to APC 0016 would be appropriate for CY 2015. Our analysis of the latest hosp ital outpatient claims

data available for this CY 2015 OPPS/ASC fi nal rule with comment period, which is based on claims submitted between January 1, 2013 and December 31, 2013, and processed on or before June 30, 2014 , indicates that the geomet ric mean costs for both HCPCS codes (G0456 and G0457) are very sim ilar to the geometric mean cost of APC 0015. Specifically, our latest hospital outpatie nt claims data for this final rule withCMS-1613-FC 400

comment period show a geometric mean co st of approximately $158 for HCPCS code G0456 based on 5,198 single claims (out of 6,645 total claims), which is close to the geometric mean cost of APC 0015, which is approximately $152. Similarly, our claims data show a geometric mean cost of a pproximately $202 for HCPCS code G0457 based on 476 single claims (out of 676 total claims), wh ich is also closer to the geometric mean cost of APC 0015, which is approximately $152 than the geometric mean cost of APC 0016, which is approximately $294. In addition, we are not convinced that hos pitals are reporting the same charges for the two types of NPWT servic es (DME-based and disposable) because a review of the latest claims data shows that the geometri c mean costs for the most highly utilized procedures described by HC PCS code G0456 (geometric mean cost of approximately $158) and CPT code 97605 (geometric mean cost of approximately $101) are significantly different. This difference in cost s captured in the clai ms data demonstrates that hospitals are not reporting identical charges for the different types of NPWT services, DME and disposable-based. Furthe rmore, we note that for all APCs whose payment rates are based upon relative payment weights, the quality and accuracy of reported units and charges influence the geometric mean costs that are the basis for our payment rates, especially for low volume items and services. However, beyond our standard OPPS trimming methodolog y (described in section II.A.2. of this final rule with comment period) that we apply to those claims that have pa ssed various types of claims processing edits, it is not our general policy to judge the accuracy of hospital coding and charging for purposes of ratesetting (75 FR 71838). We rely on hospitals to bill all HCPCS codes accurately in accordance with their code descriptors and CPT and CMSCMS-1613-FC 401

instructions, as applicable, and to report ch arges on claims and charges and costs on their Medicare hospital cost reports appropriately. In add ition, we do not specify the methodologies that hospitals must use to set charges for this or any other service. Therefore, based on the latest hospital outpatient claims data available for this final rule with comment period, we believe that APC 0015 best reflects the clin ical characteristics

and resource costs of HCPCS codes G0456 and G0457.

Comment: One commenter recommended that CMS make certain changes to APCs 0015 and 0016. Specifically, the commenter recommended that CMS lower the geometric mean cost for APC 0016 to $190, wh ich would result in reassigning certain codes that were in APC 0015 whose geometric mean cost met or exceeded this amount to

APC 0016. This commenter stated that suchreassignment would retain HCPCS codes

G0456 and G0457 in APC 0016. Response: We believe that the propos ed structures of APCs 0015 and 0016 (aside from the few code reassignments that are being made for the purpose of resolving a

violation of the 2 times rule in APC 0015 that are discussed below) are optimal in terms

of clinical and resource ho mogeneity. The geometric mean cost range for significant procedures assigned to APC 0015 is between approximately $110 (for CPT code 17250) and approximately $201 (for CPT code 11100). The geometric mean cost range for significant procedures assigned to APC 0016 is between approximately $230 (for CPT code 17282) and approximately $368 (for CP T code 11043). Reassi gning HCPCS code

G0456 from APC 0015 to APC 0016 would eitherviolate the 2 times rule in APC 0016 or necessitate dividing APC 0016 into two APCs , which we do not believe is appropriate or necessary. Both of these options are undesi rable, especially give n that the geometricCMS-1613-FC 402

mean cost of HCPCS code G0456 (approximate ly $158) is comparable to the geometric mean cost of APC 0015 (approximately $152). In summary, based on the latest claims da ta used for this final rule with comment period, we believe that HCPCS codes G0456 and G0457 are appropria tely assigned in APC 0015 for the CY 2015 update based on the clin ical and resource similarity to the other procedures in APC 0015. As has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. We will ag ain review the APC assignments for all the NPWT services in light of th e CY 2014 claims data and th e proposed APC structures for clinically relevant APCs and determine wh ether an APC reassignment for any of the NPWT codes would be appropria te in the CY 2016 rulemaking. In addition, in the CY 2015 OPPS/ASC propos ed rule, there were violations of the 2 times rule noted for both APCs 0012 and 0015 (79 FR 40981). Every year we make every effort to minimize the number of APCs that are listed as exceptions to the 2 times rule. To resolve the violations of the 2 times rule in APCs 0012 and 0015, we are making the following code reassignments:

● CPT codes 11719, 11720, 11721, 11740, and 17340, and HCPCS code G0127

from APC 0012 to APC 0340.

● CPT codes 11901, 12014, 96920, and 97605 from APC 0015 to APC 0012. These code reassignments eliminated the 2 times rule violations that existed in

APCs 0012 and 0015 in the CY 2015 OPPS/ASC proposed rule. We note that APC 0012 is one of the APCs included in the ancillary se rvices packaging policy that is discussed in section II.A.3.c.(1) of this final rule w ith comment period. Because CPT code 97605 isCMS-1613-FC 403

assigned to APC 0012, the code wi ll be conditionally packaged and assigned to status indicator “Q1” for CY 2015.

After consideration of th e public comments we received , we are finalizing our CY 2015 proposal, with modificat ion. Specifically, we are fina lizing our proposal to assign CPT code 97606 and HCPCS c odes G0456 and G0457 to APC 00 15. However, we are reassigning CPT code 9760 5 from our proposed APC 0015 to APC 0012 for the CY 2015 update to eliminate t he violation of the 2 times ru le that existed in APC

0015 based on claims data avail able for the proposed rule. In addition, for the CY 2015 upda te, the CPT Editorial Panel e stablished two new CPT codes to describe disposable NPWT services and revised the long descriptors for existing CPT codes 97605 and 97606, effective J anuary 1, 2015. Consistent with our general poli cy of using permanent codes rat her than using temporary HCPCS G-codes in order to streamline coding, we are d eleting HCPCS codes G0456 and G0457 because they are replaced with two new CP T codes effective January 1, 2015. Table 25 below shows the replacemen t CPT codes for HCPCS codes G0456 and G0457 as well as the revised long descrip tors for existing CPT codes 97605 and 97606. The final CY 2015 payment rate for the NPWT

services codes can be found in Addendum B to this final rule wi th comment period (which is available via the Inte rnet on the CMS Web site). Lik e all new codes effective January 1, 2015, the A PC assignments for the new disp osable NPWT CPT codes are open for comment for 6 0 days after display of this CY 2015 OPPS/ASC final rule with comment period.

TABLE 25.—FINAL APC ASSIGNMENTS FOR THE NPWT SERVICES FOR CY 2015CMS-1613-FC 404

CY 2014 CPT/ HCPCS

Code CY 2015 CPT Code CY 2015 Long Descriptor Proposed CY 2015 OPPS SI Proposed CY 2015

OPPS APC Final CY 2015 OPPS

SI Final CY 2015 OPPS APC

97605 97605 Negative pressure wound therapy (eg, vacuum assisted drainage collection), utilizing durable medical equipment (DME), 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 T 0015 Q1 0012

97606 97606 Negative pressure wound therapy (eg, vacuum assisted drainage collection), utilizing durable medical equipment (DME), including topical application(s), wound assessment, and instruction(s) for ongoing care, per session; total wound(s) surface area greater than 50 square centimeters T 0015 T 0015CMS-1613-FC 405

CY 2014 CPT/ HCPCS

Code CY 2015 CPT Code CY 2015 Long Descriptor Proposed CY 2015 OPPS SI Proposed CY 2015

OPPS APC Final CY 2015 OPPS

SI Final CY 2015 OPPS APC

G0456 97607 Negative pressure wound therapy, (eg, vacuum assisted drainage collection), utilizing disposable, non-durable medical equipment including provision of exudate management collection system, topical application(s), wound assessment, and instructions for ongoing care, per session; total wound(s) surface area less than or equal to 50 square centimeters T 0015 T 0015

G0457 97608 Negative pressure wound therapy, (eg, vacuum assisted drainage collection), utilizing disposable, non-durable medical equipment including provision of exudate management collection system, topical application(s), wound assessment, and instructions for ongoing care, per session; total wound(s) surface area greater than 50 square centimeters T 0015 T 0015CMS-1613-FC 406

d. Platelet Rich Plasma (PRP) (APC 0327) For CY 2015, we proposed to con tinue to assign HCPCS code G0460 (Autologous platelet rich pl asma for chronic wounds/u lcers, including phlebotomy, centrifugation, and all other pr eparatory procedures, administration and dressings, per treatment) to APC 0327 (Level II Debridemen t & Destruction), with a proposed payment rate of approximately $431. We note that HCPCS code G0460, which became effective July 1, 2013, describes both the procedure and product components associated with the autologous platelet rich plasma service. Comment: One commenter requested that CMS exempt HCPCS code G0460 from the geographic wage index variations to enable hospitals to more willingly participate in the AutoloGel Coverage with Evidence Development (CED) protocols. According to the commenter, HOPDs are relu ctant to enroll in the CED protocols because they are concerned that the proposed APC payment rate will not cover the cost of the product, the procedure, the overhead, and the additi onal administrative effort associated with CED data collection requireme nts. In addition, the commenter requested that CMS establish a final payment rate fo r APC 0327 based on the geometric mean cost of $496.99 to help achieve some stability re garding the payment for the procedures assigned to this APC. Response: We note that comments related to CED protocols or data collection are outside the scope of the proposed rule. W ith regard to the geographic wage index exemption requested by the commenter, we ha ve never made such an exception. Under the hospital OPPS, all procedures and services that include devices are wage adjusted. Moreover, the payment rates for procedur es and APCs are notbased on a specificCMS-1613-FC 407

projected amount. The final payment rate for APC 0327 is based on the geometric mean cost of all the procedures described by th e HCPCS codes assigned to this APC. We believe that the procedure de scribed by HCPCS code G0460 is appropriately assigned to APC 0327 for the CY 2015 OPPS update based on the clinical and resource similarities in relation to the other proce dures assigned to APC 0327. We note that, for this final rule with comment period, which is based on hospital outpatient claims submitted between January 1, 2013, and D ecember 31, 2013, that were proce ssed on or before June 30, 2014, our latest hospit al outpatient claims data show no claims reporting the service described by HCPCS code G0460. As has been our practice since the implementation of the OPPS in 2000, we review, on an annual basis, the APC assignments for the procedures and services paid under the OPPS. We will review the APC assignment for HCPCS code G0460 when su fficient claims data become available to determine whether a reassignment to a more appropriate APC is necessary for the CY 2016 update. After consideration of the public comment we re ceived, we are finalizing our proposal, without modification, to con tinue to assign HCPC S code G0460 to APC 0327 for CY 2015. The final CY 2015 paymen t rate for HCPCS code G0460 can be

found in Addendum B to this CY 2015 OPPS/ASC final rule (which is available via the Internet on the CMS Web site). IV. OPPS Payment for Devices A. Pass-Through Payments for Devices 1. Expiration of Transitional Pass-Through Payments for Certain Devices a. Background Section 1833(t)(6)(B)(iii) of the Act sets forth the period for which a device category eligible for transitional pass-through paymen ts under the OPPS may be in effect. TheCMS-1613-FC 408

implementing regulation at 42 CFR 419.66(g) provi des that this pass-through payment eligibility period begins on the date CMS establishes a pa rticular transitional pass-through category of devices. We may establish a new device categor y for pass-through payment in any quarter, and 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; that is, the date CMS establishes a particular category of devices e ligible for transitional pass-through payments. 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 packag e the costs of the devices that are no longer eligible for pass-through payments into the cost s of the procedures with which the devices are reported in the claims data used to set the pa yment 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.

b. CY 2015 Policy

There currently is one device category e ligible for pass-through payment, which we established effective October 1, 2013: HCPCS code C1841 (Retinal prosthesis, includes all internal and external components). Recognizing th at this device category has been eligible for at least 2 years, but not more than 3 years, of pass- through status by the end of CY 2015, in the CY 2015 OPPS/ASC proposed rule (79 FR 40989), we proposed the expiration of pass-through payment for HCPCS code C1841 devices on December 31, 2015. Therefore, in accordance with our established policy, beginning with CY 2016, we proposed to package the costs of the HCPCS

code C1841 devices into the costs related to the procedures with which the device is reported in the hospital claims data (79 FR 40989 through 40990).CMS-1613-FC 409

Comment: A few commenters requested th at CMS extend the pass-through payment period for the device described by HCPCS code C1841 due to delay of the first date of sale of the device until January 2014. The commenters asserted that the delay was due to various regulatory delays, including the Food and Drug Administrati on’s (FDA’s) Humanitarian Device Exemption (HDE) approval process and Federal Communicati ons Commission (FCC) regulations regarding utilization of a radiofrequency (RF) band approva l. The commenters therefore requested that CMS use the date of the first sale or the date of the first HCPCS code C1841 device implant (January 16, 2014) to “reset” the start date fo r pass-through payment eligibility, which would result in another year of pass-through payment status.

Response: According to 42 CFR 419.66(g ), “CMS limits the eligibility for a passthrough payment established under this section to a pe riod of at least 2 years, but not more than 3

years, beginning on the date that CMS establishes a category of devices ” (emphasis added). We cannot extend the pass-through payment status of HCPCS code C1841 beyond CY 2015 because such an extension would make the pass-throug h payment status effective longer than the maximum 3-year period permitted under 42 CFR 419.66(g). Moreover, the HCPCS code C1841 device category was made effective in the O PPS on October 1, 2013. The HCPCS code C1841 device category will have had more than 2 years of pass-through payment status as of December 31, 2015. Extending pass-through pa yment status through December 31, 2016, as requested by the commenter, would afford the HCPCS code C1841 device category longer than the 3-year maximum pass-through payment period. Therefore, after consideration of the public comments we received, we are finalizing our proposal to expire HCPCS code C1841 device category from pass-through payment status after December 31, 2015. We are finalizing our proposal to package the costs fo r devices described by HCPCS code C1841 into the costs of the procedure with which the device is reported in th e hospital claims data used in the developmentCMS-1613-FC 410

of the OPPS relative payment weights that will be used to establish the ASC payment rates for

CY 2016.

With the expiration of HCPCS code C 1841 device category from pass-through payment status at the end of CY 2015, there are no othe r currently active categories for which we would expire pass-through status in CY 2015. If we create new device categories for pass-through payment status during the remainder of CY 2014 or during CY 2015, we will propose future expiration dates in accordance with 42 CFR 419.66(g).

2. Provisions for Reducing Transitional Pass-th rough 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 hos pital’s charges for a devi ce, adjusted to cost (the cost of the device) exceeds the portion of the otherwise applicable Medicare outpatient department fee schedule amount (the APC payment amount) associated with the device. We have an established policy to estimate the portion of eachAPC payment rate that could reasonably be

attributed to the cost of the associated devi ces that are eligible for pass-through payments (66 FR 59904) for purposes of estimating the portio n of the otherwise applicable APC payment amount associated with pass-through devices. Fo r 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 pass-through payment amount for the eligible device. We have consistently used an established methodology to estimate the portion of each APC payment rate th at could reasonably be attributed to the cost of an associated device eligible for pass-through payment, using claims data from the period usedCMS-1613-FC 411

for the most recent recalibration of the APC ra tes (72 FR 66751 through 66752). We establish and update the applicable device APC offset am ounts for eligible pass-through device categories through the transmittals that impl ement the quarterly OPPS updates.

We published a list of all procedural APCs with the CY 2014 portions (both percentages and dollar amounts) of the APC payment amounts that we determined are associated with the cost

of devices on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The dollar amounts are used as the device APC offset amounts. In addition, in accordance withour 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-throughpayment 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 w ith our policy that the pass-through evaluation process and payment methodology for implantable biologicals that are surgically inserted orimplanted (through a surgical incision or a natural orifice) and that are newly approved for passthrough status beginning on or after January 1, 2010, be the device pass-through process and payment methodology only (74 FR 60476).

b. CY 2015 Policy

In the CY 2015 OPPS/ASC proposed rule ( 79 FR 40990), we proposed to continue, for CY 2015, our established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to (that is, reflect ) the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC payment rates. We proposed to continue our policy, for CY 2015, that the pass-throughCMS-1613-FC 412

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, be the device pass-through process and payment methodology only. The rationale for this policy is provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477) . We also proposed to continue our established policies for calculating and setting the device APC offset amounts for each device category eligible for pass-through payment. In a ddition, we proposed to continue to review each new device category on a case-by-case basis to dete rmine whether device costs associated with the new category are already packag ed into the existing APC struct ure. If device costs packaged into the existing APC structure are associated w ith the new category, we proposed to deduct the device APC offset amount from the pass-through payment for the device category. As stated earlier, these device APC offset amounts also would be used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices (§ 419.66(d)).

In the CY 2015 OPPS/ASC proposed rule ( 79 FR 40990), for CY 2015, we also proposed to continue our policy established in CY 2010 to include implantable biologicals in our

calculation of the device APC offset amounts. In addition, we proposed to continue to calculate and set any device APC offset amount for any new device pass-through category that includes a newly eligible implantable biological beginni ng in CY 2015, using the same methodology we have historically used to calculate and setdevice 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 (79 FR 40990).

In addition, in the CY 2015 OPPS/ASC propo sed rule (79 FR 40900), we proposed to update the list of all procedural APCs with the final CY 2015 portions of the APC paymentCMS-1613-FC 413

amounts that we determine are associated with the cost of devices on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html so that this information is available for use by the public in developing potential CY 2015 device pass-th rough payment applications and by CMS in reviewing those applications.

Comment: One commenter objected to CMS’ proposal to continue its policy of evaluating implantable biological pass-through applications through the device evaluation process. The commenter believed that all biolog icals should be evaluated through the drug and biological pass-through process, which is intende d for the evaluation of drugs and biologicals.

Response: We have discussed our rationale for this policy in the CY 2010 OPPS/ASC final rule (74 FR 60463). Implantable biologicals function as implantable medical devices and are used in the HOPD in surgical procedures in a manner similar to implantable medical devices. Therefore, since CY 2010, we have treated th em as medical devices for pass-through payment purposes. In addition, like implantable medical devices, implantable biologicals are treated as packaged surgical supplies in the OPPS under 42 CFR 419.2(b)(16). For these reasons, we will continue to treat implantable biologicals as devices for pass-through payment purposes in CY

2015.

After consideration of the public comment we received, we are finalizing, without modification, the aforementioned proposed policies for calculation of the device APC offset amounts for CY 2015. In addition, we are updating, on the CMS Web site athttp://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html, the list of all procedural APCs with the final CY 2015 portions of the APC payment amounts that we determine are associated with the cost ofCMS-1613-FC 414

devices so that this information is available for use by the public in developing potential CY 2015 device pass-through payment applications and by CMS in reviewing those applications.

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

1. Background

To ensure equitable OPPS payment when a hospital receives a device without cost or with full credit, in CY 2007, we implemented a policy to reduce the payment for specified devicedependent APCs by the estimated portion of the AP C payment attributable to device costs (that is, the device offset) when the hospita l 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 on the claim using the “FB” modifier on the line with the pr ocedure 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 sa me type of device or to a different type of device) with a full credit for the device being repl aced, the hospital is inst ructed to report as the device charge the difference between its usual char ge for the device being implanted and its usual charge for the device for which it received full cr edit. 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 ar e 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).

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75007), beginning in CY 2014, we modified our policy of reducing OPPS payment for specifiedCMS-1613-FC 415

APCs when a hospital furnishes a specified device w ithout cost or with a full or partial credit. For CY 2013 and prior years, our policy had been to reduce OPPS payment by 100 percent of the device offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset am ount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the specified device. For CY 2014, we reduced OPPS payment, for the applicable APCs, by the full or partial credit a hospital receives for a replaced device. Specifically, under this modified policy, hospitals are required to report on the claim the amount of the credit in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for a replaced device that is 50 percent or greater than the cost of the device. For CY 2014, we also limited the OPPS payment deduction for the applicab le APCs to the total amount of the device offset when the “FD” value code appears on a claim.

2. Policy for CY 2015

In the CY 2015 OPPS/ASC proposed rule (79 FR 40990 through 40992), for CY 2015, we proposed to continue our existing policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit. Specifically, for CY 2015, we proposed to continue to redu ce the OPPS payment, for the applicable APCs listed in Table 31 of the proposed rule, by the full or partial credit a provider receives for a replaced device. Under this proposed policy, hosp itals would continue to be required to report on

the claim the amount of the credit in the amount portion for “FD” when the hospital receives a credit for a replaced device listed in Table 32 of the proposed rule that is 50 percent or greater

than the cost of the device.

In the CY 2015 OPPS/ASC proposed rule (79 FR 40990 through 40992), for CY 2015, we also proposed to continue using the three criteria established in the CY 2007 OPPS/ASC finalCMS-1613-FC 416

rule with comment period for determining th e APCs to which our proposed CY 2015 policy would apply (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 devi ces must be surgically inserted or implanted devices that remain in the patient’s body af ter the conclusion of the procedure (at least temporarily); and (3) the device offset amount must be significant, which, for purposes of this policy, is defined as exceeding 40 percent of the APC cost. We also proposed to continue to restrict the devices to which the APC payment adju stment would apply to a specific set of costly devices to ensure that the adjustment would not be triggered by the implantation of an inexpensive device whose cost would not constitu te a significant proportion of the total payment

rate for an APC. We stated that we continue to believe these criteria are appropriate because no cost devices and device credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a ty pe that is implanted and remains in the body when the beneficiary leaves the hospital. We belie ve that the reduction in payment is appropriate only when the cost of the device is a significant pa rt of the total cost of the APC into which the device cost is packaged, and th at the 40-percent threshold is a reasonable definition of a significant cost.

Comment: One commenter urged CMS to di scontinue its current policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit. The commenter stat ed that procedures which involve the replacement of a device are of greater complexity than the original insertion of the device. The commenter recommended that, because the replacement procedures are not paid at a higher rate, CMS not further penalize the hospital by reducing the OPPS payment when the device is furnished without cost or with a full or partial credit to the hospital.CMS-1613-FC 417

Response: We do not agree with the comment er and believe that it is appropriate to reduce the OPPS payment for specified APCs wh en a hospital furnishes a specified device without cost or with a full or partial credit.

After consideration of the public comments we received, we are finalizing our proposals to continue our existing policy of reducing O PPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit, and to continue using the

three criteria established in the CY 2007 OPPS/ ASC final rule with comment period (71 FR 68072 through 68077) for determining the APCs to which our CY 2015 policy will apply.

We examined the offset amounts calculated from the CY 2015 final rule with comment period data and the clinical characteristics of the final CY 2015 APCs to determine which APCs

meet the criteria for CY 2015. Table 26 below lists the APCs to which the payment adjustment policy for no cost/full credit and partial credit devices will apply in CY 2015. Table 27 below lists the devices to which the payment adjustment policy for no cost/full credit and partial credit devices will apply in CY 2015.

Based on the final CY 2013 claims data av ailable for this CY 2015 OPPS/ASC final rule with comment period, we have updated the lists of APCs and devices to which the no cost/full credit and partial credit device adjustment polic y will apply for CY 2015, consistent with the

three criteria discussed earlier in this section.

TABLE 26.—APCs TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE PAYMENT ADJUSTME NT POLICY WILL APPLY IN CY 2015

CY 2015 APC CY 2015 APC Title

0039 Level III Neurostimula tor & Related Procedures

0061 Level II Neurostimulator & Related ProceduresCMS-1613-FC 418

CY 2015 APC CY 2015 APC Title

0064 Level III Treatment Fracture/Dislocation

0089 Level III Pacemaker and Similar Procedures

0090 Level II Pacemaker and Similar Procedures

0107 Level I ICD and Similar Procedures

0108 Level II ICD and Similar Procedures 0227 Implantation of Drug Infusion Device

0229 Level II Endovascular Procedures

0259 Level VII ENT Procedures

0293 Level IV Intraocular Procedures

0318 Level IV Neurostimulator & Related Procedures

0319 Level III Endovascular Procedures

0351 Level V Intraocular Procedures 0385 Level I Urogenital Procedures 0386 Level II Urogenital Procedures 0425 Level V Musculoskeletal Procedures Except Hand and Foot

0655 Level IV Pacemaker and Similar ProceduresCMS-1613-FC 419

TABLE 27.—DEVICES TO WHICH THE NO COST/FULL CREDIT AND PARTIAL

CREDIT DEVICE PAYMENT ADJUSTME NT POLICY WILL APPLY IN CY 2015

CY 2015 Device

HCPCS Code CY 2015 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 C1818 Integrated keratoprosthesis C1820 Generator, neuro rechg bat sys C1840 Lens, intraocular (telescopic) C1881 Dialysis access system C1882 AICD, other than sing/dualCMS-1613-FC 420

CY 2015 Device

HCPCS Code CY 2015 Short Descriptor

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

V. OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals A. OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certa in drugs and biologicals. Throughout this final rule with comment period, the term “biologi cal” is used because this is the term that appears in section 1861(t) of th e Act. “Biological” as used in this final rule with comment period includes “biological product” or “biologic” as defined in the PublicCMS-1613-FC 421

Health Service Act. As enacted by the Me dicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) , this provision requires the Secretary to make additional payments to hospitals for: current orphan drugs, as designated under section 526 of the Federal Food, Drug, and Cosm etic Act; current dr ugs and biologicals and brachytherapy sources used in cancer th erapy; and current radiopharmaceutical drugs and biologicals. “Current” refers to drugs or biologicals that are outpatient hospital

services under Medicare Part B for which payment was made on the first date the hospital OPPS was implemented. Transitional pass-through pa yments 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 insigni ficant” in relation to the OPPS payments for the procedures

or services associated with the new drug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” As required by statute, transitional pass-through payments fo r a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a peri od of at least 2 years, but not more than 3 years, after the payment wa s first made for the product as a hospital outpatient service under Medi care Part B. CY 2015 pass- through drugs and biologicals and their designated APCs are assigned status indicator “G” in Addenda A and B to this final rule with comment period, which are available via the Inte rnet 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 biologi cal, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds theCMS-1613-FC 422

portion of the otherwise app licable Medicare OPD fee sc hedule that the Secretary determines is associated with the drug or biol ogical. 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 acquis ition areas and the year established under such section as calculated and adjusted by the Secretary. However, we note that the Part B drug competitive acquisition program (CAP) has been postponed since CY 2009, and such a program has not been reinstated for CY 2015. This methodology for determining the pa ss-through payment amount is set forth in regulations at 42 CFR 419.64. These re gulations specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determ ines 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 furnishe d on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses se veral sources of data as a basis for payment, including the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). In this final rule with comment period, the term “ASP methodology” and “ASP-based” are inclusive of all data sources and methodologies

described therein. Additional informati on on the ASP methodology can be found on the

CMS Web site at: http://www.cms.gov/Medicare/Me dicare-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html

.CMS-1613-FC 423

The pass-through applicati on and review process for drugs and biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpa tientPPS/passthrough_payment.html

. 2. Drugs and Biologicals with Expiri ng Pass-Through Payment Status in CY 2014 In the CY 2015 OPPS/ASC proposed rule (79 FR 40992), we proposed that the pass-through status of 9 drugs and biologi cals would expire on December 31, 2014, as listed in Table 33 of the proposed rule (79 FR 40993). All of these drugs and biologicals will have received OPPS pass-through payment fo r at least 2 years and no more than 3 years by December 31, 2014. These drugs and biologicals were approved for pass-through status on or before January 1, 2013. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through status (specifically, diagnostic radiopharmaceuti cals; contrast agents; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals th at function as supplies when used in a diagnostic test or procedure; and drugs and biologicals th at function as supplies when used in a surgical procedure), our standa rd methodology for providing payment for drugs and biologicals with expiring pass-through status in an upc oming 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 $95 for CY 2015), as discussed

further in section V.B.2. of this final rule wi th comment period. If the estimated per day cost for the drug or biological is less than or equal to the appli cable OPPS drug packaging threshold, we would package payment for the dr ug or biological into the payment for the associated procedure in the upcoming calendar y ear. If the estimated per day cost of the drug or biological is greater than the OPPS drug packaging threshold, we would provideCMS-1613-FC 424

separate payment at the applicable relative ASP-based payment amount (which is ASP+6 percent for CY 2015, as discussed further in section V.B.3. of this final rule with comment period). Comment: Commenters, including several hospitals, physicians, and a manufacturer, requested th at CMS continue to pay separately for Exparel ® (bupivacaine liposome injectable suspensi on) described by HCPCS code C9290 (Injection, bupivicaine liposome, 1 mg) once pass-through payment status expires on December 31, 2014. Commenters disagreed with CMS’ proposal to package Exparel ® as a surgical supply and stated that the drug is used to control postoperative pain a nd is not used in the actual surgical procedure. In addition, commente rs noted that the product cost of Exparel ® exceeds the proposed CY 2015 packaging thresh old of $90 and is not FDA-approved as a

local anesthetic. Response: We disagree with the co mmenters’ characterization of Exparel ® as not functioning as a surgical supply because it is indicated for th e alleviation of postoperative pain. The indications and usage of Exparel ® as listed in the FDA-approved label are as follows: “Exparel® is a liposome injecti on of bupivacaine, an amide-type local anesthetic, indicated for admi nistration into the surgical site to produce postsurgical analgesia.” Exparel ® is injected immediately after the surgical procedure while the patient is still on the opera ting room table at the surg ical wound site to control postoperative pain, which is an important part of the surgical care of the patient affecting the surgical outcome. In the CY 2014 O PPS/ASC final rule with comment period (78 FR 74925 through 74939), we finalized our policy at 42 CFR 419.2(b)(16) to unconditionally package all drugs and biological s that function as supplies in a surgicalCMS-1613-FC 425

procedure. According to OPPS policy, drugs, biologicals, radiopharmaceuticals, implantable medical devices, and other items and products that are not equipment can be supplies in the OPPS (78 FR 43571 and 43575). While the commenter stated that the cost of Exparel® exceeds the drug packaging threshold, we emphasize that cost consideration is not a factor in determining whether an item is a surgical supply. We consider all items related to the surgical ou tcome and provided during the hospital stay in which the surgery is performed, including postsur gical pain management drugs, to be part of the surgery for purposes of our drug and bi ological surgical suppl y packaging policy. Therefore, for CY 2015, we are finalizing our proposal to package Exparel ® described by HCPCS code C9290 and to assign status indicator “N” to th e code for CY 2015.

Comment: A few commenters recomm ended that CMS continue pass-through payment status for new drugs, specifically diagnostic radiopharmaceuticals and contrast agents, for a full 3 years. The commenters asserted that provi ding pass-through payment status for 3 years would help provide a more current and accurate data set on which to base payment amounts of the procedure when the diagnostic radiopharmaceutical or contrast agent is subsequently package d. The commenters further recommended that CMS expire pass-through payment status fo r drugs and biological s on a quarterly as opposed to an annual basis. Response: As we stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74287), the CY 2013 OPPS/AS C final rule with comment period (77 FR 68363), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75010), and as described in section V.A. of this final rule with comment period, section 1833(t)(6)(c)(i)(II) of the Act permits CMS to make pass-through payments for aCMS-1613-FC 426

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 OPPS. We continue to believe that this period of payment appropriately facilitate s dissemination of thes e new products into clinical practice and facilitates the collection of sufficient hospital claims data reflective of their costs for future OPPS ratesetting. Ou r longstanding practice has been to provide pass-through payment for a period of 2 to 3 years, with expiration of pass-through payment status proposed and finalized thr ough the annual rulemaking process. Each year, when proposing to expire the pass-th rough payment status of certain drugs and biologicals, we examine our claims data for these products. We obs erve that hospitals typically have incorporated these produc ts into their charge masters based on the

utilization and costs observe d in our claims data. U nder the existing pass-through payment policy, we begin pass-through paymen t on a quarterly basis, depending on when applications are submitted to us for consideration. We are confident that the period of time for which drugs, biologicals, contrast agents, and radiopharmaceuticals receive pass-through payment status, which is at least 2 but no more than 3 years, is appropriate

for CMS to collect the sufficient amount of data to make a packaging determination.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to expire the pass-through pa yment status of the nine drugs and biologicals listed in Table 28 belo w. Table 28 lists the drugs and biologicals for which pass-through payment status w ill expire on December 31, 2014, the status indicators, and the assigned APCs for CY 2015.CMS-1613-FC 427

TABLE 28.—DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH PAYMENT STATUS EXPIRES DECEMBER 31, 2014

CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015 SI Final CY 2015

APC C9290 Injection, bupivicaine liposome, 1 mg N N/A C9293 Injection, glucarpidase, 10 units K 9293 J0178 Injection, aflibercept, 1 mg vial K 1420 J0716 Injection, centruroides (scorpion) immune f(ab)2, up to 120 milligrams K 1431 J9019 Injection, asparaginase (erwinaze), 1,000 iu K 9289 J9306 Injection, pertuzumab, 1 mg K 1471 Q4131 EpiFix, per square centimeter N N/A Q4132 Grafix core, per square centimeter N N/A Q4133 Grafix prime, pe r square centimeter N N/A

3. Drugs, Biologicals, and Radiopharmaceutical s with New or Continuing Pass-Through Payment Status in CY 2015 In the CY 2015 OPPS/ASC proposed ru le (79 FR 40993), we proposed to continue pass-through payment status in CY 2015 for 22 drugs and biologicals. None of these drugs and biologicals wi ll have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2014. These drugs and biologicals, which were approved for pass-through stat us between January 1, 2013 and July 1, 2014, were listed in Table 34 of the proposed rule (79 FR 40994). The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through July 1, 2014 were assigned status indicator “G ” in Addenda A and B to the proposed rule. Addenda A and B to the proposed rule are available via the Inte rnet on the CMS Web

site.CMS-1613-FC 428

Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologi cals (the pass-through payment amount) as the difference

between the amount authorized under section 1842(o) of th e Act and the portion of the otherwise applicable OPD fee schedule that th e Secretary determines is associated with the drug or biological. Payment for drugs a nd biologicals with pass-through status under the OPPS is currently made at the physician’s office payment rate of ASP+6 percent. We stated in the proposed rule that we believe it is consistent with the statute to propose to continue to provide payment for drugs and bi ologicals with pass-thr ough status at a rate of ASP+6 percent in CY 2015, which is the am ount that drugs and biologicals receive under section 1842(o) of the Act. Therefore, for CY 2015, we proposed to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the rate thes e drugs and biologicals would receive in the physician’s office setti ng in CY 2015. We proposed that a $0.00 pass-through payment amount would be paid for most pass-through drugs and biologicals

under the CY 2015 OPPS because the differen ce between the amount authorized under section 1842(o) of the Act, which is ASP+6 percent, and the porti on of the otherwise applicable OPD fee schedule that the Secret ary determines is appropriate, proposed at ASP+6 percent, is $0. In the case of policy-packaged drugs (which include the following: contrast agents; diagnostic radiopharmaceuticals; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs; and biologi cals that function as supplies when used in a surgical procedure), we proposed that their pass-through payment am ount would be equal toCMS-1613-FC 429

ASP+6 percent for CY 2015 because, if not on pass-through status, payment for these products would be packaged into the associated procedure. In addition, we proposed to continue to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2015 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 68632 through 68635). In CY 2015, as is consistent with our CY 2014 policy for diagnostic and therapeutic radiopharmaceuticals, we proposed to provide payment for both diagnostic and therapeutic radiopharmaceuticals that ar e granted pass-through payment status based on the ASP methodology. As stated above, fo r purposes of pass-through payment, we consider radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through payment status during CY 2015, we proposed to follow the standard A SP methodology to determine the pass-through payment rate that drugs receive under sect ion 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we proposed to provide pass-through payment at WAC+6 percent, the equivalent payment provided to pass-through drugs and biologi cals without ASP information. If WAC information also is not available, we proposed to provide payment for the pass-through radiopharmaceutical at 95 percen t of its most recent AWP. Comment: Several commenters supported CMS’ proposal to provide payment at ASP+6 percent for drugs, biologicals, contra st agents, and radiopharmaceuticals that areCMS-1613-FC 430

granted pass-through payment status. A few commenters requested th at CMS provide an additional payment for radiopharmaceuticals that are granted pass-through payment

status. Response: As discussed above, the stat ute provides that mandated pass-through payment for pass-through drugs and bi ologicals for CY 2015 equals the amount determined under section 1842(o) of the Act minus the portion of the otherwise applicable APC payment that CMS determines is associated with the drug or biological. Therefore, the pass-through payment is de termined by subtracting the otherwise applicable payment amount under the OPPS (ASP+6 percent for CY 2015) from the amount determined under section 1842( o) of the Act (ASP+6 percent). Regarding the commenters’ request that CMS provide an additional payment for radiopharmaceuticals that are granted pass-through payment status, we note that, for CY 2015, consistent with our CY 2014 paymen t policy for diagnostic and therapeutic radiopharmaceuticals, we proposed to provide payment for both diagnostic and therapeutic radiopharmaceuticals with pass-th rough payment status based on the ASP methodology. As stated above, the ASP met hodology, as applied under the OPPS, uses several sources of data as a basis for paymen t, including the ASP, the WAC if the ASP is unavailable, and 95 percent of the radiopharm aceutical’s most recent AWP if the ASP and WAC are unavailable. For purposes of pass-through payment, we consider radiopharmaceuticals to be dr ugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through payment status during CY 2015, we proposed to follow the standard A SP methodology to determine its pass-through payment rate under the OPPS to account fo r the acquisition and pharmacy overheadCMS-1613-FC 431

costs, including compounding costs. We con tinue to believe that a single payment is appropriate for diagnostic radiopharmaceuti cals with pass-through payment status in CY 2015, and that the payment rate of A SP+6 percent (or payment based on the ASP methodology) is appropriate to provide pa yment for both the radiopharmaceutical’s acquisition cost and any associated nuclear medicine handling and compounding costs.

We refer readers to section V.B.3. of this final rule with comment period for further discussion of payment for therapeutic radiopharmaceuticals based on ASP information submitted by manufacturers, and readers also may refer to the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. After consideration of th e public comments we receive d, we are finalizing our proposal to provide payment for drugs, biologicals, diagnostic and therapeutic radiopharmaceuticals, and contra st agents that are grante d pass-through payment status based on the ASP methodology. If a dia gnostic or therapeutic radiopharmaceutical receives pass- through status during CY 2015, we will follow the standard ASP methodology to determine the pass-through paymen t rate that drugs receive under section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we will provide pass-through payment at WAC+6 percent, the equivalent payment provided to pass-th rough drugs and biologicals without ASP

information. If WAC information also is not available, we will pr ovide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.

As discussed in more detail in sectio n II.A.3. of this final rule with comment period, we implemented a policy whereby payment for the following nonpass-through items is packaged into payment for the associated procedure: diagnosticCMS-1613-FC 432

radiopharmaceuticals; contrastagents; anesthesia drugs ; drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure; and drugs and biol ogicals that function as supplie s when used in a surgical procedure. As stated earli er, pass-through payment is the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Because payment for a drug that is policy-pack aged would otherwise be packaged if the product did not have pass-through payment stat us, we believe the ot herwise applicable OPPS payment amount would be equal to the policy-packaged drug APC offset amount

for the associated clinical APC in which the drug or biological is utilized. The calculation of the policy-packaged drug APC o ffset amounts is described in more detail

in section V.A.4. of this fina l rule with comment period. It follows that the copayment for the nonpass-through payment portion (the ot herwise 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, therefore, would 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 2014, in the CY 2015 OPPS/ASC proposed rule, we proposed to continue to set the associated copayment amount to zero for CY 2015 for pass-through drugs and biologicals that would otherwise be packaged if the it em did not have pass-through payment status.CMS-1613-FC 433

The 22 drugs and biologicals that we propos ed would continue to have pass-through payment status for CY 2015 or have been granted pass-through pa yment status as of January 2015 were shown in Table 34 of the proposed rule (79 FR 40994). Comment: Commenters supported the CY 2015 proposal to continue to set the associated copayment amounts for pass-through diagnostic radiopharmaceuticals and contrast agents that would otherwise be packaged if the product did not have pass-through payment status to zero. The comme nters noted that this policy is consistent with statutory requirements and provides cost -saving benefits to Medicare beneficiaries. Response: We appreciate the commenters ’ support of our proposal. As discussed in the CY 2015 OPPS/ASC proposed rule ( 79 FR 40993 through 40994), we believe that for drugs and biologicals th at are “policy-packaged,” the copayment for the nonpass-through payment portion of the total OPPS payment for this subset of drugs and biologicals is accounted for in th e copayment of the associated clinical APC in which the drug or biological is used. According to se ction 1833(t)(8)(E) of th e Act, the amount of copayment associated with pass-through items is equal to the amount of copayment that would be applicable if the pass-through adjustment was not applied. Therefore, we believe that the copayment amount should be zero for drugs and biologicals that are “policy-packaged,” including diagnostic radi opharmaceuticals and contrast agents. We also believe that the copayment amount shoul d be zero for anesthesia drugs that would otherwise be packaged if the item did not have pass-through payment status.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to continue to set the associated copayment amount for pass-through diagnostic radiopharm aceuticals, contrast agents, and anesthesia drugs thatCMS-1613-FC 434

would otherwise be packaged if the item di d not have pass-through payment status to

zero for CY 2015. The 35 drugs and biologicals that will continue to have pass-through payment status for CY 2015 or have been gran ted pass-through payment status as of January 1, 2015 are shown in Table 29 belo w. As is our standard methodology, we annually review new permanent HCPCS codes and delete temporary HCPCS C-codes if an alternate permanent HCPCS code is av ailable for purposes of OPPS billing and payment. Table 29 below in cludes those coding changes.CMS-1613-FC 435

TABLE 29.—DRUGS AND BIOLOGICALS WITH PASS-THROUGH PAYMENT STATUS IN CY 2015

CY 2014 HCPCS

Code CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015

SI Final CY 2015 APC A9520 A9520 Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries G 1463

N/A A9586 Florbetapir f18, diagnostic, per study dose, up to 10 millicuries G 1664 C9021 J9301 Injection, obinutuzumab, 10 mg G 1476 C9022 J1322 Injection, elosulfase alfa, 1mg G 1480 C9023 J3145 Injection, testosterone undecanoate, 1 mg G 1487 C9025 C9025 Injection, ramucirumab, 5 mg G 1488 C9026 C9026 Injection, vedolizumab, 1 mg G 1489

N/A C9027 Injection, pembrolizumab, 1 mg G 1490 C9132 C9132 Prothrombin complex concentrate (human), Kcentra, per i.u. of Factor IX activity G 9132

C9133 J7200 Factor ix (antihemophilic factor, recombinant), Rixubus, per i.u. G 1467

C9134 J7181 Injection, Factor XIII A-subunit, (recombinant), per i.u. G 1746 C9135 J7201 Injection, factor i x, fc fusion protein (recombinant), per i.u. G 1486

N/A C9136 Injection, factor viii, fc fusion protein, (recombinant), per i.u. G 1656 C9441 J1439 Injection, ferric carboxymaltose, 1 mg G 9441

N/A C9349 FortaDerm, and FortaDerm Antimicrobial, any type, per square centimeter G 1657 N/A C9442 Injection, belinostat, 10 mg G 1658 N/A C9443 Injection, dalbavancin, 10 mg G 1659 N/A C9444 Injection, oritavancin, 10 mg G 1660 N/A C9446 Injection, tedizolid phosphate, 1 mg G 1662

N/A C9447 Injection, phenylephrine and ketorolac, 4 ml vial G 1663 C9497 C9497 Loxapine, inhalation powder, 10 mg G 9497 J1446 J1446 Injection, tbo-filgrastim, 5 micrograms G 1477

J1556 J1556 Injection, immune gl obulin (Bivigam), 500 mg G 9130 J3060 J3060 Injection, taliglucerase alfa, 10 units G 9294 J7315 J7315 Mitomycin, ophthalmic, 0.2 mg G 1448CMS-1613-FC 436

CY 2014 HCPCS

Code CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015

SI Final CY 2015 APC J7316 J7316 Injection, Ocriplasmin, 0.125mg G 9298 J7508 J7508 Tacrolimus, Extended Release, Oral, 0.1 mg G 1465 J9047 J9047 Injection, carfilzomib, 1 mg G 9295 J9262 J9262 Injection, omacetaxine mepesuccinate, 0.01 mg G 9297 J9354 J9354 Injection, ado-trastuzumab emtansine, 1 mg G 9131 J9371 J9371 Injection, Vincristine Sulfate Liposome, 1 mg G 1466 J9400 J9400 Injection, Ziv-Aflibercept, 1 mg G 9296 Q4121 Q4121 Theraskin, per square centimeter G 1479 Q4122 Q4122 Dermacell, per square centimeter G 1419 Q4127 Q4127 Talymed, per square centimeter G 1449

4. Provisions for Reducing Transitional Pa ss-Through Payments for Policy-Packaged Drugs and Biologicals to Offset Costs Packaged into APC Groups a. Background Prior to CY 2008, diagnostic radiopharmaceu ticals 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 diag nostic radiopharmaceuticals and contrast agents as ancillary and suppor tive items and services into their associated nuclear medicine procedures. Therefore, be ginning in CY 2008, nonpass-through diagnostic radiopharmaceuticals and contra st agents were not subject to the annual OPPS drug packaging threshold to determine their packag ed or separately payable payment status, and instead all nonpass-through diagnostic radio pharmaceuticals and contrast agents were packaged as a matter of policy.CMS-1613-FC 437

For CY 2014, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925), we continued to package payment for all nonpass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs, and we began packaging all nonpass-through drugs, biologicals, and radioph armaceuticals that function as supplies when used in a diagnostic test or procedur e and drugs and biologica ls that function as supplies when used in a surgical procedure. These packaging policies are codified at 42 CFR 419.2(b). b. Payment Offset Policy for Diagnostic Radiopharmaceuticals As previously noted, radiopharmaceuticals are considered to be drugs for OPPS pass-through payment purposes. As describe d above, section 1833(t)(6 )(D)(i) of the Act specifies that the transiti onal pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for di agnostic 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 attribut ed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 thr ough 68641). Specifically, we use the policy-packaged drug offset fraction for APCs containing nuclear me dicine procedures,CMS-1613-FC 438

calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy-packaged drugs divided by the cost from single procedure claims in the APC. To dete rmine the actual APC offset amount for pass-through diagnostic radiopharm aceuticals 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 radi opharmaceutical is used and, accordingly, reduce the separate OPPS payment for the pass-through diagnostic radiopharm aceutical by this amount. For CY 2015, as we did in CY 2014, we proposed to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals. There is currently one diagnostic ra diopharmaceutical with pass-through status under the OPPS. HCPCS code A9520 (Techne tium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries) was granted pass-through payment status beginning October 1, 2013. We currently apply the established radi opharmaceutical payment offset policy to pass-through payment for this product. Table 35 of the CY 2015 OPPS/ASC propos ed rule (79 FR 40995) displayed the proposed APCs to which nuclear medicine pr ocedures would be assigned in CY 2015 and for which we expect that an APC offset coul d be applicable in the case of diagnostic radiopharmaceuticals with pass-through status. Comment: A few commenters requested th at CMS reinstate the “FB” modifier to specified nuclear medicine procedures in cases in which the diagnosticCMS-1613-FC 439

radiopharmaceutical is received at no cost or full credit. Th e commenters requested that the policy be maintained for CY 2015 and beyond. Response: As we discussed in the CY2014 OPPS/ASC final ru le with comment period (78 FR 75016), our review of claims datashowed that hospitals rarely received diagnostic radiopharmaceuticals at no cost or full credit. Th erefore, we do not believe that the “FB” modifier policy is warran ted for diagnostic radiopharmaceuticals. Comment: A few commenters agreed that pass-through payment status for

HCPCS code A9520 should be extended for CY 2015. Response: We appreciate the commenters’ support.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to continue to apply the di agnostic radiopharmaceutical offset policy to payment for pass-through di agnostic radiopharmaceuticals, as described in the CY 2015 OPPS/ASC proposed rule (79 FR 40994 through 40995). We will continue to reduce the payment amount for pr ocedures in the APCs listed in Table 30 in this final rule with comment period by the fu ll policy-packaged offset amount appropriate for diagnostic radiopharmaceuticals. Table 30 below displays the APCs to wh ich nuclear medicine procedures will be assigned in CY 2015 and for which we expect th at an APC offset could be applicable in the case of diagnostic radiopharmaceutical s with pass-through payment status.

TABLE 30.—APCs TO WHICH A DIAG NOSTIC RADIOPHARMACEUTICAL OFFSET MAY BE APPLICABLE IN CY 2015

CY 2015

APC CY 2015 APC Title 0308 Positron Emission Tomography (PET) Imaging 0377 Level II Cardiac ImagingCMS-1613-FC 440

CY 2015

APC CY 2015 APC Title 0378 Level II Pulmonary Imaging 0389 Level I Non-imaging Nuclear Medicine 0390 Level I Endocrine Imaging 0391 Level II Endocrine Imaging 0392 Level II Non-imaging Nuclear Medicine 0393 Hematologic Processing & Studies 0394 Hepatobiliary Imaging 0395 GI Tract Imaging 0396 Bone Imaging 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. Payment Offset Policy for Contrast Agents Section 1833(t)(6)(D)(i) of the Act sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t and the otherwise applicable OPD fee schedule amount. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for contrast agents an amount reflecting the portion of the APC payment associated with predecessor contrast agents in order to en sure no duplicate contrast agent payment is

made. In CY 2010, we established a policy to es timate 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 pa ss-through payment (74 FR 60482 through 60484).CMS-1613-FC 441

Specifically, we use the policy-packaged dr ug offset fraction for procedural APCs, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy packaged drugs divided by the cost from single procedure claims in the APC. To dete rmine the actual APC offset amount for pass-through contrast agents that takes into consideration the otherwise applicable OPPS payment amount, in the CY 2015 OPPS/ASC pr oposed rule (79 FR 40995), we proposed to multiply the policy packaged drug offset fraction by the APC payment amount for the procedure with which the pass- through contrast agent is used and, accordingly, reduce the separate OPPS payment for the pass-through contrast agent by this amount. For CY 2015, as we did in CY 2014, we proposed to continue to apply our standard contrast agents offset policy to paymen t for pass-through contrast agen ts (we refer readers to the

CY 2014 OPPS/ASC final rule with comme nt period (78 FR 75017) for the final CY 2014 policy and the CY 2015 OPPS/AS C proposed rule (79 FR 40995 through 40996) for the proposed CY 2015 policy). Although there are currently no contrast ag ents with pass-through payment status under the OPPS, we believe that a payment offs et is necessary in the event that a new contrast agent is approved for pass-through st atus during CY 2015 in order to provide an appropriate transitional pass-th rough payment for new contrast agents. We proposed to identify procedural APCs for which we expect a contrast offset could be applicable in the case of a pass-through contrast agent as any procedural APC with a policy-packaged drug amount greater than $20 that is not a nuclear medicine APC identified in Table 35 of the proposed rule, and these APCs were displaye d in Table 36 of the proposed rule. The methodology used to determine a proposed thresh old cost for application of a contrastCMS-1613-FC 442

agent offset policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60483 through 60484). For CY 2015, we proposed to continue to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 36 of th e proposed rule (79 FR 40995 through 40996), a specific offset based on the procedural APC wo uld be applied to payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent. We did not receive any public comment s on this proposal. Therefore, we are finalizing our proposal for CY 2015 without modi fication. We will continue to recognize that when a contrast agent with pass-through pa yment status is billed with any procedural APC listed in Table 31 below, a specific offset based on the procedural APC will be applied to the payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

TABLE 31.—APCs TO WHICH A CO NTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2015

CY 2015

APC CY 2015 APC Title 0080 Diagnostic Cardiac Catheterization 0083 Coronary Angioplasty, Valvulopl asty, and Level I Endovascular Revascularization 0093 Vascular Reconstruc tion/Fistula Repair 0152 Level I Percutaneous Abdomi nal and Biliary Procedures 0177 Level I Echocardiogram With Contrast 0178 Level II Echocardiogram With Contrast 0229 Level II Endovascular Revascular ization 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 ContrastCMS-1613-FC 443

CY 2015

APC CY 2015 APC Title 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 0662 CT Angiography 0668 Level I Angiography and Venography 8006 CT and CTA with Contrast Composite 8008 MRI and MRA with Contrast Composite d. Payment Offset Policy for Drugs, Bi ologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Dia gnostic Test or Pro cedure and Drugs and Biologicals That Function as Supplies When Used in a Su rgical Procedure Section 1833(t)(6)(D)(i) of the Act sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t and the otherwise applicable OPD fee

schedule amount. In the CY 2014 OPPS/AS C final rule with comment period (78 FR 74925), we finalized our policy to package drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs and biologi cals that function as supplies when used in a surgical procedure. As a part of this policy, we sp ecifically finalized that skin substitutes and stress agents used in myocardial perfus ion imaging (MPI) be policy packaged in CY 2014, in addition to diagnostic radiopharmaceu ticals, contrast agents, and anesthesia drugs (78 FR 75019). Because a payment offset is necessary in order to provide anCMS-1613-FC 444

appropriate transitional pass-through paymen t, we finalized a policy for CY 2014 to deduct from the pass-through payment for skin substitutes and stress agents an amount reflecting the portion of the APC payment asso ciated with predecessor skin substitutes and stress agents in order to ensure no duplicat e skin substitute or stress agent payment is made (78 FR 75019). In CY 2014, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to th e cost of predecessor skin substitutes or stress agents when considering a new skin substitu te or stress agent for pass-through payment (78 FR 75019). Specifically, in the case of pass-through skin substitutes, we use the policy-packaged drug offset fraction for skin substitute procedural APCs, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy-packaged drugs divided by the cost from single procedure claims in the APC. Because policy packaged radiopha rmaceuticals also would be included in the drug offset fraction for the APC to which MP I procedures are assigned, in the case of pass-through stress agents, we use the policy-packaged drug offset fraction for the procedural APC, calculated as 1 minus the fo llowing: the cost from single procedure claims in the APC after removing the cost for policy-packaged drugs excluding policy-packaged diagnostic radiopharmaceuticals divided by the cost from single procedure claims in the APC. To dete rmine the actual APC offset amount for pass-through skin substitutes and pass-through stress agents th at takes into consideration the otherwise applicable O PPS payment amount, we multiply the policy-packaged drug offset fraction by the APC payment amount for the procedure with which the pass-through skin substitute or pass-through stress agent is used and, accordingly, reduceCMS-1613-FC 445

the separate OPPS payment for the pass-thr ough skin substitute or pass-through stress agent by this amount (78 FR 75019). In the CY 2015 OPPS/ASC proposed rule (79 FR 40996), for CY 2015, as we did in CY 2014, we proposed to continue to apply the skin substitute and stress agent offset polic y to payment for pass-through skin substitutes and stress agents. There are currently six skin subs titutes (HCPCS c odes Q4121, Q4122, Q4127, Q4131, Q4132, and Q4133) with pass-through payment status under the OPPS. We currently apply the established skin subs titute payment offset policy to pass-through payment for these products. Table 37 of the CY 2015 OPPS/ASC proposed rule (79 FR 40996) displayed the proposed APCs to which skin substitute procedures would be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of skin substitutes with pass-through status. Although there are currently no stress agen ts with pass-through status under the OPPS, we believe that a payment offset is neces sary in the event that a new stress agent is approved for pass-through status during CY 2015 in order to provide an appropriate transitional pass through payment for new stress agents. Table 38 of the CY 2015 OPPS/ASC proposed rule (79 FR 40996) displayed the proposed APCs to which MPI procedures would be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of a stress agent with pass-through status. We did not receive any public comments on these proposals. Therefore, we are finalizing our proposal, without modification, to recognize thatwhen a skin substitute with pass-through payment status is billed with any proce dural APC listed in Table 32 below, a specific offset based on the proce dural APC will be applied to the payment forCMS-1613-FC 446

the skin substitute to ensure that duplicate paym ent is not made for the skin substitute. In addition, when a stress agent with pass-through payment status is billed with any procedural APC listed in Table 33 below, a sp ecific offset based on the procedural APC will be applied to the payment for the stress ag ent to ensure that duplicate payment is not made for the stress agent. Table 32 below di splays the APCs to which skin substitute procedures will be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of skin substitutes with pass-through payment status. Table 33 below displays the APCs to which MPI procedures will be assigned in CY 2015 and for which we expect that an APC offset could be applicable in the case of a stress agent with pass-through payment status.

TABLE 32.—APCs TO WHICH A SK IN SUBSTITUTE OFFSET MAY BE APPLICABLE FOR CY 2015

CY 2015

APC CY 2015 APC Title 0328 Level III Skin Repair 0329 Level IV Skin Repair

TABLE 33.—APCs TO WHICH A STRESS AGENT OFFSET MAY BE APPLICABLE FOR CY 2015

CY 2015

APC CY 2015 APC Title 0100 Cardiac Stress Tests 0377 Level II Cardiac Imaging

As we proposed, we will continue to post annually on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-CMS-1613-FC 447

Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset amounts that will be used for that year for purpos es of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide the amounts and percentages of APC payment associ ated with packaged implantable devices, policy-packaged drugs, and threshold packag ed drugs and biologicals for every OPPS

clinical APC. B. OPPS Payment for Drugs, Biologi cals, and Radiopharmaceuticals without Pass-Through Payment Status 1. Background Under the CY 2013 OPPS, we currentlypay for drugs, biologicals, and radiopharmaceuticals that do not have pass-thro ugh payment 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 e xplained 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 ra te for the procedure or treatment with which the products are usually furnished. Ho spitals do not receive separate payment for packaged items and supplies, and hospitals ma y not bill beneficiaries separately for any packaged items and supplies whose costs ar e recognized and paid within the national OPPS payment rate for the associ ated procedure or service. 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, pack aging the costs of items and services into theCMS-1613-FC 448

payment for the primary procedur e or service with which they are associated encourages hospital efficiencies and also enables hospita ls to manage their resources with maximum flexibility. 2. Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals a. Background

As indicated in section V.B.1. of th is final rule with comment period, in accordance with section 1833(t)(16) (B) of the Act, the threshol d for establishing separate APCs for payment of drugs and biological s 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 th e 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 me thodology 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 packag ing threshold for establishing separate APCs for drugs and biologicals at $90 for CY 2014. Following the CY 2007 methodology, for the CY 2015 OPPS/ASC proposed rule (79 FR 40997), 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 2015 and rounded the resulting dollar amount ($91.46) to the nearest $5 increment, which yielded a figure of $90. In performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals forCMS-1613-FC 449

Human Use (Prescription) (B ureau of Labor Statistics (B LS) series code WPUSI07003) from CMS’ Office of the Actuary (OACT). We refer below to this series generally as the PPI for Prescription Drugs.

Based on the calculations described above , we proposed a packaging threshold for CY 2015 of $90. (For a more detailed discus sion of the OPPS dr ug packaging threshold and the use of the PPI for Prescription Drugs, we refer readers to the CY 2007

OPPS/ASC final rule with commen t period (71 FR 68085 through 68086).) Following the CY 2007 methodology, for this CY 2015 OPPS/ASC final rule with comment period, we used the most rece ntly available four quarter moving average PPI levels to trend the $50 threshold forward from the th ird quarter of CY 2005 to the third quarter of CY 2015 and rounded the re sulting dollar amount ( $93.48) to the nearest $5 increment, which yielded a figure of $95. Inperforming this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (B ureau of Labor Statistics (B LS) series code WPUSI07003) from CMS’ Office of the Actuary (OACT). Therefore, for this CY 2015 OPPS/ASC final rule with comment period, using the CY 2007 OPPS methodology, we are establishing a packaging threshold for CY 2015 of $95. b. Cost Threshold for Packaging of Paymen t for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”) In the CY 2015 OPPS/ASC proposed rule (79 FR 40997), to determine the proposed CY 2015 packaging status for all nonpass-through drugs and biologicals that are not policy packaged, we calculated, on a HC PCS code-specific basis, the per day costCMS-1613-FC 450

of all drugs, biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPC S code in CY 2013 and were paid (via packaged or separate payment) under the O PPS. We used data from CY 2013 claims processed before January 1, 2014 for this calcu lation. However, we did not perform this calculation for those drugs and biologicals with multiple HCPCS codes that include different dosages, as described in section V.B.2.c. of the proposed rule, or for the following policy-packaged items that we propos ed to continue to package in CY 2015: diagnostic radiopharmaceuticals; contrast agents; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as suppl ies when used in a diagnostic test or procedure; and drugs and biol ogicals that function as supplie s when used in a surgical procedure. In order to calculate the per day cost s for drugs, biologicals, and therapeutic radiopharmaceuticals to determ ine their proposed packaging status in CY 2015, we used the methodology that was described in de tail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 68638). For each drug and biological HCPCS code, we used an estimated payment rate of ASP+6 percent (which is the payment rate we proposed for separately payable drugs a nd biologicals for CY 2015, as discussed in more detail in section V.B.3.b. of the propos ed rule) to calculate the CY 2015 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2013 (data that were used for paym ent purposes in the physician’s office setting, effective April 1, 2014) to determine the proposed rule per day cost.CMS-1613-FC 451

As is our standard methodology, for CY 2015, we proposed to use payment rates based on the ASP data from the fourth quarter of CY 2013 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site)

because these were the most recent data ava ilable for use at the time of development of the proposed rule. These data also were th e basis for drug payments in the physician’s office setting, effective April 1, 2014. For items that did not have an ASP-based payment rate, such as some therapeutic radiopharmaceutic als, we used their mean unit cost derived from the CY 2013 hospital claims data to determine their per day cost. We proposed to package items with a per day cost less than or equal to $90, and identify items with a per day cost greater than $90 as separately payabl e. Consistent with our past practice, we crossw alked historical OPPS claims data from the CY 2013 HCPCS codes that were reported to the CY 2014 HC PCS codes that we displayed in Addendum B to the proposed rule (which is availabl e via the Internet on the CMS Web site) for payment in CY 2015. Comment: The majority of the comm enters opposed the continuation of the OPPS packaging threshold of $90 for CY 2015. The commenters believed that, over the past 5 years, CMS has rapidly increased the packaging threshol d, which contradicts Congressional intent. As such, the commenters recommended that CMS eliminate the packaging threshold and provide separate pa yment for all drugs with HCPCS codes or freeze the packaging threshold at the current level ($90). Response: As stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086), we believe that packaging cert ain items is a fundamental component of aCMS-1613-FC 452

prospective payment system, that updating the packaging threshold of $50 for the CY 2005 OPPS is consistent with industry and government practices, and that the PPI for Prescription Drugs is an appropriate mech anism to gauge Part B drug inflation. Therefore, because of our continued belief th at packaging is a fundamental component of a prospective payment system that conti nues to provide import ant flexibility and efficiency in the delivery of high quality hos pital outpatient services , we are not adopting

commenters’ recommendations to pay separately for all drugs, biologicals, and radiopharmaceuticals for CY 2015 or to elimin ate the packaging threshold or to freeze the packaging threshold at $90. Since publication of the CY 2015 OPPS/AS C proposed rule, consistent with our policy of updating the packaging threshold with more recently available data for this final rule with comment period, we have again followed the CY 2007 methodology for CY 2015 and used updated four quarter moving average PPI index levels provided by the CMS Office of the Actuary to trend the $50 th reshold forward from the third quarter of CY 2005 to the third quarter of CY 2015. We then rounded the resulting updated dollar amount ($93.48) to the nearest $5 increment, which yielded a figure of $95. Therefore,

after consideration of the public comments we receiv ed, and consistent with our methodology for establishing the packaging thres hold using the most recent PPI forecast data, we are adopting a CY 2015 packaging threshold of $95. Our policy during previous cycles of the OPPS has been to use updated ASP and

claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radiopha rmaceuticals for the OPPS/ASC final rule with comment period. We note that it is also our policy to make an annual packagingCMS-1613-FC 453

determination for a HCPCS code only when we develop the OPPS/AS C final rule with comment period for the update year. Only HCPC S codes that are identified as separately payable in the final rule with comment peri od are subject to quarterly updates. For our calculation of per day costs of HCPCS code s for drugs and biologi cals in this CY 2015

OPPS/ASC final rule with comm ent period, we used ASP data from the first quarter of CY 2014, which is the basis for calculating pa yment rates for drugs and biologicals in the physician’s office setting using the ASP methodology, effective July 1, 2014, along with updated hospital claims data from CY 2013. We note that we also used these data for budget neutrality estimates and impact analys es for this CY 2015 OPPS/ASC final rule with comment period. Payment rates for HCPCS codes for sepa rately payable drugs and biologicals

included in Addenda A and B to this final rule with comment period are based on ASP data from the second quarter of CY 2014. These data are the basis for calculating payment rates for drugs and biologicals in the physician’s office setting using the ASP methodology, effective October 1, 2014. These pa yment rates will then be updated in the January 2015 OPPS update, based on the most recent ASP data to be used for physician’s office and OPPS payment as of January 1, 2015. For items that do not currently have an ASP-based payment rate, we recalculated thei r mean unit cost from all of the CY 2013 claims data and updated cost re port information available for this CY 2015 final rule with comment period to determine their final per day cost. Consequently, the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in th e CY 2015 OPPS/ASC proposed rule may be different from the same drug HCPCS code’s packaging status determined based on theCMS-1613-FC 454

data used for this CY 2015 OPPS/ASC fina l rule with comment period. Under such circumstances, we proposed to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose cost fluctuates relative to the proposed CY 2015 OPPS drug packaging threshold and the drug’s payment status (pack aged or separately payable) in CY 2014. Specifically, for CY 2015, consistent with our historical practice, we proposed to apply the following policies to these HCPCS code s for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to th e drug packaging threshold changes based on the updated drug packaging threshol d and on the final updated data:

● HCPCS codes for drugs and biologicals that were paid separately in CY 2014 and that were proposed for separate paymen t in CY 2015, and that then have per day costs equal to or less than the CY 2015 fina l rule drug packaging threshold, based on the updated ASPs and hospital claims data used fo r the CY 2015 final rule, would continue to receive separate payment in CY 2015.

● HCPCS codes for drugs and biologicals that were packaged in CY 2014 and that were proposed for separate payment inCY 2015, and that then have per day costs equal to or less than the CY 2015 final ru le drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2015 final rule, would remain packaged in CY 2015.

● HCPCS codes for drugs and biologicals for which we proposed packaged payment in CY 2015 but then have per day co sts greater than the CY 2015 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2015 final rule, would receiv e separate payment in CY 2015.CMS-1613-FC 455

We did not receive any public comments on our proposal to apply the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose cost fl uctuates relative to the CY 2015 OPPS drug packaging threshold and the drug’s payment stat us (packaged or separately payable) in CY 2013. Therefore, we are finalizing our proposal, without modifi cation, for CY 2015. c. High Cost/Low Cost Threshol d for Packaged Skin Substitutes In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74938), we unconditionally packaged skin substitute pr oducts into their associated surgical procedures as part of a broader policy to package all drugs and bi ologicals that function as supplies when used in a surgical procedure. The adoption of this policy, to package all drugs and biologicals that function as supp lies when used in a surgical procedure, followed these packaging policies: (1) packag ing of medical and surgical supplies into the related procedure under 42 CFR 419.2( b)(4) (68 FR 18543); (2) packaging of implantable devices (68 FR 18444); and (3 ) packaging of implantable biologicals (73 FR 68634). As noted in the CY 2014 OPPS/ ASC final rule with comment period, we believe these policies represented an exam ple of a broader ca tegory of drugs and biologicals that should be packaged in the OPPS, that is, drugs and biologicals that function as supplies in a surg ical procedure (78 FR 74930). As part of the policy to finalize the packaging of skin substitutes, we also finalized a me thodology that divides the skin substitutes into a high cost group a nd a low cost group, in order to ensure adequate resource homogeneity among AP C assignments for the skin substitute application procedures (78 FR 74933). For the CY 2014 update, assignment to the high cost or low cost skin substitute grou p depended upon a comparison of the July 2013CMS-1613-FC 456

ASP+6 percent payment amount for each skin substitute to the weighted average payment per unit for all skin substitutes. The weighted average was calculated using the skin

substitute utilization from the CY 2012 cl aims data and the July 2013 ASP+6 percent payment amounts. The high cost/low cost sk in substitute threshold for CY 2014 is $32

per cm 2 . Skin substitutes that had a July 2013 ASP+6 percent amount above $32 per cm 2 were classified in the high cost group, a nd skin substitutes that had a July 2013 ASP+6 percent amount at or below $32 per cm 2 were classified in th e low cost group. Any new skin substitutes without pricing information are assigned to the low cost category until pricing information is available to compare to the $32 per cm 2 threshold for CY 2014. Skin substitutes with pass-through payment stat us are assigned to the high cost category, with an offset applied as described in section V.A.4.d. of the CY 2015 OPPS/ASC proposed rule (79 FR 40996).

As discussed in the CY 2015 OPPS/ ASC proposed rule (79 FR 40998 through 40999), after the effective date of the CY 2014 packaging policy, some skin substitute manufacturers brought the fo llowing issues to our atte ntion regarding the CY 2014 methodology for determining the high cost/low cost threshold:

● Using ASP to determine a product’s plac ement in the high or low cost category may unfairly disadvantage the limited number of skin substitute products that are sold in large sizes (that is, above 150 cm 2 ). Large size skin substitute products are primarily

used for burns that are treated on an inpatient basis. Th ese manufacturers contend that nonlinear pricing for skin substi tute products sold in both larg e and small sizes results in lower per cm 2 prices for large sizes. Therefore, the use of ASP data to categorize products into high and low cost categories can result in placement of products that haveCMS-1613-FC 457

significant inpatient use of the large, lower-priced (per cm 2 ) sizes into the low cost category, even though these large size produc ts are not often us ed in the hospital outpatient department.

● Using a weighted average ASP to es tablish the high/low cost categories, combined with the drug pass-th rough policy, will lead to unstable high/low cost skin substitute categories in the future. Acco rding to one manufact urer, under our CY 2014 policy, manufacturers with produ cts on pass-through payment status have an incentive to set a very high price because hospitals are price-insensitive to products paid with pass-through payments. As these new high priced pass-through skin substitutes capture more market share, the weighted average A SP high cost/low cost threshold could escalate rapidly, resulting in a shift in the assignment of many skin substitutes from the high cost category to the low cost category.

As stated in the CY 2015 OPPS/ASC proposed rule ( 79 FR 40998), we agree with stakeholder concerns regarding the potential instability of the high/low cost categories associated with the drug pass- through policy, as well as stak eholder concerns about the inclusion of large-sized products that are primarily used for inpatients in the ASP calculation, when ASP is used to establish th e high cost/low cost categories. As an alternative to using ASP data, we believe that establishing the high cost/low cost threshold using an alternative methodology (tha t is, the weighted average mean unit cost (MUC) for all skin substitute products from claims data) may provide more stable high/low cost categories and will resolve the issue associated withlarge sized products because the MUC will be derived from hospita l outpatient claims only. The threshold would be based on costs from hospital outpatie nt claims data instead of manufacturerCMS-1613-FC 458

reported sales prices that would not include la rger sizes primarily used for inpatient burn

cases. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 40999), we proposed to maintain the high cost/low cost APC stru cture for skin substitute procedures in CY 2015. However, we proposed to revise th e current methodology used to establish the high cost/low cost threshold, a nd to establish the high cost/lo w cost threshold based on the weighted average MUC for all skin s ubstitutes using CY 2013 claims (which was proposed to be $27 per cm 2 ). Skin substitutes with an MUC above $27 per cm 2 using CY 2013 claims were proposed to be classified in the high cost gr oup and those with an MUC at or below $27 per cm 2 were proposed to be classified in the low cost group. Table 39 of the CY 2015 OPPS/ASC proposed rule (79 FR 40999) showed the CY 2014 high cost/low cost status for each skin s ubstitute product and the proposed CY 2015 high cost/low cost status based on the weighted average MUC threshold of $27. We proposed to continue the CY 2014 policy that skin s ubstitutes with pass-through payment status would be assigned to the high cost category for CY 2015. Skin substitutes with pricing

information but without claims data to calcula te an MUC would be assigned to either the high or low cost category based on the product’ s ASP+6 percent payment rate. If ASP is not available we would use WAC+6 percent or 95 percent of AWP to assign a product to either the high cost or low cost category. We also proposed that any new skin substitute without pricing information be assigned to th e low cost category until pricing information is available to compare to the CY 2015 threshold. Comment: Several commenters suppor ted CMS’ proposal to revise the methodology used to establish the high cost/l ow cost threshold from an ASP-basedCMS-1613-FC 459

methodology to a methodology based on the weighted average MUC for all skin substitutes using CY 2013 claims data. The commenters agreed that the MUC methodology would promote stability of assignm ents to the high and low cost categories and not disadvantage certain skin substitutes that are sold in especially large sizes. Response: We appreciate the commenters’ support. Comment: Other commenters requested that CMS retain the ASP-based methodology for calculating the high cost/low co st threshold because, in their opinion, the ASP is a better metric for skin substitute costs than hospital outpatient claims data. Response: We disagree with the assert ion that ASP better represents the hospital costs for skin substitutes than hospital claims data. ASP is a blend of sales prices from a variety of purchasers, including various nonhospital entities. ASP also excludes a significant number of hospital sa les, for example sales to 340B hospitals. Hospital claims data are specific to hospitals, and are used in assessing the costs of almost all other items and services in the OPPS, including other sim ilar surgical supplies, such as implantable devices and implantable biologicals, which we package for payment purposes in the OPPS. Furthermore, as stated in the CY 2015 OPPS/ASC proposed rule (79 FR 40998), we believe that using MUC will better prom ote stability versus ASP for high and low cost category assignments for skin substitutes, because ASP can be set very high by skin substitute manufacturers and disproportio nally impact the threshold calculation.

Comment: Two commenters recommended an alternative high cost/low cost threshold calculation methodology. Instead of basing the threshold on the unit cost the commenters urged CMS to calculate the high cost/low cost threshold based on the total skin substitute costs per patient, per day, whic h is currently the mechanism used to set theCMS-1613-FC 460

general OPPS drug, biological, and radiopharm aceutical packaging th reshold, which was proposed as $90 for CY 2015. These commenters believed that calculating the threshold cost per cm 2 does not accurately reflect the true cost of products as they are used clinically, and could result in displacing la rger single-size skin substitutes approved through a Premarket Approval (PMA) into the low-cost skin substitute group beginning in CY 2016. They believed that this is partly a consequence of CMS’ broad categorization of products as skin substitutes that, according to the commenters, includes 510(k)-cleared wound dressings and human ce ll, tissue, and cellular and tissue-based products (HCT/Ps) under section 361 of the Public Health Service Act (PHSA) (for example, cadaver skin or placental ti ssue). According to these commenters, manufacturers of products regul ated through these processes ca n market different sizes of their skin substitutes with greater ease than can manufacturers of skin substitutes approved through a PMA, who must reapply for an updated label through the FDA to change or add a different product size. The commenters are concer ned that a unit cost threshold may result in large products with lower per cm 2 costs, but with higher total costs per case, being assigned to the low co st category in the fu ture. One of these commenters, although generally supportive of the change from an ASP-based methodology to an MUC-based methodology, also submitted a hypothetical predictive model comparing per unit high cost/low cost calculations with per day threshold

calculations for the various skin substitutes and requested that CM S adopt a per day high cost/low cost calculation methodology begi nning in CY 2016 to pr event their skin substitutes from moving from the high cost to the low cost group in CY 2016.CMS-1613-FC 461

Response: As we explained in the CY 2014 OPPS/ASC final rule with comment period, the FDA treatment of the various sk in substitutes does not affect how skin

substitutes are treated under our policy of packaging drugs and biologicals that function as supplies in a surgical procedure (78 FR 74932 through 74933). The 61 skin substitutes

listed in Table 34 below are available in many different sizes. Product sizing, product packaging, quantity per package, and othe r such individual pr oduct attributes are

manufacturer business decisions that do not conc ern the agency. We also believe that the commenters’ analogy between the general drug, biological, and radiopharmaceutical packaging threshold and the high cost/low cost sk in substitute threshold is imperfect. Per day costs are used for the general drug, bi ological, and radiopharmaceutical packaging threshold because this threshold applies to th e entire spectrum of drugs, biologicals, and radiopharmaceuticals, which have a wide vari ety of dosing units and dose descriptors, among others, such that per unit comparisons are not possible and therefore a total per day dollar amount is calculated. On the contrary, skin substitutes divided into the high and low cost categories are all dosed per cm 2 , which is also the standard measurement for sizing wounds. Therefore, notwithstanding th e various sizes of the 61 skin substitutes listed in Table 34, meaningful unit cost comparis ons can be made for skin substitutes. As discussed earlier, we believe that the MU C methodology will help mitigate or eliminate the effect of high skin substitute ASPs on the high cost/low cost threshold. However, using a per day cost methodology as suggested by the commenters coul d adversely affect the majority of products that are tailored to the wound size. We will evaluate the per day cost methodology and compare it to the MUC methodology next year once CY 2014

claims data are available.CMS-1613-FC 462

After consideration of th e public comments we receive d, we are finalizing our proposal to maintain the high cost/low cost AP C structure for skin s ubstitute procedures in CY 2015, and our proposal to revise th e current methodology used to establish the high/low cost threshold with the alternative MUC methodol ogy. We also are finalizing for CY 2015 the policy that skin substitutes with pass-through payment status would be assigned to the high cost category. Skin subs titutes with pricing information but without

claims data to calculate an MUC will be a ssigned to either the high cost or low cost category based on the product’s ASP+6 percent paym ent rate. If ASP is not available, we will use WAC+6 percent or 95 percent of AWP to assign a product to either the high cost or low cost category. We also are finalizing our proposal th at any new skin substitutes without pricing information will be assigne d to the low cost category until pricing information is available to compare to the CY 2015 threshold. New skin substitute manufacturers must submit pricing info rmation to CMS no later than the 15 th of the third month prior to the effective da te of the next OPPS quarterly update. For example, for a new skin substitute with new pricing information to be included in the July 1 OPPS update and designated as included in the high cost group, verifiable pricing information must be provided to CMS no later than April 15. Table 34 below shows the CY 2014 high cost/low cost status for each skin s ubstitute product and the final CY 2015 high

cost/low cost status based on the wei ghted average MUC threshold of $25, which decreased slightly from the proposed $27 threshol d due to updated final rule claims data. Skin substitutes with an MUC above $25 are assigned to the high cost group for CY 2015. For 2014 there are 16 high cost skin substitutes and 27 low cost skin substitutes. For CY 2015, there are 62 sk in substitute codes, which represent theCMS-1613-FC 463

following products: 30 high cost skin substi tutes; 24 low cost skin substitutes; 7 powdered, liquid, or micronized skin substitu tes; and 1 miscellaneous skin substitute

code.CMS-1613-FC 464

TABLE 34.—SKIN SUBSTITUTE A SSIGNMENTS TO HIGH COST AND LOW COST GROUPS

CY 2015 HCPCS

Code CY 2015 Short Descriptor HCPCS Code Dosage CY 2015

SI CY 2014 High/Low

Status Based on Weighted ASP CY 2015 High/Low

Status Based on Weighted MUC C9358 SurgiMend, fetal 0.5 cm 2 N Low Low C9360 SurgiMend, neonatal 0.5 cm 2 N Low Low C9363 Integra Meshed Bil Wound Mat 1 cm 2 N Low High Q4100 Skin substitute, NOS N/A N Low Low Q4101 Apligraf 1 cm 2 N High High Q4102 Oasis wound matrix 1 cm 2 N Low Low Q4103 Oasis burn matrix 1 cm 2 N Low Low Q4104 Integra BMWD 1 cm 2 N Low High Q4105 Integra DRT 1 cm 2 N Low High Q4106 Dermagraft 1 cm 2 N High High Q4107 Graftjacket 1 cm 2 N High High Q4108 Integra Matrix 1 cm 2 N Low High Q4110 Primatrix 1 cm 2 N High High Q4111 Gammagraft 1 cm 2 N Low Low Q4112 Cymetra injectable 1 cc N N/A N/A Q4113 GraftJacket Xpress 1 cc N N/A N/A Q4114 Integra Flowable Wound Matrix 1 cc N N/A N/A Q4115 Alloskin 1 cm 2 N Low Low Q4116 Alloderm 1 cm 2 N High High Q4117 Hyalomatrix 1 cm 2 N Low Low Q4118 Matristem Micromatrix 1 mg N N/A N/A Q4119 Matristem Wound Matrix 1 cm 2 N Low Low Q4120 Matristem Burn Matrix 1 cm 2 N Low Low Q4121 Theraskin 1 cm 2 G High High Q4122 Dermacell 1 cm 2 G High High Q4123 Alloskin 1 cm 2 N Low High Q4124 Oasis Tri-layer Wound Matrix 1 cm 2 N Low Low Q4125 Arthroflex 1 cm 2 N High High Q4126 Memoderm/derma/tranz/integup 1 cm 2 N High High Q4127 Talymed 1 cm 2 G High High Q4128 Flexhd/Allopatchhd/matrixhd 1 cm 2 N Low High Q4129 Unite Biomatrix 1 cm 2 N Low HighCMS-1613-FC 465

CY 2015 HCPCS

Code CY 2015 Short Descriptor HCPCS Code Dosage CY 2015

SI CY 2014 High/Low

Status Based on Weighted ASP CY 2015 High/Low

Status Based on Weighted MUC Q4131 Epifix 1 cm 2 N High High Q4132 Grafix core 1 cm 2 N High High Q4133 Grafix prime 1 cm 2 N High High Q4134 HMatrix 1 cm 2 N High High Q4135 Mediskin 1 cm 2 N Low Low Q4136 EZderm 1 cm 2 N Low Low Q4137 Amnioexcel or Biodexcel, 1cm 1 cm 2 N Low High Q4138 BioDfence DryFlex, 1cm 1 cm 2 N Low High Q4139 Amniomatrix or Biodmatrix, 1cc 1 cc N N/A N/A Q4140 Biodfence 1cm 1 cm 2 N Low High Q4141 Alloskin ac, 1 cm 1 cm 2 N Low Low Q4142 Xcm biologic tiss matrix 1cm 1 cm 2 N Low Low Q4143 Repriza, 1cm 1 cm 2 N Low Low Q4145 Epifix, 1mg 1 mg N N/A N/A Q4146 Tensix, 1cm 1 cm 2 N Low Low Q4147 Architect ecm px fx 1 sq cm 1 cm 2 N High High Q4148 Neox 1k, 1cm 1 cm 2 N High High Q4149 Excellagen, 0.1 cc 0.1 cc N N/A N/A Q4150 Allowrap DS or Dry 1 sq cm 1 cm 2 N N/A Low Q4151 AmnioBand, Guardian 1 sq cm 1 cm 2 N N/A Low Q4152 Dermapure 1 square cm 1 cm 2 N N/A Low Q4153 Dermavest 1 square cm 1 cm 2 N N/A Low Q4154 Biovance 1 square cm 1 cm 2 N N/A High Q4155 NeoxFlo or ClarixFl o 1 mg 1 mg N N/A N/A Q4156 Neox 100 1 square cm 1 cm 2 N N/A High Q4157 Revitalon 1 square cm 1 cm 2 N N/A Low Q4158 MariGen 1 square cm 1 cm 2 N N/A Low Q4159 Affinity 1 square cm 1 cm 2 N N/A Low Q4160 NuShield 1 square cm 1 cm 2 N N/A High C9349 Fortaderm, fortaderm antimic 1 cm 2 G N/A HighCMS-1613-FC 466

d. Pass-Through Evaluation Process for Skin Substitutes At the beginning of the OPPS, skin s ubstitutes were origin ally evaluated for pass-through status using the medical devi ce pass-through process (65 FR 67839). Since mid-2001, skin substitutes have been evalua ted for pass-through payment status through the drug, biological, and radiopharmaceutical pass-through payment process. In 2001,

there were two distinct HCPCS codes desc ribing skin substitutes. For the CY 2015 update, there are 61 distinct HCPCS codes de scribing skin substitutes (not including the

not otherwise classified HC PCS code, Q4100), and of these 61 products, 18 products that are listed in Table 35 below have had, curren tly have, or will have pass-through payment

status.CMS-1613-FC 467

TABLE 35.—SKIN SUBSTITUTES THAT HAVE HAD, CURRENTLY HAVE, OR WILL HAVE PASS-THR OUGH PAYMENT STATUS

CY 2015 HCPCS

Code CY 2015 Short Descriptor PassThrough Expiration Date C9358 SurgiMend, fetal 12/31/2010 C9360 SurgiMend, neonatal 12/31/2011 C9363 Integra Meshed Bil Wound Mat 12/31/2011 C9349 FortaDerm, FortaDerm Antimic 12/31/2017 Q4101 Apligraf 12/31/2002 Q4104 Integra BMWD 12/31/2006 Q4105 Integra DRT 12/31/2006 Q4106 Dermagraft 03/31/2005 Q4107 Graftjacket 12/31/2006 Q4108 Integra matrix 12/31/2010 Q4110 Primatrix 12/31/2008 Q4121 Theraskin 12/31/2016 Q4122 Dermacell 12/31/2015 Q4124 Oasis tri-layer wound matrix 12/31/2013 Q4127 Talymed 12/31/2015 Q4131 Epifix 12/31/2014 Q4132 Grafix core 12/31/2014 Q4133 Grafix prime 12/31/2014

As discussed earlier, and as we stat ed in the CY 2015 OPPS/ASC proposed rule (79 FR 40999 through 41001) and in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74938), we packaged all skin substitutes not on pass-through payment status under the policy that packages all drugs and biologi cals that function as supplies when used in a surgical procedure (78 FR 74938) , because we consider skin substitutes to be a type of surgical supply in the HOPD. The adoption of the policy to package all drugs and biologicals that function as supp lies when used in a surgical procedure, followed the packaging policies for implantab le biologicals, implantable devices, andCMS-1613-FC 468

more broadly, the policy to package medical and surgical supplies into the related procedure under 42 CFR 419.2(b)(4). Further, as noted in the CY 2014 OPPS/ASC final rule with comment period, we believe these policies represented an example of a broader category of drugs and biologicals that should be packaged in the OPPS, that is, drugs and biologicals that function as supplies in a surgical procedure (78 FR 74930). Separately, in the CY 2010 OPPS/ASC final rule with comment period, we finalized a policy to evaluate implantable bi ologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) for pass-through payment through the medical device pass-through ev aluation process, because implantable biologicals function as implantab le devices (74 FR 60473), whic h have historically been considered supplies in the OPPS (65 FR 18443), and have been evaluated for pass-through payment through the medical de vice pass-through evaluation process since CY 2010. As noted earlier, the finalized packaging policy in the CY 2014 OPPS/ASC final rule with comment period to package all drugs and biologicals that function as supplies when used in a surgical procedure incl uded skin substitutes as a type of surgical supply, and, notably, the similarities between im plantable biologicals and skin substitutes were a key factor in packaging (like we did beginning in 2009 with implantable biologicals) skin substitutes into the associated surgical procedure (78 FR 74932). We also note that many skin substitutes are F DA-approved or cleared as devices, even though skin substitutes have traditionally been treated as biologicals under the OPPS. The similarities between these classes of pr oducts (implantable devices, implantable biologicals, and skin substitutes) informed our proposal to similarly treat applications forCMS-1613-FC 469

pass-through payment for skin substitutes using the OPPS device pass-through process,

described below. In the CY 2015 OPPS/ASC proposed ru le (79 FR 41000), we proposed that applications for pass-through payment for skin substitutes be evaluated using the medical device pass-through process and payment metho dology. As a result of this proposal, we proposed that the last skin s ubstitute pass-throug h applications evaluated using the drug and biological pass-through payment eval uation process would be those with an application deadline of the firs t business date in September 2014, and an effective date of January 1, 2015. In light of this proposal, we would change the December 1, 2014 pass-through payment applicati on deadline (for an effectiv e date of April 1, 2015) for both drugs and biologicals and devices to January 15, 2015, in order to provide sufficient time for applicants to adjust to the new policies and procedures in effect as of January 1, 2015. Any applications subm itted after the first business date in September 2014, through January 15, 2015, woul d be evaluated for the April 1, 2015 cycle. We believe that requiring skin subs titutes seeking pass-through payment to use the OPPS device pass-through evalua tion process is more approp riate because, although skin substitutes have characteristics of both surgic al supplies and biologica ls, we believe skin substitutes are best characterized as surgical supplies or devices because of their required surgical application and because they share significant clinical si milarity with other surgical devices and supplies, including implan table biologicals. Therefore, we stated in the proposed rule that if this proposal is finalized, beginni ng with applica tions seeking pass-through payment effective April 1, 2014, new skin substitutes would no longer be eligible to submit biological pass-through a pplications; rather, such applications forCMS-1613-FC 470

pass-through payment would be evaluate d using the medical device pass-through payment evaluation process, for which payment is based on charges reduced to cost from

claims. We refer readers to the CMS Web site at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/ to view the device pass-through payment application requirements and review criteria th at would apply to the evaluation of all skin substitute product applications for pass-th rough payment status beginning on or after January 1, 2015. Those skin substitutes th at are approved for pass-through payment status as biologicals effectiv e on or before January 1, 2015, would continue to be paid as pass-through biologicals for the duration of their period of pass-through payment. We also proposed to revise our regul ations at §§ 419.64 and 419.66 to reflect this proposed new policy. Specifically, we pr oposed to revise § 419.64 by deleting the existing paragraph (a)(4)(iv) text because it is currently outdated and adding new text at paragraph (a)(4)(iv) to exclude skin subs titutes from consideration for drug and biological pass-through payment. We pr oposed to modify the regulation at § 419.66(b)(3) to add that a pass-through de vice may be applied in or on a wound or other skin lesion, and we proposed to simplif y the language that “w hether or not it remains with the patient when the patient is released from the hospital” to read “either permanently or temporarily.” We also pr oposed to delete the current example in § 419.66(b)(4)(iii) of the regulati ons regarding the exclusion of materials, for example, biological or synthetic materials, that may be used to replace human skin from device pass-through payment eligib ility. We invited public comment on these proposals. Comment: Several commenters supporte d CMS’ proposal to evaluate skin substitute pass-through applic ations through the medical de vice pass-through process andCMS-1613-FC 471

pay for pass-through skin substitutes accord ing to the medical device pass-through payment methodology beginning January 1, 2015. The commenters believed that this policy change will limit instability in the high cost/low cost groups from pass-through skin substitutes with very high ASPs. The co mmenter stated that instability could occur because manufacturers set ASP and hospitals are relatively insensitive to price for separately paid pass-through skin substitutes. Therefore, the commenter added, a new high priced pass-through skin substitute could gain signific ant sales and move the high cost/low cost threshold significan tly higher from year to year. Response: We agree with the comme nters and apprecia te their support. Comment: Several commenters opposed CMS’ proposal to evaluate skin substitute pass-through applic ations through the medical de vice pass-through process. Some of these commenters argued that CMS lacks the authority to change the process for evaluating skin substitute pass- through applications. The commenters also believed that biologicals approved by the FDA under section 351 of the PHSA (those approved by the FDA under biologics license applications (BLA s)) cannot be treated as devices for passthrough payment evaluation purposes accordi ng to the Social Security Act and Congressional intent. The commenters al so claimed that ch anging the pass-through payment process for skin substitutes will stifle innovation of new wound care products. Response: We disagree with the comment ers’ assertion that the agency lacks the authority to change the process for evaluati ng skin substitutes for pass-through and that biologicals approved by the FDA under section 351 of the PH SA (BLA process) cannot be treated as devices for pass-through paym ent evaluation purposes according to the Social Security Act and Congre ssional intent. As we stat ed in the 2010 OPPS final ruleCMS-1613-FC 472

in response to a similar comment on the propos al to change the pa ss-through evaluation process for implantable biologi cals: “We do not agree with the commenters who asserted that Congress intended biologi cals approved under BLAs to be paid under the specific OPPS statutory provisions that apply to SCODs, including th e pass-through provisions” (74 FR 60476). Similarly, Congress did not specif y that we must pay for skin substitutes as separately payable biologicals rather than devices or supplies, if they also meet our criteria for payment as a device. We belie ve that skin substitutes can satisfy the definitions applied under the OPPS of a device or supply and a biological and that, for OPPS payment purposes, it is appropriate for us to consider skin substitutes as devices or supplies under both pass-through and nonpass- through payment policies, and not as separately payable biologicals. For ex ample, beginning in CY 2014, we package the

costs of skin substitutes into the costs of th e surgical procedures in which they are used, as we do for implantable biologicals and other implantable devices. Therefore, we do not believe that we must pay for skin substitutes under our OPPS payment methodologies for separately payable biologicals, rather than our device payment methodologies. In addition, for the skin substitute packaging policy, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74933) , we stated the following: “We do not believe that the FDA approval process shoul d exempt products from this packaging proposal or factor into the le vel of Medicare payment.” Si milarly, regarding our proposal to change the pass-throu gh payment evaluation process and payment methodology for skin substitutes from the drug and biologica l process to the device process, we also believe that any particular FDA approval pr ocess should not exempt such products that appropriately fall under the category of skin substitutes under the OPPS from theCMS-1613-FC 473

application of this pass-through payment pr oposal or direct whic h pass-through payment evaluation process must be used. Notably, none of the current 61 skin s ubstitute products described by distinct

HCPCS codes and listed in Table 35 above have been approved by FDA under section

351 of the PHSA. This fact is somewhat count erintuitive, as biologi cs or biologicals or biological products are most commonly understo od to be products approved by the FDA

under section 351 of the PHSA. Current skin substitute products’ FDA classifications include a variety of Class III medical devi ces, Class II medical devices, and HCT/Ps

under section 361 of the PHSA , which are tissue bank materials not subject to FDA approval requirements. We also note that whether a future wound healing product is described by the OPPS packaged category of products described in 42 CFR 419.2(b)(16) as “skin substitutes and similar products that aid wound healing” will depend upon the particular characteristics of the future product. We do not intend for the category of products described as “skin s ubstitutes and similar products that aid wound healing” to necessarily include all products with a wound healing indication. However, if a new wound healing product, regardless of FDA approva l or clearance type, fits with the “skin substitutes and similar products that aid w ound healing” category of products, all of the applicable OPPS policies that apply to “skin substitutes and similar products that aid wound healing” would also apply to the new wound healing product. Finally, we do not believe that this policy will stifle innovation of new skin substitutes, as new skin substitutes that can demonstrate a substantial clinical improvement over current wound treatments could receive pass-through status as a device. In addition, there are currently 61 distinct HCPCS codes for various skinCMS-1613-FC 474

substitutes. Of these 61 products, only 18 ( 30 percent) have had, currently have, or will have pass-through payment status granted through the drug and bi ological pass-through payment process. Therefore, pass-through pa yment does not appear to be necessary for the commercialization of these products, whic h have (in terms of distinct HCPCS codes describing them) expanded significantly from 2 skin substitutes in CY 2001 to 61 skin substitutes in CY 2015. Furthermore, we have not restricted access to the high cost skin substitute group, and we have only required manufacturers of new skin substitutes to submit pricing information for assignment to th e high cost group of skin substitutes. For these reasons, we do not believe that any CMS OPPS payment policies will stifle innovation or impede the development of new skin substitutes.

Comment: One commenter was concerned that the substantial clinical improvement criterion for medical device pass-through places an unduly high burden on new skin substitute products. The commenter believed that this requirement is “incompatible with skin substitute products , which are not required to submit efficacy data to the Food and Drug Administration.” This commenter also disagreed with CMS’ proposal to not accept any skin substitute ap plications though th e drug and biological pass-through payment process after Sept ember 1, 2014, and to move the final passthrough payment deadline for drug and biolog icals and devices from December 1, 2014, to January 15, 2015. The commenter requested that additional guidance on substantial clinical improvement be provided specifically for application to skin substitute products, beyond that described in the November 2, 2001, interim final rule with comment period entitled “Medicare Program—Prospective Payment System for Hospital OutpatientCMS-1613-FC 475

Services: Criteria for Establishing Add itional Pass-Through Categories for Medical Devices” (66 FR 55850). Response: The comment that FDA does not require submission of efficacy data for skin substitute products is overly simplifie d. The different skin substitute products

that have been identified in Table 35 a bove are subject to di fferent FDA regulatory requirements (that is, based on review by CBE R versus CDRH, regul atory classification and claims).

FDA/CDRH draws a distinction between wound dressing devices intended only to serve as a wound covering versus products in tended to promote wound healing. Those

devices that are intended to promote wound healing are subject to Premarket Approval (PMA) and require clinical data to support safety and effectiv eness of the device. Those

devices that are intended to serve as a wound covering are subject to Premarket Notification (510(k)) and require demonstration of substantia l equivalence (that is, the

device demonstrates that it is as safe and effective as a legally marketed predicate device). Generally, substantial equivalence in safety and effectiveness is demonstrated through comparative bench and animal studies and leveraged with hi storical clinical

effectiveness data for similar devices. The weakness of the evidence for many skin substitute products has been documented in two recent technology assessments by the Agency for Healthcare Research and Quality. However, different pre-market data requirements for skin substitute products regulated by FDA should not excuse these products from the substantia l clinical improvement pass- through criterion for device pass-through payment. Pass-through payment status is not intended to be granted to every new product, but only to those that sa tisfy the pass-through pa yment requirements.CMS-1613-FC 476

As stated in the CY 2001 OPPS interim fina l rule: “We believe it is important for hospitals to receive pass-thr ough payments for devices that offer substantial clinical improvement in the treatment of Medicar e beneficiaries to facilitate access by beneficiaries to the advantages of th e new technology. Conversely, the need for additional payments for devices that offe r little or no clinical improvement over a previously existing device is less apparent” (66 FR 55852). Regarding the requirements for satisfyi ng the substantial clinical improvement criterion, we believe that the list on page 55852 of the CY 2001 OPPS interim final rule suffices. For example, among the items listed is: “More rapid bene ficial resolution of the disease process treated because of the use of the device.” If a new skin substitute demonstrated improved wound healing compared to existing wound treatments, it could potentially qualify for pass-through as a medical device, assuming that the skin substitute is not described by an expired pa ss-through payment device category. Finally, we believe that sufficient notice was provided of this policy change in the CY 2015 OPPS/ASC proposed rule, and that acc epting drug and biolog ical applications through the first business date of September 2014 deadline for a January 1, 2015 pass-through payment effective date is a fair application of a policy that takes effect on January 1, 2015. The regular December 1, 2014 application deadlin e, which is being extended to January 15, 2015 for this cycle, was for pass-through payment applications with an earliest effective date of April 1, 2015, which is well past the effective date of this new policy.

After consideration of th e public comments we receive d, we are finalizing our proposal for applications seeking pass-through payment for skin subs titute and similarCMS-1613-FC 477

wound healing products effective beginning April 1, 2015, to apply using the medical device pass-through evaluation process. e. 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 pur poses, 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 genera l, prior to CY 2008, the OPPS recognized for payment only the HCPCS code that described the lowest dosag e of a drug or biological. During CYs 2008 and 2009, we applied a policy that assigned th e status indicator of the previously recognized HCPCS code to the associated newly recognized code(s), reflecting the packaged or separately payabl e status of the new code(s). In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages because we believed that adopting the standard HCPCS code-specific packaging determinations for these codes coul d lead to inappropriate payment incentives for hospitals to report certain HCPCS codes in stead of others. We continue to believe that making packaging determinations on a drug-specific basis eliminates payment incentives for hospitals to report certain HC PCS codes for drugs and allows hospitals flexibility in choosing to re port all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Th erefore, in the CY 2015 OPPS/ASC proposedCMS-1613-FC 478

rule (79 FR 41001), we proposed to con tinue our policy to make packaging determinations on a drug-specific basis, rath er than a HCPCS code-specific basis, for

those HCPCS codes that descri be the same drug or biologic al but different dosages in

CY 2015. For CY 2015, in order to propose a packag ing determination that is consistent

across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2013 claims data and our pricing information at ASP+6 percent across all of the HCPCS codes that de scribe 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 descri ptor. The following drugs did not have pricing information available for the ASP methodology for th is CY 2015 OPPS/ASC final rule with comment period and, as is our current policy for determining the packaging status of other drugs, we used th e mean unit cost available from the fourth quarter CY 2013 claims data to make the p ackaging determinations for these drugs: HCPCS code J3471 (Injection, hyaluronidase, ov ine, preservative free, per 1 usp unit (up to 999 usp units)) and HCPCS code J3472 (Inje ction, hyaluronidase, ovine, preservative free, per 1000 usp units). For all other drugs and biologicals that have HCPCS codes describing different doses, we then multiplied the weighted aver age ASP+6 percent per unit payment amount across all dosage levels of a specific drug or biological by the estima ted units per day for all HCPCS codes that describe each drug or bi ological from our claims data to determine the estimated per day cost of each drug or biol ogical at less than or equal to $95 (so thatCMS-1613-FC 479

all HCPCS codes for the same drug or biologic al would be packaged) or greater than $95 (so that 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 was displaye d in Table 41 of the CY 2015 OPPS/ASC proposed rule (79 FR 41001 through 41002). We did not receive any public comment s on this proposal. Therefore, we are finalizing our CY 2015 proposal, without modifi cation, to continue to make packaging determinations on a drug-specific basis, rath er than a HCPCS code-specific basis, for

those HCPCS codes that descri be the same drug or biologic al but different dosages. Table 36 below displays the packaging status of each drug and biol ogical HCPCS code to which the methodology applies for CY 2015.

TABLE 36.—HCPCS CODES TO WH ICH THE CY 2015 DRUG-SPECIFIC PACKAGING DETERMINATION METHODOLOGY APPLIES

CY 2015 HCPCS

Code CY 2015 Long Descriptor CY 2015 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 N J1441 Injection, filgrastim (g-csf), 480 mcg N J1460 Injection, gamma globulin, intramuscular, 1 cc N J1560 Injection, gamma globuli n, intramuscular over 10 cc N J1642 Injection, heparin sodium, (hep arin 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 su lfate, up to 500 mg N J2270 Injection, morphine su lfate, up to 10 mg NCMS-1613-FC 480

CY 2015 HCPCS

Code CY 2015 Long Descriptor CY 2015 SI J2271 Injection, morphine sulfate, 100mg N J2788 Injection, rho d immune gl obulin, human, minidose, 50 micrograms (250 i.u.) N

J2790 Injection, rho d immune gl obulin, human, full dose, 300 micrograms (1500 i.u.) N 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

3. Payment for Drugs and Biologicals w ithout Pass-Through Status That Are Not Packaged a. Payment for Specified Covered Outpat ient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals Section 1833(t)(14) of the Act de fines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14 )(B)(i) of the Act, a “specified covered outpatient drug” (known as a SCOD) is defined as a co vered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a se parate APC has been established and thatCMS-1613-FC 481

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 include d in the definition of SCODs. These exceptions are—

● A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.

● A drug or biological for which a temporary HCPCS code has not been assigned.

● During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). Section 1833(t)(14)(A)(iii) of the Ac t requires that payment for SCODs in CY 2006 and subsequent years be equal to th e average acquisition cost for the drug for that year as determined by the Secretary, su bject to any adjustment for overhead costs and taking into account the hospital acquis ition 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.CMS-1613-FC 482

Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in OPPS payment

rates for SCODs to take into account overh ead 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 relate d expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adju st the weights for am bulatory procedure

classifications for SCODs to take into account the fi ndings of the MedPAC study. It has been our longstanding policy to a pply the same treatment to all separately payable drugs and biologicals, which include SCODs, and drugs and biologicals that are not SCODs. Therefore, we apply the paymen t methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, whic h is a policy determination rather than a statutory requirement. In the CY 2015 OPPS/ASC proposed rule (79 FR 41002), we proposed to apply section 1833(t) (14)(A)(iii)(II) of the Act to all separately payable drugs and biologicals, including SCODs. Although we do not distinguish SCODs in this discussion, we note that we are required to apply section 1833( t)(14)(A)(iii)(II ) of the Act to SCODs, but we also are applying this provi sion to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable dr ugs and biologicals. Since CY 2006, we have attempted to establish a drug payment methodology that reflects hospitals’ acquisition costs for drugs and biologicals while ta king into account relevant pharmacy overhead and related hand ling expenses. We have attempted toCMS-1613-FC 483

collect more data on hospital overhead ch arges for drugs and biologicals by making several proposals that would re quire hospitals to change the way they report the cost and charges for drugs. None of these proposals we re adopted due to si gnificant 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 calculate d 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 a nd biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642 through 68643). We referred to this methodology as our standard drug payment methodology. Taking into consideration comments made by the pharmacy stakeholders and acknowledging the limitations of the reported data due to charge compression and hospitals’ repor ting practices, we added an “overhead adjustment” in CY 2010 (an internal adjustment of the data) by redistributing cost from coded and uncoded packaged drugs and biologica ls to separately payable drugs in order to provide more appropriate payments for drugs and biologicals in the HOPD. We continued this methodology, and we further refined it in CY 2012 by finalizing a policy to update the redistribution amount for inflat ion and to keep the redistribution ratio constant between the proposed rule and the fi nal rule. For a detailed discussion of our OPPS drug payment policies from CY 2006 to CY 2012, we refer readers to the CY 2013

OPPS/ASC final rule with comm ent period (77 FR 68383 through 68385). 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 chargeCMS-1613-FC 484

and claims data for drugs, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386), we indicated our concern thatthe continued use of the standard drug payment methodology (including the overhead ad justment) still may not appropriately account for average acquisition and pharmacy ove rhead cost and, therefore, may result in payment rates that are not as predictable, accurate, or appropriat e 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), 1847A, or

1847B of the Act. We refer to this alternat ive methodology as the “sta tutory default.” In

the CY 2013 OPPS/ASC final rule with comm ent period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of the Act authorizes the Secretary to calculate and adjust, as necessary, the average price for a drug in the year established under section 1842(o), 1847A, or 1847B of the Act, as the case may be, in determining payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, PartB drugs are paid at ASP+6 percent when furnished in physicians’ offices . We indicated that we believe that establishing the payment rates based on the statutory default of ASP+6 percent is appropriate as it yields increased predictabil ity in payment for separately payable drugs and biologicals under the OPPS and, therefore, we finalized our proposal for CY 2013 to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act (the st atutory default). We also finalized our proposal that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment a nd represents the combined acquisition andCMS-1613-FC 485

pharmacy overhead payment for drugs and biol ogicals, 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 ne utral weight scaler is not applied in determining payments for th ese separately paid drugs and biologicals for CY 2013 (77 FR 68389). b. CY 2015 Payment Policy In the CY 2015 OPPS/ASC proposed ru le (79 FR 41003), we proposed to continue our CY 2014 policy and pay for sepa rately payable drugs and biologicals at ASP+6 percent pursuant to section 1833(t)( 14)(A)(iii)(II) of the Act (the statutory default). We proposed that the ASP+6 per cent payment amount for separately payable drugs and biologicals requires no further ad justment and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals. We also proposed that payments for separately payable drugs and biological s are included in the budget neutrality adjustments, under the require ments in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in de termining payments for these separately paid drugs and biologicals. Comment: Commenters supported CMS’ pr oposal to pay for separately payable drugs and biologicals based on the statutory default rate of ASP+6 percent. A few commenters supported CMS’ pr oposal, but recommended that CMS examine ways to compensate hospitals for the unique, higher ove rhead and handling costs associated with therapeutic radiopharmaceuticals. Response: We appreciate the commenters ’ support of our proposal. We continue to believe that ASP+6 percent based on the st atutory default is appropriate for hospitalsCMS-1613-FC 486

for CY 2015 and that this percentage amount includes payment for acquisition and

overhead cost. We see no evidence that an ad ditional overhead adjustment is required for separately payable drugs, biologicals, and therapeutic radiopharmaceuticals for CY 2015.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to pay for sepa rately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6 percent payment amount for sepa rately payable drugs and biologicals requires no further adjustment and represen ts the combined acquisition and pharmacy overhead payment for drugs and biologicals fo r CY 2015. In addition, we are finalizing our proposal which states that payment for se parately payable drugs and biologicals be included in the budget neutrality adjustme nts, under the requirements of section 1833(t)(9)(B) of the Act, and that the budget ne utral weight scaler is not applied in determining payment of these separately pa id drugs and biologicals. We note that separately payable drug and biological paymen t rates listed in Addenda A and B to this final rule with comment period (available vi a the Internet on the CMS Web site), which illustrate the final CY 2015 payment of ASP+6 percent for separately payable nonpass-through drugs and biolog icals and ASP+6 percent for pass-through drugs and biologicals, reflect either ASP information that is the basis for calculating payment rates for drugs and biologicals in the physician’s office setting effective October 1, 2014, or WAC, AWP, or mean unit cost from CY 2013 claims data and updated cost report

information available for this final rule with comment period. In general, these published payment rates are not reflective of actual Ja nuary 2015 payment rates. This is because payment rates for drugs and biologicals w ith ASP information for January 2015 will beCMS-1613-FC 487

determined through the standard quarterl y process where ASP data submitted by manufacturers for the third quarter of 2014 (July 1, 2014 through September 30, 2014) are used to set the payment rates that are re leased for the quarter beginning in January 2015 near the end of December 2014. In addition, payment rates for drugs and biologicals in Addenda A and B to this fina l rule with comment period for which there

was no ASP information available for Octobe r 2014 are based on mean unit cost in the

available CY 2013 claims data. If ASP info rmation becomes available for payment for the quarter beginning in January 2015, we will price payment for these drugs and biologicals based on their newly available ASP information. Finally, there may be drugs and biologicals that have A SP information available for th is final rule with comment period (reflecting October 2014 ASP data) that do not have ASP information available for the quarter beginning in January 2015. Th ese drugs and biologicals will then be paid

based on mean unit cost data derived from CY 2013 hospital claims. Therefore, the payment rates listed in Addenda A and B to th is final rule with comment period are not for January 2015 payment purposes and are only illustrative of the CY 2015 OPPS payment methodology using the most recentlyavailable information at the time of

issuance of this final ru le with comment period. 4. Payment Policy for Therapeutic Radiopharmaceuticals Beginning in CY 2010 and continuing fo r CY 2014, we established a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biol ogicals. If ASP information is unavailable for a therapeutic radiopharmaceutical, we ba se therapeutic radiopharmaceutical payment on mean unit cost data derived from hospita l claims. We believe that the rationaleCMS-1613-FC 488

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 continue s to be appropriate for nonpass-through separately payable therapeutic radiopharm aceuticals in CY 2015. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 41003) , we proposed for CY 2015 to pay all nonpass-through, separately payable therapeuti c radiopharmaceuticals at ASP+6 percent, based on the statutory default described in se ction 1833(t)(14)(A)(iii)(I I) of the Act. For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer

readers to the CY 2010 OPPS/ ASC final rule with comm ent period (74 FR 60520 through 60521). We also proposed to rely on CY 2013 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 fi nal rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524). The proposed CY 2015 payment rates for nonpass-through separately payable therapeutic radiopharmaceuticals were included in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site).CMS-1613-FC 489

Comment: Several commenters supported CMS’ proposal to pay for separately payable therapeutic radiopharmaceuticals under the statutory default payment rate of ASP+6 percent, if ASP data are submitted to CMS. Response: We appreciate the commenters’ support. We continue to believe that providing payment for therapeutic radiopharm aceuticals based on ASP or mean unit cost

if ASP information is not available woul d provide appropriate payment for these products. When ASP data are not available, we believe that paying for therapeutic radiopharmaceuticals using mean unit cost will appropr iately pay for th e average hospital acquisition and associated handling cost s of nonpass-through separately payable therapeutic radiopharmaceuticals. As we st ated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60523), although using mean unit cost for payment for therapeutic radiopharmaceuticals when ASP data are not available is not the usual OPPS process (the usual process reli es on alternative data sources such as WAC or AWP when ASP information is temporarily unavailable, prior to defaulting to the mean unit cost from hospital claims data), we continue to believe that WAC or AWP is not an appropriate proxy to provide OPPS payment fo r average therapeutic radiopharmaceutical acquisition cost and associated handling costs when manufa cturers are not required to submit ASP data. Payment based on WAC or AWP under the established OPPS methodology for payment of separately paya ble drugs and biologicals is usually temporary for a calendar quarter until a manufacturer is able to submit the required ASP data in accordance with the quarterly A SP submission timeframes for reporting under

section 1847A of the Act. Because ASP reporting for OPPS payment of separately payable therapeutic radiopharmaceuticals is not required, a manufacturer’s choice to notCMS-1613-FC 490

submit ASP could result in payment fo r a separately payable therapeutic radiopharmaceutical based on WAC or AWP for a full year, a result that believe would be inappropriate.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to conti nue to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals at ASP+ 6 percent. We also are finalizing our proposal to continue to rely on CY 2013 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable. The CY 2015 final rule pa yment rates for nonpass-through separately payable therapeutic radiopharmaceuticals are in cluded in Addenda A and B to this final rule with comment period (which are available via the Internet on the CMS Web site). 5. Payment Adjustment Policy for Radioiso topes Derived From N on-Highly Enriched

Uranium Sources Radioisotopes are widely used in m odern medical imaging, particularly for cardiac imaging and predominantly for the Medicare population. Technetium-99 (Tc-99m), the radioisotope used in the major ity of such diagnostic imaging services, is currently produced in legacy reactors outside of the United States using highly enriched uranium (HEU).

The United States would like to eliminat e domestic reliance on these reactors, and is promoting the conversion of all medical radioisotope producti on 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 3-year time period. We e xpect this change in the supply source forCMS-1613-FC 491

the radioisotope used for modern medical imaging will introduce new costs into the payment system that are not accounted for in the historical claims data. Therefore, for CY 2013, we finalized a po licy to provide an additional payment of $10 for the marginal cost for radioisotopes produced by non-HEU sources (77 FR 68323). Under this policy, hospitals report HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full cost recovery add-on per study dose) once per dose along with any diagnostic scan or scans furnished using Tc-99m as long as the Tc-99m doses used can be certified by the hospi tal to be at least 95 percent derived from non-HEU sources. The time period for this a dditional payment was not to exceed 5 years from January 1, 2013 (77 FR 68321). Comment: A few commenters requeste d that CMS extend payment for HCPCS code Q9969 an additional 3 to 5 years to ensure adequate data are collected and provide a longer ramp up period for more widespread us e of non-HEU materials since they are not yet widely available. One commenter believ ed that the $10 payment is not sufficient and requested that CMS increase the payment rate. This commenter also requested that CMS eliminate the copayment. Response: We stated in our CY 2013 OPPS/ASC final rule with comment period (77 FR 68316) that our expectation was that the transition to non-HEU sourced Mo-99 would be completed within 4 to 5 years a nd that there might be a need to make differential payments for a period of 4 to 5 years. We further stated that we would reassess, and propose if necessary, on an annual basis whether such an adjustment continued to be necessary and whether any changes to the adjustment were warranted. We have reassessed this payment for CY 2015 and have not identified any newCMS-1613-FC 492

information that would cause us to modify pa yment at this time. We do not agree with the commenter’s suggestion to eliminate th e beneficiary’s copayment because section 1833(t)(8) of the Act and §§ 419.41 through 419.45 of the regulations require a beneficiary copayment. We are continuing the policy of providing an additional $10 payment for radioisotopes produced by non-HEU sources for CY 2015. Although we will reassess this policy annually, consistent with the original policy in the CY 2013

OPPS/ASC final rule with co mment period (77 FR 68321), we do not anticipate that this additional payment would extend beyond CY 2017. 6. Payment for Blood Clotting Factors For CY 2014, we provided payment fo r blood clotting factors under the same methodology as other nonpass-th rough separately payable dr ugs and biologicals under the OPPS and continued paying an updated fu rnishing fee. That is, for CY 2014, we provided payment for blood clotting factors unde r the OPPS at ASP+6 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors are provided in physicians’ offices under Medicare Part B and in other Medicare settings, a furnishing fee is also applied to the paym ent. The CY 2014 updated furnishing fee was $0.192 per unit. In the CY 2015 OPPS/ASC proposed rule (79 FR 41003), for CY 2015, we proposed to pay for blood clotting factors at ASP+6 percent, c onsistent with our proposed payment policy for other nonpass-through separately payable drugs and biologicals, and to continue our policy for payment of the furnishing fee using an updated amount. Our policy to pay for a furnishing fee for blood cl otting factors under th e OPPS is consistent with the methodology applied in the physicia n office and inpatient hospital setting, andCMS-1613-FC 493

first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and

later discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The proposed furnishing fee update was based on the percentage increase in the Consumer Price Index (CP I) for medical care for the 12-month period ending with June of the previous year. Becau se the Bureau of Labor Statistics releases the applicable CPI data af ter the MPFS and OPPS/ASC pr oposed rules are published, we were not able to include the actual upda ted furnishing fee in the proposed rules. Therefore, in accordance with our policy, as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we proposed to announce the actual figure for the percent change in the applicable CPI a nd the updated furnishing fee calculated based on that figure through applicable program inst ructions and posting on the CMS Web site

at: http://www.cms.gov/Medicare/Medi care-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html

. Comment: Commenters supported CMS’ proposal to continue to apply the furnishing fee for blood clotting factors provi ded in the OPD. The commenters also supported CMS’ proposal to pay for separately payable drugs at ASP+6 percent based on the statutory default for CY 2015. Response: We appreciate the commenters’ support.

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to provide payment for bloo d clotting factors under the same methodology as other separately paya ble drugs and biologicals under the OPPS and to continue payment of an updated furnishi ng fee. We will announ ce the actual figure of the percent change in the applicable CPI a nd the updated furnishing fee calculation basedCMS-1613-FC 494

on that figure through the applicable program instructions and posting on the CMS Web

site. 7. Payment for Nonpass-Through Drugs, Bi ologicals, and Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital Claims Data The Medicare Prescription Drug, Impr ovement, and Modernization Act of 2003 (Pub. L. 108-173) did not address the OPPS pa yment in CY 2005 and subsequent years for drugs, biologicals, and radiopharmaceutical s that have assigned HCPCS codes, but that do not have a reference AWP or appr oval for payment as pass-through drugs or biologicals. Because there was no statutory provision that dictated payment for such drugs, biologicals, and radiopharmaceuticals in CY 2005, and because we had no hospital

claims data to use in esta blishing a payment rate for th em, 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 radiopharmaceutical s with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HC PCS codes in each of those calendar years that did not crosswalk to predece ssor 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 adju sted to cost for radiopharmaceuticals. Beginning in CY 2008 and continuing through CY 2014, we implemented a policy to provide payment for new drugs and biologicals with HCPCS codes (except those that are policy-packaged), but which did not have pass-through status a nd were without OPPSCMS-1613-FC 495

hospital claims data, at an amount consis tent with the final OPPS payment methodology for other separately payable nonpass-through dr ugs and biologicals for the given year. In the CY 2015 OPPS/ASC proposed rule (79 FR 41004), for CY 2015, we proposed to continue this policy and provi de payment for new drugs, biologicals, and therapeutic radiopharmaceuticals that do not have pass-through status at ASP+6 percent, consistent with the proposed CY 2015 paymen t methodology for other separately payable nonpass-through drugs, biologicals, and therap eutic radiopharmaceuticals, which was proposed to be ASP+6 percent. We believe this proposed policy would ensure that new nonpass-through drugs, biologicals, and ther apeutic radiopharmaceuticals would be treated like other drugs, biologicals, a nd therapeutic radiopharmaceuticals under the

OPPS. For CY 2015, we are also continuing to package payment for all new nonpass-through policy-packaged products (dia gnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biological s, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure) with HCPCS codes but without claims data (those new CY 2015 HCPCS code s that do not crosswalk to predecessor HCPCS codes). This is consistent with th e CY 2014 finalized policy packaging proposal of all existing nonpass-through diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and ra diopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologica ls that function as supplies when used in a surgical procedure, as discussed in more detail in section II.A.3.

of this final rule with comment period.CMS-1613-FC 496

In accordance with the OPPS ASP methodology, in the absence of ASP data, for CY 2015, we proposed to continue our policy of using the WAC for the product to establish the initial paymen t rate for new nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS clai ms data. However, we note that if the WAC is also unavailable, we would make pa yment at 95 percent of the product’s most recent AWP. We also proposed to assign status indicator “K” (Separately paid nonpass-through drugs and biologicals, includi ng therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and biologicals wi thout OPPS claims data and for which we have not granted pass-through status. Withrespect to new nonpass-through drugs and biologicals for which we do not have ASP da ta, we proposed that once their ASP data

become available in later quarterly submissions, their payment rates under the OPPS would be adjusted so that the rates woul d be based on the ASP methodology and set to the proposed ASP-based amount (proposed for CY 2015 at ASP+6 percent) for items that have not been granted pass-through status. This proposed policy, wh ich utilizes the ASP methodology for new nonpass-through drugs and biol ogicals with an ASP, is consistent with prior years’ po licies for these items and woul d ensure that new nonpass-through drugs and biologicals would be treated like other drugs and biologicals under the OPPS, unless they are grante d pass-through status. Similarly, we proposed to continue to ba se 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 avai lable. If the WACs also are unavailable, we proposed to make payment for new therapeutic radioph armaceuticals at 95 percent of the products’CMS-1613-FC 497

most recent AWP because we would not have mean costs from hospital claims data upon which to base payment. As we proposed w ith new drugs and biologicals, we proposed to continue our policy of assigning status indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals without OPPS claims data for which we have not granted pass-through status.

Consistent with other ASP-based payment, for CY 2015, we proposed to announce any changes to the payment amounts for new drugs and bi ologicals in this CY 2015 OPPS/ASC final rule with comment pe riod and also on a quarterly basis on the CMS Web site during CY 2015 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that changes to the paymen t rates for these drugs and biologicals are necessary. The payment rates for new ther apeutic radiopharmaceuticals also would be changed accordingly based on later quarter ASP submissions. We note that the new CY 2015 HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals were

not available at the time of de velopment of the proposed rule. However, these agents are

included in Addendum B to this CY 2015 OPPS /ASC final rule with comment period (which is available via the Internet on the CMS Web site), where they are assigned

comment indicator “NI.” This comment indicat or reflects that their interim final OPPS treatment is open to public comment in this CY 2015 OPPS/ASC fina l rule with comment period. There are several nonpass-through drugs and biologicals that were payable in

CY 2013 and/or CY 2014 for which we did not have CY 2013 hospital claims data available for the proposed rule and for wh ich there are no other HCPCS codes that describe different doses of the same drug, butwhich have pricing information availableCMS-1613-FC 498

for the ASP methodology. In order to determin e the packaging status of these products for CY 2015, we proposed to continue our polic y to calculate an esti mate of the per day cost of each of these items by multiplying th e payment rate of each product based on ASP+6 percent, similar to other nonpass-thr ough drugs and biologicals paid separately under the OPPS, by an estimated average num ber 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 O PPS/ASC final rule with comment period (70 FR 68666 through 68667). We proposed to package items for which we estimated the per day administration cost to be less than or equa l to $90 (although, as mentioned in section V.B.2. of this final rule with comment period, we are finalizi ng a packaging threshold of $95 for CY 2015) and to pay separately for items for which we estimated the per day administration cost to be greater than $90 (with the exception of diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biological s, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure, which we proposed to continue to package regardless of cost) in CY 2015. We also proposed that the CY 2015 payment for separately payable items without CY 2013 clai ms data would be ASP+6 percent, similar to payment for other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology paid in the physician’s office setting, in the absence of ASP data, we proposed to us e the WAC for the produc t to establish the initial payment rate and, if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available. The proposed estimated units per day andCMS-1613-FC 499

status indicators for these items were di splayed in Table 42 of the proposed rule (79 FR 41005). Finally, there were 35 drugs and biologicals, shown in Table 43 of the proposed rule (79 FR 41005 through 41006), that were payable in CY 2013 but for which we lacked CY 2013 claims data and any other pricing information for the ASP methodology for the CY 2015 OPPS/ASC proposed rule. For CY 2010, we finalized a policy to assign status indicator “E” (Not paid by Medicar e when submitted on outpatient claims [any outpatient bill type]) whenever we lacked cl aims data and pricing information and were unable to determine the per day cost of a dr ug or biological. In a ddition, we noted that we would provide separate payment for these drugs and biologicals if pricing information reflecting recent sales be came available mid-year for the ASP methodology. For CY 2015, as we finalized in CY 2014 (78 FR 75031), we proposed to continue to assign status indi cator “E” to drugs and biologica ls that lack CY 2013 claims data and pricing information for the A SP methodology. All drugs and biologicals without CY 2013 hospital claims data or da ta based on the ASP methodology that were assigned status indicator “E” on this basis at the time of the proposed rule for CY 2015 were displayed in Table 43 of the proposed rule (79 FR 41005 through 41006). We also proposed to continue our policy to assign the products status indicator “K” and pay for them separately for the remainder of CY 2015 if pricing information becomes available. We did not receive any specific pub lic comments regarding our proposed payment for nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes, but without OPPS hospital claims data . Many commenters supported our proposal to pay for separately payable drugs at A SP+6 percent under the statutory default.CMS-1613-FC 500

However, these comments were not specifi c to new drugs and biologicals with HCPCS

codes but without OPPS claims data.

After consideration of th e public comments we receive d, we are finalizing our CY 2015 proposal without modification, incl uding our proposal to assign drug or biological products status indica tor “K” and pay for them separately for the remainder of CY 2015 if pricing information becomes availabl e. The final estimated units per day and status indicators for drugs a nd biologicals without CY 2013 cl aims data are displayed in

Table 37 below. We did not receive any public comment s on our proposal to continue to assign status indicator “E” to drugs and biologicals that lack CY 2013 claims data and pricing information for the ASP methodology and, ther efore, we are finalizing this proposal without modification. All drugs and biologi cals without CY 2013 hospital claims data and without pricing information for the ASP methodology that are assigned status

indicator “E” on this basis at the time of th is final rule with comment period for CY 2015 are displayed in Table 38 below.CMS-1613-FC 501

TABLE 37.—DRUGS AND BIOLOGICALS WITHOUT CY 2013 CLAIMS DATA

CY 2015 HCPCS

Code CY 2015 Long Descriptor Estimated Average Number of Units Per Day CY 2015

SI CY 2015 APC 90581 Anthrax vaccine, for subcutaneous or intramuscular use 1 K 1422 J0215 Injection, alefacept, 0. 5 mg 29 K 1633 J0365 Injection, aprotonin, 10,000 kiu 1 N 1439 J0630 Injection, calcitonin salmon, up to 400 units 2 K 1433 J2670 Injection, tolazoline hcl, up to 25 mg 1 N 1457 J3355 Injection, urofollitropin, 75 iu 2 K 1741 J7196 Injection, antithrombin recombinant, 50 IU 268 K 1332 J7505 Muromonab-cd3, parenteral, 5 mg 1 N 7038 J7513 Daclizumab, parenteral, 25 mg 1 N 1612 J8650 Nabilone, oral, 1 mg 4 K 1424 J9151 Injection, daunorubicin citrate, liposomal formulation, 10 mg 10 K 0821

J9215 Injection, interferon, alfa-n3, (human leukocyte derived), 250,000 iu 1 N 1473 J9300 Injection, gemtuzumab ozogamicin, 5 mg 1 K 9004CMS-1613-FC 502

TABLE 38.—DRUGS AND BIOLOGICALS WITHOUT CY 2013 CLAIMS DATA AND WITHOUT PRICING INFORMATION FOR THE ASP METHODOLOGY

CY 2015 HCPCS

Code CY 2015 Long Descriptor CY 2015 SI 90296 Diphtheria antitoxin, equine, any route E 90393 Vaccina immune globulin, human, for intramuscular use E 90477 Adenovirus vaccine, type 7, live, for oral use E

90644 Meningococcal conjugate vaccine, serogroups c & y and hemophilus influenza b vaccine (hib-mency), 4 dose schedule, when administered to children 2-15 months of age, for intramuscular use E

90681 Rotavirus vaccine, human, attenuated, 2 dose schedule, live, for oral use E 90727 Plague vaccine, for intramuscular use E J0190 Injection, biperiden lactate, per 5 mg E J0205 Injection, alglucerase, per 10 units E J0350 Injection, anistrep lase, per 30 units E J0364 Injection, apomorphine hydrochloride, 1 mg E J0395 Injection, arbutamine hcl, 1 mg E J0710 Injection, cephapirin sodium, up to 1 gm E J1180 Injection, dyphylline, up to 500 mg E J1435 Injection estrone per 1 MG E J1562 Injection, immune globul in (vivaglobin), 100 mg E J1620 Injection, gonadorelin hydrochloride, per 100 mcg E J1655 Injection, tinzapar in sodium, 1000 iu E J1730 Injection, diazoxide, up to 300 mg E J1835 Injection, itraconazole, 50 mg E J2460 Injection, oxytetracyc line hcl, up to 50 mg E J2513 Injection, pentastarch, 10% solution, 100 ml E J2725 Injection, protirelin, per 250 mcg E J2670 Injection, tolazoline hcl, up to 25 mg E J2725 Injection, protirelin, per 250 mcg E J2940 Injection, somatrem, 1 mg E J3305 Injection, trimetrexate glucuronate, per 25 mg E J3365 Injection, iv, uroki nase, 250,000 i.u. vial E J3400 Injection, triflupromazi ne hcl, up to 20 mg E J8562 Fludarabine phosphate, oral, 10 mg E J9165 Injection, diethylstilbestrol diphosphate, 250 mg E J9212 Injection, interferon alfacon-1, recombinant, 1 microgram E J9219 Leuprolide acetate implant, 65 mg ECMS-1613-FC 503

CY 2015 HCPCS

Code CY 2015 Long Descriptor CY 2015 SI

Q0174 Thiethylperazine maleate, 10 mg, oral, fda approved prescription anti-emetic, for us e as a complete therapeutic substitute for an iv anti-eme tic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen E

Q0515 Injection, sermorelin acetate, 1 microgram E

VI. Estimate of OPPS Tr ansitional Pass-Through Spendi ng for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background Section 1833(t)(6)(E) of the Act limits the total projected am ount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable pe rcentage,” currently not to exceed 2.0 percent of total program payments estimated to be ma de for all covered services under the OPPS furnished for that year. If we estimate befo re the beginning of the calendar year that the total amount of pass-through payments in th at 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 pa ss-through payments made in that year to ensure that the limit is not exceeded. We estimate the pass-through spending to determine whether payments exceed the a pplicable percentage and the appropriate prorata reduction to the conversion factor fo r the projected level of pass-through spending in the following year to ensure that total estimated pass-through spending for the prospective payment year is budget neutral, as required by section 1833(t)(6)(E) of the

Act.CMS-1613-FC 504

For devices, developing an estimate of pass-through spending in CY 2015 entails estimating spending for two groups of items. Th e first group of items consists of device categories that are currently eligible for pass-through paymen t and that will continue to be eligible for pass-through payment in CY 2015. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of items that we know are newly eligible, or project may be newly eligible, for device pass-through payment beginning in CY 2015. The sum of the CY 2015 pass-through estimates for these two groups of devi ce categories equals the total CY 2015 pass-through spending estimate for device catego ries with pass-through status. We base the device pass-through estimated payments for each device category on the amount of payment as established in sect ion 1833(t)(6)(D)(ii) of the Act, and as outlined in previous rules, including the CY 2014 OPPS/ASC fina l rule with comment period (78 FR 75034 through 75036). We note that, beginni ng in CY 2010, the pass-through evaluation process and pass-through payment for impl antable biologicals newly approved for pass-through payment beginning on or after Ja nuary 1, 2010 that are su rgically inserted or implanted (through a surgical incision or a natural orific e) is the device pass-through process and payment methodology (74 FR 6047 6). As has been our past practice (76 FR 74335), in the CY 2015 OPPS/ASC pr oposed rule (79 FR 41007), for CY 2015, we proposed to include an estimate of a ny implantable biolog icals eligible for pass-through payment in our estimate of pa ss-through spending for devices. We also proposed that, beginning in CY 2015, applic ations for pass-through payment for skinCMS-1613-FC 505

substitutes and similar produc ts be evaluated using the medical device pass-through process and payment methodology. We proposed that the last skin substitute pass-through applications evaluated using the drugs and biologicals pass-through evaluation process would be those with anapplication deadline of September 1, 2014,

and an earliest effective date of January 1, 2015. Therefore, in light of this proposal, we proposed to change the December 1, 2014 pass-through application deadline (for an earliest effective date of April 1, 2015) fo r both drugs and biologi cals and devices to January 15, 2015, in order to provide sufficient time for applicants to adjust to the new policies and procedures that will be in e ffect as of January 1, 2015. We discuss our proposal to change the pass-th rough evaluation process for sk in substitutes and address comments to this proposal and the proposal to change the April 1, 2015 pass-through effective date application d eadline in section V.B.2.d. of th is final rule with comment period, where we explain that we are finaliz ing this proposal. Th erefore, beginning in CY 2015, we will include an estimate of any skin substitutes eligible for pass-through payment in our estimate of pass-through spending for devices. We did not receive any public comments on our proposed methodology or proposed estimate for pass-through spending for devices. Therefore, we are finalizing our proposal to base the pass-through estimate for devices on our established methodology, as described above. Moreover, we are finalizi ng our proposal, beginning in CY 2015 and in future years, to include an estimate of any skin s ubstitutes eligible for pass-through payment in our estimate of pass-through spending for devices. For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act es tablishes the pass-through payment amount as the amountCMS-1613-FC 506

by which the amount authorized under section 1842(o) of the Act (o r, if the drug or biological is covered under a competitive acquisition contra ct 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 dete rmines is associated with the drug or biological. We note that the Part B dr ug CAP program has been postponed since CY 2009, and such a program has not been reinstated for CY 2015. Because, as we proposed, we will pay for most nonpass-through separately payable drugs and biologicals under the CY 2015 OPPS at ASP+6 percent, as we discuss in section V.B.3. of the proposed rule and this final rule with co mment period, which repr esents the otherwise applicable fee schedule amount associated w ith most pass-through drugs and biologicals, and because, as we proposed, we will pay for CY 2015 pass-through drugs and biologicals at ASP+6 percent, as we discuss in section V.A. of the proposed rule and this final rule with comment period, our estim ate of drug and biological pass-through payment for CY 2015 for this group of items is $0, as discussed below. Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents, without pass-throu gh status will always be packaged into payment for the associated procedures and these products will not be separately paid. In addition, we policy- package all nonpass-through drugs, biologicals, and radiopharmaceuticals that function as suppl ies when used in a diagnostic test or procedure and drugs and biologi cals that function as supplies when used in a surgical procedure, as discussed in section II.A.3. of this final rule with comment period. In theCMS-1613-FC 507

CY 2015 OPPS/ASC proposed rule (79 FR 41007), we proposed that all of these policy-packaged drugs and biologicals with pass-through status would be paid at ASP+6 percent, like other pass-through drugs and bi ologicals, for CY 2015. Therefore, our estimate of pass-through payment for polic y-packaged drugs a nd biologicals with pass-through status approved pr ior to CY 2015 is not $0. In section V.A.4. of this final rule with comment period, we discuss our pr oposed and finalized policy to determine if the costs of certain policy-packaged drugs or biologicals are already packaged into the existing APC structure. If we determine that a policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals already

included in the costs of the APCs that are associated with the drug receiving pass-through payment, we proposed to offset the amount of pass-through payment for the policy-packaged drug or biological. For thes e drugs or biologicals, the APC offset amount is the portion of the APC payment for the specific procedure performed with the pass-through drug or biological, which we refer to as the policy-packaged drug APC

offset amount. If we determine that an offset is appropriate for a specific policy-packaged drug or biological receiving pass-through payment, we reduce our estimate of pass-through payments for th ese drugs or biologicals by this amount. Similar to pass-through estimates for de vices, the first group of drugs and biologicals requiring a pass-thr ough payment estimate consists of those products that were recently made eligible for pass-thr ough payment and that will continue to be eligible for pass-through pa yment in CY 2015. The second group contains drugs and biologicals that we know are newly eligible, or project will be newl y eligible, beginning in CY 2015. The sum of the CY 2015 pass-th rough estimates for these two groups ofCMS-1613-FC 508

drugs and biologicals equals the total CY 2015 pass-through spending estimate for drugs and biologicals with pass-through status. B. Estimate of Pass-Through Spending In the CY 2015 OPPS/ASC proposed rule (79 FR 41007), we proposed to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2015, consistent with section 1833(t)(6)(E)(ii)( II) of the Act, and our OPPS policy from CY 2004 through CY 2014 (78 FR 75034 through 75036). For the first group of devices for pass -through payment estima tion purposes, there is one device category, HCPCS code C1841 (Retinal prosthesis , includes all internal and external components), elig ible for pass-through payment as of October 1, 2013, continuing to be eligible for CY 2014, and that will continue to be eligible for pass-through payment for CY 2015. Based on the one device category, HCPCS code C1841, we are finalizing our proposed rule es timate for the first group of devices of $0.5 million. In estimating our CY 2015 pass-through sp ending for device categories in the second group, we include: devi ce categories that we knew at the time of the development of the final rule will be newly eligible for pass-through payment in CY 2015; additional device categories that we estimate could be approved for pass-through status subsequent to the development of the final rule a nd before January 1, 2015; and contingent projections for new device categories establishe d in the second through fourth quarters of CY 2015. We proposed to use the gene ral methodology described in the CY 2008

OPPS/ASC final rule with co mment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass-through device categories. For theCMS-1613-FC 509

proposed rule, the estimate of CY 2015 pass- through spending for this second group of device categories was $10.0 million. We did not receive any public comments regarding our proposed pass-through estimate for devices . We are establishing one new device category subsequent to the publication of the proposed rule, HCPCS code C2624 (Implantable wireless pulmonary artery pressure sensor with deliver y catheter, including all system components), that will be effec tive January 1, 2015. We estimate that HCPCS code C2624 will cost $50.5 million in pass-through expenditures in CY 2015 Therefore,

for this CY 2015 OPPS/ASC final rule withcomment period, the estimate of CY 2015 pass-through spending for this second group of device categories is $60.5 million. To estimate CY 2015 pass-through spending fo r drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass-through paym ent status for CY 2015, we proposed to utilize the most recent Medicare physician claims data regarding their utilization, information provided in the respective pass- through applications, historical hospital claims data, pharmaceutical industry inform ation, and clinical information regarding those drugs or biologicals to project the CY 2015 OPPS utilization of the products. For the known drugs and biologicals (e xcluding policy-packaged diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a dia gnostic test or procedure, and drugs and biologicals that function as suppl ies when used in a surgical procedure) that will be continuing on pass-through payment status in CY 2015, we estimate the pass-through payment amount as the difference between ASP+6 percent and the payment rate for nonpass-through drugs and biological s that will be separately paid at ASP+6 percent,CMS-1613-FC 510

which is zero for this group of drugs. Because payment for policy-packaged drugs and biologicals is packaged if the product was notpaid separately due to its pass-through status, we proposed to include in the CY 2015 pass-through estimate the difference between payment for the policy-packaged drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the policy-packaged drug APC offset amount, if we determine that the policy-packaged drug or biological approve d for pass-through payment resembles a predecessor drug or biological already included in the cost s of the APCs that are associated with the drug rece iving pass-through payment. For the proposed rule, using the methodology described above, we calcula ted a CY 2015 proposed spending estimate for this first group of drugs and biol ogicals of approximately $2.8 million. We did not receive any public comments on our proposed methodology for calculating for calculating th e spending estimate for the first group of drugs and biologicals. For this final rule with comment pe riod, using the methodology described above, we calculated a final CY 2015 spending estim ate for this first group of drugs and biologicals of approximately $11.7 million. To estimate proposed CY 2015 pass-thr ough spending for drugs and biologicals in the second group (that is, drugs and biologi cals that we know ar e newly eligible, or project will be newly e ligible, beginning in CY 2015), in the CY 2015 OPPS/ASC proposed rule (79 FR 41008), we proposed to use utilization estimates from pass-through applicants, pharmaceutical industry data, clini cal information, recent trends in the per unit ASPs of hospital outpatient drugs, and projected annual ch anges in service volume andCMS-1613-FC 511

intensity as our basis for making the CY 2015 pass-through payment estimate. We also proposed to consider the most recent O PPS experience in appr oving new pass-through drugs and biologicals. Using our pr oposed methodology for estimating CY 2015 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and biologicals of approximately $2.2 million. We did not receive any public comments on our proposed methodology for calculating for calculating th e spending estimate for the second group of drugs and nonimplantable biologicals. For this final rule with comment period, using our finalized methodology for estimating CY 2015 pass-through payments for this second group of drugs, we calculated a spending estimate for this second group of drugs and biologicals of approximately $10.1 million. Our CY 2015 estimate for total pass-through spending for drugs and biologicals (spending for the first group of drugs and biologicals ($11.7 million) plus spending for the second group of drugs a nd biologicals ($10.1 million)) equals $21.8

million. In summary, in accordance with the me thodology described above in this section, for this final rule with comment period, we estimate that total pa ss-through spending for the device categories and the drugs and biol ogicals that are c ontinuing to receive pass-through payment in CY 2015 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2015 will be approximately $82.8 million (approximatel y $61.0 million for device categories and approximately $21.8 million for drugs and biolog icals), which represents 0.15 percent of total projected OPPS payments for CY 2015. Therefore, we estimate that pass-throughCMS-1613-FC 512

spending in CY 2015 will not amount to 2.0 pe rcent of total projected OPPS CY 2015 program spending. VII. OPPS Payment for Ho spital Outpatient Visits A. Payment for Hospital Outpatient C linic and Emergency Department Visits Since April 7, 2000, we have instructed hos pitals to report facility resources for clinic and ED hospital outpatient visits usi ng the CPT E/M codes and to develop internal hospital guidelines for reporting the appropria te visit level (65 FR 18451). Because a national set of hospital-specifi c codes and guidelines do not currently exist, we have advised hospitals that each hospital’s internal guidelines that determine the levels of clinic and ED visits to be reported should fo llow the intent of the CPT code descriptors, in that the guidelines should be designed to reasonably relate the intensity of hospital

resources to the different levels of effort represented by the codes. While many hospitals have advocated fo r hospital-specific na tional guidelines for visit billing since the OPPS st arted in 2000, and we have signaled in past rulemaking our intent to develop guidelines, this comple x undertaking has proven challenging. Our work with interested stakeholders, such as hosp ital associations, along w ith a contractor, has confirmed that no single approach could cons istently and accurately capture hospitals’

relative costs. Public comment s received on this issue, as well as our own knowledge of how clinics operate, have led us to conclude that it is not feasible to adopt a set of national guidelines for reporting hospital clinic visits that can accommodate the enormous variety of patient populations and service-mix provided by hospitals of all types and sizes throughout the country. More over, no single approach has been broadly endorsed by the stakeholder community.CMS-1613-FC 513

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75036 through 75045), we finalized a new policy which cr eated an alphanumeric HCPCS code, G0463 (Hospital outpatient clinic visit for assessmen t and management of a patient), for hospital use only representing any and all clinic vis its under the OPPS and assigned HCPCS code

G0463 to new APC 0634. We also finalized a policy to use CY 2012 claims data to develop the CY 2014 OPPS payment rates fo r HCPCS code G0463 based on the total geometric mean cost of the levels one th rough five CPT E/M codes for clinic visits previously recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). In addition, we finalized a pol icy to no longer rec ognize a distinction

between new and establishe d patient clinic visits. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75036 through 75043), we also stated our policy that we would continue to use our existing methodology to recognize the existing CPT codes fo r Type A ED visits as well as the five HCPCS codes that apply to Type B ED vis its, and to establish the OPPS payment under our established standard pro cess. We refer readers to the CY 2014 OPPS/ASC final rule with comment period for a detailed discussion of the public comments and our rationale for the CY 2014 policies. In the CY 2015 OPPS/ASC proposed rule (79 FR 41008 through 41009), for CY 2015, we proposed to continue the current policy, adopted in CY 2014, for clinic and ED visits. HCPCS code G0463 (for hospital use only) will represen t any and all clinic visits under the OPPS. We proposed to c ontinue to assign HCPCS code G0463 to APC 0634. We proposed to use CY 2013 claims da ta to develop the CY 2015 OPPS payment

rates for HCPCS code G0463 based on the total geometric mean cost of the levels oneCMS-1613-FC 514

through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). Finally, as we established in the

CY 2014 OPPS/ASC final rule with comment period, there is no longer a policy to recognize a distinction between new and established patient clinic visits. Comment: Commenters requested th at CMS discontinue the single HCPCS G-code for reporting clinic vi sits and return to a reporti ng structure that recognizes differences in clinical acuity and res ource utilization. The commenters expressed concern that CMS’ clinic visit coding pr oposal creates a payment bias that unfairly penalizes certain providers, such as traumacenters, cancer hospitals, and major teaching hospitals, which provide care for more seve rely ill Medicare beneficiaries. One commenter urged CMS to carefully review its ratesetting process for HCPCS code G0463 to ensure that claims containing packaged se rvices that are intended to be part of the hospital clinic rates are not being exclude d from the payment computations, thereby creating artificially low rate s. Another commenter recommended that CMS work with

the American Medical Associ ation (AMA) to develop faci lity-specific CPT codes for E/M clinic visits (with no distinction betw een new and established patients) and seek input from industry stakeholders to develop descriptions fo r these new codes that allow for their consistent application by hospital outpatient clinics/facilities. Response: We believe that the spectru m of hospital resources provided during an outpatient hospital clinic visit is appropriately captured and reflected in the single level payment for clinic visits. We also believe that the single visi t code is consistent with a prospective payment system, where payment is based on an average estimated relative cost for the service, although the cost of individual cases may be more or less costly thanCMS-1613-FC 515

the average. We believe the proposed payment rate for APC 0634 represents an appropriate payment for clinic visits, as it is based on the geometric mean costs of all visits. Although the cost for any given clin ic visit may be higher or lower than the geometric mean cost of APC 0634, the paym ent remains appropriate to the hospital delivering a variety of clinic visits. The high volume of claims from every level of clinic CPT code that we used for ratesetting for HCPCS code G0463 allows us to have accurate data upon which to develop appropriate payment rates. With regard to specific concerns for hospitals that treat patients with a more complex case-mix, we note that the relatively low estimated cost of clinic visits overall would result in much less underpayment or ove rpayment for hospitals that may serve a population with a more complex case-mix. As we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 41008), we proposed to use CY 2013 claims data to develop the CY 2015 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). We note that claims containing packaged services that are intended to be part of the hospital clinic rates are not excluded from payment comput ations for HCPCS code G0463, consistent with our application of our lin e-item trim as described in section II.A.2.a. of this final rule with comment period. The line-item trim described in section II.A.2.a. of this final rule with comment period requires the lines to be eligible for payment in both the claims year and the prospective years. Therefore, the lines that would be packaged when modeling clinic visits would not be subject to this trim. For a more detailed discussion ofCMS-1613-FC 516

the OPPS data process, we refer readers to s ection II.A. of this final rule with comment period. With regard to the potential for facility-s pecific CPT codes, as we have stated in the past (76 FR 74346), if the AMA were to create facility-sp ecific CPT codes for reporting visits provided in HOPDs (based on internally developed guidelines), we would

consider such codes for OPPS use.

After consideration of th e public comments we receive d, we are finalizing our CY 2015 proposal, without modification, to c ontinue to use HCPCS code G0463 (for hospital use only) to represen t any and all clinic visits under the OPPS for CY 2015. In addition, for CY 2015 we are finalizing our prop osals, without modification, to continue to assign HCPCS code G0463 to APC 0634 and to use CY 2013 claims data to develop the CY 2015 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clin ic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75040), we stated that additional study was needed to fully assess the most suitable payment structure for ED visits, including th e particular number of vi sit levels that would not underrepresent resources required to treat the most complex patients, such as trauma patients and that we believed it was best to de lay any change in ED visit coding while we reevaluate the most appropriate payment struct ure for Type A and Type B ED visits. At this time, we continue to believe that a dditional study is needed to assess the most suitable payment structure for ED visits. In the CY 2015 OPPS/ASC proposed rule, we did not propose any change in ED visit coding. Rather, for CY 2015, we proposed toCMS-1613-FC 517

continue to use our existing methodology to recognize the existing CPT codes for Type A

ED visits as well as the five HCPCS codes that apply to Type B ED visits, and to establish the CY 2015 proposed OPPS payment rates using our established standard process. We stated that we intend to furthe r explore the issues described above related to ED visits, including concerns about excessively costly patients , such as trauma patients. We also stated that we may propose change s to the coding and APC assignments for ED visits in future rulemaking. Comment: Commenters supported CMS’ proposal to continue its current methodology to recognize the existing five CPT codes for Type A ED visits, as well as the five HCPCS codes for Type B ED visits , and to establish the associated CY 2015 OPPS payment rates using its standard pr ocess. Commenters commended CMS for proceeding with caution and agreed that ad ditional study is needed on the appropriate payment structure for ED visits. Commenters also expressed their desire to work with CMS on a future policy proposal to create an appropriate payment stru cture for ED visits.

Some commenters stated that one level of hospital ED paymen t is not appropriate for the various levels of resources required in ED vi sits, especially at major teaching hospitals, and expressed concern that a single level of ED visit payment would create a payment bias that would unfairly pena lize certain providers, such as trauma centers and major teaching hospitals, which provide care for more severely ill Medicare beneficiaries. One commenter requested that CMS continue with its current ED visit payment policy for the foreseeable future and no longer attempt to make future changes to the policy in the coming years. Another commenter recomme nded that CMS work with the AMA to develop facility-specific CPT codes for Type A ED visits and Type B ED visits and seekCMS-1613-FC 518

input from industry stakeholders to develop descriptions fo r these new codes that allow for their consistent application by hospital outpatient clinics/facilities. Response: We appreciate the commenters’ supp ort of our proposal to continue the current coding structure for ED visits while we continue to study the most appropriate payment structure for Type A and Type B ED visits. As discussed above, we received multiple comments that a single payment for an ED visit might underrepresent resources required to treat the most complex patients, such as trauma patients. As we have stated before (78 FR 75040), considering this issue requ ires additional study. As we continue to give additional study to this issue, we c ontinue to welcome stakeholder input on the particular number of visit le vels that would not underrepresen t resources required to treat the most complex patients, such as trauma patients. With regard to the potential for facility-s pecific CPT codes, as we have also stated in the past (76 FR 74346), if the AMA were to create facility- specific CPT codes for reporting visits provided in HOPDs (based on internally developed guidelines), we would

consider such codes for OPPS use.

Comment: One commenter recommended, on a short-term basis, that CMS develop a set of three trauma

- specific HCPCS codes for all trauma patients, for whom a

trauma team is activated. Response: We appreciate the alterna tive presented by the commenter. We will

take this recommendation into consideration as we continue to st udy and fully consider the most appropriate payment structur e for Type A and Type B ED visits.

After consideration of th e public comments we receive d, we are finalizing our proposals, without modification, to con tinue to use our existing methodology toCMS-1613-FC 519

recognize the existing CPT codes for Type A ED visits as well as the five HCPCS codes that apply to Type B ED visits, and to establish the CY 2015 O PPS payment rates using our established standard process. We intend to further explore the issues described above related to ED visits, including concerns about excessively costly patie nts, such as trauma patients. We note that we may propose cha nges to the coding and APC assignments for ED visits in the future rulemaking. B. Payment for Critical Care Services For the history of the payment policy for critical care services, we refer readers to

the CY 2014 OPPS/ASC final rule with comm ent period (78 FR 75043). In the CY 2014 OPPS/ASC final rule with comment peri od, we continued to use the methodology

established in the CY 2011 OPPS/ASC final ru le with comment period for calculating a payment rate for critical care services that includes packaged payment of ancillary services, for example electrocardiograms, ches t X-rays, and pulse oximetry. Critical care services are described by CPT codes 99291 (Cri tical care, evaluation and management of the critically ill or cr itically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or criti cally injured patient; each additional 30 minutes (List separately in addition to code for primary service)).

As we discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 41009), compared to the CY 2012 hospital claims data used for the CY 2014 OPPS ratesetting, the CY 2013 hospital claims data used for the CY 2015 OPPS ratesetting again show increases in the geometric mean line item cost s as well as the geometric mean line item charges for CPT code 99291, which continue to suggest that hospita ls’ billing practices

for CPT code 99291 have remained the same. Because the CY 2013 claims data do notCMS-1613-FC 520

support any significant change in hospital billing practices for critical care services, we stated in the proposed rule that we continue to believe that it would be in appropriate to pay separately for the ancillary services thathospitals typically re port in addition to CPT

codes for critical care services. Therefor e, for CY 2015, we proposed to continue our policy (that has been in place since CY 2011) to recognize the existing CPT codes for

critical care services and es tablish a payment rate based on historical claims data. We also proposed to continue to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service

as critical care services in order to avoid ove rpayment. We stated that we will continue to monitor the hospital claims data for CPT code 99291 in order to determine whether revisions to this policy are warranted base d on changes in hospita ls’ billing practices. We did not receive any public comment s on this issue. Accordingly, we are finalizing our proposals, without modificati on, to continue our policy to recognize the existing CPT codes for critical care servic es and establish a payment rate based on historical claims data, and 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 serv ices in order to avoid overpayment. VIII. Payment for Partial Hospitalization Services A. Background Partial hospitalization is an intensive out patient program of psychiatric services provided to patients as an alternative to i npatient psychiatric care for individuals who

have an acute mental illness. Sectio n 1861(ff)(1) of the Act defines partial hospitalization services as “the items and services described in paragraph (2) prescribedCMS-1613-FC 521

by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursu ant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such pr ogram), which sets forth the phy sician’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 hospi talization services. S ection 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 (C MHC) (as defined in subparagraph (B)), and “which is a distinct and organized intensiv e ambulatory treatment service offering less than 24-hour-d aily care other than in an individual’s home or in an inpatient or residential sett ing.” Section 1861(ff)(3)(B) of the Act defines a community mental health center for purposes of this benefit. Section 1833(t)(1)(B)(i) of the Act provi des the Secretary withthe authority to designate the OPD services to be covered under the OPPS. The Me dicare regulations that implement this provision specify, under 42 CFR 419.21, that payments under the OPPS will be made for partial hospitalizati on services furnished by CMHCs as well as

Medicare Part B services fu rnished to hospital outpatient s designated by the Secretary, which include partial hospitalizatio n services (65 FR 18444 through 18445). Section 1833(t)(2)(C) of the Act, in pe rtinent part, requires the Secretary to “establish relative payment we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) base d on median (or, atthe election of the Secretary, mean) hospital costs” using data on claims from 1996 and data from the mostCMS-1613-FC 522

recent available cost reports. In pertin ent part, subparagraph (B) provides that the Secretary may establish groups of covered OP D services, within a classification system developed by the Secretary for covered OPD serv ices, so that services classified within each group are comparable clinic ally and with respect to the use of resources. In accordance with these provisions, we ha ve developed the PHP APCs. Section 1833(t)(9)(A) of the Act requir es the Secretary to “review not less often than annually and revise the groups, the rela tive 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 co st 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 establ ished a per diem payment methodology for the PHP APCs, effective for services furnis hed on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the medi an per diem costs have been used to calculate the relative payment weights for PHP APCs. From CY 2003 through CY 2006, the me dian per diem costs for CMHCs fluctuated significantly from year to y ear, while the median per diem costs for hospital-based PHPs remained relatively cons tant. We were concerned that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Therefore, we began efforts to strengthen th e PHP benefit through extensive data analysis and policy and payment changes finalized in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: th e first remapped 10 revenue codes thatCMS-1613-FC 523

are common among hospital-based PHP claims to the most appropriate cost centers; and the second refined our methodology for compu ting 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 re gulatory, policy, and payment changes, including a two-tiered payment approach fo r PHP services under which we paid one amount for days with 3 services (APC 0172 Le vel 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 th e 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 finaliz ed 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 criteriaand to add a reference to current physician certification requirements under 42 CFR 424.24 to conform our regulations to our longstanding policy (73 FR 68694 through 68695) . These changes have helped to strengthen the PHP benefit. We also revise d 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.CMS-1613-FC 524

For CY 2010, we retained the two-tiered payment appr oach for PHP services and used only hospital-based PHP data in compu ting the APC per diem payment rates. We used only hospital-based PHP data because we were concerned about further reducing both PHP APC per diem payment rates wit hout knowing the impact of the policy and payment changes we made in CY 2009. B ecause of the 2-year lag between data collection and rulemaking, the ch anges 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 am ended 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 da ily care “other than in an individual’s home or in an inpatient or residential sett ing.” In addition, in accordance with section 1301(a) of HCERA 2010, we revised the defini tion of a CMHC in the regulations to

conform to the revised definition now set forth under section 1861(ff)(3 )(B) of the Act. We discussed our finalized policies for th ese two provisions of HCERA 2010 in section

X.C. of the CY 2011 OPPS/ASC final ru le 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 pe r diem payment rates, two for CMHCs (for Level I and Level II services) and two for hos pital-based PHPs (for Level I and Level II services), based on each provider’s own uni que data. As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with comment period (75 FR 71991), for CY 2011, using CY 2009 clai ms data, CMHC costs had significantlyCMS-1613-FC 525

decreased again. We attributed the decrea se to the lower cost structure of CMHCs compared to hospital-based PHP providers, a nd not the impact of the CY 2009 policies.

CMHCs have a lower cost structure than hos pital-based PHP providers, in part, because the data showed that CMHCs generally provide fewer PHP services in a day and use less costly staff than hospital-based PHPs. Therefor e, it was inappropriate to continue to treat CMHCs and hospital-based providers in the same manner regarding payment, particularly in light of such disparate differences in costs. We also were concerned that paying hospital-based PHPs at a lo wer rate than their cost stru cture reflects could lead to hospital-based PHP closures and possible access problems for Medicare beneficiaries because hospital-based PHPs ar e located throughout the country and, therefore, offer the widest access to PHP services. Creating the four payment rates (two for CMHCs and two for hospital-based PHPs) based on each provide r’s data supported continued access to the PHP benefit, while also providing appropr iate payment based on the unique cost structures of CMHCs and hospital-based PH Ps. In addition, separation of data by provider type was supported by several hosp ital-based PHP commenters who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992). For CY 2011, we instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. For CY 2011, under the transition methodology, CMHC PHP APCs Leve l I and Level II per diem costs were calculated by taking 50 percent of th e difference between the CY 2010 final hospital-based PHP median costs and the CY 2011 final CMHC median costs and then adding that number to the CY 2011 final CMHC median costs. A 2-year transition under this methodology moved us in the direction of our goal, which is to pay appropriately forCMS-1613-FC 526

PHP services based on each provider type’s data, while at the same time allowing providers time to adjust their business operations and protect access to care for

beneficiaries. We also stated that we would review and analyze the data during the CY 2012 rulemaking cycle and, based on these analyses, we might further refine the payment mechanism. We refer readers to section X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994) for a full discussion. After publication of the CY 2011 OPPS/AS C 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 , 2011 WL 3102049 (W.D.Tex. 2011), aff’d , 684 F.3d 527 (5th Cir. 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 rela tive 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 weight s be based on cost data derived solely from hospitals. As discussed above, section 1833(t)(2)(C) of the Ac t requires CMS to “establish relative payment we ights for covered OPD servic es (and any groups of such services . . .) . . . based on . . . hospital co sts.” 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 applicat ion for a preliminary injunction for lack of subject-matter jurisdiction, which the plaintiffs appealed to the United States Court of Appeals for the Fifth Circuit. On June 15, 2012, the Court of Appeals affirmed theCMS-1613-FC 527

District Court’s dismissal for lack of s ubject-matter jurisdiction and found that the Secretary’s payment rate determinations for PH P services are not a facial violation of a clear statutory mandate ( Paladin , 684 F.3d at 533). 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 da ta derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital

data. The statute is reasonabl y interpreted to allow the relative payment weights for the OPPS payment rates for PHP services provide d by CMHCs to be based solely on CMHC data and relative payment weights for hos pital-based PHP services to be based exclusively on hospital data. Section 1833(t)(2)(C) of the Ac t requires the Secretary to “establish relative payment we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, subparagraph (B) provides that “the Secret ary may establish groups of covered OPD

services . . . so that services classified w ithin each group are comp arable clinically and with respect to the use of resources.” In accordance with subparagraph (B), we developed the PHP 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 cr eating the original AP C for PHP services (APC 0033), we did “establish” the initial relative payment weight for PHP services,CMS-1613-FC 528

provided in both hospital-based and CMHC-basedsettings, 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. For CY 2009,

we established new APCs for PHP servi ces based exclusively on hospital data. Specifically, we adopted a tw o-tiered APC methodology (in lieu of the original APC 0033) under which CMS paid one rate for da ys 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 da ta. For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP services provi ded by hospitals and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a mixture of hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, the relative payment weights for the two AP Cs 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 hosp ital data in determining the OPPS relative payment weights for PHP services provide d by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make plain that the data source for the re lative payment weights is subject to change from one period to another. S ection 1833(t)(2)(C) of the Act provides that, in establishing th e relative payment weights, “the Secretary shall . . . us[e]CMS-1613-FC 529

data on claims from 1996 and us [e] data from the most recent available cost reports.” We used 1996 data (in addition to 1997 data) in determining only the original relative payment weights for 2000. In the ensuing ca lendar 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 relativ e payment weights, and the wage and other adjustments described in para graph (2) to take into account changes in medical practice, changes in technology, the ad dition of new services, new cost data, and

other relevant information and factors.” For purposes of the CY 2012 update, we exercised our authority under se ction 1833(t)(9)(A) of the Act to change the data source for the relative payment weights for PHP se rvices provided by CMHCs based on “new cost data, and other relevant information and factors.”

In the CY 2014 OPPS/ASC final rule w ith comment period, we finalized our proposal to base the relative payment wei ghts that underpin the OPPS APCs, including the four PHP APCs, on geometric mean costs rather than on the median costs. For CY 2014, we established the four PHP APC pe r diem payment rates based on geometric mean cost levels calculated using the most r ecent claims and cost data for each provider type. We refer readers to the CY 2014 OPPS/ASC final rule with comment period for a more detailed discussion (78 FR 75047 through 75050). B. PHP APC Update for CY 2015 In the CY 2015 OPPS/ASC proposed rule (79 FR 41009 through 41012), for CY 2015, we proposed to continue to apply our established policies to calculate the four PHP APC per diem payment rates based on ge ometric mean per diem costs using theCMS-1613-FC 530

most recent claims and cost data for each pr ovider type. We computed proposed CMHC PHP APC geometric mean per diem costs for Le vel I (3 services per day) and Level II (4 or more services per day) PHP services using only CY 2013 CMHC claims data and the most recent cost data, and proposed hospita l-based PHP APC geometric mean per diem

costs for Level I and Level II PHP servic es using only CY 2013 hospital-based PHP claims data and the most recent cost repor t data. These proposed geometric mean per diem costs were shown in Table 44 of the CY 2015 OPPS/ASC proposed rule (79 FR 41011). To prevent confusion, we will re fer to the per diem information listed in Table 44 of the proposed rule and Tables 39 and 40 of this final rule with comment period as the PHP APC per diem costs or th e PHP APC geometric mean per diem costs, and the per diem information listed in A ddendum A as the PHP APC per diem payment rates or the PHP APC geometric mean per diem rates. The PHP APC per diem costs are the provider-specific costs derived from the most recent claims and cost data. The PHP APC per diem payment rates ar e the national unadjusted paym ent rates calculated after applying the OPPS budget neutrality adjustment s described in sections II.A.4. and II.B of this final rule with comment period. For CY 2015, the proposed geometric mean per diem costs for days with 3 services (Level I) were approximate ly $97 for CMHCs and approximately $177 for hospital-based PHPs. The proposed geometric mean per diem costs for days with 4 or more services (Level II) were approx imately $115 for CMHCs and approximately $190 for hospital-based PHPs. The CY 2015 proposed geometric mean per diem costs for CMHCs calculated under the proposed CY 2015 methodology using CY 2013 claims data and the mostCMS-1613-FC 531

recent cost data remained relatively constant when compared to the CY 2014 final geometric mean per diem costs for CMHCs established in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75050), with geometric mean per diem costs for Level I CMHC PHP services decreasing from approximately $99 to approximately $97 for CY 2015, and geometric mean per diem co sts for Level II CMHC PHP services increasing from approximately $112 to approximately $115 for CY 2015. The CY 2015 proposed geometric mean pe r diem costs for hospital-based PHPs calculated under the propos ed CY 2015 methodology using CY 2013 claims data and the most recent cost report data showed more variation when compared to the CY 2014 final geometric mean per diem costs for hospital- based PHPs, with geometric mean per diem costs for Level I hospital-based PHP servic es decreasing from approximately $191 to approximately $177 for CY 2015, and geometric mean per diem costs for Level II hospital-based PHP services decreasing from approximately $214 to approximately $190

for CY 2015. We understand that having little variati on in the PHP per diem payment rates from one year to the next allows providers to more easily plan their fiscal needs. However, we believe that it is important to base the PHP payment rates on the claims and cost reports submitted by each provider type so these rates accurately reflect the cost information for these providers. We r ecognize that several factors may cause a fluctuation in the per diem payment rates, including direct change s to the PHP APC per diem costs (for example, establishing separate APCs and associated per diem payment rates for CMHCs and hospital-based provide rs based on the provider type’s costs), changes to the OPPS (for example, basing the relative payment weights on geometricCMS-1613-FC 532

mean costs), and provider-driven changes (for example, a provider’s decision to change its mix of services or to change its charges and clinical practice for some services). We refer readers to a more complete discussion of this issue in th e CY 2014 OPPS/ASC final rule with comment period (78 FR 75049). W e invited public comments on what causes PHP costs to fluctuate from year to year and on these proposals. The proposed CY 2015 geometric mean per diem costs for the CMHC and hospital-based PHP APCs were shown in Table 44 of the proposed rule. We invited public comments on these proposals. Comment: Several commenters opposed the proposed CY 2015 PHP APC per diem payment rates and raised concerns about a continued decline in payments for these

services. Commenters stated that the proposed per diem pa yment rates were inadequate to pay providers for furnishing these servic es, and were below most program costs for providing PHP services. Other commenters suggested that CMS continue to use the CY 2014 payment rates for CY 2015. A few commenters expressed concerns that the 15-percent reduction in payment rates for Le vel II services in hospitals dropped the payment rates too far below providers’ costs. Another commenter asked that CMS provide documentation to support the propos ed payment rates for PHP services. Response: We acknowledge the concerns raised by the commenters who believe that reduced payment rates for CY 2015 will not adequately pay their costs to provide PHP services. However, the per diem payment rates reflect the cost of what each provider type expends to maintain such program s. Therefore, we do not believe that the final payment rates would be inadequate to cover the costs of providing these services.CMS-1613-FC 533

Based on the final geometric mean per diem costs derived from CY 2013 claims data and the most recent cost data, CMHCs’ geometric mean per diem costs increased

from CY 2014 to CY 2015 for APC 0172 Le vel I (3 services per day) from approximately $99 to approximately $100, a nd for APC 0173 Level II (4 or more services per day) from approximately $112 to approximately $119. These per diem cost

increases for CMHC APCs 0172 and 0173 are 0.76 percent and 5.7 percent, respectively. Final hospital-based PHP per diem costs de creased by significantly smaller amounts than the per diem costs that were proposed, but still declined when compared to CY 2014 geometric mean per diem costs. The PHP AP C geometric mean per diem costs decreased for hospital-based PHPs from CY 2014 to CY 2015 for APC 0175 Level I (3 services per day) from approximately $191 to approxima tely $186, and for APC 0176 Level II (4 or more service per day) from approximate ly $214 to approximately $203. These final hospital-based PHP APC geometric mean per diem cost decreases are 2.6 percent for APC 0175 (instead of the proposed decrease of 7.1 percent) and 5.3 percent for APC 0176 (instead of the proposed decrease of 11.3 percent). We believe that the PHP APC per diem payment rates for both providers accura tely reflect the claims and cost data of each provider type. Again, the resulting PHP APC per diem payment rates and the APC payment structures reflect the cost of what providers expend to maintain such programs. At this time, we cannot establish payment rate s that do not accuratelyreflect the current claims and cost data. For these reasons, we are not suspending implementation of the CY 2015 PHP APC per diem payment rate s for CMHCs and hospital-based PHPs. The PHP APC per diem payment rates are di rectly related to th e accuracy of the claims and cost data submitted by providers. Therefore, it is imperative that providersCMS-1613-FC 534

submit accurate claims and cost data in order for the payment rates to accurately reflect the providers’ costs. Regarding the documentation supporting the proposed PHP per diem payment rates, for each calendar year update, we explain how the PHP APC per diem payment rates are calculated in a proposed rule and a final rule. The industry is welcome to comment during the rulemaking process. We al so make available to the public the OPPS PHP limited data set (LDS) and the OPPS LDS, which we discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40931). The OPPS PHP LDS can be used to recreate the PHP cost estimates and, when used in c onjunction with the OPPS LDS, can be used to recreate the PHP APC payment rates. Both of these files are available twice a year, once for the proposed rule and again for the final rule. The LDSs are available for purchase under a CMS data use agreement through the CMS Web sites at: http://www.cms.gov/research-statisti cs-data-and-systems/files-fororder/limiteddatasets/H ospitalOPPSPHPLDS.html and http://www.cms.gov/researchstatistics-data-and-systems/files-for- order/limiteddatasets/HospitalOPPS.html

. Comment: A number of commenters noted the difficulty in planning and budgeting when payment rates for these services fluctuate and asked that CMS establish consistent and stable payments. Several co mmenters stated that they are committed to working with CMS to better understand and stabilize the paymen t rates for the PHP benefit, and to determine the factors driving the fluctuati on in rates. One commenter asserted that the wide variability in PHP AP C payment rates from year-to-year does not allow quality providers to plan for and to main tain services in a predictable way. Another commenter believed that the erratic payment ra te structure could diminish access to careCMS-1613-FC 535

because providers may be unable to forecast st atistical and financia l parameters based on the proposed PHP APC payment rates. In response to our solicitation for public comments in the proposed rule on what the industry believed was causing the fluctuat ion in payment rates, a few commenters stated that other types of hospitals (rehab ilitation, long-term acute care, and inpatient psychiatric facilities) are now providing PHP-like services, and questioned whether the

cost structure of these facil ities could be distorting PHP APC payment rates. Another commenter stated that as pr oviders move away from PHPs and toward other mental health care options, the sample size used in calculating payment rates is smaller. The

commenter further stated that volumes of se rvices in a few areas could take on greater

influence in the calculations and affect costs, creating instability in the PHP APC payment rates and difficulty in planning.

A few commenters mentioned that thei r PHPs had not experienced significant operational or clinical protoc ol changes, and no changes in the personnel delivering the mix of services that would support a reduction in the geometric mean per diem costs.

Several commenters stated that almost one-t hird of the proposed PHP APC payment rate reduction could be explained by the budget neutrality adjustment, which disproportionately affects PHPs, and which, for CY 2015, may have led to payment rates that are less than the geometric mean per diem costs. A few commenters cited a study that they had a contractor c onduct to investigate

the fluctuations. The commenters stated that the study results did not suggest that the tiered payments, the use of a geometric meanversus a median methodology, the different payments by site of service, or provider-driver factors, such as service-mix orCMS-1613-FC 536

patient-mix, were the source of the problem . The commenters noted that the study found

a dramatic decrease in the total volume of PHP services provided, but an increase in hospital-based PHP days, particularly for Le vel II services. The commenters believed that this shift to providing more hospital- based PHP services has partially offset the decline in CMHC PHP days and may have caused PHP costs to fluctuate. The commenters suggested several areas for potenti al future study, including the shift of services from CMHCs to hospital-based PHPs, a different of mix of providers within the hospital category, other types of hospitals newly offering PH P services, volume, and the size of hospitals and of PHPs. Response: We acknowledge the diffic ulties in planning and budgeting that can occur when payments fluctuate, or when payment rates decline. However, we are continuing to pay for PHP services based on prov ider data. We also believe that changes in payment rates from one year to the next are appropriate in a payment system that is annually updated to more accurately estimate the cost of a service upon which the relative payment weights are based. We continue to believe that payment rates for PHP services have fluctuated from year to year based on a variety of factors, in cluding direct changes to the PHP APC per diem payment rate, and ch anges to the OPPS. Ov er the past several years, we have made changes to the OPPS methodology for calculating PHP APC per diem payment rates to more accurately align th e payments with costs. The changes have included establishing two PHP APC payment tiers, establishing separate APCs and associated per diem payment rates for CMHCs and hospital-based providers based on each provider’s costs, and basing payments on the geometric mean costs rather than on

median costs.CMS-1613-FC 537

In addition, the OPPS is a budget neutral pa yment system and, as a result, changes in the relative payment weights associated with certain services may affect those of other services in the payment system. Furtherm ore, provider-driven changes, such as a provider’s decision to change its mix of servi ces or to change its charges and clinical practice for some services, may cause fluctuat ions in the per diem payment rates. We provided a detailed discussion of possible reas ons for the fluctuation in the rates in the CY 2015 OPPS/ASC proposed rule (79 FR 41012) and in section VIII.B. of this final rule with comment period. We appreciate the commenters’ providi ng possible reasons for fluctuations or declines in the payment rates. While severa l providers noted that their operations have not changed to support a declin e in payments, we reiterate that our payment rates are based upon claims and cost data submitted to us by providers and, therefore, reflect the cost of what providers expend to maintain such programs. We also acknowledge the variables raised by the commenters that could cause the payment rate fluctuations and the study that several commenters had commissioned to look into PHP payments. We are unable to comment directly on the study results because we are not certain of the detailed methods used for this study. However, we appreciate the areas of potential future study suggested by commenters, and will take them into consideration in future analyses. Comment: Many commenters stated that the methodology for calculating payment rates was “flawed and illogical” and asked CMS to reexamine the methodology to determine why payment rates are declin ing. The commenters suggested that CMS consider other methods for paying for PHP serv ices, such as removing PHP services from APC group assignments and creating PHPs under an independent payment status, such asCMS-1613-FC 538

is done under the home health benefit. The commenters suggested that CMS establish a base payment rate for PHP services at a hi gher level than the current mean cost, and annually adjust the base ra te by an inflation factor. A few commenters supported the two-tie red payment methodology. However, the commenters suggested using only hospital- based data, which was implemented in CY 2009. Some commenters disagreed with CMS paying PHPs differently by site of service. One commenter disputed CMS’ a ssertion that CMHCs generally provide fewer PHP services in a day. The commenter stated that claims information indicates that CMHCs submit a greater percentage of their cl aims for 4 or more services per day. The

commenter added that CMS does not collect wa ge data on CMHCs in its costs reports. Several commenters did not support continued use of the CY 2014 policy, which uses the geometric mean per diem costs to calculate PHP payment rates. Many commenters suggested other alterna tives to the current payment system, such as developing oversi ght strategies for poorly performing CMHCs if their performance suggests a high risk of fraud, and allowing top performing CMHCs to admit patients into intensive outpatient programs similarly structured as PHPs. One commenter noted that some hospital-based providers are moving away from PHPs and providing programs that are structured similarly to a PH P, but are not Medicare -certified PHPs (that is, providing several individual mental health se rvices in a day that would be similar to a PHP, but providers are not enrolled as a PHP) . The commenter stated that the programs similar to PHPs would require fewer servic es and be subject to fewer regulatory requirements (for example, no certification or recertification, no physical examination requirement, and no minimum attendance mandate), and yet have similar payment ratesCMS-1613-FC 539

as those established for PHPs. The commen ter suggested that CMS require that these programs bill for furnishing these services under the mental health services composite APC under the OPPS, with payment aligned wi th how commercial insurers pay for these services. The commenter also suggested that CMS consider policy levers to ease regulatory requirements fo r administering PHPs. Response: The OPPS successfully pays fo r outpatient services provided, such as and including partial hospitalization services, an d we disagree that the system is flawed and illogical. This system bases payment on the geometric mean costs of providing the service or services using provider data from cl aims and cost reports. As discussed above, we believe this system provides appropriate payment for partial hospitalization services based on provider costs. Sections 1833(t)(2) and 1833(t)(9) of the Act set forth the requirements for establishing and adjusting the OPPS payment rates, including the PHP payment rates. As such, we are directed to pay for these serv ices under the OPPS (which uses APCs) and may not remove these PHP services from the OPPS and pay for them separately (such as by establishing a base rate and annually adjusti ng it for inflation). The estimated costs of the PHP APCs are based on the most updated cost and claims data. The OPPS

conversion factor used to cal culate payments for those PHP APCs is updated by a market basket each year. While we continuously ex amine ways in which the data process could be improved, we also welcome and appreciate public comment with regard to potential improvements. Similarly, we appreciate th e meaningful comments that stakeholders provided regarding ways that the cost modeling process c ould be more accurate or methods to extract more appropriate data from the claims available for OPPS costCMS-1613-FC 540

modeling. For a more detailed discussion of the OPPS ratesetting process, including PHP payments, we refer readers to the CY 2015 OPPS Final Rule Claims Accounting document, available on the CMS Web site at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/index.html . Click on the link for “Hospital Outpatient Regulat ions and Notices”, then on the link to the CY 2015 OPPS final rule, and then on the CY2015 OPPS Claims Accounting document. With respect to the commenters’ reques t to return to the two-tiered payment methodology calculated using only hospital-base d data that was implemented in the

CY 2009 OPPS/ASC final rule with comme nt period (73 FR 68688 through 68693), we

refer commenters to the CY 2011 OPPS/ ASC final rule with comment period (75 FR 71991 through 71994). Because the co st of providing PHP services differs significantly by site of serv ice, in CY 2011, we implemented differing PHP payment rates for hospital-based PHPs and CMHCs. We added two new APCs (APCs 0175 and 0176) for PHP services provided by hospitals, an d based the relative payment weights for these APCs solely on hospital data. AP Cs 0172 and 0173 were designated for PHP services provided by CMHCs and were base d on a blend of CMHC and hospital data. We calculate the PHP APC per diem payment rates based on the data provided for each type of provider in order to pay for servic es. The resulting PHP APC per diem payment rates reflect the cost of what providers e xpend to maintain such programs based on data provided by these types of pr oviders, which we believe is an improvement over the two-tiered payment methodology calculat ed using only hospital-based data. In regard to the commenters’ concerns re garding the use of geometric mean rather than the median, in the CY 2013 OPPS/AS C final rule with comment period, weCMS-1613-FC 541

established the geometric mean rather than the median as the measure upon which to base the relative payment weights that underp in the OPPS APCs, including the four PHP APCs (77 FR 68406 to 68412). The CY 2015 PHP APC per diem payment rates are based on geometric mean costs. While a few commenters disagreed with our use of geometric mean costs, we believe that the use of geometric mean costs rather than median costs represents an improvement to our cost estimation process. As we stated in

the CY 2013 OPPS/ASC final rule with comm ent period (77 FR 68409), we believe that including outlier observations in developing the relative pa yment weights and capturing the full range of service costs lead to more accurate relative payment weights. In addition to better incorporating those cost values that surround the median and, therefore, describing a broader range of cost patterns, basing the relative payment weight on geometric mean costs also may promote better stability in the payment system by making OPPS payments more reflective of the range of costs associated with providing services. Further, applying the geometric mean to the PH P APCs helps ensure that the relativity of the OPPS payment weights is properly aligned. We do not believe that paying for some services based on median costs, while using geometric mean costs for other services is appropriate or equitable. We believe that paying providers using the four PHP APC per diem payment rates based on the methodologies described above supports continued access to the PHP benefit, while also providing appropriate pa yment based on the unique cost structures of CMHCs and hospital-based PHPs. We also believe that each of these policies enables us to continue our responsible stewardship of the Medicare Trust Fund by more accurately matching payments with costs. For a full discussion of each of these policiesCMS-1613-FC 542

implemented in prior rulemaking, including deta ils on the rationales, we refer readers to

the above-mentioned final rules with comme nt period, which are available on the CMS

OPPS Web site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Hospital-Ou tpatient-Regulations-and-Notices.html

. In response to the commenters’ concerns regarding CMS’ statement that CMHCs provide fewer services in a day, as stated in the CY 2014 OPPS/AS C final rule with comment period (78 FR 75047 through 75050), we are calculating the payment rates for

PHP services based on the claims and cost data submitted by providers. The updated data used for calculating payments for this CY 2015 OPPS/ASC final rule with comment period indicate that CMHCs do indeed have a greater percentage of PHP days with 4 or more services, compared to hospital-based PHPs (94.6 percent of days compared to 88.3 percent of days, respectively). However, in spite of their providing a greater percentage of days with 4 or more services, our updated co st data continue to show that CMHC costs per day are lower than those of hospital-based PHPs. In response to the question about wage da ta, CMHCs are required to include wage data for their staff on their cost reports, w ith certain exceptions. We direct readers to Medicare’s cost reporting instructions fo r CMHCs that are available online in the Provider Reimbursement Manual, Part 2, Chapter 18 on the CMS Web site at: http://www.cms.gov/Regulations-and-Gui dance/Guidance/Manuals/Paper-BasedManuals-Items/CMS021935.html?DLPage= 1&DLSort=0&DLSortDir=ascending

. With respect to the suggestion that CM S develop oversight strategies for poor performing CMHCs with conduct that suggests po tential fraud, we already have oversight strategies in place for providers that operat e in a questionable manner. For example,CMS-1613-FC 543

MACs perform medical reviews of certain PH P claims, and PHP providers with claims that present ongoing concerns may have their claims placed on prepayment review. In some cases, CMHC and hospital-based PHP pa yments may be suspended or a CMHC’s or hospital’s billing privileges may be re voked. Our Office of Financial Management (OFM) has Recovery Audit Contractors (RAC s), which regularly identify and collect overpayments from Medicare providers. Additi onally, the Center for Program Integrity (CPI) and Zone Program Integrity Contractors (ZPICs) investigate po tential fraud, waste,

and abuse across the Medicare program, including potential concerns within CMHCs. Finally, the Office of Inspector General (O IG) and other law enforcement agencies

continue in their efforts to address fr aud and abuse throughout the Medicare program, including questionable billing for partial hospitalization services. With respect to the commenters’ request to allow top performing CMHCs to admit beneficiaries who require partial hospi talization services into outpatient programs that are structured similarly to PHPs, Medi care covers and pays for reasonable and necessary PHP services provided by hospitals and CMHCs under the OPPS. While some private insurers and some State Medicaid pr ograms recognize other types of intensive outpatient mental health programs as a distin ct benefit like PHP services, the Medicare program does not. However, hospitals may provi de and bill for indi vidual services that make up various other mental health programs. Because all Medicare outpatient ment al health services are capped at the hospital-based Level II PHP per diem paymen t rate, from a payment standpoint, it does not matter how many of these i ndividual services are billed to Medicare because paymentCMS-1613-FC 544

will never exceed the hospital-based Level II PHP per diem payment rate. However,

CMHC s may only be paid for partial hosp italization services under the OPPS. We are constantly monitoring the OPPS insearch of potential refinements that would improve the accuracy and stability of the payment system. We are unclear about the policy changes that the commenters sugge sted that we make regarding easing the regulatory requirements for admi nistering PHPs. Some of the PHP requirements are set forth in the statute. For example, physici an certification and recer tification requirements

for PHP services are set forth in secti on 1835(a)(2)(F) of the Act and would require Congressional legislation to ch ange. However, if providers have suggestions for specific policy changes to improve PHP operations while safeguarding access to PHP services and paying accurately for these services , we welcome those suggestions during rulemaking or through other di alogue with th e industry. Comment: Many commenters described th e key role that PHPs play in the continuum of care for patients with mental heal th issues. A number of commenters stated that if CMS moved forward with the pr oposed payment rates, much-needed PHP programs would struggle to remain financially viable. Multiple commenters believed that additional reductions in paym ents for CY 2015 would limit the ability of hospitals and CMHCs to provide these vital psychiatric services, reduci ng capacity or leading to closures, especially in rural areas, and th ereby reducing access to care for Medicare patients. Several commenters noted that, as access to PHP services decreases, the decreases could lead to patients not recei ving any services or to patients receiving services that are not appropria te for their needs; to use of more expensive inpatient psychiatric services; or to use of alre ady stressed emergency departments. OneCMS-1613-FC 545

commenter believed that CMS was concerned about the potential fo r hospital-based PHP closures, but not about CMHC closures. Response: In response to commenters’ concern about reduced PHP payment rates leading to decreased capacity and PHP clos ures, thereby reducing access to care and further eroding the viability of the safety net system, we emphasize again that the resulting PHP APC per diem payment rate s for CY 2015 reflect the costs of what providers expend to maintain PHP programs. Th erefore, it continues to be unclear to us why reduced PHP payment rates would lead to reduced capacity or program or business closures. As noted previously, the final CY 2015 per diem costs increased for CMHCs compared to CY 2014, and decreased less than proposed for hospital-based PHPs. As we

stated in the CY 2012 OPPS/ ASC final rule with comment period (76 FR 74350), the closure of PHPs may be due to any nu mber of reasons, such as poor business management or marketing decisions, compe tition, oversaturation of certain geographic areas, and Federal and State fraud and abuse e fforts, among others. It does not directly

follow that closure could be due to reduced per diem payment rates alone, especially when these per diem payment rates reflect the costs of PHP providers as stated in claims

and cost data. In response to the commenters’ concerns that further reduction in the CMHC and hospital-based PHP APC per diem payment am ounts could further erod e the viability of the safety net system and make it more diffi cult for patients to receive needed mental health services, we take such concerns seriously for both CMHCs and hospital-based

PHPs. We will continue to monitor facili ty closings and openings for both rural and

urban areas to make sure that access issues do not exist. We also remain steadfast in ourCMS-1613-FC 546

concern regarding access to care for all benefi ciaries, while also providing appropriate payments for such care. A PHP is not the only program in which a Medicare beneficiary is able to receive

needed mental health care. Access to other forms of mental health services is also available. Although not equiva lent to a PHP, Medicare provides payment for outpatient

mental health services in addition to PHP serv ices. Many beneficiaries in need of mental health treatment receive other outpatient se rvices generally from hospital programs that

are available nationwide. Comment: Many commenters suggested that future payment rates be tied to quality criteria. One commenter recommende d a payment system that rewards individual providers for outstanding quality and outcome s while keeping costs under control, and suggested that CMS use value-based purch asing rather than “antiquated cost reimbursement-based purchasing.” One co mmenter suggested that CMS conduct an analysis to determine what quality PHP care en tails in terms of cost s and staffing, rather than basing payment rates on reported costs. Response: We responded to a similar public comment in the CY 2013 OPPS/ASC final rule with comment pe riod (77 FR 68410 through 68411) and refer readers to a summary of that comment a nd our response. Sections 1833(t)(2) and 1833(t)(9) of the Act set forth the requirements for establishing and adjusting OPPS rates, which include PHP rates. Section 1833(t)( 17) of the Act authorizes the Hospital OQR Program, which applies a payment reduction to subsection (d) hospitals that fail to meet program requirements. In the CY 2015 OPPS/ASC proposed rule (79 FR 41040), we considered future inclusion of, and re quested comments on, the following qualityCMS-1613-FC 547

measures addressing PHP issues that would apply in the hospital outpatient setting: (1) 30-Day Readmissions; (2) Group Therapy; and (3) No Individual Therapy. We refer

readers to section XIII. of this final rule with comment period for a more detailed

discussion of PHP measures considered for inclusion in the Hospital OQR Program in future years. The Hospital OQR Program doe s not apply to CMHCs. Further, currently, there is no statutory language explicitly authorizing a value-ba sed purchasing program for PHPs. With respect to the suggestion of conducting an analysis to determine what quality PHP care entails in terms of costs a nd staffing, we will take the suggestion into consideration in future analyses. We do not consider the OPPS, the syst em under which PHPs are paid, to be “antiquated.” Rather, we find the OPPS to be a robust system, which aligns payments with provider costs. As noted previously, we regularly monitor the OPPS and, in recent years, have made changes to further improve the system’s ability to pay accurately for services provided. Comment: Many commenters noted that they provide services to Medicare beneficiaries which they cannot bill for on their claims. The services cited by the commenters included, for example: assisti ng patients in finding appropriate housing; accessing other health care services; obtaini ng medications; working through issues with family members; accessing transportation to medical and other appointments; assisting with information and appointments with Soci al Security; answeri ng Medicare questions; accessing food banks and food stamps; obtaining eye and dental services; and integrating highly volatile and anxious patients into the milieu without upsetti ng the environment. Commenters stated that, curre ntly, there is no way to show through the billing processCMS-1613-FC 548

that these events take place because ther e are no billing codes that capture these

activities. Response: Section 1861(ff) of the Ac t and 42 CFR 410.43 describe the items and services included in partial hospitalization servic es. As set forth in these sections, partial hospitalization services genera lly consist of a variety of group, individual, and family psychotherapy sessions, supplemented with occu pational therapy, the se rvices of social workers, trained psychiatric nurses, and othe r staff trained to work with psychiatric patients, drugs and biologicals furnished for therapeutic purposes that cannot be self-administered, diagnostic services, education and training, and certain activity therapies designed to stabilize an acute episode of mental illness. Section 1861(ff)(2)(I) of the Act explicitly excludes meals and transportation from the items and services included in partial hospitalizat ion services. The PHP APC pe r diem payment rate is the bundled payment for partial hospitalization se rvices. Only the items and services specifically identified in the statute and regulations are cons idered partial hospitalization

services. All other items and services are not paid as part of partial hospitalization

services.

Comment: A number of commenters aske d that CMS have a dialogue with the PHP industry, and that the public comments on the proposed rule be directly addressed by CMS in an open forum where idea s could be cooperatively shared. Response: We maintain positive worki ng relationships with various industry leaders representing both CMHCs and hospital- based PHP providers with whom we have consistently met over the years to disc uss industry concerns and ideas. These relationships have provided si gnificant and valuable input re garding PHP ratesetting. WeCMS-1613-FC 549

also hold Hospital Outpatient Open Door Fo rum calls monthly, in which all individuals are welcome to participate and/or submit que stions regarding specific issues, including questions related to PHPs. Furthermore, we initiate rulemaking annually, through which we receive public comments on proposals set forth in a proposed rule, and we respond to

those comments in a final rule. All individua ls are provided an opportunity to comment, and we give consideration to each comment that we receive. Given the relationships that we have established with various industry l eaders and the various means for us to receive comments and recommendations, we believe th at we receive adequate input regarding PHP ratesetting and take that input into c onsideration when esta blishing the PHP per diem payment amounts. We continue to welcome any input and information that the industry is willing to provide.

Comment: Several commenters requested a be tter understanding of the Program for Evaluating Payment Patterns Electronic Re port (PEPPER), the areas of risk it has identified, how the PEPPER fits into fraud and abuse efforts, and how the PEPPER fits into the benefit in general, and indicated that this information might be helpful to providers. The commenters expr essed concern regarding various areas of risk cited by the PEPPER, including “No individual thera py.” The commenter stated that although most providers furnish individual therapy, it is often not documen ted or billed as it is not included in the local coverage determinations (LCDs). Response: The PEPPER is a data report that co ntains statistics for each PHP area identified nationally to be at risk for imp roper payment (referred to in the report as “target areas”). Each PEPPER contains a si ngle PHP provider’s claims data statistics, obtained from claims submitted to the MAC for these target areas. PEPPER does notCMS-1613-FC 550

identify the presence of improper payments, butit can be used by th e provider as a guide for auditing and monitoring efforts. A pr ovider can use the PEPPER to compare its claims data over time to identify areas of potential concern and to identify changes in billing practices. When a provider is sent a PEPPER, the report incl udes a user’s guide, which describes the PEPPER and the targetareas, among other things, and provides contact information for additional questions or information. Additional information on the PEPPER, including training and resources, is available at the PEPPER Web site at: http://pepperresources.org/

. Regarding “individual therapy,” which is one area of risk that the PEPPER is assessing, individual therapy is a partial hospitali zation service. Fo r a review of the partial hospitalization services , we refer readers to secti on 1861(ff)(2)(A) of the Act and our regulations at 42 CFR 410.43(a)(4)(i). We expect that providers would furnish individual therapy services as one of the services provided within a PHP.

Comment: One commenter noted that ne w Medicare conditions of participation (CoPs) are about to become effective for CMHCs, and stated that most CMHCs are

unaware of them. One commenter noted th at complying with the new CoPs would

increase its costs. The commenter also st ated that, under a provision of the Affordable Care Act that became effective October 1, 2014, providers need to be aware that a CMHC must provide at least 40 percent of its items and serv ices to individuals who are not eligible for benefits under Medicare. Response: The Conditions of Participation for Community Mental Health Centers final rule (78 FR 64604, October 29, 2013) es tablished, for the firs t time, CoPs that CMHCs must meet in order to participate in the Medicare program. The CMHC CoPsCMS-1613-FC 551

are codified in 42 CFR Part 485, Subpart J, and became effective on October 29, 2014.

Prior to the issuance of this final rule, on June 17, 2011, CMS issued a proposed rule (76 FR 35684) outlining the CoPs for Medicare -certified CMHCs. The proposed rule was open to public comment until August 16, 2011. Also, CMS issued press releases and fact sheets on the CoPs. CMS also has been working with trade organizations and the States to inform providers about the CoPs and the implementation date. Therefore, we

believe that all CMHCs should be aware of these new requirements. More information

on the CoPs for CMHCs can be found at 42 CFR Part 485, and through the link to the

final rule at: http://www.gpo.gov/fdsys/pkg/FR-2013-10-29/pdf/2013-24056.pdf . The proposed rule can be accessed through th e following link on the Web site found at: http://www.gpo.gov/fdsys/pkg/FR-2011-06-17/pdf/2011-14673.pdf. The final rule fact sheets can be accessed through the following link to the Web site found at: https://www.cms.gov/Newsroom/MediaReleas eDatabase/Fact-sheets/2013-Fact-sheetsitems/2013-10-28.html . The proposed rule press re lease can be accessed through the following link to the Web site found at: http://www.cms.gov/Newsroom/MediaReleas eDatabase/Press-re leases/2011-Pressreleases-items/2011-06-16.html . We believe that the cost associated with the CoPs is a reasonable and necessary business expense to en sure the health and safety of all CMHC clients. In addition, effective October 29, 2014, under 42 CFR 485.918(b)(1)(v), pursuant to section 1861(ff)(3)(B) of the Act, a CMHC must provide at least 40 percent

of its items and services to individuals who are not eligible for benefits under title XVIII of the Social Security Act, as measured by the total number of CMHC clients treated by the CMHC for whom services are not paid by Medicare, divided by the total number ofCMS-1613-FC 552

clients treated by the CMHC in the applicable timeframe. Under this requirement, a newly enrolling or revalidating CMHC must submit to CMS a certification statement provided by an independent ent ity (such as an accounting technician). The document must indicate that (1) the entity has review ed the CMHC’s client care data, and (2) the CMHC meets the applicable 40 percent requirement. (We re fer readers to 78 FR 64620). CMS has issued a change request that instructs MACs on the processing of such CMHC certifications. This requirement implements the provision of the Affordable Care Act noted by the commenter. For more detailedinformation, we refer readers to the Conditions of Participati on for Community Mental Health Centers final rule (78 FR 64604).

Comment: A number of commenters notedthe complexities of abiding by the

LCDs on PHPs and believed that such LC Ds are making it difficult for hospital-based PHP providers to continue to provide PHP services. Some commenters questioned

whether the LCDs should be clarified or updated. Response: LCDs issued by MACs specify under what clinical circumstances an

item or service is considered to be reasonabl e and necessary. They are administrative and educational tools to assist providers in submitting correct claims for payment. The MACs publish LCDs to provide guidance to the public and medical community within their jurisdictions. The MACs develop LCDs by considering medical literature, the

advice of local medical societies and medi cal consultants, public comments, and comments from the provider community. LCDs must be consistent with the statutory requirements for the Medicare program and w ith Medicare regulations and guidance. More information about LCDs can be found in the CMS Program Integrity ManualCMS-1613-FC 553

(Internet only manual) 100-08, Chapter 13, available at:http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/pim83c13.pdf

. Providers with questions about LCDs s hould contact their MAC for clarification or assistance. Inquiries of a clinical natu re, such as the rationa le behind coverage or noncoverage of certain items or services, ar e handled within the Medical Review (MR) department under the MAC responsible for the development of the LCD. Comment: One commenter recommended that the annual payment update for PHP APCs reflect the market basket update that is applied to all other OPPS APCs. Response: The PHP APC payment ra tes are based on the OPPS conversion factor, to which the market basket update is applied. Therefore, the market basket update is applied to the PHP APC payment rates. The OPPS conversion fact or is discussed in

further detail in section II.B. of th is final rule with comment period.

Comment: One commenter stated that physicians are billing inpatient codes

rather than PHP codes. The commenter be lieved that the change in physician reporting may have altered what facilities reporte d, which would have reduced the number of facility fees reported, and skewed th e APC data downward. The commenter recommended that CMS conduct an analysis of the frequency and type of CPT codes that have been submitted for PHP over the last 3 years. Response: As stated in sect ion 1861(ff) of the Act and 42 CFR 410.43, payment for partial hospitalization services generally represents the provider’s overhead costs, support staff, some drugs and the services of some nurses, clinical social workers, and occupational therapists, whose professional services are considered to be partialCMS-1613-FC 554

hospitalization services for which payment is made to the provider. Physician services that meet the requirements of 42 CFR 415.102(a) are separately covered and not paid as part of partial hospitalization services. Th erefore, we do not use physician claims in developing the PHP APC geometric mean per diem costs and it is unclear to us how physician billing would impact PHP APC payment rates. Regarding the recommendation that CMS conduct an analysis of the frequency and type of CPT codes that have been submitted for PHP services over the last 3 years, we will take the suggestion under consideration for future rulemaking, as we strengthen the PHP payment structure. In summary, after consideration of the public comments we received, we are finalizing our CY 2015 proposal, without modifi cation, to update th e four PHP APC per diem costs based on geometric mean cost leve ls calculated using the most recent claims and cost data for each provider type. The updated PHP APCs geometric mean per diem

costs for PHP services that we are finaliz ing for CY 2015 are shown in Table 39 and 40 below. As noted earlier in this section, we refer readers to Addendum A to this final rule with comment for the final PHP APC payment rates.

TABLE 39.—CY 2015 GEOMETRIC MEAN PER DIEM COSTS FOR CMHC PHP SERVICES

APC Group Title Geometric Mean Per Diem Costs 0172 Level I Partial Hospital ization (3 services) for CMHCs $100.15 0173 Level II Partial Hospit alization (4 or more services) for CMHCs $118.54CMS-1613-FC 555

TABLE 40.—CY 2015 GEOMETRIC ME AN PER DIEM COSTS FOR HOSPITAL-BASED PHP SERVICES

APC Group Title Geometric Mean Per Diem Costs 0175 Level I Partial Hospital ization (3 services) for hospital-based PHPs $185.87 0176 Level II Partial Hospit alization (4 or more services) for hospital-based PHPs $203.01

C. Separate Threshold for Outlier Payments to CMHCs

As discussed in the CY 2004 OPPS fina l rule with comment period (68 FR 63469 through 63470), after examining the costs, char ges, and outlier payments for CMHCs, we believed that establishing a separate OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific outlier pol icy would direct OPPS outlier payments towards genuine cost of outlier cases, and address situations where charges were being artificially increased to enhance outlier paym ents. We created a se parate outlier policy that would be specific to the estimated cost s and OPPS payments provided to CMHCs. We note that, in the CY 2009 OPPS/ASC final rule with comment period, we established an outlier reconciliation policy to comprehe nsively address charging aberrations related to OPPS outlier payments (73 FR 68594 through 68599). Therefore, beginning in CY 2004, we designated a portion of the estimated OPPS outlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS each year, excluding outlier paym ents, and established a separate outlier

threshold for CMHCs. The separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier payments to CMHCs inCMS-1613-FC 556

CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We believe that this difference in outlier payments indicates that the separate

outlier threshold for CMHCs has been successf ul in keeping outlier payments to CMHCs in line with the percentage of OPPS payments made to CMHCs. In the CY 2015 OPPS/ASC proposed ru le (79 FR 41012), we proposed to continue designating a portion of the estim ated 1.0 percent ou tlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in CY 2015, excluding outlier payments. CMHCs are projected to receive 0.03 percent of tota l OPPS payments in CY 2015, excluding outlier payments. Therefore, we proposed to designate 0.47 pe rcent of the estimated 1.0 percent outlier target amount for CMHCs, and establish a threshold to achieve that level of outlier payments. Based on our simulations of CMHC payments for CY 2015, in the CY 2015 OPPS/ASC proposed rule, we proposed to cont inue to set the threshold for CY 2015 at 3.40 times the highest CMHC PHP APC paym ent rate (that is, APC 0173 (Level II Partial Hospitalization)) (79 FR 41012). We stated that we continue to beli eve that this approach would neutralize the impact of infl ated CMHC charges on outlier payments and better target outlier payments to those tr uly exceptionally high-c ost cases that might otherwise limit beneficiary access. In addi tion, we proposed to continue to apply the same outlier payment percentage that applie s to hospitals. Therefore, for CY 2015, we proposed to continue to pay 50 percent of CM HC per diem costs over the threshold. In section II.G. of the CY 2015 OPPS/ASC pr oposed rule (79 FR 41012), for the hospital outpatient outlier payment policy, we proposed to set a dollar threshol d in addition to an APC multiplier threshold. Because the PH P APCs are the only APCs for which CMHCsCMS-1613-FC 557

may receive payment under the OPPS, we would not expect to redirect outlier payments by imposing a dollar threshold. Therefore, we did not propos e to set a dollar threshold for CMHC outlier payments. In summary, in the CY 2015 OPPS/ASC pr oposed rule, we proposed to establish

that if a CMHC’s cost for partial hospitaliz ation services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We invited public comments on these proposals. We did not receive any public comments regarding our proposed outlier policy. Therefore, we are finalizing our CY 2015 proposal to set a se parate outlier threshold for

CMHCs. As discussed in section II.G. of th is final rule with comment period, using more recent data for this final rule with comment period, we set the target for hospital outpatient outlier payments at 1.00 percent of total estimated OPPS payments. We allocated a portion of the 1.00 percent, anamount equal to 0.65 percent of outlier payments, or 0.0065 percent of total estim ated OPPS payments, to CMHCs for PHP outlier payments. For CY 2015, as proposed, we are setting the CMHC outlier threshold at 3.40 multiplied by the APC 0173 payment rate and the CY 2015 outlier percentage applicable to costs in excess of the threshold at 50 percent. In other words, if a CMHC’s cost for partial hospitalization services paid under either APC 0172 or APC 0173 exceeds 3.40 times the payment rate for APC 0173, the outlier payment will be calculated as 50 percent of the amount by which the co st exceeds 3.40 times the APC 0173 payment

rate. IX. Procedures That Will Be Paid Only as Inpatient ProceduresCMS-1613-FC 558

A. Background

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74352 through 74353) for a full historic al discussion of our longstanding policies on how we identify procedures that are typical ly provided only in an inpatient setting (referred to as the inpatient list) and, ther efore, will not be paid by Medicare under the OPPS; and on the criteria that we use to review the inpatient list eachyear to determine whether or not any procedures should be removed from the list. B. Changes to the Inpatient List In the CY 2015 OPPS/ASC proposed rule (79 FR 41012 through 41013), for the CY 2015 OPPS, we proposed to use the same methodology (described in the November 15, 2004 final rule with comment period (69 FR 65835)) of reviewing the current list of procedures on the inpatient list to identify any pro cedures that may be

removed from the list. The establishe d criteria upon which we make such a

determination are as follows: 1. Most outpatient departments are e quipped 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-only list. 4. A determination is made that the pr ocedure is being performed in numerous hospitals on an outpatient basis.CMS-1613-FC 559

5. A determination is made that the pr ocedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list. Using this methodology, we did not identif y any procedures that potentially could be removed from the inpatient list for CY 2015. Therefore, we proposed to not remove any procedures from the inpatient list for CY 2015.

After our annual review of APCs and code assignments as required by section 1833(t)(9) of the Act and further clinical re view performed by CMS medical officers, we proposed to add CPT code 22222 (Osteotomy of spine, including discectomy, anterior approach, single vertebral segment; thor acic) to the CY 2015 inpatient list. The complete list of codes that we pr oposed to be paid by Medicare in CY 2015 only as inpatient procedures was included as Addendum E to the proposed rule (which is available via the Internet on the CMS Web site). Comment: Several commenters suppor ted CMS’ proposal to add CPT code 22222 to the inpatient list. Response: We appreciate the commenters’ support.

Comment: Several commenters requested th at CMS remove CPT codes 0312T (Vagus nerve blocking therapy (morbid obesity); laparoscopic implantation of neurostimulator electrode array, anterior and posterior vagal trunks adjacent to esophagogastric junction (EGJ), with impl antation of pulse generator, includes programming); 43771 (Laparoscopy, surgical, gast ric restrictive procedure; revision of adjustable gastric restrictive device co mponent only); 43772 (Laparoscopy, surgical, gastric restrictive procedure; removal of adju stable gastric restrictive device componentCMS-1613-FC 560

only); 43773 (Laparoscopy, surgic al, gastric restrictive proc edure; removal and revision of adjustable gastric restrictive device component only); 43774 (Laparoscopy, surgical, gastric restrictive procedure; removal of adjustable gastric restrictive device and subcutaneous port components); 54411 (Remova l and replacement of a multi-component inflatable penile prosthesis through an infected field at th e same operative session); and 54417 (Removal and replacement of a non-inflat able (semi-rigid) or inflatable (self-contained) penile prosthesis through an in fected field at the same operative session) from the CY 2015 inpatient list based on their own experience, specialty society recommendation, or designation of a procedure as safe in the outpatient setting under one of the many clinical guidelines available. Response: We reevaluated data on CPT codes 0312T, 43771, 43772, 43773, 43774, 54411, and 54417 using recent utilization da ta and further clinical review performed by CMS’ medical advisors. As a result of the reevaluation, we have determined that these procedures can be sa fely performed only in the inpatient setting. We are not removing them from the inpatient list for CY 2015.

Comment: Some commenters requested that CPT code 63044 (Laminotomy (hemilaminectomy), with decompression of ne rve root(s), including partial facetectomy, foraminotomy and/or excision of herniated in tervertebral disc, reexploration, single interspace; each additional lumbar interspa ce) be removed from the inpatient list. Response: We reevaluate d data on CPT code 63044 using recent utilization data and further clinical review performed by CM S medical advisors. As a result of the reevaluation, we agree with the commenters th at this procedure can be safely performed in the outpatient setting. In addition, as a result of our r eevaluation, we believe that CPTCMS-1613-FC 561

code 63043 (Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/ or excision of herniated intervertebral disc, reexploration, single interspace; each a dditional cervical inters pace) can be safely performed in the outpatient setting. Ther efore, we are removing CPT codes 63043 and 63044 from the inpatient list. Because CPT codes 63043 and 63044 are add-on codes, they are being assigned status indicator “N” for CY 2015. Comment: Other commenters urged CMS to continue reviewing its inpatient only policy in light of ongoing changes in deliv ery systems and procedural safety and technological advances. Response: We agree with the comment ers and will continue to review the inpatient only policy.

After consideration of th e public comments we receive d, we are finalizing our proposals for the inpatient only list, with modifications. We are removing CPT codes 63043 and 63044 from the inpatient list and adding CPT code 22222 (Osteotomy of spine, including discectomy, an terior approach, single verteb ral segment; thoracic) to the CY 2015 inpatient list. The complete list of codes that will be paid by Medicare in CY 2015 only as inpatient procedures is included as Addendum E to this final rule with comment period (which is available via the Internet on the CMS Web site. X. Nonrecurring Policy Changes: Collecting Data on Services Furnished in Off-Campus Provider-Based Departments of Hospitals As we discussed in the CY 2014 OPPS/ASC proposed rule and fina l rule with comment period (78 FR 43626 and 78 FR 75061) and in the CY 2014 MedicareCMS-1613-FC 562

Physician Fee Schedule (MPFS) pr oposed rule and final rule with comment period (78 FR 43301 and 78 FR 74427), in recent years, the research li terature and popular press have documented the increased trend toward hospital acqui sition of physician practices, integration of those practices as a department of th e hospital, and the resultant increase in the delivery of physicians’ services in a hospital setting. When a Medicare beneficiary receives outpatient services in a hospit al, the total payment amount for outpatient services made by Medicare is generally hi gher than the total payment amount made by Medicare when a physician furnishes thos e same services in a freestanding clinic or in a physicians’ office. In the CY 2015 OPPS/ASC propose d rule (79 FR 41013), we stated that w e continue to seek a better understanding of how the growing tr end toward hospital acquisition of physicians’ offices and subse quent treatment of those locations as off-campus provider-based departments (PBDs) of hospitals affects payments under the MPFS and the OPPS, as well as beneficiary cost -sharing obligations. We also noted that MedPAC continues to question the appropria teness of increased Medicare payment and beneficiary cost-sharing when physicians’ o ffices become hospital outpatient departments and to recommend that Medicare pay selected hospital outpatient services at MPFS rates (MedPAC March 2012 and June 2013 Report to Congress ). In order to understand how this trend is affecting Medicare , we need information on the ex tent to which this shift is occurring. To that end, during the CY 2014 OPPS/ASC rulemaking cycle, we sought public comment regarding the best method for collecting information and data that would allow us to analyze the frequency, type, a nd payment for physicians’ and outpatient hospital services furnished in off-campus PBDs of hospitals (78 FR 75061 through 75062CMS-1613-FC 563

and 78 FR 74427 through 74428). In response to our solicitation, we received many detailed public comments. However, the commenters did not present a consensus opinion regarding whether this data collecti on was advisable or which data collection method would be preferable. Based on our anal ysis of the public comments we received, we proposed for the CY 2015 OPPS/ASC proposed rule that the most efficient and equitable means of gathering this important information across two different payment systems would be to create a HCPCS modifier to be reported with every code for physicians’ services and outpatient hospital serv ices furnished in an off-campus PBD of a hospital on both the CMS-1500 claim form for physicians’ services and the UB-04 form (CMS Form 1450) for hospital outpatient servi ces. We noted that a main provider may treat an off-campus facility as provider-bas ed if certain requirements in 42 CFR 413.65 are satisfied, and we define a “campus” at 42 CFR 413.65(a)(2) to be the physical area immediately adjacent to the provider’s main bui ldings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis, by the CMS regional office, to be part of the provider’s campus. Section 220(a)(1) of th e Protecting Access to Me dicare Act of 2014 (Pub. L. 113-93) added a new subparagraph (M) under se ction 1848(c)(2) of the Act that granted CMS the authority to engage in data collecti on to support valuation of services paid under the MPFS. In the CY 2015 OPPS/ASC proposed rule, we indicated that we are seeking more information on the frequency and type of services furnished in PBDs under this authority to improve the accuracy of MPFS practice expense payments for services furnished in off-campus PBDs. We discusse d this issue in more detail in the CY 2015CMS-1613-FC 564

MPFS proposed rule (79 FR 40333). In that di scussion, we noted our concerns that our current MPFS practice expense methodology primarily distinguishes between the resources involved in furnishing services in tw o sites of service: the nonfacility setting and the facility setting. As more physicia n practices become hospital-based and are treated as off-campus PBDs, we believe it is important to develop an understanding of which practice expense costs ty pically are incurred by the phy sicians and practitioners in the setting, which are incurred by the hospital, and whether the facility and nonfacility site-of-service differentials adequately accoun t for the typical resource costs, given these new ownership arrangements.

To understand how this trend is affec ting Medicare, including the accuracy of payments made through the MPFS, we stated in the proposed rule that we need to develop data to assess the extent to whic h this shift toward hospital-based physician practices is occurring. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 41013), we proposed to collect info rmation on the type and frequency of physicians’ services and outpatient hospital services furnished in off-campus PBDs beginning January 1, 2015, in accordance with our authority under section 1848(c)(2)(M) of the Act (as added by secti on 220(a) of Pub. L. 113-93). As noted above, we proposed

to create a HCPCS modifier that is to be reported with every code for physicians’ services and outpatient hospital services furn ished in an off-campus PBD of a hospital. Under the proposal, the modifi er would be reported on both the CMS-1500 claim form for physicians’ services and the UB-04 form (CMS Form 1450) for hospital outpatient services. In the proposed rule (79 FR 41013), we sought additional public comments onCMS-1613-FC 565

whether or not the use of a modifier code is the best mechanism for collecting this

service-level data in the hos pital outpatient department. Comment: Many commenters agreed on th e need to collect information on the frequency, type, and payment of services fu rnished in off-campus PBDs of hospitals. However, several commenters expressed concern that the HCPCS modifier would create

additional administrative burden for providers. Many of these commenters stated that the new modifier would require si gnificant changes to hospitals ’ billing systems, including a separate chargemaster for outpatient off-ca mpus PBDs and training for staff on how to use the new modifier. Many of these comment ers suggested that CMS should re-propose

a detailed data collection me thodology, test it with provide rs, make adjustments, and allow additional time for implementation. On e commenter suggested that CMS withdraw the current proposal and ask the Advisory Pa nel on Hospital Outpatient Payment (HOP Panel) to develop a propos al for data collection. Response: While we understand the comme nters’ concerns about the additional administrative burden of reporting a new HCPC S modifier, we have weighed the burden of reporting the modifier for each service ag ainst the benefit of having data that will

allow us to obtain and asse ss accurate information on the type and frequency of physicians’ services and outpatient hospital se rvices furnished in off-campus PBDs. We

do not believe that the modifier is excessively burdensome for providers to report. This is especially the case because, under current rules, when billing for services, providers must know where services are performed in or der to accurately complete value code 78 of an outpatient claim or the service location portion of a professional claim. However,

as discussed later in this section, we agree that a place of service (POS) code on theCMS-1613-FC 566

professional claim allows for the same type of data collection as a modifier on the hospital claim and would be less burdensome th an the modifier for practitioner billing. We discuss the timeframe for implementation later in this secti on. With respect to bringing this proposal to the HOP Panel, we note that such a proposal is outside the scope of the HOP Panel, which is generally charge d with advising Medica re on the clinical integrity of APCs and their associate relative payment weights. The proposed modifier is for collecting data and, as structured, does not affect APCs and their associated relative payment weights. Therefore, it would not be appropriate to solicit HOP Panel discussion

or recommendations on this proposal on data collection.

Comment: Some comment ers who were concerned about the administrative burden of the new HCPCS modifier suggestedseveral alternative methods for CMS to

collect data on services furnished in off- campus PBDs. Several of these commenters

recommended that CMS consider the establis hment of a new POS code for professional claims, or for both professional claims and hospital claims, because they believed this approach would be less administratively burde nsome than attaching a modifier to each service reported on the claim that was fu rnished in an off-campus PBD. Some commenters preferred identifying services furnished in off-campus PBDs on the Medicare cost report (CMS -2552-10). Some commenter s suggested using provider numbers and addresses to identify off-campus PBDs, or changing the provider enrollment process to be able to track these data. Other commenters suggested creating a new bill type to track outpatient hospital serv ices furnished in off-campus PBDs. Commenters generally recommended that CMS choose the least administratively burdensome approach that would ensure accura te data collection, but did not necessarilyCMS-1613-FC 567

agree on what approach would optimally achieve that result . Some commenters believed

that a HCPCS modifier would more clearly identify specific services furnished at off-campus PBDs, and would provide better in formation about the type and level of care

furnished. Some commenters believed th at a HCPCS modifier would be the least administratively burdensome approach because hospitals and physicians already report a

number of claims-based modi fiers. Other commenters argue d that additional modifiers

would increase administrative burden because this approach would increase the modifiers

that would need to be co nsidered when billing. Response: With respect to creating a new POS code to obtain data on services furnished in off-campus PBDs of a hospital, we note that POS codes are only reported on professional claims and are not included on hos pital claims. Therefore, a POS code could not be easily implemented for hospital claims. However, POS codes are already required to be reported on every professional claim a nd POS 22 is currently used to report when physicians’ services are furnished in an outpatient hospital department. (More information on existing POS codes is av ailable on the CMS Web site at: http://www.cms.gov/Medicare/ Coding/place-of-servicecodes/Place_of_Service_Code_Set.html .) Although we considered proposing a new POS code for professional claims to

collect data on services furn ished in the off-campus PBD setting, we ultimately did not do so, in part because we were aware that previous Government Accountability Office and Office of the Inspector General repor ts (October 2004, A-05-04-0025; January 2005, A-06-04-00046; July 2010, A-01-09-00503; September 2011, A-01-10-00516) have noted frequent inaccuracies in the reporting of POS codes. In addition, at the time theCMS-1613-FC 568

proposed rule was developed, we had concerns that using a POS code to report this information might not give us the reliable da ta we are looking to collect, especially if such data were to be crosswalked with hospi tal claims for the same service, because the hospital claim would have a modifier, not a POS code. However, we have been persuaded by public comments suggesting th at use of a POS code would be less administratively burdensome on professional clai ms than use of a modifier. Specifically, because a POS code is already required on ev ery professional claim, we believe that creating a new POS code to distinguish outpati ent hospital services that are furnished oncampus versus off-campus would require less staff training and education than would use of a modifier on the professional claim. In addition, professional claims only have space for four modifiers. While a very small pe rcentage of professional claims have four modifiers, required use of an additional modifier for every professional claim could lead

to more occurrences where there would not be space for all applicable modifiers. Unlike hospital claims, we note that a new professiona l claim is required whenever the place of service changes. That is, even if the same practitioner treats the same patient on the same day in the office and hospital, the services furnished in the office setting must be submitted on one claim with the POS 11 (Office) code, while those furnished in the outpatient hospital department would be submitted on a separate claim with the POS 22 (Outpatient Hospital) code (w e note that the POS 22 code will be changing under the final policy). Likewise, if a new POS code were to be created for an off-campus PBD setting, a separate claim for services furnishe d in that setting woul d be required relative

to a claim for services furnished on the main campus by the same practitioner to the same patient on the same day. Based on public co mments and after further consultation withCMS-1613-FC 569

Medicare billing experts, we believe that the use of the PO S code on professional claims

would be no less accurate than the use of a modifier on prof essional claims in identifying services furnished in off-campus PBDs. In addition, we believe that the POS code would be less administratively burdensome for pract itioners billing using the professional claim because a POS code is already requi red for every professional claim. With respect to adding new fields to existing claim forms or creating a new bill type, we do not believe that this data collec tion warrants these measures. We believe that those changes would create greater administrative burden than a HC PCS modifier or POS code, especially because providers are alr eady accustomed to using modifiers and POS

codes. Revisions to the claim form to add new fields or an additional bill type would create significant administrativ e burden to revise claims processing systems and educate providers, which we believe is not necessary, given the availability of a modifier and POS codes. Although providers may not be fa miliar with this new modifier or any new POS code; because these types of codes already exist generally for hospital and professional claims, providers and suppliers should already have an understanding of these types of codes and how to apply them. Finally, we do not believe that expansions to the claim form or use of a new bill type would provide us with detailed information on exactly which services were furnished in anoff-campus PBD versus those furnished on the main campus when those services are furnished on the same day. We also do not believe that we could accurately determine which services are furnished at off-campus PBDs using currently available national provider identifier (NPI) and facility address data. Ho spitals are required to report th e 9-digit zip code indicating where a service was furnished for purpos es of paying properly for physician andCMS-1613-FC 570

anesthesia services paid under the MPFS when that zip code differs from the master address for the hospital on file in CMS claims systems (Pub. 100-04, Transmittal 1681, February 13, 2009). However, the billing zip code for the hospital main campus could be broad enough to incorporate on and off-campus PBDs. Further, a zip code reported in value code 78 does not allow CMS to distingu ish between services furnished in different locations on the same date. Therefore, we do not believe that a comparison of the zip code captured in value code 78 and the main campus zip code is sufficiently precise. Finally, while we considered the sugg estion that CMS use currently reported Medicare hospital cost report (CMS-2552-10) data to identify services furnished at off-campus PBDs, we note that although aggreg ate data on services furnished in different settings must be reported th rough the appropriate cost center, we would not be able to obtain the service-specific level of detail that we would be able to obtain from claims

data.

We will take under consideration the suggestion that CMS create a way for hospitals to report their acqui sition of off-campus PBDs th rough the enrollment process, although this information, as currently re ported, like many of the suggestions above, would not allow us to know exactly which services are furnished in off-campus PBDs and which services are furnished on the hospita l’s main campus when a hospital provides both on the same day.

Comment: Commenters noted that the proposed modifier w ould not allow CMS to know the precise location of the off-campus PBDs for billed services or when services are furnished at different off-campus PBD locations in the same day.CMS-1613-FC 571

Response: We agree that neither the proposed modifier nor a POS code provides precise information on the specific location of each off-campus PBD for each furnished service. However, we believe having inform ation on the type and frequency of services furnished at all off-campus locations will assist CMS in better understanding the

distribution of services between on-cam pus locations and off-campus locations. Comment: MedPAC believed there may be some value in collecting data on services furnished in off-campus PBDs to validate the accuracy of site-of-service reporting when the physician’s office is off-campus but bills as an outpatient department. MedPAC indicated that any da ta collection effort should not prevent the development of policies to align payment rates across sett ings. MedPAC encouraged CMS to seek legislative authority to set equal paymen t rates across settings for evaluation and management office visits a nd other select services. Response: We thank MedPAC for its s upport of our data collection efforts to better inform the frequency and types of servi ces that are being furnished in off-campus

PBDs.

Comment: Many commenters suggested that pr oviders would not be able to accurately apply the new modifier by the January 1, 2015 implementation timeline and recommended a 1-year delay before providers w ould be required to apply the modifier to services furnished at off-campus PBDs. So me commenters requested only a 6-month delay in implementation. Commenters indicated that signi ficant revisions to internal billing processes would require additional time to implement. Response: Although we believe that the cu stomary January 1st effective date that applies to most policies adopted in the fi nal rules with comment period for both theCMS-1613-FC 572

MPFS and the OPPS would provide sufficient lead time, we understand the commenters’ concerns with the proposed timeline for im plementation, given that the new reporting requirements may require changes to billing sy stems as well as educ ation and training for staff. Accordingly, although we are finalizi ng our proposal to crea te a HCPCS modifier for hospital services furnished in an off-ca mpus PBD setting, we ar e adopting a voluntary reporting period of the new HC PCS modifier for 1 year. That is, reporting the new HCPCS modifier for services furnished at an off-campus PBD will not be mandatory until January 1, 2016, in order to allow providers time to make systems changes, test these changes, and train staff on use of the new modifier before report ing is required. We welcome early reporting of the modifier and believe a full year of preparation should provide hospitals with sufficient time to m odify their systems fo r accurate reporting. With respect to the POS code for professi onal claims, we will request two new POS codes to replace POS code 22 (Hospital Outpatient) through the POS Workgroup and expect that it will take some time for these new codes to be established. Once the new POS codes are ready and integrated into CM S claims systems, practitioners would be required to use them, as applicable. More in formation on the availability of the new POS codes will be forthcoming insubregulatory guidance. Ho wever, we do not expect the new POS codes to be available prior to July 1, 2015. There will be no voluntary reporting period of the POS codes for appli cable professional claims because each professional claim requires a POS code in or der to be accepted by Medicare. However, we do not view this to be problematic because we intend to give prior notice on the POS coding changes and, as many of the commenter s noted, because practi tioners are already accustomed to using a POS code on every claim they submit.CMS-1613-FC 573

Comment: Many commenters expressed concern th at this data collection would eventually lead to equalizing payment for si milar services furnis hed in the nonfacility setting and the off-campus PBD setting. Se veral commenters noted that the trend of hospitals acquiring physician prac tices is due to efforts to better integrate care delivery and suggested that CMS weigh the benefits of care integration when deciding payment changes. Some commenters suggested that CM S use these data to equalize payment for

similar services between thes e two settings. These commente rs suggested that there is

little difference in costs and care between the two settings that would warrant the difference in payment. Several of these co mmenters highlighted beneficiary cost-sharing

as one reason for site-neutr al payment, noting that the total payment amount for outpatient services is generally h igher than the total payment amount for those same services when furnished in a physician’s office. Response: We appreciate these comments. At this time, we are only finalizing a

data collection in this final rule with comme nt period. We did not propose and, therefore, are not finalizing any adjustment to payments furnished in the off-campus PBD setting.

Comment: One commenter noted that the CMS proposal would not provide additional information on how a physician practice billed prior to becoming an off-campus PBD, which would be important for analyzing the impact of this trend. Response: We agree that understand ing physician billing patterns prior to becoming an off-campus PBD is important in analyzing the impact of this trend, and we will continue to evaluate ways to analyze cl aims data to gather this information. We believe that collecting data us ing the additional modifier and POS code finalized in this final rule with comment period will be an im portant tool in furt hering this analysis.CMS-1613-FC 574

Comment: Some commenter s suggested that the term “off-campus” be better defined. Commenters asked how billing would occur for hospitals with multiple campuses because the CMS definition of campus references main buildings and does not

include remote locations. The commenters maintained that remote locations are not the same as off-campus departments and that remote campuses furnish both inpatient and outpatient hospital services, in contrast to individual hospital departments. The commenters argued that these types of locati ons are not ones that were formerly a physician office practice, and furnish complete ly different types of services than a physician office. One commenter also asked wh ether the modifier is intended to cover

services furnished in freest anding emergency departments. Response: For purposes of the modifier and the POS codes we are finalizing in this final rule with comment period, we define “campus” using the definition at 42 CFR 413.65(a)(2) to be the physical area i mmediately adjacent to the provider’s main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yard s of the main buildings, and any other areas determined on an individual case basis, by the CMS regional offi ce, to be part of the provider’s campus. Our intent is to capture outpatient services furnished off of the hospital’s main campus and off of any other hospital campuses. The term “remote location of a hospital” is defined at 42 CFR 413.65(a)(2). Under these regulations, a “remote location” includes a hospital campus other than the main hospital campus. Specifically, a remote location is “a facility or an organization that is either created by, or acquired by, a hospital that is a main provider for the purpose of furnishing inpatient hospital serv ices under the name, ownership, and financial and administrative control of the main provider . . . .”CMS-1613-FC 575

Therefore, we agree with the commenter that remote locations of the hospital should not be required to report the modifier nor shoul d practitioners be re quired to report the off-campus POS code in these settings. Th is term “remote location” does not include “satellite” locations of a hosp ital, but because a satellite f acility is one that provides inpatient services in a buildi ng also used by another hospital, or in one or more entire buildings located on the same campus as build ings used by another hospital, we also are not requiring satellite facilities to report the mo difier or the POS codes. Satellite facilities are described in the regulations at 42 CF R 412.22(h). Accordingly, reporting of the modifier and POS codes would be required fo r outpatient services furnished in PBDs beyond 250 yards from the main campus of the hospital, excluding serv ices furnished in a remote location or satellite facility of the hospital. We also appreciate the comment on emer gency departments. We do not intend for hospitals to report the new modifier for services furnished in an emergency department that is provider-based to a hospital. We note that there is already a POS code for the emergency department, POS 23 (emergen cy room-hospital), and this code would continue to be used for emergency departme nt services. That is, the new off-campus PBD code that will be created for purposes of this data collecti on would not apply to hospital emergency department services. Ho spitals that have questions about which departments are considered to be “off-cam pus PBDs” should review additional guidance that CMS releases on this policy and work w ith the appropriate CMS regional office if individual, specific questions remain.

Comment: Several commenters asked fo r clarification on when to report the

modifier for services furnished both on-cam pus and off-campus on the same day. TheCMS-1613-FC 576

commenters provided several scenarios of vis its and diagnostic services furnished on the same day. Response: The location where the service is actually furnished would dictate the use of the modifier, regardless of where the or der for services initiated. We expect the modifier and the POS code for off-campus PBDs to be reported in locations in which the hospital expends resources to furnish the service in an off-campus PBD setting. For example, hospitals would not report the modifier for a diagnostic test that is ordered by a practitioner who is located in an off-campus PBD when the service is actually furnished on the main campus of the hospital. This i ssue does not impact use of the POS codes because practitioners submit a different claim for each POS where they furnish services for a specific beneficiary.

Comment: A few commenters asked for clarification on whet her their entity

constitutes a PBD. Response: PBDs are departments of the hos pital that meet the criteria specified in regulations at 42 CFR 413.65. Ques tions about PBDs may be di rected to th e appropriate CMS regional office.

Comment: One commenter recommended that CMS publish the data it acquires through adoption of this modifier. Response: Data collected through the ne w HCPCS modifier would be part of the

Medicare Limited Data Set and would be av ailable to the public for purchase along with

the remainder of the Limited Data Set. Sim ilarly, professional claims data with revised POS coding would be available as a st andard analytic file for purchase.CMS-1613-FC 577

In summary, after consideration of the public comments received, we are finalizing our proposal with modifications. For hospital claims, we are creating a

HCPCS modifier that is to be reported with every code fo r outpatient hospital services furnished in an off-campus PBD of a hospital. This code will not be required to be reported for remote locations of a hospital defined at 42 CFR 412.65, sa tellite faci lities of a hospital defined at 42 CFR 412.22(h), or for services furnished in an emergency department. This 2-digit modifier will be added to the HCPCS annual file as of January 1, 2015, with the label “PO,” the shor t descriptor “Serv/pr oc off-campus pbd,” and the long descriptor “Servi ces, procedures and/or surger ies furnished at off-campus provider-based outpatient departments.” Re porting of this new modifier will be voluntary for 1 year (CY 2015), with repor ting required beginning on January 1, 2016. Additional instruction and provider education will be forthcoming in subregulatory guidance. For professional claims, instead of fina lizing a HCPCS modifier, in response to public comments, we will be deleting current POS code 22 (outpatient hospital department) and establishing two new POS codes--one to identify outpatient services furnished in on-campus, remote, or satellite lo cations of a hospital, and one to identify services furnished in an off-campus PBD hosp ital setting. We will maintain the separate POS code 23 (Emergency room-hospital) to id entify services furnis hed in an emergency department of the hospital. These new POS c odes will be required to be reported as soon as they become available. However, advan ced notice of the availability of these codes will be shared publicly as soon as practicable.CMS-1613-FC 578

XI. CY 2015 OPPS Payment Status and Comment Indicators A. CY 2015 OPPS Payment Status Indicator Definitions Payment status indicators (SIs) that we assign to HCPCS codes and APCs serve an important role in determining payment fo r services under the OPPS. They indicate whether a service represented by a HCPCS c ode is payable under the OPPS or another payment system and also whether particul ar OPPS policies apply to the code. The complete list of the CY 2015 payment status indicators and their definitions is displayed in Addendum D1 to this final rule with comment period, which is available on the CMS

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The CY 2015 payment status indicator assignments for APCs and HCPCS codes ar e shown in Addendum A and Addendum B, respectively, to this final rule with comment period, which are available on the CMS Web

site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The changes to CY 2015 payment status

indicators and their definitions are discussed in detail below. We note that, in the CY 2014 OPPS/AS C final rule with comment period (78 FR 74869 through 74888), for CY 2014, we created a new status indicator “J1” to identify HCPCS codes that are paid under a comprehensive APC. However, because we delayed implementation of the new compre hensive APC policy until CY 2015, we also delayed the effective date of payment status indicator “J1” to CY 2015. A claim with payment status indicator “J1” will trigger a comprehensive APC payment for the claim.

We refer readers to section II.A.2.e. of th is final rule with comment period for a discussion of implementation of th e new comprehensive APC policy.CMS-1613-FC 579

In the CY 2015 OPPS/ASC proposed rule (79 FR 41014), for CY 2015, we proposed to delete payment status indicator “X” and to assign ancillary services that are currently assigned payment status indicator “X” to either pa yment status indicator “Q1”

or “S.” We also proposed to revise the definiti on of payment status indicator “Q1” by removing payment status indicator “X” from the packaging criteria, so that codes assigned payment status indicator “Q1” woul d be designated as STV-packaged, rather than STVX-packaged, because payment status indicator “X” was proposed for deletion. These proposed changes, the public comments we received and our responses, and our finalized policies are discusse d in section II.A.3.c.(1) of th is final rule with comment period. Section II.A.3.c.(1) of this final rule with comment period discusses the ancillary services packaging policy. The ancillary se rvices packaging policy is the policy that makes maintaining status indicator “X” no l onger necessary. After consideration of the public comments that we received and that ar e discussed in section II.A.3.c.(1) of this final rule with comment period, we are fi nalizing, without modification, our CY 2015 proposal to delete payment stat us indicator “X” and to assign ancillary services that are currently assigned payment status indicator “X” to either pa yment status indicator “Q1”

or “S.” In addition, for CY 2015, we proposed to cl arify the definition of payment status indicator “E” to state that payment status indicator “E” applies to items, codes, and services in any of the following cases:

● For which pricing is not available;

● Not covered by any Medicare outpatient benefit category;

● Statutorily excluded by Medicare; orCMS-1613-FC 580

● Not reasonable and necessary. Regarding items “for which pricing is not available,” this applies to drugs and biologicals assigned a HCPCS code but with no available pricing information (for example, WAC). In reviewing the OPPS status indica tors and Addendum D1 for CY 2015, we noticed that there are a few drugs or biol ogicals that are currently assigned payment status indicator “A,” indicating payment unde r a non-OPPS fee schedule . These drugs or biologicals are administered infrequently in conjunction with em ergency dialysis for patients with ESRD, but when administered in the HOPD, they are paid under the standard OPPS drug payment methodology for drugs and biologicals, that is, at ASP+6 percent unless they are packaged. (We refer read ers to section V. of this final rule with comment period for additional discussion of thes e drugs and their status indicators.) We proposed to change the status indicators for these drugs or biologicals for CY 2015 by removing the phrase “EPO for ESRD Patients” from the list of examples for status indicator “A.” In addition, we proposed to clarify the definition of payment status indicator “A” by adding the phrase “separately payable” to nonimplant able prosthetic and

orthotic devices. We did not receive any public comment s regarding our proposed change and

clarifications of the definitions of payment status indicators “E” and “A.” Therefore, we are finalizing our clarifi cation and proposed policies, without modifications, for

CY 2015.

B. CY 2015 Comment Indicator DefinitionsCMS-1613-FC 581

In the CY 2015 OPPS/ASC proposed rule (79 FR 41014), for the CY 2015 OPPS, we proposed to use the same two comment indi cators that are in effect for the CY 2014

OPPS.

● “CH”—Active HCPCS code in current a nd next calendar year; status indicator and/or APC assignment have changed or activ e HCPCS code that will be discontinued at the end of the current calendar year.

● “NI”—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code. We proposed to use the “CH” comme nt indicator in the CY 2015 OPPS/ASC proposed rule (79 FR 41014) to indicate HCPC S codes for which the status indicator or APC assignment, or both, are proposed for change in CY 2015 compared to their assignment as of June 30, 2014. We believed that using the “CH” indicator in the proposed rule would facilitate the public’s review of the changes that we proposed for CY 2015. We proposed to use the “CH” co mment indicator in the CY 2015 OPPS/ASC final rule with comment period to indicate HC PCS codes for which the status indicator or APC assignment, or both, would change in CY 2015 compared to their assignment as of December 31, 2014. Use of the comment indicator “CH” in association with a composite APC indicates that the configuration of th e composite APC would be changed in the

CY 2015 OPPS/ASC final rule with comment period. In addition, we proposed that any ex isting HCPCS codes with substantial

revisions to the code desc riptors for CY 2015 compared to the CY 2014 descriptorsCMS-1613-FC 582

would be labeled with comment indicat or “NI” in Addendum B to the CY 2015

OPPS/ASC final rule with comm ent period. However, in or der to receive the comment indicator “NI,” the CY 2015 revision to the code descriptor (compared to the CY 2014 descriptor) must be significan t such that the new code desc riptor describes a new service or procedure for which the OPPS treatment may change. We use comment indicator

“NI” to indicate that these HCPCS codes will be open for comment as part of the

CY 2015 OPPS/ASC final rule with comme nt period. In the CY 2015 OPPS/ASC proposed rule, we stated that , like all codes labeled with comment indicator “NI,” we would respond to public comments and fina lize their OPPS treatment in the CY 2016

OPPS/ASC final rule wi th comment period. In accordance with our usual practice, we proposed that CPT and Level II HCPCS

codes that are new for CY 2015 also would be labeled with commen t indicator “NI” in

Addendum B to the CY 2015 OPPS/ASC final rule with comment period. We did not receive any public co mments on the proposed use of comment

indicators for CY 2015.

We believe that the CY 2014 definitions of the OPPS comment indicators continue to be appropriate for CY 2015. Th erefore, we are continuing to use those

definitions without modification for CY 2015. Only HCPCS codes with comment

indicator “NI” in this CY 2015 OPPS/ASC fina l rule with comment period are subject to comment. HCPCS codes that do not appear with comment indicator “NI” in this

CY 2015 OPPS/ASC final rule with comment period will not be open to public comment, unless we specifically request additional comments elsewhere in this final rule with comment period.CMS-1613-FC 583

The definitions of the OPPS comment indicators for CY 2015 are listed in

Addendum D2 to this final rule with comment period, wh ich is available on the CMS

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. XII. Updates to the Ambulatory Sur gical 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 legisla tive history and statutory authority related to payments to ASCs under Medicare, we re fer 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 di scussion 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), the CY 2013 OPPS/ASC final rule with comment period (77 FR 68434 through 68467), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75064 through 75090). 2. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services

Under 42 CFR 416.2 and 416.166 of the Medicare regulations, subject to certain exclusions, covered surgical procedures in an ASC are surgical procedures that are separately paid under the OPPS, that would not be expected to pose a significant risk to beneficiary safety when performed in an AS C, and for which standard medical practice dictates that the beneficiary would not typically be expect ed to require active medicalCMS-1613-FC 584

monitoring and care at midnight following the procedure (“overnight stay”). We adopted this standard for defining which surgical procedures are covered under the ASC payment system as an indicator of the complexity of the procedure and its appropriateness for Medicare payment in ASCs. We use this standard only for purposes of evaluating procedures to determine whether or not they are appropriate to be furnished to Medicare beneficiaries in ASCs. We define surgical procedures as those de scribed 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 c odes 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 procedur es: (1) brachytherapy sources; (2) certain implantable items that have pass-through pa yment 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) ce rtain radiology services for which separate payment is allowed under the OPPS. These c overed ancillary services are specified in § 416.164(b) and, as stated previously, ar e eligible for separate ASC payment (72 FR 42495). Payment for ancillary items a nd 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 rate s for, covered surgic al procedures and covered ancillary services in ASCs in c onjunction with the annual proposed and finalCMS-1613-FC 585

rulemaking process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In addition, as discussed in detail in section XII.B. of this final rule with comment period, because we base ASC pa yment policies for covered surgical procedures, drugs, biologicals, and certain other covered an cillary services on the OPPS payment policies, and we use quarterly change requests to update se rvices covered under the OPPS, we also provide quarterly update change requests (CRs) for ASC covered surgical procedures and cove red ancillary services throughout the year (January, April, July, and October). CMS releases new Leve l II codes to the public or recognizes the release of new CPT codes by the AMA and ma kes these codes effective (that is, the codes are recognized on Medicare claims) vi a these ASC quarterly update CRs. Thus, these quarterly updates are to implement ne wly 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 releas ed only once a year and, therefore, are implemented only through the January quart erly update. New Category I CPT vaccine

codes are released tw ice a year and are implemente d 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 ne wly 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 crit eria for designation as ASC covered surgicalCMS-1613-FC 586

procedures or covered ancill ary services. Updating the li sts of ASC covered surgical procedures and covered ancillary services, as well as their payment rates, in association with the annual OPPS rulemaking cycle is particularly important because the OPPS relative payment weights and, in some cases, pa yment rates, are used as the basis for the payment of covered surgical procedures and covered ancillary servic es under the revised ASC payment system. This joint update pro cess ensures that the ASC updates occur in a regular, predictable, and timely manner.

B. Treatment of New Codes 1. Process for Recognizing New Category I and Category III CPT Codes and Level II

HCPCS Codes Category I CPT, Category III CPT, and Le vel II HCPCS codes are used to report procedures, services, items, and supplies und er the ASC payment system. Specifically, we recognize the following codes on ASC clai ms: (1) Category I CPT codes, which describe surgical procedures and vaccine codes; (2) Category III CPT codes, which describe new and emerging technologies, se rvices, and procedur es; and (3) Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services notdescribed 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 a nd Level II HCPCS codes that describe surgical procedures, and to make pre liminary determinations during the annual OPPS/ASC rulemaking process re garding whether or not they meet the criteria for payment in the ASC setting as covered surgical procedures and, if so, whether or not they are office-based procedures (72 FR 42533 th rough 42535). In addition, we identify newCMS-1613-FC 587

codes as ASC covered ancillary services ba sed upon the final payment policies of the revised ASC payment system. We have separated our discussion below into two sections based on whether we proposed to solicit public comments in the CY 2015 OPPS/ASC proposed rule (and respond to those comments in this CY 2015 OP PS/ASC final rule with comment period) or whether we are soliciting public comments in this CY 2015 OPPS/ASC final rule with comment period (and responding to those co mments in the CY 2016 OPPS/ASC final rule with comment period). We note that we sought public comment in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75067) on the new Category I and Category III CPT and

Level II HCPCS codes that were effec tive January 1, 2014. We also sought public

comment in the CY 2014 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2013. These new codes, with an effective date of October 1, 2013, or January 1, 2014, were fla gged with comment indicator “NI” in

Addenda AA and BB to the CY 2014 OPPS/ASC final rule with comment period to

indicate that we were assi gning them an interim payment status and payment rate, if applicable, which were subjec t to public comment following publication of the CY 2014

OPPS/ASC final rule with comm ent period. In the proposed ru le, we stated that we will respond to public comments and finalize the treatment of these codes under the ASC payment system in this CY 2015 OPPS/AS C final rule with comment period.CMS-1613-FC 588

2. Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April 2014 and July 2014 for Which We Solicited Public Comments in the CY 2015 OPPS/ASC Proposed Rule In the April 2014 and July 2014 CRs, we made effective for April 1, 2014 and July 1, 2014, respectively, a total of seven new Level II HCPCS codes and four new Category III CPT codes that describe ASC covered surgical procedures and covered ancillary services that were not addressed in the CY 2014 OPPS/ASC final rule with comment period. In the April 2014 ASC quarterly update (Transmittal 2927, CR 8675, dated April 10, 2014), we added two new surgical Level II HCPCS codes and one new drug and biological Level II HCPCS code to the list of covered surgical procedures and covered ancillary services, respectively. Table 45 of the CY 2015 OPPS/ASC proposed rule (79 FR 41016) listed the new Level II HCPCS codes that were implemented April 1, 2014, along with their propos ed payment indicators for CY 2015. In the July 2014 quarterly update (Transmittal 2970, CR 8786, dated May 23, 2014), we added one new brachytherapy Level II HCPCS code and three new drug and biological Level II HCPCS codes to the list of covered ancillary services. Table 46 of the CY 2015 OPPS/ASC proposed rule (79 FR 41016 through 41017) listed the new Level II HCPCS codes that were implemented July 1, 2014 along with their proposed payment indicators and proposed ASC payment rates for CY 2015. Through the July 2014 quarterly update CR, we also implemented ASC payment for four new Category III CPT codes as one ASC covered surgical procedure and three covered ancillary services, eff ective July 1, 2014. These codes were listed in Table 47 ofCMS-1613-FC 589

the CY 2015 OPPS/ASC proposed rule ( 79 FR 41017), along with their proposed payment indicators and proposed payment rates for CY 2015.

The HCPCS codes listed in Table 45 of the CY 2015 OPPS/ASC proposed rule (79 FR 41016) were included in Addenda AA or BB to the proposed rule (which are

available via the Internet on the CMS Web site ). Because the payment rates associated

with the new Level II HCPCS codes and Cate gory III CPT codes that became effective July 1, 2014 (listed in Table 46 and Table 47 of the proposed rule (79 FR 41016 through 41017)) were not available to us in time for incorporation into the Addenda to the OPPS/ASC proposed rule, our polic y is to include these HCPC S codes and their proposed payment indicators and payment rates in the pr eamble to the proposed rule but not in the Addenda to the proposed rule. These codes a nd their final payment indicators and rates are included in the appropriate Addendum to this CY 2015 OPPS/AS C final rule with comment period. Therefore, the codes im plemented by the July 2014 ASC quarterly update CR and their proposed CY 2015 payment indicators and rates that were displayed in Table 46 and Table 47 of the proposed rule were not included in Addenda AA or BB to the proposed rule (which are available via th e Internet on the CMS Web site). The final list of ASC covered surgical procedures and co vered ancillary services and the associated payment weights and payment indicators ar e included in Addenda AA or BB to this

CY 2015 OPPS/ASC final rule with comment period, consistent with our annual update policy. We invited public comment on these proposed payment indicators and the proposed payment rates for the new Category III CPT code and Le vel II HCPCS codes that were newly recognized as ASC covered surgical procedures or covered ancillaryCMS-1613-FC 590

services in April 2014 and July 2014 through the quarterly update CRs, as listed in Tables 45, 46, and 47 of the CY 2015 O PPS/ASC proposed rule (79 FR 41016 through 41017). We proposed to finalize their payment indicators and their pa yment rates in this

CY 2015 OPPS/ASC final rule with comment period. We did not receive any public comment s regarding these proposed ASC payment indicators. Therefore, we are adopting as final for CY 2015 the ASC payment indicators for the ASC covered surgical procedures and covered ancillary services described by the new Level II HCPCS codes implemented in April 2014 and July 2014 through the quarterly update CRs as shown below, in Tables 41 and 42, respectively. For the new Category III CPT codes implemented in July 2014 through the quarterly update CR, as shown below in Tabl e 43, we are not finalizing the “Z2” payment indicator that we proposed for CPT codes 0348T, 0349T, and 0350T. For CY 2015, these codes will be conditionally packag ed under the OPPS when provided with a significant procedure (status indicator “Q1”). With the exception of device removal procedures (as discussed in section XII.D.1.b. of this final rule with comment period), HCPCS codes that are conditionally packag ed under the OPPS are always packaged (payment indicator “N1”) under the ASC paym ent system. Therefore, we are changing the final CY 2015 ASC payment indicator for CPT codes 0348T, 0349T, and 350T from “Z2” to “N1.” We are adopting as final the payment indicator proposed for CPT code

0356T.

These new HCPCS and CPT codes also are displayed in Addenda AA and BB to this final rule with comment period (which are available via the Internet on the CMS Web site). We note that after publicati on of the CY 2015 OPPS/ASC proposed rule, theCMS-1613-FC 591

CMS HCPCS Workgroup created permanent HCPCS J-codes for CY 2015 to replace certain temporary HCPCS C-codes and Q-c odes made effective for CY 2014. These permanent CY 2015 HCPCS J-codes are liste d alongside the tem porary CY 2014 HCPCS C-codes and Q-codes in Tables 41 and 42 be low. We also note that the CMS HCPCS Workgroup created a long descriptor for J1781 that is slightly different from the long descriptor listed for HCPCS code C 9134 in the CY 2015 OPPS/ASC proposed rule.CMS-1613-FC 592

TABLE 41.—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN APRIL 2014

CY 2014 HCPCS

Code CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015 Payment Indicator C9739 C9739 Cystourethroscopy, with inse rtion of transprostatic implant; 1 to 3 implants G2

C9740 C9740 Cystourethroscopy, with inse rtion of transprostatic implant; 4 or more implants G2 C9021 J9301 Injection, obinutuzumab, 10 mg K2 G2 = Non office-based surgical procedure added in CY 2008 or later; payment based on OPPS relative payment weight. K2 = Drugs and biologicals paid separately when prov ided integral to a surgical procedure on ASC list; payment based on OPPS rate.

TABLE 42.—NEW LEVEL II HCPCS CO DES FOR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2014

CY 2014 HCPCS Code CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015 Payment Indicator C2644 C2644 Brachytherapy source, cesium-131 chloride solution, per millicurie H2 C9022 J1322 Injection, elosulfase alfa, 1mg K2 C9134 J7181 Injection, Factor XIII A-subunit, (recombinant), per iu K2 Q9970* J1439 Injection, ferric carboxymaltose, 1 mg K2

*HCPCS code Q9970 replaced HCPCS code C9441 effective July 1, 2014. H2 = Brachytherapy source paid sepa rately when provided integral to a surgical procedure on ASC list; payment based on OPPS rate. K2 = Drugs and biologicals paid separately when prov ided integral to a surgical procedure on ASC list; payment based on OPPS rate.CMS-1613-FC 593

TABLE 43.—NEW CATEGORY III CPT CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2014

CY 2014 CPT Code CY 2015 CPT Code CY 2015 Long Descriptor Final CY 2015 Payment Indicator

0348T Radiologic examination, radiostereometric analysis (RSA); spine, (includes, cervical, thoracic and lumbosacral, when performed) N1

0349T Radiologic examination, radiostereometric analysis (RSA); upper extremity(ies), (includes shoulder, elbow and wrist, when performed) N1

0350T Radiologic examination, radiostereometric analysis (RSA); lower extremity(ies), (includes hip, proximal femur, knee and ankle, when performed) N1

0356T Insertion of drug-eluting implant (including puncta l dilation and implant removal when performed) into lacrimal canaliculus, each R2

N1 = Packaged service/item; no separate payment made. 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.

3. Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments in this CY 2015 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 HCPC S codes that are effective January 1 in the final rule with comment period updati ng the ASC payment system for the following calendar year. These codes are released to the public via the CM S HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January ASCCMS-1613-FC 594

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 co mment period updating the ASC payment system for the following calendar year. All of thes e codes are flagged with comment indicator

“NI” in Addenda AA and BB to the OPPS/AS C final rule with comment period to indicate that we are assigning them an interi m 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 ope n to public comment in the OPPS/ASC final rule with comment period, and we respond to these comments in the final rule with comment period for the next calendar year’s OPPS/ASC update. In the CY 2015 OPPS/ASC proposed ru le (79 FR 41017), we proposed to continue this process for CY 2015. Specifical ly, for CY 2015, we proposed to include in

Addenda AA and BB to the CY 2015 OPPS/ASC final rule with comment period any new Category I and III CPT codes effective January 1, 2015, that would be incorporated in the January 2015 ASC quarterly update CR and any new Level II HCPCS codes, effective October 1, 2014 or January 1, 2015, that would be released by CMS in its October 2014 and January 2015 ASC quarterly up date CRs. We stated that these codes would be flagged with commen t indicator “NI” in Addenda AA and BB to this CY 2015

OPPS/ASC final rule with comm ent period to indicate that we have assigned them an interim payment status. We also stated thattheir payment indicators and payment rates, if applicable, would be open to public co mment in this CY 2015 OPPS/ASC final rule with comment period and would be finalized in the CY 2016 OPPS/AS C final rule with comment period.CMS-1613-FC 595

We did not receive any public comments regarding this proposed process. Therefore, for CY 2015, we are finalizing our proposal, without modification, to continue our established process for recognizing and soliciting public comments on new Level II HCPCS codes and Category I and III CPT codes that become effective on October 1, 2014, or January 1, 2015, as described above. C. Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary

Services 1. Covered Surgical Procedures a. Additions to the List of ASC Covered Surgical Procedures In the CY 2015 OPPS/ASC proposed rule (79 FR 41017 through 41018), we proposed to update the list of ASC covered su rgical procedures by adding 10 procedures to the list for CY 2015. These 10 procedures were among those excluded from the ASC list for CY 2014 because we believed they di d not meet the definition of a covered surgical procedure based on our expectation that they w ould be expected to pose a significant risk to beneficiary sa fety when performed in an ASC, or would be expected to require active medical monitoring and care of the beneficiary at midnight following the procedure. We conducted a review of all HC PCS codes that currently are paid under the OPPS, but not included on the ASC list of cove red surgical procedures, to determine if changes in technology and/or medical practice affected the clinical appropriateness of these procedures for the ASC se tting. We determined that these 10 procedures would not be expected to pose a signifi cant risk to beneficiary safetywhen performed in an ASC, and would not be expected to require ac tive medical monitoring and care of theCMS-1613-FC 596

beneficiary at midnight followi ng the procedure and, therefor e, we proposed to include them on the list of ASC covered surgical procedures for CY 2015. The 10 procedures that we proposed to add to the ASC list of covered surgical procedures, including thei r HCPCS code long descri ptors and proposed CY 2015 payment indicators, were displayed in Table 48 of the CY 2015 OPPS/ASC proposed rule (79 FR 41018). Comment: Several commenters supporte d adding the 10 procedures to the CY 2015 covered surgical pr ocedures list for ASCs. Response: We thank the commenters for th eir support. As indi cated later in this section, we are finalizing our proposal to a dd these procedure codes to the ASC list, in addition to two other procedure codes recommended by commenters.

Comment: Some commenter s stated that the APC re lative weight for APC 0208

is too low for the cervical and lumbar fu sion procedures (as de scribed by HCPCS codes 22551, 22554, and 22612) proposed to be added to the list of ASC covered surgical procedures, and they urged CMS to reassign th ese three procedures codes to another APC with a higher relative weight. Response: As discussed in detail in section II.A.2.e. of this final rule with comment period, we agree with the commen ters, and we are reassigning CPT codes 22551, 22554, and 22612 to APC 0425 for CY 2015 because the geometric mean costs of these codes are more similar to the geomet ric mean cost of APC 0425, which has a higher geometric mean cost than APC 0208.

Comment: Some commenters stated that, in order to perform the procedures proposed to be added to the ASC list of cove red surgical procedures, additional procedureCMS-1613-FC 597

codes needed to be added to the list because some of the proposed additions to the list could not be furnished without procedures described by additional codes. Other codes were requested to be added because they represent procedures that are commonly furnished in conjunction with procedures desc ribed by the codes that were proposed to be

added. Commenters stated that without addi ng the additional codes for procedures that must be performed in conjunction with or are often performed along with the proposed added procedures, these types of cases will continue to not be furnished in the ASC setting. Commenters stated that some of th e procedures described by these codes were covered by other carriers and could be safely performed in the ASC setting for Medicare patients. Some commenters believed that, be cause Medicare makes facility payments for unlisted CPT codes under the OPPS, CMS should provide ASCs with the same flexibility to use unlisted CPT codes to report proce dures. The list of c odes that commenters requested to be added in addition to those th at were proposed to be added is shown in

Table 44 below.CMS-1613-FC 598

TABLE 44.—PROCEDURES REQUESTE D FOR ADDITION TO THE CY 2015 LIST OF ASC COVERED SURGICAL PROCEDURES

CY 2015 CPT/HCPCS Codes CY 2015 Short Descriptor

19307 Mast mod rad 20930*** Sp bone algrft morsel add-on 20931*** Sp bone algrft struct add-on 20936* Sp bone agrft local add-on 20937* Sp bone agrft morsel add-on 20938* Sp bone agrft struct add-on 22526 Idet single level 22527 Idet 1 or more levels 22532* Lat thorax spine fusion 22533* Lat lumbar spine fusion 22534* Lat thor/lumb addl seg 22552* Addl neck spine fusion 22558* Lumbar spine fusion 22585* Additional spinal fusion 22610* Thorax spine fusion 22633* Lumbar spine fusion combined 22830* Exploration of spinal fusion 22840* Insert spine fixation device 22842* Insert spine fixation device 22845* Insert spine fixation device 22846* Insert spine fixation device 22849* Reinsert spinal fixation 22850* Remove spine fixation device 22851 Apply spine prosth device 22855* Remove spine fixation device 22856 Cerv artific diskectomy 23470 Reconstruct shoulder joint 28805 Amputation thru metatarsal 31600 Incision of windpipe 32551 Insertion of chest tube 33244 Remove eltrd transven 35471 Repair arterial blockage 35903 Excision graft extremity 37191 Ins endovas vena cava filtr 37193 Rem endovas vena cava filter 39400 Mediastinoscopy incl biopsy 43280 Laparoscopy fundoplasty 43281 Lap paraesophag hern repairCMS-1613-FC 599

CY 2015 CPT/HCPCS Codes CY 2015 Short Descriptor 43770 Lap place gastr adj device 44180 Lap enterolysis 44970 Laparoscopy appendectomy 54332 Revise penis/urethra 54336 Revise penis/urethra 54535 Extensive testis surgery 54650 Orchiopexy (fowler-stephens) 57120 Closure of vagina 57282 Colpopexy extraperitoneal 57283 Colpopexy intraperitoneal 57310 Repair urethrovaginal lesion 57425 Laparoscopy surg colpopexy 58260 Vaginal hysterectomy 58262 Vag hyst including t/o 58543 Lsh uterus above 250 g 58544 Lsh w/t/o uterus above 250 g 58553 Laparo-vag hyst complex 58554 Laparo-vag hyst w/t/o compl 58573 Tlh w/t/o uterus over 250 g 60252 Removal of thyroid 60260 Repeat thyroid surgery 60271 Removal of thyroid 63011 Remove spine lamina 1/2 scrl 63012 Remove lamina/facets lumbar 63015 Remove spine lamina >2 crvcl 63016 Remove spine lamina >2 thrc 63017 Remove spine lamina >2 lmbr 63035 Spinal disk surgery add-on 63040 Laminotomy single cervical 63046 Remove spine lamina 1 thrc 63048 Remove spinal lamina add-on 63057 Decompress spine cord add-on 63064 Decompress spinal cord thrc 63075 Neck spine disk surgery 63076 Neck spine disk surgery 77002**** Needle localization by xray L-codes** (L codes for implants - plates and screws, peek or bone, putty - HCPCS not specified) *CPT codes on the OPPS inpatient list for CY 2015. **HCPCS codes for prosthetics or prosthetic supplies. ***CPT codes already on the ASC list of covered surgical procedures. **** CPT code already on the ASC list of covered ancillary servicesCMS-1613-FC 600

Response: We examined all of the c odes that commenters requested for addition to the ASC list of covered surgical procedures. Of the 75 codes requested for addition to the ASC list, we did not review the 19 proce dures that are reported by CPT codes that are on the OPPS inpatient list (iden tified with one asterisk in Table 44), or the unspecified non-surgical HCPCS L-codes (identified with two asterisks in Table 44) because these codes are not eligible for addition to the ASC list of covered surgical procedures, consistent with our final policy which is discussed in detail in the August 2, 2007 final rule (72 FR 42476 through 42486; 42 CFR 416.166). In addition, we did not review the 2 procedures reported by CPT codes that are already on the ASC list of covered surgical procedures (identified with th ree asterisks in Table 44), or the 1 procedure reported by a

CPT code that is on the ASC list of covered ancillary services (identified with four asterisks in Table 44). With respect to the remaining procedur es described by the 52 codes in Table 44 that commenters requested be added to the list of ASC covered surgical procedures, we do not agree that any of the procedures desc ribed by these codes should be added to the list because they do not meet our criteria fo r inclusion on this lis t. Under 42 CFR 416.2 and 416.166, subject to certain exclusions, cove red surgical procedures in an ASC are surgical procedures that are separately paid under the OPPS, that would not be expected to pose a significant risk to beneficiary safe ty when performed in an ASC, and would not be expected to require active medical monito ring and care of the beneficiary at midnight following the procedure. The criteria used under the revised ASC payment system to identify procedures that woul d be expected to pose a si gnificant safety risk when performed in an ASC include, but are not lim ited to, those procedures that: generallyCMS-1613-FC 601

result in extensive blood loss; require major or prolonged invasion of body cavities; directly involve major blood vesse ls; are generally emergent or life threatening in nature; commonly require systemic thrombolytic ther apy; are designated as requiring inpatient care under § 419.22(n); can only be reported us ing a CPT unlisted surgical procedure code; or are otherwise excluded under § 411.15 (we refer readers to § 416.166).

Procedures that do not meet the criteria se t forth in 42 CFR 416.166 would not be added to the list of ASC covered surgical procedures. Although the commenters asserted that some of the procedures they were requesting for addition to the list are as safe as procedures already on the list, based on our review of the procedures listed in Table 44, we found that all of the remaining procedures described by the 52 codes either would be expe cted to pose a threat to beneficiary safety or would require active me dical monitoring and car e of the beneficiary at midnight following the procedure. Speci fically, we found that prevailing medical practice called for inpatient hospital stays for beneficiaries undergoing many of the procedures and that some of the procedures directly involve majo r blood vessels and/or may result in extensive blood loss. Therefore, we are not including an y of the procedures suggested by commenters on the list of ASC c overed surgical procedures for CY 2015. Regarding the comment about unlisted codes being noncovered in the ASC, we have a longstanding ASC policy that all unl isted codes are noncovered in the ASC because we are unable to determine (due to th e nondescript nature of unlisted codes) if a procedure that would be reported with an unlis ted code would not be expected to pose a significant risk to beneficiar y safety when performed in an ASC, and would not be expected to require active medical monitori ng and care of the bene ficiary at midnightCMS-1613-FC 602

following the procedure. We c ontinue to believe it would not be appropriate to provide ASC payment for unlisted CPT codes in the surgical range, even if payment may be provided under the OPPS. ASCs do not possess the breadth and intensity of services that hospitals must maintain to care for patients of higher acuity, and we would have no way of knowing what specific procedures reporte d by unlisted CPT codes were provided to patients in order to ensure that th ey are safe for ASC performance.

After consideration of th e public comments we received, we are finalizing the

addition of the 10 HCPCS codes that we proposed to the lis t of ASC covered surgical procedures for CY 2015. As addressed in section XII.C.1.e. of this final rule with comment period, we also are adding CPT code 63044 (Laminotomy (hemilaminectomy), with decompression of nerve root(s), includi ng partial facetectomy, foraminotomy and/or excision of herniated intervertebral disc, re exploration, single interspace; each additional lumbar interspace) to the ASC list of covered surgical procedures for CY 2015. This code was removed from the OPPS inpatient-o nly list in response to comments and, after review of the procedure descri bed by this code, we believe that the procedure could be safely performed in an ASC and would not re quire active medical monitoring and care of the beneficiary at midnight following the proc edure. The procedure codes, descriptors, and payment indicators for these 11 new cove red surgical procedures for CY 2015 are displayed in Table 45 below.CMS-1613-FC 603

TABLE 45.—ADDITIONS TO THE LIST OF ASC COVERED SURGICAL PROCEDURES FOR CY 2015

CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015

ASC Payment Indicato r

22551 Arthrodesis, anterior in terbody, including disc space preparation, discectomy, osteophytectomy and decompression of spinal co rd and/or nerve roots; cervical below c2 J8

22554 Arthrodesis, anterior in terbody technique, including minimal discectomy to prepare interspace (other than for decompression); cervical below c2 J8

22612 Arthrodesis, posterior or posterolateral technique, single level; lumbar (with lateral transverse technique, when performed) J8

22614 Arthrodesis, posterior or posterolateral technique, single level; each additional vertebral segment (list separately in addition to c ode for primary procedure) N1

63020 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebral di sc; 1 interspace, cervical G2

63030 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebral di sc; 1 interspace, lumbar G2

63042 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebral disc, reexploration, single interspace; lumbar G2

63044 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebral disc, reexploration, single interspace; each additional lumbar interspace (list separately in addition to c ode for primary procedure) N1

63045 Laminectomy, facetectomy and foraminotomy (unilateral or bilateral wi th decompression of spinal cord, cauda equina and/or ne rve root[s], [eg, spinal or lateral recess stenosis]), single vertebral segment; cervical G2CMS-1613-FC 604

CY 2015 HCPCS

Code CY 2015 Long Descriptor Final CY 2015

ASC Payment Indicato r

63047 Laminectomy, facetectomy and foraminotomy (unilateral or bilateral wi th decompression of spinal cord, cauda equina and/or ne rve root[s], [eg, spinal or lateral recess stenosis]), single vertebral segment; lumbar G2

63056 Transpedicular approach with decompression of spinal cord, equina and/or nerve root(s) (eg, herniated intervertebral disc), single segment; lumbar (including transfacet, or lateral extraforaminal approach) (eg, far lateral herniated intervertebral disc) G2

b. Covered Surgical Procedur es 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 a dded to the ASC list of covered surgical procedures in CY 2008 or late r years that we determine are performed predominantly (more than 50 percent of the time) in physic ians’ offices based on consideration of the most recent available volume and utilization data for each individual procedure code and/or, if appropriate, th e clinical characteristic s, utilization, and volum e of related codes. In that rule, we also finalized our policyto exempt all procedures on the CY 2007 ASC list from application of the office-based cl assification (72 FR 42512) . The procedures

that were added to the ASC list of covered surgical procedures be ginning in CY 2008 that

we determined were office-based were id entified in Addendum AA to that rule by payment indicator “P2” (Office-based surgic al procedure added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on OPPS relative paymentCMS-1613-FC 605

weight); “P3” (Office-based su rgical 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 adde d to ASC list in CY 2008 or later without MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), depending on whether we estimated the procedure would be paid according to the standard ASC payment methodology based on its OPPS relative payment weight or at the MPFS nonfacility PE RVU-based amount. Consistent with our final policy to annually review and update the list of surgical procedures eligible for payment in ASCs, each year we identify surgical procedures as either temporarily office-based (these are new procedure codes with li ttle or no utilization

data that our medical advisors have determined are clinically similar to other procedures that are permanently office-based), perman ently office-based, or nonoffice-based, after taking into account updated vol ume and utilization data. (2) Changes for CY 2015 to Covered Surgic al Procedures Designa ted as Office-Based In developing the CY 2015 OPPS/ASC proposed rule, we followed our policy to annually review and update the surgical pro cedures for which ASC payment is made and to identify new procedures that may be appropriate for ASC payment, including their potential designation as office -based. We reviewed CY 2013 volume and utilization data

and the clinical characterist ics for all surgical procedures that are assigned payment indicator “G2” (Non-office-based surgical pr ocedure added in CY 2008 or later; payment based on OPPS relative payment weight) in CY 2014, as well as for those procedures assigned one of the temporary office-based pa yment indicators, specifically “P2,” “P3,”CMS-1613-FC 606

or “R2” in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75071 through 75075).

Our review of the CY 2013 volume a nd utilization data resulted in our identification of two covered surgical procedures, CPT codes 10022 and 19296 that we believe meet the criteria for designation as office-based. The data indicate these procedures are performed more than 50 percen t of the time in physicians’ offices and our

medical advisors believe the services are of a level of complexity consistent with other procedures performed routinely in physicia ns’ offices. The two CPT codes we proposed to permanently designate as office-based were listed in Table 49 of the CY 2015 OPPS/ASC proposed rule (79 FR 41019). We invited public comment on this proposal.

Comment: One commenter stated th at CPT code 10022 was performed only 51 percent of the time in the office setting and recommended that it temporarily be designated as office-based rather than permanently. Response: As stated in the proposed rule and above, we designate new procedure codes as temporarily office-base d in situations where we have little to no utilization data on these procedures and our Medical Officers have determ ined these procedures are clinically similar to other procedures that are permanently office-based. For CPT code 10022, we have enough volume and utilization da ta from CY 2013 to indicate that CPT code 10022 is performed more than 50 percent of the time in physicians’ offices and our

medical advisors believe this service is of a leve l of complexity consistent with other procedures performed routinely in physicians’ offices. Therefore, we believe that this code should be designated as permanently office-based.CMS-1613-FC 607

After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to designate the procedures described by CPT codes 10022 and 19296 as permanently office-based for CY 2015, as set forth in Table 46

below.CMS-1613-FC 608

TABLE 46.—ASC COVERED SURGICAL PROCEDURES NEWLY DESIGNATED AS PERMANENTLY OFFICE-BASED FOR CY 2015

* Final payment indicators are based on a comparison of the final rates according to the ASC standard ratesetting methodology and the MPFS final rates effective January 1, 2015. We note that these payment indicators do not include the effect of the nega tive update to the MPFS payment rates effective April 1, 2015 under current law. Updates to the AS C rates and payment indicators effective April l, 2015 will be included in the April 2015 quarterly ASC ad denda posted on the CMS Web site. For a discussion of the MPFS rates, we refer readers to the CY 2015 MPFS final rule with comment period. We also reviewed CY 2013 volume and u tilization data and other information for the 8 procedures finalized for temporary offi ce-based status in Tables 52 and 53 in the

CY 2014 OPPS/ASC final rule with comme nt period (78 FR 75074 through 75075). Among these eight procedures, there were very few claims data or no claims data for six procedures: CPT code 0099T (Implantation of intrastromal corneal ring segments); CPT code 0299T (Extracorporeal shock wave fo r integumentary wound healing, high energy, including topical application and dressing care; initial w ound); CPT code C9800 (Dermal injection procedure(s) for facial li podystrophy syndrome (LDS) and provision of Radiesse or Sculptra dermal filler, in cluding all items and supplies); CPT code 10030 (Image-guided fluid collection drainage by catheter (eg, abscess, hematoma, seroma, lymphocele, cyst), soft tissue (eg, extremity, abdominal wall, neck), percutaneous); CPT CY 2015 CPT Code CY 2015 Long Descriptor CY 2014 ASC Payment Indicator Proposed CY 2015

ASC Payment Indicator* Final CY 2015

ASC Payment Indicator* 10022 Fine needle aspiration; with imaging guidance G2 P3 P3

19296 Placement of radiotherapy afterloading expandable catheter (single or multichannel) into the breast for interstitial radioelement application following partial mastectomy, includes imaging guidance; on date separate from partial mastectomy G2 P2 P2CMS-1613-FC 609

code 64617 (Chemodenervation of muscle(s); larynx, unilateral, percutaneous (eg, for spasmodic dysphonia), includes guidance by ne edle electromyography, when performed); and CPT code 67229 (Treatment of extensive or progressive reti nopathy, 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 premat urity), photocoagulation or cryotherapy). Consequently, we proposed to maintain thei r temporary office-based designations for

CY 2015. We proposed that one procedure that ha s a temporary office-based designation for CY 2014, CPT code 0226T (Anoscopy, high reso lution (HRA) (with magnification and chemical agent enhancement); diagnostic, including collection of specimen(s) by brushing or washing when performed), be packaged under the OPPS for CY 2015. Our policy is to package covered surgical procedures under the ASC payment system if these procedures are packaged under the OPPS. C onsequently, we proposed to package, and assign payment indicator “N1” to, this cove red surgical procedur e code in CY 2015. HCPCS code 0124T (Conjunctival incision wi th posterior extrascleral placement of pharmacological agent (does not include supply of medication)) was finalized for temporary office-based status in the CY 2014 OPPS/ASC final rule with comment period. However, this code was deleted effective December 31, 2013. The proposed CY 2015 payment indicator designations for the 7 remaining procedures that were temporarily designate d as office-based in CY 2014 were displayed in Table 50 of the CY 2015 OPPS/ASC propos ed rule (79 FR 41019). The procedures for which the proposed office-based designati ons for CY 2015 are temporary also wereCMS-1613-FC 610

indicated by asterisks in A ddendum AA to the proposed rule (which is available via the Internet on the CMS Web site). We invited public comment on these proposals.

Comment: One commenter stated th at because CPT code 10030 is new for CY 2014, it should not be designated as te mporarily office-based at this time. Response: As stated in the 2014 O PPS/ASC final rule with comment period (78 FR 75074 through 75075), after re viewing the clinical charac teristics, utilization, and volume of related codes, we determined th at the procedures described by CPT code 10030 would be predominantly performed in physicians’ offices. However, because we

had no utilization data for CPT code 10030, we made the office-based designation temporary rather than permanent for CY 2014. As discussed above, we continue to have no claims data for this procedure so we are continuing to designate the procedures described by CPT code 10030 as temporarily o ffice-based. We will reevaluate CPT code 10030 in next year’s rulemaking. After consideration of the public co mment we received, for CY 2015 we are finalizing our proposal without modification to designate six procedures listed in Table 47 below as temporarily office- based. HCPCS code 0226T (Anoscopy, high resolution (HRA) (with magnification and ch emical agent enhancement); diagnostic, including collection of speci men(s) by brushing or wash ing when performed) was included in our proposal for CY 2015. However, this code will be deleted effective December 31, 2014.CMS-1613-FC 611

TABLE 47.— CY 2015 PAYMENT I NDICATORS FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY OFFICE-BASED IN THE CY 2014 OPPS/ASC FINAL RULE WITH COMMENT PERIOD

CY 2015 CPT Code CY 2015 Long Descriptor CY 2014 ASC Payment Indicator CY 2015 ASC Payment Indicator** 0099T Implantation of intrastromal corneal ring segments 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* D5

0299T Extracorporeal shock wave for integumentary wound healing, high energy, including topical application and dressi ng care; initial wound R2* R2*

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*

10030 Image-guided fluid collection drainage by catheter (eg, abscess, hematoma, seroma, lymphocele, cyst), soft tissue (eg, extremity abdominal wall, neck), percutaneous P2* P2*

64617 Chemodenervation of muscle(s); larynx, unilateral, percutane ous (eg, for spasmodic dysphonia), includes guidance by needle electromyography, when performed P3* P3*

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 prematurit y), photocoagulation or cryotherapy R2* R2*

* If designation is temporary. ** Final payment indicators are based on a comparison of the final rates according to the ASC standard ratesetting methodology and the MPFS final rates effective January 1, 2015. We note that these payment indicators do not include the effect of the nega tive update to the MPFS payment rates effective April 1, 2015 under current law. Updates to the AS C rates and payment indicators effective April l, 2015 will be included in the April 2015 quarterly ASC ad denda posted on the CMS Web site. For a discussion of the MPFS rates, we refer readers to the CY 2015 MPFS final rule with comment period.CMS-1613-FC 612

c. ASC Covered Surgical Procedures to be 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 fo r calculating the ASC payment rates for covered surgical procedures that are assigned to the subs et 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 th e procedure is adequate to provide packaged payment for the high-cost implantable devices used in those procedures. (2) Changes to List of ASC Covere d Surgical Procedures Designated as

Device-Intensive for CY 2015

As we discuss in section II.A.2.e of the CY 2015 OPPS/ASC proposed rule (79 FR 40940 through 40953), for CY 2015, we proposed to implement 28 comprehensive APCs created to replace th e current device-depe ndent APCs and a few nondevice-dependent APCs under the OPPS, whic h would eliminate all device-dependent APCs for CY 2015. We proposed to define a comprehensive APC as a classification for the provision of a primary se rvice and all adjunctive serv ices provided to support the delivery of the primary service. Beca use a comprehensive APC would treat all individually reported codes as representing components of the comprehensive service, our OPPS proposal is to make a single prospective payment based on the cost of all individually reported codes th at represent the provision of a primary service and all adjunctive services provided to suppor t the delivery of the primary service. Unlike the OPPS claims processing system that can be configured to make a single payment for the encounter-based comp rehensive service whenever a HCPCS codeCMS-1613-FC 613

that is assigned to a comprehensive APC appears on the claim, the ASC claims processing system does not allow for this type of conditional packag ing. Therefore, we proposed that all separately paid covered anci llary services that ar e provided integral to covered surgical procedures that would map to comprehensive APCs would continue to be separately paid under the ASC payment system instead of being packaged into the payment for the comprehensive APC as unde r the OPPS. The OPPS relative payment weights for the comprehensive APCs woul d include costs for ancillary services; therefore, we could duplicate payment if we based the ASC payment rate on the OPPS relative payment weights for the comprehensive AP Cs. Therefore, to avoid this issue, we proposed that the ASC payment rates for th ese comprehensive APCs would be based on the CY 2015 OPPS relative payments weights that have been calculated using the standard APC ratesetting methodology for the primary service instead of the relative payment weights that are based on the comp rehensive bundled service. For the same reason, under the ASC payment system, we also proposed to use the standard OPPS APC ratesetting methodology instead of the co mprehensive methodology to calculate the device offset percentage for comprehe nsive APCs for purposes of identifying device-intensive procedures and to calculate payment rates for device-intensive procedures assigned to comprehensive APCs. Payment rates for ASC device-intensive procedures are based on a modified payment methodology to ensure that payment fo r the procedure is adequate to provide packaged payment for the high-cost implantab le devices used in those procedures. Device-intensive procedures are currently defi ned as those procedures that are assigned to device-dependent APCs with a device offset percentage greater than 50 percent of theCMS-1613-FC 614

APC cost under the OPPS. Because we proposed to implement the comprehensive APC policy and, therefore, eliminate device-de pendent APCs under the OPPS in CY 2015, we need to define ASC device-intensive proce dures for CY 2015. We proposed to define ASC device-intensive procedures as those procedures that are assigned to any APC (not only an APC formerly designated device-dep endent) with a device offset percentage greater than 40 percent base d on the standard OPPS APC ratesetting methodology. We believe that our proposal to lo wer the offset threshold from greater than 50 percent to greater than 40 percent bette r aligns with the OPPS devi ce credit policy finalized for CY 2014 (78 FR 75006 and 75007) that applies to procedures with a significant device offset amount, which is defined as exceedi ng 40 percent of the APC cost. Because the ASC device-intensive methodology is applied to procedures with significant device costs, we believe that the definition of “significant” with regard to device-intensive procedures

should match that used under the OPPS to de termine “significant” device costs for the device credit policy. We proposed changes to § 416.171(b)(2) to refl ect this proposal. We also proposed to update the ASC list of covered surgical procedures that are eligible for payment according to our devi ce-intensive procedure payment methodology, consistent with our proposed modified de finition of device-i ntensive procedures, reflecting the proposed APC assignments of procedures and AP C device offset percentages based on the CY 2013 OPPS claims and cost report data available for the final rule with comment period. The ASC covered surgical procedures that we proposed to designate as

device-intensive and that w ould be subject to the device -intensive procedure payment methodology for CY 2015 were listed in Tabl e 51 of the proposed rule (79 FR 41021CMS-1613-FC 615

through 41023). The CPT code, the CPT code short descriptor, the proposed CY 2015 ASC payment indicator (PI), the proposed CY 2015 OPPS APC assignment, the proposed CY 2015 OPPS APC device offset percentage, and an indication if the full credit/partial credit (FB/FC) device adjustment policy would a pply also were listed in Table 51. All of these procedures were included in Addendum AA to the proposed rule (which is available via the Internet on the CMS Web site). We invited public comment on these proposals.

Comment: Some commenters supported the proposal to change the device offset threshold from 50 percent to 40 percent, ci ting that the proposal allowed for greater flexibility in allowing clinical considerati ons to determine site-of-care decisions and would likely lead to a migration of servi ces from HOPDs to ASCs. However, some commenters urged CMS to monitor volume a nd to explore the implications of the expansion of this policy. Other commen ters requested that CMS adopt additional changes to the device-intensive policy to enc ourage migration of services to ASCs from other settings. Some commenters recommende d that the device offset percentage be lowered to 30 percent. Some commenters ex pressed the same views as CMS received in prior rulemaking – that the ASC device o ffset percentages should be based on a percentage of the total unadjusted ASC cost fo r a service rather than a percentage of the HOPD, or that the device offset be applied to all procedures for which CMS can establish a device cost regardless of the percentage of the total cost that the device represents. These commenters suggested that these alte rnatives would result in savings to the Medicare program. Some commenters also expressed the same views as CMS receivedCMS-1613-FC 616

in prior rulemakings--that CMS should not adjust the device portion of the ASC payment for device-intensive procedures by the wage index. Response: In the August 2, 2007 final rule (72 FR 42503 through 42508), we established a modified payment methodol ogy for calculating ASC payment rates for device-intensive proced ures under the ASC payment system. We defined device-intensive procedures as those procedures that are as signed to device-dependent APCs under the OPPS with device costs of gr eater than 50 percent of the APC cost under the OPPS (that is, the device offset percenta ge is greater than 50 percent). In the CY 2015 OPPS/ASC proposed rule (79 FR 41020), we proposed to define ASC device-intensive procedures as those procedures that are assigned to any APC with a device offset percentage greater than 40 percent based on the standard OPPS APC ratesetting methodology. In that proposed rule, we stated that we believe that lowering the offset threshold from greater than 50 per cent to greater than 40 percent better aligns with the OPPS device credit policy finaliz ed for CY 2014 (78 FR 75006 through 75007) that applies to procedures w ith a significant device offset amount, which is defined as exceeding 40 percent of the APC cost. B ecause the ASC device-intensive methodology is applied to procedures with significant de vice costs, we believe that the definition of “significant” with regard to device-intensive procedures s hould match that used under the OPPS to determine “significant” device costs for the device credit policy. We do not believe that it should be lowered to 30 percent, because the intent of the policy change is to align significant device cost percenta ge in the OPPS with the device-intensive procedures in the ASC payment system.CMS-1613-FC 617

We do not agree with the commenters that the device-intensive methodology should be applied to all procedures where a device offset could be established. Nor do we agree with the commenters who sugge sted using a threshold to determine device-intensive procedures that is based on the ASC payment rate instead of the OPPS payment rate. Under 42 CFR 416.167 and 416.171, most ASC payment rates are based on the OPPS relative payment weights, and our ASC policy is to be consistent with the

OPPS. “Device intensive” iden tifies those procedures assigne d to APCs with significant device costs and applies to services that are performed both in the HOPD and ASC.

Procedures are not device intensive in one se tting and not in another – they either have significant associated device costs or they do not, based on the purpose of the surgical procedure. Accordingly, we believe th at the device-intensiv e methodology for ASCs should align with the device-intensive policies for OPPS.

We also continue to believe it would not be appropriate to var y the portion of the national payment that is wage-adjusted for different servic es, such as applying the wage index only to the service portion of the ASC payment f or device-intensive procedures, as the commenters requested. As indicated above, o ur ASC policy is to

be consistent with the OPPS becau se ASC payment rates are based on the OPPS relative payment weights. There fore, we apply the ASC geograph ic wage adjustment to the entire ASC pay ment rate for device-intensive procedures. We also refer readers to our responses t o similar comments in the CY 20 09, CY 2010, CY 2011, CY 2012, CY 2013, and CY 20 14 OPPS/ASC final rules with c omment period (73 FR 68735; 74 FR 60608 throug h 60609; 75 FR 72039; 76 FR 744 09; 77 FRCMS-1613-FC 618

68449; and 78 FR 75076, respectivel y). We respond to the comme nters’ request to monitor volume and to explore th e implications of this policy i n the next response. Comment: Some commenters supported the lowering of the device offset percentage to 40 percent, but sta ted that this policy, if final ized, would make device-intensive procedures more attractive to ASCs. Commenter s suggested that CMS monitor its data to determine whether the policy results in significant

increases in volume of these ser vices and that CMS explore the implications of further expanding the list of device-intensive procedures. Response: We will continue to monitor our data to ensure that our payment policies do not have the unintended consequence of inappropriat ely encouraging

shifts in site of service. Comment: One commenter expressed a ppreciation that CM S designated HCPCS code 0334T (Sacroiliac joint stab ilization for arthrodesis, percutaneous or minimally invasive (indirect visualizat ion), includes obtaining and appl ying autograft or allograft (structural or morselized), when performed, includes image guidance when performed (eg, CT or fluoroscopic)) as de vice-intensive, but e xpressed concern that the device offset percentage was too low, thereby resulti ng in an undervalued ASC payment. The

commenter stated that Medicare patients otherwise eligible for this treatment in the ASC

would be denied access due to the low ASC payment. The commenter suggested that CMS consider HCPCS-specific device offset s rather than at the APC level. Alternatively, the commenter suggested that CMS add “device offset similarity” (that is, identifying and grouping procedure codes based on the similarity of their respective device offsets) as an additional criterion (in addition to clinical and cost similarity) inCMS-1613-FC 619

APC assignment. Another commenter stated that ASC payment for transprostatic implant procedures (as described by HC PCS codes C9739 and C9740) was too low because these procedures were not designated as device-intensive in the ASC setting, and it is unlikely that any transprostatic implantprocedures would be conducted in the ASC setting for a Medicare patient. Response: In the August 2, 2007 ASC fina l rule (72 FR 42504), we finalized our policy to apply the OPPS device offset pe rcentage to the OPPS national unadjusted payment to acquire the device cost in cluded in the OPPS payment rate for a

device-intensive ASC covered surgical procedure, which we then set as equal to the device portion of the national unadjusted ASC payment rate for the procedure. The device offset percentage repres ents a weighted average for a ll of the procedures assigned to the APC. It is not uncommon that, with in an APC, there will be a range of device costs associated with the various procedures assigned to the APC. The device offset for the APC represents a weighted average for all of the procedures assigned to the APC, and the device offset percentage is our best esti mate of the amount of device cost included in an APC payment under the OPPS. We did not propose calculating offsets at the HCPCS level or introducing a new criterion for APC code assignments. Thes e would be significant changes to our longstanding policy of calculating offsets at the APC level, discussed above, and we believe our current policy allows for appropriate payment. Moreover, under 42 CFR 416.167 and 416.171, ASC covered surgical procedures are classified using OPPS APC groups described in 42 CFR 419.31. Under our policy, we cannot assign a CPT code to a different APC for the ASC setting.CMS-1613-FC 620

We believe that APC 0425 is an appropriate APC assignment for CPT

code 0334T based on clinical and resource sim ilarity to other pro cedures assigned to

APC 0425 and have calculated the device offs et for this procedure according to our longstanding policy discussed above. We be lieve that payment for this code is appropriate. With respect to the comment about AS C payment for transprostatic implant procedures being too low because the pr ocedures do not currently qualify for a device-intensive offset adjustment, as addressed in section III.C.3.e. of this final rule with comment period, for CY 2015, we are maintaining our APC assignments for HCPCS codes C9739 and C9740 to APCs 0162 and 1564, re spectively. As discussed in section

III.C.3.e. of this final rule with comment period, the APC assignments for HCPCS codes C9739 and C9740 are initial APC assignments until we obtain claims data for these two codes for the CY 2016 OPPS update. We will r eevaluate whether these codes qualify for a device-intensive adjustment based on th eir APC assignments for CY 2016 in next year’s rulemaking cycle.

As indicated in section II.A.2.e. of this final rule with comme nt period, after consideration of the public comments we received regarding the proposed OPPS comprehensive APC policy, we are finalizing our proposal to imp lement the comprehensive APC policy for CY 2015, with some minor modifications. With respect to modifications to the comprehens ive APC policy that affect the ASC payment policy, we note that the finalized comp rehensive APC policy includes all devicedependent APCs, except for APCs 0427, 0622, and 0652, which will become standard APCs because we are discontinuing the devi ce-dependent APC policy. This modificationCMS-1613-FC 621

does not affect any of our proposals with resp ect to the finalized comprehensive APCs or

the definition of device-intensive. Given the final OPPS comprehensive APC policy and after cons ideration of the public comments we received, we are finalizi ng our proposal that all separately paid covered ancillary services that are provided integral to cove red surgical procedures that would map to comprehensive APCs will continue to be separately paid under the ASC payment system instead of being packaged into the payment for the comprehensive APC as under the OPPS. Further, the ASC paymen t rates for these comprehensive APCs will be based on the CY 2015 OPPS relative paymen ts weights that have been calculated using the standard APC ratesetting methodology for the primary servic e (instead of the relative payment weights that are based on the comprehensive bundled service) and use the standard OPPS APC ratesetting me thodology instead of the comprehensive methodology to calculate the device offset percentage for comprehensive APCs for purposes of identifying device-intensive proc edures and to calculate payment rates for device-intensive procedures assigned to comprehensive APCs. We also will define ASC device-intensive procedures as those procedures that are assigned to any APC with a device offset percentage greater than 40 percent based on the standard OPPS APC ratesetting methodology and codify th is policy in the regulations at 42 CFR 416.171(b)(2). Finally, we will upda te the ASC list of covered surgical procedures that are eligible for payment according to our device-intensive procedure payment methodology, consistent with our final modified definition of device-intensive procedures, reflecting the final APC assignmen ts of procedures and APC device offsetCMS-1613-FC 622

percentages based on the CY 2013 OPPS claims a nd cost report data available for this final rule with comment period. We are designating the ASC cove red surgical procedures display ed in Table 48 below as device-intensive and subject to the device-intensiv e procedure payment methodology for CY 2015. The CPT code, the CPT code short desc riptor, the final CY 2015 ASC payment indicator (PI), the final CY 2014 OPPS APC assignment, the final CY 2015 OPPS APC device offset percentage, and an indicat ion if the full credit/partial credit (FB/FC) de vice adjustment policy will app ly, also are listed in Table 48 below. All of these procedures are included in Addend um AA to this final rule with comment period (which i s available via the Internet o n the CMS Web site). d. Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit Devices Our ASC policy with regard to payment fo r costly devices implanted in ASCs at no cost/full credit or partia l credit as set forth in § 416.179 is consistent with the OPPS policy that was in effect until CY 2014. Th e established ASC policy reduces payment to ASCs when a specified device is furnished withou t cost or with full credit or partial credit

for the cost of the device for those ASC covere d surgical procedures that are assigned to APCs under the OPPS to which this policy ap plies. 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 a nd partial credit devices (73 FR 68742 through 68744).

As discussed in section IV.B. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75006), we finalized our proposal to modify our former policy of reducing OPPS payment for specifi ed APCs when a hospital furnishes aCMS-1613-FC 623

specified device without cost or with a full or partial credit. Formerly, under the OPPS, our policy was to reduce OPPS payment by 100 pe rcent of the device offset amount when a hospital furnishes a specified device without cost or with a full cr edit and by 50 percent of the device offset amount when the hospi tal receives partial cr edit in the amount of 50 percent or more (but less than 100 percent) of the cost for the specified device. For CY 2014, we finalized our proposal to reduce OPPS payment for applicable APCs by the full or partial credit a provider receives for a replaced device, capped at the device offset

amount. Although we finalized our proposal to m odify the policy of reducing payments when a hospital furnishes a specified device wi thout cost or with full or partial credit under the OPPS, in that final rule with comment period (78 FR 75076 through 75080), we finalized our proposal for CY 2014 to maintain our ASC policy for reducing payments to ASCs for specified device-inte nsive procedures when the ASC furnishes a

device without cost or with fu ll or partial credit. Unlike the OPPS, there is currently no mechanism within the ASC claims processing system for ASCs to submit to CMS the actual amount received when furnishing a sp ecified device at full or partial credit. Therefore, under the ASC payment system, we finalized our proposal for CY 2014 to continue to reduce ASC payments by 100 per cent or 50 percent of the device offset

amount when an ASC furnishes a device withou t cost or with full or partial credit, respectively. In the CY 2015 OPPS/ASC proposed rule (79 FR 41021 through 41023), we proposed to update the list of ASC covere d device-intensive pro cedures, based on the revised device-intensive definition proposed above, that would be subject to the noCMS-1613-FC 624

cost/full credit and partial credit device adju stment policy for CY 2015. Table 51 of the proposed rule (79 FR 41021 through 41023) disp lays the ASC covered device-intensive procedures that we proposed would be subjec t to the no cost/full credit or partial credit device adjustment policy for CY 2015. Specifi cally, when a procedur e that is listed in Table 51 is subject to the no co st/full credit or partial cred it device adjustment policy and is performed to implant a device that is furn ished at no cost or with full credit from the manufacturer, the ASC would append the HC PCS “FB” modifier on the line with the procedure to implant the device. The cont ractor would reduce payment to the ASC by

the device offset amount that we estimate re presents the cost of the device when the necessary device is furnished wit hout cost to the ASC or with full credit. We continue to believe that the reduction of ASC payment inthese circumstances is necessary to pay appropriately for the covered surgical procedure being furnished by the ASC. For partial credit, we proposed to redu ce the payment for implantation procedures

listed in Table 51 of the CY 2015 OPPS/ ASC proposed rule (79 FR 41021 through 41023) that are subject to the no cost/full credit or partial cr edit device adjustment policy by one-half of the device offset amount that would be applie d if a device was provided at no cost or with full credit, if the credit to the ASC is 50 percent or more (but less than 100 percent) of the cost of the new devi ce. The ASC would append the HCPCS “FC” modifier to the HCPCS code for a surgical pro cedure listed in Table 51 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 (but less than 100 percent) of the cost of a device. In order to report that they r eceived a partial credit of 50 pe rcent or more (but less than 100 percent) of the cost of a new device, ASCs would have the option of either:CMS-1613-FC 625

(1) submitting the claim for the device replacement procedure to their Medicare contractor after the procedur e’s performance but prior to manufacturer acknowledgment of credit for the device, a nd subsequently contacting th e contractor regarding a claim adjustment once the credit determinati on is made; or (2) holding the claim for the device implantation procedure until a determin ation 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 part ial credit is 50 percen t or more (but less than 100 percent) of the cost of the replacem ent device. Beneficiary coinsurance would

continue to be based on the reduced payment amount. We currently apply the “FB/FC” modifier policy to device-intensive procedures

that involve devices that w ould be amenable to removal and replacement in a device recall or warranty situation. We proposed to apply the “FB/FC” modifier policy to all device-intensive procedures beginning in CY 2015 because, in addition to receiving devices at no cost/full credit or partial credit due to a device recall or warranty situation, ASCs also may receive devices at no cost/full credit or partial credit due to being part of an investigational device trial. In order to ensure that our polic y covers any situation involving a device-intensive procedure where an ASC may receive a device at no cost/full credit or partial credit, we proposedto apply our FB/FC policy to all deviceintensive procedures. We invited public comment on these proposals. We did not receive any comments on this proposal. Therefore, we are finalizing our proposals without modificat ion. Specifically, we will ap ply our FB/FC policy to all device-intensive procedures beginning in CY 2015. The devi ce-intensive procedures forCMS-1613-FC 626

CY 2015 are listed in Table 48 below. For CY 2015, we will reduce the payment for the procedures listed in Table 48 below by the full device offs et amount if a device is

furnished without cost or with full credit. ASCs must append the HCPCS modifier “FB” to the HCPCS code for a surgical procedure listed in Table 48 below when the device is

furnished without cost or with full credit. In addition, for CY 2015, we will reduce the payment for the proce dures listed in Table 48 below by one-half of the device offset amount if a device is provided with partial cred it, if the credit to th e ASC is 50 percent or more (but less than 100 percent) of the de vice cost. The ASC must append the HCPCS

“FC” modifier to the HCPCS code for a surgical procedure listed in Table 48 below when the facility receives a partial credit of 50 percen t or more (but less than 100 percent) of the cost of a device.

TABLE 48.—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE-INTENSIVE FOR CY 2015, I NCLUDING ASC COVE RED SURGICAL

PROCEDURES FOR WHICH THE NO COST/FULL CREDIT OR PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY

HCPCS

Code Short Descriptor Final CY 2015 ASC PI Final CY 2015

OPPS APC Final CY 2015

Device Offset Percentage Final FB/FC Policy

Will Apply 19298 Place breast rad tube/caths J8 0648 0.4408 Yes 19325 Enlarge breast with implant J8 0648 0.4408 Yes 19342 Delayed breast prosthesis J8 0648 0.4408 Yes 19357 Breast reconstruction J8 0648 0.4408 Yes

22551 Neck spine fuse&remov bel c2 J8 0425 0.5565 Yes 22554 Neck spine fusion J8 0425 0.5565 Yes 22612 Lumbar spine fusion J8 0425 0.5565 Yes 23515 Treat clavicle fracture J8 0064 0.4319 Yes 23585 Treat scapula fracture J8 0064 0.4319 Yes 23615 Treat humerus fracture J8 0064 0.4319 YesCMS-1613-FC 627

HCPCS

Code Short Descriptor Final CY 2015 ASC PI Final CY 2015

OPPS APC Final CY 2015

Device Offset Percentage Final FB/FC Policy

Will Apply 23616 Treat humerus fracture J8 0064 0.4319 Yes 23630 Treat humerus fracture J8 0064 0.4319 Yes 23670 Treat dislocation/fracture J8 0064 0.4319 Yes 24361 Reconstruct elbow joint J8 0425 0.5565 Yes 24363 Replace elbow joint J8 0425 0.5565 Yes 24365 Reconstruct head of radius J8 0425 0.5565 Yes 24366 Reconstruct head of radius J8 0425 0.5565 Yes 24370 Revise reconst elbow joint J8 0425 0.5565 Yes 24371 Revise reconst elbow joint J8 0425 0.5565 Yes 24435 Repair humerus with graft J8 0425 0.5565 Yes 24498 Reinforce humerus J8 0425 0.5565 Yes 24515 Treat humerus fracture J8 0064 0.4319 Yes 24516 Treat humerus fracture J8 0064 0.4319 Yes 24545 Treat humerus fracture J8 0064 0.4319 Yes 24546 Treat humerus fracture J8 0064 0.4319 Yes 24575 Treat humerus fracture J8 0064 0.4319 Yes 24579 Treat humerus fracture J8 0064 0.4319 Yes 24586 Treat elbow fracture J8 0064 0.4319 Yes 24587 Treat elbow fracture J8 0064 0.4319 Yes 24615 Treat elbow dislocation J8 0064 0.4319 Yes 24635 Treat elbow fracture J8 0064 0.4319 Yes 24666 Treat radius fracture J8 0064 0.4319 Yes 25441 Reconstruct wrist joint J8 0425 0.5565 Yes 25442 Reconstruct wrist joint J8 0425 0.5565 Yes 25444 Reconstruct wrist joint J8 0425 0.5565 Yes 25446 Wrist replacement J8 0425 0.5565 Yes 25574 Treat fracture radius & ulna J8 0064 0.4319 Yes 25575 Treat fracture radius/ulna J8 0064 0.4319 Yes 25607 Treat fx rad extra-articul J8 0064 0.4319 Yes 25608 Treat fx rad intra-articul J8 0064 0.4319 Yes 25609 Treat fx radial 3+ frag J8 0064 0.4319 Yes 26686 Treat hand dislocation J8 0064 0.4319 Yes 27279 Arthrodesis sacroiliac joint J8 0425 0.5565 Yes

27415 Osteochondral knee allograft J8 0425 0.5565 Yes 27428 Reconstruction knee J8 0425 0.5565 YesCMS-1613-FC 628

HCPCS

Code Short Descriptor Final CY 2015 ASC PI Final CY 2015

OPPS APC Final CY 2015

Device Offset Percentage Final FB/FC Policy

Will Apply

27438 Revise kneecap with implant J8 0425 0.5565 Yes 27440 Revision of knee joint J8 0425 0.5565 Yes 27442 Revision of knee joint J8 0425 0.5565 Yes 27443 Revision of knee joint J8 0425 0.5565 Yes 27446 Revision of knee joint J8 0425 0.5565 Yes 27745 Reinforce tibia J8 0425 0.5565 Yes 27759 Treatment of tibia fracture J8 0064 0.4319 Yes 27823 Treatment of ankle fracture J8 0064 0.4319 Yes 27827 Treat lower leg fracture J8 0064 0.4319 Yes 27828 Treat lower leg fracture J8 0064 0.4319 Yes 28415 Treat heel fracture J8 0064 0.4319 Yes 28715 Fusion of foot bones J8 0425 0.5565 Yes 33206 Insert heart pm atrial J8 0089 0.6972 Yes 33207 Insert heart pm ventricular J8 0089 0.6972 Yes 33208 Insrt heart pm atrial & vent J8 0089 0.6972 Yes 33210 Insert electrd/pm cath sngl J8 0090 0.6858 Yes 33211 Insert card electrodes dual J8 0090 0.6858 Yes 33212 Insert pulse gen sngl lead J8 0090 0.6858 Yes 33213 Insert pulse gen dual leads J8 0089 0.6972 Yes

33214 Upgrade of pacemaker system J8 0089 0.6972 Yes 33216 Insert 1 electrode pm-defib J8 0090 0.6858 Yes 33217 Insert 2 electrode pm-defib J8 0090 0.6858 Yes 33221 Insert pulse gen mult leads J8 0655 0.7495 Yes

33224 Insert pacing lead & connect J8 0089 0.6972 Yes

33227 Remove&replace pm gen singl J8 0090 0.6858 Yes

33228 Remv&replc pm gen dual lead J8 0089 0.6972 Yes

33229 Remv&replc pm gen mult leads J8 0655 0.7495 Yes 33230 Insrt pulse gen w/dual leads J8 0107 0.7851 Yes 33231 Insrt pulse gen w/mult leads J8 0108 0.8114 Yes 33233 Removal of pm generator J8 0090 0.6858 Yes 33240 Insrt pulse gen w/singl lead J8 0107 0.7851 Yes 33249 Nsert pace-defib w/lead J8 0108 0.8114 YesCMS-1613-FC 629

HCPCS

Code Short Descriptor Final CY 2015 ASC PI Final CY 2015

OPPS APC Final CY 2015

Device Offset Percentage Final FB/FC Policy

Will Apply

33262 Remv&replc cvd gen sing lead J8 0107 0.7851 Yes

33263 Remv&replc cvd gen dual lead J8 0107 0.7851 Yes

33264 Remv&replc cvd gen mult lead J8 0108 0.8114 Yes 33270 Ins/rep subq defibrillator J8 0108 0.8114 Yes 33271 Insj subq impltbl dfb elctrd J8 0090 0.6858 Yes 33282 Implant pat-active ht record J8 0090 0.6858 Yes 37221 Iliac revasc w/stent J8 0229 0.5036 Yes 37225 Fem/popl revas w/ather J8 0229 0.5036 Yes 37226 Fem/popl revasc w/stent J8 0229 0.5036 Yes

37227 Fem/popl revasc stnt & ather J8 0319 0.5911 Yes 37228 Tib/per revasc w/tla J8 0229 0.5036 Yes 37229 Tib/per revasc w/ather J8 0319 0.5911 Yes 37230 Tib/per revasc w/stent J8 0319 0.5911 Yes 37231 Tib/per revasc stent & ather J8 0319 0.5911 Yes 37236 Open/perq place stent 1 s t J8 0229 0.5036 Yes 37238 Open/perq place stent same J8 0229 0.5036 Yes 53440 Male sling procedure J8 0385 0.5902 Yes 53444 Insert tandem cuff J8 0385 0.5902 Yes 53445 Insert uro/ves nck sphincter J8 0386 0.6988 Yes

53447 Remove/replace ur sphincter J8 0386 0.6988 Yes 54400 Insert semi-rigid prosthesis J8 0385 0.5902 Yes 54401 Insert self-contd prosthesis J8 0386 0.6988 Yes

54405 Insert multi-comp penis pros J8 0386 0.6988 Yes

54410 Remove/replace penis prosth J8 0386 0.6988 Yes

54416 Remv/repl penis contain pros J8 0386 0.6988 Yes 55873 Cryoablate prostate J8 0385 0.5902 Yes 61885 Insrt/redo neurostim 1 array J8 0039 0.8616 Yes 61886 Implant neurostim arrays J8 0318 0.8688 Yes

61888 Revise/remove neuroreceiver J8 0061 0.5625 YesCMS-1613-FC 630

HCPCS

Code Short Descriptor Final CY 2015 ASC PI Final CY 2015

OPPS APC Final CY 2015

Device Offset Percentage Final FB/FC Policy

Will Apply

62361 Implant spine infusion pump J8 0227 0.8062 Yes

62362 Implant spine infusion pump J8 0227 0.8062 Yes 63650 Implant neuroelectrodes J8 0061 0.5625 Yes 63655 Implant neuroelectrodes J8 0039 0.8616 Yes 63663 Revise spine eltrd perq aray J8 0061 0.5625 Yes 63664 Revise spine eltrd plate J8 0061 0.5625 Yes 63685 Insrt/redo spine n generator J8 0318 0.8688 Yes 64553 Implant neuroelectrodes J8 0061 0.5625 Yes 64555 Implant neuroelectrodes J8 0061 0.5625 Yes 64561 Implant neuroelectrodes J8 0061 0.5625 Yes 64565 Implant neuroelectrodes J8 0061 0.5625 Yes 64568 Inc for vagus n elect impl J8 0318 0.8688 Yes 64569 Revise/repl vagus n eltrd J8 0061 0.5625 Yes 64575 Implant neuroelectrodes J8 0061 0.5625 Yes 64580 Implant neuroelectrodes J8 0039 0.8616 Yes 64581 Implant neuroelectrodes J8 0061 0.5625 Yes 64590 Insrt/redo pn/gastr stimul J8 0039 0.8616 Yes 65770 Revise cornea with implant J8 0293 0.6611 Yes

69714 Implant temple bone w/stimul J8 0425 0.5565 Yes

69715 Temple bne implnt w/stimulat J8 0425 0.5565 Yes 69718 Revise temple bone implant J8 0425 0.5565 Yes 69930 Implant cochlear device J8 0259 0.8283 Yes 0238T Trluml perip athrc iliac art J8 0319 0.5911 Yes 0282T Periph field stimul trial J8 0061 0.5625 Yes 0283T Periph field stimul perm J8 0318 0.8688 Yes

0302T Icar ischm mntrng sys compl J8 0089 0.6972 Yes 0303T Icar ischm mntrng sys eltrd J8 0090 0.6858 Yes

0304T Icar ischm mntrng sys device J8 0090 0.6858 Yes 0308T Insj ocular telescope prosth J8 0351 0.9066 Yes 0316T Replc vagus nerve pls gen J8 0039 0.8616 Yes 0387T Leadless c pm ins/rpl ventr J8 0319 0.5911 YesCMS-1613-FC 631

e. ASC Treatment of Surgical Procedures Removed from the OPPS Inpatient List for

CY 2015

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 possi ble inclusion on the ASC list of covered surgical procedures. In the CY 2015 OPPS/ ASC proposed rule (79 FR 41023), we stated there are no procedures proposed for removal from the OPPS inpatient list for CY 2015, so we did not propose any procedures for possi ble inclusion on the ASC list of covered surgical procedures.

Comment: Some commenters recommended that, if a surgical procedure was removed from the inpatient list, it be made eligible for payment in the ASC setting. Response: As 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 proce dures that are being proposed for removal from the OPPS inpati ent-only list for possi ble inclusion on the ASC list of covered surgical procedures. We review these procedures and include them on the ASC list of covered surgical procedures only if the surgical procedure would not be expected to pose a signifi cant risk to beneficiary safetywhen performed in an ASC, and would not be expected to require ac tive medical monitoring and care of the beneficiary at midnight following the procedure. Although there were no procedures pr oposed for removal from the OPPS inpatient list for CY 2015, we are removing CPT code 63043 (LaminotomyCMS-1613-FC 632

(hemilaminectomy), with decompression of ne rve root(s), including partial facetectomy, foraminotomy and/or excision of herniated in tervertebral disc, reexploration, single interspace; each additional cervical in terspace) and CPT code 63044 (Laminotomy (hemilaminectomy), with decompression of ne rve root(s), including partial facetectomy, foraminotomy and/or excision of herniated in tervertebral disc, reexploration, single interspace; each additional lumbar interspace) from the inpatient-only list in response to a public comment. We refer readers to section IX .B. of this final rule with comment period for our discussion of the CY 2015 inpatient-onl y list. As discussed previously, because these procedures were remove d from the OPPS inpatient-only list, we review them to determine whether they should be include d on the list of ASC covered surgical procedures. We believe that the proce dure described by CPT code 63044 would not be expected to pose a significant risk to benefi ciary safety when performed in an ASC, and would not be expected to require active medi cal monitoring and care of the beneficiary at midnight following the procedure. Therefore, we are including th e procedure described by CPT code 63044 on the list of ASC covered surg ical procedures and list the procedure code, descriptor, and payment indicator for this new covered surg ical procedure in

Table 45 of section XII.C.1.a. of this final rule with comment period. However, we do not believe that the procedure described by CPT code 63043 should be added to the ASC

list because we believe that the benefici ary would generally require active medical monitoring and care at midnight following the procedure, so we are not adding it to the list of ASC covered surgical procedures.CMS-1613-FC 633

2. Covered Ancillary Services Consistent with the established ASC payment system policy, we proposed to update the ASC list of covered ancillary servic es to reflect the proposed payment status

for the services under the CY 2015 OPPS. Maintaining consistency with the OPPS may result in proposed changes to ASC paym ent indicators for some covered ancillary services because of changes that are be ing proposed under the OPPS for CY 2015. For example, a covered ancillary service that was separately paid under the revised ASC payment system in CY 2014 may be proposed for packaged status under the CY 2015 OPPS and, therefore, also under the ASC payment system for CY 2015. To maintain consistency with the OPPS, we proposed that these services also would be packaged under the ASC payment system for CY 2015. Comment indicator “CH,” discussed in section XII.F. of the CY 2015 OPPS/ASC proposed rule (79 FR 41028), is used in Addendum BB to the proposed rule (which is available via the Internet on the CMS Web site) to indicate covered ancillary services for which we proposed a change in the ASC payment indicat or to reflect a proposed change in the

OPPS treatment of the service for CY 2015. Except for the Level II HCPCS codes and Level III CPT codes listed in Table 46 and Table 47 of the proposed rule ( 79 FR 41016 through 41017), all ASC covered ancillary services and thei r proposed payment indicators for CY 2015 were included in Addendum BB to the proposed rule (which is available via the Internet on the CMS Web site). We invited public comment on this proposal.CMS-1613-FC 634

Comment: Commenters were concerne d that, because ASC payment rates are already substantially lower than HOPD rates, packaging these anci llary services codes would not provide adequate payment for a ll of the procedures being performed, and would result in cases shifting from the ASC to the more expensive HOPD setting. The commenters noted that this was particularlyproblematic because there are 244 ancillary and surgical codes that are separately paya ble as procedures in CY 2014 under the OPPS but are proposed to be packaged and no l onger separately payable in CY 2015 under the

OPPS. The commenters noted that Medica re currently pay ASCs approximately 55 percent of the hospital rate for the same service and expressed concern that packaging the payment for the secondary services will lower the ASC payment even further and discourage the movement of volume to AS Cs. Commenters recommended that CMS work to ensure that any packaging policies are not structured to disp roportionately impact the already lower cost provider. Response: We discuss the OPPS ancill ary services packaging policy for CY 2015 in section II.A.3.c.(1) of this final rule with comment period. Of the 21 APCs proposed for conditional packaging under this policy, 17 of the 21 contain services that are not ASC services. Therefore, for the most part , this packaging policy does not apply to the ASC. The four remaining APCs contain pr imarily minor imaging services, such as a chest X-ray. Most of these diagnostic test s are not typically performed in the ASC; instead, they are performed pre- operatively before the patien t has surgery at the ASC. Therefore, we do not believe that ASCs will be adversely impacted by the OPPS ancillary services packaging policy in CY 2015. In additio n, to the extent that any of the packaged covered ancillary services ar e performed with covered surg ical procedures , the relativeCMS-1613-FC 635

weights of the surgical procedures will reflect the additional cost of the packaged ancillary service. We typically consider the potential effect of OPPS payment policy changes, including new packaging policies, on ASC payments, and we will continue to

do so in the future.

After consideration of the public comments we rece ived, we are finalizing, without modification, our proposal to update the ASC list of c overed ancillary services to reflect the payment status for the servi ces under the OPPS. All CY 2015 ASC covered ancillary services and their final payment i ndicators are included inAddendum BB to this final rule with comment period (which is ava ilable via the Internet on the CMS Web site). D. ASC Payment for Covered Surgical Pr ocedures and Covered Ancillary Services 1. ASC Payment for Covered Surgical Procedures a. Background Our ASC payment policies for covered su rgical procedures under the revised ASC payment system are fully described in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66828 through 66831). Under our established policy for the revised ASC payment system, the ASC sta ndard ratesetting methodology of multiplying the ASC relative payment weight for the pro cedure by the ASC conversion factor for that same year is used to calcul ate the national unadjusted payment rates for procedures with payment indicators “G2” and “A2.” Payment indicator “A2” was developed to identify procedures that were included on the list of ASC covered surgical procedures in CY 2007 and, therefore, were subject to transiti onal payment prior to CY 2011. Although the 4-year transitional peri od has ended and payment indicator “A2” is no longer required to identify surgical procedures subject to transitional payment, we retained paymentCMS-1613-FC 636

indicator “A2” because it is used to id entify procedures that are exempted from application of the office-based designation.

The rate calculation established for de vice-intensive procedures (payment indicator “J8”) is structured so that the p ackaged 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 2014 OPPS /ASC final rule with comment period (78 FR 75064 through 75090), we updated the CY 2013 ASC payment rates for ASC covered surgical procedures with payment indicators of “A2,” “G2,” and “J8” using CY 2012 data, consistent with the CY 2014 OPPS update. We also updated payment rates for device-intensive procedures to in corporate the CY 2014 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-base d amount (we refer readers to the CY 2015 MPFS proposed rule) or the amount calculated using the ASC standard ratesetting methodology for the procedure. In the CY 2014 OPPS/ASC final rule with comment period, we updated the payment amoun ts for office-based procedures (payment indicators “P2,” “P3,” and “R2”) using the most recent available MPFS and OPPS data. We compared the estimated CY 2014 rate fo r each of the office-based procedures, calculated according to the ASC standa rd ratesetting met hodology, to the MPFS nonfacility PE RVU-based amount to determin e which was lower and, therefore, would be the CY 2014 payment rate for the proce dure according to the final policy of the revised ASC payment system (§ 416.171(d)).CMS-1613-FC 637

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2015 In the CY 2015 OPPS/ASC proposed rule (79 FR 41024), we proposed to update ASC payment rates for CY 2015 using the es tablished rate calculation methodologies under § 416.171 and using our proposed modifi ed definition of device-intensive procedures, as discussed above. Because th e proposed OPPS relative payment weights were based on geometric mean costs for CY 2015, the ASC system used geometric means to determine proposed relative payment weights under the ASC standard methodology. We proposed to continue to use the amount calculated under the ASC standard ratesetting methodology for procedur es assigned payment indicators “A2” and

“G2.” We proposed that payment rates for offi ce-based procedures (payment indicators “P2,” “P3,” and “R2”) and device-intensive procedures (payment indicator “J8”) be calculated according to our established polic ies and, for device-int ensive procedures, using our proposed modified definition of de vice-intensive procedures, as discussed above. Therefore, we proposed to update the payment amount for the service portion of the device-intensive procedur es using the ASC standard ratesetting methodology and the payment amount for the device portion ba sed on the proposed CY 2015 OPPS device offset percentages that have been calculat ed using the standard OPPS APC ratesetting methodology. Payment for office-based proced ures is at the lesser of the proposed CY 2015 MPFS nonfacility PE RVU-based amount or the proposed CY 2015 ASC payment amount calculated according to the ASC standard ratesetting methodology. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75081), we finalized our proposal to calcu late the CY 2014 payment rate s for ASC covered surgicalCMS-1613-FC 638

procedures according to our established methodologies, with the exception of device removal procedures. For CY 2014, we finalized a policy to conditionally package device removal codes under the OPPS. Under the OPPS, a conditionally packaged code (status indicators “Q1” and “Q2”) describes a HC PCS code where the payment is packaged when it is provided with a significant procedur e but is separately paid when the service appears on the claim without a significant pr ocedure. Because ASC services always include a covered surgical procedure, HCPCS codes thatare conditionally packaged under the OPPS are always packaged (payment indicator “N1”) under the ASC payment system. Therefore, no Medicare payment would be made when a device removal procedure is performed in an ASC without another surgical procedure included on the claim; therefore, no Medicare payment would be made if a device was removed but not replaced. To address this concern, for the device removal procedures that are conditionally packaged in the OPPS (status in dicator “Q2”), we assigned the current ASC payment indicators associated with these proc edures and continued to provide separate payment in CY 2014. For CY 2015, we proposed to continue this policy for the device removal procedures for these same reasons. We invited public comment on these propos als. We did not receive any public comments on these proposals. Therefore, we are finalizing our pr oposed policies without modification to calculate the CY 2015 pa yment rates for ASC covered surgical procedures according to our established me thodologies using the modified definition of device-intensive procedures. For those covered surgical procedures where the payment

rate is the lower of the fi nal rates under the ASC standa rd ratesetting methodology and the MPFS final rates, the final payment indicator s and rates set forth in this rule are basedCMS-1613-FC 639

on a comparison using the MPFS rates effec tive January 1, 2015. These payment rates

and indicators do not include th e effect of the negative updat e to the MPFS payment rates effective April 1, 2015 under current law. Upda tes to these rates a nd payment indicators effective April l, 2015 will be included in the April 2015 quarterly ASC addenda posted

on the CMS Web site. For a discussion of th e MPFS rates, we refer readers to the CY 2015 MPFS final rule with comment period.

c. Waiver of Coinsurance and Deductible for Certain Preventive Services Section 1833(a)(1) and s ection 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 th e Act (excluding electrocardiograms) that are recommended by the United States Preventi ve Services Task Force (USPSTF) with a grade of A or B for any indication or popul ation 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 provi sions and identified categories of services and the ASC covered surgical procedures and covered ancillary services that are preventive services that are recommended by the USPSTF with a grade

of A or B for which the coinsurance and th e deductible are waived. For a complete discussion of our policies and categories of services, we refer readers to the CY 2011 OPPS/ASC final rule with comment peri od (75 FR 72047 through 72049). We did not propose any changes to our policies or the ca tegories of services for CY 2015. We identify the specific services with a double as terisk in Addenda AA and BB to this final rule with comment period (which are available via the Internet on the CMS Web site).CMS-1613-FC 640

d. Payment for Cardiac Resynchronization Therapy Services Cardiac resynchronization therapy (CRT) us es 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 perf ormed 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 (Inse rtion of pacing elec trode, cardiac venous system, for left ventricular pacing, at time of insertion of pacing car dioverter-def ibrillator or pacemaker pulse generator (eg, for upgrade to dual chamber system) (list separately in addition to code for primary procedure )) and 33249 (Insertion or replacement of permanent pacing cardioverter-def ibrillator system with tran svenous lead(s), single or dual chamber) are performed on the same date of service in an AS C. ASCs use the corresponding HCPCS Level II G-code (G0448) for proper reporting when the procedures described by CPT codes 33225 a nd 33249 are performed on the same date of service. When not performed on the same day as the service described by CPT code 33225, ASC payment for the service desc ribed by CPT code 33249 is based on APC 0108 using the device-intensive methodol ogy. When not performed on the same day as the service described by CPT code 33249, ASC payment for the service described by CPT code 33225 is based on APC 0655 using the device-intensive methodology. For a complete discussion of our policy regarding payment for CRT-D services in ASCs, weCMS-1613-FC 641

refer readers to the CY 2012 OPPS/ASC fina l rule with comment period (76 FR 74427 through 74428). In the CY 2015 OPPS/ASC proposed rule (79 FR 41025), for CY 2015, we proposed that CPT code 33249, the primary code for CRT-D services, continue to be assigned to APC 0108, and that payment for CPT code 33225 be packaged under the OPPS. Consequently, we also proposed th at CPT code 33249 would continue to be assigned to APC 0108 and payment for CPT code 33225 would be packaged into the payment for the primary covered surgical procedure (for example, CPT code 33249) under the ASC payment system for CY 2015. Because we proposed to package CPT code 33225 packaged under the ASC paymen t system and, therefore, it would not receive separate payment, it would no longe r be necessary that ASCs use the HCPCS Level II G-code (G0448) for proper reporti ng when the procedures described by CPT codes 33225 and 33249 are performed on the same date of service. We invited public comment on these proposals. We did not receive any public comment s on these proposals. Further, we are finalizing our proposals under the OPPS that CPT code 33249, the primary code for CRT-D services, continue to be assigned to APC 0108, and that payment for CPT code 33225 be packaged under the OPPS. Therefore, we are finalizing our proposals under the ASC payment system without modification. Specifically, CPT code 33249, the primary code for CRT-D services, will continue to be assigned to APC 0108, and payment for CPT code 33225 will be packaged into the payment for the primary covered surgical procedure (for example, CPT code 33249).CMS-1613-FC 642

e. Payment for Low Dose Rate (LDR ) Prostate Brachytherapy Composite LDR prostate brachytherapy is a treatm ent 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/ca theters. At least two CPT codes are used to report the treatment serv ice because there are separate codes that describe placement of the needles/catheter s and the application of the brachytherapy sources: CPT code 55875 (Transperineal placemen t of needles or catheters into prostate for interstitial radioelement applicati on, with or without cystoscopy); and CPT code 77778 (Interstitial radiation source ap plication; complex). Generally, the component services represented by both codes are provided in the same operative session

on the same date of servi ce to the Medicare beneficiar y being treated with LDR brachytherapy for prostate cancer.

In the CY 2013 OPPS/ASC final rule w ith comment period, we finalized our proposal to establish the CY 2013 ASC paymen t rate for LDR prostate brachytherapy services based on the OPPS relative payment weight applicable to APC 8001 when CPT codes 55875 and 77778 are performed on the same da te of service in an ASC. ASCs use the corresponding HCPCS Level II G-code (G0458) for proper reporting when the procedures described by CPT codes 55875 a nd 77778 are performed on the same date of service, and therefore receive the appropriate LDR prostate brachytherapy composite payment. When not performed on the same day as the service described by CPT code 55875, the service described by CPT code 77778 will be assigned to APC 0651. When not performed on the same day as the serv ice described by CPT code 77778, the service described by CPT code 55875 will be assigned to APC 0162. For a complete discussionCMS-1613-FC 643

of our policy regarding payment for LDR pros tate brachytherapy services in ASCs, we

refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68457). In the CY 2015 OPPS/ASC proposed rule (79 FR 41025), we did not propose any changes to our current policy regarding AS C payment for LDR prostate brachytherapy

services for CY 2015. 2. Payment for Covered Ancillary Services a. Background Our final payment policie s under the revised ASC payment system for covered ancillary services vary according to the part icular type of servic e and its payment policy under the OPPS. Our overall policy provides se parate ASC payment for certain ancillary items and services integrally related to the provision of ASC covere d surgical procedures that are paid separately under the OPPS a nd provides packaged ASC payment for other ancillary items and services that are p ackaged or conditionally packaged (status indicators “N,” “Q1,” and “Q2”) under the OPPS. In the CY 2013 OPPS/ASC rulemaking (77 FR 45169; 77 FR 68457 through 68458), we further clarified our policy regarding the payment indicator assignment of codes that are conditionally packaged in the OPPS (status indicators “Q 1” and “Q2”). Under the O PPS, a conditionally packaged code describes a HCPCS code where the paymen t 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 servi ces always include a surgical procedure, HCPCS codes that are conditionally packag ed under the OPPS are always packaged (payment indictor “N1”) under the ASC pa yment system. Thus, our final policy generally aligns ASC payment bundles with those under the OPPS (72 FR 42495). In allCMS-1613-FC 644

cases, in order for those ancillary services al so to be paid, ancill ary items and services must be provided integral to the performa nce of ASC covered surgical procedures for

which the ASC bills Medicare. Our ASC payment policies provide separa te payment for drugs and biologicals that are separately paid under the OPPS at the OPPS rates. We generally pay for separately payable radiology services at the lower of the MPFS nonfacility PE RVU-based (or technical component) amountor the rate calcula ted 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 ra diology services that are pa id separately when provided integral to a surgical procedure on the ASC lis t are set to “Z2” so that payment is made based on the ASC standard ratesetting met hodology rather than the MPFS nonfacility PE RVU amount, regardless of which is lower. This modification to the ASC payment methodology for ancillary serv ices was finalized in response to a comment on the CY 2011 OPPS/ASC proposed rule that sugg ested it is inappropriate to use the MPFS-based payment methodology for nuclear medicine procedures because the associated diagnostic radiopharmaceutical, although packaged under the ASC payment system, is separately paid under the MPFS (42 CFR 416.171(d)(1)). We set the payment

indicator to “Z2” for these nuclear medici ne procedures in the ASC setting so that payment for these procedures would be ba sed on the OPPS relative payment weight rather than the MPFS nonfacility PE RVU-base d amount to ensure that the ASC will be compensated for the cost associated with the diagnostic radiopharmaceuticals.CMS-1613-FC 645

In addition, because the same issue ex ists for radiology procedures that use contrast agents (the contrast agent is packaged under th e 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 cont rast agents so that payment for these procedures will be based on the OPPS relative payment weight a nd, therefore, will incl ude the cost for the contrast agent (42 CFR 416.171(d)(2)). ASC payment policy for brachytherapy sources mirrors the payment policy under the OPPS. ASCs are paid for brachytherapy sources provided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS or, if OPPS rates are unavailable, at contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs have been paid for brachytherapy sources pr ovided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS. Our ASC policies also provide separate payment for: (1) certain items and services that CMS designates as contracto r-priced, including, butnot limited to, the procurement of corneal tissue; and (2) certa in implantable items that have pass-through payment status under the OPPS. These categor ies do not have prospectively established ASC payment rates according to the final policies for the revised ASC payment system (72 FR 42502 and 42508 through 42509; 42 CFR 416.164(b)). Under the revised ASC payment system, we have designated corneal ti ssue acquisition and hepatitis B vaccines as contractor-priced. Corneal tissue acqui sition is contractor-priced based on the invoiced costs for acquiring the corneal tissue for transplantation. Hepatitis B vaccines are contractor-priced based on invoiced costs for the vaccine.CMS-1613-FC 646

Devices that are eligible for pass-through payment unde r the OPPS are separately paid under the ASC payment system and are co ntractor-priced. Currently, the one device that is eligible for pass-through payment in the OPPS is described by HCPCS code C1841 (Retinal prosthesis, incl udes all internal and external components). The payment amount for HCPCS code C1841 under the ASC pa yment system is contractor-priced. Under the revised ASC payment system (72 FR 42502), payment for the surgical procedure associated with the pass-through de vice is made according to our standard methodology for the ASC payment system, base d on only the service (nondevice) portion of the procedure’s OPPS relative payment wei ght if the APC weight for the procedure includes other packaged device costs. (We note that the cost for the new pass-through device would not be included in the APC weight because historical claims are used to

establish the OPPS relative we ights). We also refer to this methodology as applying a “device offset” to the ASC payment for the asso ciated surgical procedure. This ensures that duplicate payment is not provided for any portion of an implanted device with OPPS pass-through payment status. There are no ot her device costs included in the APC for the surgical procedure associated with HCPC S code C1841. Therefore, payment for the associated surgical procedure is made according to the standard methodology and no device offset is applied. HCPCS code C1841 was approved for pass-through payment effective October 1, 2013, and will continue to be eligible for pass-through payment in

CY 2015. b. Payment for Covered Ancillary Services for CY 2015 In the CY 2015 OPPS/ASC proposed rule (79 FR 41026 through 41027), for CY 2015, we proposed to update the ASC payment rates and to make changes to ASCCMS-1613-FC 647

payment indicators as necessary to mainta in consistency between the OPPS and ASC payment system regarding the packaged or sepa rately payable status of services and the proposed CY 2015 OPPS and ASC payment rates. We also proposed to continue to set the CY 2015 ASC payment rates for brachythera py sources and separately payable drugs and biologicals equal to the propos ed OPPS payment rates for CY 2015. Consistent with established ASC pa yment policy (72 FR 42497), we proposed that the proposed CY 2015 payment for separa tely payable covered radiology services be based on a comparison of the proposed CY 2015 MPFS nonfacility PE RVU-based amounts (we refer readers to the CY 2015 MPFS proposed rule) and the proposed CY 2015 ASC payment rates calculated accord ing 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 se rvices that use contrast agents). We proposed that payment for a radiology servic e would be packaged into the payment for the ASC covered surgical procedure if the ra diology service is packaged or conditionally packaged under the OPPS. The payment indicators in Addendum BB to the proposed rule indicate whether the pr oposed payment rates for radiol ogy services are based on the MPFS nonfacility PE RVU-based amount or th e 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 se rvices that we proposed to pay based on the ASC standard ratesetti ng methodology are assigned payment indicator “Z2” (proposed revised definition, as discussed below: Radiology or diagnostic service paid separately when provided integral to a surgical procedure on ASC list; payment based on OPPS relative payment weight), a nd those for which the proposed payment isCMS-1613-FC 648

based on the MPFS nonfacility PE RVU-base d amount be assigned payment indicator “Z3” (proposed revised definition, as discussed below: Radiology or diagnostic 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/AS C final rule with comment period (75 FR 72050), payment indicators for all nucle ar medicine procedures (defined as CPT codes in the range of 78000 through 78999) that are designated as radi ology services that are paid separately when provided integral to a surgical procedure on the ASC list are set to “Z2” so that payment for these procedures will be based on the OPPS relative payment weight (rather than the MPFS nonfacility PE RVU-based amount, regardless of which is lower) and, therefore, will include the costfor the diagnostic radiopharmaceutical. We proposed to continue this modification to the payment methodology in CY 2015 and, therefore, set the payment indicator to “Z2” for nuclear medicine procedures.

As finalized in the CY 2012 OPPS/AS C final rule with comment period (76 FR 74429 through 74430), payment indicators fo r radiology services that use contrast agents are set to “Z2” so that payment for these procedures will be based on the OPPS relative payment weight and, therefore, will in clude the cost for the contrast agent. We proposed to continue this modification to the payment methodology in CY 2015 and, therefore, proposed to assign the payment indi cator “Z2” to radiol ogy services that use contrast agents. Covered ancillary services are items and services that are integral to a covered surgical procedure performed in an ASC for which separate payment may be made under the ASC payment system (42 CFR 416.2). Covered ancillary se rvices include, amongCMS-1613-FC 649

other categories of items and services, certain radiology services , including diagnostic imaging services, for which separate payment is allowed under the OPPS when these services are necessary for the successful completion of a surgical procedure and are performed in the ASC immediately preced ing, during, or immediately following the covered surgical procedure, as evidenced by the service being provided on the same day as a covered surgical pro cedure (42 CFR 416.164(b)(5)). Currently, there are certain nonimaging diagnostic tests for which payment is not made under Medicare Part B when provided in an ASC setting although these tests are paid under the OPPS. Therefore, we believe that certain nonimaging diagnostic tests for which separate payment is allowed

under the OPPS should be considered covered ancillary services and separately paid when these tests are required for the succe ssful performance of the surgery and are performed in the ASC on the same day as a covered surg ical procedure. Therefore, we proposed that, beginn ing in CY 2015, certain diagnostic tests within the medicine range of CPT codes for which separate payment is allowed under the OPPS be covered ancillary services when th e they are integral to an ASC covered surgical procedure. We believe that adop ting such a payment po licy is reasonable and appropriate to ensure access to these tests inASCs and is consiste nt with the OPPS. We proposed that diagnostic test s within the medicine range of CPT codes include all Category I CPT codes in the medicine ra nge established by CPT, from 90000 to 99999, and Category III CPT codes and Level II HCPCS codes that describe diagnostic tests that crosswalk or are clinically similar to pro cedures in the medicine range established by

CPT.CMS-1613-FC 650

We proposed to pay for these tests at the lower of the MPFS nonfacility PE RVU-based (or technical component) amount or the rate calculated ac cording to the ASC standard ratesetting methodol ogy because this would ensure appropriate and equitable payment for these diagnostic tests provided in tegral to covered surgical procedures and not provide a payment incentive for migrati on of the tests from physician offices to ASCs. Further, we believe these diagnostic tests are similar to the covered ancillary services that are radiology services, and this is the payment methodology we use for those services. We proposed that the dia gnostic tests for which the proposed payment is based on the ASC standard ratesetting methodology be assigned to payment indicator “Z2” (proposed revised definition: Radiology or diagnostic service paid separately when provided integral to a surgic al procedure on ASC list; payment based on OPPS relative payment weight), and those for which th e proposed payment is based on the MPFS nonfacility PE RVU-based amount be assigned payment indicator “Z3” (proposed revised definition: Radiology or diagnostic service paid separately wh en provided integral to a surgical procedure on ASC list; payment based on MPFS nonfacility PE RVUs). We proposed changes to the definitions for payment indicators “Z2” and “Z3,” as detailed in

section XII.F.2. of this fi nal rule with comment period, and proposed changes to § 416.164(a)(11) and (b)(5) as well as § 416.171(b)(1) to re flect these proposals. We have identified one diagnostic test th at is within the medicine range of CPT codes and for which separate payment is allowed under the OPPS: CPT code 91035 (Esophagus, gastroesophageal reflux test; with mucosal attached telemetry pH electrode placement, recording, analysis and interpretatio n). We proposed to add this code to the list of ASC covered ancillary services and proposed separate ASC payment as a coveredCMS-1613-FC 651

ancillary service for this code beginning in CY 2015 when the test is integral to an ASC covered surgical procedure. We would e xpect the procedure described by CPT code 91035 to be integral to the endoscopic attach ment of the electrode to the esophageal

mucosa. Most covered ancillary services and thei r proposed payment indicators were listed in Addendum BB to the proposed rule (which is available via the Internet on the CMS Web site). We invited public comment on these proposals. Comment: Several commenters supporte d CMS’ proposals to expand the scope of ASC covered ancillary services to include certain diagnostic tests and to add CPT

code 91035 to the list of ASC covered ancillary services and allow separate payment for this code when the test is integral to an AS C covered surgical procedure. However, these commenters expressed concer n regarding the proposed ASC payment for CPT code 91035 and requested that CMS reassign the code to a higher-paying APC. Response: We thank the commenters fo r their support for our proposal. Payment

for CPT 91035 is addressed in section III.C.2. of this final rule with comment period. Briefly, the ASC payment is dependent upon the APC assignment for this service. Based on our analysis of the latest hospital outpatient claims data used for this final rule with comment period, we believe that CPT code 91035 is appropriately assigned to APC 0361. Our claims data show a geometric mean cost of approximately $466 for CPT code 91035 based on 1,272 single claims (out of 5,099 total claims), and a geometric mean cost of approximately $341 for APC 0361. Further, th e geometric mean cost of APC 0142 is approximately $884, which is almost twice the geometric mean cost of CPT code 91035.CMS-1613-FC 652

Also, assignment of 91035 to APC 0142 woul d create a 2 times violation in APC 0142, because the geometric mean cost of the highe st cost significant procedure in APC 0142 (CPT code 44361, with a geometric mean cost of $1,019) is 2.2 times the geometric mean cost of 91035. Therefore, APC 0142 would not be appropriate for 91035 and we are finalizing our CY 2015 proposal to conti nue to assign CPT code 91035 to APC 0361. After consideration of the public comment s we received, we are finalizing these proposals without modification: to expand th e scope of ASC-covere d ancillary services to include certain diagnostic tests for which separate payment is allowed under the OPPS when provided integral to covered ASC surgi cal procedures; to pa y for these diagnostic tests 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; and to revise §§ 416.164(a)(11) and (b)(5) as well as § 416.171(b)(1) to reflect these finalized policies. We also are revising the regulation text at § 416.171( d) to reflect that payment for these tests will be at the lo wer of the MPFS nonfacility PE RVU-based amount or the rate calculated according to the ASC standard ratesetting methodology, as

discussed above and in the CY 2015 OPPS/AS C proposed rule (79 FR 41027). For those covered ancillary services where the payment rate is the lower of the final rates under the ASC standard ratesetting methodology and the MPFS final rates, the final payment

indicators and rates set forth in this rule are based on a comparis on using the MPFS rates effective January 1, 2015. These payment rate s and indicators do not include the effect of the negative update to the MPFS paymen t rates effective April 1, 2015 under current law. Updates to these rates and paymen t indicators effective April l, 2015 will be included in the April 2015 quarterly ASC a ddenda posted on the CMS Web site. For aCMS-1613-FC 653

discussion of the MPFS rates, we refer re aders to the CY 2015 MPFS final rule with comment period. E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle Our process for reviewing applications to establish new classes of new technology intraocular lenses (NTIOLs) is as follows:

● Applicants submit their NTIOL reque sts for review to CMS by the annual deadline. For a request to be considered complete, we require submission of the information that is found in the guidance document entitled “Application Process and Information Requirements for Requests for a New Class of New Technology Intraocular Lenses (NTIOLs) or Inclusion of an IOL in an existing NTIOL Class” posted on the

CMS Web site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/ASCPayment/NTIOLs.html.

● We announce annually in the proposed rule updating the ASC and OPPS payment rates for the following calendar year , a list of all requests to establish new NTIOL classes accepted for review during th e calendar year in wh ich the proposal is published. In accordance with section 141(b )(3) of Pub. L. 103-432 and our regulations at § 416.185(b), the deadline for receipt of public comments is 30 days following publication of the lis t of requests in the proposed rule.

● In the final rule updating the ASC and OPPS payment rates for the following calendar year, we —

○ Provide a list of determinations made as a result of our review of all new NTIOL class requests and public comments;CMS-1613-FC 654

○ When a new NTIOL class is created, we identify the predominant characteristic of NTIOLs in that class that sets them apart from other IOLs (inc luding those previously approved as members of other expired or activ e NTIOL classes) and that is associated with an improved clinical outcome.

○ The date of implementation of a paymen t adjustment in the case of approval of

an IOL as a member of a new NTIOL class woul d be set prospectively as of 30 days after publication of the ASC payment update fina l rule, consistent with the statutory requirement.

○ Announce the deadline for submitting requests for review of an application for a new NTIOL class for the following calendar year. 2. Requests to Establish Ne w NTIOL Classes for CY 2015 We did not receive any requests for revi ew to establish a new NTIOL class for CY 2015 by March 3, 2014, the due date publis hed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75085). 3. Payment Adjustment The current payment adjustment for a 5-year period from the implementation date of a new NTIOL class is $50 per lens. Since implementation of the process for adjustment of payment amounts for NTIOLs in 1999, we have not revised the payment adjustment amount, and we did not propose to revise the payment adjustment amount for

CY 2015.CMS-1613-FC 655

4. Announcement of CY 2015 Deadline for Submitting Requests for CMS Review of Applications for a New Class of NTIOLs In accordance with 42 CFR 416.185(a) of our regulations, CMS announces that in order to be considered for payment effec tive beginning in CY 2016, requests for review of applications for a new class of new t echnology IOLs must be received at CMS by 5 p.m. EST, on March 2, 2015. Send requests to ASC/NTIOL, Divi sion of Outpatient Care, Mailstop C4–05–17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244–1850. To be c onsidered, requests for NTIOL reviews must include the information requested on the CMS Web site at: http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf

. F. ASC Payment and Comment Indicators 1. Background In addition to the payment indicators that we introduced in the August 2, 2007 final rule, we also created final comment indicators for the ASC payment system in the

CY 2008 OPPS/ASC final rule with comme nt period (72 FR 66855). We created Addendum DD1 to define ASC payment indi cators 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 recei ve packaged or separate payment in ASCs, such as whether they were on the ASC list of covered services prior to CY 2008; payment designation, such as device- intensive or office-based, and the corresponding ASC payment methodology; and their classification as separately payable ancillary servicesCMS-1613-FC 656

including radiology services , brachytherapy sources, OPPS pass-through devices, corneal tissue acquisition services, drugs or biologicals, or NTIOLs.

We also created Addendum DD2 that lists the ASC comment indicators. The

ASC comment indicators used in Addenda AA and BB to the proposed rules and final rules with comment period serve to identif y, for the revised ASC payment system, the status of a specific HCPCS code and its paym ent 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 ne w codes for the next calendar year for which the interim payment indicator assigned is subject to comment. The comment indicator “NI” also is assigned to existi ng codes with substantial revisi ons to their descriptors such that we consider them to be describing new services, as discussed in the CY 2010

OPPS/ASC final rule with co mment period (74 FR 60622). We indicated that in the

CY 2015 OPPS/ASC final rule with comme nt 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 2014 OPPS/ASC final rule with comment period. The “CH” comment indicator was used in Addenda AA and BB to the proposed rule (which are available vi a the Internet on the CMS Web site) to indicate that the payment indicator assignment has changed for an active HCPCS code in the current year and next calendar year; an active HCPCS code is newly recognized as payable in ASCs;

or an active HCPCS code is discontinued at the end of the current calendar year. The “CH” comment indicators that are published in the final rule with comment period areCMS-1613-FC 657

provided to alert readers that a change has been made from one calendar year to the next, but do not indicate that the change is subject to comment. 2. ASC Payment and Comment Indicators In the CY 2015 OPPS/ASC proposed rule (79 FR 41028), we did not propose any changes to the definitions of the ASC comment indicators for CY 2015. In order to incorporate changes associated with our proposal for CY 2015, as detailed in section XII.D.2.b. of the proposed rule, that certain diagnosti c tests qualify as covered ancillary services when provi ded integral to an ASC cove red surgical procedure, we proposed to revise the definitions for paymen t indicators “Z2” and “Z3” to add the words “or diagnostic” after “Radiology” so that the proposed defi nition for payment indicator “Z2” would be “Radiology or diagnostic service paid separately when provided integral to a surgical procedure on ASC list; paym ent based on OPPS relative payment weight,” and the proposed definition for paymen t indicator “Z3” would be “Radiology or diagnostic service paid separately when provided integral to a surgic al procedure on ASC list; payment based on MPFS nonfacility PE R VUs.” We refer readers to Addenda DD1 and DD2 to the proposed rule (which are ava ilable via the Internet on the CMS Web site) for the complete list of ASC payment a nd comment indicators for the CY 2015 update. We did not receive any public comments regarding our proposals to change the definitions of “Z2” and “Z3”. Therefore, we are finalizing our pr oposal to revise the definitions for payment indicators “Z2” and “Z3” to add the word s “or diagnostic” after “Radiology” so that the revised definition fo r payment indicator “Z2” will be “Radiology or diagnostic service paid separately when provided integral to a surgical procedure on ASC list; payment based on OPPS relative paym ent weight,” and the revised definitionCMS-1613-FC 658

for payment indicator “Z3” will be “Radiology or diagnostic service paid separately when provided integral to a surgical pr ocedure on ASC list; payment based on MPFS nonfacility PE RVUs.”

G. Calculation of the ASC Conversi on Factor and the ASC Payment Rates 1. Background In the August 2, 2007 final rule (72 FR 42493), we established our policy to base ASC relative payment weights and payment ra tes under the revised ASC payment system on APC groups and the OPPS relative payment we ights. Consistent with that policy and the requirement at section 1833(i) (2)(D)(ii) of the Act that th e revised payment system be implemented so that it would be budget neut ral, 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 w ould be budget neutral to estimated total Medicare payments under the prior (CY 2007) ASC payment system (the ASC conversion factor is multiplied by the rela tive payment weights calculated for many ASC services in order to establish payment rates) . That is, application of the ASC conversion factor was designed to result in aggregate Medicare expenditures under the revised ASC payment system in CY 2008 being equal to ag gregate Medicare expenditures that would

have occurred in CY 2008 in the absence of th e revised system, taking into consideration the cap on ASC payments in CY 2007 as re quired under section 1833( i)(2)(E) of the Act (72 FR 42522). We adopted a policy to make the system budget neutral in subsequent calendar years (72 FR 42532 through 42533; 42 CFR 416.171(e)).

We note that we consider the term “e xpenditures” in the context of the budget neutrality requirement under se ction 1833(i)(2)(D)(ii) of the Act to mean expendituresCMS-1613-FC 659

from the Medicare Part B Trust Fund. We do not consider expe nditures to include beneficiary coinsurance and copayments. Th is distinction was important for the CY 2008 ASC budget neutrality model that considered payments across the OPPS, ASC, and MPFS payment systems. However, because co insurance is almost always 20 percent for ASC services, this interpretation of expend itures has minimal impact for subsequent budget neutrality adjustments calculated w ithin the revised ASC payment system. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 through 66858), we set out a step-by-step illustration of the final budget neutrality adjustment calculation based on the methodology fina lized 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 co mment 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, consiste nt with the final polic y, we calculated the CY 2008 ASC payment rates by multiplying th e 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 certa in nuclear medicine procedur es or involving the use of contrast agents, as discussed in section X II.D.2.b. of the proposed rule), the established policy is to set the payment rate at th e lower of the MPFS unadjusted nonfacility

PE RVU-based amount or the amount calcula ted using the ASC standard ratesetting methodology. Further, as discussed in the CY 2008 OPPS/ASC final rule with commentCMS-1613-FC 660

period (72 FR 66841 through 66843), we also adopted alternative ratesetting methodologies for specific types of services (f or example, device-int ensive procedures). As discussed in the August 2, 2007 fi nal 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 calculati ng individual ASC payments by applying the pre-floor and pre-reclassifiedIPPS hospital wage indexes to the labor-related share, which is 50 percent of the ASC payment amount based on a GAO report of ASC costs using 2004 survey data. Beginning in CY 2008, CMS accounted for geographic wage

variation in labor cost wh en calculating individual ASC payments by applying the pre-floor and pre-reclassifi ed hospital wage index valu es that CMS calculates for payment under the IPPS, using updated Core Based Statistical Areas (CBSAs) issued by OMB in June 2003. In other words, the wage index for an ASC is the pre-floor and pre-reclassified hospital wage index under th e IPPS of the CBSA that maps to the CBSA

where the ASC is located. The reclassification provision in secti on 1886(d)(10) of the Act is specific to hospitals. We believe that using the most r ecently available pre-floor and pre-reclassified IPPS hospital wage indexes results in the mo st appropriate adjustment to the labor portion of ASC costs. We continue to believ e that the unadjusted hospital wage indexes, which are updated yearly and are used by many other Medicare payment systems, appropriately account for geographic va riation in labor costs for ASCs. On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas , and New England City and Town Areas inCMS-1613-FC 661

the United States and Puerto Rico based on the standards published on June 28, 2010 in

the Federal Register (75 FR 37246 through 37252) and 201 0 Census Bureau data. (A copy of this bulletin may be obtained at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf .) The pre-floor and pre-reclassified IPPS hospital wage i ndexes for FY 2014 do not reflect OMB’s new area delineations and, because the ASC wa ge indexes are the pre-floor and prereclassified IPPS hospital wa ge indexes, the CY 2014 ASC wage indexes do not reflect the OMB changes. As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28068), we proposed to use the new CBSAs delineations issued by OMB in OMB Bulletin 13-01 for the IPPS hospi tal wage index beginning in FY 2015. Therefore, because the ASC wage indexes ar e the pre-floor and pre-reclassified IPPS hospital wage indexes, the proposed CY 2015 ASC wage indexes reflected the new OMB

delineations. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 through 49957), we finalized our proposal to use these new OMB delineations for the IPPS hospital wage index. Therefore, the final ASC wage indexes, which are the pre-floor and pre-reclassified IPPS hospital wage indexes, will reflect the new OMB delineations. As

discussed in section XII. G.2.b. of the CY 2015 OPPS/ASC proposed rule (79 FR 41030), we proposed a transition to these new OMB de lineations for ASCs in certain situations

for CY 2015. We note that, in certain instances, there might be urban or rural areas for which there is no IPPS hospital whose wage index datawould be used to set the wage index for that area. For these areas, our policy has beento use the average of the wage indexes for CBSAs (or metropolitan divisions as applicable ) that are contiguous to the area that hasCMS-1613-FC 662

no wage index (where “contiguous” is defined as sharing a border). For example, for CY 2014, we applied a proxy wage index base d on this methodology to ASCs located in CBSA 25980 (Hinesville-Fort Stewart, GA) and CBSA 08 (Rural Delaware). When all of the areas contiguous to the urban CBSA of interest are rural and there is no IPPS hospital that has wage index data th at could be used to set the wage index for that area, we determine the ASC wage inde x by calculating the av erage of all wage indexes for urban areas in the State (75 FR 72058 through 72059). In other situations, where there are no IPPS hospitals located ina 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 indexes for CBSAs (or metropolitan divisions where applicable) that are contiguous to the area with no wage index. 2. Calculation of the ASC Payment Rates a. Updating the ASC Relative Payment Weights for CY 2015 and Future Years We update the ASC relative payment wei ghts each year usin g 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). In the CY 2015 OPPS/ASC proposed rule (79 FR 41029 through 41030), consistent with our established policy, we proposed to scale the CY 2015 re lative payment weights for ASCs according to the following method. Holding ASC utilizatio n and the mix of services constant from CY 2013, we proposed to compare the tota l payment using the CY 2014 ASC relative payment weights with the tota l payment using the CY 2015 relative payment weights to take into account the change s in the OPPS relative paym ent weights between CY 2014CMS-1613-FC 663

and CY 2015. We proposed to use the rati o of CY 2014 to CY 2015 total payment (the weight scaler) to scale th e ASC relative payment weights for CY 2015. The proposed CY 2015 ASC scaler was 0.9142 and scaling w ould apply to the ASC relative payment weights of the covered surgical procedures and covered anci llary radiology services for which the ASC payment rates are base d on OPPS relative payment weights. Scaling would not apply in the case of ASC payment for separately payable covered ancillary services that have a pr edetermined 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 wei ghts would not apply to those services. The ASC payment weights for those services without predetermined national payment amounts (that is, those services with nationa l payment amounts that would be based on OPPS relative payment weights) would be scal ed to eliminate any difference in the total payment between the current year and the update year. For any given year’s ratesetting, we t ypically use the most recent full calendar year of claims data to model budget neutrality adjustments. For this final rule with comment period, we used CY 2013 ASC claims data. To create an analytic file to support ca lculation of the weight scaler and budget neutrality adjustment for the wage index (discussed below), we summarized available CY 2013 ASC claims by ASC and by HCPCS c ode. We used the National Provider Identifier for the purpose of identifying uni que ASCs within the CY 2013 claims data.CMS-1613-FC 664

We used the supplier zip code reported on th e 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/ResearchStatistics-Data-and-Systems/Files-for-Ord er/LimitedDataSets/ASCPaymentSystem.html

. b. Transition Period to New OMB Delineations for ASC Wage Index

As discussed in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28054 through 28055), we proposed to use the new CBSA delineations issued by OMB in OMB Bulletin 13-01 dated February 28, 2013 for the IPPS hospital wage index. Therefore, because the ASC wage indexes are the pre-floo r and pre-reclassified IPPS hospital wage indexes, the proposed CY 2015 ASC wage indexes reflected the new OMB delineations. While we believe that instituting the latest OMB labor market area delineations would create a more accurate and up-to-date wage index system, we also recognize that implementing the new OMB delineations may cause some short-term instability in ASC payments. Therefore, we proposed a transi tion to the new OMB delineations similar to what we proposed for the IPPS for FY 2015 (79 FR 28062) and the OPPS as described in section II.C of the proposed rule. Specifica lly, for ASCs, we proposed a 1-year blended wage index for all ASCs that would experien ce any decrease in thei r actual wage index exclusively due to the implementation of the new OMB delineations. For ASCs where the CY 2015 ASC wage index with the CY 2015 CBSAs would be lower than with the CY 2014 CBSAs, we proposed that the CY 2015 ASC wage index would be 50 percent of the ASC wage index based on the CY 2014 CBSA and 50 percent of the ASC wage

index based on the new CY 2015 CBSA. We be lieve a 1-year 50/50 blended wage index would mitigate the short-term instability and negative payment impacts due to theCMS-1613-FC 665

proposed implementation of the new OMB delin eations, providing ASCs that would be negatively impacted by the new OMB delineations with a transition period during which they may adjust to their new geographic CBS A. We believe that a longer transition period would reduce the accuracy of the overa ll labor market area wage index system. Comment: Some commenters objected to CMS continuing to use the pre-floor and pre-reclassified IPPS hospital wage i ndexes for the labor portion of ASC costs. These commenters stated that ASCs and hospitals compete in the same local markets and provide many of the same services and require similar staff. Commenters stated that the different wage index for hospitals than for ASCs increases the gap between the OPPS and ASC payment rates. Response: As discussed in the Au gust 2, 2007 final rule (72 FR 42517 through 42518) and as codified at § 416.172(c) of th e regulations, the revised ASC payment system accounts for geographic wage vari ation when calculati ng individual ASC payments by applying the pre-floor and pre-r eclassified IPPS hospital wage indexes to the labor-related share, which is 50 per cent of the ASC payment amount. We have responded to similar comments in the past and believe our prior rationale for using unadjusted wage indexes is still a sound one. We continue to believe that the unadjusted hospital wage indexes, which are updated yearly and are used by many other Medicare payment systems, appropriately account for ge ographic variation in labor costs for ASCs. We did not propose to change our use of the pre-floor, pre-reclassified IPPS wage indexes for the ASC wage index. Therefore, in addition to the reasons stated above, we will continue to apply the pre-floor, pre-r eclassified IPPS hospital wage indexes for the labor portion of ASC costs. We refer readers to our responses to similar comments in theCMS-1613-FC 666

CY 2010, CY 2011, CY 2012, CY 2013, and CY 2014 OPPS/ASC final rules with comment period (74 FR 60625; 75 FR 72059; 76 FR 74446; 77 FR 68463; and 78 FR 75086, respectively). Comment: Commenters supported CMS’ pr oposal to phase in reductions to the ASC wage indexes that occur as a result of the new OMB labor market delineations. Response: We appreciate the commenters ’ support and, as stated below, we are finalizing this policy as proposed.

After consideration of th e public comments we receive d, we are finalizing our proposal to apply a 1-year bl ended wage index for all ASCs that would experience any

decrease in their actual wa ge index exclusively due to the implementation of the new OMB delineations. Specifically, for ASCs wh ere the CY 2015 ASC wage index with the

CY 2015 CBSAs is lower than with the CY 2014 CBSAs, we will calculate the CY 2015 ASC wage index such that it will be 50 pe rcent of the ASC wage index based on the CY 2014 CBSA and 50 percent of the AS C wage index based on the new CY 2015

CBSA. c. 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. In the CY 2015 OPPS/ASC proposed rule (79 FR 41030 through 41031), consistent with our final ASC payment policy, for the CY 2015 ASC payment system, we proposed to calculate and apply a budget neutrality adjustment to the ASC conversion factor for supplier level changes in wage index values for the upcoming year, just as the OPPS wage index budget neutrality ad justment is calculated and applied to theCMS-1613-FC 667

OPPS conversion factor. For CY 2015, we calcu lated this proposed adjustment for the ASC payment system by using the most recent CY 2013 claims data available and estimating the difference in total payment that would be created by introducing the proposed CY 2015 ASC wage indexes. Sp ecifically, holding CY 2013 ASC utilization and service-mix and the proposed CY 2015 nati onal payment rates af ter application of the weight scaler constant, we calculated the total adjust ed payment using the CY 2014 ASC wage indexes and the total adjusted payment using the proposed CY 2015 ASC wage indexes (which reflect the new OMB de lineations and would include any applicable transition period). 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 2014 ASC wage indexes to the total adjust ed payment calculated with the proposed CY 2015 ASC wage indexes and applied th e resulting ratio of 0.9983 (the proposed CY 2015 ASC wage index budget neutrality ad justment) to the CY 2014 ASC conversion factor to calculate the proposed CY 2015 ASC conversion factor. Section 1833(i)(2)(C)(i) of the Act requi res 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 perc entage increase in the Consumer Price Index for all urban consumers (U.S. city aver age) 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 mech anism, but it requires the payment amounts to be increased by the CPI-U in the absence of any update. Because the Secretary updates the AS C 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 theCMS-1613-FC 668

CPI-U for CY 2010 and subsequent calendar year s. Therefore, the annual update to the ASC payment system is the CPI-U (refe rred to as the CPI-U update factor). Section 3401(k) of the Affordable Care Act amended section 1833(i)(2)(D) of the Act by adding a new clause (v) which require s that “any annual update under [the ASC payment] system for the year, after applica tion of clause (iv), shall be reduced by the productivity adjustment described in secti on 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 multif actor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicab le fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”) . Clause (iv) of section 1833(i)(2)(D) of the Act authorizes the Secret ary to provide for a reduction in any annual update for failure to report on quality measures . Clause (v) of section 1833(i)(2)(D) of the Act states that applica tion 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 paymen t system for a year being less than such payment rates for the preceding year. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we finalized a policy that ASCs begin submitting data on quality measures for services beginning on October 1, 2012 for the CY 2014 payment determination under the ASCQR Program. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 through 68500), we finalized a methodology to calculate reduced national unadjusted payment rates using the ASCQR Program redu ced update conversion factor that wouldCMS-1613-FC 669

apply to ASCs that fail to meet their qua lity reporting require ments for the CY 2014 payment determination and subsequent years. The application of th e 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 syst em being less than zero for a year for ASCs that fail to meet the ASCQR Program requirements. We amended §§ 416.160(a)(1) and 416.171 to reflect these policies.

In accordance with section 1833(i)(2)(C)(i) of the Act, before applying the MFP adjustment, the Secretary first determines the “percentage increase” in the CPI-U, which we interpret cannot be a negativ e percentage. Thus, in the instance where the percentage change in the CPI-U for a year is negative, we would hold the CPI-U update factor for the ASC payment system to zero. For the CY 2014 payment determination and subsequent years, under section 1833(i)(2)(D )(iv) of the Act, we would reduce the annual update by 2.0 percentage points for an ASC that fails to submit quality information under the rules established by the Secretary in accordance with section 1833(i)(7) of the Act. Section 1833(i)(2)(D)(v) of the Act, as adde d by section 3401(k) of the Affordable Care Act, requires that the Secretary reduce the annual update fact or, after application of any quality reporting reduction, by th e MFP adjustment, and states that application of the MFP adjustment to the annual update factor after application of any quality reporting reduction may result in the update being less th an zero for a year. If the application of the MFP adjustment to the annual update factor after application of any quality reporting reduction would result in an MFP-adjusted upd ate factor that is less than zero, the resulting update to the ASC payment rate s would be negative and payments would decrease relative to the prior year. We refer readers to th e CY 2011 OPPS/ASC final ruleCMS-1613-FC 670

with comment period (75 FR 72062 through 72064) for illustrative examples of how the MFP adjustment is applied to the ASC payment system. In the CY 2015 OPPS/ASC proposed ru le (79 FR 41031), based on IHS Global Insight’s (IGI’s) 2014 first quarter forecast w ith historical data through 2013 fourth quarter, for the 12-month period ending with the midpoint of CY 2015, the CPI-U update was projected to be 1.7 percent. Also, ba sed on IGI’s 2014 first quarter forecast, the MFP adjustment for the period ending with th e midpoint of CY 2015 was projected to be 0.5 percent. IGI is a nationa lly recognized economic and financial forecasting firm that contracts with CMS to forecast the component s of CMS’ market baskets as well as the

CPI-U and MFP. We finalized the methodol ogy for calculating the MFP adjustment in

the CY 2011 MPFS final rule with comme nt period (75 FR 73394 through 73396) as

revised in the CY 2012 MPFS final rule with comment period (76 FR 73300 through 73301). The ASCQR Program affected payment rates beginning in CY 2014 and, under this program, there is a 2.0 percentage point reduction to th e CPI-U for ASCs that fail to meet the ASCQR Program requirements. We proposed to reduce the CPI-U update of 1.7 percent by the MFP adjustment of 0.5 percentage point, resulting in an MFP-adju sted CPI-U update factor of 1.2 percent for ASCs meeting the quality reporting requirement s. Therefore, we proposed to apply a 1.2 percent MFP-adjusted CPI-U update factor to the CY 2014 ASC conversion factor for ASCs meeting the quality reporting requireme nts. We proposed to reduce the CPI-U update of 1.7 percent by 2.0 percentage point s for ASCs that do not meet the quality reporting requirements and then apply th e 0.5 percentage point MFP reduction. Therefore, we proposed to apply a -0.8 per cent quality reporting/ MFP-adjusted CPI-UCMS-1613-FC 671

update factor to the CY 2014 ASC conversion factor for ASCs not meeting the quality reporting requirements. We also proposed th at if more recent data are subsequently available (for example, a more recent es timate of the CY 2015 CPI-U update and MFP adjustment), we would use such data, if appropriate, to determine the CY 2015 ASC update for the final rule with comment period. For CY 2015, we also proposed to ad just the CY 2014 ASC conversion factor ($43.471) by the proposed wage index budget neutrality factor of 0.9983 in addition to the MFP-adjusted update factor of 1.2 per cent discussed above, which results in a proposed CY 2015 ASC conversion factor of $43.918 for ASCs meeting the quality reporting requirements. For ASCs not mee ting the quality reporting requirements, we proposed to adjust the CY 2014 ASC convers ion factor ($43.471) by the proposed wage index budget neutrality factor of 0.9983 in addition to the qua lity reporting/MFP-adjusted update factor of -0.8 percent discussed a bove, which results in a proposed CY 2015 ASC conversion factor of $43.050. We invited public comment on these proposals.

Comment: Some commenter s stated that CMS should replace the CPI-U as the update mechanism for ASC payments with the hospital market basket. Commenters

stated that the CPI-U measures inflation in a basket of c onsumer goods atypical of what ASCs purchase. In addition, the commenters stat ed that the Affordable Care Act requires CMS to reduce the update by a measure of productivity gains, wh ich inappropriately subjects ASCs to two productivity adjustment s: improvements reflected in the price of consumer purchased goods and the additional statutorily required reduction. While the commenters maintained that the hospital mark et basket would be the most appropriateCMS-1613-FC 672

update for ASCs, they suggested that there are various alternatives w ithin the CPI-U that CMS could explore that more accurately reflect the economic climate in the ASC environment. For instance, CMS could use s ubsets of the CPI-U (medical care, medical care services, and outpatient services) that are consistent with the se rvices being provided in the ASC setting. MedPAC commented that, in the CY 2013 rulemaking, CMS requested public comment on the feasibility of ASC cost in formation to determine whether CPI-U or another type of update factor would be more appropriate, but that CMS did not propose to begin collecting ASC cost data. MedPAC acknowledged that there may be a burden associated with requiring ASCs to subm it cost reports, but recommended that CMS

collect some sort of ASC cost data, such as through surveys. Response: As we have stated in respons e to similar comments in the past (for example, 77 FR 68465; 78 FR 75088 through 75089) , we continue to believe that, while commenters argue that the items included in the CPI–U index may not adequately measure inflation for the goods and services provided by ASCs, the hospital market basket does not align with the cost structures of ASCs. Hospitals provide a much wider range of services, such as room and boa rd and emergency services, and the costs associated with providing these services ar e not part of the ASC cost structure. Therefore, at this time, we do not believe that it is appropriate to use the hospital market basket for the ASC annual update. We recognize that the CPI-U is an output price index that accounts for productivity. However, section 1833(i)(2)(D)(v) of the Act requires th e agency to reduce the annual update factor by the MFP adjustment . For the reasons stated above, we do notCMS-1613-FC 673

believe that the hospital market basket appropri ately reflects the cost structures of ASCs,

and because we do not have cost data on ASCs, we are continuing to use the CPI-U which we believe provides a reasonable appr oximation of the price increases facing ASCs. We will continue to explore the feasib ility of collecting ASC cost data. However, based on our past experience, we do not believ e that collecting such data through surveys would be productive. We appreciate the comm enter’s suggestion to adjust the CPI-U, such as by using subsets of services within the CPI-U, for productivity and will take this suggestion into consideration if we propose changes to the ASC update factor in the

future.

After consideration of th e public comments we receiv ed, we are applying our established methodology for determining th e final CY 2015 ASC conversion factor. Using more complete CY 2013 data for this final rule with comment period than were available for the proposed rule, we calculated a wage index budget neutrality adjustment of 0.9998. Based on IGI’s 2014 third quarter forecast, the CPI–U for the 12-month period ending with the midpoint of CY 2015 is now projected to be 1.9 percent, while the MFP adjustment (as discussed and finali zed in the CY 2012 MPFS final rule with comment period (76 FR 73300 through 73301)) is 0.5 percent, resulting in an MFP-adjusted CPI–U update factor of 1.4 pe rcent for ASCs that meet the quality reporting requirements. The final ASC conve rsion factor of $44.071, for ASCs that meet the quality reporting requirements, is the pr oduct of the CY 2014 c onversion factor of $43.471 multiplied by the wage index budget ne utrality adjustment of 0.9998 and the MFP-adjusted CPI–U payment update of 1.4 pe rcent. For ASCs that do not meet the quality reporting requirement s, we are reducing the CPI–U update of 1.9 percent byCMS-1613-FC 674

2.0 percentage points and thenwe are applying the 0.5 perc entage point MFP reduction, resulting in a -0.6 percent quality reportin g/MFP-adjusted CPI–U update factor. The final ASC conversion factor of $43.202 for ASCs that do not meet th e quality reporting requirements is the product of the CY 2014 conversion factor of $43.471 multiplied by the wage index budget neutrality adju stment of 0.9998 and the quality reporting/MFP-adjusted CPI–U pa yment update of -0.6 percent. 3. Display of CY 2015 ASC Payment Rates

Addenda AA and BB to this CY 2015 OPPS/ ASC final rule with comment period (which are available via the Internet on the CMS Web site) display the final updated ASC payment rates for CY 2015 for covered surg ical procedures and covered ancillary services, respectively. For those covered surgical procedures and covered ancillary services where the payment rate is the lowe r of the final rates under the ASC standard ratesetting methodology and the MPFS final rates, the final payment indicators and rates set forth in this rule are based on a compar ison using the MPFS rates effective January 1, 2015. These payment rates and indicators do not include the effect of the negative update to the MPFS payment rates effective April 1, 2015 under current law. Updates to these rates and payment indicators effective Apr il l, 2015 will be included in the April 2015 quarterly ASC addenda posted on the CMS We b site. For a discussion of the MPFS rates, we refer readers to the CY 2015 M PFS final rule with comment period. The payment rates included in these addenda refl ect the full ASC payment update and not the reduced payment update used to calculate payment rates for ASCs not meeting the quality reporting requireme nts under the ASCQR Program. These addenda contain several types of information related to th e CY 2015 payment rates. Specifically, inCMS-1613-FC 675

Addendum AA, a “Y” in the column titled “Sub ject 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 fo r 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 i ndicator for CY 2015. Display of the comment indicator “NI” in the column titled “Comment Indicator” indicates that the code is new (or substantia lly revised) and that the payment indicator assignment is an interim assignment that is open to comment in the final rule with comment period. The values displayed in the column titled “CY 2015 Payment Weight” are the relative payment weights for each of the li sted services for CY 2015. The payment weights for all covered surgical procedures and covered ancillar y services whose ASC payment rates are based on OPPS relative payment weights were scaled for budget neutrality. Therefore, scaling was no t applied to the device portion of the device-intensive procedur es, services that are pa id at the MPFS nonfacility PE RVU-based amount, separately payable co vered ancillary serv ices that have a predetermined national payment amount, such as drugs and biologicals andCMS-1613-FC 676

brachytherapy sources that are separately paid under the OPPS, or services that are contractor-priced or paid at reasonable cost in ASCs. To derive the CY 2015 payment rate displayed in the “CY 2015 Payment Rate” column, each ASC payment weight in the “CY 2015 Payment Weight” column was multiplied by the CY 2015 conversion factor of $44.071. The conversion factor includes a budget neutrality adjustment for changes in the wage index values and the annual update factor as reduced by the produc tivity adjustment (as discussed in

section XII.H.2.b. of this fina l rule with comment period). In Addendum BB, there are no relative payment weights displayed in the “CY 2015 Payment Weight” column for items a nd services with predetermined national payment amounts, such as separately pa yable drugs and biologicals. The “CY 2015 Payment” column displays the CY 2015 national unadjusted ASC payment rates for all items and services. The CY 2015 ASC pa yment rates listed in Addendum BB for separately payable drugs and biologicals ar e based on ASP data used for payment in physicians’ offices in October 2014. Addendum E provides the HCPCS codes and short descriptors for surgical procedures that are to be excluded from payment in ASCs for FY 2015. We did not receive any public comments regarding the continuation of our policy to provide CY 2015 ASC payment informati on as detailed in Addenda AA and BB. Therefore, Addenda AA and BB to this fina l rule with comment period (which are

available via the Internet on the CMS Web s ite) display the updated ASC payment rates for CY 2015 for covered surgical procedures and covered ancillary services, respectively, and provide additional informati on related to the CY 2015 rates.CMS-1613-FC 677

XIII. Hospital Outpatient Qu ality Reporting Program Updates A. Background

1. Overview CMS seeks to promote higher quality and mo re efficient health care for Medicare beneficiaries. In pursuit of these goa ls, CMS has implemented quality reporting programs for multiple care settings including the quality reporting program for hospital outpatient care, known as the Hospital Ou tpatient Quality Reporting (OQR) Program, formerly known as the Hospital Outpat ient Quality Data Reporting Program (HOP QDRP). The Hospital OQR Program has generally been modeled after the quality reporting program for hospital inpatient servi ces known as the Hospital Inpatient Quality Reporting (IQR) Program (formerly known as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program). In addition to the Hospital IQR and Hospital OQR Programs, CMS has implemented quality reporting programs for ot her care settings that provide financial incentives for the reporting of quality data to CMS. These additional programs include reporting for care furnished by:

● Physicians and other eligible professionals, un der the Physician Quality Reporting System (PQRS, formerly referred to as the Physician Quality Reporting Program Initiative (PQRI));

● Inpatient rehabilitation facilities, under the Inpatient Reha bilitation Facility Quality Reporting Program (IRF QRP);

● Long-term care hospitals, under th e Long-Term Care Hospital Quality Reporting (LTCHQR) Program;CMS-1613-FC 678

● PPS-exempt cancer hospitals, under th e PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program;

● Ambulatory surgical centers, under the Ambulatory Surgical Center Quality Reporting (ASCQR) Program;

● Inpatient psychiatric facilities, under the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program;

● Home health agencies, under the Home Health Quality Reporting Program (HH QRP); and

● Hospices, under the Hospice Quality Reporting Program. In addition, CMS has implemented two value-based purchasing programs, the Hospital Value-Based Purcha sing (Hospital VBP) Program and the End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP), that link payment to performance. In implementing the Hospital OQR Program and other quality reporting programs, we have focused on measures th at have high impact and support national priorities for improved quality and efficien cy of care for Medicare beneficiaries as reflected in the National Quality Strategy (NQS) and CMS Quality Strategy, as well as

conditions for which wide cost and treatment variations have been reported, despite established clinical guidelines. To the exte nt possible under various authorizing statutes, our ultimate goal is to align the clinical quality measure require ments of our various quality reporting programs. As appropriate, we will consider the adoption of measures with electronic specifications to enable the collection of this inform ation as part of care delivery.CMS-1613-FC 679

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68467 through 68469) for a discussion on the principles underlying consideration

for future measures that we intend to use inimplementing this and other quality reporting

programs. 2. Statutory History of the Hospital OQR Program

We refer readers to the CY 2011 OPPS/A SC final rule with comment period (75 FR 72064 through 72065) for a detailed disc ussion of the statut ory history of the Hospital OQR Program. 3. Measure Updates and Data Publication a. Maintenance of Technical Specifications for Quality Measures CMS maintains technical specifications for previously adopted Hospital OQR Program measures. These specifications are updated as we continue to develop the Hospital OQR Program. The manuals that c ontain specifications for the previously adopted measures can be found on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQne

tTier2&cid=1196289981244

. Many of the quality measures used in Medicare and Medica id reporting programs are endorsed by the National Quality Forum (NQF ). We note that not all of the measures adopted by the Hospital OQR Program are NQF-endorsed, nor is NQF endorsement a program requirement (section 1833(t)(17)(C)(i) of the Act). As part of its regular maintenance process for endorsed performance measures, the NQF requires measure stewards (owners/develope rs) to submit annual measur e maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward is responsible for updating and maintaining the currencyCMS-1613-FC 680

and relevance of the measure and will conf irm existing or minor specification changes with the NQF on an annual basis. The NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. We note that the NQF’s annual or trie nnial maintenance processes for endorsed measures may result in the NQF requiring upd ates to measures in order to maintain endorsement status. Other non-NQF measur es may undergo maintenance changes as well. We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates into the meas ure specifications for measures that we have adopted for the Hospital OQR Program so that these measure specifications remain current. We also recognize that some changes to measures are substa ntive in nature and might not be appropriate for adoptio n using a subregulatory process. Therefore, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68469 through 68470), we finalized our pr oposal to follow the same process for updating Hospital OQR Program me asures that we adopted fo r the Hospital IQR Program measures, including the subregulatory pro cess for making updates to the adopted measures (77 FR 53504 through 53505). This process expanded upon the subregulatory process for updating measures that we fina lized in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 68767). b. Public Display of Quality Measures

We refer readers to the CY 2014 OPPS /ASC proposed rule (78 FR 43645) for a discussion of our policy for the publicati on of Hospital OQR Program data on the Hospital Compare Web site and noninteractive CMS Web sites.CMS-1613-FC 681

In the CY 2015 OPPS/ASC proposed rule (79 FR 41033), we did not propose any changes to our policies on the publ ic display of quality measures. Comment: One commenter urged CMS to c ontinue to keep stakeholders such as physicians, hospitals, measure developers, a nd patient groups engaged in public reporting

to ensure that accurate and beneficial reporting is performed. This commenter encouraged CMS to establish streamlined po licies and procedures for partnering with nongovernmental entities that have an interest in posting data through ongoing

communication with these stakeholders , including the rulemaking process. Response: We interpret the commenter’ s suggestion to “...establish streamlined policies and procedures for partnering with nongovernmental entities that have an interest in posting data...” to mean that we should es tablish streamlined policies and procedures to partner with physicians, hospitals, measure de velopers, and patient gr oups that wish to be involved in our quality data reporting efforts. To the exte nt feasible and practical, we work with as many stakeholders as possible to ensure data are accurately reported and displayed on Hospital Compare and other CMS Web sites. In the future, we will continue working with stakeholders to consolidate and streamline reporting. B. Process for Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68471), we finalized a policy that once a quality measur e is adopted for the Hospital OQR Program, it is retained for use in subsequentyears unless othe rwise specified. In the CY 2015 OPPS/ASC proposed rule (79 FR 41033), we did not propose any changes to the process for retaini ng measures previously adopted.CMS-1613-FC 682

C. Removal 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 final rule, we finalized a process for immediate retirement, which we later termed “removal” (74 FR 43863), of Hospital IQR Program measures based on evidence that the continued use of the measure as specified raised patient safety concerns. We adopted the sa me immediate measure retirement policy for the Hospital OQR Program in the CY 2010 O PPS/ASC final rule with comment period (74 FR 60634 through 60635). We refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68472 through 68473) for a discussion of our reasons for changing the term “retirement” to “r emoval” in the Hospital OQR Program.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), we finalized a set of criteria for determining whether to remove measures from the Hospital IQR Program. These criteria are: (1) measure performan ce among hospitals is so high and unvarying that meaningful distinctions and improveme nts in performance can no longer be made (“topped-out” measures); (2) performance or improvement on a measure does not result in better patient outcomes; (3) a measure does not align with current clinical guidelines or practice; (4) the availability of a more broa dly applicable (across settings, populations, or conditions) measure for the topic; (5) the availa bility of a measure th at is more proximal in time to desired patient outcomes for the particular topic; (6) th e 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. Th ese criteria were sugg ested through public comment on proposals for the Hospital IQR Program, and we determined that theseCMS-1613-FC 683

criteria are also applicable in evaluating the Hospital OQR Program quality measures for

removal. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68472 through 68473), we finalized our proposal to apply these measure remova l criteria in the Hospital OQR Program as well. In addition to the Ho spital IQR Program’s criteria, we consider eliminating measure redundancy and inco rporating the views of the Measure Applications Partnership (MAP) when evaluating measures for removal. 2. Criteria for Removal of “Topped-Out” Measures In the CY 2015 OPPS/ASC proposed rule (79 FR 41033 through 41034), we proposed to refine the criteria for determini ng when a measure is “topped-out.” We had previously finalized that a measure is “topped-out” whenmeasure performance among hospitals is so high and unvarying that m eaningful distinctions and improvements in performance can no longer be made (“toppe d-out” measures) (77 FR 68472). We do not believe that measuring hospital perfor mance on “topped-out” measures provides meaningful information on the quality of care provided by hospitals. We further believe that quality measures, once “toppe d-out,” represent care standards that have been widely adopted by hospitals. We believe such measur es should be considered for removal from the Hospital OQR Program because their as sociated reporting burden may outweigh the value of the quality information they provide. In order to determine “topped-out” status , we proposed to apply the following two criteria, the first of which was previous ly adopted by the Hospital VBP Program for certain measures in the Hospital Inpatient VBP Program final rule (76 FR 26510). The

second criterion is a modified version of what was previously adopted by the HospitalCMS-1613-FC 684

VBP Program in the above mentioned final rule (76 FR 26510), with the change from the “less than” operator (<) to the “less than or equal to” operator ( ≤ ). Specifically, we proposed that a measure under the Hospital OQR Program is “topped-out” when it meets both of the following criteria:

● Statistically indistinguis hable performance at the 75th and 90th percentiles; and

● A truncated coefficient of vari ation less than or equal to 0.10. To identify if a measure has statistically indistinguishable performance at the 75th and 90th percentiles, we would determin e whether the difference between the 75 th and

90 th percentiles for a measure is within two times the standard error of the full dataset. The coefficient of variation (CV) is a descri ptive statistic that e xpresses the standard deviation as a percentage of th e sample mean; this provides a statistic that is independent of the units of observation. Applied to this analysis, a large CV would indicate a broad

distribution of individual hos pital scores, with large a nd presumably meaningful differences between hospitals in relative perf ormance. A small CV would indicate that the distribution of individual hospital scores is clustered tightly around the mean value, suggesting that it is not usef ul to draw distinctions am ong individual hospitals’ measure performance. The truncated CV excludes observations with rates below the 5 th percentile

and above the 95 th percentile. We adopted the sec ond of these “topped-out” criteria for the Hospital VBP Program (79 FR 50055). Both criteria were adopted for the Hospital IQR Program (79 FR 50204) and are be ing adopted for the ASCQR Program (section XIV.A.3. of this fina l rule with comment period). We invited public comment on this proposal.CMS-1613-FC 685

Comment: Many commenters supported CM S’ proposed criteria for identifying “topped-out” measures. Some commenters recommended that CMS proceed cautiously, expressing concern that removal of meas ures could disrupt hospitals’ quality improvement efforts. Some commenters beli eved there is value in collecting data on some topped-out measures, regardless of nati onal performance scores. Other commenters urged CMS to assess the topped-out measur es individually and in a broader context before removing them. Response: We agree that, in some cas es, measures that are quantitatively “topped-out” may still be appropriate if, for exam ple, the specified care topic is important to providers and/or beneficiarie s or if some classes or some hospitals may still have room for improvement with the measure. We r ecognize that some measures may not be appropriate for the topped-out analysis, incl uding measures of outcomes for which small numbers are desired (for example, hospital-acqu ired infection and patient safety oriented measures). We note that “topped-out” status is only one of many factors we consider in removing measures. We consider the removal of each topped-out measure on a case-by-case basis, as appropr iate, and determine whether a clinical or other quality improvement need for the measure justifies the retention of a topped-out measure that

otherwise meets our criteria. We refer readers to III.C.1.of th is final rule with comment period, “Considerations in Removing Quality Measures from the Hospital OQR Program,” for a discussion of the different factors we consider in removing measures. Comment: Many commenters urged CMS to continue monitoring performance on “topped-out” measures to ensure that hi gh performance continues and that quality gains are sustained.CMS-1613-FC 686

Response: We expect hospitals to al ways follow appropriate standards-of-care and clinical guidelines regardless of whether a quality measure exists. We believe that HOPDs are committed to providing quality car e to patients and we do not have any indication that HOPDs will stop doing so wh en measures are removed. We currently monitor the performance of removed measur es to ensure that performance does not decline significantly and will continue to do s o. However, we must balance the costs of continued monitoring of a successful measure with high levels of performance with the adoption of other measures where there ar e opportunities for improve ment in clinical quality. At this time, we believe the two fina lized topped-out criteria will ensure the detection of potential topped-out measures that have high performance with little variability. However, we will consider the need for refinement and, if we determine changes may be necessary, we will propose such changes in future rulemaking.

After consideration of th e public comments we received, we are finalizing the “topped-out” criteria as propos ed. Specifically, we are fina lizing a policy that a measure under the Hospital OQR Program is “topped-out” when it meets both of the following criteria: (1) statistically indistinguishable performance at the 75th and 90th percentiles; and (2) a truncated coefficient of variation less than or e qual to 0.10. To identify if a measure has statistically indisti nguishable performance at the 75 th and 90 th percentiles,

we will determine whether the difference between the 75 th and 90 th percentiles for a

measure is within two times the standard erro r of the full dataset. However, consistent

with our discussion above at XIII.C.1.of this final rule with comment period, “Considerations in Removing Quality Measur es from the Hospital OQR Program,” weCMS-1613-FC 687

evaluate different factors in cons idering the removal of measures. We will assess the benefits of retaining a meas ure on a case-by-case basis be fore proposing to remove a measure from the Hospital OQR Program. 3. Removal of Measures from the Hospital OQR Program for the CY 2017 Payment Determination and Subsequent Years In the CY 2015 OPPS/ASC proposed rule (79 FR 41034), we proposed to remove three measures for the CY 2017 payment determination and subsequent years: OP-4, OP-6, and OP-7. Based on our analysis of Hospital OQR Program chart-abstracted measure data for January 1, 2013 – June 30, 2013 (Q1-Q2) encounters, the following measures met both: (1) the previously finali zed criteria for being “topped-out”; that is, measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in perfor mance can no longer be made (77 FR 68472); and (2) the two criteria we finalized in secti on XIII.C.2. of this final rule with comment period for determining “topped-out” status. These measures are:

● OP-4: Aspirin at Arrival (NQF # 0286);

● OP-6: Timing of Antibiotic Prophylaxis; and

● OP-7: Prophylactic Antibiotic Selecti on for Surgical Patients (NQF # 0528). Therefore, we proposed to remove thes e three measures from the Hospital OQR Program beginning with the CY 2017 payment determination. We believed that removal was appropriat e as there appeared little room for improvement for these measures, all of which address standards of clinical care. In addition, b y removing these measures, we hoped to alleviate the maintenanc e costs

and administrative burden to hos pitals associated with retainin g them. Should weCMS-1613-FC 688

determine that hospital adherenc e to these practices has unacce ptably declined, we stated that we would re-propose these measures in future rulema king. In addition, we would comply with any require ments imposed by the Paperwork Reduction Act before reinstituting these measu res. We noted that we removed three measures under the Hospital IQR Program similar to th ese measures; the similar measures were AMI-1, SCIP-Inf-1, and SCIP-Inf-2, respectively. We note that we retained SCIP-Inf-1 and SCIP-Inf-2 as voluntarily repo rted electronic clinical quality measures in the Hospital IQR Program (79 FR 50208). We invited public comment on these proposals. Comment: Many commenters supported the proposal to remove OP-4, OP-6, and OP-7, noting that the remova l would reduce administrative burden on hospitals. Some commenters specifically supported the removal of these measures to align with the Hospital IQR Program. One commenter reco mmended the removal of the three proposed topped-out measures effec tive January 2015, to reduce administrative burden for hospitals. Response: We thank the commenters for their support. We continue to look for ways to minimize burden as we pursue th e quality objectives of the Hospital OQR Program. We agree that quality of care m easures should be aligned across our quality reporting and value-based purchasing programs to the extent possible. The patient encounter period for the CY 2017 payment determination is January 1, 2015 through December 31, 2015. Thus, for patient enc ounters beginning January 1, 2015, hospitals would not be required to submit data on any me asures that we are finalizing for removal

as discussed below.CMS-1613-FC 689

Comment: Some commenter s inquired about the criteria for resuming data collection for measures that are removed from the Hospital OQR Program. One

commenter recommended that CMS establish a process, similar to the one used by NQF, to place a measure in “reserve status” for some time after the measure is determined to be “topped-out” to ensure no “backsliding” has occurred. Another commenter suggested that CMS consider sampling hospitals on their performance on these removed measures to ensure continued high performance on these measures. Response: We thank the commenters fo r their suggestions to monitor topped-out measures for continued high performan ce and we understand their concerns of backsliding. Should we determine that hos pital adherence to these practices has unacceptably declined; we would propose to rein state the measure in future rulemaking to resume data collection. We expect hospitals to always follow appr opriate standards-ofcare and clinical guidelines in exercising posit ive interventions, rega rdless of whether a

measure is removed.

Comment: Some commenter s urged CMS to retain OP-4 for voluntary reporting. Some commenters opposed the removal of OP -4, noting that this measure provides incentives for better care and improves pati ent outcomes, and the data help Medicare

beneficiaries make informed choices about their health care options. One commenter

recommended that CMS not remove OP-4 until there are at least 2 years of continued high performance data. Response: We agree with the commenter s that OP-4 should be retained. Upon further analysis, we have found that, a lthough technically “toppe d-out,” the rate distributions for OP-4 indicate that hospitals with a small number of cases have lowerCMS-1613-FC 690

rates. Because performance for OP-4 is still low in some hospitals, and there is substantial evidence indicating that aspirin atarrival is associated with better patient outcomes, we are not finalizing our proposal to remove OP-4. Comment: Some commenters opposed th e removal of OP-6 and OP-7, noting that the removal of these measures may cause unnecessary harm to su rgical patients. One

commenter recommended that CMS not remove OP-6 and OP-7 until there are at least 2 years of continued high performance data. Response: We thank the commenters for expressing their concerns. Our proposed criteria for topped-out measures did not include a timeframe for sustained statistical performance; however, we will ta ke this suggestion into consideration for future rulemaking. Based on our topped-out analysis, both OP-6 and OP-7 are “topped-out” across hospitals, and we do not be lieve that removal of these two measures would cause unnecessary harm to surgical pati ents because our data show that hospital performance on OP-6 and OP-7 is high and unvarying, indicating that HOPDs have been in compliance with OP-6 in exercising the correct timing as well as with OP-7 in administering the appropriate antibiotic for surgical patients. In addition, unlike OP-4,

we did not see indications in the measure di stributions for OP-6 and OP-7 that imply outlier hospitals with a small number of cases have statistically significantly lower rates. Therefore, this leads us to believe that re moval of these two measures would not cause unnecessary harm to surgical patients. Because our data indicate that hospital performance on OP-6 and OP-7 is high and unvarying, we believe the costs associated with the maintenance of our administrative sy stems and the costs to hospitals to continue reporting outweigh the benefits of retaining of these measures in the Hospital OQRCMS-1613-FC 691

Program. We expect hospitals to follow a ppropriate standards-of-care and clinical guidelines in exercising positive interventions, regardless of whether a measure is removed. Therefore, as noted below, we ar e finalizing our proposal to remove the OP-6

and OP-7 measures and will continue to m onitor clinical trends and repropose these measures if we see the performance gap widening.

Comment: One commenter noted that , beginning with CY 2015 reporting, hospitals will be required to report a new element (Rectal Culture-Guided Antibiotic) for OP-7. The commenter requested clarifica tion because CMS proposed to remove this

measure. Response: We clarify th at, as stated above, we are removing OP-7 from the Hospital OQR Program beginning with the CY 2017 payment determination. The patient encounter period for the CY 2017 payment determination is January 1, 2015 through December 31, 2015. Therefore, beginning withCY 2015 patient encounters, hospitals are not required to submit Rectal Culture-Guid ed Antibiotic data or other data for OP-7.

After consideration of th e public comments we received and for the reasons we discussed above, we are fina lizing our proposal to remove OP-6 and OP-7 from the Hospital OQR Program as proposed. However, we are not finalizing our proposal to remove OP-4 and are retaining that measur e in the Hospital OQR Program for reasons discussed above. Hospitals are to report data on OP-4 as prev iously required. We refer

readers to the CY 2008 OPPS/ ASC final rule with comm ent period (FR 72 66865), the

CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68482), and the CY 2014 OPPS/ASC final rule with comment pe riod (78 FR 75111 through 75112) for more

information about OP-4 and the data submissi on requirements. Set out in the table belowCMS-1613-FC 692

are the measures we are removing for the CY 2017 payment determination and subsequent years.

Hospital OQR Program Measures Removed for the CY 2017 Payment Determination and Subsequent Years NQF # Measure

N/A OP-6: Timing of Prophylactic Antibiotics 0528 OP-7: Prophylactic Antibiotic Se lection for Surgical Patients

D. Quality Measures Previously Adopted for the CY 2016 Payment Determination and Subsequent Years As previously discussed, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68471), we finalized a polic y that, beginning CY 2013, when we adopt measures for the Hospital OQR Program, these measures are automatically adopted for all subsequent years’ payment determinations , unless we propose to remove, suspend, or replace the measures. The table below lists 27 measures that we adopted for the CY 2016 payment determination and subsequent years under the Hospital OQR Program.

Hospital OQR Program Measure Set Previously Adopted for the CY 2016 Payment Determination and Subsequent Years NQF# Measure Name

N/A OP-1: Median Time to Fibrinolysis 0288 OP-2: Fibrinolytic Therapy Receive d Within 30 Minutes of ED Arrival  0290 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 0286 OP-4: Aspirin at Arrival 0289 OP-5: Median Time to ECG N/A OP-6: Timing of Prophylactic Antibiotics **  528 OP-7: Prophylactic Antibiotic Se lection for Surgical Patients** 0514 OP-8: MRI Lumbar Spine for Low Back PainCMS-1613-FC 693

Hospital OQR Program Measure Set Previously Adopted for the CY 2016 Payment Determination and Subsequent Years NQF# Measure Name

N/A OP-9: Mammography Follow-up Rates N/A OP-10: Abdomen CT – Use of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material N/A OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non Cardiac Low Risk Surgery

N/A OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT) N/A OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache N/A OP-17: Tracking Clinic al Results between Visits 0496 OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients N/A OP-20: Door to Diagnostic Evalua tion by a Qualified Medical Professional 0662 OP-21: Median Time to Pain Management for Long Bone Fracture N/A OP-22: ED- LeftWithout Being Seen**** 0661 OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received HeadCT or MRI Scan Interpretation Within 45 minutes of Arrival N/A OP-25: Safe Surgery Checklist Use N/A OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures* 0431 OP-27: Influenza Vaccination C overage among Healthcare Personnel 0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow -up Interval for Normal Colonoscopy in Average Risk Patients 0659 OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 1536 OP-31: Cataracts – Improvement in Patie nt’s Visual Function within 90 Days Following Cataract Surgery*** * OP-26: Procedure categories and corres ponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata &blobtable=MungoBlobs. ** Measures removed beginning with the CY 2017 payment determination, as set forth in section XIII.D.3.b. of this final rule with comment period. *** Measure collected voluntarily, as set forth in section XIII.D.3.b. of this final rule with comment period.   Name has been updated to correspond with NQF-endorsed name.CMS-1613-FC 694

Comment: Some commenter s expressed views on prev iously adopted Hospital OQR Program measures. Some commenters were supportive of previously adopted measures, and some commenters recommende d changing measure specifications for

some measures. Several commenters aske d CMS to consider removing previously adopted measures from the Hospital OQR Program, specifically, OP-9, OP-10, OP-14, OP-15, OP-20, OP-22, and OP-25, because th ese measures are no longer NQF-endorsed, are not recommended by the MAP, or are deemed unsuitable for public reporting. Response: Because we did not propos e to remove OP-9, OP-10, OP-14, OP-15, OP-20, OP-22, or OP-25 from the Hospita l OQR Program, change their measure specifications, or discuss th e related MAP recommendations in the CY 2015 OPPS/ASC proposed rule, these comments are beyond the scop e of the proposed rule. Therefore, we are not changing the status of any of the measures referred to by commenters. However, we will take into consideration commenters’ concerns regarding these measures for future rulemaking. Regarding removal of measures fr om the Hospital OQR Program based upon NQF endorsement, we focus on measures appr opriate to the specifi c provider category

that reflect the level of care a nd the most important areas of service and measures for that provider category. Section 1833( t)(17)(C)(i) of the Act re quires the Secretary to ‘‘develop measures that the Secretary determin es to be appropriate for the measurement of the quality of care (including medication errors) furnished by hos pitals in outpatient settings and that reflect cons ensus among affected parties and, to the extent feasible and practicable, shall include measures set fort h by one or more national consensus building entities.’’ This provision does not require th at the measures we adopt for the HospitalCMS-1613-FC 695

OQR Program be endorsed by any particular en tity, and we believe that consensus among affected parties can be achieved by m eans other than endorsement by a national consensus building entity, including through the measure developmen t process, through broad acceptance and use of the measure(s), and through public comment. At this time, we continue to believe th ere is value in collecting and reporting these measures, but we can consider removal in future rulemaking. We thank the commenters for the measure suggestions and will share them with measure stewards. 1. Data Submission Requirements for OP-27: Influenza Vaccination Coverage Among Healthcare Personnel (NQF # 0431) Repor ted via NHSN for the CY 2017 Payment Determination and Subsequent Years The Influenza Vaccination Coverage among Healthcare Personnel (HCP) (NQF # 0431) was finalized for the Hospital OQR Program in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75097 through 75099). We refer readers to the

CY 2014 OPPS/ASC final rule with comment period (78 FR 75116 through 75117) for a discussion of the previously finalized data submission requirements for this measure. This measure was previously finalized fo r the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51631). In the CY 2015 OPPS/ASC proposed rule (79 FR 41035), we made two clarifications: (1) correcting the previously stated submission deadline; and (2) clarifying that hospitals should report the Influenza Vaccination Coverage among HCP (NQF # 0431) measure by CMS Certification Number (CCN) rather than separately reporting for both the inpatient and outpatient setting.CMS-1613-FC 696

a. Clarification of Submission Deadline and Data Submitted We noted that there was a typographical error in our discussion in the CY 2014

OPPS/ASC final rule with comment period (78 FR 75116 through 75117), and we proposed to remedy that error in the proposedrule. Specifically, we stated that the deadline for hospitals to submit NHSN hos pital-acquired infection (HAI) measure collection data would be “May 15, 2015, w ith respect to the October 1, 2015 through March 31, 2015 encounter period” (78 FR 75117). In the CY 2015 OPPS/ASC proposed rule, we clarified that the beginning of th e encounter period shoul d be “October 1, 2014” instead of “October 1, 2015.” In addition, we clarified that the data to be submitted are more specifically referred to as “Health care Personnel (HCP) Influenza Vaccination summary reporting data” instead of “HAI measure collection data.” Comment: Commenters supported the CMS clarification of the reporting

deadline for OP-27 because this deadline will align the reporting for both inpatient and outpatient settings. Response: We thank commenters for th eir support. We agree that measures should be aligned across our quality reporti ng and value-based purchasing programs to the extent possible. As stated above, we are cl arifying that the beginning of the encounter period is October 1, 2014, and that the data to be s ubmitted are “Healthcare Personnel Influenza Vaccination summary reporting data” instead of “HAI measure collection data.” b. Clarification on Reporting by CM S Certification Number (CCN) We received public comment about the burden of separately collecting HCP

influenza vaccination status for both the hos pital inpatient and outpatient settingsCMS-1613-FC 697

(78 FR 75098). We believe that reporting a sing le vaccination count for each health care facility enrolled in NHSN will be less burdensom e to facilities. Therefore, in response to these concerns, we collaborated with CDC and clarified in an Operational Guidance document that, beginning with the 2 014-2015 influenza season (CY 2014 reporting period and CY 2016 payment determination), facilities will repor t data to NHSN by enrolled facility (also known as OrgID). CD C will then translate and submit the data to CMS on behalf of the facilities by CCN. 1 The CDC also has produced an Operational Guidance document regarding reporting for this measure, which can be found at: http://www.cdc.gov/nhsn/PDFs/HCP/Operational-Guidance-ACH-HCP-Flu.pdf

. Reporting data in this way will allow h ealth care facilities with multiple care settings to simplify data collection and submit a single count applicable across the inpatient and outpatient settings. We will th en publicly report the percentage of HCP who received an influenza vaccination per CCN . This single count per CCN will inform the public of the percentage of vaccinated HC P at a particular hea lthcare facility, which would still provide meaningful data and help to improve the quality of care. Specific

details on data submission for this measure can be found at: http://www.cdc.gov/nhsn/acute-care-hospital/hcp-vaccination/ and at: http://www.cdc.gov/nhsn/acute-care-hospital/index.html . This clarification was also noted in

the FY 2015 IPPS/LTCH PPS final rule for th e Hospital IQR Program (79 FR 50217). Comment: Many commenters supported CMS’ guidance allowing hospitals to report OP-27 for both the inpati ent and outpatient settings us ing one single count because it provides a clearer picture of vaccination rates, reduces provider burden, and aligns the

1 We erroneously referred to “CNN” in the CY 2015 OPPS/ASC proposed rule (79 FR 41035). We have corrected that reference in this fina l rule with comment period to “CCN.”CMS-1613-FC 698

inpatient and outpatient settings. Some commenters, however, requested further clarification on this guidance because the Ho spital IQR Program clarified in the FY 2015 IPPS/LTCH PPS final rule that hospitals “s hould report a single count per enrolled facility, and not CCN” and that facilities should “collect and submit a single vaccination count for each health care facilityenrolled in NHSN by facility OrgID.” Response: We thank commenters for th eir support of the guidance issued. Consistent with the Hospital IQR Program in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50217), for OP-27, hospitals should report a single count per enrolled facility (by OrgID), and not per CCN. We require facilities to collect and submit a single

vaccination count for each health care facility enrolled in NHS N by facility OrgID.

Comment: One commenter was concerned that viewers of Hospital Compare will

not understand that the measure entails data in both hospital inpatient and outpatient settings. The commenter believed this would create confusion among consumers and misinform their decision-making. Response: We thank the commenter for its concern. However, we do not agree that reporting a single vaccination count for each enrolled healthcare facility will cause

confusion. We believe that it will be eas ier for consumers to understand the influenza vaccination rate of a hospital as a whole when we combine data for both the inpatient and outpatient settings, and we believe the m easure is important enough for it to be implemented in both the inpati ent and outpatient settings. As stated above, we clarify that, cons istent with the Hospital IQR Program and CDC Operational Guidance, hospitals should report to NHSN a single count per enrolled facility by the facility OrgID.CMS-1613-FC 699

2. Delayed Data Collection for OP-29 and OP-30

In the CY 2014 OPPS/ASC final rule with comment period, we adopted OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0558) ( 78 FR 75102) and OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interv al for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF # 0659) (78 FR 75102), both chart-abstracted measures, and proposed that aggregate data would be collected via an online Web-based tool (the QualityNet Web site) beginning with the CY 2016 payment determination. We finalized that, for the CY 2016 payment dete rmination, hospitals would be required to submit aggregate-level encounter data between July 1, 2015 and November 1, 2015 for data collected during January 1, 2014 through December 31, 2014 (78 FR 75114). On December 31, 2013, we issued guidan ce stating that we would delay the implementation of OP-29 and OP-30 for 3 months for the CY 2016 payment determination, changing the encounte r period from January 1, 2014 through December 31, 2014 to April 1, 2014 through December 31, 2014 ( https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQn

etTier3&cid=1228772854917 ). The data submission window for data collected from April 1, 2014 through December 31, 2014 is still July 1, 2015 through November 1, 2015.

The data submission windows and the encounter periods for subsequent years remain as previously finalized (78 FR 75114); hospitals are to submit Web-based data between July 1 and November 1 of the year prior to a payment determination with respect to the encounter period of January 1 to December 31 of 2 years prior to a payment determination year.CMS-1613-FC 700

Comment: Several commenters noted thei r support for efforts to limit the overuse of colonoscopies, but expressed concern th at OP-29 and OP-30 are burdensome because they are chart-abstracted measures, have not been specified or tested at the facility level, and are measures of physician quality rather than facility quality. Another commenter stated that these measures are not yet meaningf ul due to low sample sizes and the lack of specifications detailed with algorithms for the measures. Response: We have prev iously responded to the commenters’ concerns that the measure is not specified or tested at the facility level and is a measure of physician quality rather than facility quality. We refer readers to our responses in the CY 2014

OPPS/ASC final rule with comment period (78 FR 75099 through75103) where we

finalized these measures. We continue to believe the measures are suitable for HOPDs

based on the reasons we discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75100 through 75102). In addition, we understand the commenters’ concerns regarding the administrative effort associated with chart- abstraction. We will continue to examine options for less burde nsome reporting mechanisms for these and other program measures in the future. Comment: Many commenters supported CM S’ delayed collection of OP-29 and OP-30, but requested specific rationale for the delay. Response: Based on feedback from st akeholders, we believed it would be too burdensome to require hospitals to impleme nt OP-29 and OP-30 by January 1, 2014 since these measures could require coordinati on with other physicians (78 FR 75113). Consequently, we delayed the data collecti on period until April 1, 2014. We believe thatCMS-1613-FC 701

this 3-month period was sufficient to allow hos pitals to put the necessary mechanisms in place to collect these data. 3. OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery

In the CY 2014 OPPS/ASC final rule w ith comment period, we adopted OP-31 Cataracts – Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536) for the CY 2016 paymen t determination and subsequent years (78 FR 75103). This measure assesses the ra te of patients 18 years and older (with a diagnosis of uncomplicated cataract) in a sa mple who had improvement in visual function achieved within 90 days following catara ct surgery based on completing both a pre-operative and post-operat ive visual function survey. In the CY 2015 OPPS/ASC proposed rule (79 FR 41036), we: (1) corrected our response to public comments, (2) noted our decision to delay data collection for the CY 2016 payment determination, and (3) proposed voluntary data collection for the CY 2017 payment determination and subsequent years for OP-31: Cataracts: Improvement in Patient’s Visual Function w ithin 90 Days Following Cataract Surgery (NQF # 1536). a. Correction of Respon se to Public Comments

In the CY 2014 OPPS/ASC final rule w ith comment period, we stated, in response to commenters concerne d that the proposed chart-abstracted measures had not been field-tested, that “all three measures that we are finalizing . . . were field-tested in the HOPD facility setting by the measure stewards. These three measures are: (1) Endoscopy/Polyp Surveillance: Appropr iate Follow-Up Interval for NormalCMS-1613-FC 702

Colonoscopy in Average Risk Patients (NQF # 0658); (2) Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a Hist ory of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF # 0659); and (3) [OP- 31] Cataracts: Improvement in Patient’s Visual Function within 90 Days Foll owing Cataract Surg ery (NQF # 1536)” (78 FR 75099 through 75100). We inadvertently misstated that the OP- 31: Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536) had been

field-tested in the HOPD sett ing, and we are clarifying here that this measure has not

been field-tested in that sett ing. However, we note that, in considering and selecting this measure, we took into account other principles or factors, including: NQS goals, type of measure, HHS Strategic Plan and Ini tiatives, NQF endorsement, MAP support, stakeholder input, alignment with quality goa ls and settings, relevance, utility, and burden. More information about these principles can be found in the CY 2014 OPPS/ASC proposed rule and final rule with comment period (78 FR 43643 through 43644) and in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68467 through 68468). b. Delayed Data Collection for OP-31 and Exclusion from the CY 2016 Payment

Determination Measure Set Since our adoption of this measure, we have come to believe that it can be operationally difficult for hospitals to collect and report this measure. Specifically, we

are concerned that the results of the survey used to assess the pre-operative and post-operative visual function of the patient may not be shared across clinicians, makingCMS-1613-FC 703

it difficult for hospitals to have knowledge of the visual function of the patient before and after surgery.

We also are concerned about the use of inconsistent surveys to assess visual function; the measure specificati ons allow for the use of any validated survey and results may be inconsistent should clinicians use different surveys. Therefore, on December 31, 2013, we issued guidance stating that we would delay the implementation of OP-31 by 3 months from January 1, 2014 to April 1, 2014 for the CY 2016 payment

determination ( https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQn

etTier3&cid=1228772854917 ). Because of continuing concerns, on April 2, 2014, we issued additional guidance sta ting that we would further de lay the implementation of the measure from April 1, 2014 to January 1, 2015 for the CY 2016 payment determination ( https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQn

etTier2&cid=1228721506778 ). In the CY 2015 OPPS/ASC proposed rule (79 FR 41036), we proposed to exclude OP-31 Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536) from the CY 2016 payment determination measure set. We proposed not to subject hospitals to a payment reduction with respect to this measure for the CY 2016 payment determination. We invited comment on this proposal. Comment: Many commenters commended CMS’ recognition of the associated operational issues and the proposal to exclude OP-31 from the CY 2016 payment

measure determination set. Other commenters disagreed; they stated that complications following cataract surgery ar e not acceptable, and they strongly believed that OP-31CMS-1613-FC 704

tracks patient-centered clinical outcome s and improves care coordination among providers. Response: We agree that complicat ions following cataract surgery are not acceptable. While OP-31 does not address complications following cataract surgery, it does address improvement in visual functi on following cataract su rgery and tracks an important patient-centered clin ical outcome. Based on stak eholder feedback, we believe

this measure should be excluded from the CY 2016 payment determination because there are a low number of hospitals ready to operationalize th is measure for the CY 2016 payment determination. As noted below, we believe that by the CY 2017 payment determination, many more hospitals will be operationally able to collect the data necessary for this measure and may choose to do so.

After consideration of th e public comments we receive d, we are finalizing our proposal to exclude OP-31 from the CY 2016 pa yment determination measure set as proposed. Therefore, we will not subject hosp itals to a payment reduc tion with respect to OP-31 for the CY 2016 payment determination. c. Voluntary Collection of Data for OP- 31 for the CY 2017 Payment Determination and Subsequent Years We continue to believe that OP-31 promotes accountability for Medicare beneficiaries, improve coordination of serv ices, reduce fragmented care, encouraged redesigned care processes for high quality a nd efficient service delivery, and incentivize higher value care (78 FR 75099). Furthermor e, we believe that HOPDs should be partners in care with physi cians and other clinicians, a nd this measure provides an opportunity to do so. Therefore, we are co ntinuing to include this measure in theCMS-1613-FC 705

Hospital OQR Program measure set. However, in the CY 2015 OPPS/ASC proposed rule (79 FR 41036), we proposed that hospitals have the option to vol untarily collect and submit OP-31 data for the CY 2015 encounter period/CY 2017 payment determination and subsequent years. In addition, we proposed to not subject hospitals to a payment reduction with respect to this measure during the period of voluntary reporting. For hospitals that choose to submit data voluntar ily, we would request that they submit such data using the means and timelines finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75112 through 75113). Data submitted voluntarily will be publicly reported as discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43645) and final rule with comment period (78 FR 75092). We invited public comment on this proposal. Comment: Many commenters requested that CMS remove the measure from the program entirely, rather than delaying im plementation and allowing voluntary reporting. The commenters repeated similar concerns expressed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75099 through 75103), where this measure was finalized, regarding associated burden, suitability for the Hospital OQR Program versus the PQRS, program alignment of this m easure, non-standardization of collected information, NQF endorsement, MAP recomm endations, and coordination challenges faced by facilities. Response: We do not agree that we s hould remove the measure entirely, because

we believe OP-31 addresses an area of care that is not adequately addressed in our current measure set and is an important ar ea of care coordination between performing physicians, practitioners that assess visual function, and HOPDs where procedures areCMS-1613-FC 706

performed. We previously addressed the a bove concerns in our responses the CY 2014

OPPS/ASC final rule with co mment period where we finalized this measure and refer

readers to that final rule with comm ent period (78 FR 75099 through 75103) for a

discussion of these issues. Comment: Commenters opposed to volunt ary reporting of OP-31 were concerned that incomplete display of data is confusing and not meaningful to consumers and is hard to validate. Furthermore, commenters feared th at the display of data from some hospitals but not others would lead some patients to conclude that some hospitals are more committed to improving cataract surgery. Response: We appreciate the commente rs’ concerns, but we do not agree that voluntary data reporting will result in data that are confusing, are not meaningful, or cause patients to conclude that some hospita ls are more committed to improving cataract surgery. There are many situations where hospitals do not submit information to the Hospital OQR Program due to lack of cas es or low case volume. Where quality information is submitted, we make this in formation publicly available as statutorily required, and we state when it is not availabl e. Furthermore, reporting of measure data by some hospitals and not others under volun tary reporting would not affect the validity of data reported for this Web-based measure any more so than a required measure where not all hospitals had cases. We note that at this time, we do not validate aggregate data submitted to CMS using an online tool, so diffi culty to validate this information is not a program issue. We refer readers to secti on XIII.H.3 of this final rule with comment period where we discuss our validation procedures.CMS-1613-FC 707

We understand some facilities are capable of reporting data for this measure at this time, and we believe those facilities shoul d report if they are ope rationally able to do so. We believe voluntary reporting is bene ficial for HOPDs b ecause all HOPDs, both participating and not participating in volunt ary reporting, can use th e reported data to gauge their own performance and identify im provement efforts. By retaining the measure but allowing voluntary reporting, we cancontinue to monitor the data submitted to assess further enhancement of the measure as necessary. Comment: Commenters expressed support for patient-reported outcome measures

like OP-31 and recommended additional outcome measures for cataract procedures, such as Complications within 30 Days Followi ng Cataract Surgery Requiring Additional Procedures (NQF #0564) and Better Visual Ac uity Within 90 Days Following Cataract Surgery (NQF #0565). Response: We thank the commenters for the support and their input regarding patient-reported outcome measures. We ma y consider these suggestions for future

measure selection. Comment: One commenter suggested thatCMS allow voluntary reporting for all newly adopted measures, given the inconvenien ce and burden associated with preparing to report a measure that later may beco me suspended or for which we delay implementation. Response: We thank the commenter for the suggestion. We understand that hospitals may have been inconvenienced by th is measure, but disagree that all newly adopted measures should be voluntarily reported. We have retained the vast majority of measures adopted for the Hospital OQR Program.CMS-1613-FC 708

After consideration of th e public comments we receive d, we are finalizing our proposal that hospitals have the option to voluntarily collect and submit OP-31 data for the CY 2015 encounter period/CY 2017 payment determination and subsequent years as proposed. For hospitals that choose to submit data, we request that they submit such data using the means and timelines finalized inthe CY 2014 OPPS/ASC final rule with comment period (78 FR 75113 through 75115). We will not subject hospitals to a payment reduction with respect to this meas ure during the period of voluntary reporting. However, data submitted voluntarily will be publicly reported. E. New Quality Measure for the CY 2018 Pa yment Determination and Subsequent Years In the CY 2015 OPPS/ASC proposed rule (79 FR 41036 through 41039), we proposed to adopt one new claims-based meas ure into the Hospital OQR Program for theCY 2017 payment determination and subsequent years: OP-32: Facility 7-Day RiskStandardized Hospital Visit Rate after Outp atient Colonoscopy. Colonoscopy is one of the most frequently performed procedures inthe outpatient setting in the United States. 2 The most recent data available indicate that, in 2002 alone, physicians performed an estimated 14 million colonoscopies in the United States. 3 Colonoscopies are associated with a range of well-described and potentially preventable adverse events that can lead to hospital visits, repeat procedures, or surgical intervention for treatment, including colonic perforation, gastrointestinal (GI) bleeding, and cardiopulmona ry events such as hypoxia, aspiration pneumonia, and cardiac arrhythmia s. While hospital vi sits are generally

2 Russo A, Elixhauser A, Steiner C, Wier L. Hospital-Based Ambulatory Surgery, 2007: Statistical Brief #86. Healthcare Cost and Utilization Project (HCUP) Statistical Briefs . Rockville (MD)2006. 3 Seeff LC, Richards TB, Shapiro JA, et al. How ma ny endoscopies are performed for colorectal cancer screening? Results from CDC's survey of endoscopic capacity. Gastroenterology. Dec 2004;127(6):1670-1677.CMS-1613-FC 709

unexpected after outpatient colono scopy, the literature suggests that the majority of these visits occur within the first 7 days. 4 , 5 , 6 Reported hospital visit rates after outpatient colonoscopy range from 0.8 to 1.0 percent at 7 to 14 days post procedure, and from 2.4 to 3.8 percent at 30 days post procedure. 7 , 8 , 9 Some adverse events such as bleeding occur

after the 7 th day, but based on input from clinical experts, public comment, and empirical analyses, we concluded that unplanned hospital visits with in 7 days is the optimal outcome to ensure capture of procedure-rela ted adverse events and to minimize capture of hospital visits unrelated to the procedure. This measure provides the opportunity for providers to improve quality of care and to lower the rates of adverse events leading to hospital visits after outpatient colonoscopy; this measure will encourage providers to achieve the outcome rates of the best performers. We believe it is important to reduce adverse patient outcomes associated with preparation for colonoscopy, th e procedure itself, and follow-up care. Therefore, we proposed to include OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy, which is based on paid Medicare FFS claims, in the Hospital OQR Program for the CY 2017 payment determinat ion and subsequent years. We expect that the measure would promote improveme nt in patient care over time because

4 Rathgaber SW, Wick TM. Colonoscopy completion and complication rates in a community gastroenterology practice. Gastrointest Endosc . 2006; 64:556-62. 5 Rabeneck L, Saskin R, Paszat LF. Onset and clinical course of bleeding and perforation after outpatient colonoscopy: a population-based study. Gastrointest Endosc. 2011; 73:520-3. 6 Ko CW, Riffle S, Michael L, et al. Serious compli cations within 30 days of screening and surveillance colonoscopy are uncommon. Clin Gastroenterol Hepatol . 2010; 8:166-73. 7 Ko CW, Riffle S, Shapiro JA, et al. Incidence of minor complications and time lost from normal activities after screening or surveillance colonoscopy. Gastrointest Endosc. Apr 2007;65(4):648-656. 8 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757. 9 Chukmaitov AS, Menachemi N, Brown SL, Saunders C, Tang A, Brooks R. Is there a relationship between physician and facility volumes of ambulatory procedures and patient outcomes? J Ambul Care Manage. Oct-Dec 2008;31(4):354-369.CMS-1613-FC 710

transparency in publicly reporting measure scores will make patient unplanned hospital visits (emergency department visits, obs ervation stays, and inpatient admissions) following colonoscopies more vi sible to providers and patien ts and encourage providers to incorporate quality improveme nt activities in order to re duce these visits. Providers are often unaware of complications followi ng colonoscopy for which patients visit the hospital. 10 This risk-standardized quality measur e will address this information gap and promote quality improvement by providing feedb ack to facilities and physicians, as well as transparency for patients on the rates and variation across faci lities in unplanned hospital visits after colonoscopy.

The outcome measured in the OP-32 measure is all-cause, unplanned hospital visits (admissions, observation stays, and emer gency department visits) within 7 days of an outpatient colonoscopy procedure. The meas ure score, also referre d to as the facilitylevel risk-standardized hospital visit rate, is derived from the calcula tion of the ratio of the numerator to the denominator multiplied by the crude rate. The numerator is the number of predicted (meaning adjusted actua l) hospital visits, which is the number of unplanned hospital visits within 7 days of colonoscopy that th e facility is predicted to

have based on its case-mix. The denominator is the number of expected hospital visits, which is the number of unplanne d hospital visits the facility is expected to have based on the nation’s performance with the facility’s case-mix. The crude rate is the national unadjusted number of patients who had a hospital visit post-colonoscopy among all patients who had a colonoscopy.

10 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757.CMS-1613-FC 711

Based on discussions with clinical an d technical panel experts, the measure excludes colonoscopies for patients unde rgoing concomitant high-risk upper GI endoscopy because these patients are at a high er risk for hospital visits than patients undergoing a typical colonoscopy, and patients with a history of inflammatory bowel disease (IBD) or diverticulitis in the y ear preceding the colonoscopy because we likely could not fully characterize and adjust fo r their pre-procedure risk of needing a post-procedure hospital visit or identify whether these admissions are planned or unplanned. The measure also excludes pro cedures for patients who lack continuous

enrollment in Medicare FFS Parts A and B in the 1 month af ter the procedure to ensure all patients have complete data available fo r outcome assessment. The statistical risk adjustment model includes 15 clinically re levant risk-adjustment variables that are strongly associated with risk of hospital visits within 7 days following colonoscopy. Additional methodology details and informa tion obtained from public comments for measure development are available at: http://www.cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html under “Hospital Outpatient Colonoscopy.” Section 1890A(a)(2) of the Act outlines the pre-rulemaking process established under section 1890A of the Act, which requires the Secretary to make available to the public by December 1 of each year a list of quality and efficiency measures that the Secretary is considering. This measure was included on a publicly available document titled “MAP Pre-Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs” on the NQF Web site at:http://www.qualityforum.org/Publications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_M easures_for_More_than_20_Federal_ProgrCMS-1613-FC 712

ams.aspx (formerly referred to as the “List of Measures Under Consideration”) in compliance with section 1890A(a)(2) of the Act. (We note that at the time the measure

was listed on the “MAP Pre-Rulemaki ng Report: 2014 Recommendations on Measures for More than 20 Federal Programs,” it was named “High-Acuity Care Visits after Outpatient Colonoscopy Procedure.”) The MAP, which represents stakehol der groups, conditionally supported the measure, “noting the need to provide outcome information to inform consumer decisions and drive quality improvement.” The MAP further stated that “[t] his measure addresses an important quality and safety issue with in cidence of these events ranging from 10 to 22 per 1,000 after risk adjustment.” However, the MAP also “recognized the need for the measure to be further developed and gain NQF endorsement. The MAP expects the endorsement process to resolve questions of th e reliability and validity of the measure as well as with the accuracy of the algorithm for a ttributing claims data in light of possible effects of the Medicare 3-day paymen t window policy.” As required under section 1890A(a)(4) of the Ac t, we considered the input and recommendations provided by the MAP in selecting measures to propose for the Hospital OQR Program.

We believe we have addressed the con cerns raised by the MAP to the extent possible. The measure is well-defined and precisely specified for consistent implementation within and between organiza tions that will allow for comparability. Reliability testing demonstrated the measur e data elements produced were repeatable; that is, the same results were produced a hi gh proportion of the time when assessed in the same population in the same time period. Vali dity testing demonstrated that the measure data elements produce measure scores that co rrectly reflect the quali ty of care providedCMS-1613-FC 713

and that adequately identify diffe rences in quality. In order to ensure the accuracy of the algorithm for attributing claims data and the comprehensive capture of HOPD colonoscopies potentially affected by the pol icy, we identified physician claims for colonoscopy in the HOPD setting from the Medi care Part B Standard Analytical Files (SAF) with an inpatient admission within 3 days and lacki ng a corresponding HOPD facility claim. We then attribute the colonos copies identified as aff ected by this policy to the appropriate HOPD facility using the facil ity provider ID from the inpatient claim. Section 1833(t)(17)(C)(i) of the Act states that, “T he Secretary shall develop

measures . . . that reflect c onsensus among affected parties an d, to the extent feasible and practicable, shall include measures set fort h by one or more national consensus building entities.” We believe that this proposed m easure reflects consensus among the affected parties, because the MAP, which represents stakehol der groups, reviewed, conditionally supported the measure, and stat ed that it “would provide valuable outcome information to inform consumer decision and drive quality improvement.” Further, the measure was subject to public comment during the MAP and measure development processes, with some public commenters agreeing with the MAP’s conclusions on the measure (MAP Report, January 2014, p. 184 http://www.qualityforum.org/Publications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_M easures_for_More_than_20_Federal_Progr

ams.aspx ). We also note that the measure was submitted to NQF for endorsement on February 21, 2014. Currently, there are no publicly available quality of care reports for providers or facilities that conduct outpatie nt colonoscopies. Thus, adopt ion of this measure provides an opportunity to enhance the information av ailable to patients choosing among providers who offer this elective procedure. We beli eve this measure would reduce adverse patientCMS-1613-FC 714

outcomes associated with preparation fo r colonoscopy, the procedure itself, and follow-up care by capturing and making more visible to providers and patients all unplanned hospital visits following the procedur e. Further, providing outcome rates to providers will make visible to clinicians meaningful quality differences and encourage improvement. Although this measure is not NQF-endorsed, it is cu rrently undergoing the endorsement process, as notedabove. Therefore, we belie ve the statutory requirement for included measures to have, to the extent feasible and practicable , been set forth by a national consensus-building entity has been met. We invited public comment on the propos al to include OP-32 in the Hospital OQR Program for the CY 2017 payment de termination and subsequent years. Comment: Several commenters supported the adoption of OP-32, stating that it will provide patients with important information about the quality of colonoscopy care furnished in outpatient settings. Some comm enters noted that CM S has appropriately considered the MAP’s input in adopting this measure and that the measure’s adoption is a good first step in the continued evol ution of the Hospital OQR Program. Response: We thank commenters for thei r support and acknowledgement that the measure is appropriate for the Hospital OQR Program. We agree that measuring quality

of care associated with col onoscopy procedures is an impor tant clinical care area to

assess for HOPDs. Comment: Many commenters urged CM S not to adopt OP-32 until it is NQF-endorsed. Several of these commenters also noted that the MAP supported this measure on condition of NQF-endorsement, a nd stated that the NQF process would resolve a number of questions about the reliability, validity and feasibility of thisCMS-1613-FC 715

measure. The commenters requested that, in general, CMS only include measures in the Hospital OQR Program that have been NQF -endorsed in order to avoid subsequent suspension or removal of these measures. Response: We note that not all of the measures adopted by the Hospital OQR Program are NQF-endorsed, and as we stated in our earlier disc ussion in this final rule with comment period, NQF endorsement is not a program requirement, as consensus among affected parties can be reached thr ough means other than NQF endorsement. Under section 1833(t)(17 )(C)(i) of the Act, the Secretary must develop measures that reflect consensus among affected parties and, to the extent feasible and practicable, must include measures set forth by one or mo re national consensus building entities. Whenever possible, we strive to adopt NQF-endorsed measures because these measures will meet these requirements. However, we believe the requirements that measures reflect consensus among affected parties can be achieved in other ways, including through the measure development pr ocess, through broad acceptance and use of the measure, and through public comments. Furt her, it may not be feasible or practicable to adopt an NQF-endorsed measure, such as when an NQF-endorsed measure does not exist. Section 1833(t)(17)(C)( i) of the Act does not require that each measure we adopt for the OQR Program be endorsed by a nationa l consensus building entity, or by the NQF specifically. As discussed below, we believe the measure as developed exhibits sufficient levels of reliability, validity, and feasibility to be adopted for the Hospital OQR Program. We have also submitted this measure to the NQF for endorsement.

Comment: A few commenters noted that the measure is current ly being reviewed by the NQF All-Cause Admissions and Readmi ssions Standing Committee. CommentersCMS-1613-FC 716

were disappointed that the Committee’s minut es indicated there we re no discussions of consideration of key elements of the measure’s construc tion and testing. Response: We thank the commenters for sharing their concerns . We believe the NQF process is rigorous and transparent. We understand the NQF All-Cause Admissions and Readmissions Standing Committee applie s the four NQF criteria for measure

endorsement 11 and votes on each criterion. In addition, our understanding is that the measure was discussed in detail by NQF work ing groups prior to the measure discussion

at the All-Cause Admissions a nd Readmissions Standing Committee (http://www.qualityforum.org/ProjectMaterials.aspx?projectID=73619). NQF also seeks public comments on measures before endorsement.

http://www.qualityforum.org/comments_By_Proj ect.aspx?projectID=110&ActivityID=762#p=3. ( This link requires users to log in to the NQF Web site.) For questions related to NQF internal procedures, we suggest cont acting the NQF directly at

http://www.qualityforum.org/About_NQF/Contact_NQF.aspx

. Comment: Many commenters did not s upport CMS’ proposal to finalize OP-32, stating that complications from colonoscopies are rare and hospitals already take steps to ensure colonoscopies are conducted in such a way so as to eliminate preventable complications. Some commenters specifically noted that the literature indicates the measured incidence rate is less than 2 pe rcent, and does not ri se to the level of importance needed for a national quality measurement program. Response: Given the widespread us e of colonoscopy for colorectal cancer screening in the outpatient set ting, we consider measuring the quality of this high volume procedure to be a priority. We agree that the incidence of colonoscopy complications is

11 Available at: http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx.CMS-1613-FC 717

relatively low. However, serious adverse ev ents, such as perforation of the bowel and bleeding, may occur following colonoscopies. We view OP-32 as a critical outcome measure for which the goal is to drive towa rd and sustain zero harm. In addition, some literature suggests that many f acilities performing colonoscopies are unaware of patients accessing hospital-based care with adverse events because patients return to different facilities, including other hospi tals and emergency department s, and would not return to the same outpatient facility. For exampl e, one study showed that physicians were unaware of nearly 75 percent of hospita l admissions for adverse events following colonoscopy. 12 While most colonoscopies ar e performed without subsequent complication, we note that, among Medicare pa tients aged 65 and older, 1.6 percent of outpatient colonoscopies resulted in an unplanned hospital vi sit within 7 days. 13 This is based on a 20-percent sample of nationwide Medicare FFS patients. If we were to use full national data (that is, a 100 percent sample), we estimate 1.7 million colonoscopies would have been performed among Medicare FFS patients and nearly 27,000 unplanned hospitals visits would have occurred within 7 days of colonoscopy. These findings suggest that adverse events are not as rare or inconsequential as many believed and that quality measurement for colonoscopy procedur es in the hospital outpatient setting is important. Comment: Many commenters expressed concern that OP-32 includes hospital visits unrelated to colonoscopy (counted in the numerator) . Some commenters

12 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010; 170(19): 1752–1757. 13 2010 Medicare 20 percen t fee-for-service sample. Based on an analysis of 20 percent sample of Medicare FFS data from 2010 during measure development. The 20 percent sample included 332,391 outpatient colonoscopies meeting the measure inclusio n and exclusion criteria, and 1.6 percent of these colonoscopies were followed by an unplanned hospital visit. This equates to 5,331 unplanned hospital visits in the 20 percent sample.CMS-1613-FC 718

questioned why the measure uses an all-cau se categorization versus only admissions attributable to colonoscopies. One commenter suggested that all high-risk colonoscopies (such as patients with multiple biopsies, pa tients with inflammatory bowel disease, and diverticulitis) should be ex cluded from the measure. Commenters recommended that

OP-32 should be limited to low-risk surveillanc e and screening colonos copies as well as nontherapeutic colonoscopies for Medicare patients. One commenter appreciated that OP-32 includes a mechanism for excluding hospital visits for certain “planned” procedures, but encouraged CMS to expand th at list to also incl ude bone fractures and

behavioral health disorders. Response: We clarify that this measur e is purposely designed to use a broad outcome of hospital visits follo wing surgery rather than a narr ow set of easily identifiable complications. From a patient and health car e system perspective, the goal of this measure is to encourage and inform provi der efforts to minimize all potential acute complications, not just those narrowly related to procedural technique. This is important

as the literature 14 , 15 , 16 , 17 , 18 suggests that hospital visits following colonoscopy occur due to a range of adverse events re lating to the bowel preparati on, anesthesia, the colonoscopy procedure itself, and follow-up care. These adverse events include a range of symptoms and signs such as abdominal pain, bloa ting, dizziness and collapse, electrolyte disturbances, and cardiorespira tory symptoms (from sedation use) in addition to other

14 Day LW, Kwon A, Inadomi JM, et al. Adverse events in older patients undergoing colonoscopy: a systematic review and meta-analysis. 2011;74:885-96. 15 Ko CW, Dominitz JA. Complications of colonoscopy: magnitude and management. Gastrointest Endosc Clin N Am 2010;20:659-71. 16 ASGE Standards of Practice Committ ee, Fisher DA, Maple JT, et al. Complications of colonoscopy. Gastrointest Endosc 2011;74:745-52. 17 Baudet JS, Diaz-Bethencourt D, Aviles J, et al. Mi nor adverse events of colonoscopy on ambulatory patients: the impact of moderate sedation. Eur J Gastroenterol Hepatol 2009;21:656-61. 18 Ko CW, Riffle S, Shapiro JA, et al. Incidence of minor complications and time lost from normal activities after screening or surveillance colonoscopy. 2007;65:648-56.CMS-1613-FC 719

complications, such as bleeding and bowel perforat ion, that are directly related to procedural techniques. The broad outcome of unplanned hospital vi sits captures all of these potential acute comp lications of colonoscopy. As to the suggestion of expanding the list to include bone fractur es and behavioral health disorders, we note that inpatient admissions for bone fracture and behavioral health disorders (such as depression and anxi ety) are typically acute and are not generally considered as “planned” admissions. We do not expect planned admissions for these conditions within the first 7-days following colonoscopy. Furthermore, we have adapted the planned readmission algorithms develope d by CMS independent of OP-32. This algorithm has been validated against medical re cord (chart-extracted) data to ensure it only removes planned admissions. Our goal for including the measure is to encourage providers to be mindful of reducing post-colonoscopy admission caused by prior colonoscopy proc edures performed at a HOPD. For example, patients may be at higher risk of falls post-colonoscopy secondary to dehydration following the bowel preparation for the pr ocedure, and there may be opportunities for providers to minimi ze this risk. Furthermore, we removed planned admissions from the measure outco me by adapting CMS’ Planned Readmission Algorithm version 3.0. 19 , 20 This algorithm removes nonacute admissions for scheduled procedures (for example, total hip repl acement) and other types of care always considered planned (for example, rehabilitation or maintenance chemotherapy) from the

19 Horwitz L, Grady J, Dorsey K, Zhang W, Keenan M, Keshawarz A, Cohen D, Ngo C, Okai M, Nwosu C, Lin Z, Bhat K, Krumholz H, Bernheim S. 2014 Measures Updates and Specifications Report: HospitalWide All-Cause Unplanned Readmission--Version 3.0. 2014: Centers for Medicare & Medicaid Services, 2014. 20 Available at: http://www.cms.gov/Medicare/Quality -Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Measure-Methodology.htmlCMS-1613-FC 720

outcome because these admissions do not reflect differences in colonoscopy quality of

care. Comment: One commenter noted that CMS stated that the statistical risk adjustment model includes 15 clinically rele vant risk- adjustment variables (such as number of polyps removed) that are strongly associat ed with risk of hos pital visits within seven days following colonoscopy and certain patients receiving colonoscopies that would be more likely to have a subsequent visit were excl uded. The commenter stated that CMS did not report the variation be tween hospitals in the application for NQF-endorsement. The commenter raised the po ssibility of no statis tically significant difference between a hospital’s risk-adjusted visit rate and the national average. The

commenter believed this scenario would make it impossible to identify poor performers and good performers for this measure. W ithout this type of differentiation, the

commenter did not understand how this measure will be actionable for care improvement. The commenter suggested that CMS conduct a r oot cause analysis fo r specific related readmission after colonoscopy or test of the variation of the measure between hospital providers. The commenter also suggested that The Joint Commission’s guidelines and

relevant Conditions of Partic ipation standards would enhanc e care improvement efforts. Response: We thank the commente r for their suggestions to enhance improvement efforts for colonoscopy. We clarify that, in the application for NQF endorsement, we noted that the measure, following risk-adjustment, is able to detect statistically significant varia tion (good and poor performers) between outpatient facilities by demonstrating measure score variation usi ng the 2010 Healthcare Cost and Utilization Project (HCUP) data from four States (Ca lifornia, New York, Nebraska, and Florida).CMS-1613-FC 721

Using a very conservative boot strapping (sampling with replacement) statistical technique, we constructed 95 percent interval estimates (similar to confidence intervals) around the facility measure score and used th e estimates to place facilities into three performance categories: worse than expected; no different than expect ed; and better than expected. Based on this analysis, we identi fied 5 outlier facili ties among a total of 992 ASCs and HOPDs. This analysis included onl y about one-tenth of a ll outpatient facilities in the United States, and typically we see gr eater variation between facilities when 100 percent of nationwide facilities are incl uded for actual measure implementation and reporting due to increased precision related to greater sample size. We disagree with the notion that there is a possibility of no sta tistically significant difference between a hospital’s risk-adjusted visit rate and the national average. Our analysis shows statistically significant facil ity variation. Some f acilities have a hospital visit rate that is higher than the expected national average rate and this is statistically significant. Also, we only testedprovider variation using data from 4 States. We expect greater variation and more out liers using nationwide data. We are committed to filling the perfor mance gaps in colonoscopy performed in the outpatient setting. Therefore, we belie ve this measure is appropriate for the outpatient setting. However, in response to comments, to allow sufficient time to conduct further analysis of this measure, we are finalizing this measure beginning with the CY 2018 payment determination, rather than the CY 2017 payment determination as proposed. We plan to perform a dry run of the measure in 2015. From our perspective, a dry run is a preliminary analysis of data in which HOPDs may review their measure results, and ask questions about and beco me familiar with the measure methodology.CMS-1613-FC 722

Dry runs will include 3 to 4 years of paid Medicare FFS claims. We will use the most recent complete claims samples (usually 6 to 9 months prior to the start date) for dry runs. For example, if the dry run begins in March 2015, the most recent data available may be July 2011 to June 2014 (assuming we use 3 years of data). Because we use paid Medicare FFS claims, HOPDs will not need to submit any additional data for the dry run. General information about dry run as well as c onfidential reports will be made available for hospitals to review on their accounts at https://www.qualitynet.org . The dry run will generate confidential reports at the patient level, indicating whether the patient had a hospital visit, the type of visit (admission, emergency department vi sit, or observational stay), the admitting facility, and the principa l discharge diagnosis. Further, the dry run

will enable HOPDs to see the measure score reports and have the opportunity to receive individual patient data and information contai ned within individual pa tient records. In addition, we will continue to generate these reports for HOPDs after we implement the measure beginning with the CY 2018 paymen t determination. HOPDs can use the information to identify performance gaps a nd develop quality improvement strategies. Dry run results are not linked to public reporting, payment determinations, or reliability testing. We expect the dry run to take approximately one month to conduct, during which facilities will be provided the c onfidential report and the opportunity to review their performance and pr ovide feedback to us. The measure will have no payment impact until the CY 2018 payment determination and subsequent years. Public display of data will occur on or after December 1, 2017, but there will be no public display of the dry run data.CMS-1613-FC 723

We agree that adhering to The Joint Commission’s guidelines and relevant Conditions of Participation standards could enhance care improvement efforts and hospitals’ rates on this measur e, and we encourage hospitals to follow these guidelines and standards. We also believe that issuing reports to hospitals, such as those that we will provide during the dry-run, would help hospita ls to identify the r oot cause (practices and conditions) that could cause hospital visits after colonoscopy. Comment: Many commenters expressed c oncern that OP-32 is not sufficiently reliable to be included in the Hospital OQR Program; specifically, the measure developer

has indicated that the measur e is only “fairly” reliable, with an interclass correlation coefficient (ICC) of 0.335. These commenters contended that “fair” reliability is not sufficient for publicly reported quality metric s since such informa tion could misinform the public, and urged CMS to conduct an an alysis on the measure’s reliability to understand the amount of data required to achieve “good” reliability. Several commenters argued that “good” re liability should result in an ICC of at least 0.60. Other commenters believed that reliability will improve with several years’ worth of data. Another commenter requested th at data from this measure be withheld from public reporting until concerns about its reliability and validity can be thoroughly assessed. Response: We disagree with commenter s and believe that OP-32 is sufficiently reliable to be included in the Hospital OQR Program. The ICC value submitted in the initial NQF application (0.335) wa s calculated using a split samp le of data from 2 years. We randomly split the patient cohort at each ho spital into two equal halves, calculated the measure using each half, and then calculated the agreement between these two (the ‘test’ and the ‘retest’). After submitting the m easure to NQF for endorsement review, weCMS-1613-FC 724

conducted additional calculations of the reliability testing score, this time using the Spearman-Brown prophecy formula. The Spearman-Brown prophecy formula is an accepted statistical method which estimates th e ICC if the sample were increased. Therefore, it allows us to estimate what the reliability score would be if all observations were used for public reporting rather thanusing a split sample. Our Spearman-Brown prophecy formula calculations resu lted in a higher ICC of 0.43. The NQF considers the ICC values rangi ng from 0.21 to 0.40 as “fair” reliability and values ranging from 0.41 to 0.60 as “moderat e” reliability. Therefore, the ICC values of 0.335 and 0.43 are interpreted as “fair” and “moderate” reliability, respectively. These

ICC values are also in line with other NQF-endorsed outcome measures used in other CMS programs. For example, in the Hospital Readmissions Reduction Program, the Inpatient Acute Myocardial Infarction (AMI) 30-day Risk Standardized Readmission measure (NQF #0505) (76 FR 51667) has an ICC of 0.369, and the Pneumonia (PN) 30-day Risk Standardized Readmission meas ure (NQF #0506), also in the Hospital Readmissions Reduction Program (76 FR 51667) , has an ICC of 0.406. Both measures are NQF-endorsed. Regarding the concerns that the public may be misinformed and that we should withhold public reporting until the measure’s reliability and validity is addressed, as stated above, we believe the reliability of th e measure is sufficiently reliable for inclusion in the Hospital OQR Program and do not ag ree that the public ma y be misinformed or that we should withhold public reporting. In addition to our calculations above, reliability testing previously conducted by the measure steward demonstrated the measure data elements produced were repeatable; thatis, the same results were produced a highCMS-1613-FC 725

proportion of the time when assessed in the same population in the same time period. Also, validity testing by the measure stewar d demonstrated that the measure data elements produce measure scores that correc tly reflect the qualit y of care provided and that adequately identify differences in quality. As the commenters suggested, the measur e reliability may be further improved by using several years’ worth of data; however, we must balance the reliability of the

measure with the timeliness of the measure. As discussed, at this time, we believe that 1 year of data appropriately ba lances these competing interests for payment determination purposes, but we will continue to assess this belief during the dry run. Also, we will consider conducting additional reliability assessments of the measure using an extended data period. Moreover, we believe it is important to include this measure in the program because colonoscopy is a high volume, co mmon procedure performed at outpatient facilities and is frequently performed on relatively healthy patients to screen for colorectal cancer (CRC). Given the wide spread use of colonoscopy, understanding and minimizing procedure-related adverse events is a high priority. These adverse events, such as abdominal pain, bleed ing, and intestinal perforati on, can result in unanticipated hospital visits post procedure. Physicians performing colonoscopies are often unaware that patients seek acute care at hospitals following the procedure and the associated adverse events are potentially preventable. We strongly be lieve that the measure would promote improvement in patient care over time because transparency in publicly reporting measure scores would make patien t unplanned hospital visits (emergency department visits, observation stays, and inpatient admissions) following colonoscopiesCMS-1613-FC 726

more visible to HOPDs and patients and incentivize HOPDs to incorporate quality improvement activities in or der to reduce these visits. Finally, we believe this measure should be included in the program because currently, this risk-standardized colonoscopy quality measure is the only measure

available that would address this informa tion gap and promote quality improvement by providing feedback to facilities and physicians , as well as transparency for patients on the

rates and variation across fac ilities in unplanned hospital vis its after colonoscopy. There are no publicly available quality of care reports for HOPDs that conduct outpatient colonoscopies. Therefore, adoption of this measure provides an opportunity to enhance the information available to patients c hoosing among HOPDs that offer this elective procedure. We believe this measure woul d reduce adverse patient outcomes associated with preparation for colonoscopy, the proce dure itself, and follow -up care by capturing and making more visible to HOPDs and patie nts all unplanned hospital visits following the procedure. In addition, providing outcome rates to HOPDs would make visible to clinicians meaningful quality diffe rences and incentivize improvement. In response to comments, however, to allow sufficient time to conduct further analysis of this measure, we are finali zing this measure beginning with the CY 2018 payment determination, rather than the CY 2017 payment determination as proposed. We plan to perform a dry run (a preliminary analysis) of the measure in 2015. We refer readers to our discussion of the dry run above, in response to a previous comment. With national implementation of a dry run of this measure, we will also review the appropriate cutoff volume for facilities, if necessary, in reporting the measure score. We require a minimum volume (cut off volume) of colonoscopies pe r facility to be able toCMS-1613-FC 727

calculate a reliable measure score for the f acility. We have yet to determine the minimum volume per facility (that is, the cutoff colonoscopy volume). Because we used a Medicare 20 percent sample to develop the measure, we could not estimate this cutoff during measure development. However, testing during the measure dry-run with 100 percent of the sample per facility will he lp us to determine the appropriate cutoff volume of colonoscopies per facility. HOPDs will be notified via the QualityNet Web

site of the cutoff volume of colonscopies per facility. While some HOPDs perform too few colonos copies for us to calculate a measure score, and we would not publicly report thei r data, these facilities would remain in the measure cohort. Typically, for public reporting of hospital measures on the Hospital Compare Web site, the measure score is reporte d as “Number of cases too small” for hospitals with fewer cases than the cutoff. We will use the same protocol when the measure is publicly reported for the Hosp ital OQR Program, and will report a measure

score as “Number of cases too small” for HOP Ds with fewer cases than the cutoff on the QualityNet Web site. Comment: Many commenters were c oncerned that HOPDs may not have actionable information genera ted from OP-32. Specifically, commenters were concerned that claims would not accurately capture th e data of patients who had initial colonoscopy at a facility but had a subseque nt hospital visit at a different facility. Several of these commenters questioned whether this measure wi ll benefit facilities or patients if each facility only receives a report with an aggregate number of claims based on historical data. Commenters requested that CMS clarify its plan to report detail ed patient-level data confidentially to facilities that indicate whethe r the patient had a hospita l visit, the type ofCMS-1613-FC 728

visit (admission, emergency department vis it, and observational stay), the admitting facility, and the principal disc harge diagnosis. These reports would enable facilities to understand their performance and take step s where remediation is needed. One

commenter also recommended that CMS allow at least a two-quarter black-out period so that hospitals have ample time to reviewand request corrections to their data. Response: We do not believe that claims data will be difficult to capture at a facility different from where the colonosc opy was performed. Hospitals are responsible for accurately populating claims, regardless of where the patient had the procedure done. In addition, due to commenters’ concerns, we intend to conduct a dry run (discussed in detail above) and provide deta iled facility specific information containing confidential patient-level data to all HOPDs . The dry run will generate confidential reports at the patient level, indicating whether the patient had a hospita l visit, the type of visit (admission, emergency department vis it, or observational stay), the admitting facility, and the principal disc harge diagnosis. Further, it will enable HOPDs to see the measure score reports and have the opportunity to receive individual patient data and information contained within individual patien t records. In additi on, we will continue to generate these reports for HOPDs after we implement the measure beginning with the CY 2018 payment determination. HOPDs can use the information to identify performance gaps and develop quality improveme nt strategies. As we previously stated, dry runs have no payment impact and are not linked to public reporting. The main purpose of the dry run is to provide opportuni ties for hospitals to review their measure results and ask questions about measure methodology.CMS-1613-FC 729

Comment: A few commenters stated that the measure methodology should include risk adjustment for socioeconomic fact ors so the results are accurate and reflect

differences in socioeconomic burden and raci al composition of patie nts across hospitals. Commenters were concerned that without prope r risk adjustment, a hospital that serves a disproportionate share of low-income patie nts with confounding socioeconomic factors may have more unplanned visits following out patient procedures. Commenters stated that the measure score can be skewed by fact ors such as race, home lessness, cultural and linguistic barriers, and low lite racy. Commenters also stat ed that the readmissions of low-income patients with confounding socio economic factors are caused by factors beyond the control of the hospital and, th erefore, do not reflect the quality of care being provided. Several commenters recommended th at, after the NQF has reviewed OP-32, CMS consider submitting this measure as part of the socioeconomic status (SES) trial period created by the NQF Board of Directors. Response: We do not believe that the m easure is biased for low-income patients with confounding socioeconomic factors

. When developing the measure, we tested how the measure score varied among outpatient f acilities with varying proportion of low SES patients. Using patient dual eligibility status as an indicator of low SES, we noted that the median measure score, and the meas ure score distribution, was similar among facilities with many low SES patients compared to facilities with a few low SES patients. Based on our testing as well as input fromthe measure developer and the national technical expert panel, we c oncluded that facilities with a high proportion of low SES patients were not biased by this measure a nd that the measure score was unaffected byCMS-1613-FC 730

SES status. These findings were presen ted to the NQF All- Cause Admissions and Readmissions Measures Standing Committee on May 6, 2014. 21 Also, we thank the commenters for the suggestions to submit the measure as part of the SES trial period, which is a trial for a defined period that would assess the impact and implications of risk adjusting relevantquality measures for sociodemographic factors

and was a recommendation of the Consensus Standards Approval Committee following its review of the NQF Expert Panel’s report Risk Adjustment for Socioeconomic Status and Other Sociodemographic Factors. ( http://www.qualityforum.org/Press_Releases/ 2014/NQF_Board_Approves_Trial_Risk_Adjustm

ent.aspx ). We will take this suggestion in to consideration in future years. Comment: One commenter requested clar ification of how the measure numerator

and denominator for OP-32 are calculated. Response: The measure score is the rati o of predicted hospita l visits (numerator) over the expected hospital visits (denominat or) multiplied by the crude national rate. The measure score numerator is the predicted rate , which is the number of unplanned hospital visits the facility is predicted to have within 7 days of colonoscopy, and it accounts for the observed unplanned hospital visit rate, the number of colonoscopies performed at the facility, and the facility’s case mix. This is sometimes referred to as the “adjusted actual

rate.”

The measure score denominator is the expected rate, which is the number of unplanned hospital visits the facility is expected to have based on the nation’s performance with that facility’s case and mix. It is the sum of all patients’ expected probabilities of a hospital visit, given their ri sk factors and the risk of readmission at an

21 Available at: http://www.qualityforum.org/All-Cause_Ad missions_and_Readmissions_Measures.aspx.CMS-1613-FC 731

average facility. The contribution of each risk factor (for example, age) to the patient’s risk of a hospital admission is calculated ba sed on all of the patients in the measure

cohort. The crude national rate is the average rate of hospital visits following colonoscopy observed in the entire measure cohor t. We also refer readers to the measure discussion above and measure specifications ( http://www.qualityforum.org/WorkArea/linkit. aspx?LinkIdentifier=id&ItemID=75057) for a more

detailed discussion of how the numerat or and denominator are calculated.

Comment: Commenters believed that the Medicare 3-day window payment policy for hospitals does not allow HOPDs to ge nerate a claim when there is an inpatient admission during the 3-day window payment polic y, that is, during the 3 days subsequent to the colonoscopy. Commenters stated that HOPDs may be advantaged with systematic undercounting of hospital visits while ASCs get a full count of all hos pital visits within 7 days subsequent to outpatient colo noscopy. Commenters did not believe the methodological solution proposed by the measur e developer, using physician claims with an HOPD Place of Service (POS) code, is adeq uate due to the high error rates in POS coding on physician claims. Commenters were concerned th at these challenges would make comparisons of HOPD and ASC data impossible, and significantly reduce the validity of the measure in the HOPD setting. Response: We agree that th e ability to detect meaningful variation is an important

indication of the value of a measure. We have shown facility variation in unplanned hospital visits following colonoscopy in bot h nationwide Medicare data from HOPDs and

also in the 2010 Healthcare Cost and Utilizat ion Project (HCUP) da ta. We have also shown facility variation in unplanned hospita l visits among ASCs alone using HCUP dataCMS-1613-FC 732

from California. ASCs are unaffected by the 3-day payment window policy. 22 We are

confident that the variation shown is a reflecti on of facility variation in quality and not as a result of any issues to do with the 3-da y window payment policy. We are aware of the impact of the 3-day window payment policy and will ensure HOPD colonoscopies affected by the 3-day window payment policy are included in the measure cohort and outcome to the fullest extent possible. Based on our internal testing with claims data, we believe our current algorithm is appropriate and accurate. However, since we always strive for improvement, we will evaluate the colonoscopy measure dry run data and work

with HOPDs and ASCs to further review and refine the algorithm if necessary. We clarify that HOPD colonoscopy clai ms for calculation of the measure are identified using both the physic ian and the facility claims. We did not intend to imply that colonoscopies performed in HOPDs are solely identifie d from physician claims. For both ASCs and HOPDs, the measure first id entifies colonoscopy claims using both the physician claim and the corresponding facility claim to ensure that each colonoscopy

claim is attributed to the a ppropriate facility. As a second step, the measure matches (1) physician claims that contain HOPD as th e POS that do not have a matching facility claim with (2) inpatient claims to iden tify potential HOPD colonos copies that have a subsequent inpatient admission within the meas ure’s timeframe of interest. This second step identifies HOPD colonoscopy claims aff ected by the 3-day window payment policy. An OIG review ( http://oig.hhs.gov/oas/reports/region10/11000516.pdf ), concluded that, based on a sample of 2009 claims, inaccura cies in physician POS coding often occur where a procedure occurs at a HOPD or ASC a nd a facility claim exists, yet the physician

22 Center for Medicare and Medicaid Services, “Facility 7-Day Risk-Standa rdized Hospital Visit Rate after Outpatient Colonoscopy,” National Qua lity Form Measure Submission Form, 20.CMS-1613-FC 733

claimed a nonfacility POS. By matching both facility and physician colonoscopy claims for any given patient, we ensure that we accurately identify colonoscopy claims to the fullest extent possible and attribute the col onoscopy to the appropria te provider including HOPD colonoscopies affected by th e 3-day window payment policy. We also have taken steps to educate providers about the appropriate POS coding and actively audit providers to improve the accuracy of POS coding. Beginning in 2012,

we also introduced the “PD” modifier to in dicate physician claims affected by the 3-day window payment policy. Regarding the comment concerning ch allenges in comparing HOPD and ASC data, the measure includes col onoscopies from all outpatient se ttings to ensure that the expected hospital visit rate for any facility is estimated using the full national experience of colonoscopy patients. We a ppreciate the concern that ther e are structural differences in claims across HOPD and ASC settings. However, the measure links claims across multiple settings to identify outpatient colonoscopy claims, comorbidities for risk-adjustment, and patient outcomes. Linking patient claims across multiple settings largely mitigates the impact of potential di fference in coding practice among settings and allows comparisons of colonos copy quality across settings.

Comment: One commenter was concerne d that the low occurrence rate may make the measure unreportable. Response: On Hospital Compare , we report measure rates, but may refrain from publishing numerator and/or denominator data if either are less than 11. Consistent with the CMS Policy for Privacy Act Implementation & Breach Notification, 2007, CMS statistical, aggregate or summarized info rmation created as a result of analysis conductedCMS-1613-FC 734

using identifiable CMS data obtained under CMS-approved projects/ studies may only be disclosed if the data are not individual-speci fic and the data are aggregated to a level

where no data cells contain 10 or fewer individuals https://www.cms.gov/ResearchStatistics-Data-and-Systems/CMS-InformationTechnology/SystemLifecycleFramework/downloads/privacypolicy.pdf. Comment: Many commenters expressed c oncern that, if finalized, the OP-32 measure’s data collection period would be gin July 1, 2014, several months before adoption of the measure is finalized. Thes e commenters requested that CMS delay the beginning of the data submission period until at least 30 days after the rule is finalized. Response: After consider ation of the public comments we received, we are not finalizing our proposal to use paid Medica re FFS claims from a 12-month period from July 1 of the year 3 years before the payment determination year to June 30 of the following year. We will not use administrative claims data for services that occur prior to January 1, 2015. Instead, after the dry run, we will use paid Medicare FFS claims from a 12-month period from January 1 to December 31 of the year 2 years before a payment determination year. Specifically, since we are finalizing this meas ure beginning with the CY 2018 payment determination, and we will star t with paid Medicare FFS claims from January 1, 2016 to December 31, 2016.

Comment: Some comment ers suggested that CMS consider developing additional outcomes measures specific to co lonoscopies, such as a measure of whether colonoscopy patients remain cancer free. Response: We appreciate the commenters ’ suggestions and will take them into

consideration for future measure selection.CMS-1613-FC 735

We continue to believe that quality of care measurement in the clinical area of outpatient colonoscopy is an important gap area with ample room for improvement and that this measure has sufficient reliability and validity for use in the Hospital OQR Program. Therefore, after consideration of the public comments we received, we are finalizing our proposal to adopt the OP-32: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Co lonoscopy measure for the Hospital OQR Program. However, to allow HOPDs sufficient time to review their measure data from the dry run and utilize the confidential facility reports with patient-level associated hospital event information, we are finalizing to make this measur e required beginning with the CY 2018 payment determination and su bsequent years, instead of the CY 2017 payment determination and subsequent years as proposed. We plan to perform a dry run of th e measure in 2015. Also, with national implementation of a dry run of this measure, we will also review the appropriate cutoff volume for facilities, if necessary, in reporting the measure scor e. We refer readers to our discussion of the dry run and the cutoff volume above, in responses to previous

comments.

The finalized measure set for the Hospital OQR Program CY 2017 payment determination and subsequent years, which in cludes previously finalized measures, is

listed below.

Finalized Hospital OQR Program Measure Set for the CY 2017 Payment Determination and Subsequent Years NQF # Measure Name

N/A OP-1: Median Time to Fibrinolysis 0288 OP-2: Fibrinolytic Therapy Receive d Within 30 Minutes of ED Arrival** **CMS-1613-FC 736

Finalized Hospital OQR Program Measure Set for the CY 2017 Payment Determination and Subsequent Years NQF # Measure Name

0290 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 0286 OP-4: Aspirin at Arrival 0289 OP-5: Median Time to ECG 0514 OP-8: MRI Lumbar Spine for Low Back Pain N/A OP-9: Mammography Follow-up Rates N/A OP-10: Abdomen CT – Use of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material N/A OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non Cardiac Low Risk Surgery

N/A OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT) N/A OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache N/A OP-17: Tracking Clinic al Results between Visits 0496 OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients N/A OP-20: Door to Diagnostic Evalua tion by a Qualified Medical Professional 0662 OP-21: Median Time to Pain Management for Long Bone Fracture N/A OP-22: ED- LeftWithout Being Seen*** 0661 OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received HeadCT or MRI Scan Interpretation Within 45 minutes of Arrival N/A OP-25: Safe Surgery Checklist Use N/A OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures* 0431 OP-27: Influenza Vaccination C overage among Healthcare Personnel 0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow -up Interval for Normal Colonoscopy in Average Risk Patients 0659 OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 1536 OP-31: Cataracts – Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery** * OP-26: Procedure categories and corres ponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&blobheadername1=Content-CMS-1613-FC 737

Disposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata &blobtable=MungoBlobs. ** Measure voluntarily collected as set forth in section XIII.D.3.b. of this final rule with comment period. *** Name has been updated to correspond with NQF-endorsed name.

The finalized measure set for the Hospital OQR Program CY 2018 payment determination and subsequent years, which in cludes previously finalized measures, and which includes the newly adopted measure, OP-32, is listed below.

Finalized Hospital OQR Program Measure Set for the CY 2018 Payment Determination and Subsequent Years NQF # Measure Name

N/A OP-1: Median Time to Fibrinolysis 0288 OP-2: Fibrinolytic Therapy Receive d Within 30 Minutes of ED Arrival  0290 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 0286 OP-4: Aspirin at Arrival 0289 OP-5: Median Time to ECG 0514 OP-8: MRI Lumbar Spine for Low Back Pain N/A OP-9: Mammography Follow-up Rates N/A OP-10: Abdomen CT – Use of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material N/A OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non Cardiac Low Risk Surgery

N/A OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT) N/A OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache N/A OP-17: Tracking Clinic al Results between Visits 0496 OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients N/A OP-20: Door to Diagnostic Evalua tion by a Qualified Medical Professional 0662 OP-21: Median Time to Pain Management for Long Bone Fracture N/A OP-22: ED- LeftWithout Being Seen** *CMS-1613-FC 738

Finalized Hospital OQR Program Measure Set for the CY 2018 Payment Determination and Subsequent Years NQF # Measure Name

0661 OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received HeadCT or MRI Scan Interpretation Within 45 minutes of Arrival N/A OP-25: Safe Surgery Checklist Use N/A OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures* 0431 OP-27: Influenza Vaccination C overage among Healthcare Personnel 0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow -up Interval for Normal Colonoscopy in Average Risk Patients 0659 OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 1536 OP-31: Cataracts – Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery** N/A OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy**** * OP-26: Procedure categories and corres ponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata &blobtable=MungoBlobs. ** Measure voluntarily collected as set forth in section XIII.D.3.b. of this final rule with comment period. *** Name has been updated to correspond with NQF-endorsed name. **** New measure finalized for the CY 2018 payment determination and subsequent years. F. Possible Hospital OQR Program Measures and Topics for Future Consideration The current measure set for the Hospita l OQR Program includes measures that assess processes of care, imaging efficien cy patterns, care transitions, ED throughput efficiency, the use of health information t echnology (health IT), care coordination, patient safety, and volume. For future payment de terminations, we are considering expanding these measure areas and creating measures innew areas. Specifically, we are exploring (1) electronic clinical quality measures ; (2) partial hospitalization measures; (3) behavioral health measures; and (4) other measures that align with the National Quality Strategy and the CMS Quality Strategy domains.CMS-1613-FC 739

1. Electronic Clinical Quality Measures HHS believes all patients, their families, and their health care providers should have consistent and timely access to their healthinformation in a standardized format that can be securely exchanged between the patien t, providers, and others involved in the patient’s care. (HHS August 2013 Statement, “Principles and Strategy for Accelerating Health Information Exchange” ( http://www.healthit.gov/sites/default/files/ acceleratinghieprinciples_strategy.pdf ) The Department is committed to accelerating hea lth information exchange (HIE) through the use of electronic health records (EHRs) and other types of healthinformation technology (health IT) across the broader care co ntinuum through a number of initiatives including: (1) alignment of incentives and payment adjustments to encourage provider adoption and optimization of health IT and HIE services through Medicare and Medicaid payment policies; (2) adoption of common standards and cert ification requirements for interoperable health IT; (3) s upport for privacy and security of patient information across all HIE-focused initiatives; and (4) gove rnance of health information networks. More information on the governance of health information networks and its role in facilitating inter operability of health informa tion systems can be found at: http://www.healthit.gov/sites/default/files/ ONC10yearInteroperabilityConceptPaper.pdf

. These initiatives are designed to enco urage HIE among health care providers, including professionals and hospitals elig ible for the Medicare and Medicaid EHR Incentive Programs as well as those who are not eligible for those programs, and are designed to improve care deliver y and coordination acr oss the entire care continuum. For example, the Transition of Care Measure #2 in Stage 2 of the Medicare and MedicaidCMS-1613-FC 740

EHR Incentive Programs (77 FR 54017 thr ough 54020) requires HIE to share summary records for more than 10 percent of care transitions. We anticipate that as EHR technology evolves and more infrastructure is operational, we will begin to accept electroni c reporting of many measures from EHR technology certified under the ONC health IT Certification Program. We are working diligently toward this goal. We believe that submitting data for the Hospital OQR Program electronically would significantly reduce the administrative burden associated with reporting chart-abstracted measures. We recognize that considerable work needs to be done by measure owners and health IT developers and implementers to make this possible with respect to the clin ical quality measures targeted for electronic specifications (e-specifications). This work includes co mpleting e-specifications for measures, pilot testing, reliability and validit y testing, and implementing such specifications in certified EHR technology to capture and calculate the results. We received the following comments on these future measures. Comment: Many commenters supported CM S’ efforts to establish electronic clinical quality measur es after validation and testing, but expressed concerns and offered suggestions. One commenter specifically no ted the importance of health information exchanges in disseminating infection preventi on and control information across the care

continuum. Some commenters encouraged CMS to obtain input from ONC and hospital staff, for the purpose of ensuring the maturity of e-specifications and the ability of certified EHRs to support valid, feasible, and re liable electronic clinic al quality measures for implementation in different programs. Some commenters urged CMS to proceed in a phased approach to implementing electronic clinical quality measures.CMS-1613-FC 741

Response: We agree that health informa tion exchanges are critical in quality care improvement, including infection prevention and c ontrol. To the greatest extent feasible,

we strive to work with ONC and stakeholde rs, including hospital staff, to develop and specify electronic clinical quality measures before their adoption. If we decide to propose electronic clinical qual ity measures in the future, we will consider a phased approach. Comment: One commenter stated that it is premature to expand the measure set to include electronic clinical quality measures at this time because tremendous work in developing or defining e-specificat ions, pilot testing, and validity and reliability testing is

still needed. Response: We recognize that much work needs to be done before the adoption of electronic clinical quality measures. Howeve r, we also believe that implementation of electronic clinical quality measures will ul timately reduce provider burden and facilitate care coordination and patient engagement. We will weigh and balance these concerns when we propose to adopt electronic clinical quality measures in the future.

Comment: One commenter stated that the additional time needed to develop electronic clinical quality measures will a llow hospitals to optimize their EHRs and develop information sharing networks. Response: We thank the commenter for ra ising this concern. We believe, to the extent feasible, it is important to ensure th at hospitals are ready to implement EHRs and

will continue to work with them as we im plement electronic clinical quality measures.

We thank the commenters for their views and will consider them as we develop and implement future electronic clinical quality measures.CMS-1613-FC 742

2. Partial Hospitaliza tion Program Measures We seek to develop a comprehensive set of quality measures to be available for widespread use for informed decision-maki ng and quality improvement in the hospital outpatient setting. Therefore, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75106), we stated that, through futu re rulemaking, we intended 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, such as partial hospitalization programs (P HPs) that are part of HOPDs. Partial hospitalization is an intensive out patient program of psychiatric services provided to patients as an alternative to i npatient psychiatric care for individuals who

have acute mental illness. The PHP was de signed to assist individuals with acute psychiatric illness in managing debilitating symptoms and prevent the need for hospitalization or rehos pitalization. Behavioral health treatments and services have improved and evolved through medication ad vances, recovery-based therapy, and

evidenced-based interventions , including peer supports. PHP services have had the opportunity to evolve to provide individuals with a unique se tting that can contribute to maintaining social and community connectivity while focusing on sustained recovery to prevent initial hospitalization during a given episode and subs equent rehospitalization. Currently, the Hospital OQR Program has not adopted measures applicable to PHPs. Although we believe that the PHP is an important program offering an alternative to inpatient stays, we note that PHP utilization has been declining. 23 Therefore, as we consider implementing PHP measures in fu ture years, we invited public comment

23 http://www.cms.gov/Research-Statistics-Da ta-and-Systems/Statistics-Trends-andReports/Reports/downloads/Leung_PHP_PPS_2010.pdf

.CMS-1613-FC 743

regarding the utility of including measures for this care setting in the Hospital OQR Program. We specifically requested public comment on three PHP measures we submitted to the MAP for consideration as part of the “MAP Pre-Rulemaking Report: 2014

Recommendations on Measures for Mo re than 20 Federal Programs” ( http://www.qualityforum.org/Publ ications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_M easures_for_More_than_20_Federal_Progr

ams.aspx (formerly referred to as the “List of Measures Under Consideration”)):

● 30-Day Readmission;

● Group Therapy; and

● No Individual Therapy.

These measures are included in the Pr ogram for Evaluating Payment Patterns Electronic Reports (PEPPERs) developed unde r the Comprehensive Error Rate Testing (CERT) Program. Further information on th ese claims-based measures that provide indicators of quality of care can be found at http://www.pepperresources.org/LinkClick.as px?fileticket=stK9uUmQWlM%3d&tabid=148

. We also requested public input on othe r possible quality measures for partial hospitalization services for inclusion in th e Hospital OQR Program in future years.

Comment: Some commenter s supported CMS’ consider ation of PHP measures, noting that these measures will encourage hospitals to monitor their performance over time and identify opportunities for quality improvement. Response: We thank the commenters for their support. We agree that PHPs are an important alternative to inpatient stay s and there may be value in collecting and reporting this data.CMS-1613-FC 744

Comment: Many commenters did not support PHP quality metrics in the Hospital OQR Program, stating that th ere are significant differences between outpatient and PHP treatment services, structure, and supervision, as well as other concerns. Commenters recommended that CMS adopt PHP measures that have been NQF-endorsed and are MAP-recommended, noting that the three PHP measures mentioned in the proposed rule were not recommended by the MAP because they were not well-defined or required additional evidence relating to their value. Commenters suggested that CMS address the MAP’s concerns before proposing these meas ures for use in the Hospital OQR Program. Response: We disagree that PHP meas ures are not appropriate for the Hospital OQR Program based on differences between outpatient and PHP treatment services, structure, and supervision. Because PHP services are provided by HOPDs, are an important alternative to inpatient stays, a nd are utilized by Medicar e beneficiaries, we believe that there may be value in collecti ng and reporting quality measure data for these services. However, at this time, we are notproposing any PHP measures for the Hospital OQR Program. The PHP measures on whic h we invited comment have not been recommended by the MAP. The MAP stated that it needed further information on the 30-Day Readmission measure and recommended that the No Individual Therapy and Group Therapy measures be submitted for NQF endorsement before they are adopted by the Hospital OQR Program ( http://www.qualityforum.org/Publications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_M easures_for_More_than_20_Federal_Progr

ams.aspx ). If we do consider proposing PHP measures in the future, to the extent feasible, we intend to propose to adopt measures wh ich are NQF-endorsed and have been MAPrecommended. Before adopting a measure, we try to address stakeholder concerns,CMS-1613-FC 745

including the differences in the outpatient and PHP settings . Finally, if we choose to propose the three measures discussed in the proposed rule, we will consider the

comments of the MAP and address them to the extent feasible. We note, however, that not all of the measures adopted by the Ho spital OQR Program are NQF-endorsed, nor is NQF endorsement a program requirement (section 1833(t)(17)(C)(i) of the Act).

Comment: Some commenters believed th at using PHP measures in the Hospital OQR Program would constitute a duplication of efforts because the measures are already

included in PEPPER. Other commenters al so viewed PEPPER measures as auditing tools rather than quality measures. Response: We will consider the comment ers’ viewpoint if we propose to adopt

the PEPPER measures in future rulemaki ng. We note that these measures, while addressing areas of payment concern, also addr ess areas of quality of care concern and that the PEPPER measures are not public ly reported at the facility level. Comment: Commenters expressed con cerns about the 30-day readmissions measure because this patient population tends to be readmitted for behavioral conditions due to social issues for which hospitals have little control. Commenters stated that PHP patients’ clinical needs evolve over time, that readmissions ar e often needed to stabilize patients, and that measuring facilities on readmission rates could cause unintended consequences. Commenters further stated that the readmission measure is not sufficiently risk-adjusted. Response: We thank the commenters for raising these concerns. We will consider these concerns if we propose to adopt the 30-day read mission PEPPER measure for the Hospital OQR Program in future rulemaking.CMS-1613-FC 746

Comment: Some comment ers stated that CMS s hould better understand the challenges facing PHP and readmissions before imposing PHP quality measures because quality measures could further destabilize th e PHP rate and threaten access to this

service. Response: We understand that utilizati on of PHP services has been decreasing and that many challenges may be unique to the PHP setting. We will consider these issues before proposing to adopt any PHP measures in future rulemaking.

Comment: One commenter recommended that CMS include the 60+ Days of

Service measure in the PHP measure suite as well as assessments of intensive outpatient programs that treat individuals with substance use disorders. Response: We thank the commenter for the recommendation and will consider this measure if we propose to adopt PHP meas ures in future rulemaking. We note that

Medicare does not cover inte nsive outpatient program (IOP) services, and this could

affect the usefulness of the recommende d measure for the Hospital OQR Program.

Comment: Some commenters encour aged CMS to develop specific PHP measures such as: (1) requiring PHPs to id entify a specific appoint ment within 14 days; (2) requiring continuing care information be provided directly to the follow-up provider; and (3) establishing Quality Service Criteria for use in judging performance, including criteria relating to access, treatment intensit y, discharge planning, and continuity of care. Response: We appreciate the commente rs’ suggestions. We support coordination of care efforts and will consider developi ng these types of measures for the Hospital OQR Program.CMS-1613-FC 747

Comment: One commenter argued that the Group Therapy measure should only be adopted as a percentage rating of group th erapy as a comparison to all interventions

billed. The commenter also noted that bot h group therapy and i ndividual psychotherapy are needed for optimal success. Response: We thank the commenter for sh aring its views. We are unclear what the commenter means by “a percentage rating of group therapy” and so cannot respond at this time. However, we welcome clarification and will consider all of the commenter’s concerns if we propose to adopt PH P measures in future rulemaking. Comment: One commenter voiced suppor t for our efforts in working toward electronic quality of care measures in the PHP setting of care. Response: We note that we did not speci fically discuss electronic quality-of-care measures for the PHP setting in the proposed ru le. However, we are working diligently to implement electronic measures across th e quality reporting programs, and we may consider electronic clinical quality meas ures for the PHP setting in the future.

We thank the commenters for their views and will consider them as we develop future policies.

3. Behavioral Health Measures In addition to PHP measures, we are c onsidering other measures specific to behavioral health in the outpatient setting, including measures a ddressing depression and alcohol abuse. Major depressi on is a leading cause of disabi lity in the United States, complicates the treatment of other serious illn esses, and is associated with an increased risk of suicide. Major depression is a co mmon mental health c ondition, affecting 6 toCMS-1613-FC 748

9 percent of those over 55 years of age. 24 Along with other serious mental health conditions, it has a higher Medi care inpatient read mission rate than all other conditions with the exception of heart failure. 25 Alcohol use disorders are the most prevalent type of

addictive disorder in i ndividuals ages 65 and over. 26 Roughly 6 percent of the elderly are considered to be heavy users of alcohol. 27 Alcohol abuse is of ten associated with depression and contributes to the etiology of serious medical conditions, including liver disease and coronary heart disease. Because of the prevalence of depression and alcohol abuse and their impact on the Medicare populat ion, we believe that we should consider

measures in these and other behavioral hea lth areas for use in future Hospital OQR Program payment determination years. Therefore, we invited public comment on measures applicable to these areas that w ould be suitable for the Hospital OQR Program. Comment: Many commenters supported CM S’ efforts to develop and implement quality measurement tools related to alc ohol abuse and depression because of the prevalence of these conditions within the Medicare population and the need to improve

care coordination for these conditions. Comm enters encouraged CMS to incorporate measures that address the following principles: (1) the patient’s readiness for treatment; (2) the treatment will address me ntal health issues in conjun ction with the alcohol abuse; and (3) the patient’s willingness to participat e in an alcohol abus e program without the

need for coerced efforts.

24 O’Connor E, Whitlock E, Beil T, et al. Screenin g for depression in adult patients in primary care settings: a systematic evidence revi ew. Annals of Internal Medicine 2009 December 1:151(11):793-803. 25 Stephen F. Jencks, M. D., M.P.H., Mark V. Williams, M.D.,and Eric A. Coleman, M.D., M.P.H. Rehospitalizations among Patients in the Medi care Fee-for-Service Pr ogram. N Engl J Med 2009;360:1418-28. 26 Stephen Ross. Alcohol Use Disorders in the Elderl y. Psychiatry Weekly (no date) Available at: http://www.psychweekly.com/aspx/artic le/ArticleDetail.as px?articleid=19. 27 AL Mirand and JW Welte. Alcohol consumption among the elderly in a general population, Erie County, New York. Am J Public Health. 1996 July; 86 (7): 978–984.CMS-1613-FC 749

Response: We thank commenters for th eir support, and we will consider these principles if we choose to propose to adopt behavioral health measures in the future. Comment: One commenter suggested adopting a measure that evaluates screening for psychological/physi cal or sexual trauma, arguing that trauma informed care

is critical to successful rec overy and better engagement and retention in ambulatory care. Response: We agree that this clinical topic is important, and we will consider adopting a measure screening for trauma in the future.

Comment: Some commenters argued that behavioral health measures are more suited to the IPFQR Program. Response: We disagree with this view. We believe all care settings should seek to improve the behavioral hea lth outcomes of their patients. Comment: One commenter recommended that CMS work with the NQF to develop appropriate measures related to be neficiary wellness concerns. The commenter noted that behavioral health quality measur es are used in the nursing home and home health care settings, and that these measures s hould be reviewed to determine if they are applicable to the outpatient setting. The commenter believe d that any measures used should be claims-based and not generated by chart abstraction to minimize administrative

burden. Response: We interpret “beneficiary wellness concerns” to mean measures of behavioral health. We endeavor to adopt measures that are NQF-endorsed and believe it

is critical to work with stak eholders to develop measures. However, we note that not all of the measures adopted by the Hospital OQR Program are NQF-endorsed, nor is NQF endorsement a program requirement (section 1833 (t)(17)(C)(i) of the Act) as consensusCMS-1613-FC 750

among affected parties can be reflected thr ough means other than NQF endorsement. In addition, to the extent feasible, we believe it is important to align measures across all our quality reporting programs, and we will look to other settings for measures of behavioral health. Finally, we will continue to examine options for less burdensome reporting mechanisms for these and other program measures in the future; this includes claims-based and electronically submitted data.

Comment: Some comment ers recommended that beha vioral health quality

measures not be considered at this tim e for the Hospital OQR Program, arguing that

additional research and education needs to be done to develop helpful behavioral

measures. Response: We will continue to resear ch appropriate measures and work with

stakeholders as we consider behavioral hea lth measures for the Hospital OQR Program in

the future. Comment: One commenter urged CMS to work with its behavioral health Technical Experts Panel (TEP) and the MAP to identify and bring forward behavioral

health measures that are suitable for th is population and for consideration by all

stakeholders. Response: We convene TEPs, groups of stakeholders and experts, to provide technical input on the development, selecti on, and maintenance of measures. Convening TEPs is one important step in the measure de velopment or reevaluation process to ensure transparency and it provides an opportunity to receive multi-stakeholders input early in the process. We refer readers to http://www.cms.gov/Medicare/ Quality-Initiatives-PatientAssessment-Instruments/MMS /TechnicalExpertPanels.html for more information on TEPs.CMS-1613-FC 751

We believe it is important to work with stak eholders as we develop and adopt behavioral health measures. We will leverage both TEPs and the MAP as we consider future

measures. Comment: One commenter recommended that CMS incorporate standardized

behavioral health measures th at are currently in widespread use, such as the National Center for Quality Assurance’s behavioral health measures. Response: We thank the commenter for its recommendation, and we will consider these measures for future rulemaking.

Comment: Some commenter s supported CMS’ efforts to identify depression and depression-related issues in the Medicare population. The commenters believed that an identification tool should be used for any new patient encounter and recommended that every Medicare provider shoul d be required to use a depre ssion screening tool at any initial patient screening/encounter. Some commenters, however, not ed that depression screening in the ambulatory setting is nearly universal, and, therefore, such a measure may be “topped-out” evenbefore adoption. Response: We thank commenters fo r their support. We interpret the commenters’ suggestions to mean that we should include measures that encourage providers to screen patients to identify depression. We will consider depression screening measures in the future.

We thank the commenters for their view s on behavioral health measures in the outpatient setting and will consider th em as we develop future policies.CMS-1613-FC 752

4. National Quality Strategy and CMS Quality Strategy Measure Domains In considering future Hospital OQR Pr ogram measures, we are focusing on the following National Quality Strategy and CMS Qu ality Strategy measure domains: make care safer, strengthen person and family e ngagement, promote effective communication and coordination of care, promote effec tive prevention and tr eatment, work with communities to promote best practices of h ealthy living, and make care affordable. We believe measures in these areas will promote better care and align measures across multiple CMS quality programs, in particul ar, the Hospital OQR, Hospital IQR, and ASCQR Programs. We received the following comments on these future measures. Comment: Many commenters supported th e Hospital OQR Program’s effort to align future measures with the NQS priori ties and CMS quality strategy, noting that doing so will make the Hospital OQR Program more consistent with the Hospital IQR Program. Commenters urged CMS to furthe r align our measures with other quality reporting programs. One commenter stat ed that CMS should respond to all MAP recommendations as part of any proposed rule so that stakeholders may gain a better understanding of our decisions, particularlywhen a MAP recommendation is not being

followed. Response: We thank the commenters for th eir support. To the extent practicable, we strive to align measures across our qual ity reporting programs. We also appreciate

the feedback of the MAP and work to addre ss its concerns before adopting measures in the Hospital OQR Program. As we stated above, to the extent feasible , we strive to state and address the MAP concerns when adopting a measure.CMS-1613-FC 753

Comment: Some comment ers recommended that CMS introduce measures to track and monitor radiation dose exposure and contrast dose exposure, including organ-specific radiation exposure based on pa tient weight and contrast administration, and a meaningful tracking mech anism for patient longitudina l exposure. One commenter noted that the PQRS program has included some similar measures giving radiologists an incentive to track patient exposure. In addition, the commenter noted that The Joint Commission, the FDA, and the EPA have all issued guidance recommending that exposure to radiation through me dical devices be minimized. Response: We thank the commenters for their recommendations, and we may consider these types of measures in future years. Comment: One commenter urged CMS to require hospitals to comply with all manufacturing standards for imaging equipment to facilitate patient safety and promote the overall quality of patient care in ho spitals. The commenter also recommended a measure tracking the demonstrated re duction in suboptimal or nondiagnostic echocardiograms and the resulting improvement s in diagnosis and re ductions in costs to

Medicare and beneficiaries. Response: We thank the commente r for its recommendation, and we may consider these types of measures in future years. Comment: One commenter encouraged the implementation of a CAHPS survey used to encourage patient experience improve ment across the ambulatory surgery sector. The commenter urged CMS to continue to anal yze and address the role of the survey and discuss the comparative roles of surveys acro ss other care settings and quality reportingCMS-1613-FC 754

programs. Another commenter encouraged CM S to involve consumers and purchasers in refinement of the CAHPS surveyfor the outpatient setting. Response: We thank the commenters for these suggestions. We intend to include such survey measures for the outpatient setting on our December 1, 2014 Measures under Consideration (MUC) List for MAP review. We currently use patient experience-of-care surveys in a variety of health care setti ngs. For example, both the ESRD QIP and the Hospital IQR Program use patient experience-o f-care surveys, the In-center Hemodialysis

Consumer Assessment of Healthcare Provi ders and Systems (ICH CAHPS) and the Hospital Consumer Assessment of Health care Providers and Systems (HCAHPS), respectively. We agree that, to the extent feasible, survey instruments should be aligned and coordinated across settings. The deve lopmental process of CAHPS and patient experience-of-care surveys involves several opp ortunities for input from patients, patient advocates, and stakeholders from the HOP D and ASC industry, in cluding professional associations, clinicians, accreditation or ganizations, and the government. These opportunities include serving on the TEP, responding to the Federal Register notice requesting measures, topics, or public domai n questionnaires, and providing comment on the survey through the OMB clearance process

. Comment: One commenter recomme nded that CMS target high volume procedures that may be unnecessary at the composite, individual hospital, and physician levels, including those that are part of the Choosing Wisely campaign. Response: We thank the commente r for its recommendation, and we may consider these types of measures in future years.CMS-1613-FC 755

Comment: One commenter requested that CMS risk-adjust measures of clinical

outcomes for SES in order to avoid disadvant aging hospitals, particularly safety-net hospitals that are eval uated on these outcomes. Response: We thank the commenter for th is feedback. We addressed the topic of risk adjustment with respect to the Ho spital IQR and Hospital Readmissions Reduction Programs in the FY 2015 IPPS/LTCH PPS fi nal rule (79 FR 50219 and 50026 through 50027), and we believe the same approach woul d apply to risk adjustment for Hospital OQR Program measures because the Hosp ital OQR Program outcome measures are risk-adjusted, and this appro ach aligns with outcome measures methodology used in other programs across settings. The purpose of risk adjustment when comparing outcome rates for two different outpatient faci lities is to statistically compensate (or adjust) for risk

factor differences in the two facilities so that the outcome rates can be compared legitimately despite the differences in risk factors. We appreciate the commenters’ suggesti ons on the importance of addressing SES in the Hospital OQR Program. We continue to consider and evaluate stakeholder concerns regarding the impact of pa tients’ SES on Hospital OQR measures. Comment: Many commenters urged CMS to adopt only NQF-endorsed measures for its quality reporting and pay-for-per formance programs, arguing that the consensus-based process validates quality meas ures’ rigor and ensures that the measures

have been are reliable and have been car efully tested, validated, and scrutinized.

Commenters also commended CMS for cons idering the MAP’s input in selecting measures, particularly because the MA P considers NQF endorsement, measures’ feasibility of implementation, stakeholder input, and validity.CMS-1613-FC 756

Response: We thank commenters for thei r support for the MAP process. To the extent feasible, we seek to adopt measures that have been NQF-endorsed. However, we also note that consensus among affected pa rties can be reflected through means other than NQF endorsement. We also refer reader s to our discussion above in section XIII.E. of this final rule with comment peri od in response to a similar comment. Comment: Commenters suggested that CMS consider adopting measures of HAIs, such as SSI, CLABSI, CAUTI, MRSA, and C. difficile , or infection control process measures, such as MRSA colonizat ion at admission or hand hygiene adherence, use of barrier precautions, or other process m easures. Commenters noted that infections

such as MRSA and C. difficile are a significant source of mo rbidity and mortality. One commenter encouraged CMS to develop co mposite measures of common surgical infections; another commenter requested that CMS adopt measures that have aligned data

elements with the CDC’s NHSN. Response: We agree that it is important to minimize infection events that present significant health risks to patients. We also believe that infection prevention measures provide information critical to quality im provement efforts. We note that several

measures that focus on these infections are already included in the Hospital IQR Program (79 FR 50202) and are aligned with the CDC’ s NHSN. We will consider including these types of measures for the outpatient setti ng in the Hospital OQR Program and aligning them with other quality reporting programs, such as the Hospital IQR Program, to the

extent feasible in future years.CMS-1613-FC 757

Comment: One commenter suggested that CMS consider measures of adverse outcomes from high-volume procedures such as cataract removals, other eye procedures, endoscopies, musculoskeletal pr ocedures, and colonoscopies. Response: We thank the commenter fo r its suggestion and may consider these types of measures in future years.

We thank the commenters for their views and will consider them as we develop future policies. G. Payment Reduction for Hospitals That Fa il to Meet the Hospital Outpatient Quality Reporting (OQR) Program Requirement s for the CY 2015 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 S ecretary will incur a 2.0 percentage point reduction to their Outpatient De partment (OPD) fee schedule in crease 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 i nvolved and will not be taken into account in computing the applicable OPD fee schedule increase factor for a subsequent payment

year. The application of a reduced OPD fee sc hedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are re quired to report outpatient qual ity data in order to receive the full payment update factor and that fail to meet the Hospital OQR ProgramCMS-1613-FC 758

requirements. Hospitals that meet the reporting requirements receive the full OPPS payment update without the reduction. For a more detailed discussion of how this payment reduction was initially implemen ted, we refer readers to the CY 2009

OPPS/ASC final rule with comm ent period (73 FR 68769 through 68772). The national unadjusted payment rates for many services paid under the OPPS equal the product of the OPPS c onversion factor and the scal ed relative payment weight

for the APC to which the service is assi gned. 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 (lis ted in Addendum B to this proposed rule, which is av ailable via the Internet on the CMS Web site): “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” or “U.” We note that we are finalizing our proposal to

delete status indicator “X”’ as described in s ections II.A.3. and X. of this final rule with comment period. We also note that we are finalizing our proposal to develop status indicator “J1” as part of our compre hensive APC policy, effective for CY 2015,

discussed in section II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910) and sections II .A.2.e. of the CY 2015 OPPS/ASC proposed rule and this final rule with comment period. Payment for all services assigned to these

status indicators will be s ubject to the reduction of the national unadjusted payment rates for hospitals that fail to meet Hospital OQR Program requirements, with the exception of services assigned to New Technology APCs with assigned status indicator “S” or “T.”

We refer readers to the CY 2009 OPPS/A SC final rule with comment period (73 FR 68770 through 68771) for a discussion of this policy.CMS-1613-FC 759

The OPD fee schedule increase factor is an input into the OPPS conversion factor, which is used to calculate OPPS payment rate s. 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 (tha t is, the full convers ion factor), and a reduced market basket conversion factor (tha t 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 ra tio as the “reporting ra tio” to indicate that it applies to payment for hospitals that fa il to meet their reporting requirements. Applying this reporting ratio to the OPPS pa yment amounts results in reduced national unadjusted payment rates that are mathemati cally equivalent to the reduced national unadjusted payment rates that would result if we multiplied the scaled OPPS relative payment weights by the reduced conversion factor. For example, to determine the reduced national unadjusted payment rates that applied to hospitals that failed to meet their quality reporting requirements for the CY 2010 OPPS, we multiplied the final full national unadjusted payment rate found in Addendum B of the CY 2010 OPPS/ASC final rule with comment period by the CY 2010 OPPS final 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 Me dicare beneficiary’s minimum unadjusted copayment and national unadjusted copayment fo r a service to which a reduced national unadjusted payment rate applies would each equal the product of th e reporting ratio and the national unadjusted copayment or the mini mum unadjusted copayment, as applicable, for the service. Under this policy, we a pply the reporting ratio to both the minimumCMS-1613-FC 760

unadjusted copayment and national unadjus ted copayment for services provided by hospitals that receive the payment reduction for failure to meet the Hospital OQR Program reporting requirements. This appli cation of the reporting ratio to the national unadjusted and minimum unadjusted copaymen ts 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 applicab le adjustments to the OPPS national unadjusted payment rates apply when the OPD fee schedule increase factor is reduced for hospitals that fail to meet the requirements of the Hospital OQR Program. For example, the following standard adjustments apply to the reduced national unadjusted payment rates: the wage index adjustment; the multiple procedure adjustment; the interrupted procedure adjustment; the rural sole community hospital adjustment; and the adjustment for devices furnished with full or partial cr edit or without cost. Similarly, OPPS outlier payments made for high cost and complex proc edures will continue to be made when outlier criteria are met. For hospitals th at fail to meet the quality data reporting requirements, the hospitals' costs are compared to the reduced payments for purposes of outlier eligibility and paymen t calculation. We establishe d this policy in the OPPS beginning in the CY 2010 OPPS/ASC final ru le with comment period (74 FR 60642). For a complete discussion of the OPPS outlier calculation and eligibility criteria, we refer

readers to section II.G. of this final rule with comment period.CMS-1613-FC 761

2. Reporting Ratio Application and Asso ciated Adjustment Policy for CY 2015 In the CY 2015 OPPS/ASC proposed ru le (79 FR 41017), we proposed to continue our established po licy of applying the reducti on 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 2015 annual payment update factor. For the CY 2015 OPPS, the proposed reporting ratio is 0.980, calculated by dividing the proposed reduced conversion factor of $72.692 by the proposed full conversion factor of $74.176. We proposed to continue to apply the reporting ratio to all services calculated using the OPPS conversion factor. For th e CY 2015 OPPS, we proposed to apply the reporting ratio, when applicable, to all HCPC S codes to which we have assigned status indicators “P,” “Q1,” “Q2,” “Q3,” “R,” “S ,” “T,” “V,” and “U” (other than new technology APCs to which we ha ve assigned status indicato rs “S” and “T”). We note that we are finalizing our proposal to delete status indicator “X” as described in sections II.A.3. and X. of the proposed rule and this fi nal rule with comment period. We note that we are finalizing our proposal to develop status indicator “J1” as part of our CY 2015 comprehensive APC policy, discussed in se ctions II.A.2.e. of the CY 2015 OPPS/ASC proposed rule and this final rule with comme nt period and to apply the reporting ratio to the comprehensive APCs. We proposed to co ntinue to exclude se rvices paid under New Technology APCs. We proposed to continue to apply the reporting ra tio to the national unadjusted payment rates and the mini mum unadjusted and national unadjusted copayment rates of all applicable services for those hospitals that fail to meet the Hospital OQR Program reporting requirements. We also proposed to continue to apply all other applicable standard adjustments to the OPPS national unadjusted payment rates forCMS-1613-FC 762

hospitals that fail to meet the requirements of the Hospital OQR Program. Similarly, we proposed to continue to calculate OPPS outlie r eligibility and outlier payment based on the reduced payment rates for t hose hospitals that fail to meet the reporting requirements. We did not receive public comments on our proposal. Therefore, we are finalizing our proposal to apply the Hosp ital OQR Program reduction in the manner described above. We also are finalizing our proposal, with modification, to reflect the

CY 2015 OPPS status indicators to which the adjustment would apply. For the CY 2015 OPPS, the final reporting ratio is 0.980, calculated by dividing the final reduced conversion factor of $72.661 by the fi nal full conversion factor of $74.144. As a result, for the CY 2015 OPPS, we are applying a reporting ratio of 0.980 to the national unadjusted payments, minimu m unadjusted copayments, and national unadjusted copayments for all applicable servi ces for those hospitals failing to meet the Hospital OQR Program reporting requirements. This reporting ratio applies to HCPCS codes assigned status indicator s “J1,” “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” or “V,” excluding services paid under New Technology APCs. All other applicable standard adjustments to the OPPS national unadj usted payment rates for hospitals that fail to meet the requirements of the Hospital OQR Program will continue to apply. We continue to calculate OPPS outlier eligibilit y and outlier payment based on the reduced rates for those hospitals that fail to meet the reporting requirements.CMS-1613-FC 763

H. Requirements for Reporting Hospital OQR Program Data for the CY 2017 Payment Determination and Subsequent Years 1. Administrative Requirements for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75108 through 75109) for a discussion of the Hospital OQR Program procedural requirements for the CY 2015 payment determinati on and subsequent years. In that final rule with comment period, we codified these procedural requirements at 42 CFR 419.46(a). 2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program

a. General Proce dural Requirements

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75110 through 75111) for a discussi on of Hospital OQR Program general procedural requirements. In that final rule with comment pe riod, we finalized our proposal to codify these general proce dural requirements at 42 CFR 419.46(c). In the CY 2015 OPPS/ASC proposed rule (79 FR 41042), we proposed to correct a typographical error in 42 CFR 419.46(c). This section stat es, “Except as provided in paragraph (d) of this section, hospitals that participate in the Hospital OQR Program must

submit to CMS data on measures selected under section 1833(17)(C) of the Act . . .” We proposed to correct the erroneous refere nce of “section 1833( 17)(C)” to “section 1833(t)(17)(C).” We invited public comment on this proposal.CMS-1613-FC 764

We did not receive any public comment s on this proposal. Therefore, we are finalizing the typographical correction as proposed. b. Requirements for Chart-Abstracted Measur es Where Data Are Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years The following chart-abstracted measures fi nalized previously and retained in the Hospital OQR Program require data to be submitted for the CY 2017 payment determination and subsequent years:

● OP-1: Median Time to Fibrinolysis;

● OP-2: Fibrinolytic Therapy Receiv ed Within 30 Minutes of ED Arrival (NQF # 0288);

● OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention (NQF # 0290);

● OP-4: Aspirin at Arrival (NQF# 286)

● OP-5: Median Time to ECG (NQF # 0289);

● OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients (NQF # 0496);

● OP-20: Door to Diagnostic Evalua tion by a Qualified Medical Professional;

● OP-21: ED – Median Time to Pa in Management for Long Bone Fracture (NQF # 0662);

● OP-22: ED – Left Without Being Seen;

● OP-23: ED – Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interp retation Within 45 Minutes of Arrival (NQF # 0661);CMS-1613-FC 765

● OP-29: Endoscopy/Polyp Surveillance : Appropriate Follow-up Interval for Normal Colonoscopy in Average Ri sk Patients (NQF # 0658); and

● OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoi dance of Inappropriate Use (NQF # 1536).

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68481 through 68484) for a discussion of the form and manner for data

submission of these measures.

As we noted in the CY 2015 OPPS/ASC proposed rule (79 FR 41042), we neither proposed new chart-abstracted measures where pa tient-level data is s ubmitted directly to CMS nor proposed new requirements for data submission for chart-abstracted measures. c. Claims-Based Measure Data Requirements for the CY 2017 and CY 2018 Payment Determination and Subsequent Years We proposed one additional claims-based measure for the CY 2017 payment determination and subsequent years, OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy (79 FR 41036 through 41039). However, as

discussed in section XIII.E. of this final ru le with comment period, we are finalizing this measure for the CY 2018 payment determination and subsequent years instead of the CY 2017 payment determination and subsequentyears as proposed. As discussed in

section XIII.E. of this final rule with co mment period, we will us e claims data from January 1, 2016 – December 31, 2016 to calculate OP-32 for the CY 2018 payment

determination in order to use the most rece ntly available data. Therefore, we are finalizing that to calculate OP-32, we will us e claims data from January 1 – December 31 of the calendar year 2 years pr ior to the payment determinati on year (for example, for theCMS-1613-FC 766

CY 2018 payment determination, we will use data from January 1, 2016 – December 31, 2016). Therefore, there will be a total of se ven claims-based measures for the CY 2017 payment determination and subsequent years:

● OP-8: MRI Lumbar Spine for Low Back Pain (NQF # 0514);

● OP-9: Mammography Follow-Up Rates;

● OP-10: Abdomen CT – Us e of Contrast Material;

● OP-11: Thorax CT – Use of Contrast Material;

● OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non-Cardiac Low Risk Surgery (NQF # 0669);

● OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT); and

● OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache. For the CY 2018 payment determination and subsequent years, there will be a total of eight claims-based measures:

● OP-8: MRI Lumbar Spine for Low Back Pain (NQF # 0514);

● OP-9: Mammography Follow-Up Rates;

● OP-10: Abdomen CT – Us e of Contrast Material;

● OP-11: Thorax CT – Use of Contrast Material;

● OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non-Cardiac Low Risk Surgery (NQF # 0669);CMS-1613-FC 767

● 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; and

● OP-32: Facility 7-Day Risk-Standardi zed Hospital Visit Rate after Outpatient Colonoscopy.

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75111 through 75112) for a discussion of the claims-based measure data submission requirements for the CY 2015 payment determination and subsequent years. In the CY 2012 OPPS/ASC final rule with comment period, we deferred the public reporting of OP-15 (76 FR 74456). We extended the postponement of public reporting for this measure in the CY 2013 and CY 2014 OPPS/ASC final rules with comment period (77 FR 68481, 78 FR 75111). As we noted in the CY 2015 OPPS/ASC proposed rule (79 FR 41042), we did not propos e any changes to this policy. Public reporting for OP-15 continues to be deferre d, and this deferral has no effect on any payment determinations; however, hospitals are still required to submit data as previously finalized (76 FR 74456). Comment: One commenter supported the proposed deferra l of the public reporting of OP-15. The commenter appreciate d CMS’ concerns regarding inappropriate use of brain CT imaging and the need for an established clinical guideline to address this issue. However, the commenter did not beli eve older adults or adults on anticoagulant medications should be included in OP-15, a nd noted that current research suggests headaches are a potential contraindication. The commenter also e xpressed concern thatCMS-1613-FC 768

claims are not detailed enough to capture the clinical indica tions needed for appropriate exclusions. As a result, the commenter was concerned that this measure may discourage clinically appropriate brai n CTs for higher-risk older populations. The commenter

believed that CMS should focus its efforts on other CT measures, particularly after trauma or suspected pulmonary embolism. Another commenter asked CMS to remove

OP-15 from the measure set. Response: Given stakeholder concerns, including those of this commenter, we

continue to evaluate whether OP-15 needs to be refined before bei ng publicly reported. We continue to believe, for the reasons st ated in the CY 2012 OPPS/ ASC final rule with comment period (76 FR 74456), that the measur e has value, and we will continue to collect data with regard to th is measure. However, we will also continue to defer public reporting until we have resolved these concer ns. Because the measure is claims-based,

this deferral does not affect data submi ssion requirements for the Hospital OQR Program (that is, HOPDs do not submit data for claims-b ased measures other than the actual FFS claims), and an HOPD’s payment determination will not be affected based on OP-15 while public reporting is deferred. d. Data Submission Requirements for Measure Data Submitted via the CMS Web-Based Tool for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75112 through 75115) for a discussion of the requirements for measure data submitted via the Web-based tool on a CMS Web site (the QualityNet Web site) for the CY 2016 payment determination and subsequent years.CMS-1613-FC 769

In the CY 2015 OPPS/ASC proposed rule (79 FR 41042), we did not propose any changes to the data submission requirement s for data submitted via the CMS Web-based

tool. e. Population and Sampling Data Requireme nts for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2011 OPPS/A SC final rule with comment period (75 FR 72100 through 72103) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74482 through 74483) for discussi ons of our policy that hospitals may voluntarily submit aggregate population and sample size counts for Medicare and non-Medicare encounters for the measure populations for which chart-abstracted data

must be submitted. In the CY 2015 OPPS/AS C proposed rule (79 FR 41042), we did not propose any changes to this policy.

f. Review and Corrections Period for Chart-Abstracted Measures Under the Hospital OQR Program, hospitals submit chart-abstracted data to CMS on a quarterly basis. These data are typically due 4 months after the quarter has ended, unless we grant an extension or exception, as fu rther described in sec tion XIII.J. of this final rule with comment period. We refer readers to the CY 2014 OPPS/ASC final rule with comment period for a discussion of our previously finalized policies regarding

submissions deadlines for chart-abstracted measures (78 FR 68482). Hospitals may begin submitting data on the first discharge day of any reporting quarter and can modify this data up until the close of the submissi on period (or 4 months after the quarter has ended). For example, if a hospital enters data on January 2, it could continue to review, correct, and change these data until August 1, the first quarter submission deadline. WeCMS-1613-FC 770

generally provide rates for the measures that have been submitted for chart-abstracted, patient-level data 24 to 48 hours following submission. Hospitals are encouraged to submit data early in the submission schedule so that they can identify errors and resubmit data before the quarterly submission deadline. In the CY 2015 OPPS/ASC proposed rule (79 FR 41042 through 41043), we proposed to formalize this 4-month period as the review and corrections period for chart-abstracted data for the Hospital OQR Program. During this re view and corrections period, hospitals can enter, review, and co rrect data submitted di rectly to CMS. However, after the submission deadline, hospita ls would not be allo wed to change these

data. We believe that 4 months is sufficient time for hospitals to perform these activities. We invited public comment on this proposal. Comment: Many commenters did not suppor t CMS’ proposal to have the data submission period run concurrently with the review and corrections period, stating that CMS allows a separate time period for review and corrections for nearly all of CMS’ other quality reporting programs. Comment ers specifically stated that, with the proliferation of quality measures in each of CMS’ quality reporting programs, hospitals need all of the time currently afforded to capture and report data accurately. Commenters recommended that CMS provide at least 30 days immediately after the submission deadline to allow hospitals to review and correct their data. Response: We disagree with the comme nters who believed thatour other quality reporting programs have a separate review a nd corrections period. Providers may review their data during the submission period, but ar e not afforded time after this period to correct their data. We note that our proposed review and corrections period is consistentCMS-1613-FC 771

with the informal review and corrections period of other quality reporting programs, including the Hospital IQR Program. As stated in the proposed rule ( 79 FR 41042-41043), hospitals typically have 4 months to submit, review, and correct th eir chart-abstracted data, and we merely proposed to formalize this time period as th e review and corrections period. We believe that 4 months is adequate because hospitals ha ve been using this period of time to submit, view, and correct their chart-abstracted data for the life of the pr ogram. We strongly encourage hospitals to submit their data as early as possible so they can take full advantage of the time needed for review and correction. In add ition, the length of time

for data submission for chart-abstracted data th at is validated affects the timeliness of the validation process; additional time would fu rther lengthen the time from when care is rendered to when data can be made publicly available.

After consideration of th e public comments we receive d, and consistent with our policy in other quality reporting programs, we are finalizing the 4 months review and corrections period as proposed. We strongly en courage hospitals to submit their data to CMS as early as possible to have the maxi mum time to review and correct their data. 3. Hospital OQR Program Validation Requireme nts for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent

Years a. Background

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68484 through 68487) for a discussion of finalized policies regarding our validation requirements. We codified these policies at 42 CFR 419.46(e). In theCMS-1613-FC 772

CY 2015 OPPS/ASC proposed rule (79 FR 41043 through 41044), we proposed three changes to our validation procedures: (1 ) we proposed to change the eligibility requirements for hospitals selected for validation so that a hospital would be eligible if it submits at least one case to the Hospital OQR Program Clinical Data Warehouse during the quarter containing the most recently availa ble data; (2) we proposed to give hospitals the option to either submit pape r copies of patient charts or securely transmit electronic

versions of medical information for validatio n; and (3) we proposed that a hospital must identify the medical record staff responsible for submission of records under the Hospital OQR Program to the designated CMS contractor. b. Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2012 a nd CY 2013 OPPS/ASC final rules with comment period (76 FR 74484 through 74485 and 77 FR 68484 through 68485) for a discussion of finalized policies regardi ng our sampling methodology, including sample size, eligibility for validation selection, and encounter minimums for patient-level data

for measures where data is obtained from chart abstraction and submitted directly to CMS from selected hospitals. In the CY 2015 OPPS/ASC proposed ru le (79 FR 41043), we proposed one change to this process. Pr eviously, to be eligible for random selection for validation, a hospital must have been coded as “open” in the CASPER system at th e time of selection and must have submitted at least 10 encounters to the Clinical Data Warehouse during the data collection period for the applicable payment determination (76 FR 74484). We proposed that, beginning with the CY 2015 encounter period for the CY 2017 paymentCMS-1613-FC 773

determination and subsequent years, a hospital will be eligible for validation if it submits at least one case to the Hospital OQR Pr ogram Clinical Data Warehouse during the quarter containing the most re cently available data. The quarter containing the most recently available data will be defined base d on when the random sample is drawn. For example, if we draw a sample in December 2014, the most recent data available would be that from the second quarter of 2014, which ends June 2014, because the submission deadline for second quarter data would be November 1, 2014 ( https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQn

etTier2&cid=1205442125082 ; 78 FR 68482). As another exampl e, if a sample is drawn in October 2014, the most recent available data would be from quarter one, which ended in March 2014, because data must have been submitted by August 1, 2014. We believe this change is necessary because it increases the probability that selected hospitals have

current data in the Clinical Data Warehouse to be validated. Previ ously, hospitals that did not have data from the current year ava ilable could still be selected for validation. We invited public comment on this proposal. Comment: Many commenters supported CMS’ proposal to allow a hospital to be eligible for validation if it submits at l east one case to the Hospital OQR Program Clinical Data Warehouse during the quarter with the most recently available data. One commenter, however, recommended that CMS cha nge the number of cases for a facility to be eligible for validation from at leas t 1 case to at least 12 cases because up to 12 records are required per hospital per quart er for validation. Co mmenters also urged CMS to evaluate the appropria teness of hospital selection ba sed on this narrower criterion and to propose refinements, if necessary, in the future.CMS-1613-FC 774

Response: We thank commenters for thei r support. We agree with the suggestion that a hospital should only be eligible for random selection for validation if it submits at least 12 cases to the Hospital OQR Program Clinical Data Warehouse during the quarter with the most recently available data. As the commenter noted, currently, when a hospital is selected for validation, we request up to 12 cases per quarter per hospital. We stated our rationale for requesting up to 12 cases per quarter in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74486), where we explained that we attempt to balance burden to hospitals with data accurac y. Accordingly, we recognize that allowing a hospital to be eligible for random selecti on for validation if it is “open” or requiring only one case in the quarter containing the most recently available data may not allow us an adequate number of records to ensure data submitted by the hospital is valid and are modifying our proposal accordi ngly to align with our vali dation procedures and goals.

After consideration of the public comments we rece ived, and for the reasons stated above, we are finalizing our proposal with a modification that, beginning with the CY 2015 encounter period for the CY 2017 paymen t determination and subsequent years, a hospital will be eligible fo r random selection for validation if it submits at least 12 cases, instead of just 1 as proposed, to the Hospital OQR Program Clinical Data Warehouse during the quarter cont aining the most recently available data. The quarter containing the most recently available data will be defined based on when the random sample is drawn.CMS-1613-FC 775

c. Targeting Criteria for Data Valid ation Selection for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68485 through 68486) for a discussion of our targeting criteria. In the CY 2015 OPPS/ASC proposed rule (79 FR 41043), we did not propose any changes to these policies. d. Methodology for Encounter Selection fo r the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68486) for a discussion of our met hodology for encounter selection. In the CY 2015 OPPS/ASC proposed rule (79 FR 41043) , we did not propose any changes to this policy. e. Medical Record Documentation Reque sts for Validation and Validation Score Calculation for the CY 2017 Payment De termination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68486 through 68487) for a discussion of our previously finalized procedures for requesting medical record documentation for va lidation and validation score calculation.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75118), we codified these procedures at 42 CFR 419.46(e)(1) a nd (e)(2). In the CY 2015 OPPS/ASC proposed rule (79 FR 41043 through 41044), we proposed two changes to these policies for the CY 2017 payment determination and subse quent years: (1) we proposed to give hospitals the option to either submit paper copi es of patient charts or securely transmit

electronic versions of medical information fo r validation; and (2) we proposed that aCMS-1613-FC 776

hospital must identify the medical record st aff responsible for submission of records under the Hospital OQR Program to the designated CMS contractor.

For records stored electr onically, hospitals expend a dditional resources printing records onto paper that may be more effici ently transmitted electronically. In addition, the length of paper charts ha s been increasing, and the paper used to submit these records has an environmental impact. Therefore, we proposed to give hospitals the option to either submit copies of paper patient charts or securely transmit electronic versions of medical information, which has the potentia l to significantly reduce administrative burden, cost, and environmental impact. We have already finalized a similar policy for the Hospital IQR Program in the FY 2014 IPPS/LTCH PPS fina l rule (78 FR 50834 through 50836) that allows hospitals for the Hospital IQR Program to submit electronic records through the mail on a CD, DVD, or fl ash drive. In addition, in the FY 2015 IPPS/LTCH PPS final rule for the Hospital IQR Program (79 FR 50269), we finalized our proposal to also allow hospitals to submit patient charts using a Secure File Transfer Portal on the QualityNet Web site. The current Hospital OQR Program re gulation at § 419.46(e)(1) states: ‘‘Upon written request by CMS or its contractor , a hospital must submit to CMS supporting medical record documentation that the hospi tal used for purposes of data submission under the program. . . .” We proposed that this requirement may be met by employing either of the following options for the CY 2017 payment determination and subsequent years: (1) a hospital may submit paper medi cal records, the form in which we have historically requested them; or (2) a hospital may securely transmit el ectronic versions of

medical information.CMS-1613-FC 777

For the CY 2017 payment determination and subsequent years, we proposed that hospitals that chose to securely transmit electronic versions of medical information should either: (1) download or copy the digital image (that is , PDF) of the patient chart onto CD, DVD, or flash drive and ship th e electronic media following instructions specified on the QualityNet Web site; or (2) securely submit digital images (PDFs) of patient charts using a Secure File Transfer Portal on the QualityNet Web site. The Secure File Transfer Portal would allow hospitals to transfer files thr ough either a Web-based portal or directly from a client application using a secure file transfer protocol. The system provides a mechanism for securely exchanging documents containing sensitive

information such as Protected Health In formation (PHI) or Personally Identifiable Information (PII). Detailed instructions on how to use this system are available in the

Secure File Transfer 1.0 User Ma nual available on QualityNet at: http://www.qualitynet.org/dcs/ContentServer?c= Page&pagename=QnetPublic%2FPage%2FQnet

Basic&cid=1228773343598

. In addition, in the CY 2013 OPPS/AS C final rule with comment period (77 FR 68486 through 68487), we stated that our validation contra ctor would request medical documentation from each hospital sel ected for validation via certified mail or other trackable method. This request would be sent 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 the State QIO)” (77 FR 68487). Quality Improvement Or ganizations (QIOs) are CMS contractors required by the Act (section 1152 through 1154) tasked with, among other responsibilities, assisting hospitals with quality improvement activities. Due to the evolution of the structure of the QIO pr ogram, beginning with CY 2015 for the CY 2017CMS-1613-FC 778

payment determination and subsequent years, we proposed that a hos pital must identify the medical record staff responsible for submission of records under the Hospital OQR Program to the designated CMS contractor; th is CMS contractor may be a contractor other than the State QIO. Finally, we noted that a typographical error exists in our validation language in § 419.46(e). This section states, “CMS may validate one or more measures selected under section 1833(17)(C) of the Act . . . .” “[S]ection 1833(17)(C)” should instead state “section 1833(t)(17)(C). ” We proposed to make this change in the regulation text. We invited public comment on these proposals. Comment: Commenters supported CMS’ pr oposal to offer hospitals the option to submit, for validation purposes, either paper copies of pati ent charts or to securely

transmit electronic versions of medical info rmation using either electronic media (for example, CD, DVD, flash drive) or PDFs subm itted using the Secure File Transfer Portal on the QualityNet Web site. Commenters note d that the prevalence of electronic medical

records lends itself well to elec tronic submission of records. Response: We thank commenters for th eir support and we agree with their

comments. Comment: Commenters supported CMS’ pr oposal to require hospitals to identify the medical record staff responsible for su bmitting validation records for the Hospital OQR Program, but requested that CMS make ev ery effort to work with State hospital

associations to ensure that the correct individuals have b een identified through this new process. Commenters also requested that CM S require contractors to update their lists quarterly to ensure that in formation is kept current.CMS-1613-FC 779

Response: We thank commenters for their support. We will consider commenters’ concerns when instructing our contractors to keep validation contacts up-to-date, and, to the extent feasible, we will attempt to work with state hospital

associations.

After consideration of th e public comments we receive d, we are finalizing our proposals: (1) to give hospitals the option to either submit: (a) paper copies of patient charts; or (b) electronic vers ions of medical information by: (i) downloading or copying the digital image (that is, PDF) of the pati ent chart onto encrypted CD, DVD, or flash drive and shipping the encrypted electronic media following in structions specified on the QualityNet Web site; or (ii) securely submitting PDFs of patient charts using a Secure File Transfer Portal on the QualityNet Web site; (2) that hospitals must identify the medical record staff responsible for subm ission of records under the Hospital OQR Program to the designated CMS contractor as proposed; and (3) to correct our typographical error in regulation text to read “section 1833(t)(17)(C)” as proposed. I. Hospital OQR Program Reconsiderati on and Appeals Procedures for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68487 through 68489) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75118 through 75119) for a discussi on of our reconsideration and appeals procedures. We codified this process by which participating hospitals may submit requests for reconsideration at 42 CFR 419.46( f). We also codified language at § 419.46(f)(3) stating that a hosp ital that is dissatisfied w ith a decision made by CMS onCMS-1613-FC 780

its reconsideration request may file an app eal with the Provider Reimbursement Review

Board. In the CY 2015 OPPS/ASC proposed rule (79 FR 41044), we did not propose any changes to the reconsiderat ion and appeals procedures. J. Extension or Exception Process for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment period (78 FR 75119 through 75120), and 42 CFR 419.46(d) for a comp lete discussion of our extraordinary circumstances extension or waiver process under the Hospital OQR Program. In the CY 2015 OPPS/ASC proposed rule (79 FR 41044) , we did not propose any substantive changes to these policie s or the processes. However, in the future, we will refer to the process as the Extraordinary Circumstances Extensions or Exemptions process, instead of the Extraordinary Circumstances Extensions or Waiver process. We are in the pr ocess of revising the Extraordinary Circumstances/Disaster Extens ion or Waiver Request form (CMS-10432), approved under OMB control number 0938-1171. We are updating the forms and instructions so that a hospital or facility may apply for an extension for all applicable quality reporting programs at one time. In addition, we proposed to make a conforming change from the phrase “extension or waiver” to the phrase “exten sion or exemption” in 42 CFR 419.46(d). We proposed to revise the language in 42 CFR 419.46(d) at79 FR 41081 (July 14, 2014) to state that CMS may grant an exte nsion or exception of one or more dataCMS-1613-FC 781

submission deadlines and requirements in th e event of extraordinary circumstances beyond the control of the hospital, such as whenan act of nature affects an entire region or locale or a systemic problem with one of CMS’ data collection systems directly or indirectly affects data subm ission. CMS may grant an extension or exception as follows:

• Upon request by the hospital. Specifi c requirements for submission of a request for an extension or exception are available on the QualityNet Web site.

• At the discretion of CMS. CMS may grant exceptions or extensions to hospitals that have not requested th em when CMS determines that an extraordinary circumstance has occurred. We invited comments on this proposal. Comment: Commenters supported CMS’ decision to update the forms and instructions for the extension or exception pr ocess so that a hospital may apply for an extension for all applicable quality programs at one time. Response: We thank co mmenters for their support.

After consideration of th e public comments we receive d, we are finalizing our proposal to change the phra se “extension or waiver” to the phrase “extension or exemption” at 42 CFR 419.46(d) as proposed. XIV. Requirements for the Ambulator y Surgical Center Quality Reporting (ASCQR) Program A. Background

1. Overview

We refer readers to section XIII.A.1. of th is final rule with comment period for a general overview of our qua lity reporting programs.CMS-1613-FC 782

2. Statutory History of th e Ambulatory Surgical Center Quality Reporting (ASCQR) Program

We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 through 74493) for a detailed discussion of the statutory history of the ASCQR Program. 3. Regulatory History of the ASCQR Program

We refer readers to section XV.A.3. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75122) for an overview of the regulatory history of the ASCQR Program. B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68493 through 68494) for a detailed discu ssion of the priorities we consider for ASCQR Program quality measure selection. 2. Policy for Removal of Quality Measures from the ASCQR Program We previously adopted a policy to reta in measures from the previous year’s ASCQR Program measure set for subsequent ye ars’ measure sets except when they are removed, suspended, or repl aced as indicated (76 FR 74504; 77 FR 68494 through 68495; 78 FR 75122). In the CY 2015 OPPS/ASC proposed rule (79 FR 41045), we proposed a process for removing adopted measures.

In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43863 through 43865), we finalized a process for immediat e retirement (a term we later changed to “removal”) of RHQDAPU Program (now referred to as th e Hospital IQR Program) measures based onCMS-1613-FC 783

evidence that the continued use of the measure as specified raised patient safety concerns. We stated that we believe immediate retirement of quality measures should occur when the clinical evidence suggests that continued collection of the data may result in harm to patients. For example, we removed the AMI-6 : Beta Blocker at Arrival measure from the Hospital IQR Program because it encour aged care that raised potential safety concerns according to newly published rese arch suggesting that beta-blockers could increase mortality risks for certain patie nt populations (74 FR 43863). Under such circumstances, we may not be able to wait until the annual rulemaki ng cycle or until we have had the opportunity to obtain input from the public to retire a measure because of the need to discourage potent ially harmful practices, whic h may result from continued

collection of the measure. In these situations, we would promptly retire the measure and notify hospitals and the public of the retirement of the measure and the reasons for its retirement through the usual communication channels. Further, we w ould confirm the retirement of the measure that was the subject of immedi ate retirement in the next prog ram rulemaking. Finally, we stated that, in other circumstances where we do not believe that continued use of a measure raises specific safety concerns, we in tend to use the rulema king process to retire

the measure. For the same reasons stated for the Hospital IQR Program, we believe that this process also would be appropriate fo r the ASCQR Program. Therefore, in the CY 2015 OPPS/ASC proposed rule (79 FR 41045) , we proposed to adopt this same removal process for the ASCQR Program. U nder this process, we would immediately remove an ASCQR Program measure based on evidence that the continued use of the measure as specified raised patient safety concerns. In these situations, we wouldCMS-1613-FC 784

promptly remove the measure and notify AS Cs and the public of the removal of the

measure and the reasons for its removal th rough the ASCQR Program ListServe and the ASCQR Program QualityNet Web site at: http://www.qualitynet.org/dcs/ContentServer?c= Page&pagename=QnetPublic%2FPage%2FQnet

Tier2&cid=1228772879650 . Further, we would confirm th e removal of the measure that was the subject of immediate remova l in the next OPPS/ASC rulemaking.

For situations where we do not believe the continued use of a measure raises specific safety concerns, we proposed to use the regular rulemaking process to remove a measure to allow for public comment. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53505 through 53506), we listed the criter ia we have used to determine whether to remove measures from the Hospital IQR Pr ogram. These criteria are: (1) measure performance among hospitals is so high and unva rying that meaningful distinctions and improvements in performance can no longe r 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 orpractice; (4) the availability of a more broadly applicable (across settings, popul ations, or conditions) measure for the topic; (5) the availability of a measure that is more proximal in time to desired patient outcomes for the pa rticular topic; (6) the availa bility of a measure that is more strongly associated with desired patie nt outcomes for the particular topic; and (7) collection or public reporting of a measur e leads to negative unintended consequences other than patient harm. These criteria were suggested through public comment on proposals for the Hospital IQR Program, and we agreed that these criteria should be considered in evaluating the Hospital IQR Program quality measures for removal (75 FR 53506). We believe that these criteria also are applicable in evaluating ASCQRCMS-1613-FC 785

Program quality measures for removal because we have found them useful for evaluating measures in the Hospital IQR Program and our other quality reporting programs, which share similar goals to the ASCQR Program. Accordingly, we proposed to adopt these measure removal criteria for the ASCQR Program. We invited public comment on these proposals. Comment: Many commenters supported CMS’ proposed measure removal policy and commended CMS for fostering an aligned approach for measures removal criteria across our quality reporting and value-based purchasing programs. Response: We thank the commenters for their support. We agree that for consistency, an approach to removing meas ures should be aligned across our quality reporting and value-based purchasing programs to the extent possible. Comment: One commenter supported CM S’ proposal to immediately remove measures that raise public safety concerns. The commenter recommended that CMS notify ASCs by mail and also post notifica tion on the CMS Web si te on the ASCQR Web page under the “Announcements” heading, in addition to communication through the ASCQR Program ListServe and the QualityNet Web site. Response: We thank the commente r for supporting our proposal and the suggestions for notifying ASCs. Past experi ence indicates that th e current notification process using the QualityNet Web site and the ASCQR Program ListServe is a fast, efficient, and effective mean s of publicly communicating information about the ASCQR Program, and using this pro cess would be consistent with how other ASCQR Program information is provided. Therefore, we are not including these additional modes of communication with ASCs for purposes of ASCQR Program notices at this time.CMS-1613-FC 786

Comment: One commenter believed that proposed measure removal criteria (2) (availability of alternativ e measures with a stronger rela tionship to patient outcomes) and (6) (the availability of a measure that is more strongly as sociated with desired patient outcomes for the particular topic) are duplica tive, and that criterion (2) should read as “performance or improvement on a measure do es not result in bette r patient outcomes.” The commenter also suggested that criterion (3) (a measur e does not align with current clinical guidelines or practice) and crite rion (7) (collection or public reporting of a measure leads to negative unintended conseque nces other than patient harm) should be applied to all measures, but the remaining crit eria should be applied more selectively on a measure-by-measure basis. Response: We thank the commenter fo r these recommendations. We disagree

with the commenter that crite rion (2) and criterion (6) are the same and that criterion (2) should be reworded as suggested. Criteri on (2) applies when there is more than one

alternative measure with a str onger relationship to patient outc omes that is available, and criterion (6) applies where ther e is only one measure that is strongly and specifically associated with desired patient outcomes for th e particular topic that is available. For criterion (2), there may be different alternativ e measures available that meet this criterion to different degrees. The suggestion to rephr ase criterion (2) to read “performance or improvement on a measure does not result in be tter patient outcomes” would change the meaning of criterion (2). As we discuss earlier, the measure rem oval criteria have been developed through public comment on proposals for the Hospital IQR Program. We believe that these criteria also are applicable in evaluati ng the ASCQR Program quality measures forCMS-1613-FC 787

removal, because we have found them useful for evaluating measures in the Hospital IQR Program as well as other quality reporting programs, which share similar goals to the ASCQR Program. We note that we did not propose any changes to criterion (2) in the CY 2015 OPPS/ASC proposed rule. Further, based on our experien ce with the Hospital IQR Program, we believe criterion (2) is appropriate and do not believe that additional refinement is necessary. Therefore, we ar e not revising this crit erion. We thank the

commenters for their views and will take them into consideration as we continuously

assess these criteria. With respect to the commenter’s suggesti on that criteria (3) a nd (7) apply to all measures but the remaining criteria be appl ied more selectively on a case-by-case basis, we disagree with respect to se lective application of the crit eria. We intend for all the criteria, including criteria (3) and (7), to apply to all measures to the extent possible. In any given situation, we will focus only on remova l criteria that are relevant to a particular

set of circumstances. If more than one of the measure removal criteria appears to be relevant, we intend to take a balanced appr oach in assessing the value of each of the different criteria in a given situ ation before removing any measure.

After consideration of th e public comments we receive d, we are finalizing our proposal without modification on the measure re moval process and crite ria. Specifically, we will immediately remove an ASCQR Pr ogram measure based on evidence that the continued use of the measure as specified ra ises patient safety concerns. In these situations, we will promptly remove the measure and notify ASCs and the public of the

removal of the measure and the reasons fo r its removal through the ASCQR Program ListServe and the ASCQR Program QualityNet Web site. Further, we will confirm theCMS-1613-FC 788

removal of the measure that was the subject of immediate removal in the next OPPS/ASC rulemaking.

For situations where we do not believe the continued use of a measure raises specific safety concerns, we will use the regul ar rulemaking process to remove a measure to allow for public comment. In these situations, we will use the following criteria to

determine whether to remove the measures from the ASCQR Program: (1) measure performance among ASCs is so high and unva rying that meaningful distinctions and improvements in performance can no longe r 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 orpractice; (4) the availability of a more broadly applicable (across settings, popul ations, or conditions) measure for the topic; (5) the availability of a measure that is more proximal in time to desired patient outcomes for the pa rticular topic; (6) the availa bility of a measure that is more strongly associated with desired patie nt outcomes for the particular topic; and (7) collection or public reporting of a measur e leads to negative unintended consequences other than patient harm. 3. Criteria for Removal of “Topped-Out” Measures In the CY 2015 OPPS/ASC proposed rule (79 FR 41045 through 41046), we proposed to define criteria for when we woul d consider a measure to be “topped-out.” A measure is “topped-out” when measure performance among ASCs is so high and unvarying that meaningful dist inctions and improvements in performance can no longer be made (“topped-out” measures). We do notbelieve that measuring ASC performance on “topped-out” measures provides meaningf ul information on the quality of careCMS-1613-FC 789

provided by ASCs. We further believe th at quality measures, once “topped-out,” represent care standards that have been wi dely adopted by ASCs. We believe such

measures should be considered for remova l from the ASCQR Program because their associated reporting burden may outweigh the value of the qualit y information they provide. Specifically, we proposed that a measure under the ASCQR Program is “topped-out” when it meets both of the following criteria:

● Statistically indistinguis hable performance at the 75th and 90th percentiles; and

● A truncated coefficient of vari ation less than or equal to 0.10. To identify if a measure has statistica lly indistinguishable performance at the 75 th

and 90 th percentiles, we would determine whether the difference between the 75 th and 90 th percentiles for an ASC’s measure is within two times the standard error of the full

dataset. The coefficient of variation (CV) is a descriptiv e statistic that expresses the standard deviation as a percentage of the sa mple mean; this provides a statistic that is independent of the units of observation. A pplied to this analysis, a large CV would

indicate a broad distributi on of individual ASC scores, with large and presumably meaningful differences between ASCs in relative performance. A small CV would

indicate that the distribution of individual facility scores is clustered tightly around the mean value, indicating that itis not useful to draw dis tinctions among individual ASCs on measure performance. The truncated CV excludes observations whose rates are below

the 5 th percentile and above the 95 th percentile; this avoids u ndue effects of the highest and lowest outlier values, which, if included, can inappropriately wi den the dispersion of

the distribution. These same criteria for wh en we would consider a measure to beCMS-1613-FC 790

“topped-out” have been adopted in the Hospital VBP Program (79 FR 50055), the Hospital IQR Program (79 FR 50204), and th e Hospital OQR Program (section XIII.C.2 of this final rule with comment period). We invited public comment on this proposal. Comment: Many commenters supported CM S’ proposed “topped-out” criteria for measure removal and the alignment of these criteria across the Hospital IQR and Hospital VBP Programs. One commenter suggested that CMS refine the first criterion to ensure

that measures exhibit sufficient lack of va riability before they are removed. Several commenters suggested that CMS have a m echanism in place to identify a significant

decline in adherence rates after a measure has been removed. Response: We thank the commenters fo r their support of the proposed topped-out criteria. We expect ASCs to always follo w appropriate standards-of-care and clinical guidelines, regardless of whether a quality m easure exists. We believe that ASCs are committed to providing quality care to patients , and we do not have any indication that ASCs will stop doing so when measures are removed. While it is possible that removing a meas ure could result in reduced performance, we have guarded against this possibility by se tting topped-out criteriathat evidence very high, unvarying levels of performance. Furthe r, we intend to continue to work with quality measurement stakeholders to en sure that performance does not decline significantly after removing a measure. Ho wever, we must balance the costs of continued monitoring of a successful measure with high levels of performance with the adoption of other measures where there ar e opportunities for improve ment in clinical quality.CMS-1613-FC 791

Regarding the suggestion to further refi ne the first criteri on, which refers to determining that a measure exhibits sufficien t lack of variability before removal, we proposed topped-out criteria that evidence very high, unvarying levels of performance and, at this time, do not believe additional refi nement that would make the criteria more stringent is necessary. However, we will co nsider the need for refinement and, if we determine changes may be necessary, we will propose such changes in future rulemaking. In addition, we will not use our topped-out criteria exclusively when evaluating the retention or removal of a measure; a measur e that meets our topped-out criteria could be retained for other program r easons as discussed below. Comment: One commenter cautioned agai nst removing measures solely based on the proposed “topped out” criteria, and was con cerned that these criteria might lead to the removal of valuable program measures. Th e commenter cited the example of patient safety measures and surgical site infection rates, which are intended to drive toward and

sustain zero harm. The commenter believed th at these types of measures could have performance scores that meet the topped out criteria over time. However, the commenter believed they would have enduring value to consumers and providers. Some commenters urged CMS to assess “topped-out” measures i ndividually, that is, ca se-by-case, and in a broader context before removing them from the ASCQR Program. Response: We agree that some measures that are quantitativ ely “topped-out” may still be appropriate for other reasons. Theref ore, as we do for the Hospital IQR Program and the Hospital VBP Program, and consistent with our discussion above in section

XIV.B.3. of this final rule with comment period, we will evaluate several factors in considering the removal of measures fo r the ASCQR Program. We will assess theCMS-1613-FC 792

benefits of retaining a meas ure on a case-by-case basis be fore proposing to remove a measure from a quality data reporting program and will not remove a measure solely on the basis of meeting any specific criterion. Comment: One commenter requested cl arification whether ASC-5: Prophylactic IV antibiotic timing is toppe d-out because this measure is topped-out in the HOPD setting. Response: We thank the commenter for this request. In response, we have reviewed data collected under the ASCQR Program. Our analysis indicated that performance for the prophylact ic IV antibiotic timing m easure is relatively high. However, because we continue to have some facilities with completeness of reporting

issues and data have been collected for a rela tively short time, we do not believe we have sufficient data to support a topped out analys is for the purposes of measure removal for the ASCQR Program at this time. Furthermor e, we believe that a prophylactic antibiotic timing measure remains relevant clinically or for quality improvement purposes under the ASCQR Program.

After consideration of th e public comments we received, we are finalizing the proposed “topped-out” criteria. Specifically, we are finalizing a policy that a measure under the ASCQR Program is “topped-out” when it meets both of the following criteria: (1) statistically indistinguishable performan ce at the 75th and 90th percentiles; and (2) a

truncated coefficient of variation less than or equal to 0.10. To identify if a measure has statistically indistinguishable performance at the 75 th and 90 th percentiles, we will

determine whether the difference between the 75 th and 90 th percentiles for an ASC’s

measure is within two times the standard error of the full dataset.CMS-1613-FC 793

As we do for the Hospital IQR Progr am and the Hospital VBP Program, and

consistent with our discussion above in secti on XIV.B.3. of this final rule with comment period, we will evaluate several factors in c onsidering the removal of measures for the ASCQR Program. We will assess the benefits of retaining a measure on a case-by-case basis before proposing to remove a meas ure from the ASCQR Program and will not remove a measure solely on the basis of meeting any specific criterion. 4. ASCQR Program Qualit y Measures Adopted in Previous Rulemaking In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 through 74517), we implemented the ASCQR Program beginning with the CY 2014 payment

determination. In the CY 2012 OPPS/ASC fina l rule with comment period, we adopted five claims-based measures for the CY 2014 payment determination and subsequent years, two measures with data submissi on via an online Web page for the CY 2015 payment determination and subsequent years, and one process of care,

healthcare-associated infection measur e for CY 2016 payment determination and subsequent years (76 FR 74496 to 74511). In the CY 2014 OPPS/ASC final rule with comment period, we adopted three chart-abstracted measures for the CY 2016 payment determination and subsequent years (78 FR 75124 to 75130). The quality measures that we previously adopted are listed in the chart below. ASC Program Measure Set Previously Adopted for the CY 2016 Payment Determination and Subsequent Years ASC # NQF # Measure Name ASC-1 0263 Patient Burn ASC-2 0266 Patient Fall ASC-3 0267 Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant ASC-4 0265 Hospital Transfer/Admission ASC-5 0264 Prophylactic Intrave nous (IV) Antibiotic Timing ASC-6 N/A Safe Surgery Checklist UseCMS-1613-FC 794

ASC Program Measure Set Previously Adopted for the CY 2016 Payment Determination and Subsequent Years ASC # NQF # Measure Name ASC-7 N/A ASC Facility Volume Data on Selected ASC Surgical Procedures Procedure categories and corres ponding HCPCS codes are located at: http://qualitynet.org/dcs/Cont entServer?c=Page&pagename=Qnet Public%2FPage%2FQnetTier2&cid=1228772475754 ASC-8 0431 Influenza Vaccination Coverage among Healthcare Personnel ASC-9 0658 Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients ASC-10 0659 Endoscopy/Polyp Surveillance: Co lonoscopy Interval for Patients with a History of Adenomatous Polyps-Avoidance of Inappropriate Use ASC-11 1536 Cataracts: Im provement in Patient’s Vi sual Function within 90 Days Following Cataract Surgery* * Measure voluntarily collected as set forth in section XIV.E.3.c. of this final rule with comment period.

The comments we received on these pr eviously adopted measures and our responses are set forth below.

Comment: Some commenter s asked CMS to remove some previously adopted measures for ASCs, because they believed thes e measures were either inappropriate or

too burdensome for ASCs. Response: We thank the commenters for their suggestions. At this time, we are not removing any of the measures suggested by commenters. We did not propose to remove any measures from the ASCQR Program in the CY 2015 OPPS/ASC proposed rule. Further, there is no evidence that cont inued use of the measures as specified raises patient safety concerns that would require immediate remova l of the measures based on the process we are finalizing in this final rule with comment period. However, we will take these suggestions into consideration in future year s using the measure removal criteria we are adopting in this final rule with comment period.CMS-1613-FC 795

5. New ASCQR Program Quality Measure fo r the CY 2018 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75124) for a detailed discussion of our approach to ASCQR measure selection. In the CY 2015 OPPS/ASC proposed rule (79 FR 41046 through 41048), we proposed to adopt one new claims-based measure into the ASCQR Program for the CY 2017 payment determination and subsequent years: ASC-12: Facility Seven -Day Risk-Standardized Hospital Visit Ra te after Outpatient Colonoscopy. Colonoscopy is the most commonly perf ormed ambulatory surgery in the United

States. 28 The most recent data available i ndicate that, in 2002 alone, physicians performed an estimated 14 million co lonoscopies in the United States. 29 Colonoscopies are associated with a range of well-describe d and potentially preventable adverse events that can lead to hospital visits, repeat proce dures, or surgical inte rvention for treatment, including colonic perf oration, gastrointestinal (GI) blee ding, and cardiopulmonary events such as hypoxia, aspiration pneumonia, and cardiac arrhythmias. While hospital visits are generally unexpected after outpatient col onoscopy, the literature suggests that the majority of these visits occur within the first 7 days. 30 , 31 , 32 Reported hospital visit rates after outpatient colonoscopy range from 0.8 to 1.0 percent at 7 to 14 days post procedure,

28 Russo A, Elixhauser A, Steiner C, Wier L. Hospital-Based Ambulatory Surgery, 2007: Statistical Brief #86. Healthcare Cost and Utilization Project (HCUP) Statistical Briefs . Rockville (MD)2006. 29 Seeff LC, Richards TB, Shapiro JA, et al. How ma ny endoscopies are performed for colorectal cancer screening? Results from CDC's survey of endoscopic capacity. Gastroenterology. Dec 2004;127(6):1670-1677.

30 Rathgaber SW, Wick TM. Colonoscopy completion and complication rates in a community gastroenterology practice. Gastrointest Endosc . 2006; 64:556-62. 31 Rabeneck L, Saskin R, Paszat LF. Onset and clinical course of bleeding and perforation after outpatient colonoscopy: a population-based study. Gastrointest Endosc. 2011; 73:520-3. 32 Ko CW, Riffle S, Michael L, et al. Serious compli cations within 30 days of screening and surveillance colonoscopy are uncommon. Clin Gastroenterol Hepatol . 2010; 8:166-73.CMS-1613-FC 796

and from 2.4 to 3.8 percent at 30 days post procedure. 33 , 34 , 35 Some adverse events such as bleeding occur after day 7, but based on input from clinical experts, public comment, and empirical analyses, we concluded that unplan ned hospital visits within 7 days is the optimal outcome to ensure capture of proce dure-related adverse events and to minimize capture of hospital visits unr elated to the procedure. This measure provides the opportunity for ASCs to improve quality of care and to lower the rates of adverse events leading to hospital visits af ter outpatient colonoscopy; this would encourage ASCs to achieve the outcome rates of the best performers. We believe it is important to reduce adverse patient outcomes associated with preparation for colonoscopy, th e procedure itself, and follow-up care. Therefore, we proposed to include the ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy measure, which is calculated from paid Medicare FFS claims, in the ASCQR Program for the CY 2017 payment determination and subsequent years. We expect the measure would prom ote improvement in patient care over time because transparency in publicly reporting measure scores would make patient unplanned hospital visits (emergency department visits , observation stays, and inpatient admissions) following colonoscopies more visible to ASCs and patient s and incentivize ASCs to incorporate quality improvement activities in order to reduce th ese visits. ASCs are often

33 Ko CW, Riffle S, Shapiro JA, et al. Incidence of minor complications and time lost from normal activities after screening or surveillance colonoscopy. Gastrointest Endosc. Apr 2007;65(4):648-656. 34 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757. 35 Chukmaitov AS, Menachemi N, Brown SL, Saunders C, Tang A, Brooks R. Is there a relationship between physician and facility volumes of ambulatory procedures and patient outcomes? J Ambul Care Manage. Oct-Dec 2008;31(4):354-369.CMS-1613-FC 797

unaware of complications following colonoscopy for which patients visit the hospital. 36 This risk-standardized quality measure woul d address this information gap and promote quality improvement by providing feedback to facilities and physicians, as well as transparency for patients on the rates and va riation across facilitie s in unplanned hospital visits after colonoscopy.

The outcome measured in the ASC-12 m easure is all-cause, unplanned hospital visits (admissions, observation stays, and emer gency department visits) within 7 days of an outpatient colonoscopy procedure. The measure score, also referred to as the facility-level risk-standardized hospital visit rate, is derived from the calculation of the

ratio of the numerator to the denominator mu ltiplied by the crude rate. The numerator is the number of predicted (meaning adjusted actua l) hospital visits, which is the number of unplanned hospital visits within 7 days of colonoscopy that th e facility is predicted to

have based on its case-mix. The denominator is the number of expected hospital visits, which is the number of unplanne d hospital visits the facility is expected to have based on the nation’s performance with the facility’s case-mix. The crude rate is the national unadjusted number of patients who had a hospital visit post-colonoscopy among all patients who had a colonoscopy.

Based on discussions with clinical an d technical panel experts, the measure excludes colonoscopies for patients unde rgoing concomitant high-risk upper GI endoscopy because these patients are at a high er risk for hospital visits than patients undergoing a typical colonoscopy, and patients with a history of inflammatory bowel disease (IBD) or diverticulitis in the y ear preceding the colonoscopy because we likely

36 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757.CMS-1613-FC 798

could not fully characterize and adjust fo r their pre-procedure risk of needing a post-procedure hospital visit or identify whether these admissions are planned or unplanned. The measure also excludes pro cedures for patients who lack continuous

enrollment in Medicare FFS Parts A and B in th e first month after the procedure to ensure all patients included in the analysis have comp lete data available for outcome assessment. The statistical risk adjustment model incl udes 15 clinically rele vant risk-adjustment variables that are strongly associated with risk of hospital visits within 7 days following a colonoscopy. Additional methodology detail s and information obtained from public comment for measure development are available at: http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/Ho spitalQualityInits/Measure-Methodology.html

. Section 1890A of the Act requires the Secretary to establish a pre-rulemaking process with respect to the selection of certain categories of quality and efficiency measures. Under section 1890A(a)(2) of the Ac t, the Secretary must make available to the public by December 1 of each year a list of quality and efficiency measures that the Secretary is considering for the Medicare pr ogram. The measure that we proposed was reviewed by the MAP and was included on a publicly available document entitled “MAP Pre-Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs” (formerly referred to as the “Lis t of Measures Under Consideration”) on the NQF Web site at: http://www.qualityforum.org/Publications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_M easures_for_More_than_20_Federal_Progr

ams.aspx (“MAP Report”). We note that, at the time the measure was listed on the “MAP Pre-Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs,” it was named “High-Acuity Care Visits after Outpatient Colonoscopy Procedure.” The MAP conditionally supporte d this measure for the ASCQR Program.CMS-1613-FC 799

The MAP Report stated that the measur e “[s]hould be submitted for and receive NQF endorsement; Measure is promising butneeds further development” (p. 187). Further, the MAP Report stated that the measure “would provide valuable outcome information to inform consumer decision and drive quality improvement” and that the “NQF endorsement process would resolve quest ions about the reliab ility and validity of

the measure.” The MAP also stated that NQF endorsement would resolve questions about “the feasibility of the algorithm for attributing claims data in light of possible effects of the Medicare three-day paym ent window” (p. 187, MAP Report). However,

this concern with Medicare Part A hospital payments relates to the Hospital OQR Program and not the ASCQR Program. As required under section 1890A(a)(4) of the Act, we considered the i nput and recommendations provi ded by the MAP in selecting measures to propose for the ASCQR Program.

We believe we have addressed the con cerns raised by the MAP to the greatest extent possible. The measure was submitted to NQF for endorsement on February 21, 2014. The measure is well-define d and precisely specified for consistent implementation within and between organiza tions that will allow for comparability. Reliability testing demonstrated the measur e data elements produced were repeatable; that is, the same results were produced a hi gh proportion of the time when assessed in the same population in the same time period. Vali dity testing demonstrated that the measure data elements produce measure scores that co rrectly reflect the qua lity of care provided and that adequately identif y differences in quality. Currently, there are no publicly available quality of care reports for ASCs that conduct outpatient colonoscopies. Therefore, adoption of this measure provides anCMS-1613-FC 800

opportunity to enhance the information availa ble to patients choosing among ASCs that offer this elective procedure. We believe this measure would reduce adverse patient outcomes associated with preparation fo r colonoscopy, the procedure itself, and follow-up care by capturing and making more vi sible to ASCs and pa tients all unplanned hospital visits following the pr ocedure. In addition, providi ng outcome rates to ASCs

would make visible to clinicians meani ngful quality differences and incentivize improvement. Sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of the Act, when read together, require the Secretary, except as the Secr etary may otherwise provide, to develop measures appropriate for the measurement of the quality of care furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more natio nal consensus building entities. As stated

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74465 and 74505), we believe that consensus among affected partie s can be reflected through means other than NQF endorsement, including consensus ach ieved during the measure development process, consensus shown through broad acceptance and use of measures, and consensus through public comment. We believe this proposed measure meets these statutory requirements. We believe that this measure is appropriate for the measurement of quality of care furnished by ASCs because this procedure is commonly performed in ASCs and, as discussed above, can signify important issues in the care being provided in ASCs. We

also believe this measure reflects consensu s among affected parties because the MAP, which represents stakeholder groups, reviewed and conditionally supported the measure, and stated that it “would pr ovide valuable outcome information to inform consumerCMS-1613-FC 801

decision and drive quality improvement.” Fu rther, the measure was subject to public comment during the MAP and measure deve lopment processes, with some public commenters agreeing with the MAP’s conclu sions on the measure (p. 187, MAP Report, January 2014; http://www.qualityforum.org/Publications/2014/01/MAP_PreRulemaking_Report__2014_Recommendations_on_M easures_for_More_than_20_Federal_Progr

ams.aspx ). As discussed above, the statute also requi res the Secretary, except as the Secretary may otherwise provide, to include measures set forth by one or more national consensus building entities to the extent feasible and practicable. This measure is not NQF-endorsed; however, as noted above, this measure is currently undergoing the NQF endorsement process. We note that sections 1833(i)(7)(B) and (t)( 17) of the Act do not require that each measure we adopt for th e ASCQR Program be endorsed by a national consensus building entity, or by the NQF specifically. Further, under section 1833(i)(7)(B) of the Act, sect ion 1833(t)(17)(C)(i) of the Act, which contains this requirement, applies to the ASCQR Program , except as the Secretary may otherwise provide. Under this provisi on, the Secretary has further authority to adopt nonendorsed

measures. In summary, we proposed to adopt on e new measure for the ASCQR Program for the CY 2017 payment determination and subsequent years.

ASC # NQF# Proposed ASCQR Measure for the CY 2017 Payment Determination and Subsequent Years ASC-12 Pending Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient ColonoscopyCMS-1613-FC 802

We invited public comment on our pr oposal to include ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy in the ASCQR Program beginning with the CY 2017 payment determination. Comment: Several commenters agreed that the ASC-12 measure addresses an important area to monitor for quality impr ovement, given the number of colonoscopy procedures performed annually in ASCs. Response: We thank the commenters for their support. We ag ree that the quality

of care associated with col onoscopy procedures is an impor tant clinical care area to assess quality of care for ASCs. Comment: Many commenters urged CM S not to adopt ASC-12 until it is NQF-endorsed. Several of these commenters also noted that the MAP supported this measure on condition of NQF-endorsement, noti ng that the NQF process would resolve a number of questions about the reliability, valid ity and feasibility of this measure. These commenters requested that, in general, CMS only include measures in the ASCQR Program that have been NQF-endorsed in or der to avoid later suspending or removing

these measures. Response: We appreciate the comm enters’ concerns. Under sections 1833(i)(7)(B) and (t)(17)(C)(i) of the Act, except as the Secret ary may otherwise provide, the Secretary must develop m easures that reflect consensu s among affected parties and, to the extent feasible and practicable, mu st include measures set forth by a national consensus building entity. Whenever po ssible, we strive to adopt NQF-endorsed measures because these measures will meet these requirements. However, we believe the requirements that measures reflect consensu s among affected parties can be achieved inCMS-1613-FC 803

other ways, including through the measur e development process, through broad acceptance and use of the measure, and through public comments. Further, it may not be feasible or prac ticable to adopt an NQF-endorsed measure, such as when an NQF-endorsed measure does no t exist. Section 1833( t)(17)(C)(i) of the Act does not require that each measure we adopt for the ASCQR Program be endorsed by a national consensus building entity, or by the NQF specifically. Moreover, section 1833(i)(7)(B) of the Act states that s ection 1833(t)(17) of the Act, which contains this requirement, applies to the ASCQR Progr am, except as the Secretary may otherwise provide. Under this provision, the Secretary has further author ity to adopt measures that do not reflect consensus among affected par ties and that are not endorsed by a national consensus building entity. Therefore, not all of the measures adopted for the ASCQR Program are required to be NQF-endorsed. As discussed below, we believe the m easure as developed exhibits sufficient levels of reliability, validity, and feasibility to be adopted for the ASCQR Program. As noted above, we also have submitted this measure to NQF for endorsement. Comment: Many commenters did not s upport CMS’ proposal to finalize ASC-12 because complications from colonoscopies are very rare and ASCs already take steps to ensure colonoscopies are conducted to e liminate preventable complications. Many

commenters noted that the literature on the measure indicates the incidence of complications following colonoscopy is less than 2 percent. These commenters suggested that this low incidence meant that the measure should notbe included in the ASCQR Program as it may be topped out or that the quality concern addressed by theCMS-1613-FC 804

measure does not rise to the level of importance needed for a national quality measurement program. Response: Given the widespread us e of colonoscopy for colorectal cancer screening in the outpatient setting, we consider colonos copy a high volume procedure and measuring the quality of care associated with colonoscopies a high priority for us.

We commend ASCs that are al ready taking steps to ensure colonoscopies are conducted to eliminate preventable complications. While we agree that the incidence of colonoscopy complications is re latively low, serious adverse events, such as perforation of the bowel and bleeding, may occur following colonoscopies. We view this measure as a critical outcome measure where the goal is to drive toward and sustain zero harm. In addition, some literature suggests that many facilities performing colonoscopies are unaware of patients accessing hos pital-based care with adverse events because patients return to different f acilities, including hospitals and emergency departments, and would not return to the AS C facility. For example, one study showed that physicians were unaware of nearly 75 percent of hospital admissions for adverse events following colonoscopy. 37 While most colonoscopies are performed without subsequent complication, we note that, in our analysis of Medicare FFS data, this measure showed that among Medicare patients aged ≥ 65, 1.6 percent of outpatient colonoscopies resulted in an unplanned hospital visit within 7-days. 38 This estimate is based on a 20 percent sample of nationwide Medicare fee-for-service patients. If we

37 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757. 38 2010 Medicare 20 percent fee-for- service sample. Based on an analysis of 20 percent sample of Medicare FFS data from 2010 during measure development. The 20 percent sample included 332,391 outpatient colonoscopies meeting the measure inclusio n and exclusion criteria, and 1.6 percent of these colonoscopies were followed by an unplanned hospital visit. This equates to 5,331 unplanned hospital visits in the 20 percent sample.CMS-1613-FC 805

were to use full national data (that is, a 100 percent sample), we estimate 1.7 million colonoscopies would have been performe d among Medicare FFS patients and nearly 27,000 unplanned hospitals visits would have occu rred within 7-days of the procedure. These findings suggest adverse events are not as rare or inconsequential as many believed and that quality measurement for colonoscopy procedures in the outpatient setting is important. We agree with the commenters’ statement that the low incidence rate may suggest that the measure is topped-out , but in addition to the reasons for adopting this measure discussed above, we believe that a low incide nce rate does not conclusively determine whether a measure has reached topped-out status. After the measure has been implemented, over time, we will assess it again for topped-out status using the two topped-out criteria we are finalizing in secti on XIV.B.3. of this final rule with comment period. Comment: Many commenters expressed conc ern that ASC-12 is not sufficiently reliable to be included in the ASCQR Progr am, specifically, that the measure developer

has indicated that the measur e is only “fairly” reliable, with an interclass correlation coefficient (ICC) of 0.335. These commenters contended that “fair” reliability is not sufficient for publicly reported quality metric s because such information could misinform the public, and urged CMS to conduct an an alysis on the measure’s reliability to understand the amount of data required to achieve “good” reliability. Several commenters argued that “good” re liability should result in an ICC of at least 0.60. Other commenters believed that reliability will improve with several years’ worth of data.CMS-1613-FC 806

Another commenter requested th at data from this measure be withheld from public reporting until concerns about its reliability and validity can be thoroughly assessed. Response: We disagree with commenter s and believe that AS C-12 is sufficiently reliable to be included in the ASCQR Progr am. The ICC value submitted in the initial NQF application (0.335) was calculated using a split sample of data from 2 years. We randomly split the patient cohort at each hospi tal into two equal halves, calculated the measure using each half, and then calculated the agreement between these two (the ‘test’ and the ‘retest’). After submitting the m easure to NQF for endorsement review, we

conducted additional calculations of the reliability testing score, this time using the Spearman-Brown prophecy formula. The Spearman-Brown prophecy formula is an accepted statistical method which estimates th e ICC if the sample were increased. Therefore, it allows us to estimate what the reliability score would be if all observations were used for public reporting rather thanusing a split sample. Our Spearman-Brown prophecy formula calculations resu lted in a higher ICC of 0.43. The NQF considers the ICC values rangi ng from 0.21 to 0.40 as “fair” reliability and values ranging from 0.41 to 0.60 as "moderate" reliability. Therefore, the ICC values of 0.335 and 0.43 are interpreted as “fair” and “moderate” reliability, respectively. These

ICC values are also in line with other NQF-endorsed outcome measures used in other CMS programs. For example, in the Hospital Readmissions Reduction Program (76 FR 51667), the Inpatient Acute Myo cardial Infarction (AMI) 30-day Risk Standardized Readmission measure ( NQF #0505) has an ICC of 0.369 and the Pneumonia (PN) 30-day Risk Standardized Readmission measure (NQF #0506) has anCMS-1613-FC 807

ICC of 0.406. Both measures are NQF-endorsed. We consider the reliability of 0.335, as noted in the proposed rule, accep table for the ASCQR Program. Regarding the concerns that we s hould withhold public reporting until the measure’s reliability a nd validity is addressed, as stated above, we believe the reliability of the measure is sufficiently reliable fo r inclusion in the ASCQR Program and do not agree that the public may be misinformed or that we should withhold public reporting. In addition to our calculations above, reliability testing previously conducted by the measure

steward demonstrated the measure data elemen ts produced were repeatable; that is, the same results were produced a high proportion of the time when assessed in the same population in the same time period. Als o, validity testing by the measure steward

demonstrated that the measure data elemen ts produce measure scores that correctly reflect the quality of care provided and that adequately identify differences in quality. As the commenters suggested, the measur e reliability may be further improved by using several years’ worth of data; however, we must balance the reliability of the

measure with the timeliness of the measure. As discussed, at this time, we believe that 1 year of data appropriately ba lances these competing interests for payment determination purposes, but we will continue to assess this be lief during the dry run we discuss below. Also, we will consider conducting additional re liability assessments of the measure using an extended data period. Moreover, we believe it is important to include this measure in the program because colonoscopy is a high volume, co mmon procedure performed at outpatient facilities and is frequently performed on relatively healthy patients to screen for colorectal cancer. Given the widespr ead use of colonoscopy, understanding andCMS-1613-FC 808

minimizing procedure-related adverse events is a high priority. These adverse events, such as abdominal pain, bleed ing, and intestinal perforati on, can result in unanticipated hospital visits post procedure. Physicians performing colonoscopies are often unaware that patients seek acute care at hospitals following the procedure and the associated adverse events are potentially preventable. We strongly be lieve that the measure would promote improvement in patient care over time because transparency in publicly reporting measure scores would make patien t unplanned hospital visits (emergency department visits, observation stays, and inpatient admissions) following colonoscopies more visible to ASCs and patients and in centivize ASCs to incorporate quality improvement activities in or der to reduce these visits. Finally, we believe this measure should be included in the program because currently this risk-standardized quality meas ure is the only measure available that would address this information gap and promote qua lity improvement by providing feedback to facilities and physicians, as we ll as transparency for patient s on the rates and variation across facilities in unplanned hospital visi ts after colonoscopy. There are no publicly available quality of care reports for ASCs that conduct outpatient colonoscopies. Therefore, adoption of this measure provide s an opportunity to enhance the information available to patients choosing am ong ASCs that offer this elective procedure. We believe this measure would reduce adverse patient outcomes associated with preparation for colonoscopy, the procedure itself, and follow-up care by capturing and making more visible to ASCs and patients all unplanned hos pital visits following the procedure. In addition, providing outcome rates to ASCs woul d make visible to cl inicians meaningful quality differences and incentivize improvement.CMS-1613-FC 809

In response to comments, however, to allow sufficient time to conduct further analysis of this measure, we are finalizi ng the adoption of this measure beginning with the CY 2018 payment determination, rather than beginning with the CY 2017 payment determination as proposed. We plan to perf orm a dry run of the measure in 2015. From our perspective, a dry run is a preliminary analysis of data in which ASCs may review their measure results, and ask questions about and become familiar with the measure methodology. Dry runs will include three to f our years of paid Medicare FFS claims. We will use the most recent complete claims samples (usually 6 to 9 months prior to the start date) for dry runs. For example, if the dry run begins in March 2015, the most recent data available may be July 2011 to June 2014 (assuming 3 years of data). Because we use paid Medicare FFS claims, ASCs will not need to submit any data for the dry run. The general information on the dry run as well as the confidential dry run reports will be

available for ASCs to review on their accounts at https://www.qualitynet.org

. The dry run will generate confidential reports at the pati ent level, indicating whether the patient had a hospital visit, the type of visit (admission, emergency department vi sit, or observational stay), the admitting facility, and the principa l discharge diagnosis. Further, the dry run will enable ASCs to see the measure score reports and have the opportunity to receive individual patient data and information cont ained within individua l patient records.

ASCs can use the information to identif y performance gaps and develop quality improvement strategies. Dry run results ar e not linked to public reporting or payment determinations. We expect the dry run to take approxima tely 1 month to conduct once data are obtained, after which facilities will be provided the confidential report and the opportunity to review th eir performance and provide feedback to us.CMS-1613-FC 810

In addition, we will continue to gene rate these reports for ASCs after we implement the measure beginning with th e CY 2018 payment determination. The measure will have no payment impact unt il the CY 2018 payment determination and subsequent years. Public display of measure data will occur on or after December 1, 2017, but there will be no public display of the dry run data. With national implementation of a dry run of this measure, we also will review the appropriate cutoff volume for facilities, if necessary, in reporting the measure score. We require a minimum volume (cut off volume) of colonoscopies pe r facility to be able to

calculate a reliable measure score. We ha ve yet to determine the minimum volume per facility (that is, the cutoff colonoscopy volum e). Because we used a Medicare 20-percent sample to develop the measure, we coul d not estimate this cutoff during measure development. However, testing during th e measure dry-run with 100 percent of the sample per facility will help us to determine the appropriate cutoff volume of colonoscopies per facility. ASCs will be notified via the QualityNet Web site of the cutoff volume of colonoscopies per facility, if any. While some ASCs perform too few colonos copies for us to calculate a measure score and we would not publicly report their data, these facilities would remain in the measure cohort. Typically, for public repor ting of hospital measures on the CMS Web

site Hospital Compare , the measure score is reported as “Number of cases too small” for hospitals with fewer cases than the cutoff. We will use the same protocol when the measure is publicly reported for the ASCQR Program, and will report a measure score as

“Number of cases too small” fo r ASCs with fewer cases than the cutoff on the QualityNet

Web site.CMS-1613-FC 811

Comment: Several commenters pointed outthat, from the perspective of using claims as a data source for this measure, th e codes for ASCs are se rvices rendered-driven, while the codes for HOPDs are diagnosis-driv en. Commenters were concerned that the coded information and the associated risk-adjus tment for this measure may not be able to capture the sensitivity and specificity of the clinical care following an outpatient colonoscopy. Given the difference in coding practices and claims architecture between HOPDs and ASCs, commenters recommended further testing for a fair performance comparison between HOPDs and ASCs. One co mmenter inquired if CMS plans to field test this measure prior to implementation. Commenters contended that the measure must be systematically assessed to assure the meas ure results are attributable to differences in quality alone. The commenters suggested th at the measure score should be directly validated against outpatient medical records and measure results across settings must be assessed to ensure that any comparisons are valid. Response: We thank the commenters for expressing their concerns regarding possible effects of coding pract ices and claims architecture on the data available through administrative claims in capturing the sensitiv ity and specificity of the clinical care following an outpatient colonoscopy. The meas ure is designed, however, to mitigate any differences in coding practices across HOP Ds and ASCs. For example, to capture comorbidities for risk adjustment, the measure uses claims across care settings, including physician outpatient claims, so differences in claims submitted dur ing the procedure are not likely to affect the comorb idities assigned to the patient. In addition, the outcome counts hospital visits regardless of whethe r they are billed as admissions, emergency room visits, or observations stays; ther efore, if there are differences betweenCMS-1613-FC 812

colonoscopies done at ASCs and HOPDs in th e type of hospital visit a patient with complications incurs (for example, whether obs ervation stays or ED visits are used), the

measure will be insensitive to these differences. We recognize that the claims architect ure differs for HOPDs and ASCs because the two facility types utilize different bill forms and have different payment systems. However, we do not agree that our measure specifications do not account for differences in claims architecture and necessary billing codes in discerning hospital events following colonoscopy. The measure includes colonoscopies from all outpatient settings to ensure that the expected hospital visit rate for any facility is estimated using the full national experience of colonoscopy patients. Specifically , we include all outpatient colonoscopies to make sure that (1) the effects that ri sk factors exert on the outcome are estimated based on colonoscopies performed among all outpatient settings; a nd (2) the national average rate of hospital visits following colonos copy is calculated based on all outpatient colonoscopies. Our approach includes all outpatient claims, incl uding HOPD, ASC, and physician claims. To identify all outpatie nt colonoscopy claims, including claims affected by the Medicare 3-day payment wi ndow policy, the measure specifications link claims across multiple care settings (outpatient and inpatient). Furthermore, the measure specifications link claims across multiple care settings to derive comorbidity data to ensure the patient comorbidities are capt ured to the fullest extent possible for risk-adjustment and to id entify patient outcomes. Linking patient claims across multiple settings largely mitigates the impact of potential difference in coding practice am ong settings and allows comparisons of colonoscopy quality across set tings. For example, potential variation in the coding ofCMS-1613-FC 813

comorbidities in the index colonoscopy claim may occur based on the setting. However, we derive comorbidities for risk adjustment fr om all inpatient and outpatient claims in the preceding 12 months. By using all claims in the preceding year, we capture patient comorbidities to the fullest extent possible and mitigate the impact of potential coding differences between settings that would o ccur if we used the index colonoscopy claim

alone. Further, similar approaches to deriving comorbidities from claims data are used for other risk-adjusted outcome measures. The measure developer has validated the accuracy of this approach on multiple occasions for prior measures developed for the inpatient setting. For example, in th e Hospital Readmissions Reduction Program (76 FR 51667), the Inpatient Acute Myo cardial Infarction (AMI) 30-day Risk Standardized Readmission measure ( NQF #0505) has an ICC of 0.369, and the Pneumonia (PN) 30-day Risk Standardized Readmission measure (NQF #0506) has an ICC of 0.406. Both measures are NQF-endorsed. Regarding the suggestion that the meas ure score should be directly validated against outpatient medical records, at this time, we believe that it would be overly burdensome to validate the reported data, be cause of the limited experience that ASCs have with reporting quality data to CMS coupled with the low incidence of cases for this measure. In addition, as stated in secti on XIV.D.6. of this final rule with comment period, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641 through 53642) for a complete discussion of our policy not to require validation of claims-based measures (beyond the usual claims validati on activities conducted by our Medicare Administrative Contractors).CMS-1613-FC 814

We appreciate commenters’ concerns re garding factors that may impact HOPDs and ASCs. In response to comments, to allo w sufficient time to conduct further analysis of this measure, we are finalizing the a doption of this measure beginning with the CY 2018 payment determination, rather than beginning with the CY 2017 payment determination as proposed. In addition, we plan to perform a dry r un (a preliminary analysis) of the measure

in 2015. We refer readers to our discussi on of the dry run above, in response to a previous comment. Comment: Several commenters disagreed with the statement in the proposed rule (79 FR 41047) that the ASC-12 measure is “w ell-defined and preci sely specified for consistent implementation within and be tween organizations that will allow for comparability.” These commenters raised th e issue that the Medi care payment window policy that applies to hospitals will result in under-detection of hospital events for colonoscopies performed by HOPDs; the 3-da y (or 1-day) payment window applies to outpatient services furnished by hospitals and hospitals that are wholly owned or wholly operated Part B entities. Hospitals are requi red to bundle the techni cal component of all outpatient diagnostic services and relate d nondiagnostic services (for example, therapeutic) with the claim for an inpatient stay when services are furnished to a Medicare beneficiary in the 3 days (or, in th e case of a hospital that is not a subsection (d) hospital, during the 1-day) preceding an i npatient admission in compliance with section 1886 of the Act. Commenters expressed their co ncern that as a result of this payment policy, HOPDs may have systematic undercounti ng of hospital visits while ASCs get a full count of all hospital visi ts within 7 days subsequent to outpatient colonoscopy.CMS-1613-FC 815

Commenters did not believe the methodol ogical solution proposed by the measure developer, using physician claims with an HOPD Place of Service (POS) code indicating the colonoscopy was performed at an HOPD, is adequate due to the high error rates in POS coding on physician claims. Commenters were concerned that these challenges would make comparison of HOPD and ASC data impossible, and significantly reduce the validity of the measure in the HOPD setting. Response: We disagree with the comment ers, and we continue to believe this measure is “well-defined and precisely speci fied for consistent implementation within and between organizations that will allow for comparability,” as we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 41047). We agree that the ability to detect mean ingful variation is animportant indication of the value of a measure. As the commenter has correctly noted, we have shown facility variation in unplanned hospita l visits following colonoscopy in both nationwide Medicare

data from HOPDs and also in the 2010 Hea lthcare Cost and Utilization Project (HCUP) data. We have also shown facility varia tion in unplanned hospital visits among ASCs alone using HCUP data from California. 39 The observed average hospital visit rate and the variation in unplanned hospital visit ra tes among ASCs, which are unaffected by the 3-day payment window policy, were very sim ilar to HOPDs suggesting that the measure performs equally well in both settings. Acco rdingly, we are confiden t that the variation shown is a reflection of facility variation in qu ality and not as a result of any issues to do with the 3-day payment window policy.

39 Center for Medicare and Medicaid Services, “Facility 7-Day Risk-Standa rdized Hospital Visit Rate after Outpatient Colonoscopy,” National Qua lity Form Measure Submission Form, 20.CMS-1613-FC 816

Based on our internal testing with claims data, we believe our current algorithm is appropriate and accurate. However, since we always strive for improvement, we will evaluate the colonoscopy measure dry run data and work with HOPDs and ASCs to

further review and refine th e algorithm if necessary. Regarding POS billing, the OIG has found b illing errors incorrectly assigning the

service site for both HOPDs and ASC-relate d claims on physician claims where there were matching HOPD or ASC claims and that the percentage of incorrectly billed claims was significantly higher for ASC-related claims. 40 Many physicians’ services can be furnished either in a facility setting such as an HOPD or ASC, or in a non-facility setting such as a physician’s office, urgent care cente r or independent clinic. For these services, Medicare has two different payment rates under the physician fee sc hedule (PFS). The PFS facility rate is generally lower to reflect the fact that certain resources are supplied by the facility, and Medicare makes a separate payment to the facility under another payment system. By matching both facilityand physician colonoscopy claims for any given patient, the current measure met hodology ensures that colonoscopy claims are identified to the fullest extent possible a nd attribute the colonoscopy to the appropriate provider when billing is affected by the 3-day window payment policy. We clarify that HOPD claims for col onoscopy procedures for calculation of the measure are identified using both physician a nd facility claims. We did not intend to imply that HOPD colonoscopy claims are identi fied solely from physician claims. For both ASCs and HOPDs, the measure first id entifies colonoscopy claims using both the physician claim and the corresponding facility cl aim to ensure the s ite of the colonoscopy

40 OIG, Physician services processed by Medicare Part B Contractors during Calendar Year 2009, September 2011, A-01-10-00516.CMS-1613-FC 817

service is attributed to the appropriate provider. As a s econd step, the measure matches (1) physician claims that contain HOPD as th e POS that do not have a matching facility claim with (2) inpatient claims to identify potential HOPD colonoscopi es resulting in an inpatient admission. This second additional step identifies HOPD colonoscopy claims affected by the 3-day window payment policy. Therefore, we do not agree that ASCs will be adversely affected by use of POS billing to locate colonoscopi es performed by physicians due to high levels of coding errors in POS coding on Part B for physician services because our measure calculation methodology addresses this concern. We also have taken steps to educate p hysicians about the appropriate POS coding and actively audit physicians to im prove the accuracy of POS coding http://www.cms.gov/Outreach -and-Education/Medicare-Learning-NetworkMLN/MLNMattersArticles/downloads/MM7502.pdf . In addition, from 2012 onwards, Medicare billing introduced the “PD” modifier to i ndicate physician claims affected by the 3-day window payment policy.

Comment: In reference to the stat ement in the CY 2015 OPPS/ASC proposed rule (79 FR 41047) that “there are no publiclyavailable quality of care reports for ASCs that conduct outpatient colonoscopies,” one commenter stated that, on the Physician Compare Web site, CMS includes data on colonosc opy measures that provide a detailed look at the quality of colonoscopy services provided. This commenter suggested that CMS further enhance publicly available data by including measures captured by Qualified Clinical Data Regist ries to increase the robustnes s of publicly available data on colonoscopy provided across all sites of service.CMS-1613-FC 818

Response: We thank the commenter fo r providing this input , but note that the cited information is available at the physicia n level. We believe that quality of care

measure information also should be reported at the facility leve l, and that facilities have a role in monitoring the surgical procedures performed at their fac ility and subsequent

adverse outcomes. Patients and facilities should be able to review reported quality of care measure information at the ASC-facilitylevel. We thank the commenter for the suggestion to include measures captured by Qua lified Clinical Data Re gistries to further enhance publicly available data such as the colonoscopy data and we may take this into consideration in future rule making.

Comment: While some commenters believe d that a long collection period, such as three years, is needed in order to generate measure scores that are moderately reliable, they also were concerned that the public ly reported measure score would not be a reflection of current, or even recent, performance. Commenters were concerned that consumers could be misled by the outdated data. Response: As discussed previously, we agree with the commenter that a longer data collection period may increase measure re liability. However, we must balance the reliability of the measure with the timeliness of the measure and, as discussed later, at this time, we believe that 1 year of data appr opriately balances these competing interests. We will continue to assess this belief during the dry run. Comment: Several commenters expressed concern that the measure that was put forth to NQF review retained elements of the inpatient measure. Commenters stated that including these elements was inappropriate, a nd interpreted this action to mean that the measure has not been thoroughly reviewed and fully adapted for outpatient use. TheseCMS-1613-FC 819

commenters gave examples of the alleged inap propriate inpatient elements: (1) certain condition categories (CCs) are not included in risk adjustment if they are only recorded at the time of the colonoscopy, and yet they are considered to be possi ble adverse outcomes; and (2) although end stage renal disease (ESRD) would not be a complication of colonoscopy diagnosed and reco rded at the time of the pro cedure, it was included on the list of CCs. Commenters urged CMS to ensure that revised specifi cations are developed and then independently reviewed to ensure outpatient adaptation is complete prior to measure implementation. Response: We appreciate the commente rs’ concerns. In keeping with good practice, we have continued to review a nd seek comment on the measure specifications subsequent to measure development and implementation to ensure the measure remains up-to-date in view of any potential new information. As the commenters noted, the measure technical specifications included a list of CCs that the measure does not consider for risk adjustment if the CC(s) occurred at the time of colonoscopy. In view of the comments, we have revised the list of CCs and updated the measure specifications to ensure only conditions relevant to colonosc opy are included. Of note, the inclusion of ESRD on the list was an error; we have revi sed the list and will use the revised list in implementing the measure. We corrected the list in subsequent measure descriptions during the NQF public comment period. Comment: Many commenters expresse d concern that the ASC-12 measure includes hospital visits un related to colonoscopy. So me commenters requested explanation for why the measure uses an all-cause categorizati on rather than only admissions related to colonoscopies.CMS-1613-FC 820

Response: We clarify that this measur e is purposely designed to use a broad outcome of hospital visits follo wing surgery rather than a narr ow set of easily identifiable complications. From a patient and health syst em perspective, the goal of this measure is to encourage and inform ASC efforts to mi nimize all potential acute complications, not just those narrowly related to pr ocedural technique. This is important as the literature suggests, 41 , 42 , 43 , 44 that hospital visits following co lonoscopy occur due to a range of adverse events relating to the bowel prepar ation, anesthesia, the colonoscopy procedure itself, and follow-up care. These include a range of symptoms and signs such as abdominal pain, bloating, dizziness and co llapse, electrolyte disturbances, and cardiorespiratory symptoms (from sedation us e), in addition to complications that are directly related to procedur al technique such as bleedi ng and bowel perforation. The broad outcome of unplanned hospital visits captures all of these potential acute complications of colonoscopy. Our goal for the measure is to encourag e ASCs to be mindful of reducing postcolonoscopy admissions caused by the prior colonoscopy procedure performed at their facility. For example, patients may be at hi gher risk of falls pos t-colonoscopy secondary to dehydration following the bowel prepara tion for the procedure and there may be opportunities for ASCs to minimize this risk. We removed planned admissions from the

41 Ko CW, Dominitz JA. Complications of colonoscopy: magnitude and management. Gastrointest Endosc Clin N Am 2010;20:659-71. 42 ASGE Standards of Practice Committ ee, Fisher DA, Maple JT, et al. Complications of colonoscopy. Gastrointest Endosc 2011;74:745-52. 43 Baudet JS, Diaz-Bethencourt D, Aviles J, et al. Mi nor adverse events of colonoscopy on ambulatory patients: the impact of moderate sedation. Eur J Gastroenterol Hepatol 2009;21:656-61. 44 Ko CW, Riffle S, Shapiro JA, et al. Incidence of minor complications and time lost from normal activities after screening or surveillance colonoscopy. 2007;65:648-56.CMS-1613-FC 821

measure outcome adapting CMS’ Planned Readmission Algorithm version 3.0. 45,46 This algorithm removes nonacute admissions for schedul ed procedures (for example, total hip replacement) and other types of care alwa ys considered planned (for example, rehabilitation or maintenance chemotherapy) from the outcome. That is, we removed planned admissions from the outcome because planned admissions do not reflect differences in colonoscopy quality of care. Comment: One commenter requested th at CMS clarify how the numerator and

denominator for ASC-12 are calculated. Response: The measure score is the rati o of predicted hospita l visits (numerator) over the expected hospital visits (denominat or) multiplied by the crude national rate. The measure score numerator is the predicted rate , which is the number of unplanned hospital visits the facility is predicted to have w ithin 7 days of colonoscopy, and it accounts for the observed unplanned hospital visit rate, the number of colonoscopies performed at the facility, and the facility’s case mix. This is sometimes referred to as the “adjusted actual

rate.”

The measure score denominator is the expected rate, which is the number of unplanned hospital visits the facility is expected to have, based on the nation’s performance with that facility’s case-mix. It is the sum of all patients’ expected probabilities of a hospital visit, given their ri sk factors and the risk of readmission at an average hospital. The contribution of each risk factor (for example, age) to the patient’s

45 Horwitz L, Grady J, Dorsey K, Zhang W, Keenan M, Keshawarz A, Cohen D, Ngo C, Okai M, Nwosu C, Lin Z, Bhat K, Krumholz H, Bernheim S,. 2014 Measures Updates and Specifications Report: HospitalWide All-Cause Unplanned Readmission--Version 3.0. 2014: Centers for Medicare & Medicaid Services, 2014. 46 Available at: http://www.cms.gov/Medicare/Quality -Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Measure-Methodology.html.CMS-1613-FC 822

risk of a hospital admission is based on all of the patients in the measure cohort. The crude national rate is the average rate of hospital visits following colonoscopy observed

in the entire measure cohort. We also refer readers to the measure discussion above and measure specifications ( http://www.qualityforum.org/WorkArea/li nkit.aspx?LinkIdentifier=id&ItemID=75057) for a

more detailed discussion of how the nu merator and denominator are calculated. Comment: Many commenters were con cerned that facilities would lack actionable information genera ted from ASC-12. Several of these commenters questioned

whether this measure will benefit facilities and patients because each facility will only receive a report with an aggregate number of claims that will be based on historical data, which will make it difficult for the facility to set a course for improvement if needed. Commenters requested that CMS clarify its plan to report detailed patient-level data confidentially to ASCs that indicates whether the patient had a hospita l visit, the type of visit (admission, emergency department vis it, or observational stay), the admitting facility, and the principal discharge diagnosis to assi st facilities with quality improvement, to enable facilities to unders tand their performance and take steps where

remediation is needed. Several commente rs also noted that ASCs do not provide post-operative follow-up care after patient discharg es and do not have direct access to the

records of other health care facilities. Consequently, this constraint would limit their ability to identify improvements based on the data provided by this measure. Response: The primary purpose of this measure is to illuminate the quality differences in colonoscopies that are presen tly not visible to pa tients and may not be

visible to some facilities. In measure devel opment, we found the facil ity variations in theCMS-1613-FC 823

measure score suggest some facilities provide worse than expected care. We believe the detailed patient-level data that we will pr ovide confidentially to ASCs will help them identify areas for improvement efforts. The data would indicate wh ether the patient had a hospital visit, the type of visit (admission, emergency department vi sit, or observational stay), the admitting facility, and the princi pal discharge diagnosis. The dry run will enable ASCs to see the measure score repo rts and have the oppor tunity to receive individual patient data and information contai ned within individual pa tient records. We will continue to generate these reports for ASCs after we implement the measure beginning with the CY 2018 payment determinat ion. ASCs can use the information to identify performance gaps and develop quality improvement strategies. We understand the challenges involved in following up with ASC patients. The colonoscopy measure addresses these challenges by providing feedback to facilities and

clinicians about th e outcomes experienced by thei r patients following colonoscopy. Many clinical experts noted that facilities were often unaware of patients’ return visits to hospitals. They noted that many patients would often return to a different facility or an emergency department. One study noted that physicians were unaware of 75 percent of return hospital visits following colo noscopy at a major tertiary center. 47 Comment: Several commenters expresse d concern that ASC-12 does not include risk-adjustment to account for patient diffe rences, stating that CMS does not report the variation between ASCs once this risk adjustme nt has been applied and that there may be no statistically significant diffe rence between an ASC’s risk-a djusted visit rate and the national average making it impossible to identif y low performers and high performers.

47 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med 2010;170:1752-7.CMS-1613-FC 824

One commenter specifically recommended th at patients with conditions such as inflammatory bowel disease and diverticulitis should be included with appropriate risk adjustment. Commenters recommended CMS consider the drawb acks of the current methodology, conduct analysis to test the vari ation of the measure between ASCs, and

reconsider this measure for in clusion in future proposals. Response: We thank the commenters for all the suggestions to improve the measure. In the measure application for NQF endorsement, we note that the measure, following risk-adjustment, is able to detect statistically significant variation between outpatient facilities by demons trating measure score variati on using the 2010 HCUP data from four States (California, New Yor k, Nebraska, and Florida). Using a very conservative sampling technique (sampling with replacement), 48 we constructed 95 percent interval estimates around the facil ity measure score (sim ilar to confidence intervals) and used the estimates to place f acilities into three perf ormance categories: worse than expected; no different than expected ; and better than expected. Based on this analysis, we identified 5 ou tlier facilities among a total of 992 ASCs and HOPDs. This analysis included only about one-tenth of all outpatient facilities in the United States. Typically, we see greater vari ation between facilities when 100 percent of nationwide

facilities are included for actual m easure implementation and reporting.

As to the commenter’s recommendation to risk-adjust patients with certain conditions, we excluded patie nts with inflammatory bowel disease (IBD) and

diverticulitis because it is difficult to assess fr om claims data whether these patients have

an active or inactive disease wh ich may alter their risk of the outcome. We determined

48 Efron, B. (1979). Bootstrap methods: Another look at jackknife. Ann. Stat. 7, 1-26.CMS-1613-FC 825

that we could not adequately risk-adjust for the risk of the outcome for these patients. Second, our analysis suggested that nearly half of the patients with IBD and diverticulitis have post-colonoscopy hospital vi sits with a primary diagnosis of IBD and diverticulitis respectively. We could not tell from the claims data whether these visits were planned or unplanned. We did test fo r variation among ASCs and HOPDs independently using HCUP data from California (see Measure Technical Report). As we previously discussed, the measure was able to adequate ly detect variation in the measure score among ASCs. As for the inquiry about further testing th e measure, we have more time to further test the measure because, in response to comm ents, we are finalizing the adoption of this measure beginning with the CY 2018 payment de termination, rather than beginning with the CY 2017 payment determination as proposed. We plan to perform a dry run (a preliminary analysis) of the measure in 2015. We refer readers to our discussion of the dry run above, in response to a previous comment. Comment: One commenter expressed con cern that ASCs would have difficulty gathering and reporting the information for the proposed ASC-12 measure. Response: We thank the commenter for providing this input and note that this measure will be calculated completely from data obtained from paid Medicare FFS claims submitted by ASCs, hospitals, and physic ians. For this reason, it will not require any additional information-ga thering on the part of ASCs. We continue to believe that quality of care measurement in the clinical area of outpatient colonoscopy is an important gap area with ample room for improvement and that this measure has sufficient reliability and validity for use in the ASCQR Program.CMS-1613-FC 826

Therefore, after consideration of the public comments we received, we are finalizing our proposal to adopt the ASC-12: Facility Seve n-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy measure for the ASCQR Program. However, to allow

ASCs sufficient time to review their meas ure data from the dry run and utilize the confidential facility re ports with patient-level associat ed hospital event information, we are finalizing the adoption of this measur e for the CY 2018 payment determination and subsequent years, instead of the CY 2017 paym ent determination and subsequent years as proposed. We plan to perform a dry run (a prel iminary analysis) of the measure in 2015. Also, with national implementation of a dry run of this measure, we also will review the appropriate cutoff volume for fac ilities, if necessary, in repor ting the measure score. We

refer readers to our discussion of the dry run and the cutoff volume above, in our response to a previous comment.

The finalized measure set for th e ASCQR Program CY 2017 payment determination and subsequent years, is listed below.CMS-1613-FC 827

Finalized ASC Program Measure Set fo r the CY 2017 Payment Determination and Subsequent Years ASC # NQF # Measure Name ASC-1 0263 Patient Burn ASC-2 0266 Patient Fall ASC-3 0267 Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant ASC-4 0265 Hospital Transfer/Admission ASC-5 0264 Prophylactic Intrave nous (IV) Antibiotic Timing ASC-6 N/A Safe Surgery Checklist Use ASC-7 N/A ASC Facility Volume Data on Selected ASC Surgical Procedures Procedure categories and co rresponding HCPCS codes are located at: http://qualitynet.org/dcs/C ontentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 ASC-8 0431 Influenza Vaccination Coverage among Healthcare Personnel ASC-9 0658 Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonosc opy in Average Risk Patients ASC-10 0659 Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Ad enomatous Polyps-Avoidance of Inappropriate Use ASC-11 1536 Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery* * Measure voluntarily collected startin g as set forth in section XIV.E.3.c. of this final rule with comment period.

The finalized measure set for th e ASCQR Program CY 2018 payment determination and subsequent years, which in cludes previously finalized measures and the newly-adopted measure, ASC-12, is listed below.CMS-1613-FC 828

Finalized ASC Program Measure Set fo r the CY 2018 Payment Determination and Subsequent Years ASC # NQF # Measure Name ASC-1 0263 Patient Burn ASC-2 0266 Patient Fall ASC-3 0267 Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant ASC-4 0265 Hospital Transfer/Admission ASC-5 0264 Prophylactic Intrave nous (IV) Antibiotic Timing ASC-6 N/A Safe Surgery Checklist Use ASC-7 N/A ASC Facility Volume Data on Selected ASC Surgical Procedures Procedure categories and co rresponding HCPCS codes are located at: http://qualitynet.org/dcs/C ontentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 ASC-8 0431 Influenza Vaccination Coverage among Healthcare Personnel ASC-9 0658 Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonosc opy in Average Risk Patients ASC-10 0659 Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Ad enomatous Polyps-Avoidance of Inappropriate Use ASC-11 1536 Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery* ASC-12 Pending Facility Seven-Day Ri sk-Standardized Hospital Visit Rate after Outpatient Colonoscopy** * Measure voluntarily collected startin g as set forth in section XIV.E.3.c. of this final rule with comment period. ** New measure finalized for CY 2018 payment determination and subsequent years.

6. ASCQR Program Measures for Future Consideration

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68493 through 68494), where we finali zed our approach to future measure selection for the ASCQR Program. We seek to develop a comprehensive set of quality measures to be available for widespread us e for informed “patient decision-making and quality improvement in the ASC setting” (77 FR 68496). We also seek to align theseCMS-1613-FC 829

quality measures with the National Quality Strategy (NQS), the CMS Strategic Plan (which includes the CMS Quality Strategy), and our other quality reporting and value-based purchasing programs, as appropria te. Accordingly, as we stated in the CY 2015 OPPS/ASC proposed rule (79 FR 41048 through 41049), in considering future ASCQR Program measures, we are focusing on the following NQS and CMS Quality Strategy measure domains: make care safer; strengthen person and family engagement; promote effective communication and coordina tion of care; promote effective prevention and treatment; work with communities to promote best practices of healthy living; and

make care affordable. Comment: Commenters supported CMS’ alignment efforts. One commenter supported the direction of the ASCQR Program to align future measures with the NQS priorities, noting that doing so will make th e ASCQR Program more consistent with the Hospital IQR Program. Another commenter agr eed with the goal of aligning measures in the ASCQR Program with the Hospital OQR Program and the Hospital IQR Program, and urged that the alignment should eliminat e confusion and avoid disadvantaging ASCs. Response: We thank the commenters fo r supporting our alignment efforts. To the extent practicable, we strive to align meas ures with national priorities, including the NQS priorities as well as across our qual ity reporting and va lue-based purchasing

programs. Comment: Several commenters requested that CMS collaborate with stakeholder communities to develop and implement appr opriate ophthalmic measures for the ASC setting, potentially including measures of in cidence of toxic anterior segment syndrome in cataract surgery patients, incorrect intrao cular lens implantation in cataract surgeryCMS-1613-FC 830

patients, and unplanned anterior vitrectomy in cataract surgery patients. Another commenter suggested that CMS consider several new measures in the future, including adverse outcomes from high-volume procedures such as cataract removals, other eye procedures, endoscopies, musculoskeletal procedures, and colonoscopies. This commenter also encouraged CMS to devel op composite measures of common surgical infections and to involve consumers and purch asers in refinement of the CAHPS survey for the outpatient setting. In addition, this commenter urged CMS to continue to analyze and address the role of the survey and disc uss the comparative roles of PQRS CAHPS, ACO CAHPS, S-CAHPS, or the HOSD/ASC CAHPS surveys. Response: We thank the commenters for these recommendations and will consider these types of measures in future years. We have included an unplanned anterior vitrectomy in cataract surgery patients and patient experience of care survey

measures in our Measures under Consider ation (MUC) list for the MAP for the ASC setting. We agree that the adoption and implementation of appropriate cataract surgery measures are important for the ASCQR Program , given the number of such procedures performed on Medicare bene ficiaries in this setting. We use patient experience of care surveys in a variety of health care settings. We agree that, to the extent feasible, survey instruments should be aligned and coordinated across settings. The developmental process of CAHPS and patient experience of care surveys involves several opportunities for input from patient s, patient advocates, and

stakeholders from the HOPD and ASC indus try, including profe ssional associations, clinicians, accreditation organi zations, and the government.CMS-1613-FC 831

Comment: One commenter requested that CMS provide additional guidance with respect to the process for suggesting and submitting future ASCQR Program measures. This commenter further requested that CM S distinguish, when establishing reporting requirements, between ASCs that are equippe d for the performance of sterile surgical operations and ambulatory endoscopy centers that are equipped to perform nonsurgical endoscopy procedures. Response: We generally request co mments on future ASCQR Program measure topics through the rulemaki ng process and did so in the CY 2014 OPPS/ASC proposed rule (78 FR 43664). We also accepted measur es for consideration from associations through ONC's measure project tracking system ( http://oncprojectracking.org/ ); associations

were invited via the CMS Listserv to a ttend a training session for how to submit measures into this system. Regarding dis tinguishing ASCs by the services provided, we are aware that ASCs vary in th e types of services they prov ide. This variety presents challenges in devising a measure set that can glean applicable quality of care information across ASCs. With respect to current clai ms-based measures that include surgical procedures, at this time, we are not able to identify facilities th at would never perform surgical procedures from the information on claims. Therefore, we are not able to distinguish ineligibility for a measure from non-reporting. Comment: One commenter recommended that CMS consider the following measure topics for the ASCQR Program: (1) Equipment Reprocessing (for patient safety, high-level disinfection and st erilization, with a partic ular emphasis on endoscope reprocessing); and (2) Sedation Safety – A possible anesthesia-related measure couldCMS-1613-FC 832

include the use of reversal ag ents to patients given moderate sedation agents (medications used to rescue patients from deeper levels of sedation than intended). Response: We thank the commenter for these recommendations and will consider these measure topics for the ASCQR Program in future years.

Comment: One commenter noted that th e program currently includes a measure on hospital transfer or admission after a proc edure, which tracks whether patients are transferred or admitted directly to a hospital (including a hospital emergency room) upon discharge from an ASC. This commenter beli eved that this measure could be expanded to include patients who return home after the ASC procedure, but are admitted to a hospital shortly thereafter because of a problem related to the proced ure because doing so would enable us to more comprehensiv ely track patients who experience serious complications or medical errors related to an ASC procedure. Response: We thank the commenter for providing this information and note that the ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy measure includes all unplanned hospital visits (emergency department visits, observation stays and inpatient admissions ) within 7 days following the procedure.

We will continue to consider additional meas ures that track hospital visits following ASC procedures as appropriate in the future.

Comment: One commenter recommended th at CMS develop a measure to track surgical site infection rates for ambulatory surgeries in ASCs. The commenter observed

that CMS stated in the CY 2012 OPPS/A SC final rule with comment period (76 FR 74503 through 74504) that we would consider proposing an SSI measure and requested an update.CMS-1613-FC 833

Response: We agree that it is important to encourage th e reduction of SSIs. In the CY 2012 OPPS/ASC rulemaking, we proposed bu t did not finalize the Surgical Site Infection Rate measure (NQF # 0299), but stat ed that we will c onsider proposing the measure once a suitable set of procedures a nd a protocol for ASCs and HOPDs has been developed (76 FR 74504). We are not aware of any updates to this measure, but will consider these types of measures in future years.

Comment: One commenter recommended that the ASCQR Program should move to a value-based purchasing model no late r than 2016, rewarding high-performing ASCs and penalizing low-performing ASCs. Response: We thank the commenter for this recommendation. As we noted in

the CY 2014 OPPS/ASC final rule with comm ent period (78 FR 75122), we currently do not have express statutory authority to im plement a value-based purchasing program for

ASCs. Comment: One commenter requested that CMS publish each year, as part of the proposed rule, a 2-year or 3-year timeline of anticipated changes to the ASCQR Program to facilitate ASC facility planning. Response: We thank the commenter for the comment and note that we seek to provide information to ASC facilities in a dvance whenever possible to support future planning. For example, in the CY 2012 OPPS/ASC rulemaking, we finalized measures sets for the CY 2014, CY 2015, and CY 2016 pa yment determinations (76 FR 74496 to 74511). Similarly, in the CY 2013 OPPS/ASC final rule with comment period, we

finalized a data collection a nd processing period policy for claims-based measures using QDCs for the CY 2015 payment determination and subsequent years (77 FR 68497CMS-1613-FC 834

through 68498), and in the CY 2014 OPPS/ASC final rule with comment period, we finalized our policy regarding particip ation status for the CY 2016 payment determination and subsequent years (78 FR 75134 through 75135). In this year’s rulemaking, we also are finalizing policies that span more than one year, such as including the ASC-12 measure in the AS CQR Program measure set for the CY 2018 payment determination and subsequent year s, the process for removing measures, and topped-out criteria. While we cannot commit to providing a 2-year or3-year timeline at this point due to the rapidly evolving quali ty measurement and program environment, we will continue to provide information to ASCs through the QualityNet Web site, the ASCQR Program ListServe, and the rulemaking process as appropriate.

Comment: Several commenters stated th at they would welcome opportunities to work with CMS to explore alternative reporting options for measures that cut across CMS quality reporting programs, particularly measures that are included in both the ASCQR Program and PQRS. Response: We thank the commenters fo r their offer to collaborate with CMS on alternative reporting options. We will conti nue to look for opportuni ties to work with ASC community stakeholders to con tinuously improve the ASCQR Program. Comment: Several commenters expresse d concern about the MAP, specifically the public comment process and the pract ice of submitting measure concepts for

consideration. These commenters believed th at the MAP does not adequately consider public comments, and stated that the MAP session agendas schedul ed voting activities prior to public comments, which limited the ab ility of comments to impact voting, and that the public could not address the Coordi nating Committee until after deliberationsCMS-1613-FC 835

were completed. These commenters also st ated that the public could comment on the draft MAP Pre-Rulemaking Report, but that these comments were not considered by the Coordinating Committee and, theref ore, did not result in revi sions to the final report. These commenters recommended that public co mments be solicited prior to, rather than, after voting on agenda items, and that the MAP Coordinating Committee be required to formally consider and respond to public co mments on the draft report. Several other commenters expressed concern regarding the MAP’s review of measure “concepts” that have not been fully developed, saying that recommendations are premature for measure concepts or measure drafts. These commen ters recommended that when “concepts” are presented, the MAP should determine whethe r the measure concept/draft would fill a measure gap but reserve further judgment for the completed measure. These commenters

are further concerned that th e inclusion of measure “concep ts” results in an unreasonably large number of items for the MAP to consider, which can limit the time allotted to

consider each measure. Response: We thank the commenters fo r their comments and concerns, but note that they do not directly address any proposals included in the CY 2015 OPPS/ASC proposed rule; rather, they are directed towards MAP-specific processes. We invite the commenters to submit their MAP-specific con cerns directly to the NQF, which convenes

the MAP. In response to the comments concerning the MAP's review of measure “concepts” that have not been fully developed, resulti ng in recommendations that are premature for measure concepts or measure drafts, we in terpret the commenters’ use of the terms “concept” and “draft” to refer to measures under development as defined in our legend onCMS-1613-FC 836

page 87 of the List of Measures und er Consideration for December 1, 2013 ( https://www.google.com/url?sa=t&rct=j&q=&esr c=s&source=web&cd=1&cad=rja&uact=8&ve d=0CCAQFjAA&url=http%3A%2F%2Fwww.quality forum.org%2FSetting_Priorities%2FPartne rship%2FMeasures_Under_Consideration_Lis t.aspx&ei=aQUuVJrsM6nIsAT61IDQAg&usg=AFQjCNFPjzG9-t7flmf-RFf7o_rSvpxxQ&sig2=V6Hi_GdCM2OUcP 5xkoudcw&bvm=bv.76802529,d.cWc ) . We strive to ensure that the pre-rulemaki ng process allows for thorough review by the MAP and other

stakeholders of all meas ures under consideration.

Comment: Some comment ers suggested that CMS consider developing additional outcomes measures specific to colonoscopies and consider developing a measure of whether or not colonoscopy pa tients remain cancer free, specifically suggesting that we work with stakeh olders to improve existing measures. Response: We thank the commenter for their recommendations and will consider these types of measures in future years. We also thank all commenters for providing their views and we will consider them as we develop future measures for the ASCQR Program. 7. Maintenance of Technical Specifications for Quality Measures

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74513 through 74514), where we finali zed our proposal to follow the same process for updating the ASCQR Program meas ures that we adopted for the Hospital OQR Program measures, includ ing the subregulatory proces s for making updates to the adopted measures. In the CY 2013 OPPS/ ASC final rule with comment period (77 FR 68496 through 68497) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75131), we provided additiona l clarification regarding the ASCQRCMS-1613-FC 837

Program policy in the context of the previ ously finalized Hospital OQR Program policy, including the processes for addressing nonsubs tantive and substantiv e changes to adopted

measures. We maintain technical specifications for previously adopted ASCQR Program measures. These specifications are update d as we continue to develop the ASCQR Program. The manuals that contain specifica tions for the previously adopted measures can be found on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQne

tTier2&cid=1228772475754

. Many of the quality measures used in Medicare and Medica id reporting programs are NQF-endorsed. We note that two of the me asures previously adopted for the ASCQR Program are not NQF-endorsed, and NQF endorse ment is not a program requirement. However, for those measures that are NQF -endorsed, the NQF requires measure stewards to submit annual measure maintenance update s and undergo maintenance of endorsement review every 3 years as part of its re gular maintenance process for NQF-endorsed performance measures. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating an d maintaining the curr ency and relevance of the measure and will confirm existing or minor specification ch anges with the NQF on an annual basis. The NQF solicits inform ation from measure stewards for annual reviews, and it reviews measures for continue d endorsement in a spec ific 3-year cycle. We note that the NQF’s annual or trie nnial maintenance processes for endorsed measures may result in the NQF requiring upd ates to measures in order to maintain endorsement status. Other non-NQF measur es may undergo maintenance changes as well. We believe that it is important to ha ve in place the subregulatory process that weCMS-1613-FC 838

have adopted for the ASCQR Program to in corporate nonsubstantive updates into the measure specifications for measures so that the measure specifications remain current. We also recognize that some changes to measur es are substantive in nature and might not be appropriate for adoption us ing a subregulatory process. In the CY 2015 OPPS/ASC proposed rule (79 FR 41049), we did not propose any changes to this policy. 8. Public Reporting of ASCQR Program Data In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 through 74515), we finalized a policy to make data that an ASC submitted for the ASCQR Program publicly available on a CMS Web site after providing an ASC an opportunity to review the data to be made public. When ava ilable, these data will be displayed at the CCN level; we intend to make data colle cted under the ASCQR program publicly

available in CY 2015. In the CY 2015 OPPS/ ASC proposed rule (79 FR 41049), we did not propose any changes to this policy. Comment: One commenter urged CMS to make the data submitted by ASCs available to the public after giving ASCs an opportunity to preview the data. Response: We thank the commenter fo r their comment, and note that in the

CY 2012 OPPS/ASC final rule with comme nt period (76 FR 74514 through 74515), we finalized a policy to make data that an ASC submitted for the ASCQR Program publicly available on a CMS Web site after providing an ASC an opportunity to review the data to be made public. These data will be displaye d at the CCN level. We did not propose any changes to this policy (79 FR 41049).CMS-1613-FC 839

C. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements 1. Statutory Background

We refer readers to section XV.C.1. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75131 through 75132) for a detailed discussion of the statutory background regarding payment reductions fo r ASCs that fail to meet the ASCQR Program requirements. 2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for a Payment Determination Year The national unadjusted payment rates for many services paid under the ASC payment system 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 conversi on 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 consumer s (CPI-U), which curre ntly is the annual update for the ASC payment system, minus th e 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 zer o. Under the ASCQR Program, any annual update will be reduced by 2.0 pe rcentage points for ASCs that fail to meet the reporting requirements of the ASCQR Program. This reduction applied beginning with the CY 2014 payment rates. For a complete discussion of the calculation of the ASC conversion factor, we refer readers to secti on XII.G. of this fina l rule with comment period.CMS-1613-FC 840

In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 through 68500), in order to implement the requirement to reduce the annual update for ASCs that fail to meet the ASCQR Program requirements, we finalized our proposal that we would

calculate two conversion fact ors: a full update convers ion factor and an ASCQR Program reduced update conversion factor. We finalized our proposal to calculate the reduced national unadjusted payment rates using the ASCQR Program reduced update

conversion factor that would apply to ASCs that fail to meet their quality reporting requirements for that calendar year payment determination. We finalized our proposal that application of the 2.0 percentage point reduction to the annual update may result in the update to the ASC payment system being less than zero prior to th e application of the MFP adjustment.

The ASC conversion factor is used to cal culate the ASC payment rate for services with the following payment indicators (liste d in Addenda AA and BB to this final rule with comment period, which are available via the Internet on the CM S Web site): “A2,” “G2,” “P2,” “R2,” “Z2,” as well as the serv ice portion of device-i ntensive procedures identified by “J8.” We finalized our proposal that payment for all services assigned the payment indicators listed above would be subject to the reduc tion 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 assi gned status indicators other than payment indicators “A2,” “G2,” “J8,” “P2,” “R2,” and “Z2.” These services include separately payable drugs and biologicals, pass-thr ough devices that are contractor-priced,CMS-1613-FC 841

brachytherapy sources that are paid base d on the OPPS payment rates, and certain office-based procedures and ra diology services where payment is based on the MPFS PE RVU amount and a few other specific services that receive cost-based payment. As a result, we also finalized our proposal that the ASC payment ra tes for these services would not be reduced for failure to meet the ASCQR Program requirements because the payment rates for these services are not cal culated using the ASC conversion factor and, therefore, not affected by reductions to the annual update. Office-based surgical procedures (perform ed more than 50 percent of the time in physicians’ offices) and separately paid radi ology services (excluding covered ancillary radiology services involving certa in nuclear medicine procedur es or involving the use of contrast agents, as discussed in section XII. C.1.b. of this final rule with comment period) are paid at the lesser of the MPFS nonfac ility PE RVU-based amounts or the amount

calculated under the standard ASC rate setting methodology. Similarly, in section XII.D.2.b. of this final rule with comment pe riod, we are finalizing that payment for the new category of covered ancillar y services (that is, certain diagnostic test codes within the medical range of CPT codes for which se parate payment is allowed under the OPPS and when they are integral to an ASC covered surgical procedure) will be at the lesser of the MPFS nonfacility PE RVU-based amounts or the rate calculated according to the standard ASC ratesetting methodology. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68500), we finalized our proposal that the standard ASC ratesetting methodology for this type of comp arison 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 pa yment indicator, based on the comparison,CMS-1613-FC 842

assigned to these procedures or services is co nsistent for each HCPC S 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. Ther efore, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68500), we fina lized our proposal 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. In that final rule with comment perio d, we finalized our proposal that all other applicable adjustments to the ASC nationa l unadjusted payment rates would apply in those cases when the annual update is re duced for ASCs that fail to meet the requirements of the ASCQR Program (77 FR 68500). For example, the following standard adjustments would a pply to the reduced national una djusted payment rates: the wage index adjustment, the multiple procedure adjustment, the interrupted procedure adjustment, and the adjustment for devices furn ished with full or partial credit or without cost. We believe that these adjustments continue to be equally applicable to payment for ASCs that do not meet the ASCQR Program requirements. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75132), we did not make any changes to these policie s. In the CY 2015 O PPS/ASC proposed rule (79 FR 41049 through 41050), we did not pr opose any changes to these policies.CMS-1613-FC 843

D. Administrative Requirements We received a public comment on the AS CQR Program requirements in general. Comment: One commenter expressed a ppreciation that CMS did not propose any substantial changes to participatory requirements, stating that this will provide ASCs with valuable time to stabilize the processes fo r what is currently required without adding

additional burden on resources. Response: We interpret the commenter as referring to prog ram administrative requirements overall, and not to just part icipation status as the commenter makes

reference to issues of burden. We thank the commenter for this support. We agree that program administrative process st ability to the extent possibl e is important in developing the ASCQR Program. We continue to look for ways to minimize burden as we pursue the quality objectives of the ASCQR Program. 1. Requirements Regarding QualityNet Account and Security Administrator

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75132 through 75133) for a detailed discussion of the QualityNet security administrator requirements, including setting up a QualityNet account, and the associated timelines, for the CY 2014 payment determinatio n and subsequent years. In the CY 2015 OPPS/ASC proposed rule (79 FR 41050), we did not propose any changes to these policies. 2. Requirements Regarding Participation Status

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75133 through 78 FR 75135) for a complete discussion of the participation status requirements for the CY 2014 payment determin ation and subsequent years. In theCMS-1613-FC 844

CY 2015 OPPS/ASC proposed rule (79 FR 41050) , we did not propose any changes to these policies. E. Form, Manner, and Timing of Data Submitted for the ASCQR Program We received public comments on alternate methods for submitting data for the ASCQR Program.

Comment: One commenter recommended that CMS allow ASCs to meet the requirements of the ASCQR Program using re gistry-based reporting, noting that using a registry is an option under the PQRS and that other registries are already in existence. This commenter recommended CMS issue proposals regarding this option in next year's proposed rule. The commenter also recommen ded that ASCs should also have the option of submitting quality data to CMS through an EHR-based reporting mechanism, as there are ASCs that have implemented this tec hnology and could benefit from this option. Response: We thank the commenter for th ese suggestions. We agree that it could reduce burden to have a regi stry-based mechanism for data submission. We have not proposed a registry-based reporting option becau se currently, there is not a registry in place that is collecting informa tion on the quality measures that we have adopted for this program. Should registry-based reporting of the ASC quality measures adopted for the ASCQR Program become available in the future , we will explore further the viability of incorporating a registry-based report ing mechanism in the ASCQR Program. Regarding the use of EHR systems for reporting quality data, we agree that reporting by this method could reduce reporti ng burden. However, we are not aware of quality measures for ASCs that have been specified for electronic reporting. If such measures do exist, an unders tanding of the level of EHR adoption and capabilities ofCMS-1613-FC 845

ASCs to utilize this method would be nece ssary before proposing their adoption by the ASCQR Program. As we discussed in th e CY 2014 OPPS/ASC final rule with comment period (78 FR 75124 through 75126), in a recent e nvironmental scan, which included an

assessment of the readiness of ASC to el ectronically report quality data, we found evidence of low levels of EHR use by ASCs. We believe that ASCs continue to be slow to adopt EHRs because many of these faciliti es are small and the cost of EHRs may pose a barrier to adoption. Furthe r, there has been no incentive program to encourage such adoption by ASCs. Comment: One commenter requested a ba tch-processing data submission option for entities that own multiple ASCs. Response: We interpret this comment as referring to the ability to send quality measure data electronically in a format that allows for data submission for multiple ASCs, rather than requiring individual ASC dataentry as is currently required for data

submitted via a CMS online data submission tool measure data. We thank the commenter for their request and are considering how to implement this capability into our data submission processes. In the ev ent this method can be available for data submission, we would issue proposals through rulemaking for ASCQR Program implementation. 1. Requirements Regarding Data Processing and Collection Periods for Claims-Based Measures Using Qualit y Data Codes (QDCs)

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75135) for a complete summary of the data processing and collection periods for the claims-based measures using QDCs for the CY 2014 payment determination andCMS-1613-FC 846

subsequent years. In th e CY 2015 OPPS/ASC proposed rule (79 FR 41050), we did not propose any changes to these policies. We did not receive any public comment s on data submission for claims-based measures using QDCs. 2. Minimum Threshold, Minimum Case Volume, and Data Completeness for Claims-Based Measures Using QDCs

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75135 through 75137) for a complete discussion of the minimum thresholds, minimum case volume, and data completeness for successful reporting for the CY 2014 payment determination and subsequent year s. In the CY 2015 O PPS/ASC proposed rule (79 FR 41050), we did not propose a ny changes to these policies. We received the following public comments on data collection using QDCs.

Comment: One commenter recommende d that CMS raise the 50 percent threshold for claims meeting measure speci fications containing QDCs, noting that many of the issues in the early years of the program that led to this standard have been resolved. Response: We thank the commenter fo r the recommendation and, while we did not propose any changes to our QDC use thres hold in this rulemaking, we will consider this comment as we move forward with progr am planning as ASCs now have experience in submitting data in this manner. Comment: One commenter supported CM S’ decision not to propose any changes to minimum thresholds, minimum case volume, and data completeness for successful reporting, noting that program stability is important. Specifically, the commenterCMS-1613-FC 847

supports maintaining the sample size requi rements for the endoscopy measures, ASC-9

and ASC-10. Response: We thank the commenter for its support of these da ta-related policies, including the maintenance of the sample size requirements for the endoscopy measures. 3. Requirements for Data Submitted Via a CMS Online Data Submission Tool

a. Data Collection for ASC-6 and ASC-7

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74509) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75137 through 75138) for a complete di scussion of the requirements for data

collection and submission for the ASC-6: Sa fe Surgery Checklist Use and ASC-7: ASC Facility Volume Data on Selected ASC Surg ical Procedures meas ures for the CY 2015 payment determination and subsequent year s. In the CY 2015 O PPS/ASC proposed rule (79 FR 41050), we did not propose a ny changes to these policies. b. Delayed Data Collection for ASC-9 and ASC-10 In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75124 through 75130), we adopted ASC-9: Endoscopy/Pol yp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Aver age Risk Patients (NQF #0658) and ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy In terval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659), two additional chart-abstracted measures, and we finalized a policy that aggregate data (numerators, denominators, and exclusions) on all ASC pa tients would be collected via an online Web-based tool that would be made available to ASCs via the QualityNet Web site.CMS-1613-FC 848

We finalized that the data collection time period would be the calendar year (January 1 to December 31) 2 years prior to the affected payment determination year, and the data collected would be submitted during th e time period of January 1 to August 15 in the year prior to the affected payment determination year. Thus, for the CY 2016 payment determination, ASCs would be requi red to submit aggregate-level encounter data from January 1, 2014 to December 31, 2014 using our Web-based tool during the data submission window of January 1, 2015 to August 15, 2015 (78 FR 75138 through 75139). On December 31, 2013, we issued guidan ce stating that we would delay the implementation of ASC-9 and ASC-10 for 3 months for the CY 2016 payment determination, with a resulting encounter period of April 1, 2014 to December 31, 2014 instead of January 1, 2014 to December 31, 2014 ( https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQn

etTier3&cid=1228772879036 ). The data submission timef rame and the encounter period for subsequent years remain as previously finalized (78 FR 75139). c. Delayed Data Collection and Exclusion for ASC-11 for the CY 2016 Payment Determination and Voluntary Data Collection for ASC-11 for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period, where we adopted ASC-11: Cataracts – Improve ment in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536) beginning with the CY 2016 payment determination (78 FR 75129), and finalized the data collection and data submission timelines (78 FR 75138 to 75139). This measure assesses the rate of patients 18 yearsCMS-1613-FC 849

and older (with a diagnosis of uncomplicated cataract) in a sample who had improvement

in visual function achieved within 90 days following cataract surgery based on completing both a pre-operative and pos t-operative visual function survey. Since our adoption of this measure, we have come to believe that it can be operationally difficult at this time for ASCs to collect and report this measure. Specifically, we are concerned that the re sults of the survey used to assess the pre-operative and post-operative visual functi on of the patient may not be shared across clinicians and facilities, ma king it difficult for ASCs to have knowledge of the visual function of the patient before and after surgery. We are also concerned about the surveys used to assess visual function; the measure a llows for the use of a ny validated survey and results may be inconsistent should clinicians use different surveys. Therefore, on December 31, 2013, we issued guidance stating that we would delay data collection for ASC-11 for 3 mont hs (data collection would commence with April 1, 2014 encounters) for the CY 2016 payment determination ( https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQn

etTier3&cid=1228772879036 ). We issued additional guidance on April 2, 2014, stating that we would further delay the implementa tion of ASC-11 for an additional 9 months, until January 1, 2015 for the CY 2016 payment determination, due to continued concerns ( https://www.qualitynet.org/dcs/ContentServer? c=Page&pagename=QnetPublic%2FPage%2FQn

etTier3&cid=1228773811586 ). In the CY 2015 OPPS/ASC proposed rule (79 FR 41051), we proposed to exclude ASC-11 Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536) from the CY 2016 payment determination measure set.CMS-1613-FC 850

We would not subject ASCs to a payment reduc tion with respect to this measure for the CY 2016 payment determination.

We continue to believe that this meas ure addresses an area of care that is not adequately addressed in our current meas ure set and the measure serves to drive coordination of care (78 FR 75129). Further, we believe ASCs shoul d be a partner in care with physicians and other clinicians us ing their facility and that this measure provides an opportunity to do so. Therefore, we are continuing to include this measure in the ASCQR Program measure set for th e CY 2017 payment determination and subsequent years. However, we understand the concerns and, ther efore, proposed that

data collection and submission be voluntar y for this measure for the CY 2017 payment determination and subsequent years. ASCs would not be subject to a payment reduction for failing to report this measure during the pe riod of voluntary reporting. For ASCs that choose to submit data, we continue to request that they submit such data using the means and timelines finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75138 to 75139). Data submitted volunta rily will be publicly reported as

discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 75138 to 75139). We invited public comment on this proposal.

Comment: Some comment ers stated that complications following cataract surgery are not acceptable and believed that ASC-11 tracks patient-centered clinical

outcomes. The commenters stated that th e measure would promote and improve care coordination among providers. Some comme nters commended CMS’ recognition of the associated operational issues and taking the approach to delay implementation of this

measure as well as allo wing voluntary collection.CMS-1613-FC 851

Response: We appreciate the commente rs that supported and agreed with our view and the approach we take for this meas ure. We agree that complications following cataract surgery are not acceptable. Wh ile ASC-11 does not address complications following cataract surgery, it does address improvement in visual function following cataract surgery and it tracks an importa nt patient-centered clinical outcome.

Comment: Some commenters did not s upport voluntary data reporting based on concerns regarding the extent to which ASCs would report data for ASC-11 if reporting was voluntary. Some commenters stated that incomplete display of data is not meaningful to consumers. Other commenters expressed concerns that the display of data

from some ASCs but not others would lead some patients to conclude that some ASCs are more committed to improving cataract surgery. Several other commenters predicted that very few ASCs will report data for th e ASC-11 measure, leading to an insufficient sample. Response: We thank the commenters for their views. We note that the proposal, which we are finalizing in this final rule w ith comment period, is for the measure to be voluntarily reported by ASCs. Th erefore, ASCs would be ab le to choose whether to implement data collection and reporting processes for this measure. We continue to

believe the ASC-11 measure has value in this care setting. We do not agree that an insufficient sample of facilities will report data for the ASC-11 measure because we also have self-reports from ASCs th at some did put processes in place to collect data for this measure, and that these ASCs would like to report data for this measure because they view the measure as an important quality measure for facilities.CMS-1613-FC 852

We do not agree that ASC-11 data re ported on a voluntary basis would not be meaningful for consumers. There are many situations where ASCs do not submit information to the ASCQR Program because they do not have such information due to

lack of cases or low case volume. In th e CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 through 74515), we finalized a policy to make data that an ASC submitted for the ASCQR Program publicly available on a CMS Web site after providing an ASC an opportunity to review the data to be made public. Therefore, when ASCs’ information is submitted, we will make this information publicly available. Where this information is not submitted, we will state that the information is not available. We also do not agree that reporting of measure data by some ASCs and not others under voluntary reporting would affect the validity of data reported for this Web-based measure because

this situation is no differentthan any other measure where not all ASCs had cases. Comment: Many commenters requested that CMS remove the ASC-11 measure from the program entirely, rather than de laying implementation and allowing voluntary reporting. These commenters reiterated si milar concerns expressed in the CY 2014

OPPS/ASC final rule with co mment period regarding associ ated burden, suitability for ASCQR Program versus PQRS, program alignm ent of this measure, nonstandardization of collected information, NQF endorseme nt, MAP recommendati on, and coordination challenges faced by facilities. Response: We continue to believe this measure addresses the importance area of care coordination and responsibility for mon itoring patient outcomes between performing physicians, practitioners that assess visual function, and faci lities where procedures areCMS-1613-FC 853

performed; therefore, we are not removi ng ASC-11 from the ASCQR Program measure set for the CY 2017 payment determ ination and subsequent years. With respect to the concerns raised by commenters about the measure, we refer

commenters to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75124 through 75126, 75129, and 75138 through 75139) wher e we previously have responded

to these concerns.

After consideration of th e public comments we receive d, for the reasons discussed above, we are finalizing our proposal to allo w voluntary data collec tion and reporting of this measure for the CY 2017 payment determina tion and subsequent years. We also are finalizing our proposal to ex clude the measure entirely from the CY 2016 payment determination measure set. ASCs will be able to begin reporting with January 1, 2015

services as described above in section XIV.E .3. of this final rule with comment period. For ASCs that choose to submit data, we reque st that they submit such data using the

means and timelines finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75138 to 75139). ASCs will not be subj ect to a payment reduction for failing to report this measure during the period of voluntary reporting. Datavoluntarily submitted will be publicly reported. 4. Claims-Based Measure Data Requirements for the New Measure for the CY 2018 Payment Determination and Subsequent Years In the CY 2015 OPPS/ASC proposed ru le (79 FR 41046-41048), we proposed to adopt the ASC-12: Facility Seven-Day Risk -Standardized Hospita l Visit Rate after Outpatient Colonoscopy measure, which is a claims-based measure that does not require any additional data submi ssion apart from standard Me dicare FFS claims. In theCMS-1613-FC 854

CY 2015 OPPS/ASC proposed rule (79 FR 41051) , we also proposed that, for this measure, which uses ASC Medicare clai ms data as specified in the ASCQR Specifications Manual and does not require any additional data submission such as QDCs, we would use paid Medicare FFS claims from a 12-month period from July 1 of the year 3 years before the payment determina tion year to June 30 of the following year. Thus, we stated, for the CY 2017 payment determination for this measure, claims from July 1, 2014 to June 30, 2015 would be used. We noted that we pr oposed to adopt this measure under the ASCQR Program as well as the Hospital OQR Program, as described in section XIII.H.2.c. of the proposed rule. We stated that this ASCQR Program time period provides for the timeliest data possible while aligning the proposed data submission requirements with our Hospital OQR Program proposal, which would use the claims-based measure data submission requirements for the CY 2015 payment determination and subsequent years that we adopted in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75111 through 75112). We invited public comment on this proposal. Comment: Many commenters expressed c oncern that, if finalized, the ASC-12 measure’s data collection period would be gin July 1, 2014, several months before adoption of the measure is finalized. Se veral commenters recommended that data collection begin July 1, 2015. Response: As we stated above in se ction XIV.B.5. of this final rule with comment period, we are finalizing the a doption of ASC-12 for the CY 2018 payment determination and subsequent years instead of the CY 2017 payment determination and subsequent years as proposed. We are fi nalizing the data submission time period forCMS-1613-FC 855

ASC-12 to use paid Medicare FFS claims from the calendar year 2 years before the payment determination calendar year. For the CY 2018 payment determination, we will use paid Medicare FFS claims from January1, 2016 to December 31, 2016. We believe the reliability of the measure using 1 year of data is sufficiently reliable. While we believe that measure reliability may be fu rther improved by using a longer time period, we must balance the reliability of the measure with the timeliness of the measure. At this time, we believe that 1 year of data appropriately balances these competing interests, but we will continue to assess this belief during the dry run.

After consideration of th e public comments we receive d, we are not finalizing our proposal to use paid Medicar e FFS claims from a 12-month period from July 1 of the year 3 years before the payment determinati on year to June 30 of the following year. Instead, we will use paid Medicare FFS claims from the calendar year 2 years before the payment determination calendar year. Specifi cally, with respect to the CY 2018 payment determination, for calculating ASC-12, we will use paid Medicare FFS claims from January 1, 2016 to December 31, 2016. 5. Data Submission Requirements for ASC- 8 (Influenza Vaccination Coverage Among Healthcare Personnel) Reported via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination and Subsequent Years a. Previously Adopted Requirements for the CY 2016 Payment Determination

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74510) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75139 through 75140) for a complete di scussion of the ASC-8 measure (Influenza Vaccination Coverage among Healthcare Pers onnel) (NQF #0431), including the dataCMS-1613-FC 856

collection timeframe and the data reporti ng standard procedures for the CY 2016 payment determination. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75139 through 75140), we finalized our proposal to use the data submi ssion and reporting standard procedures that have been set forth by the CDC for NHSN participation in general and

for submission of this measure to NHSN. We refer readers to the CDC’s NHSN Web site for detailed procedures for enrollment ( http://www.cdc.gov/nhsn/ambulatorysurgery/enroll.html ), set-up ( http://www.cdc.gov/nhsn/ambul atory-surgery/setup.html ), and reporting ( https://sams.cdc.gov ) (user authorization through Secure Access Management Services (SAMS) is required for access to NHSN). We note that the reporting link was updated in the CY 2015 OPPS/ASC proposed rule (79 FR 41051). b. Data Collection Timeframes for the CY 2017 Payment Determination and Subsequent

Years and Submission Deadlines for th e CY 2016 Payment Determination and Subsequent Years In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74510), we finalized our policy that data collection for the CY 2016 paym ent determination would be from October 1, 2014 through March 31, 2015 (the 2014-2015 influenza season data). In the CY 2015 OPPS/ASC proposed rule ( 79 FR 41051 through 41052, we proposed that for the CY 2017 payment determination and subs equent years, ASCs would collect data from October 1 of the year 2 years prior to the payment determination year to March 31 of the year prior to the payment determina tion year. For example, the CY 2017 payment determination would require data coll ection from October 1, 2015 to March 31, 2016.CMS-1613-FC 857

In the CY 2014 OPPS/ASC proposed rule, we proposed that ASCs would have until August 15, 2015 to submit their 2014-2015 influenza season data (October 1, 2014 through March 31, 2015) to NHSN. We stated that this date is the latest date possible for data entry that would provide sufficient time for us to make the CY 2016 payment determinations and is aligned with the data entry deadline for the measures entered via the CMS online tool (78 FR 43670). While some commenters suppor ted this proposal, others expressed disagreement with this proposal because it differed from the May 15 deadline proposed for the Hospital IQR Program (78 FR 27700, 50822) and the Hospital OQR Program (78 FR 43656, 75116 through 75117) a nd they believed this difference in

deadlines could cause confusion, thereby disadvantag ing ASCs (78 FR 75140). Other commenters believed that providi ng ASCs with a later deadli ne would provide an unfair advantage because ASCs would have longer to submit their data. Due to these concerns, we did not finalize the August 15, 2015 deadline. We stated th at we intended to propose

a submission deadline for this measure for the CY 2016 payment determination in this proposed rule. In the proposed rule, we proposed that Ma y 15 of the year in which the influenza

season ends be the submission deadline for each payment determination year, similar to the Hospital IQR and OQR Programs. For example, for the CY 2016 payment determination, ASCs would be required to submit their 2014-2015 influenza season data (October 1, 2014 through March 31, 2015) by May 15, 2015. Similarly, for the CY 2017 payment determination, ASCs would be re quired to submit their 2015-2016 influenza season data (October 1, 2015 through Marc h 31, 2016) by May 15, 2016. We believe a May 15 reporting deadline would enable ASCs to use data summarizing the results ofCMS-1613-FC 858

their previous influenza vaccination campaign to set targets and make plans for their influenza vaccination campaigns prior to the next influenza season. This deadline also would enable us to post and the public to revi ew the summary data before the start of the next influenza season. Finally, th is date aligns to the May 15 deadline used in the Hospital IQR and OQR Programs for this measure. We invited public comment on this proposal. Comment: Many commenters supported the proposed submission deadline of May 15 for ASC-8. One commenter expressed concern that there is a time lag for reporting this data, and urged that the public s hould have access to the data at the time the

data is most useful. Response: We thank the commenters for their support. We believe a May 15 reporting deadline will enable ASCs to use data summarizing the result s of their previous influenza vaccination campaign to set targets and make plans for their influenza vaccination campaigns prior to the next influe nza season. This deadline also will enable us to post and the public to revi ew the summary data before th e start of the next influenza season. Finally, this date aligns with the May 15 deadline used in the Hospital IQR and OQR Programs for this measure. Comment: Several commenters opposed setting the submission deadline for ASC-8 to May 15, arguing that the August 15 dead line considered in the prior year rule was better aligned with the other measures in the ASCQR Program and would minimize confusion and reporting burden. One commen ter suggested that the Hospital IQR and Hospital OQR Programs should move their dead lines to August 15 to support program alignment.CMS-1613-FC 859

Response: We thank the commenters for supporting last year’s proposal regarding a data submission d eadline for the ASC-8 measure. We proposed an August 15

data submission deadline in the CY 2014 OPPS/ASC proposed rule (78 FR 43670), but did not finalize this proposal due to commenters’ concerns with nonalignment with other quality reporting programs (78 FR 75140). While we seek to align reporting deadlin es whenever possible within the ASCQR Program (78 FR 75140), we believe alignment across programs with the May 15 reporting deadline will prevent confusion in repor ting across different facilities. We also

believe this earlier deadline wi ll enable us to make the data publicly available in time for ASCs to use the data summarizing the result s of their previous influenza vaccination campaign to set targets and make plans for th eir influenza vaccination campaigns prior to

the next influenza season. This would be very difficult to achie ve with an August 15 reporting deadline.

After consideration of th e public comments we receive d, for the reasons set forth above, we are finalizing our propos al without modification to a dopt May 15 of the year in

which the influenza season ends as the data submission deadline for the ASC-8 measure for each payment determination year , beginning with the CY 2016 payment determination. We also are finalizing our proposal without modification that, for the CY 2017 payment determination and subsequent years, ASCs will collect data from October 1 of the year 2 years prior to the payment determinat ion year to March 31 of the year prior to the paym ent determination year.CMS-1613-FC 860

6. ASCQR Program Validation of Claims -Based and CMS Web-Based Measures

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53641 through 53642) for a complete discussion of our policy not to require validation of claims-based measures (beyond the usual cl aims validation activities conducted by our Medicare Administrative Contractors) or Web-based measures for the ASCQR Program, which is in alignment with our requirements for the Hospital IQR and OQR Programs. In the CY 2015 OPPS/ASC proposed rule (79 FR 41052), we did not propose any changes to this policy. We received the following comment on data validation for the ASCQR Program.

Comment: One commenter recommended that CMS develop an ASCQR data validation program to assure the accuracy a nd integrity of quality data that will be publicly reported under the ASCQR Program. Response: We thank the commenter for the comment, and note that we continue to evaluate the feasibility of data validati on for the ASCQR Program. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641 through 53642) for a complete discussion of our policy not to require valid ation of claims-based measures (beyond the usual claims validation activities conducted by our Medicare Administ rative Contractors) or Web-based measures for the ASCQR Program. At this time, we believe that it would be overly burdensome to validate the reporte d data given the inexperience that ASCs have with reporting quality data to CMS coupl ed with the low incidence of cases for the claims-based measures. As we gain more experience with the ASCQR Program, we will reassess whether a data validation process for claims-based measures and measures where aggregate data are reported via an online tool is needed.CMS-1613-FC 861

7. Extraordinary Circumstances Extensions or Exemptions for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53642 through 53643) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75140 through 75141) for a complete discussion of our extraordinary circumstances extension or waiver process under the ASCQR Program. In the CY 2015 OPPS/ASC proposed rule (79 FR 41052), we did not propose any substantive changes to these policies or the processes. However, in the future, we will refer to the process as the “Extraordinary Circumstances Extensions or Exemptions” process rather than the “Extraordinary Circumstances Exte nsions or Waivers” process. We also are in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form (CMS -10432), approved under OMB control number 0938-1171. We are updating the instructions and the form so that a hospital or facility may apply for an extension for all applicable quality reporting programs at the same time. In addition, the instructions for the form will be updated. 8. ASCQR Program Reconsideration Procedures for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53643 through 53644) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75141) for a complete discussion of our informal reconsider ation process for the ASCQR Program for the CY 2014 payment determ ination and subsequent years. In the CY 2015 OPPS/ASC proposed rule (79 FR 41052) , we did not propose any changes to the informal reconsideration process.CMS-1613-FC 862

XV. Changes to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law: Expansion Exception Process A. Background 1. Statutory Basis Unless the requirements of an applicable exception are satisfied, section 1877 of the Act, also known as the “physician self-refe rral law”--(1) prohib its a physician from making referrals for certain designated health services payable by Medicare to an entity with which the physician (or an immediate fa mily member) has a financial relationship (ownership or compensation); and (2) prohib its the entity from submitting claims to Medicare (or billing another i ndividual, entity, or third pa rty payer) for those designated

health services furnished as a result of a prohibited referral. The Act establishes a number of specific exceptions to the physician self-referral law and grants the Secretary the authority to create regulat ory exceptions for financial re lationships that the Secretary determines pose no risk of program or patient abuse. Since the original enactment of the statute in 1989, we have published a series of final rules interpreting the statute and promulgating numerous exceptions. Section 1877(d) of the Act sets fort h exceptions related to ownership and investment interests held by a physician (or an immediate family member of a physician) in an entity that furnishes designated hea lth services. Sectio n 1877(d)(2) of the Act provides an exception for owners hip and investment interests in rural providers. Under the provision of section 1877(d)(2 ) of the Act, in order for an ownership or investment interest to qualify for the ex ception, the designated health services must be furnished in a rural area (as defined in s ection 1886(d)(2) of the Act), a nd substantially all of theCMS-1613-FC 863

designated health services fu rnished by the entity must be furnished to individuals residing in a rural area. Section 1877(d)(3 ) of the Act provides the hospital ownership exception, often referred to as the “whol e hospital exception,” for ownership and investment interests in a hospital located outside of Puerto Ri co, provided that the referring physician is authorized to perform services at the hospita l and the ownership or investment interest is in the hospital itsel f (and not merely in a subdivision of the hospital). 2. Affordable Care Act Amendments to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law Section 6001(a) of the Affordable Care Act amended the rural provider and whole hospital exceptions to the phys ician self-referral law to im pose additional restrictions on physician ownership and investment in rura l providers and hospitals. Section 6001(a) defines a “physician owner or investor” as a physician, or immediate family member of a physician, who has a direct or indi rect ownership or investment interest in a hospital. We refer to hospitals with direct or indi rect physician owners or investors as “physician-owned hospitals.” Section 6001(a)(3) of the A ffordable Care Act established new section 1877(i) of the Act, which imposes additional requireme nts for physician-owned hospitals to qualify for the rural provider or whole hospital excep tion. In addition to other requirements, section 1877(i)(1) of the Act prohibits a physician-owned hospital from expanding its facility capacity beyond the number of operati ng rooms, procedure rooms, and beds for which the hospital was licensed as of Marc h 23, 2010, unless an exception is granted by the Secretary.CMS-1613-FC 864

Section 1877(i)(3) of the Ac t requires the Secretary to establish and implement an exception process to the prohibition on expansio n of facility capacity. We refer to this process as the “expansion exception proce ss.” Section 1877(i)(3)(A)(i) of the Act provides that a hospital qualifying as an “a pplicable hospital” or a “high Medicaid facility” may apply for an expansion excepti on. Section 1877(i)(3)(E ) of the Act sets forth the eligibility criteria for applicable hospitals, which include criteria concerning inpatient Medicaid admissions, bed capacity, and bed occupancy. Section 1877(i)(3)(F) of the Act sets forth the eligibility criteria for high Medicaid faci lities, which include a criterion concerning inpatie nt Medicaid admissions. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72240), we addressed many of the additional requirements that were established by section 6001(a)

of the Affordable Care Act for the rura l provider and whole hospital exceptions, including the prohibition on expansion of fac ility capacity. In that final rule with comment period, we finalized regulations at 42 CFR 411.362(b)(2) that prohibit a physician-owned hospital from increasing the number of operating rooms, procedure rooms, and beds beyond that for which th e hospital was licensed on March 23, 2010 (or, in the case of a physician-owned hospital that did not have a provider agreement in effect as of that date, but did have a provider agreement in effect on December 31, 2010, the effective date of such agreement), if the hospi tal seeks to avail itself of the rural provider or whole hospital exception. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74517), we promulgated regulations under 42 CFR 411.362(c) that govern the expansion exception process. Section 411.362(c)(2) sets forth th e criteria for a physici an-owned hospital toCMS-1613-FC 865

qualify for an expansion exception as an applicable hospital. Specifically, § 411.362(c)(2) states that: (1) the hospital’s a nnual percent of tota l inpatient admissions under Medicaid must be equal to or greater th an the average percent with respect to such admissions for all hospitals located in the c ounty in which the hospital is located during the most recent fiscal year for which data ar e available as of the date that the hospital submits its exception request; (2) the hospital must be located in a State in which the average bed capacity in the St ate is less than the national average bed capacity during the most recent fiscal year for which data are avai lable as of the date that the hospital submits its request; and (3) the hospital must have an average bed occupancy ra te that is greater than the average bed occupancy rate in the St ate in which the hospital is located during the most recent fiscal year for which data ar e available as of the date that the hospital submits its request. Section 411.362(c)(3) specifies the criteria for a physic ian-owned hospital seeking an exception under the expansion exception proc ess on the basis that it is a high Medicaid facility, including the requirement that, with respect to each of the three most recent fiscal years for which data are available as of the date that the hospital submits its exception request, the hospital must have an annual percent of total inpatient admissions under Medicaid that is estimated to be greater thansuch percent with respect to such admissions for any other hospital located in the c ounty in which the hospital is located. In the CY 2012 OPPS/ASC proposed rule (76 FR 42350 through 42352), we proposed that filed Medicare hospital cost report data from the CMS Healthcare Cost Report Information System (HCRIS) be used to determine whether a hospital satisfies the inpatient Medicaid admissions, bed capacity, a nd bed occupancy criteria for applicableCMS-1613-FC 866

hospitals and the inpatient Me dicaid admissions criterion for high Medicaid facilities. We requested public comments c oncerning alternative data s ources that could result in

more accurate determinations as to whethe r a hospital satisfies the relevant criteria (76 FR 42350). The public comments that we received provided no persuasive support

for a data source more accurate than the filed hos pital cost report data reported to HCRIS. Therefore, we finalized the requirement to us e filed hospital cost re port data for purposes of facility capacity expans ion exception requests in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74518). In this final rule with comment period, we refer to the filed hospital cost report data that ar e required under our existing regulations as

“HCRIS data.” As required by section 1877( i)(3)(A) of the Act, the regulations addressing the expansion exception process in the CY 2012 OP PS/ASC final rule with comment period were issued by January 1, 2012, and the pr ocess was implemented on February 1, 2012. B. Limitations Identified by Stakeholders Regarding the Required Use of HCRIS Data Following the implementation of the expansion exception process on February 1, 2012, industry stakeholders informed us of what they believed to be certain limitations regarding the required use of HCRIS data under the regulations at

42 CFR 411.362. In the CY 2015 OPPS/AS C proposed rule (79 FR 41053), we discussed the existing required us e of HCRIS data and certain limitations of the data that were identified by stakeholders and CMS. We do not repeat that info rmation here; rather, we refer readers to the proposed rule for a comp lete discussion of the issues. To address the limitations regarding the required use of HCRIS data, we proposed to modify theCMS-1613-FC 867

expansion exception process to permit the use of certain non-HCRIS data sources for the inpatient Medicaid admissions, bed cap acity, and bed occupancy criteria. As of the publication date of the CY 2015 OPPS/ASC proposed rule, a correctly completed hospital cost report did not in clude Medicaid managed care admissions or discharges and, therefore, Me dicaid managed care admissions and discharges were not

available in HCRIS. As a re sult, the information collected to date through HCRIS cannot be used to estimate reliably Medicaid ma naged care admissions or discharges for purposes of estimating the percentages of inpatient Medicaid admissions under §§ 411.362(c)(2)(ii) and (c)(3)(ii). In addition, a hospital that has not participated as a provider in the Medicare program for each of the 3 most recent fiscal years for which data is available would be precluded from seeking a facility expansion exception as a high Medicaid facility. It would be simila rly prohibitive if the requesting hospital is seeking an exception as either an applicable hospital or high Medica id facility, and the hospitals in the county in which the request ing hospital is locate d were not Medicare participating providers or were not participa ting in the Medicare pr ogram during each of the years for which comparisons are require d under the statute and our regulations. We believe that some physician-owned hos pitals that serve a significant number of Medicaid managed care patien ts and are interested in th e expansion exception process may fail to qualify for an exception due to th e exclusion of Medicaid managed care data. Accordingly, as detailed in section XV .C. of the CY 2015 OPPS/ASC proposed rule (79 FR 41054), we proposed to revise the expansion exception process to permit physician-owned hospitals to use filed hospital co st report data, data from internal data sources, or data from external data sources to estimate the required percentages ofCMS-1613-FC 868

inpatient admissions under Medicaid. (We re ferred in the proposal to the non-HCRIS

internal data sources and exte rnal data sources that we pr oposed to permit for purposes of the expansion exception process as “supplemental data sources.”) Al so, as explained in section XV.B. of the CY 2015 OPPS/ASC pr oposed rule (79 FR 41054), we proposed to revise the expansion exception process to pe rmit the use of supplemen tal data sources for the bed capacity and bed occupancy cr iteria for applicable hospitals. C. Changes to the Physician-Owned Hospital Expansion Exception Process Below we discuss the provisions of th e proposed rule and summarize and respond to the public comments we received in response to our proposals. For ease of reference, we have divided the comments and responses into the following categories: supplemental data sources; fiscal year st andard; community input and ti ming of complete request; and

additional considerations. 1. Supplemental Data Sources Given the limitations regarding the re quired use of HCRIS data (which we

described in sections XV.B.1. and XV.B .2. of the CY 2015 OPPS/ASC proposed rule (79 FR 41053 through 41054)), we proposed to revise our regulations at §§ 411.362(c)(2)(ii), (c)(2)(iv), (c)(2)(v), a nd (c)(3)(ii) to permit physician-owned hospitals to use data from certain internal data sources or external data sources, in addition to HCRIS data, in order to estimat e the percentages of inpatient Medicaid admissions, and to determine the bed capacitie s and the bed occupancy rates referenced in those sections. We stated in the proposed rule that we were not prescribing that hospitals use a specific indi vidual data source or comb ination of data sources.CMS-1613-FC 869

We proposed that, for purposes of the e xpansion exception process, internal data sources would be sources generated, maintain ed, or under the control of the Department, and we gave as examples the Healthcare Cost and Utilization Project (HCUP), the Medicaid Statistical Information System (MSIS), and the Medicaid Analytic Extract (MAX). We sought public comments that r ecommended other possible internal data sources. We also proposed that, for purpos es of the expansion exception process,

“external data sources” would be data sour ces generated, maintaine d, or under the control of a State Medicaid agency, and we sought public comments that recommended other possible external data sources, including those of other State agencies or departments. Finally, we proposed to amend 42 CFR 411.351: (1) to define “internal data source” to include only non-HCRIS data sour ces that are reliable and tran sparent, and that maintain or generate data that are accurate, complete, and objectively verifiable for purposes of the expansion exception process, and to define “external data source” to include only data sources that are reliable and transparent, a nd that maintain or ge nerate data that are accurate, complete, and objectively verifiable for purposes of the expansion exception process; and (2) to state that internal data s ources and external data sources must maintain data that are readily available and accessi ble to the requesting hospital, comparison hospitals, and to CMS for purposes of the expansion exception process. We noted in the proposed rule that th e expansion exception process includes both the physician-owned hospital’s completion of its request and CMS’ c onsideration of the physician-owned hos pital’s request. We stated in the proposed rule that we believe that the supplemental data sources

should--CMS-1613-FC 870

● Be transparent regarding what compri ses the data, where the data originated, and the manner and method by which the data source received the data;

● Be maintained on a secure database th at prevents distortion or corruption of

data and that ensures th e accuracy of the data;

● Contain sufficient information to enable accurate estimates of the percentages of inpatient Medicaid admissions, and accurate determinations of bed capacities and bed occupancy rates;

● Contain sufficient information to enable the comparisons required by § 411.362(c)(2)(ii), (c)(2)(iv) , (c)(2)(v), and (c)(3)(i i) for the fiscal year(s) at issue; and

● Contain sufficiently clear and detailed data that will enable multiple users to produce consistent results and outcome s when using the same data set. In the proposed rule, we recognized that, if a physician-owned hospital uses data from a supplemental data source, the hospital may ultimately need to make estimates or

determinations in addition to those referenced in our exis ting regulations. Accordingly, we proposed to revise our regulations to allow for th e additional estimates or determinations that may be necessary under our revised process. Specifically, we proposed to permit a requesting hospital to us e data from a supplemental data source to:

● Estimate its own annual percenta ge of inpatient Medicaid admissions (§ 411.362(c)(2)(ii)).

● Estimate the average percentage withrespect to such admissions for all hospitals located in the county in which the hospital is locate d (§ 411.362(c)(2)(ii)).

● Determine the average bed capacity in the State in which the hospital is located (§ 411.362(c)(2)(iv)).CMS-1613-FC 871

● Determine the national averag e bed capacity (§ 411.362(c)(2)(iv)).

● Determine its own average bed occupancy rate (§ 411.362(c)(2)(v)).

● Determine the average bed occupancy rate for the State in which the hospital is located (§ 411.362(c)(2)(v)).

● Estimate its annual percentage of to tal inpatient admissions under Medicaid for each of the 3 most recent fiscal years for wh ich data are available (§ 411.362(c)(3)(ii)).

● Estimate the annual percentages of total inpatient admissions under Medicaid for every other hospital located in the county in which the ho spital is located for each of the 3 most recent fiscal years for whic h data are available (§ 411.362(c)(3)(ii)). We respond below to the specific comment s that we received in response to our proposal.

a. Internal Data Sources

Comment: All of the commenters supported CMS’ efforts to permit physician-owned hospitals to use supplementa l data sources in the expansion exception process because of the limitations of the H CRIS data, especially with respect to the inpatient Medicaid admissions criteria. The commenters generally agreed that a more flexible approach would help ensure that th e physician-owned hospita ls that satisfy the statutory criteria are able to expand facility capacity under the CMS process. Response: We appreciate the commen ters’ support. Accordingly, we are finalizing a number of our pr oposals to revise the expansi on exception process to provide for the flexibility called for by the comment ers and other industry stakeholders to effectuate the purpose of section 6001( a) of the Affordable Care Act.CMS-1613-FC 872

Comment: One commenter stated that it appreciated CMS’ efforts to permit physician-owned hospitals to use supplemental data sources but also expressed concern

that an internal data source as defined in th e proposed rule would ha ve limited utility in the expansion exception process. With respec t to the internal datasources provided as examples in the proposed rule, the commente r identified limitations concerning the data sources’ completeness for purposes of the expa nsion exception process. Specifically, the

commenter stated that certain States do not provide information to the HCUP and that the MSIS does not provide sufficient detail at the State or count y level for purposes of the expansion exception process. The commenter added that the Medica id Analytic Extract (MAX) would not be appropriate for the expa nsion exception process because it may not be used for nonresearch purposes. Response: We share the concerns identif ied by the commenter. After publication of the proposed rule, we made additional inquirie s into the utility of internal data sources with respect to the inpatient Medicaid admissions criteria. As a resu lt of those inquiries and further review, we agree with the co mmenter that these data sources contain significant limitations, including in complete data for purposes of the exception process, as well as issues related to timeliness, av ailability, and accessibility of the data. Accordingly, we do not believe that the three sources listed in the proposed rule satisfy

all of the standards that we set forth in th e proposed rule for supplemental data sources (79 FR 41055), which we continue to believe are critical for any supplemental data source that could be used in the expansion exception process. None of the commenters provided information regarding other potentiallyacceptable internal data sources, and we are unaware of any other intern al data sources that could be used to estimate accuratelyCMS-1613-FC 873

and reliably the percentages of inpatient Medicaid admissions required. Therefore, we are not finalizing our proposal to permit th e use of any non-HCRIS internal data source for the inpatient Medicaid admissions crit eria required at §§ 411.362(c)(2)(ii) and (c)(3)(ii). We also believe that many of the limita tions that the commenter and our review identified regarding the proposed internal data sources would also apply to the bed capacity and bed occupancy criteria at § 411.362 (c)(2)(iv) and (c)(2)(v). Specifically, we

do not believe that internal data sources ot her than HCRIS would include relevant and adequate information to determine accurate ly the average bed capacity for hospitals within a State or nationally; nor do we beli eve internal data sources other than HCRIS

would include information to determine accura tely bed occupancy rates in a State. Accordingly, we are not finalizing our pr oposed revisions to §§ 411.362(c)(2)(iv) and (c)(2)(v) that would permit the use of any non-HCRIS internal data source for those criteria. Because no internal data source, other than HCRIS, will be permitted in the expansion exception process under this fina l rule with comment period, we are not finalizing our proposal to add a definiti on of “internal data source” to § 411.351.

Comment: One commenter recommended that physician-owned hospitals be allowed to use as an internal data source the same Medicaid eligibility determination process that hospitals us e for Medicare disproporti onate share hospital (DSH)

determinations. Response: Medicare DSH determina tions are based on Medicaid days, not admissions (or discharges). Based on our re view, we do not believe that Medicaid days,

without additional detailed information for the requesting and each comparison hospital,CMS-1613-FC 874

could be used in calculations to estimate accurately or reliably th e required percentages of inpatient Medicaid admissions. The commenter did not explain how Medicaid eligibility data could be us ed to estimate inpatient admissions under Medicaid for the requesting hospital and each comparison hos pital, when required. Without further explanation, we cannot agree that the Medica id eligibility determination process that hospitals use for Medicare DSH determinati ons should be consider ed a data source.

b. External Data Sources Comment: Most commenters urged CMS to finalize its proposal to permit the use

of data from external data sources for th e inpatient Medicaid admissions criteria. One commenter stated that its State Medicaid agen cy’s data on inpatient Medicaid admissions includes fee-for-service and managed care da ta, and that the data on total patient admissions are readily available from the Me dicaid agency. The commenter indicated that the State Medicaid agency data c ould be used to determine accurately the percentages of inpatient Me dicaid admissions referenced in § 411.362(c)(2)(ii) and (c)(3)(ii). The commenter also stated that th e State did not charge a fee for providing the necessary data. Response: We believe that States have a significant inte rest in ensuring that data generated, maintained, or under the control of the State Medicaid agencyare accurate and reliable. In general, submission of data to a State Medicaid agen cy is not voluntary, and hospitals are incented to provide accurate data and other information to receive payment for the services that they provide to the St ate’s Medicaid enrollees. Accordingly, we are persuaded to finalize our propos al to permit the use of an external data source for the inpatient Medicaid admissions criteria at § 411.362(c)(2)(ii) and (c )(3)(ii) with theCMS-1613-FC 875

modification stemming from the recent revisi on to the Medicare hospital cost report described in this response. We also are adopting as final our proposed definition of

“external data source” with no modificat ion. We are adding this definition at § 411.362(a), rather than at § 411.351 as propos ed, because the definition of “external data source” applies only to our regulations at § 411.362. We note that CMS recently revised the hospi tal cost report to require the reporting of Medicaid managed care discharg es in addition to Medicaid fee-for-service discharges. As a result of this revision, a correctly completed hospital cost report will include Medicaid managed care di scharges and, thus, Medicaid managed care discharges eventually will be available in HCRIS. At such time, the limitations that led to our proposal will be resolved, and HCRIS should be sufficiently complete to estimate the percentages of Medicaid inpatient admi ssions required in § 411.362(c)(2)(ii) and (c)(3)(ii). However, we anticipate that it will take several years before physician-owned hospitals that are interested in requesting anexpansion exception will be able to utilize the necessary Medicaid managed care data thro ugh HCRIS. Therefore, we are permitting physician-owned hospitals to use data from an external data source for the inpatient

Medicaid admissions criteria until such time that the Secretary determines that HCRIS contains sufficiently complete inpatient Medi caid discharge data. At that time, going forward, physician-owned hospitals may use only filed Medicare hospital cost report data for the inpatient Medicaid admissions criter ia. For additional information about the recent revisions to the hospital cost report, we refer readers to Transmittal 6 on the CMS

Web site at: http://www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/2 014-Transmittals-Items/R6P240.html

.CMS-1613-FC 876

We did not receive any public comment s regarding whether an external data source would contain adequate information to determine the remaining four calculations required for the Secretary to grant an excepti on to the facility expansion prohibition for an applicable hospital (that is, the average be d capacity in the State where the requesting hospital is located, national average bed cap acity, the requesting hos pital’s average bed occupancy, and the average bed occupancy fo r all hospitals in the State where the requesting hospital is located). Based on our own review, we do not believe that an

external data source would meet the standard s set forth in the proposed rule when used for the criteria at § 411.362(c)(2)( iv) and (c)(2)(v). Therefor e, we are not finalizing our proposal to permit the use of external data s ources for the four calcu lations specified in this paragraph and, thus, we are limiting the use of external data sources to the estimations of the percentages of inpatie nt Medicaid admissions at § 411.362(c)(2)(ii) and (c)(3)(ii). Comment: One commenter suggested thatphysician-owned hospitals seeking an expansion exception be permitted to use the most current external data available, regardless of source. Response: We interpret the comment as a suggestion that a requesting hospital should be able to use multiple external data sources to achieve the goal of using the “most current” data available when requesting an ex pansion exception, provided that each data

source meets the criteria for an “external data source.” We disagree with the commenter

because we believe that the use of more than one data source would add unnecessary complexity to the Secretary’s re view and lead to inconsistent results, including from year to year where multiple-year comparisons are required. In order to ensure accurate andCMS-1613-FC 877

consistent estimates and determinations and to facilitate the Secr etary’s review of a physician-owned hospital’s reque st for a facility expansi on exception, all of the data necessary for a physician-owned hospital to es timate or determine the percentages of inpatient Medicaid admissions referenced in §§ 411.362(c)(2)(ii) and (c)(3)(ii) must come from a single data source. Specificall y, the same data source, whether HCRIS or an external data source, must be used in th e numerator and denominator when determining or estimating the percentages of inpatient admissions under Medicaid for the requesting hospital and any other comp arison hospital required under § 411.362(c)(2)(ii) and (c)(3)(ii). We will continue to monitor the use of data sources in the expansion exception process and, if necessary, we will provide additional guidance on the CMS Web site regarding how an external data source s hould be used for the inpatient Medicaid

admissions criteria. Comment: One commenter identified potenti al shortcomings in the data that its State Medicaid agency collects. Specifically, this commenter stated that its State collects Medicaid inpatient admissions data from gene ral acute care hospitals but not psychiatric or specialty hospitals. (The commenter did not define “specialty hos pital.”) For this reason, the commenter claimed that its State Medicaid agency data would be incomplete if the requesting hospital is a psychiatric or specialty hospital or must compare itself to a psychiatric or sp ecialty hospital. Response: Although we understand the pot ential implication of a State Medicaid agency not requiring a particul ar type of hospital to report admissions (or discharges) data to the agency, we note that HCRIS rema ins available under the policies set forth in this final rule with comment period. No Medi care participating hosp ital is exempt fromCMS-1613-FC 878

reporting cost report data in HCRIS. Hospita ls requesting an exception to the Affordable Care Act’s facility expansion prohibition may use HCRIS data to make the necessary estimates and determinations required under the statute and our regulations.

Comment: One commenter recommended that physician-owned hospitals be permitted to use a State-provided listing of Medicaid DSH-eligible hospitals as an external data source. The commenter suggested that, if a hospital ha s been determined by its State Medicaid agency to be eligible for Medicaid DSH payments, the supporting data that show the Medicaid inpatientutilization rate or low-income utilization rate status of the hospital would be an ade quate external data source. Response: We do not believe that a lis ting of Medicaid DSH-eligible hospitals, even if developed by a State Medicaid agency, qualifies as an external data source under our proposed definition. Moreover, we are not persuaded to expand the definition of

“external data source” to include such a listing because we are unclear how a listing, by itself, could provide the data necessary to estimate the percen tages of inpatient Medicaid admissions required under the statute and our regulations. Comment: One commenter suggested thatadmissions data, which it was able to

obtain from the State health and human se rvices commission, should be preferred over discharge data for purposes of the in patient Medicaid admissions criteria. Response: In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74519), we determined that discharge data may be used to estimate the percentages of inpatient Medi caid admissions. We did not propose to revise this policy in the CY 2015 OPPS/ASC proposed rule. Howeve r, we are clarifying in this CY 2015

OPPS/ASC final rule with comm ent period that either admissi ons data or discharge dataCMS-1613-FC 879

may be used to either determine or estimate the percentages referenced in § 411.362(c)(2)(ii) and (c)(3)(ii), provided that the data being used are from a permitted data source. We are not pe rsuaded to rank or prioritize these types of data. The Secretary will determine whether an estimate is accurate or appropriate given the specific facts and circumstances underlying a physicia n-owned hospital’s expansion exception request. c. Completeness of Supplemental Data Sources Comment: One commenter expressed concern about the utility of an external data source, as defined in the proposed rule, for pur poses of the expansion exception process. The commenter stated that, in some States, cer tain types of hospitals are not required to report any data to the States in which theyare located. The commenter did not provide information regarding whether State Medicaid agencies can or do generate on their own (that is, without relying on re ported information from hospita ls) inpatient admissions data for those hospitals not required to report such data. The commenter requested that CMS clarify whether the State Medicaid sources would be considered “complete” for purposes of the expansion exception process under such circumstances. Response: We recognize the possibility that a State Medicaid agency may not generate, maintain, or otherwise control a da ta source that would contain sufficient data for the inpatient Medicaid admissions criteria , the only eligibility criteria for which we are permitting the use of an external data sour ce in this final rule with comment period. Thus, the utility of the external data sources that we are permitting likely will depend on the State in which the physicia n-owned hospital is located.CMS-1613-FC 880

Whether an external data source is considered comple te depends on the facts and circumstances of the particular situation. For example, if a physician-owned hospital is seeking to qualify as a high Me dicaid facility and the State’ s data source does not include data on one of the comparison hospitals, th e State’s data would not be considered complete for purposes of the process because a high Medicaid facility must compare itself against each other hospital in the county in which it is located. d. Other Issues Related to Supplemental Data Sources Comment: One commenter expressed con cern that contradictory data sources could create confusion for requesting physic ian-owned hospitals, those who wish to comment on an expansion exception request, and th e Secretary in her review of a request. The commenter provided an example where a physician-owned hospital chooses to utilize available HCRIS data for its expansi on request, but the available data from the State Medicaid agency conflict with the HCRIS data, appearing to show that the physician-owned hospital was not the highest Me dicaid facility in a more recent fiscal year(s). Two commenters recommended that CMS consider issuing guidance as to how

external data sources will be characterized or measured in comparison to HCRIS data, how CMS and the Secretary will evaluate comments received from opposing hospitals, and what criteria the Secretary intends to relyupon to make the ultimate determinations.

Another commenter recommended that CMS not prioritize or rank additional data sources, given that access to supplemental data sources will vary based upon the entity requesting an expansion exception. Response: Determinations regarding e xpansion exception requests will be made on a case-by-case basis, with consideration gi ven to all information available to CMS atCMS-1613-FC 881

the time of the review. We are not able to provide the specific guidance requested by the first commenter because the example provided is hypothetical in nature and not part of an actual request for the Secretary’ s consideration. As we statedin the proposed rule, we believe that permissible data sources shoul d, among other things, be transparent, be secure, enable accurate estimates of the pe rcentages of inpatient Medicaid admissions, and provide for consistent resu lts in order to enable the Se cretary to make an informed decision regarding whether a requesting physic ian-owned hospital satisfies the statutory requirements for an exception to the facili ty expansion prohibition. We continue to believe in the importance of these attributes , and all data sources utilized by a requesting hospital and any community comments provi ded during the excepti on expansion process

will be evaluated with them in mind. B ecause each request will be reviewed on a case-by-case basis, we decline to issue guidance regarding th e relative priority of data sources. The Secretary will make determinations based on the criteria enumerated in the Affordable Care Act, as set forth in sect ion 1877(i)(3) of the Ac t and our regulations.

Comment: One commenter recommended th at, in addition to considering other data sources, CMS consider other factor s when reviewing an expansion exception request. The commenter claimed that Medicai d patient days are a better metric than Medicaid admissions because Medicaid patient days reflect a hospital’s use of resources to care for a Medicaid patient. The commen ter also suggested that CMS consider the specialty services, such as neonatal intensiv e care unit (NICU) serv ices, that a hospital provides. Specifically, the commenter suggest ed that CMS consider the bed occupancy of a particular specialty serv ice if that service treats a very large Medicaid population.CMS-1613-FC 882

Response: We do not have the author ity to revise the expansion exception process to incorporate the f actors that the commenter r ecommended. Section 6001(a) of

the Affordable Care Act established criteriathat physician-owned hos pitals must satisfy in order to qualify for an expansion excep tion request, including criteria concerning inpatient Medicaid admissions. As we unde rstand the comment, the commenter is recommending that we substitute (or addi tionally consider) a hospital’s inpatient Medicaid days as a criterion for granting an exception to the prohibition on facility expansion. The statute does not provide the Secretary discre tion to consider inpatient Medicaid days in lieu of th e inpatient Medicaid admissions criteria. Similarly, we lack the authority to consider the bed occupancy of specific specialty services, a factor which, even if permissible, would complicate our review of an exception request. e. Summary of Final Provisions Re garding Supplemental Data Sources After consideration of the public comments we received on the use of supplemental data sources, we are not finalizing the proposed revisions to § 411.362(c)(2)(ii) and (c)(3)(ii) that would permit physician-ow ned hospitals to use data from an internal data source other than HCRIS to estimate the percentages of inpatient

Medicaid admissions referenced in those sections. Accordingl y, we are not finalizing our proposal to add a definition of the term “internal data source” under § 411.351. As finalized, § 411.362(c)(2)(ii) and (c )(3)(ii) reflect modificati ons from our proposal that would have permitted physician-owned hospitals to use data from an external data source to estimate the percentages of inpatient Medi caid admissions referenced in those sections. Specifically, we are revising these sections to require the use of HCRIS data once they are complete and permit the use of data from an external data source only until then. WeCMS-1613-FC 883

also are finalizing the definition of “externa l data source” without modification, although we are adding the definition at § 411.362(a) , rather than at § 411.351 as proposed. Finally, we are not finalizing th e proposed revisions to thos e sections that would permit physician-owned hospitals to use data from a non-HCRIS data source to determine State average bed capacity, national averaged be d capacity, the requesting physician-owned hospital’s average bed occupanc y rate, or the State average bed occupancy rate. We provide the following chart of the fina l provisions to assist the reader.

Regulation Requirement Permissible Data Source(s) Limitations § 411.362(c)(2)(ii) Estimate the requesting hospital’s own annual percentage of inpatient Medicaid admission HCRIS, external data source An external data source may be used only until such time as the Secretary determines that HCRIS contains sufficiently complete inpatient Medicaid discharge data. § 411.362(c)(2)(ii) Estimate the average percentage with respect to such admissions for all hospitals located in the county in which the requesting hospital is located HCRIS, external data source An external data source may be used only until such time as the Secretary determines that HCRIS contains sufficiently complete inpatient Medicaid discharge data. § 411.362(c)(2)(iv) Determine the average bed capacity in the State in which the requesting hospital is located HCRIS --

§ 411.362(c)(2)(iv) Determine the national average bed capacity HCRIS -- § 411.362(c)(2)(v) Determine the requesting hospital’s own average bed occupancy rate HCRIS --

§ 411.362(c)(2)(v) Determine the average bed occupancy rate for HCRIS --CMS-1613-FC 884

Regulation Requirement Permissible Data Source(s) Limitations

the State in which the requesting hospital is located § 411.362(c)(3)(ii) Estimate the requesting hospital’s annual percentage of total inpatient admissions under Medicaid for each of the three most recent fiscal years for which data are available HCRIS, external data source An external data source may be used only until such time as the Secretary determines that HCRIS contains sufficiently complete inpatient Medicaid discharge data. § 411.362(c)(3)(ii) Estimate the annual percentages of total inpatient admissions under Medicaid for every other hospital located in the county in which the requesting hospital is located for each of the three most recent fiscal years for which data are available HCRIS, external data source An external data source may be used only until such time as the Secretary determines that HCRIS contains sufficiently complete inpatient Medicaid discharge data.

2. Fiscal Year Standard Section 1877(i)(3)(F) of the Act requires that a high Medicaid facility use data from each of the 3 most recent fiscal years fo r which data are available. In the CY 2012

OPPS/ASC final rule with comm ent period (76 FR 74518), we stat ed that we consider the most recent fiscal year for which data are av ailable to be the most recent year for which HCRIS contains data from at least 6,100 hospita ls. We currently apply this standard to expansion exception requests for both applicab le hospitals and high Medicaid facilities. In the CY 2015 OPPS/ASC proposed rule (79 FR 41055), we proposed to revise our standard so that the most recent fiscal ye ar for which data are available would be the year for which the data source(s) used in an expansion exception request containCMS-1613-FC 885

sufficient data to perform the comparisons required under § 411.362(c) (2)(ii), (c)(2)(iv), (c)(2)(v), and (c )(3)(ii). Specifically, we proposed that data sources, either alone or in combination with other data sources, would be considered to contain “sufficient data” if they contain all data from the requesti ng hospital and each hospital to which the requesting hospital must compare itself that are necessary to perform the estimates required in the expansion exception process. In addition, with re spect to a hospital seeking an expansion exception as an applicable hospital, we proposed that, in order to be considered to contain “sufficient data,” the data sources, either al one or in combination with other data sources, must contain the data necessary to determine the State and national average bed capacity and the average bed occupancy rate in the State in which the requesting hospital is located for purpos es of the expansion exception process. We also proposed to require that data fr om the same fiscal year be used for the applicable hospital eligibility criteria at § 411.362(c )(2)(ii), (c)(2)(iv) and (c)(2)(v), even if the hospital uses multiple data sources for those criteria. We st ated our belief that requiring the use of data from the same fi scal year will ensure consistency and equitability in the expans ion exception process. We sought public comments on our proposal to revise the standard that determin es the most recent fiscal year(s) for which data are available, as well as other ways to define “sufficient data” for purposes of the expansion exception process.CMS-1613-FC 886

a. Summary of Public Comments and Ou r Responses Regarding the Fiscal Year

Standard

Comment: All of the commenters that addressed this issue supported CMS’ proposal to revise the interpretation of the sta ndard “the most recent fiscal year for which

data are available.” The commenters stated generally that external data sources often have more recent data than the fiscal year for which HCRIS contains data from at least 6,100 hospitals. Two commenters recommended d eeming a data source “sufficient” and, thus, acceptable for use in an expansion ex ception request, if it co ntains all of the information necessary to complete the calculati ons required to determine eligibility for an exception as a high Medicaid facility or a pplicable hospital. Another commenter similarly supported the proposal and suggested th at CMS consider the sufficiency of data on a case-by-case basis. Response: We agree with the commenters that recommended that we deem a data source “sufficient” and, thus, acceptable for use in an expansion exception request, if it contains all of the information necessary to complete the calculations required to determine eligibility for an exception as a high Medicaid facility or applicable hospital. Although determining the sufficiency of a data source on a case-by-case basis could significantly lengthen the period of time required for a thorough review of an expansion exception request, we believe that evaluating the sufficien cy of data on a modified case-by-case basis is nonetheless appropria te, as explained more fully below. We are adopting separate st andards to determine the su fficiency of data sources for the Medicaid inpatient admissions criteria and the bed capacity and occupancy criteria set forth in our regulations. For purposes of the Medicaid inpatient admissions estimatesCMS-1613-FC 887

required in § 411.362(c)(2)(ii) and (c)(3)(ii), we are adopting a standard under which we will consider a data source sufficient when it contains data from the requesting hospital and every hospital located in the same county as the requesting hospital. This applies to

both external data sources and HCRIS. The st atutory criteria at se ctions 1877(i)(3)(E)(ii) and (i)(3)(F)(ii) of the Act afford no flexib ility to make these determinations based on data from fewer than all of the hospitals located in the same c ounty as the requesting hospital. For purposes of the bed capacityand occupancy determinations required in § 411.362(c)(2)(iv) and (c)(2)(v), we will consid er HCRIS sufficient for a particular fiscal year on a State-by-Stat e basis, rather than the curr ent “6,100 hospitals reporting” standard. Specifically, this final rule with comment period requires a requesting physician-owned hospital to satisfy the be d capacity criterion in § 411.362(c)(2)(iv) during the most recent fiscal year for which HCRIS contai ns data from a sufficient number of hospitals in the re quester’s State to determine the State’s average bed capacity and a sufficient number of hospitals nationa lly to determine the national average bed capacity. In addition, this final rule w ith comment period requires a requesting physician-owned hospital to satisfy the bed occupancy criteri on in § 411.362(c)(2)(v) during the most recent fiscal year for which HCRIS contai ns data from a sufficient number of hospitals in the State to dete rmine the requesting hospital’s average bed occupancy rate and the State’s average bed occupancy rate. “Sufficient number” means that enough hospitals have reported datasuch that the determinations in § 411.362(c)(2)(iv) and (c)(2)(v) would not mate rially change afte r additional hospital data are reported.CMS-1613-FC 888

We will consult with the CMS Office of the Actuary to determine whether average bed capacity and bed occupancy rate s would materially change upon additional hospital reporting. CMS intends to report on its Web site each State’s average bed capacity, the national average bed capacity, a nd each State’s average bed occupancy, per fiscal year, as they become available. A requesting physician-owned hospital may use only the averages posted on the CMS Web site as of the date that the hospital submits its expansion exception request. We provide the following examples to illu strate the application of the standard applicable to the determinations required in § 411.362(c)(2)(iv) and (c)(2)(v). Assume that, for FY 2013, the requesting hospital is one of 200 Medicare-par ticipating hospitals located in State A. Assume also that, af ter consultation with the CMS Office of the Actuary, we determine that State A’s FY 2013 average bed capacity and bed occupancy rates would not materially change once HCRIS contains data from atleast 85 percent of State A hospitals (170 hospitals). Finally, a ssume that CMS is able to determine the FY 2013 national average bed capacity rate once 5,500 hospita ls have reported bed capacity data in HCRIS, and that this rate would not materially change even if the remaining Medicare-participating hospitals reported data in HCRIS. Under the standard adopted in this final rule with comment period, the requesting hospital may use FY 2013 HCRIS data to make the State bed capacity and occupancy determinations required in § 411.362(c)(2)(iv) and (c)(2)(v) once HCRIS co ntains data from at least 170 of the Medicare-participating hospitals in State A fo r that fiscal year. The requesting hospital may use FY 2013 HCRIS data to determine th e national average bed capacity required inCMS-1613-FC 889

§ 411.362(c)(2)(iv) once HCRIS contains data fr om at least 5,500 Me dicare-participating hospitals for that fiscal year. In contrast, assume that, for FY 201 3, there are only 10 Medicare-participating hospitals in State B. Assume also that, after consultation with the CMS Office of the Actuary, we determine that State B’s FY 2013 average bed capacity and bed occupancy rates would materially change unless HCRIS contains data from all of State B’s hospitals. Thus, a physician-owned hospital located in State B could not use FY 2013 HCRIS data until all 10 Medicare-participating hospitals in State B reported their bed capacity and occupancy data in HCRIS for that fiscal year. With respect to external data sources, because we recognize that State Medicaid agencies likely will have varying collecti on time periods that ma y not line up with the Federal fiscal year end for which HCRIS data are available (for example, calendar year or State fiscal year), we are permitting the use of any 12-month period for the data, provided that all 3 years use the same 12-month cycle. For example, a State Medicaid agency may collect Medicaid inpatient admissions data on a calendar year cycle. A physician-owned hospital requesting an expansi on exception as a high Medicaid facility may use calendar years 2013, 2012 and 2011 if the external data so urce, for each of those years, contains all data from the requesting hos pital and every hosp ital located in the same county as the requesting hospital. We note that, if the latest year for which HCRIS contained data sufficient to determine the average bed capacity in the Stat e in which the requesting hospital is located and the national bed capacity was FY 2011, but HCRIS contained FY 2012 data sufficient to determine the requesting hosp ital’s own average bed occupancy and theCMS-1613-FC 890

average bed occupancy rate for the State in which the requesting hos pital is located, the hospital could use FY 2011 data for the dete rminations required in § 411.362(c)(2)(iv)

and FY 2012 data for the determinations re quired in § 411.362(c)(2 )(v). We recognize that using different years from the same perm issible data source to make the estimates or

determinations set forth in the criteria for applicable hospitals may require additional review of an expansion exception request by the Secretary. Howeve r, in light of our interpretation that each criterion that a physician-owned hospital seeking a facility expansion exception must meet is analyzed separately, we believe that allowing a requesting hospital to use data from 12-month periods that may be different for each criterion will permit use of the most recent data, result in more accurate determinations, and best effectuate the plain meaning of th e statutory and regulato ry language regarding

these criteria. b. Summary of Final Provisions Rega rding the Fiscal Year Standard

After consideration of th e public comments we received on the standard regarding the most recent available data, we are finaliz ing our proposals with se veral modifications. For purposes of the estimates required in § 411.362(c)(2)(ii) and (c)(3)(ii), the most recent 12-month period for which data are avai lable is the most recent 12-month period

for which the data source used contains al l data from the requesting hospital and each hospital to which the requesting hospital mu st compare itself. For purposes of the determinations required in § 411.362(c)(2)(iv), we require a requesting physician-owned hospital to satisfy the criterion during the most recent fiscal year for which HCRIS

contains data from a sufficient number of hospitals to determine the relevant State’s average bed capacity and the national aver age bed capacity. For purposes of theCMS-1613-FC 891

determinations required in § 411.362 (c)(2)(v), we require a requesting physician-owned hospital to satisfy the criterion during the most recent fiscal year for which HCRIS

contains data from a sufficient number of hos pitals to determine the requesting hospital’s average bed occupancy rate and the releva nt State’s average bed occupancy rate. Because we are continuing to require the us e of HCRIS data for the determinations required in § 411.362(c)(2)(iv) and (c)(2)(v), we believe that th is bifurcated approach is

necessary. Finally, we note that we analyze each estimate or determination required under § 411.362(c)(2) separately. We in terpret the statute and our re gulations to allow the use of different time periods for each estimate or determination, provided that the data source (or time period) used to perform the necessary calculation contains: (1) for purposes of § 411.362(c)(2)(ii) and (c)(3)(ii), all data from the requesting hospital and each hospital to which the requesting hospital must compare itself; (2) for purposes of § 411.362(c)(2)(iv), data from a sufficient number of hospitals to determine the relevant State’s average bed capacity and the national average bed capacity; and (3) for purposes of § 411.362(c)(2)(v), data from a sufficient number of hospitals to determine the requesting hospital’s average bed occupancy rate and the relevant State’s average bed occupancy rate, respectively. CMS will continue to determine and make available on its Web site State bed capacity and occupancy rates and the national average bed capacity rate. “Sufficient number” means that enough hos pitals have reported data such that the determinations in § 411.362(c)(2 )(iv) and (c)(2)(v) w ould not materially change even if data that may be missing from co mparison hospitals were included. 3. Community Input and Timi ng of a Complete RequestCMS-1613-FC 892

In the CY 2015 OPPS/ASC proposed rule (79 FR 41055 through 41056), we proposed to require that a physician-owned hospital requesting an expansion exception provide actual notification direc tly to hospitals whose data ar e part of the comparisons set forth under § 411.362(c)(2)(ii) a nd (c)(3)(ii) of the regul ations. Under proposed § 411.362(c)(5), the notification must be in wr iting, in either electronic or hard copy form, and must be provided at the same ti me that the hospital discloses on any public Web site for the hospital that it is requesting an exception. We stated in the proposed rule that we believe that this additional safeguard would ensure that comparison hospitals are aware of the opportunity to confirm or dispute the accuracy or re liability of the data in the physician-owned hos pital’s request. Our existing regulations at § 411.362(c)(5 ) set forth the process for community input and the timing of a complete expans ion exception request. These regulations provide for a 30-day comment peri od following publication in the Federal Register of notice of the physician-owned hospital’s ex pansion exception request and a 30-day rebuttal period for the reques ting hospital to respond, if it chooses, to any written

comments that CMS receives from the community. Currently, an expansion exception request is considered complete at the end of the 30-day comment period if CMS does not

receive written comments from the community. If CMS receives written comments from the community, the request is considered co mplete at the end of the 30-day rebuttal period, regardless of whether the requesti ng hospital submits a rebuttal statement. In the proposed rule, we explained that permitting the use of non-HCRIS data in an expansion exception request would likely requ ire additional time for our review of the request, including any comments submitted with respect to the request. Therefore, weCMS-1613-FC 893

proposed to revise our regulat ions at § 411.362(c)(5) to extend the date by which certain expansion exception requests will be deemed complete. Specifically, we proposed to revise § 411.362(c)(5) to provide that, where the request, a ny written comments, and any rebuttal statement include only HCRIS data, the current timeframes would apply. That is, such an expansion exception request would be deemed complete no later than: (1) the end of the 30-day comment period if no wr itten comments from the community are received; and (2) the end of the 30-day rebuttal period if written comments from the community are received, regardless of wh ether the physician-owned hospital submitting the request submits a rebuttal statement. We also proposed that, where the request, any written comments, or a rebuttal statement includes data from a supplemental data source, an expansion exception request would be deem ed complete no later than: (1) 180 days after the end of the 30-day comment period if no written comments from the community are received; and (2) 180 days after the end of the 30-day rebuttal period if written comments from the community are received, re gardless of whether the physician-owned hospital submitting the request submits a rebuttal statement. a. Summary of Public Comments and Ou r Responses Regarding Community Input and Timing of a Complete Request Comment: Some commenters encouraged CMS not to finalize the actual notification requirement, stating that it w ould impose a burden (both procedural and financial) on the requesting hos pital or could lead to an in crease in comments regarding each request and the complexity of those comments. One commenter stated that requiring actual notification to other hosp itals located in the same county as theCMS-1613-FC 894

requesting hospital goes beyond the intent of the Congress in enacting this provision of

the Affordable Care Act. Response: We believe that an actual notification requirement is important to ensure that comparison hospitals are aware of the opportunity to c onfirm or dispute the accuracy or reliability of the data in the physician-owned hospital’s request, and that any burden on the requesting hospita l is outweighed by the facilitation of robust community input that can help inform th e Secretary’s review of an e xpansion exception request. We believe that thorough vetting of all relevant informati on, both from the requesting hospital and the community in which the hospital is located, in fact, was the intent of the Congress. We disagree with the commenter that stated that this requirement goes beyond the congressional intent or our statutory authority. Comment: One commenter opposed CMS’ proposal to deem an expansion exception request that relies on a non-HCRIS data source comp lete no later than 180 days after the end of the 30-day comment period if no written comments from the community are received, and 180 days after the end of th e 30-day rebuttal period if written comments from the community are received, regardle ss of whether the physician-owned hospital submitting the request submits a rebuttal statement. The commenter stated that the additional time beyond the 30-day period provid ed for in our existing regulations is particularly unnecessary if th e requesting hospital uses inpatient admissions data from a State Medicaid agency that shows the percentage of Medicaid admissions for all of the hospitals operating in the same county as th e requesting hospital. Response: The purpose of our propos ed policy extending the timeframe for deeming complete an expansion excepti on request where the request itself, anyCMS-1613-FC 895

community input, or any rebuttal statement includes non-HCRIS data is to provide CMS with sufficient time to address any potentia l conflicts between data presented by the requesting hospital and data or other inform ation presented by a commenter or in the possession of CMS. As we noted in the CY 2012 OPPS/ASC final rule with comment period, the limitations on data sources that ma y be used in a physician-owned hospital’s expansion exception request do not apply to members of the community or to CMS (76 FR 74522). Therefore, it is possible (if not likely) that, when reviewing an expansion exception request, CMS would need to verify the data (and other information, if any) provided by the requesting hospita l and any commenters, as well as consider the data in light of the information otherwise available to CMS. This review could involve the use of internal experts or contractors, which will require additional time. We note that the timeframe for deeming an expansion exception request complete will be “no later than” 180 days after the end of the 30-day comment period (if no written comments from the community are received) and 180 days after the end of the 30-day rebuttal period (if written comments from the community ar e received) does not preclude an earlier timeframe where the information submitted by the requesting hospital does not conflict with any community input or inform ation otherwise available to CMS. b. Final Provisions Regarding Community Input and Timing of a Complete Request

After consideration of th e public comments we receiv ed on community input and timing of a complete response, we are fi nalizing our proposal, without modification, recognizing that, under this final rule w ith comment period, the only permissible supplemental data sources are ex ternal data sources, as defi ned in this final rule with comment period at § 411.362.CMS-1613-FC 896

D. Additional Considerations We recognize the importance of an accurate and consistent expansion exception process. We stated in the CY 2015 OPPS/AS C proposed rule (79 FR 41056) that we are

aware that data sources have unique characteristics due to their inputs, collection methods, compilation, and other factors, and that we would take this into consideration if we finalized our proposal to permit the use of supplemental data sources. In an effort to implement an accurate and consistent e xpansion exception process, we solicited comments on the utility, appropriateness, and limitations of our proposal to permit the use of supplemental data sources. Specifically, we sought comments that:

● Address whether permitting the use of s upplemental internal or external data sources would significantly affect the outcomes for any of the estimates or determinations required in our regulations.

● Address whether permitting the use of supplemental data sources would materially affect a physician- owned hospital’s ability to re quest an exception or CMS’ determination on an exception request.

● Describe the length of time that would be necessary to obtain or generate the required data from a specific data source.

● Address whether and when the data will be available and accessible per fiscal

year.

● Address whether the data will be av ailable and accessible in a format that enables the requesting hospital to perform the necessary comparisons.

● Describe how supplemental data s ources could or should be prioritized, including, but not limited to, rankings related to accuracy or reliability.CMS-1613-FC 897

● Describe how data from a particular da ta source could be used in the expansion exception process. We encouraged commente rs to specify whether a particular data source already maintains the percentages or rates required, or whether calculations will be necessary to generate the required percen tages or rates. If calculations will be necessary, we requested that commen ters describe the calculations.

● Describe the cost to industry stake holders, State governments, and the Federal government for obtaining or generating data from any potential data sources. We

consider cost to include bot h resources (for example, human capital and information technology) and actual fina ncial burden (for example, fees to use or purchase the data).

We also solicited comments on whether any additional burdens would affect the quality of care for beneficiaries as a resu lt of additional costs borne by a requesting hospital. We note that our inquiries were limited to solicitations of comments intended to inform our decision making regarding our actua l proposals and, therefore, do not require a response in this final rule with comment period. However, we have chosen to summarize and respond to the comments that addressed ranking or prioritizing data sources and types of data because we believe discussion of these issues helps clarify how our revisions to the expans ion exception process that we are finalizing will be implemented.

Comment: A few commenters who addre ssed the additional considerations set forth in the proposed rule discussed ranking or prioritizing permitted data sources. One commenter recommended that CMS not prioritiz e or rank additional data sources, given that access to supplemental data sources wi ll vary based on the hospital seeking theCMS-1613-FC 898

exception. Another commenter suggested that CMS give the highest priority to admissions data from State Medicaid agenci es for the inpatient Medicaid admissions

criteria. The commenter stated that the State in which the commenter is located provides an unbiased, reliable, single source of inpatient Medicaid admissions percentages that would eliminate the need for independent calculations by the re questing hospital and

individuals and entities in the community in which the hospital is located. The commenter further suggested that if actual admissions data are unavailable through the State Medicaid agency, CMS permit the us e of other data, including estimates of

Medicaid admissions based on disc harges using supplemental data. Response: We share the concerns of th e commenters that noted that the external data sources available to reque sting hospitals will vary from State to State. We also believe that the quality and completeness of the external data sources available to requesting hospitals will vary in the same manner. We further note the complexity involved in making a generally applicable polic y as to how to rank or prioritize various data sources. Therefore, we decline to provide guid ance regarding the rank or prioritization of potentially available data sources for use in the expansion exception process. Our goal remains to ensure a fair, accurate, and consistent process to implement

section 6001 of the Affordable Care Act. As discussed elsewhere in this preamble, each expansion exception request will be consider ed on a case-by-case basis. The Secretary will consider only reliable, credible information to determine whether a requesting physician-owned hospital qualifies for an excep tion to the facility expansion prohibition.CMS-1613-FC 899

E. Summary of the Final Provisions Rega rding the Expansion Exception Process under the Rural Provider and Hospital Ownership Ex ceptions to the Physician Self-Referral

Law In this final rule with comment period, we are finalizing the following policies related to the expansion exception pr ocess for physician-owned hospitals:

● We are permitting the use of external data sources to estimate a physician-owned hospital’s annual percenta ge of inpatient admissions under Medicaid (§ 411.362(c)(2)(ii) and (c)(3)(ii)), the averag e percentage of inpatient admissions under Medicaid of all hospita ls in the county in which a physic ian-owned hospital requesting an expansion exception as an “applicable hospita l” is located (§ 411.362(c)(2)(ii)), and the annual percentage of inpatient admissions unde r Medicaid of any ot her hospital in the county in which a physician-owned hospital re questing an expansion exception as a “high Medicaid facility” is located (§ 411.362(c)(3)(ii)). However, on or after such date that the Secretary determines that HCRIS contains sufficiently complete inpatient Medicaid discharge data, a hosp ital may use only filed Medicare hos pital cost report data to estimate the percentages of inpatient Medicaid admissions referenced in § 411.362(c)(2)(ii) a nd (c)(3)(ii).

● We are defining “external data source” at § 411.362 to mean a data source that (1) is generated, maintained, or under the co ntrol of a State Medi caid agency; (2) is reliable and transparent; (3) maintains data th at, for purposes of the process described in § 411.362(c), are readily available and accessibl e to the requesting hospital, comparison hospitals, and CMS; and (4) maintains or gene rates data that, for purposes of the processCMS-1613-FC 900

described in § 411.362(c), are accurate, complete , and objectively verifiable. We are not finalizing our proposed definiti on of “internal data source.”

● For purposes of § 411.362(c)(2)(ii) and (c )(3)(ii), we are in terpreting the most recent 12-month period for which data are avai lable as the most recent 12-month period

for which the data source used contains al l data from the requesting hospital and each hospital to which the requesting hospital must compare itself.

● For purposes of the determinations required in § 411.362(c)(2)(iv), we require a requesting physician-owned hospital to satisfy the criterion during the most recent fiscal year for which HCRIS contains data from a su fficient number of hospitals to determine a State’s average bed capacity and the national av erage bed capacity. For purposes of the determinations required in § 411.362 (c)(2)(v), we require a requesting physician-owned hospital to satisfy the criterion during the most recent fiscal year for which HCRIS

contains data from a sufficient number of hos pitals to determine the requesting hospital’s average bed occupancy rate and the releva nt State’s average bed occupancy rate. “Sufficient number of hospitals” means in this final rule with comment period that enough hospitals have reported data such thatthe determinations in § 411.362(c)(2)(iv) and (c)(2)(v) would not materially change even if data that may be missing from comparison hospitals were included.

● Where the request, any written comment s, and any rebuttal statement include only HCRIS data, we will consider a reque st for an expansion exception complete no later than: (1) the end of the 30-day commen t period if no written comments from the community are received; and (2) the end of the 30-day rebuttal period if writtenCMS-1613-FC 901

comments from the community are received, re gardless of whether the physician-owned hospital submitting the request submits a rebuttal statement (§ 411.362(c)(5)(i)).

● Where the request, any written comment s, or any rebuttal statement include

data from an external data s ource (as defined in this final rule with comment period), we will consider a request for an expansion exception complete no later than: (1) 180 days after the end of the 30-day comment period if no written comments from the community are received; and (2) 180 days after the end of the 30-day rebuttal period if written comments from the community are received, re gardless of whether the physician-owned hospital submitting the request submits a rebuttal statement (§ 411.362(c)(5)(ii)). We are not finalizing our proposal to revise the bed capacity and bed occupancy criteria at § 411.362(c)(2)(iv) a nd (c)(2)(v) to permit the use of non-HCRIS data sources. However, we are revising §§ 411.362(c)(2)(iv) and (c)(2)(v) to clarif y the fiscal year periods that requesting hospitals must use to make the determinations required in those

sections. XVI. Revision of the Requirements for Phys ician Certification of Hospital Inpatient Services Other Than Psychi atric Inpatient Services In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27644 through 27650), we discussed the statutory requirement for certif ication of hospital inpatient services for payment under Medicare Part A. The certific ation requirement for inpatient services other than psychiatric inpatientservices is found in section 1814(a)(3) of the Act, which provides that Medicare Part A payment will onlybe made for such services “which are furnished over a period of time, [if] a physician certifies that such services are required to be given on an inpatient basis.”CMS-1613-FC 902

As discussed in the CY 2015 OPPS/ ASC proposed rule (79 FR 41056 through 41058), in commenting on our FY 2014 proposal mentioned above, some commenters argued that the statutory refere nce to services furnished “over a period of time” and the then-existing regulation’s lack of any specific deadline for physician certifications in

nonoutlier cases indicated that no certification was required for short-stay cases. In support of their argument, the commenters cited the legislative history of section 1814(a)(3) of the Act, which these commente rs interpreted as indicating that the certification requirements should apply only to certain long-term stays. As we indicated in our response to these public comments in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50939), we do not agree with the assertion that the only possible interpretation of the statut e is that the requirement for physician certification only applies to long- stay cases. The statute does not define “over a period of time,” and further provides that “such certificat ion shall be furnished only in such cases, and with such frequency, and accompanied by such supporting material . . . as may be provided by regulations.” By this language, Congress explicitly de legated authority to the agency to elucidate this provi sion of the statute by regulation. In our previous regulations, we inte rpreted the statute’s requirement of a physician certification for inpa tient hospital services furnis hed “over a period of time” to apply to all inpatient admissions. While this is not the only possibl e interpretation of the statute, we believe that it is a permissible interpretation.

We continue to believe that an or der from a physician or other qualified practitioner in order to trigger an inpa tient hospital admission as specified in 42 CFR 412.3 is necessary for all inpatient admissions. As described more fully in theCMS-1613-FC 903

FY 2014 IPPS/LTCH PPS final rule (78 FR 50938 through 50954), the requirement for a physician order for a hospital inpatient admission has long be en clear in the Medicare hospital conditions of participation (CoPs), and we promulgated § 412.3 to make more explicit that admission pursuant to this order is the means whereby a beneficiary becomes a hospital inpatient and, therefor e, is required for payment of hospital inpatient services under Medicare Part A. A beneficiary becomes a hospital inpatient when admitted as such after a physician (or othe r qualified practitioner as pr ovided in the regulations) orders inpatient admission in accordance with the CoPs, and Medicare pays under Part A

for such an admission if the order is documen ted in the medical record. The order must be supported by objective medical informati on for purposes of the Part A payment determinations. Thus, the physic ian order must be present inthe medical record and be supported by the physician admission and progre ss notes in order for the hospital to be paid for hospital i npatient services.

As further noted in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50938 through 50954), we believe the additional certific ation requirements now specified under § 424.13(a)(2), (a)(3), and (a)(4) (that is, the r eason for hospitalizati on, the estimated time the patient will need to remain in the hospi tal, and the plan of posthospital care, if applicable) generally can be satisfied by elements routinely found in a patient’s medical record, such as progress notes. However, as we look to achieve our policy goals with the minimum administrative requirements necessary, and afte r considering previous public comments and our experience with our existing regulations, we believe that, in the majority of cases, the additional benefits (for example, as a program safeguard) of formally requiring aCMS-1613-FC 904

physician certification may not outweigh th e associated administrative requirements placed on hospitals. Because we continue to believe that an inpatient admission order is necessary for all inpatient admissions, we proposed in the CY 2015 OPPS/ASC proposed rule (79 FR 41057) to require such orders as a condition of payment based upon our general rulemaking authority und er section 1871 of the Act rath er than as an element of the physician certification under section 1814(a)(3 ) of the Act. Section 1871 of the Act authorizes the Secretary to “prescribe such regulations as may be necessary to carry out the administration of the insurance programs under [Title XVIII].” A clear regulatory definition of when and how a beneficiary beco mes an inpatient is necessary to carry out

the administration of Medicare Part A. S ection 1861(b) of the Act defines “inpatient hospital services” as certain it ems and services furnished to “an inpatient of a hospital,” but does not define “an inpatient of a hos pital.” Accordingly, § 412.3 provides the necessary definition for purposes of Medicare Part A payment by clarifying when “an

individual is considered an i npatient of a hospital, includi ng a critical access hospital.” We proposed to remove paragraph (c) from § 412.3. As we proposed to rely on a different statutory authority for such regul ation, we proposed that an admission order would no longer be a required component of physician certification of medical necessity. As to the physician certification requirement, we maintain that our prior longstanding policy was based upon a permissibl e interpretation of section 1814(a)(3) of the Act pursuant to that provi sion’s express delegation of authority to the agency to

determine the circumstances under which su ch certification shoul d be required. Nonetheless, after consideration of pub lic feedback, our experience under the then-existing regulations, and our policy goa ls, in the CY 2015 OPPS/ASC proposed ruleCMS-1613-FC 905

(79 FR 41057), we proposed to change our inte rpretation of section 1814(a)(3) of the Act to require a physician certif ication only for long-stay cases and outlier cases. As noted above, we believe that, in most cases, the admission order, medical record, and progress notes w ill contain sufficient information to support the medical necessity of an inpatient admission without a separate requirement of an additional, formal, physician certification. However, we believe that evidence of additional review and documentation by a treating physician be yond the admission orde r is necessary to

substantiate the continued medi cal necessity of long or cost ly inpatient stays. While granting the Secretary broad discretion to determine the circumstances under which a physician certification should be required, the statut e specifies that th e certification by a physician with respect to inpa tient hospital services (other than inpatient psychiatric hospital services) “shall be furnished no later th an the 20th day” of the stay. Because the statute specifically requires that certifica tion must occur no later than the 20th day, we believe that, at a minimum, Congress inte nded that physicians should conduct a more thorough review of such cases to help ensure that all requirements of medical necessity

continue to be met. We also note th e regulations at § 424.13(f)(2) specify our longstanding requirement that the physician certification for cost outlier cases occur no later than 20 days into th e hospital stay, and we did not propose to change the requirements for these cases. Therefore, we believe that, for nonoutlier cases, 20 days is also an appropriate minimum threshold for the physician certification, and we proposed to define long-stay cases as cases with stays of 20 days or longer. Specifically, in the CY 2015 OPPS/AS C proposed rule (79 FR 41057), we proposed to revise paragraph (a) of § 424.13 to specify that Medicare Part A pays forCMS-1613-FC 906

inpatient hospital services (other than inpatient psychiatric facility services) for cases that are 20 inpatient days or more, or are outlier cases under subpart F of Part 412 of this chapter, only if a physician certif ies or recertifies the following: (1) The reasons for either— (i) Continued hospitalization of the pa tient for medical treatment or medically required diagnostic study; or (We note that, in setting out the co rresponding regulation text for this provision in the proposed rule (79 FR 41083), we inadvertently omitted the word “Continued” at the beginning of this paragraph (a)(1)(i) . We are making a conforming correction in this fi nal rule with comment period. We do not believe that this conforming correction results in a ny substantive change in policy.) (ii) Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F of Part 412 of this chapter). (2) The estimated time the patient w ill need to remain in the hospital. (3) The plans for posthos pital care, if appropriate. We also proposed to revise paragraph (b) of § 424.13 to specify that certifications for long-stay cases must be furnished no la ter than 20 days into the hospital stay. Because the care furnished in inpatient psychiatric facilities is often purely

custodial and therefore not covered under Me dicare and because the primary purpose of

the certification of thes e cases is to help ensure that Medicare pays only for services of the type appropriate for Me dicare coverage, we did not propose changes to the certification requirements for inpati ent psychiatric hospital services. As discussed more fully in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50942 through 50943), there also are inherent differe nces in the operation of and beneficiaryCMS-1613-FC 907

admission to IRFs. Therefore, we also did not propose any changes to the admission requirements for IRFs. We invited public comment on these proposals. Summaries of the public comments we received and our responses to those public comments are set forth below.

Comment: Most commenters were s upportive of the proposal to eliminate physician certification requireme nts for the majority of inpa tient cases (other than long stay and cost outlier cases). Many commenters stated that the proposal would improve efficiency and would reduce the overall ad ministrative burden on hospitals. Several commenters stated that the proposal woul d resolve ongoing issues within hospitals wherein certain practitioners ro utinely and appropriately admit patients, but are unable to complete the certification requirement because they do not meet the statutory definition of a physician. The commenters indicated that, because these cases rarely exceed 20 days, and do not typically exceed outlier thre sholds, these practitioners would not be required to seek approval from a physicianto complete a physician certification

statement. Response: We thank the commenters fo r their support of our proposal to apply certification requirements at § 424.13 only to long-stay and outli er cases. We agree that our proposal would reduce administrative burden in general, and in particular would

reduce the administrative burden associated w ith the majority of cases involving an admission order issued by a practitioner qualifi ed to issue the order but who did not meet the statutory definition of a physician a nd therefore could not certify the case. Comment: Several commenters, while ap preciative of the proposal to limit physician certification requireme nts, continued to disagree that CMS has the statutoryCMS-1613-FC 908

authority to require signed admission orders for all inpatient cases. The commenters contended that CMS cannot use its general rulemaking authority under section 1871 of the Act to require a signed physician orde r for every inpatient admission. These commenters argued that that th e continued requirement for ad mission orders is essentially

the same as the certification requirement and stated that section 1814(a)(2) of the Act is explicit in requiring physician cer tification only for services “furnished over a period of

time” and not for all services. Response: We disagree with these co mmenters. While the inpatient admission order was a required component of the physic ian certification under our previous policy, the order and the physician certification do not serve identical policy goals under our proposal, which we are now finalizing. For all cases, a proper ly authorized and documented admission order is necessary because the admission order is integral to a clear regulatory definition of when and how a beneficiary becomes an inpatient. Such a definition is necessary to carry out the administration of Medicare Part A because, as noted previously, section 1861(b) of the Ac t defines “inpatient hospital services” as

certain items and services furnished to “an in patient of a hospital,” but does not define “an inpatient of a hospital.” Accordingly, fo r all cases, our admissi on order requirements at § 412.3 provide the necessary definition for purposes of Medicare Part A payment by clarifying when “an individual is considered an inpatient of a hospital, including a critical access hospital.” The development of admission order requirements is a necessary and appropriate use of our general rulemaki ng authority under section 1871 of the Act. In most cases, the admission order, along with the medical record and progress notes, may also provide sufficient informati on to support the medical necessity of anCMS-1613-FC 909

inpatient admission without the separate requirement of an additional, formal, physician certification. However, for long or very costlyinpatient stays, we be lieve that additional review and documentation by a treating physician are necessary to help substantiate the continued medical necessity of such stays, and a physician certification provides evidence

of such additional review. The fact that we have determined, in the majority of cases, that the additional benefits (for example, as a program safeguard) of formally requiring a physician certification do not outweigh the asso ciated administrative requirements placed on hospitals in no way changes the necessity and appropriateness of requiring a signed

admission order for all cases.

Comment: Some commenter s requested that CMS require the admission order to be signed by the time of billing, not be fore discharge, as is permitted for CAH certification requirements. The commente rs cited the admini strative burden and logistical challenges involv ed with CMS’ requirements. Response: We believe that, in most cases , matters relating to the determination of patient status should be resolved before disc harge, due to the cons equences that flow from such a determination. For example, whet her services are billed under Medicare Part A or Part B can have a significant impact on a be neficiary’s financial liability. Therefore, we do not believe it is appropriate to cha nge our existing policy which requires that inpatient orders be signed prior to discharg e by a practitioner familiar with the case and authorized by the hospital to admit inpatients.

In the FY 2015 IPPS/LTCH PPS final ru le (79 FR 50163 through 50165), we did finalize a provision to allow CAHs to comp lete certification re quirements (including completion of the admission order) no later th an 1 day before the date on which the claimCMS-1613-FC 910

for payment is submitted as they had been al lowed to do prior to FY 2014. However, this policy exists in part to provide CAHs with greater flexibility in meeting certification requirements unique to CAHs. For example, CAHs face a statutory requirement that a physician certify that a patient will be expected to be transferred or discharged within 96

hours of admission. We do not believe it would be appropriate to apply this historical CAH policy more broadly to hospitals that do not face the same circumstances as CAHs. Comment: Several commenters requeste d that CMS provide additional guidance regarding the required content a nd format of the physician certification statement. Some

commenters asked that CMS confirm that the policy re quiring physician certification only for long-stay and outlier cases did not otherwise alter the inpatient hospital admission guidelines discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50944 through 50953). Others commenters request ed general guidance and clarification regarding CMS policies in this area. Response: As discussed previously in the section, the phys ician certification requirements at § 424.13 generally may be sa tisfied by elements routinely found in a patient’s medical record, such as progress notes. CMS does not require that a physician certification comply with a specific standard or format--only that it ensures that the conditions at § 424.13(a) were met. If the medical record adequately describes the reasons for continued hospitalization, the estimated time the patient is expected to require inpatient care, and discharge planning (where appropriate), and th e medical record is signed by a physician involved with and respons ible for the patient’s care, this would satisfy certification requirements.CMS-1613-FC 911

Our proposed policy change regarding the physician certification requirements does not change unrelated requirements im plemented in the FY 2014 IPPS/LTCH PPS final rule such as the requirements related to the 2-midnight policy. It also does not alter or remove any requirements for hos pitals regarding admission orders. We are committed to continuing to work closely with and provide outreach to stakeholders regarding inpatient admissi on policies and certification requirements.

Comment: Some comment ers requested that CMS provide guidance on how MACs will review cases in the interim time pe riod between publication of this final rule and the effective date of the regulation changes (January 1, 2015). Response: Since the effective date of the FY 2014 IPPS/LTCH PPS final rule, we have worked closely with the MACs to en sure that the 2-midnight policy and related certification requirements are ap plied appropriately. As disc ussed previously, we believe that physician certification requirements for a hi gh percentage of inpatient stays can be readily satisfied by elements routinely found in the medical record. Hospitals need to comply with all existing certification require ments until the finalized policy changes in this final rule with comment period go into effect on January 1, 2015. We are committed

to continue to work with the MACs to prioritize medical review cases. In summary, after consider ation of the public comments we received, we continue to believe our certification proposal satis fies our policy goals while reducing the administrative burden on hospitals. Therefore, we are finalizing the policy as proposed in the CY 2015 OPPS/ASC proposed rule, which limits the requirement for physician certification to long-stay (20 days or longer) and outlier ca ses. We are finalizing our proposed revisions of paragr aph (a) of § 424.13, with one minor modification. We areCMS-1613-FC 912

adding the word “Continued” at the begi nning of paragraph (a)(1)(i), which we inadvertently omitted when we set out the regul ation text in the proposed rule. We note that the preamble discussion in the proposed rule included this word (79 FR 41057), as discussed earlier. We also are finalizing our proposed revision of paragraph (b) of § 424.13, without modification, to sp ecify that certifications fo r long-stay cases must be furnished no later than 20 days into the hospital stay. XVII. CMS-Identified Overpayments Asso ciated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors (§§ 422.330 and 423.352) A. Background Medicare Part C and Part D payments to Medicare Advantage (MA) organizations and Part D sponsors are determined, in pa rt, using data submitted to CMS by the MA organizations and Part D sponsors. These “pay ment data” include diagnosis data that are used by CMS to risk adjust Part C and PartD payments, Prescription Drug Event (PDE) data that are used by CMS to cost reconcile various Part D subsidies, as well as other types of data discussed below. MA organi zations and Part D s ponsors are obliged to submit accurate, complete, and truthful payment -related data, as described in regulations at 42 CFR 422.504(l) and 423.505(k). Through our review and oversight of payment data submitted by MA organizations and Pa rt D sponsors, CMS identifies situations where MA organizations and/or Part D s ponsors have submitted payment data to CMS

that should not have been submitted either because the data submitted are inaccurate or

because the data are inconsistent with Part C and Part D requirements. (Throughout this section, we refer to these data submissions as “erroneous payment data.”) If an MACMS-1613-FC 913

organization or Part D sponsor submits er roneous payment data to CMS, the MA organization or Part D sponsor can address errors by submitting corrected data to CMS payment systems. Our approach thus far to th ese types of situations has been to request that MA organizations and Part D sponsors make these data corrections voluntarily. However, in instances where the MA orga nization or Part D sponsor fails to make the requested data correction, the payment amount for the plan, calculated using that erroneous payment data, may also be incorrect. As a result, we have concluded that CMS needs to establish a formal proc ess that allows us to recoup overpayments that result from the submission of erroneous payment data by an MA organization or Part D sponsor in the limited circumstances when the organi zation fails to correct those data. We emphasize that, in our experience, the circum stance where an MA organization or Part D sponsor fails to correct iden tified erroneous payment dataarises very infrequently. In the CY 2015 OPPS/ASC proposed rule (79 FR 41058 through 41063), we proposed a new process that is not intended to replace established recovery and appeals processes such as the Risk Adjustment Data Validation (RADV) audit dispute and appeal process described at 42 CFR 422.31 1 or the Part D payment appeals process described at

42 CFR 423.350. We stated that this proposed process would not constitute a change to the existing Part C or Part D payment met hodologies. Rather, we merely proposed to adopt a procedural mechanism for recouping overpayments that CMS will use in those limited circumstances when an MA organiza tion or Part D sponsor fails to correct erroneous payment data after notice and reque st from CMS to do so. The established recovery and appeals processes do not support th is scenario. Section 1856(b) of the Act establishes authority for CMS to add standard s for Part C and MA organizations. SectionCMS-1613-FC 914

1853 of the Act for Part C and sections 1860D-14 and 1860D-15 of the Act for Part D establish the methodology for computing payments to MA organizations and Part D sponsors, respectively. We believe that inherent in the methodology under which we calculate payments to MA organizations and Part D sponsors is the authority for CMS to establish a process for identif ying and recouping overpayments in order to ensure that payments are made consistent with the paym ent framework establishe d in the statute. Therefore, we proposed to implement such a process through change s to our regulations. 1. Medicare Part C Payment Background For Medicare Part C, CMS makes pr ospective monthly payments to MA organizations for each enrollee in the plan. CMS’ monthly Part C payment for each MA plan enrollee consists of two components: the capitated payment for each enrollee (calculated as the plan-specific county payment rate multiplied by the enrollee risk score), plus the plan rebate amount (if any). The plan-specific county rates and the plan rebate amount are based on the bid appr oved by CMS and are set in advance for a payment year. In addition, payment rates may be adjusted for enrollees with end-stage renal disease, enrollees in Medical Savings A ccount MA plans, and enrollees in religious fraternal benefit society MA plans under § 422.304. Prospective payments are made during the year, subject to a reconc iliation after the end of the year. CMS adjusts the plan-specific county payment rate for each enrollee based on an

enrollee risk score. Enrollee risk scores are determined using the CMS-Hierarchical Condition Category (CMS-HCC) risk adjustmentmodel in effect for the payment year, plan-submitted diagnoses for the data co llection year, and other data that CMS determines to be appropriate to perform risk adjustment. The CMS-HCC model isCMS-1613-FC 915

prospective in that it uses diagnosis informati on from a base year (data collection year) to adjust payments for the next year (payment year or coverage year). For example, the risk adjustment model uses diagnosis data from 201 3 to adjust payments to MA organizations for coverage in 2014. To determine the appropriate risk score for each beneficiary, CMS uses demographic characteristics of beneficiaries and diagnostic information gathered in the administration of Original Medicare and submitted by MA organizations. MA organizations are currently required to subm it an occurrence of anHCC model-relevant diagnosis only once during the data collecti on year, even though a beneficiary may have

several service dates in a data collection year associated with a given diagnosis. The minimum data elements currently collected from MA organizations under § 422.310 are: Health Insurance Claim (HIC) Number; prov ider type (hospita l inpatient, hospital outpatient, or physician); service from date; service through date; a nd ICD-9 codes at the level of specificity used by the HCC mode l. In addition, effective January 2012, CMS

collects more detailed Part C utilization and cost data fr om MA organizations (often referred to as encounter data), that will be used in setting risk scores.

CMS allows 13 months after the end of a data collec tion year for MA organizations to update the risk adjustment data submitted under § 422.310; this period provides MA organizations an oppor tunity to identify and correct errors in data they have submitted for that data collection year (that is , by deleting diagnoses from CMS’ systems) and to identify and submit additional diagnos es not submitted during the data collection year. During this 13-month period, CMS uses the diagnosis data th at MA organizations have submitted up to that point to calculate in terim beneficiary risk scores for adjustingCMS-1613-FC 916

prospective payments made during the payment year. The end of this 13-month period is called the final risk adjustment data submission deadline (§ 422.310(g)(2)(ii)). For each payment year, we apply three sets of risk scores to adjust payments: initial and midyear risk scores during th e payment year (both sets are based on incomplete diagnosis data from the data colle ction year) and final ri sk scores after the payment year using data MA organizations submitted as of the final deadline for risk adjustment data (which reflect complete datafor the data collection year). During the year, CMS makes monthly prospective pa yments to MA organizations based on enrollment information and using interim ri sk scores calculated based on the data available before the final risk adjustment data submission deadline. CMS calculates the preliminary risk scores before the first pa yment is made (that is, for January of the payment year) and again in the middle of the payment year; an interim reconciliation is made so that the prospective payments to MA organizations are based on the most recent

risk score available for each enrollee. After the final risk adjustment da ta submission deadline, CMS conducts a reconciliation, in which the prospective Part C payments made during the coverage year based on interim risk scores are compared to Part C payments recalculated using final

risk scores and the latest enrollment data. While changes in enrollment data are updated every month by CMS’ systems during the paym ent year (for example, disenrollments from MA organizations and dates of death from the Social Security Administration (SSA)), risk adjustment dataare not finalized until the final risk adjustment data

submission deadline.CMS-1613-FC 917

We note that after the deadline for submi ssion of final risk adjustment data, MA organizations are allowed to submit corrected diagnosis data to correct overpayments they received from CMS. However, after this deadline, MA organizations are not allowed to submit diagnosis codes for additional payment, as specified in § 422.310(g)(2)(ii); this provision was recen tly adopted in the final rule entitled “Medicare Program; Contract Year 2015 Polic y and Technical Changes to the Medicare Advantage and the Medicare Prescription Dr ug Benefit Programs” (79 FR 29843). When such corrections are submitted, CMS conducts another reconciliation to correct the payments made to the MA organization us ing the established payment adjustment process. In addition, under § 422.311, CMS c onducts Risk Adjustment Data Validation (RADV) audits of the risk adjustment datasubmitted by MA orga nizations pursuant to § 422.310. Such RADV audits are conducted at the MA organization contract level and are designed to calculate a cont ract–level error rate and pa yment adjustment amount for a specific payment year under audit. 2. Medicare Part D Payment Background For Medicare Part D, the Medicare Pr escription Drug Benefit, Improvement, and Modernization Act (MMA), which amended the Act by adding Part D under Title 18, provides four payment mechanisms: di rect subsidy (codified at § 423.329(a)); reinsurance subsidy (codifie d at § 423.329(c)); low-income subsidy (codified at §§ 423.780 and 423.782); and risk sharing (codified at § 423.336(b)). As a condition of payment, section 1860D-15(d)(2)(A) of the Act requires that Part D sponsors submit data and information necessary for CMS to carryout those payment provisions. Part DCMS-1613-FC 918

sponsors submit PDE data, direct and indi rect remuneration (DIR) data and risk adjustment data to CMS for payment purposes. Throughout the coverage year, CMS make s prospective payments to Part D sponsors that cover three subs idies: the direct subsidy; the low-income cost-sharing subsidy; and the reinsurance subsidy. Th e payment amounts are based on information in the approved basic bid and on data received by CMS that are used to update payments throughout the year. Following the end of th e coverage year, the prospective payments are reconciled against the actua l costs of the Part D sponsor . Reconciliation of the lowincome cost-sharing subsidy and reinsurance an d the calculation of risk sharing are based on PDE and DIR data submitted by the Part D sponsor, as well as data captured from other CMS systems. CMS instructs Part D s ponsors that they should continually monitor their submitted data throughout the year in or der to ensure that the reconciliation and final payment determinations are accurate. The final Part D payment determinati on may be reopened and revised at CMS discretion under § 423.346. In our final rule, “Medicare Prog ram; Medicare Prescription Drug Benefit” published in the Federal Register on January 28, 2005 (70 FR 4194), we stated that including the Medi care Part D reopening provisi on at § 423.346 would “ensure that the discovery of any overpayment or underpayments could be rectified” (70 FR 4316). However, this is only possible to the extent that the data submitted by Part D sponsors are accurate. Accordingly, prio r to making a payment determination for a coverage year, either through a reconcil iation described at § 423.343 or a reopening described at § 423.346, CMS periodically makes requests that Part D sponsors correct payment data that do not comply with progr am requirements (that is, what we haveCMS-1613-FC 919

defined as “erroneous payment data”). Thes e may be general requests to all Part D sponsors to look for a type of payment i ssue (see for example, the Health Plan Management System (HPMS) memorandum, “C orrecting Missing, Invalid, and Inactive

Prescriber Identifiers on2012 Prescription Drug Event (PDE) Records,” dated February 4, 2013.) or targeted requests to specific Part D sponsors known to have particular payment issues (as was done in the “Prescriber NPI Project” announced in the HPMS memorandum, “Announcement of Prescrib er NPI Project and Website Release,” dated December 4, 2012). If a Part D sponsorfails to correct its payment data, the erroneous payment data remain in the paym ent system, rendering th e reopening provision ineffective for rectifying overp ayments as it was intended. B. Provisions of the Propos ed Rule and Final Policies In the CY 2015 OPPS/ASC proposed rule (79 FR 41058 through 41063), we proposed to establish regulations at 42 CF R 422.330, relating to MA organizations, and at 42 CFR 423.352, relating to Part D sponsors, that would specify the procedural mechanism for CMS to recoup overpayments asso ciated with data errors identified by CMS in payment data submitted by MA organi zations and Part D sponsors. We also proposed to create a process whereby an MA organization or Part D sponsor can appeal the finding that payment data are erroneous. We noted that our proposed policy is in tended to establish a process to address data errors and payment adjustments that are not addressed by existing processes such as the RADV audit and appeal process or overp ayments identified by the MA organization or Part D sponsor, which are subject to separa te procedures. If an MA organization or a Part D sponsor self-identifies an overpayme nt, that overpayment must be reported andCMS-1613-FC 920

returned to CMS in accordance with secti on 1128J(d) of the Act, which was added by

section 6402 of the Affordable Care Act. Regulations implementing section 1128J(d) have recently been adopted at §§ 422.326 and 423.360 in the final rule entitled “Medicare Program; Contract Year 2015 Policy and Techni cal Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” (79 FR 29843). Comment: Several commenters suppor ted the establishment of a formal overpayment collection and appeals process. Response: We appreciate the commenters’ support. Comment: Several commenters expre ssed concern about including Part C and Part D proposed provisions in the OPPS/ASC pr oposed rule. The commenters stated that these proposed provisions are unrelated to the OPPS and ASC payment systems. Response: The Secretary generally has discretion to schedu le and group topics for rulemaking, meaning any proposed and final rule published in the Federal Register, as long as proper public notice is given thatincludes an explanation of the proposed policies, the rationale and basi s for the proposal, and the public is given an opportunity to

comment. Comment: A few commenters requested that CMS make clear that the proposal regarding CMS-identified overpayments has no relationship to ot her CMS overpayment regulations, specifically the ove rpayment regulations that we re promulgated to implement the requirements of section 6402 of the Affordab le Care Act, codifiedat section 1128J(d) of the Act (79 FR 29847). Commenters expr essed concern that, given the connection between plan-identified overpay ments and the False Claims Act, there is a potential for confusion and significant unintended consequences.CMS-1613-FC 921

Response: In the preamble to the CY 2015 OPPS/ASC proposed rule, we expressly limited the scope of our proposal to es tablishing a process to address data errors and payment adjustments that are not addresse d by existing processes. We stated that overpayments identified by an MA organizati on or a Part D spons or are subject to separate procedures and that if an MA organization or a Part D sponsor self-identifies an overpayment, the overpayment must be reported and returned to CMS in accordance with §§ 422.326 and 423.360 of the regulations. We ar e further clarifying here that the CMS-identified overpayment process that is be ing finalized is separa te and distinct from the overpayment rule that implemented the Affordable Care Act requirements regarding plan-identified overpayments codified at section 1128J(d) of the Act. Comment: A few commenters provi ded comments on and questioned the provisions of §§ 422.326 and 423.360 which rela te to reporting and returning of overpayments identified by MA organizations and Part D sponsors, respectively. Response: We consider these public co mments to be out of the scope of the provisions of the proposed rule. The propos ed rule was limited to the issue of CMS-identified overpayments arising from th e submission of erroneous payment data. Therefore, we are not addressing th ese comments in this final rule.

Comment: A few commenters stated that it is essential that CMS has overall

control over the CMS-identified overpayment process to ensu re proper identification and monitoring of overpayments. The commenters st ated that this control is necessary to ensure that requests from separate CMS comp onents or the Department’s Office of the Inspector General (OIG) for payment data changes are consistent with CMS-issued payment regulations and guidance. The commenters recommended that CMS provideCMS-1613-FC 922

adequate resources to the appr opriate staff components in or der to effectively coordinate and manage this process. Response: In the CY 2015 OPPS/ASC pr oposed rule, we stated that we may identify payment data that need to be corrected through a variety of different mechanisms, including, but not limited to, CMS analyses of payment data, audits, and/or communications with the MA organization or Medicare Part D sponsor. Regardless of how a potential overpayment is identified, CMS will conduct an independent evaluation of the erroneous data finding, before i ssuing a data correction notice to an MA organization or Part D sponsor. Alth ough CMS may utilize OIG reports or other information to help to identify erroneous pa yment data, it is CMS, not the OIG, which will issue the request to correct payment data. Likewise, other separate CMS components may identify erroneous payment da ta, but it is the Me dicare Part C and Part D payment components at CMS that will determine if that erroneous payment data could result in an overpayment and whethe r or not the CMS-identified overpayment process will be used to correct the overpaymen t. In addition, requests to correct payment data will only be issued after CMS has thor oughly reviewed the source or the mechanism that identified the payment data and has c oncurred with the findings that the payment

data were erroneous. We appreciate and agree with the commenters’ suggestion that the CMS administration should provide adequate res ources to the payment staff in order to effectively coordinate an d manage this process.CMS-1613-FC 923

Comment: One commenter asked CMS to clarify whether this regulation would be used as a means to collect any alle ged improper payments identified through the Recovery Audit Contra ctors (RAC) process. Response: As we indicate d in the preamble of the propos ed rule, this process is not intended to replace established recovery and appeals processes. We do not anticipate using this process to collect any overpayment s identified through the RAC process at this

time. Comment: Several commenters expresse d concern that the proposed rule does not address underpayments iden tified by CMS or the health plan. A few commenters suggested that CMS add language to the regulation to expl ain how health plans recover underpayments that they or CMS have identi fied. One commenter suggested that CMS offset identified underpayments agains t overpayments before recouping any overpayments. Response: The purpose of the proposed provisions is to recover overpayments identified by CMS and return them to the Me dicare Trust Funds. The offset calculation used to determine the overpayments will follow the Medicare Part C and Part D payment rules, and, as a result, the offset calcula tion may capture some underpayments. The extent to which underpayments will be recognized in the offset calculation to net out an overpayment will be limited and will vary depending on the circumstance surrounding the overpayment. The purpose of the provisions is not to pr ovide the opportunity for MA organizations and Part D sponsors to secu re additional payment by submitting additional

data after the data submission deadlines. As noted in the preamble of the proposed rule, MA organizations and Part D sponsors have a period of time after the end of the dataCMS-1613-FC 924

collection and coverage years, respectively, to update and supplement the payment data submitted throughout the year. In Part C, th at period is 13 months, and in the Part D context, it is approximately 6 months. We be lieve that these periods are adequate for MA organizations and Part D sponsors to ensure that they have submitted the data necessary to substantiate their payments. Comment: One commenter expressed con cern that MA organizations’ or Part D sponsors’ benefit filings, current business deal ings, and statutory rights and obligations may be affected if the plan’s financial in formation is rendered uncertain due to an overpayment recovery by CMS. Response: While we understand the comment er’s concern that the possibility of returning overpayments may introduce some fi nancial uncertainty for MA organizations and Part D sponsors, CMS has an obligation to ensure that payments to MA organizations and Part D sponsors are made consistent wi th the applicable program requirements. Thus, we believe that CMS has the authority to recover, and MA or ganizations and Part D sponsors have an obligation to return, identified overpayments.

Comment: A few commenters stated that overpayment recoupments from Part D sponsors may negatively impact beneficiaries. Commenters urged CMS to ensure that any adjustments made to recoup CMS overpayme nts from Part D sponsors continue to be appropriate to ensure that beneficiarie s are not financially negatively impacted. Response: We understand the commen ters’ concerns that overpayment recoupments not negatively affect beneficiar ies. However, CMS has previously issued regulations that address this issue. Sec tion 423.466(a) of the regul ations states that whenever a Part D sponsor receives informa tion that necessitates a retroactive claimsCMS-1613-FC 925

adjustment, the Part D sponsor must process th e adjustment and issue refunds or recovery notices within 45 days of the Part D sponsor’s receipt of complete information regarding the claims adjustment. In addition, § 423.466(b) states that Medica re Part D sponsors

must coordinate benefits with State Pharm aceutical Assistance Programs (SPAPs), other entities providing prescription drug coverage, beneficiaries, and other third party entities paying on the beneficiaries’ behalf for a peri od not to exceed 3 years from the date on which the prescription for a covered Part D drug was filled. Comment: A few commenters expresse d concern about the burden imposed on providers. Commenters stat ed that the overpayment recovery process might cause financial consequences or penalties for phys icians. Commenters expressed concern over

the burden of related document ation requests. One commente r urged CMS to ensure that any associated provider record requests are limited to the spec ific instance of erroneous data under dispute. The commenter suggested that the plan requesting medical records be required to provide documentation on the scope of the erroneous data dispute identified by CMS and to limit the data request to the specific data issue identified. Response: These commenters appear to be focused on Part C and risk adjustment data. We recognize the commenters’ concerns that recoupment of overpayments may entail negative financial consequences for physicians. However, it is CMS’ responsibility to make payments to MA or ganizations and Part D sponsors that are consistent with the applicable statutes a nd regulations; this incl udes the authority to recover overpayments and return them to th e Medicare Trust Funds. In addition, CMS is

not allowed to interfere with the financial arrangements between MA organizations and their providers. Therefore, CMS is limited in how we can respond to the commenters’CMS-1613-FC 926

concern. While we recognize there may be some burden relating to the request for documentation, it is important for the integrit y of the payment process that overpayments are properly identified and documented. Comment: One commenter suggested that any Medical Loss Ratio (MLR) remittances paid by the plan to CMS s hould be considered when computing the overpayment recovery amount. For example, if a plan had an MLR below the statutory minimum and paid an MLR remittance to CMS, and then, at a later date, it was determined that the plan was overpaid for that year, the remittance would reduce the overpayment recovery amount. Response: From a conceptual perspec tive, we believe that the impact or relationship between an MLR remittance and th e overpayment offset amount is an issue about the payment calculation methodology a nd MLR administrati on, rather than a procedural issue. This regulation narrowly sp ecifies a procedural mechanism for, first, recovering overpayments from MA organi zations and Part D sponsors and, second, providing an appeals process rela ted to the accuracy and correctness of the payment data underlying the offset. Therefore, we belie ve that these comments relating to MLR remittances are out of the scope of the provisions of the proposed rule. Comment: One commenter expressed concern that there might be a large number of complications in situations wher e a contract has been terminated, or where there have been mergers or acquisitions invol ving the sponsor, or where other significant plan changes have occurred. The comme nter requested guidance from CMS on the process in these situations. The commenter also asked that CMS be flexible in these

scenarios.CMS-1613-FC 927

Response: We hold entities contrac ting with CMS responsible for returning overpayments, regardless of thei r merger and acquisition history.

After consideration of th e public comments we received, we are finalizing the proposal to establish a process for recoveri ng CMS-identified overpayments associated with erroneous payment data submitted by MA organizations and Part D sponsors. 1. Definitions of “Payment Data” and “Applicable Reconciliation Date” In the CY 2015 OPPS/ASC proposed rule (79 FR 41060), we proposed to define “payment data” to mean data controlled and submitted to CMS by an MA organization or a Part D sponsor that is used for payment purposes (proposed §§ 422.330(a) and 423.352(a)). The MA organization or Part D sp onsor is responsible for the accuracy of such data. MA organizations and Part D sponsors are currently required to attest to the accuracy, completeness, and truthfulne ss of such data under § 422.504(l) and § 423.505(k), respectively. For Medicare Part C, the data submitted by the MA organization to CMS include, for example, en rollment data and risk adjustment data specified at § 422.310. For Medicare Part D, data submitted by the Part D sponsor to CMS include enrollment data and data submitted under § 423.329(b)(3) (risk adjustment data), § 423.336(c)(1) (cost data), § 423.343 (data for retroactive adjustments and reconciliations), and data provided for purpos es of supporting allowa ble reinsurance costs and allowable risk corridor costs as defined in § 423.308, which include data submitted to CMS regarding direct or i ndirect remuneration (DIR). There are additional payment-related data that CMS uses to calculate Part C and Part D payments that are submitted directly to CMS by other entities, such as SSA.

These entities are the authoritative source fo r data that they submit to CMS, and MACMS-1613-FC 928

organizations and Part D sponsors are not th e official source for data submitted by these other entities. For example, the SSA is the authoritative source for date of death of Medicare beneficiaries. An MA organizat ion or a Part D sponsor generally does not submit a beneficiary’s date of death directly to CMS’ systems; such data come from the

SSA data feed. When the SSA submits corrected data regard ing a beneficiary’s date of death to CMS, CMS’ systems recalculate the payments made to the plan for that beneficiary and correct any incorrect paym ent through a routine retroactive payment adjustment process. Therefore, we proposed to define “payment data” as only data that the MA organization or Part D sponsor c ontrols and submits to CMS for payment

purposes. For MA organizations under Part C, in the CY 2015 OPPS/ASC proposed rule (79 FR 41060), we proposed that the “applicable reconciliation date” occurs on the date of the annual final risk adjustment data submission deadline set under § 422.310(g)(2)(ii). While changes in enrollment data are upda ted every month by CMS’ systems during the payment year (for example, disenrollments from MA organizations and dates of death from the SSA), risk adjustment data are not finalized until th e final risk adjustment data

submission deadline. Prior to that dead line, CMS allows the MA organization to continue submitting corrected and new diagnos is data. However, once the final risk adjustment data submission deadline has passed, CMS uses this final diagnosis data to calculate the final risk scores for the payment year. CMS then uses those final risk scores for payment reconciliation. By proposing that the applicable reconc iliation date occurs on the risk adjustment data submission dead line, we intend to signal that the normal payment process for the year has been concluded.CMS-1613-FC 929

For Part D sponsors, in the CY 2015 OPPS/ASC proposed rule (79 FR 41060), we proposed that the “applicable reconciliation date” is the later of either: the annual deadline for submitting PDE data for the annual Part D payment reconciliations referenced in § 423.343(c) and (d); or the a nnual deadline for submitting DIR data. The annual deadline for submitting PDE data is th e last Federal business day prior to June 30 of the year following the coverage year being reconciled. The annual deadline for submitting DIR data is announced annually th rough subregulatory guidance and generally occurs around the last business day in June of the year following the coverage year being

reconciled. We selected these events to defi ne the Part D applicable reconciliation date because data must be submitted by these deadlines in order to be used for the purposes of the final Part D payment reconciliation. We noted in the proposed rule that the proposed definitions of “applicable reconciliation date” are nearly identical to the definitions of “applicab le reconciliation” at existing §§ 422.326 and 423.360. Similarly, the propos ed definitions of “payment data” are nearly identical to the definitions of “funds” at existing §§ 422.326 and 423.360. Although proposed §§ 422.330 and 423.352 addressed overpayments to MA organizations and Part D sponsors that have been identified by CMS, whereas §§ 422.326 and 423.360 address overpayments that are identi fied by the MA organization or Part D sponsor, we stated in the propos ed rule that we do not beli eve that the issue of which entity (CMS or the plan) identified the overp ayment is relevant to the question of when the overpayment occurred or what information is at issue. Both the regulations regarding overpayments identified by MA or ganizations and Part D sponsors finalized earlier this year in the final rule entitled “Medic are Program; Contract Year 2015 Policy andCMS-1613-FC 930

Technical Changes to the Medicare Adva ntage and the Medicare Prescription Drug Benefit Programs” and the regulations we proposed in the CY 2015 OPPS/ASC proposed rule to establish offset and appeal pro cedures for CMS-identified overpayments were

intended to address circumstances in whic h an overpayment has been identified; therefore, we believe it would be appropr iate and avoid unnecessary confusion to use

similar definitions. Comment: A few commenters requeste d that CMS clarify the definition of “payment data.” Specifically, commenters stated that the de finition of “payment data” in the proposed rule is supposed to corres pond to the definition of “funds” at §§ 422.326 and 423.360. However, the commenters pointe d out that, in the proposed rule, CMS defined “payment data” as “data controlled and submitted by” an MA organization or a Part D sponsor. Commenters noted that definition of “funds” omits the word “controlled.” Commenters expressed concern ov er the inclusion of the word “controlled” in the definition of “payment data” because MA organizations and Part D sponsors do not

control all relevant data. Commenters re quested that CMS revise the definition of “payment data” to conform to the definition of “funds” at §§ 422.326 and 423.360. Response: We agree with the commenters. Our intent was to align the definitions of “payment data” with the defi nition of “funds” at §§ 422.326 and 423.360 (79 FR 41060). Therefore, we are removing th e word “controlled” from the regulatory definition of “payment data” in this final rule. Comment: One commenter requested thatCMS define “erroneous claims data” as used in the proposed rule.CMS-1613-FC 931

Response: We did not use the phrase “er roneous claims data” in the preamble language or regulation text of the proposed rule. In the pr eamble of the proposed rule, we used the phrase “erroneous payment data” to mean “...payment data...that should not

have been submitted—either because the data submitted are inaccurate or because the

data are inconsistent with Part C and Pa rt D requirements” (79 FR 41058). We are adding the definition of “erroneous payment data” to the final regulation text at §§ 422.330(a) and 423.352(a).

Comment: A few commenters noted that , in the preamble of the proposed rule, CMS referenced specific provisions of §§ 422.504 and 423.505 of the regulations and stated that MA organizations and Part D sponsors are requ ired to certify the accuracy, completeness, and truthfulness of their paymen t data. Commenters were concerned that CMS did not include the phrase “based on bestknowledge, information, and belief” that is included under §§ 422.504 and 423.505. Commen ters requested that CMS revise the preamble language of the final rule to acknowledge the “best knowledge, information, and belief” standard articulated at §§ 422.504 and 423.505 and to remove any incorrect references suggesting that MA organizati ons (or Part D sponsor s) bear unqualified responsibility for data accuracy. Response: We did not intentiona lly exclude “based on best knowledge, information, and belief” from the preamble discussion. We acknowledge that MA organizations and Part D sponsors certify, based on best knowledge, information, and belief, the accuracy, completeness, and truthf ulness of all data related to payment as stated at §§ 422.504 and 423.505. After a review of the preamble language, we do not

believe that additional edits are ne cessary as a result of the omission.CMS-1613-FC 932

After consideration of th e public comments we received, we are finalizing the proposed regulatory definition of “payment da ta,” with a modification to remove the reference to “controlled,” as described earlier. We also are adding a definition of “erroneous payment data” in the final re gulation text at §§ 422.330(a) and 423.352(a). 2. Request for Corrections of Payment Data Because MA organizations and Part D sponsors are required to submit accurate payment data, we have the authority to reque st that erroneous data be corrected when

errors are discovered. In the CY 2015 OPPS/ASC proposed rule (79 FR 41060), we proposed a mechanism for recouping overp ayments in situations where CMS has identified an error in payment data, the MA organization or Part D sponsor has not

corrected that errone ous data upon request, and CMS determines that, as a result of the erroneous payment data, an overpayment was made. Under pr oposed §§ 422.330(b) and 423.352(b), we proposed that CMS would make the request through a data correction

notice that would contain or make reference to the specific payment data identified by CMS as erroneous, the reason why CMS believe s that the payment data are erroneous, and the timeframe in which the MA orga nization or Part D sponsor must make corrections to the data. This proposal was notintended to limit our authority to request correction of erroneous payment data to onl y those narrow circumstances in which an overpayment has already been identified. CMS may identify payment data that need to be corrected through a variety of differen t mechanisms, including, but not limited to, CMS analyses of payment data, CMS a udits, or communications with the MA organization or Part D sponsor.CMS-1613-FC 933

We understand that, at some point, it would no longer be practical for MA organizations and Part D sponsors to correct payment data for coverage years that have long since been reconciled. Therefore, consistent with the look-back period for overpayments that are identif ied by the MA organization or Part D sponsor found at existing §§ 422.326 and 423.360, in the CY 2015 OPPS/ASC proposed rule (79 FR 41060), we proposed that CMS would re quest corrections to erroneous payment data only if the erroneous data affects paymen ts for one or more of the 6 most recently completed payment years. That would m ean, for example, that after the initial reconciliation takes place for Part D paymen ts under § 423.343 (that is , the determination of the final amount of direct subsidy de scribed in § 423.329(a)(1), final reinsurance payments described in § 423.329(c), the fi nal amount of the low-income subsidy described in § 423.329(d), or fi nal risk corridor payments as described in § 423.336) for contract year 2015 (which would take place in 2016), CMS may request corrections to erroneous payment data for contract y ears 2010 through 2015. We proposed to use the same 6-year look-back period as applies to plan-identified overpayments under existing §§ 422.326 and 423.360 because both overpayment policies are intended to address circumstances in which an overpayment has b een identified, and we do not believe that the issue of which entity (CMS or the plan) id entified the overpayment is relevant to the length of the look-back period. We proposed that the timeframes for corr ecting payment data would be the same as under our current practice for correcting paym ent data described in existing procedural rules and subregulatory guidan ce and would be explained in additional procedural rules and subregulatory guidance, as necessary. Fo r example, current Part D guidance statesCMS-1613-FC 934

that corrections to PDE data must be comp leted within 90 days from discovery of the

issue. We refer readers to the Health Plan Management System (HPMS) memorandum

entitled “Revision to Previous Guidance Titl ed ‘Timely Submission of Prescription Drug Event (PDE) Records and Resolution of Rejected PDEs,’” dated October 6, 2011.

Comment: A few commenters believed that the proposed rule on CMS-identified overpayments should only apply to actual ov erpayments, not merely the submission of incorrect payment data. These commenters were concerned that CMS incorrectly assumes that erroneous payment data equates to an overpayment. Response: We understand that correc ting erroneous payment data submitted by an MA organization or a Part D sponsor a nd rerunning the payment process to determine the payment that should have been made ma y reflect an underpayment, overpayment, or no change when comparing the two results. Consistent with §§ 422.504(l) and 423.505(k), MA organizations a nd Part D sponsors must submit accurate payment data (based on best knowledge, information, and beli ef). We clarify th at CMS may make the request to correct erroneous payment data, re gardless of whether or not that data would result in an overpayment under our exis ting and inherent authority related to administration of the payment proc esses; this rule does not cha nge or limit that authority. Rather, this rule provides authority to init iate an offset to recover overpayments when erroneous payment data have been submitted, the erroneous payment data resulted in an overpayment, and the erroneous payment da ta were not subsequently corrected upon request from CMS. The intent of the provisions at §§ 422.330 and 423.352 is to provide a process whereby CMS-identified overpayments can be recovered; this process begins with CMS’ request for correction of the erroneous payment data that caused theCMS-1613-FC 935

overpayment to occur. We will establish the existence and extent of an overpayment by applying the Part C and Part D payment rules and formulas applicable to the payment year in question. Comment: Commenters requested thatCMS clarify that the overpayment recoupment process would apply only to contract years for which CMS has completed

final reconciliation. Commenters noted that CMS did not link the proposed regulatory definition of “applicable r econciliation date” to other subsections of the proposed regulations. The commenters stated that based on the proposed regulations, if CMS identifies an error in payment data and the payment error identified affects payments for any of the 6 most recently completed payment years, CMS may send a data correction notice to the MA organization or the Part D sponsor. However, CMS does not define “recently completed” or correlate the definition with the phrase “applicable reconciliation date.” Commenters requested that CMS clar ify its intention to recoup overpayments only following the “applicable reconciliation date.” Response: Our determination that an overpayment has occurred will be made after the applicable reconciliation date, as defi ned in this final rule, for the contract year in which the erroneous payment data were id entified. In addition, the payment error must affect payment in one of the 6 most recently completed payment years. For example, after the initial reconciliation takes place for Part D payments under § 423.343 (that is,

the determination of the final amount of dir ect subsidy described in§ 423.329(a)(1), final reinsurance payments described in § 423.329( c), the final amount of the low-income subsidy described in § 423.329(d) , or final risk corridor payments as described inCMS-1613-FC 936

§ 423.336) for contract year 2015 (which would take place in 2016), the 6 most recently completed payment years would be 2010 through 2015.

Consistent with our statements above regarding our existing and inherent authority related to administration of the payment processes to make the request to correct erroneous payment data, regardless of whether or not that data would result in an overpayment, we believe we have authority to request the correction of erroneous data at any time. Accordingly, we are moving the la nguage that limits CMS to the 6-year lookback period at §§ 422.330(b) and 423.352(b), “R equest to correct payment data,” and associating it with §§ 422.330(c) and 423.352(c), “Payment offset,” in order to clarify that, while we may request the correction of erroneous payment data at any time, we will only use the payment offset procedures establis hed in this rule to recover overpayments in the 6 most recently completed payment years. Therefore, we are modifying proposed§§ 422.330(c) and 423.352(c) to indicate that when the MA organization or Part D sponsor fails to correct payment data in response to a request under §§ 422.330(b) and 423.352(b), CMS will conduct a payment offset against payments made to the MA organization or Part D sponsor if: (1) the payment error affects payments for any of th e 6 most recently completed payment years; and (2) the payment error for a particular paym ent year is identified after the applicable

reconciliation date fo r that payment year. Comment: One commenter requested th at CMS institute a single, uniform timeframe to correct any payment data erro rs before CMS initiates payment-offset procedures. The commenter believed that the different time periods associated with the resubmission or correction of various data po ints can lead to unn ecessary confusion andCMS-1613-FC 937

the potential for missed deadlines. This commenter recommended that CMS create a uniform timeframe of at least 120 days to submit data corrections. The commenter expressed concern that the process for collectin g and verifying corrected data will involve numerous steps and that the pr ocess also likely will involve third parties, potentially including vendors no longer under contract, wh ich would add additional steps and time to the process of collecting and va lidating the data. The comment er stated that a turnaround time of less than 120 days creates a risk for not being able to collect the payment data and conduct a diligent and fulsome analysis before responding to CMS. Response: We understand that it makes sense to have a uniform timeframe for submitting corrected payment data in response to a CMS notification of CMS-identified erroneous payment data. We also understa nd that different timeframes for submitting

corrected data could lead to confusion and missed deadlines. However, we disagree with the commenter that 120 days is necessary to correct all types of payment data. As we cited in the preamble of the proposed rule , current Part D guidance in the HPMS memorandum dated October 6, 2011, states th at corrections to PDE data must be completed within 90 days from discovery of the issue. We have no reason to believe that the 90-day timeframe for correcting Part D da ta under this provision is inadequate. Therefore, we will not be making changes to this policy at this time. Timeframes for correcting Part C payment data will be expl ained in additional procedural rules and subregulatory guidance. Comment: One commenter requested clar ification regarding the submission of payment data corrections between the fina l risk adjustment submission deadline and when a payment reconciliation or payment rerun is conducted.CMS-1613-FC 938

Response: This commenter’s request appe ars to be directed at Part C and risk adjustment data. An overpayment may exis t once applicable reconciliation has occurred,

which is the final deadline for the submission of risk adjustment data for Part C. MA organizations should submit data corrections to correct an overpayment the MA organization has identified as soon as the MA organization recogni zes the overpayment has occurred (§ 422.326). In the context of th at rule and the process adopted under this rule, the operational action of conducting a risk adjustment payment rerun will be implemented according to our policy and schedul es. The submission of data corrections should not be delayed relative to the timing of a risk adjustment rerun. If the data correction is not submitted, and we have identified the erroneous risk adjustment payment data, we may move forward with a payment offset. We agree that additional information on this issue would be helpful to MA organizations and will be providing further guidance as needed. Comment: A few commenters noted that, in the proposed rule, CMS stated that if the MA organization or Part D sponsor subm its corrected payment data in response to CMS’ request, CMS will perform a reconci liation in the payment system using the established payment adjustment process. The commenters requested that CMS clarify

that the referenced reconciliation is in reference to the established reopening of a payment adjustment reconciliation process. The commenter stated that the current reopening process is well-estab lished and equitable, balanc ing the rights and obligations of Part D sponsors and CMS, and, therefore, th ere is an appropriate adjustment of both overpayments and underpayments to the Part D sponsor. The commenters urged CMS to invest additional operational resources to strengthen the existing reopening process.CMS-1613-FC 939

Response: If an MA organization or a Part D sponsor submits corrected payment data, as requested by CMS, we will recoup any overpayment amounts by performing a payment reconciliation according to our paym ent processing policies and schedules. We appreciate the commenter’s suggestion to i nvest additional operat ional resources to strengthen the existing reopening process, and will take this suggestion into

consideration. Comment: Several commenters expresse d concern regarding the length of the 6-year look-back period. Some of the commenters indicated the length of the look-back period would place undue burden on plans and provi ders. Another commenter stated that a 6-year timeframe is typically reserved for fraud and abuse processes and is not considered appropriate for routine oper ational processes. A few commenters

recommended that the look- back period be 3 years. Response: We believe thata 6-year look-back period is an appropriate timeframe for identifying overpayments. As stated in the proposed rule, the 6-year look-back period is consistent with the look-back period established for overpayments that are identified by MA organizations or Part D sponsors ( §§ 422.326 and 423.360). Also as stated in the proposed rule, we proposed to use the same 6-year look-back period as applies to plan-identified overpayments because both ove rpayment policies are intended to address circumstances in which an overpayment has o ccurred and has been identified. We do not believe that the issue of which entity (CMS or the plan) identified the overpayment is relevant to the length of the look-back period.

Comment: A few commenters recomm ended that the look-back period be implemented prospectively. One commenter st ated that a 6-year look-back period couldCMS-1613-FC 940

affect many distributed risk arrangements between plans and providers that cross multiple years and have already been reconciled. Another commenter asked that CMS phase in the look-back period, beginning with a 1-year look-back period and each year adding an additional year to the look-back period, until 2020 when a 6-year look-back could be applied. Response: We disagree with the comme nters' recommendations to implement the look-back period prospectively. We proposed 6 years as the length of the look-back period because we believe that this timeframe best balances the government’s interest in having overpayments returned with entities’ inte rest in finality. We note that the statute of limitations related to the False Claims Act is 6 years from the date of the violation or 3 years from the date the relevant government official learns of the situation, but in no case more than 10 years from the date of the violation. Furthermore, under § 422.504(d) and § 423.505(d), MA organizations and Part D sponsors are required to maintain, for 10 years books, records, documents, and othe r evidence of accounting procedures and practices related to costs, financia l statements, cash flow, among others.

After consideration of the public comments we rece ived, we are finalizing proposed §§ 422.330(b) and 423.352(b) and pr oposed §§ 422.330(c) and 423.352(c) with modifications. We are moving the language regarding the 6-year look-back period from proposed §§ 422.330(b) and 423.352(b) to §§ 42 2.330(c)(1) and 423.352(c)(1) in order to indicate that if the MA orga nization or Part D sponsor fails to correct payment data, CMS will conduct a payment offset if the payment e rror affects payments for any of the 6 most recently completed payment years and the paymen t error for a particul ar payment year is identified after the applicable reconc iliation date for that payment year.CMS-1613-FC 941

3. Payment Offset If the MA organization or Part D sponsor submits corrected payment data in response to CMS’ request pursuant to proposed § 422.330(b) and § 423.352(b), CMS will perform a reconciliation in the payment system using the established payment adjustment process. CMS’ systems will conduct a payment reconciliation and determine the associated payment adjustment based on the corrected data using established payment policies and procedures. Howe ver, if the MA organization or Part D sponsor fails to correct the erroneous paym ent data, in the CY 2015 OPPS/ASC proposed rule (79 FR 41061), we proposed that CMS would conduct a payment offset from plan payments (proposed §§ 422.330(c) and 423.352(c)).

a. Offset Amount

Because the data would not have been co rrected in the routine payment process, in the CY 2015 OPPS/ASC proposed rule (79 FR 41061 through 41062), we proposed, to be codified at §§ 422.330(c) and 423.352(c), that CMS determ ine the overpayment offset amount by applying a payment calculation algorithm to simulate the payment calculations currently app lied by CMS to produce the routine Part C and Part D payments. The payment calculation algorithm w ould apply the Part C or Part D payment rules for the applicable year to calculate what the corre ct payment should have been using corrected payment data. CMS currently simulates payment error amounts for a variety of different purposes, including for the annual Part C and Part D error rate reporting (required by the Improper Payment Eliminati on and Recovery Act (IPERA) and subject to the annual agency’s Chief Financial Offi cer’s (CFO) audit and re ported in the annual Agency Financial Report (AFR)), RADV paym ent error estimation (subject to publicCMS-1613-FC 942

comment), and the Part C and Part D monthly paymen t validation required by CFO auditors. These payment error calculations are all conducted outside of the suite of payment systems that CMS uses to make rou tine payments to MA organizations and Part D sponsors. In the proposed rule, we stated that we believe that these calculations are

reliable and an accurate reflection of what the routine payment systems would calculate using the corrected data if the MA organization or Part D sponsor had submitted corrected payment data. The actual process for calculating the overpayment will be different for Part C and Part D because of the different payment rules for the two programs. The Part C and Part D programs are both subject to risk adju stment payment error resulting from invalid diagnoses and to payment error due to inaccura te enrollment data. The Part D program is further subject to payment reconciliation erro r resulting from errors in PDE data and/or DIR data. The two programs also are subject to different schedules with regard to the applicable reconciliation da te and subsequent payment reconciliation processes. When new payment-related data are submitted to CMS payment systems, there is generally a change to the correct amountof payment once CMS conducts a payment reconciliation using the establ ished payment adjustment process. However, it is not sufficient for the plan to just submit the new corrected risk adjustment, PDE, or DIR data to CMS systems because data submission does not automatically trigger a system reconciliation and payment adjustment. A change in payment will only occur if a payment reconciliation is conducted. If the applicable reconciliation has already been performed, CMS, at its discretion, may conduc t risk adjustment reruns or Part D reopenings to ensure that payments also are corrected to reflect the newly corrected data.CMS-1613-FC 943

In the CY 2015 OPPS/ASC proposed ru le (79 FR 41061), we proposed that, under the payment calculation al gorithm, CMS would calculate the payment to the MA organization or Part D sponsor with and without the corrected data as of a specified date. The difference in the two amounts--that is, the amount by which the payments already made to the MA organization or Part D sponsor exceed the payments that should have

been made as reflected in the calculation us ing the corrected data--would be the payment recovery or offset amount. We provided the following examples of how the offset

amount would be calculated for Part C and Pa rt D overpayments relative to two different types of payment data errors to illustrate our proposal:

● Part C Offset Calculation. The ex ample for Part C relates to incorrect diagnosis data identified by CMS in the pro cess of calculating the national payment error estimate. A beneficiary’s final risk score and annual payment will be recalculated outside of the routine payment system without the invalid diagnoses but using all the other data used in the routine payment system. The year-appropriate CMS-HCC risk adjustment methodology will be used to produce the revised risk scores. The difference in payment for the beneficiary pre- and post- change in the invalid diagnosis will be the offset amount. This offset amount--generated using the same process for each beneficiary for whom erroneous payment data are iden tified by CMS--will be summed across all

beneficiaries.

● Part D Offset Calculation. The exampl e for Part D relates to the situation in which a Part D plan sponsor has submitted PD E records for a benefi ciary that include invalid National Drug Codes (NDCs). For payment purposes, PDEs are required to

reference valid NDCs. In order to calculate the Part D payment offset amount, all of theCMS-1613-FC 944

beneficiary’s entire post-reconciliation PDE da ta will be pulled, and the incorrect PDEs will be deleted or adjusted. The programmed calculation logic will keep track of a variety of payment-related information; for example, a beneficiary’s benefit phase, gross covered drug cost, true out-o f-pocket (TrOOP) costs, low-in come cost-sharing subsidies (if any), and plan payment as the benefici ary progresses through the Part D coverage benefit. The calculation algorithm will tap into a variety of different data sets, such as health plan benefit parameters, beneficiar y low-income subsidy status, and standard low-income cost-sharing subsidy parameters . Reports will then be produced on Gross Covered Drug Cost (GCDC) and low-income co st-sharing subsidy payment differentials. These payment differential amounts will be in corporated into final reinsurance, lowincome cost-sharing subsidy, and risk shar ing summary totals for a contract. DIR adjustments will be factored into these calculati ons to arrive at the related payment offset amount to be applied at the c ontract level. The difference in reinsurance, low-income cost-sharing subsidy, and risk sharing dollars with and without the correction to the PDEs will constitute the payment offset related to the beneficiaries with the incorrect PDEs. If the erroneous payment da ta in question is subseque ntly corrected through the CMS payment system, the offset amount will be reversed, and the payment to the MA organization or Part D sponsor will be updated through the routine payment process. However, if the data in the CMS system are not corrected and CMS conducts a reconciliation or reopening for the applicable payment year after the offset has been determined, the data will not be properly synchronized, and it is possible that the resulting payment adjustments could be incorrec t. In order to resolve this problem, CMS may reverse the original offset and recalculate the offset using the more recent data usedCMS-1613-FC 945

in the most recent payment reconciliation or reopening. The new offset amount will replace the previous offset amount, and CM S would need to evaluate and act on the resulting overpayment or underpayment. Comment: A few commenters expresse d concern about the payment calculation algorithm that will be used to determin e the overpayment amount that should be recouped. Other commenters stated that they could not understand why CMS cannot simply correct the data in the payment systems of record and “run a reopening.” Commenters requested that CMS clarify w hy the traditional re opening process cannot adequately address the types of payment i ssues outlined in the proposed rule. The

commenters noted that CMS has us ed its existing authority in the past to remove PDEs it

believed should not have been submitted. One commenter stated that this proposal creates an environment where the sponso r’s records of the PDEs and the TrOOP accumulators would be out of sync with CMS systems timing and would pose challenges during the reconciliations of PDEs and payment data, as well as readjudication of beneficiary claims, and as a result, recommended that CM S withdraw the proposal and

assess whether there are other current less on erous mechanisms that can be adopted to better meet its goals. Response: For the Part C program and the Part D program, we believe that the traditional risk adjustment rerun and other reopening processes are the best mechanisms to recoup overpayments. We believe that these processes will be adequate to recoup overpayments in most cases because we assume that the majority of MA organizations and Part D sponsors will adjust their paymen t data upon request by CMS. However, as we stated in the preamble to our proposed ru le, if an MA organiza tion or Part D sponsorCMS-1613-FC 946

fails to correct erroneous payment data, th e established risk adjustment rerun and reopening processes are inadequate. Because th e data would not have been corrected in the CMS payment system, we will have to determine the overpayment amount by applying a payment calculation algorithm to si mulate the payment calculations currently applied by CMS systems to produce routine Part C and Part D payments. It is true, as one commenter stated, that, in the Part D program, CMS has used existing authority to

remove PDE data that should not have been submitted. We use that authority in very

limited circumstances when the erroneous data is PDE data. Part D payment data also includes, however, direct and indirect rem uneration (DIR) data, for which we do not have

a means to “correct” erroneous data. Likewi se, we do not have a process in place to

“correct” erroneous data in the Part C program. In addition, because we only expect to conduct these types of data co rrections in a limited set of circumstances, and it would require significant resources to make the payment system changes to support such corrections, CMS is prepared to use a more economical process based on running a payment calculation algorithm to recover the improper payments. As stated in the proposed rule, CMS already simulates Part C and Part D payments outside of the core payment syst ems to accurately calculate payments and payment errors for a variety of different pur poses. Therefore, we believe that this procedural mechanism is the least onerous mechanism that can be adopted to recoup overpayments, return them to the Medicare Trust Funds, and ensure that payments are made consistent with the payment framework es tablished in statute. Therefore, we are not withdrawing the proposal, as one commenter recommended.CMS-1613-FC 947

Comment: One commenter stated that CMS should not implement any type of extrapolation methodology when calculating the payment offset for MA organizations or Part D sponsors. The commenter believed th at CMS may seek to ex trapolate the results of erroneous payment data to all benefici aries enrolled under a contract if the MA organization or Part D sponsor does not submit corrected data as requested by CMS. The commenter believed that the proposed provision could be interpreted to mean that CMS may apply the offset amount to all beneficiar ies, even though not all beneficiaries may have been affected by the incorrect data. The commenter opined that it would not be appropriate to extrapolate payment-o ffset calculations w ithout providing MA organizations and Part D sponsors with noti ce or an explanation of the methodologies that CMS would employ. Commenters reco mmended that CMS expressly state that extrapolation will not be involved in pa yment recoupment under the CMS-identified overpayment regulations, and the payment of fsets should be applied based on payment errors that have been determined for specific beneficiaries. Response: CMS may identify errone ous payment data submitted by MA organizations or Part D sponsors through a vari ety of different means. In the proposed rule, we discussed the procedures that CMS would undertake when erroneous payment data are identified, but did not addres s the means by which CMS would identify erroneous payment data. Therefore, this co mment is outside the scope of the proposed

rule.

Comment: Several commenters raised the issue that, in cases where a CMS-identified overpayment is a result of errors in diagnosis data submitted by MA organizations, CMS’ determination of the ove rpayment amount shoul d take into accountCMS-1613-FC 948

the fact that the CMS-HCC risk adjustment model used to risk-adjust payments to MA organizations is calibrated on diagnoses from Medicare fee-for-service claims not MA organizations’ claims. Commenters referred to this as the “data inconsistency issue.” Specifically, commenters noted thatCMS has recognized, in the contract-level RADV context, that individual errors in risk ad justment data cannot be equated with overpayments without first accounting for the error rate in the f ee-for-service (“FFS”)

claims data. Commenters al so stated that CMS has ac knowledged when calculating overpayments based on medical record review for RADV audits that it must “account for

the fact that the documentation standard used in RADV audits to de termine a contract’s payment error (medical records) is different from the documentation standard used to develop the Part C risk-adjus tment model (FFS claims).” Further, commenters noted that, to address this problem, CMS impl emented a “FFS Adjuster” that offsets the payment recovery amount to account for FFS and MA program differences in

documentation standards. These commenters be lieved that CMS’ application of the “FFS Adjuster” in the RADV contex t does fulfill the actuarial equivalence requirement under the risk adjustment provisions in the Act, a nd failure to maintain logical consistency by applying this adjuster in the context of the CMS-identified overpayments addressed by this rule would be contrary to the actuarial standard in statute. Response: We understand from these comm ents that commenters are specifically recommending that any risk adjustment paymen t recovery amounts be adjusted to reflect medical record coding documentation diffe rentials between FFS providers and MA organizations. We note that this type of ad justment would not apply to other types of data errors, such as those that might be found in PDE data. We further interpret theCMS-1613-FC 949

commenters to be saying that the overpayme nt amounts should be adjusted downward to take the medical record coding documenta tion differential into account. From a conceptual perspective, we believe that the application of a FFS adjuster is a payment calculation methodology issue, rather than a procedural issue. Our proposal was narrowly tailored to specify a procedure fo r correcting the inaccurate data that MA organizations and Part D sponsors have submitted for payment and providing an appeals process. Therefore, we believe that these comments relating to data inconsistency and the application of a FFS adjuster to overpaym ents are outside the scope of the proposed provision.

After consideration of th e public comments we receive d, we are finalizing our proposal, as proposed, w ithout modification. b. Payment Offset Notification In the CY 2015 OPPS/ASC proposed rule (79 FR 41062), we proposed that CMS would provide a payment offset notice to the MA organization or Part D sponsor (proposed §§ 422.330(d)(1) through (d)(3) and 423.352(d)(1) through (d)( 3)). The notice would provide the dollar amount to be offs et against a plan’s monthly prospective payments and an explanation of how the er roneous data were identified and of the calculation of the payment offset amount. Un der our proposal, the payment offset notice would also explain that, in the event that the MA organization or Part D sponsor disagrees with the payment offset, it may request an appeal within 30 days of the issuance of the payment offset notice. Comment: A number of commenters reque sted that CMS provide for an appeals process prior to conducting the payment recovery or offset.CMS-1613-FC 950

Response: We are concerne d that if we allow for app eals prior to the offset, we are at risk of having an extensive process th at inordinately delays the offset and the recovery of the overpayment. However, we are willing to engage in a dialogue with plans prior to the offset. We anticipate that this dialogue will help to resolve data issues prior to implementing the payment offset and recovery. Therefore, we are not making the requested changes to the proposed pro cess for payment offset notification.

After consideration of th e public comments we receive d, we are finalizing our proposal. However, we are making a minor modification to the accompanying regulation text at § 422.330(d) and § 423.352(d) to clar ify that the payment offset notice will

include at least the information outlined in the regulation, but may include other information relevant to the payment offset. 4. Appeals Process for MA Orga nizations and Part D Sponsors In the CY 2015 OPPS/ASC proposed rule (79 FR 41062), we proposed an appeals process for MA organizations a nd Part D sponsors with three levels of review, including reconsideration (described at proposed §§ 422.330(e)(1) and 423.352(e)(1)), an informal hearing (described at proposed §§ 422.330(e)(2) and 423.352(e)(2)), and an Administrator review (d escribed at proposed §§ 422.330(e)(3) and 423.352(e)(3)).

a. Reconsideration In the CY 2015 OPPS/ASC proposed rule (79 FR 41062), we proposed that an MA organization or Part D sponsor must file its request for recons ideration within 30 days from the date that CMS issued the paym ent offset notice to the MA organization or the Part D sponsor (proposed §§ 422.330(e)(1)( i) and 423.352(e)(1)(i)). At proposed §§ 422.330(e)(1)(ii) and 423.352(e)(1)(ii), we addr ess the information that must beCMS-1613-FC 951

included in the MA organization’s or Part D sponsor’s request for reconsideration. The request would have to contain the findings or issues with which the MA organization or Part D sponsor disagrees, th e reasons for its disagreement, and any additional documentary evidence that the MA organizatio n or Part D sponsor wishes to submit in support of its position. This additional evid ence would have to be submitted with the request for reconsideration. Under our propos al, any information submitted after this time would be rejected as untimely. Under our proposal, the CMS reconsid eration official would review the underlying data that were used to determin e the amount of the payment offset and any additional documentary evidence that the MA organization or Part D sponsor timely submitted with its reconsideration request ( §§ 422.330(e)(1)(iii) and 423.352(e)(1)(iii)). We note that, in some instances, the CMS r econsideration official’s review of the underlying data may include review of informa tion identifying or explaining the error in the payment data, such as information from the source that iden tified the erroneous payment data. We proposed at §§ 422.330(e )(1)(iv) and 423.352(e)(1)(iv) that the CMS

reconsideration official would inform the MA organization or Part D sponsor of the decision. We proposed at §§ 422.330( e)(1)(v) and 423.352(e) (1)(v) that a

reconsideration decision would be final a nd binding unless a timely request for an informal hearing is filed by the MA organization or Part D sponsor.

Comment: Several commenters stated th at a 30-day window to submit an appeal request is too short. A few commenters asked that CMS prov ide at least 60 days from the

time a data correction notice is issued for Part D sponsors to appeal the data correction decision. One commenter suggested a timeframe of 30 days to appeal and an additionalCMS-1613-FC 952

60 days for researching the issue and gathering supporting documents necessary for

consideration. Response: We have considered these c oncerns and suggestions, and we continue to believe that 30 days is sufficient time to file the appeal, particularly because the MA organization or Part D sponsor would have received an earlie r notification and request to

correct the erroneous data.

After consideration of th e public comments we receive d, we are finalizing our proposal without modification. b. Informal Hearing In the CY 2015 OPPS/ASC proposed rule (79 FR 41062), we proposed that if the MA organization or Part D sponsor is dissatis fied with CMS’ reconsideration decision, it would be entitled to request an inform al hearing (proposed §§ 422.330(e)(2) and 423.352(e)(2)). As proposed at §§ 422.330(e)(2)( i) and 423.352(e)(2)(i), a request for an informal hearing must be made in writing a nd filed within 30 days of the date of CMS’ reconsideration decision. The request must include a copy of CMS’ reconsideration decision and must specify the findings or i ssues in the decision with which the MA organization or Part D sponsor disagrees a nd the reasons for its disagreement (proposed §§ 422.330(e)(2)(ii) and 423.352(e)(2)(ii)). In the CY 2015 OPPS/ASC proposed ru le (79 FR 41062), we set forth the proposed procedures for conducting th e informal hearing at proposed §§ 422.330(e)(2)(iii) and 423.352(e)(2)(iii). Under these procedures, CMS would provide written notice of the time and place of the informal hearing at least 10 days

before the scheduled date of the h earing (proposed § 422.330(e)(2)(iii)(A) andCMS-1613-FC 953

§ 423.352(e)(2)(iii)(A)); the in formal hearing would be conducted by a CMS hearing officer. The hearing officer would be limited to reviewing the reco rd that was before

CMS when CMS made its reconsid eration determination (proposed § 422.330(e)(2)(iii)(B) and § 423.352(e)(2)(iii)(B)). Unde r our proposal, no new or additional documentation or evidence may be submitted at this hearing. At proposed § 422.330(e)(2)(iii)(C) and § 423.352( e)(2)(iii)(C), we proposed that the CMS hearing

officer would review the record of the proceeding before the CMS reconsideration official using the clearly err oneous standard of review. CM S’ reconsideration decision would not be reversed unless the MA organiza tion or Part D sponsor establishes that the decision was clearly erroneous in light of the evidence in the record before the CMS

reconsideration official. In the CY 2015 OPPS/ASC proposed rule (79 FR 41062), at proposed §§ 422.330(e)(2)(iv) and 423.352(e)(2)(iv), we pr oposed that the CMS hearing officer

would send a written decision of the informal hearing to the MA or ganization or Part D sponsor explaining the basis for the decision. The CMS hearing officer’s decision would be final and binding, unless the decision is re versed or modified by the Administrator (proposed §§ 422.330(e)(2)(v ) and 423.352(e)(2)(v)). Comment: One commenter recommended that CMS allow plans the opportunity to present oral arguments duri ng the informal hearing appeal stage and that written notice addressing the time and location of the heari ng be provided at leas t 30 days prior, as opposed to the proposed 10 days. Response: As proposed and finalized, th is rule will permit MA organizations and Part D sponsors, at the informal hearing st age, to present oral arguments regardingCMS-1613-FC 954

whether or not the CMS reconsideration offici al’s decision was clearl y erroneous. At the informal hearing, the hearing officer will review, and the parties may discuss, the contents of the administrative record, which wa s before the reconsideration official. We understand that 10 days’ notice of the time and place of the hearing may be insufficient notice for some MA organizations and Part D sp onsors to arrange for travel to the hearing location. Therefore, we are accepting the commenters’ suggestion to extend the timeframe for CMS to provide written notice of the time and place of the hearing, and are extending that timeframe to 30 days before th e scheduled date for the informal hearing.

Comment: A few commenters stated that with the “clearly erroneous” standard, CMS is unfairly placing the burden of proving CMS wrong completely on the MA organizations and Part D spons ors. Commenters pointed out that a sponsor may be unable--not unwilling--to collect the data required to refute CMS’ assertions. One commenter stated that while the burden of pr oof falls to the sponsors to disprove CMS’ claims, there is no explicit requirement thatCMS must be able to substantiate its concerns regarding data before it triggers the proposed incorrect payment notification process. The commenter is concerned that without changes to these standards the possibility exists for abuse of the proce ss, putting sponsors on a continual defensive cycle. The commenter suggested that CM S be obligated to provide reasonable substantiation of its overpayment claim and that the standard for review be that the MA organization or Part D sponsor provide reasonable evidence, in light of the available data, that the CMS claim is not supportable. Response: The issue of whether or not payment data submitted by an MA organization or Part D sponsorare erroneous is a factual issue that is determined byCMS-1613-FC 955

looking at the payment data in relation to the payment framework established in statute and regulation, which the MA organizatio ns and Part D sponsors agree to be contractually bound by when they sign the agre ement with CMS to operate a Medicare Advantage and/or a Voluntary Medicare Pr escription Drug Plan. Under the clearly erroneous standard of review, the hearing o fficer will only overturn the reconsideration official’s decision if that decision, based on th e record before the reconsideration official, contains plain errors of fact or law. Because the determina tion of whether or not payment data submitted by an MA organization or Part D sponsor are erroneous is a factual one, we believe that the clearly e rroneous standard is appropria te. The CMS reconsideration official reviews the underlying data that were submitted by the MA organization or Part D sponsor and any additional documentary evidence timely submitted by the MA organization or Part D sponsor, and thus is in the best position to determine the facts underlying the determination that erroneous payment data have been submitted. Accordingly, the reconsideration official’s de cision should only be disturbed in the case

of a clear error.

We believe commenters ar e concerned that there is no requirement that CMS substantiate its claims of an overpayment and th at could lead to abuse of the process. To the contrary, paragraph (b) of both § 422.330 and § 423.352 imposes a burden and a requirement on CMS. Under these provisions, we can request corr ections to payment data through a notice in whic h we are obligated to include or make reference to the specific data that need to be corrected and the reason why we believe that the data are erroneous. “Erroneous payment data,” as stat ed in the preamble of the proposed rule and the text of the regulations bei ng adopted in this final rule, ar e data that should not haveCMS-1613-FC 956

been submitted because the data are either inaccurate or inconsistent with Part C or Part D requirements. We will determine payment data to be erroneous based on the applicable statutes and regulations. Base d on the payment framework established in statute and regulation, we will determine whether or not that erroneous data result in an overpayment prior to conducting the payment offset. Commenters are concerned that they will be unable--not unwilling--to refute

CMS’ decision that the submission of err oneous payment data has resulted in an overpayment. As we stated in the preambl e to our proposed rule, we proposed to establish a process for identif ying and recouping overpayments to ensure that payments are made consistent with the payment framew ork established by statute. If we determine that an overpayment has occurr ed, the MA organization or PartD sponsor must be able to provide evidence to refute the finding that the underlying payment data are erroneous in order to succeed on appeal. As statedin the proposed rule at §§ 422.330(f) and 423.352(f), the MA organizatio n or Part D sponsor must be able to prove by a preponderance of the evidence that our finding that the payment data are erroneous was incorrect or otherwise inconsistent with ap plicable program requirements. Thus, we

believe that it is reasonable to expect that MA organizations and Part D sponsors provide evidence to support how their payment data are correct and consistent with program requirements in order for the CMS hearing offi cer to reverse both an initial determination by CMS and a reconsideration decision by the CMS reconsideration official that erroneous payment data have been submitted.

After consideration of th e public comments we receive d, we are finalizing our proposals with respect to the procedures thatwill apply to a reque st for an informalCMS-1613-FC 957

hearing, with a modification to provide that we will provide written notice of the time and place of the hearing 30 days before the scheduled date, as described above. c. Review by Administrator In the CY 2015 OPPS/ASC proposed rule (79 FR 41062), we proposed that the MA organization or Part D sponsor may requestreview of the hear ing officer’s decision by the Administrator within 30 days of i ssuance of the hearing officer’s decision (proposed §§ 422.330(e)(3)(i) and 423.352(e)(3)( i)). The MA organization or Part D sponsor may provide written arguments to the Administrator for review. Under proposed §§ 422.330(e)(3)(ii) and 423.352(e)(3)(ii), after receiving the request for review, the

Administrator would have the di scretion to elect to review the hearing determination or decline to review it. As provided at pr oposed §§ 422.330(e)(3)(iii) and 423.352(e)(3)(iii),

if the Administrator declines to review the hearing officer’s decision, the hearing

officer’s decision would be final and binding. At pr oposed §§ 422.330(e)(3)(iv) and 423.352(e)(3)(iv), we proposed that if the Admi nistrator elects to review the hearing officer’s decision, the Administrator would re view the hearing officer’s decision, as well as any other information included in the reco rd of the hearing officer's decision and any written arguments submitte d by the MA organization or Part D sponsor. The

Administrator would be able to uphold, reverse, or modify th e hearing officer’s decision.

The Administrator’s determination w ould be final and binding (proposed §§ 422.330(e)(3)(v) and 423.352(e)(3)(v)). We did not receive any public comme nts on the proposal for review by the Administrator and are finalizing th is proposal without modification.CMS-1613-FC 958

5. Matters Subject to Appeal and Burden of Proof In the CY 2015 OPPS/ASC proposed rule (79 FR 41063), at proposed §§ 422.330(f)(1) and (2) and 423.352(f)(1) and (2), we proposed to limit the subjectmatter that an MA organization or Part D sponsor may appeal under this provision and establish the burden of proof th at the MA organization or Part D sponsor must meet in its appeal. Under this provision, an MA organiza tion or a Part D sponsor would be able to appeal the notice of payment offset solely on the grounds that CMS’ finding that the MA organization’s or Part D sponsor’s payment data were either erroneous or otherwise inconsistent with applicable program requi rements. The MA organization or Part D sponsor would bear the burden of proof by a preponderance of the evidence in demonstrating that CMS’ finding was incorrect or inconsistent with applicable program requirements. At proposed §§ 422.330(g) and 423.352(g), we proposed that the appeals process under paragraph (e) of these se ctions would apply only to pa yment offsets described at proposed §§ 422.330(c) and 423.352(c). It woul d not apply to any other CMS payment offset process. Comment: One commenter noted that, in the proposed rule, CMS stated that the burden of proof is on the MA organization orPart D sponsor to prove that the CMS finding was “incorrect or otherw ise inconsistent with applic able program requirements.” This commenter asked that CMS clarify that plans would not be expected to conform to FFS requirements or business models in coding practices. The commenter stated that in the past there have been occasions when CMS has relied on the use of FFS requirements or customary practices in the absence of specific MA or Part D guidelines. TheCMS-1613-FC 959

commenter stated that this creates an unreas onable burden of regulations, rules, manuals, notices, and bulletins that must be considered in the process of identifying, reporting, and appealing matters of data accuracy and potential overpayment. In addition, the commenter believed that this practice does not address the fact that an error may have been solely caused by provider error, over which a plan has no control, and therefore places an unreasonable burden on the plan. Response: We are not clear about the commenter’s conc ern. In the preamble of the proposed rule, the phrase “applicable program requirements” is referring to MA program requirements, not to FFS program requirements. If the commenter is asking about coding practices, CMS does not provide specific MA guidelines on how to code, but instead requires that MA or ganizations use the code sets and guidelines in whatever

version of the International Classification of Diseases that is in effect for the classification and reporting of diseases for all U.S. health care settings (not just Medicare). Further, we are unsure as to what the commenter is referring in the statement “in the past there have been occasions when CMS has relied on the use of FFS requirements or customary practices in the abse nce of specific MA or Part D guidelines.” The commenter did not provide any examples, so we are unable to respond to this concern. Regarding the statement that an MA organization has no control over provider errors in data submission, we refer reader s to the contracting provisions in the MA regulation at § 422.504 regarding the MA or ganization’s responsibility for data

submissions.

After consideration of th e public comments we receive d, we are finalizing our proposal without modification.CMS-1613-FC 960

6. Effective Date of Appeals Process Provisions In the CY 2015 OPPS/ASC proposed rule (79 FR 41063), we proposed that this new procedural mechanism for a payment offset at proposed § 422.330 and § 423.352 would apply after the effectiv e date of any final rule implementing the new payment offset and appeals process, but that reque sts to correct payment data under proposed §§ 422.330(b) and 423.352(b) and the payment offsets under proposed §§ 422.330(c) and 423.352(c) may apply to any payment year, subject to the 6-year limitation under §§ 422.330(b) and 423.352(b). We invited public comments on these propos als regarding the effective date and application of the rule. We did not receive any public comments on these proposals, and we are finalizing our proposals with the modification discussed above to codify the 6-year limitation in paragraph (c) of §§ 422.330 and 423.352. In summary, we are finalizing the provisions at §§ 422.330 and 423.352, with the following modifications. We are removing the phrase “controlled and” from the definition of “payment data” at §§ 42 2.330(a) and 423.352(a). We are adding the definition of “erroneous payment data” to th e final regulation te xt at §§ 422.330(a) and 423.352(a). At §§ 422.330(b) and 423.352(b), we are moving language regarding the 6-year look-back period to §§ 422.330(c)(1) and 423.352(c)(1) to indicate that if the MA organization or Part D sponsor fails to correct payment data, CMS will conduct a payment offset if the payment error identifi ed affects payments for any of the 6 most recently completed payment years and the paymen t error for a particul ar payment year is identified after the applicable reconciliation date for that payment year. At §§ 422.330(c)CMS-1613-FC 961

and 423.352(c), we are adding paragraph (2) to clarify that CMS will calculate the payment offset amount using the correct pa yment data. In addition, we are making a minor modification to the regul ation text at § 422.330(d) a nd § 423.352(d) to clarify that the payment offset notice will include at leas t the information outlined in the regulation, but may include other information relevant to the payment offset. Finally, we are revising §§ 422.330(e)(2)(iii)(A) an d 423.352(e)(2)(iii)(A) to stat e that we will provide written notice of the time and place of the informal hearing at least 30 days before the

scheduled date.

XVIII. Files Available to th e Public via the Internet

Addendum J to this final rule with co mment period is a new addendum that we proposed for CY 2015, in response to requests by public commenters on the CY 2014

OPPS/ASC final rule with comm ent period for additional data regarding ratesetting for the new comprehensive APCs established in that final rule with comment period, which

are discussed in section II.A.2.e. of this final rule with comme nt period. Addendum J lists the HCPCS code pairs for which we are finalizing complexity adjustments for CY 2015, by clinical family; the HCPCS c odes finalized for exclusion from the comprehensive APC payment bundle; a nd the relevant co st statistics. The public comments that we received related to the proposed Addendum J to the CY 2015 OPPS/ASC proposed rule are discussed in detail in section II. A.2.e. of this final rule with comment period. We are finalizing our proposal to create Addendum J without

modification. The Addenda to the OPPS/ASC proposed ru les and the final rules with comment period are published and available only via th e Internet on the CMS Web site. To viewCMS-1613-FC 962

the Addenda to this final rule comment period pertaining to CY 2015 payments under the OPPS, we refer readers to the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Hospital-Ou tpatient-Regulations-and-Notices.html;

select “1613-FC” from the list of re gulations. All OPPS Addenda to this final rule with comment period are contained in the zipped folder entitled “2015 OPPS 1613-F Addenda” at the bottom of the page. To view the Adde nda to this final rule with comment period pertaining to the CY 2015 payments under the ASC payment system, we refer readers to

the CMS Web site at: http://www.cms.gov/Medicare/Me dicare-Fee-for-ServicePayment/ASCPayment/ASC-Regulations-and-Notices.html; select “1613-FC” from the list of regulations. All ASC Addenda to this final rule with comment period are contained in the zipped folders entitl ed “Addendum AA, BB, DD1 and DD2,” and

“Addendum EE”. XIX. 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 commen t before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2 )(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:

● The need for the information collecti on and its usefulness in carrying out the proper functions of our agency.CMS-1613-FC 963

● 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 auto mated collection techniques. In the CY 2015 OPPS/ASC proposed rule (79 FR 741063 through 41067), we solicited public comments on each of the issues outlined above for the information collection requirements discussed below. B. Requirements in Regulation Text: Ch anges to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-R eferral Law: Expansion Exception Process (§ 411.362)

As discussed in section XV.C. of the CY 2015 OPPS/ASC proposed rule (79 FR 41054 through 41056) and in section XV. C. of this final rule with comment period, we proposed to modify the physician- owned hospital expansion exception process under the rural provider and hospital ownership exceptions to the physician self-referral law. Specifically, we proposed to permit physician-owned hospitals to use certain

non-HCRIS data sources to demonstrate satisfa ction of the expansion exception process eligibility criteria.

In section XIX.B. of the CY 2015 O PPS/ASC proposed rule (79 FR 41063), we

stated that we believe the burden asso ciated with our modifications to the physician-owned hospital expansion exception process is exempt from the PRA under 5 CFR 1320.3(c) because the information collect ion will not impact 10 or more entities in a 12-month period. We did not receive a ny public comments on the proposed statedCMS-1613-FC 964

burden of our proposed modifications to the physician-owned hospital expansion exception process.

As discussed in section XV.C. of this final rule with comment period, we are finalizing our proposal with certain modificat ions. The provisions are exempt from the PRA under 5 CFR 1320.3(c) because the inform ation collection will not impact 10 or more entities in a 12-month period.

C. Associated Information Collectio ns Not Specified in Regulatory Text In the CY 2015 OPPS/ASC proposed rule, we made reference to proposed associated information collection requirements that were not discu ssed in the regulation text contained in the proposed rule. The fo llowing is a discussion of those requirements, any public comments we received, and ourresponses to those public comments. 1. Hospital OQR Program

As we stated in section XIV. of the CY 2012 OPPS/ASC final rule with comment period, the Hospital OQR Program has been ge nerally modeled after the quality data reporting program for the Hospital IQR Program (76 FR 74451). We refer readers to the

CY 2011 OPPS/ASC final rule with comme nt period (75 FR 72111 through 72114), the

CY 2012 OPPS/ASC final rule with comme nt period (76 FR 74549 through 74554), the

CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68527 through 68532), and

the CY 2014 OPPS/ASC final rule with comment period (78 FR 75170 through 75172) for detailed discussions of Hospital OQR Program information collection requirements we have previously finalized.CMS-1613-FC 965

a. Revisions to the CY 2016 Pa yment Determination Estimates In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75103), we finalized the adoption of four new measures for the CY 2016 payment determination and subsequent years: (1) OP-27: Influe nza Vaccination Coverage among Healthcare Personnel (NQF # 0431); (2) OP 29: E ndoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658); (3) OP 30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidan ce of Inappropriate Use (NQF # 0659); and (4) OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery (NQF # 1536). In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75171), we estimated measures OP-29, OP-30, and OP-31 would require 40 hours of reporting per quarter (96 cases x 0.417 hours). We also estimated that reporting these measures via our Web-based tool would take 10 minutes (or 0.167 hours) per measure per year (or 2.5 minutes for each quarter’s data, which are submitted on an annual basis) (78 FR 75171 through 75172).

We noted in section XIII.D.2. of the CY 2015 OPPS/ASC proposed rule and this final rule with comment period that we have delayed reporting for OP-29 and OP-30 for the CY 2016 payment determination by one quarter. Therefore, we estimate a reduction

in burden of 40 hours for each of these meas ures (40 hours per quarter for reporting + 2.5 minutes of reporting via the Web-based t ool) per hospital for the CY 2016 payment determination. In addition, in section X III.D.3. of the CY 2015 OPPS/ASC proposed rule and this final rule with comment period, we are finalizing our propos al to exclude OP-31 from the CY 2016 payment determination measure set. Therefore, we estimate that thereCMS-1613-FC 966

will be no burden for reporting OP-31 for the CY 2016 payment determination, and an overall reduction in burden of 160 hours ((40 hou rs per quarter for reporting x 4 quarters) + 0.167 hours per year for reporting via the We b-based tool) per hospital for the CY 2016 payment determination. Combining the estimated reductions in bur den for all three of these measures, we

estimate a total reduction in burden of 240 hours (40 hours + 40 hours + 160 hours) per hospital for the CY 2016 payment determination due to delayed data collection for OP-29

and OP-30 and the exclusion of OP-31. We estimate that approximately 3,300 hospitals will participate in the Hospital OQR Program for the CY 2016 payment determination. Therefore, we estimate a to tal reduction in burden of 792,000 hours (240 hours x 3,300 hospitals) for the CY 2016 payment determin ation from our orig inal estimate of 1.6 million hours (160 hours/measure x 3 measur es x 3,300 hospitals) as discussed in the

CY 2014 OPPS/ASC final rule with comme nt period (78 FR 75171 through 75172) for all hospitals participating in the Hospita l OQR Program based on the data collection delays for OP-29 and OP-30 and the excl usion of OP-31. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75171), we estimated that these measures would result in a financial burden of $30 per hour. Th erefore, we estimate that the changes to

these three measures will result in a re duction in financial burden of $23.8 million ($30/hour x 792,000 hours) for the CY 2016 paymen t determination from our original estimate of $76.8 million ($1.6 million x $30) as discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75171 through 75172).CMS-1613-FC 967

b. Hospital OQR Program Requirements fo r the CY 2017 Payment Determination and Subsequent Years

As we stated in the CY 2014 OPPS/ ASC final rule with comment period (78 FR 75171), we believe there is a burden a ssociated with successful participation in the Hospital OQR Program, where successful participation resu lts in a full annual payment update (APU) for the particular paym ent determination. For the reasons stated in that rule, we believe that the burden a ssociated with these requirements is 42 hours per hospital or 138,600 hours for all hospitals fo r the CY 2017 payment determination and subsequent years. We estimate a financia l burden for these requirements of $4.2 million ($30/hour x 138,600) for all hospitals. (1) Claims-Based Measures for the CY 2017 and CY 2018 Payment Determinations and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68530) for detailed discussions of the information collection requirements for the previously finalized claims -based measures (OP-8, OP- 9, OP-10, OP-11, OP-13, OP-14, and OP-15). In section XIII.E. of this fina l rule with comment pe riod, we are finalizing our proposal to adopt one additional claims-b ased measure, OP-32: Facility Seven-Day Risk-Standardized Hospital Visi t Rate after Outpatient Colo noscopy, but are finalizing its

inclusion in the measure set for the CY 2018 payment determination and subsequent years instead of for the CY 2017 payment determination and subsequent years as proposed. Before publicly reporting this meas ure, however, we will conduct a dry run (a preliminary analysis) for facilities to review their performance and pr ovide feedback. ForCMS-1613-FC 968

more detailed information about the dry run, we refer readers to our discussion in section XIII.E. of this final rule with comment period. As we noted in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68530) and consistent with the modifica tions we are finalizing in this final rule with comment period, we calculate claims-b ased measures using Medicare FFS claims data that do not require additional hospital data submissions. (2) Chart-Abstracted Measures for the CY 2017 Payment Determination and Subsequent

Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68530 through 68531) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75171) for detailed discussions of the information collection requirements for the previously finalized chart-abstract ed measures (OP-1, OP-2, OP-3, OP-4, OP-5, OP-6, OP-7, OP-18, OP-20, OP-21, OP- 22, OP-23, OP-29, OP-30, and OP-31). In the CY 2015 OPPS/ASC proposed rule (79 FR 41034), we proposed to remove

three chart-abstracted measures from the Hospital OQR Program beginning with the CY 2017 payment determination, OP-4: Aspiri n at Arrival (NQF # 0286); OP-6: Timing of Prophylactic Antibiotics; and OP-7: Perioperative Care: Prophylactic Antibiotic Selection for Surgical Patients (NQF # 0528). Insection XIII.C.3. of this final rule with comment period, we are finalizi ng our proposal to remove tw o of these measures (OP-6 and OP-7) from the Hospital OQR Program for the CY 2017 payment determination and subsequent years. We are not finalizing our pr oposal to remove OP-4 and refer readers to

section XIII.C.3. of this final rule with co mment period for a detailed discussion. We previously estimated that each particip ating hospital will sp end 35 minutes (or 0.583CMS-1613-FC 969

hours) per case to collect and submit the data required for the chart-abstracted measures finalized for the CY 2015 payment determin ation and subsequent years (OP-1, OP-2, OP-3, OP-4, OP-5, OP-6, OP 7, OP-18, OP -20, OP-21, OP-22, and OP-23) (78 FR 75171). Because we are finalizing our proposals to remove two of these measures, we

believe that the time to chart-abstract m easures will be reduced by 16.7 percent (2 of 12 measures) per case. Therefore, we estimate that hospitals will spend approximately 29 minutes (0.483 hours) per case to collect and submit these data. Data submitted for the CY 2014 payment determination indicate that the average hospital will submit approximately 1,266 cases pe r year for these measures. Therefore, as a result of our removal of 2 chart-abstracted measures, we estimate that the time it will take for the average hospital to abstract data for all of the chart-abstracted measures will be 612 hours per year (1,266 cases x 0.483 hours) . We estimate that there will be approximately 3,300 hospitals that particip ate in the Hospital OQR Program for the CY 2017 payment determination and subsequent years. Therefore, we estimate that the chart-abstracted measures for the CY 2017 payment determination and subsequent years

will result in a burden of 2.02 million hours (612 hours x 3,300 hospitals) for all participating hospitals, for a total fina ncial burden of approximately $61 million (2.02 million hours x $30/hour). In addition, in the CY 2014 OPPS/AS C final rule with comment period (78 FR 75171), we estimated that OP-29 and OP-30 would require 25 minutes (0.417 hours) per case per measure to chart-abst ract. We also estimated that hospitals would abstract 384 cases per year for each of these measures. Our estimate for the CY 2017 payment determination and subsequent years has not changed from last year’sCMS-1613-FC 970

estimate (although, as noted above, we have changed our estimate for the CY 2016 payment determination based on the delay of reporting OP-29 and OP-30). Therefore, for the CY 2017 payment determination and s ubsequent years, we estimate a burden of 1.1 million hours (3,300 hospitals x 0.417 hours/ case x 384 case/measure x 2 measures) for all participating hospitals for OP-29 and OP-30 for a total financial burden of approximately $33 million ($30/hour x 1.1 million hours).

In section XIII.D.3. of this final rule with comment period, we are finalizing our proposal to exclude OP-31 from the CY 2016 payment determination measure set and, for the CY 2017 payment determination and subs equent years, to change this measure from required to voluntary. Hospitals will not be subject to a payment reduction with respect to this measure for the CY 2016 paym ent determination or during the period of voluntary reporting. We continue to believe this measure addr esses an important area of care, and anticipate that many facilities will re port this measure on a voluntary basis. In

the CY 2014 ASC/OPPS final rule with co mment period (78 FR 75171), we estimated that OP-31 would require 25 minutes (0.417 hours ) per case to chart-abstract. We also estimated that hospitals would abstract 384 cases per year for this measure. We estimate that approximately 20 percent of hospitals (660 hospitals (3,300 hospitals x 0.2)) will elect to report this measure on a voluntary basi s. Therefore, we ar e revising the estimated burden for this measure to 105,685 hours (660 hospitals x 0.417 hours/case x 384 cases) for participating hospitals for the CY 2017 payment determination and subsequent years, for a total financial burden of approxi mately $3.2 million ($30/hour x 105,685 hours). Therefore, for the chart-abstracted meas ures, we estimate a total burden for all participating hospitals of 3.23 million hours (2.02 million hours + 105,685 hours +CMS-1613-FC 971

1.1 million hours) and $96.9 million (3.23 million hours x $30/hour) for the CY 2017 payment determination and subsequent years. (3) Web-Based Measures Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75171) for detailed discussions of the information collection requirements for the previously finalized measures submitted via th e Web-based tool. For the reasons stated in that final rule with comment period, we estimate that each partic ipating hospital would spend 10 minutes per measure per year to colle ct and submit the data for the six measures (OP-12, OP-17, OP-25, OP-26, OP-29, and OP-30) submitted via the Web-based tool. Therefore, the estimated annual burden a ssociated with these measures for all participating hospitals is 3,307 hours (3,300 hospitals x 0.167 hours/measure x 6 measures/hospital) for the CY 2017 paymen t determination and subsequent years. As stated above, in section XIII.D.3. of this final rule with comment period, we are finalizing our proposal that hospitals have the option to voluntar ily collect and submit OP-31 data beginning with the CY 2015 en counter period for the CY 2017 payment determination and subsequent years; failing to report this measure will not affect hospitals’ payment determinations for CY 2017 and subsequent years. We continue to believe this measure addresses an important area of care and estimate that approximately 20 percent of hospitals or 660 hospitals (3,300 hospitals x 0.2) will elect to report this measure on a voluntary basis. Therefore, we are revising the estimated burden for this measure for all participati ng hospitals to 111 hours (660 hos pitals x 0.167 hours) for the CY 2017 payment determination and subsequent years.CMS-1613-FC 972

Moreover, we estimate that the financ ial burden incurred for the Web-based submission of these measures for all part icipating hospitals wi ll be $119,070 ($30/hour x (3,858 hours + 111 hours)) for the CY 2017 payment determination and subsequent

years. (4) NHSN HAI Measure for the CY 2017 Paym ent Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75172) for detailed discussions of th e information collection requirements for OP-27: Influenza Vaccination Coverage among Healthcare Personnel. In section

XIII.D.1. of this final rule with commen t period, we are clarifying the submission deadline for this measure. We do not believe there will be a change in burden due to this

clarification because it was a typographical error and our prev ious estimates were based

on the correct submission timeframe. We also noted that facilities should collect and submit a single vaccination count for each hea lth care facility enro lled in NHSN by the facility OrgID. Although we believe an ove rall reduction in burden will occur because hospitals will only be required to submit this information once for both the Hospital IQR Program and the Hospital OQR Program, we do not believe there is a reduction in burden that is directly attributable to the Hospital OQR Program. That is, this requirement is independent of the Hospital IQR Program requi rements. Therefore, our burden analysis

remains the same. For the reasons discusse d in the CY 2014 OPPS/AS C final rule with comment period (78 FR 75172), we estimate a tota l burden for all par ticipating hospitals of 106,940 hours and a total financial burden of $3,208,203 associated with this measure.CMS-1613-FC 973

c. Review and Corrections Period Requirements for the CY 2017 Payment Determination and Subsequent Years

In section XIII.H.2.f. of this final rule with comment period, we are finalizing our proposal to formalize that the time during whic h hospitals submit chart-abstracted data is the review and corrections period for those da ta. Because this proposal does not require hospitals to submit additional data, we do not believe it will increase burden for these hospitals. d. Hospital OQR Program Validation Requirements for the CY 2017 Payment Determination and Subsequent Years

In sections XIII.H.3.b. and XIII.H.3.e. of this final rule with comment period, we are finalizing three changes to our validation procedures: (1) a hospital will be eligible

for random selection for valida tion if it submits at least 12 cases to the Hospital OQR Program Clinical Data Warehouse during th e quarter containing the most recently available data (we note that th is is a modification of our pr oposal that a hospital would be eligible for random selection for validation if it submitted 1 case); (2) hospitals will have the option to either submit pape r copies of patient charts or securely transmit electronic

versions of medical information for valida tion; and (3) hospitals must identify the medical records staff responsible for subm ission of records under the Hospital OQR Program to the designated CMS contractor. We do not believe that these changes to the eligibility requirements will result in additiona l burden because we will continue to select 500 hospitals for validation consistent with our previous burden estimates indicate (78 FR 75172). In addition, we do not believe requiring hospitals to identify the medical records staff responsible for submission of r ecords will result in additional burden sinceCMS-1613-FC 974

hospitals must already submit this informati on to our designated contractors (the State QIO), and only the contractor to whom the data is submitted may change. However, we do believe that the second requirement regard ing the method of submission may result in a change in burden. We are finalizing our proposal that the requirement to submit patient charts for validation of Hospital OQR Program data may be met by employing either of the following options: (1) a hospital may submit pape r medical records, the form in which we have historically requested them; or (2) a hospital may securely transmit electronic versions of medical information beginning in the CY 2017 payment determination and for subsequent years. We are finalizing our proposal that hosp itals that choose to securely transmit electronic ve rsions of medical informati on should either: (1) download or copy the digital image (that is., a PDF) of the patient chart onto an encrypted CD, DVD, or flash drive and ship the encrypted electronic media following instructions specified on the QualityNet Web site; or (2) s ecurely submit PDFs of patient charts using a Secure File Transfer Portal on the Qu alityNet Web site. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50834 through 50835), th e Hospital IQR Program previously finalized a similar policy that also allows hospitals to submit electronic versions of records for validation using the first method. In the FY 2015 IPPS/LTCH PPS final rule, the Hospital IQR Program finalized secure subm ission of digital images via a Secure File Transfer Portal (79 FR 50269). For the sa me reasons outlined in the Hospital IQR Program (78 FR 50956), we are finalizing our pr oposal to set a reimbursement rate of $3.00 per patient chart submitted electronically (using either of the finalized methods for electronic submission) for validation fo r the CY 2017 payment determination andCMS-1613-FC 975

subsequent years. We will continue to reimburse hospitals at a rate of 12 cents per page, plus shipping, for records pr ovided on paper (76 FR 74577).

The burden associated with validation is the time and effort necessary to submit

validation data to the CMS contractor. Fo r some hospitals, we believe that submitting these data electronically may result in a reduc tion in burden; for others we believe that submitting paper copies will be the least bur densome option. As we have previously

stated in the CY 2014 OPPS/ASC final ru le with comment period, we sample 500 hospitals for validation, and we estimate that it will take each hospital 12 hours to comply with the data submission requirements (78 FR 75172). Therefore, because the number of hospitals we sample for validation will remain the same, we estimate a total burden of approximately 6,000 hours (500 hospitals x 12 hours/hospital) and a total financial impact of $180,000 ($30/hour x 6,000 hours) fo r the CY 2017 payment determination and subsequent years. e. Extraordinary Circumstances Ex tensions or Exemptions Process

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment period (78 FR 75119 through 75120), and 42 CFR 419.46(d) for a comp lete discussion of our extraordinary circumstances extension or waiver process under the Hospital OQR Program. In this final rule with comment period, we are fi nalizing our proposal to change the phrase

“extension or waiver” to “extension or exem ption” throughout the regulation. In section XIII.J. of this final rule with comment pe riod, we note that we intend to make certain changes to the form to ensure that the form is consistent across CMS quality reportingCMS-1613-FC 976

programs. We do not anticipate that these minor changes will affect the collection of information burden estimates for this process. f. Reconsideration and Appeals

While there is burden associated with filing a reconsideration request, the regulations at 5 CFR 1320.4 for the PRA (44 U.S.C. 3518(c)(1)(B)) exclude collection activities during the conduct of administrative actions such as reconsiderations or appeals. We invited public comment on the burde n associated with these information collection requirements. We did not r eceive any public comments on this burden. 2. ASCQR Program Requirements a. Background

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74554), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53672), the CY 2013

OPPS/ASC final rule with comment period (77 FR 68532 through 68533), and the

CY 2014 OPPS/ASC final rule with comme nt period (78 FR 75172 through 75174) for detailed discussions of the ASCQR Program information collection requirements we have previously finalized.

b. Revisions to the CY 2016 Pa yment Determination Estimates In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75124 through 75130), we finalized the adoption of thr ee new measures for the CY 2016 payment determination and subsequent years: ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658); ASC-10: Endoscopy/Polyp Su rveillance: Colonoscopy Interval forCMS-1613-FC 977

Patients with a History of Adenomatous Po lyps – Avoidance of Inappropriate Use (NQF # 0659); and ASC-11: Cataracts – Im provement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536). In that final rule with comment period, we estimated that each pa rticipating ASC would spend 35 minutes per

case to collect and submit the data for thes e measures, resulting in a total estimated burden for ASCs with a single case pe r ASC of 3,067 hours (5,260 ASCs × 0.583 hours per case per ASC). We also st ated that we expected ASCs would vary greatly as to the number of cases per ASC due to ASC specialization (78 FR 75173).

As we stated in section XIV.E.3. of the CY 2015 OPPS/ASC proposed rule and this final rule with comment period, we have delayed reporting for ASC-9 and ASC-10 for the CY 2016 payment determination by one quarter. Therefore, we estimate a 25-percent reduction in cases and burden fo r these measures for the CY 2016 payment

determination. As we stated in section XIV.E.3.c. of the CY 2015 OPPS/ASC proposed rule and this final rule with comment peri od, we delayed reporting of ASC-11 by 1 year. We also are finalizing our proposal to exclude ASC-11 from the CY 2016 payment determination measure set. As a result, we do not believe there would be any burden

associated with this measure for the CY 2016 payment determination. c. Claims-Based Measures for the CY 2017 Payment Determination and Subsequent

Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68532) and CY 2014 OPPS/ASC final rule with comment period (78 FR 75172 through 75174) for detailed discussions of the information collection requirements for the five previously-adopted claims-based ASCQR Program measures (four outcomeCMS-1613-FC 978

measures and one process measure). The five previously adopted measures are: ASC-1: Patient Burn (NQF # 0263); ASC-2: Patient Fall (NQF # 0266); ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedur e, Wrong Implant (NQF # 0267); ASC-4: Hospital Transfer/Admission (NQF # 0265); and ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing (NQF # 0264). For the reasons we discussed in the CY 2014 OPPS/ASC final rule with comment pe riod (78 FR 75172 through 75173), we estimate that the reporting burden to report Quality Data Code s (QDCs) for these five

claims-based outcome measures woul d be nominal for the CY 2017 payment determination and for subsequent years.

In section XIV.B.5. of this final rule with comment period, we are finalizing our proposal to add one additiona l claims-based measure to the ASCQR Program, but are finalizing its inclusion in the measure sets for the CY 2018 payment determination and subsequent years, instead of the measure set we proposed for the CY 2017 payment determination and subsequent years. Before publicly reporting this measure, we plan to perform a dry run (a preliminary analysis) of the measure in 2015. We refer readers to

section XIV.B.5 of this final rule with comment period for a detailed discussion of the dry run. Because this measure, ASC-12: Facil ity Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy, will be computed by CMS based on paid Medicare FFS claims, and will not require AS Cs to submit QDCs, we do not anticipate

that this measure would create additional bur den to ASCs during the dry run or for the CY 2018 payment determination and subsequent years.CMS-1613-FC 979

d. Web-Based Measures for the CY 2017 Paym ent Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68532) and CY 2014 OPPS/ASC final rule with comment period (78 FR 75172 through 75174) for detailed discussions of the information collection requirements for the five previously-adopted Web-based measur es, excluding ASC-11, which we proposed for voluntary inclusion in the ASCQR Program for the CY 2017 payment determination and subsequent years. The five previously a dopted measures are: ASC-6: Safe Surgery Checklist Use; ASC-7: ASC Facility Volume Da ta on Selected ASC Surgical Procedures; ASC-8: Influenza Vaccination Coverage Am ong Healthcare Personnel (NQF # 0431); ASC-9: Endoscopy/Polyp Surveillance: Appr opriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658); and ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Pa tients with a History of Adenomatous Polyps-Avoidance of Inappropriate Use (NQF # 0659).

For the reasons we discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75173 through 75174), we estimat e that the reporting burden for the ASC-6: Safe Surgery Checklist Use and the ASC-7: ASC Facility Volume measures would be 1,756 hours (5,260 ASCs x 2 measures x 0.167 hours per ASC) and $52,680 (1,756 hours x $30.00 per hour) annually for the CY 2017 payment determination and for subsequent years.

For the reasons discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75173 through 75174), we estimat e that the reporting burden for the ASC-8: Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431)CMS-1613-FC 980

measure would be 18,005 hours and $540,150 (18,005 hours x $30.00 per hour) annually for the CY 2017 payment determination and for subsequent years.

For the reasons discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75173 through 75174), we estimate that the reporting burden for ASCs with a single case per ASC for the ch art-abstracted ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658) and ASC-10: Endos copy/Polyp Surveillance: Colonoscopy

Interval for Patients with a History of Adenomatous Polyps -Avoidance of Inappropriate Use (NQF # 0659) measures would be 3,067 hours and $92,010 (3,067 hours x $30.00 per hour) annually for the CY 2017 payment determination and for subsequent years.

In section XIV.E.3.c. of this final rule with comment period, we are finalizing our proposal that data collect ion and submission be voluntary for the CY 2017 payment determination and subsequent years for ASC- 11: Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536), meaning we would not subject ASCs to a payment reducti on with respect to this measure during the period of voluntary reporting. We continue to believe this measure addresses an important area of care, and an ticipate that many facilities will report this measure on a voluntary basis. In the CY 2014 ASC/ OPPS final rule with comment period (78 FR 75173), we estimated that each part icipating ASC would sp end 35 minutes per

case to collect and submit the data for this measure, making the tota l estimated burden for ASCs with a single case per ASC 3,067 hour s (5,260 ASCs x 0.583 hours per case per ASC) annually. We expect that ASCs would vary greatly as to the number of cases per ASC due to ASC specialization. We estimat e that approximately 20 percent of ASCsCMS-1613-FC 981

would elect to report this m easure on a voluntary basis; ther efore, we estimate the total estimated burden for ASCs with a singl e case per ASC to be 613 hours (1,052 ASCs x 0.583 hours per case per ASC) and $18,390 ( 613 hours x $30.00 per hour) annually for the CY 2017 payment determination and subsequent years. e. Extraordinary Circumstances Extension or Exemptions Process

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53642 through 53643) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75140) for a complete discussion of our extraordinary circumstances extension or waiver process under the ASCQR Program. In the CY 2015 OPPS/ASC proposed rule, we did not propose to make any substantive ch anges to this process. However, in the future, we will refer to the process as the extraordinary circumstances extensions or exemptions process. In section XIV.E.7. of this final rule with comment period, we note that we intend to make certain changes to the form to ensure that the form is consistent across CMS quality reporting programs. We do not anticipate that these minor changes would affect the burden estimates for this process.

f. Reconsideration

While there is burden associated with filing a reconsideration request, the regulations at 5 CFR 1320.4 for the PRA ( 44 U.S.C 3518(c)(1)(B)) exclude collection activities during the conduct of administrative actions such as reconsiderations. We invited public comment on the burde n associated with these information collection requirements. We did not r eceive any public comments on this burden.CMS-1613-FC 982

XX. Waiver of Proposed Rulemaking and Response to Comments A. Waiver of Proposed Rulemaking We ordinarily publish a notice of proposed rulemaking in the Federal Register and invite public comment on a proposed rule. The notice of proposed rulemaking includes a reference to the lega l authority under which the rule is proposed, and the terms and substance of the proposed rule or a desc ription of the subjects and issues involved. This procedure can be waived, however, if an agency finds good cause that a notice-andcomment procedure is impracticable, unnecessar y, or contrary to th e public interest and incorporates a statement of the finding and its reasons in the rule issued. We utilize HCPCS codes for Medicare payment purposes. The HCPCS is a national coding system comprised of Level I codes (CPT codes) and Level II codes that are intended to provide uniformity to coding procedures, services, and supplies across all types of medical providers and suppliers. CPT codes are copyrighted by the AMA and consist of several categories, including Category I codes which are 5-digit numeric codes, and Category III codes which are tempor ary codes to track emerging technology, services, and procedures. The AMA issues an annual update of the CPT code set each Fall, with January 1 as the effective date for implementing the updated CPT codes. The HCPCS, including both CPT codes and Level II codes, is similarl y updated annually on a calendar year basis. Annual coding changes are not available to the public until the Fall immediately preceding the annual January update of the OPPS and the ASC payment system. Because of the timing of the release of these new codes, it is impracticable for us to provide prior notice and so licit comment on these codes an d the payments assigned to them in advance of publication of the final rule that implements the OPPS and the ASCCMS-1613-FC 983

payment system. However, it is imperative that these coding cha nges be accounted for and recognized timely under the OPPS and the ASC payment system for payment because services represented by these codes will be provided to Medicare beneficiaries in hospital outpatient departments and ASCs during the calendar year in which they become effective. Moreover, regulations impleme nting the HIPAA (42 CFR Parts 160 and 162) require that the HCPCS be used to report health care services, including services paid under the OPPS and the ASC payment system. We assign interim payment amounts and status indicators to any new codes according to our assessme nt of the most appropriate

APC based on clinical and res ource homogeneity with other procedures and services in the APC. If we did not assign payment am ounts to new codes on an interim basis, the alternative would be to not pay for these services during the initial calendar year in which

the codes become effective. We believe it w ould be contrary to the public interest to delay establishment of paymen t amounts for these codes. Therefore, we find good cause to waive the notice of proposed rulemaking for the establishment of payment amounts for select ed HCPCS codes identified with comment

indicator “NI” in Addendum B and Addendu m BB to this final rule with comment period. We are providing a 60- day public comment period. B. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowle dge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this final rule with comment pe riod, and, when we proceed with a subsequent document(s), we will respond to those comments in the preamble to that document.CMS-1613-FC 984

XXI. Economic Analyses A. Regulatory Impact Analysis

1. Introduction We have examined the impacts of this final rule with comment period, as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Re gulation and Regulatory Review (January 18, 2011), the Regulatory Flex ibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Contract with America Advancement Act of 1996 (Pub. L. 104-121) (5 U.S. C. 804(2)). This section of the final rule with comment period contains the im pact and other economic analyses for the provisions that we are finalizing. Executive Orders 12866 and 13563 direct agenci es to assess all costs and benefits of available regulatory alterna tives and, if regulation is n ecessary, to select regulatory approaches that maximize net benefits (inc luding potential economi c, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both co sts and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This final rule with comment period has been designated as an econo mically significant rule under se ction 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, this final rule with comment period has been reviewed by the Office of Management and Budget. We have prepared a regulatoryCMS-1613-FC 985

impact analysis that, to the best of our abilit y, presents the costs and benefits of this final rule with comment period. We solicited comm ents on the regulatory impact analysis in the proposed rule, and we address the public co mments we received in this section below

and in other sections of this final ru le with comment period as appropriate.

2. Statement of Need This final rule with comment period is necessary to update the Medicare hospital OPPS rates. It is necessary to make ch anges to the payment policies and rates for outpatient services furnished by hospitals and CMHCs in CY 2015. We are required under section 1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion factor used to determine the payment rates fo r APCs. We also are required under section 1833(t)(9)(A) of the Act to review, not less often than a nnually, and revise the groups, the relative payment weights, and th e 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 a nnually. We are revising the APC relative payment weights using claims data for serv ices furnished on and after January 1, 2013, through and including December 31, 2013 and processed through June 30, 2014, and updated cost report information. This final rule with comment period also is necessary to update the ASC payment rates for CY 2015, enabling CMS to make changes to payment policies and payment rates for covered surgical procedures and cove red ancillary services that are performed in an ASC in CY 2015. Because 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 refl ect annual changes to the OPPS relativeCMS-1613-FC 986

payment weights. In addition, we are requi red 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. 3. Overall Impacts for the OPPS and ASC Payment Provisions

We estimate that the total increase in Federal government expenditures under the OPPS for CY 2015 compared to CY 2014 due to the changes in this final rule with comment period, will be approximately $900 m illion. Taking into account our estimated changes in enrollment, utilization, and case- mix, we estimate that the OPPS expenditures for CY 2015 will be approximately $5.135 bill ion higher relative to expenditures in

CY 2014. Because this final rule with comme nt period is economically significant as measured by the threshold of an additional $100 million in expenditures in one year, we have prepared this regulatory impact analysis that, to the best of our ability, presents its costs and benefits. Table 49 displays the re distributional impact of the CY 2015 changes in OPPS payment to various groups of hospitals and for CMHCs. We estimate that the update to the conve rsion factor and othe r adjustments (not including the effects of outli er payments, the pass-through es timates, and the application of the frontier State wage adjustment for CY 2015) will increase total OPPS payments by 2.2 percent in CY 2015. The changes to the APC weights, the changes to the wage indexes, the continuation of a payment adju stment for rural SCHs, including EACHs, and the payment adjustment for cancer hospitals will not increase OP PS payments because these changes to the OPPS are budget neutral. However, these updates will change the distribution of payments within the budget neutral system. We estimate that the total change in payments between CY 2014 and CY 2015, considering all payments, includingCMS-1613-FC 987

changes in estimated total outlier payments , pass-through payments, and the application of the frontier State wage adjustment outsi de of budget neutrality, in addition to the application of the OPD fee schedule increase factor after all adjustments required by sections 1833(t)(3)(F), 1833(t)(3)(G), and 1833(t)(17) of the Act, will increase total estimated OPPS payments by 2.3 percent. We estimate the total increase (from changes to the ASC provisions in this final rule with comment period as well as from enrollment, utilization, and case-mix changes) in Medicare expenditures under the ASC pa yment system for CY 2015 compared to CY 2014 to be approximately $236 million. Because the provisions for the ASC payment system are part of a final rule th at is economically significant as measured by the $100 million threshold, we have prepared a regulatory impact analysis of the changes to the ASC payment system that, to the best of our ability, presents the costs and benefits of this portion of the final ru le with comment period. Table 50 and Table 51 of this final rule with comment period di splay the redistributional imp act of the CY 2015 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 OPPS Changes in this Final Rule with Comment Period (1) Limitations of Our Analysis The distributional impacts presented here are the proj ected effects of the CY 2015 policy changes on various hospital groups. As we did for the proposed rule, we post on the CMS Web site our hospital-specific estimat ed payments for CY 2015 with the other supporting documentation for this final ru le with comment period. To view theCMS-1613-FC 988

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-1613-FC” from the list of regulations and notices. The hos pital-specific file layout and the hospital-specific file are listed with the other supporting documentation for this final rule with comment period. We show hospital-specific data only for hosp itals whose claims we re used for modeling the impacts shown in Table 49 below. We do not show hospital-specific impacts for hospitals whose claims we were unable to use. We refer readers to section II.A. of this final rule with comment period for a discussi on of the hospitals whose claims we do not use for ratesetting and impact purposes.

We estimate the effects of the indivi dual 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 behavi oral responses to our policy changes. In addition, we do not make adjustments for futu re changes in variables such as service volume, service-mix, or number of enc ounters. In the CY 2015 OPPS/ASC proposed rule (79 FR 41068), we solicited public comm ent and information about the anticipated effects of our proposed changes on providers and our methodology for estimating them. Any public comments that we received are addr essed in the applicable sections of the final rule with comment period th at discuss the specific policies. (2) Estimated Effects of OPPS Changes on Hospitals Table 49 below shows the estimated impact of this final rule with comment period on hospitals. Historically, the first line of th e impact table, which estimates the change inCMS-1613-FC 989

payments to all facilities, has always incl uded cancer and children’s hospitals, which are held harmless to their pre-BBA amount. We also include CMHCs in the first line that includes all providers. We now include a second line for all hospitals, excluding permanently held harmless hospitals and CMHCs. We present separate impacts for CM HCs in Table 49, and we discuss them separately below, because CMHCs are paid on ly for partial hospitaliz ation services under the OPPS and are a different provider type from hospitals. In CY 2015, we are continuing to pay CMHCs under APC 0172 (Level I Partial Hospitali zation (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 hosp ital-based PHPs) and APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs). The estimated increase in the total paym ents made under the OPPS is determined largely by the increase to th e 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 update d annually by the OPD f ee schedule increase

factor as discussed in detail in section II. B. of this final rule with comment period. Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule increase factor is equal to the market basket percentage incr ease applicable under se ction 1886(b )(3)(B)(iii) of the Act, which we refer to as the IPPS ma rket basket percentage increase. The IPPS market basket percentage increase fo r FY 2015 is 2.9 percent (79 FR 49994). Section 1833(t)(3)(F)(i) of the Act reduces that 2.9 percent by the multifactor productivity adjustment described in secti on 1886(b)(3)(B)(xi) (II) of the Act, which isCMS-1613-FC 990

0.5 percentage point for FY 2015 (which is also the MFP adjustment for FY 2015 in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49994)); and sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act fu rther reduce the market basket percentage increase by 0.2 percentage point, resulting inthe OPD fee schedule increase factor of 2.2 percent. We are using the OPD fee schedule increase f actor of 2.2 percent in the calculation of the

CY 2015 OPPS conversion factor. Section 103 24 of the Affordable Care Act, as amended by HCERA, further authorized addi tional expenditures outside budget neutrality for hospitals in certain frontier States that have a wage index less than 1.00. The amounts

attributable to this frontier State wage index adjustment ar e incorporated in the CY 2015

estimates in Table 49. To illustrate the impact of the CY 20 15 changes, our analysis begins with a

baseline simulation model that uses the CY 2014 relative payment weights, the FY 2014 final IPPS wage indexes that include reclassifications, a nd the final CY 2014 conversion

factor. Table 49 shows the estimated redist ribution of the increase in payments for CY 2015 over CY 2014 payments to hospitals and CMHCs as a result of the following factors: the impact of the APC reconf iguration and recalibration changes between CY 2014 and CY 2015 (Column 2); the wage indexes and the provider adjustments (Column 3); the combined impact of all the changes described in the preceding columns plus the 2.2 percent OPD fee schedule increas e factor update to the conversion factor (Column 4); the combined impact shown in Column 4 plus the CY 2015 frontier State wage index adjustment (Column 5); and th e estimated impact taking into account all payments for CY 2015 relative to all paym ents for CY 2014, including the impact ofCMS-1613-FC 991

changes in estimated outlier payments and changes to the pass-through payment estimate (Column 6). We did not model an explicit budget neutrali ty adjustment for the rural adjustment for SCHs because we are finalizing our propos al to maintain the current adjustment percentage for CY 2015. Because the updates to the conversion factor (including the update of the OPD fee schedul e increase factor), the estimated cost of the rural adjustment, and the estimated cost of pr ojected pass-through payment for CY 2015 are applied uniformly across services, observed re distributions 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 mo st frequently furnished services will change), and the impact of the wage inde x changes on the hospital. However, total payments made under this system and the exte nt to which this final rule with comment period will redistribute mone y during implementation also will depend on changes in volume, practice patterns, and the mix of se rvices billed between CY 2014 and CY 2015 by various groups of hospitals , which CMS cannot forecast. Overall, we estimate that the rate s for CY 2015 will increase Medicare OPPS payments by an estimated 2.3 percent. Removing payments to cancer and children’s hospitals because their payments are held harmless to the pre-OPPS ratio between payment and cost and removing payments to CMHCs results in an estimated 2.3 percent increase in Medicare payments to all other hospitals. These estimated payments will not significantly impact other providers.CMS-1613-FC 992

Column 1: Total Number of Hospitals

The first line in Column 1 in Table 49 shows the total numbe r of facilities (4,006), including designated cancer a nd children’s hospitals and CMHCs, for which we were able to use CY 2013 hospital outpatient and CMHC claims data to model CY 2014 and CY 2015 payments, by classes of hospitals, for CMHCs and for dedicated cancer hospitals. We excluded all hospitals and CMHCs for which we could not plausibly estimate CY 2014 or CY 2015 payment and entit ies that are not paid under the OPPS. The latter entities include CAHs, all-inclusiv e hospitals, and hospita ls located in Guam, the U.S. Virgin Islands, Northern Mariana Is lands, American Samoa, and the State of Maryland. This process is discussed in greater detail in section II.A. of this final rule with comment period. At this time, we are unable to calculate a di sproportionate share hospital (DSH) variable for hospitals not participating in the IPPS. Hospitals for which we do not have a DSH variable are grouped se parately and generally include freestanding psychiatric hospitals, rehabil itation hospitals, and long-term care hospitals. We show the total number of OPPS hosp itals (3,871), excluding th e 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 hos pitals to their “pre-BBA amount” as specified under the terms of the statute, and therefore, we removed them from our impact analyses. We show the isolated impact on 72 CMHCs at the bottom of the impact table and discuss that impact separately below. Column 2: APC Recalibration – All ChangesCMS-1613-FC 993

Column 2 shows the estimated effect of APC recalibration. Column 2 also reflects any changes in multiple procedure disc ount patterns or conditional packaging that occur as a result of the changes in th e relative magnitude of payment weights. As a result of APC recalibration, we estimate that urban hospitals will experi ence no change, with the impact ranging from an increase of 0.3 percent to a decrease of -0.1 percent, depending on the number of beds. Rural hospitals will experience no change, with the impact ranging from an increase of 0.3 percent to a decrease of -0.4 percent, depending on the number of beds. Major teaching hosp itals will experience an increase of 0.7 percent overall. Column 3: New Wage Indexes and th e Effect of the Provider Adjustments

Column 3 demonstrates the combin ed budget neutral impact of the APC recalibration; the updates for the wage inde xes with the fiscal year (FY) 2015 IPPS post-reclassification wage indexes; and the rural adjustment. We modeled the independent effect of the budget neutral ity adjustments and the OPD fee schedule increase factor by using the relative payment weights and wage indexes for each year, and using a CY 2014 conversion fa ctor that included the OP D fee schedule increase and a budget neutrality adjustment for differences in wage indexes. Column 3 reflects the independent effect s of the updated wage indexes, including the application of budget neutrali ty for the rural floor policy ona nationwide basis. This

column excludes the effects of the frontier State wage index adjustment, which is not budget neutral and is included in Column 5. We did not mode l a budget neutrality adjustment for the rural adjustment for SCHs because we are finalizing our proposal toCMS-1613-FC 994

continue the rural payment adjustment of 7.1 percent to rural SCHs for CY 2015, as

described in section II.E. of this final rule with comment period. We modeled the independent effect of updating the wage indexes by varying only the wage indexes, holding APC relative pa yment weights, service-mix, and the rural adjustment constant and using the CY 2015 scaled weights and a CY 2014 conversion factor that included a budget neutrality adju stment for the effect of changing the wage

indexes between CY 2014 and CY 2015. Th e FY 2015 wage policy results in modest

redistributions. There is no difference in impact be tween the CY 2014 cancer hospital payment adjustment and the CY 2015 cancer hospital payment adjustment because we are finalizing our proposal to use the same paym ent-to-cost ratio target in CY 2015 as in

CY 2014. Column 4: All Budget Neutrality Changes Combined with the Market Basket Update

Column 4 demonstrates the combined impact of all the changes previously described and the update to the conversion fact or of 2.2 percent. Overall, these changes will increase payments to urban hospitals by 2.3 percent and to rural hospitals by 1.9 percent. Most classes of hosp itals will receive an increase in line with the 2.2 percent overall increase after the update is app lied to the budget neutrality adjustments. Column 5: All Adjustments with the Frontier State Wage Index Adjustment This column shows the impact of all budget neutrality adjustments, application of the 2.2 percent OPD fee schedule increase f actor, and the nonbudget-neutral impact of applying the CY 2015 frontier State wage adjustment. Rural hospitals in West North Central and Mountain States will experience estimated increases in payment of 3.4 andCMS-1613-FC 995

4.2 percent, respectively, as a result of the frontier State wage index adjustment, while urban hospitals in those States will experien ce estimated increases of 3.2 and 2.5 percent, respectively. Column 6: All Changes for CY 2015 Column 6 depicts the full impact of the CY 2015 policies on each hospital group by including the effect of all of the cha nges for CY 2015 and comparing them to all estimated payments in CY 2014. Column 6 sh ows the combined budget neutral effects of Column 2 and 3; the OPD fee schedule increas e; the impact of the frontier State wage index adjustment; the impact of estimated OPPS outlier payments as discussed in section II.G. of this final rule with comment period; the change in the Hospital OQR Program payment reduction for the small number of hospitals in our impact model that failed to meet the reporting requirements (discussed in section XIII. of this final rule with comment period); and the difference in tota l OPPS payments dedicated to transitional pass-through payments. Of those hospitals that failed to m eet the Hospital OQR Program reporting requirements for the full CY 2014 update (and assumed, for modeling purposes, to be the same number for CY 2015), we included 37 hos pitals in our model because they had both CY 2013 claims data and recent cost report data . We estimate that the cumulative effect of all changes for CY 2015 will increase paym ents to all facilities by 2.3 percent for CY 2015. We modeled the independent effect of all changes in Column 6 using the final relative payment weights for CY 2014 and th e relative payment weights for CY 2015. We used the final conversion factor for CY 2014 of $72.672 and the CY 2015 conversion factor of $74.144 discussed in section II.B. of this final rule with comment period.CMS-1613-FC 996

Column 6 contains simulated outlier paym ents for each year. We used the 1-year charge inflation factor used in the FY 2015 IPPS/LTCH PPS final ru le (79 FR 50379) of 5.09 percent (1.0509) to increase individual costs on the CY 2013 claims, and we used the most recent overall CCR in the July 2014 Ou tpatient Provider-Specific File (OPSF) to estimate outlier payments for CY 2014. Us ing the CY 2013 claims and a 5.09 percent charge inflation factor, we currently estimat e that outlier payments for CY 2014, using a multiple threshold of 1.75 and a fixed-dolla r threshold of $2,900 will be approximately 0.8 percent of total payments. The estimated current outlier paymen ts of 0.8 percent are incorporated in the comparison in Column 6. We used the same set of claims and a charge inflation factor of 10.44 percent (1.1044) and the CCRs in the July 2014 OPSF, with an adjustment of 0.9821, to reflect rela tive changes in cost and charge inflation between CY 2013 and CY 2015, to model th e CY 2015 outliers at 1.0 percent of estimated total payments using a multiple threshold of 1.75 and a fixed-dollar threshold of $2,775. The charge inflation and CCR inflation factors are di scussed in detail in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50379 through 50380). We estimate that the anticipated ch ange in payment between CY 2014 and CY 2015 for the hospitals failing to meet the Hospital OQR Program requirements will be negligible. Overall, we estimate that facilities will experience an increase of 2.3 percent under this final ru le with comment period inCY 2015 relative to total spending in CY 2014. This projected increase (shown in Column 6) of Table 49 reflects the 2.2 percent OPD fee schedul e increase factor, less 0.13 perc ent for the change in the pass-through estimate between CY 2014 and CY 2015, plus 0.18 percent for the difference in estimated outlier payments between CY 2014 (0.82 pe rcent) and CY 2015CMS-1613-FC 997

(1.0 percent), less 0.1 percent due to the fr ontier State wage index adjustment in CY 2014, plus 0.1 percent due to the frontier State wage index adjustment in CY 2015.

We estimate that the combined effect of a ll changes for CY 2015 will increase payments to urban hospitals by 2.3 percent. Overall, we estimate that rural hospitals will experience a 1.9 percent increase as

a result of the combined effects of all changes for CY 2015. We estimate that rural hospitals that bill less than 5,000 lines of OP PS services will experience a decrease of -2.0 percent and rural hospitals that bill 11,000 or more lines of OPPS services will experience adjustments ranging from 0.9 to 2.1 percent. Among hospitals by teaching status, we es timate that the impacts resulting from the combined effects of all changes will in clude an increase of 3.1 percent for major teaching hospitals and 2.0 percent for nonteach ing hospitals. Minor teaching hospitals will experience an estimated increase of 2.0 percent. In our analysis, we also have categori zed hospitals by type of ownership. Based on this analysis, we estimate that voluntary hospitals will experience an increase of 2.4 percent, proprietary hosp itals will experience an in crease of 1.7 percent, and governmental hospitals will experien ce an increase of 2.1 percent.CMS-1613-FC 998

TABLE 49.—ESTIMATED IMPACT OF THE CY 2015 CH ANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM (1) (2) (3) (4) (5) (6)

Numbe

r of Hospit

als APC Recalibrat

ion (all changes) New Wage Index and Provider Adjustme nts All Budget Neutral Change s (combin ed cols

2,3) with Market Basket Update All Budget Neutral Changes and Update (Column

4) with Frontier

Wage Index Adjustm ent All Chang es

ALL FACILITIES * 4,006 0.0 0.0 2.2 2.3 2.3 ALL HOSPITALS 3,871 0.0 0.0 2.2 2.3 2.3 (excludes hospitals permanently held harmless and CMHCs)

URBAN HOSPITALS 3,008 0.0 0.0 2.3 2.4 2.3 LARGE URBAN 1,646 0.1 0.2 2.5 2.5 2.5 (GT 1 MILL.) OTHER URBAN 1,362 0.0 -0.1 2.1 2.3 2.1 (LE 1 MILL.)

RURAL HOSPITALS 863 0.0 -0.3 1.9 2.2 1.9 SOLE COMMUNITY 376 0.1 -0.2 2.2 2.6 2.2 OTHER RURAL 487 -0.2 -0.3 1.6 1.7 1.6

BEDS (URBAN) 0 - 99 BEDS 1,067 0.0 0.0 2.3 2.4 2.3 100-199 BEDS 856 0.0 0.0 2.2 2.3 2.2 200-299 BEDS 458 -0.1 0.1 2.2 2.4 2.2 300-499 BEDS 410 -0.1 0.1 2.2 2.4 2.3 500 + BEDS 217 0.3 -0.1 2.4 2.4 2.5CMS-1613-FC 999

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

Numbe

r of Hospit

als APC Recalibrat

ion (all changes) New Wage Index and Provider Adjustme nts All Budget Neutral Change s (combin ed cols

2,3) with Market Basket Update All Budget Neutral Changes and Update (Column

4) with Frontier

Wage Index Adjustm ent All Chang es BEDS (RURAL) 0 - 49 BEDS 345 0.1 -0.2 2.2 2.4 2.2 50- 100 BEDS 315 0.3 -0.3 2.2 2.5 2.2 101- 149 BEDS 116 -0.3 -0.1 1.8 2.1 1.8 150- 199 BEDS 46 -0.4 -0.4 1.4 2.1 1.4 200 + BEDS 41 -0.3 -0.4 1.5 1.5 1.5

VOLUME (URBAN) LT 5,000 Lines 544 -1.7 -0.3 0.2 0.4 0.4 5,000 - 10,999 Lines 135 -0.8 -0.2 1.3 1.3 1.4 11,000 - 20,999 Lines 117 -1.5 0.0 0.6 1.2 0.9 21,000 - 42,999 Lines 228 -0.7 0.0 1.5 1.5 1.6 42,999 - 89,999 Lines 526 -0.3 0.0 1.9 1.9 1.9 GT 89,999 Lines 1,458 0.1 0.0 2.3 2.4 2.4

VOLUME (RURAL) LT 5,000 Lines 34 -3.8 -0.3 -1.9 1.1 -2.0 5,000 - 10,999 Lines 27 -1.8 -0.5 -0.1 1.1 0.0 11,000 - 20,999 Lines 42 -1.1 -0.3 0.8 0.8 0.9 21,000 - 42,999 Lines 161 0.2 -0.3 2.1 2.7 2.1CMS-1613-FC 1000

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

Numbe

r of Hospit

als APC Recalibrat

ion (all changes) New Wage Index and Provider Adjustme nts All Budget Neutral Change s (combin ed cols

2,3) with Market Basket Update All Budget Neutral Changes and Update (Column

4) with Frontier

Wage Index Adjustm ent All Chang es

GT 42,999 Lines 599 0.0 -0.3 1.9 2.1 1.9

REGION (URBAN) NEW ENGLAND 152 1.1 0.2 3.5 3.5 3.4 MIDDLE ATLANTIC 361 0.5 0.5 3.2 3.2 3.2 SOUTH ATLANTIC 482 -0.2 -0.3 1.7 1.7 1.7 EAST NORTH CENT. 473 0.1 -0.1 2.2 2.1 2.2 EAST SOUTH CENT. 179 -0.9 -0.5 0.9 0.9 0.9 WEST NORTH CENT. 194 0.0 -0.2 2.0 3.2 2.0 WEST SOUTH CENT. 527 -0.7 -0.5 1.0 1.0 1.1 MOUNTAIN 203 0.0 -0.1 2.1 2.5 2.2 PACIFIC 389 0.3 1.1 3.6 3.6 3.7 PUERTO RICO 48 -0.4 0.3 2.1 2.1 1.9

REGION (RURAL) NEW ENGLAND 23 1.6 -0.1 3.6 3.6 3.6 MIDDLE ATLANTIC 58 0.8 0.2 3.2 3.2 3.2 SOUTH ATLANTIC 130 -0.6 -0.5 1.0 1.0 1.0 EAST NORTH CENT. 120 0.0 0.0 2.2 2.2 2.1 EAST SOUTH CENT. 165 -0.8 -0.5 0.9 0.9 0.9 WEST NORTH CENT. 101 0.2 -0.2 2.2 3.4 2.1 WEST SOUTH 181 -0.7 -0.8 0.7 0.7 0.7CMS-1613-FC 1001

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

Numbe

r of Hospit

als APC Recalibrat

ion (all changes) New Wage Index and Provider Adjustme nts All Budget Neutral Change s (combin ed cols

2,3) with Market Basket Update All Budget Neutral Changes and Update (Column

4) with Frontier

Wage Index Adjustm ent All Chang es

CENT. MOUNTAIN 61 0.7 -0.4 2.5 4.2 2.6 PACIFIC 24 0.8 0.9 4.0 3.9 3.9

TEACHING STATUS NON-TEACHING 2,839 -0.2 0.0 2.0 2.1 2.0 MINOR 706 -0.2 -0.1 1.9 2.2 2.0 MAJOR 326 0.7 0.1 3.1 3.0 3.1

DSH PATIENT PERCENT 0 21 0.0 0.3 2.5 2.5 2.5 GT 0 - 0.10 328 0.3 0.2 2.7 2.8 2.7 0.10 - 0.16 334 0.1 0.0 2.3 2.5 2.3 0.16 - 0.23 680 0.1 0.0 2.2 2.3 2.2 0.23 - 0.35 1,076 0.0 0.0 2.1 2.3 2.1 GE 0.35 824 0.1 0.1 2.3 2.3 2.4 DSH NOT AVAILABLE ** 608 -3.6 0.0 -1.4 -1.4 -1.5

URBAN TEACHING/DSH TEACHING & DSH 938 0.2 0.0 2.4 2.6 2.5 NO TEACHING/DSH 1,477 -0.2 0.1 2.1 2.1 2.1 NO TEACHING/NO DSH 18 -0.1 0.4 2.5 2.5 2.5 DSH NOT 575 -3.3 0.1 -1.0 -0.9 -1.0CMS-1613-FC 1002

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

Numbe

r of Hospit

als APC Recalibrat

ion (all changes) New Wage Index and Provider Adjustme nts All Budget Neutral Change s (combin ed cols

2,3) with Market Basket Update All Budget Neutral Changes and Update (Column

4) with Frontier

Wage Index Adjustm ent All Chang es

AVAILABLE**

TYPE OF OWNERSHIP VOLUNTARY 2,006 0.1 0.0 2.4 2.5 2.4 PROPRIETARY 1,322 -0.4 -0.1 1.7 1.8 1.7 GOVERNMENT 543 -0.1 -0.1 2.1 2.1 2.1

CMHCs 72 0.0 -0.5 1.7 1.7 1.3

Column (1) shows total hospitals and/or CMHCs. Column (2) includes all CY 2015 OPPS policies and compares those to the CY 2014 OPPS. Column (3) shows the budget neutral impact of updating the wage index by applying the FY 2015 hospital inpatient wage index, including all hold harmless policies and transitional wage s. The rural adjustment continues our current policy of 7.1 percent so the budget neutrality factor is 1. The budget neutrality adjustment for the cancer hospital adjustment is 1.000 because the payment-to-cost ratio target remains the same as in CY 2014. Column (4) shows the impact of all budget neutrality adjust ments and the addition of the 2.2 percent OPD fee schedule update factor (2.9 percent reduced by 0.5 percentage point for the final productivity adjustment and further reduced by 0.2 percentage point in order to satisfy statutory requirements set forth in the Affordable Care Act). Column (5) shows the nonbudget neutral impact of applying the frontier State wage adjustment in CY 2015. Column (6) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier payments, and applying payment wage indexes. *These 4,006 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.CMS-1613-FC 1003

(3) Estimated Effects of OPPS Changes on CMHCs

The last line of Table 49 demonstrates the isolated impact on CMHCs, which furnish only partial hospitalization services under the OPPS. In CY 2014, CMHCs are paid under two APCs for thes e services: APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) and APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs). Hospitals are paid for partial hospitalization services under APC 0175 (Level I Partial Hospitaliz ation (3 services) for hospi tal-based PHPs) and APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs). We use our standard ratesetting methodology to deri ve the payment rates for each APC based on

the cost data derived from claims and cost da ta for the provider-type-specific APC. For CY 2015, we are finalizing our proposal to continue the provider-type-specific APC structure that we adopted in CY 2011. We modeled the impact of this APC policy assuming that CMHCs will continue to provide the same number of days of PHP care, with each day having either 3 services or 4 or more services, as seen in the CY 2013

claims data used for this final rule with comment period,. We excluded days with 1 or 2 services because our policy only pays a per diem rate for partial hospitalization when 3 or more qualifying services are provided to the beneficiary. We estimate that CMHCs will experience an overall 1.3 percent increas e in payments from CY 2014 (shown in Column 6). Column 3 shows that the estimated imp act of adopting the FY 2015 wage index

values will result in a small decrease of -0.5 percent to CMHCs. We note that all providers paid under the OPPS, including CM HCs, will receive a 2.2 percent OPD fee

schedule increase factor. Co lumn 4 shows that combining this OPD fee scheduleCMS-1613-FC 1004

increase factor, along with changes in APC policy for CY 2015 and the FY 2015 wage index updates, will result in an estimated incr ease of 1.7 percent. Column 5 shows that adding the frontier State wage index adjustment will result in no change to the cumulative 1.7 percent increase. Column 6 shows that adding the changes in outlier and pass-though payments will result in a -0.4 percent decr ease in payment for CMHCs, for a total increase of 1.3 percent. This refl ects all changes to CMHCs for CY 2015.. (4) Estimated Effect of OPPS Changes on Beneficiaries For services for which the beneficiary pays a copayment of 20 percent of the payment rate, the beneficiary share of payment will increase for services for which the OPPS payments will rise and will decrease for services for which the OPPS payments will fall. For further discussion on the calculation of the national unadjusted copayments and minimum unadjusted copayments, we refer r eaders to section II.I. of this final rule with comment period. In all cases, section 1833(t)(8)(C)(i) of the Act limits beneficiary liability for copayment for a procedure performed in a year to the hospital inpatient deductible for the applicable year. We estimate that the aggregate benefici ary coinsurance percentage will be 20.0 percent for all services pa id under the OPPS in CY 2015. The estimated aggregate beneficiary coinsurance reflects general syst em adjustments, including recalibration of the APC relative payment weights, change inthe portion of OPPS payments dedicated to pass-through payments, and the CY 2015 comprehensive APC payment policy discussed

in section II.A.2.e. of this fi nal rule with comment period.CMS-1613-FC 1005

(5) Estimated Effects of OPPS Changes on Other Providers The relative payment weights and paym ent amounts established under the OPPS affect the payments made to ASCs as discusse d in section XII. of this final rule with comment period. No types of providers or suppliers other than hospitals, CMHCs and ASCs will be affected by the proposed changes in this final rule with comment period. (6) Estimated Effects of OPPS Changes on the Medicare and Medicaid Programs The effect on the Medicare program is expected to be $900 million in additional program payments for OPPS services furnishe d in CY 2015. The effect on the Medicaid program is expected to be limited to incr eased 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 XXI.A. of this final rule with comment period. (7) Alternative OPPS Policies Considered Alternatives to the OPPS changes we pr oposed and are finalizing and the reasons

for our selected alternatives are discussed th roughout this final rule with comment period. In this section, we discuss so me of the major issues and the alternatives considered.

● Alternatives Considered for the Establishment of Comprehensive APCs

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 74861 through 74910 and 75184 through 75185) for a discussion of our policy to establish comprehensive APCs for CY 2015 and th e alternatives we considered. We note that we published tables in that final rule with comment period to demonstrate how this policy would have been implemented in CY 2014, and stated that we would beCMS-1613-FC 1006

considering any additional public comments we receive when we update the policy for CY 2015 to account for changes that may occur in the CY 2013 claims data. b. Estimated Effects of CY 2015 ASC Payment System Policies Most ASC payment rates are calculated by multiplying the ASC conversion factor by the ASC relative payment weight. As discusse d fully in section XII. of this final rule with comment period, we are setting th e CY 2015 ASC relative payment weights by scaling the CY 2015 OPPS relative payment weights by the ASC scaler of 0.9225. The estimated effects of the updated relative paym ent weights on payment rates are varied and are reflected in the estimated paymen ts displayed in Tables 50 and 51 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 productiv ity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity (MFP) (as projecte d by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period). For ASCs that fail to meet their quality reporting requirements, the CY 2015 payment determinations will be based on the applicati on of a 2.0 percentage point reduction to the annual update factor, which currently is th e CPI-U. We calculated the CY 2015 ASC conversion factor by adjusting the CY 2014 ASC conversion factor by 0.9998 to account for changes in the pre-floor and pre-recla ssified hospital wage indexes between CY 2014 and CY 2015 and by applying the CY 2015 M FP-adjusted CPI-U update factor ofCMS-1613-FC 1007

1.4 percent (projected CPI-U update of 1.9 percent minus a projected productivity adjustment of 0.5 percentage point). Th e CY 2015 ASC conversion factor is $44.071. (1) Limitations of Our Analysis Presented here are the projected effect s of the changes for CY 2015 on Medicare payment to ASCs. A key limitation of our analys is is our inability to predict changes in

ASC service-mix between CY 2013 and CY 2015 w ith precision. We believe that the net effect on Medicare expenditures resulting from the CY 2015 changes will be small in the aggregate for all ASCs. However, such ch anges 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. Clearl y, individual ASCs will experience changes in payment that differ from the aggregated estimated impacts presented below. (2) Estimated Effects of ASC Payment System Policies on ASCs Some ASCs are multispecialty facilities that perform the gamut of surgical procedures from excision of lesions to hernia repair to cataract extraction; others focus on a single specialty and perform only a limited rang e of surgical procedures, such as eye, digestive system, or orthopedic procedures. The combined effect on an individual ASC of the update to the CY 2015 payments will de pend on a number of factors, including, but not limited to, the mix of services the ASC pr ovides, the volume of specific services provided by the ASC, the percentage of its pa tients who are Medicare beneficiaries, and the extent to which an ASC provides diffe rent services in the coming year. The following discussion presents tables that disp lay estimates of the impact of the CY 2015 updates to the ASC payment syst em on Medicare payments to ASCs, assuming the sameCMS-1613-FC 1008

mix of services as reflected in our CY 2013 claims data. Table 50 depicts the estimated aggregate percent change in payment by surgical specialty or ancillar y items and services group by comparing estimated CY 2014 paymen ts to estimated CY 2015 payments and Table 51 shows a comparison of estimated CY 2014 payments to estimated CY 2015 payments for procedures that we estimate will receive the most Medicare payment in

CY 2014.

Table 50 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 code s 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 des cending order by estimated Medicare program payment to ASCs. The following is an expl anation of the information presented in

Table 50.

● Column 1—Surgical Specialty or Anc illary Items and Services Group indicates the surgical specialty into which ASC proce dures are grouped and the ancillary items and services group which includes all HCPCS codes for covered an cillary 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 wh ich the Medicare pr ogram payments are

attributed.

● Column 2—Estimated CY 2014 ASC Payments were calculated using CY 2013 ASC utilization (the most recent fu ll year of ASC utilization) and CY 2014CMS-1613-FC 1009

ASC payment rates. The surg ical specialty and ancillary items and services groups are displayed in descending order base d on estimated CY 2014 ASC payments.

● Column 3—Estimated CY 2015 Percent Change is the aggregate percentage increase or decrease in Medicare program pa yment to ASCs for each surgical specialty or ancillary items and services group that are at tributable to updates to ASC payment rates for CY 2015 compared to CY 2014. As seen in Table 50, for the six specialty groups that account for the most ASC utilization and spending, we estimate that the update to ASC rates for CY 2015 will result in a 1-percent decrease in aggregate pa yment amounts for eye and ocular adnexa procedures, a 6-percent increase in aggreg ate payment amounts for digestive system procedures, a 1-percent increase in aggreg ate payment amounts for nervous system procedures, a 2-percent increase in aggreg ate payment amounts for musculoskeletal system procedures, a 3-percent increase in aggregate payment amounts for genitourinary system procedures, and a 5-percent incr ease in aggregate payment amounts for integumentary system procedures. An estimated increase in aggregate pa yment for the specialty group does not mean that all procedures in the group will experience increased pa yment rates. For example, the estimated increase for CY 2015 for digestiv e system procedures is likely due to an increase in the ASC payment weight for some of the high volume procedures, such as CPT code 43239 (Upper GI endoscopy biopsy) wh ere estimated payment will increase by 9 percent for CY 2015. Also displayed in Table 50 is a separa te estimate of Medicare ASC payments for the group of separately payable covered an cillary items and serv ices. The paymentCMS-1613-FC 1010

estimates for the covered surgical procedures include the costs of packaged ancillary items and services. We estimate that aggregate payments for these items and services will decrease by 4 percent for CY 2015.

TABLE 50.—ESTIMATED IMPACT OF THE CY 2015 UPDA TE TO THE ASC

PAYMENT SYSTEM ON AGGREGA TE CY 2015 MEDICARE PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND SERVICES GROUP

Surgical Specialty Group (1) Estimated CY 2014

ASC Payments (in Millions) (2) Estimated CY 2015 Percent Change (3) Total $3,819 1% Eye and ocular adnexa $1,560 -1% Digestive system $781 6% Nervous system $568 1% Musculoskeletal system $472 2% Genitourinary system $165 3% Integumentary system $137 5% Respiratory system $53 3% Cardiovascular system $36 -1% Ancillary items and services $24 -4% Auditory system $14 1% Hematologic & lymphatic systems $6 14%

Table 51 below shows the estimated impact of the updates to the revised ASC payment system on aggregate ASC payments for selected surgical procedures during CY 2015. The table displays 30 of the pro cedures receiving the greatest estimated CY 2014 aggregate Medicare payments to AS Cs. The HCPCS codes are sorted in descending order by estimated CY 2014 program payment.

● Column 1–CPT/HCPCS code.

● Column 2–Short Descriptor of the HCPCS code.CMS-1613-FC 1011

● Column 3–Estimated CY 2014 ASC Payments were calculated using CY 2013 ASC utilization (the most recent full year of ASC utilization) and the CY 2014 ASC payment rates. The estimated CY 2014 paym ents are expressed in millions of dollars.

● Column 4–Estimated CY 2015 Percent Change reflects the percent differences between the estimated ASC payment for CY 2014 and the estimated payment for CY 2015 based on the update.

TABLE 51.--ESTIMATED IMPACT OF THE CY 2015 UPDA TE TO THE ASC PAYMENT SYSTEM ON AGGREG ATE PAYMENTS FOR SELECTED PROCEDURES

CPT/HCPCS Code

(1) Short Descriptor (2) Estimated CY 2014

ASC Payments (in millions) (3) Estimated CY 2015 Percent Change (4) 66984 Cataract surg w/iol, 1 stage $1,131 -1% 43239 Upper GI endoscopy, biopsy $170 10% 45380 Colonoscopy and biopsy $167 7% 45385 Lesion removal colonoscopy $107 6% 66982 Cataract surgery, complex $93 -1% 64483 Inj foramen epidural l/s $90 0% 62311 Inject spine l/s (cd) $79 0% 45378 Diagnostic colonoscopy $72 6% 66821 After cataract laser surgery $63 3% 64493 Inj paravert f jnt l/s 1 lev $47 0% G0105 Colorectal scrn; hi risk ind $45 1% 64635 Destroy lumb/sac facet jnt $45 -5% 63650 Implant neuroelectrodes $41 4% G0121 Colon ca scrn not hi rsk ind $41 1% 64590 Insrt/redo pn/gastr stimul $38 -1% 15823 Revision of upper eyelid $35 2% 63685 Insrt/redo spine n generator $34 29% 29827 Arthroscop rotator cuff repr $34 1% 64721 Carpal tunnel surgery $32 -1% 29881 Knee arthroscopy/surgery $30 -1% 29824 Shoulder arthroscopy/surgery $27 1%CMS-1613-FC 1012

CPT/HCPCS Code

(1) Short Descriptor (2) Estimated CY 2014

ASC Payments (in millions) (3) Estimated CY 2015 Percent Change (4) 29880 Knee arthroscopy/surgery $25 -1% 43235 Uppr gi endoscopy diagnosis $23 10% 62310 Inject spine c/t $23 0% 29823 Shoulder arthroscopy/surgery $22 1% 52000 Cystoscopy $22 1% G0260 Inj for sacroiliac jt anesth $21 0% 45384 Lesion remove colonoscopy $21 7% 67042 Vit for macular hole $21 1% 26055 Incise finger tendon sheath $19 -2%

(3) Estimated Effects of ASC Paym ent System Policies on Beneficiaries We estimate that the CY 2015 update to the ASC payment system will be generally positive for beneficiaries with respec t to the new procedures that we are adding to the ASC list of covered surgical procedur es and for those that we are designating as office-based for CY 2015. First, other than certain preventive services where coinsurance and the Part B deductible is waived to comply with section 1833(a)(1) and (b) of the Act, the ASC coinsurance rate for all procedures is 20 percent. This contrasts with procedures performed in HOPDs under the OPPS, wher e the beneficiary is responsible for copayments that range from 20 percent to 40 percent of the procedure payment (other than for certain preventive se rvices). Second, in almost a ll cases, the ASC payment rates under the ASC payment system are lower than payment rates for the same procedures under the OPPS. Therefore, the beneficiar y 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 theCMS-1613-FC 1013

inpatient deductible. The statute requires that copayment amounts under the OPPS not exceed the inpatient deductible.) Beneficiar y coinsurance for services migrating from physicians’ offices to ASCs may decrease or increase under the revised ASC payment system, depending on the partic ular service and the relativ e payment amounts under the MPFS compared to the ASC. However, for those additional procedures that we are designating as office-based in CY 2015, the beneficiary coinsurance amount under the ASC payment system generally will be no grea ter than the beneficiary coinsurance under

the MPFS because the coinsurance under both payment systems generally is 20 percent (except for certain preventive services where the coinsurance is waived under both payment systems). (4) Alternative ASC Payment Policies Considered Alternatives to the minor changes that we are making to the ASC payment system and the reasons that we have chosen specifi c options are discussed throughout this final rule with comment period. There are no major changes to ASC policies for CY 2015. c. Accounting Statements and Tables As required by OMB Circul ar A-4 (available on the Office of Management and Budget Web Site at: http://www.whitehouse.gov/sites/default/file s/omb/assets/regulatory_matters_pdf/a4.pdf), we have prepared two accounting statements to illustrate the im pacts of this final rule with comment period. The first accounti ng statement, Table 52 below, illustrates the classification of expenditure s for the CY 2015 estimated hos pital OPPS incurred benefit impacts associated with the CY 2015 OP D fee schedule increase, based on the 2014 Trustee’s Report. The second accounting st atement, Table 53 below, illustrates theCMS-1613-FC 1014

classification of expenditures associated w ith the 1.4 percent CY 2015 update to the ASC payment system, based on the provisions of th is final rule with comment period and the baseline spending estimates for ASCs in the 2014 Trustee’s Report. Lastly, the tables classify most estimated impacts as transfers.

TABLE 52.--ACCOUNTING STATEMENT: CY 2015 ESTIMATED HOSPITAL

OPPS TRANSFERS FROM CY 2014 TO CY 2015 ASSOCIATED WITH THE CY 2015 HOSPITAL OUTPATIENT OP D FEE SCHEDULE INCREASE

Category Transfers Annualized Monetized Transfers $900 million

From Whom to Whom Federal Government to outpatient hospitals and other providers who r eceive payment under the hospital OPPS Total $900 million

TABLE 53.--ACCOUNTING STATEM ENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2014 TO CY 2015 AS A RESULT OF THE CY 2015 UPDATE TO THE ASC PAYMENT SYSTEM

Category Transfers Annualized Monetized Transfers $42 million From Whom to Whom Federal Government to Medicare Providers and Suppliers Total $42 million

d. Effects of Requirements for the Hospital OQR Program

In section XIII. of this final rule w ith comment period, we are finalizing policies affecting the Hospital OQR Program. Of 3,325 ho spitals that met elig ibility requirements for the CY 2014 payment determination, we determined that 88 hospitals did not meet the requirements to receive the full OPD fee sc hedule increase factor. Most of these hospitals (70 of the 88) chos e not to participate in the Hospital OQR Program for the CY 2014 payment determination. We estimate that approximately 90 hospitals will notCMS-1613-FC 1015

receive the full OPD fee schedule increase fa ctor for the CY 2017 payment determination and subsequent years.

In section XIII.E. of this final rule with comment period, we are finalizing our proposal to add one claims-based quali ty measure, OP-32: Facility 7-Day Risk-Standardized Hospital Vi sit Rate after Outpatient Colonoscopy, for the Hospital OQR Program for the CY 2018 payment determination and subsequent years, instead of the CY 2017 payment determination and subseq uent years as proposed. Because this measure is claims-based, it will not require additional burden from data reporting or other action on the part of the hospitals. Therefore, we do not anticipate that this measure will cause any additional facilities to fail to meet requirements the Hospital OQR Program for the CY 2018 payment determination and subsequent years.

In section XIII.C.3. of this final ru le with comment period, for the CY 2017 payment determination and subsequent years, we are finalizing our proposal to remove OP-6 and OP-7 from the Hospital OQR Program. However, we are not finalizing our proposal to remove OP-4 and are retaining th at measure in the Hospital OQR Program for

reasons discussed in section XIII.C.3. In sect ions XIII.D.3.b. and c. of this final rule with comment period, we are also finalizing our pr oposal to exclude OP-31 from the CY 2016 payment determination measure set and to change that measure from required to voluntary for the CY 2017 payment determination and subsequent years. Hospitals will not be subject to a payment reduction with respect to this measure for the CY 2016 payment determination or during th e period of voluntary reporting. We anticipate a reduction in burden of approximately 840,517 hours or $25.2 million across participating hospitals from the two measures we are removing and theCMS-1613-FC 1016

measure we are making voluntary, as further de tailed in sections XIII.C.3. and XIII.D.3.c.

of this final rule with co mment period, respectively, and the information collection requirements in section XIX.C.1. of this fi nal rule with comment period. We refer readers to the information collection requirement s section of this final rule with comment period (section XIX.C.1. of this final rule with comment period) for a detailed discussion of the financial burden of the requ irements of the Hospital OQR Program. The validation requirements that we are finalizing for the CY 2017 payment determination and subsequent years will result in medical record documentation of approximately 6,000 cases per quarter (up to 12 cases per quarter for 500 hospitals) submitted to the designated CMS contractor. In section XIII.H.3.e. of this final rule with comment period, we are finaliz ing our proposal to allow hospitals to submit medical record documentation for validation using either of two methods : (1) through paper medical records; or (2) by securely tr ansmitting electronic versions of medical information by either (a) downloading or copying the digital image (tha t is, a PDF) of the patient chart onto CD, DVD, or flash driv e and shipping the electronic media following instructions specified on the QualityNet We b site; or (b) securely submitting digital images (PDFs) of patient charts using a S ecure File Transfer Portal on the QualityNet

Web site. As stated in prior rulemaking (76 FR 74577), we will pay for the cost of sending paper medical record documentation to the de signated CMS contractor at the rate of 12 cents per page for copying and approxima tely $1.00 per case for postage. For both new electronic methods, we are finalizing our proposal in the information collectionCMS-1613-FC 1017

requirements section of this final rule withcomment period to reimburse hospitals for sending medical records electronically at a rate of $3.00 per patient chart.

As we stated in the CY 2014 OPPS/ ASC final rule with comment period (78 FR 75192), we have found that an outpatien t medical chart generally contains up to 10 pages. However, because we do not yet know how many hospitals will choose to submit data electronically or through pape r, we cannot estimate the total cost of expenditures and are unable to estimate the number of hospitals that will fail the validation documentation submission requirement for the CY 2017 payment determination. Because we will pay for the data collection effort, we believe that a requirement for medical record document ation for up to12 cases per quarter for 500 hospitals for CY 2015 represents a minimal burden to Hospital OQR Program participating hospitals.

e. Effects of CY 2015 Polic ies for the ASCQR Program

In section XIV. of this final rule w ith comment period, we are adopting policies affecting the ASCQR Program. Of 5,260 ASCs that met eligibility requirements for CY 2014, we determined that 116 ASCs did not meet the requirements to receive the full annual payment update.

In section XIV.B.5. of this final rule with comment period, we are finalizing the adoption of one claims-based quality measure, ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate af ter Outpatient Colonoscopy, for the ASCQR Program beginning with the CY 2018 payment determination, rather than beginning with the CY 2017 payment determination as proposed. The measure is claims-based and will not require additional data reporting or ot her action by ASCs. Therefore, we do notCMS-1613-FC 1018

anticipate that this measure will cause any additional ASCs to fail to meet the ASCQR Program requirements. We present the time and burdens associated with our finalized policies and proposals in section XIX.C.2. of this final rule with comment period.

In section XIV.E.3.b. of this final ru le with comment period, we noted the 3-month delay in data collection for ASC-9 and ASC-10 for the CY 2016 payment

determination. We do not believe that th is 3-month delay in data collection will significantly affect the number of ASCs th at meet the ASCQR Program requirements.

In section XIV.E.3.c. of this final rule with comment period, we are finalizing our proposal that ASC-11, which was to be first included in the CY 2016 payment determination, will not be included in the CY 2016 measure set, and that the measure will be voluntary for the CY 2017 payment determination and subsequent years. ASCs will not be subject to a payment reduction fo r the CY 2016 payment determination, nor will ASCs be subject to a payment reduction for the CY 2017 payment determination and subsequent years for failing to report this vol untary measure. Because this measure has not yet affected any payment determination, we do not believe that there will be any impact on the number of ASCs that meet th e ASCQR Program requirements as a result of

our decision not to include this measure in the measure set for the CY 2016 payment

determination and to make this meas ure voluntary for the CY 2017 payment determination and subsequent years.

We do not believe that the other measures we previously adopted will cause any additional ASCs to fail to meet the ASCQR Pr ogram requirements. (We refer readers to

the CY 2014 OPPS/ASC final rule with comm ent period for a list of these measures (78 FR 75130)).CMS-1613-FC 1019

Further, we do not believe that any of the other proposal s we are finalizing in this final rule with comment period will significantly affect the number of ASCs that do not receive a full annual payment update for the CY 2017 payment determination. We are

unable to estimate the number of ASCs thatwill not receive the full annual payment update based on the CY 2015 and CY 2016 paym ent determinations (78 FR 75192). For this reason, using the CY 2014 payment determination numbers as a baseline, we estimate that approximately 116 ASCs will not receive the full annua l payment update in

CY 2017 due to failure to meet the ASCQR Program requirements. We invited public comment on the burde n associated with these information collection requirements. We did not receive any public comments. f. Effects of Changes to the Rural Provide r and Hospital Ownership Exceptions to the Physician Self-Referral Law Section 6001(a) of the Affordable Ca re Act amended the rural provider and hospital ownership exceptions to the physicia n self-referral law (s ections 1877(d)(2) and (d)(3) of the Act, respectively) to impose additional restrictions on physician ownership or investment in hospitals. The ame nded rural provider and hospital ownership exceptions provide that a hospital may not increase the number of operating rooms, procedure rooms, and beds beyond that for which the hospital was licensed on March 23, 2010 (or, in the case of a hospital that did not ha ve a provider agreement in effect as of this date, but did have a pr ovider agreement in ef fect on December 31, 2010, the date of effect of such agreement). We issued regulations a ddressing the prohibition against facility expansion in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72240).CMS-1613-FC 1020

Section 6001(a)(3) of the Affordable Care Act added section 1877(i)(3)(A)(i) of the Act to set forth that the Secretary sha ll establish and implement an exception process to the prohibition on expansion of facility capacity. We i ssued regulations that govern the expansion exception pro cess in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74517) at 42 CFR 411.362(c). The regulations addressing the expansion exception process were issued by January 1, 2012, and the process was implemented on February 1, 2012. As required by the statute, the expansi on exception process provides that hospitals that qualify as an “applicable hospital” or a “high Medicaid facility” may request an exception to the prohibition on facility expa nsion. The existing expansion exception process requires the use of filed Medicare cost report datafrom the Healthcare Cost Report Information System (HCRIS) for hospita ls to demonstrate that they satisfy the relevant eligibility criteriaset forth in § 411.362(c)(2) for applicable hospitals and § 411.362(c)(3) for high Medicaid facilities (76 FR 42350 through 42352). As discussed in section XV.C. of the CY 2015 OPPS/ASC proposed rule (79 FR 41054 through 41056), we proposed to permit physician-owned hos pitals to use certa in non-HCRIS data sources to demonstrate satisfaction of the expa nsion exception process eligibility criteria.

In section XV.C. of this final rule with comment period, we are finalizing our proposal with certain modifications. Under our polic y, we will continue to require each hospital seeking to qualify for an expansion exception to access and utilize data for its estimations

or determinations to demonstrate that the hospital meets the releva nt criteria and to provide a detailed explanation regarding whether and how it satisfies each of the relevantCMS-1613-FC 1021

criteria. We believe the impact of our modi fication on affected hospitals will be minimal, given that the use of data from a non-HCRIS data source is voluntary. Our policy will require each requesting hospi tal also to provide actual notification that it is requesting an expansi on exception directly to hospitals whose data are part of the comparisons set forth in § 411.362(c)(2)(ii) and (c )(3)(ii) of the regula tions, in addition to performing the other methods of notification specified in our existing regulations. We are finalizing this policy, and we believe the impact of this additional requirement on physician-owned hospitals will be minimal. We believe that our policy will affect a relatively small number of physician-owned hospitals. We estimate that there are approximately 265 physician-owned hospitals in the country. Since the process was implemented in February 2012, we have received only four requests, only one of which has been considered sufficiently complete to continue with publication in the Federal Register , under the current regulations. We anticipate receiving a si milar number of requests each year. We do not believe thatwe can use the four request s to estimate accurately the potential increase in operating rooms, procedure rooms, and beds pursuant to approved expansion exception requests, and we are not awar e of any data that may indicate such an increase. At this time, we also have no da ta or projections that may help estimate the number of physicians that will be affected by these pr oposals as a result of their ownership interests in hospitals. We believe that beneficiaries may be positively impacted by our policies. Specifically, an increase in ope rating rooms, procedure rooms, and beds may augment the volume or nature of services offered by physic ian-owned hospitals. An expansion in theCMS-1613-FC 1022

number of hospital beds may also permit additional inpatient admissions and overnight stays. Increased operating rooms, procedur e rooms, and beds may result in improved

access to health care facilities and services. We believe that our policies are necessary to conform our regulations to the amen dments to section 1877 of the Act. We solicited public comments on each of the issues outlined above that contain

estimates of the costs and benefits of th e proposed rule. We specifically solicited comments on the potential impact on State govern ments, because we proposed to define

external data sources as da ta sources generated, maintain ed, or under the control of a State Medicaid agency. We did not recei ve any public comments on our estimates. g. Effects of Policies Related to CMS-Identi fied Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors

In section XVII. of this final rule with comment period, we discuss our final decisions to set forth in regul ations a formal process, incl uding appeals processes, that allows us to recoup overpayments in the limited set of circumstances where CMS makes a determination that an overpayment to an MA organization or Part D sponsor occurred because the organization or sponsor submitted erroneous payment data to CMS. It is difficult to predict how many times CMS will annually determine an overpayment due to erroneous payment data submitted to CMS by an MA organization or Part D sponsor and that, therefore, will be subject to the offset and appeals regulations. However, we predict that it will be highly unlikely to exceed 10 cases a year and will probably be fewer. Further, electing to appeal a CMS overpayme nt determination under the final regulations is completely at the discretion of the MA organization or Part D sponsor. The MACMS-1613-FC 1023

organization or Part D sponsor may agree th at the data require correction and resubmit the data; MA organizations and Part D s ponsors that receive notification of an overpayment are under no obligation to ini tiate the appeal pro cess. If the MA organization or Part D sponsor chooses not to appeal, there are no costs or burden associated with the appeal. If the MA orga nization or Part D spons or chooses to appeal the overpayment determination, there will be co sts associated with preparing the appeal request. We are establishing three levels of app eal (reconsideration, informal hearing, and Administrator review), each of which the MA organization or Part D sponsor will have to request. Once the appeal has been filed, however; there will be little or no cost experienced by the MA organization or Part D sponsor because the appeal process is on the record and will not involve oral testimony. The extent to which there will be costs associated with preparing the appeal request is subject to preference and choice. We estimate that it will take a plan 5 hours to pr epare and file a recons ideration request. In terms of cost, it has been our experience thatmost appeals have been prepared by highlevel officials of the plan or lawyers. Acco rding to the most recent wage data provided by the Bureau of Labor Statistics (BLS) for May 2012, the mean hourly wage for the category of “Lawyers”—which we believe, cons idering the variety of officials who have submitted appeals, is the most appropriate category—is $62.93. Multiplying this figure by 50 hours (10 submissions x 5 hours) results in a projected annual cost burden of $3,147. We estimate the preparation and fili ng of a request for a hearing, or for Administrator’s review will take 2 hours, at most, because the MA organization or Part D sponsor cannot submit new evidence. The hearin g officer or Administra tor is limited to aCMS-1613-FC 1024

review of the record. Multiplying this figure by 40 hours (10 submissions x 4 hours) results in a projected annual cost burden of $2,517. It is estimated that if the costs of

benefits and overhead are includ ed, the total annual costs for requests at the three levels will be approximately $11,000. B. Regulatory Flexibility Act (RFA) Analysis The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a signi ficant impact on a substantial nu mber 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 th e Small Business Administration’s size standards with total revenues of $38.5 million or less in any single year. Most ASCs and

most CMHCs are considered small businesse s with total revenues of $15 million or less in any single year. We estimate that this final rule with comment period may have a significant impact on approximately 2,006 hospi tals with voluntary ownership. For details, see the Small Business Administ ration’s “Table of Small Business Size

Standards” at http://www.sba.gov/content/table- small-business-size-standards

. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the opera tions 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 th e Act, we define a small rural hospital as a hospital that is located outside of a metr opolitan statistical area and has 100 or fewer

beds. We estimate that this final rule with comment period may have a significant impact on approximately 709 sm all rural hospitals.CMS-1613-FC 1025

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 i ssuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $141 million. This final rule with comment period does not manda te any requirements for State, local, or tribal governments, or for the private sector.

D. Conclusion The changes we are making in this final rule with comment pe riod will affect all classes of hospitals paid under the OPPS and will affect both CMHCs and ASCs. We estimate that most classes of hospitals pa id under the OPPS will experience a modest increase or a minimal decrease in paymen t for services furnished under the OPPS in

CY 2015. Table 49 demonstrates the estimateddistributional impact of the OPPS budget neutrality requirements that will result in a 2.3 percent increase in payments for all services paid under the OPPS in CY 2015, afte r considering all of the changes to APC reconfiguration and recalibrati on, as well as the OPD fee sche dule increase factor, wage index changes, including the frontier State wage index adju stment, estimated payment for outliers, and changes to the pass-through paym ent estimate. However, some classes of providers that are paid under the OPPS will experience more significant gains and others will experience modest losses in OPPS payments in CY 2015.CMS-1613-FC 1026

The updates to the ASC payment system for CY 2015 will affect each of the approximately 5,300 ASCs currently approved fo r participation in th e Medicare program. The effect on an individual ASC will depend on its mix of patients, the proportion of the ASC’s patients who are Medicare beneficiaries, the degree to which the payments for the procedures offered by the ASC are changed under the ASC payment system, and the extent to which the ASC provides a different set of procedures in the coming year.

Table 50 demonstrates the estimated di stributional impact among ASC surgical specialties of the MFP-adjusted CPI-U update factor of 1.4 percent for CY 2015. XXII. Federalism Analysis Executive Order 13132 establishes certain requ irements that an agency must meet when it promulgates a proposed rule (and subseq uent final rule) that imposes substantial direct costs on State and local governments , preempts State law, or otherwise has Federalism implications. We have examin ed the OPPS and ASC provisions included in this final rule with comment period in accordance with Executive Order 13132, Federalism, and have determined that they wi ll 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 49 of this final rule with comment period, we estimate that OPPS payments to governmental hospita ls (including State and local governmental hospitals) will increase by 2.1 percent under this final rule with comment period. While

we do not know the number of ASCs or CMHCs with government ownership, we anticipate that it is small. The analyses we ha ve provided in this sec tion of this final rule with comment period, in conjunction with the remainder of this document, demonstrateCMS-1613-FC 1027

that this final rule with comment period is consistent with the regulatory philosophy and principles identified in Execu tive Order 12866, the RFA, and s ection 1102(b) of the Act. This final rule with comment period will affect payments to a substantial number of small rural hospitals and a small number of rural ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some effects may be significant.CMS-1613-FC 1028

List of Subjects

42 CFR Part 411 Kidney diseases, Medicare, Physician referral, Reporting and recordkeeping requirements.

42 CFR Part 412 Administrative practice and procedure, Health facilitie s, Medicare, Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 416 Health facilities, Health professions , Medicare, Reporting and recordkeeping requirements.

42 CFR Part 419 Hospitals, Medicare, Reporting an d recordkeeping requirements.

42 CFR Part 422 Administrative practice a nd procedure, Health facili ties, Health maintenance, organizations (HMO), Medicare, Penaltie s, Privacy, Reporting and recordkeeping requirements.

42 CFR Part 423 Administrative practice and procedure, Emergency medical services, Health facilities, Health maintenance organizations (HMO), Health professionals, Medicare, Penalties, Privacy, Reporting a nd recordkeeping requirements.

42 CFR Part 424 Emergency medical services, Health professions, Medicare.CMS-1613-FC 1029

For reasons stated in the preamble of th is document, the Centers for Medicare & Medicaid Services is amending 42 CFR Chapter IV as set forth below:

Part 411—EXCLUSIONS FROM MEDI CARE AND LIMITATION ON

MEDICARE PAYMENT 1. The authority citation for part 411 continues to read as follows: Authority : Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, and 1395nn). 2. Section 411.362 is amended by— a. Under paragraph (a), adding a de finition of “External data source” in alphabetical order. b. Revising paragraphs (c)(2)(ii), (c )(2)(iv), (c)(2)(v), (c)(3)(ii), and (c)(5).

The addition and revisions read as follows: § 411.362 Additional requirements concernin g physician ownership and investment in hospitals. (a) * * *

External data source means a data source that— (1) Is generated, maintained, or under the control of a State Medicaid agency; (2) Is reliable and transparent; (3) Maintains data that, for purposes of the process de scribed in paragraph (c) of this section, are readily available and accessi ble to the requesting hospital, comparison hospitals, and CMS; andCMS-1613-FC 1030

(4) Maintains or generates data that, for purposes of the process described in paragraph (c) of this section, are accura te, complete, and objectively verifiable.

* * * * * (c) * * * (2) * * * (ii) Medicaid inpatient admissions. Has an annual pe rcent of total inpatient admissions under Medicaid that is equal to or greater than the average percent with respect to such admissions for all hospitals lo cated in the county in which the hospital is located during the most recent 12-month period fo r which data are availa ble as of the date that the hospital submits its request. For purposes of this paragraph, the most recent 12-month period for which data are availabl e means the most recent 12-month period for

which the data source used contains all data from the reques ting hospital and each hospital located in the same c ounty as the requesting hospital. (A) Until such time that the Healthcare Cost Report Information System (HCRIS) contains sufficiently complete inpatient Medi caid discharge data, a hospital may use filed Medicare hospital cost report data or data from an external data source (as defined in paragraph (a) of this section) to estimate its annual percent of to tal inpatient admissions under Medicaid and the average percent with re spect to such admissions for all hospitals located in the county in whic h the hospital is located. (B) On or after such date that the Secretary determines that HCRIS contains sufficiently complete inpatient Medicaid di scharge data, a hospital may use only filed Medicare hospital cost report data to estimate its annual percent of total inpatientCMS-1613-FC 1031

admissions under Medicaid and the average perc ent with respect to such admissions for all hospitals located in the county in which th e hospital is located.

* * * * * (iv) Average bed capacity. Is located in a State in which the average bed capacity in the State is less th an the national average bed cap acity during the most recent fiscal year for which HCRIS, as of the date that the hospital submits its request, contains data from a sufficient number of hospitals to determine a State’s average bed capacity and the national average bed capacity. CMS will provide on its Web site State average bed capacities and the national average bed cap acity. For purposes of this paragraph, “sufficient number” means the number of hosp itals, as determined by CMS, that would ensure that the determination under this pa ragraph would not materially change after additional hospital data are reported. (v) Average bed occupancy

. Has an average bed occupancy rate that is greater than the average bed occupancy rate in the St ate in which the hospital is located during the most recent fiscal year for which HCRIS, as of the date that the hospital submits its request, contains data from a sufficient numbe r of hospitals to determine the requesting hospital’s average bed occupanc y rate and the relevant St ate’s average bed occupancy rate. A hospital must use filed hospital costreport data to determine its average bed occupancy rate. CMS will provide on its Web site State average bed occupancy rates. For purposes of this paragraph, “sufficient number” means the number of hospitals, as determined by CMS, that would ensure that the determination under this paragraph would not materially change after addi tional hospital data are reported. (3) * * *CMS-1613-FC 1032

(ii) Medicaid inpatient admissions. W ith respect to each of the 3 most recent 12-month periods for which data are availabl e as of the date the hospital submits its request, has an annual percent of total i npatient admissions under Medicaid that is estimated to be greater than such percent with respect to such admissions for any other hospital located in the county in which the hospital is located. For purposes of this paragraph, the most recent 12-month period for which data are available means the most recent 12-month period for which the data so urce used contains all data from the requesting hospital and every hospital locate d in the same county as the requesting hospital. (A) Until such time that the Healthcare Cost Report Information System (HCRIS) contains sufficiently complete inpatient Medi caid discharge data, a hospital may use filed Medicare hospital cost report data or data from an external data source (as defined in paragraph (a) of this section) to estimate its annual percentage of total inpatient admissions under Medicaid and the annual pe rcentages of total inpatient admissions under Medicaid for every other hospital locate d in the county in wh ich the hospital is

located. (B) On or after such date that the Secretary determines that HCRIS contains sufficiently complete inpatient Medicaid di scharge data, a hospital may use only filed Medicare hospital cost report data to estimate its annual pe rcentage of total inpatient admissions under Medicaid and the annual pe rcentages of total inpatient admissions under Medicaid for every other hospital locate d in the county in wh ich the hospital is

located.

* * * * *CMS-1613-FC 1033

(5) Community input and timing of complete request. Upon submitting a request for an exception and until th e hospital receives a CMS decision, the hospital must disclose on any public Web site for the hospi tal that it is requesting an exception and must also provide actual notif ication that it is requesting an exception, in either electronic or hard copy form, directly to hospitals whose data are part of the comparisons in paragraphs (c)(2)(ii) and (c)(3 )(ii) of this section. Indi viduals and entities in the hospital’s community may provide input with respect to the hospital’s request no later than 30 days after CMS publishes notice of the hospital’s request in the Federal Register . Such input must take the form of written comments. The written comments

must be either mailed or submitted electroni cally to CMS. If CMS receives written comments from the community, the hospital ha s 30 days after CMS notifies the hospital

of the written comments to submit a rebuttal statement. (i) If only filed Medicare hospital cost report data are used in the hospital’s request, the written comments, and the hospital’s rebuttal statement— (A) A request will be deemed complete at the end of the 30-day comment period if CMS does not receive written comments from the community. (B) A request will be deemed complete at the end of the 30-day rebuttal period, regardless of whether the hospital submits a rebuttal statement, if CMS receives written comments from the community. (ii) If data from an external data source are used in the hospital’s request, the written comments, or the hospital’s rebuttal statement— (A) A request will be deemed complete no later than 180 days after the end of the 30-day comment period if CMS does not receive written comments from the community.CMS-1613-FC 1034

(B) A request will be deemed complete no later than 180 days after the end of the 30-day rebuttal period, regardless of whether the hospital subm its a rebuttal statement, if CMS receives written comments from the community.

* * * * *

PART 412—PROSPECTIVE PAYM ENT SYSTEMS FOR INPATIENT

HOSPITAL SERVICES 3. The authority citation for Part 412 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat. 1501A-332), sec. 1206 of Pub. L. 113-67, and sec 112 of Pub. L. 113-93. § 412.3 [Amended] 4. Section 412.3 is amended by— a. Removing paragraph (c). b. Redesignating paragraphs (d) and (e) as paragraphs (c) and (d), respectively. c. In redesignated paragraph (d)(1) , removing the cross-reference “paragraph (e)(2)” and adding in its place the cross-reference “paragraph (d)(2)”.

PART 416—AMBULATORY SURGICAL SERVICES 5. The authority citation for Part 416 continues to read as follows: Authority: Secs. 1102 and 1871 of the Soci al Security Act (42 U.S.C. 1302 and 1395hh). 6. Section 416.164 is amended by revising pa ragraphs (a)(11) and (b)(5) to read

as follows: § 416.164 Scope of ASC services.CMS-1613-FC 1035

(a) * * * (11) Radiology services for which sepa rate payment is not allowed under the OPPS and other diagnostic tests or interpretive services that are inte gral to a surgical procedure, except certain diagnostic tests fo r which separate payment is allowed under the OPPS;

* * * * * (b) * * * (5) Certain radiology services and cert ain diagnostic tests for which separate payment is allowed under the OPPS.

* * * * * 7. Section 416.171 is amended by revisi ng paragraphs (b)(1), (b)(2), and (d) introductory text to read as follows: § 416.171 Determination of paymen t rates for ASC services.

* * * * * (b) * * * (1) Covered ancillary services specif ied in § 416.164(b), w ith the exception of radiology services and cert ain diagnostic tests as provided in § 416.164(b)(5); (2) The device portion of device-intens ive procedures, whic h are procedures assigned to an APC with a device cost grea ter than 40 percent of the APC costs when calculated according to the standard OPPS APC ratesetting methodology.

* * * * * (d) Limitation on payment rates for offi ce-based surgical proc edures and covered ancillary radiology services a nd certain diagnostic tests

. Notwithstanding the provisionsCMS-1613-FC 1036

of paragraph (a) of this section, for any covered surgical procedure under § 416.166 that CMS determines is commonly performed in physicians’ offices or for any covered ancillary radiology service or diagnostic test under § 416.164(b)(5), excluding those listed in paragraphs (d)(1) and (d)(2) of this section, the national unadjusted ASC payment rates for these procedures and se rvices will be the lesser of the amount determined under paragraph (a) of this secti on or the amount calcula ted at the nonfacility practice expense relative valu e units under § 414.22(b)(5)(i)(B) of this chapter multiplied by the conversion factor described in § 414.20(a)(3) of this chapter.

* * * * *

PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL

OUTPATIENT DEPARTMENT SERVICES 8. The authority citation for Part 419 continues to read as follows: Authority: Secs. 1102, 1833(t), and 1871 of the So cial Security Act (42 U.S.C. 1302, 1395l(t), and 1395hh). 9. Section 419.2 is amended by revising pa ragraphs (b)(7) and (b)(16) to read as

follows: § 419.2 Basis of payment.

* * * * * (b) * * * (7) Ancillary services;

* * * * *CMS-1613-FC 1037

(16) Drugs and biological s that function as supplies when used in a surgical procedure (including, but not limited to, skinsubstitutes and similar products that aid wound healing and implantable biologicals);

* * * * * 10. Section 419.22 is amended by revising paragraph (j) to read as follows: § 419.22 Hospital services excluded from payment under the hospital outpatient prospective payment system

. * * * * * (j) Except as provided in § 419.2(b)(11), prosthetic devices a nd orthotic devices.

* * * * * 11. Section 419.32 is amended by adding paragraph (b)(1)(iv)(B)( 6 ) to read as

follows: § 419.32 Calculation of prospective payment rates for hospital outpatient services.

* * * * * (b) * * * (1) * * * (iv) * * * (B) * * * ( 6 ) For calendar year 2015, a multifactor pr oductivity adjustment (as determined by CMS) and 0.2 percentage point.

* * * * * § 419.46 [Amended] 12. Section 419.46 is amended by—CMS-1613-FC 1038

a. In paragraph (c)(1), removing th e phrase “section 1833(17 )(C)” and adding in its place the phrase “s ection 1833(t)(17)(C)”. b. In paragraph (d) introductory textand paragraph (d)(1), removing the term “waiver” and adding in its place the term “exception” each time it appears. c. In paragraph (d)(2), removing the te rm “waivers” and adding in its place the term “exceptions”. d. In paragraph (e) introductory text , removing the phrase “section 1833(17)(C)” and adding in its place the phr ase “section 1833(t)(17)(C)”. 13. Section 419.64 is amended by revisi ng paragraph (a)(4)(iv) to read as

follows: § 419.64 Transitional pass-through p ayments: Drugs and biologicals.

* * * * * (a) * * * (4) * * * (iv) A biological that is not a skin substitute or similar product that aids wound healing.

* * * * * 14. Section 419.66 is amended by revi sing paragraph (b)(3) and removing paragraph (b)(4)(iii) to read as follows: § 419.66 Transitional pass-through payments: Medical devices.

* * * * * (b) * * *CMS-1613-FC 1039

(3) The device is an integral part of th e service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted (either permanently or temporarily) or applied in or on a wound or other skin lesion.

* * * * *

PART 422—MEDICARE ADVANTAGE PROGRAM 15. The authority citation for Part 422 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 16. A new § 422.330 is added to subpart G to read as follows: § 422.330 CMS-identified overpayments asso ciated with payment data submitted by MA organizations. (a) Definitions. For pur poses of this section— Applicable reconciliation da te occurs on the date of the annual final deadline for risk adjustment data submission described at § 422.310(g)(2)(ii). Erroneous payment data means payment data that should not have been submitted

either because the data submitted are inaccurate or because the data are inconsistent with Medicare Part C requirements. Payment data means data submitted by an MA organization to CMS and used for payment purposes, including enrollment data and data submitted under § 422.310. (b) Request to correct payment data . (1) When CMS identifies erroneous payment data submitted by an MA organization (other than an error identified through the process described in § 422.311), CMS may send a data correcti on notice to the MA organization requesting that the MA or ganization correct the payment data.CMS-1613-FC 1040

(2) The notice will include or make refe rence to the specific payment data that need to be corrected, the reason why CMS belie ves that the payment data are erroneous, and the timeframe for correcting the payment data. (c) Payment offset. (1) If the MA organization fails to submit the corrected payment data within the timeframe as requested in accordance with paragraph (b) of this section, CMS will conduct a payment offset against payments made to the MA organization if— (i) The payment error affects payments for any of the 6 most recently completed payment years; and (ii) The payment error for a particular payment year is identified after the applicable reconciliation date for that payment year. (2) CMS will calculate the payment offset amount using the correct payment data and a payment algorithm that applies the payment rules for the applicable year. (d) Payment offset notification. CMS will issue a payment offset notice to the MA organization that include s at least the following: (1) The dollar amount of the offset from plan payments. (2) An explanation of how the erroneous data were identified and used to calculate the payment offset amount. (3) An explanation that, if the MA organization disagrees with the payment offset, it may request an appeal within 30 days of issuance of the payment offset

notification.CMS-1613-FC 1041

(e) Appeals process. If an MA or ganization does not agre e with the payment offset described in paragraph (c) of this section, it may appeal under the following three-level appeal process: (1) Reconsideration. An MA organizat ion may request reconsideration of the payment offset described in paragraph (c) of this section, according to the following

process: (i) Manner and timing of request

. A written request for reconsideration must be filed within 30 days from the date that CMS issued the payment offset notice to the MA organization. (ii) Content of request. The written request for rec onsideration must specify the findings or issues with which the MA orga nization disagrees and the reasons for its disagreement. As part of its request fo r reconsideration, the MA organization may include any additional documentary evidence in support of its posit ion. Any additional evidence must be submitted with the request for reconsideration. Additional information submitted after this time will be rejected as untimely. (iii) Conduct of reconsideration. In conducting the recons ideration, the CMS

reconsideration official revi ews the underlying data that were used to determine the amount of the payment offset and any addi tional documentary evidence timely submitted by the MA organization. (iv) Reconsideration decision. The CMS reconsideration official informs the MA organization of its decision on the reconsideration request.CMS-1613-FC 1042

(v) Effect of reconsideration decisio n. The decision of the CMS reconsideration official is final and binding unless a timely request for an in formal hearing is filed in accordance with paragraph (e )(2) of this section. (2) Informal hearing. An MA or ganization dissatisfied with CMS’ reconsideration decision made under paragraph (e)(1) of this secti on is entitled to an informal hearing as provided for under paragr aphs (e)(2)(i) through (e)(2)(v) of this

section. (i) Manner and timing for request. A re quest for an informal hearing must be made in writing and filed with CMS within 30 days of the date of CMS’ reconsideration

decision. (ii) Content of request. The request for an informal hearing must include a copy of the reconsideration decision and must speci fy the findings or issues in the decision with which the MA organization disagrees and the reasons for its disagreement. (iii) Informal hearing procedures. The informal hearing will be conducted in accordance with the following: (A) CMS provides written notice of the time and place of the informal hearing at least 30 days before the scheduled date. (B) The informal hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not timely presented with the reconsideration request. The CM S hearing officer is limited to the review of the record

that was before the CMS reconsideration o fficial when CMS made its reconsideration

determination.CMS-1613-FC 1043

(C) The CMS hearing officer will review the proceeding before the CMS

reconsideration official on the record made before the CMS re consideration official using the clearly erroneous standard of review. (iv) Decision of the CMS hearing offi cer. The CMS hearing officer decides the

case and sends a written decision to the MA organization explaining the basis for the

decision. (v) Effect of hearing officer’s decisi on. The hearing officer’s decision is final and binding, unless the decisi on is reversed or modifiedby the Administrator in accordance with paragraph (e )(3) of this section. (3) Review by the Administrator. The Administrator review will be conducted in the following manner: (i) An MA organization that has re ceived a hearing officer’s decision may request review by the Administra tor within 30 days of the date of issuance of the hearing officer’s decision under paragraph (e)(2)(iv) of this section. The MA organization may submit written arguments to the Administrator for review. (ii) After receiving a request for review , the Administrator has the discretion to

elect to review the heari ng officer’s determination in accordance with paragraph (e)(3)(iv) of this se ction or to decline to review the hearing officer’s decision. (iii) If the Administrator declines to review the hearing o fficer’s decision, the hearing officer’s decision is final and binding. (iv) If the Administrato r elects to review the he aring officer’s decision, the Administrator will review the hearing offi cer’s decision, as well as any information included in the record of the hearing o fficer’s decision and an y written argumentCMS-1613-FC 1044

submitted by the MA organization, and determin e whether to uphold, reverse, or modify the hearing officer’s decision. (v) The Administrator’s determination is final and binding. (f) Matters subject to ap peal and burden of proof. (1) The MA organization’s appeal is limited to CMS’ finding that the payment data submitted by the MA organization are erroneous. (2) The MA organization bears the bu rden of proof by a preponderance of the evidence in demonstrating that CMS’ finding that the payment data were erroneous was

incorrect or otherwise inconsistent w ith applicable program requirements. (g) Applicability of appeals process. The appeals process under paragraph (e) of this section applies only to payment offs ets under paragraph (c) of this section.

PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT 17. The authority citation for Part 423 continues to read as follows: Authority : Secs. 1102, 1106, 1860D–1 through 1860D–42, and 1871 of the Social Security Act (42 U.S. C. 1302, 1306, 1395w–101 through 1395w–152, and 1395hh). 18. A new § 423.352 is added to read as follows: § 423.352 CMS-identified overpayments asso ciated with payment data submitted by Part D sponsors. (a) Definitions. For purposes of this section-- Applicable reconciliation da te occurs on the later of either the annual deadline for submitting—CMS-1613-FC 1045

(1) Prescription drug event (PDE) data for the annual Part D payment

reconciliations referred to in § 423.343(c) and (d); or (2) Direct and indi rect remuneration data. Erroneous payment data means payment data that should not have been submitted

either because the data submitted are inaccurate or because the data are inconsistent with Medicare Part D requirements. Payment data means data submitted by a Part D sponsor to CMS and used for payment purposes, including enrollment data and data submitted under § 423.329(b)(3), § 423.336(c)(1), and § 423.343, and data provid ed for purposes of supporting allowable

reinsurance costs and allowable risk corrido r costs as defined in § 423.308, including data submitted to CMS regarding dir ect and indirect remuneration. (b) Request to correct payment data . (1) When CMS identifies erroneous payment data submitted by a Part D sponsor, CMS may send a data correction notice to the Part D sponsor requesting that the Pa rt D sponsor correct the payment data. (2) The notice will include or make refe rence to the specific payment data that need to be corrected, the reason why CMS belie ves that the payment data are erroneous, and the timeframe for correcting the payment data. (c) Payment offset. (1) If the Part D sponsor fails to submit the corrected payment data within the timeframe as requested in accordance with paragraph (b) of this section, CMS will conduct a payment offset against payments made to the Part D sponsor

if— (i) The payment error affects payments for any of the 6 most recently completed payment years; andCMS-1613-FC 1046

(ii) The payment error for a particular payment year is identified after the applicable reconciliation date for that payment year. (2) CMS will calculate the payment offset amount using the correct payment data and a payment algorithm that applies the payment rules for the applicable year. (d) Payment offset notification. CMS will issue a payment offset notice to the Part D sponsor that includ es at least the following: (1) The dollar amount of the offset from plan payments. (2) An explanation of how the erroneous data were identified and used to calculate the payment offset amount. (3) An explanation that, if the Part D sponsor disagrees with the payment offset, it may request an appeal within 30 days of issuance of the payment offset notification. (e) Appeals process. If a Part D spon sor does not agree with the payment offset described in paragraph (c) of this section, it may appeal under the following three-level appeal process: (1) Reconsideration. A Part D spons or may request rec onsideration of the payment offset described in paragraph (c) of this section, according to the following

process: (i) Manner and timing of request

. A written request for reconsideration must be filed within 30 days from the date that CMS issued the payment offset notice to the Part D sponsor. (ii) Content of request. The written request for rec onsideration must specify the findings or issues with which the Part D sponsor disagrees and the reasons for its disagreement. As part of its request for r econsideration, the Part D sponsor may includeCMS-1613-FC 1047

any additional documentary evidence in suppor t of its position. Any additional evidence must be submitted with the request for reconsideration. Additional information submitted after this time will be rejected as untimely. (iii) Conduct of reconsideration. In conducting the recons ideration, the CMS

reconsideration official revi ews the underlying data that were used to determine the amount of the payment offset and any addi tional documentary evidence timely submitted by the Part D sponsor. (iv) Reconsideration decision. The CMS reconsideration official informs the Part D sponsor of its decision on the reconsideration request. (v) Effect of reconsideration decisio n. The decision of the CMS reconsideration official is final and binding unless a timely request for an in formal hearing is filed in accordance with paragraph (e )(2) of this section. (2) Informal hearing. A Part D sponso r dissatisfied with CMS’ reconsideration decision made under paragraph (e)(1) of this sect ion is entitled to an informal hearing as provided for under paragraphs (e)(2)(i) through (e)(2)(v) of this section. (i) Manner and timing for request. A re quest for an informal hearing must be made in writing and filed with CMS within 30 days of the date of CMS’ reconsideration

decision. (ii) Content of request. The request for an informal hearing must include a copy of the reconsideration decision and must speci fy the findings or issues in the decision with which the Part D sponsor disagrees and the reasons fo r its disagreement. (iii) Informal hearing procedures. The informal hearing will be conducted in accordance with the following:CMS-1613-FC 1048

(A) CMS provides written notice of the time and place of the informal hearing at least 30 days before the scheduled date. (B) The informal hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not timely presented with the reconsideration request. The CM S hearing officer is limited to the review of the record

that was before the CMS reconsideration o fficial when CMS made its reconsideration

determination. (C) The CMS hearing officer will review the proceeding before the CMS

reconsideration official on the record made before the CMS re consideration official using the clearly erroneous standard of review. (iv) Decision of the CMS hearing offi cer. The CMS hearing officer decides the

case and sends a written decision to the Pa rt D sponsor explaining the basis for the

decision. (v) Effect of hearing officer’s decisi on. The hearing officer’s decision is final and binding, unless the decisi on is reversed or modifiedby the Administrator in accordance with paragraph (e )(3) of this section. (3) Review by the Administrator. The Administrator review will be conducted in the following manner: (i) A Part D sponsor that has receiveda hearing officer’s decision may request review by the Administrator within 30 days of the date of issuance of the hearing officer’s decision under paragraph (e)(2)(iv) of this section. The Part D sponsor may submit written arguments to the Administrator for review.CMS-1613-FC 1049

(ii) After receiving a request for review , the Administrator has the discretion to

elect to review the heari ng officer’s determination in accordance with paragraph (e)(3)(iv) of this se ction or to decline to review the hearing officer’s decision. (iii) If the Administrator declines to review the hearing o fficer’s decision, the hearing officer’s decision is final and binding. (iv) If the Administrato r elects to review the he aring officer’s decision, the Administrator will review the hearing offi cer’s decision, as well as any information included in the record of the hearing o fficer’s decision and an y written argument submitted by the Part D sponsor, and determine whether to uphold, reverse, or modify the hearing officer’s decision. (v) The Administrator’s determination is final and binding. (f) Matters subject to ap peal and burden of proof. (1) The Part D sponsor’s appeal is limited to CMS’ fi nding that the payment data s ubmitted by the Part D sponsor

are erroneous. (2) The Part D sponsor bears the bur den of proof by a preponderance of the evidence in demonstrating that CMS’ finding that the payment data were erroneous was

incorrect or otherwise inconsistent w ith applicable program requirements. (g) Applicability of appeals process. The appeals process under paragraph (e) of this section applies only to payment offs ets under paragraph (c) of this section.

PART 424--CONDITIONS FOR MEDICARE PAYMENT 19. The authority citation for Part 424 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).CMS-1613-FC 1050

20. Section 424.13 is amended by— a. Revising paragraph (a) introductory text. b. Removing paragraph (a)(1). c. Redesignating paragraphs (a)(2), (3), and (4) as paragraphs (a)(1), (2), and (3), respectively. d. Revising redesignat ed paragraph (a)(1)(i). e. Revising paragraph (b).

The revisions read as follows: § 424.13 Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (a) Content of certificati on and recertification. Me dicare Part A pays for inpatient hospital services (other than inpatient psychiatric facility services) for cases that are 20 inpatient days or more, or are outlier cases under subpart F of part 412 of this chapter, only if a physician certif ies or recertifies the following: (1) * * * (i) Continued hospitalization of the pa tient for medical treatment or medically required diagnostic study; or

* * * * * (b) Timing of certification. For outlier cases under subpart F of Part 412 of this chapter, the certification must be signed a nd documented in the medical record and as specified in paragraphs (e) through (h) of this section. For al l other cases, the certification must be signed and documented no later than 20 days into the hospital stay.

* * * * *Dated: October 22, 2014.

______________________________ Marilyn Tavenner, Administrator,

Centers for Medicare & Medicaid

Services.

Dated: October 26, 2014.

___________________________ Sylvia M. Burwell, Secretary, Department of Health and Human Services.

BILLING CODE 4120-01-PCMS-1613-FC 1052

[FR Doc. 2014-26146 Filed 10/31/2014 at 4:15 pm; Publication Date: 11/10/2014]