DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services 42 CFR Parts 410, 411, 416, 419, 489, and 495 [CMS-1525-FC] RIN 0938-AQ26 Medicare and Medicaid Programs: Hospit al Outpatient Prospective Payment; Ambulatory Surgical Center Payment; Hosp ital Value-Based Purchasing Program; Physician Self-Referral; and Patient No tification Requirements in Provider Agreements AGENCY: Centers for Medicare & Me dicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
SUMMARY: This final rule with comment period revises the Medicare hospital outpatient prospective payment system (O PPS) for CY 2012 to implement applicable statutory requirements and changes arising from our continuing e xperience with this system. In this final rule with comment period, we describe the changes to the amounts and factors used to determine the payment rate s for Medicare hospital outpatient services paid under the OPPS. In addition, this final rule with co mment period updates the revised Medicare ambulatory surgical center (ASC) payment sy stem to implement applicable statutory requirements and changes arising from our cont inuing experience with this system. In this final rule with comment period, we se t forth the relative payment weights and payment amounts for services furnished in ASCs, specific HCPCS codes to which these changes apply, and other ratesetting information for the CY 2012 ASC payment system.CMS-1525-FC 2 We are revising the requirements for th e Hospital Outpatient Quality Reporting (OQR) Program, adding new requirements for ASC Quality Reporting System, and making additional changes to provisions of the Hospital Inpatient Value-Based Purchasing (VBP) Program. We also are allowing eligible hospitals and CAHs participati ng in the Medicare Electronic Health Record (EHR) Incentive Prog ram to meet the clinical quality measure reporting requirement of the EHR Incen tive Program for payment year 2012 by participating in the 2012 Medicare EHR In centive Program Electronic Reporting Pilot. Finally, we are making changes to th e rules governing the whole hospital and rural provider exceptions to the physician se lf-referral pr ohibition for expansion of facility capacity and changes to provider agreement regula tions on patient notification requirements.
DATES : Effective Date : This final rule with co mment period is effective on January 1, 2012. Comment Period : To be assured consider ation, comments on the payment classifications assigned to HCPCS codes iden tified in Addenda B, AA, and BB of this final rule with comment period with the “NI” comment indicator and on other areas specified throughout this final rule w ith comment period, and comments on the suspension of the effective dates of the Ho spital-Acquired Condition (HAC), Agency for Healthcare Research and Quality (AHRQ) , and Medicare spending per beneficiary measures discussed in section XVI.A.2. of this final rule with comment period, must beCMS-1525-FC 3 received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on January 3, 2012. 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, 2012, at the following address: ASC/NTOL, Division of Outpa tient Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
ADDRESSES: In commenting, please refer to file code CMS-1525-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 encourag e you to) submit electronic comments on this regulation to http://www.regulations.gov
. Follow the instructions under the “submit a comment” tab. 2. By regular mail . You may mail written comments to the following address
ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1525-FC, P.O. Box 8013, Baltimore, MD 21244-1850.CMS-1525-FC 4 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-1525-FC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier . If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington, DC— Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, S.W., Washington, DC 20201. Because access to the interior of the Hube rt H. Humphrey Build ing 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 ofCMS-1525-FC 5 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 extr a copy of the comments being filed. b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses 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, Hospital outpatient prospective payment issues. Char Thompson, (410) 786-2300, Ambul atory surgical center issues. Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-4533, Partial hospitalization and community me ntal health center issues. James Poyer, (410) 786-2261, Reporting of Hospital Outpatient Quality Reporting (OQR) and ASC Quality Reporting Program issues.CMS-1525-FC 6 Teresa Schell, (410) 786-8651, Physician Ownership and Investment in Hospitals issues. Georganne Kuberski, (410) 786-0799, Patie nt Notification Requirements issues. James Poyer, (410) 786-2261, and Ernessa Brawley (410) 786-2075, Hospital Value-Based Purchasing (VBP) Program issues.
SUPPLEMENTARY INFORMATION: Inspection of Public Comments : All comments 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 av ailable 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 System (FDsys) , a service of the U.S.CMS-1525-FC 7 Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/

. Addenda Available Only Through th e Internet on the CMS Web Site In the past, a majority of the Addenda referred to throughout the preamble of our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 proposed rule, all of the Addenda will no longer appear in the Federal Register as part of the annual OPPS/ASC proposed and final rules to decrease admini strative burden and reduce costs associated with publishing lengthy tables. Instead, these Addenda will be published and available only on the CMS Web site. The Addenda re lating to the OPPS are available at: http://www.cms.gov/HospitalOutpatientPPS . The Addenda relating to the ASC payment system are available at: http://www.cms.gov/ASCPayment/ . For complete details on the availability of the Addenda referenced in th is final rule with comment period, we refer readers to section XVII. Readers who e xperience any problems accessing any of the Addenda that are posted on the CMS Web site identified above should contact Charles Braver at (410) 786-0378. Alphabetical List of Acronyms Appearin g in This Federal Register Document ACEP American College of Emergency Physicians AHA American Hospital Association AHIMA American Health Inform ation Management Association AHRQ Agency for Healthcare Research and Quality AMA American Medical AssociationCMS-1525-FC 8 AMP Average Manufacturer Price AOA American Osteopathic Association APC Ambulatory Payment Classification ARRA American Recovery and Re investment Act of 2009, Pub. L. 111-5 ASC Ambulatory Surgical Center ASP Average Sales Price AWP Average Wholesale Price BBA Balanced Budget Act of 1997, Pub. L. 105-33 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 CAP Competitive Acquisition Program CBSA Core-Based Statistical Area CCN CMS Certification Number CCR Cost-to-Charge Ratio CDC Centers for Disease Control CERT Comprehensive Error Rate Testing CLFS Clinical Laboratory Fee Schedule CMHC Community Mental Health CenterCMS-1525-FC 9 CMS Centers for Medicare & Medicaid Services CPT Current Procedural Terminology (c opyrighted by the American Medical Association) CQM Clinical Quality Measure CR Cardiac Rehabilitation CY Calendar Year DFO Designated Federal Official DHS Designated Health Service DRA Deficit Reduction Act of 2005, Pub. L. 109-171 DSH Disproportionate Share Hospital EACH Essential Access Community Hospital E/M Evaluation and Management EHR Electronic Health Record ESRD End-Stage Renal Disease FACA Federal Advisory Committee Act, Pub. L. 92-463 FAR Federal Acquisition Regulations FDA Food and Drug Administration FFS Fee-for-Service FSS Federal Supply Schedule FY Fiscal Year GAO Government Accountability Office HAC Hospital-Acquired ConditionCMS-1525-FC 10 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 Healthcare Personnel HCPCS Healthcare Common Procedure Coding System HCRIS Hospital Cost Report Information System HHA Home Health Agency HIPAA Health Insurance Portabi lity and Accountability Act of 1996, Pub. L. 104-191 HOPD Hospital Outpatient Department Hospital OQR Hospital Outpatient Quality Reporting ICR Intensive Cardiac Rehabilitation IDE Investigational Device Exemption IHS Indian Health Service IQR Inpatient Quality Reporting I/OCE Integrated Outpatient Code Editor IOL Intraocular Lens IPPS [Hospital] Inpatient Prospective Payment System MAC Medicare Administrative Contractor MedPAC Medicare Payment Advisory Commission MIEA-TRHCA Medicare Improvements and Ex tension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432CMS-1525-FC 11 MIPPA Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 110-275 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 Physician Fee Schedule MSA Metropolitan Statistical Area NCCI National Correct Coding Initiative NHSN National Healthcare Safety Network NCD National Coverage Determination NPP Nonphysician practitioner NQF National Quality Forum NTIOL New Technology Intraocular Lens OIG [HHS] Office of the Inspector General OMB Office of Management and Budget OPD [Hospital] Outpatient Department OPPS [Hospital] Outpatient Prospective Payment System OQR Outpatient Quality Reporting PBD Provider-Based Department PHP Partial Hospitalization Program PPI Producer Price IndexCMS-1525-FC 12 PPS Prospective Payment System PR Pulmonary Rehabilitation PRA Paperwork Reduction Act QAPI Quality Assessment and Performance Improvement QIO Quality Improvement Organization RAC Recovery Audit Contractor RFA Regulatory Flexibility Act RHHI Regional Home Health Intermediary SBA Small Business Administration SCH Sole Community Hospital SDP Single Drug Pricer SI Status Indicator TEP Technical Expert Panel TOPs Transitional Outpatient Payments VBP Value-Based Purchasing WAC Wholesale Acquisition Cost In this document, we address two paym ent systems under the Medicare program: the OPPS and the ASC payment system. In addition, we are making changes to the rules governing limitations on certain physician referrals to hospitals in which physicians have an ownership or investment interest, the provider agreement regulations on patient notification requirements, and the rules gove rning the Hospital I npatient Value-Based Purchasing (VBP) Program. The provisions re lating to the OPPS are included in sectionsCMS-1525-FC 13 I. through XII., section XIV., and sections XVII. through XXI. of this final rule with comment period. Addenda A, B, C, D1, D2, E, L, M, and N, which relate to the OPPS, are referenced in section XVII. of this final rule with comment period and are available via the Internet on the CMS Web site at the URL indicated in section XVII. The provisions related to the ASC payment system are included in sections XIII., XIV., and XVII. through XXI. of this final rule w ith comment period. Addenda AA, BB, DD1, DD2, and EE, which relate to the ASC paymen t system, are referenced in section XVII. of this final rule with comment period and are available via the Internet on the CMS Web site at the URL indicated in section XVII. The provisions re lating to physician referrals to hospitals in which physicians have an ow nership or investment interest and to the provider agreement regulations on patient notification requirements are included in section XV., and the provisions relating to the Hospital Inpatient VBP Program are included in section XVI. of this final rule with comment period.
Table of Contents I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule and This Final Rule with Comment Period A. Legislative and Regulatory Authority for the Hospital Outpatient Perspective Payment System B. Excluded OPPS Services and Hospitals C. Prior Rulemaking D. Advisory Panel on Ambulatory Payment Classification (APC) Groups 1. Authority of the APC PanelCMS-1525-FC 14 2. Establishment of the APC Panel 3. APC Panel Meetings a nd Organizational Structure E. Summary of the Major Contents of the CY 2012 OPPS/ASC Proposed Rule 1. Updates Affecting OPPS Payments 2. OPPS Ambulatory Payment Cl assification (APC) Group Policies 3. OPPS Payment for Devices 4. OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals 5. Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices 6. OPPS Payment for Hospital Outpatient Visits 7. Payment for Partial Hospitalization Services 8. Procedures That Would Be Pa id Only as Inpatient Procedures 9. Policies on Supervision Standards for Outpatient Services in Hospitals and
CAHs 10. OPPS Payment Status and Comment Indicators 11. OPPS Policy and Payment Recommendations 12. Updates to the Ambulatory Surg ical Center (ASC) Payment System 13. Reporting Quality Data for Annual Payment Rate Updates 14. Changes to EHR Incentive Program for Eligible Hospitals and CAHs Regarding Electronic Submission of Clinical Quality Measures (CQMs) 15. Changes to Provisions Relating to Physician Self-Referral Prohibition and Provider Agreement Regulations on Pa tient Notification RequirementsCMS-1525-FC 15 16. Additional Changes to the Hospital Inpatient VBP Program 17. Economic and Federalism Analyses F. Public Comments Received in Re sponse to the CY 2012 OPPS/ASC Proposed Rule G. Public Comments Received on the CY 2011 OPPS/ASC Final Rule with Comment Period II. Updates Affecting OPPS Payments A. Recalibration of APC Relative 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 Median Costs 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 Record s and Median Cost Calculations d. Calculation of Single Procedur e APC Criteria-Based Median Costs (1) Device-Dependent APCs (2) Blood and Blood Products (3) Allergy Tests (APCs 0370 and 0381)CMS-1525-FC 16 (4) Hyperbaric Oxygen Therapy (APC 0659) (5) Payment for Ancillary Outpatient Services When Patient Expires (APC 0375) (6) Endovascular Revascularizati on of the Lower Extremity (APCs 0083, 0229, and 0319) (7) Non-Congenital Cardiac Catheterization (APC 0080) (8) Cranial Neurostimulator and Electrodes (APC 0318) (9) Brachytherapy Sources e. Calculation of Composite APC Criteria-Based Median Costs (1) Extended Assessment and Manage ment Composite APCs (APCs 8002 and 8003) (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) (3) Cardiac Electrophysiologic Ev aluation and Ablation Composite APC (APC 8000) (4) Mental Health Services Composite APC (APC 0034) (5) Multiple Imaging Compos ite APCs (APCs 8004, 8005, 8006, 8007, and 8008) (6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418, 0655, and 8009) 3. Changes to Packaged Services a. Background b. Packaging IssuesCMS-1525-FC 17 (1) CMS Presentation of Findings Re garding Expanded Packaging at the February 28-March 1, 2011 and A ugust 10-12, 2011 APC Panel Meetings (2) Packaging Recommendations of the APC Panel at its February 28-March 1, 2011 Meeting (3) Packaging Recommendations of th e APC Panel at its August 2011 Meeting (4) Other Packaging Proposals and Policies for CY 2012 4. Calculation of OPPS Scaled Payment Weights B. Conversion Factor Update C. Wage Index Changes D. Statewide Average Default CCRs E. OPPS Payment to Certain Rural and Other Hospitals 1. Hold Harmless Transitional Payment Changes 2. Adjustment for Rural SCHs and EA CHs under Section 1 833(t)(13)(B) of the
Act F. OPPS Payments to Certain Canc er Hospitals Described by Section 1886(d)(1)(B)(v) of the Act 1. Background 2. Study of Cancer Hospital Co sts Relative to Other Hospitals 3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals 4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was Not Finalized 5. Payment Adjustment for Certain Cancer Hospitals for CY 2012CMS-1525-FC 18 G. Hospital Outpatient Outlier Payments 1. Background 2. Proposed Outlier Calculation 3. Final Outlier Calculation 4. Outlier Reconciliation 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 Codes 1. Treatment of New Level II HCPCS Codes and Category I CPT Vaccine Codes and Category III CPT Codes for Which We Solicited Public Comments in the CY 2012 Proposed Rule 2. Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments on this CY 2012 OPPS/ASC Final Rule with Comment Period B. OPPS Changes--Variations within APCs 1. Background 2. Application of the 2 Times RuleCMS-1525-FC 19 3. Exceptions to the 2 Times Rule C. New Technology APCs 1. Background 2. Movement of Procedures from New Technology APCs to Clinical APCs D. OPPS APC-Specific Policies 1. Cardiovascular Services a. Cardiovascular Computed Tomography (CCT) (APCs 0340 and 0383) b. Cardiac Imaging (APC 377) c. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes (APC 0108) d. Implantable Loop Recorder Monitoring (APC 0690) e. Echocardiography (APCs 0128, 0269, 0270, and 0697) 2. Gastrointestinal Services a. Upper Gastrointestinal (G I) Services (APCs 0141, 0419, and 0422) b. Gastrointestinal Transit and Pressure Measurement (APC 0361) 3. Genitourinary Services a. Laser Lithotripsy (APC 0163) b. Percutaneous Renal Cryoablation (APC 0423) 4. Nervous System Services a. Revision/Removal of Neurotra nsmitter Electrodes (APCs 0040 and 0687) b. Magnetoencephalography (MEG) (APCs 0065, 0066, and 0067) c. Transcranial Magnetic Stim ulation Therapy (TMS) (APC 0218)CMS-1525-FC 20 5. Ocular and Ophthalmic Services a. Placement of Amniotic Membrane (APCs 0233 and 0244) b. Insertion of Anterior Segment Aqueous Drainage Device (APC 0673) c. Scanning Ophthalmic Diagnostic Imaging (APC 0230) d. Intraocular Laser Endoscopy (APC 0233) 6. Orthopedic and Musculoskeletal Services a. Percutaneous Laminotomy/Laminectormy (APC 0208) b. Level II Arthroscopy (APC 0042) c. Closed Treatment Fracture of Finger, Toe, and Trunk (APCs 0129, 0138, and 0139) d. Level I and II Strapping and Ca st Application (APCs 0058 and 0426) 7. Radiology Services a. Proton Beam Therapy (APCs 0664 and 0667) b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, 0067, and 0127) c. Adrenal Imaging (APC 0408) d. Positron Emission Tomography (PET) Imaging (APC 0308) (Created from Myocardial Positron Emission Tomography (PET) Imaging (APC 0307) and Nonmyocardial Positron Emission To mography (PET) Imaging (APC 0308)) e. Device Construction for Intensity M odulated Radiation Therapy (IMRT) (APC 0305) f. Computed Tomography of A bdomen/Pelvic (APCs 0331 and 0334)CMS-1525-FC 21 g. Complex Interstitial Radia tion Source Application (APC 0651) h. Radioelement Applications (APC 0312) 8. Respiratory Services a. Pulmonary Rehabilitation (APC 0102) b. Bronchial Thermoplasty (APC 0415) c. Insertion of Bronchial Valve (APC 0415) 9. Other Services a. Skin Repair (APCs 0133, 0134, and 0135) b. Nasal Sinus Endoscopy (APC 0075) c. Bioimpedance Spectroscopy (APC 0097) d. Autologous Blood Salvage (APC 0345) 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 2012 Policy 2. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background b. CY 2012 Policy B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit DevicesCMS-1525-FC 22 1. Background 2. APCs and Devices Subject to the Adjustment Policy 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 2011 3. Drugs, Biologicals, and Radiopharm aceuticals with New or Continuing Pass-Through Status in CY 2012 4. Provisions for Reducing Transitiona l Pass-Through Payments for Diagnostic Radiopharmaceuticals and Contrast Agents to Offset Costs Packaged into APC Groups a. Background b. Payment Offset Policy for Diagnostic Radiopharmaceuticals c. Payment Offset Policy for Contrast Agents 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. BackgroundCMS-1525-FC 23 b. Cost Threshold for Packaging of Payment for HCPCS Codes that Describe Certain Drugs, Nonimplantable Biologi cals, and Therapeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”) c. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological But Different Dosages d. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals (“Policy-Packaged” Drugs and Devices) 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 Biologicals b. CY 2012 Payment Policy c.. Payment Policy for Therapeutic Radiopharmaceuticals 4. Payment for Blood Clotting Factors 5. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes, But without OPPS 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. BackgroundCMS-1525-FC 24 B. Policies for Hospital Outpatient Visits 1. Clinic Visits: New and Established Patient Visits 2. Emergency Department Visits 3. Visit Reporting Guidelines VIII. Payment for Partial Hospitalization Services A. Background B. PHP APC Update for CY 2012 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. Policies for the Supervision of Outpatient Services in Hospitals and CAHs A. Background B. Issues Regarding the Supervision of Hospital Outpatient Therapeutic Services Raised by Hospitals and Other Stakeholders 1. Independent Review Process a. Selection of Review Entity b. Review Process c. Evaluation Criteria 2. Conditions of Payment and Hospital Outpatient Therapeutic Services Described by Different Benefit CategoriesCMS-1525-FC 25 3. Technical Corrections to the Supervision Standards for Hospital Outpatient Therapeutic Services Furnished in Hospitals or CAHs C. Summary of CY 2012 Final Policies on Supervision Standards for Outpatient Therapeutic Services in Hospitals and CAHs 1. Independent Review Process 2. Conditions of Payment and Hospital Outpatient Therapeutic Services Described by Different Benefit Categories 3. Technical Corrections XI. Final CY 2012 OPPS Payment Status and Comment Indicators A. Final CY 2012 OPPS Payment Status Indicator Definitions 1. Payment Status Indicators to Desi gnate Services That Are Paid under the
OPPS 2. Payment Status Indicators to De signate Services That Are Paid under a Payment System Other Than the OPPS 3. Payment Status Indicators to Desi gnate Services That Are Not Recognized under the OPPS But That May Be Recognized by Other Institutional Providers 4. Payment Status Indicators to Desi gnate Services That Are Not Payable by Medicare on Outpatient Claims B. Final CY 2012 Comment Indicator Definitions XII. OPPS Policy and Payment Recommendations A. MedPAC Recommendations B. APC Panel RecommendationsCMS-1525-FC 26 C. OIG Recommendations XIII. Updates to the Ambulatory Surg ical Center (ASC) Payment System A. Background 1. Legislative Authority for the ASC Payment System 2. Prior Rulemaking 3. 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 and July 2011 for Wh ich We Solicited Public Comments in the CY 2012 OPPS/ASC Proposed Rule 3. Process for New Level II HCPCS c odes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comments in this CY 2012 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-Based (1) BackgroundCMS-1525-FC 27 (2) Changes for CY 2012 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 Surgical Procedures Designated as Device-Intensive for CY 2012 d. ASC Treatment of Surgical Procedur es Removed from the OPPS Inpatient List for CY 2012 2. Covered Ancillary Services D. ASC Payment for Covered Surgi cal Procedures and Covered Ancillary Services 1. Payment for Covered Surgical Procedures a. Background b. Update to ASC-Covered Surgical Procedure Payment Rates for CY 2012 c. Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit Devices d. Waiver of Coinsurance and Deduc tible for Certain Preventive Services e. Payment for the Cardiac Re synchronization Therapy Composite 2. Payment for Covered Ancillary Services a. Background b. Payment for Covered Ancillary Services for CY 2012 E. New Technology Intraocular Lenses (NTIOLs)CMS-1525-FC 28 1. NTIOL Cycle and Evaluation Criteria 2. NTIOL Application Proce ss for Payment Adjustment 3. Requests to Establish Ne w NTIOL Classes for CY 2012 4. Payment Adjustment 5. Announcement of CY 2012 Deadlin e for Submitting Requests for CMS Review of Appropriateness of ASC Payment for Insertion of an NTIOL Following Cataract Surgery F. ASC Payment and Comment Indicators 1. Background 2. ASC Payment and Comment Indicators G. ASC Policy and Payment Recommendations H. 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 2012 and Future Years b. Updating the ASC Conversion Factor 3. Display of CY 2012 ASC Payment Rates XIV. Hospital Outpatient Quality Reporting Program Updates and ASC Quality Reporting A. Background 1. OverviewCMS-1525-FC 29 2. Statutory History of Hospital Outpatient Quality Reporting (Hospital OQR) Program 3. Technical Specification U pdates and Data Publication a. Maintenance of Technical Specifications for Quality Measures b. Publication of Hospital OQR Program Data B. Revision to Measures Previously Adopted for the Hospital OQR Program for the CY 2013 and CY 2014 Payment Determinations 1. Background 2. Revision to OP-22 Left Without Being Seen C. New Quality Measures for the CY 2014 and CY 2015 Payment Determinations 1. Considerations in Expanding and Updating Quality Measures under Hospital OQR Program 2. New Hospital OQR Program Quality Measures for the CY 2014 Payment Determination a. New National Healthcare Safety Network (NHSN) Healthcare Associated Infection (HAI) Measure for the CY 2014 Pa yment Determination: Surgical Site Infection (NQF #0299) b. New Chart-Abstracted Measures for the CY 2014 Payment Determination

c. New Structural Measures (1) Safe Surgery Checklist Use MeasureCMS-1525-FC 30 (2) Hospital Outpatient Department Vo lume for Selected Outpatient Surgical Procedures Measure 3. Hospital OQR Program Measures for the CY 2015 Payment Determination a. Retention of CY 2014 Hospital OQR Measures for the CY 2015 Payment Determination b. New NHSN HAI Measure for the CY 2015 Payment Determination D. Possible Quality Measures under Cons ideration for Future Inclusion in the Hospital OQR Program E. Payment Reduction for Hospitals That Fail to Meet the Hospital OQR Requirements for the CY 2012 Payment Update 1. Background 2. Reporting Ratio Application and A ssociated Adjustment Policy for CY 2012 F. Extraordinary Circumstances Extension or Waiver for CY 2012 and Subsequent Years G. Requirements for Reporting of Hospital OQR Data for CY 2013 and Subsequent Years 1. Administrative Requirements for CY 2013 and Subsequent Years 2. Form, Manner, and Timing of Data Submission for CY 2013 and Subsequent
Years a. CY 2013 and CY 2014 Data Submi ssion Requirements for Chart-Abstracted Measure Data Submitted Directly to CMSCMS-1525-FC 31 b. Eligibility to Voluntarily Sample and Data submission Exception for Low Patient Volume for CY 2 013 and subsequent Years c. Population and Sampling Data Requirements Beginning with the CY 2013 Payment Determination and for Subsequent Years d. Claims-Based Measure Data Requirements for the CY 2013 and CY 2014 Payment Determinations e. Structural Measure Data Require ments for the CY 2013 and CY 2014 Payment Determinations f. Data Submission Deadlines for the NHSN HAI Surgical Site Infection Measure for the CY 2014 Payment Determination g. Data Submission Requirements for OP -22: ED-Patient Left Before Being Seen for the CY 2013 and CY 2014 Payment Determinations 3. Hospital OQR Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS: Data Valid ation Approach for the CY 2013 Payment Determination a. Randomly Selected Hospitals b. Use of Targeting Criteria for Data Validation Selection for CY 2013 (1) Background (2) Targeting Criteri a for Data Validation Selection for CY 2013 c. Encounter Selection d. Validation Score CalculationCMS-1525-FC 32 4. Additional Data Validation Conditions under Consideration for CY 2014 and Subsequent Years H. Hospital OQR Reconsideration a nd Appeals Procedures for CY 2013 and Subsequent Years I. Electronic Health Records (EHRs) J. 2012 Medicare EHR Incentive Pr ogram Electronic Reporting Pilot for Hospitals and CAHs 1. Background 2. Electronic Reporting Pilot 3. CQM Reporting under the Electronic Reporting Pilot K. ASC Qualit y Reporting Program 1. Background 2. ASC Quality Reporting Program Measure Selection a. Timetable for Selecting ASC Quality Measures b. Considerations in the Selection of Measures for the ASC Quality Reporting Program 3. ASC Quality Measures for the CY 2014 Payment Determination a. Claims-Based Measures Requiring Submission of Quality Data Codes (QDCs) Beginning January 1, 2012 (1) Patient Burns (NQF #0263) (2) Patient Falls (NQF #0266)CMS-1525-FC 33 (3) Wrong Site, Wrong Side, Wrong Pa tient, Wrong Procedure, Wrong Implant (NQF #0267) (4) Hospital Transfer/Admission (NQF #0265) (5) Prophylactic Intravenous (IV) Antibiotic Timing (NQF #0264) (6) Ambulatory Patient with Appropria te Method of Surgical Hair Removal (NQF #0515) (7) Selection of Prophylactic Antib iotic: First OR Second Generation Cephalosporin (NQF #0268) b. Surgical Site Infection Rate (NQF #0299) 4. ASC Quality Measures for the CY 2015 Payment Determination a. Retention of Measures Adopted fo r the CY 2014 Payment Determination in the CY 2015 Payment Determination b. Structural Measures for the CY 2015 Payment Determination (1) Safe Surgery Checklist Use (2) ASC Facility Volume Data on Selected ASC Surgical Procedures 5. ASC Quality Measures for the CY 2016 Payment Determination a. Retention of Measures Adopted fo r the CY 2015 Payment Determination in the CY 2016 Payment Determination b. HAI Measure: Influenza Vaccina tion Coverage among Healthcare Personnel (HCP) (NQF #0431) 6. ASC Measure Topics for Future ConsiderationCMS-1525-FC 34 7. Technical Specification Updates and Data Publication for the CY 2014 Payment Determination a. Maintenance of Technical Specifications for Quality Measures b. Publication of ASC Qua lity Reporting Program Data 8. Requirements for Reporting of ASC Quality Data for the CY 2014 Payment Determination a. Data Collection and Submission Requi rements for the Claims-Based Measures b. Data Submission Deadlines for the Surgical Site Infection Rate Measure XV. Changes to Whole Hospital and Rural Provider Exceptions to the Physician Self-Referral Prohibition: Exception for Expa nsion of Facility Capacity; and Changes to Provider Agreement Regulations on Pa tient Notification Requirements A. Background B. Changes Made by the Affordable Care Act 1. Provisions Relating to Exception to Ownership and Investment Prohibition (Section 6001(a) of the Affordable Care Act) 2. Provisions of Section 6001(a)(3 ) of the Affordable Care Act C. Process for Requesting an Excep tion to the Prohibition on Expansion of Facility Capacity 1. General Comments 2. Applicable Hospital a. Percentage Increase in Population b. Inpatient AdmissionsCMS-1525-FC 35 c. Nondiscrimination d. Bed Capacity e. Bed Occupancy 3. High Medicaid Facility a. Number of Hospitals in County b. Inpatient Admissions c. Nondiscrimination 4. Procedures for Submitting a Request 5. Community Input 6. Permitted Increase a. Amount of Permitted Increase b. Location of Permitted Increase 7. Decisions 8. Limitation on Review 9. Frequency of Request D. Changes Related to Provider Agr eement Regulations on Patient Notification Requirements XVI. Additional Hospital Value-Based Pu rchasing (Hospital VBP) Program Policies A. Hospital VBP Program 1. Legislative Background 2. Overview of the Hospital I npatient VBP Program Final Rule 3. Additional FY 2014 Hospital VBP Program MeasuresCMS-1525-FC 36 4. Minimum Number of Cases and Meas ures for the Outcome Domain for the FY 2014 Hospital VBP Program a. Background b. Minimum Number of Cases for Mortality Measures, AHRQ Composite Measures, and HAC Measures c. Minimum Number of M easures for Outcome Domain 5. Performance Periods and Base line Periods for FY 2014 Measures a. Clinical Process of Care Domain and Patient Experience of Care Domain Performance Period and Baseline Period b. Outcome Domain Performance Periods and Baseline Periods 6. Performance Standards for the FY 2014 Hospital VBP Program a. Background b. Mortality Measures c. Clinical Process of Care and Pati ent Experience of Care FY 2014 Performance Standards d. AHRQ Measures
e. HAC Measures 7. FY 2014 Hospital VBP Program Scoring Methodology a. FY 2014 Domain Scoring Methodology b. HAC Measures Scoring Methodology 8. Ensuring HAC Reporting Accuracy 9. Domain Weighting for FY 2014 Hospital VBP ProgramCMS-1525-FC 37 B. Review and Correction Process under the Hospital VBP Program 1. Background 2. Review and Correction of Data Submitted to the QIO Clinical Warehouse on Chart-Abstracted Process of Ca re Measures and Measure Rates 3. Review and Correction Process for Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Data a. Phase One: Review and Correction of HCAHPS Data Submitted to the QIO Clinical Warehouse b. Phase Two: Review and Correction of the HCAHPS Scores for the Hospital VBP Program XVII. Files Available to th e Public Via the Internet A. Information in Addenda Rela ted to the Final CY 2012 Hospital OPPS B. Information in Addenda Related to the Final CY 2012 ASC Payment System XVIII. Collection of Information Requirements A. Legislative Requirement s for Solicitation of Comments B. Requirements in Regulation Text 1. ICRs Regarding Basic Comm itments of Providers (§489.20) 2. ICRs Regarding Exceptions Process Re lated to the Prohibition of Expansion of Facility Capacity (§411.362) C. Associated Information Collections Not Specified in Regulatory Text 1. Hospital Outpatient Quality Reporting (Hospital OQR) ProgramCMS-1525-FC 38 2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014, and CY 2015 Payment Determinations a. Previously Adopted Hospital OQR Program Measures for the CY 2012, CY 2013, and CY 2014 Payment Determinations b. Additional Hospital OQR Program Measures for CY 2014 c. Hospital OQR Program Measures for CY 2015 3. Hospital OQR Program Validation Requirements for CY 2013 4. Hospital OQR Program Reconsid eration and Appeals Procedures 5. ASC Quality Reporting Program 6. 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and CAHs 7. Additional Topics XIX. Response to Comments XX. Economic Analyses A. Regulatory Impact Analysis 1. Introduction 2. Statement of Need 3. Overall Impacts for OPPS and ASC Provisions 4. Detailed Economic Analyses a. Effects of OPPS Changes in Th is Final Rule with Comment Period (1) Limitations of Our Analysis (2) Estimated Effects of This Final Rule with Comment Period on HospitalsCMS-1525-FC 39 (3) Estimated Effects of This Fi nal Rule with Comment Period on CMHCs (4) Estimated Effect of This Final Rule with Comment Period on Beneficiaries (5) Effects on Other Providers (6) Effects on the Medi care and Medicaid Programs (7) Alternatives Considered b. Effects of ASC Payment System Cha nges in This Final Rule with Comment Period (1) Limitations of Our Analysis (2) Estimated Effects of This Final Rule with Comment Period on Payments to
ASCs (3) Estimated Effects of This Final Rule with Comment Period on Beneficiaries (4) Alternatives Considered c. Accounting Statements and Tables d. Effects of Requirements for the Ho spital Outpatient Quality Reporting (OQR) Program e. Effects of Changes to P hysician Self-Referral Regulations f. Effects of Changes to Provider Ag reement Regulations on Patient Notification Requirements g. Effects of Additional Hospital VBP Program Requirements h. Effects of the 2012 Electronic Reporting Pilot B. Regulatory Flexibility Act (RFA) Analysis C. Unfunded Mandates Reform Act AnalysisCMS-1525-FC 40 D. Conclusion XXI. Federalism Analysis Regulation Text I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule and This
Final Rule with Comment Period A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System When Title XVIII of the Social Security Act (the Act) was enacted, Medicare payment for hospital outpatient se rvices was based on hospital-spec ific costs. In an effort to ensure that Medicare and its beneficiar ies pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added sect ion 1833(t) to the Act authorizing implementation of a PPS for hos pital outpatient servic es. The OPPS was first implemented for services furnishe d on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR Part 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), enactedCMS-1525-FC 41 on February 8, 2006; the Medicare Improvement s and Extension Act under Division B of Title I of the Tax Relief and Health Ca re Act of 2006 (MIEA-TRHCA) (Pub. L. 109- 432), enacted on December 20, 2006; the Medica re, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacte d 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.); and most recently the Medicare and Medicaid Exte nders Act of 2010 (MMEA, Pub. L. 111-309). Under the OPPS, we pay for hospital out patient services on a rate-per-service basis that varies accordi ng to the ambulatory payment classification (APC) group to which the service is assigned. We us e the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Cu rrent Procedural Terminology (CPT) codes) to identify and group the services within each APC group. The OPPS includes payment for most hospital outpatient services, except thos e identified in section I.B. of this final rule with comment period. Section 1833(t) (1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by community ment al health centers (CMHCs)) and hospital outpatient services that are furnished to inpatie nts who have exhausted their Part A benefits, or who are otherw ise not in a covered Part A stay.CMS-1525-FC 42 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 for an item or service within the same APC group (referred to as the “2 tim es rule”). In implementing this provision, we generally us e the median cost of the ite m 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 data to appropr iately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to asCMS-1525-FC 43 New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology AP C is temporary; that is, we retain a service within a New Technology APC until we ac quire sufficient data to assign it to a clinically appropriate APC group. B. 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 exercised the authority granted under the stat ute to also exclude from the OPPS those 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 Medicare P hysician Fee Schedule (MPFS); 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 composite rate; and services and procedures th at require an inpatient stay that are paid under the hospital inpatient pr ospective payment system (IPPS). We set forth theCMS-1525-FC 44 services that are excluded from paym ent under the OPPS in 42 CFR 419.22 of the regulations. Under §419.20(b) of the regulations, we speci fy the types of hospitals and entities that are excluded from payment under th e OPPS. These excluded entities include: Maryland hospitals, but only for services that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; cr itical access hospitals (CAHs); hospitals located outside of the 50 States, the Dist rict of Columbia, and Puerto Rico; and Indian Health Service (IHS) hospitals. C. 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/HospitalOutpatientPPS/ . The CY 2011 OPPS/ASC final rule with comment period a ppears in the November 24, 2010 Federal RegisterCMS-1525-FC 45 (75 FR 71800). In that final rule with co mment period, we revised the OPPS to update the payment weights and conversion factor for services payable under the CY 2011 OPPS on the basis of claims data from Janu ary 1, 2009, through December 31, 2009, and to implement certain provisions of the Affordable Care Act. In addition, we responded to public comments received on the provisions of the CY 2010 final rule with comment period (74 FR 60316) pertaining to the APC a ssignment of HCPCS codes identified in Addendum B to that rule with the new in terim (“NI”) comment indicator, and public comments received on the August 3, 2010 O PPS/ASC proposed rule for CY 2011 (75 FR 46170). On July 18, 2011, the CY 2012 OPPS/ASC proposed rule appeared in the Federal Register (76 FR 42170). This proposed rule, w ith a 60-day comment period that ended on August 30, 2011, proposed to revise the Medicare OPPS and the ASC payment system to implement applicable statutory requiremen ts and changes arisi ng from our continuing experience with these systems. D. Advisory Panel on Ambulatory Payment Classification (APC) Groups 1. Authority of the Advisory Panel on Ambulatory Payment Classification (APC) Groups (the APC 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 outside panel of experts to review the clinical integrity of the payment groups and their weights under the OPPS. The Act further specifies that the panel will act in an advisory capacity. The APC Panel, discussed under section I.D.2. of this finalCMS-1525-FC 46 rule, fulfills these requirements. The APC Pa nel is not restricted to using data compiled by CMS, and it may use data collected or developed by organizations outside the Department in conducting its review. 2. Establishment of the APC Panel On November 21, 2000, the Secretary signed the initial charter establishing the APC Panel. This expert panel, which may be composed of up to 15 representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise) subject to the OPPS, reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. The APC Panel is technical in nature, and it is governed by the provisi ons of the Federal Advisory Committee Act (FACA). Since its initial ch artering, the Secretary has rene wed the APC Panel’s charter five times: on November 1, 2002; on November 1, 2004; on November 21, 2006; on November 2, 2008 and November 12, 2010. The current charter spec ifies, among other requirements, that: the APC Panel continues to be technical in nature ; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The current APC Panel membership and other information pertaining to the APC 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

.CMS-1525-FC 47 3. APC Panel Meetings a nd Organizational Structure The APC Panel first met on February 27 through March 1, 2001. Since the initial meeting, the APC Panel has held multiple mee tings, with the last meeting taking place on August 10-12, 2011. Prior to each m eeting, we publish a notice in the Federal Register to announce the meeting and, when necessar y, to solicit nominations for APC Panel membership and to announce new members. The APC Panel has establis hed an operational structur e that, in part, currently includes the use of three subcom mittees to facilitate its re quired APC review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups and Status Indicator (SI) Assignments (previously known as the Packaging Subcommittee). The Data Subcommittee is responsible for studying the data issues confronting the APC Panel and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the APC Panel on all technical issues pertaining to observation services and hospi tal outpatient visits paid under the OPPS (for example, APC configur ations and APC payment weights). The Subcommittee for APC Groups and SI Assignmen ts advises the Panel on the following issues: the appropriate SIs to be assigned to HCPCS code s, including but not limited to whether a HCPCS code or a category of code s should be packaged or separately paid; and the appropriate APCs to be assigned to HCPCS codes regarding services for which separate payment is made.CMS-1525-FC 48 Each of these subcommittees was established by a majority vote from the full APC Panel during a scheduled APC Panel meeting, and the APC Panel recommended that the subcommittees continue at th e August 2011 APC Panel meeting. We accept those recommendations of the APC Panel. All subcommittee recommendations are discussed and voted upon by the full APC Panel. Discussions of the other recommenda tions made by the APC Panel at the February/March 2011 and August 2011 APC Panel meetings are include d in the sections of this final rule with comment period th at are specific to eac h recommendation. For discussions of earlier APC Panel meetings and recommendations, we refer readers to previously published hospital OPPS/ASC propos ed and final rules, the CMS Web site mentioned earlier in this secti on, and the FACA database at: http://fido.gov/facadatabase/public.asp

. E. Summary of the Major Contents of the CY 2012 OPPS/ASC Proposed Rule In the CY 2012 OPPS/ASC proposed rule that appeared in the Federal Register on July 18, 2011 (76 FR 42170), we set forth pr oposed changes to the Medicare hospital OPPS for CY 2012 to implement statutory requ irements and changes arising from our continuing experience with the system. In addition, we set forth proposed changes to the revised Medicare ASC payment system for CY 2012, including proposed updated payment weights, covered surgical procedures , and covered ancillary items and services based on the proposed OPPS update. In additi on, we proposed to make changes to the rules governing limitations on certain physician re ferrals to hospitals in which physicians have an ownership or investment interest , provider agreement regulations on patientCMS-1525-FC 49 notification requirements, and the rules gove rning the Hospital I npatient Value-Based Purchasing (VBP) Program. The following is a summary of the major changes that we proposed to make for
CY 2012: 1. Updates Affecting OPPS Payments In section II. of the proposed rule, we set forth—

● The methodology used to recalibrate the proposed APC relative payment weights.

● The proposed changes to packaged services.

● The proposed update to the conversion factor used to determine payment rates under the OPPS. In this section, we propos ed changes in the amounts and factors for calculating the full annual update in crease to the conversion factor.

● The proposed consideration of adopting a policy that would address situations where IPPS wage index adjustments result in significant fluctuations in the wage index.

● The proposed update of st atewide average default CCRs.

● The proposed application of hold harmless transitional outpatient payments (TOPs) for certain small rural hospitals, ex tended by section 3121 of the Affordable Care
Act.

● The proposed payment adjustment for rural SCHs.

● The proposed payment adjustment for cancer hospitals.

● The proposed calculation of the hospital outpatient outlier payment.

● The calculation of the proposed national unadjusted Medicare OPPS payment.CMS-1525-FC 50

● The proposed beneficiary copayments for OPPS services. 2. OPPS Ambulatory Payment Cla ssification (APC) Group Policies In section III. of the pro posed rule, we discussed--

● The proposed additions of new HCPCS codes to APCs.

● The proposed establishment of a number of new APCs.

● Our analyses of Medicare claims data and certain recommendations of the APC Panel.

● The application of the 2 times rule and proposed exceptions to it.

● The proposed changes to specific APCs.

● The proposed movement of procedures from New Technology APCs to clinical
APCs. 3. OPPS Payment for Devices In section IV. of the proposed rule , we discussed the proposed pass-through payment for specific categories of devices and the proposed adjustment for devices furnished at no cost or with partial or full credit. 4. OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals In section V. of the proposed rule , we discussed the proposed CY 2012 OPPS payment for drugs, biologicals, and ra diopharmaceuticals, including the proposed payment for drugs, biologicals, and radi opharmaceuticals with and without pass-through

status.CMS-1525-FC 51 5. Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices In section VI. of the proposed rule, we discussed the estimate of CY 2012 OPPS transitional pass-through spending fo r drugs, biologicals, and devices. 6. OPPS Payment for Hospital Outpatient Visits In section VII. of the proposed rule, we set forth our proposed policies for the payment of clinic and emergency department visits and critical care services based on claims data. 7. Payment for Partial Hospitalization Services In section VIII. of the proposed rule, we set forth our proposed payment for partial hospitalization services, including the proposed separate threshold for outlier payments for CMHCs. 8. Procedures That Would Be Paid Only as Inpatient Procedures In section IX. of the proposed rule, we discussed the procedures that we proposed to remove from the inpatient list and a ssign to APCs for payment under the OPPS. 9. Policies on Supervision Standards for Outp atient Services in Hospitals and CAHs In section X. of the proposed rule, we discussed proposed policy changes relating to the supervision of outpatient servi ces furnished in hospitals and CAHs. 10. OPPS Payment Status and Comment Indicators In section XI. of the proposed rule, we discussed our proposed changes to the definitions of status indicators assigned to APCs and presented our proposed comment indicators.CMS-1525-FC 52 11. OPPS Policy and Payment Recommendations In section XII. of the proposed rule, we addressed recommendations made by the Medicare Payment Advisory Commission (MedPAC) in its March 2011 report to Congress, by the Office of Inspector Genera l (OIG), and by the APC Panel regarding the OPPS for CY 2012. 12. Updates to the Ambulatory Surg ical Center (ASC) Payment System In section XIII. of the proposed rule, we discussed the proposed updates of the revised ASC payment system and payment rates for CY 2012. 13. Reporting Quality Data for Annual Payment Rate Updates In section XIV. of the proposed rule, we discussed the proposed measures for reporting hospital outpatient quali ty data for the OPD fee sc hedule increase factor for CY 2013 and subsequent calendar years; set fo rth the requirements for data collection and submission; and discuss the reduction to the OPPS OPD fee sche dule increase factor for hospitals that fail to meet the Hosp ital OQR Program requirements. We also discussed proposed measures for reporting ASC quality data for the annual payment update factor for CYs 2014, 2015, and 2016; and set forth the requirements for data collection and submission fo r the annual payment update. 14. Changes to EHR Incentive Program for Eligible Hospitals and CAHs Regarding Electronic Submission of Clinical Quality Measures (CQMs) In section XIV.J. of the proposed rule, we proposed to allow e ligible hospitals and CAHs participating in the Medicare EHR In centive Program to meet the CQM reportingCMS-1525-FC 53 requirement of the EHR Incentive Program fo r payment year 2012 by participating in the 2012 Medicare EHR Incentive Program Electronic Reporting Pilot. 15. Changes to Provisions Relating to Phys ician Self-Referral Pr ohibition and Provider Agreement Regulations on Patient Notification Requirements In section XV. of the proposed rule, we presented our proposed exception process for expansion of facility capacity under the whole hospital and rural provider exceptions to the physician self -referral law, and proposed cha nges to the provider agreement regulations on patient no tification requirements. 16. Additional Changes Relating to th e Hospital Inpatient VBP Program In section XVI. of the proposed rule, we presented our proposed requirements for the FY 2014 Hospital Inpatient VBP Program. 17. Economic and Federalism Analyses In sections XX. and XXI. of the proposed rule, we set forth an analysis of the regulatory and federalism impacts that the proposed changes would have on affected entities and beneficiaries. F. Public Comments Received in Res ponse to the CY 2012 OPPS/ASC Proposed Rule We received approximately 1,356 timely pieces of correspondence containing multiple comments on the CY 2012 OPPS/ASC pr oposed rule that appeared in the Federal Register on July 18, 2011. We note that we received some public comments that were outside the scope of the CY 2012 OPPS/ASC proposed rule. Out of scope public comments are not addressed in this CY 2012 OPPS/ASC final rule with comment period. Summaries of the public comments that are within th e scope of the proposed ruleCMS-1525-FC 54 and our responses are set forth in the various sections of this fina l rule with comment period under the appr opriate headings. G. Public Comments Received on the CY 2011 OPPS/ASC Final Ru le with Comment Period We received approximately 43 timely pieces of correspondence on the CY 2011 OPPS/ASC final rule with commen t period that appeared in the Federal Register on November 24, 2010 (75 FR 71800), some of which contained multiple comments on the interim APC assignments and/or status indi cators of HCPCS codes identified with comment indicator “NI” in Addendum B to that final rule with comment period. Summaries of those public comments on topics open to comment in the CY 2012 OPPS/ASC final rule with comm ent period and our responses to them are set forth in various sections of this fi nal rule with comment period under the appropriate headings. II. Updates Affecting OPPS Payments A. Recalibration of APC Relative Weights 1. Database Construction a. Database Source and Methodology Section 1833(t)(9)(A) of the Act requires that the Secretary 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.CMS-1525-FC 55 In the CY 2012 OPPS/ASC proposed rule (76 FR 42179), for the CY 2012 OPPS, we proposed to recalibrate the APC relative payment weights for services furnished on or after January 1, 2012, and before January 1, 2013 (CY 2012), using the same basic methodology that we described in the CY 2011 OPPS/ASC final rule with comment 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 2012, we used approximately 138 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furn ished on or after January 1, 2010, and before January 1, 2011. For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2012, we used approximately 148 million final action claims (claims for which all disput es and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2010, and before January 1, 2011. (For exact counts of claims used, we refer readers to the claims accounting narrativ e under supporting documentation for the proposed rule and this final rule with comment period on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/ .) Of the 148 million final action claims for services provided in hospital outpatient settings used to calculate the final CY 2012 OP PS payment rates for this final rule with comment period, approximately 112 million clai ms were the type of bill potentiallyCMS-1525-FC 56 appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of th e 112 million claims, approximately 3 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining appr oximately 109 million claims, we created approximately 110 million single records, of which approximately 75 million were “pseudo” single or “single session” claims (created from approximately 25 million multiple procedure claims using the proce ss we discuss later in this section). Approximately 888,000 claims were trimme d out on cost or units in excess of +/- 3 standard deviations from the geometric mean, yielding approximately 108 million single bills for median setting. As described in section II.A.2. of this final rule with comment period, our data devel opment process is designed with the goal of using appropriate cost information in se tting the APC relative 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. Ultimately, we were able to use for CY 2012 ratesetting someCMS-1525-FC 57 portion of approximately 94 percent of the CY 2010 claims containing services payable under the OPPS. The final APC relative we ights and payments for CY 2012 in Addenda A and B to this final rule with comment period (which are referenced in section XVII. of this final rule with comment period and available vi a the Internet on the CMS Web site) were calculated using claims from CY 2010 that were processed before July 1, 2011, and continue to be based on the median hospital costs for services in the APC groups. Under the methodology we are adopting in this final ru le with comment period, we select claims for services paid under the OPPS and match th ese claims to the most recent cost report filed by the individual ho spitals 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 calculat e the median costs underpinning the APC relative payment weights and the CY 2012 payment rates. b. Use of Single and Multiple Procedure Claims For CY 2012, in general, we proposed to continue to use single procedure claims to set the medians on which the APC relative payment weights would be based, with some exceptions as discussed below in this section. We generally use single procedure claims to set the median costs for APCs because we believe that the OPPS relative weights on which payment rates are based shoul d be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.CMS-1525-FC 58 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 proposed to continue 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 enabled us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single procedure claims. The history of our use of a bypass list to generate “pseudo” singl e procedure claims is well do cumented, most recently in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71811 through 71822). In addition, for CY 2008, we increased packag ing and created the fi rst composite APCs. We have continued our packaging policies and the creation of composite APCs for CYs 2009, 2010, and 2011, and we proposed to c ontinue them for CY 2012. Increased packaging and creation of composite APCs al so increased the number of bills that we were able to use for median calculation 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 to calcu late APC median costs. We have continuedCMS-1525-FC 59 the composite APCs for multiple imaging services for CYs 2010 and 2011, and we proposed to continue to create them for CY 2012. We refer readers to section II.A.2.e. of the proposed rule and this final rule with co mment period for a discussion of the use of claims to establish median costs for composite APCs. We proposed to continue to apply these processes to enable us to use as much claims data as possible for ratesetting fo r the CY 2012 OPPS. This methodology enabled us to create, for the proposed rule, appr oximately 67 million “pseudo” single procedure claims, including multiple imaging composite “s ingle session” bills (we refer readers to section II.A.2.e.(5) of the proposed rule for further discussion), to add to the approximately 33 million “natural” single procedure claims. For the proposed rule, “pseudo” single procedure a nd “single session” pro cedure bills represented approximately 67 percent of all single procedur e bills used to calculate median costs. For CY 2012, we proposed to bypass 460 HCPCS codes for CY 2012 that were identified in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypa ss list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” sing le bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year’s bypass list and use the updated year’s data (for CY 2012, data ava ilable for the February 28-March 1, 2011 APC Panel meeting from CY 2010 claims processed through September 30, 2010, and CY 2009 claims data processed through June 30, 2010, used to model the payment ratesCMS-1525-FC 60 for CY 2011) to determine whether it would be appropriate to propos e to add additional codes to the previous year’s bypass list. For CY 2012, we proposed to continue to bypass all of the HCPCS codes on the CY 2011 OPPS bypass list. We updated HCPCS codes on the CY 2011 bypass list that were mapped to new HCPCS codes for CY 2012 ratesetting by evaluating data for the replacement codes und er the empirical criteria described below and also removing the HCPCS codes that we proposed to be deleted for CY 2012, which were listed in Table 1 of the proposed rule. We also proposed to remove HCPCS codes that were not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. None of these deleted codes were “overlap bypass codes” (t hose HCPCS codes that are bo th on the bypass list and are members of the multiple imaging composite AP Cs). We also proposed to add to the bypass list for CY 2012 all HCPCS codes not on the CY 2011 bypass list that, using either the CY 2011 final rule data (CY 2009 claims) or the February 28-March 1, 2011 APC Panel data (first 9 months of CY 2010 claims), met the empi rical criteria for the bypass list that are summarized below. The entire list proposed for CY 2012 (including the codes that remain on the bypass list from prior years) was open to public comment. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the representation of packaging on “natural” si ngle procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. The proposed criteria for the bypass list were:CMS-1525-FC 61

● 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 procedures 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 median cost of packaging obser ved in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount of error in redistributed costs. During the assessment of claims against the bypass criteria, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount and vol ume protects the validity of cost estimates for low cost services billed with the bypassed service. In response to comments to the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be up dated, we considered whether it would be appropriate to update the $50 packaged cost threshold for 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 byCMS-1525-FC 62 the market basket increase would prevent contin uing decline in the threshold’s real value. For CY 2011, based on CY 2009 claims data, we proposed to apply the final market basket increase of 3.6 percent published in the CY 2009 OPPS/ASC final rule with comment period (73 FR 26584) to the $50 packag ed cost threshold used in the CY 2010 OPPS/ASC final rule with comm ent period (74 FR 60325). This calculation led us to a proposed packaged cost threshold for bypa ss list additions for CY 2011 of $50 ($51.80 rounded to $50). We stated that we believe that applying the market basket increase from the year of claims data to the packaged cost threshold, rounded to the nearest $5 increment, would appropriately account for the effects of inflation when considering additions to the bypass list because the market basket increase reflects the extent to which the price of inputs for hospital services is expected to increase compared to the price of inputs for hospital services in the prior year. We proposed for CY 2012, based on the same rationale described for the CY 2011 OPPS/ASC final rule with comment period (75 CFR 71812), to continue to update the pack aged cost threshold by the market basket increase. By applying the final CY 2011 mark et basket increase of 1.85 percent to the prior non-rounded dollar threshold of $51.80 ( 75 FR 71812), we determined that the threshold increases for CY 2012 to $55 ($52.76 rounded to $55, the nearest $5 increment). Therefore, we proposed to set the median packaged cost threshold on the CY 2010 claims at $55 for a code to be c onsidered for addition to the CY 2012 OPPS bypass list.

● The code is not a code for an unlisted service.CMS-1525-FC 63 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 2012 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also proposed to continue to include on the bypass list certain HCPCS codes in order to purposefully direct the as signment of packaged costs to a companion code where services always appear togeth er and where there w ould otherwise be few single procedure claims available for ratese tting. For example, we have previously discussed our reasoning for adding HC PCS code G0390 (Trauma response team associated with hospital critic al care service) and the CP T codes for additional hours of drug administration to the bypass list (73 FR 68513 and 71 FR 68117 through 68118). As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “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 bypass 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 reassessedCMS-1525-FC 64 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 readers to section II.A.2.b. of the proposed rule and this final rule with comment peri od for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be us ed for calculating composite AP C median costs. “Overlap bypass codes” that are members of the propos ed multiple imaging composite APCs were identified by asterisks (*) in Addendum N to the proposed rule (which is available via the Internet on the CMS Web site). Addendum N to the proposed rule incl uded the proposed list of bypass codes for CY 2012. The list of bypass codes contains codes that were reported on claims for services in CY 2010 and, therefor e, includes codes that were in effect in 2010 and used for billing but were deleted for CY 2011. We retained these deleted bypass codes on the proposed CY 2012 bypass list because these co des existed in CY 2010 and were covered OPD services in that period, and CY 2010 cl aims data are used to calculate CY 2012 payment rates. Keeping these deleted bypass codes on the bypass list potentially allowed us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the proposed multiple imaging composite APCs were identified by asterisks (*) in the third column of Adden dum N to the proposed rule. HCPCS codes that we proposed to add for CY 2012 were identified by asterisks (*) in the fourth column of Addendum N.CMS-1525-FC 65
Comment : One commenter recommended that CMS add CPT code 77332 (Treatment devices, design and construction; simple (simple block, simple bolus)) to the bypass list in order to yield additional clai ms for ratesetting for composite APC 8001 (LDR Prostate Brachytherapy Composite). The commenter’s analysis showed that bypassing the code would yield a significant increase in the nu mber of claims to set the composite rate. Response : As discussed above, we perform an analysis on the natural single major claims to determine possible additions to the bypass list. In doing so, we apply a set of empirical criteria to identify codes that would be appropriate for addition to the bypass list, based on how well they represent the clinic al use of the service as well as the limited packaging impact of bypassing those codes. These criteria are consistent with the goal of using appropriate data for rateset ting. The commenter suggested that bypassing the code would be appropriate because it would yield additional claims without a discussion of the impact of bypassing the c ode. In the APC Panel 2012 data used to create the bypass list proposal , the code failed to meet the empirical criteria. Of the 134 available natural single major claims, 117 ( 87 percent) of those claims contained packaging, which exceeds the 5 percent limit for a code to be placed on the bypass list. Additionally, the median cost of packaging on those claims was $200.23, which exceeds the $55 limit for the code to be placed on the bypass list. These data suggest that bypassing the code may potentially and relatively often, distri bute packaged costs, where it might not be appropriate. For example, where CPT code 77332 is furnished on the day on which a visit was the only other payabl e service, if CPT code 77332 were on theCMS-1525-FC 66 bypass list, the packaging would be associat ed with the visit, not with CPT code 77332, because we use the line-item costs fo r codes on the bypass list without their attendant packaging to esta blish the median cost for the bypass code. This would inappropriately reduce the median cost for CPT code 77332. While we seek to use as much available information as possible that is available in the OPPS claims data set, we do so with the goal of using appropriate cost information in setting the APC relative weights. In this case, we believe that adding the CPT code 77332 to the bypass list would create considerable risk in assigning p ackaging that rightfully should be associated with CPT code 77332 to other services. Th erefore we are not adding CPT code 77332 to the bypass list for CY 2012.
Comment : One commenter recommended that CMS continue to explore additional methodologies to increase the numbe r of procedure claims used for rate setting, including expanding the crite ria for inclusion on the bypass list. Response : We are always seeking additional methodologies that would enable us to increase the number of procedure claims used for rate setting. However, it is important to us that we ensure that any new met hodology or change to current methodology or criteria would not result in costs that are appropriately packaged into a service being inappropriately assigned to another service, as , for example, we believe would be the case if we were to place CPT code 77332 on the bypass list. After consideration of th e public comments we receive d, we are adopting as final the proposed “pseudo” single claims pro cess and the final CY 2012 bypass list of 460 HCPCS codes, as displayed in Addendum N of this final rule with comment periodCMS-1525-FC 67 (available via the Internet on the CMS Web site). Table 1 below contains the list of codes that we are removing from the CY 2012 by pass list because these codes were either deleted from the HCPCS before CY 2010 (and therefore were not covered OPD services in CY 2010) or were not separately pa yable codes under the CY 2012 OPPS because these codes are not used for ratesetting (and therefore would not need to be bypassed). None of these deleted codes we re “overlap bypass” codes.
TABLE 1.—HCPCS CODE S REMOVED FROM THE CY 2012 BYPASS LIST
HCPCS

Code HCPCS Short Descriptor 29220 Strapping of low back 78350 Bone mineral, single photon 90816 Psytx, hosp, 20-30 min 90818 Psytx, hosp, 45-50 min 90826 Intac psytx, hosp, 45-50 min 99241 Office consultation 99242 Office consultation 99243 Office consultation 99244 Office consultation 99245 Office consultation 0144T CT heart wo dye; qual calc

c. Calculation and Use of Cost-to-Charge Ratios (CCRs) In the CY 2012 OPPS/ASC proposed rule (76 FR 42181), for CY 2012, we proposed to continue to use the hospital-spec ific overall ancillary and departmental CCRs to convert charges to estimated costs through ap plication of a revenue code-to-cost center crosswalk. To calculate the APC median costs on which the proposed CY 2012 APC payment rates were based, we calculated hos pital-specific overal l ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2010 claimsCMS-1525-FC 68 data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2009. For the CY 2012 OPPS proposed rates, we used the set of claims processed during CY 2010. We applied the hospital-specific CCR to the hospital’s charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hier archy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is availabl e for review and continuous comment on the CMS Web site at: http://www.cms.gov/HospitalOutpati entPPS/03_crosswalk.asp#TopOfPage

. To ensure the completeness of the reve nue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2010 (the year of the claims data we used to calculate the pr oposed CY 2012 OPPS payment rates). For CY 2010, the National Uniform Billing Committee added revenue codes 860 (Magnetoencephalography (MEG); general classification) and 861 (Magnetoencephalography (MEG)). For purposes of applying a CCR to charges reported under revenue codes 860 and 861, we proposed to use nonstandard Medicare cost report cost center 3280 (Electrocardi ogram (EKG) and Electroence phalography (EEG)) as the primary cost center and to use standard co st center 5400 (Electroencephalography (EEG)) as the secondary cost center. We believe that MEG, which evaluates brain activity, is similar to EEG, which also evaluates brain acti vity, and that the few hospitals that furnish MEG are likely to furnish it in the same depart ment of the hospital in which they furnish EEG services. Therefore, we believe that the CCRs that we apply to the EEG revenue codes are more likely to result in a more accurate estimated cost for MEG than would theCMS-1525-FC 69 application of the hospital-specific overal l ancillary CCR. For hospitals that report charges under revenue code 860 or 861 but do not report costs on thei r cost report under cost center 3280 or 5400, we proposed to appl y the hospital-specifi c overall CCR to the charges reported under revenue code 860 or 861 for purposes of estimating the cost of these services. We discuss MEG, including th e issue of the CCR to be applied to charges for MEG, in section III.D. of this final rule with comment period. We note that revenue codes with effective dates in CY 2011 are not relevant to this process because these new revenue codes were not applicable to cl aims for services furnished during CY 2010. 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, 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). One longstanding exception to this general methodology for calculation of CCRs used for converti ng charges to costs on each claim is the calculation of median blood costs, as discu ssed in section II.A.2.d.( 2) of the proposed rule and this final rule with comment pe riod and which has been our standard policy since the CY 2005 OPPS. 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. WeCMS-1525-FC 70 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 for hospitals that filed outpatient claims in CY 2010 before determining whether the CCRs fo r 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, in most cases , cost reports with cost reporting periods beginning in CY 2009. For the proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate median costs for the proposed CY 2012 OPPS payment rates. If the most r ecent available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-speci fic CCRs for each hospital. We used the overall ancillary CCR referenced in section II.A. 1.c. of the proposed rule for all purposes that require use of an overall ancillary CCR. We proposed to continue this longstanding methodology for the calculation of median costs for CY 2012. Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflectCMS-1525-FC 71 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. To explore this issue, in August 2006, we awarded a contract to RTI International (RTI) to study the effects of charge co mpression in calculating the IPPS cost-based relative weights, particularly with regard to the impact on inpatient diagnosis-related group (DRG) payments, and to consider methods to better capture the variation in cost and charges for individual se rvices when calculating costs for the IPPS relative weights across services in the same cost center. RTI issued a report in March 2007 with its findings on charge compression, which is available on the CMS Web site at: http://www.cms.gov/reports/downloads/Dalton.pdf . Although this report was focused largely on charge compression in the context of the IPPS cost-based relative weights, because several of the findings were relevant to the OPPS, we discusse d that report in the CY 2008 OPPS/ASC proposed rule (72 FR 42641 through 42643) and discussed those findings again in the CY 2008 OPPS/ASC fina l rule with comment period (72 FR 66599 through 66602). In August 2007, we contracted with RTI to evaluate the cost estimation process for the OPPS relative weights because its 2007 report had concentrated on IPPS DRG cost-based relative weights. The results of RTI’s analyses had implications for both the OPPS APC cost-based relati ve weights and the IPPS MS -DRG (Medicare severity) cost-based relative weights. The RTI fina l report can be found on RTI’s Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-CMS-1525-FC 72 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 there was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule. Specifically, we fi nalized our proposal for both the OPPS and IPPS to create one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current CCR for “Medical Supplies and Equipm ent” into one CCR for low-cost medical supplies and another CCR for high-cost implantable devices in order to mitigate some of the effects of charge compression. Accord ingly, in Transmittal 20 of the Provider Reimbursement Manual, Part II (PRM-II ), Chapter 36, Form CMS-2552-96, which was issued in July 2009, we created a new subs cripted Line 55.01 on Worksheet A for the “Implantable Devices Charged to Patients” cost center. This new subscripted cost center, placed under the standard line for “Medical Su pplies Charged to Patients,” is available for use for cost reporting periods beginning on or after May 1, 2009. A subscripted cost center is the addition of a se parate new cost center line a nd description which bears a logical relationship to the sta ndard cost center line and is located immediately following a standard cost center line. Subscripting a cost center line adds flexibility and cost center expansion capability to the cost report. Fo r example, Line 55 of Worksheet A on Form CMS 2552-96 (the Medicare hospital cost repor t) is “Medical Supplies Charged toCMS-1525-FC 73 Patients.” The additional cost center, which isolates the costs of “Implantable Medical Supplies Charged to Patients”, was creat ed by adding subscripted Line 55.01 to Worksheet A and is defined as capturing the costs and charges billed with the following UB-04 revenue codes: 0275 (Pacemaker); 0276 (In traocular lens); 0278 (other implants); and 0624 (FDA investigations devices) (73 FR 48458). In preparation for the FY 2012 IPPS proposed rule and the CY 2012 OPPS proposed rule, we assessed the availability of data in the “Implantable Devices Charged to Patients” cost center. In order to develop a robust analys is regarding the use of cost data from the “Implantable Devices Charged to Patients” cost center, we believe that it is necessary to have a critical ma ss of cost reports file d with data in this cost center. The cost center for “Implantable Devices Charged to Patients” is effectiv e for cost reporting periods beginning on or after May 1, 2009. We checked the availability of CY 2009 cost reports in the December 31, 2010 quarter ending update of HCRIS, which is the latest upload of CY 2009 cost report data that we could use for the proposed rule. We determined that there were only 437 hospita ls that had completed the “Implantable Devices Charged to Patients” cost center (o ut of approximately 3,500 IPPS hospitals). We stated in the proposed rule that we do not believe this is a sufficient amount of data from which to generate a meaningful analysis. Therefore, we did not propose to use data from the “Implantable Devices Charged to Patie nts” cost center to create a distinct CCR for Implantable Devices Charged to Patients for use in calculating the OPPS relative weights for CY 2012. We stated that we woul d reassess the availability of data for the “Implantable Devices Charged to Patients” cost center for the CY 2013 OPPS rulemakingCMS-1525-FC 74 cycle. Because there is approxi mately a 3-year lag in the ava ilability of cost report data for IPPS and OPPS ratesetting purposes in a gi ven calendar year, we believe we may be able to use data from the revised Medicare hospital cost report form to estimate costs from charges for implantable devices for the CY 2013 OPPS relative weights. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients, ” public comments, and our responses, we refer readers to the FY 2009 IPPS final rule (73 FR 48458 through 45467). In the CY 2009 OPPS/ASC final rule with comment period, we indicated that we would be making some other OPPS-specific changes in response to the RTI report recommendations. Specifically, these cha nges included modifications to the cost reporting software and the additi on of three new nonstandard cost centers. With regard to modifying the cost reporting preparation softwa re in order to offer additional descriptions for nonstandard cost centers to improve the accuracy of reporting for nonstandard cost centers, we indicated that the change would be made for th e next release of the cost report software. These changes have been ma de to the cost reporting software with the implementation of CMS Transmittal 21, under Chapter 36 of the PRM-II, available on the CMS Web site at: http://www.cms.gov/Manuals/PBM/ , which is effective for cost reporting periods ending on or after October 1, 2009. We also indicated that we intended to add new nonstandard cost centers for “Cardiac Rehabilitati on,” “Hyperbaric Oxygen Therapy,” and “Lithotripsy.” We note that, in January 2010, CMS issued Transmittal 21 which updated the PRM-II, Chapter 36, Form CMS-2552-96. One of the updates in this transmittal established nonstandard costCMS-1525-FC 75 centers for “Cardiac Rehabilitation,” “Hyperb aric Oxygen Therapy,” and “Lithotripsy” for use on Worksheet A. These three new nonst andard cost centers became available for cost reporting periods ending on or after October 1, 2009, and are included in the revenue code to cost center crosswalk we proposed to use for calculating payment rates for the CY 2012 OPPS (76 FR 42183). Specifically, th e nonstandard cost centers are: 3120 (Cardiac Catheterization Laboratory); 3230 (CAT Scan); 3430 (Magnetic Resonance Imaging (MRI)). The revenue code to cost cen ter crosswalk that we proposed to use for purposes of estimating the median costs of items and services for the CY 2012 OPPS is available for review and conti nuous comment (outside of comment on this final rule with comment period) on the CMS Web site at: http://www.cms.gov/HospitalOutpati entPPS/03_crosswalk.asp#TopOfPage Furthermore, in the FY 2011 IPPS/LTC H PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resona nce Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospita ls report the costs and charges for these services under new cost cente rs on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS/ LTCH PPS and CY 2009 OPPS/ASC proposed and final rules, RTI found that the costs a nd charges of CT scans, MRI, and cardiac catheterization differ significantly from the cost s and charges of other services included in the standard associated cost center. RT I also concluded that both the IPPS and OPPS relative weights would better estimate the cost s of those services if CMS were to add standard costs centers for CT scans, MRI, and cardiac catheteri zation in order forCMS-1525-FC 76 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 PP S final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRI, and cardiac catheterization.) The new standard cost centers for MRI, CT scans, and cardiac catheterization are eff ective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. CMS issued the new hospital cost report Form CMS-2552-10 on December 30, 2010. The new cost report form can be accessed at the CMS Web site at: https://www.cms.gov/Manuals/PBM/itemdeta il.asp?filterType= none&filterByDID=- 99&sortByDID=1&sortOrder=ascendi ng&itemID=CMS021935&intNumPerPage=10

. Once at this Web site, users s hould double click on “Chapter 40.” We believe that improved cost report soft ware, the incorporation of new standard and nonstandard cost centers, and the elimin ation of outdated requirements will improve the accuracy of the cost data contained in the electronic cost report data files and, therefore, the accuracy of our cost estimation processes for the OPPS relative weights. We will continue our standard practice of examining ways in which we can improve the accuracy of our cost estimation processes.
Comment : Commenters requested that CMS r econsider its position to not use the data from the implantable device cost cente r to calculate the APC relative weights for CY 2012. Commenters noted that in the FY 2012 IPPS proposed rule, CMS found that only 437 hospitals out of approximately 3,500 IPPS hospitals reported data in theCMS-1525-FC 77 “Implantable Devices Charged to Patients” cost center of the Medicare hospital cost report based on the December 2010 update of FY 2009 HCRIS. Several commenters said that an analysis by their c ontractor identified nearly 800 hospitals using the new cost center in the April 2011 HCRIS update and esti mated that 1000 hospitals would be using the new cost center by August 2011. Therefore, the commenters believed there is now a sufficient amount of data to use the impla ntable device CCR to calculate the relative weights and improve the accuracy of the paymen t rates. Commenters also suggested that because the IPPS and OPPS use CCRs calculate d at different levels , the analysis of robustness for the new cost center is less signi ficant in the OPPS than in the IPPS, and should not be necessary before adopting th e CCRs from the Implantable Device cost center. One commenter suggested that the on ly justifiable reason to not implement the new CCR would be for issues related to suspect data, and that the limited use of the cost center should not delay implementation of the new Implantable Medical Device cost center CCR. One commenter suggested that, should the available data be deemed insufficient, CMS should provide additional analysis justifying why that data were insufficient, provide data on the representa tiveness of the hospita ls reporting under the implantable medical device cost center and explore other alternatives in addressing charge compression. Response : In the CY 2012 OPPS/ASC proposed rule, we indicated that we did not have sufficient cost report data to devel op the kind of robust analysis that we assured the public we would provide prior to implementing a new CCR for implantable medical devices. Therefore, we stated that we would reassess the availability of data forCMS-1525-FC 78 CY 2013. We have reviewed the availability of FY 2009 cost reports in the June 30, 2011 quarter ending update of HCRIS, which is th e latest upload of FY 2009 cost report data that we currently have available. We have determ ined that, for cost reporting periods beginning on or after May 1, 2009, the effective date of line 55.30 (Implantable Devices Charged to Patients), there were 363 hospitals paid under the OPPS whose claims were used for the calculation of median costs in the CY 2012 OPPS/ASC proposed rule (out of approximately 4,000 OPPS hospitals) that have completed the “Implantable Devices Charged to Patients” co st center in the HCRIS data for the quarter ending December 31, 2010. In contrast, we found that there were 1,689 OPPS hospitals that reported costs in the implantable device co st center in the HCRIS data for the quarter ending June 30, 2011, that were us ed to calculate the median costs that are the basis for the CY 2012 payment rates established in this final rule with public comment period. We agree that there are differences betw een the OPPS and IPPS in the calculation of the CCRs and their use in es tablishing estimated costs. However, we believe that it is important to analyze the CCRs used for calcu lation of the median costs for procedures that use implantable devices and the imp act of changes in these median costs on payments for all services before the new CCRs for implantable devices are adopted. Such analysis is important because it allo ws the opportunity for the public to provide comment on the impact of the adoption of t hose CCRs on payment for services that do not use implantable devices. In a budget ne utral payment system, payment for services that do not require implantable devices would be reduced as a result of increases in payment for services that use implantable devices. Quarterly H CRIS updates and theCMS-1525-FC 79 commenters themselves indicate that hundreds of hospitals would report cost report data for the new implantable device cost center in th e HCRIS data used for this final rule with comment period, although such data was not av ailable for the proposed rule. This would create the possibility that ch anges to payments for servi ces that include implantable devices that appear in the final rule with comment period could be vastly different from the proposed payments for those services in the CY 2012 proposed rule. Similarly, if we were to use the CCRs for implantable devices in the calculation of the median costs for this final rule with comment period, the publ ic would not have had an opportunity to comment on the impact of their use on payments for services that do not use implantable devices. We are not finalizing relative paym ent weights based on the new CCR for implantable devices charged to patients for CY 2012 because we believe that the transition in reporting charges and costs for implantable medical devices from the general medical supplies cost centers to a highly spec ialized cost center for high cost items means that the final rule relative weights would ot herwise be very different from the proposed rule relative weights. In the proposed ru le cost report data, 363 hospitals reported approximately $4.9 billion in costs in the im plantable medical device cost center in Worksheet A. In the final rule cost repor t data, 1,689 hospitals reported approximately $20.7 billion in costs in the implantable me dical device cost center on Worksheet A. Therefore, it was not possible to calculate proposed payment rates that would reflect the same use of the implantable medical device CCR as would be used for the final rule due to the transition. To the exte nt that the use of a CCR for im plantable medical devices inCMS-1525-FC 80 the final rule might create median costs for services that require high cost implantable medical devices that differ si gnificantly from those we es timated for the proposed rule, the public would not have had an opportunity to comment on the unexpected changes to payments for all other services that woul d occur as a result of using the CCR for implantable medical devices. We believe that it is more appropriate to wait until CY 2013, when we expect to provide an impact analysis that enables the publ ic to assess the full impact of the use of the new CCR that is specific to implantabl e devices on payments for all services. Therefore, we are not using the CCRs that are specific to implantable devices in calculating the APC relative weights for CY 2012.
Comment : Commenters urged CMS to increas e education efforts to encourage faster hospital adoption of the use of the im plantable medical device cost center. One commenter suggested that more widespread us e of the implantable device cost center would improve the validity of payment weights based on those estimated costs. Response : We agree that it is important that hospitals understand how to accurately report data in the “Implantable De vices Charged to Patients” cost center, and we have worked to add more clarity to the co st report instructions. In addition, we also believe that the December 31, 2010 update of H CRIS reflected relatively few entries for this cost center because the corresponding cost center line was only available for use for cost reporting periods beginni ng on or after May 1, 2009. This timing of this effective date meant that hospital data for this cost center line would not be evident to CMS untilCMS-1525-FC 81 the March 31, 2011 HCRIS update. Howeve r, this update occurred after the December 31, 2010 HCRIS update we used wh en we prepared the proposed rule.
Comment : Commenters suggested that CMS monitor the accuracy of the data reported in the implantable device cost cente r on the Medicare hospital cost report. Commenters urged CMS to impress upon th e Medicare Administrative Contractors (MACs) the importance of establishing a mech anism to audit the implantable device cost center to ensure that the costs and charges are appropriately repor ted. In addition, one commenter suggested that the co st reporting software be modifi ed to create a level 1 error in the case where no data is reported on line 55.30 (Implantable Devices Charged to Patients) to compel hospitals to report that information. Response : We agree with the commenters that the cost reporting lines, whether they are for implantable devices charged to patients, MRI, CT scans, cardiac catheterization, or any others, should be s ubject to greater au dit scrutiny from the Medicare contractors. The new Medicar e cost report form CMS–2552–10, on line 121 of Worksheet S–2, Part I, asks “Did this faci lity incur and report costs for implantable devices charged to a patient? Enter in colu mn 1 ‘Y’ for yes or ‘N’ for no.” All hospital types, including non-IPPS hospitals, CAHs, and Maryland inpatient short-term acute hospitals, are required to properl y report their co sts and charges, and if the answer to this question is “Y” for any type of hospital, then line 72, column 26, of Worksheet B, Part I must be greater than 0, with an accurate amount that refl ects the hospital’s costs for implantable devices charged to patients. In addition, we note that a Level 1 edit on the CMS–2552–10 form already exists that ensures that line 72, column 26, of Worksheet B,CMS-1525-FC 82 Part I (Implantable Devices Charged to Patients on Worksheet A of the CMS–2552–10 form) is greater than 0 if Worksheet S–2, Part I, line 121 is “Y.” The edit is also set up for the reverse scenario; that is, if there is an amount on Worksheet B, Part I, line 72, column 26, then the response on Worksheet S–2, Pa rt I, line 121 must be “Y.” We do not agree with commenters that a level 1 error should be established to force hospitals to report costs on line 55.30 because it is possi ble that some hospitals do not provide services for which charges are reported in th e revenue codes that correspond to the costs that are to be reported on line 55.30 (f or example, psychiatric hospitals).
Comment : One commenter believed that the st andard cost centers for Computed Tomography and Magnetic Resonance Imaging would be artificially low due to hospital allocation of capital costs across the hospital ra ther than to particul ar cost centers, and suggested that payments based on these CCRs would not accurately reflect the resources used in providing those services. As a result, the commenter recommended that CMS exercise a similar degree of caution as that in the approach for the new “Implantable Devices Charged to Patients” cost center CCRs before using any data based on the new CT and MRI cost centers. Response : We provided background on the cr eation of the new standard cost centers in the proposed rule and will reassess the availability of data for the “Implantable Devices Charged to Patients” cost center, and the “MRI, CT Scans, and Cardiac Catheterization” cost center s, for the CY 2013 OPPS rulemaki ng cycle. If appropriate, we will propose to create distinct CCRs for these cost centers at that time.CMS-1525-FC 83
Comment : Commenters asked that CMS create a new cost center exclusively for the costs of MEG so that the calculation of the median cost for MEG would more accurately reflect the expense of the equipmen t, maintenance contract and dedicated staff necessary to furnish the service. Severa l commenters suggested that cost center 5400 should be the primary cost center assignme nt and 3280 should be the secondary cost center assignment for revenue codes 0860 (Magnetoencephalography (MEG) - General Classification) and 0861 Magnoetoecnephalogr aphy (MEG). This would reverse the current cost center assignments for these revenue codes. Some commenters asked that CMS adopt the non-standard subscripted co st center assignment that one MAC had allowed for its hospitals that furnish MEG. Response : In the absence of recommendatio ns for use of other existing cost center’s CCRs, we continue to believe th at for revenue codes 0860 and 0861 nonstandard cost center 3280 “EKG and EEG” is an appropr iate primary cost center mapping and cost center 5400 “Electroencephalography” is an ap propriate secondary cost center mapping. We welcome recommendations on more su itable currently existing standard or nonstandard cost center CCRs. We will also discuss the issue with the APC Panel. With regard to the request to create a ne w cost center exclusive to the costs of MEG, as we stated in the CY 2011 OPPS/ASC final rule with comment period, we do not believe a new cost center is needed to capture the costs of MEG. Over the past several years, we have either proposed or discusse d potential new standard and nonstandard cost centers for the Medicare hospital co st report in our 2008, 2009, 2010, 2011 hospital inpatient and outpatient final rules. All of the potential cost centers that we haveCMS-1525-FC 84 discussed for addition to the cost report , whether standard or nonstandard, have demonstrated volume in the electronic hospital cost report data. In its July 2008 report on using cost report data to estimat e costs for both the IPPS and OPPS ( http://www.rti.org/reports/cms/ ), RTI International examined the electronic hospital cost report database and recommended new standard and nonstandard cost centers on the basis of reporting volume across hospitals. RTI Inte rnational typically identified no fewer than 200 institutions reporting a speci fic service category, such as cardiac catheterization or cardiac rehabilitation, in subscr ipted or other lines for the new nonstandard and standard cost centers. Historically, our rationale for adding an official nons tandard cost center to the cost report has been at the request of Medicare contractors expe riencing a significant volume of requests for a cost center for a specific type of service. In contrast, the volume of MEG services has been and continues to be extremely low. In the hospital outpatient CY 2010 OPPS claims data, hospitals reported 150 units of MEG spread among the three CPT codes for MEG: 75 units of CPT code 95965 (Magnetoencephalography (MEG ), recording and analysis ; for spontaneous brain magnetic activity ( e.g. epileptic cerebral cortex locali zation)); 38 units of CPT code 95966 (Magnetoencephalography (MEG), recordi ng and analysis; for spontaneous brain magnetic activity ( e.g. epileptic cerebral cort ex localization) for evoked magnetic fields, single modality ( e.g. sensory, motor, language or visual cortex localizatio n)); and 37 units of CPT code 95967 (Magnetoencephalography (MEG), recording and analysis; for spontaneous brain magnetic activity ( e.g. epileptic cerebral cortex localization), for evoked magnetic fields, each additional modality ( e.g. sensory, motor language, or visualCMS-1525-FC 85 cortex localization (List separately in additi on to code for primary procedure))). This continues the pattern of very low volumes of the total of the 3 MEG codes that have been reported in the outpatient setting since the cr eation of the codes in CY 2005 (39 units in CY 2005, 75 units in CY 2006, 102 units in CY 2007, 75 units in 2008, 131 units in 2009, and 150 units in CY 2010). Therefore, we c ontinue to believe that a specific cost center is not appropriate for MEG, given th e longstanding low volum e of this service. For a discussion of the APC Panel recommendation on the final payment policy for MEG, we refer readers to section III.D. of this final rule with comment period.
Comment : Commenters requested that CMS outline a method by which more discrete cost center lines coul d be requested for capital-e xpensive services having their own NUBC revenue codes. Response : The process by which a hospital may request permission to use a subscripted line on a cost report is found in the Provider Reimbursement Manual, Part II (PRM-II), Chapter 40. Contractor approval is not necessary to subscript lines on the cost report for use in reporting nons tandard cost centers, as long as hospitals follow the Medicare guidelines in the PRM. However, as discussed above with regard to creation of national cost centers, we have either proposed or discusse d potential new standard and nonstandard cost centers for the Medicare hos pital cost report in cases where doing so would provide more accurate information th at would justify the resources and costs associated with doing so. For example, we have proposed and finali zed nonstandard cost centers such as those for Cardiac Reha bilitation, Hyperbaric Oxygen Therapy, and Lithotripsy (74 FR 60344) as well as standard cost cente rs for Implantable MedicalCMS-1525-FC 86 Devices Charged to Patients, Cardiac Ca theterization, Computed Tomography, and Magnetic Resonance Imaging throug h the annual rulemaking process.
Comment : Several commenters requested that CMS modify the revenue code-to-cost center crosswalk to include da ta on the number of providers billing using each revenue code in the claims data whose cost reports contain the associated cost center under each mapping. Response : All of the data that are required to perform this analysis is available to the public. The HCRIS data, which include in formation from the hospital cost reports, are available on the CMS Web site at http://www.cms.gov/CostReports/C ostReportsFY/list.asp#TopOfPage , while our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS , includes information about purchasing the ‘‘OPPS Limited Data Set’’. Th e HCRIS data can be used to extract the cost center information the commenters requ est while the claims data in the OPPS Limited Data Set include the revenue codes and HCPCS on the claims billed by each OPPS provider. 2. Data Development Process and Calculation of Median Costs In this section of this fi nal rule with comment period, we discuss the use of claims to calculate OPPS payment rates for CY 2012. The hospital OPPS page on the CMS Web site on which this final rule with comment period is posted provides an accounting of claims used in the developmen t of the final payment rates at: http://www.cms.gov/HospitalOutpatientPPS . The accounting of claims used in the development of this final rule with comm ent period is included on the CMS Web siteCMS-1525-FC 87 under supplemental materials for this CY 2012 OPPS/ASC final rule with comment period. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addi tion, below in this secti on we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. Our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS , includes information about purchasing the “OPPS Lim ited Data Set,” which now includes the additional variables previously available only in the OPPS Iden tifiable Data Set, including ICD-9-CM diagnosis codes and reve nue code payment amounts. This file is derived from the CY 2010 claims that were used to calculate the proposed and final payment rates for the CY 2012 OPPS. We used the methodology described in s ections II.A.2.a. throu gh II.A.2.e. of this final rule with comment period to calculate the median costs we use to establish the relative weights used in cal culating the OPPS payment rates for CY 2012 shown in Addenda A and B to the this rule with co mment period (which are available via the Internet on the CMS Web site). We refer re aders to section II.A.4. of the proposed rule and this final rule with comment period for a discussion of the conversion of APC median costs to scaled payment weights.
Comment : Commenters expressed concern with respect to the volatility of the OPPS payment rates from year to year. On e commenter suggested a “stability policy” that the median costs from claims be adjusted to limit changes from year to year and asked that CMS limit any decreases in payment compared to the prior year to no more than a 5-percent decline.CMS-1525-FC 88 Response : As previously discussed in th e CY 2011 OPPS/ASC final rule with comment period (FR 75 71833), there are a number of factors that contribute to median costs fluctuations from one year to the next including (but not limited to) hospital behavior in adjusting mix of services, hos pital costs and charges changes each year resulting in changes to the CCRs, reassignm ents of HCPCS codes, changes to OPPS payment policy (for example, changes to p ackaging), and implemen tation of composite APCs. We cannot stabilize hos pital-driven fundamental i nputs to the calculation of OPPS payment rates. However, we have stri ved to resolve some of the other potential reasons for instability from year to year. Sp ecifically, we continue to seek ways to use more claims data so that we have fewer APCs for which there are small numbers of single bills used to set the APC median cost s. Moreover, we have tried to eliminate APCs with very small numbers of single bills where we could do so. We recognize that changes to payment policies, such as th e packaging of paymen t for ancillary and supportive services and the implementation of composite APCs, may contribute to volatility in payment rates in the short term. However, we believe that larger payment packages and bundles should help to stabilize payments in the long term by enabling us to use more claims data and by establishing payments for larger groups of services. Further, in seeking to mitigate fluctuations in the OPPS, implementing such a system would make payments less reflective of the tr ue service costs. Limiting decreases to payments across all APCs in a budget neutra l payment system could unfairly reduce the payments for other services due to the effects of the scaling that is necessary to maintainCMS-1525-FC 89 budget neutrality and would distor t the relativity of pa yment that is based on the cost of all services.
Comment : Several commenters expressed concerns over the payment reductions for device-dependent APCs, blood and blood products, multiple imaging composites, and packaged services citing impact to beneficiar y access to necessary procedures and patient safety. The commenters were also concerned that payments do not accurately reflect the costs of providing the procedures. Response : We discuss the public comments we received on the payment for particular services throughout this final rule with comment period. However, in general, we believe that our methodology for calcula ting the payments made for services furnished in hospital outpatient departments co mports with the stat utory requirements and results in payments that reflect the relative cost of these services within the statutory constraints of a budget neutral system. Ind eed, our data show significant increase in payment as a percentage of cost since the inception of the OPPS. a. Claims Preparation For this final rule with comment peri od, we used the CY 2010 hospital outpatient claims processed before July 1, 2011, to calcula te the median costs of APCs that underpin the relative weights for CY 2012. To begin the calculation of the relative weights for CY 2012, we pulled all claims for outpatient services furnished in CY 2010 from the national claims history file. This is not th e population of claims paid under the OPPS, but all outpatient claims (including, for exampl e, critical access hospital (CAH) claims andCMS-1525-FC 90 hospital claims for clinical laboratory servic es 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 112 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 Outpat ient), 14x (Hospital-- Labor atory Services Provided to Nonpatients), or 76X (Clinic--Community Mental Health Center). Other bill types are not paid under the OPPS; therefore, these claims were not used to set OPPS payment. 2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims w ith bill type 14X are laboratory specimen claims, of which we use a subset for the limite d number of services in these claims that are paid under the OPPS. 3. Claims that were bill type 76X (CMHC).CMS-1525-FC 91 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 (tha t 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. For 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 forCMS-1525-FC 92 inspection and comment on the CMS Web site: http://www.cms.gov/HospitalOutpatientPPS
. Revenue codes that we do not use to set medians 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 nothing but influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost and, therefore, these claims are not used to set OPPS rates. We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied 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 mean and median cost a nd a per day mean and median cost for drugs and nonimplantable biologicals, therap eutic radiopharmaceutical agents, andCMS-1525-FC 93 brachytherapy sources, as well as other informa tion used to set payment rates, such as a unit-to-day ratio for drugs. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60517), we first adopted a policy to redist ribute some portion of total cost of packaged drugs and biologicals to the separately payable drugs and biologicals as ac quisition and pharmacy overhead and handling costs. As discussed furthe r in section V.B.3. of this final rule with comment, as we proposed, we are continuing this policy for CY 2012. Therefore, we used the line-item cost data for drugs and biologicals for which we had a HCPCS code with ASP pricing information to calculate the ASP+X values, first for all drugs and biologicals with HCPCS codes, whether sepa rately paid or packaged, and then for separately payable drugs and biologicals and for packaged drugs and biologicals, respectively, by taking the ratio of total clai m cost for each group relative to total ASP dollars (per unit of each drug or biol ogical HCPCS code’s July 2011 ASP amount multiplied by total units for each drug or biol ogical in the CY 2010 claims data). These values are ASP+9 percent (for all drugs a nd biologicals with HCPCS codes, whether separately paid or packaged), ASP-2 percent (f or drugs and biologicals that are separately paid), and ASP+192 percent (for drugs and bi ologicals that have HCPCS codes and that are packaged), respectively. As we discuss in section V.B.3. of this final rule with comment period, and as we proposed, we are re distributing $169 million of the total cost in our claims data for coded packaged drugs and biologicals with an ASP to payment for separately payable drugs and biologicals. We also are redistributing an additional $71.3 million from the cost of uncoded packaged drugs billed under pharmacy revenue codeCMS-1525-FC 94 series 025X (Pharmacy) and 026X (IV Thera py). This total excludes the cost of diagnostic and therapeutic radiopharmaceutical s because they are not reported under pharmacy revenue codes or under the pharmacy co st center on the hospi tal cost report. Our CY 2012 redistribution of $240.3 million in estimated costs from coded and uncoded packaged drugs to separately payable drugs represents the $200 million in total packaged drug costs redistributed from the CY 2011 OPPS/ASC final rule with comment period (75 FR 71967), updated by the PPI for Pharm aceuticals for Human Use, to derive a proportion of redistributed costs to total cost s. We then updated our analysis for this CY 2012 OPPS/ASC final rule with comme nt period, holding the proportion of redistributed pharmacy overhead and handling cost constant, both for packaged coded drugs (35 percent) and for packaged uncode d drugs (10.7 percent), constant between the proposed rule and the final rule with comme nt period. This allowed us to keep the proportion of redistributed cost s (and thus the ASP + X percent) stable between the proposed rule and the final rule with co mment period. Redistributing a total of $240.3 million in pharmacy overhead cost from packaged drugs and biologicals reduces the $1.4 billion cost of packaged drugs and bi ologicals with HCPCS codes and ASPs to $1.16 billion, approximately a 17-percent re duction. Redistributing $71.3 million from the cost of uncoded packaged drugs and bi ologicals reduces the $666 million cost of uncoded drugs and biologicals to $594.7 milli on, approximately an 11-percent reduction. To implement our CY 2012 policy to redistribute $169 million from the pharmacy overhead cost of coded packaged drugs and biologicals to separately payable drugs and biologicals and $71.3 million from the cost of uncoded packaged drugs, we multiplied theCMS-1525-FC 95 cost of each packaged drug or biologi cal with a HCPCS code and ASP pricing information in our CY 2010 claims data by 0.77, and we multiplied all uncoded packaged pharmacy drug costs in our CY 2010 claims data, excluding those for diagnostic radiopharmaceuticals, by 0.89. We also a dded the redistributed $240.3 million to the total cost of separately payable drugs and biologicals in our CY 2010 claims data, which increased the relationship between the tota l cost for separately payable drugs and biologicals and ASP dollars for the same drugs and biologicals from ASP-2 percent to ASP+4 percent. We refer read ers to section V.B.3. of this final rule with comment period for a complete discussion of our policy to pay for separately paid drugs and biologicals and pharmacy overhead for CY 2012. 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 that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” “V,” or “X” in the prospective year’s payment system. This logic preserve s charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly proposed to come off the inpatient list for CY 2011 that were assigned status indicator “C” in the claim year. It also preservesCMS-1525-FC 96 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 CP T codes for the packaged services were not paid because the service is part of another service that was reporte d on the same claim or the code otherwise violates claims processing edits. For CY 2012, we proposed to continue the policy we implemented for CY 2011 to exclude line-item data fo r pass-through drugs and biologic als (status indi cator “G” for CY 2010) and nonpass-through drugs and biologi cals (status indicato r “K” for CY 2010) where the charges reported on the claim for the li ne were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appr opriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. Fo r 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, theref ore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in the CY 2011 OPPS/ASC final rule with co mment period (75 FR 71828) of line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, theref ore, should not be used for ratesetting. We believe that removing lines wi th valid status indicat ors that were edited and not paid during claims processing increase s the accuracy of the single bills used to determine the mean unit costs for use in the ASP+X calculation described in section V.B.3. of this final rule with comment period.CMS-1525-FC 97 b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims (1) Splitting Claims As we proposed, for this CY 2012 final rule with comment period, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups follow below.) For CY 2012, we proposed to continue our curr ent policy of defining major procedures as any HCPCS code having a status indicator of “S,” “T,” “V ,” or “X;” defining minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and classifying “other” procedures as a ny code having a status indicator other than one that we have classified as major or minor. For CY 2012, we proposed to continue assigning status indicator “R ” to blood and blood products ; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “ST VX-packaged codes;” status indicator “Q2” to all “T-packaged codes;” and status indicator “Q3” to all codes that may be paid through a composite APC based on com posite-specific criteria or paid separately through single code APCs when the criteria are not met. As discussed in the CY 2009 OPPS/ASC final rule with comment peri od (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. We proposed to treat these codes in the same manner for data purposes for CY 2012 as we have treated them since CY 2008. Specifically, we proposed to continue to evaluate whether the criteria for separate paym ent of codes with stat us indicator “Q1” or “Q2” are met in determining whether they ar e treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are ca rried through the data either with statusCMS-1525-FC 98 indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to whic h they are assigned and are considered as “pseudo” single procedure claims for major code s. 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 th rough the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the median costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.e. of th is final rule with comment period. Specifically, we divided the remaining claims into the following five groups: 1. Single Procedure Major Claims : Claims with a single separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”); claims with one unit of a status i ndicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date. 2. Multiple Procedure Major Claims : Claims with more than one separately payable procedure (that is, stat us indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”), or multiple units of one payable procedure. These claims include those codes with a stat us 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 butCMS-1525-FC 99 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,” “V ,” or “X”). We also include, in this set, claims that co ntained one unit of one code wh en the bilateral modifier was appended to the code and the code was conditiona lly or independently b ilateral. In these cases, the claims represented more than one unit of the service described by the code, notwithstanding that only one unit was billed. 3. Single Procedure Minor Claims : Claims with a single HCPCS code that was assigned status indicator “F,” “G,” “H,” “K ,” “L,” “R,” “U,” or “N” and not status indicator “Q1” (“STVX-packaged”) or stat us indicator “Q2” (“T-packaged”) code. 4. Multiple Procedure Minor Claims : Claims with multiple HCPCS codes that are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N;” claims that contain more than one code with status indi cator “Q1” (“STVX-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” “V,” or “X” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code with status indicator “Q2” but no code with status indicator “T” on the same date of service. 5. Non-OPPS Claims : Claims that contain no se rvices payable 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 or clinical laboratory tests, and do not c ontain a code for a separately payable or packaged OPPSCMS-1525-FC 100 service. Non-OPPS claims include claims fo r therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medi care 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” (“STVX-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. We did not receive any public comment s on our proposed process of organizing claims by type. Therefore, for the reasons set forth in the propos ed rule (76 FR 42185 through 41286), we are finalizing our CY 2012 proposal without modification. (2) Creation of “Pseudo” Single Procedure Claims As we proposed, to develop “pseudo” singl e 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 c ould break them into “p seudo” 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 claimCMS-1525-FC 101 record for each separately payable procedure on a different date of service (that is, a “pseudo” single). As we proposed, for this final rule with comment period, we also used the bypass codes listed in Addendum N to this final rule with comment period (which is referenced in section XVII. of this final rule with co mment period and availabl e via the Internet on the CMS Web site) and discusse d in section II.A.1.b. of this final rule with comment period to remove separately payable procedur es which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed a bove, we ignore the “overlap bypass codes,” that is, those HCPCS codes th at are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The CY 2012 “overlap bypass codes” are listed in Addendum N to this final rule with comment period (which is ava ilable 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 “p seudo” single procedure claim records. The single procedure claim record that containe d the bypass code did not retain packaged services. The single procedure claim record that contained the othe r separately payable procedure (but no bypass code ) retained the packaged re venue code charges and the packaged HCPCS code charges. We also re moved lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. Where one unit of a single, separately payable procedure code remained on the claim after removal of theCMS-1525-FC 102 multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the cost s 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. As we proposed, for this final rule with comment period, we then assessed the claims to determine if the criteria for the multiple imaging composite APCs, discussed in section II.A.2.e.(5) of this fi nal rule with comment period, we re met. Where the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available fo r further assessment as part of the composite APC. Because the packaged code would not be a separately pa yable procedure, we considered it to be unavailable for use in se tting the composite APC median cost. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other thanthe bypass code to create a “pseudo” single procedure claim. We also identified line -items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to us e more claims data for ratesetting purposes.CMS-1525-FC 103 As we proposed, for this final rule with comment period, we also examined the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2011 rela tive weight, set the units to one on that HCPCS code to reflect our policy of payi ng only one unit of a code with a status indicator of “Q1.” We then packaged all cost s for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2011 relative weight to create a “pseudo” single procedure claim for that code: addi tional units of the st atus indicator “Q1” HCPCS code with the highest CY 2011 relative weight; other codes with status indicator “Q1”; and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from the data status indicator of “N” to the status indicator of the APC to which th e selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC median cost for the status indicator “Q1” HCPCS code. Similarly, as we proposed, for this fi nal rule with comment period, where a multiple procedure minor claim contained mu ltiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single co de with status indicator “Q2,” we selected the status indicator “Q2” HC PCS code that had the highest CY 2011 relative weight, set the units to one on that HCPCS code to re flect our policy of paying only one unit of aCMS-1525-FC 104 code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2011 relative weight to create a “pseudo” single proce dure claim for that code: ad ditional units of the status indicator “Q2” HCPCS code with the highest CY 2011 relative weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for th e selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim. As we proposed, for this final rule with comment period, where a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q 1” (“STVX-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had th e highest relative weight for CY 2011 and set the units to one on that HCPC S code to reflect our policy of paying only one unit of a code with a stat us indicator of “Q2.” We th en packaged all costs for the following into a single cost for the select ed (“T packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2011 relative weight; other codes with status indicator “Q2”; codes with status indi cator “Q1” (“STVX-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We fa vor status indicator “Q2” over “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2011 relative weights. If a stat us indicator “Q1” HCPCS code had a higher CY 2011 relative weight, it would become the primary code fo r the simulated single bill process. WeCMS-1525-FC 105 changed the status indicator fo r the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicat or of the APC to which the selected code was assigned and we consider ed 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, where they meet 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.1. of this final rule with comment period. Lastly, as we proposed, for this final rule with comment period, we excluded those claims that we were not able to c onvert to single procedure claims even after applying all of the techniques for creation of “pseudo” single pr ocedure claims to multiple procedure major claims and to multiple procedure minor claims. As has been our practice in recent years, we also excl uded claims that contained codes that were viewed as independently or conditionally b ilateral and that cont ained the bilateral modifier (Modifier 50 (Bilatera l procedure)) because the line-item cost for the code represented the cost of two units of the pr ocedure, notwithstanding that hospitals billed the code with a unit of one.
Comment : Commenters supported the propos ed process for creating pseudo single procedure claims. Response : We appreciate the commenters’ s upport and will continue to look for ways to refine the process to secure more cl aims data for use in calculating median costs.CMS-1525-FC 106 After consideration of the public comments we receive d, as we proposed, we are continuing to apply the proposed methodol ogy described above for the purpose of creating pseudo single procedure claims for the CY 2012 OPPS. c. Completion of Claim Records and Median Cost Calculations (1) General Process As we proposed, for this final rule with comment period, we then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this final rule with comment period (which is referenced in section XVII. of this final rule with comment period and available vi a the Internet on the CMS Web site) and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the servic es reported under packaged revenue codes in Table 2 below that appeared on the claim w ithout a HCPCS code into the cost of the single major procedure remaining on the claim. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we 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, we will continue to comp are the final list of packaged revenue codes that we adopt for CY 2012 to the revenue codes that the I/OCE will package for CY 2012 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 theCMS-1525-FC 107 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 proposed list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment peri od (74 FR 60362 through 60363), we finalized changes to the packaged revenue code lis t based on our examination of the updated NUBC codes and public comment to the CY 2010 proposed list of packaged revenue codes. For CY 2012, as we did for CY 2011, we reviewed the changes to revenue codes that were effective during CY 2010 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we would propose to package for the CY 2012 OPPS. We believe that the charges reported under the revenue codes listed in Table 2 below continue to reflect ancillar y and supportive services for which hospitals report charges without HCPCS codes. Theref ore, for CY 2012, as we proposed, we are continuing to package the costs that we de rive from the charges reported without HCPCS code under the revenue codes displayed in Ta ble 2 below for purposes of calculating the median costs on which the CY 2012 OPPS are based. We did not receive any public comme nts on our proposed list of packaged revenue codes. Therefore, for the reasons set forth in the proposed rule (76 FR 42187 through 42188), we are finali zing the proposed packaged revenue codes for CY 2012, without modification, which are identified in Table 2 below. We note that these revenue codes include only revenue codes that were in effect in CY 2010, the year of the claims data on which the CY 2012 OPPS payment rates are based.
TABLE 2.—CY 2012 PACKAG ED REVENUE CODESCMS-1525-FC 108
Revenue

Code Description 0250 Pharmacy; General Classification 0251 Pharmacy; Generic Drugs 0252 Pharmacy; Non-Generic Drugs 0254 Pharmacy; Drugs Incident to Other Diagnostic Services 0255 Pharmacy; Drugs Incident to Radiology 0257 Pharmacy; Non-Prescription 0258 Pharmacy; IV Solutions 0259 Pharmacy; Other Pharmacy 0260 IV Therapy; General Classification 0261 IV Therapy; Infusion Pump 0262 IV Therapy; IV Therapy/Pharmacy Svcs 0263 IV Therapy; IV Therapy/Drug/Supply Delivery 0264 IV Therapy; IV Therapy/Supplies 0269 IV Therapy; Other IV Therapy 0270 Medical/Surgical Supplies and Devices; General Classification 0271 Medical/Surgical Supplies a nd Devices; Non-sterile Supply 0272 Medical/Surgical Supplies and Devices; Sterile Supply 0275 Medical/Surgical Supplies and Devices; Pacemaker 0276 Medical/Surgical Supplies a nd Devices; Intraocular Lens 0278 Medical/Surgical Supplies and Devices; Other Implants 0279 Medical/Surgical Supplies and Devices; Other Supplies/Devices 0280 Oncology; General Classification 0289 Oncology; Other Oncology 0343 Nuclear Medicine; Diagnostic Radiopharmaceuticals 0344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 0370 Anesthesia; General Classification 0371 Anesthesia; Anesthesia Incident to Radiology 0372 Anesthesia; Anesthesia Inci dent to Other DX Services 0379 Anesthesia; Other Anesthesia

0390 Administration, Processing and Stor age for Blood and Blood Components; General Classification

0392 Administration, Processing and Stor age for Blood and Blood Components; Processing and Storage

0399 Administration, Processing and Stor age for Blood and Blood Components; Other Blood HandlingCMS-1525-FC 109
Revenue

Code Description

0621 Medical Surgical Supplies – Extens ion of 027X; Supplies Incident to Radiology

0622 Medical Surgical Supplies – Extensi on of 027X; Supplies Incident to Other DX Services 0623 Medical Supplies – Extension of 027X, Surgical Dressings 0624 Medical Surgical Supplies – Extensi on of 027X; FDA Investigational Devices 0630 Pharmacy – Extension of 025X; Reserved 0631 Pharmacy – Extension of 025X; Single Source Drug 0632 Pharmacy – Extension of 025X; Multiple Source Drug 0633 Pharmacy – Extension of 025X; Restrictive Prescription 0681 Trauma Response; Level I Trauma 0682 Trauma Response; Level II Trauma 0683 Trauma Response; Level III Trauma 0684 Trauma Response; Level IV Trauma 0689 Trauma Response; Other 0700 Cast Room; General Classification 0710 Recovery Room; General Classification 0720 Labor Room/Delivery; General Classification 0721 Labor Room/Delivery; Labor 0732 EKG/ECG (Electrocardiogram); Telemetry 0762 Specialty services ; Observation Hours 0801 Inpatient Renal Dialysis; Inpatient Hemodialysis 0802 Inpatient Renal Dialysis; Inpatien t Peritoneal Dialysis (Non-CAPD)

0803 Inpatient Renal Dialysis; Inpatien t Continuous Ambulatory Peritoneal Dialysis (CAPD)

0804 Inpatient Renal Dialysis; Inpatient C ontinuous Cycling Peritoneal Dialysis (CCPD) 0809 Inpatient Renal Dialysis; Other Inpatient Dialysis 0810 Acquisition of Body Component s; General Classification 0819 Inpatient Renal Dialysis; Other Donor 0821 Hemodialysis-Outpatient or Home; He modialysis Composite or Other Rate 0824 Hemodialysis-Outpatient or Home; Maintenance – 100% 0825 Hemodialysis-Outpatient or Home; Support ServicesCMS-1525-FC 110
Revenue

Code Description 0829 Hemodialysis-Outpatient or Home; Other OP Hemodialysis

0942 Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training

0943 Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation

0948 Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation

In accordance with our longstanding polic y, as we proposed, we are continuing to exclude: (1) claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packag ing flag number 3 to claims on which hospitals submitted token charges less than $1.0 1 for a service with status indicator “S” or “T” (a major separately payable serv ice under the OPPS) for which the fiscal intermediary or MAC was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative weight of the APC to which each code was assigned. We do not believe 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 are contin uing these processes for the CY 2012 OPPS. As we proposed, for this final rule with comment period, for the remaining claims, we then standardized 60 percent of the costs of the claim (which we haveCMS-1525-FC 111 previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by de termining the wage index that applied to the hospital that furnished the se rvice and dividing the cost fo r the separately paid HCPCS code furnished by the hospital by that wage index. The claims accounting that we provide for the proposed and fi nal rule contains the formul a we use to standardize the total cost for the effects of the wage index. As has been our policy since the inception of the OPPS, we proposed to use the pre-reclas sified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post- reclassification wage i ndices and, therefore, would result in the most accurate unadjusted median costs. In accordance with our longstanding practice, as proposed, for this final rule with comment period, we also excluded single and pseudo single procedure claims for which the total cost on the claim was outside 3 standa rd deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multipl e 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 109 milli on claims were left. Using these 109 million claims, we created approximately 110 million single and “pseudo” single procedure claims, of which we used slightly more than 108 million single bills (after trimming out approximately 888,000 claims as disc ussed in section II.A.1.a. of this final rule with comment period) in the CY 2012 median development and ratesetting.CMS-1525-FC 112 We used these claims to calculate th e final CY 2012 median costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC medians determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be consider ed comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secret ary) for an item or service in the group is more than 2 times greater than the lowe st median cost for an item or service within the same group (the 2 times rule). We note that, for purposes of identifying significant HCPCS for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or c odes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC median cost to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible with in the set of approximately 100 million single procedure or single session claims we use for establishing median costs. Similarly, a HCPCS code for which th ere are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC median. Unliste d codes are not used in establishing the percent of claims contributing to the APC, nor are their cost s used in the calculation of the APC median. Finally, we reviewed the me dian costs for the services for which we are proposing to pay separately under this final rule with comment period, and we reassigned HCPCS codes to differe nt APCs where it was necessa ry to ensure clinical andCMS-1525-FC 113 resource homogeneity within the APCs. Sec tion III. of this final rule with comment period includes a discussion of many of the HCPCS code assignment changes that resulted from examination of the median co sts and for other reasons. The APC medians were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific medians and the APC medians we re weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pse udo” single procedure claims. As we discuss in sections II.A.2.d. and II.A .2.e. and in section VIII.B. of this final rule with comment period, in some cases , APC median 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 calcula tion of single APC criteria-based median costs. Section II.A.2.e. of this final rule wi th comment period discusses the calculation of composite APC criteria-based median costs. Section VIII.B. of this final rule with comment period addresses the methodology for calculating the median costs for partial hospitalization services. We did not receive any public comments on this aspect of the median calculation process that we proposed fo r CY 2012. Therefore, we are adopting it as final. After consideration of the public comments we receive d, we are finalizing our proposed methodology for calculating median costs for purposes of creating payment weights and subsequent payment rates for the CY 2012 OPPS. (2) APC Panel Recommendations Regarding Data Development At the February 28-March 1, 2011 APC Panel Meeting, we provided the APC Panel Data Subcommittee with a list of all APCs fluctuating by gr eater than 10 percentCMS-1525-FC 114 when comparing the CY 2011 OPPS final rule median costs based on CY 2009 claims processed through June 30, 2010, to those base d on CY 2010 OPPS/ASC final rule data (CY 2008 claims processed through June 30, 2009) . We included explanatory data where possible to allow the Data Subcommittee to focus on APC median changes that required more investigation, based on its reques t (75 FR 71834). The APC Panel Data Subcommittee reviewed the fluctuations in the APC median costs but did not express particular concerns with the median cost changes. We also provided the APC Panel Data S ubcommittee with a summary of cost and CCR data related to the Myocardial Positr on Emission Tomography (PET) imaging APC, APC 0307, as well as the associated dia gnostic radiopharmaceutical, Rb82 rubidium, based on a request for data related to the decline in the APC median cost from the CY 2010 OPPS final rule to the CY 2011 OPPS proposed rule. The Data Subcommittee noted a decline in the CCRs associated with the HCPCS codes in APC 0307, as well as declines in the line-item costs of th e associated diagnostic radiopharmaceutical. At the February 28-March 1, 2011 APC Pa nel Meeting, the APC Panel made a number of recommendations related to the data process. The Panel’s recommendations and our responses follow. Recommendation 1 : The Panel commends the CMS staff for responding to the data requests of the Data Subcommittee. CMS Response to Recommendation 1 : We appreciate this recommendation. Recommendation 2 : The Panel recommends that the work of the Data Subcommittee continue.CMS-1525-FC 115 CMS Response to Recommendation 2 : We are accepting this recommendation. Recommendation 3 : The Panel recommends that Agatha Nolen, D.Ph., M.S., F.A.S.H.P., serve as acting chairperson for the winter 2011 meeting of the Data Subcommittee. CMS Response to Recommendation 3 : We are accepting this recommendation. At the August 10-12, 2011 APC Panel Me eting, CMS again provided the APC Panel Data Subcommittee with a list of all APCs fluctuating by gr eater than 10 percent when comparing the CY 2012 OPPS proposed rule median costs based on CY 2010 claims processed through December 21, 2010, to those based on CY 2011 OPPS/ASC final rule data (CY 2009 claims processed through June 30, 2010). We also gave an overview of the ASP+X calculation and the CY 2012 proposal for separately paid drugs, and an overview of the proposed pa yment (with DRG Cap) for Cardiac Resynchronization Therapy-Defibrillator ( CRT-D) composite. The APC Panel made a number of recommendations related to spec ific services. Recommendations (4-9) are discussed as part of the discussion of th e specific service to which they pertain. Recommendation 10 : The Panel recommends that the work of the Data Subcommittee continue. CMS Response to Recommendation 10 : We are accepting this recommendation. Recommendation 14 : The Panel recommends that Daniel J. Pothen, M.S., R.H.I.A, C.H.P.S., C.P.H.I.M.S., C.C.S., C. C.S.-P., C.H.C., be named the chair of the Data Subcommittee CMS Response to Recommendation 14 : We are accepting this recommendation.CMS-1525-FC 116 d. Calculation of Single Procedur e APC Criteria-Based Median Costs (1) Device-Dependent APCs Device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. For a full history of how we have calculated payment ra tes for device-dependent APCs in previous years and a detailed discussi on of how we developed the standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the pr ocedure-to-device edits and device-to-procedure ed its 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 ru le with comment period (71 FR 68070 through 68071). In the CY 2012 OPPS/ASC proposed rule (76 FR 42190), for CY 2012, we proposed to use the standard methodol ogy for calculating median costs for device-dependent APCs that was finalized in the CY 2011 OPPS/AS C final rule with comment period (75 FR 71834 through 71837). (We referred readers to section II.D.6. and II.A.e.6. of the proposed rule for detailed explanations of the proposed nonstandard methodology regarding cardiac re synchronization therapy). This methodology utilizes claims data that generally represent the full cost of the required de vice. Specifically, we proposed to calculate the median costs fo r device-dependent APCs for CY 2012 using only the subset of single procedure claims from CY 2010 claims data that pass the procedure-to-device and device -to-procedure edits; do not contain token charges (lessCMS-1525-FC 117 than $1.01) for devices; do not contain the “FB” modifier signifying that the device was furnished without cost to the pr ovider, supplier, or practitioner, or where a full credit was received; and do not contain the “FC” modifi er signifying that the hospital received partial credit for the device. The procedure-to -device edits require th at when a particular procedural HCPCS code is bille d, the claim must also contain an approp riate device code, while the device-to-procedure edits require that a claim that contains one of a specified set of device codes also c ontain an appropriate procedur e code. We stated in the proposed rule that we continue to beli eve the standard methodology for calculating median costs for device-dependent APCs give s us the most appropriate median costs for device-dependent APCs in which the hospita l incurs the full cost of the device. Table 3 of the proposed rule (76 FR 42191) listed the APCs for which we proposed to use our standard device- dependent APC ratesetting methodology (as explained in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71834 through 71837)) for CY 2012. In the proposed rule , we noted that ther e are five proposed device-dependent APC title changes and one proposed deletion for CY 2012. As discussed in detail in secti on II.A.2.d.(6) of the proposed rule, we proposed to change the title of APC 0083 from “Coronary or Non- Coronary Angioplasty and Percutaneous Valvuloplasty” to “Level I Endovascular Reva scularization of the Lower Extremity”; the title of APC 0229 from “Transcatheter Placemen t of Intravascular S hunt and Stents” to “Level II Endovascular Revasc ularization of the Lower Extremity”; and the title of APC 0319 from “Endovascular Revascularization of the Lower Extremity” to “Level III Endovascular Revascularization of the Lower Extremity.” We also proposed to changeCMS-1525-FC 118 the title of APC 0040 from “Percutaneous Impl antation of Neurostimulator Electrodes” to “Level I Implantation/Revisi on/Replacement of Neurostimul ator Electrodes,” and the title of APC 0061 from “Laminectomy, Lapa roscopy, or Incision for Implantation of Neurostimulator Electrodes” to “Level II Implantation/Revision/Replacement of Neurostimulator Electrodes,” as discussed in section III.D.1. of th e proposed rule. In addition, as discussed in secti on II.A.2.e.(6) of the proposed ru le, we proposed to delete APC 0418 (Insertion of Left Ventricular Pacing Electrode) for CY 2012. As we discussed in detail in sect ion III.D.6. of the proposed ru le, we proposed to limit the payment for services that ar e assigned to APC 0108 to the proposed IPPS standardized payment amount for MS-DRG 227 (Cardiac De fibrillator Implan t without Cardiac Catheterization and without Me dical Complications and Como rbidities), and we proposed to continue to apply the device edits and othe r standard features of the device-dependent APCs to APC 0108. Finally, we referred reader s to Addendum A to the proposed rule for the proposed payment rates for de vice-dependent APCs for CY 2012.
Comment : Several commenters supported CMS’ proposal to continue using the standard methodology for calculatin g median costs for device-dependent APCs as well as the continued use of device coding edits to ensu re that hospitals are reporting charges for implanted devices. Some commenters recommended that CMS continue examining and refining the ratesetting methodology for pro cedures involving devices in order to encourage the continued development and prol iferation of new tec hnology, and that CMS further improve the accuracy of estimates for the costs of devices included in multiple procedure claims used for the purpose of se tting relative weights. Some commentersCMS-1525-FC 119 asked for continued focus on coding educati on, particularly as it impacts the use of proper HCPCS supply codes, so that these codes are appropriately reported by hospital coders. Other commenters supported the mandatory reporting of all device HCPCS codes. Response : We appreciate the commenters’ s upport of the con tinued use of the standard device-dependent AP C ratesetting methodology and th e procedure-to-device and device-to-procedure edits. As we ha ve stated in the past (75 FR 71835 and 74 FR 60367), we agree with the commenters th at we should continue to encourage the development and proliferation of new tec hnology under the OPPS. We have special mechanisms to provide payment for new technologies and services under the OPPS, including new technology APCs and transitional pass-throug h payments devices. We refer readers to sections III.C. and IV.A., re spectively, of this fina l rule with comment period for more information on these paymen t methodologies. For all OPPS services, we continue our efforts to use the data from as many claims as possible, through approaches such as use of the bypass list a nd date splitting of claims as described further in section II.A. of this final rule with comment peri od, and through methodologies such as increased packaging and composite APCs. As we have stated in the past ( 73 FR 68535 through 68536 and 74 FR 60367), we agree that accurate reporting of device, supply, and technology charges will help to ensure that these items are appropriately a ccounted for in future years’ OPPS payment rates. We encourage stakeholders to carefully review HCPCS code de scriptors, as well as any guidance CMS may have provided for speci fic HCPCS codes. In addition, we haveCMS-1525-FC 120 provided further instructions on the billing of medical and surgical supplies in the October 2008 OPPS update (Transmittal 1599, Change Request 6196, dated September 19, 2008) and the April 2009 OPPS update (Transmittal 1702, Change Request 6416, dated March 13, 2009). For HCPC S codes that are paid under the OPPS, providers may also submit inquiries to th e AHA Central Office on HCPCS, which serves as a clearinghouse on the proper use of Leve l I HCPCS codes for hospitals and certain Level II HCPCS codes for hospitals, physicians, and other health professionals. Inquiries must be submitted using the approved form, which may be downloaded from the AHA Web site ( http:// www.ahacentraloffice.org ) and either faxed to (312) 422–4583 or mailed directly to the AHA Central Office: Central Office on HCPCS, American Hospital Association, One North Franklin, Floor 29, Chicago, IL 60606.
Comment : Some commenters concurred with CMS’ proposed determination that APC 0385 (Level I Prosthetic Urological Pr ocedures) and APC 0386 (Level II Prosthetic Urological Procedures) should be categoriz ed as device-dependent APCs. Other commenters expressed appreciation for the proposed increase in payment for APC 0425 (Level II Arthroplasty or Implantation with Prosthesis). Response : We appreciate the commenters’ support of the designation of APC 0385 and APC 0386 as device-dependent APCs and the proposed payment increase for
APC 0425.
Comment : Several commenters expressed concern that the proposed CY 2012 payment rate for the implantation of cochlear implants, described by CPT code 69930 (cochlear device implantation, with or without mastoidectomy) which is assigned to APCCMS-1525-FC 121 0259 (Level VII ENT Procedures ), decreased by approximately 12 percent from that in the CY 2011 OPPS/ASC final rule with commen t period. According to commenters, this payment rate is inconsistent with the averag e decrease in proposed payment of all OPPS APCs relative to CY 2011 of approximately 6 percent and is insufficient to cover hospitals’ costs for providing this service and ensure that beneficiaries will continue to have access to cochlear implants. The comm enters observed, based on their analysis of Medicare claims data, that while the overall median co st of APC 0259 decreased, the component parts of the APC (that is, the de vice, the procedure, and the other bundled supplies and services) either remained the sa me or increased. The commenters requested that CMS evaluate the data upon which the proposed CY 2012 payment rate for APC 0259 is based in order to ensure its validity. Response : We appreciate the commenters’ concerns regarding the proposed payment rate for procedures involving co chlear implants. Under the standard device-dependent APC ratesetting met hodology, the median cost for APC 0259 is calculated using only those single bills that reflect the full cost of the cochlear implant device. While we will monitor the changes in APC 0259 over time, we believe that the payment rate for this service, calculated according to the standard device-dependent APC ratesetting methodology for the proposed rule and this final rule with comment period, appropriately reflects hospitals’ relative costs for providing this procedure as reported to us in the claims and cost report data. We note that the median cost for CPT code 69930 calculated from the CY 2010 hospital claims and co st report data available for this final rule with comment is $28,892, approximately 6 percent less than the median cost ofCMS-1525-FC 122 $30,730 calculated from the CY 2009 hospital claims and cost report data upon which the final CY 2011 payment rate was calculated. After consideration of the public comments we receive d, we are finalizing our proposed CY 2012 payment policies for device-d ependent APCs with modification. The CY 2012 OPPS payment rates for device-dependent APCs are based on their median costs calculated from CY 2010 claims and th e most recent cost report data, using only single procedure claims that pass the proce dure-to-device and devi ce-to-procedure edits, do not contain token charges for devices (le ss than $1.01), do not have an “FB” modifier signifying that the device was furnished w ithout cost or with full credit, and do not contain an “FC” modifier si gnifying that the hospital received partial credit for the device. We continue to belie ve that the median costs calc ulated from the single claims that meet these criteria represent the most va lid estimated relative costs of these services to hospitals when they incur the full cost of the devices requ ired to perform the procedures. Table 3 below lists the APCs for which we used our standard device-dependent APC ratesetting methodology for CY 2012. We note that we are not finalizing our proposal to limit the payment for services that are assigned to APC 0108 to the IPPS standardized payment amount for MS-DRG 227, and that we are continuing to apply the device edits and other standard features of the device-dependent APCs to this APC for CY 2012. We also are deleting APC 0418 a nd changing the titles of APC 0108 and 0655 as we proposed. We refer read ers to section II.A.2.e. (6) of this final rule with comment period for a detailed discussion of these final policies. We also note that we are revisingCMS-1525-FC 123 the APC titles for APC 0083, 0229, and 0319 for CY 2012, as we discuss in section II.A.2.d.(6) of this final rule with comment period and that we are changing the APC titles for APC 0040 and APC 0061 as discussed in s ection III.D.4.a. of th is final rule with comment period. We refer readers to Adde ndum A to this final rule with comment period (which is available via the Internet on the CMS Web site) for the final payment rates for these APCs for CY 2012.
TABLE 3.--CY 2012 DEVICE-DEPENDENT APCs

CY 2012

APC CY 2012 Status Indicator CY 2012 APC Title 0039 S Level I Implantation of Neurostimulator Generator

0040 S Level I Implantation/Revision/Replacement of Neurostimulator Electrodes

0061 S Level II Implantation/Revision/Replacement of Neurostimulator Electrodes 0082 T Coronary or Non- Coronary Atherectomy

0083 T Coronary Angioplasty, Va lvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity 0084 S Level I Electrophysiologic Procedures 0085 T Level II Electrophysiologic Procedures 0086 T Level III Electrophysiologic Procedures

0089 T Insertion/Replacement of Permanent Pacemaker and Electrodes 0090 T Insertion/Replacement of Pacemaker Pulse Generator 0104 T Transcatheter Placement of Intracoronary Stents

0106 T Insertion/Replacement of Pacemaker Leads and/or Electrodes 0107 T Insertion of Cardioverter-Defibrillator
*0108 T Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes 0115 T Cannula/Access Device Procedures 0202 T Level VII Female Reproductive Procedures 0227 T Implantation of Drug Infusion DeviceCMS-1525-FC 124

CY 2012

APC CY 2012 Status Indicator CY 2012 APC Title

0229 T Level II Endovascular Revascularization of the Lower Extremity 0259 T Level VII ENT Procedures 0293 T Level V Anterior Segment Eye Procedures 0315 S Level II Implantation of Neurostimulator Generator

0318 S Implantation of Cranial Neurostimulator Pulse Generator and Electrode

0319 T Level III Endovascular Revasc ularization of the Lower Extremity 0384 T GI Procedures with Stents 0385 S Level I Prosthetic Urological Procedures 0386 S Level II Prosthetic Urological Procedures 0425 T Level II Arthroplasty or Implantation with Prosthesis 0427 T Level II Tube or Catheter Changes or Repositioning 0622 T Level II Vascular Access Procedures 0623 T Level III Vascular Access Procedures 0648 T Level IV Breast Surgery 0652 T Insertion of Intraperito neal and Pleural Catheters 0653 T Vascular Reconstruction/ Fistula Repair with Device

0654 T Insertion/Replacement of a Permanent Dual Chamber Pacemaker
*0655 T Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode

0656 T Transcatheter Placement of Intracoronary Drug-Eluting Stents 0674 T Prostate Cryoablation 0680 S Insertion of Patient Activated Event Recorders *We refer readers to section II.A.2.e (6) of this final rule with comment period for detailed information on changes to APC 0108 and APC 0655. (2) Blood and Blood Products Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood pr oducts through APCs rather th an packaging payment forCMS-1525-FC 125 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 2012 OPPS/ASC proposed rule (76 FR 42191 through 42192), 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, in order 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 would then apply this mean ratio to the overall CCRs of hospitals not reporting costs and char ges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals . We calculated the median costs upon which the proposed CY 2012 payment rates for blood and bloodCMS-1525-FC 126 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. As we stated in the proposed rule ( 76 FR 42192), we continue to believe the hospital-specific, blood-specific CCR methodol ogy best responds to the absence of a blood-specific CCR for a hospital than alternat ive methodologies, such as defaulting to the overall hospital CCR or applying an aver age blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we believe that it yields more accurate estimated costs for these products. We believe that conti nuing with this methodology in CY 2012 would result in median costs for blood and blood produ cts that appropriately reflect the relative estimated costs of these produc ts for hospitals without blood cost centers and, therefore, for these blood products in general.
Comment : Some commenters asserted that there is a gap between CMS’ proposed payments for blood and blood products and the costs incurred by hospitals for the acquisition, management, and processing of blood and blood produc ts, including high volume products such as leukocyte reduced red blood cells, described by HCPCS codes P9016 (Red blood cells, leukocytes reduced, each unit), P9021 (Red blood cells unit), and P9040 (Red blood cells, leukoreduced irradiated ). These commenters stated that CMS should implement appropriate payment policies, such as paying no less than the payment rates in effect for CY 2011 for individual blood products in CY 2012, to close the gap between OPPS payment and the costs of blood and blood products and to ensureCMS-1525-FC 127 continued beneficiary access. They stated that this action is crucial, given that those costs continue to rise for a variety of reasons. For example, one commenter cited federally mandated requirements and recommendations by the U.S. Food and Drug Administration (FDA) as having a significant impact on th e increasing costs of blood products, while another commenter noted that transfusion safe ty officers are being hired in most major hospitals to address improper transfusi on and inappropriate use of blood. The commenters argued that, given the 2-year lag in herent in available claims data in the OPPS ratesetting process, the use of hospital cl aims data without adjustments likely will not reflect these rising co sts in a timely manner. Response : As we indicated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71838 through 71839), we continue to believe that using blood-specific CCRs applied to hospital claims data result s in payments that appropriately reflect hospitals’ relative costs of providing blood and blood products as reported to us by hospitals, which would reflect hospitals’ ch anging costs due to factors cited by the commenters, such as FDA requirements, to the extent that these are affecting blood costs. We annually update payment groups and payment weights using the most recently available hospital claims and cost report data. This process allows us to recalibrate the payment groups and payment weights in respon se to changes in hospitals’ costs from year to year in the most timely manner possi ble. A fundamental prin ciple of the OPPS is that it is based on relative weights, and as we have stated in the past (73 FR 68541), it is the relativity of the costs to one another, rather than absolu te cost, that is important in setting payment rates. To deviate from our standard OPPS ratesetting methodology byCMS-1525-FC 128 paying no less than the payment rates in e ffect for CY 2011 for i ndividual blood products in CY 2012 would skew this re lativity. We also note that the median costs per unit (calculated using the blood-sp ecific CCR methodology) for this final rule with comment period increase for the majority of the most commonly provided blood and blood products (including the highe st volume blood and blood pr oduct, described by HCPCS code P9016) compared to the CY 2011 median costs. For all APCs whose payment rates are based upon relative payment weights, we note that the quality and accuracy of reported units and charges significantly influenc e the median costs that are the basis for our payment rates, especially for low volume items and services. After consideration of th e public comments we receiv ed, we are finalizing, without modification, our CY 2012 proposal to calculate median costs upon which the CY 2012 payments rates for blood and blood pro ducts are based usi ng our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs (the methodology we have utilized since CY 2005). We be lieve that continuing this methodology in CY 2012 results in median costs for blood and blood products that appropriately reflect the relative estimated co sts of these products for hospitals without blood cost centers and, therefore, for these products in general. We refer readers to Addendum B to this fi nal rule with comment period (which is available via the Internet on the CMS Web s ite) for the final CY 2012 payment rates for blood and blood products (which are identified with status indicator “R”). For a more detailed discussion of the blood-specific CCR methodology, we refer readers to theCMS-1525-FC 129 CY 2005 OPPS proposed rule (69 FR 50524 thr ough 50525). For a full history of OPPS payment for blood and blood products, we refe r readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810). (3) Allergy Tests (APCs 0370 and 0381) In the CY 2006 OPPS final rule w ith comment period (70 FR 68610), we discussed the confusion raised by a number of provide rs related to the reporting of units for single and multiple allergy tests described by CPT codes 95004 through 95078. According to the providers, wh ile some of these codes instruct providers to specify the number of tests or use the singul ar word “tests” or “testing” in their descriptors, others do not contain such instruction or do not contain “tests” or “testing” in their descriptors. In light of the variable hospita l billing that may be incons istent with the CPT code descriptors, as discussed in detail in the CY 2006 OPPS final rule with comment period (70 FR 68610), we examined CY 2004 claims a nd determined that the charges reported on many single procedure claims represent a “per visit” charge, rather than a “per test” charge, including claims for the allergy test c odes that instruct provi ders to specify the number of tests. As a result of our analysis of our claims data, we differentiated single allergy tests (“per test” from multiple allergy tests (“per visit”) by placing these services in two different APCs. We believed that maki ng this distinction clar ified billing for these services and more accurately placed them w ith like services sharing similar resource costs. We also provided billing guida nce in CY 2006 in Transmittal 804 (issued on January 3, 2006) specifically clarifying that hospitals should report charges for the CPT codes that describe single aller gy tests to reflect charges “per test” rather than “per visit”CMS-1525-FC 130 and should bill the appropriate number of units (as defined in the CPT code descriptor) of these CPT codes to describe a ll of the tests provided. Si nce 2006, we have analyzed our claims data to determine whether the reporting of these services has improved. In the CY 2012 OPPS/ASC proposed ru le (76 FR 42192), we proposed to continue to use our methodology of differentia ting single allergy test s (“per test”) from multiple allergy tests (“per visit”) by assigning these services to two different APCs to provide accurate payments for these tests in CY 2012. Specifically, services proposed to be assigned to APC 0381 (Singl e Allergy Tests) reflect th e CPT codes that describe single allergy tests in which CP T instructions direct provid ers to specify the number of tests performed. Alternativ ely, the procedures proposed for assignment to APC 0370 (Allergy Tests) describe multiple allergy tests per encounter; therefore, for these procedures, only one unit of the service is b illed even if multiple tests are performed. As discussed in the CY 2012 OPPS/AS C proposed rule (76 FR 42192), our analysis of the CY 2010 claims data availabl e for the proposed rule for the single allergy tests, specifically those services assign ed to APC 0381, did not reflect improved and more consistent hospital billing practices of “per test” for single allergy tests. The median cost of APC 0381 calculated for the proposed rule accord ing to the standard single claims OPPS methodology was approximately $51, signi ficantly higher than the CY 2011 OPPS/ASC final rule median cost of approximately $33 that was calculated according to the “per unit” methodology, and gr eater than we would expect for these procedures that are to be reported “per test ” with the appropriate number of units. Some claims for single allergy tests still appear to provide charges that represent a “per visit”CMS-1525-FC 131 charge, rather than a “per test” charge. Ther efore, consistent with our payment policy for single allergy tests since CY 2006, we calculated a proposed “per unit” median cost for APC 0381, based upon 601 claims containing multiple units or multiple occurrences of a single CPT code. The proposed CY 2012 median cost for APC 0381 using the “per unit” methodology was approximately $34. For a full discussion of the “per unit” methodology for APC 0381, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66737). In addition, we proposed that multiple allergy tests continue to be assigned to APC 0370 with a median cost calculation based on the standard OPPS methodology for CY 2012. This resulted in a proposed APC me dian cost of approximately $97 based on 283 claims. We did not receive any public comment s on our CY 2012 proposal for payment of single or multiple allergy tests. We are finalizing our CY 2012 proposal, without modification, to calculate a “p er unit” median cost for AP C 0381 as described above in this section. The final CY 2012 median cost of APC 0381 is approximately $31. Furthermore, we also are finalizing our CY 2012 proposal, without modification, to use the standard OPPS methodology to se t the APC payment rate for APC 0370. We are revising the title of APC 0370 from “Allergy Tests” to “M ultiple Allergy Tests” so that the APC title more accurately describes a ll the services assigned to the APC. The final CY 2012 median cost of APC 0370 is approximately $80 based on 306 claims.CMS-1525-FC 132 (4) Hyperbaric Oxygen Therapy (APC 0659) Since the implementation of OPPS in August 2000, the OPPS has recognized HCPCS code C1300 (Hyperbaric oxygen unde r pressure, full body chamber, per 30 minute interval) for hyperbaric oxygen (HBO T) provided in the hospital outpatient setting. In the CY 2005 final rule wi th comment period (69 FR 65758 through 65759), we finalized a “per unit” median cost calculation for APC 0659 (Hyperbaric Oxygen) using only claims with multiple units or multiple occurrences of HCPCS code C1300 because delivery of a typical HBOT service requires more than 30 minutes. We observed that claims with only a single occurrence of th e code were anomalies, either because they reflected terminated sessions or because they were incorrectly coded with a single unit. In the same rule, we also established that HBOT would not generally be furnished with additional services that might be packaged under the standard OPPS APC median cost methodology. This enabled us to use claims with multiple units or multiple occurrences. Finally, we also used eac h hospital’s overall CCR to estimate costs for HCPCS code C1300 from billed charges rather than the CCR for the respiratory therapy or other departmental cost centers. Our rationale for using the hospital’s overall CCR can be found in the CY 2005 OPPS final rule with comment period (69 FR 65758 through 65759). The public comments on the CY 2005 OPPS proposed rule effectively demonstrated that hospitals report the costs and charges for HBOT in a wide variety of cost centers. Since CY 2005, we have used th is methodology to estimate the median cost for HBOT. The median costs of HBOT us ing this methodology have been relatively stable for several years.CMS-1525-FC 133 In the CY 2012 OPPS/ASC proposed ru le (76 FR 42192), we proposed to continue using the same methodology to estima te a “per unit” medi an cost for HCPCS code C1300 for CY 2012. This methodology resu lted in a proposed APC median cost of approximately $107 using 370,519 claims with mu ltiple units or multiple occurrences for HCPCS code C1300 for CY 2012. We did not receive any public comments on our proposal to continue to use our established ratesetting methodology for calcu lating the median cost of APC 0659 for payment of HBOT for CY 2012. We are finalizing our CY 2012 proposal, without modification, to continue to use our es tablished ratesetting me thodology for calculating the median cost of APC 0659 for payment of HBOT, with a final CY 2012 median cost of approximately $105. (5) Payment for Ancillary Outpatient Se rvices When Patient Expires (APC 0375) In the November 1, 2002 final rule with comment period (67 FR 66798), we discussed the creation of the new HCPCS modi fier “–CA” to address situations where a procedure on the OPPS inpatient list must be performed to resuscitate or stabilize a patient (whose status is that of an out patient) with an emer gent, life-threatening condition, and the patient dies before being ad mitted as an inpatient. HCPCS modifier “-CA” is defined as a procedure payable onl y in the inpatient setting when performed emergently on an outpatient who expires prior to admission. In Transmittal A-02-129, issued on January 3, 2003, we instructed hosp itals on the use of this modifier. For a complete description of the history of th e policy and the development of the paymentCMS-1525-FC 134 methodology for these services, we refer read ers to the CY 2007 O PPS final rule with comment period (71 FR 68157 through 68158). In the CY 2012 OPPS/ASC proposed rule (76 FR 42192 through 42193), we proposed to continue to use our establishe d ratesetting methodology for calculating the median cost of APC 0375 (Ancillary Outpatie nt Services When Patient Expires) and to continue to make one payment under APC 0375 fo r the services that meet the specific conditions for using HCPCS modifier “–CA.” That is, we proposed to calculate the relative payment weight for APC 0375 by usi ng all claims reporting a status indicator “C” (inpatient procedures) appended with HCPC S modifier “-CA.” For the history and detailed explanation of the methodology, we refer readers to the CY 2004 OPPS final rule (68 FR 63467 through 63468). We stated in the proposed rule that we continue to believe that this established ratesetting methodology results in the most appropriate aggregate median cost for the ancillary se rvices provided in th ese unusual clinical situations. We stated that we believe that hospital s are reporting the HCPCS modifier “–CA” according to the policy initially establishe d in CY 2003. We noted that the claims frequency for APC 0375 has been relatively stab le over the past few years. We noted that the median cost for APC 0375 has d ecreased based on the CY 2010 OPPS claims data used for the development of the propos ed rates for CY 2012 compared to that for CY 2011. Variation in the median cost for APC 0375 is expected because of the small number of claims and because the specifi c cases are grouped by the presence of the HCPCS modifier “-CA” appended to an inpati ent only procedure and not according to theCMS-1525-FC 135 standard APC criteria of clin ical and resource homogeneit y. Cost variation for APC 0375 from year to year is anticipated and accepta ble as long as hospitals continue judicious reporting of the HCPCS modifier “-CA.” Table 4 of the proposed rule showed the number of claims and the median costs for APC 0375 for CYs 2007, 2008, 2009, 2010, and 2011, and the proposed median cost for APC 0375 for CY 2012. For CY 2012, we proposed a median cost of approximate ly $5,711 for APC 0375 based on 155 claims. We did not receive any public comments re garding this proposal. For the reasons explained in the CY 2012 OPPS/ASC proposed rule, we are finalizing our CY 2012 proposal, without modification, to continue to use our establ ished ratesetting methodology for calculating the median cost of APC 0375, which has a final CY 2012 APC median cost of approximately $6,039. Ta ble 4 below shows the number of claims and the final median costs for APC 0375 for CYs 2007, 2008, 2009, 2010, 2011, and
2012.
TABLE 4.--CLAIMS FOR ANCILLARY OUTPATIENT SERVICES

WHEN PATIENT EXPIRES (–CA MO DIFIER) FOR CYs 2007 THROUGH 2012 Prospective Payment Year Number of Claims APC Median Cost CY 2007 260 $3,549 CY 2008 183 $4,945 CY 2009 168 $5,545 CY 2010 182 $5,911 CY 2011 168 $6,304 CY 2012 208 $6,039CMS-1525-FC 136

(6) Endovascular Revascularization of the Lower Extremity (APCs 0083, 0229, and 0319) For the CY 2011 update, the AMA’s CPT Editorial Panel created 16 new CPT codes in the Endovascular Revascularizat ion section of the 2011 CPT code book to describe endovascular revascul arization procedures of the lower extremity performed for occlusive disease. In the CY 2011 O PPS/ASC final rule with comment period (75 FR 71841 through 71845), we discussed the process and methodology by which we assigned the new CY 2011 endova scular revascularization CP T codes to APCs that we believe are comparable with re spect to clinical characteristics and resources required to furnish the services. Specifically, we we re able to use the existing CY 2009 hospital outpatient claims data and most recent cost re port data to create simulated medians for 12 of the 16 new separately payable codes for CY 2011. Because the endovascular revascularization CPT codes are new for CY 2011, we used our CY 2009 single and “pseudo” single claims data to simulate the new CY 2011 CPT code definitions. As shown in Table 7 of the CY 2011 OPPS/ ASC final rule with comment period (75 FR 71844), many of the new endovascul ar revascularization CPT codes were previously reported using a combination of CY 2009 CPT codes. In order to simulate median costs, we selected claims that we be lieve meet the definition for each of the new endovascular revascularization CPT codes. Table 7 showed the criteria we applied to select a claim to be used in the calculati on of the median cost for the new codes (shown in Column A). As we stated in the CY 2011 OPPS/ASC final rule with comment periodCMS-1525-FC 137 (75 FR 71842), we developed these criteria based on our clinicians’ understanding of services that were reported by CY 2009 CPT co des that, in various combinations, reflect the services provided that are described by the new CPT codes for CY 2011. After determining the simulated median costs for the procedures, we assigned each CPT code to appropriate APCs based on their clinical homogeneity and resourceuse. Of the 16 new codes, we assigned 9 CPT codes to APC 0083 (Coronary or NonCoronary Angioplasty and Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 (Transcatheter Placement of Intravas cular Shunts), and created new APC 0319 (Endovascular Revascularization of the Lower Extremity) for 2 CPT codes. Table 8 of the CY 2011 OPPS/ASC final rule with comm ent period displayed their final CY 2011 APC assignments and CPT median costs (75 FR 71845). We noted that because these CPT codes are new for CY 2011, they are iden tified with comment indicator “NI” in Addendum B to the CY 2011 OPPS/ASC final rule with comment period to identify them as a new interim APC assignment for the new year and subject to public comment. We specifically requested public comment on our methodology for simulating the median costs for these new CY 2011 CPT codes in addition to public comments on the payment rates themselves (75 FR 71845). At its February 28-March 1, 2011 meeti ng, the APC Panel recommended that CMS provide data to allow the Panel to inve stigate and monitor the APC weights for the lower extremity revascularization procedur es in light of CPT coding changes for CY 2011. In the CY 2012 OPPS/ASC proposed rule, we indicated that we wereCMS-1525-FC 138 accepting the APC Panel’s recommendation and w ill provide additional data to the Panel at an upcoming meeting. In the CY 2012 OPPS/ASC proposed ru le (76 FR 42190), we proposed to continue with the CY 2011 methodology that was described previously in this section in determining the APC assignments for the CPT codes that describe endovascular revascularization of the lowe r extremity. The predecessor en dovascular revascularization CPT codes were in existence prior to CY 2011 and were assigned to APCs based on claims data and cost report data. Given th at these data are available for the services described by the predecessor e ndovascular revascularization CPT codes, we proposed to continue for CY 2012 to use the existing hospita l outpatient claims and cost report data from the previous endovascular revasculariz ation CPT codes to simulate an estimated median cost for the new endovascular revasc ularization CPT codes in determining the appropriate APC assignments. As has been our practice since the implementation of the OPPS in 2000, we review our la test claims data for ratese tting and, if necessary, revise the APC assignments for the upcoming year. In this case, review of the procedures with significant claims data in APC 0083 showed a 2 times rule violation. Specifically, APC 0083, as it was initially configur ed, showed that the range of the CPT median costs for the procedures with signifi cant claims data was approximately between $3,252 (for CPT code 35476 (Transluminal balloon angioplast y, percutaneous; venous)) and $7,174 (for CPT code 37221 (Revascularization, endovascul ar, open or percutaneous, iliac artery, unilateral, initial vess el; with transluminal stent placemen t(s), includes angioplasty within the same vessel, when performed)), resulting in a 2 times rule violation. Because of itsCMS-1525-FC 139 median cost, we stated that we believe th at CPT code 37221 would be more appropriately placed in APC 0229, which had an initial esti mated median cost of approximately $8,606, based on the clinical and resource characteri stics of other procedur es also assigned to APC 0229. Therefore, for CY 2012, we proposed to revise the APC assignment for CPT code 37221, from APC 0083 to APC 0229, to accura tely reflect the cost and clinical features of the procedure. This propos ed reassignment of CPT code 37221 from APC 0083 to APC 0029 would eliminate the 2 times rule violation for APC 0083 noted above. Based on this reconfiguration, the CY 2010 clai ms data available for the proposed rule were used to calculate a median co st of approximately $4,683 for APC 0083, approximately $8,218 for APC 0229, and approximately $14,556 for APC 0319. All three proposed median costs for CY 2012 we re significantly greater than the CY 2011 OPPS/ASC final rule median costs of approximately $3,740 for APC 0083, approximately $7,940 for APC 0229, and approximately $13,751 for APC 0319. In addition, we proposed to revise the APC titles for APCs 0083, 0229, and 0319 to better describe the proce dures assigned to these APCs. Specifically, we proposed to revise the APC title for APC 0083 from “Cor onary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty” to “Level I E ndovascular Revascularization of the Lower Extremity”; for APC 0229, from “Transcathe ter Placement of Intravascular Shunt and Stents” to “Level II Endovascular Revascul arization of the Lower Extremity”; and for APC 0319, from “Endovascular Revascularization of the Lower Extremity” to “Level III Endovascular Revascularization of the Lower Extremity.”CMS-1525-FC 140 We solicited public comments on the proposed status indicators and APC assignments for the endovascular revasculariz ation of the lower extremity CPT codes for CY 2012. Table 5 of the proposed rule listed the endovascular reva scularization of the lower extremity CPT codes along with thei r proposed status indicator and APC assignments for CY 2012. As noted previ ously, because these CPT codes are new for CY 2011, they are identified with comment indicator “NI” in Addendum B to the CY 2011 OPPS/ASC final rule with comment pe riod to identify them as a new interim APC assignment for the new year and subjec t to public comment. We specifically requested public comment on our methodology for simulating the median costs for these new CY 2011 CPT codes in addition to public comments on the payment rates themselves (75 FR 71845). We respond to any public comments received on the CY 2011 OPPS/ASC final rule with comme nt period and the CY 2012 OPPS/ASC proposed rule below. At its August 10-12, 2011 meeting, the AP C Panel supported CMS’ proposal to move HCPCS code 37221 (Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, initial vesse l; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed) to APC 0229.
Comment : Several commenters supported th e CY 2012 proposal to rename APCs 0083, 0229, and 0319 to better describe the proc edures assigned to these APCs, and requested that CMS finalize th ese changes. The commenters also supported the proposed status indicator assignments of “T” for each of these APCs. One commenter agreed with the proposed renaming of APC 0229 and 0319 but asked that CMS change the APC titleCMS-1525-FC 141 of APC 0038 to “Coronary Angioplasty, Va lvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity” in order to reflect the coronary as well as endovascular procedures assigned to that APC. Response : We appreciate the commenters’ supp ort of our proposal to revise the titles for APCs 0083, 0229, and 0319. We agree with the commenter that a title of “Coronary Angioplasty, Valvul oplasty, and Level I Endovascul ar Revascularization of the Lower Extremity” would more accurately describe the procedures assigned to APC 0083. Therefore, we are finalizing our CY 2012 proposal, with modification, to revise the APC title for APC 0083 from “Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty” to “Coronary Angioplasty, Valvul oplasty, and Level I Endovascular Revascularization of th e Lower Extremity”; for APC 0229, from “Transcatheter Placement of Intravascular Shunt and Stents” to “Level II Endovascular Revascularization of the Lower Extremity ”; and for APC 0319, from “Endovascular Revascularization of the Lower Extremity” to “Level III Endovascular Revascularization of the Lower Extremity.” We also are fi nalizing our proposal, w ithout modification, to continue to assign status indica tor “T” to each of these APCs.
Comment : Many commenters supported our overall methodology for calculating simulated medians for the endovascular revasc ularization CPT codes established for 2011 and agreed with the APC reassignment for CPT code 37221 from APC 0083 to APC 0229. A few commenters cited that, duri ng the August 2011 APC Panel meeting, the APC Panel recommended that CMS finalize this proposal.CMS-1525-FC 142 Response : We appreciate the commenters’ support of our overall methodology for calculating simulated medians for the endovascular revascularization CPT codes established for 2011. Based on analysis of our the hospital claims and cost report data available for this final rule with comment period, and in accordance with the feedback we received from many commenters, we continue to believe that CPT code 37221 is more appropriately placed in APC 0229 than in APC 0083. Our data shows 4,673 simulated single claims (out of 4,710 total claims) for CPT code 37221 with a CPT median cost of approximately $7,053, which is closer to th e APC median cost of approximately $8,088 for APC 0229 than to the APC 0083 median co st of approximately $4,611.28. We also note that if CPT code 37221 were assigned to APC 0083, a 2 times violation would likely result. Therefore, after consideration of the public comments received and the APC Panel recommendation at its August 2011 m eeting, we are finalizing our proposal, without modification, to assign CPT c ode 37221 to APC 0229, which has a final CY 2012 median cost of approximately $8,088.
Comment : Several commenters disagreed with the continued APC assignment for CPT code 37223 (Revascularization, endovascul ar, open or percutaneous, iliac artery, each additional ipsilateral i liac vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when pe rformed) in APC 0083. They stated that the service described by CPT code 37223 is more si milar clinically and in terms of resource utilization to the procedures assigned to APC 0229 because this service involves stent placement. The commenters also argued that CPT code 37223 is an add-on code to CPT code 37221, and should be assigned to APC 022 9, which is the APC to which CPT codeCMS-1525-FC 143 37221 is assigned. They pointed out that CP T codes 37206 (Transcatheter placement of an intravascular stent(s) (except coronar y, carotid, and vertebra l vessel, and lower extremity arteries), percutaneous; each additional vessel) and 37208 (Transcatheter placement of an intravascular stent(s) (non- coronary vessel other than iliac and lower extremity arteries), open; each additional ve ssel) are also add-on CPT codes, and that they are assigned to the same APC as the pr imary codes with which they are billed (that is, APC 0229). The commenters further added that CPT code 37223, like CPT code 37221, requires the use of an implantable endova scular stent, and that the CY 2012 OPPS proposed payment rate of approximately $4,520 for CPT code 37223 does not take the cost of the device into consid eration. They noted that any efficiencies to be gained by performing the procedure described by CPT code 37223 at the same time as the procedure described by CPT code 37223 would be captured appropriately in the multiple procedure discount that would apply as a resu lt of both procedures being assigned status indicator “T.” Response : We are unable to simulate a me dian cost for CPT code 37223 using the CY 2010 claims data available for this final rule with comment period because we have no single service claims data that appropriately descri be the procedure associated with CPT code 37223. Therefore, analysis of our hospital outpatient claims data does not support an APC reassignment for CPT code 37223 from APC 0083 to APC 0229 based on resource homogeneity, and we believe that the servi ce described by CPT code 37223 is clinically similar to pr ocedures in APC 0083. We note that we will have CY 2011 hospital claims available for CPT code 37223 and the other new endovascularCMS-1525-FC 144 revascularization CPT codes for the first ti me for CY 2013 OPPS ratesetting, and that we will closely monitor our data to ensure th at the APC placements appropriately reflect hospitals’ costs for these procedures. We also note that when hospitals report CPT code 37223, we expect them to also report one of the following device HCPCS C-c odes for the implantable stent used in those procedures:

● C1874 (Stent, coated/covered, with delivery system)

● C1875 (Stent, coated/covered, without delivery system)

● C1876 (Stent, non-coated/non-c overed, with delivery system)

● C1877 (Stent, non-coated/non-covered, without delivery system)

● C2617 (Stent, non-coronary, temporary, without delivery system)

● C2625 (Stent, non-coronary, te mporary, with delivery system) These HCPCS C-codes were made effec tive April 1, 2001, and are a part of the procedure-to-device edits for CPT code 37223. Procedure-to-device edits, which have been in place for many procedures since 2005, re quire that when a particular service or procedural CPT or Level II HCPCS code is billed, the claim must also contain an appropriate device code. After analysis of our claims data a nd consideration of the public comments received, we are finalizing our proposal, wit hout modification, to continue to assign CPT code 37223 to APC 0083, which has a final CY 2012 median cost of approximately $4,611.CMS-1525-FC 145
Comment : Some commenters disagreed with the APC assignment for CPT codes 37224 (Revascularization, endovascular, open or percutaneous, femoral/popliteal artery(s), unilate ral; with transluminal angiopla sty) and 37235 (Revascularization, endovascular, open or percutaneous, tibial/p eroneal artery, unilat eral, each additional vessel; with transluminal stent placement(s) and atherectomy, include s angioplasty within the same vessel, when performed) to APC 0083, and stated that both procedures would be more appropriately placed in APC 0229 based on the economic and clinical coherence to other procedures alr eady assigned to APC 0229. Response : Analysis of our hospital outpa tient claims shows 4,288 simulated single claims (out of 4,320 total claims) with a median cost of approximately $5,418 for CPT code 37224, while there were no claims submitted upon which we could simulate a median cost for CPT code 37235. The range of the median costs for APC 0083 with significant claims data is approximate ly between$3,230 to approximately $5,766, which is in line with the median cost of approximately $5,418 for CPT code 37224. Based on our claims data, we believe that CPT c ode 37224 is appropriately placed in APC 0083 which has a final median cost is approxima tely $4,611. As is the case with CPT code 37223, we do not have claims data to suppor t the reassignment of CPT code 37235 to a different APC. We also believe that CPT codes 37224 and 37235 are sufficiently similar clinically to the other procedures in AP C 0083 to warrant their continued placement in that APC. Therefore, we will continue to assign CPT codes 37224 and 37235 to APC 0083 for CY 2012.CMS-1525-FC 146 We note that, similar to CPT code 37223, both CPT codes 37224 and 37235 are included as part of the procedure-to-device edits, and hospitals are reminded to refer to the latest edits on the CMS OPPS Web site. The updated lists of edits can be found under “Device, Radiolabeled Produc t, and Procedure Edits” at http://www.cms.gov/HospitalOutpatientPPS/

. After consideration of the public comments receiv ed on the CY 2011 OPPS/ASC final rule with comment period and the CY 2012 OPPS/ASC proposed ru le and review of our claims data, we are finalizing our CY 2012 proposal, without modification, to continue with the CY 2011 methodology that we described in the CY 2012 OPPS/ASC proposed rule (76 FR 42193 through 42194) in de termining the APC assignments for the CPT codes that describe endova scular revascularization of the lower extremity for the reasons set forth above. We also ar e finalizing our CY 2012 proposal, without modification, to revise the APC assignme nt for CPT code 37221, from APC 0083 to APC 0229. We are finalizing our CY 2012 proposal, with modification, to revise the APC titles for APCs 0083, 0229, and 0319 as described previously. Table 5 below lists the endovascular revascularization of the lower extremity CPT codes along with their final status indicator and APC assignments for CY 2012.
TABLE 5.—APCs TO WHICH ENDOVASCULAR REVASCULARIZATION OF THE LOWER EXTREMITY CPT CODES WILL BE ASSIGNED FOR CY 2012

CY 2012 CPT Code CY 2012 Short Descriptor CY 2011

SI CY 2011 APC Final CY 2012 SI Final CY 2012

APC 37220 Iliac revasc T 0083 T 0083CMS-1525-FC 147
CY 2012 CPT Code CY 2012 Short Descriptor CY 2011

SI CY 2011 APC Final CY 2012 SI Final CY 2012

APC 37221 Iliac revasc w/stent T 0083 T 0229 37222 Iliac revasc add-on T 0083 T 0083 37223 Iliac revasc w/stent add-on T 0083 T 0083 37224 Fem/popl revas w/tla T 0083 T 0083 37225 Fem/popl revas w/ather T 0229 T 0229 37226 Fem/popl revasc w/stent T 0229 T 0229 37227 Fem/popl revasc stnt & ather T 0319 T 0319 37228 Tib/per revasc w/tla T 0083 T 0083 37229 Tib/per revasc w/ather T 0229 T 0229 37230 Tib/per revasc w/stent T 0229 T 0229 37231 Tib/per revasc stent & ather T 0319 T 0319 37232 Tib/per revasc add-on T 0083 T 0083 37233 Tibper revasc w/ather add-on T 0229 T 0229 37234 Revsc opn/prq tib/pero stent T 0083 T 0083 37235 Tib/per revasc stnt & ather T 0083 T 0083

(7) Non-Congenital Cardiac Catheterization (APC 0080) For CY 2011, the AMA CPT Editorial Pa nel deleted 19 non-congenital cardiac catheterization-related CPT codes and repla ced them with 20 new CPT codes in the Cardiac Catheterization and Injection-Related section of the 2011 CPT Code Book to describe more precisely the specific services provided during cardiac catheterization procedures. In particular, the CPT Edito rial Panel deleted 19 non-congenital cardiac catheterization-related CPT codes from th e 93500 series and created 14 new CPT codes in the 93400 series and 6 in the 93500 series . We discussed these coding changes in detail in the CY 2011 OPPS/AS C final rule with comment period, along with the process by which we assigned the new CPT codes to AP Cs that we believe are comparable withCMS-1525-FC 148 respect to clinical characteristics and resources required to furnish the cardiac catheterization services de scribed by the new CPT codes (75 FR 71846 through 71849). As discussed in the final rule with comment period, we were able to use the existing CY 2009 hospital outpatient claims data and the most recent cost report data to create simulated medians for the new separately pa yable CPT codes for CY 2011. Specifically, to estimate the hospital costs associat ed with the 20 new non-congenital cardiac catheterization-related CPT codes based on th eir CY 2011 descriptors, we used claims and cost report data from CY 2009. B ecause of the substantive coding changes associated with the new non-congenital card iac catheterization-related CPT codes for CY 2011, we used our CY 2009 single and “pseu do” single claims data to simulate the new CY 2011 CPT code definitions. We stat ed that many of the new CPT codes were previously reported using multiple CY 2009 CP T codes, and we provided a crosswalk of the new CY 2011 cardiac catheterization CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in Table 11 of the CY 2011 OP PS/ASC final rule with comment period (75 FR 71849). Table 11 showed the criteria we applied to select a claim to be used in the calculation of the median cost for the new codes (shown in column A). As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71847 through 71848), we developed th ese criteria based on our clinicians’ understanding of services that were repor ted by CY 2009 CPT codes that, in various combinations, reflect the services provided th at are described in the new CPT codes. We used approximately 175,000 claims for the ne w non-congenital catheterization-related CPT codes, together with the single a nd “pseudo” single procedure claims for theCMS-1525-FC 149 remaining congenital catheter ization-related CPT codes in APC 0080, to calculate CPT level median costs and the median cost for APC 0080 of approximately $2,698. We noted that, because the CPT codes listed in Table 11 are new for CY 2011, they were identified with comment indicator “NI” in A ddendum B of that final rule with comment period to identify them as subject to public comment. We specifically requested public comment on our methodology for simulating th e median costs for these new CY 2011 CPT codes, in addition to public comments on the payment rates themselves (75 FR 71848). In the CY 2012 OPPS/ASC proposed rule (76 FR 42195), for CY 2012, we proposed to continue to use the CY 2011 methodology in determining the APC assignments for the cardiac catheteriza tion CPT codes. The predecessor cardiac catheterization CPT codes were in existence prior to CY 2011 and were assigned to APC 0080 based on claims data and cost report data. Given that these data are available for the services described by the predecessor ca rdiac catheterization CP T codes, we proposed for CY 2012 to continue to us e the existing hospital outpatient claims and cost report data from the predecessor cardiac cath eterization CPT codes to simulate an estimated median cost for the new cardiac catheterization CPT codes in determining the appropriate APC assignments. As has been our practice sin ce the implementation of the OPPS in 2000, we review our latest claims data for ratesetting and, if necessa ry, revise the APC assignments for the upcoming year. Based on analysis of the CY 2010 claims data available for the proposed rule, the proposed median cost for APC 0080 was approximately $2,822 for CY 2012, which was slightly greater than the median cost of approximately $2,698 for theCMS-1525-FC 150 CY 2011 OPPS/ASC final rule with comment period. For CY 2012, we did not propose any changes to the CY 2011 APC assignments of any of the codes assigned to APC 0080 because the claims data available for the pr oposed rule support continuation of these APC assignments. We solicited public comments on the proposed status indicators and the APC assignments for CY 2012 for the cardiac cath eterization CPT codes. Table 6 of the proposed rule listed the new CY 2011 cardiac catheterization CPT c odes along with their proposed status indicators and APC assignments for CY 2012.
Comment : Some commenters supported our CY 2012 proposal for payment of non-congenital cardiac catheterization. Response : We appreciate the commenters’ support of our payment methodology for the non-congenital cardiac catheterization pro cedures. Therefore, consistent with our rationale set forth above, we are finalizing our CY 2012 pr oposal, without modification, to continue with the CY 2011 methodology in determining the APC assignments for the non-congenital cardiac catheter ization CPT codes. The final CY 2012 median cost for APC 0080 is approximately $2,721. Table 6 below lists the CY 2012 cardiac catheterization CPT codes along with their final status indicators and APC assignments for CY 2012.
TABLE 6.—APCs TO WHICH NON-CONGENITAL CARDIAC CATHETERIZATION CPT CODES WI LL BE ASSIGNED FOR CY 2012

CY 2012 HCPCS

Code CY 2012 Short Descriptor CY 2011

SI CY 2011 APC Final CY 2012 SI Final CY 2012

APCCMS-1525-FC 151
CY 2012 HCPCS

Code CY 2012 Short Descriptor CY 2011

SI CY 2011 APC Final CY 2012 SI Final CY 2012

APC 93451 Right heart cath T 0080 T 0080 93452 Left hrt cath w/ventrclgrphy T 0080 T 0080 93453 R&l hrt cath w/ventriclgrphy T 0080 T 0080 93454 Coronary artery angio s&i T 0080 T 0080 93455 Coronary art/grft angio s&i T 0080 T 0080 93456 R hrt coronary artery angio T 0080 T 0080 93457 R hrt art/grft angio T 0080 T 0080 93458 L hrt artery/ventricle angio T 0080 T 0080 93459 L hrt art/grft angio T 0080 T 0080 93460 R&l hrt art/ventricle angio T 0080 T 0080 93461 R&l hrt art/ventricle angio T 0080 T 0080 93462 L hrt cath trnsptl puncture T 0080 T 0080

93463 Drug admin & hemodynmic meas N NA N NA 93464 Exercise w/hemodynamic meas N NA N NA 93563 Inject congenital card cath N NA N NA 93564 Inject hrt congntl art/grft N NA N NA 93565 Inject l ventr/at rial angio N NA N NA 93566 Inject r ventr/atrial angio N NA N NA 93567 Inject suprvlv aortography N NA N NA 93568 Inject pulm art hrt cath N NA N NA

(8) Cranial Neurostimulator and Electrodes (APC 0318) For CY 2011, the AMA CPT Editorial Panel created a new CPT code 64568 (Incision for implantation of cranial nerve (e g, vagus nerve) neurostimulator electrode array and pulse generator) and in dicated that it describes th e services formerly included in the combinations of (1) CPT code 64573 (In cision for implantation of neurostimulator electrodes; cranial nerve) and CPT code 61885 (Insertion or replacement of cranial neurostimulator pulse generator or receiver, direct or induc tive coupling; with connectionCMS-1525-FC 152 to a single electrode array); or (2) CP T code 64573 and CPT code 61886 (Insertion or replacement of cranial neurostimulator pulse generator or receiver , direct or inductive coupling; with connection to two or more el ectrode arrays). As we discussed in the CY 2011 OPPS/ASC final rule with comme nt period (75 FR 71850), our standard process for assigning new CPT codes to APCs is to assign the code to the APC that we believe contains services that are comparable with respect to clinical characteristics and resources required to furnish the service. A new CPT code is given a comment indicator of “NI” to identify it as a new interim APC assignment for the first year and the APC assignment for the new code is then open to pub lic comment. In some, but not all, cases, we are able to use the existing data from es tablished codes to simulate an estimated median cost for the new code to guide us in the assignment of the new code to an APC. For CY 2011, in the case of the new neur ostimulator electrode and pulse generator implantation CPT code, we were able to use the existing CY 2009 claims and most current cost report data to create a simulated median cost. Specifically, to estimate the hospita l costs of CPT code 64568 based on its CY 2011 descriptor, we used CY 2009 claims a nd the most recent cost report data, using the single and “pseudo” single claims within this data set to simulate the definition of this service. We selected claims with CPT code 64573 on which CPT code 61885 or 61886 was also present and consistent with the description of the new CPT code 64568. We treated the summed costs on these claims as if they were a single procedure claim for CPT code 64568. We created an estimated median cost of approximately $22,562 for CPT code 64568 from 298 single claims to se t a final payment rate for CY 2011 for theCMS-1525-FC 153 new code. We created APC 0318 (Implanta tion of Cranial Neurostimulator Pulse Generator and Electrode) for CY 2011, to which CPT code 64568 is the only procedure assigned. APC 0225 (Implantation of Neurostimulator Electrode s, Cranial Nerve), which contained only the predecessor CPT code 64573, was deleted effective January 1, 2011. We noted that, because CPT code 64568 is new for CY 2011, it was identified with comment indicator “NI” in Addendum B of the CY 2011 OPPS/ASC final rule with comment period to identify it as subject to public comment. We specifically requested public comment on our methodology for simulating the median costs for this new CY 2011 CPT code, in addition to public comments on the payment rate itself (75 FR 71850). In the CY 2012 OPPS/ASC proposed rule (76 FR 42195 through 42196), we proposed to use the same methodology we used in CY 2011 to estimate the hospital costs of CPT code 64568 and to continue to ma intain CPT code 64568 as the only code assigned to APC 0318 for CY 2012.
Comment : One commenter on the CY 2011 OPPS final rule with comment period expressed appreciation for CM S’ efforts to establish APC 0318. Response : We appreciate the commenters’ support for the creation of APC 0318. We did not receive any public comments on our proposals for cost estimation or APC assignment of CPT code 64568 for CY 2012. We are finalizing our CY 2012 proposal, without modification, to use the same methodology we used in CY 2011 to estimate hospital costs of CPT code 64568. For this final rule with comment period, we created an estimated median cost of approximately $24,262 for CPT code 64568 fromCMS-1525-FC 154 455 single claims to set a payment rate fo r APC 0318 for CY 2012. We are maintaining CPT code 64568 as the only code assigned to APC 0318 for CY 2012. (9) Brachytherapy Sources (A) Background Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) of Pub. L. 108-173 (MMA), mandated the creati on of additional groups of covered OPD services that classify devi ces of brachytherapy consisti ng of a seed or seeds (or radioactive source) (“ brachytherapy sources”) separately from other services or groups of services. The additional groups must refl ect the number, isotope, and radioactive intensity of the brachytherapy sources furn ished and include separate groups for palladium-103 and iodine-125 sources. Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of Pub. L. 108-173, established payment for brachytherapy sources furnished from January 1, 2004 through December 31, 2006, based on a hospital’s charges for each brachytherapy source furnished adjusted to cost. Under section 1833(t)(16)(C) of the Act, charges for the brachytherapy sources ma y not be used in determining any outlier payments under the OPPS for that period in wh ich payment is based on charges adjusted to cost. Consistent with our practice under th e OPPS to exclude items paid at cost from budget neutrality consideration, these items we re excluded from budget neutrality for that time period as well. Subsequent to the MMA, various amendments to the Act were made that resulted in the extension of the payment period fo r brachytherapy sources based on a hospital’sCMS-1525-FC 155 charges adjusted to cost through December 31, 2009. The CY 2011 OPPS/ASC final rule with comment period summarizes these amendm ents to the Act and our proposals to pay for brachytherapy sources at prospective paym ent rates based on their source specific median costs from CY 2007 thr ough CY 2009 (75 FR 71977 through 71981). In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 through 60537), we adopted for CY 2010 the general OPPS prospective payment methodology for brachytherapy sources, consistent with se ction 1833(t)(2)(C) of the Act, with payment rates based on source-specific median costs. For CY 2011, we continued to use the general OPPS prospective payment methodol ogy for brachytherapy sources, consistent with section 1833(t)(2)(C) of th e Act (75 FR 71980). We also finalized our proposals to continue the policy we first implemented in the CY 2010 OPPS/AS C final rule with comment period (74 FR 60537 and 75 FR 71980) regarding payment for new brachytherapy sources for which we have no cl aims data, based on the same reasons we discussed in the 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was superseded by section 142 of Pub. L. 110-275) . That policy is intended to enable us to assign future new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates based on our consideration of external data and other relevant information regard ing the expected costs of the sources to hospitals. Consistent with our policy regarding APC payments made on a prospective basis, for CYs 2010 and 2011, we finalized proposal s to subject brachyt herapy sources to outlier payments under section 1833(t)(5) of the Act, and al so to subject brachytherapy source payment weights to scaling for purposes of budget neutrality (75 FR 71980CMS-1525-FC 156 through 71981 and 75 FR 60537). Hospitals could receive outlier payments for brachytherapy sources if the costs of furnis hing brachytherapy sources meet the criteria for outlier payment. In addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with comment period (74 FR 60534 and 75 FR 71978 and 71979, respectively), implementation of prospective payments for brachytherapy sources provided opportunities for eligible hosp itals to receive additiona l payments in CY 2010 and CY 2011 under certain circumstances thr ough the 7.1 percent rura l adjustment, as described in section II.E. of this final rule with comment period. (B) OPPS Payment Policy As we have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 through 60534, and 75 FR 71978), we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons. The general OPPS payment methodology uses medi an costs based on claims data to set the relative payment weights for hospital out patient services. This payment methodology results in more consistent, predictable, and equitable payment amounts per source across hospitals by eliminating some of the extr emely high and low payment amounts resulting from payment based on hospitals ’ charges adjusted to cost. We believe that the OPPS prospective payment methodology, as opposed to payment based on hospitals’ charges adjusted to cost, would also provide hospita ls 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.CMS-1525-FC 157 In the CY 2012 OPPS/ASC proposed rule (76 FR 42196 through 42197), we proposed to use the median costs from CY 2010 claims data for setting the proposed CY 2012 payment rates for brachytherapy sources, as we proposed for most other items and services that will be paid under the CY 2012 OPPS. We proposed to continue the other payment policies for brachytherapy source s we finalized and fi rst implemented in the CY 2010 OPPS/ASC final rule with comm ent period (74 FR 60537). We proposed to pay for the stranded and non-stranded 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, respectively, on a per source basis (as opposed, for example, to a per mCi), which is based on the policy we establishe d in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66785). The propos ed payment methodology for NOS sources would provide payment to a hospital for new sources and, at the same time, encourage interested parties to quickly br ing new sources to our attentio n so that specific coding and payment could be established. We also proposed to continue the pol icy we first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new brachytherapy sources for which we have no cl aims data, based on the same reasons we discussed in the CY 2008 O PPS/ASC final rule with co mment period (72 FR 66786; which was superseded for a period of time by section 142 of Pub. L. 110-275). That policy is intended to enable us to as sign new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates set based on our considerationCMS-1525-FC 158 of external data and other relevant inform ation regarding the e xpected costs of the sources to hospitals. Consistent with our policy regarding AP C payments made on a prospective basis, as we did for CY 2011, we proposed to subject brachytherapy sources to outlier payments under section 1833(t)(5) of the Act, and also to subject brachytherapy source payment weights to scaling for purposes of budget neutrality. Hospitals can receive outlier payments for brachytherapy sources if the co sts of furnishing brachytherapy sources meet the criteria for outlier payment. In a ddition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with comment pe riod (74 FR 60534 and 75 FR 71978 through 71979, respectively), implementation of prosp ective payments for brachytherapy sources would provide opportunities for eligible hospi tals to receive additional payments in CY 2012 under certain circumstances thr ough the 7.1 percent rura l adjustment, as described in section II.E. of the proposed rule. Therefore, we proposed to pay for brachyt herapy sources at prospective payment rates based on their source-specific median costs for CY 2012. We referred readers to Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2012 payment rates fo r brachytherapy sources, identified with status indicator “U.” For more detailed disc ussion of the legislative history surrounding brachytherapy sources and our proposed and final policies for CY 2004 through CY 2011, we refer readers to the CY 2011 O PPS/ASC final rule with comment period (75 FR 71977 through 71981).CMS-1525-FC 159
Comment : Some commenters requested th at CMS discard its prospective payment methodology for brachytherapy sources based on source-specific median costs, and revert to payments based on brachytherapy ch arges adjusted to costs, for a variety of reasons. The commenters claimed that the clai ms data show a huge variation in costs per unit; that there continues to be, in th e CY 2012 proposed rule data, longstanding instability and fluctuation of costs; that more than one half of the current brachytherapy sources have proposed payment rates based on 50 or fewer hospitals (a number that a commenter reported has declined from 2010 to 2012); and that proposed payment rates are unstable and fluctuate significantly. The commenters were also concerned that rank order anomalies continue to exist in propos ed source payment rates, such as between C2635, high activity palladium, and C2640 and C2641, which represent forms of low activity palladium. The commenters also cl aimed that the charges adjusted to cost method would cost the Medicare program approximately $10.8 million less than the prospective payment methodology based on medi an cost per source. The commenters claimed that the number of hospitals provi ding brachytherapy treatment and the number of beneficiaries treated with brachythera py have declined from 2010 to 2011 because some hospitals cannot recover their costs under the prospective payment rates adopted in CY 2010. The commenters also pointed out that High Dose Ra te (HDR) Iridium-192 may treat multiple patients over a 90-day source life, making its true cost dependent on the number of patients treate d, and thus making fair prospective payment difficult to achieve.CMS-1525-FC 160 Response : As we stated previously (72 FR 66782; 74 FR 60534; 75 FR 71979), we believe that median costs based on hos pital claims data for brachytherapy sources have produced reasonably consistent per-sou rce cost estimates over the past several years, comparable to the patterns we have observed for many other OPPS services whose payments are set based upon relative payment we ights from claims data. We believe that our per-source payment methodology specific to each source’s radioisotope, radioactive intensity, and stranded or non-stranded conf iguration, supplemented by payment based on the number of sources used in a specific clin ical case, adequately accounts for the major expected sources of variability across trea tments. As we also explained previously (72 FR 66782; 74 FR 60535; 75 FR 71979), a pros pective payment system such as the OPPS relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a service for a particular patient, but with the exception of outlier cases, it is adequate to ensure access to appropriate care. In the case of brachytherapy sources for which the law re quires separate paym ent groups, without packaging, the costs of these individual items could be expected to show greater variation than some other APCs under the OPPS because higher variability in costs for some component items and services is not balan ced with lower variability for others and because relative weights are typically estimated using a smaller set of claims. Nevertheless, we believe that prospectiv e payment for brachytherapy sources based on median costs from claims calculated acco rding to the standa rd OPPS methodology is appropriate and provides hospitals with the greatest incentives for efficiency in furnishing brachytherapy treatment.CMS-1525-FC 161 As we have stated previously (75 FR 71979), under the budget neutral provision for the OPPS, it is the relativity of costs of services, not th eir absolute costs, that is important, and we believe that brachytherapy so urces are appropriatelypaid according to the standard OPPS payment approach. Furthe rmore, we are not concerned that some sources may have median costs and paym ent rates based on 50 or fewer providers, because it is not uncommon for OPPS prospect ive payment rates to be based on claims from a relatively small number of hospitals that furnished the service in the year of claims data available for the OPPS update ye ar. Fifty hospitals may report hundreds of brachytherapy source claims for many cases and comprise the universe of providers using particular low volume sources, for which we ar e required to pay sepa rately by statute. Further, our methodology for estimating median costs for brachytherapy sources utilizes all line-item charges 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 source claims are lost. We ha ve no reason to believe that prospective payment rates based on claims from those prov iders furnishing a particular source do not appropriately reflect the cost of that source to hospitals. In the case of high and low activity iodine -125 sources, our claims data show that the cost of the high activity source is greater than the low activity sources, as we have noticed in the past. However, this relations hip is reversed for palladium-103 sources, as one commenter pointed out. As we have st ated in the past (75 FR 71979), we have no information about the expected cost differen tial between high and lo w activity sources of various isotopes other than what is available in our claims a nd hospital cost report data.CMS-1525-FC 162 For high activity palladium-103, only 12 hosp itals reported this service in CY 2010, compared to 150 and 211 providers for low activity palladium sources described by HCPCS codes C2640 and C2641, respectively. As we stated regarding this issue in the CY 2010 and CY 2011 OPPS/ASC final rule with comment period (74 FR 60535 and 75 FR 71979), it is clear that fewer provi ders furnished high activity palladium-103 sources than low activity palladium sources, and we expect that the hospital cost distribution for those hospitals could be different than the co st distribution of the large number of providers reporting the low activit y sources. These varied cost distributions clearly contribute to the observe d relationship in median cost s between the different types of sources. However, we see no reason w hy our standard ratesetting methodology for brachytherapy sources that relies on all claims from all hospitals furnishing brachytherapy sources would not yield valid median costs for those hospitals furnishing the different brachytherapy sources upon whic h CY 2012 prospective payments rates are based. Prospective payment for brachytherapy sources based on their median costs makes the source payment an integral part of the OPPS, rather than a separate cost-based payment methodology within the OPPS, as i ndicated previously (75 FR 71980). We believe that consistent and predictable prospectively esta blished payment rates under the OPPS for brachytherapy sources are appropriate because we do not believe that the hospital resource costs associated with specifi c brachytherapy sources would vary greatly across hospitals or clinical conditions under tr eatment, other than through differences inCMS-1525-FC 163 the numbers of sources utili zed that would be accounted for in the standard OPPS payment methodology we are finalizing for CY 2012. As we indicated in the CY 2011 OPPS/A SC final rule with comment period (75 FR 71980), we agree that high dose rate (HDR) brachytherapy sources such as HDR irirdium-192 have a fixed active life and must be replaced every 90 days; as a result, hospitals’ per-treatment cost for the sour ce would be dependent on the number of treatments furnished per source. The source co st must be amortized over the life of the source. Therefore, in establishing their char ges for HDR iridium, we expect hospitals to project the number of treatments that woul d be provided over the life of the source and establish their charges for the source accord ingly, as we have stated previously (72 FR 66783; 74 FR 60535; 75 FR 71980). Fo r most of these OPPS services, our practice is to establish prospective paym ent rates based on the median costs from hospitals’ claims data to provide incentives for efficient and cost-effective delivery of these services. We do not agree with the commenters that prospective brachytherapy source payment based on median costs would increa se aggregate Medicare expenditures using the charges-adjusted-to-cost methodology comp ared to the proposed prospective payment methodology. Our past studies, su ch as that discussed in the CY 2010 final rule with comment period (74 FR 60535), have shown that payment at charges adjusted to cost results in higher aggregate payment for br achytherapy sources than does prospective payment. As we indicated in the CY 2010 final rule with comment period and the CY 2011 final rule with comment peri od (74 FR 60535 and 75 FR 71980), we haveCMS-1525-FC 164 traditionally found that charge inflation for brachytherapy sources appears to be higher than the market basket inflation update a pplicable to prospective payments under the OPPS. Therefore, we found that the estimat ed payments we calculated for brachytherapy charges adjusted to cost were greater th an the estimated prospective payment rates because the hospital market ba sket grows more slowly than the charges for brachytherapy sources. The commenter did not provide its aggregate payments study in its comment to the CY 2012 OPPS/ASC proposed rule, and we do not know whether the commenter’s study took into account factors such as char ge inflation. Moreover, the OPPS is a prospective payment system that ensures e quitable prospective payment of services across providers, and efficient use of resour ces, including brachytherapy sources, which since CY 2010 are part of OPPS prospective payment. Concerning the comment that some provide rs may have decided to discontinue offering brachytherapy services because the OPPS payment rates for sources were too low, as we have noted in the past (7 5 FR 71980), there are ma ny reasons why some providers may discontinue services, such as brachytherapy. For example, changes in medical technology or emphasis on different treatment forms for a medical condition can influence whether a set of services are conti nued. In addition, providers accept payment from a number of payers in addition to Medicare, and we believe a global shift by a provider to discontinue any se rvices would be influenced by factors other than our payment rates alone.
Comment : One commenter supported the proposed payment policy for new brachytherapy sources for which we have no claims data, namely, to assign new HCPCSCMS-1525-FC 165 codes for new brachytherapy sources to their own APCs, with prospective payment rates based on CMS’ consideration of external data and other relevant information regarding the expected costs of th e sources to hospitals. Response : We appreciate the commenter’s support for this payment policy. After consideration of the public comments we receive d, we are finalizing our proposal to pay for brachythe rapy sources at prospective payment rates based on their source-specific median costs for CY 2012. We refer readers to Addendum B to this final rule with comment period (which is availa ble via the Internet on the CMS Web site) for the final CY 2012 payment rates for brachyt herapy sources, identified with status indicator “U.” We also are finalizing our proposals to continue our policies regarding payment for NOS codes for stranded and non- stranded sources and new brachytherapy sources for which we have no claims data. Specifically, we are finalizing our proposals to continue payment for stranded and non- stranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or non-stra nded prospective payment for such sources, respectively as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786); and our pr oposal to assign HCPCS codes for new brachytherapy sources to their own APCs , with proposed payment rates based on consideration of external data and other relevant informati on, in the absence of claims data. Once claims data are available, our st andard ratemaking process will be applied to the calculation of the median cost for the new brachytherapy source. Consistent with our policy regarding APC payments made on a prospective basis, we are finalizing our proposal to subject the cost of brachytherapy sources to the outlierCMS-1525-FC 166 provision of section 1833(t)(5) of the Act, and also to subject brachytherapy source payment weights to scaling fo r purposes of budget neutrality. As stated in the proposed rule (76 FR 42197), we continue to invite hospitals and other parties to submit recommendations to us for new HCPCS codes to describe new brachytherapy sources consisting of a radioact ive isotope, including a detailed rationale to support recommended new sources. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4- 05-17, Centers for Medi care and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We will continue to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis.CMS-1525-FC 167 e. Calculation of Composite AP C Criteria-Based Median 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 only necessary, high quality care and to provide that care as efficiently as possible. For CY 2008, we developed compos ite 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 complete service. Combining payment for multiple independent services into a single OPPS paymen t in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An a dditional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in vol ume and/or incorrectly coded. Under the OPPS, we currently have composite AP C policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation servic es, mental health services, and multiple imaging services. We refer readers to th e CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652). In the CY 2012 OPPS/ASC proposed rule (76 FR 42197), for CY 2012, we proposed to continue, with some modificati ons, our established composite APC policies for extended assessment and management , LDR prostate brachytherapy, cardiacCMS-1525-FC 168 electrophysiologic evaluation and ablation, ment al health services, and multiple imaging services, as discussed in sections II.A.2.e.( 1), II.A.2.e.(2), II.A.2.e .(3), II.A.2.e.(4), and II.A.2.e.(5), respectively, of the proposed rule. We also proposed to create a new composite APC for cardiac resynchronization th erapy services, as di scussed in section II.A.2.e.(6) of the proposed rule. After consideration of the public comments we received as discussed below, for CY 2012, we are finalizing, wit hout modification, our proposal to modify some aspects of our established composite APC policie s for extended assessment and management, LDR prostate brachytherapy, cardiac electrophysiologic eval uation and ablation, mental health services, and multiple imaging servic es, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and II.A.2.e.( 5), respectively, of th is final rule with comment period. We also are finalizing, with modification, our proposal to create a new composite APC for cardiac resynchronization th erapy services, as di scussed in section II.A.2.e.(6) of this final rule with comment period. (1) Extended Assessment and Manageme nt Composite APCs (APCs 8002 and 8003) In the CY 2012 OPPS/ASC proposed rule (76 FR 42197 through 42198), for CY 2012, we proposed to continue to incl ude composite APC 8002 (Level I Extended Assessment and Management Composite) a nd composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS for CY 2012. For CY 2008, we created these two composite APCs to pr ovide payment to ho spitals in certain circumstances when extended assessment a nd management of a patient occur (an extended visit). In most circumstances, obs ervation services are s upportive and ancillaryCMS-1525-FC 169 to the other services provided to a patient. In the circumstances when observation care is provided in conjunction with a high level visit or direct referral a nd is an integral part of a patient’s extended encounter of care, paymen t is made for the entire care encounter through one of two composite APCs as appropriate. As defined for the CY 2008 OPPS, com posite APC 8002 describes an encounter for care provided to a patient that includes a high level (Level 5) clinic visit or direct referral for observation services in conjuncti on with observation serv ices of substantial duration (72 FR 66648 through 66649). Composite APC 8003 describes an encounter for care provided to a patient that includes a hi gh level (Level 4 or 5) Type A emergency department visit, a high level (Level 5) Type B emergency de partment visit, or critical care services in conjunction with observati on services of substantial duration. HCPCS code G0378 (Observation services, per hour) is assigned status indi cator “N,” signifying that its payment is always packaged. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66648 through 66649), th e Integrated Outpatient Code Editor (I/OCE) evaluates every claim received to determine if payment through a composite APC is appropriate. If payment through a comp osite APC is inappropr iate, the I/OCE, in conjunction with the OPPS Pricer, determines the appropriate status indicator, APC, and payment for every code on a claim. The speci fic criteria that must be met for the two extended assessment and management composite APCs to be paid are provided below in the description of the claims that were se lected for the calculation of the proposed CY 2012 median costs for these composite AP Cs. We did not propose to change these criteria for the CY 2012 OPPS.CMS-1525-FC 170 When we created composite APCs 8002 and 8003 for CY 2008, we retained as general reporting requirements for all observation services those criteria related to physician order and evaluation, documentati on, and observation beginning and ending time as listed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66812). These are more general requirements that encourage hospitals to provide medically reasonable and necessary care and help to ensure the proper reporting of observation services on correctly coded hospi tal claims that reflect the full charges associated with all hospital resources utilized to provide the reported services . We also issued guidance clarifying the correct method for reporting the starting time for observation services (sections 290.2.2 through 290.5 in the Medicare Claims Processing Manual (Pub. 100-4), Chapter 4, through Transmittal 1745, Cha nge Request 6492, issued May 22, 2009 and implemented July 6, 2009). We did not propos e to change these reporting requirements for the CY 2012 OPPS. For CY 2012, we proposed to continue the extended assessment and management composite APC payment methodology for APCs 8002 and 8003 (76 FR 42198). We stated that we continue to believe that the composite APCs 8002 and 8003 and related policies provide the most appr opriate means of paying for th ese services. We proposed to calculate the median costs for APCs 8002 and 8003 using all single and “pseudo” single procedure claims for CY 2010 that meet the criteria for payment of each composite
APC.CMS-1525-FC 171 Specifically, to calculate the proposed me dian costs for composite APCs 8002 and 8003, we selected single and “pseudo” single procedure claims that met each of the following criteria: 1. Did not contain a HCPCS code to whic h we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the da te of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we already assure that they would not contain a code for a service with status indicator “T” on the same date of service.); 2. Contained eight or more units of HCPCS code G0378; and 3. Contained one of the following codes:

● In the case of composite APC 8002, HC PCS code G0379 (Direct referral of patient for hospital observation care) on the sa me date of service as HCPCS code G0378; or CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); or CPT code 99215 (Office or other outpatient visit for the evaluation and management of an establishe d patient (Level 5)) provided on the same date of service or one day before th e date of service for HCPCS code G0378.

● In the case of composite APC 8003, CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluati on and management of a patient (Level 5)); CPT code 99291 (Critical care, evaluation a nd management of the critically ill or critically injured patient; first 30-74 minutes ); or HCPCS code G0384 (Level 5 hospital emergency department visit provided in a Type B emergency department) provided onCMS-1525-FC 172 the same date of service or one day before the date of service for HCPCS code G0378. (As discussed in detail in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68684), we added HCPCS code G0384 to the eligibility criteria for composite APC 8003 for CY 2009.) As discussed further in section VII. of the proposed rule and this final rule with comment period, and consistent with our CY 2008, CY 2009, CY 2010, and CY 2011 final policies (as discussed in section IX. of the final rules with comment period for these calendar years), when calculating the median costs for the clinic, Type A emergency department visit, Type B emergency depart ment visit, and critical care APCs (0604 through 0617 and 0626 through 0630), we utili ze our methodology that excludes those claims for visits that are eligible for payment through the two extended assessment and management composite APCs, that is APC 8002 or APC 8003. We believe that this approach results in the most accurate co st estimates for APCs 0604 through 0617 and 0626 through 0630 for CY 2012. At its February 28-March 1, 2011 meeting, the APC Panel recommended that CMS consider expanding the extended asse ssment and management composite APCs for CY 2012. In the proposed rule, we indicated that we are accepting this recommendation. As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42198), consistent with our decision to accept the APC Panel’ s recommendation, we have examined various ways of potentially expanding the current extended assessment and management composite APCs to further limit the possibili ty that total benefici ary copayments would exceed the inpatient deductible during extended observation encounters. We did notCMS-1525-FC 173 propose for CY 2012 the expanded extended assessment and management composite APCs that we analyzed because, while the composites that we modeled would serve to further limit the number of beneficiaries w ith copayments that exceeded the inpatient deductible, the modeled composites also had th e effect of possibly increasing copayments by a small amount for the majority of benefi ciaries undergoing extended observation. In addition, expanded assessment and management composite APCs do not address certain concerns about extended observation services raised by stakeholders at CMS’ observation listening session last year (that is, observat ion time not counting towards the 3-day prior hospitalization requirement for the skilled nursing facility benefit). As we stated in the proposed rule, we will continue our efforts to model other composite structures for a possible new extended assessment and manage ment composite structure for CY 2013. In summary, for CY 2012, we proposed to continue to include composite APCs 8002 and 8003 in the OPPS. We proposed to continue the extended assessment and management composite APC payment meth odology and criteria that we finalized for CYs 2009, 2010, and 2011. We also proposed to calculate the median costs for APCs 8002 and 8003 using the same methodology that we used to calculate the medians for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we used all single and “pseudo” single procedure claims from CY 2010 that met the criteria for payment of each composite APC and applied the standard packaging and trimming rules to the claims before calculating the propos ed CY 2012 median costs. The proposed CY 2012 median cost resulting from this methodology for composite APC 8002 was approximately $395, which was calculated fr om 16,770 single and “pseudo” single billsCMS-1525-FC 174 that met the required criteria. The pr oposed CY 2012 median cost for composite APC 8003 was approximately $735, which was calculated from 225,874 single and “pseudo” single bills that met the required criteria.
Comment : Commenters supported CMS’ policy to package payment for observation care and to not pr ovide additional payment through an extended assessment and management composite APC payment when observation services are billed with significant surgical procedures. One commenter stated that the obs ervation services in such cases are most likely related to post-pr ocedural recovery, and thus no additional payment is warranted. The commenter argue d, however, that when observation services are billed along with minor surgical procedur es, the observation services should be paid separately. The commenter suggested that CMS utilize the MPFS definition of minor surgical procedures and reassi gn the codes currently assigned status indicator “T” to two newly created status indicator s “T1”( for general surgical procedures) and “T2” (for minor surgical procedure as defined in MPFS) in order to allow observation services to be paid separately when provided with a mi nor surgical procedure with the suggested status indicator ”T2.” Response : We appreciate the commenters’ s upport of our policy not to allow payment of APC 8002 or 8003 for claims that include a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service on the same day as or one day prior to the date of the service associated with HCPCS code G0378. We agree with the commenters that payment for such se rvices is included in the payment for the surgical procedure. We appreciate the comm enter’s suggestions to define minor surgicalCMS-1525-FC 175 procedures and to develop new status indi cators to allow for separate payment for observation services when billed with a minor surgical procedure and will take these suggestions into consideration for possible futu re rulemaking. At this time, we have not proposed to make any policy changes to al low for separate payment for observation services when billed with a minor surgical procedure, nor have we proposed to create new status indicators for CY 2012. Therefore, we are not making any such changes in this final rule with comment period. After consideration of the public comments we received, we are adopting as final, without modification, our CY 2012 proposal to continue to include composite APCs 8002 and 8003 in the OPPS and to continue th e extended assessment and management composite APC payment methodology and cr iteria that we finalized for CYs 2009 through 2011. We applied the standard packag ing and trimming rules to the claims and calculated the median costs for APCs 8002 a nd 8003 using all single and “psuedo” single procedure claims from CY 2010 that meet the criteria for payment of each composite APC. The final CY 2012 median cost re sulting from this methodology for APC 8002 is approximately $393, which was calculated fr om 18,447 single and “psuedo” single bills that met the required criteria. The final CY 2012 median cost for composite APC 8003 is approximately $721, which was calculated from 247,334 single and “psuedo” single bills that met the required criteria. (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) LDR prostate brachytherapy is a treatmen t for prostate cancer in which hollow needles or catheters are inserted into the prostate, followed by permanent implantation ofCMS-1525-FC 176 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 77778 (Interstitial radiation source application; co mplex). Generally, the component services represented by both codes are provided in the same operative session in the same hospital on the same date of servi ce to the Medicare beneficiar y being treated with LDR brachytherapy for prostate cancer. As disc ussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66653), OPPS payment rates for CPT code 77778, in particular, had fluctuated over the years. We were frequently informed by the public that reliance on single procedure claims to set the me dian costs for these services resulted in use of mainly incorrectly coded claims for LDR prostate brachytherapy because a correctly coded claim should include, for the same date of service, CPT codes for both needle/catheter placement and application of radiation sources, as well as separately coded imaging and radiation therapy planning services (that is, a multiple procedure claim). In order to base payment on claims for th e most common clinical scenario, and to further our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital encounter, beginning in CY 2008, we began providing a single payment for LDR prostate brachytherapy when the composite service, reported as CPT codes 55875 and 77778, is furnishe d in a single hospital encounter. WeCMS-1525-FC 177 based the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the median cost derived from claims for th e same date of servic e that contain both CPT codes 55875 and 77778 and that do not contain other separately paid codes that are not on the bypass list. In uncommon occurr ences in which the services are billed individually, hospitals have continued to re ceive separate payments for the individual services. 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 and a detailed description of how we developed the LDR prostate brachytherapy composite APC. In the CY 2012 OPPS/ASC proposed ru le (76 FR 42199), we proposed to continue paying for LDR prostate brachythe rapy services using the composite APC methodology proposed and implemented for CY 2008 through CY 2011. That is, we proposed to use CY 2010 claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other se parately paid procedur e codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2011 practice, we proposed not to use the claims that meet these criteria in the calculation of the median costs for APCs 0163 (Level IV Cystourethroscopy and Other Gen itourinary Procedures ) and 0651 (Complex Interstitial Radiation Source Applicati on), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We proposed that the median costs for APCs 0163 and 0651 would continue to be calcu lated using single and “pseu do” single procedure claims. We stated that we believe that this com posite APC contributes to our goal of creatingCMS-1525-FC 178 hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also continue to believe that data from claims reporting both services required for LD R prostate brachythera py provide the most accurate median cost upon which to ba se the composite APC payment rate. Using a partial year of CY 2010 claims data available for the CY 2012 proposed rule, we were able to use 556 claims th at contained both CPT codes 55875 and 77778 to calculate the median cost upon which th e proposed CY 2012 payment for composite APC 8001 is based. The proposed median cost for composite APC 8001 for CY 2012 was approximately $3,364. This was an increase compared to the CY 2011 final median cost for this composite APC of approx imately $3,195 based on 849 single bill claims from a full year of CY 2009 claims data. The proposed CY 2012 median cost for this composite APC was slightly less than $3,555, the sum of the proposed median costs for APCs 0163 and 0651 ($2,658 + $897), the APCs to which CPT codes 55875 and 77778 map if one service is billed on a claim without the other. We stated that we believe the proposed CY 2012 median cost for co mposite APC 8001 of approximately $3,364, calculated from claims we believe to be corr ectly coded, would result in a reasonable and appropriate payment rate for this service in CY 2012.
Comment : One commenter expressed con cern with CMS’ methodology to use claims for median cost calculation for APC 8001 with both CPT codes 55875 and 77778 on the same date of service and no other sepa rately paid services that are not on the bypass list, which resulted in 556 CY 2012 propos ed rule claims. The commenter noted that this is only 12 percent of all CY 2012 proposed rule claims containing CPT codesCMS-1525-FC 179 55875 and 77778. The commenter stated that its analysis of commonly included procedure codes with LDR procedures would include CPT code 77332 (Treatment devices, design and construction; simple (simple block, simple bolus)), which the commenter recommended be added to the bypass list. This would add 406 claims to the median cost calculation based on the comment er’s analysis of CY 2012 proposed rule claims. Response : We disagree with the commenter that 556 claims is not a robust number of single claims for ratesetting purpos es. There are many services for which we have median costs based on hundreds of singl e and “pseudo” single claims. Moreover, the CY 2012 proposed rule median cost of approximately $3,364, the CY 2012 final median cost of approximately $3,340, a nd the CY 2011 final median cost of approximately $3,195 all compare favorably a nd show stability in the median cost calculation for APC 8001. We do not believe th e median cost would remain stable to such a degree if the claims used in rate setting for composite APC 8001 were inadequate or inaccurately reflected hospitals’ costs for providing the service described by CPT codes 55875 and 77778. We also do not believe it is appropriate to include CPT code 77332 on the bypass list for the reasons discusse d in section II.A.1.b. of this final rule with comment period.
Comment : One commenter requested that CMS implement the proposed CY 2012 payment rate for composite APC 8001, due to the increased median cost for
APC 8001.CMS-1525-FC 180 Response : We appreciate the commenter’s s upport for our proposed payment rate for composite APC 8001. We note that we base final OPPS rates on median costs calculated using a full year of hospital claims and cost report data rather than a partial year’s data, which were the data available for the proposed rule. After consideration of th e public comments we receiv ed, we are finalizing, without modification, our proposal to conti nue paying for LDR pros tate brachytherapy services using the composite APC me thodology implemented for CYs 2008, 2009, 2010, and 2011 described above in this section. Th e final CY 2012 median cost for composite APC 8001 is approximately $3,340, cal culated from 595 single bills. (3) Cardiac Electrophysiologic Evaluati on and Ablation Composite APC (APC 8000) Cardiac electrophysiologic evaluation a nd ablation services frequently are performed in varying combinations with one another during a single episode of care in the hospital outpatient setting. Therefore, corre ctly coded claims for these services often include multiple codes for component services that are reported with different CPT codes and that, prior to CY 2008, were always paid separately through different APCs (specifically, APC 0085 (Level II Electrophys iologic Evaluation), APC 0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). As a result, there w ould never be many single bills for cardiac electrophysiologic evaluation and ablation services, and those th at are reported as single bills would often represent atypical cases or incorrectly coded claims. As described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659), the APC Panel and the public expressed pers istent concerns rega rding the limited andCMS-1525-FC 181 reportedly unrepresentative sing le bills available for use in calculating the median costs for these services according to our standard OPPS methodology. Effective January 1, 2008, we establishe d APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation se rvice and one specified electrophysiologic ablation service. Calculating a composite AP C for these services allowed us to utilize many more claims than were available to es tablish the individual APC median costs for these services, and we also saw this com posite APC as an opportunity to advance our stated goal of promoting hospital efficiency through larger payment bundles. In order to calculate the median cost upon which the pa yment rate for composite APC 8000 is based, we used multiple procedure claims that cont ained at least one CPT code from group A for evaluation services and at leas t one CPT code from group B fo r ablation services reported on the same date of service on an individua l claim. Table 9 in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66656) identified the CPT codes that are assigned to groups A and B. For a full discussion of how we identified the group A and group B procedures and established the payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer reader s to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Wh ere a service in group A is furnished on a date of service that is di fferent from the date of servi ce for a code in group B for the same beneficiary, payments are made under the appropriate single procedure APCs and the composite APC does not apply.CMS-1525-FC 182 In the CY 2012 OPPS/ASC proposed ru le (76 FR 42200), we proposed to continue to pay for cardiac electrophysiologi c evaluation and ablation services using the composite APC methodology proposed and im plemented for CY 2008 through CY 2011. Consistent with our CY 2008 through CY 2011 practice, we proposed not to use the claims that meet the composite payment criteri a in the calculation of the median costs for APC 0085 and APC 0086, to which the CPT codes in both groups A and B for composite APC 8000 are otherwise assigned. Medi an costs for APCs 0085 and 0086 would continue to be calculated using single procedure claims. We stated that we continue to believe that the composite APC methodol ogy for cardiac electrophysiologic evaluation and ablation services is the most efficient and effective way to use the claims data for the majority of these services and best repres ents the hospital resour ces associated with performing the common combinations of these services that are clinically typical. Furthermore, this approach creates incen tives for efficiency by providing a single payment for a larger bundle of major procedures when they are performed together, in contrast to continued separate payment for each of the individual procedures. For CY 2012, using a partial year of CY 2010 claims data available for the proposed rule, we were able to use 11,156 claims containing a combination of group A and group B codes and calculated a proposed median cost of approximately $11,598 for composite APC 8000. This was an increase co mpared to the CY 2011 final median cost for this composite APC of approximately $10,673 based on a full year of CY 2009 claims data. We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42200) that we believe the proposed median cost of $11,598 calculate d from a high volume of correctly codedCMS-1525-FC 183 multiple procedure claims would result in an accurate and appropriate proposed payment for cardiac electrophysiologic evaluation a nd ablation services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service.
Comment : One commenter supported CMS’ proposal to continue its current composite methodology for cardiac electrophysio logic evaluation and ablation services, stating that it is the most efficient and effec tive method to use claims data for most of the cardiac electrophysiologic services, and best repr esents the resources associated with the combined services. Response : We appreciate the commenter’s support. We are finalizing our proposal for CY 2012, without modification, to continue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology implemented for CY 2008 thr ough CY 2011. For this final rule with comment period, we were able to us e 11,706 claims from CY 2010 containing a combination of group A and group B codes and calculated a final CY 2012 median cost of approximately $11,313 for composite AP C 8000. Table 7 below list the groups of procedures upon which we based composite APC 8000 for CY 2012.
TABLE 7.—GROUPS OF CAR DIAC ELECTROPHYSIOLOGIC EVALUATION AND ABLATION PROCEDURES UPON WHICH COMPOSITE APC 8000 IS BASED

Codes Used in Combinations: At Least One in Group A and One in Group B CY 2012 CPT Code Single Code CY 2012

APC CY 2012 SI (Composite) Group A Comprehensive electrophysiologic 93619 0085 Q3CMS-1525-FC 184

Codes Used in Combinations: At Least One in Group A and One in Group B CY 2012 CPT Code Single Code CY 2012

APC CY 2012 SI (Composite) evaluation with righ t atrial pacing and recording, right vent ricular pacing and recording, His bundle recording, including insertion and repositioning of multiple electrode catheters, without induction or attempted induction of arrhythmia Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or at tempted induction of arrhythmia; with righ t atrial pacing and recording, right vent ricular pacing and recording, His bundle recording 93620 0085 Q3 Group B Intracardiac cathe ter ablation of atrioventricular node function, atrioventricular conduct ion for creation of complete heart block, with or without temporary pacemaker placement 93650 0085 Q3 Intracardiac cathe ter ablation of arrhythmogenic focus; for treatment of supraventricular tac hycardia by ablation of fast or slow atriove ntricular pathways, accessory atrioventricular connections or other atrial foci, singly or in combination 93651 0086 Q3 Intracardiac cathe ter ablation of arrhythmogenic focus; for treatment of ventricular tachycardia 93652 0086 Q3

(4) Mental Health Services Composite APC (APC 0034) In the CY 2012 OPPS/ASC proposed rule (76 FR 42200 through 42201), for CY 2012, we proposed to continue our longs tanding policy of limiting the aggregateCMS-1525-FC 185 payment for specified less resource-intensiv e mental health services furnished on the same date to the payment for a day of partia l hospitalization, which we consider to be the most resource-intensive of a ll outpatient mental health treatment for CY 2012. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy. We stated that we continue to believe that the costs associated with administering a partial hospitalization program represent the most resource-intensive of all outpatient mental health treatment. Therefore, we did not believe that we should pay more fo r a day of individual mental health services under the O PPS than the partial hospitalization per diem payment. As discussed in detail in section VIII. of the proposed rule, for CY 2012, we proposed to continue using a provider-specific two tiered payment approach for partial hospitalization services that distinguishes payment made for services furnished in a CMHC from payment made for services fu rnished in a hospital. Specifically, we proposed one APC for partial hospitalization pr ogram days with three services furnished in a CMHC (APC 0172 (Level I Partial Hosp italization (3 servi ces) for CMHCs)) and one APC for days with four or more servic es furnished in a CMHC (APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs)). We proposed that the payment rates for these two APCs be based upon the me dian per diem costs calculated using data only from CMHCs. Similarly, we proposed one APC for partial hospitalization program days with three services furnished in a hospital (APC 0175, Level I Partial Hospitalization (3 services) for Hospital-Based PHPs), and one APC for days with four or more services furnished in a hospital (APC 0176, Level II Partial Hospitalization (4 orCMS-1525-FC 186 more services) for Hospital-Based PHPs). We proposed that the payment rates for these two APCs be based on the median per diem costs calculated using data only from hospitals. Because our longstanding policy of limiti ng the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment rate for the most resource-intensive of a ll outpatient mental health treatment, for CY 2012, we proposed to continue to set th e payment rate for APC 0034 (Mental Health Services Composite) at the same rate as we proposed for APC 0176, which is the maximum partial hospitalization per diem pa yment. As we stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42201), we believe this APC payment rate would provide the most appropriate payment for composite APC 0034, taking into consideration the intensity of the mental health services and the differences in the HCPCS codes for mental health services that could be paid through this composite APC compared with the HCPCS codes that could be paid through pa rtial hospitalization APC 0176. When the aggregate payment for specified mental hea lth services provided by one hospital to a single beneficiary on one date of service base d on the payment rates associated with the APCs for the individual services exceeds the maximum per diem partial hospitalization payment, we proposed that those specified me ntal health services would be assigned to APC 0034. We proposed that APC 0034 would have the same payment rate as APC 0176 and that the hospital woul d continue to be paid one unit of APC 0034. The I/OCE currently determines whether to pay these specif ied mental health services individually or to make a single payment at the same rate as the APC 0176 per diem rate for partialCMS-1525-FC 187 hospitalization for all of the specified mental health services furn ished by the hospital on that single date of service, and we propos ed for CY 2012 that it would continue to determine this. We did not receive any comments on this pr oposal. We continue to believe that the costs associated with administering a partial hospitalization program represent the most resource intensive of all outpatient ment al health treatment, and we do not believe that CMS should pay more for a day of indivi dual mental health se rvices under the OPPS than the partial hospitalization per diem pa yment. Therefore, we are finalizing our CY 2012 proposal, without modification, to limit the aggregate payment for specified less intensive outpatient mental health services furnished on the same date by a hospital to the payment for a day of partial hos pitalization, specifically APC 0176. (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) Prior to CY 2009, hospitals received a full APC payment for each imaging service on a claim, regardless of how many procedur es were performed dur ing a single session using the same imaging modality. Based on exte nsive data analysis, we determined that this practice neither reflected nor promoted the efficiencies hospitals can achieve when performing multiple imaging procedures dur ing a single session (73 FR 41448 through 41450). As a result of our data analysis , and in response to ongoing recommendations from MedPAC to improve payment accuracy for imaging services under the OPPS, we expanded the composite APC model developed in CY 2008 to multiple imaging services. Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service. WeCMS-1525-FC 188 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 13 of the CY 2011 OPPS/ASC final rule with co mment period (75 FR 71859 through 71860). While there are three imaging families, th ere are five multiple imaging composite APCs due to the statutory requirement at section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 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);

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

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

● APC 8008 (MRI and MRA with Contrast Composite). We define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. 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.CMS-1525-FC 189 Hospitals continue to use the same HC PCS codes to report imaging procedures, and the I/OCE determines when combinati ons of imaging procedures qualify for composite APC payment or map to standard (sole service) APCs for payment. We make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packaged services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging procedures performed across families. For a full discussion of the development of the multiple imaging compos ite APC methodology, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569). At its February 2010 meeting, the APC Panel recommended that CMS continue providing analysis on an ongoing basis of the impact on beneficiaries of the multiple imaging composite APCs as data become available. In the CY 2011 OPPS/ASC proposed rule, we indicated that we were accepting this recommendation and would provide the requested analysis to the APC Panel at a futu re meeting (75 FR 46212). As we discuss in the CY 2012 OPPS/ASC proposed rule, at the February 28-March 1, 2011 APC Panel meeting, CMS staff provided an updated analysis of the multiple imaging composite APCs to the Panel, comparing pa rtial year CY 2010 imaging composite cost and utilization data to compar able CY 2009 data in order to meet the APC Panel request that we provide analysis of the impact on be neficiaries of the multiple imaging composite APCs (76 FR 42201). In the CY 2012 OPPS/ASC proposed rule (76 FR 42201), for CY 2012, we proposed to continue paying for all multiple imaging procedures within an imagingCMS-1525-FC 190 family performed on the same date of service using the multiple imaging composite payment methodology. The proposed CY 2012 payment rates for the five multiple imaging composite APCs (APC 8004, AP C 8005, APC 8006, APC 8007, and APC 8008) were based on median costs calculated from a partial year of CY 2010 claims available for the CY 2012 OPPS/ASC proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calcu late the proposed median costs, we used the same methodology that we used to calculat e the final CY 2011 median costs for these composite APCs. That is, we removed any HCPCS codes in the OPPS imaging families that overlapped with codes on our bypass list (“overlap bypa ss codes”) to avoid splitting claims with multiple units or multiple occurrences of codes in an OPPS imaging family into new “pseudo” single claims. The imaging HCPCS codes that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC median costs appear in Table 9 of the CY 2012 OPPS/ASC proposed rule. (We noted that, consistent with our propos al in section II.A.1.b. of th e CY 2012 proposed rule to add CPT code 71550 (Magnetic resonance (eg, prot on) imaging, chest (eg, for evaluation of hilar and mediastinal lymphade nopathy); without contrast mate rial(s)) to the list of bypass codes for CY 2012, we also proposed to add CPT code 71550 to the list of proposed OPPS imaging family services ove rlapping with HCPCS codes on the proposed CY 2012 bypass list (76 FR 42201 through 42202). We integrated the identification of imaging composite “single session” claims , that is, claims with multiple imaging procedures within the same family on the sa me date of service, into the creation ofCMS-1525-FC 191 “pseudo” single procedure claims to ensure th at claims were split in the “pseudo” single process into accurate reflections of either a composite “singl e session” imaging service or a standard sole imaging service resource cost. Like all single bills, the new composite “single session” claims were for the same date of service and contained no other separately paid services in order to isolate th e session imaging costs. Our last step after processing all claims through the “pseudo” sing le process was to reassess the remaining multiple procedure claims using the full bypass list and bypass process in order to determine if we could make other “pseudo” sing le bills. That is, we assessed whether a single separately paid service remained on the claim after removing line-items for the “overlap bypass codes.” As discussed in detail in section III.D.2. of the CY 2012 OPPS/ASC proposed rule, we proposed to establish two APCs to which we would propose to assign the codes created for CY 2011 by the AMA’s CPT Edito rial Board for combined abdominal and pelvis CT services (76 FR 42235). Specifi cally, we proposed to create new APC 0331 (Combined Abdominal and Pelvis CT Without Contrast), to which we proposed to assign CPT code 74176 (Computed tomography, abdomen and pelvis; without contrast material); and we proposed to create new APC 0334 (Combined Abdominal and Pelvis CT With Contrast), to which we pro posed to assign CPT codes 74177 (Computed tomography, abdomen and pelvis; with c ontrast material(s)) and 74178 (Computed tomography, abdomen and pelvis; without contra st material in one or both body regions, followed by contrast material(s) and further sections in one or both body regions) for the CY 2012 OPPS. As noted and listed in secti on III.D.2. of the proposed rule, we selectedCMS-1525-FC 192 claims of predecessor codes of new CP T codes 74176, 74177, and 74178 to calculate the costs of proposed new APCs 0331 and 0334, resp ectively (76 FR 42235). Therefore, we proposed not to use those claims listed in Ta ble 21 in section III.D.2. of the proposed rule in calculating the costs of APCs 8005 and 8006. We were able to identify 1 million “single session” claims out of an estimated 2 million potential composite cases from our ratesetting claims data, or approximately half of all eligible claims, to calculat e the proposed CY 2012 median costs for the multiple imaging composite APCs. We listed in Table 8 of the proposed rule the HCPCS codes that would be subject to the propos ed multiple imaging composite policy, the approximate proposed median costs for the imaging composite APCs, and their respective families for CY 2012. The HCPCS codes listed in Table 8 were assigned status indicator “Q3”' in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) to identify their status as potentially pa yable through a composite APC. Their proposed compos ite APC assignment was identified in Addendum M to the proposed rule (which is available via the Internet on the CMS Web site). Table 9 of the proposed rule listed the OPPS imaging family services that overlap with HCPCS codes on the proposed CY 2012 bypass list.
Comment : Some commenters requested th at CMS provide separate APC payment when multiple imaging services are provided on the same date of service but at different times, because, according to the commenters, services at different times require additional resources than serv ices performed together. Th e commenters indicated that hospitals providing emergent services are mo re likely than other hospitals to provideCMS-1525-FC 193 multiple imaging services, some of which are provided in the same day but at different times. The commenters stated that when imag ing services are not provided at the same encounter, the same economies of scale are not realized as when imaging services are provided together. For example, cases in whic h it is necessary to perform CT scans of the chest, abdomen, and pelvis, and also a CT sc an of the brain and/or soft tissues of the neck, must be split into two separate enc ounters separated by a period of time, due to required repositioning of the patient, and safety requirements. One commenter requested that hospitals report a modifier or condition code to report situations in which multiple imaging services are provided on the same date but at different times , in order to afford additional payment in those circumstances. Th e commenter further opined that the fact that CMS allows separate payment for multiple E/M services on the same date of service shows that CMS recognizes that resources are expended for each cl inic visit, and that this is an identical concept to multiple imaging services on the same date but at differing sessions. Response : As we stated in the CY 2010 a nd CY 2011 final rules with comment period (74 FR 60399 and 75 FR 71858 through 71859), we do not agree with the commenters that multiple imaging procedures of the same modality provided on the same date of service but at different times s hould be exempt from the multiple imaging composite payment methodology. As we i ndicated in the CY 2009 through CY 2011 OPPS/ASC final rules with comment peri od (73 FR 68565; 74 FR 60399; 75 FR 71859), we believe that composite payment is appropr iate even when proce dures are provided on the same date of service but at different times because hospitals do not expend the sameCMS-1525-FC 194 facility resources each and every time a patien t is seen for a distinct imaging service in a separate imaging session. In most cases, we expect that patients in these circumstances would receive imaging procedures at diffe rent times during a single prolonged hospital outpatient encounter. The efficiencies th at may be gained from providing multiple imaging procedures during a single session are achieved in ways other than merely not having to reposition the patient. Even if the same level of effici encies could not be gained for multiple imaging procedures performed on the same date of service but at different times, we expect that any higher co sts associated with these cases would be reflected in the claims data and cost reports we use to calculate the median costs for the multiple imaging composite APCs and, therefor e, in the payment rates for the multiple imaging composite APCs. Therefore, we do not believe it is necessary or appropriate for hospitals to report imaging procedures provi ded on the same date of service but during different sittings any differently than they would report imaging procedures performed consecutively in one sitting with no time in between the imaging services. In addition, for the above reasons, we do not believe it is necessary to implement a modifier or condition code to distinguish between such cas es. We believe that the comparison to our E/M visit policy of providing separate payments to separate clinic visits on the same day is not relevant because, unlike radiology depart ments, clinics often operate independently from each other in different parts of the hospi tal with separate sta ffs providing different services.
Comment : A few commenters, who expre ssed concern that providers may receive inadequate compensation and a resulti ng decrease in benefi ciary access, statedCMS-1525-FC 195 that CMS should continue to provide analyses to the APC Panel of the impact of its imaging composite APC policy on payment and usage of imaging services. One commenter noted the updated analysis that CMS staff provided at the February 28-March 1, 2011 APC Panel meeting. The commenter a ppreciated the shared information, and recommended that CMS continue to monitor co sts, provide information on the impact of multiple imaging composite APCs, and use the information learned to ensure beneficiary access, as well as to evaluate whether th e existing multiple imaging composite APC methodology accurately reflects all costs of proving the services. Other commenters agreed with CMS’ decision not to propose any expansion of imaging composite APCs, opining that no expansion of the imaging co mposite APCs should be considered until robust data on the current policy is availa ble for public review and comment. One commenter expressed concern with CMS’ pr oposal to create two additional multiple imaging composite APCs. Response : We will continue to monitor the multiple imaging composite APC rate methodology and the cost of providing imaging services. We will report any information to the APC Panel and the public, as appropria te. Any expansion to the multiple imaging composite APCs would be subject to noti ce and comment rulemaki ng. We note that we did not propose to create two additional mu ltiple imaging composite APCs for CY 2012 as one commenter indicated.
Comment : Some commenters stated that, while they understood the multiple imaging composite APCs are intended to en courage efficiencies, they were concerned that the methodology employs arb itrary reductions absent data and may adversely affectCMS-1525-FC 196 beneficiary access to those imaging services subject to the policy. Other commenters stated that the efficiencies to be gained from multiple imaging procedures cannot be extrapolated across modalities. Response : The median costs upon which th e payment rates for the multiple imaging composite APCs are based are calc ulated using CY 2010 claims that qualified for composite payment, including those with only two imaging procedures and those with substantially higher numbers of imaging pro cedures. Therefore, because the payment rates reflect actual hospitals’ actual costs for providing multiple imaging services during a single session, we do not agree with the co mmenter that the polic y employs arbitrary reductions. As we have stated in the past (75 FR 71858 and 74 FR 60400), we do not agree that the composite APC payment rates are insufficient to reflect the current costs of diagnostic imaging procedures when more th an two imaging procedures are performed, and we do not believe that, in aggregate, OPPS payment for multiple imaging services will be inadequate so as to limit beneficiar y access. We note that the multiple imaging composite APC methodology is applied only wh en multiple imaging procedures of the same imaging modality are performed during the same session, and is not applied across imaging modalities. After consideration of the public comments we rece ived, we are adopting our CY 2012 proposal, without modification, to c ontinue paying for all multiple imaging procedures within an imaging family perfor med on the same date of service using the multiple imaging composite payment methodol ogy. The CY 2012 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8 005, APC 8006, APC 8007,CMS-1525-FC 197 and APC 8008) are based on median costs ca lculated from the CY 2010 claims that would have qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a si ngle date of service). Using the same ratesetting methodology desc ribed in the CY 2012 OPPS/ASC proposed rule (76 FR 42202), we were able to identify approximately 1.1 million “single session'' claims out of an estimated 2.2 million potenti al composite cases from our ratesetting claims data, or approximately half of all e ligible claims, to calculate the final CY 2012 median costs for the multiple imaging composite APCs. Table 8 below lists the HCPCS codes that will be subject to the multiple imaging composite policy and their respective families and approximate composite APC median costs for CY 2012. Table 9 below lists the O PPS imaging family services that overlap with HCPCS codes on the CY 2012 bypass list.
TABLE 8.—OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCs Family 1 – Ultrasound
CY 2012 APC 8004 (Ultrasound Composite) CY 2012 Approximate APC Median Cost = $192 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, limitedCMS-1525-FC 198 Family 2 - CT and CTA wi th and without Contrast CY 2012 APC 8005 (CT and CTA without Contrast Composite)* CY 2012 Approximate APC Median Cost = $432 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 2012 APC 8006 (CT and CTA with Contrast Composite) CY 2012 Approximate APC Median Cost = $722 70487 Ct maxillofacial w/dye 70460 Ct head/brain w/dye 70470 Ct head/brain w/o & w/dye 70481 Ct orbit/ear/fossa w/dye 70482 Ct orbit/ear/fossa w/o&w/dye 70488 Ct maxillofacial w/o & w/dye 70491 Ct soft tissue neck w/dye 70492 Ct sft tsue nck w/o & w/dye 70496 Ct angiography, head 70498 Ct angiography, neck 71260 Ct thorax w/dye 71270 Ct thorax w/o & w/dye 71275 Ct angiography, chest 72126 Ct neck spine w/dye 72127 Ct neck spine w/o & w/dye 72129 Ct chest spine w/dye 72130 Ct chest spine w/o & w/dyeCMS-1525-FC 199 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 will assign APC 8006 rather than APC 8005. Family 3 - MRI and MRA with and without Contrast

CY 2012 APC 8007 (MRI and MRA without Contrast Composite)* CY 2012 Approximate APC Median Cost = $700 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 dyeCMS-1525-FC 200 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 2012 APC 8008 (MRI and MRA with Contrast Composite) CY 2012 Approximate APC Median Cost = $1,001 70549 Mr angiograph neck w/o&w/dye 70542 Mri orbit/face/neck w/dye 70543 Mri orbt/fac/nck w/o & w/dye 70545 Mr angiography head w/dye 70546 Mr angiograph head w/o&w/dye 70548 Mr angiography neck w/dye 70552 Mri brain w/dye 70553 Mri brain w/o & w/dye 71551 Mri chest w/dye 71552 Mri chest w/o & w/dye 72142 Mri neck spine w/dye 72147 Mri chest spine w/dye 72149 Mri lumbar spine w/dye 72156 Mri neck spine w/o & w/dye 72157 Mri chest spine w/o & w/dye 72158 Mri lumbar spine w/o & w/dye 72196 Mri pelvis w/dye 72197 Mri pelvis w/o & w/dye 73219 Mri upper extremity w/dye 73220 Mri uppr extremity w/o&w/dye 73222 Mri joint upr extrem w/dyeCMS-1525-FC 201 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, the I/OCE will assign APC 8008 rather than APC 8007.

TABLE 9.--OPPS IMAGING FAMILY SERVICES OVERLAPPING WITH HCPCS CODES ON THE CY 2012 BYPASS LIST Family 1 – Ultrasound 76700 Us exam, abdom, complete 76705 Echo exam of abdomen 76770 Us exam abdo back wall, compCMS-1525-FC 202 76775 Us exam abdo back wall, lim 76776 Us exam k transpl w/Doppler 76856 Us exam, pelvic, complete 76870 Us exam, scrotum 76857 Us exam, pelvic, limited Family 2 - CT and CTA wi th and without Contrast

70450 Ct head/brain w/o dye 70480 Ct orbit/ear/fossa w/o dye 70486 Ct maxillofacial w/o dye 70490 Ct soft tissue neck w/o dye 71250 Ct thorax w/o dye 72125 Ct neck spine w/o dye 72128 Ct chest spine w/o dye 72131 Ct lumbar spine w/o dye 72192 Ct pelvis w/o dye 73200 Ct upper extremity w/o dye 73700 Ct lower extremity w/o dye 74150 Ct abdomen w/o dye Family 3 - MRI and MRA with and without Contrast 70336 Magnetic image, jaw joint 70544 Mr angiography head w/o dye 70551 Mri brain w/o dye 71550 Mri chest w/o dye 72141 Mri neck spine w/o dye 72146 Mri chest spine w/o dye 72148 Mri lumbar spine w/o dye 73218 Mri upper extremity w/o dye 73221 Mri joint upr extrem w/o dye 73718 Mri lower extremity w/o dye 73721 Mri jnt of lwr extre w/o dye

(6) Cardiac Resynchronization Ther apy Composite APC (APCs 0108, 0418, 0655, and 8009) Cardiac resynchronization therapy (CRT) us es electronic devices to sequentially pace both sides of the heart to improve its output. CRT utilizes a pacing electrodeCMS-1525-FC 203 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.” CRT performed by the implantation of a pacemaker along with a pacing electrode is referred to as “CRT–P.” CRT-D services are described by combina tions of CPT codes for the insertion of pulse generators and the inse rtion of the leads associated with ICDs, along with the insertion of the pacing electrode. For the impl antation of a pulse gene rator, hospitals may use CPT code 33240 (Insertion of single or dual chamber pacing cardioverterdefibrillator pulse genera tor), which is the only CPT code assigned to APC 0107 (Insertion of Cardioverter-D efibrillator) for CY 2011, in combination with CPT code 33225 (Insertion of pacing electr ode, cardiac venous system, fo r left ventricular pacing, at time of insertion of pacing cardioverte r-defibrillator or pacemaker pulse generator (including upgrade to dual chamber system)), which is assigned to APC 0418 (Insertion of Left Ventricular Pacing Electrode) for CY 2011. For the implantation of a pulse generator and leads, hospitals may use CP T code 33249 (Insertion or repositioning of electrode lead(s) for single or dual chamber pacing cardioverte r-defibrillator and insertion of pulse generator), which is the only CPT code assigned to APC 0108 (Insertion/Replacement/Repair of Cardiovert er-Defibrillator Leads) for CY 2011, in combination with CPT code 33225. For CRT-P services, hospitals may use CPT codes 33206 (Insertion or replacement of permanent pacemaker with transvenous electrode(s); atrial) and 33207 (Insertion or replacement of permanent p acemaker with transvenous electrode(s);CMS-1525-FC 204 ventricular), which are assigned to AP C 0089 (Insertion/Replacement of Permanent Pacemaker and Electrodes) for CY 2011, in combination with CPT code 33225. Hospitals also may use CPT code 33208 (In sertion or replacement of permanent pacemaker with transvenous elec trode(s); atrial and ventricula r), for the implantation of a pacemaker with leads, which is assigned to APC 0655 (Insertion/Replacement/Conversion of a Pe rmanent Dual Chamber Pacemaker), in combination with CPT code 33225. A number of commenters who responded to prior OPPS proposed rules, as well as public presenters to the APC Panel, ha ve recommended that CMS establish new composite APCs for CRT-D services, citing sign ificant fluctuations in the median cost for CPT code 33225 and the payment rate for APC 0418. The commenters and presenters have pointed out that, because th e definition of CPT code 33225 specifies that the pacing electrode is inserted at the same time as an ICD or pacemaker, CMS would not have many valid single or pseudo single cl aims upon which to calculate an accurate median cost. These commenters and presenters also asserted that claims data for these services demonstrate that the percentage of single claims available for use in CRT ratesetting is very low compared to the total number of claims submitted for CRT–D or CRT–P services. The APC Panel at its February and August 2009 meetings recommended that CMS evaluate the implica tions of the creation of a new composite APC for CRT-D services and recommended th at CMS reconsider creating a composite APC or a group of composite APCs for CRT-D and CRT-P services. While we did notCMS-1525-FC 205 propose to create any new composite APCs for CY 2010 or CY 2011, we accepted both of these APC Panel recommendations (75 FR 71852). As described in the CY 2012 OPPS/ ASC proposed rule (76 FR 42203 through 42206), in response to the APC Panel recomme ndations and the comments we received, we evaluated the implications of creating f our composite APCs for CRT services, which would include the ICD and pacemaker inserti on procedures listed previously in this section (described by CPT codes 33240, 33249, 33206, 33207, and 33208) performed in combination with the insertion of a paci ng electrode (described by CPT code 33225). Table 10 of the proposed rule and Table 10 below outline the four potential composite APCs that we modeled. Specifically, we provide a description of each potential composite APC, the combination of CPT code s that we used to define the potential composite APC, the frequency of claims that met the definition of the potential composite APC that could be used to cal culate a median cost for the potential composite APC, and the median cost calculated for the potential composite APC using CY 2010 claims data available for the proposed rule, that is, t hose claims processed between January 1 and December 31, 2010.
TABLE 10.—POTENTIAL COMPOSITE APCs

Potential Composite APC Description Component APCs CPT Codes CY 2010 Frequency CY 2012 Payment Estimate Based on Proposed Rule Claims

DataCMS-1525-FC 206
Potential Composite APC Description Component APCs CPT Codes CY 2010 Frequency CY 2012 Payment Estimate Based on Proposed Rule Claims

Data A Cardiac Resynchronization Therapy - ICD Pulse Generator and Leads 0418 0107 33225 33240 21 $35,623

B Cardiac Resynchronization Therapy - ICD Pulse Generator 0418 0108 33225 33249 2,358 $38,854

C Cardiac Resynchronization Therapy - Pacemaker Pulse Generator, and Leads (Atrial or Ventricular) 0418 0089 33225 33206 33207 84 $17,306

D Cardiac Resynchronization Therapy - Pacemaker Pulse Generator, and Leads (Atrial and Ventricular) 0418 0655 33225 33208 314 $18,705

For CY 2012, under the authority of s ection 1833(t)(1)(B) of the Act, we proposed to create a new composite APC 8009 (Cardiac Resynchronization Therapy with Defibrillator Composite), listed as potentia l composite APC “B” in Table 10 above, for CRT-D services. This proposed composite APC was the only modeled composite in the study with significant claims volume, as s hown above in Table 10, and would provide aCMS-1525-FC 207 single payment for a procedure currently assi gned to APC 0418 together with a procedure currently assigned to APC 0108 (Insertion/ Replacement/Repair of CardioverterDefibrillator Leads) when performed on the sa me date of service. Specifically, we proposed to create composite APC 8009, whic h would be used when the procedures described by CPT code 33225 and CPT code 33249 are performed on the same day, in order to recognize the inherent challenges in calculating acc urate median costs for CPT code 33225 based on single procedure claims utilized in the standard OPPS ratesetting methodology, and to address the public commente rs’ concerns regarding the fluctuations in median costs for APC 0418. We stated that we believe a composite payment methodology is appropriate for these services and would result in more accurate payment for these services because such a met hodology is specifically designed to provide payment for two or more procedures when th ey are provided in the same encounter, thus enabling us to use more claims data to calculate median costs, and to use claims data that more accurately represents the full cost of the services when they are furnished in the same encounter. We also stated that we belie ve that there is sufficient claims volume for CPT code 33225 and CPT code 33249 provided in the same encounter to warrant creation of the composite APC. In addition, we indi cated that we believe the claims volume for CPT 33225 and CPT 33249 is sufficient to demons trate that these services are commonly performed together. While the other combina tions of CRT procedures listed in Table 10 may also be performed together, we did not propose to implement composite APCs for these services because of the low frequency with which CPT code 33225 was reported in the claims data in combination with other CP T codes that describe the insertion of anCMS-1525-FC 208 ICD and a pacemaker. As we have stated previously (74 FR 60392), because of the complex claims processing and ratesetting logi c involved, in the past , we have explored composite APCs only for combinations of services that are commonly performed together. Because of the low frequency of the other combinations of CRT procedures listed in Table 10 above, we did not consider them to be commonly performed together. Under the authority of section 1833(t)(2)(E) of the Act, we also proposed to cap the payment rate for composite APC 8009 at the most comparable Medicare-severity diagnosis-related group (MS-DRG) payment ra te established under the IPPS that would be provided to acute care hospitals for providi ng CRT-D services to hospital inpatients. Specifically, we proposed a payment rate for APC 8009 as the lesser of the APC 8009 median cost or the IPPS payment rate fo r MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac Catheterization without Majo r Complication or Comorbidity), as adopted in the FY 2012 IPPS/LTCH PPS final rule. We stated that we woul d establish the OPPS payment amount as the FY 2012 IPPS standa rdized payment amount for MS-DRG 227 under this proposal. In the FY 2012 IPPS/ LTCH proposed rule, this amount was $26,364.93. We calculated the standardized payment rate for MS-DRG 227 ($26,364.93) by multiplying the normalized weight from Table 5 of the FY 2012 IPPS/LTCH proposed rule (5.1370) by the sum of the non-labor and labor-related shares of the proposed FY 2012 IPPS operating standardized amount (nonwage-adjusted ) ($5,132.36), which were obtained from Table 1B of the FY 2012 IPPS/LTCH proposed rule. For further detail on the calculation of the IPPS proposed FY 2012 payments rates, we refer readers to the FY 2012 IPPS / LTCH PPS proposed rule (76 FR 26028 through 26029).CMS-1525-FC 209 We stated that we consider the standa rdized payment rate for MS-DRG 227 to represent appropriate payment for a compar able package of services furnished to outpatients. We also stated that we believe that, because this MS-DRG includes defibrillator implantation for those inpa tients without major complications or comorbidities, it represents the payment made for hospital inpatients who are most similar to patients who would receive CRT-D services on an outpatient basis because hospital outpatients are generally less sick th an hospital inpatients and because patients who have complications or comorbitities would be most likely to be admitted to inpatient status to receive CRT-D services. Similar to the proposed payment rate for composite APC 8009, the proposed payment rate for MS-DRG 227 included the device costs associated with CRT-D services, along with the service costs associated with CPT codes 33225 and 33249, which are the procedures that are reported for implanting those devices. We stated that we believe that we should not pay more for these services under the proposed OPPS composite APC payment than under the IPPS because the OPPS payment would, by definition, include fewer ite ms and services th an the corresponding IPPS MS-DRG payment. For example, the IPPS MS-DRG payment includes payment for drugs and diagnostic tests that would be separately payable under the OPPS. We explained that a payment cap is necessary, ther efore, to ensure that we do not create an inappropriate payment incentive to provide CRT -D services in one setting of care as opposed to another by paying more for CRT-D services in the outpatient setting compared to the inpatient setting. We al so explained that we believe that limiting payment for CRT-D services under the OPPS to the IPPS MS-DRG payment will ensureCMS-1525-FC 210 appropriate and equitable payment to hosp itals because patient s who receive these services in the hospital outpatient setting are not as sick as patients who have been admitted to receive this same service in th e hospital inpatient setting. Therefore, we expect it would be less costly to provide ca re for these patients, who would also spend less time in the facility. In the CY 2012 OPPS/ASC proposed rule (76 FR 42241 through 42242), we also addressed cases when CPT codes 33225 and 33249 are performed on different dates of service. We proposed to retain CPT code 33249 in APC 0108, but to reassign CPT code 33225 to APC 0108 on the basis that these codes ar e similar in clinical characteristics and median cost. We proposed to revise the title of APC 0108 to read “Insertion/Replacement/Repair of AICD Lead s, Generator, and Pacing Electrodes” for CY 2012. We also proposed to reassign CP T code 33224 (Insertion of pacing electrode, cardiac venous system, for left ventricular p acing, with attachment to previously placed pacemaker or pacing cardioverter-defibrillat or pulse generator (including revision of pocket, removal, insertion, and/or replacem ent of generator)) from APC 0418 to APC 0655, and to change the title of APC 0655 fr om “Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker” to “Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or P acing Electrode.” In the CY 2012 OPPS/ASC proposed rule (76 FR 42205), we stated that we believe that r eassigning CPT code 33224 to APC 0655 will promote stability in pa yment for CPT code 33224 because CPT code 33224 would then be assigned to an APC with similar median costs, but with a higher volume of services and, therefor e, will benefit from the stabil ity in APC median costs andCMS-1525-FC 211 payment rates that generally result as the vol ume of services within an APC increases. Because these proposed actions would result in APC 0418 containing no CPT codes, we proposed to delete APC 0418. In addition, as with composite APC 8009 and under the authority of section 1833(t)(2)(E) of the Act, we proposed to lim it the payment for services assigned to APC 0108 to the IPPS standardized payment amount for MS-DRG 227. In other words, we proposed a payment rate for APC 0108 as the lesser of the APC 0108 median cost or the IPPS standardized payment rate for MS-D RG 227. We stated that we believe that MS-DRG 227 is the most comparable DRG to APC 0108 because, like APC 0108, MS-DRG 227 includes implantation of a defi brillator in patients who do not have medical complications or comorbidities. If we were to base payment for APC 0108 on our calculated median cost of approxim ately $27,361, it would result in a payment under the CY 2012 OPPS that would exceed our pr oposed standardized payment under the IPPS for MS-DRG 227 of $26,364.93. We stated th at we do not believe that it would be equitable to pay more for the implantation of a cardioverter defibrillator or implantation of a left ventricular pacing electrode for an outpatient encounter, which, by definition, includes fewer items and services than an inpa tient stay during which the patient has the same procedure. In order to ensure that hospitals correctly code for CRT services in the future, we proposed to create claim processing edits that would return claims to providers unless CPT code 33225 is billed in conjunction with one of the following CPT codes, as specified by the AMA in the CPT code book:CMS-1525-FC 212

● 33206 (Insertion or replacement of pe rmanent pacemaker with transvenous electrode(s); atrial);

● 33207 (Insertion or replacement of pe rmanent pacemaker with transvenous electrode(s); ventricular);

● 33208 (Insertion or replacement of pe rmanent pacemaker with transvenous electrode(s); atrial and ventricular);

● 33212 (Insertion or replacement of p acemaker pulse generator only; single chamber, atrial or ventricular);

● 33213 (Insertion or replacement of p acemaker pulse generator only; dual chamber, atrial or ventricular);

● 33214 (Upgrade of implante d pacemaker system, conve rsion of single chamber system to dual chamber system (includes removal of previously placed pulse generator, testing of existing lead, insertion of new lead, insertion of new pulse generator));

● 33216 (Insertion of a singl e transvenous electrode, permanent pacemaker or cardioverter-defibrillator);

● 33217 (Insertion of 2 transvenous el ectrodes, permanent pacemaker or cardioverter-defibrillator);

● 33222 (Revision or relocation of skin pocket for pacemaker);

● 33233 (Removal of permanent pacemaker pulse generator);

● 33234 (Removal of transvenous pacemaker electrode(s); single lead system, atrial or ventricular);CMS-1525-FC 213

● 33235 (Removal of transvenous pacemaker electrode(s); dual lead system, atrial or ventricular);

● 33240 (Insertion of singl e or dual chamber pacing cardioverter-defibrillator pulse generator); or

● 33249 (Insertion or repositioning of el ectrode lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion of pulse generator). In summary, for CY 2012, we proposed to create a composite APC for CRT-D services billed with CPT code 33225 and CPT code 33249 on the same date of service (Composite APC 8009 (Cardiac Resynchronizati on Therapy - ICD Pulse Generator and Leads)), for which we proposed that paymen t would be capped at the IPPS payment rate for MS-DRG 227. In other words, we w ould calculate payment for APC 8009 based on the lesser of the APC 8009 median cost orthe IPPS standardized payment for MSDRG 227. We also proposed to reassign CP T code 33225 to APC 0108 and to continue to assign CPT code 33249 to APC 0108 when th ey are furnished on different dates of service; to calculate payment for APC 0108 based on the lesser of the APC 0108 median cost or the IPPS standardized payment for MS-DRG 227; and to delete APC 0418. Finally, we proposed to implement claims pro cessing edits that would return to providers incorrectly coded claims on which a pacing electrode insertion (CPT code 33225) is billed without an ICD or pacemaker inserti on. The proposed changes would all be made in a budget neutral manner, in the same way that payment for other composite APCs and the reassignment of codes to APCs are budget neutral with in the OPPS.CMS-1525-FC 214 At its August 10-11 meeting, the APC Panel recommended that CMS establish the payment rates for APC 8009 (Cardiac Res ynchronization Therapy with Defibrillator, Composite) and APC 0108 (Insertion/Replacemen t/Repair of Cardioverter-Defibrillator Leads) using only outpatient claims data . We are accepting this recommendation and will use only outpatient claims data to es tablish the payment rates for ICD and CRT-D implantation procedures, as discussed in grea ter detail in response to comments below.
Comment : Many commenters supported the creation of a composite APC for CRT-D services, and the restructuring of APC 0108 in order to address the median cost fluctuations in APC 0418. Many commenters objected to the proposal to cap payments for the composite APC 8009 and for APC 0108 at the IPPS payment rate for MS-DRG 227. While some commenters acknowledge d that limiting the payment for CRT-D services provided to hospital outpatients makes intuitive sense and applauded CMS for exploring Medicare payment across payment systems rather than limiting policy proposals to within a single payment system , they expressed concern that CMS had not demonstrated that the services included in composite APC 8009 and APC 0108 are the same services included in MS-DRG 227. Ma ny commenters noted that there could be legitimate explanations for the higher hospita l outpatient cost estimates for CRT that would support higher hospital outpatient pa yments, such as the inclusion of less expensive ICD-only cases in the MS-D RG 227 payment bundle and geographic variations in cost for CRT -D devices provided to hosp ital inpatients and hospital outpatients. They asserted that MS-DRG 227 is an inappropriate comparator because it includes CRT-D implantation procedures, al ong with less expensiv e ICD-only cases.CMS-1525-FC 215 Other commenters argued that a payment cap is inappropriate because the proposed payment rate of approximately $26,365 for co mposite APC 8009 would fail to cover the cost of CRT-D devices used in the pr ocedures described by CPT codes 33225 and 33249 based on CMS’ calculation of AP C costs associated with devices presented in Table 24 of the CY 2012 OPPS/ASC proposed rule. The leading manufacturers of CRT devi ces argued that the payment cap is unnecessary, projecting that average actual payment differences (after accounting for wage index adjustments, indirect me dical education (IME) payments, and disproportionate share hospital (DSH) paym ents) under the CRT-D composite APC (with no payment cap applied) and MS-DRG 227 woul d be unsubstantial and unlikely to create inappropriate payment incentives, indicating that a significant shift in site of care (from hospital inpatient to hospital outpatient) for im plantable defibrillator implants has already been taking place over the past several years despite lower OPPS paym ent rates. Other commenters urged CMS to postpone the proposal to link IPPS and OPPS payments for CRT services until data from the new cost centers for implantable devices provides more accurate information for median cost development. Many commenters also stated th at the cap as described in the proposed rule is not an accurate reflection of the equivalent I PPS payment for CRT-D services because the operating and capital standardiz ed amounts paid to inpatient hospitals were not included, indicating that, accord ing to the IPPS final rule, th e total payment cap should be approximately $29,000. Other commenters adde d that IME and DSH payments also should be included in the cap calculation. The commenters urged CMS to take theseCMS-1525-FC 216 MS-DRG payment adjustments into considerat ion if an IPPS payment cap were applied to composite APC 8009 and APC 0108. Response : We appreciate the commenters’ suggestions presented in response toour proposal to cap the OPPS payment for CRT-D services at the IPPS payment for MSDRG 227, and the commenters’ support for the creation of a composite APC for CRT-D services. After revisiting this issue, we agree that while MS-DRG 227 includes less expensive ICD-only cases, along with CRT -D system implants, proposed APC 8009 would include only CRT-D cases (and not ICD-only cases), and therefore does not represent a comparable package of services . Therefore, because there are significant differences in these payment bundles, and because we believe a payment cap would only be appropriate for comparable packages of services, we agree with the commenters that a better approach at this time would be to refrain from implementing our CY 2012 proposal to cap the hospital outpatient payment rate for CRT-D services or ICD implantation procedures based on the IPPS pa yment rate for MS-DRG 227. As described in the proposed rule, we continue to believe that we should recognize the inherent challeng es in calculating accurate median costs for CPT code 33225 based on single procedure claims utilized in the standard OPPS ratesetting methodology, and that we should address the co mmenters’ past concerns regarding the fluctuations in median costs for the APC to which this service has been assigned. We also continue to believe that it is import ant to ensure that we do not create an inappropriate payment incentive to provide services in one se tting of care as opposed to another, also as stated in the proposal. In light of these goals, and taking intoCMS-1525-FC 217 consideration the commenters’ observations that the hospital inpatient and outpatient payment bundles for CRT-D services are di fferent, we are modifying our proposal to create composite APC 8009 for CRT-D services . Under this final rule with comment period, we will treat CPT codes 33225 and 33249 as a single, composite service when they are performed on the same day as propos ed, but rather than assigning them to composite APC 8009, we are assigning them to existing APC 0108 for CY 2012. We believe that this APC assignment is appropr iate because the CRT-D procedure described by the combination of CPT codes 33225 and 33249 is clinically similar to the basic (nonresynchronization) ICD insertion procedur e described by CPT code 33249 when it is performed by itself and assigned to APC 0108. Both procedures involve the insertion of one or more electrodes into th e heart with subsequent conne ction to a cardiac pacing and defibrillation device. The difference between CRT-D and ICD insertion is the use of an additional pacing wire, but we note that APC 0108, in general, and CPT code 33249, specifically, already reflect a range of numbers of electrode s. We also note that the CRT-D procedure and the ICD- only procedure have similar final CY 2012 median costs of approximately $38,468 (based on 3,145 single claims) and $26,988 (based on 7,910 single claims), respectively, and that the pla cement of these procedures in the same APC does not violate the 2 times rule. We also ar e finalizing our proposal to change the title of APC 0108 to “Insertion/Replacement/Repai r of AICD Leads, Generator, and Pacing Electrodes” because this APC will provide payment for ICD procedures, including CRT-D services.CMS-1525-FC 218 In calculating the median costs upon wh ich the payment rate for APC 0108 is based for CY 2012, for this final rule with comment period, we included single procedure claims for the individual services assigne d to APC 0108, as well as single procedure claims that contain the composite CRT-D se rvice, defined as the combination of CPT codes 33225 and 33249 with the same date of service. We were able to use 11,055 single bills from the CY 2012 final rule claims data (3,145 composite CRT-D service claims and 7,910 claims for other services assigned to APC 0108) to calculate a median cost of approximately $29,839. We note that under this po licy, hospitals will continue to use the same CPT codes to report CRT-D procedures, and the I/OCE will determine when combinations of procedures qualify for composite service payment or map to standard (sole service) APCs for payment. We will make a single payment for those procedures that qualify for composite servi ce payment, as well as any pa ckaged services furnished on the same date of service. Because CPT codes 33225 and 33249 may be treated as a composite service for payment purposes, we are assigning them stat us indicator “Q3” (Codes that may be paid through a composite AP C) in Addendum B to this final rule with comment period. The assignment of CPT codes 33225 and 33249 to APC 0108 when treated as a composite service also will be reflected in Addendum M to this final rule with comment period (which is available via the Internet on the CMS Web site). By continuing to recognize these procedur es as a single, composite service, we are able to use a higher volume of correctly coded claims for CPT code 33225 and, therefore, to address the i nherent ratesetting challenges associated with CPT code 33225 and stabilize payment for this se rvice. We also note that this policy is consistent with theCMS-1525-FC 219 principles of a prospective payment system, specifically to place similar services that utilize technologies with varying costs in th e same APC in order to promote efficiency and decisionmaking based on individual patien t’s clinical needs rather than financial considerations. By calculating the median cost for APC 0108 using claims from both ICD-only cases and CRT-D cases, we allow th e costs of each to influence the overall median cost for the APC, which will rise or fall in the future depending on hospitals’ utilization patterns. As i ndicated earlier, this methodology allows us to accept the APC Panel’s recommendation to calculate paymen t for these services using only hospital outpatient claims data.
Comment : A few commenters questione d CMS’ authority under section 1833(t)(2)(E) of the Act to cap the payment rate for an OPPS composite APC at a comparable MS-DRG payment rate establishe d under the IPPS, arguing that they believe this provision of the Act app lies only to adjustments made within the OPPS, and does not give CMS authority to make equitabl e adjustments across payment systems. Many commenters pointed out that CMS has held strongly to the principle of setting OPPS payment rates based only on hospita l outpatient claims and cost report data since the beginning of the OPPS, often refusi ng stakeholders’ request s to use external data or make cross-system payment comparisons as the basis for setting payment rates. The commenters stated that for CMS to cro ss payment systems and deviate from this longstanding policy would introduce a si gnificant level of uncertainty and unpredictability. Other commenters stated th at crossing payment systems for the first time under the OPPS represents a signifi cant departure from the standard OPPSCMS-1525-FC 220 ratesetting methodology, undermines the integr ity of the OPPS, discourages hospitals from providing care in the most appropriate setting, and adversely affects investment in new technologies. Some commenters also argued that CMS should not a ssume the hospital inpatient cost data for CRT-D services is more valid than hospital outpatient cost data. To the contrary, commenters noted that there are various mechanisms in place for hospital outpatient claims, such as the procedure-to-devic e edits, to ensure that hospitals report the full costs of devices provided in hospital outpatient depa rtments, while there are no similar mechanisms in place for devices provide d in hospital inpatient settings of care. The commenters pointed out that the OPPS and the IPPS have been designed to be internally consistent but not comparable to each other, noting that the methods used to establish relative weights in each sy stem are independent and unrelated. Commenters also stated that if CMS were to set a precedent for looking across payment systems in this circumstance, then CMS should be consistent and make crosssystem payment comparisons for all items and services, such as separately payable drugs and biologicals, which are paid at a lower pe r drug payment rate wh en they are provided in hospital outpatient settings compared to physician office settings. Response : Although we are not finalizing our proposal to institute a payment cap for composite APC 8009 and APC 0108, we beli eve we have broad authority under the statute to implement a cap on the payment rate for an OPPS APC at a comparable MS-DRG payment rate established under the IPPS. We also disagree that we cannot explore this policy option because it would be unprecedented and involve data other thanCMS-1525-FC 221 data obtained from hospital outpatient claims . It is not unprecedented for CMS to use data from one payment system in the calculati ons for another in spec ific circumstances. For example, as described in detail in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72033) and in section XIII.C .1.b. of this CY 2012 OPPS/ASC final rule with comment period, we use physician claims data in determining which procedures will be designated as “office-based” for the ASC lis t of covered surgical procedures, and in setting the ASC payment rate, we use the lower of the MPFS nonfacility PE RVU -based amount or the amount calculated using the AS C standard ratesetting methodology for the procedure. Even if the use of such data were unprecedented, we do not believe that we should neglect to pursue innovations and refinements to Medicare payment policy because any such innovations and refinements would be new. We also disagree that a payment policy to create payment parity betw een the IPPS and OPPS in one clinical area would necessitate the creation of parity across payment systems for all items and services. We note that there could be many different payment approaches that could be chosen for comparison purposes for any given item or service, giving rise to implementation issues. That is, comparisons could be made between the OPPS and the payment methodologies for services furnished in the physician’s office setting such as the MPFS for physicians’ services or ASP fo r certain covered Part B drugs, as the commenter suggested, or comparisons could be made between the OPPS and the IPPS or other payment systems, and the “payment parity” resulting from those comparisons would be vastly different. For example, wh ile the commenters’ suggested approach to achieve payment parity between the hospital outpatient setting and the physician officeCMS-1525-FC 222 setting for drugs and biologicals would us ually result in higher hospital outpatient payment rates of ASP+ 6 percent, an appr oach that would achieve payment parity between the hospital outpatient setting and the hospital inpatient setting would result in payment for most drugs and biologicals be ing packaged into the associated APC procedure payment, because payment for most drugs and biologicals under the IPPS is included in the MS-DRG payment. In addition, immediately a pplying such a policy across all items and services (rather than incrementally for items and services in one clinical area or a handful of clinical areas through notic e-and-comment rulemaking) may result in payment instability as payments would potentially increase and decrease for thousands of services. We note that we may consider examining th e issue of payment parity with respect to other payment systems, even when the data upon which the cost of a service is calculated are from a different source, because such an approach may deter inappropriate migration of services to a setting of care ba sed on financial consideration rather than clinical needs. Although we are not implementing our proposal to cap payment for CRT-D services in CY 2012, we will continue to expl ore methods to ensure our payment systems do not provide inappropriate payment incentives to provide services in one setting of care as opposed to another setting of care.
Comment : Some commenters contested the statement in the CY 2012 OPPS/ASC proposed rule that hospital outpatients are generally less si ck than hospital inpatients, arguing that not all patients with comorbid ities are admitted as inpatients. SeveralCMS-1525-FC 223 commenters stated that CMS has not provided evidence to support the claim that CRT-D services on an outpatient ba sis would include fewer items and services than on an inpatient basis. Response : As indicated previous ly, we are not implemen ting our proposal to cap payment for CRT-D services at the IPPS paymen t rate for MS-DRG 227. We continue to believe, however, that the Medicare beneficiar ies who receive a service on an outpatient basis would generally not be expected to be as sick as those who are admitted to the hospital to receive the same service. The Medicare Benefit Policy Manual (100-02), Chapter 1, Section 10 (available on the CMS Web site at: http://www.cms.gov/manuals/Downloads/bp102c01.pdf ) defines an inpatient as a person who has been admitted to a hospital for bed o ccupancy for purposes of receiving inpatient hospital services. As stated in the manual, factors to be considered when making the decision to admit include such things as the severity of the signs and symptoms exhibited by the patient and the medical predictability of something adverse happening to the patient. We believe this supports our statem ent that, generally, patients who can receive a service on an outpatient basis rather than be admitted as inpatients are not as sick as patients who would need to be admitted as inpatients to receive those same services. We also continue to believe that the co sts of providing a service to a hospital inpatient, in general, may exceed the co sts for providing the same service on an outpatient basis. In general, payment for out patient care through an APC consists only of the cost of the procedure, certain packaged ancillary services, and the cost of nursing and other staff care during the immediate recovery period. Patients ar e able to go homeCMS-1525-FC 224 quickly (and if they are not able to go home quickly, they would typically be admitted). In general, the payment for operating costs of inpatient hospital se rvices under the IPPS includes similar services th at would be paid under the OPPS through an APC, plus associated diagnostic testing, dr ugs, laboratory tests, and the co st of an extended recovery over several days. Inpatient care is typically associated w ith longer periods of recovery, which may be triggered by increased complica tions, increased comorbidity, or increased risk. Although an individual outpatient case may be more expensive than an individual inpatient case, inpatients, on the average, will be sicker and more costly than outpatients receiving similar services.
Comment : A few commenters disagreed with the proposed reassignment of CPT code 33224 to APC 0655, and the proposed reassignment of CPT code 33225 to APC 0108. According to the commenters, th e claims data upon which CMS calculated the proposed median cost of CPT code 33225 was flawed because it included many claims that should have been rejected if CM S applied its device-to- procedure edits. The commenters provided data analys is indicating that there were only 13 single bills that met the criteria of the device-dependent APC ratesetting methodology, and that the median cost calculated from those 13 single bills is approximately $8,149 rather than the median cost of approximately $34,018 calculated by CM S using 458 single bills from the data available for the CY 2012 proposed rule. Th e commenters requested that CMS maintain APC 0418, and continue to assign to it CPT codes 33224 and 33225, based on their estimated median cost of approximately $8,149 for CPT code 33225 and CMS’ estimated median cost of approximately $12,418 for CPT code 33224. The commenters expressedCMS-1525-FC 225 general concern that the devi ce-to-procedure edits were not being applied correctly to hospital outpatient claims. Response : We appreciate the commenters br inging to our attention potential problems with the claims used to calculat e the proposed CY 2012 median cost for CPT code 33225. We are investigati ng the possibility th at erroneous claims may have made it pass the claims processing logic in place to enforce the device-to-procedure and procedure-to-device edits, and how they may ha ve been present in the set of claims we used in ratesetting for the proposed rule. We note that we used a total of 28 single bills for CPT code 33225 to calculate a median co st of approximately $18,855 for this final rule with comment period, which is consistent with the much lower number of single bills identified by the commenters in the proposed ru le data set and consistent with the number of single bills for this service in prior years’ hospital outpatient claims data. We will continue to examine this issue in order to ensure that the claims we use to calculate median costs for these CPT codes, as well as all CPT codes assigned to device-dependent APCs, conform with the de vice-dependent APC ratese tting methodology outlined in section II.A.2.d.(1) of this fi nal rule with comment period. We do not agree with the commenters th at we should maintain APC 0418 for CPT codes 33224 and 33225. Based on the hospital ou tpatient claims and cost report data available for this final rule with comment period, we calculated a final median cost of approximately $12,418 using 198 single bills ( out of 831 total bills) for CPT code 33224, and a final median cost of approximate ly $18,855 using 28 singl e bills (out of 10,424 total bills) for CPT code 33225. We c ontinue to believe that CPT code 33224CMS-1525-FC 226 appropriately aligns, both in terms of clinical characteristics and res ource utilization, with other procedures assigned to APC 0655, wh ich has a final CY 2012 median cost of approximately $9,638, because the median cost of CPT code 33224 is relatively close to the overall APC median cost and APC 0655 in cludes pacemaker insertion procedures. Therefore, we are finalizing our proposal, without modification, to assign CPT code
33224 to APC 0655. In addition, we agree with commenter s that CPT code 33225 should not be assigned to APC 0108. We believe that CP T code 33225 should be assigned to APC 0655, rather than APC 0108 or APC 0418, when it is not performed on the same day as the service described by CPT code 33249, base d upon the median cost calculated for CPT code 33225 using data available for this fina l rule with comment period and based upon the commenters’ estimates presented in their analysis of this CPT code’s cost. While we acknowledge that the final rule median cost of approximately $18,855 is higher than the median costs of the other procedures a ssigned to APC 0655, we be lieve this is an appropriate assignment for this CPT code from a clinical perspective because the procedure described by CPT code 33225 differs from the procedure described by CPT code 33224 (which is in APC 0655) only in the po sition of the end of the electrode within the heart. In addition, CPT code 33225 is also similar to other pr ocedures assigned to APC 0655, such as CPT code 33214 (Upgrade of implanted pacemaker system, conversion of single chamber system to dua l chamber system (i ncludes removal of previously placed pulse generator, testing of existing lead, insertion of new lead, insertion of new pulse generator), which describes the upgrade of a pacemaker which generallyCMS-1525-FC 227 includes new hardware and placement of a ne w electrodes. We also note that this assignment does not violate the 2 times rule. Therefore, for CY 2012, we are modifying our proposal to reassign CPT code 33225 to APC 0108 when it is performed without CPT code 33249. Instead, CPT code 33225 is reassigned to APC 0655 when it is performed without CPT code 33249. We also are finalizing our proposals to change the title of APC 0655 to “Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode” and to delete APC 0418.
Comment : Many commenters supported the proposal to implement claims processing edits that would return claims to providers unless CPT code 33225 is billed in conjunction with one of the c linically appropriate CPT c odes specified by the AMA in the CPT code book. Response : We appreciate the commenters’ s upport. We are implementing our CY 2012 proposal, without modification, to crea te claims processing edits for CPT code 33225 that would return claims to providers if CPT code 33225 is not correctly billed on the claim in conjunction with one of the clin ically appropriate CPT codes specified by the AMA in the CPT code book, as descri bed previously in this section. In summary, after consider ation of the public comments we received and the APC Panel recommendation, we are not finalizing our proposal to implement a payment cap for CRT-D services and ICD implantation pr ocedures based upon the payment rate for IPPS MS-DRG 227 as proposed. Instead, we will recognize CPT codes 33225 and 33249 as a single, composite service when they are performed on the same day as proposed. However, for CY 2012, rather than assigning the procedures described by CPT codesCMS-1525-FC 228 33225 and 33249 when they are performed on the same day to composite APC 8009, we are assigning them to existing APC 0108. We are implementing our proposal to change the title of APC 0108 to “Insertion/Replacement/ Repair of AICD Leads, Generator, and Pacing Electrodes” because this APC will pr ovide payment for ICD procedures including CRT-D services. Hospitals will continue to use the same CPT codes to report CRT-D procedures and ICD-only procedures, and the I/OCE will identify when the combination of CPT codes 33225 and 33249 on the same day qualify for composite service payment. We will make a single composite payment for such cases. When not performed on the same day as the service described by CP T code 33225, the service described by CPT code 33249 will continue to be assigned to APC 0108. When not performed on the same day as the service described by CPT code 33249, the service described by CPT code 33225 will be assigned to APC 0655 (we note th at this is a modification from our proposal to assign CPT code 33225 when it does not appear with CPT code 33249 to APC 0108). We also are finalizing our pr oposals to reassign CPT code 33224 to APC 0655 for CY 2012, to change the title of APC 0655 from “Insertion/Replacement/Conversion of a Pe rmanent Dual Chamber Pacemaker” to “Insertion/Replacement/Conversion of a Perm anent Dual Chamber Pacemaker or Pacing Electrode,” and to delete APC 0418. In addition, we are finalizing our proposed policy to implement claims processing edits that will return to providers incorrec tly coded claims on which a pacing electrode insertion (the procedure desc ribed by CPT code 33225) is billed without a procedure to insert an ICD or pacemaker.CMS-1525-FC 229 3. Changes to Packaged Services a. Background The OPPS, like other prospective paymen t systems, relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a service or bundle of services for a particul ar patient, but with the exception of outlier cases, the payment is adequate to ensure acc ess to appropriate care. Packaging payment for multiple interrelated services into a singl e payment creates incentives for providers to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encourag ing long-term cost containment. For example, where there are a variety of supplies that could be used to furnish a service, some of which are more expensive than others , packaging encourages hospitals to use the least expensive item that meets the patient’s needs, rather than to routinely use a more expensive item. Packaging al so encourages hospitals to negotiate carefully with manufacturers and suppliers to reduce the pur chase price of items and services or to explore alternative group purchasing arra ngements, thereby encouraging the most economical health care. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furn ished, while carefully sc rutinizing the services ordered by practitioners to ma ximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the stability of paymen t for services over time. Finally, packaging also may reduce th e importance of refini ng service specific payment because there is more opportunity for hospitals to average payment across higher cost cases requiring ma ny ancillary services and lowe r cost cases requiring fewerCMS-1525-FC 230 ancillary services. For these reasons, packag ing payment for services that are typically ancillary and supportive to a pr imary service has been a fundamental part of the OPPS since its implementation in August 2000. We assign status indicator “N” to those HCPCS codes that we believe are always integral to the performance of the primary modality; therefore, we always package their costs into the costs of the separately paid pr imary services with which they are billed. Services assigned status indicator “N” are unconditionally packaged. We assign status indicator “Q1” (“STVX- Packaged Codes”), “Q2” (“T-Packaged Codes”), or “Q3” (Codes that may be paid through a composite APC) to each conditionally packaged HCPCS code. An “STVX-packaged code” describes a HCPCS code whose payment is packaged when one or more separately paid primary services with the status indicator of “S,” “T,” “V,” or “X” are furnished in the hospital outpatient encounter. A “T-packaged code” describes a code whose payment is packaged when one or more separately paid surgical procedures with the status indicator of “T” are provided during the hospital outpatient encounter. “STVX-packaged codes” and “T-packaged codes” are paid separately in those un common cases when they do not meet their respective criteria for packag ed payment. “STVX-packaged codes” and “T-packaged codes” are conditionally packaged. We refer re aders to section XI.A.1. of this final rule with comment period and Addenda D1 (which is referenced in section XVII. of this final rule with comment period and available via the Internet on the CMS Web site) with other Addenda, for a complete listing of status indicators and the meaning of each.CMS-1525-FC 231 We use the term “dependent service” to refer to the HCPCS codes that represent services that are typically an cillary and supportive to a prim ary diagnostic or therapeutic modality. We use the term “independent se rvice” to refer to the HCPCS codes that represent the primary therapeutic or diagnos tic modality into which we package payment for the dependent service. In future years, as we consider the development of larger payment groups that more broadly reflect serv ices provided in an encounter or episode of-care, it is possible that we might propose to bundle paymen t for a service that we now refer to as “independent.” Hospitals include HCPCS codes and char ges for packaged services on their claims, and the estimated costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims in establishing payment rates for the separately payable services. We encourage hospitals to report all HCPCS codes that describe packaged services that were provided, unless the CPT Editorial Panel or CMS provide other guidance. The a ppropriateness of the OPPS payment rates depends on the quality and completeness of the claims data that hospitals submit for the services they furnish to our Medicare beneficiaries. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we adopted the packaging of payment fo r items and services in seven categories into the payment for the primary diagnostic or therapeutic modality to which we believe these items and services are ty pically ancillary and supportive. The seven categories are: (1) guidance services; (2) image processing services; (3) intraoperative services; (4) imaging supervision and interpretation serv ices; (5) diagnostic radiopharmaceuticals;CMS-1525-FC 232 (6) contrast media; and (7) observation servic es. We specifically chose these categories of HCPCS codes for packaging because we beli eve that the items and services described by the codes in these categories are typical ly ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. In addition, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66650 through 66659), we finalized a dditional packaging for the CY 2008 OPPS, which included the establishment of ne w composite APCs for CY 2008, specifically APC 8000 (Cardiac Electrophysiologic Evalua tion and Ablation Composite), APC 8001 (LDR Prostate Brachytherapy Composite), APC 8002 (Level I Extended Assessment & Management Composite), and APC 8003 (Level II Extended Assessment & Management Composite). In the CY 2009 OPPS/ASC fina l rule with comment period (73 FR 68559 through 68569), we expanded the composite APC model to one new clinical area— multiple imaging services. We created five multiple imaging composite APCs for payment in CY 2009 that incorporate statut ory requirements to differentiate between imaging services provided with contrast a nd without contrast as required by section 1833(t)(2)(G) of the Act. The multiple imaging composite APCs are: (1) APC 8004 (Ultrasound Composite); (2) APC 8005 (CT a nd CTA without Contrast Composite); (3) APC 8006 (CT and CTA with Contrast Composite); (4) APC 8007 (MRI and MRA without Contrast Composite); and (5) APC 8008 (MRI and MRA with Contrast Composite). We discuss composite APCs in mo re detail in section II.A.2.e. of this final rule with comment period.CMS-1525-FC 233 We recognize that decisions about pa ckaging and bundling payment involve a balance between ensuring that payment is ad equate to enable the hospital to provide quality care and establis hing incentives for efficiency thr ough larger units of payment. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42206), we invited public comments regarding our packaging proposals for the CY 2012 OPPS. b. Packaging Issues (1) CMS Presentation of Findings Re garding Expanded Packaging at the February 28-March 1, 2011 and A ugust 10-11, 2011 APC Panel Meetings In deciding whether to package a service or pay for a code separately, we have historically considered a variety of factor s, including whether the service is normally provided separately or in conj unction with other services; ho w likely it is for the costs of the packaged code to be appropriately ma pped to the separately payable codes with which it was performed; and whether the expected cost of the service is relatively low. As discussed in section I.D. of the proposed rule and this fina l rule with comment period, the APC Panel advises CMS on the clinic al integrity of payment groups and their weights, and the APC Panel has had a Packag ing Subcommittee that is now renamed the Subcommittee for APC Groups and Status Indica tor (SI) Assignments to reflect that its function has expanded to include assisting CMS with assignment of HCPCS codes to APCs. As part of its function, the APC Panel studies and makes recommendations on issues pertaining to services that are not separately paya ble under the OPPS, but whose payments are bundled or packaged into APC payments. The APC Panel has considered packaging issues at several earlier meeti ngs. For discussions of earlier APC PanelCMS-1525-FC 234 meetings and recommendations, we refer readers to previously published hospital OPPS/ASC proposed and final rule s on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/list.asp

. (2) Packaging Recommendations of the AP C Panel at its February 28-March 1, 2011 Meeting During the February 28-March 1, 2011 APC Panel meeting, the APC Panel accepted the report of the Subcommittee for APC Groups and Status Indicator (SI) Assignment, heard several public presentations related to packaged services, discussed the deliberations of the subcommittee, a nd made five recommendations related to packaging and to the function of th e subcommittee. The Report of the February 28-March 1, 2011 meeting of th e APC Panel may be found at the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanel onAmbulatoryPaymentClassificationGrou
ps.asp
. To summarize, the APC Panel made five recommendations regarding the packaging of payment under the CY 2012 OPPS. Below we present each of these five packaging recommendations and our responses to those recommendations. The first APC Panel recommendation that relates to packagi ng and that we discuss in this section is APC Panel Recommendation 4. Two othe r recommendations, Recommendations 12 and 13, which evolved from the discussions of the APC Groups and Status Indicator Subcommittee, are related specifi cally to HCPCS codes, were discussed in section III.D. of the proposed rule, and are addressed in sec tion III.D. of this final rule with commentCMS-1525-FC 235 period. Recommendation 12 was that CMS reassign HCPCS code 65778 (Placement of amniotic membrane on the ocular surface fo r wound healing; self-retaining) and HCPCS code 65779 (Placement of amniotic membrane on the ocular surface for wound healing; single layer, sutured) to AP C 0233 (Level III Anterior Segm ent Eye Procedures) and that CMS furnish data when data become availa ble for these two codes. Recommendation 13 was that CMS create an intermediate-level upper gastrointestinal procedures APC. APC Panel Recommendation 4 : That HCPCS code 31627 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with computer-assisted, image-guided navigation (List separately in addition to code for primary procedure[s])) should continue to be assigned a status indica tor of “N.” The Panel further recommended that CMS continue to collect claims data for HCPCS code 31627. CMS Response to Recommendation 4 : HCPCS code 31627 was new for CY 2010, and we assigned a new interim st atus indicator of “N” in our CY 2010 OPPS/ASC final rule with comment period based on our policy of packaging guidance and intraoperative services that are an cillary and dependent upon an independent separately paid procedure. At the APC Pa nel’s February 2010 meeting, the manufacturer of the electromagnetic navigation bronc hoscopy (ENB) technology, one of several technologies that can be used to perfor m the service described by HCPCS code 31627, asserted that use of the ENB technology dur ing a bronchoscopy procedure enables access to distal lesions that are otherwise not accessible without use of the ENB technology. The manufacturer also stated that wit hout separate payment for the ENB technology, hospitals would likely not adopt the technology and the population that would likelyCMS-1525-FC 236 benefit from the ENB technology would not have access to this technology. In response to the manufacturer’s presentation at the February 2010 Panel meeting, the APC Panel asked CMS to consider whether HCPCS code 31627 should be packaged or paid separately; and if it should be paid separately, the APC Panel asked CMS to investigate the appropriate APC assignment. The report of the February 2010 APC Panel meeting is available at: http://www.cms.gov/FACA/05_AdvisoryPanel onAmbulatoryPaymentClassificationGrou
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. We stated in the CY 2011 OPPS/ASC pr oposed rule (75 FR 46223) that we considered and analyzed the information available to us for HCPCS code 31627 and believed that the code described a procedure that is supportive of and ancillary to the primary diagnostic or therapeutic modality. Therefore, we proposed to package payment for HCPCS code 31627. We stated that, by proposing to package payment for this procedure, we would be treating it in the same manner as similar computer assisted, navigational diagnostic procedures that are supportive of and anci llary to a primary diagnostic or therapeutic modality. At its August 23-24, 2010 meeting, the AP C Panel listened to discussions regarding whether HCPCS code 31627 should remain packaged for CY 2011. After hearing presentations from the public, the APC Panel recommended that CMS continue to package payment for HCPCS code 31627 into payment for the major separately paid procedure with which it is performed and asked that CMS bring claims data on the cost of HCPCS code 31627 to the APC Panel’s wint er 2011 meeting for review. AfterCMS-1525-FC 237 consideration of all of the information provi ded by commenters on this issue, and hearing the discussion of the issue by the APC Panel at its August 23-24, 2010 meeting, we accepted the APC Panel’s recommendation to continue to package payment for HCPCS code 31627 into the payment for the major sepa rately paid procedure with which it is reported for CY 2011. In addition, we also accepted the APC Panel’s recommendation that CMS bring claims data for HCPCS code 31627 to the winter 2011 APC Panel meeting. The report of the August 2010 APC Panel meeting is available at| http://www.cms.gov/FACA/05_AdvisoryPanel onAmbulatoryPaymentClassificationGrou
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. At its meeting on February 28-March 1, 2011, the APC Panel listened to a public presentation in which the manufacturer of the ENB technology requested that HCPCS code 31627 be paid separately on the basis that the cost of the tec hnology is substantially higher than the OPPS payment for APC 0076 (Level I Endoscopy Lower Airway), the APC to which most bronchoscopy codes are assigned and into which payment for HCPCS code 31627 is packaged. The manufact urer stated that if CMS does not pay HCPCS code 31627 separately, hospitals will not furnish the pr ocedure to hospital outpatients. In response to the request of the AP C Panel at its August 2010 meeting, we presented the available data on HCPCS c ode 31627 that could be derived from the hospital outpatient claims that were paid under the OPPS for services on and after January 1, 2010 through and including Se ptember 30, 2010, as processed through the CMS common working file by December 31, 2010. Specifically, using the limited set ofCMS-1525-FC 238 APC Panel data, CMS found that 119 hospita ls billed for 573 units of HCPCS code 31627, and that HCPCS code 31627 had a median cost of approximately $329 per unit. We also found that HCPCS code 31627 is report ed on 0 to 4 percent of the claims for bronchoscopy codes with which CPT guidance st ates that it is permissible to report HCPCS code 31627, with the exception of HCPCS code 31626 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, wh en performed; with placement of fiducial markers, single or multiple). HCPCS code 31627 was reported on approximately 52 percent of claims for HCPCS code 31626 in the APC Panel data. The APC Panel considered this information in its formula tion of Recommendation 4 that CMS continue to package payment for HCPCS code 31627 into the payment for the bronchoscopy code with which HCPCS code 31627 is reported. Subsequent to the APC Panel meeting, examination and analysis of the CY 2012 pr oposed rule data found that 149 hospitals reported 867 units of HCPCS code 31627, a nd that HCPCS code 31627 had a proposed rule median cost of approximately $344 per unit. After considering the public presentati on and the information presented by CMS staff, the APC Panel recommended that HC PCS code 31627 continue to be assigned a status indicator of “N.” The Panel furthe r recommended that CMS continue to collect claims data for HCPCS code 31627. In the CY 2012 OPPS/ASC proposed rule (76 FR 42208), we proposed to accept both of the APC Panel’s recommendations for the CY 2012 OPPS. Specifically, we proposed to assign HCPCS code 31627 to status indicator “N” for the CY 2012 OPPS and, theref ore, proposed to package payment for the procedure into payment for the bronchoscopy to which we belie ve that it is ancillary andCMS-1525-FC 239 supportive. As with all packaged items a nd services, we propose that the cost we calculate for CPT code 31627 would be added to the costs on the single bill for the bronchoscopy code with which the service reported by CPT code 31627 is furnished, and therefore, the cost of CPT code 31627 would be incorporated into the payment for the APC to which that bronchoscopy code is assigne d. We stated in the proposed rule that we continue to believe that HCPCS code 31627, for which there are several different technologies, describes a service that is supportive and ancilla ry to the primary bronchoscopy procedure with which it must be reported, as defined by CPT. HCPCS code 31627 describes a computer assisted im age guided navigation service that is not furnished without a bronchoscopy. As de fined by CPT, HCPCS code 31627 may only be furnished in addition to a bronchoscopy servic e and, therefore, we believe that it is ancillary and supportive to the bronchoscopy serv ice with which it must be reported. We agreed to provide further claims inform ation on HCPCS code 31627 to the APC Panel when it becomes available.
Comment : One commenter supported the APC Panel recommendation at its February 2011 meeting that CMS provide fu rther claims information on HCPCS code 31627 to the APC Panel when it becomes available. Response : We appreciate the commenter’s support and will furnish further information on HCPCS code 31627 to the APC Panel at a future meeting. For CY 2012, we are continuing to pack age payment for HCPCS code 31627 into payment for the separately paid procedure with which it is furnished because we continue to believe that it is ancillary and supp ortive to the bronchoscopy with which it isCMS-1525-FC 240 performed, as set forth in the CY 2012 proposed rule (76 FR 42207 through 42208). Therefore, we have assigned HCPCS code 31627 a status indicator of “N” for CY 2012. APC Panel Recommendation 5 : That CMS consider a more appropriate APC assignment for HCPCS code 31626 (Bronc hoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with placement of fiducial markers), the most common code with which HCPCS code 31627 was billed in 2010. CMS Response to Recommendation 5 : In the CY 2012 OPPS/ASC proposed rule, we accepted this recommendation and, th erefore, proposed to reassign HCPCS code 31626 (which had a proposed CY 2012 APC me dian cost of approximately $2,708) from APC 0076 (which had a proposed CY 2012 APC me dian cost of approximately $751) to APC 0415 (Level II Endoscopy Lower Airw ay), which had a proposed CY 2012 APC median cost of approximately $2,007. We agr eed with the APC Panel that it appears that the proposed APC median cost of HCPCS c ode 31626 of $2,708 justified placement in an APC that has a median cost that is more similar to the APC median cost for this code. We stated that we believe that APC 0415 is the most appropriate clinically similar APC because the proposed CY 2012 median cost for APC 0415 of $2,007 is more similar in clinical resource for HCPCS code 31626 than the proposed CY 2012 median cost for APC 0076 of $715.
Comment : Commenters supported our propos al to move HCPCS code 31626 to APC 0415 for CY 2012. Response : We appreciate the commenters ’ support and are finalizing our proposal for the reasons set forth above.CMS-1525-FC 241 For CY 2012, we are moving HCPCS code 31626 from APC 0076 to APC 0415, which has a final median cost of approximately $2,024. APC Panel Recommendation 6 : That Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC Groups and Stat us Indicator (SI) Assignments Subcommittee for 2011. CMS Response to Recommendation 6 : In the CY 2012 OPPS/ASC proposed rule, we indicated that we accepted the AP C Panel’s recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S. continue to chair the APC Groups a nd Status Indicator Assignments Subcommittee for 2011. We did not receive any public comments on this recommendation. We appreciate the services of Ms. Kelly as ch air of the Subcommittee for CY 2011. APC Panel Recommendation 7 : That CMS furnish the results of its investigation of claims that contain the following unconditi onally packaged codes without separately paid procedures:

● HCPCS code G0177 (Training and educati onal services related to the care and treatment of patient's disabling mental hea lth problems per session (45 minutes or more));

● HCPCS code G0378 (Hospital obs ervation service, per hour);

● HCPCS code 75940 (Percutaneous pl acement of IVC filter, radiological supervision and interpretation); and

● HCPCS code 76937 (Ultrasound guidan ce for vascular access requiring ultrasound evaluation of potential access sites, documentation of selected vessel patency,CMS-1525-FC 242 concurrent realtime ultrasound visualization of vascular needle entry, with permanent recording and reporting (List separately in addition to code for primary procedure)). CMS Response to Recommendation 7 : In the CY 2012 OPPS/ASC proposed rule, we indicated that we accepted the AP C Panel’s recommendation that CMS furnish the results of its investigation of claims that contain the unconditionally packaged codes, HCPCS code G0177, HCPCS code G0378, HCPCS code 75940, and HCPCS code 76937, at a future APC Panel meeting.
Comment : One commenter supported the APC Panel recommendation that CMS furnish the results of its investigation of cl aims that contain the following unconditionally packaged codes without separately paid procedures: HCPCS code 75940 and HCPCS code 76937. Response : As we indicated in the proposed rule (76 FR 42208), we will furnish this information to the APC Panel at a future meeting. APC Panel Recommendation 8 : That the work of the APC Groups and Status Indicator (SI) Assignments Subcommittee continue. CMS Response to Recommendation 8 : In the CY 2012 OPPS/ASC proposed rule, we indicated that we accepted the APC Panel’s recommendation that the work of the APC Groups and Status Indicator Assignments Subcommittee continue. We did not receive any public comments on this recommendation. (3) Packaging Recommendations of th e APC Panel at its August 2011 Meeting During the August 10-11, 2011 APC Panel meeting, the APC Panel accepted the report of the Subcommittee for APC Groups a nd Status Indicator (SI) Assignments, heardCMS-1525-FC 243 several public presentations rela ted to packaged services, di scussed the deliberations of the subcommittee, and made three recomme ndations related to packaging and to the function of the subcommittee. The subcom mittee also made recommendations with regard to APC placement of specific services that are discussed in section III.D of this final rule with comment period. The Re port of the August 10-11, 2011 meeting of the APC Panel may be found at the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanel onAmbulatoryPaymentClassificationGrou
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. Below we present each of the three re commendations related to packaging and our responses to those recommendations. Recommendations that evolved from the discussions of the Subcommittee on APC Group s and Status Indicator Assignments that are specific to the APC assignment of HCPC S codes and removal of HCPCS codes from the inpatient only list are discu ssed in sections III and IX, respectively, of this final rule with comment period. APC Panel Recommendation 9 : That CMS give HCPC S code 65778 (Placement of amniotic membrane on the ocular surface for wound healing; self-retaining) a status indicator of “T” and provide the Panel with correlating claims data when available. CMS Response to Recommendation 9 : We refer readers section III.D.5.a of this final rule with comment period fo r discussion of this recommendation. APC Panel Recommendation 11 : The Panel recommends that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chai r of the APC Groups and SI Assignments Subcommittee.CMS-1525-FC 244 CMS Response to Recommendation 11: We accept the recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., re main the chair of the APC Groups and SI Assignments Subcommittee. We appreciate Ms. Kelly’s continuing service in this position. APC Panel Recommendation 12: The Panel recommends that the work of the APC Groups and SI Assignments Subcommittee continue. CMS Response to Recommendation 12 : We are accepting the APC Panel’s recommendation that the work of the APC Groups and SI Assignments Subcommittee continue. (4) Other Packaging Proposals and Policies for CY 2012 The HCPCS codes that we proposed be packaged either unconditionally (for which we continue to assign status indicat or “N”), or conditionally (for which we continue to assign status i ndicators “Q 1,” “Q2,” or “Q3”), were displayed in Addendum B of the CY 2012 OPPS/ASC propos ed rule (76 FR 42208). The supporting documents for the CY 2012 OPPS/ASC propos ed rule, including but not limited to Addendum B, are available at the CMS Web site at: www.cms.hhs.gov/HospitalOutpatientPPS/HORD . To view the proposed status indicators by HCPCS code in Addendum B, select “CMS 1525-P” and then select the folder labeled “2012 OPPS Proposed Rule A ddenda” or “2012 OPPS Final Rule with Comment Period Addenda” from the list of supp orting files. Open the zipped file and select Addendum B, which is available as both an Ex cel file and a text file.CMS-1525-FC 245
Comment : Commenters stated that CMS’ p ackaging policies would likely lead to less efficient use of resources, limited access to innovative treatment options, and greater instability in payments because the policie s are based on several flawed assumptions. Commenters believed that, to the extent that hospitals control the ar ray of services they provide, CMS’ packaging policies assume that the same incentives apply to services furnished in hospital outpatient departments as to inpatient services. One commenter stated that under the hospital inpatient prospective payment system (IPPS), hospitals have an incentive to provide care, including advan ced technologies, in an efficient manner to ensure the lowest cost for the patient’s dia gnosis. In contrast, in hospital outpatient departments, because Medicare payment is based on procedures rather than diagnoses, the commenter believed that hospitals have an incentive to provide the lowest cost item or service included in an APC. The commenter further believed that if that service does not fully address the patient’s needs, th e hospital would receiv e better payment by bringing the patient back for a second visit or admitting the patient for inpatient care than by providing a more costly option within the same APC. Moreover, the commenters believed that when an APC’s payment rate is significantly less than th e cost of a technology, hospitals ha ve a strong disincentive to use that technology, even if it could reduce the costs of care at a later date. The commenters believed that CMS’ use of expanded packaging has the risk of encouraging hospitals to forego performing needed services and us ing new technologies that may be more resource intensive during one visit, but could save the patient future outpatient department visits or inpatient care.CMS-1525-FC 246 Response : Packaging payment for items and serv ices that are ancillary to and dependent on the major procedure for whic h a payment rate is established is a fundamental concept of the OPPS, based in re gulation in the definiti on of costs that are included in the national payment rate for a service (42 CFR 419.2(b)) and in place since the inception of the OPPS (65 FR 18447). We continue to believe th at packaging creates incentives for hospitals and their physician partners to work together to establish appropriate protocols that eliminate unnecessary servic es where they exist and institutionalize approaches to providing necessary services more efficiently. With respect to new services or new applications of existing technology, we be lieve that packaging payment for ancillary and dependent services creates appropriate incentives for hospitals to seriously consider whether a new service or a new technology offers a benefit that is sufficient to justify the cost of the new se rvice or new technology. Where this review results in reductions in services that are only marginally beneficial or influences hospitals’ choices to not utili ze certain technologies, we beli eve that these changes could improve, rather than harm, the quality of car e for Medicare beneficiaries because every service furnished in a hospital carries some leve l of risk to the patient and the beneficiary would be spared the risk associated with th e additional service or different technology. Moreover, we believe that hospita ls strive to provide the best care they can to the patients they serve so that when new technologies are proven to improve the quality of care, their utilization will increase appropriately, whether the payment for them is packaged or not. While we believe hospitals are committed to pr ovide optimal care to their patients, we are aware that there are financial pressures on hos pitals that might motivate some providersCMS-1525-FC 247 to split services among diffe rent hospital encounters in such a way as to maximize payments. While we do not expect that hospi tals would routinely change the way they furnish services or the way they bill for se rvices in order to maximize payment, we recognize that it would be possible and we cons ider that possibility as we annually review hospital claims data. We will continue to exam ine claims data for patterns of fragmented care, and if we find a pattern in which a hospital appears to be dividing care across multiple days, we will refer it for investigation to the QIO or to the Program Safeguard Contractor, as appropriate to the circumstances we find.
Comment : Commenters asked that CMS ma ke underlying payment rates for packaged services, including utilization rate s, estimated median costs, and numbers of hospitals furnishing various services, availa ble to the public. In addition, commenters asked that CMS study and report annually to the APC Panel and to the public on the impact of packaged payment on beneficiary access to care. One co mmenter believed that the APC Panel recommended that CMS report annually on the impact of packaging on net payments for patient care. Response : Each year, CMS makes available an extensive amount of OPPS data that can be used for any data analysis an interested party would care to perform. Specifically, we make available a considerab le amount of data for public analysis each year through the supporting data files that are posted on the CMS Web site in association with the display of the proposed and final rule s. In addition, as we discuss in detail in section II.A.2. of this final rule with comment period, we make available the public use files of claims, including, for CY 2008 and late r, supplemental line item cost data forCMS-1525-FC 248 every HCPCS code under the OPPS, and a de tailed narrative description of our data process for the annual OPPS/ASC proposed and final rules that th e public can use to perform any desired analyses. Therefore, commenters are able to examine and analyze these data to develop specific information to assess the impact and effect of packaging for the services of interest to them. This info rmation is available to support public requests for changes to payments under the OPPS, whether with regard to separate payment for a packaged service or other issues. We unde rstand that the OPPS is a complex payment system and that it may be difficult to determine the quantitative amount of packaged cost included in the median cost for every i ndependent service. However, commenters routinely provide us with meaningful analyses at a very detailed and service-specific level based on the claims data we make avai lable. We routinely receive complex and detailed public comments, incl uding extensive code-specific data analysis on packaged and separately paid codes, using the data from current and prior propos ed and final rules. The APC Panel did not recommend at either the February 2011 or August 2011 meetings that CMS should report annually on the impact of packaging on net payments for patient

care. Comment : Commenters stated that CMS assumes that its packaging policies will allow it to continue to collect the data it n eeds to set appropriate, stable payment rates in the future, but that this assumption is fl awed. Commenters stated that CMS’ past experience with packaging payment for ancill ary items indicates th at hospitals do not submit codes for services that do not directly affect their payment and see no reason to believe that this will change. The comme nters asked that CMS require complete andCMS-1525-FC 249 correct coding for packaged services so th at all items and services that are not individually paid must be included on the cl aim to provide CMS with essential data for future OPPS updates. Commenters expresse d concern about what they believed to be decreases in the number of hospitals reporti ng services as a result of packaging and bundling. They believed that the decline coul d be due to one or both of two reasons: Hospitals may no longer be providing these services; or hospital s could be providing these services but not reporti ng codes and charges for them , denying CMS accurate data for use in rate setting. The commenters were concerned that decreased reporting of services will result in the costs of packaged services not being in cluded in the payment for the independent service with which they are furnished. Response : We do not believe that there has been or will be a significant change in what hospitals report and charge for the out patient services they furnish to Medicare beneficiaries and other patie nts as a result of our cu rrent packaging methodology. Medicare cost reporti ng standards specify th at hospitals must impose the same charges for Medicare patients as for other patients. We are often told by hospitals that many private payers pay based on a percentage of charges and that, in accordance with Medicare cost report ing rules and generally accepte d accounting principles, hospital chargemasters do not differentiate between th e charges to Medicare patients and other patients. Therefore, we have no reason to believe that hospit als will stop reporting HCPCS codes and charges for packaged services they provide to Medicare beneficiaries. As we stated in the CY 2009 OPPS/ASC fina l rule with comment period (74 FR 68575), we strongly encourage hospitals to report a charge for each packaged service theyCMS-1525-FC 250 furnish, either by billing the packaged HCPCS code and a charge for that service if separate reporting is consistent with CPT and CMS instructions, by increasing the charge for the separately paid associated service to include the charge for the packaged service, or by reporting the charge for the packaged se rvice with an appropria te revenue code but without a HCPCS code. Any of these means of charging for the packaged service will result in the cost of the packaged service be ing incorporated into the cost we estimate for the separately paid service. If a HCPCS code is not reported when a packaged service is provided, we acknowledge that it can be challe nging to specifically track the utilization patterns and resource cost of the packaged se rvice itself. However, we have no reason to believe that hospitals have not considered th e cost of the packaged service in reporting charges for the independent, separately paid se rvice. We expect th at hospitals, as other prudent businesses, have a quality review pro cess that ensures that they accurately and completely report the services they furnish, w ith appropriate charges for those services to Medicare and all other payers. We encour age hospitals to report on their claim for payment all HCPCS codes that describe packag ed services that were furnished, unless the CPT Editorial Panel or CMS provides other gu idance. To the extent that hospitals include separate charges for packaged servic es on their claims, the estimated costs of those packaged services are then added to th e costs of separately paid procedures on the same claims and used in establishing payment ra tes for the separately paid services. It is impossible to know with any certainty whethe r hospitals are failing to report HCPCS codes and charges for services for which the payment is packaged into payment for the independent service with whic h the packaged service is furnished. Moreover, if aCMS-1525-FC 251 hospital fails to report the HCPCS codes and charges for packaged services, the reason may be that the hospital has chosen to packag e the charge for the ancillary and dependent service into the charge for the service with which it is furnished. Although we prefer that hospitals report HCPCS codes and charges for all services they furnish, if the hospital’s charge for the independent service also reflec ts the charge for all ancillary and supportive services it typically provides, the absence of HCPCS codes and separate charges would not result in inappropriately low median cost for the independent service, although CMS would not know which specific ancillary and su pportive services were being furnished. If a hospital is no longer provi ding a service, there may be many reasons that a hospital chooses not to provide a part icular service or chooses to cease providing a particular service, including, but not limited to, because the hospital has determined that it is no longer cost effective for the hospital to furn ish the service and that there may be other hospitals in the community that can furnish the service more efficiently.
Comment : One commenter asked that CMS reinstate separate payment for radiation oncology guidance procedures becaus e these services are vital to the safe provision of radiation thera py and unconditionally packaging payment for them may discourage hospitals from providing them. Response : We recognize that radiation onc ology guidance services, like most packaged services, are important to providi ng safe and high quality care to patients. However, we continue to believe that hospitals will invest in services that represent genuinely increased value to patient care, a nd if hospitals can furn ish them efficiently. We will continue to pay separately for i nnovative technologies if a device meets theCMS-1525-FC 252 conditions for separate payment as a pass-thr ough device or if a new procedure meets the criteria for payment as a new technology APC. After considering the public commen ts we received, for CY 2012, we are continuing to package payment for the services for which we proposed unconditional or conditional packaged payment in the proposed rule for the reasons set forth above. The HCPCS codes for which payment will be packaged into payment for the independent separately paid procedures with which the codes are reported either unconditionally (for which we continue to assign status indicat or “N”), or conditionally (for which we continue to assign status i ndicators “Q1”, “Q2”, or “Q3” ) are displayed in Addendum B of this final rule with comment period (which is referenced in section XVIII. of this final rule with comment period and available vi a the Internet on the CMS Web site). The supporting documents for this CY 2012 O PPS/ASC final rule with comment period, including but not limited to Addendum B, are available at www.cms.gov/HospitalOutpatientPPS/HORD . To view the status indicators by HCPCS code in Addendum B, select “CMS 1525-FC” and then select the folder labeled “2012 OPPS Proposed Rule Addenda” or “2012 O PPS Final rule with Comment Period Addenda” from the list of supporting files. Op en the zipped file a nd select Addendum B, which is available as both an Excel file and a text file. The continuation of our standard poli cy regarding packaging of drugs and biologicals, implantable biologicals, contrast agents and diagnostic radiopharmaceuticals is discussed in section V.B. of this final rule with comme nt period. We note that an implantable biological that is surgically inserted or implan ted through a surgical incisionCMS-1525-FC 253 or a natural orifice is commonly referred to throughout this final rule with comment period as an “implant able biological.” The creation of a new composite APC for CY 2012 for payment of the insertion of cardiac resynchronization device s is discussed in section II.A.2.e.(6) of this final rule with comment period. 4. Calculation of OPPS Scaled Payment Weights As we proposed in the CY 2012 OPPS/A SC proposed rule (76 FR 42209), using the APC median costs discussed in sections II.A.1. and II.A.2. of this final rule with comment period, we calculated the final re lative payment weights for each APC for CY 2012 shown in Addenda A and B to this fi nal rule with comment period (which are referenced in section XVII. of this final ru le with comment period and available via the Internet on the CMS Web site). In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid Leve l Clinic Visit) because mid-level clinic visits were among the most frequently perf ormed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC. Beginning with the CY 2007 OPPS (71 FR 67990), we 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 APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five levels). Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42209), forCMS-1525-FC 254 CY 2012, to maintain consistency in using a median for calculating unscaled weights representing the median cost of some of the most frequently provided services, we proposed to continue to use the median cost of the mid-level clinic visit APC (APC 0606) to calculate unscaled weights. Follow ing our standard methodology, but using the proposed CY 2012 median cost for AP C 0606, for CY 2012, we assigned APC 0606 a relative payment weight of 1.00 and divide d the median cost of each APC by the proposed median cost for APC 0606 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality. Section 1833(t)(9)(B) of the Act 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 2012 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 2011 scaled relative weights to the estimated aggregate weight using the proposed CY 2012 unscaled relative weights. For CY 2011, we multiplied the CY 2011 scaled APC relative weight a pplicable to a serv ice paid under the OPPS by the volume of that service from CY 2010 claims to calculate the total weight for each service. We then added together the total weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2012, we performed the same processCMS-1525-FC 255 using the proposed CY 2012 unscaled weights ra ther than scaled weights. We then calculated the weight scaler by dividing the CY 2011 estimat ed aggregate weight by the proposed CY 2012 estimated aggregate weight. The service-mix is the same in the current and prospective years because we use the same set of claims for service volume in calculating the aggregate weight for each year . For a detailed discussion of the weight scaler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/ . We included payments to CMHCs in our comparison of estimated unscaled weight in CY 2012 to estimated total weight in CY 2011 usi ng CY 2010 claims data, holding all other components of the payment system constant to isolate changes in to tal weight. Based on this comparison, we adjusted the unscaled relative weights for purposes of budget neutrality. The proposed CY 2012 unscaled re lative payment weights were adjusted by multiplying them by a proposed weight scal er of 1.4647 to ensure that the proposed CY 2012 relative weight s are budget neutral. Section 1833(t)(14) of the Act provides th e payment rates for certain “specified covered outpatient drugs.” That section st ates that “Additional expenditures resulting from this paragraph shall not be taken into account in esta blishing the conversion factor, weighting and other adjustment factors for 2004 and 2005 under paragraph (9) but shall be taken into account for subsequent years.” Therefore, the cost of those specified covered outpatient drugs (as discussed in se ction V.B.3. of the proposed rule and this final rule with comment period) was in cluded in the proposed budget neutrality calculations for the CY 2012 OPPS.CMS-1525-FC 256 We did not receive any public comments on the proposed methodology for calculating scaled weights from the median costs for the CY 2012 OPPS. Therefore, for the reasons set forth in the proposed rule (76 FR 42209), we are finalizing our proposed methodology without modification, including upda ting of the budget neutrality scaler for this final rule with comment period as we proposed. Under this methodology, the final unscaled payment weights were adjusted by a weight scaler of 1.3588 for this final rule with comment period. The final scaled relativ e payment weights listed in Addenda A and B to this final rule with comment period (whi ch are referenced in section XVII. of this final rule with comment period and availa ble via the Internet on the CMS Web site) incorporate the final recalibration adjustments discussed in sections II.A.1. and II.A.2. of this final rule with comment period.CMS-1525-FC 257 B. Conversion Factor Update Section 1833(t)(3)(C)(ii) of the Act requi res us to update the conversion factor used to determine payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833( t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market bask et percentage increase applicable to hospital discharges under section 1886(b )(3)(B)(iii) of the Act. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689), consistent with curren t law, based on IHS Global Insight, Inc.’s second quarter 2011 forecast of the FY 2012 ma rket basket increase, the FY 2012 IPPS market basket update is 3.0 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the Act, as added by section 3401(i) of the Pub. L. 111-148 and as amended by section 10319(g) of such law and further amended by section 1105(e) of Pub. L. 111-152, provide adjustments to the OPD fee schedule update for CY 2012. Specifically, section 1833(t)(3)(F) require s that the OPD fee schedule increase factor under subparagraph (C)(i v) be reduced by the adjust ments described in section 1833(t)(3)(F) of the Act. Speci fically, section 1833( t)(3)(F)(i) of the Ac t requires that the OPD fee schedule increase factor under subparagraph (C)(iv) be re duced by the productivity adjustment described in s ection 1886(b)(3)(B )(xi)(II) of the Act for 2012 and subsequent years. 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 w ith the applicable fiscal ye ar, year, cost reporting period,CMS-1525-FC 258 or other annual period) (t he “MFP adjustment”). We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51690 th rough 51692) for a discussion of the calculation of the MFP adjustment. The final MFP adjustment for FY 2012 is 1.0 percentage point. We proposed that if more recent data are subsequently available after the publication of the proposed rule (for example, a more r ecent estimate of the market basket and MFP adjustment), we would use su ch data, if appropria te, to determine the CY 2012 market basket update and the MFP adjustment in the CY 2012 final rule. Consistent with this proposal, in this CY 2012 OPPS/ASC final rule with comment period, we reduced the OPD fee schedule incr ease factor for CY 2012 by the final MFP adjustment of 1.0 percentage point for FY 2012. Because the OPD fee schedule increase factor is based on the IPPS hospital inpatient market basket percentage increase, we believe that it is appropriate to apply the same MFP adjustment that is used to reduce the IPPS market basket increase to the OPD fee sc hedule increase factor. Consistent with the FY 2012 IPPS/LTCH PPS final rule, we applie d the updated final FY 2012 market basket percentage increase and the MFP adjustment to the OPD fee schedule increase factor for the CY 2012 OPPS. We believe that it is appropriate to apply the MFP adjustment, which is calculated on a fiscal year basis, to the OPD fee schedule increase factor, which is used to update the OPPS payment rates on a calendar year basis, because we believe that it is appropriate for the numbers associ ated with both components of the calculation (the underlying OPD fee schedule increase factor and the pro ductivity adjustment) to be aligned so that changes in market conditions are aligned.CMS-1525-FC 259 In addition, section 1833(t)(3 )(F)(ii) of the Act requires that the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the adjustment described in subparagraph (G) for each of 2010 through 2019. For CY 2012, section 1833(t)(3)(G)(ii) of the Act provides a 0.1 percentage point re duction to the OPD fee schedule increase factor under subparagraph (C)(i v). Therefore, as we pr oposed, we are applying a 0.1 percentage point reduction to th e OPD fee schedule increase factor. We note that section 1833(t) (F) of the Act provides that application of this subparagraph may result in the increase factor under subpara graph (C)(iv) being less than 0.0 for a year, and may result in payment ra tes under the payment system under this subsection for a year being less than such payment rates for the preceding year. As described in further detail below, we are ap plying an OPD fee sche dule increase factor of 1.9 percent for the CY 2012 OPPS (3.0 percent, wh ich is the final estimate of the hospital market basket increase, less the 1.0 percentage point MFP adjustment, less the 0.1 percentage point additional adjustment). In the CY 2012 OPPS/ASC proposed rule (76 FR 42210), we proposed to revise 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph ( 3 ) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, fo r CY 2012, we reduce the OPD fee schedule increase factor by the multifactor productivity adjustment as determined by CMS, and to reflect the requirement in s ection 1833(t)(3)(G)(ii) of the Act, as required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by 0.1 percentage point for CY 2012. We also proposed to amend § 419.32(b)(1)(iv)(A) to indicate that the hospital inpatient market basket percentage in crease applicable underCMS-1525-FC 260 section 1886(b)(3)(B)(iii) of the Act is furt her reduced by the adjustments necessary to satisfy the requirements in sections 1 833(t)(3)(F) and (t)(3) (G) of the Act. We did not receive any public comments on our proposed adjustments to the OPD fee schedule increase factor or on the proposed changes to § 419.32(b)(1)(iv )(B) to add a new paragraph ( 3 ). We also did not receive any public comments on our proposed change to § 419.32(b)(1)(iv)(A). For the reas ons discussed above, we are adjusting the OPD fee schedule increase factor and ar e making the two changes to § 419.32 as proposed. To set the OPPS conversion factor for CY 2012, we increased the CY 2011 conversion factor of $68.876 by 1.9 percent. In accordance with se ction 1833(t)(9)(B) of the Act, we further adjusted the conversi on factor for CY 2012 to ensure that any revisions we make to the updates for a revise d wage index and rural adjustment are made on a budget neutral basis. We calculated an overall budget neutrality factor of 1.0005 for wage index changes by comparing total estim ated payments from our simulation model using the FY 2012 IPPS final wage indices to those payments using the current (FY 2011) IPPS wage indices, as adopted on a calendar year basis for the OPPS. For CY 2012, we are not making a cha nge to our rural adjustment policy. Therefore, the budget neutrality factor for the rural adjustment is 1.0000. For CY 2012, we are finalizing a payment adjustment policy for dedicated cancer hospitals, as discussed in section II.F. of this final rule with comment period. Consistent with the final cancer hospital payment adjustme nt policies discussed in section II.F. of this final rule with comment period, we calculated a CY 2012 budget neutralityCMS-1525-FC 261 adjustment factor of 0.9978 by comparing th e estimated total payments under section 1833(t) of the Act, including the cancer hos pital adjustment under section 1833(t)(18)(B) and 1833(t)(2)(E) of the Act, to hospitals desc ribed in section 1886(d )(1)(B)(v) of the Act to the estimated total payments under section 1833(t) of the Act if there were no cancer hospital adjustment, including TOPS that would otherwise be made to hospitals described in section 1886(d)(1)(B)(v) of the Act. As discussed in section II.F. of this final rule with comment period, in terms of dollars, the budget neutrality payment reduction is estimated to be $71 million for CY 2012; that is, we estimate that total payments with a cancer hospital payment adjustment would increa se total payments by $71 million and this amount needs to be offset by adjusting other payments. Therefore, we applied a budget neutrality adjustment factor of 0.9978 to th e conversion factor to make the hospital adjustment budget neutral. For this final rule with comment peri od, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2012 will equal approximately $89 million, which represents 0.22 percent of total projected CY 2012 OPPS spending. Therefore, the conversion f actor is also adjusted by the difference between the 0.15 percent estimate of pass-through sp ending for CY 2011 and the 0.22 percent estimate of CY 2012 pass-through spending, resu lting in an adjustment for CY 2012 of 0.07 percent. Finally, estimated payments fo r outliers remain at 1.0 percent of total OPPS payments for CY 2012. The OPD fee schedule incr ease factor of 1.9 percent for CY 2012 (that is, the estimate of the hospital market basket in crease of 3.0 percent le ss the 1.0 percentageCMS-1525-FC 262 point MFP adjustment and less the 0.1 percentage point adjustment which were necessary in order to comply with the requirements of the Affordable Care Act), the required wage index budget neutrality adjustment of a pproximately 1.0005, the cancer hospital payment adjustment of 0.9978, and the adjustment of 0.07 percent of projected OPPS spending for the difference in the pass-through spending re sult in a conversion factor for CY 2012 of $70.016. This conversion factor for CY 2012 of $70.016 reflects the full OPD fee schedule increase, after including the adjust ments which were necessary in order to comply with the requirements of the Affordable Care Act. As we stated in the proposed rule, ho spitals that fail to meet the reporting requirements of the Hospital OQR Program woul d continue to be subject to a further reduction of additional 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that w ould be used to calculate the OPPS payment rates made for their services as required by section 1833(t)(17) of the Act. For a complete discussion of the Hospital OQR requirements and the payment reduction for hospitals that fail to meet those requirements, we refer readers to section XIV. E. of the proposed rule and this final rule with comme nt period. To calculate the CY 2012 reduced market basket conversion factor for those hospi tals that fail to meet the requirements of the Hospital OQR Program for the full CY 2012 payment update, we are making all other adjustments discussed above, but using a re duced OPD fee schedul e update factor of -0.1 percent (that is, the OPD fee schedule increase factor of 1.9 percent further reduced by 2.0 percentage points as required by section 1833(t)(17)(A)(i) of th e Act for failure to comply with the Hospital OQR requirements) . This resulted in a reduced conversionCMS-1525-FC 263 factor for CY 2012 of $68.616 for those hospita ls that fail to meet the Hospital OQR requirements (a difference of -$1.40 in the c onversion factor relativ e to those hospitals that met the Hospital OQR requirements). We did not receive any public comments on our proposed methodology for calculating the CY 2012 conversion factor. In summary, for CY 2012, we are using a final conversion factor of $70.016 in the calculation of the national unadjusted paymen t rates for those items and services for which payment rates are calculated using medi an costs. We did not receive any public comments on this proposal. Therefore, fo r the reasons we discuss above, we are amending § 419.32(b)(1)(iv)(B) by adding a new paragraph ( 3 ) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2012 in order to satisfy the statutory requirements of sections 1833(t)(3)( F) and (t)(3)(G)(ii) of the Act. We also are amending § 419.32(b)(1)(iv)(A) to indicate th at the hospital inpatient market basket percentage increase is reduced by the adju stments described in § 419.32(b)(1)(iv)(B). We are using a reduced conversion factor of $68.616 in the calculation of payments for hospitals that fail to comply with the Hosp ital OQR requirements to reflect the reduction to the OPD fee schedule increase factor that is required by section 1833(t)(17) of the Act for these hospitals. C. Wage Index Changes Section 1833(t)(2)(D) of the Act requir es the Secretary to determine a wage adjustment factor to adjust, for geographi c wage differences, the portion of the OPPS payment rate, which includes the copayment sta ndardized amount, that is attributable toCMS-1525-FC 264 labor and labor-related cost. This portion of the OPPS payment ra te is called the OPPS labor-related share. This adjustment mu st be made in a budget neutral manner and 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 attributable 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 2012 OPPS/ASC proposed rule (76 FR42211), we did not propose to revise this policy for the CY 2012 OPPS. We refer readers to section II.H. of this final rule with comment period for a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital. As discussed in section II.A.2.c. of th is final rule with comment period, for estimating national median APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation usi ng the same FY 2012 pr e-reclassified wage index that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels fr om the determination of a national unadjusted OPPS payment rate and the copayment amount. As published in the original OPPS Apr il 7, 2000 final rule with comment period (65 FR 18545), the OPPS has consistently adopted the final fiscal year IPPS wage index as the calendar year wage index for adju sting the OPPS standard payment amounts forCMS-1525-FC 265 labor market differences. Thus, the wage i ndex that applies to a particular acute care short-stay hospital under the IPPS also appl ies to that hospital under the OPPS. As initially explained in the September 8, 1998 OP PS proposed rule, we believed that using the IPPS wage index as the source of an adju stment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of th e Act, the IPPS wage index is updated annually. The Affordable Care Act contains provi sions that affect the final FY 2012 IPPS wage index values, including revisions to the reclassification wage comparability criteria that were finalized in the FY 2009 IPPS fi nal rule (73 FR 48568 through 48570), and the application of rural floor budget neutrality on a national, rather than State-specific, basis through a uniform, national adjustment to the area wage index (76 FR 26021). In addition, section 10324 of the Affordable Care Act requires CMS to establish an adjustment to create a wage index floor of 1.00 for hospitals located in States determined to be frontier States. Section 10324 of the Affordable Care Act specifies that, for services furnished beginning CY 2011, the wage adjustment factor applicable to any HOPD that is located in a frontier State (as defined in section 1886( d)(3)(E)(iii)(II) of the Act) may not be less than 1.00. Further, section 10324 states that th is adjustment to the wage index for these outpatient departments should not be made in a budget neutral manner. As such, for the CY 2012 OPPS, as we proposed, we are con tinuing to adjust th e FY 2012 IPPS wage index, as adopted on a calendar year basis fo r the OPPS, for all hos pitals paid under theCMS-1525-FC 266 OPPS, including non-IPPS hospitals (providers that are not paid unde r the IPPS) located in a frontier State, to 1.00 in instances where the FY 2012 wage index (that reflects Medicare Geographic Classification Review Board (MGCRB) reclassifications, the application of the rural floor , and the rural floor budget neutrality adjustment) for these hospitals is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, we fully expect that the HOPD will receive a wage index based on the geographic location of the sp ecific inpatient hospital with which it is associated. Therefore, if the associated hospi tal is located in a frontier State, the wage index adjustment applicable fo r the hospital will also apply for the affiliated HOPD. We refer readers to the FY 2011 and FY 2012 IPPS/LTCH PPS final ru les (75 FR 50160 and 76 FR 51581, respectively) for a detailed disc ussion regarding this provision, including our methodology for identifying which areas meet the definition of frontier States as provided for in section 1886(d )(3)(E)(iii)(II)) of the Act. In addition to the changes required by the Affordable Care Act, we note that the FY 2012 IPPS wage indices 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 floor provisions, an ad justment for occupational mix, and an adjustment to the wage index ba sed on commuting patterns of employees (the out-migration adjustment). We refer read ers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51581 through 51605) for a detailed di scussion of all cha nges to the FY 2012 IPPS wage indices. In addition, we refer r eaders to the CY 2005 OPPS final rule withCMS-1525-FC 267 comment period (69 FR 65842 through 65844) a nd subsequent OPPS rules for a detailed discussion of the history of these wage i ndex adjustments as applied under the OPPS. Section 3137 of the Affordable Care Act extended, through FY 2010, section 508 reclassifications as well as certain special ex ceptions. The most rece nt extension of the provision was included in section 102 of the Medicare and Medicaid Extender Act, which extends, through FY 2011, secti on 508 reclassifications as well as certain special exceptions. The latest exte nsion of these provisions expired on September 30, 2011, and is no longer applicable effec tive with FY 2012. As we did for CY 2010, we revised wage index values for certain special excep tion hospitals from January 1, 2011 through December 31, 2011, under the OPPS, in order to give these hospitals the special exception wage indices under the OPPS for the sa me time period as under the IPPS. In addition, because the OPPS pays on a calendar year basis, the eff ective date under the OPPS for all other nonsection 508 and non-speci al exception providers was July 1, 2011, instead of April 1, 2011, so that these providers also received a full 6 months of payment under the revised wage index comparable to the IPPS. For purposes of the OPPS, as we proposed, we are continuing our policy in CY 2012 of allowing non-IPPS hospitals pa id under the OPPS to qualify for the out-migration adjustment if they are locat ed in a section 505 out-migration county (section 505 of the Medicare Prescription Dr ug, Improvement, and Modernization Act of 2003 (MMA)). We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J listed in the FY 2012 IPPS/LTCH PPS final rule (and made available via the Internet on the CMS Web site at:CMS-1525-FC 268 http://www.cms.gov/AcuteInpatientPPS/01_overview.asp ) identifies counties eligible for the out-migration adjustment and hospitals th at will receive the adjustment for FY 2012. We note that, beginning with FY 2012, under the I PPS, an eligible hospital that waives its Lugar status in order to receive the out-migr ation adjustment has effectively waived its deemed urban status and, thus, is rural fo r all purposes under th e IPPS, including being considered rural for the di sproportionate share hospital (DSH) payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. We refer readers to the FY 2012 IPPS/LTCH PP S final rule (76 FR 51599) for a more detailed discussion on the Lugar redesignation waiver for the out-migration adjustment). As we have done in prior years, we are in cluding Table 4J as Adde ndum L to this final rule with comment period with the addition of non-IPPS hospitals that will receive the section 505 out-migration adjustment unde r the CY 2012 OPPS. Addendum L is referenced in section XVII. of this final ru le with comment period and available via the Internet on the CMS Web site. As stated earlier in this section, our longstanding policy for OPPS has been to adopt the final wage index used in IPPS. Therefore, for calculating OPPS payments in CY 2012, we used the FY 2012 IPPS wage indi ces. However, section 1833(t)(2)(D) of the Act confers broad discreti onary authority upon the Secret ary in determining the wage adjustment factor used under the OPPS. Specifically, this provision provides that “subject to paragraph (19), the Secretary shal l determine a wage adjustment factor to adjust the portion of payment and coinsuranc e attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions . . . .” InCMS-1525-FC 269 other prospective payment systems, we do not adopt the adjustments applied to the IPPS wage index, such as the out-migration adjustme nt, reclassifications, a nd the rural floor. For the OPPS, using the IPPS wage index as the source of an adjustment factor for geographic wage differences has, in the past, been both reason able and logical, given the inseparable, subordinate status of the outpatient department within the hos pital overall. However, in recent years, we have become concerned that hospitals converting their status significantly infl ate wage indices across a State. In the FY 2008 IPPS final rule (72 FR 47324 and 47325), we discusse d a situation where a CAH may have converted back to IPPS status in order to increase the rural floor. The FY 2012 IPPS/LTCH PPS final rule (76 FR 51824) shows the impact of this CAH conversion. Hospitals in Massachuset ts can expect an approximate 8.7percent increase in IPPS payments due to the convers ion and the resulting increase of the rural floor. Our concern is that the manipulation of the rural floor is of sufficient magnitude that it requires all hospital wage indices to be reduced approximately 0.62 percent as a result of nationwide budget neutrality for the rural floor (or more th an a 0.4 percent total payment reduction to all IPPS hospitals). In addition to the CAH conversion, we r ecently received two requests from urban hospitals to convert to rural hospital status under section 1886 (d)(8)(E) of the Act, which would inflate other States’ rural floors, th rough the conversion of what would otherwise be urban hospitals to rural status. While we recognize that conversions from urban-torural status are permitted under section 1886(d)(8 )(E) of the Act, we are concerned with individual urban to rural conversions allowi ng payment redistributions of this magnitude.CMS-1525-FC 270 We believe the above discussions demonstrat e that the rural floor is resulting in significant disparities in wage index and, in some cases, resulting in situations where all hospitals in a State receive a wage index higher than that of the single highest wage index urban hospital in the State. As stated above , the statute does not re quire the Secretary to use the IPPS wage adjustment factor to wa ge adjust OPPS payments and copayments, nor to apply to OPPS payment and copayment calcu lations the same wage adjustment factor that the law requires be applied to IPPS payments. In the CY 2012 OPPS/ASC proposed rule ( 76 FR 42212), we stated that we were considering the adoption of a policy that would address situations where IPPS wage index adjustments, such as th e rural floor, result in signifi cant fluctuations in the wage index within a State. One op tion we proposed would be not to apply the rural floor wage index at all in the OPPS where the rural floor is set by a smal l number of hospitals in a State and results in a rural floor that benefits all hospitals in the State. Alternatively, we proposed that we could appl y within-State rural budget ne utrality to the OPPS wage index as we did for both th e IPPS and OPPS wage index beginning in FY 2009. In the proposed rule, we sought public comment on wh ether to: (1) adopt the IPPS wage index for the OPPS in its entirety including the ru ral floor, geographic recl assifications, and all other wage index adjustments (our current poli cy); (2) adopt the IPPS wage index for the OPPS in its entirety except when a small numb er of hospitals set the rural floor for the benefit of all other hospitals in the State, a nd, if so, then not appl y the rural floor wage index; (3) adopt the IPPS wage index for the OPPS in its enti rety except apply rural floor budget neutrality within each State instead of nationally; or (4) adopt another decisionCMS-1525-FC 271 rule for when the rural floor should not be applied in the OPPS when we have concerns about disproportionate impact. We also requested public comments on an option that we were considering adopting for both the IPPS and the OPPS, where we would determine the applicable rural wage index floor using only data from those hospitals geographically rural under OMB and the Census Bureau’s MSA designations, an d without including wage data associated with hospitals reclassified from urban to rural status under secti on 1886(d)(8)(E) of the Act. Such a policy would eliminate the incentiv e to reclassify from urban to rural status primarily to increase rural floors across a Stat e, and would ensure th at the rural floor is based upon hospitals loca ted in rural areas.
Comment : Commenters that were in favor of maintaining the current policy (option 1 listed above) of adopting the IPPS wage indices under the OPPS cited several different reasons for their choice. Several co mmenters believed that hospital inpatient and outpatient departments are “inseparable” be cause they are subject to the same labor cost environment, and, therefore, should have the same wage index where applicable. Other commenters preferred maintaining the current wage index policy and implementing wage index changes in the context of co mprehensive wage index reform. These commenters believed that only comprehensive wage index reform can revise the wage index in such as way as “to minimize volatil ity of the wage index and remove incentives to game the system.” Commenters stated that an additional reas on for maintaining the current policy was that different wage indi ces for inpatient and outpatient paymentsCMS-1525-FC 272 would add a level of admini strative complexity that is overly burdensome and
unnecessary. Several commenters expressed a pref erence for wage index policy option 2 included in the proposed rule (to adopt the I PPS wage index for the OPPS in its entirety except when a small number of hospitals set the rural floor for the benefit of all other hospitals in the State, and, if so, then not apply the rura l floor wage index). These commenters typically viewed this option to be the best in terms of addressing current inequities. However, some of the commenter s requested that CMS explicitly define a “small number” threshold as well as what is considered as a “benefit” for all other hospitals in the State. Some commenters th at supported option 2 preferred option 2 to option 3 (the adoption of the IPPS wage index policies but application of statewide rather than national budget neutrality for the rural floor policy). Commenters that preferred option 2 rather than option 3 argued that a na tional level adjustment was in keeping with Congressional intent, especia lly given that Congress enacte d legislation to establish national budget neutrality for the rural floor in the IPPS under the Affordable Care Act (effective in FY 2011). These commenters also were concerned about CMS deciding when budget neutrality adjustments should be ap plied at the State versus national levels. Several commenters favored option 3 becau se they supported the application of statewide level budget neutrality for the rura l floor policy. These commenters favored basing the wage index on Bureau of Labor Sta tistics (BLS) data rather than hospital cost reports but believed that, in the absence of broader wage index reform, option 3 was the most equitable policy. One commenter, a lthough supportive of systematic wage indexCMS-1525-FC 273 reform, stated that CMS “should not wait fo r reform to address obvious and significant immediate problems” and therefore advocated for option 3. Instead of recommending other policy options , for the fourth potential wage index policy option (adopting another d ecision rule), most commenters simply requested further detail. Several commenters did not exhibit any preferences for any specific wage index policy options, choosing instead to comment generally about issues of concern. One commenter believed that “looking at one polic y in isolation serves only to address one issue while likely creating other inequities in the system.” Another commenter was concerned that any new rule could unnece ssarily harm rural providers. Another commenter that supported systematic wage index reform advocated not making changes until reports from the Institute of Medici ne are completed and the CMS report to Congress, which is due on December 31, 2011, are fully analyzed. Commenters requested further detail to formulate a polic y position on the four options presented and urged CMS to include impact analyses for the final rule. Response : We appreciate the public comments. We acknowledge that there may be inequities in the current application of the wage index policy and its various adjustments. This is why we described vari ous methods and wage i ndex options that we might consider under the OPPS to address manipulation of wage index adjustment policies, and, in this specific case, the rura l floor wage index and its national level budget neutrality. In the CY 2012 OPPS/ASC proposed rule , we referred specifically to the conversion of one CAH to IPPS status to in crease the rural floor for the State, whichCMS-1525-FC 274 would increase IPPS and OPPS payments to th at State, while decreasing IPPS and OPPS payments to hospitals in other States, under a policy in which the rural floor wage index budget neutrality was applied at the national level. Simila rly, we are aware of requests from urban hospitals to convert to rural hosp ital status, which would inflate those States’ rural floors. While we recognize that conve rsions from urban-to-rural status are permitted under section 1886(d)(8)(E) of the Act, we are concerned with individual urban-to-rural conversions that would result in payment redistributions of this magnitude. However, we agree with the commenters th at stated that maintaining the current policy for CY 2012 would be the best opti on, given the broader wage index reform currently under development and considerati on. This includes the Report to Congress with a plan for wage index reform, which is due December 31, 2011, under the Affordable Care Act. We will continue to consider these policy options in future rulemaking, especially in the context of other si gnificant wage index revisions. In response to commenters’ reco mmendations that we provide more detailed impact analysis, we are providing a State level impact table, similar to the table provided in the FY 2012 IPPS/LTCH final rule (76 FR 51824 thr ough 51825), that displays the impact of the rural floor and imputed floor policie s with national budget neutrality on OPPS hospitals and their payments by State. This ta ble is included in section XX. of this final rule with comment period.
Comment : A few commenters responded to our request for comments on setting the applicable rural wage index floor us ing only data from hospitals that are geographically rural according to OMB and MSA designations, and without includingCMS-1525-FC 275 wage data associated with hospitals reclassi fied from urban to rural status under section 1886(d)(8)(E) of the Act. One commenter oppos ed using data from geographically rural hospitals alone in setting the rural floor because reclassified hospitals are considered rural for all payment policies. Se veral commenters agreed that wage data associated with hospitals that are reclassified should be excluded from calcula tion of the rural floor. One commenter questioned why it is necessary to maintain the rural fl oor wage index policy under the OPPS. Response : For the reasons stated above, in this final rule with comment period, we are adopting the IPPS wage index and its adjustments for use under the OPPS. However, in the IPPS proposed rule for FY 2013, we may address the issue of including hospitals reclassified from urban to rural st atus under section 1886(d )(8)(E) of the Act.
Comment : One commenter asked whether an increase similar to the 1.1 percent increase included in the FY 2012 IPPS/LTCH fi nal rule (76 FR 51788) should also apply under the OPPS. Response : The increase cited by the comment er is limited to IPPS payments. Budget neutrality (including that for the rura l floor) is calculated prospectively each year under the OPPS. While we have historic ally adopted the IPPS wage index when developing the wage indices for calcula ting payments under the OPPS, the budget neutrality factors that applied to the standa rdized amount under IPPS as a result of the rural floor were not applied to the OPPS conve rsion factor, and thus would not have any effect on OPPS budget neutrality.CMS-1525-FC 276 After consideration of the public comments we receive d, we are finalizing our policy to adopt the FY 2012 IPPS wage inde x for the CY 2012 OPPS in its entirety including the rural floor, ge ographic reclassifications, and all other wage index adjustments. 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 final FY 2012 IPPS wage indices referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.gov/HospitalOutpatientPPS/ . At this link, readers will find a link to the final FY 2012 IPPS wage index tables. D. Statewide Average Default CCRs In addition to using CCRs to estimate costs from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs 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 unde r the OPPS during the PPS year. Medicare contractors cannot calculate a CCR for some hos pitals because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital’s Medicare contractor is able to calculate the hospital’s actual CCR from its most recently submitted Medicare cost report. These hospitals include , but are not limited to, hospita ls that are new, have not accepted assignment of an existing hospital’s provider agreement, and have not yetCMS-1525-FC 277 submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outside the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11 ). As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42213), we are updating the default ratios for CY 2012 using the most recent cost report data. We discuss our policy for using default CCRs, including setting the ce iling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 thr ough 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009. We proposed to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the CY 2012 OPPS relativew weights. Table 11 published in the proposed rule li sted the proposed CY 2012 default urban and rural CCRs by State and compared them to last year’s default CCRs. These proposed CCRs represented the ratio of tota l costs to total charges for th ose cost centers relevant to outpatient services from each hospital’s most recently submitted cost report, weighted by Medicare Part B charges. We also adjusted ratios from submitted cost reports to reflect final settled status by applying the differen tial between settled to submitted overall CCRs for the cost centers relevant to outpatient se rvices from the most recent pair of final settled and submitted cost reports. We then weighted each hospital’s CCR by the volume of separately paid line-items on hospital clai ms corresponding to the year of the majorityCMS-1525-FC 278 of cost reports used to calculate the ov erall 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 de fault CCRs, including the hospitals used in our calculations and our trimming criteria. We did not receive any public comme nts on our CY 2012 proposal. We are finalizing our proposal to apply our standa rd methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we used to adjust charges to costs on claims data for setting the CY 2012 OPPS relative weights. We used this methodology to calculate the statewid e average default CCRs listed in Table 11 below. For this CY 2012 OPPS/ASC final rule with comment period, approximately 47 percent of the submitted cost reports utilized in the default ratio calculations represented data for cost reporting periods ending in CY 2010 and 53 percent were for cost reporting periods ending in CY 2009. Fo r Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substi tute for Maryland CCRs. Few hospitals in Maryland are elig ible to receive payment under the OPPS, which limits the data available to calculate an accurate a nd representative CCR. The weighted CCR is used for Maryland because it takes into account each hospita l’s volume, rather than treating each hospital equally. We refer r eaders to the CY 2005 O PPS final rule with comment period (69 FR 65822 ) for further discussion and the rationale for our longstanding policy of using the national average CCR for Maryland. In general,CMS-1525-FC 279 observed changes in the stat ewide average default CCRs between CY 2011 and CY 2012 are modest and the few significant changes are associated with areas that have a small number of hospitals. Table 11 below lists the fi nalized statewide average default CCRs for OPPS services furnished on or after January 1, 2012.
TABLE 11.–-CY 2012 STATEW IDE AVERAGE CCRs

State Urban/Rural CY 2012 Default CCR Previous Default CCR (CY 2011 OPPS Final Rule) ALASKA RURAL 0.487 0.479 ALASKA URBAN 0.321 0.315 ALABAMA RURAL 0.213 0.212 ALABAMA URBAN 0.191 0.193 ARKANSAS RURAL 0.225 0.223 ARKANSAS URBAN 0.274 0.282 ARIZONA RURAL 0.236 0.231 ARIZONA URBAN 0.193 0.202 CALIFORNIA RURAL 0.189 0.195 CALIFORNIA URBAN 0.202 0.205 COLORADO RURAL 0.345 0.350 COLORADO URBAN 0.225 0.233 CONNECTICUT RURAL 0.356 0.356 CONNECTICUT URBAN 0.292 0.291 DISTRICT OF COLUMBIA URBAN 0.301 0.313 DELAWARE RURAL 0.280 0.279 DELAWARE URBAN 0.347 0.362 FLORIDA RURAL 0.183 0.185 FLORIDA URBAN 0.170 0.172 GEORGIA RURAL 0.241 0.246 GEORGIA URBAN 0.214 0.220 HAWAII RURAL 0.320 0.356 HAWAII URBAN 0.306 0.308CMS-1525-FC 280

State Urban/Rural CY 2012 Default CCR Previous Default CCR (CY 2011 OPPS Final Rule) IOWA RURAL 0.297 0.252 IOWA URBAN 0.272 0.288 IDAHO RURAL 0.416 0.419 IDAHO URBAN 0.378 0.384 ILLINOIS RURAL 0.245 0.251 ILLINOIS URBAN 0.240 0.239 INDIANA RURAL 0.298 0.302 INDIANA URBAN 0.268 0.270 KANSAS RURAL 0.282 0.286 KANSAS URBAN 0.209 0.215 KENTUCKY RURAL 0.223 0.220 KENTUCKY URBAN 0.245 0.244 LOUISIANA RURAL 0.256 0.256 LOUISIANA URBAN 0.226 0.235 MARYLAND RURAL 0.280 0.284 MARYLAND URBAN 0.251 0.256 MASSACHUSETTS URBAN 0.320 0.314 MAINE RURAL 0.440 0.460 MAINE URBAN 0.460 0.450 MICHIGAN RURAL 0.313 0.312 MICHIGAN URBAN 0.314 0.320 MINNESOTA RURAL 0.482 0.483 MINNESOTA URBAN 0.326 0.311 MISSOURI RURAL 0.248 0.258 MISSOURI URBAN 0.267 0.264 MISSISSIPPI RURAL 0.226 0.229 MISSISSIPPI URBAN 0.186 0.182 MONTANA RURAL 0.434 0.444 MONTANA URBAN 0.398 0.399 NORTH CAROLINA RURAL 0.256 0.254 NORTH CAROLINA URBAN 0.264 0.264 NORTH DAKOTA RURAL 0.322 0.351CMS-1525-FC 281

State Urban/Rural CY 2012 Default CCR Previous Default CCR (CY 2011 OPPS Final Rule) NORTH DAKOTA URBAN 0.429 0.360 NEBRASKA RURAL 0.323 0.328 NEBRASKA URBAN 0.252 0.259 NEW HAMPSHIRE RURAL 0.323 0.323 NEW HAMPSHIRE URBAN 0.292 0.290 NEW JERSEY URBAN 0.221 0.221 NEW MEXICO RURAL 0.266 0.277 NEW MEXICO URBAN 0.286 0.307 NEVADA RURAL 0.242 0.269 NEVADA URBAN 0.169 0.178 NEW YORK RURAL 0.410 0.415 NEW YORK URBAN 0.350 0.375 OHIO RURAL 0.324 0.327 OHIO URBAN 0.241 0.241 OKLAHOMA RURAL 0.248 0.260 OKLAHOMA URBAN 0.220 0.208 OREGON RURAL 0.302 0.306 OREGON URBAN 0.327 0.340 PENNSYLVANIA RURAL 0.270 0.275 PENNSYLVANIA URBAN 0.200 0.210 PUERTO RICO URBAN 0.490 0.505 RHODE ISLAND URBAN 0.287 0.284 SOUTH CAROLINA RURAL 0.222 0.222 SOUTH CAROLINA URBAN 0.217 0.227 SOUTH DAKOTA RURAL 0.309 0.316 SOUTH DAKOTA URBAN 0.253 0.251 TENNESSEE RURAL 0.212 0.221 TENNESSEE URBAN 0.201 0.204 TEXAS RURAL 0.239 0.245 TEXAS URBAN 0.210 0.216 UTAH RURAL 0.385 0.386 UTAH URBAN 0.359 0.362CMS-1525-FC 282

State Urban/Rural CY 2012 Default CCR Previous Default CCR (CY 2011 OPPS Final Rule) VIRGINIA RURAL 0.238 0.241 VIRGINIA URBAN 0.257 0.263 VERMONT RURAL 0.415 0.411 VERMONT URBAN 0.365 0.365 WASHINGTON RURAL 0.366 0.367 WASHINGTON URBAN 0.317 0.327 WISCONSIN RURAL 0.407 0.412 WISCONSIN URBAN 0.327 0.334 WEST VIRGINIA RURAL 0.283 0.291 WEST VIRGINIA URBAN 0.335 0.337 WYOMING RURAL 0.385 0.393 WYOMING URBAN 0.302 0.296

E. OPPS Payments to Certain Rural and Other Hospitals 1. Hold Harmless Transitional Payment Changes When the OPPS was implemented, every provider was eligible to receive an additional payment adjustment (called either transitional corridor payments or transitional outpatient payments (TOPs)) if the payments it received for covered OPD services under the OPPS were less than the payments it would have received for the same services under the prior reasonable cost-based system (refe rred to as the pre-BBA amount). Section 1833(t)(7) of the Act provides that the TO Ps were temporary payments for most providers and intended to ease their transi tion from the prior reasonable cost-based payment system to the OPPS system. Ther e are two exceptions to this temporary provision, cancer hospitals and children’s hospitals. Such a hospital could receive TOPs to the extent its PPS amount was less than it s pre-BBA amount in the applicable year. Section 1833(t)(7)(D)(i) of the Act originally provided for TOPs to rural hospitals withCMS-1525-FC 283 100 or fewer beds for covered OPD services furnished before January 1, 2004. However, section 411 of Pub. L. 108- 173 (the Medicare Prescription Drug, Improvement, and Modernization Act of 2003) amended section 18 33(t)(7)(D)(i) of the Act to extend these payments through December 31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also extended the TOPs to sole co mmunity hospitals (SCHs) located in rural areas for services furnished during the period that began with the provider’s first cost reporting period beginning on or af ter January 1, 2004, and ending on December 31, 2005. Accordingly, the authority for making TOPs under section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of Pub. L. 108-173, for rural hospitals having 100 or fewer beds and SC Hs located in rural areas expired on December 31, 2005. Section 5105 of Pub. L. 109-171 (the De ficit Reduction Act of 2005) extended the TOPs for covered OPD services furnishe d on or after January 1, 2006, and before January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. Section 5105 also reduced the TOPs to rural hospitals from 100 percent of the difference between the provider’s OPPS payments and the pre- BBA amount. When the OPPS payment was less than the provider’s pre-BBA amount, the amount of payment was increased by 95 percent of the amount of the differenc e between the two amounts for CY 2006, by 90 percent of the amount of that difference for CY 2007, and by 85 percent of the amount of that difference for CY 2008. For CY 2006, we implemented section 5105 of Pub. L. 109-171 through Transmittal 877, issued on February 24, 2006. In the Transmittal, we di d not specificallyCMS-1525-FC 284 address whether TOPs apply to essential access community hospitals (EACHs), which are considered to be SCHs under section 1886 (d)(5)(D)(iii)(III) of th e Act. Accordingly, under the statute, EACHs are treated as SC Hs. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010), we stated that EACHs were not eligible for TOPs under Pub. L. 109-171. However, we stated they were eligible for the adjustment for rural SCHs authorized unde r section 411 of Pub. L. 108-173. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68228), we updated §419.70(d) of our regulations to reflect the requirements of Pub. L. 109-171. In the CY 2009 OPPS/ASC proposed rule ( 73 FR 41461), we stated that, effective for services provided on or after January 1, 2009, rural hospitals having 100 or fewer beds that are not SCHs would no longer be e ligible for TOPs, in accordance with section 5105 of Pub. L. 109-171. However, subseque nt to issuance of the CY 2009 OPPS/ASC proposed rule, section 147 of Pub. L. 110-275 amended sec tion 1833(t)(7)(D)(i) of the Act by extending the period of TO Ps to rural hospitals with 10 0 beds or fewer for 1 year, for services provided before January 1, 2010. Section 147 of Pub. L. 110-275 also extended TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD services provided on or after January 1, 2009, and before January 1, 2010. In accordance with section 147 of Pub. L. 110-275, when the OPPS payment is less th an the provider’s pre-BBA amount, the amount of payment is incr eased by 85 percent of the amount of the difference between the two payment amounts for CY 2009. For CY 2009, we revised our regulations at §§ 419.70(d)(2) a nd (d)(4) and added a new paragraph (d)(5) to incorporate the provisions of section 147 of Pub. L. 110-275.CMS-1525-FC 285 In addition, we made other te chnical changes to § 419.70(d)(2) to more precisely capture our existing policy and to correct an inaccurate cross-reference. We also made technical corrections to the cross-references in paragraphs (e), (g), and (i) of § 419.70. For CY 2010, we made a technical correc tion to the heading of § 419.70(d)(5) to correctly identify the policy as described in the subsequent regulation text. The paragraph heading now indicates that the adjustment applies to small SCHs, rather than to rural SCHs. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60425), we stated that, effective for serv ices provided on or after Ja nuary 1, 2010, rural hospitals and SCHs (including EACHs) having 100 or fewe r beds would no longer be eligible for TOPs, in accordance with section 147 of Pub. L. 110-275. However, subsequent to issuance of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of the Affordable Care Act amended section 1833(t)(7)(D)(i)( III) of the Act by extending the period of TOPs to rural hospitals that are not SCHs with 100 beds or fewer for 1 year, for services provided before January 1, 2011. Section 3121(a) of the Affordable Care Act amended section 1833(t)(7)(D)(i )(III) of the Act and extende d the period of TOPs to SCHs (including EACHs) for 1 year, for se rvices provided before January 1, 2011, and section 3121(b) of the Affordable Care Act removed the 100-bed limitation applicable to such SCHs for covered OPD services furnis hed on and after January 1, 2010, and before January 1, 2011. In accordance with section 31 21 of the Affordable Care Act, when the OPPS payment is less than th e provider’s pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the difference between the two paymentCMS-1525-FC 286 amounts for CY 2010. Accordingly, in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71882), we updated § 419.70(d) of the regulations to reflect the TOPs extensions and amendments described in section 3121 of the Affordable Care Act. Section 108 of the Medicare and Me dicaid Extenders Act of 2010 (MMEA) (Pub. L. 111-309) extended for 1 year the hold harmless provision for a rural hospital with 100 or fewer beds that is not an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, for such a hospital, for services furnished before January 1, 2012, when the PPS amount is less than the provider’s pre-BBA amount, the amount of payment is increased by 85 percent of th e amount of the difference between the two payments. In addition, section 108 of the MMEA also exte nded for 1 year the hold harmless provision for an SCH (as defined in section 1886(d)(5 )(D)(iii) of the Act (i ncluding EACHs) and removed the 100-bed limit applicable to such SCHs for covered OPD services furnished on or after January 1, 2010 and before January 1, 2012. Therefore, for such hospitals, for services furnished before January 1, 2012, when the PPS amount is less than the provider’s pre-BBA amount, the amount of pa yment is increased by 85 percent of the amount of the difference between the two paym ents. Effective for services provided on or after January 1, 2012, a rural hos pital with 100 or fewer beds that is not an SCH and an SCH (including EACHs) will no longer be elig ible for TOPs, in accordance with section 108 of the MMEA. In the CY 2012 OPPS/ ASC proposed rule (76 FR 42216), we proposed to revise our regulat ions at § 419.70(d) to conform the regulation text to the self-implementing provisions of sect ion 108 of the MMEA described above.CMS-1525-FC 287 We did not receive any public comment s on our proposed policy to update the language in § 419.70(d) of the re gulations. For the reasons we specified in the CY 2012 OPPS/ASC proposed rule (76 FR 42215 and 42216), we are finalizing our proposed revisions of § 419.70(d) without modification. 2. Adjustment for Rural SCHs and EACHs under Section 1833(t)(13)(B) of the Act In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, 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 Pub. L. 108-173. Section 411 gave the Secretary the authority to make an adjustment to O PPS 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 hosp itals in urban areas. Our an alysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs a nd biologicals, brachyt herapy sources, and devices paid under the pass-through paymen t policy, in accordance with section 1833(t)(13)(B) of the Act. In CY 2007, we became aware that we did not specifically address whether the adjustment applies to EACHs, which ar e considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Ac t. Thus, under the statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 andCMS-1525-FC 288 68227), for purposes of receiving this rural ad justment, we revised § 419.43(g) to clarify that EACHs are also eligible to receive the rural SCH adjust ment, assuming these entities otherwise meet the rural adjustment criteria. Currently, three hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of Pub. L. 105- 33, a hospital can no longer become newly classified as an EACH. This adjustment for rural SCHs is budge t neutral and applied before calculating outliers and copayment. As we stated in the CY 2006 OPPS final rule with comment period (70 FR 68560), we would not reestabl ish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 pe rcent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2011. Furt her, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we update d the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to co sts by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment. For the CY 2012 OPPS, we proposed to continue our policy of a budget neutral 7.1 percent payment adjustment for rural SCHs , including EACHs, fo r 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 (76 FR 46232). In the CY 2012 OPPS/AS C proposed rule, we indicated that we intend to reassess the 7.1 percen t adjustment in the near future by examining differences between urban hospitals’ costs and rural hosp itals’ costs using updated claims data, cost reports, and provider information.CMS-1525-FC 289 We did not receive any public comments regarding the proposed continuation of the 7.1 rural adjustment. We are finalizi ng our CY 2012 proposal, without modification, to apply the 7.1 percent payment adjustment to rural SCHs, including EACHs, for all services and procedures paid under the O PPS in CY 2012, excluding separately payable drugs and biologicals, devices paid unde r the pass-through payment policy, and items paid at charges reduced to co sts because we continue to believe that the adjustment is appropriate for application in CY 2012. F. OPPS Payments to Certain Cancer Hosp itals Described by S ection 1886(d)(1)(B)(v) of the Act 1. Background Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA), Medicare has paid can cer hospitals iden tified in section 1886(d)(1)(B)(v) of the Act ( cancer hospitals) under the OPPS for covered outpatient hospital services. There are 11 cancer hospitals that meet the classification criteria in section 1886(d)(1)(B)(v ) of the Act. These 11 cancer hospitals are exempted from payment under the IPPS. With the Medica re, Medicaid and SCHI P Balanced Budget Refinement Act of 1999, Congress created sect ion 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to serve as a permanent payment floor by limiting cancer hospitals’ potential losses under the OPPS. Through section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA” amount. That is, cancer hospitals are perm anently held harmless to their “pre-BBA”CMS-1525-FC 290 amount, and they receive transitional outpatient payments (TOPs) to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in secti on 1833(t)(7)(F) of the Act. The “pre-BBA” payment amount is an amount equal to the product of the reasonable cost of the hospital for covered outpatient services for the portions of the hospital’s cost report ing period (or periods) occurring in the current year and the base payment-to-cost ratio (PCR) for the hosp ital. The “pre-BBA” amount, including the determination of the base PCR, are define d at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital a nd Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budg et neutrality calculati ons. Almost all of the 11 cancer hospitals receive TOPs each ye ar. The volume weighted average PCR for the cancer hospitals is 0.83, or the outpatient payment with TOPs to cancer hospitals is 83 percent of reasonable cost. Section 3138 of the Affordable Care Act amended section 1833(t) of the Social Security Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpa tient costs incurred by cancer hospitals described in section 1886(d)(1)(B )(v) of the Act with respect to APC groups exceed the costs incurred by other hospitals furnishing se rvices under section 1833(t) of the Act, as determined appropriate by the Secretary. In addition, section 3138 of the Affordable Care Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by such hospitals when st udying cancer hospital co stliness. Further,CMS-1525-FC 291 section 3138 of the Affordable Care Act provi des that if the Secret ary determines that cancer hospitals’ costs with respect to APC gr oups are determined to be greater than the costs of other hospitals furnishing services und er section 1833(t) of the Act, the Secretary shall provide an appropriate adjustment under section 1833(t)(2 )(E) of the Act to reflect these higher costs. Cancer hospitals desc ribed in section 1886(d )(1)(B)(v) of the Act remain eligible for TOPs (which are not budge t neutral) and outlier payments (which are budget neutral). 2. Study of Cancer Hospitals’ Co sts Relative to Other Hospitals It has been our standard analytical appr oach to use a combination of explanatory and payment regression models to assess the costliness of a class of hospitals while controlling for other legitimate influences of costliness, such as ability to achieve economies of scale, to ensure that costliness is due to the type of hos pital and to identify appropriate payment adjustments. We used this approach in our CY 2006 OPPS final rule with comment period to establish the 7.1 percent payment adjustment for rural SCHs (70 FR 68556 through 68561). In our discus sion for the CY 2006 OPPS proposed rule, we stated that a simple comparison of unit costs would not be sufficient to assess the costliness of a class of hospitals because th e costs faced by indivi dual hospitals, whether urban or rural, are a function of many vary ing factors, including local labor supply and the complexity and volume of services provided (70 FR 42699). In constructing our analysis of cancer hos pitals’ costs with respect to APC groups relative to other hospitals, we considered whet her our standard analyt ical approach to use a combination of explanatory and payment regr ession models would lead to valid resultsCMS-1525-FC 292 for this particular study, or wh ether we should develop a diff erent or modified analytic approach. We note that the analyses pres ented in the CY 2006 OPPS proposed and final rules were designed to establish an adjustment for a large class of rural hospitals. In contrast, section 3138 of the Affordable Care Ac t is specifically limited to identifying an adjustment for 11 cancer hospitals to the exte nt their costs with respect to APC groups exceeded those costs incurred by other hospitals furnishing services under section 1833(t) of the Act. With such a small sample si ze (11 out of approximate ly 4,000 hospitals paid under the OPPS), we were concerned that the standard explanatory and payment regression models used to esta blish the rural hospital adjustme nt would lead to imprecise estimates of payment adjustments for this sm all group of hospitals. Further, section 3138 of the Affordable Care Act specifies explicit ly that cost comparisons between classes of hospitals must include the cost of drugs and bi ologicals. In our CY 2006 analysis of rural hospitals, we excluded the cost of drugs and biologicals in our model because the extreme units associated with proper billing for some drugs and biologicals can bias the calculation of a service mix index, or volume weighted average APC relative weight, for each hospital (70 FR 42698). Therefore, we chose not to pursue our standard combination of explanatory and payment regression modeling to determine a proposed cancer hospital adjustment. As discussed in the CY 2011 OPPS/ASC proposed rule (75 FR 46235), while we chose not to use our standard models to cal culate a proposed cancer hospital adjustment, we determined it still would be appropriat e to construct our usual provider-level analytical dataset consisting of variables related to assessing costliness with respect toCMS-1525-FC 293 APC groups, including average cost per unit for a hospital and the hospital’s average APC relative weight as an indicator of the hos pital’s resource intens ity, as measured by the APC relative weights. We used these vari ables to calculate univariate statistics that describe the costliness with respect to APC gr oups and related aspect s of cancer hospitals and other hospitals paid under the OPPS. While descriptive statisti cs cannot control for the myriad factors that contribu te to observed costs, we believ ed that stark differences in cost between cancer hospitals and other hospitals paid unde r the OPPS that would be observable by examining descriptive univariat e statistics would provi de some indication of relative costliness. We began our anal ysis of the cancer hospitals by creating an analytical dataset of hospita ls billing under the OPPS for CY 2009 (a total of 3,933) that were included in our claims dataset fo r establishing the CY 2011 OPPS proposed APC relative weights. This analytical da taset included the 3,933 OPPS hospitals’ total estimated cost (including packaged cost), to tal lines, total discounted units as modeled for CY 2011 OPPS payment, and the average weight of their separately payable services (total APC weight divided by total units) as modeled for the CY 2011 OPPS. We then summarized estimated utilization and payment fo r each hospital (“hospital-level”). These files consist of hospital-level aggregate cost s (including the cost of packaged items and services), total estimated discounted un its under the modeled proposed CY 2011 OPPS, total estimated volume of number of occurr ences of separately payable HCPCS codes under the modeled proposed CY 2011 OPPS, an d total relative weight of separately payable services under the modeled propos ed CY 2011 OPPS. After summarizing modeled payment to the hospital-level, we re moved 48 hospitals in Puerto Rico from ourCMS-1525-FC 294 dataset because we did not believe that their cost structure reflected the costs of most hospitals paid under the OPPS and because they could bias th e calculation of hospital-weighted statistics. We then remove d an additional 66 hospitals with a cost per unit of more than 3 standard deviations fr om the geometric mean (mean of the natural log) because including outliers in hospital-weighted descriptive statistics also could bias those statistics. This resulted in a data set with 11 cancer ho spitals and 3,808 other hospitals. We included the following standard hospital-level variables that describe hospital costliness in our analysis f ile: outpatient cost per di scounted unit under the modeled CY 2011 OPPS (substituting a cost per administ ration, rather than a cost per unit, for drugs and biologicals); each hospital’s pr oposed CY 2011 wage index as a measure of relative labor cost; the service-mix index, or volum e-weighted average proposed CY 2011 APC relative weight (including a simulated weight for drugs and biologicals created by dividing the CY 2010 April ASP-based payment amount at ASP+6 percent appearing in Addendum A and B of the propos ed rule by the proposed conversion factor of $68.267); outpatient volume based on number of occurrences of HCPCS codes in the CY 2009 claims data; and number of beds. We used these variables because they are key indicators of costliness with respect to APC groups under the modeled OPPS system, and they allowed us to assess the relative costline ss of classes of hospita ls under the proposed CY 2011 OPPS. A hospital’s service mix index is a measure of resource intensity of the services provided by the hospital as meas ured by the proposed CY 2011 OPPS relative weights, and standardizing the cost per di scounted unit by the serv ice mix index createsCMS-1525-FC 295 an adjusted cost per unit estimate that refl ects the remaining relative costliness of a hospital remaining afte r receiving the estimated paymen ts that we proposed to make under the CY 2011 OPPS. In short, if a class of hospitals demonstr ates higher cost per unit after standardization by service mix, it is an early indication that the class of hospitals may be significantly more costly in the regression models. We used these data to calculate the descriptive univariate statis tics for cancer hospitals appearing in Table 12 below. We note that because drugs and biol ogicals are such a si gnificant portion of the services that the cancer hospitals provide, and because section 3138 of the Affordable Care Act explicitly requires us to consider th e cost of drugs and biologicals, we included the cost of these items in our total cost calculation for each hos pital, counting each occurrence of a drug in the modeled proposed CY 2011 data (based on units in CY 2009 claims data). That is, we sought to treat each administration of a drug or biological as one unit. In reviewing these descriptive statistics, we observed that can cer hospitals had a standardized cost per discounted unit of $150.12 compared to a standardized cost per discounted unit of $94.14 for all other hospitals. That is, cancer hos pitals’ average cost per discounted unit remained high even afte r accounting for payment under the modeled proposed CY 2011 payment system, which is not true for all other hospitals. Observing such differences in standardized cost per disc ounted unit led us to conclude that cancer hospitals are more costly with respect to APC groups than other hospitals furnishing services under the OPPS, even without the infe rential statistical mode ls that we typically employ.CMS-1525-FC 296
TABLE 12.—MEANS AND STANDARD DE VIATIONS FOR KEY VARIABLES BY CANCER AND NON-CANC ER OPPS HOSPITALS

Cancer Hospitals Non-Cancer Hospitals Variable

Mean Standard Deviation Mean Standard Deviation Outpatient Cost per Unit* $344.20 (64.68) $264.11 (165.86) Unit Cost Standardized by Service Mix Wage Indices $150.12 (31.64) $94.14 (81.19) Wage Index 1.10 (0.13) 0.98 (0.16) Service Mix Index * 2.19 (0.26) 3.18 (2.25) Outpatient Volume 192,197 (186,063) 34,578 (43,094) Beds 173 (162.33) 173 (171.46) Number of Hospitals 11 3,808

* Includes drugs and biologicals based on pe r administration rather than per unit. 3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals Having reviewed the cost data from the st andard analytic database and determined that cancer hospitals are more costly with respect to APC groups than other hospitals furnishing services under the OPPS system, we decided to examine hos pital cost report data from Worksheet E, Part B (where TOPs are calculated on the Hospital and Hospital Health Care Complex Cost Re port each year) in order to determine whether our findings were further supported by cost report data and to determine an appropriate proposed payment adjustment methodology for CY 2011 ba sed on cost report data. Analyses on our standard analytic database and descriptive statistics pr esented in Table 12 above did not consider TOPs in assessing costliness of cancer hospitals relativ e to other hospitals furnishing services under section 1833(t) of the Act. There we re several reasons for this. One reason was that TOPs have no associated re lative weight that could be included in anCMS-1525-FC 297 assessment of APC-based payment. TOPs ar e paid at cost report settlement on an aggregate basis, not on a per service basis, and we would have no way to break these payments down into a relative weight to incorporate these retrospective aggregate payments in the form of a relative weight. The cost report data we selected for the analysis were limited to the OPPS-specific pa yment and cost data available on Worksheet E, Part B. These data include aggregat e OPPS payments, including outlier payments and the cost of medical and other health servic es. These aggregate measures of cost and payment also include the cost and paym ent for drugs and biologicals and other adjustments that we typically include in our regression modeling, including wage index adjustment and rural adjustme nt, if applicable. While th ese cost report data cannot provide an estimate of cost pe r unit after controlli ng for other potential factors that could influence cost per unit, we us ed this aggregate cost and payment data to examine the cancer hospitals’ OPPS PCR and compare thes e to the OPPS PCR for other hospitals. PCRs calculated from the most recent cost report data available at the time of the CY 2011 OPPS/ASC proposed rule also indicate d that costs relative to payments at cancer hospitals were higher than those at other hospitals paid under the OPPS (that is, cancer hospitals have lower PCRs). In order to calculate PCRs for hospitals paid under the OPPS (including cancer hospitals), we used the same extract of cost report data from the Hospital Cost Report Information System (HCRIS) that we us ed to calculate the CCRs that were used to estimate median costs for the CY 2011 OPPS. We limited the dataset to the hospitals with CY 2009 claims data that we used to model the CY 2011 proposed APC relative weights.CMS-1525-FC 298 We estimated that, on average, the OPPS pa yments to the 11 cancer hospitals, not including TOPs, were approximately 62 percent of reasonable cost (that is, we calculated a PCR of 0.615 for the cancer hospitals), wh ereas we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 87 percent of reasonable cost (resulting in a PCR of 0.868). Based on our findings that cancer hospitals, as a class, have a significantly lower volume weighted average PCR than the volume weighted PCR of other hospitals furnishing services under the OPPS and our fi ndings that the cancer hospitals cost per discounted unit standardized fo r service mix remains much hi gher than the standardized cost per discounted unit of a ll other hospitals, we proposed an adjustment for cancer hospitals to reflect these higher costs, effective January 1, 2011. For purposes of calculating a proposed adjustment, we chose to rely on this straightforward assessment of payments and costs from the cost report data because of the concer ns outlined above with respect to the small number of hospitals, and because of the challenges associated with accurately including drug and biological cost s in our standard regression models. We believed that an appropriate adjustment w ould redistribute enough payments from other hospitals furnishing services under the OPPS to the cancer hospitals to give cancer hospitals a PCR that was comparable to the average PCR for other hospitals furnishing services under the OPPS. Therefore, we proposed a hospital-specific payment adjustment determined as the percentage of additional payment needed to raise each cancer hospital’s PCR to the weighted average PCR for other hospitals furnishing services under the OPPS (0.868) in the CY 2011 dataset. This would be accomplished byCMS-1525-FC 299 adjusting each cancer hosp ital’s OPPS APC payment by the percentage difference between the hospital’s indivi dual PCR (without TOPs) and th e weighted average PCR of the other hospitals furnishi ng services under the OPPS. This cancer hospital payment adjustment proposed for CY 2011 would have re sulted in an estimated aggregate increase in OPPS payments to cancer hospitals of 41.2 percent and a net increase in total payments, including TOPs, of 5 percent for CY 2011. 4. Proposed CY 2011 Cancer Hospital Payment Adjustment Was Not Finalized The public comments associated with th e cancer hospital adjustment that we proposed for CY 2011 are detailed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71886 through 71887). Many commenters urged CMS to consider TOPs when calculating the cancer hos pital payment adjustment, stating that the proposed methodology results, largely, in a change in the form of outpatient payments to cancer hospitals by shifting payment from hold harm less payment under the TOPs provision to APC payments. Noting that the majority of cancer care provided in the country is provided by the non-cancer hospi tals that would experien ce a payment reduction under the CY 2011 proposal, commenters also suggest ed that the associated budget neutral payment reduction of 0.7 percent was not appropriate or equitable to other OPPS hospitals. Commenters also expressed con cern that the proposed payment adjustment would increase beneficiary copayments. That is, they believed th at the proposed cancer hospital adjustment would increase APC paym ents and, because beneficiary copayment is a percentage of the APC payment, Medica re beneficiaries seeking services at the 11 designated cancer hospitals would experience higher copayments due to the proposedCMS-1525-FC 300 methodology. These commenters encouraged CMS to implement the adjustment in a way that does not increase beneficiary c opayments. As indicated in the CY 2011 OPPS/ASC final rule with comment peri od (75 FR 71887), because the many public comments we received identified a broad range of very important issues and concerns associated with the proposed cancer hospital payment adjustment, we determined that further study and deliberation was necessary and, therefore, we did not finalize the CY 2011 proposed payment adjustment for certain cancer hospitals. 5. Payment Adjustment for Certain Cancer Hospitals for CY 2012 After further review and deliberation of the issues associated with the cancer hospital payment adjustment, in the CY 2012 OPPS/ASC proposed rule, we proposed a cancer hospital payment adjustment reflecti ng the same approach as we took in the CY 2011 OPPS/ASC proposed rule, that is, an adjustment under which cancer hospitals would receive additional payments (based on estimates) so that each cancer hospital’s PCR would be comparable to the weighted average PCR for other hospitals furnishing services under section 1833(t) of the Act. Therefore, for services furnished on and after January 1, 2012, we proposed that, for a cance r hospital with an individual PCR below the weighted average PCR for other hospitals furnishing services under the OPPS in the CY 2012 dataset, we would make a hospital- specific payment adjustment by adjusting the wage-adjusted OPPS payment for covered OPD services (except devices receiving pass-through status because thes e items and services are always paid at the estimated full cost and, therefore, a payment adjustment above zero percent is unnecessary) furnished on and after January 1, 2012, by the percent difference betwee n the hospital’s individualCMS-1525-FC 301 PCR and the weighted average PCR of othe r hospitals furnishi ng services under the OPPS in the CY 2012 dataset. This met hodology resulted in estimated percentage payment adjustments for the 11 cancer hospita ls that ranged between 10.1 percent and 61.8 percent, with an estimated aggregate in crease in OPPS payment to cancer hospitals of 39 percent for CY 2012 and an estimated net increase in total payments, including TOPs, of 9 percent. Because section 7101 of the Affordable Care Act expanded the 340B drug program to include certain cancer hospitals, we also proposed that the cancer hospital payment adjustment be recalculated each ye ar. The 340B drug program allows certain hospitals to purchase certain outpatient drugs at reduced prices. We understand from commenters that, currently, two cancer hospi tals participate in the 340B program. However, inclusion of cancer hospitals in the 340B drug program should lower drug costs at participating cancer hospitals going forward and, therefore, may cause changes in each cancer hospital’s PCR compared to the previous y ear’s calculation.
Comment : Many commenters urged CMS to c onsider TOPs when calculating the cancer hospital payment adjustment. Th e commenters stated that the proposed methodology to adjust each cancer hospital’s OPPS payment by the percentage difference between their individual PCR without TOPs a nd the weighted average PCR of the other hospitals paid under OPPS results, largely, in a change in the form of outpatient payments to cancer hospitals by shifting payment from hold harmless payments under the TOPs provision to APC payments. This substituti on of TOPs for APC payments, in turn, results in savings to the Medicare progr am which, the commenters asserted, is inCMS-1525-FC 302 violation of the statutory requi rement that the policy be budget neutral. The commenters suggested that because the Congressional B udget Office scoring of section 3138 of the Affordable Care Act estimates no Federal budgetary impact, Congress did not intend for savings under this provision. Commenters also suggested that the a ssociated budget neutral payment reduction to other hospitals is no t appropriate or equitable to othe r hospitals paid under the OPPS. The commenters indicated that it was not th e intent of Congress for the provision to impact the non-cancer hospitals in a manner th at is disproportionate to the benefits obtained by the cancer hospitals. Many commenters noted that the majority of cancer care provided in the country is provided by the non-cancer hosp itals that would experience a payment reduction under the proposal. Commenters also expressed concern that the proposed payment adjustment would increase beneficiary copayments. That is, they believed that the proposed cancer hospital adjustment would increase APC payments and, because beneficiary copayment is a percentage of the APC payment, Medicare beneficiaries seeking services at the 11 designated cancer hospitals will experience higher copayments due to the proposed methodology. The commenters encouraged CMS to implement the adjustment in a way that does not increase benefi ciary copayments, such as pr oviding the adjustment amount in aggregate instead of on a per cla im basis through enhanced APC payments. Commenters indicated that CMS selected an inappropriate benchmark against which to compare each cancer hospital’s PCR. Specifically, the commenters indicated that CMS should have taken into account the concentration of outpati ent services at theCMS-1525-FC 303 designated cancer hospitals as compared to other PPS hospitals and adjust the PCR benchmark higher. The commenters argued that other PPS hospitals have the ability to improve their Medicare margins through other payment systems, but that cancer hospitals receive the majority of their Medicare pa yments through the OPPS. These commenters asserted that, because concentration of out patient services was not considered in establishing the benchmark, the proposed ad justment was not va lid. The commenters also indicated that, because outliers were included in the calculation of hospital PCRs, application of the payment adjustment to the APC payment amount will result in PCRs less than the intended target for cancer hospita ls with relatively large outlier payments and suggested that the payment adjustment be applied to outlier payments as well as APC payments. In addition, the commenters opposed annual recalculation of the cancer adjustment stating that CMS should not expe ct significant cost savings at the cancer hospitals as a result of the inclusion of cancer hospitals in the 340B drug program and that the cancer hospitals require payment stab ility and predictability over the long term. Other commenters supported the proposal to annually recalculat e the cancer hospital adjustment, stating that this will ensure more equitable payments. In addition, these commenters indicated that CMS must make the payment adjustment effective for services furnished on or after January 1, 2011, in or der to comply with section 3138 of the Affordable Care Act. Several commenters addressed CMS’ study methodology. One commenter suggested that the CMS analysis is inadequate to conclude th at costs are higher in cancer hospitals and that an adjustment is warra nted. This commenter noted that the CMSCMS-1525-FC 304 analysis did not control for the many factors that might explain diffe rences in costliness or assess to what extent cost differences could be explained by differences in efficiency. This commenter also asserted that the ex clusion of TOPs from the comparison of costliness distorts the analys is and makes the findings invalid. Another commenter suggested that CMS examine the costs of can cer patients generally for all hospitals and compare the costs of these 11 hospitals to all hospitals providing cance r care to ensure an adjustment does not reinforce high-cost ch aracteristics of the 11 designated cancer hospitals. This commenter also indicated th at additional payments to cancer hospitals should be guided by quality of care and, becau se the Affordable Care Act requires the 11 cancer hospitals to begin submitting quality da ta in fiscal year 2014, suggested that the additional payments to cancer hospitals be de layed until these quality data are available to serve as a basis for the payment adjustment. Response : We analyzed the various issues ra ised by commenters, and in this final rule with comment period, we are adopting final policies that re flect a number of modifications to our proposed policies. We be lieve that a number of points raised by the commenters have merit and, consistent with ou r broad authority under the statute, we are adopting some (but not all) of their recommendations. As discussed above, section 3138 of the A ffordable Care Act added a new section 1833(t)(18) to the Social Security Act, providing for an adjustment under section 1833(t)(2)(E) of the Social S ecurity Act to address highe r costs incurred by cancer hospitals. Section 1833(t)(2)(E) of the Act, in turn, directs the Secret ary to establish, “inCMS-1525-FC 305 a budget neutral manner,” payment “adjustments as determined to be necessary to ensure equitable payments, such as adjustment s for certain classes of hospitals.” Under sections 1833(t)(18) and 1833(t)(2)(E) of the Social Security Act, the agency’s authority with respect to the cancer hospital adjustment is broad; similarly, under section 1833(t)(2)(E) of the Act, the agency’s authority with respect to calculating budget neutrality is broad. In contrast, the pr ovision of the statute for calculating TOPs is prescriptive. Commenters requested that CMS maintain TOPs at their current level, that is, calculate TOPs by ignoring the cancer hospi tal payment adjustment under sections 1833(t)(18) and 1833(t)(2)(E) of the Act. Unde r the statute, howeve r, the calculation of TOPs is directly tied to what is paid under section 1833(t) of the Act. Specifically, under section 1833(t)(7)(D)(ii) of the Act, “for covered OPD services for which the PPS amount is less than the pre-BBA amount, th e amount of payment under this subsection [1833(t)] shall be increased by the amount of such difference.” The “PPS amount” means, with respect to covered OPD services , “the amount payable under this title [Title 18] for such services (determined without regard to this paragraph)...” (section 1833(t)(7)(E) of the Act). Under this provi sion, the cancer hospital payment adjustment is included in the calculation of the “ PPS amount” because it is an adjustment under sections 1833(t)(18) and 1833(t) (2)(E) of the Act and, theref ore, is the “amount payable under this title.” To the extent the PPS am ount is less than the pre-BBA amount, a cancer hospital would qualify for a TOP.CMS-1525-FC 306 With respect to the issue of establishi ng, in a budget neutral manner, the cancer hospital payment adjustment, we agree with the commenters that it is appropriate to consider that, to some extent, the cancer hos pital payment adjustment changes the form of payments (from TOPs to cancer hospital ad justment payments). The cancer hospital payment adjustment presents a unique circumstance insofar as the cancer hospital adjustment can result in lower TOPs. Cons istent with section 1833( t)(2)(E) of the Act, we agree that, in determining the baseline for the budget neutrality calculation, it is appropriate to consider TOPs that would otherwise be made if there were no cancer hospital payment adjustment. In determining the budget neutrality adjustment factor, we compare estimated CY 2012 total payments w ith the cancer hospital payment adjustment under sections 1833(t)(18) a nd 1833(t)(2)(E) of the Act to estimated CY 2012 total payments without a cancer hospital payment adjustment, taking into account TOPs that would otherwise be made in the absence of a cancer hospital payment adjustment. The inclusion of TOPs in the baseline signifi cantly increases the baseline, and accordingly decreases the amount that other payments need to be reduced to offset the increased payments resulting from the cancer hospital payment adjustment. The budget neutrality adjustment factor for the can cer hospital payment adjustme nt is 0.9978. In percentage terms, the budget neutrality reduc tion to the conversion factor is 0.2 percent in this final rule with comment period, as opposed to 0.7 percent in the proposed rule. In dollar terms, the budget neutral payment reduction a ssociated with the can cer hospital payment adjustment is an estimated $71 million for CY 2012 based on updated cost report information. That is, the can cer hospital payment adjustment is estimated to increaseCMS-1525-FC 307 total payments by $71 million over the baseline (which accounts for TOPs) and this amount must be offset by reductions in othe r payments (resulting in the 0.2 percent reduction to the conversion factor). For th is final rule with comment period, we are adopting the above-described approach of cal culating budget neutralit y, consistent with our broad authority under the statute, for the reasons stated above and because we believe it will increase equity to hospitals paid unde r the OPPS that are not cancer hospitals, as urged by the commenters. In response to commenters who urged us to implement the cancer hospital payment adjustment in a manner that does not increase beneficiary copayments, such as providing the adjustment amount in aggregat e instead of on a per claim basis through enhanced APC payments, we reexamined the manner in which the cancer hospital payment adjustment is applied. We have broad discretion in designing the cancer hospital payment adjustment under sections 183 3(t)(18)(B) and 1833(t)(2)(E) of the Act. Consistent with this broad authority, we agr ee that it is appropriate to make the cancer hospital payment adjustment through the form of an aggregate payment determined at cost report settlement to each cancer hospita l, as opposed to an adjustment at the APC level, thereby avoiding the hi gher copayments for beneficiar ies associated with providing the adjustment on a claims basis through increa sed APC payments. Therefore, in order to implement the cancer hospital payment adjustment in a way that does not increase beneficiary copayments as ur ged by commenters, and in light of the discretion afforded by the statute, we are providi ng the cancer hospital payment adjustment as an aggregate payment to each cancer hospital at cost repo rt settlement instead of through enhancedCMS-1525-FC 308 APC payments as proposed. As explained further below, the aggregate adjustment adopted in this final rule with comment pe riod (like the proposed APC-level adjustment) is based on the comparison of each cancer hos pital’s PCR to the weighted average PCR of the other hospitals that furnish services under the OPPS using the most recent submitted or settled cost report available at the time of this final rule with comment period. In addition, commenters sugge sted that CMS take into account the cancer hospitals’ significant Medicare outpatient c oncentration (which, based on the comment letter, is the portion of the cancer hospitals’ total Medicare payments that are OPPS payments) when establishing an appropriate PCR benchmark. In other words, the commenter argued that CMS should take into ac count the portion of the cancer hospitals’ total Medicare payments that are OPPS paym ents compared to the non-cancer hospitals’ total Medicare payments that are OPPS paymen ts. Section 3138 of the Affordable Care Act provides that if the Secret ary determines under section 1 833(t)(18)(A) of the Act that costs incurred by cancer hospitals exceed t hose costs of other hospitals furnishing services under section 1833(t), the Secretary shall provide fo r an appropriate adjustment to reflect the higher costs. We are not pe rsuaded that Medicare outpatient concentration in and of itself has an impact on the costs in curred for providing OPD services at cancer hospitals relative to other OPPS hospitals that warrants an adjustment in determining the cancer hospital adjustment. Therefore, we are not adopting this suggestion of the

commenters.CMS-1525-FC 309 With respect to commenters that indicated that because outliers were included in the calculation of hospital PCRs, applicati on of the payment adjustment to the APC payment amount will result in PCRs less than the intended target for cancer hospitals with relatively large outlier payments, we examined this issue and believe commenters made a valid argument that cancer hospitals w ith relatively large outlier payments will be provided less additional payment than inte nded under the proposed methodology because the payment adjustment would be applied on ly to the APC portion of the payment and not to the outlier amounts. If we were to finalize the implementation of the cancer hospital payment adjustment through increased APC payments as proposed, the PCR used to determine the amount of the adjustment would need to be recalculated to exclude outlier payments. This change would pr ovide a larger APC adjustment to cancer hospitals that have large outlier payments relative to other OPPS hospitals. However, because we are providing the cancer hospital payment adjustment in aggregate at cost report settlement and not through adjustments to the APC payment, it is appropriate to continue to include outlier payments in the ca lculation of the PCRs used to determine the payment adjustment amount. In response to the commenters who suggest ed that annual recalculation of the PCRs for purposes of calculating the cancer ho spital payment adjustment is not necessary because significant cost savings are not expected at the cancer hospitals as a result of the inclusion of cancer hospitals in the 3 40B drug program, we believe that annual recalculation of the cancer hos pital payment adjustment will provide a timely assessmentCMS-1525-FC 310 of the changes in OPPS payments relative to costs due to any reason and, therefore, will enable CMS to provide OPPS payments that are accurate and equitable. With regard to the implementation date for the cancer hospital payment adjustment, the agency did not finalize th e proposed cancer hosp ital adjustment for CY 2011 for a variety of reasons, as explaine d in the CY 2011 OPPS/AS C final rule with comment period. Significantly, the majority of all commenters expressed concerns about implementation of the adjustment and, based on the broad range of important issues and concerns raised by them, we did not imple ment a cancer hospital adjustment for CY 2011. Moreover, the obligation to provide a cancer hospital payment adjustment is triggered only insofar as the Secretary dete rmines under section 1833( t)(18)(A) of the Act that costs incurred by hospitals described in section 1886(d)(1)(B)(v) of the Act exceed those costs incurred by other hospitals furnishi ng services under this subsection. Several commenters raised concerns about the agency’s study of costliness conducted under section 1833(t)(18)(A) of the Act; for exampl e, a commenter suggested that the CMS analysis was inadequate to conc lude that costs are higher in cancer hospitals and that an adjustment was warranted. Given the uncerta inty surrounding these issues as well as public comments arguing against implementing a cancer hospital payment adjustment for CY 2011, we decided not to do so for CY 2011. We note that, insofar as the cancer adjustment is budget neutral, the lack of a cancer hospital payment adjustment for CY 2011 also means that other payments we re not reduced for CY 2011 to offset the increased payments from the adjustment.CMS-1525-FC 311 Regarding the commenter’s concerns re lated to the agency’s study conducted pursuant to section 1833(t)(18 )(A) of the Act, as detail ed above and in the CY 2011 OPPS/ASC final rule with co mment period (75 FR 71883), we determined that we could not use our standard analytic al approach, which uses a combination of explanatory and payment regression models while controlling for other legitimate influences of costliness, to assess the costliness of cancer hospitals relative to other OPPS hospitals. Although this kind of analysis would allow us to c ontrol for the many factors that might explain differences in costliness, as suggested by th e commenter, we believe that this approach would lead to imprecise estimates of co stliness due to the small sample size (11 hospitals). With respect to commenters who suggested that it would be more appropriate for the CMS study on costliness to compare the costs of providing OPD services at the 11 cancer hospitals to the costs of providing services related to ca ncer care at other hospitals furnishing services under section 1833(t) of the Act, we believ e such an approach is not appropriate because section 3138 of the Afford able Care Act does not specify that the comparison be made with regard to particul ar APC groups related to cancer services. In addition, with respect to the comme nter who believed that the amount of additional payments to cancer hospita ls should be guided by quality of care information and, therefore, be delayed un til 2014 when the cancer hospitals begin to submit quality data to CMS, we note that s ection 1833(t)(18) of th e Act did not include such a requirement nor did it in clude quality measures as a requirement for the additional payments to cancer hospitals. Therefore, we do not believe it is appropriate to delayCMS-1525-FC 312 implementation of the cancer hospital paym ent adjustment until cancer hospitals have submitted quality data to CMS. After consideration of the public comments we received, we are adopting in this final rule with comment period a number of the commenters’ suggestions and a number of changes to our proposed CY 2012 policie s regarding the can cer hospital payment adjustment including modifications to our CY 2012 proposal with regard to the calculation of the budget neutra lity adjustment associated with the cancer hospital payment adjustment. The budget neutral paymen t reduction that is associated with the cancer hospital payment adjustment for CY 2012 is calculated as the difference in estimated CY 2012 total payments to cancer hospitals, including the cancer hospital payment adjustment, and estimated CY 2012 to tal payments to cancer hospitals without the cancer adjustment, including TOPs. Theref ore, based on updated cost report data, the budget neutrality adjustment to the OPPS conversion factor is 0.9978, a reduction of 0.2 percent (as opposed to a reduction of 0.7 percen t in the proposed rule). In addition, we are providing the CY 2012 cancer hospital payment adjustment to cancer hospitals in the form of an aggregate payment at cost repor t settlement instead of through an increased adjustment to APC payments on a claims basis, as was proposed. Consistent with the approach in the proposed rule, the CY 2012 cancer hospital payment adjustment adopted in this final rule with comment period is intended to provide additional payments to cancer hospitals so that the hospital’s PCR with the payment adjustment is equal to the weighted average PCR for other hospitals, which we refer to as the “target PCR.” In contrast to the approach in the proposed rule, however, in this finalCMS-1525-FC 313 rule with comment period, we are adopti ng a policy under which the amount of the payment adjustment will be made on an aggreg ate basis at cost report settlement. Under this final rule with comment period, we will examine each cancer hospital’s data at cost report settlement, determine the cancer hos pital’s PCR (before the cancer hospital payment adjustment), and in turn determine the lump sum amount necessary (if any) to make the cancer hospital’s PCR equal to the targ et PCR. To the extent at cost report settlement a cancer hospital’s PCR (before the cancer hospital payment adjustment) is above the target PCR, a cancer hospital paym ent adjustment of zero is given. This is because we believe that this would indicate that the cancer hospital’s costs do not exceed the costs incurred by other hospitals furnishi ng services under the OPPS, and therefore a payment adjustment above zero would not be necessary. We are amending are regulations at § 419.43 to capture the above-described final policy. Consistent with the approach in the pr oposed rule, the target PCR is set in advance and is calculated using the most recen t submitted or settled cost report data that are available at the time of this final rule with comment period. For CY 2012, the target PCR for purposes of the cancer hospital paym ent adjustment is 0.91. To calculate the target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A of this final rule with comment period, used to estimate median costs for the CY 2012 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital’s most recent cost report, whether as submitted or settled. We then limited the da taset to the hospitals with CY 2010 claims data that we use to model the impact of the CY 2012 final APC re lative weights (4,018CMS-1525-FC 314 hospitals) because it is appropria te to use the same set of hospitals that we are using to calibrate the modeled CY 2012 OPPS. The cance r hospitals in this dataset largely had cost report data from cost reporting periods ending in FY 2010. The cost report data for the other hospitals were from cost report periods with fiscal year ends ranging from 2009 to 2010. We then removed the cost report data of the 47 hospitals located in Puerto Rico from our data set because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, th erefore, their inclusion may bias the calculation of hospital-weighted statistics. We also removed 223 hospitals with cost report data that were not complete (missi ng aggregate OPPS payments (which include outliers), missing aggregate cost data, or missi ng both), so that all cost reports in the study would have both the payment and cost da ta necessary to calculate a PCR for each hospital, leading to a final analytic file of 3,748 hospitals with cost report data. We believe that the costs and PPS payments re ported on Worksheet E, Part B, for the hospitals included in our CY 2012 modeling is sufficien tly accurate for assessing hospital’s relative costliness b ecause all of the key elements that we believe are necessary for the analysis (payment and cost ) are contained on this worksheet. Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to the 11 cancer hospitals , not including TOPs, are approximately 67 percent of reasonable cost (that is, we calculated a PCR of 0.674 for the cancer hospitals), whereas, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are appr oximately 91 percent of reasonable cost (weighted average PCR of 0.91). Individua l cancer hospital’s O PPS PCRs range fromCMS-1525-FC 315 approximately 0.63 to approximately 0.78. Base d on these data, a target PCR of 0.91 will be used to determine the CY 2012 cancer hospital payment adjustment to be paid at cost report settlement. Therefore, the payment amount associated with the cancer hospital adjustment to be determined at cost report settlement will be the additional payment needed to result in a PCR equal to 0.91 for each cancer hospital. Using the same data described above, we calculated estimates of the percentage difference between each cancer hospital’s PCR and the target PCR. Table 13 below indicates estimates in percentage terms of the CY 2012 payment adjustment for each cancer hospital. The actual amount of the CY 2012 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital’s CY 2012 payments and costs. U nder the policies in this final rule with comment period, the payment adjustments for can cer hospitals are estimated to result in an aggregate increase in OPPS payments to cancer hospitals of 34.5 percent for CY 2012 and a net increase in total payment, includi ng TOPs, of 9.5 percent. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, incl uding the cancer hosp ital payment adjustment, have been made for a cost reporting period.
TABLE 13.—ESTIMATED CY 2012 HOSPITAL-SPECIFIC PAYMENT ADJUSTMENT FOR CANCER HOSPITALS (WITHOUT REGARD TOPS) TO BE PROVIDED AT COST REPORT SETTLEMENTCMS-1525-FC 316

Provider Number Hospital Name Percentage increase without TOPs 050146 City of Hope Helford Clinical Research Hospital 15.8% 050660 USC Kenneth Norris Jr. Cancer Hospital 32.8% 100079 University of Miami Hospital & Clinic 28.4% 100271 H. Lee Moffitt Cancer Center & Research Institute 22.4% 220162 Dana-Farber Cancer Institute 44.8% 330154 Memorial Hospital for Cancer and Allied Diseases 39.4% 330354 Roswell Park Cancer Institute 25.2% 360242 James Cancer Hospital & Solove Research Institute 30.9% 390196 Hospital of the Fox Chase Cancer Center 16.0% 450076 University of Texas M. D. Anderson Cancer Center 39.4% 500138 Seattle Cancer Care Alliance 44.7% Total 34.5%

G. Hospital Outpatient Outlier Payments 1. Background Currently, the OPPS provides outlier payments on a service-by-service basis. For CY 2011, the outlier threshold is met when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005, in addition to the tradit ional multiple threshold, in order to better target outliers to those high cost and comple x procedures where a very costly service could present a hospital w ith significant financial loss. If the cost of a service meets both of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing theCMS-1525-FC 317 service exceeds 1.75 times the APC payment ra te. Before CY 2009, this outlier payment had historically been considered a fina l payment by longstanding OPPS policy. We implemented a reconciliation process similar to the IPPS outlier rec onciliation process for cost reports with cost reporting peri ods beginning on or after January 1, 2009 (73 FR 68594 through 68599). It has been our policy for the past seve ral years to report the actual amount of outlier payments as a percent of total spe nding in the claims being used to model the proposed OPPS. Our current estimate of tota l outlier payments as a percent of total CY 2010 OPPS payment, using available CY 2010 claims and the revised OPPS expenditure estimate for the 2011 Trustee’s Re port, is approximately 1.13 percent of the total aggregated OPPS payments. Therefore, for CY 2010, we estimate that we paid at 0.13 percent above the CY 2010 outlier target of 1.0 percent of tota l aggregated OPPS payments. As explained in the CY 2011 OPPS/AS C final rule with comment period (75 FR 71887 through 71889), we set our projecte d target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2011. The outlier thresholds were set so that estimated CY 2011 aggregate outlier payments would equal 1.0 percent of th e total estimated aggregate payments under the OPPS. Using CY 2010 claims data and CY 2011 paymen t rates, we currently estimate that the aggregate outlier payments for CY 2011 will be approximately 1.06 percent of the total CY 2011 OPPS payments. The difference between 1.0 percent and 1.06 percent is reflected in the regulatory impact analysis in section XX. of this final rule with commentCMS-1525-FC 318 period. We note that we provide estimated CY 2012 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/HospitalOutpatientPPS/

. 2. Proposed Outlier Calculation In the CY 2012 OPPS/ASC proposed ru le (76 FR 42222), we proposed for CY 2012 to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for outlier payments. We proposed that a portion of that 1.0 percent, specifical ly 0.14 percent, 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 thre shold as a proportion of total estimated outlier payments. As discussed in section VIII.C. of the proposed rule, for CMHCs, we proposed to continue our longstanding polic y that if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Pa rtial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.C. of this final rule with comment period. To ensure that the estimated CY 2012 a ggregate 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 outlie r payments would be triggered when the costCMS-1525-FC 319 of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate pl us a $2,100 fixed-dollar threshold. This proposed threshold reflected the methodology disc ussed below in this section, as well as the proposed APC recalibration for CY 2012. We calculated the proposed fixed-dollar th reshold for the proposed rule using largely the same methodol ogy as we did in CY 2011 (75 FR 71887 through 71889). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2011 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCR, which are ma intained by the Medica re contractors and used by the OPPS Pricer to pay claims. Th e claims that we use to model each OPPS update lag by 2 years. For the proposed rule, we used CY 2010 claims to model the CY 2012 OPPS. In order to estimate the pr oposed CY 2012 hospital outlier payments for the proposed rule, we inflated the charges on the CY 2010 claims using the same inflation factor of 1.0908 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024) . We used an inflation factor of 1.0444 to estimate CY 2011 charges from the CY 2010 charges reported on CY 2010 claims. The methodology for determining this ch arge inflation factor is discussed in the FY 2012 IPPS/LTCH PPS proposed rule and final rule (76 FR 26024 and 51792, respectively). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of thes e charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers,CMS-1525-FC 320 hospitals use the same ancillary and outpatien t cost centers to capture costs and charges for inpatient and outpatient services. As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we c ould systematically ove restimate the OPPS hospital outlier threshold if we did not a pply a CCR inflation adjustment factor. Therefore, in the CY 2012 OPPS/ASC proposed rule, we proposed to apply the same CCR inflation adjustment factor that we pr oposed to apply for the FY 2012 IPPS outlier calculation to the CCRs used to simulate th e proposed CY 2012 OPPS outlier payments that determine the fixed-dollar threshold. Specifically, for CY 2012, we proposed to apply an adjustment of 0.9850 to the CCRs th at were in the April 2011 OPSF to trend them forward from CY 2011 to CY 2012. The methodology for calculating this proposed adjustment was discussed in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024 through 26025). Therefore, to model hospital outlier payments for the CY 2012 OPPS/ASC proposed rule, we applied the overall CCRs from the April 20 11 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9850 to approximate CY 2012 CCRs) to charges on CY 2010 claims that were adjusted (using the proposed charge inflation factor of 1.0908 to appr oximate CY 2012 charges). We simulated aggregated CY 2012 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multip le threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, untilCMS-1525-FC 321 the total outlier payments e qualed 1.0 percent of aggregated estimated total CY 2012 OPPS payments. We estimated that a proposed fixed-dollar threshold of $2,100, 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. We proposed to continue to make an outlier paym ent that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the proposed fixed-dollar threshold of $2,100 are met. For CMHCs, we proposed that, if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment for APC 0173, the outlier payment would be calcula ted 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 requirements. For hos pitals that fail to meet the Hospital OQR requirements, we proposed to continue our policy that we implemented in CY 2010 that the hospitals' costs would be compared to th e reduced payments for purposes of outlierCMS-1525-FC 322 eligibility and payment calcula tion. For more information on the Hospital OQR Program, we refer readers to section XIV. of this final rule with comment period.
Comment : One commenter opposed the proposed increase to the fixed-dollar threshold, stating that it woul d reduce the number of cases eligible for outlier payments across the industry. Another commenter s upported the proposed policy of estimating outlier payments to be 1.0 percent of the estimated aggregate to tal payments under the OPPS for outlier payments and of increasing the fixed-dollar outlier threshold to $2,100. Response : As indicated above, we introduced a fixed-dollar threshold in order to better target outliers to those high cost and complex procedures where a very costly service could present a hospital with significan t financial loss. We maintain the target outlier percentage of 1.0 percent of estimat ed aggregate total payment under the OPPS and have a fixed-dollar threshold so that O PPS outlier payments are made only when the hospital would experience a si gnificant loss for supplying a particular service. For CY 2012, based on updated data, we have esta blished a fixed-dollar threshold of $1,900 which, together with a multiple threshold of 1.75, will enable us to meet our target outlier payment of 1 percent of total OPPS spending. 3. Final Outlier Calculation Consistent with historical practice, we used updated data for this final rule with comment period for our outlier calculati on. For CY 2012, we are applying the overall CCRs from the July 2011 Outpa tient Provider-Specific File w ith a CCR adjustment factor of 0.9903 to approximate CY 2012 CCRs to charges on the final CY 2010 claims that were adjusted to approximate CY 2012 charge s (using the final 2-ye ar charge inflationCMS-1525-FC 323 factor of 1.0794). These are the same CCR adju stment and charge inflation factors that were used to set the IPPS fixed-dollar threshold for the FY 2012 IPPS/LTCH PPS final rule (76 FR 51792 through 51795). We simula ted aggregated CY 2012 hospital outlier payments using these costs for several differe nt fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payment would continue to be made at 50 percent of the amount by which the co st of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2011 OPPS pa yments. We estimate that a fixed-dollar threshold of $1,900, combined with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent of es timated aggregated total OPPS payments to outlier payments. In summary, for CY 2012, we will continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the final fixed-dollar threshold of $1,900 are met. Fo r CMHCs, if a CMHC’s cost for partial hospitalization services, pa id under either APC 0172 or APC 0173, exceeds 3.40 times the payment for APC 0173, the outlier payment is calculated as 50 pe rcent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We estimate that this threshold will allocate 0.12 percent of outlier payments to CMHCs for PHP outlier payments. 4. Outlier ReconciliationCMS-1525-FC 324 In the CY 2009 OPPS/ASC final rule w ith comment period (73 CFR 68599), we adopted as final policy a process to reconcil e hospital or CMHC outlier payments at cost report settlement for services furnished during cost reporting periods beginning in CY 2009. OPPS outlier reconciliation more fully ensures accurate outlier payments for those facilities that have CCRs that fluctuate significantly re lative to the CCRs of other facilities, and that r eceive a significant amount of outli er payments (73 FR 68598). As under the IPPS, we do not adjust the fixed-dol lar threshold or the amount of total OPPS payments set aside for outlier payments for reconciliation activity because such action would be contrary to the prospective natu re of the system. Our outlier threshold calculation assumes that overall ancillary CCRs accurately estimate hospital costs based on the information available to us at the time we set the prospectiv e fixed-dollar outlier threshold. For these reasons, as we ha ve previously disc ussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68596) and as we proposed for CY 2012, we did not incorporate any assumptions about the effects of reconciliation into our calculation of the OPPS fi xed-dollar outlier threshold.CMS-1525-FC 325 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, subparts C and D. As proposed, for this final rule wi th comment period, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this final rule with comment period and the relative weight determined under secti on II.A. of this final rule with comment period. Therefore, as proposed, for this final rule with comment period, the national unadjusted payment rate for most APCs contained in Addendum A to this final rule with comment period (which is refe renced in section XVII. of this final rule with comment period and available via the In ternet 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 pe riod (which is referenced in section XVII. of this final rule with comment period a nd available via the Internet on the CMS Web site) was calculated by multiplying the CY 2012 scaled weight for the APC by the CY 2012 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 updateCMS-1525-FC 326 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 Outpatient Quality Reporti ng (OQR) Program (formerly referred to as the Hospital Outpatient Quality Data Re porting Program (HOP QDRP)) requirements. For further discussion of the payment reduc tion for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XVI.D. of this final rule with comment period. We demonstrate in the steps below how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital th at fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to this final rule with comment period), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R ” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements. Individual providers interest ed in calculating the payment amount that they would receive for a specific service from the natio nal unadjusted payment rates presented in Addenda A and B to this final rule with comm ent period (which are re ferenced in sectionCMS-1525-FC 327 XVII. of this final rule with comment peri od and 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 2012 OPPS fee sche dule increase factor of 1.90 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 comment period (65 FR 18496 through 18497) for a detailed discussion of how we deri ved this percentage. We confirmed that this labor-related share for hospital outpat ient services is appropriate 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). The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific pa yment rate for a specific service.CMS-1525-FC 328 X is the labor-related portion of the national unadjusted payment rate.
X

= .60 * (national unadjusted payment rate) Step 2 . Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2012 under the IPPS, reclassifications through the MGCRB, section 1886 (d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of Pub. L. 98-21. We note that the reclassifications of hospitals under se ction 508 of Pub. L. 108-173, as extended by sections 3137 and 10317 of the Affordable Care Act, expired on September 30, 2010. Section 102 of the Medicare and Medicaid Extenders Act of 2010 extends Section 508 and certain additional special exception hospital reclassifications from October 1, 2010 through September 30, 2011. Therefore, these reclassifications will not apply to the CY 2012 OPPS. (For further discussion of the changes to the FY 2012 IPPS wage indices, as applied to the CY 2012 OPPS, we re fer readers to section II.C. of this final rule with comment period.) As we propose d, 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. Step 3 . Adjust the wage index of hospitals 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 505CMS-1525-FC 329 of Pub. L. 108-173. Addendum L to this fi nal rule with comment period (which is referenced in section XVII. of this final ru le with comment period and available via the Internet on the CMS Web site) contains the qualifying counties and the associated wage index increase developed for the FY 2012 I PPS and listed as Table 4J in the FY 2012 IPPS/LTCH PPS final rule and available via the Internet on the CMS Web site at: http://www.cms.gov/AcuteInpatientPPS/01_overview. asp. This step is to be followed only if the hospital is not reclassified or redesignated under secti on 1886(d)(8) or section 1886(d)(10) of the Act. Step 4 . Multiply the applicab le 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 representation of Step 4 and adjusts the labor-related portion of the national 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 paymen t rate) * applicab le wage index. Step 5 . Calculate 40 percent (the nonla bor-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.CMS-1525-FC 330 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 a SCH, set fort h in the regulations at §412.92, or an EACH, which is considered to be a SCH unde r section 1886(d)(5)(D)(i ii)(III) of the Act, and located in a rural area, as defined in §412.64(b), or is treated as being located in a rural area under §412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment. The formula below is a mathematical 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 have provided 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 that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we use a provider that is located in Brooklyn, New Yo rk that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The CY 2012 full national unadjusted paymen t rate for APC 0019 is $307.74. The reduced national unadjusted payment rate for a hospi tal that fails to meet the Hospital OQR Program requirements is $301.59. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019.CMS-1525-FC 331 The FY 2012 wage index for a provider located in CBSA 35644 in New York is 1.3142. The labor-related portion of the full national unadjusted payment is $242.66 (.60 * $307.74 * 1.3142). The labor-related portion of the reduced national unadjusted payment is $237.81 (.60 * $301.59 * 1.3142). The nonlabor-related portion of the full national unadjusted payment is $123.10 (.40 * $307.74). The nonlabor-related portion of the reduced national unadjusted paymen t is $120.63(.40 * $301.59). The sum of the labor-related and nonlabor-related portions of the full national adjusted payment is $365.76 ($242.66 + $123.10). The sum of the reduced national adjusted payment is $358.44 ($237.81 + $120.63). 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, for all services paid under the OPPS in CY 2010, and in calendar years thereafter, the percentage is 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 amountCMS-1525-FC 332 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 to the amount of the inpatie nt deductible, which for CY 2012 is $1,156. Section 4104 of the Affordable Care Ac t eliminated the Part B coinsurance for preventive services furnished on and after Ja nuary 1, 2011 that meet certain requirements, including flexible sigmoidoscopies and scr eening colonscopies, and waived the Part B deductible for screening colonoscopies that b ecome diagnostic during the procedure. Our discussion of the changes made by the Affordab le Care Act with regard to copayments for preventive services furnished on and afte r January 1, 2011 may be found in section XII.B. of the CY 2011 OPPS/ASC final ru le with comment period (75 FR 72013). 2. OPPS Copayment Policy In the CY 2012 OPPS/ASC proposed rule (76 FR42224), we proposed to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we proposed to use the same standard rounding principles that we have historically used in instances where the application of our standard copaymen t methodology would result in a copayment amount that is less than 20 percent a nd cannot be rounded, under standard rounding principles, to 20 percent. (We refer read ers to the CY 2008 OPPS/ ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effec tive January 1, 2012, were shown in AddendaCMS-1525-FC 333 A and B to the proposed rule (which were available via the Inte rnet on the CMS Web site). As discussed in section XIV.E. of the proposed rule and this final rule with comment period, for CY 2012, the Medicare beneficiary’s minimum unadjusted copayment and national unadjusted copayment fo r a service to which a reduced national unadjusted payment rate applies will equal the product of the reporting ratio and the national unadjusted copayment, or the product of the repo rting ratio and the minimum unadjusted copayment, resp ectively, for the service. We did not receive any public comment s regarding the proposed methodology for calculating copayments for CY 2012. Therefore, for the reasons set forth in the proposed rule (76 FR 42225), we ar e finalizing our CY 2012 copayment amounts without modification. We note that we received pub lic comments on the copayments that would apply to beneficiaries who receive services from dedicated cancer hospitals under our proposal to provide an adjust ment to payments to these hospitals. Those copaymentrelated public comments are discussed in sec tion II.F. of this final rule with comment period. 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 payment percentage for the APC by dividing the APC’s national unadjusted copayment by its payment rate. For example, usingCMS-1525-FC 334 APC 0019, $61.55 is 20 percent of the full nati onal unadjusted payment rate of $307.74. For APCs with only a minimum unadjusted copa yment in Addenda A and B of this final rule with comment period (which are availabl e via the Internet on the CMS Web site), the beneficiary payment percen tage is 20 percent. The formula below is a mathematical representation of Step 1 and calculates national copayment as a percentage of national payment for a given service. B is the beneficiary payment percentage.
B = National unadjusted copayment for APC/ national unadjusted payment rate for APC Step 2 . Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this 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 calcula ted 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 percentage to the adjusted pa yment rate for a service calculated under section II.H. of this final rule with comment period, with and without the rural adjustment, to calculate the adjusted 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) * BCMS-1525-FC 335 Step 4 . For a hospital that failed to meet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.980. The unadjusted copayments for services payable under the OPPS that will be effective January 1, 2012, are shown in Addenda A and B to this final rule with comment period (which are referenced in section XVII. of this final rule with comment period and available via the Internet on the CMS Web s ite). We note that the national unadjusted payment rates and copayment rates shown in Addenda A and B to this final rule with comment period reflect the full CY 2012 OPD f ee schedule increase factor discussed in section XIV.E. of this final rule with comment period. Also as noted above, section 1833(t)(8)(C )(i) of the Act limits the amount of beneficiary copayment that may be collected to the amount of the inpatient deductible, which for CY 2012 is $1,156.CMS-1525-FC 336

I 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 describe medical services and procedures;

● 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 the 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. This quarterly process offers hospitals access to codes that may more accura tely 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 comments on these new codes and finalize our proposals related to these codes throughCMS-1525-FC 337

I our annual rulemaking process. As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42225 through 42226), in Table 14 below (also Table 14 of the proposed rule), we summarize our process for updati ng codes through our O PPS quarterly update CRs, seeking public comments, and finalizing their treatment under the OPPS. We note that because of the timing of the publication of the proposed rule, the codes that were implemented through the July 2011 OPPS qua rterly update 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 2011 OPPS quarterly upda te were included in Addendum B.
TABLE 14.—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES

OPPS Quarterly Update CR Type of Code Effective Date Comments Sought When Finalized

April l, 2011 Level II HCPCS Codes April 1, 2011 CY 2012 OPPS/ASC proposed rule CY 2012 OPPS/ASC final rule with comment period
Level II HCPCS Codes July 1, 2011 CY 2012 OPPS/ASC proposed rule CY 2012 OPPS/ASC final rule with comment period July 1, 2011 Category I (certain vaccine codes) and III CPT codes July 1, 2011 CY 2012 OPPS/ASC proposed rule CY 2012 OPPS/ASC final rule with comment period

October 1, 2011 Level II HCPCS Codes October 1, 2011 CY 2012 OPPS/ASC final rule with comment period CY 2013 OPPS/ASC final rule with comment periodCMS-1525-FC 338

I OPPS

Quarterly Update CR Type of Code Effective Date Comments Sought When Finalized

Level II HCPCS Codes January 1, 2012 CY 2012 OPPS/ASC final rule with comment period CY 2013 OPPS/ASC final rule with comment period January 1, 2012 Category I and III CPT Codes January 1, 2012 CY 2012 OPPS/ASC final rule with comment period CY 2013 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 2012 OPPS/ASC proposed rule or whether we are soliciti ng public comments in this CY 2012 OPPS/ASC final rule with comment period. In the CY 2012 OPPS/ASC proposed ru le, we noted that we sought public comment in the CY 2011 OPPS /ASC final rule with comment period on the new CPT and Level II HCPCS codes that were effective January 1, 2011. We also sought public comments in the CY 2011 OPPS/ ASC final rule with comment period on the new Level II HCPCS codes effective Oc tober 1, 2010. These new codes, with an effective date of October 1, 2010, or Janua ry 1, 2011, were flagged with comment indicator “NI” (New code, interim APC a ssignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2011 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, which were subject to public comment following publication of the CY 2011 OPPS/ASC final rule with commentCMS-1525-FC 339

I period. We are responding to public co mments and finalizing our proposed OPPS treatment of these codes in this CY 2012 OPPS/ASC final rule with comment period. We received comments on several new codes that were assigned to comment indicator "NI" in Addendum B of the CY 2011 OPPS/ASC final rule with comment period. We respond to those comments in sectio ns II.A. and III.D. of this final rule with comment period. Table 15 lists the long descri ptors for the CPT codes that were assigned to comment indicator "NI" for which we received public comments to the CY 2011 OPPS/ASC final rule with comm ent period and the specific sections where the comments are addressed.
TABLE 15.—COMMENTS TO THE CY 2011 OPPS/ASC FINAL RULE WITH COMMENT PERIOD ON NEW HCPCS CODES ASSIGNED TO COMMENT INDICATOR “NI”
CY 2011 CPT Code CY 2011 Long Descriptor Section In This CY 2012 OPPS/ASC Final Rule With Comment Period Where Comments Are Addressed 0242T Gastrointestinal tract transit and pressure measurement, stomach through colon, wireless capsule, with interpretation and report III.D.2.b. (Gastrointestinal Transit and Pressure Measurement) 31295 Nasal/sinus endoscopy, su rgical; with dilation of maxillary sinus ostium (eg, balloon dilation), transnasal or via canine fossa 31296 Nasal/sinus endoscopy, su rgical; with dilation of frontal sinus ostium (eg, balloon dilation) 31297 Nasal/sinus endoscopy, su rgical; with dilation of sphenoid sinus ostium (eg, balloon dilation) III.D.9.b. (Nasal Sinus Endoscopy)CMS-1525-FC 340

I CY

2011 CPT Code CY 2011 Long Descriptor Section In This CY 2012 OPPS/ASC Final Rule With Comment Period Where Comments Are Addressed 37221 Revascularization, e ndovascular, open or percutaneous, iliac artery, unilateral, initial vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed 37223 Revascularization, e ndovascular, open or percutaneous, iliac artery, each additional ipsilateral iliac vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed 37234 Revascularization, e ndovascular, open or percutaneous, tibial/peron eal artery, unilateral, each additional vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed 37235 Revascularization, e ndovascular, open or percutaneous, tibial/peron eal artery, unilateral, each additional vessel; with transluminal stent placement(s) and atherectomy, includes angioplasty within the same vessel, when performed II.A.2.d.(6) (Endovascular Revascularization of the Lower Extremity)

64568 Incision for implantation of cranial nerve (eg, vagus nerve) neurostimulator electrode array and pulse generator II.A.2.d.(8) (Cranial Neurostimulator and Electrodes) 65778 Placement of amniotic membrane on the ocular surface for wound healing; self-retaining 65779 Placement of amniotic membrane on the ocular surface for wound healing; single layer, sutured III.D.5.a. (Placement of Amniotic Membrane) 74176 Computed tomography, abdomen and pelvis; without contrast material 74177 Computed tomography, abdomen and pelvis; with contrast material(s) 74178 Computed tomography, abdomen and pelvis; III.D.7.f. (Computed Tomography of Abdomen/Pelvis)CMS-1525-FC 341

I CY

2011 CPT Code CY 2011 Long Descriptor Section In This CY 2012 OPPS/ASC Final Rule With Comment Period Where Comments Are Addressed without contrast material in one or both body regions, followed by contrast material(s) and further sections in one or both body regions 90867 Therapeutic repetitive transcranial magnetic stimulation treatment; planning 90868 Therapeutic repetitive transcranial magnetic stimulation treatment; delivery and management, per session III.D.4.c. (Transcranial Magnetic

Stimulation Therapy) 92132 Scanning computerized ophthalmic diagnostic imaging, anterior segment, with interpretation and report, unilateral or bilateral 92133 Scanning computerized ophthalmic diagnostic imaging, posterior segment, with interpretation and report, unilateral or bilateral; optic nerve 92134 Scanning computerized ophthalmic diagnostic imaging, posterior segment, with interpretation and report, unilateral or bilateral; retina III.D.5.c. (Scanning Ophthalmic Imaging)

1. Treatment of New Level II HCPCS Code s and Category I CPT Vaccine Codes and Category III CPT Codes for Which We So licited Public Comments in the CY 2012 Proposed Rule Through the April 2011 OPPS quarterly update CR (Transmittal 2174, Change Request 7342, dated March 18, 2011) and th e July 2011 OPPS quarterly update CR (Transmittal 2234, Change Request 7443, date d May 27, 2011), we recognized several new HCPCS codes for separate payment under th e OPPS. Effective Ap ril 1 and July 1 of CY 2011, we made effective a total of 22 new Level II HCPCS codes and 14 Category III CPT codes. Specifically, 5 new Level II HCPC S codes were effective for the April 2011CMS-1525-FC 342

I update and another 17 new Level II HCPCS codes were effective for the July 2011 update for a total of 22. Fourteen new Categor y III CPT codes were effective for the July 2011 update. Of the 22 new Level II HCPCS codes, we recognized for separate payment 16 of these codes, and of the 14 new Category III CPT codes, we recognized for separate payment 12 of these codes, for a total of 28 new HCPCS codes that are recognized for separate payment for CY 2012. Through the April 2011 OPPS quarterly update CR, we allowed separate payment for each of the five new Level II HCPCS code s. Specifically, as displayed in Table 16 below (Table 15 of the proposed rule), we provided separate payment for the following HCPCS codes:

● HCPCS code C9280 (Injection, eribulin mesylate, 1 mg)

● HCPCS code C9281 (Injec tion, pegloticase, 1 mg)

● HCPCS code C9282 (Injecti on, ceftaroline fosamil, 10 mg)

● HCPCS code Q2040 (Injection, incobotulinumtoxin A, 1 unit)

● HCPCS code C9729 (Percutaneous la minotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with ligamentous resection, discectomy, facetectomy and/or foraminot omy, when performed) any method under indirect image guidance, with the use of an endoscope when performed, single or multiple levels, unilateral or bilateral; lumbar) We note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection, incobotulinumtoxin A, 1 unit) beginn ing April 1, 2010. HCPCS code C9278 was effective January 1, 2011, and deleted March 30, 2011, because it was replaced withCMS-1525-FC 343

I HCPCS code Q2040. HCPCS code C9278 was a ssigned to pass-throug h status beginning January 1, 2011, when the code was implemented. Because HCPCS code Q2040 describes the same drug as HCPCS code C 9278, we are continuing its pass-through status and assigning the HCPCS Q-code to the same APC and status indicato r as its predecessor HCPCS C-code, as shown in Table 16 belo w. Specifically, HCPCS code Q2040 is assigned to APC 9278 and st atus indicator “G.” In the CY 2012 OPPS/ASC proposed rule, we solicited public comments on the proposed status indicators and APC assi gnments of HCPCS codes C9280, C9281, C9282, C9729, and Q2040, which were listed in Table 15 of that proposed rule (76 FR 42226) and now appear in Table 16 of this final ru le with comment period. We did not receive any public comments on the proposed APC assi gnments and status i ndicators for HCPCS codes C9280, C9281, C9282, C9729, and Q2040. However, for CY 2012, the HCPCS Workgroup replaced HCPCS C9280, C9281, C9 282, and Q2040 with permanent HCPCS J-codes. Specifically, C9280 was replaced with J9179 (Injection, eribulin mesylate, 0.1 mg), C9281 with J2507 (Inje ction, pegloticase, 1 mg), C9282 with J0712 (Injection, ceftaroline fosamil, 10 mg), and Q2040 w ith J0588 (Injection, incobotulinumtoxin A, 1 unit). Consistent with our general po licy of using permanent HCPCS codes if appropriate rather than using temporary HCPCS codes for the reporting of drugs under the OPPS in order to streamline coding, we are showing the replacement HCPCS codes effective January 1, 2012 in Table 16 th at replaced HCPCS C9280, C9281, C9282, and Q2040.CMS-1525-FC 344

I Similarly, for CY 2012, we deleted HCPCS code C9729 on June 30, 2011 because it was replaced with CPT code 0275T . Further discussion of CPT code 0275T can be found below. Because HCPCS codes J2507, J0712, and J0588 describe the same drugs and the same dosages currently designated by HCPCS codes C9281, C9282, and Q2040, respectively, these drugs will continue thei r pass-through status in CY 2012. Therefore, we are assigning HCPCS codes J2507, J0712, a nd J0588 to the same status indicators and APCs as their predecessor HCPCS codes, as shown in Table 16. However, we note that the replacemen t code for HCPCS code C9280 does not describe the same dosage descriptor, and consequently, the replacement HCPCS code will be assigned a new APC number. Speci fically, C9280 has a dosage descriptor of 1 mg; however, its replacement HCPCS code J9179 has a dosage descriptor of 0.1 mg. Therefore, effective January 1, 2012, HCPCS codes J9179 will be assigned to APC 1426 to maintain data consistency for future rulemaking. Because the predecessor HCPCS code C9280 was assigned to pass-through status , HCPCS code J9179 will continue to be assigned status indicator “G” for CY 2012. We did not receive any public comment s on the new Level II HCPCS codes that were implemented in April 2011. We are a dopting as final, without modification, our proposal to assign the Level II HCPCS codes listed in Table 16 to the APCs and status indicators as proposed for CY 2012, with the exception of HCPCS code J9179, which will be assigned to APC 1426. Table 16 shows the final APC and status indicator assignments for all five Level II HCPCS codes.CMS-1525-FC 345

I TABLE 16.—LEVEL II HCPCS CODE S WITH A CHANGE IN OPPS STATUS INDICATOR OR NEWLY IMPLEMENTED IN APRIL 2011

CY 2011 HCPCS

Code CY 2012 HCPCS

Code CY 2012 Long Descriptor Final CY 2012

Status Indicator Final CY 2012

APC C9280 J9179 Injection, eribulin mesylate, 0.1 mg G 1426 C9281 J2507 Injection, pegloticase, 1 mg G 9281 C9282 J0712 Injection, ceftaroline fosamil, 10 mg G 9282

C9729 0275T Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method under indirect image guidance (eg, fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bilateral; lumbar T 0208

Q2040* J0588 Injection, incobotulinumtoxin A, 1 unit G 9278

*Level II HCPCS code C9278 was delete d March 31, 2011, and replaced with HCPCS code Q2040 effective April 1, 2011.
Through the July 2011 OPPS quarterly upda te CR, which included HCPCS codes that were made effective July 1, 2011, we a llowed separate payment for 11 of the 17 new Level II HCPCS codes. Specifically, as di splayed in Table 16 of the proposed rule (Table 17 of this final rule with comment period), we provided separate payment for the following HCPCS codes:

● HCPCS code C9283 (Injection, acetaminophen, 10 mg)

● HCPCS code C9284 (Injec tion, ipilimumab, 10 mg)CMS-1525-FC 346

I ● HCPCS code C9285 (Lidocaine 70 mg/tetracaine 70 mg, per patch)

● HCPCS code C9365 (Oasis Ultra Tri- Layer Matrix, per sq uare centimeter)

● HCPCS code C9406 (Iodine I-123 iofl upane, diagnostic, per study dose, up to 5 millicuries)

● HCPCS code C9730 (Bronchoscopic br onchial thermoplasty with imaging guidance (if performed), radiofrequency ab lation of airway sm ooth muscle, 1 lobe)

● HCPCS code C9731 (Bronchoscopic br onchial thermoplasty with imaging guidance (if performed), radiofrequency abla tion of airway smooth muscle, 2 or more lobes)

● HCPCS code Q2041 (Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco)

● HCPCS code Q2042 (Injection, hy droxyprogesterone caproate, 1 mg)

● HCPCS code Q2043 (Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, includi ng leukapheresis and all other preparatory procedures, per infusion)

● HCPCS code Q2044 (Inje ction, belimumab, 10 mg) We note that two of the Level II HCPC S Q-codes that were made effective July 1, 2011, were previously described by a HCPCS J-code and a C-code that were assigned to pass-through stat us under the hospital OPPS. Specifically, HCPCS code Q2041 replaced HCPCS code J7184 (Injection, von willebrand factor complex (human), Wilate, per 100 iu vwf:rco) beginning July 1, 2011. HCPCS code J7184 was assigned to pass-through status when it was made effec tive January 1, 2011; however, the code isCMS-1525-FC 347

I “Not Payable by Medicare” because HCPCS c ode J7184 is replaced with HCPCS code Q2041 effective July 1, 2011. Therefore, HC PCS code J7184 was reassigned to status indicator “E” effective July 1, 2011. Becau se HCPCS code J7184 describes the same drug as HCPCS code Q2041, we continued its pass-through status and assigned HCPCS code Q2041 to status indicator “G” effectiv e July 1, 2011. However, because the dosage descriptor for HCPCS code Q2041 is not the same as HCPCS code J7184, we reassigned HCPCS code Q2041 to a new APC to maintain data consistency for future rulemaking. Specifically, HCPCS code Q2041 was assigne d to APC 1352 effective July 1, 2011. In addition, HCPCS code Q2043 replaced HCPC S code C9273 (Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated wi th pap-gm-csf, including leukapheresis and all other preparatory procedures, per in fusion) beginning July 1, 2011. HCPCS code C9273 was assigned to pass-thr ough status when it was made effective October 1, 2010. Because HCPCS code Q2043 describes the same product as HCPCS code C9273, we continued its pass-through st atus and assigned HCPCS code Q2043 to status indicator “G” as well as assigned it to the sa me APC, specifically APC 9273, effective July 1, 2011. Of the 17 HCPCS codes that were made effective July 1, 2011, we did not recognize for separate payment six HCPCS codes that describe durable medical equipment (DME) because DME is paid under the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPO S) Fee Schedule and not the OPPS. These codes were listed in Table 16 of the proposed rule, and were assigned to either status indicator “Y” or “A” effective July 1, 2011.CMS-1525-FC 348

I In the CY 2012 OPPS/ASC proposed rule, we solicited public comments on the status indicators and APC assignments wher e applicable for the 17 HCPCS codes that were listed in Table 16 of that propos ed rule (76 FR 42227 through 42228) and now appear in Table 17 of this final rule w ith comment period. We received a comment on the APC assignments for HCPCS codes C9730 and C9731. A summary of the comments and our responses can be found in section III. D.8.b. (Bronchial Thermoplasty) of this final rule with comment period. In add ition, we received some comments on the long descriptor for HCPCS code Q2043. A summary of the comm ents and our responses can be found in section V.A.3. of this final rule with comment period. With the exception of HCPCS codes C9730, C9731, and Q2043, we received no other public comments on the 14 other Level II HCPCS codes listed in Table 16 of the CY 2011 OPPS/ASC proposed rule. However, for CY 2012, the HCPCS Workgroup replaced several HCPCS C-codes with an A- code, J-code, or Q-code. Specifically, C9283 was replaced with J0131 (Injection, a cetaminophen, 10 mg), C9284 with J9228 (Injection, ipilimumab, 1 mg), C9365 with Q4124 (Oasis Ultra Tri-Layer Matrix, per square centimeter), C9406 with A9584 (I odine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries), Q2041 with J7183 (Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco), Q 2042 with J1725 (Injection, hydroxyprogesterone caproate, 1 mg), and Q2044 with J0490 (Injection, belimumab, 10 mg). Because HCPCS codes J0131, J9228, Q4124, A9584, J7183 and J0490 describe the same drugs and the same dosages currently designated by HCPCS codes C9283,C9284, C9365, C9406, Q2041, and Q2044, respec tively, these drugs will continueCMS-1525-FC 349

I their pass-through status in CY 2012. Theref ore, we are assigni ng HCPCS codes J0131, J9228, Q4124, A9584, J7183 and J0490 to the same status indicators and APCs as their predecessor HCPCS codes, as shown in Tabl e 17. We note that since HCPCS code Q2042 is assigned to status indicator "K" (Nonpass-Through Drugs; Paid under OPPS; Separate APC payment), its replacement HCPCS code J1725 will also continue its nonpass-through status in CY 2012. Further, for CY 2012, the CPT Editorial Panel made effective Category III CPT codes 0276T and 0277T on January 1, 2012. Because Category III CPT codes 0276T and 0277T describe the same procedures as HCPCS code C9730 and C9731, we are deleting HCPCS codes C9730 and C9731 on December 31, 2011, and assigning both CPT codes to the same status indicator and APC a ssignment as its predecessor HCPCS code, as shown in Table 17. As stated previously, we did not rece ive any other public comments on the new Level II HCPCS codes that were implemen ted in July 2011, other than HCPCS codes C9730, C9731, and Q2043, which are discussed in sections III.D.8.b. and V.A.3., respectively, of this final rule with comment period. We are adop ting as final, without modification, our proposal to assign the 17 Level II HCPCS codes listed in Table 12 to the APCs and status indicat ors as proposed for CY 2012. Table 17 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2011, with their fina l status indicators, APC assignments, and payment rates for CY 2012.CMS-1525-FC 350

I TABLE 17.—NEW LEVEL II HCPCS CODES IMPLEMENTED IN JULY 2011

CY 2011 HCPCS

Code CY 2012 HCPCS

Code CY 2012 Long Descriptor Final CY 2012

Status Indicator Final CY 2012 APC C9283 J0131 Injection, acetaminophen, 10 mg G 9283 C9284 J9228 Injection, ipilimumab, 1 mg G 9284 C9285 C9285 Lidocaine 70 mg/tetracaine 70 mg, per patch G 9285 C9365 Q4124 Oasis Ultra Tri-Laye r Matrix, per square centimeter G 9365

C9406 A9584 Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries G 9406

C9730 0276T Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with bronchial thermoplasty, 1 lobe T 0415

C9731 0277T Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with bronchial thermoplasty, 2 or more lobes T 0415

K0741 K0741 Portable gaseous oxygen system, rental, includes portable cont ainer, regulator, flowmeter, humidifier, cannula or mask, and tubing, for cluster headaches Y NA

K0742 K0742 Portable oxygen conten ts, gaseous, 1 month's supply = 1 unit, for cluster headaches, for initial months supply or to replace used contents Y NA

K0743 K0743 Suction pump, home model, portable, for use on wounds Y NA

K0744 K0744 Absorptive wound dressing for use with suction pump, home model, portabl e, pad size 16 square inches or less A NA

K0745 K0745 Absorptive wound dressing for use with suction pump, home model, porta ble, pad size more than 16 square inches but less than or equal to 48 square inches A NACMS-1525-FC 351

I CY 2011 HCPCS

Code CY 2012 HCPCS

Code CY 2012 Long Descriptor Final CY 2012

Status Indicator Final CY 2012 APC

K0746 K0746 Absorptive wound dressing for use with suction pump, home model, porta ble, pad size greater than 48 square inches A NA

Q2041 J7183 Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco G 1352 Q2042 J1725 Injection, hydroxyprogest erone caproate, 1 mg K 1354

Q2043 Q2043 Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, including leukapheresis and all other preparatory procedures, per infusion G 9273
Q2044 J0490 Injection, belimumab, 10 mg G 1353

In the CY 2012 OPPS/ASC proposed rule (76 FR 42228), for CY 2012, 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 vaccin e codes and Category III CPT codes that are released on the AMA Web site in January are made effective in July of the same year through the July quarterly update CR, consis tent with the AMA’s implementation date for the codes. Through the July 2011 OPPS quarterly update CR, we allowed separate payment for 12 of the 14 new Category III CPT codes effective July 1, 2011. Specifically, as displayed in Table 17 of th e proposed rule, we allow separate payment for the following Category III CPT codes:CMS-1525-FC 352

I ● CPT code 0263T (Intramuscular autol ogous bone marrow ce ll therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedur e including unilateral or bilateral bone marrow harvest)

● CPT code 0264T (Intramuscular autol ogous bone marrow ce ll therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete pr ocedure excluding bone marrow harvest)

● CPT code 0265T (Intramuscular autol ogous bone marrow ce ll therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; unilate ral or bilateral bone marrow harvest only for intramuscular autologous bone marrow cell therapy)

● CPT code 0267T (Implantation or repl acement of carotid sinus baroreflex activation device; lead only, unilatera l (includes intra-ope rative interrogation, programming, and repositioning, when performed))

● CPT code 0268T (Implantation or repl acement of carotid sinus baroreflex activation device; pulse ge nerator only (includes in tra-operative interrogation, programming, and repositioning, when performed))

● CPT code 0269T (Revision or removal of carotid sinus ba roreflex activation device; total system (includes generator placem ent, unilateral or bila teral lead placement, intra-operative interrogation, programming, and repositioning, when performed))CMS-1525-FC 353

I ● CPT code 0270T (Revision or removal of carotid sinus ba roreflex activation device; lead only, unilateral (includes in tra-operative interr ogation, programming, and repositioning, when performed))

● CPT code 0271T (Revision or removal of carotid sinus ba roreflex activation device; pulse generator only (includes intr a-operative interroga tion, programming, and repositioning, when performed))

● CPT code 0272T (Interrogation device ev aluation (in person), carotid sinus baroreflex activation system, including tele metric iterative communication with the implantable device to monitor device dia gnostics and programmed therapy values, with interpretation and report (eg, battery stat us, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day))

● CPT code 0273T (Interrogation device ev aluation (in person), carotid sinus baroreflex activation system, including tele metric iterative communication with the implantable device to monitor device dia gnostics and programmed therapy values, with interpretation and report (eg, battery stat us, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day); with programming)

● CPT 0274T (Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (w ith or without ligamentous resection, discectomy, facetectomy and/or foraminot omy) any method under indirect image guidance (eg, fluoroscopic, CT), with or w ithout the use of an endoscope, single or multiple levels, unilateral or bilateral; cervical or thoracic)CMS-1525-FC 354

I ● CPT 0275T (Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (w ith or without ligamentous resection, discectomy, facetectomy and/or foraminot omy) any method under indirect image guidance (eg, fluoroscopic, CT), with or w ithout the use of an endoscope, single or multiple levels, unilateral or bilateral; lu mbar) (As published in the July 2011 OPPS quarterly update CR, CPT code 0275T replac ed Level II HCPCS code C9729 effective July 1, 2011.) We note that Category III CPT codes 0262T (Implantation of catheter-delivered prosthetic pulmonary valve, endovascular approach) and 0266T (Implantation or replacement of carotid sinus baroreflex activat ion device; total system (includes generator placement, unilateral or b ilateral lead placement, in tra-operative interrogation, programming, and repositioning, when performed )) were assigned to status indicator “C” (Inpatient Procedures) under the hospital OPPS beginning July 1, 2011. As we stated in the proposed rule (76 FR 42229), we believe these procedures should only be paid when provided in the inpatient setting because of the clinical circumstances under which these procedures are performed. There are no new Category I Vaccine CPT codes for the July 2011 update. Furthermore, for CY 2012, the CPT Editori al Panel made effective Category III CPT code 0275T on July 1, 2011. Because Category III CPT code 0275T describes the same procedure as HCPCS code C9 729, we deleted HCPCS code C9729 on June 30, 2011. Through the July 2011 OPPS quart erly update CR, we also instructed hospitals to report the procedure previ ously described by HCPCS code C9729 withCMS-1525-FC 355

I Category III CPT code 0275T effective July 1, 2011. Because Category III CPT code 0275T describes the same procedure desi gnated by HCPCS code C9729, we assigned Category III CPT code 0275T to the same st atus indicator and APC assignment as its predecessor HCPCS code, as show n in Table 16 and Table 18. We received a comment on the APC assignm ent and long descriptor for Category III CPT code 0275T. A summary of the comment and our response can be found in section III.D.6.a. (Percutaneous Laminotomy/ Laminectomy) of this final rule with comment period. Table 18 lists the Category III CPT codes that were implemented in July 2011, along with their final status i ndicators, final APC assignments where applicable, and final payment rates for CY 2012.
TABLE 18.—CATEGORY III CP T CODES IMPLEMENTED IN JULY 2011CMS-1525-FC 356

I CY 2012 CPT Code CY 2012 Long Descriptor Final CY 2012

Status Indicator Final CY 2012

APC

0262T Implantation of catheter-delivered prosthetic pulmonary valve, endovascular approach C NA

0263T Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure including unilat eral or bilateral bone marrow harvest S 0112

0264T Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure excluding bone marrow harvest S 0112

0265T Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if pe rformed; unilateral or bilateral bone marrow harvest only for intramuscular autologous bone marrow cell therapy S 0112

0266T Implantation or replacement of carotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and repositioning, when performed) C NA

0267T Implantation or replacement of carotid sinus baroreflex activation device; lead only, unilateral (includes intra-operative interrogation, programming, and repositioning, when performed) T 0687CMS-1525-FC 357

I

0268T Implantation or replacement of carotid sinus baroreflex activation de vice; pulse generator only (includes intra-op erative interrogation, programming, and repositioning, when performed) S 0039

0269T Revision or removal of ca rotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and repositioning, when performed) T 0221

0270T Revision or removal of ca rotid sinus baroreflex activation device; lead only, unilateral (includes intra-opera tive interrogation, programming, and repositioning, when performed) T 0687

0271T Revision or removal of ca rotid sinus baroreflex activation device; pul se generator only (includes intra-opera tive interrogation, programming, and repositioning, when performed) T 0688

0272T Interrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the implantable device to monitor device diagnostics and programmed therapy values, with interpretation and report (eg, battery status, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day) S 0218CMS-1525-FC 358

I In the CY 2012 OPPS/ASC proposed rule (76 FR 42227 through 42229), we solicited public comments on the CY 2012 pr oposed status indicators and the proposed APC assignments and payment rates, if app licable, for the Level II HCPCS codes and the Category III CPT codes that are newly rec ognized in April or July 2011 through the respective OPPS quarterly update CRs. These codes were listed in Tables 15, 16, and 17 of the proposed rule. We proposed to fina lize their status indi cators and their APC

0273T Interrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the implantable device to monitor device diagnostics and programmed therapy values, with interpretation and report (eg, battery status, lead impedance, pulse amplitude, pulse width, therapy frequency, pathway mode, burst mode, therapy start/stop times each day); with programming S 0218

0274T Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method under indirect image guidance (eg, fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bilateral; cervical or thoracic T 0208

0275T Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method under indirect image guidance (eg, fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bilateral; lumbar T 0208CMS-1525-FC 359

I assignments and payment rates, if applicable, in this CY 2012 OPPS/ASC final rule with comment period. Because the July 2011 OPPS quarterly update CR was issued close to the publication of the proposed rule, the Leve l II HCPCS codes and the Category III CPT codes implemented through the July 2011 O PPS quarterly update CR could not be included in Addendum B to the proposed rule, but these codes were listed in Tables 16 and 17, respectively. We proposed to incorpor ate these codes into Addendum B to this CY 2012 OPPS/ASC final rule with comment pe riod, which is consistent with our annual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2011 OPPS update CR and displayed in Ta ble 15 were included in Addendum B to the proposed rule (which is available via th e Internet on the CMS Web site), where their proposed CY 2012 payment rates were also sh own. We did not receive any additional comments on this process. The final status indicators, APC assignments, and payment rates, if applicable, for the Level II HCPC S codes and the Category III CPT codes that are newly recognized in Apr il or July 2011 through the re spective OPPS quarterly update CRs are found in Addendum B to this CY 2012 OPPS/ASC final rule with comment period (which is available via th e Internet on the CMS Web site). 2. Process for New Level II HCPCS Codes and Category I and Category III CPT Codes for Which We Are Soliciting Public Comm ents on this CY 2012 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 codesCMS-1525-FC 360

I are released to the public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In the past, we also have released new Le vel II HCPCS codes that are effective October 1 through the October OPPS quarterly update CRs and incorporated these new codes in the final rule with comment peri od updating the OPPS for the following calendar year. All of these codes are flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comm ent period to indicate that we are assigning them an interim payment status which is subject to public comment. Specifically, the status indicator and the APC assignment and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in the final rule with comment period, and we respond to these comm ents in the OPPS/AS C final rule with comment period for the next calendar y ear’s OPPS/ASC update. In the CY 2012 OPPS/ASC proposed rule (76 FR 42230), we proposed to continue this process for CY 2012. Specifically, for CY 2012, we proposed to include in Addendum B to this CY 2012 OPPS/ASC final rule with comment peri od (which is availabl e via the Internet on the CMS Web site) the new Category I a nd III CPT codes effective January 1, 2012 (including the Category III CPT codes that were released by the AMA in July 2011) that would be incorporated in the January 2012 OPPS quarterly update CR and the new Level II HCPCS codes, effective October 1, 2011, or January 1, 2012, that would be released by CMS in its October 2011 and January 2012 OPPS quarterly update CRs. As proposed, in this final rule with comment period, these co des are flagged with co mment indicator “NI” in Addendum B to this CY 2012 OPPS/ASC fina l rule with comment period to indicateCMS-1525-FC 361

I that we have assigned them an interim OP PS payment status for CY 2012. As proposed, in this final rule with comment period, thei r status indicators and their APC assignments and payment rates, if applicable, are open to public comment and will be finalized in the CY 2013 OPPS/ASC final rule with comment pe riod. We note that the CPT codes that were released by the AMA in July 2011 that were subject to comment in the CY 2012 OPPS/ASC proposed rule, and were listed in Table 17, will not be assigned to comment indicator “NI” in Addendum B because commen ts about these codes will be addressed in this CY 2012 OPPS/ASC final rule with comment period.
Comment : One commenter recommended that, through a Web posting, CMS request public input on the APC assignment s of the Category I CPT vaccine codes, Category III CPT codes, and Level II HCPCS c odes that are made effective on October 1 or January 1 of subsequent years but are ma de available to the public by the completion of each year’s OPPS proposed rule. The comme nter indicated that some of these codes have already been released to the public, either through the CMS or AMA CPT Web site, by July 1 of any given year. This same comme nter suggested that th e lack of stakeholder input on the interim APC assignments may negativ ely impact Medicare beneficiaries. In particular, the commenter stated that interi m payment assignments have been influential in determining whether hospitals provide services to Medicare beneficiaries or not, and further suggested that if the payment for a procedure or service does not adequately reflect the true costs of furnishing the service, then hospitals may decide not to offer the service to Medicare beneficiaries.CMS-1525-FC 362

I Response : The commenter is corr ect that Category I Vaccine and Category III CPT codes that are effective January 1 of a subsequent year are released on the AMA CPT Web site on or about July 1. However, some Level II HCPCS codes are not released on the CMS Web site until much la ter. For the October update, the Level II HCPCS C-codes that are effective October 1 are usually released and posted on the CMS Web site in August or September, dependi ng on the number of OPPS new technology service and pass-through drug and device applications that are evaluated. Therefore, we do not have sufficient time to evaluate the new codes, determine proposed APC assignments, post those proposed assignments to the CMS Web site, accept and consider public comments, and respond to public comments between the time that the new codes become available and the time that we must meet our systems deadlines for our claims processing and payment files for the upcoming quarter. Given the challenges and time constraints in meeting the quarterly CPT a nd Level II HCPCS systems deadlines, we will continue to assign the new code s that are effective October 1and January 1 of subsequent year to interim APC assignment s. If we were to wait for comments on the interim APC assignments for the new codes before making them effective on October 1 or January 1, this may result in services and items not being paid for separately for a whole year, which would ultimately disadvantage both the hos pital outpatient facilities and Medicare beneficiaries. The OPPS is a prospective payment system that provides payment for groups of services that share clin ical and resource use characteristics. It should be noted that, with all new codes, our policy has been to assign the service to an APC based on input from aCMS-1525-FC 363

I variety of sources, including but not limited to review of the clinical similarity of the service to existing procedur es; input from CMS medical advisors; information from interested specialty societies; and review of all other information available to us, including information provided to us by the public, whether through meetings with stakeholders or additional information that is mailed or otherwise communicated to us. After consideration of the public comments we receive d, we are finalizing our proposed policy, without modifi cation, to assign the new CPT and Level II HCPCS codes that are effective October 1 and January 1 of subsequent years to interim APC assignments and request comments on the code s in the annual OPPS/ASC final rule with comment period, as described above.
Comment : Some commenters requested that CMS implement a 1 to 2 year dampening period to minimize significant fluctua tions in payments from year to year for newly bundled or packaged procedure codes. One commenter specifically stated that limiting the payment reduction to 10 percent w ould prevent hospitals from experiencing substantial payment reductions and woul d allow hospitals reasonable time to appropriately update their chargemasters to reflect the newly packaged codes. Response : We do not believe it is necessary or appropriate to limit payment reductions for any individual service in orde r to prevent hospitals from experiencing substantial payment reductions as the comment er indicates. While payment rates for individual services may decrease from year to year, the total estimated payments made to hospitals remains the same because the OPPS is, by statute, a budget neutral payment system. In order to accurately report charges on their claims, hospitals must be cognizantCMS-1525-FC 364

I of HCPCS coding changes, specifically with re spect to Category I and III CPT codes and Level II HCPCS codes that occur throughout the year, including the quarterly updates (April 1, July 1, and October 1) as well as the annual updates (January 1). In recent years, the CMS and the AMA’s CPT Editorial Panel have increasingl y created new codes that use a single HCPCS code to report combin ations of services that were previously reported by multiple HCPCS codes or multiple units of a single HCPS code. For example, effective January 1, 2010, CMS created HCPCS code G0424 (Pulmonary rehabilitation, including exer cise (includes monitoring), per hour, per session) to represent a comprehensive program of pulm onary therapy and the CPT Editorial Panel created CPT code 77338 (Multi-leaf collimator (MLC) device(s) for intensity modulated radiation therapy (IMRT), design and construc tion per IMRT plan) to report all devices furnished under a single IMRT treatment plan. As we have stated before, we expect hospitals to carefully review each new HCPCS code when setting charges for the forthcoming year. However, in particular, hospitals should be especially careful to thoughtfully establish charges for new codes that use a single code to report multiple services that were previously reported by multiple codes. It is vital in these cases that hospitals carefully establish charges that fully include all of the ch arges for all of the predecessor services that are reported by the ne w code. To fail to carefully construct the charge for a new code that reports a combin ation of services that were previously reported separately, particularly in the first year of the new code, under-represents the cost of providing the service describing by the new code and can have significant adverseCMS-1525-FC 365

I impact on future payments under the OPPS fo r the individual service described by the new code. 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 regula tions. 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. We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are dire ctly related to, and supportive of, performing the main independent procedures or furnishing the services. Therefore, we do not make separate payment for these packaged items or services. For example, packaged items and services include: (1) Use of an operating, treatment, or procedure room;CMS-1525-FC 366

I (2) Use of a recovery room; (3) Observation services; (4) Anesthesia; (5) Medical/surgical supplies; (6) Pharmaceuticals (other than thos e for which separate payment may be allowed under the provisions discussed in sec tion V. of the proposed rule and this final rule with comment period); (7) Incidental services such as venipuncture; (8) Guidance services, image proce ssing services, intraoperative services, imaging, supervision and interpretation se rvices, diagnostic radiopharmaceuticals, and contrast media. Further discussion of packaged services 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 co mplete service (72 FR 66650 through 66652). Under CY 2011 OPPS policy, we provide composite APC payment for certain extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evalua tion and ablation, mental he alth services , and multiple imaging services. Further discussion of com posite APCs is included in section II.A.2.e. of this final rule with comment period.CMS-1525-FC 367

I Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC weight represents the hospital median cost of the services included in that APC, relative to the hospital median cost of the services included in APC 0606 (Level 3 Hospit al Clinic Visits). The APC weights are scaled to APC 0606 because it is the middle le vel hospital clinic visit APC (the Level 3 hospital clinic visit CPT code out of five le vels), and because middle level hospital clinic visits are among the most frequently furnishe d services in the hos pital outpatient setting. Section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring basis occurring no less than annually, and revise the groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services , new cost data, and other relevant information and factors. Secti on 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representa tives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the APC Panel recommendations for specific services for th e CY 2012 OPPS and our responses to them are discussed in the relevant specific sections throughout this final rule with comment period). Finally, section 1833(t)(2) of the Act provi des that, subject to certain exceptions, the items and services within an APC gr oup cannot be considered comparable withCMS-1525-FC 368

I respect to the use of resources if the highest median cost (o r mean cost as elected by the Secretary) for an item or service in the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the same group (referred to as the “2 times rule”). We use the median cost of the item or service in implementing this provision. The statute aut horizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an exception in the case of a drug or biological that has been designated as an orphan drug unde r section 526 of the Federal Food, Drug, and Cosmetic Act). 2. Application of the 2 Times Rule In accordance with section 1833(t)(2) of the Act and §419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resource s, if the median cost of the highest cost item or service within an APC group is more th an 2 times greater than the median 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 signi ficant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contri bute at least 2 percent of the single major claims used to establish the APC median cost to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected beca use we believe that a subset of 1,000 claimsCMS-1525-FC 369

I is negligible within the set of approxi mately 100 million single procedure or single session claims we use for establishing median costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negl igible impact on the APC median. In the CY 2012 OPPS/ASC proposed rule (76 FR 42231) , we proposed to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low-volume items and services for CY 2012. During the APC Panel’s February 2011 mee ting, we presented median cost and utilization data for services furnished during the period of January 1, 2010, through September 30, 2010, about which we had concerns or about which the public had raised concerns regarding their APC assignments, status indicator assignments, or payment rates. The discussions of most service-sp ecific issues, the APC Panel recommendations, if any, and our proposals and final policies fo r CY 2012 are contained mainly in sections III.C. and III.D. of this final rule with comment period. In addition to the assignment of specific services to APCs that we discussed with the APC Panel, we also identified APCs with 2 times violations that were not specifically discussed with the APC Panel but for which we proposed changes to their HCPCS codes’ APC assignments in Addendum B to the pr oposed rule. We note that Addendum B did not appear in the printed version of the Federal Register as part of the CY 2012 OPPS/ASC proposed rule. Rather, it was pub lished and made available only via the Internet on the CMS Web site at: http://www.cms. gov/ . In these cases, to eliminate a 2 times violation or to improve clinical and resource homogeneity, we proposed toCMS-1525-FC 370

I reassign the codes to APCs that contain services that are similar with regard to both their clinical and resource characteristics. We also proposed to rename existing APCs or create new clinical APCs to complement pr oposed HCPCS code reassignments. In many cases, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2012 included in the proposed rule were related to changes in median costs of services that were observed in the CY 2010 claims data newly available for CY 2012 ratesetting. We also proposed changes to the status indicators for some codes that were not specifically and separately discussed in the proposed rule. In these cases, we proposed to change the status indicators for some codes because we believe that another status indicator would more accurately describe their pa yment status from an OPPS perspective based on the policie s that we proposed for CY 2012. Addendum B of the CY 2012 OPPS/ASC proposed rule identified with a comment indicator “CH” those HCPCS codes for which we proposed a change to the APC assignment or status indicator as assigned in the April 2011 Addendum B Update (available via the Internet on the CMS Web site at: http://www.cms. gov/ ). In contrast, Addendum B of this final rule with comment period identifies with the “CH” co mment indicator the final CY 2012 changes compared to the codes' status as refl ected in the October 2011 Addendum B update. 3. Exceptions to the 2 Times Rule As discussed earlier, we may make excep tions to the 2 times limit on the variation of costs within each APC group in unusual cases such as low volume items and services. Taking into account the APC changes that we proposed for CY 2012 based on the APC Panel recommendations that were discusse d mainly in sections III.C. and III.D. ofCMS-1525-FC 371

I the proposed rule, the other proposed changes to status indicators and APC assignments as identified in Addendum B to the proposed ru le (which was available via the Internet on the CMS Web site), and the use of CY 2010 cl aims data to calcula te the median costs of procedures classified in the APCs, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. We used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs:

● Resource homogeneity;

● Clinical homogeneity;

● Hospital outpatient setting;

● Frequency of service (volume); and

● Opportunity for upcoding and code fragments. For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 18458). Table 18 of the CY 2012 OPPS/ASC proposed rule (76 FR 42232) listed 17 APCs that we proposed to exempt from the 2 times rule for CY 2012 base d on the criteria cited above. For cases in which a recommendation by the APC Panel appeared to result in or allow a violation of the 2 times rule, we generally accepted the APC Panel’s recommendation because those recommendations were based on explic it consideration of resource use, clinical homoge neity, site of service, and th e quality of the CY 2010 claims data used to determine the APC payment rates that we proposed for CY 2012. The median costs for hospital outpatient services fo r these and all other APCs that were usedCMS-1525-FC 372

I in the development of the CY 2012 OPPS/ASC proposed rule and this final rule with comment period can be found on the CMS Web site at: http://www.cms. gov/HospitalOutpatientPPS/01_overview.asp

. For the CY 2012 OPPS/ASC proposed rule, we based the listed exceptions to the 2 times rule on claims data for date s of service between January 1, 2010, and December 31, 2010, that were processed before January 1, 2011. For this final rule with comment period, we used claims data for dates of service between January 1, 2010, and December 31, 2010, that were processed on or before June 30, 2011 and updated CCRs, if available. Although we stated in the CY 2012 OPPS/ASC pr oposed rule (76 FR 42232) that the list of APC exemptions that appeared in Table 18 were based on claims data processed from January 1, 2010, thr ough September 30, 2010, we are clarifying that the listed exceptions were based on claims data processed between January 1, 2010, and December 31, 2010, consistent with past practice of using claims data processed between January 1 and December 31 of an applicable ye ar to determine APCs that are exempted from the 2 times rule. Thus, after consid ering the public comment s we received on the CY 2012 OPPS/ASC proposed rule and making changes to APC assignments based on those comments, we analyzed the CY 2010 claims data used for this final rule with comment period to identify the APCs with 2 times violations. Based on the final CY 2010 claims data, we found that there are 23 APCs with 2 times rule violations, a cumulative increase of 6 APCs from the propos ed rule. We applied the criteria as described earlier to identify the APCs that are exceptions to the 2 times rule for CY 2012,CMS-1525-FC 373

I and identified additional APCs that meet the criteria for exception to the 2 times rule for this final rule with comment period:

● APC 0076 (Level I Endoscopy Lower Airway)

● APC 0135 (Level III Skin Repair)

● APC 0148 (Level I An al/Rectal Procedures)

● APC 0262 (Plain Film of Teeth)

● APC 0317 (Level II Miscella neous Radiology Procedures)

● 0330 (Dental Procedures)

● APC 0341 (Skin Tests)

● APC 0403 (Level I Nervous System Imaging)

● APC 0409 (Red Blood Cell Tests)

● APC 0607 (Level 4 Hospital Clinic Visits) In addition, we also determined that ther e are five APCs that no longer violate the 2 times rule:

● APC 0016 (Level IV Debridement & Destruction)

● APC 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices)

● APC 0245 (Level I Cataract Procedures without IOL)

● APC 0263 (Level I Mi scellaneous Radiology)

● APC 0432 (Health and Behavior Services) We have not included in this count thos e APCs where a 2 times violation is not a relevant concept, such as APC 0375 (Ancilla ry Outpatient Services when PatientCMS-1525-FC 374

I Expires), with an APC median cost set based on multiple procedure claims; therefore, we have identified only final APCs, including those w ith criteria-based median costs, such as device-dependent APCs, with 2 times rule violations.
Comment : One commenter supported CMS’ proposal to exempt APCs 0016 and 0058 from the 2 times rule. According to the commenter, because the procedures included in both APCs are similar based on clinical homogeneity and resource costs, there is little opportunity to upcode, and therefore, it is a ppropriate to exempt APCs 0016 and 0058 from the 2 times rule. Response : We appreciate the commenter’s support. Based on our analysis of the CY 2010 claims used for the final rule with comment period, we found that APC 0016 no longer violated the 2 times rule. However, APC 0058 continued to violate the 2 times rule. The range in median costs for the proc edures with significan t claims data in APC 0058 is between $49 and $116. Currently, there ar e only two levels of APCs for services that describe strapping and cast appli cation, which include APC 0058 and APC 0426 (Level II Strapping and Cast Application). In contrast to APC 0058, our claims data show that the range in median costs for the procedures with significant claims data in APC 0426 is between $150 and $197. Because of the range in median costs in APC 0426, we believe that the procedures in APC 0058 should continue to be placed in APC 0058. Therefore, we are finalizing our propos al to continue to exempt APC 0058 from the 2 times rule. After consideration of the public comment that we received and our review of the CY 2010 costs from claims available for this final rule with comment period, we areCMS-1525-FC 375

I finalizing our proposal to exem pt 12 original APCs (that ap peared in Table 18 of the CY 2012 OPPS/ASC proposed rule with commen t period and also appears in Table 19 below) from the 2 times rule for CY 2012, w ith modification. Specifically, we removed five APCs that no longer violated the 2 tim es rule and increased the number of APC exceptions from 17 to 23 APCs, as described prev iously in this section. Our final list of 23 APCs exempted from the 2 times ru le is displayed in Table 19 below.
TABLE 19.—FINAL APC EXCEPT IONS TO THE 2 TIMES RULE FOR CY 2012

Final CY 2012

APC Final CY 2012 APC Title 0057 Bunion Procedures 0058 Level I Strapping and Cast Application 0060 Manipulation Therapy 0076 Level I Endoscopy Lower Airway 0080 Diagnostic Cardiac Catheterization 0135 Level III Skin Repair 0148 Level I Anal/Rectal Procedures 0235 Level I Posterior Segment Eye Procedures 0262 Plain Film of Teeth 0317 Level II Miscellaneous Radiology Procedures 0330 Dental Procedures 0340 Minor Ancillary Procedures 0341 Skin Tests 0347 Level III Transfusion Laboratory Procedures 0367 Level I Pulmonary Test 0369 Level III Pulmonary Tests 0403 Level I Nervous System Imaging 0409 Red Blood Cell Tests 0436 Level I Drug Administration 0604 Level 1 Hospital Clinic Visits 0607 Level 4 Hospital Clinic VisitsCMS-1525-FC 376

I Final CY 2012

APC Final CY 2012 APC Title 0660 Level II Otorhinolar yngologic Function Tests 0667 Level II Proton Beam Radiation Therapy

C. New Technology APCs 1. Background In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the time period a service was eligible for payment under a New Technology APC. Beginning in CY 2002, we retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to an appropriate clinical APC. This policy allows us to move a service from a New Technology APC in less than 2 years if sufficient data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient data upon which to base a decision for reassignment have not been collected. We note that the cost bands for New Technology APCs range from $0 to $50 in increments of $10, from $50 to $100 in increments of $50, from $100 to $2,000 in increments of $100, and from $2,000 to $10,000 in increments of $500. These cost bands identify the APCs to which new technology procedures and services with estimated service costs that fall within those cost ba nds are assigned under the OPPS. Payment for each APC is made at the mid-point of th e APC’s assigned cost band. For example, payment for New Technology APC 1507 (New Technology – Level VII ($500 - $600)) is made at $550. Currently, there are 82 Ne w Technology APCs, ranging from the lowestCMS-1525-FC 377

I cost band assigned to APC 1491 (New Tec hnology – Level IA ( $0 - $10)) through the highest cost band assigned to APC 1574 (New Technology – Level XXXVII ($9,500 - $10,000). In CY 2004 (68 FR 63416), we last restructured the New Technology APCs to make the cost intervals more consistent acro ss payment levels and refined the cost bands for these APCs to retain two parallel sets of New Technology APCs, one set with a status indicator of “S”' (Significan t Procedures, Not Discounted when Multiple. Paid under OPPS; separate APC payment) and the othe r set with a status indicator of “T” (Significant Procedure, Multiple Reduction Ap plies. Paid under OPPS; separate APC payment). These current New Technology APC configurations allow us to price new technology services more appr opriately and consistently. Every year we receive many requests for higher payment amounts under our New Technology APCs for specific pr ocedures under the OPPS becau se they require the use of expensive equipment. We are taking th is opportunity to reiterate our response in general to the issue of hosp itals’ capital expenditu res as they relate to the OPPS and Medicare. Under the OPPS, one of our goals is to ma ke payments that are appropriate for the services that are necessary fo r the treatment of Medicare be neficiaries. The OPPS, like other Medicare payment systems, is budget neut ral and increases are limited to the annual hospital inpatient market basket increase. We believe that our payment rates generally reflect the costs that are associated with providing care to Medi care beneficiaries in cost-efficient settings, and we believe that our rates are adequate to ensure access to services.CMS-1525-FC 378

I For many emerging technologies, there is a transitional period during which utilization may be low, often because providers are first learning about the techniques and their clinical utility. Quite often, partie s request that Medicare make higher payment amounts under our New Technology APCs for new procedures in that transitional phase. These requests, and their accompanying estimates for expected total patient utilization, often reflect very low rates of patient use of expensive equipment, resulting in high per use costs for which requesters believe Medi care should make full payment. Medicare does not, and we believe should not, assume res ponsibility for more than its share of the costs of procedures based on Medicare benefi ciary projected utiliz ation and does not set its payment rates based on initial projections of low utilization for services that require expensive capital equipment. For the OPPS, we rely on hospitals to make informed business decisions regarding the acquisition of high cost capital equipment, taking into consideration their knowledge a bout their entire patient ba se (Medicare beneficiaries included) and an understanding of Medicare ’s and other payers’ payment policies. We note that, in a budget neutral environment, payments may not fully cover hospitals’ costs in a particular circumst ance, including those for the purchase and maintenance of capital equipment. We re ly on hospitals to make their decisions regarding the acquisition of high cost equipment with the understanding that the Medicare program must be caref ul to establish its initial payment rates, including those made through New Technology APCs, for new serv ices that lack hospital claims data based on realistic utilization pr ojections for all such services delivered in cost-efficient hospital outpatient settings. As the OPPS acquires claims data regarding hospital costsCMS-1525-FC 379

I associated with new procedures, we regularly examine the claims data and any available new information regarding the clinical aspect s of new procedures to confirm that our OPPS payments remain appropriate for proce dures as they transi tion into mainstream medical practice. 2. Movement of Procedures from New Technology APCs to Clinical APCs As we explained in the November 30, 2001 final rule (66 FR 59902), we generally keep a procedure in the New Tec hnology APC to which it is initially assigned until we have collected sufficient data to enable us to move the procedure to a clinically appropriate APC. However, in cases where we find that our original New Technology APC assignment was based on inaccurate or inadequate information (although it was the best information available at the time) , or where the New Technology APCs are restructured, we may, based on more recent resource utilization information (including claims data) or the availab ility of refined New Technology APC cost bands, reassign the procedure or service to a different New T echnology APC that most appropriately reflects its cost. Consistent with our current policy, in the CY 2012 OPPS/ASC proposed rule (76 FR 42233), we proposed for CY 2012 to re tain services within New Technology APC groups until we gather sufficien t claims data to enable us to assign the service to a clinically appropriate APC. The flexibility a ssociated with this policy allows us to move a service from a New Technology APC in less th an 2 years if sufficient claims data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient claims data upon which to base a decision for r eassignment have notCMS-1525-FC 380

I been collected. Table 19 of the proposed ru le listed the HCPCS codes and associated status indicators that we proposed to reassign from a New Technology APC to a clinically appropriate APC or to a different New Tec hnology APC for CY 2012. Currently, in CY 2011, there are three pro cedures described by a HCPCS G-code receiving payment through a New Technol ogy APC. Specifically, HCPCS code G0417 (Surgical pathology, gross and microscopic ex amination for prostate needle saturation biopsy sampling, 21-40 specimens) is a ssigned to New Technology APC 1506 (New Technology - Level VI ($400 - $500)); HCPC S code G0418 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 41-60 specimens) is assigned to New Technol ogy APC 1511 (New Technology - Level XI ($900 - $1,000)); and HCPCS code G0419 (Sur gical pathology, gross and microscopic examination for prostate needle saturation bi opsy sampling, greater than 60 specimens) is assigned to New Technology APC 1513 (New Technology - Level XIII ($1,100-$1,200)). Analysis of our hospital outpatient da ta for claims submitted for CY 2010 indicates that prostate satu ration biopsy procedures are rarely performed on Medicare patients. For OPPS claims submitted from CY 2009 through CY 2010, our claims data show that there were only five claims submitted for HCPCS code G0417 in CY 2009 and only one in CY 2010 with a proposed median cost of approximately $532. Our claims data did not show any hos pital outpatient claims for HCPCS codes G0418 and G0419 from either CY 2009 or CY 2010. While we believe that these procedures will always be low volume, given the number of specimens being collected, we be lieve that we should continue their NewCMS-1525-FC 381

I Technology payments for another year for HCPCS codes G0417, G0418, and G0419 to see if more claims data become available. For CY 2012, we proposed to revise the APC assignments for these procedures and con tinue the New Technology APC payments for HCPCS G-codes G0417, G0418, and G0419. Sp ecifically, we proposed to reassign HCPCS code G0417 from APC 1506 to APC 1505 (New Technology - Level V ($300 - $400)), HCPCS code G0418 from APC 1511 to APC 1506 (New Technology - Level VI ($400 - $500)), and HCPCS G0419 code fr om APC 1513 to APC 1508 (New Technology - Level VIII ($600 - $700)). We stated in th e proposed rule that we believe that the proposed revised APC assignments would more appropriately reflect the procedures described by these three HCPCS G-codes, based on clinical a nd resource considerations. These procedures and their proposed APC assi gnments are displayed in Table 19 of the proposed rule. We did not receive any public comment s on the APC reassignments for HCPCS codes G0417, G0418, and G0419. Therefore, fo r the reasons set forth above, we are finalizing our proposal, without modificat ion, to assign HCPCS code G0417 to APC 1505, HCPCS code G0418 to APC 1506, and to assign HCPCS code G0419 to APC 1508. The final CY 2012 payment rates for HCPCS codes G0417, G0418, and G0419 can be found in Addendum B of this final rule with comment period (which is available via the Internet on the CMS Web site). Table 20 below lists the HCPCS codes and associated status indicators that we ar e reassigning from a New Technology APC to a different New Technology APC for CY 2012.CMS-1525-FC 382

I TABLE 20.—REASSIGNMENT OF PR OCEDURES ASSIGNED TO NEW TECHNOLOGY APCs FOR CY 2012

CY 2011 HCPCS

Code CY 2011 Short Descriptor CY 2011

SI CY 2011 APC Final CY 2012 SI Final CY 2012

APC G0417 Sat biopsy prostate 21-40 S 1506 S 1505 G0418 Sat biopsy prostate 41-60 S 1511 S 1506 G0419 Sat biopsy prostate: >60 S 1513 S 1508

D. OPPS APC-Specific Policies 1. Cardiovascular Services a. Cardiovascular Computed Tomography (CCT) (APC 0340 and 0383) The CPT Editorial Panel created the following new codes for cardiovascular computed tomography (CCT) services e ffective January 1, 2010: CPT codes 75571 (Computed tomography, heart, without contrast material, with quant itative evaluation of coronary calcium), 75572 (Computed tomogra phy, heart, with contrast material, for evaluation of cardiac structure and mor phology (including 3D image postprocessing, assessment of cardiac function, and evaluation of venous structures, if performed)), 75573 (Computed tomography, heart, with cont rast material, for evaluation of cardiac structure and morphology in the setting of c ongenital heart disease (including 3D image postprocessing, assessment of LV cardiac f unction, RV structure and function and evaluation of venous structures, if perf ormed)), and 75574 (Computed tomographic angiography, heart, coronary arteries and bypass grafts (whe n present), with contrast material, including 3D image postprocessing (including evaluation of cardiac structure and morphology, assessment of cardiac function, and evaluation of venous structures, ifCMS-1525-FC 383

I performed). These Category I CPT codes repl aced eight Category III CPT codes that had been in effect through December 31, 2009. For CY 2010, we assigned CPT code 75571 to APC 0340 (Minor Ancillary Procedur es), and we assigned CPT codes 75572, 75573, and 75574 to APC 0383 (Cardiac Computed Tomographic Imaging). For CY 2011, we maintained these APC assignments, with fi nal payment rates for APC 0340 and 0383 of $46.23 and $256.86, respectively. For CY 2012, we proposed to maintain the assignments of CPT code 75571 to APC 0340 and CPT codes 75572, 75573, and 75574 to APC 0383. APCs 0340 and 0383 have fina l CY 2012 median costs of approximately $46 and $262, respectively.
Comment : One commenter was concerned that hospitals may be failing to report the services in APC 0383 with CPT codes 75572, 75573, and 75574, which were effective January 1, 2010, and are continuing to report the related services using the expired Category III CPT codes previ ously used through December 31, 2009. The commenter requested that CMS analyze the CY 2010 claims data to determine whether the expired CCT codes are being used to repo rt CCT services and, if so, to use those claims in calculating the APC 0383 final medi an cost. The commenter also urged CMS to reassign CPT code 75571 from APC 0340 to APC 0282 (Miscellaneous Computed Axial Tomography) for reasons of clinical coherence and resource use similarity to procedures in APC 0282. The commenter contended that APC 0340 contains several procedures that do not require the same e quipment or clinical staff as CPT code 75571, while APC 0282 contains services that do have similar clinical and resource characteristics to CPT code 75571.CMS-1525-FC 384

I In addition, the commenter expressed concer ns that hospitals do not report their costs in a consistent and accurate way and do not update their chargemasters regularly with charges that reflect appropriate relativit y, and offered to work with CMS to develop a standard methodology to addre ss these issues. The comment er also recommended that CMS promote the need to accurately and completely report all services provided. Response : We believe that the CY 2012 me dian costs we have calculated for CPT codes 75572, 75573, and 75574 and APC 0383 appr opriately reflect valid estimates of the cost of these services. We compared the median costs and single procedure claims based on CY 2009 claims (used for final CY 2011 payment rates) with median costs and single procedure claims based on CY 2010 claims (which we are using for the final CY 2012 payment rates). The final CY 2011 APC 0383 median cost of approximately $254 used 11,323 single bills based on 6 of the category III CPT codes used prior to CPT codes 75572, 75573, and 75574. The final CY 2012 APC 0383 median cost of approximately $262 used 15,253 single bills based on CPT codes 75572, 75573, and 75574. This shows consistency across years in median costs a nd an increase in the number of single bills used. Therefore, we have no reason to believe that the median costs we have calculated do not reflect valid estimates of the costs of CPT codes 75572, 75573, and 75574, which went into effect on January 1, 2010. We believe that CPT code 75571 is a minor ancillary procedure and is appropriately assigned to APC 0340, in terms of resources and clini cal similarity. CPT code 75571 has a final median cost of a pproximately $31, and APC 0340 has a final median cost of approximately $46. In cont rast, APC 0282 has a final median cost ofCMS-1525-FC 385

I approximately $107, driven largely by a single major procedure CPT code, that is, CPT code 76380 (Computed tomography, limited or localized follow-up study), with a final median cost of approximately $107. Theref ore, CPT code 75571, with a final median cost of approximately $31, would not be an appropriate resource similarity for APC 0282, while CPT code 75571 is similar to other codes in APC 0340 with respect to resource use. Therefore, we believe it is appropriately assigned to APC 0340. We agree with the commenter that accurate reporting of ch arges for all services will help to ensure that these items are appropriately accounted for in future years’ OPPS payment rates. As we often state (73 FR 68535 through 68536; 74 FR 60367; and 75 FR 71835), we encourage stakeholders to carefully review HCPCS code descriptors, as well as any guidance CMS may have provided for speci fic HCPCS codes. We note that the definition of charges in the regulations at 42 CFR 413.53(b) states that implicit in the use of charges as the basis of apportionment is the objective that charges for services be related to the cost of the services. As new HCPCS codes are developed or existing HCPCS code descriptors are revi sed from year to year (for example, by redefining units of service), we expect that hospitals’ submitte d Medicare charges relate appropriately to the costs of those services. Therefore, we do not share the commenter’s belief that we should modify our standard ratesetting met hodology (for example, by using claims data for deleted codes) in order to calculate the median costs for the services described by CPT codes 75572, 75573, and 75574. We refer read ers to the Provider Reimbursement Manual (Pub. 15-2, Part 2, Chapter 40 Hospita l and Hospital Health Care, Form CMS 2552-10) for CMS’ instructions for reporting costs.CMS-1525-FC 386

I After considering the public comments we received and reviewing our claims data, we are maintaining the assignment of CPT code 75571 to APC 0340, for which we have calculated a final rule median cost of approximately $46 for CY 2012, and we are maintaining the assignment of CPT codes 75572, 75573, and 75574 to APC 0383, for which we have calculated a fi nal rule median cost of approximately $262 for CY 2012. b. Cardiac Imaging (APC 0377) For CY 2012, we proposed to assign the following CPT codes to APC 0377 (Level II Cardiac Imaging): 78451(Myocar dial perfusion imaging, tomographic (SPECT) (including attenuation correction, qu alitative or quantitative wall motion, ejection fraction by first pass or gated technique, additi onal quantification, when performed); single study, at rest or st ress (exercise or pharmacologic)); 78452 (Myocardial perfusion imaging, tomographic (SPECT) (including at tenuation correction, qualitative or quantitative wall motion, ejection fraction by firs t pass or gated technique, additional quantification, when performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/or redistribution and/ or rest reinjection); 78453 (Myocardial perfusion imaging, planar (inclu ding qualitative or quantitative wall motion, ejection fraction by first pass or gated technique, additi onal quantification, when performed); single study, at rest or st ress (exercise or pha rmacologic)); and 78454 (Myocardial perfusion imaging, planar (inclu ding qualitative or quantitative wall motion, ejection fraction by first pass or gated technique, additi onal quantification, when performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/orCMS-1525-FC 387

I redistribution and/or rest reinjection). APC 0377 had a proposed national unadjusted payment rate of approximately $677. The national unadjusted payment for APC 0377 for CY 2011 is approximately $760. However, it is important to note that the national unadjusted payment rate for APC 0377 for CY 2011 was based on CY 2009 claims data and CPT codes 78451, 78452, 78453 and 78454 had not been created in CY 2009. In CY 2009, APC 0377 was populated with CPT codes 78460 (Myocardial perf usion imaging (planar) single study, at rest of stress (exercise an d/or pharmacologic), with or without quantification); 78461 (Myocardial perfusion imaging (planar) single study, at rest or stre ss (exercise and/or pharmacologic), with or without quantification; multiple studie s (planar), at rest and/or stress (exercise and/or pharmacologic), and re distribution and/or rest injection, with or without quantification); 78464 (Myocardial perfusion imag ing (planar) single study, at rest or stress (exercise and/or pharmaco logic), with or without quantification; tomographic (SPECT) single study (including at tenuation correction when performed), at rest or stress (exercise and/or pharmacologi c), with or without quantification); and 78465 (Myocardial perfusion imaging (planar) single study, at rest or stre ss (exercise and/or pharmacologic), with or without quantifica tion; tomographic (SPECT) multiple studies (including attenuation correction when performe d), at rest or stress (exercise and/or pharmacologic), with or without quantifica tion), which were also cardiac imaging services. Therefore, CY 2009 is the first year in which hospi tals established charges for the new CPT codes for CY 2010 on which th e CY 2012 proposed rule and final rule medians are based.CMS-1525-FC 388

I Comment : Several commenters expressed concern over the proposed 11 percent payment reduction to APC 0377. Commenters belie ved that there were irregularities in the hospital cost data that suggest inaccu rate reporting of co sts associated with procedures in APC 0377, rather than an act ual decline in resour ce use. Commenters particularly pointed out that CPT code 78453 (Myocardial perfusion imaging, planar, single study) has a higher mean and medi an cost than CPT code 78454 (Myocardial perfusion imaging, planar, multiple studies), according to CMS data. The commenters stated that it is illogical to expect hospita ls to use fewer resources for furnishing multiple studies than for furnishing a single study. In light of these irregularities, and the continued decline in the pr oposed payment, the commenters recommended that CMS reevaluate the data used to set the payment rate for APC 0337, to ensure that the data indeed capture the entire universe of claims for these APCs and reflect all procedure and radiopharmaceutical costs. The commenters further recommended that CMS recalculate median costs for these procedures after ad ditional refinement of the data, including eliminating hospital claims w ith CCRs of 0.2 or less and, if subsequent review still warrants a payment reduction for either APC, such a reduction should be phased in over several years. Commenters suggested a 1- to 2-year “dampening period” beginning with the first year that CMS coul d utilize claims for ratesetti ng, given that APC 0377 contains four CPT codes that were new for CY 2010 and replaced previously existing services that were assigned to APC 0377. Co mmenters stated that hospitals are often slow to update their charge masters following coding changes. Additionally, the commenters recommended that CMS establish a threshold change of 10 percent that triggers anCMS-1525-FC 389

I enhanced CMS validation process for all AP Cs, including accounting for all packaged costs and review of excluded /included claims. The comme nters also recommended that CMS limit year-to-year changes in payment rate s to a maximum of 5 to 10 percent for a single year, unless CMS or public commenters identify factors responsible for significant fluctuations in cost data, such as the intr oduction of new technologies or changes in the composition of an APC. Response : In accordance with sections 1833(t)(2)(B) and 1833(t)(9)(A) of the Act and §§ 419.31 and 419.50 of the regulations, we annually review the items and services within an APC group with respect to comparability of the use of resources and clinical homogeneity. The payment rates, incl uding the relative wei ghts, set annually for these services are based on the claims and cost report data used for ratesetting. For the CY 2012 update, the payment rates for AP Cs 0337 are based on data from claims submitted during CY 2010 according to the standard OPPS ratesetting methodology. Specifically, we used 502,757 single claims ( out of 584,855 total claims) from CY 2012 proposed rule claims data to calculate the proposed rule median cost of approximately $701, and we used 539,100 single claims ( out of 640,458 total claims) from CY 2012 final rule claims data to calculate the me dian cost for APC 0337 of approximately $672, on which we based the CY 2012 national unadjusted payment rate. We note that the final CY 2012 median cost represents a slight decline from the median cost of approximately $701, upon which the CY 2012 proposed payment rate for this APC was based and the median cost of approximately $752, upon which the final CY 2011 payment rate was based. As we have in the past (75 FR 71916), we note thatCMS-1525-FC 390

I our cost-finding methodology is based on reduci ng each hospital’s charge for its services to an estimated cost by applyi ng the most discrete hospital- specific CCR available for the hospital that submitted the claim. Therefore, it is the hospital’s claims and cost reports that determine the estimated costs that are us ed to calculate the median cost for each service and, when aggregated into APC groups, the hospital data are used to calculate the median cost for the APC on which the APC payment rate is based. As we have previously, we note that, as part of our standa rd ratesetting process, we already engage in a standard review process for all APCs that experience significan t changes in median costs (74 FR 60365). We examined our claims data for APC 0377 for the CY 2011 OPPS final rule with comment period, the CY 2012 proposed ru le, and this CY 2012 final rule with comment period. Specifically we looked at th e following data elements for all single and pseudo single procedure bills for the four CPT codes that are a ssigned to APC 0377 and that, therefore, are the data points on whic h the median cost for the APC is based: median CCR; median charge; median line ite m cost (that is, without packaging); and median amount of packaging (shown in Table 21). We also show in Table 21 the count of single and pseudo single procedure claims for the APC and the total frequency for the
APC.
TABLE 21.—SELECTED DATA FOR APC 0377

Single and Pseudo Single Procedure Bills for APC 0377 CY 2011 Final Rule Data CY 2012 Proposed Rule Data CY 2012 Final Rule Data Median line item CCR 0.1780 0.1719 0.1639 Median line item charge $2,248.00 $3,040.00 $3,045.00CMS-1525-FC 391

I Single and Pseudo Single Procedure Bills for APC 0377 CY 2011 Final Rule Data CY 2012 Proposed Rule Data CY 2012 Final Rule Data Median line item cost $386.96 $520.84 $499.05 Median packaged cost 325.79 $128.42 124.54 Count of single and pseudo single bills 494,745 502,757 542,890 Total Frequency 579,047 584,855 640,458 Total APC Median Cost $751.80 $701.09 $672.37

We observe from this information that th e median charge for services that are assigned to APC 0377 has increased from th e CY 2011 final rule data (CY 2009 claims containing charges for the deleted codes) to the CY 2012 proposed and final rule data sets (based on charges for the codes that were e ffective January 1, 2010). The CCRs that are applied to the codes remained the same from the CY 2011 fi nal rule data to the CY 2012 proposed rule data but declined slightly in the CY 2012 final rule data, with the updating of the data with more current cost reports . Therefore, the line item median costs increased between the CY 2011 final rule da ta and the CY 2012 propos ed rule data but declined in the CY 2012 final rule data due to the decrease in the CCRs. We also observe that the packaged cost for codes in APC 0377 declined 61 percent from the CY 2011 final rule data to the CY 2012 proposed rule data a nd further declined anot her 3 percent in the CY 2012 final rule data. Therefore, we believe that the reduction in the payment rate for APC 0377 is attributable to the slight declin e in the CCRs and the si gnificant decline in the packaged cost. We acknowledge that some hospitals may ch arge at different markups over cost for different services. However, as long as th e cost report is corre ctly completed and theCMS-1525-FC 392

I charges are mapped to the cost center in whic h the costs for the service are recorded, the CCRs will represent a valid reflection of th e relationship between the costs and the charges. The OPPS, like all other prospectiv e payment systems, assumes that hospitals complete the cost report properly, including ma pping the charges for a service to the cost center in which the costs for that service are captured. We recognize that there is considerable variability in the charges that hospitals established for the four CPT codes that we re new for CY 2010 and replaced deleted codes for reporting these serv ices that had been assigne d to APC 0377, but it is not uncommon for a high level of variability in the charges for a service to occur. In addition, it is normal that such variability w ould be carried through to the calculation of estimated costs for the service. Hospitals ch arges are a reflection of the monetary value that the hospital places on the service, and we do not advise hospitals with regard to what they should charge for a service other than to require that the charges be reasonably related to their cost for the se rvice, and that they must char ge all payers the same amount for the same service. (We refer readers to the definition of “charges” at 42 CFR 413.53(b).) However, our use of the median charge to establish payment levels was specifically designed to addre ss wide variances in hospita l cost accounting systems and billing patterns, and also has consistently been a reliable mechanism for promoting increased consistency without in troducing additional regulations. We recognize that it appear s peculiar that the estima ted cost for CPT code 78453, which represents the cost of a single myo cardial perfusion imaging (MPI) study, would be greater than the estimated cost for CP T code 78454, which represents the cost ofCMS-1525-FC 393

I multiple myocardial perfusion imaging studies done in a single session. However, our costs are based on the amount of the charge th at the hospital estab lished for the service and the hospital’s CCR from its Medicare cost re port. It is not unusual for hospitals to establish charges that do not comport with our expecta tion of the charges they would establish based on the defin ition of the code for the service for which they are establishing charges and on which we based si mulated medians. Moreover, because the median cost is the 50 th percentile of the array of cost s from different hospitals, case-mix and volume differences between different hospitals can also result in seemingly peculiar relativity between median costs. Based on our review of the claims data and cost report data, we believe our estimated median cost for APC 0377 is a valid es timate of the relative cost of the services under the APC and, therefore, see no reason to adopt an alternative methodology that would eliminate claims from hospitals with CCRs below 0.2 or limit the decline in the median cost to 5 to 10 percent. In add ition, based on the significant volume of single bills used to calculate the median cost (539,100 single procedure bills of 640,458 total frequency or 84 percent of the total frequency for the services in the APC), we have no reason to believe that the median cost we have calculated should not be used to establish the payment for APC 0377 and, therefore, will not implement a 1- to 2-year “dampening period,” as suggested by the co mmenters. To the extent th at hospitals determine that their charges should be revised to better re flect the resources re quired to furnish the services currently assi gned to APC 0377, the revised charges would be reflected in future years’ OPPS payment rates.CMS-1525-FC 394

I Comment : Commenters asked that CMS post to the CMS Web site the data analysis that was made available to the APC Panel for all APCs for which the APC Panel median costs fluctuated by more than 10 percent compared to the CY 2011 OPPS final rule median costs to allow all interested st akeholders to review and comment on the data. Response: During the August 10-11, 2011 m eeting of the APC Panel, we presented a list of all APCs whose median costs fluctuated by gr eater than 10 percent when comparing the CY 2011 final rule medi an costs to CY 2012 proposed rule median costs. While the proposed payment for APC 0377 represented a reduc tion in payment of 11 percent, the decline in median cost was less than 10 percent; therefore, it was not included on the list presented to the APC Panel during its August 10-11, 2011 meeting. The comparisons of APCs with median costs fluctuating by more than 10 percent is based on median cost data available on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS . Additionally, the OPPS Limited Data Set (LDS), which contain claims used to estab lish median cost for use in ratesetting, is available for purchase on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS . Therefore, interest ed stakeholders have access to the same data that we examined and presented to the APC Panel. After considering the public comments we received and examining the reasons for the decline in the median cost for APC 0377, we are declining to make any of the adjustments to the median cost that commen ters requested because we believe that the data on which the median cost for APC 0377 is calculated are valid and that the median cost is an appropriate reflection of the 50 th percentile of the array of the estimated costs ofCMS-1525-FC 395

I services assigned to APC 0377. Therefore, we are finalizing our CY 2012 proposal, without modification, to continue to assign CPT codes 78451, 78452, 78453, and 78454 to APC 0377. We are finalizing a payment rate for APC 0377 for CY 2012 based on the CY 2012 OPPS final rule median cost of approximately $672. c. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes (APC 0108) We refer readers to section II.A.2.E.(6) of this final rule with comment period for a detailed discussion of this issue. d. Implantable Loop Recorder Monitoring (APC 0690) For CY 2012, we proposed to reassign CPT code 93299 (Interrogation device evaluation(s), (remote) up to 30 days; impl antable cardiovascular monitor system or implantable loop recorder system, remote data acquisition(s), receipt of transmissions and technician review, technical support and distribution of results) from APC 0691 (Level III Electronic Analysis of Devices) to APC 0690 (Level I Electronic Analysis of Devices), with a proposed payment rate of approximately $35.
Comment : Some commenters objected to the reassignment of CPT code 93299 from APC 0691 to APC 0690. They believed that the reassignment will result in inadequate payment to hospitals for the res ources required to provide the service and may be a disincentive to hospitals to provide this service. Response : The calculated median cost for CPT code 93299 based on CY 2010 hospital claims and cost report data available for this final rule with comment period is approximately $38. We are confident that th e observed costs in the claims data areCMS-1525-FC 396

I representative of the costs of providing this service in CY 2010 because almost all of the claims are single claims (2,249 out of 2,253) that can be used for ratesetting. The calculated median cost of approximately $38 for CPT code 93299 is similar to that of most of the CPT codes in APC 0690, and very close to the overall APC median cost of approximately $35. In contrast, the overa ll APC median cost for APC 0691 is approximately $168, more than four times the median cost of CPT code 93299. Therefore, we do not agree with commenter s that the placement of CPT code 93299 in APC 0690 does not meet the APC recalibrati on standards of clinical and resource homogeneity and would result in inadequate payment to hospitals. Thus, we are finalizing our proposal, without modification, to reassign CPT code 93299 to APC 0690 for
CY 2012. e. Echocardiography (APCs 0128, 0269, 0270, and 0697) Under the OPPS, echocardiography services are reported using a combination of CPT codes and HCPCS C-codes. Hospitals report the echocardiography CPT codes when performing echocardiography procedures w ithout contrast. Alte rnatively, hospitals report the HCPCS C-codes when performing ec hocardiography procedures with contrast, or without contrast followed by with contra st. In addition to the HCPCS C-codes, hospitals should also report th e appropriate units of the HC PCS codes for the contrast agents used in the performa nce of the echocardiograms. Currently, there are four APCs that describe echocardiography services

● APC 0128 (Echocardiogram With Contrast) ● APC 0697 (Level I Echocardi ogram Without Contrast)CMS-1525-FC 397

I ● APC 0269 (Level II Echocar diogram Without Contrast)

● APC 0270 (Level III Echocardiogram Without Contrast) For CY 2012, we proposed payment rate s for these APCs of approximately $564, $219, $384, and $567, respectively.
Comment : Some commenters expr essed concern with the proposed payment rate of approximately $384 for CPT code 93306 (Ec hocardiography, transt horacic real-time with image documentation (2D), includes M-mode recording, when performed, complete, with spectral Doppler echo cardiography, and with color fl ow Doppler echocardiography), stating that the 5-percent decrease in the pa yment rate could be the result of miscoding. The commenters suggested that hospitals were continuing to bill CPT code 93307 (Echocardiography, transthoracic , real-time with image doc umentation (2D), includes Mmode recording, when performed, complete , without spectral or color Doppler echocardiography) in conjunction with CPT codes 93320 (Doppler echocardiography, pulsed wave and/or continuous wave with spectr al display (List separately in addition to codes for echocardiographic imaging); co mplete) and 93325 (Doppl er echocardiography color flow velocity mapping), rather than using CPT code 93306 because they were still adjusting to billing with CPT code 93306. Th e commenters requested that CMS confirm that the calculation of th e median cost for APC 0269, which is the APC that CMS proposed to continue to assign to CP T code 93306, is based on correct coding. Response : CPT code 93306 was made effec tive on January 1, 2009. Consistent with our statement in the CY 2011 OPPS/ ASC final rule with comment period (75 FR 71947), we find no evidence that would sugge st that the fluctuations in cost dataCMS-1525-FC 398

I for echocardiography APCs are due to incorrect hospital billing practi ces. For this CY 2012 OPPS/ASC final rule with comment peri od, which is based on the CY 2010 hospital outpatient claims for ratesetting, our claims show a significant volume of data for CPT code 93306. Specifically, our analysis reveal s a CPT median cost of approximately $394 based on 975,213 single claims (out of 990,809 total claims) for CPT code 93306, which represents 90 percent of the claims in AP C 0269. Given the significan t volume of claims and its CPT median cost of approximate ly $394, we believe that CPT code 93306 is appropriately placed in APC 0269, which has a final APC median cost of approximately $393 for CY 2012. Therefore, after consideration of the public comments that we received, we are finalizing our CY 2012 proposal, without modifi cation, to continue to assign CPT code 93306 to APC 0269. As has been our practice si nce the implementation of the OPPS, we annually review all the items and services within an APC group to determine, with respect to comparability of th e use of resources, for any 2 times rule violations. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignmen ts for the following year. We will again reevaluate the status indi cator and APC assignment for CPT code 93306 for the CY 2013 OPPS rulemaking cycle.
Comment : Several commenters requeste d that CMS reassign CPT codes 76825 (Echocardiography, fetal, cardiovascular sy stem, real time with image documentation (2d), with or without m-mode record ing) and 76826 (Echocardiography, fetal, cardiovascular system, real time with image documentation (2d), with or without m-modeCMS-1525-FC 399

I recording; follow-up or repeat study) fr om the proposed APC 0697 to APC 0269. The commenters believed that fetal echocardiography is just as resource intensive as adult echocardiography. Another commenter stated that the low median cost for these services is the result of low frequency for these services, and suggested that some of the charges reported may be the result of miscoding. Response : In Addendum B of the CY 2012 OPPS/ASC proposed rule, we flagged CPT codes 76825 and 76826 with comment indica tor "CH" to indicate that we are reassigning the APC assignments for these codes. Specifically , we proposed to reassign CPT code 76825 from APC 0270 to APC 0697, and reassign CPT code 76826 from APC 0269 to APC 0697. Because these codes have been in existence for almost 20 years, and have been reportable under the hospital OPPS since it was implemented in 2000, we believe that the low frequency of these services is the result of infrequent use of this procedure on Medicare patients. Analysis of our claims data from the past 3 years, specifically from CY 2008, CY 2009, and CY 2010, reveal that th ese procedures are relatively low volume procedures. CPT code 76825 has had fewer than 330 single claims for ratesetting for each year (327 single claims in CY 2008, 291 single claims in CY 2009, and 282 single claims in CY 2010), with a CPT median cost that has ranged between $89 and $126. Similarly, CPT code 76826 has had fewer than 50 single claims for ratesetting for each year (25 single clai ms in CY 2008, 23 single claims in CY 2009, and 43 single claims in 2010), with a CPT me dian cost that has ranged between $85 and $92. Based on our claims data, we belie ve that CPT codes 76825 and 76826 are more appropriately placed in APC 0697 based on their clinical homogeneity and resource costsCMS-1525-FC 400

I to the other procedure assigned to APC 0697. Furthermore, despite the relatively low volumes, the median costs for these services are notably stable and are more consistent with the median costs of the services a ssigned to lowest level echocardiogram APC, specifically, APC 0697, than to the services assigned to APC 0269, which has an APC median cost of approximately $393. After consideration of the public comments received on our proposed APC reassignment, we are finaliz ing our CY 2012 proposal, without modification, to reassign CPT code 76825 from APC 0270 to APC 0697, and to reassign CPT code 76826 from APC 0269 to APC 0697, which has a final CY 2012 median cost of approximately $221.
Commenter : Several commenters expressed co ncern that the proposed payment rate of approximately $567 for the non-contra st echocardiogram pr ocedures that are assigned to APC 0270 is higher than the pr oposed payment rate of approximately $564 for the contrast echocardiograms procedur es that are assigne d to APC 0128. The commenters indicated that it is not appropr iate for an APC with contrast enhanced echocardiogram procedures to have a lower me dian cost and lower payment rate than an APC with non-contrast enhanced echocar diogram procedures. The commenters requested that CMS develop a more consistent and stable payment methodology for echocardiograms that utilize contrast agents because the cost of th e contrast agents is approximately $117 and requires significantly mo re work when compared to non-contrast echocardiogram procedures. One commenter recommended that CMS adopt three APCs for contrast-enhanced echocardiogram procedures to parallel the three APCs that exist for non-contrast enhanced echocardiogram proce dures, while another commenter requestedCMS-1525-FC 401

I data analysis supporting the higher proposed payment rate for APC 0270. Several commenters urged CMS to pay separately for th e administration and cost of the contrast agent. Response : As stated above, we have four separate APCs to which echocardiography services are a ssigned. Procedures that ut ilize contrast agents are assigned to APC 0128, while procedures without contrast agents are assigned to one of three APCs, specifically, APC 0270, APC 0269, or APC 0697. As described above, in the CY 2012 OPPS/ASC proposed rule, the pr oposed payment rates for APCs 0270, APC 0269, and APC 0697 varied between $219 and $567. Analysis of our claims data show that the median costs for two of the non- contrast echocardiogram APCs (APC 0697 and 0269) are lower than the median cost of the contrast echocardiogram APC (APC 0128). Specifically, our claims data show an APC median cost of approximately $221 for APC 0697 and approximately $393 for APC 0269, co mpared to the median cost of approximately $557 for APC 0128. Our claims da ta show a higher median cost for one of the non-contrast echocardi ography APCs, specifically, APC 0270, which has a median cost of approximately $581. We agree with the commenters that, in general, contrastbased echocardiography procedures would i nvolve more resources than non-contrast echocardiography services. However, we believe that some non-echocardiography procedures are more complex than contrast -based echocardiography procedures despite the lack of contrast use, and as a result, we expect their costs to be higher. As shown by our claims data, the costs involved with th e non-contrast echocardi ography procedures assigned to APC 0270 are signif icantly higher than the co ntrast-based echocardiographyCMS-1525-FC 402

I procedures that are assigned to APC 0128. As we do every year, we will again review our claims data for these services for the CY 2013 OPPS rulemaking cycle. We find no evidence that would suggest that the median costs calculated for these APCs based on hospital claims and cost report data incorrec tly reflect the relativ e resource costs of providing the services in AP C 0128 or APC 0697. We also do not believe that it is necessary to separate APC 0128 into three APCs as one commenter suggested, because the current composition results in no 2 times ru le violation and the major procedures in the APC are similar based on resource co sts, ranging from approximately $505 to approximately $732. In addition, payment for the administrati on of contrast agen ts as well as the contrast agent products are included in paymen t for the associated imaging procedure, as discussed in section V.B.2.d. of this fina l rule with comment period. In limited circumstances, we pay separately for contra st agents that are approved for pass-through status under the OPPS, as discussed in sect ion V.A. of this final rule with comment period. Payment for pass-through status is lim ited to a minimum of 2 years but no more than 3 years. Furthermore, as we stated above, hospita ls should report the appropriate units of the HCPCS codes for the contrast agents used in the performance of the echocardiograms procedures. It is extremely important that hospitals report all HCPCS codes, consistent with their descriptors, CPT and/or CMS instru ctions, and correct codi ng principles, for all charges for all services they furnish, whether payment for the services is made separately or is packaged. The appropr iateness of the OPPS payment rates depend on the qualityCMS-1525-FC 403

I and completeness of the claims data that hospi tals submit for the services they furnish to Medicare beneficiaries. After consideration of the public comments we rece ived, we are finalizing, without modification, our CY 2012 proposal to c ontinue to calculate our median costs for the non-contrast echocardiography proce dures based on APCs 0697, 0269, and 0270, and to calculate our median costs for the cont rast-echocardiography procedures based on APC 0128. We believe that continuing this methodology in CY 2012 results in payment rates for the contrast echo cardiography and non-contrast echocardiography procedures that appropriately reflect the costs for these se rvices. For a more detailed discussion and history of the OPPS payment for echocardiog raphy services, we refer readers to the CY 2008 OPPS/ASC final rule with comme nt period (72 FR 66644 through 66646), the CY 2009 OPPS/ASC final rule with comme nt period (73 FR 68542 through 68544), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60374 through 60383). Table 22 below shows the procedures and fi nal median costs assigned to the four echocardiography APCs.
TABLE 22.—APC ASSIGNMENTS FOR ECHOCARDIOGRAPHY PROCEDURES FOR CY 2012

APC HCPCS Code Short Descriptor Final CY 2012 Median

Cost C8921 TTE w or w/o fol w/cont, com C8922 TTE w or w/o fol w/cont, f/u C8923 2D TTE w or w/o fol w/con,co C8924 2D TTE w or w/o fol w/con,fu 0128 (Echocardiogram

With Contrast) C8925 2D TEE w or w/o fol w/con,in $557CMS-1525-FC 404

I APC HCPCS Code Short Descriptor Final CY 2012 Median

Cost C8926 TEE w or w/o fol w/cont,cong C8927 TEE w or w/o fol w/cont, mon C8928 TTE w or w/o fol w/con,stres C8929 TTE w or wo fol wcon,Doppler C8930 TTE w or w/o contr, cont ECG 76825 Echo exam of fetal heart 76826 Echo exam of fetal heart 0697 (Level I Echocardiogram Without Contrast) 93308 Tte f-up or lmtd $221

93304 Echo transthoracic 93306 Tte w/doppler complete 93307 Tte w/o doppler complete 93313 Echo transesophageal 93315 Echo transesophageal 0269 (Level II Echocardiogram Without Contrast) 93350 Stress tte only $393

93303 Echo transthoracic 93312 Echo transesophageal 93316 Echo transesophageal 93318 Echo transesophageal intraop 0270 (Level III Echocardiogram Without Contrast) 93351 Stress tte complete $581CMS-1525-FC 405

I 2. Gastrointestinal Services a. Upper Gastrointestinal (G I) Services (APCs 0141, 0419, and 0422) For CY 2012 we proposed to create new APC 0419 (Level II Upper GI Procedures), an intermediate APC between APC 0141 (Level I Uppe r GI Procedures) and APC 0422 (Level II Upper GI Procedures, wh ich we proposed to rename ”Level III Upper GI Procedures”). For APC 0141, we cal culated a proposed rule median cost for CY 2012 of approximately $603. For proposed new APC 0419, we calculated a proposed rule median cost of approximately $904. For APC 0422, we calculated a proposed rule median cost of approximately $1,833. For CY 2011, there are two upper gast rointestinal (GI) procedure APCs, APC 0141, which has a CY 2011 national unadj usted payment rate of $611.73, and APC 0422, which has a CY 2011 national unadjusted payment rate of $1,148.75. In the CY 2011 OPPS/ASC proposed rule, we proposed to reconfigure APCs 0141 and APC 0422 by moving several CPT codes from APC 0141 to APC 0422. We had received public comments on the CY 2011 proposed rule objec ting to our CY 2011 proposal on the basis that the reconfiguration woul d reduce the median cost and, therefore, the payment for services to which APC 0422 was assigned and would not mainta in the clinical homogeneity of these services. Instead co mmenters, including the applicable medical specialty societies, asked that we reconf igure APCs 0141 and 0422 to create three APCs by adding a new APC for upper GI procedures. They also recommended a HCPCS configuration that they belie ved would provide payment rate s that would more accurately reflect the median costs of the services in APCs 0141 and 0422. We finalized ourCMS-1525-FC 406

I proposed changes to APCs 0141 and 0422 for CY 2011 without establishing a third APC for upper GI procedures for the reasons di scussed in the CY 2011 OPPS/ASC final rule with public comment period (75 FR 71907). However, when we developed the median costs for APCs 0141 and 0422 using CY 2010 claims data for discussion at the APC Panel meeting of February 28-March 1, 2011, we observed that there was a 2 times rule violation for APC 0141 that had not existed for the CY 2010 OPPS. For the APC Panel meeting, we simulated the HCPCS codes and APC median costs that would result from the reconfiguration that was recommended by th e stakeholders in their comments on the CY 2011 OPPS/ASC final rule with comment pe riod, and we discussed the results with the APC Panel. The APC Panel recommended that CMS create an intermediate level upper GI procedures APC (APC Panel Recommendation 13). The APC Panel recommendations and report may be found at the APC Panel Web site, located at: http://www.cms.gov/FACA/05_AdvisoryPanel onAmbulatoryPaymentClassificationGrou
ps.asp
. For the reasons we discuss below, as stat ed in the proposed rule, we accepted the APC Panel recommendation to propose to esta blish three levels of upper GI procedure APCs and to propose to adopt the reconfigur ation recommended by stakeholders because we believe that the proposed reconfiguration will provide pa yments that are more closely aligned with the median costs of the services. We stated that creating an intermediate APC for upper GI procedures would provide APC median costs that are more closely aligned with the median costs for the ma ny CPT codes for upper GI procedures, andCMS-1525-FC 407

I therefore, the APC median costs better refl ect the resources required to provide these services as defined by the CPT codes for them . Moreover, we believed that the proposed reconfiguration would resolve the 2 times rule violation that would result in APC 0141 if we were to apply the CY 2011 APC configur ation to the CY 2012 proposed rule data. Therefore, we stated in the pr oposed rule that we believed th at we would need to propose to reassign HCPCS codes, regardless of wh ether we created the intermediate APC for CY 2012. We stated that we believed that the proposed reconfiguration to create the intermediate APC would be the most appr opriate means of avoiding a 2 times rule violation that would otherwise exist for CY 2012 and that the resulting median costs would provide payments that are more reflectiv e of the relative costs of the services being furnished. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42238), for CY 2012, we proposed to create new APC 0419 (Level II Upper GI Procedures), as recommended by the stakeholders, and we pr oposed to reassign HCPCS codes previously assigned to APCs 0141 and 0422 to the three APC configuration. Table 23 of the proposed rule contained the proposed HCPCS code reassignm ents for CY 2012 using the proposed three APC reconfiguration. We belie ve that this propos ed reconfiguration classifies upper GI CPT codes in groups that demonstrate the best clinical and resource homogeneity. For APC 0141, we calculated a pr oposed rule median cost for CY 2012 of approximately $603. For proposed new AP C 0419, we calculated a proposed rule median cost of approximately $904. For APC 0422, we calculated a proposed rule median cost of approximately $1,833.CMS-1525-FC 408

I At its August 10-11, 2011 APC Panel mee ting, the APC Panel recommended that CMS adopt the proposed APC r econfiguration for upper gastro intestinal (GI) procedures and the creation of a new APC 0419 (Level II Upper GI Procedures). The Panel further recommended that HCPCS code 43227 (Esophagosc opy, rigid or flexible; with control of bleeding (e.g., injection, bipol ar cautery, unipolar cautery, la ser, heater probe, stapler, plasma coagulator)) and HCPCS code 43830 (Gas trostomy, open; without construction of gastric tube (e.g., Stamm pro cedure) (separate procedure )) be reassigned to APC 0422 (proposed to be renames “Level III Upper GI Procedures”). Response to APC Panel Recommendation : We do not agree with the APC Panel recommendation to move CPT code 43227 to APC 0422 because CPT code 43227 is a very low volume service with a total freque ncy of 45 in CY 2010, for which the median cost has varied considerably over the past few years ($1,010 in CY 2011; $725 in CY 2010). We will reassess the placement of CPT code 43227 for CY 2013. However, we agree with the APC Panel’s recommenda tion to move CPT code 43830 to APC 0422 because the median cost for CPT code 43830 of approximately $1,630 is more similar to the median cost for APC 0422 of approximately $1,819 and is less similar to the median cost for APC 0319 of approximately $887. Th erefore, we are assigning CPT code 43830 to APC 0422 for the CY 2012 OPPS.
Comment : Many commenters supported the creation of new APC 0419. Commenters indicated that creation of the new intermediate APC would result in APCs for upper GI procedures that are more cohesi ve with regard to the resources used to provide the services and would provide for more equitable payment for these services. InCMS-1525-FC 409

I particular, commenters were pleased to w ith the proposed reassignment of CPT code 43228 to APC 0422 because they believed that th e assignment would enable facilities to cover the cost of the device and provide patien ts with greater access to the service. One commenter objected to the reconfiguration of these APCs on the basis that some of the services in each APC have median costs that are higher than the median cost for the APC and, therefore, would be paid less than their median cost. Response : We continue to believe that it is appropriate to create a third level of upper GI procedures and that it is appropria te to assign CPT code 43228 to APC 0422 for the reasons discussed in the proposed rule as summarized at the beginn ing of this section. Therefore, we are adopting our proposal to create new APC 0419 for CY 2012, and we have assigned CPT code 43228 to APC 0422 for CY 2012. We disagree with the commenter who objected to the reconfigura tion of the upper GI procedure APCs on the basis that the medians for some HCPCS codes in each APC were higher than the median cost for the APC. The median cost by definition is the 50th percentile of the array of the costs of single bills. Therefore, the median costs for some HCPCS codes will always fall below the median cost for the APC. A funda mental principle of a prospective payment system like the OPPS is that prospective paym ent is set at a measure of central tendency that, on average, pays an amount that is approp riately reflective of the relative cost of the services in the group to whic h the payment rate applies.
Comment : Several commenters objected to the proposed assignment of CPT code 43257 (Upper gastrointestinal endoscopy includ ing esophagus, stomach, and either the duodenum and/or jejunum as appropriate; with delivery of thermal energy to the muscleCMS-1525-FC 410

I of lower esophageal sphincter and/or gastric cardia, for tr eatment of gastroesophageal reflux disease) and CPT code C9724 (Endoscopi c full thickness placa tion in the gastric cardia using endoscopic placation system (EPS); includes endoscopy) to APC 0422 and asked that CMS create an APC for transora l surgical endoscopy to which these codes would be assigned. The commenters believe that CPT codes 43257 and C9724 are clinically different from most other servic es in APC 0422 because these services provide surgical therapy and that the resources require d to furnish them are much greater than the resources required to furnish the other serv ices in APC 0422. Comm enters requested the creation of the new level IV upper GI procedur e APC that they believed would result in appropriate payment for these procedures a nd would also improve the accuracy of the payment for the procedures that will rema in in APC 0422. Commenters stated that current claims data for CPT code 43257 underes timates the cost of the service because hospitals are using the code incorrectly. They also stated that the CY 2010 claims data for CPT code 43257 reports the cost of a genera tion 1 Stretta catheter that was sold at a cost of $1,225, although since 2010 hospitals ha ve been using a ge neration 2 catheter which has an average sales price of $2,450. Ther efore, the commenters asserted that the use of CY 2010 claims data will not fully reflect the cost of the device s that will be used in CY 2012. Commenters suggested that CMS designate the new level IV APC that they requested as device dependent, establish pr ocedure-to-device edits, and use only the claims that meet the device edits in se tting the rates for the applicable APCs. Response: We disagree that it is necessary to create a fourth level upper GI APC to which to assign HCPCS codes 43257 and C9724. We believe that CPT codes 43257CMS-1525-FC 411

I and C9724 are clinically simila r to the other services assigned to APC 0422 such as CPT codes 43228 (Esophagoscopy, rigid or flexible; with ablation of tu mor(s), polyp(s), or other lesion(s), not amenable to removal by hot biopsy forceps, bipol ar cautery or snare technique), and 43870 (Closure of gastrostom y, surgical), which are both therapeutic upper GI procedures. Moreover, the fi nal median cost for CPT code 43257 of approximately $1,535 falls below the final me dian cost for APC 0422 of approximately $1,819. As we discuss in section II.A. of this final rule with public comment, we calculate the median costs of services base d on the most recent charges and cost reports that are available to us at the time we are preparing the proposed and final rules. To the extent that the costs for the catheter used to furnish CPT code 43257 increased after CY 2010, those costs will be used to establish paym ent rates for the years in which the claims are used. With regard to HCPCS code C9724, we note that it is a low volume service for which the median cost has varied widely ove r the past few years (for example, $1,370 for CY 2009 OPPS; $2,947 for CY 2010 OPPS; and $5,139 for CY 2011 OPPS), and we believe that its median cost of approxim ately $5,944 and low volume make it unsuited for establishment of a single service APC for CY 2012 OPPS. We note that placement of HCPCS code C9724 in APC 0422 is not a violation of the 2 times rule because HCPCs code C9724 is not a significant procedure to wh ich the 2 times rule applies because it has a single bill frequency of less than 1,000 and al so has a single bill frequency that is less than 99 and the single bills represent less than 2 percent of the single bills used to calculate the median cost for APC 0422. We re fer readers to section III.B. of this final rule with comment period for additional information regarding the 2 times rule.CMS-1525-FC 412

I After consideration of the comments we received, we are finalizing our proposals to create new APC 0419 (Level II Upper GI Procedures), to rename APC 0422 as “Level III Upper GI Procedures”, and to reassign the HCPCS codes for upper GI procedures to the three APC configuration (APCs 0141, 0419 and 0422) for CY 2012 OPPS, as shown in Table 23 below. We are not creating a le vel IV upper GI procedure APC into which to place HCPCS codes 43257 and C9724 because we believe that HCPCS codes 43257 and C9724 are appropriately assi gned to APC 0422 for CY 2012. We are not accepting the APC Panel’s recommendation that we r eassign CPT code 43227 to APC 0422 because it is a very low volume service for which the medi an cost has not been stable over the past few years. We are accepting the APC Pa nel’s recommendation that we reassign CPT code 43830 to APC 0422, and we have done so for the CY 2012 OPPS.CMS-1525-FC 413

I

TABLE 23.--RECONFIGURATION OF UPPER GI PROCEDURE CODES FOR CY 2012

APC HCPCS Code SI DESCRIPTION Median Cost Single Bill Frequency Percent of Single Bills Total Bill Frequency

0141 T Level I Upper GI Procedures 591.79 377,123 . 763,297 43831 T Place gastrostomy tube $0.00 0 . 0

43999 T Stomach surgery procedure $217.22 1,929 . 2,373

43204 T Esoph scope w/sclerosis inj $418.08 2 . 7

43761 T Reposition gastrostomy tube $505.61 395 . 658

43510 T Surgical opening of stomach $512.50 2 . 2

43235 T Uppr gi endoscopy diagnosis $521.98 74,801 20 134,072 43200 T Esophagus endoscopy $560.60 1,129 . 6,309

43239 T Upper gi endoscopy biopsy $606.72 272,965 72 547,867

43202 T Esophagus endoscopy biopsy $608.73 495 . 1,365

43248 T Uppr gi endoscopy/guide wire $609.35 17,395 5 40,005

43236 T Uppr gi scope w/submuc inj $640.49 3,598 1 8,942

43247 T Operative upper gi endoscopy $651.27 5,421 1 18,333 43234 T Upper gi endoscopy exam $656.09 568 . 1,006 43600 T Biopsy of stomach $685.79 6 . 16

43243 T Upper gi endoscopy & inject $735.82 174 . 354

43241 T Upper gi endoscopy with tube $760.58 172 . 504 43499 T Esophagus surgery $2,102.2 556 . 1,484CMS-1525-FC 414

I APC HCPCS Code SI DESCRIPTION Median Cost Single Bill Frequency Percent of Single Bills Total Bill Frequency procedure 6

0419 T Level II Upper GI Procedures 887.02 92,633 . 176,640

91111 T Esophageal capsule endoscopy $705.62 113 . 130

43250 T Upper gi endoscopy/tumor $716.68 986 1 3,278

43201 T Esoph scope w/submucous inj $739.21 107 . 287

43237 T Endoscopic us exam esoph $767.86 397 . 759

43259 T Endoscopic ultrasound exam $778.41 14,488 16 23,686

43251 T Operative upper gi endoscopy $791.81 3,066 3 11,680

43231 T Esoph endoscopy w/us exam $792.01 387 . 526 43246 T Place gastrostomy tube $803.98 16,328 18 22,843 43458 T Dilate esophagus $828.33 147 . 1,376 49446 T Change g-tube to g-j perc $849.75 403 . 732

43244 T Upper gi endoscopy/ligation $859.62 5,376 6 7,380

43255 T Operative upper gi endoscopy $862.67 4,041 4 8,073

49440 T Place gastrostomy tube perc $879.79 1,891 2 3,113

43205 T Esophagus endoscopy/ligation $887.78 126 . 152 43249 T Esoph endoscopy dilation $888.34 20,318 22 53,074 43215 T Esophagus endoscopy $893.83 231 . 987

43245 T Uppr gi scope dilate strictr $902.32 2,607 3 5,744 43217 T Esophagus endoscopy $912.55 24 . 108 43226 T Esoph endoscopy dilation $926.00 804 1 1,272CMS-1525-FC 415

I APC HCPCS Code SI DESCRIPTION Median Cost Single Bill Frequency Percent of Single Bills Total Bill Frequency 49441 T Place duod/jej tube perc $955.65 151 . 263 43220 T Esoph endoscopy dilation $990.70 642 1 1,015 44100 T Biopsy of bowel $1,030.2 1 4 . 23

43240 T Esoph endoscope w/drain cyst $1,030.5 3 41 . 104

43238 T Uppr gi endoscopy w/us fn bx $1,035.1 0 408 . 593

43232 T Esoph endoscopy w/us fn bx $1,046.0 2 385 . 501

43242 T Uppr gi endoscopy w/us fn bx $1,104.7 0 13,185 14 17,943

43258 T Operative upper gi endoscopy $1,118.1 7 5,950 6 10,953 43227 T Esoph endoscopy repair $1,403.9 3 27 . 45

. . . . 0422 T Level III Upper GI Procedures 1819.19 3,030 . 3,924

43216 T Esophagus endoscopy/lesion $1,078.0 4 14 . 38

43257 T Uppr gi scope w/thrml txmnt $1,535.0 7 63 2 92 43870 T Repair stomach opening $1,559.2 4 101 3 166 43830 T Place gastrostomy tube $1,629.5 5 168 6 318 43228 T Esoph endoscopy ablation $1,832.3 9 2,643 87 3,231 C9724 T EPS gast cardia plic $5,944.4 3 41 1 79
b. Gastrointestinal Transit and Pressure Measurement (APC 0361)CMS-1525-FC 416

I The AMA CPT Editorial Panel created CP T code 0242T (Gastrointestinal tract transit and pressure measurement, stomach through colon, wireless capsule, with interpretation and report) effective Ja nuary 1, 2011. For CY 2011, we assigned CPT code 0242T to APC 0361 (Level II Alimentary Tests) with a payment rate of $282.48. For CY 2012, we proposed to maintain the assignment of CPT c ode 0242T to APC 0361 with a proposed rule median cost of approximately $295, and a proposed payment of $284.80. (The CY 2012 OPPS/ASC final ru le median cost for APC 0361 is approximately $286.)
Comment : Several commenters on the CY 2011 final rule with comment period regarding the APC assignment of CPT code 0242T, requested reassignment of CPT code 0242T from APC 0361 to New Technology APC 1510 (New Technology APC - Level X), which has a payment rate of $850. The commenters claimed that CPT code 0242T is not similar to the other procedures assigne d to APC 0361 either in terms of clinical similarity or resource costs; therefore, it should be assigned to a New Technology APC because there currently are insu fficient utilization and claims data for the service. The commenters believed that CPT code 0242T is significantly different than the other procedures in APC 0361, which are predomin antly indicated to assess the esophagus, while CPT code 0242T is purportedly a unique te st that provides tr ansit, pressure, pH, and temperature measurement of the GI tr act from the stomach to the colon. The commenters also stated that the resources, incl uding clinical labor, fo r the procedures in APC 0361 differ from those of CPT code 0242T . The commenters claimed that the manometric tests assigned to APC 0361 measure neur omuscular activity in anCMS-1525-FC 417

I anatomically specific, fixed manner, utilizi ng a reusable catheter, while CPT code 0242T utilizes a disposable capsule and a special m eal to capture multiple pressure and transit measurements throughout the GI tract and co st $600 per procedure. Adding other procedure costs to the disposable costs yi elds total procedure costs in excess of $800, according to the commenters. The commenters point to the past assignment of CPT code 91110 (Gastrointestinal tract imaging, intral uminal (eg, capsule endoscopy), esophagus through ileum, with physician interpretati on and report) to a New Technology APC until sufficient claims data were gathered for assi gnment to a clinical APC, and they request a similar approach to APC assignment for CPT code 0242T. Response : We disagree that assignment to a clinical APC necessarily implies that there are clinical and cost data for a new service. We rou tinely make assignments of new CPT codes to clinical APCs before we have cl aims data that are indicative of their source costs of a procedure. We make these assignments initially using the best currently available information, while reviewing claims data once such data become available and making reassignments accordingly based on those data. We expect to do the same regarding CPT code 0242T. As was the case when we made the in itial assignment for CY 2011, we continue to believe that there are relevant clinical similarities between the CPT code 0242T service and other services in APC 0361 to continue to justify this APC assignment. CPT code 0242T and the services in APC 0361 all involve tests of the al imentary canal. Regarding resource costs, the final rule median co st of APC 0361 is approximately $288, with a median cost range of procedures in the APC from approximately $235 to approximatelyCMS-1525-FC 418

I $680. We do not believe a New Technology APC is warranted for this procedure at this time. We believe that the c linical attributes and CY 2012 me dian costs of the services found in APC 0361 support the assignment of CP T code 0242T to APC 0361 as an initial assignment. We generally wait until median cost claims data are available before reassignment to a new APC. For CY 2012, we will maintain our assignment of CPT code 0242T to APC 0361, which has a final median cost of approximately $286. We will review this assignment for CY 2013 when some claims data should be available for this procedure. 3. Genitourinary Services a. Laser Lithotripsy (APC 0163) For CY 2012, we proposed to continue to assign CPT codes 52353 (Cystourethroscopy, with ureteroscopy and/ or pyeloscopy; with lithotripsy (ureteral catheterization is included)) and 50590 ((Fragmenting of kidne y stone) to their existing CY 2011 APCs. That is, we proposed to continue to assign CPT code 52353 to APC 0163 (Level IV Cystourethroscopy and other Genitourinary Procedures), which had a proposed payment rate of approximately $2,566, and to continue to assign CPT code 50590 to APC 0169 (Lithotripsy), which had a proposed payment rate of approximately $3,568. CPT code 50590 was made effective January 1, 1986, and describes an extracorporeal shock wave lithotripsy. CP T code 52353 was made effective January 1, 2001, and describes a cystourethroscopy with li thotripsy. Our understanding is that the lithotripsy described in CPT code 52353 is laser lithotripsy.CMS-1525-FC 419

I At the August 2011 APC Panel Meeting, a presenter requested the Panel to recommend to CMS to reassign CPT code 52353 from APC 0163 to the same APC as CPT code 50590, which is APC 0169. The presenter stated that the proposed payment rate for APC 0169 for CY 2012 shows an increase of approximately 23 percent in the OPPS and approximately 25 percent in the ASCs, while the proposed payment rate for APC 0163 shows a 0.3 percent decrease in th e OPPS and a 1.3 percent decrease in the ASCs, thereby creating a significant financia l advantage for shock wave lithotripsy over ureteroscopy with lithotripsy. The presente r further suggested that placing CPT code 52353 in APC 0169 would be clinically appropr iate because both procedures describe lithotripsy of stones in the ureter and kidney, and also because their historical median costs have tracked closely over time. Afte r discussion of the of the median costs observed for both CPT codes 52353 and 50590, the APC Panel made no recommendation on the CY 2012 APC assignment for CPT code 52353.
Comment : Some commenters recommended the reassignment CPT code 52353 to the same APC as CPT code 50590, which is APC 0169. One commenter argued that the reassignment of CPT code 52353 to AP C 0169 would avoid pot ential incentives to use shock wave lithotripsy over ureteroscopy with lithotripsy. This commenter further stated that these two similar and competing procedures should be placed in the same APC so that their OPPS and ASC payment rates will increase, or decrease, consistently in the future. Response : CPT code 50590 has been assigned to APC 0169 since the OPPS was implemented in 2000. CPT code 52353 was ini tially assigned to APC 0162 (Level IIICMS-1525-FC 420

I Cystourethroscopy Procedures) when the CPT code was made effective in 2001. However, in CY 2002, we revised the APC assignment for CPT code 52353 to APC 0163 (Level IV Cystourethroscopy Pr ocedures) based on input from our clinical advisors that the procedure is similar to the other procedures in APC 0163 based on clinical homogeneity and resource costs. Since CY 2002, CPT code 52353 has been assigned to
APC 0163. In addition, we disagree with the commenter that placing these two procedures in two separate APCs creates an incentive to use one procedure over another. We believe that physicians would choose the most a ppropriate procedure based on a patient's diagnosis and other relevant clin ical factors. Further, based on our claims data, we do not believe that placing both pr ocedures in the same APC would be appropriate. Our analysis of the final CY 2012 claims data rev eal that shock wave lithotripsy (CPT code 50590) is more commonly performed on Medi care patients than ureteroscopy with lithotripsy (CPT code 52353). Specifically, our data show a CPT median cost of approximately $2,711, based on 3,366 single cl aims, for CPT code 52353. CPT code 52353 represents 22 percent of the claims w ithin APC 0163, and its CPT median cost of approximately $2,711 is relatively close to the CY 2012 final APC median cost of approximately $2,596 for APC 0163. In contrast, the CY 2012 final median co st for CPT code 50590, which is in APC 0169, is approximately $3,647, based on 30,178 single claims. This final median cost of approximately $3,647 for CPT code 50590 is high er than the final median cost of approximately $2,711 for CPT code 52353.CMS-1525-FC 421

I Comment: One commenter suggested that the increase in the median cost for CPT code 50590 may be a result of the applic ation of a CCR calculated from costs and charges reported in the nonstandard cost center data for lithotripsy. Response: The nonstandard lithotripsy cost center 07699 is a feature of the hospital cost report CMS 2552-10. No CMS 2552-10 cost reports were used in determining the payment rates for the CY 2012 OPPS. The CCRs in the CY 2012 OPPS are created from the hospital cost repor t CMS 2552-96, and there is no standard or nonstandard lithotripsy cost center in the CMS 2552-96 cost report. Given our claims data for the CY 2012 update for these lithotri psy procedures, we believe that CPT code 52353 is appropriately placed in APC 0163 based on its clinical homogeneity and resource cost compared to other procedures already assigned in APC 0163. 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 continue to review on an annual basis the APC assignment for CPT code 52353 and determine whether a r eassignment in the APC is necessary. Therefore, after consideration of th e public comments we received, we are finalizing our CY 2012 proposal, without modifi cation, to continue to assign CPT code 52353 to APC 0163, which has a final CY 2012 median cost of approximately $2,596, and to continue to assign CPT code 50590 to APC 0169, which has a final CY 2012 median cost of approximately $3,647. b. Percutaneous Renal Cryoablation (APC 0423)CMS-1525-FC 422

I For CY 2012, we proposed to continue to assign CPT code 50593 (Ablation, renal tumor(s), unilateral, percutaneous, cryothe rapy) to APC 0423 (Lev el II Percutaneous Abdominal and Biliary Procedures), with a proposed payment rate of approximately $3,969. This CPT code was new in CY 2008; how ever, the same service was previously described by CPT code 0135T (Ablation re nal tumor(s), unilateral, percutaneous, cryotherapy). We note that in CY 2007, based upon the APC Panel's recommendation made at the March 2006 APC Panel meeti ng, we reassigned CPT code 50593 (then CPT code 0135T) from APC 0163 ((Level IV Cyst ourethroscopy and other Genitourinary Procedures)) to APC 0423. We expect hospitals, when reporting CPT code 50593, to also report the device HCPCS code, C2618 (P robe, cryoablation), a ssociated with the procedure.
Comment : One commenter disagreed with th e proposed continued assignment for CPT code 50593 to APC 0423 because, the commenter stated, this APC includes other procedures that do not require the use of high-cost devices, su ch as cryoablation probes. The commenter reported that the payment ra te of approximately $3,969 for the procedure does not accurately reflect the costs incurred by hospitals that perform this procedure, and, as a result, hospitals are reluctant to perform this procedure. The commenter suggested that CMS determine the payment rate for CPT code 50593 based on its mean cost, rather than on median cost. The comment er stated that the proposed mean cost for APC 0423 is approximately $4,835, and approximately $5,394 for CPT code 50593. Further, the commenter recommended that CMS designate CPT code 50593 as a devicedependent procedure and require hospitals to submit claims with the appropriate HCPCSCMS-1525-FC 423

I code, C2618, so that charges can be reported appropriately. The commenter stated that CPT code 50593 cannot be performed without the device, and adding CPT code 50593 to the device-dependent procedure list would result in more accurate claims data for future ratesetting. Response : First, we believe that CPT code 50593 is appropriately placed in APC 0423 based on clinical and res ource costs when compared to other procedures also assigned to APC 0423. As we stated in the CY 2007 OPPS final rule with comment period (71 FR 68049 through 68050), the CY 2008 OPPS/ASC final rule with comment period (72 FR 66709), the CY 2009 OPPS/AS C final rule with comment period (73 FR 68611), the CY 2010 OPPS/ASC final ru le with comment period (74 FR 60444), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 71910), we revised the APC assignment for the percutaneous rena l cryoablation procedure from APC 0163 to APC 0423 in CY 2007 based on the APC Pane l’s recommendation to reassign the procedure to APC 0423. For CY 2012, we proposed to assign four CPT codes to APC 0423. These procedures share similar median cost s ranging from approximately $3,733 to approximately $4,493, which are well within the tw o-fold variation in median cost that is permitted by the law for an OPPS payment group. Therefore, the grouping of these procedures in the same APC does not violate th e 2 times rule. We note that all four of these procedures are relatively low volume, with fewer than 1,800 total claims each for CY 2010 and fewer than 700 single claims each for ratesetting. We believe that grouping these clinically similar, low-volume procedur es for the percutaneous ablation of renal,CMS-1525-FC 424

I liver, or pulmonary tumors in the same paym ent group helps to promote payment stability for these low volume services. Secondly, as we stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68611), the final APC relative weight s and payment rates are based on median hospital costs, not mean costs, for APC groups . The OPPS relies on th e relativity of costs for procedures as reported by hospitals in establishing payment rates, and we do not believe it would be appropriate to uti lize a different payment methodology based on mean cost for one APC, while the payment ra tes for the other clinical APCs would be based on median costs. Mean and median cost s are two different statistical measures of central tendency and, based on common distri butions, mean costs typically are higher than median costs. Therefore, we do not believe it would be appropriate to use a combination of these measures to establish the payment weights for different APCs under the OPPS. Further, as we stated in the CY 2007 OPPS final rule with comment period (71 FR 68049 through 68050), the CY 2008 OPPS/A SC final rule with comment period (72 FR 66709), the CY 2009 OPPS/ASC final ru le with comment period (73 FR 68611), the CY 2010 OPPS/ASC final rule with co mment period (74 FR 60444), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 71910), we designate a procedure as device-dependent service based on consideration of all the procedures in a single APC. While all of the procedures assigned to APC 0423 require the use of implantable devices, for many of the procedur es, there are no Level II HCPCS codes that describe all of the technologies that may be used in the pr ocedures. Therefore, it wouldCMS-1525-FC 425

I not be possible for us to develop procedur e-to-device edits for all of the CPT codes assigned to APC 0423. Finally, we remind hospitals th at we expect all of the HCPCS codes to be reported that appropriately describe the items used to provide services, rega rdless of whether the HCPCS codes are packaged or paid sepa rately. When reporting CPT code 50593, we expect hospitals to also report the device HCPCS code C2618, which is associated with this procedure. If hospitals use more than one probe in performing the CPT code 50593 procedure, we expect hospitals to report th is information on the claim and adjust their charges accordingly. Hospitals should report the number of cryoabla tion probes used to perform the CPT code 50593 procedure as the units of HCPCS code C2618, which describes these devices, with their charges for the probes. Since CY 2005, we have required hospitals to report device HCPCS code s for all devices used in procedures if there are appropriate HCPCS codes available. In this way, we can be confident that hospitals have included charge s on their claims for devices used in procedures when they submit claims for those procedures. After consideration of the public comment we received, we are finalizing our CY 2012 proposal, without modification, to c ontinue to assign CPT code 50593 to APC 0423, which has a final CY 2012 APC median cost of approximately $4,096. 4. Nervous System Services a. Revision/Removal of Neurostim ulator Electrodes (APCs 0040 and 0687)
As discussed in detail in the CY 2012 OPPS/ASC proposed rule (76 FR 42233 through 42234), for CY 2012, we proposed to move CPT codes 63663 (Revision,CMS-1525-FC 426

I including replacement, when performed, of spinal neurostimulator electrode percutaneous array(s), including fluoroscopy, when pe rformed) and 63664 (Revision, including replacement, when performed, of spinal neur ostimulator electrode pl ate/paddle(s) placed via laminotomy or laminectomy, including fluoroscopy, when performed) from APC 0687 (Revision/Removal of Neurostimula tor Electrodes) to APC 0040 (Level I Implantation/Revision/Replacement of Neurost imulator Electrodes). We noted that the proposed CY 2012 median costs for CPT codes 63663 and 63664 of approximately $4,316 and $4,883, respectively, are more consistent with the proposed median cost of APC 0040 of approximately $4,516 than with th e proposed median cost of APC 0687 of approximately $1,492. We also proposed to change the title of APC 0040 from “Percutaneous Implantation of Neuros timulator Electrodes” to “Level I Implantation/Revision/Replacement of Neurost imulator Electrodes” and the title of APC 0061 (Level II Implantation/Revision/Replacemen t of Neurostimulator Electrodes) from “Laminectomy, Laparoscopy, or Incision fo r Implantation of Neurostimulator Electrodes” to “Level II Implantation/Re vision/Replacement of Neurostimulator Electrodes.” CPT codes 63661 (Removal of spinal neurostimulator electrode percutaneous array(s), including fluoro scopy, when performed), 63662 (Removal of spinal neurostimulator electrode plate/paddl e(s) placed via laminotomy or laminectomy, including fluoroscopy, when performe d), 63663, and 63664 were all effective January 1, 2010. We proposed that CPT codes 63661 and 63662 would remain in
APC 0687.CMS-1525-FC 427

I In addition, for CY 2012, we propos ed to assign CPT 64569 (Revision or replacement of cranial nerve (eg, vagus nerve) neurostimulator electrode array, including connection to existing pulse generato r), effective January 1, 2011, to APC 0687.
Comment : Several commenters supported the proposed reassignment of CPT codes 63663 and 63664 from APC 0687 to APC 0040. The commenters believed that the proposed reassignment places these CPT codes in an APC that is consistent with their median costs. The commenters also s upported the retention of CPT code 63661 and 63662 in APC 0687 because their proposed CY 2012 median costs are consistent with the overall proposed APC 0687 median costs. In addition, the commenters agreed with the proposed title changes for APC 0040 and APC 0061. One commenter agreed with the proposed reassignment of CPT codes 63663 and 63664 to APC 0040 but recommended the creation of two new HCPCS codes to allow hospitals to differentiate between revision and replacement procedures and to foster analysis of the cost differences between revision and replacement procedures for pur poses of future APC assignments. The commenter also sought device -to-procedure and procedure- to-device edits to ensure device costs are completely captured. Response : We appreciate the commenters’ s upport for the reassignment of CPT codes 63663 and 63664 from APC 0687 to APC 0040, the continued assignment of CPT codes 63661 and 63664 to APC 0687, and the ti tle changes to APC 0040 and APC 0061. We agree with the commenters that the propos ed changes would ensure that all four codes are in APCs that are c onsistent with their median costs. Therefore, we are finalizing our proposals to reassign CPT codes 63663 and 63664 to APC 0040, toCMS-1525-FC 428

I continue to assign CPT codes 63661 and 63662 to APC 0687, and to change the titles of APC 0040 to “Level I Implantation/Revi sion/Replacement of Neurostimulator Electrodes” and APC 0061 to “Level II Implantation/Revision/Replacement of Neurostimulator Electrodes.” We do not agree that it is necessary to create new HCPCS codes in order to differentiate between neurostimulator electrod e replacement and revision procedures. As we discussed in the CY 2012 OPPS/ASC propos ed rule (76 FR 42234), we examined the CY 2010 claims data available for the proposed rule to compare the frequency of claims containing CPT codes 63663 or 63664 that were billed with and without HCPCS code C1778 (Lead, neurostimulator (implant able)) or HCPCS code C1897 (Lead, neurostimulator test kit (implantable)) in orde r to determine whether they describe mainly device revision or replacement procedures. Because the majority of claims did not contain HCPCS code C 1778 or C1897, these fi ndings suggested that these CPT codes are being used by hospitals to describe main ly device revision pr ocedures, although there were a significant number of cases with devi ce replacement procedures in the claims data. We also note that we implemented cl aims processing logic to allow CPT codes 63663 and 63664 to satisfy the device-to-pro cedure edits for HCPCS codes C1778 and C1897, effective January 1, 2012. We cannot imp lement procedure-to-device edits for CPT codes 63663 and 63664 because they do not always involve the implantation of a device.
Comment : One commenter objected to the proposed assignment of CPT code 64569 to APC 0687. The commenter stated that CPT code 64569 is clinically similar toCMS-1525-FC 429

I CPT codes 63663 and 63664, the only difference being CPT code 64569 is an incision-based procedure, while CPT codes 63663 and 63664 are percutaneous. The commenter also argued that assigning CPT code 64569 to APC 0687 would result in significant financial losses for hospitals and presented simulated data using claims for CPT code 63663 and 63664 to estimate a median cost for CPT code 64569 ranging between approximately $5,551 and $7,790. Response : We are assigning CPT code 64569 to APC 0687, as we proposed, with a CY 2012 final rule median cost of appr oximately $1,451. We do not agree that CPT code 64569 is inappropriately assigned to APC 0687. Our clinical anal ysis indicates that CPT code 64569 is similar to the other devi ce revision and replacement procedures in APC 0687. Furthermore, since CPT code 64569 was effective January 1, 2011, we do not have frequency and cost information upon which to make an assessment of whether there is a meaningful difference between th e cost of revising th e VNS electrodes and generator or replacing them. We do not agre e with the commenter that it is possible to derive meaningful estimates of the costs of providing the service described by CPT code 64569 by using data for CPT codes 63663 and 63664 because these codes involve different types of devices. Therefore, we are not convinced by th e commenter that the assignment of the CPT code 64569 to APC 0687 is inappropriate. As we did with the CPT codes 63661 through 63664, we will continue to monitor and analyze the data for CPT code 64569 when it becomes available. After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to assi gn CPT codes 63663 and 63664 to APC 0040 andCMS-1525-FC 430

I to assign CPT codes 63661, 63662, and 64569 to AP C 0687. We also are finalizing our proposal to change the title of APC 0 040 from “Percutaneous Implantation of Neurostimulator Electrodes” to “Level I Implantation/Revision/Replacement of Neurostimulator Electrodes” and the title of APC 0061 from “Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes” to “Level II Implantation/Revision/Replacement of Neurostimulator Electrodes.” b. Magnetoencephalography (MEG) (APCs 0065, 0066, and 0067) There are three CPT codes associated with MEG: 95965 (Magnetoencephalography (meg), recording a nd analysis; for spontaneous brain magnetic activity (eg, epileptic cerebral cortex lo calization)); 95966 (Magnetoencephalography (meg), recording and analysis; for evoked magnetic fields, single modality (eg, sensory, motor, language, or visual cortex loca lization)); and 95967 (Ma gnetoencephalography (meg), recording and analysis; for evoked magnetic fields, each additional modality (eg, sensory, motor, language, or visual cortex localization)). For CY 2012 we calculated a proposed rule median cost of approximately $1,821 for CPT code 95965 based on a frequency of 48 single bills out of a total fre quency of 50 bills. We proposed to continue to assign CPT code 95965 to APC 0067 (Level III Stereotactic Ra diosurgery, MRgFUS, and MEG), which had a proposed rule median cost of approximately $3,368. At its August 10-11, 2011 meeting, the AP C Panel made two recommendations with regard to CPT code 95965. First, the APC Panel recommended t hat CMS implement appropriate edits requiring hospita ls to use the new MEG revenue code, 086X, with CPT codes 95965, 95966, and 95967. We a ddress this recommendation in theCMS-1525-FC 431

I context of a comment from the public to which we respond below. Second, the APC Panel recommended that CMS move CP T code 95965 from APC 0067 to APC 0066 (Level II Stereotactic Radi osurgery, MRgFUS, and MEG), for consistency. We agree with this recommendation and have rea ssigned CPT code 95965 to APC 0066 because the median cost in the data available for this final rule with comment period for CPT code 95965 of approximately $1,741 is similar to the median cost of APC 0066 of approximately $2,521. In contrast, the medi an cost of APC 0067 of approximately $3,374 is substantially above the median cost for CPT code 95965. We note that the procedure described by CPT code 95965 is a low-volume service for which we have a single bill frequency of 70, compared to a total bill frequency of 75, in our CY 2012 OPPS final rule data. Although it is a low- volume service, single bills represent 93 percent of total frequency for CPT code 95965.
Comment : Commenters stated that the costs of MEG are far higher than the costs of electroencephalograms (EEG) and electroc ardiograms (ECG) and that therefore CMS should not use the CCRs from the cost centers for these services to reduce the charges for MEG to costs. Instead, according to comment ers, CMS should create a new cost center on the Medicare hospital cost repo rt to isolate the costs of MEG and calculate and apply a CCR from the dedicated MEG co st center to the charges for MEG to secure a more accurate estimated cost for MEG. Response : We refer readers to section II.A.1.c . of this final rule with comment period for a summary of public comments and responses related to the use of the CCRsCMS-1525-FC 432

I for cost centers 3280 (EKG and EEG) as pr imary and 5400 (Electroencephalography) as secondary, to reduce the charges for MEG to estimated relative costs.
Comment : Commenters urged CMS to requir e that hospitals use revenue codes that are specific to MEG. One hospital that furnished comments indicated that its MEG services are furnished through the radiology de partment, but that the department through which MEG services are furnis hed varies across hospitals. (As indicated previously, the APC Panel recommended that CMS implement appropriate edits requiring hospitals to use the MEG specific revenue codes, 086X, with CPT codes 95965, 95966, and 95967.) Response : As we indicate in the Section 20.5, Chapter 4, of the Medicare Claims Processing Manual, generally, CMS does not instruct hospitals on the assignment of HCPCS codes to revenue codes for services provided under OPPS because hospitals’ assignment of cost vary (available on the CMS Web site at: http://www.cms.gov/Manuals ; select Internet Only Manuals). Where explicit instructions are not provided, hospitals should report thei r charges under the revenue code that will result in the charges being assigned to the sa me cost center to which the cost of those services are assigned in the cost report. We do not believe that establishing edits to require hospitals to report th e charges for MEG under the dedicated MEG revenue code series is necessary or appropr iate. Medicare pays for a lo w volume of MEG services for which there are no special requirements that would justify creation of edits that force hospitals to report particular revenue codes fo r particular CPT codes. Specifically, in the CY 2012 final rule claims data, a small numbe r of hospitals reported one of the three CPT codes for MEG. We believe that it is not reasonable to implement nationalCMS-1525-FC 433

I CPT-to-revenue code edits to enforce the use of MEG-specific revenue codes when a small number of hospitals reported only 144 lines of MEG total for the 3 MEG codes in CY 2010. Specifically, in the final rule sing le bills on which we are basing the CY 2012 median costs, 4 hospitals reported 31 lines of CPT code 95967; 6 hospitals reported 384 lines of CPT code 95966; and 10 hospitals reported 75 lines of CPT code 95965. The MEG codes were first paid under the OPPS as new technology services in CY 2006 and the total frequency of services and the number of hospitals th at furnish the service have always been very low. For CY 2012, as stated previousl y, we are accepting the APC Panel’s recommendation to reassign CPT code 95965 to APC 0066 because the CY 2012 final rule median cost of CPT code 95965 of approxi mately $1,741 is more similar to the final median cost of APC 0066 of approximately $2,521 than to the median cost of APC 0067, which is approximately $3,374. We are not accepting the APC Panel’s recommendation to implement edits requiring that hospitals that furnish MEG must report the charges for the service using the MEG specific revenue code series 086X for the reasons stated above. For a response to the commenters’ re quests for a dedicated cost center on the Medicare cost report, we refer readers to sec tion II.A.c. of this final rule with comment period. c. Transcranial Magnetic Stim ulation Therapy (TMS) (APC 0218) For CY 2011, the CPT Editorial Panel deleted CPT code 0160T (Therapeutic repetitive transcranial magnetic stimulat ion treatment planning) on December 31, 2010, and replaced it with CPT codes 90867 (Therape utic repetitive transcranial magneticCMS-1525-FC 434

I stimulation treatment; planning) effectiv e January 1, 2011. Similarly, CPT code 0161T (Therapeutic repetitive transcranial ma gnetic stimulation tr eatment delivery and management, per session) was deleted on December 31, 2010, and was replaced with CPT code 90868 (Therapeutic re petitive transcranial magne tic stimulation treatment; delivery and management, per session) effective January 1, 2011. In Addendum B to the CY 2011 OPPS/ASC final rule with comment period, CPT codes 90867 and 90868 were assigned to APC 0216 (Level III Nerve and Muscle Tests) with a payment rate of approximately $186 and were flagged with comment indicator “NI” to indicate that these codes were ne w codes for CY 2011 with an interim APC assignment subject to public comment. We stated that we would address any public comments on issues regarding these new code s in this CY 2012 OPPS/ASC final rule with comment period. In addition, in the CY 2012 OPPS/ASC proposed rule, we proposed to continue to assign CPT codes 90867 and 90868 to APC 0216 for CY 2012.
Comment : One commenter on the CY 2011 O PPS/ASC final rule with comment period agreed with the APC assignment for CPT code 90867 and indicated that APC 0216 is appropriate, based on the resources required to perform TMS planning and its similarity to other procedures with similar resource costs in this APC. However, this same commenter disagreed with the pl acement of CPT code 90868 in APC 0216. The commenter stated there are no clinically sim ilar procedures in APC 0216 whose resources are comparable to that of TMS treatment delivery, and recommended the reassignment of CPT code 90868 from APC 0216 to APC 0320 (Ele ctroconvulsive Therapy), which has aCMS-1525-FC 435

I payment rate of approximately $414 for CY 2011. The commenter asserted that the hospital outpatient claims data for TMS is not reliable and, therefore, should not be used as the basis for the assignment of CPT code 90868 to APC 0216. Response : Although both CPT codes 90867 and 90868 were new codes for CY 2011, the services they describe are not ne w because they were previously described by two predecessor CPT codes, specifically Category III CPT codes 0160T and 0161T. CPT code 90867 was previously describe d by CPT code 0160T, and CPT code 90868 was previously described by CPT code 0161T. Both CPT codes 0160T and 0161T were made effective July 1, 2006, and deleted on December 31, 2010. From July 1, 2006 through December 31, 2010, both CPT codes 0160T and 0161T were assigned to
APC 0216. We do not agree with the commenter that CPT code 90868 should be placed in APC 0320 based on resource similarity. Based on analysis of our hospital outpatient claims data for predecessor CPT codes 0160T and 0161T from CY 2006 through CY 2010, we believe that both CPT codes 90867 and 90868 would be more appropriately placed in APC 0218 (Level II Nerve and Muscle Tests) rather than in the proposed APC 0216. There were no claims data for either procedure (as described by CPT codes 0160T and 0161T) during CY 2006, CY 2007, and CY 2008. For the CY 2011 OPPS/ASC final rule with comment period, we used claims processed during CY 2009 for ratesetting, and our claims data showed a CPT median co st of approximately $176 for CPT code 0160T based on 17 single claims (out of 17 total claims), and a CPT median cost also of approximately $176 for CPT code 0161T base d on 68 single claims (out of 69 totalCMS-1525-FC 436

I claims), which closely resemble the APC median cost of approximately $184 for APC 0216 for the CY 2011 OPPS. However, for this CY 2012 OPPS/ASC final rule with comment period, which is based on the CY 2010 hospital outpa tient claims for ratesetting, our claims data show a CPT medi an cost of approximately $88 for CPT code 0160T (which is now described by CPT code 90867) based on 6 single claims (out of 9 total claims), and a CPT median cost of approximately $105 for CPT code 0161T (which is now described by CPT code 90868) based on 211 single claims (out of 221 total claims). Given our claims data for pr edecessor CPT codes 0160T and 0161T, we believe that both CPT codes 90867 and 90868 are approp riately placed in APC 0218, which has a final APC median cost of approximately $84 for CY 2012 based on clinical homogeneity and resource costs. We note that the OPPS methodology allows hos pitals to actively contribute on an ongoing basis to the ratesetting process and to influence future payment rates for services by submitting correctly c oded and accurately priced claims for the services they provide. According to this methodology, it is genera lly not our policy to judge the accuracy of hospital coding and charging for purposes of ratesetting. We also do not agree with the commenter that the procedure described by CPT code 90868 would fit into APC 0320 from a clinic al perspective because the provision of electroconvulsive therapy generally requires more extensive m onitoring and services (for example, muscle blockade) than transcranial magnetic treatment delivery and management. Therefore, after consideration of the public comment we received on the CY 2011 OPPS/ASC final rule with co mment period, we are finalizi ng our CY 2012 proposal, with modification. That is, we are reassi gning CPT codes 90867 and 90868 from APC 0216CMS-1525-FC 437

I to APC 0218, which has a final CY 2012 median cost of approximately $84. Given the information reflected in the CY 2012 final ru le claims data for predecessor CPT codes 0160T, which shows a median cost of approximately $105, and a median cost of approximately $88 for CPT code 0161T, we belie ve our claims data show the costs of these procedures are similar to the costs of other proce dures assigned to APC 0218. We also believe that these procedures are simila r to the other procedures assigned to APC 0218 from a clinical standpoint. We will reevaluate the APC assignment for CPT codes 90867 and 90868 in future OPPS updates as additional information becomes available to

us. 5. Ocular and Ophthalmic Services a. Placement of Amniotic Membrane (APCs 0233 and 0244) For the CY 2011 update, the AMA CP T Editorial Panel revised the long descriptor for CPT code 65780 (Ocular surf ace reconstruction; amniotic membrane transplantation, multiple layers) to include th e words “multiple layers” to further clarify the code descriptor. In addition, the AM A CPT Editorial Panel created two new CPT codes that describe the placement of amniotic membrane on the ocular surface without reconstruction; one describing the placement of a self-retaining (non-sutured/non-glued) device on the surface of the eye, and the othe r describing a single layer of amniotic membrane sutured to the surface of the eye. Specifically, the AMA CPT Editorial Panel created CPT codes 65778 (Placement of amnio tic membrane on the ocular surface for wound healing; self-retaining) and 65779 (P lacement of amniotic membrane on the ocular surface for wound healing; single layer, sutured), effective January 1, 2011.CMS-1525-FC 438

I As has been our practice since the im plementation of the OPPS in 2000, we review all new procedures before assigning th em to an APC. In determining the APC assignments for CPT codes 65778 and 65779, we t ook into consideratio n the clinical and resource characteristics involved with placem ent of amniotic membrane products on the eye for wound healing via a self-retaining devi ce and a sutured, single-layer technique. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72402), we assigned CPT code 65780 to APC 0244 (Corneal and Amni otic Membrane Transplant) with a CY 2011 payment rate of approximately $2,681. We assigned CPT code 65778 to APC 0239 (Level II Repair and Plastic Eye Procedures ) with a payment rate of approximately $559, and CPT code 65779 to APC 0255 (Level II An terior Segment Eye Procedures) with a payment rate of approximately $519. In addition, we assigned both CPT codes 65778 and 65779 to comment indicator “NI” in Addendum B of the CY 2011 OPPS/ASC final rule with comment period to indicate that both codes were new codes for CY 2011 with an interim APC assignment subject to public co mment. We further stated that we would address any public comments on issues rega rding these new codes in this CY 2012 OPPS/ASC final rule with comment period. At the APC Panel at the February 28 -March 1, 2011 meeting, a presenter requested the reassignment of both new CPT codes 65778 and 65779 to APC 0244, which is the same APC to which CPT code 65780 is assigned. The presenter indicated that, prior to CY 2011, the procedures described by CPT codes 65578 and 65779 were previously reported under the original version of CPT c ode 65780, which did not specify “multiple layers,” and, as such, these new codes should continue to be assigned to APCCMS-1525-FC 439

I 0244. Further, the presenter stated that the co sts of the new procedur es described by CPT codes 65778 and 65779 are very similar to th e procedure described by CPT code 65780. The APC Panel recommended that CM S reassign both CPT codes 65778 and 65779 to APC 0233 (Level III Anterior Segm ent Eye Procedures), citing clinical similarity to procedures al ready in APC 0233. Based on clin ical as well as resource similarity to the other procedures curr ently assigned to APC 0233, in the CY 2012 OPPS/ASC proposed rule (76 FR 42237), we proposed to accept the APC Panel's recommendations to reassign CPT code 65778 from APC 0239 to APC 0233 and to reassign CPT code 65779 from APC 0255 to APC 0233. However, based upon our further review and analysis of the clinical characteristics of the procedure described by CPT code 65778, we also proposed to c onditionally package CPT code 65778. The service described by CPT code 65778 would rarely be provided as a separate, stand-alone service in the HOPD; it would almost excl usively be provided in addition to and following another procedure or service. Our medical ad visors indicated that the procedure described by CPT code 65778 is not significantly differe nt than placing a bandage contact lens on the surface of the eye to cover a corneal epithelial defect. CPT code 65778 describes the simple placement of a special type of banda ge (a self-retaining amniotic membrane device) on the surface of the eye, which would most commonly be used in the HOPD to cover th e surface of the eye after a procedure that results in a corneal epithelial defect. In fact, the self-retaining amniotic membrane device is structurally similar to a bandage contact lens, except that the central material is amniotic membrane instead of contact lens polymer. Given the characteristics of this procedure,CMS-1525-FC 440

I the device used in the procedure, and its likely use in the HOPD, we proposed to conditionally package CPT code 65778 for CY 2012 and reassign its status indicator from “T” to “Q2” to indicate th at the procedure is packaged when it is billed on the same date with another pro cedure or service that is also a ssigned to status indicator “T.” Otherwise, separate payment woul d be made for the procedure. In summary, for CY 2012, we proposed to reassign CPT code 65778 from APC 0239 to APC 0233 with a conditionally packaged status of “Q2,” to reassign CPT code 65779 from APC 0255 to APC 0233, which had a proposed median cost of approximately $1,214, and to continue to assign CPT code 65780 to APC 0244, which had a proposed median cost of approximately $2,767. At the August 2011 APC Panel Meeting, a presenter urged the Panel to recommend to CMS not to conditionally package CPT code 65778 for CY 2012, and instead, assign it to status indicator “T.” Based on information presented at the meeting, and after further discussion on the issue, the APC Panel recommended that CMS reassign the status indicator for CPT code 65778 from conditionally packaged “Q2” to status indicator “T.”
Comment : Several commenters urged CMS not to finalize its proposal to conditionally package CPT code 65778 by assign ing it to status indicator “Q2,” and instead adopt the APC Panel's recommendation to assign it to status indicator “T.” One commenter expressed concern that c onditionally packaging CPT code 65778 is inappropriate because it will result in no paym ent for the procedure despite the significant costs hospitals incur in furnishing the servi ce, which includes the cost of the ProkeraCMS-1525-FC 441

I device (the self-retaining amniotic membrane de vice) that is used w ith this procedure. Further, this same commenter disagreed with CMS’ assertion that the service described by CPT code 65778 is merely a minor procedure that involves placing a bandage contact lens on the surface of the eye, and stated th at the service is a significant, separate procedure that should continue to be separately paid. Response : We disagree that the proce dure described by CPT code 65778 is a significant procedure. The procedure has b een described by the manufacturer as “like inserting a contact lens.” Th e manufacturer’s Web site st ates the following about the Prokera self-retaining amniotic membrane de vice: “The ProKera® device configuration enables easy insertion in the office, hospital bedside or following surgical procedures to prevent adhesions while delivering the w ound repair and wound healing actions of amniotic membrane.” Because this is a type of specialized bandage that is typically placed on the surface of the eye im mediately after a surgery that has resulted in a corneal epithelial defect, we believe that assigning CPT code 65778 to a conditionally packaged status encourages hospitals to use resources more efficiently. We expect hospitals to provide only necessary, high qua lity care and to provide that care as efficiently as possible. We expect that, for most surgically -induced corneal epithelial defects, hospitals will use a conventional eye patch or a standard bandage contact lens to promote faster wound healing and greater patien t comfort, and that they wi ll reserve very high cost products, such as the self-retaining amniotic membrane device, for rare and exceptional vision-threatening cases. We believe that the conditional packaging of CPT code 65778 is consistent with this expectation and will encourage efficient hospital outpatient careCMS-1525-FC 442

I under these circumstances. Based on the natu re of this procedure, we believe that assigning CPT code 65778 to status indicator “Q2” is appropriate under the hospital OPPS. Therefore, we are not accepting the APC Panel's recommendation to reassign this procedure to status indicator “T.” After consideration of th e public comments we received and the APC Panel's August 2011 recommendation, we are finalizi ng our proposal, without modification, to assign status indicator “Q2” to CPT code 65778. When the service is furnished with a separately payable surgical procedure with status indi cator “T”' on the same day, payment for CPT code 65778 is packaged. Otherwise, payment for CPT code 65778 is made separately through APC 0233, which has a CY 2012 final median cost of approximately $1,164. We also are finalizi ng our proposal to accept the APC Panel's recommendation to reassign CPT code 65779 from APC 0255 to APC 0233, which has a final CY 2012 median cost of approximat ely $1,164. Further, we are finalizing our proposal, without modification, to conti nue to assign CPT code 65780 to APC 0244, which has a final CY 2012 median cost of approximately $2,654. As has been our practice since the im plementation of the OPPS, we annually review all the items and services within an APC group to determine, with respect to comparability of the use of resources, for any 2 times rule violations. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignments fo r the following year. In CY 2012, we will again reevaluate the status indicator and APC assignments for CPT codes 65778, 65779,CMS-1525-FC 443

I and 65780 for the CY 2013 OPPS rulemaking cycle. The amniotic membrane procedures and their CY 2012 final APC assignments are displayed in Table 24 below.
TABLE 24.—APC ASSIGNMENTS FOR THE AMNIOTIC MEMBRANE PROCEDURES FOR CY 2012

CY 2011 HCPCS

Code CY 2011 Short Descriptor CY 2011

SI CY 2011 APC Final CY 2012 SI Final CY 2012

APC 65778 Cover eye w/membrane T 0239 Q2 0233 65779 Cover eye w/membrane suture T 0255 T 0233 65780 Ocular reconst transplant T 0244 T 0244 b. Insertion of Anterior Segment Aqueous Drainage Device (APC 0673) The AMA CPT Editorial Panel created cat egory III CPT code 0253T (Insertion of anterior segment aqueous drai nage device, without extrao cular reservoir; internal approach, into the suprachor oidal space) effective on January 1, 2011. We assigned CPT code 0253T to APC 234 (Level IV Anterior Segment Eye Procedures) in the OPPS, effective January 1, 2011 with a comment indi cator “NI” in Addendum B of the CY 2011 OPPS/ASC final rule with comment peri od (75 FR 72448). For CY 2012, we proposed to continue to assign CPT code 0253T to APC 0234, with a proposed payment rate of approximately $1,754.
Comment : A few commenters requested th at CMS reassign CPT code 0253T to APC 0673 (Level V Anterior Segment Eye Procedures), with a proposed CY 2012 payment rate of approximately $2,901. The commenters claimed that CPT code 0253T would be more appropriately placed in APC 0673 based on clinical homogeneity and resource costs. Specificall y, the commenters stated that, because CPT code 0253T is aCMS-1525-FC 444

I glaucoma treatment with an implantabl e device, it should be assigned to APC 0673 because, unlike the procedures assigned to APC 0234, the procedures assigned to APC 0673 are primarily glaucoma treatments with an implantable device. Commenters also stated that the procedure described by CPT code 0253T is very similar to the procedure described by CPT code 0191T (Insertion of an terior segment aqueous drainage device, without extraocular reservoi r; external approach), which is assigned to APC 0673. Finally, the commenters stated that the cost of the device used in CPT code 0253T is similar to that of other devices used in glaucoma treatment procedures assigned to
APC 0673. Response : After revisiting this issue and r eexamining the clinical and resource characteristics of CPT code 0253T, we agr ee with the commenters that CPT code 0253T is similar clinically and in terms of res ource utilization to the procedures currently assigned to APC 0673. In fact, the procedure described by CPT code 0253T is almost the same as the procedure described by CPT code 0191T, which is currently assigned to APC 0673. Also, both of these procedures employ the same type of internally inserted implantable glaucoma drainage device. Th erefore, after consid eration of the public comments we received, we are modifying our proposal and reassigning CPT code 0253T from APC 0234 to APC 0673, which has a final median cost of approximately $2,911 for CY 2012. We will monitor claims and cost repo rt data related to CPT code 0253T as the data become available for future updates. c. Scanning Ophthalmic Diagnostic Imaging (APC 0230)CMS-1525-FC 445

I For CY 2011, the CPT Editorial Pane l deleted CPT codes 0187T (Scanning computerized ophthalmic diagnostic imaging, an terior segment, with interpretation and report, unilateral) and 92135 (Scanning com puterized ophthalmic diagnostic imaging, posterior segment, (eg, scanning laser) with interpretation and re port, unilateral) on December 31, 2010, and replaced them with three new codes effective January 1, 2011. Specifically, CPT code 0187T was replaced with CPT code 92132 (Scanning computerized ophthalmic diagnostic imaging, an terior segment, with interpretation and report, unilateral or bilateral), and CP T code 92135 was replaced with CPT codes 92133 (Scanning computerized ophthalmic diagnos tic imaging, posterior segment, with interpretation and report, unilateral or bila teral; optic nerve) and 92134 (Scanning computerized ophthalmic diagnostic imaging, pos terior segment, with interpretation and report, unilateral or bilateral; retina). In Addendum B of the CY 2011 OPPS/ASC final rule with comment period, CPT codes 92132, 92133, and 92134 were assigned to APC 0230 (Level I Eye Tests & Treatments) with a payment ra te of approximately $42 and were flagged with comment indicator “NI” to indicate that these code s were new codes for CY 2011 with an interim APC assignment subject to public comment. We stated that we would address any public comments on issues regarding these new code s in this CY 2012 OPPS/ASC final rule with comment period. In addition, in the CY 2012 OPPS/ASC proposed rule, we proposed to continue to assign CPT codes 92132, 92133, and 92134 to APC 0230.CMS-1525-FC 446

I Comment : One commenter on the CY 2011 O PPS/ASC final rule with comment period requested that CMS reassign CPT codes 92132, 92133, and 92134 from APC 0230 to APC 0698 (Level II Eye Te sts & Treatments), which has a CY 2011 payment rate of approximately $67, to account for the long de scriptor changes for the new codes. Specifically, the commenter indi cated that the predecessor code s, specifically, CPT codes 0187T and 92135 described a unilateral procedure; however, the new codes, specifically, CPT codes 92132, 92133, and 92134, describe a “unilate ral or bilateral” procedure in the code descriptors. Further, the commenter expressed concern that the new codes are paid at half the CY 2010 payment rate, which the commenter believed is inappropriate since the typical patient encounter involves two tests. Response : As indicated above, CPT codes 92132, 92133, and 92134 were assigned to APC 0230 effective on January 1, 20 11. We assigned these new codes to the same APC and status indicator as thei r predecessor CPT codes 0187T and 92135. We note that these predecessor CPT codes were active codes for some time. CPT code 92135 was made effective January 1, 1999 and de leted on December 31, 2010, while CPT code 0187T was made effective January 1, 2008, and deleted on December 31, 2010. Given the history of the predecessor c odes, we reviewed our claims. For the CY 2012 update, the payment rates are based on data from claims submitted during CY 2010 according to the standard OPPS ratesetting methodology. Based on our analysis, we found significant claims data for predecessor CPT codes 92135 and 0187T. Our CY 2012 final claims data s how that the median cost for CPT code 92135 is approximately $41 based on 191,170 single claims (out of 191,934 total claims),CMS-1525-FC 447

I and approximately $44 based on 341 single claims (out of 348 total claims) for CPT code 0187T. We believe that the final rule median costs of approximately $41 and $44 are similar to the final median cost of appr oximately $48 for APC 0230. We also believe that the resources consumed in performing thes e procedures are not significantly different for unilateral versus bilateral imaging. After consideration of the public comment we received on the CY 2011 OPPS/ASC final rule with comment peri od, we are finalizing our CY 2012 proposal, without modification. Given the significant information reflected in the CY 2012 final rule claims data for predecessor CPT codes 92135 and 0187T, we believe our claims data are sufficient for us to continue to assign these services to APC 0230, which has a final CY 2012 median cost of approximately $45. We will reevaluate the APC assignment for CPT codes 92132, 92133, and 92134 in future OPPS updates as additional information becomes available to us. Also, we expect to have the first claims data available for CPT codes 92132, 92133, and 92134 for the CY 2013 OPPS/ASC rulemaking cycle. d. Intraocular Laser Endoscopy (APC 0233) CPT code 66711 (Ciliary body destruction; cyclophotocoagulation, endoscopic) is assigned to APC 0233 (Level III Anterior Se gment Eye Procedures) for CY 2011, with a CY 2011 payment rate of $1,233.03. In the CY 2012 OPPS/ASC proposed rule, we proposed continued assignment for CPT code 66711 for CY 2012 to APC 0233, with a proposed payment rate of $1,171.65. The fina l rule median cost for APC 0233 is approximately $1,164.CMS-1525-FC 448

I Comment : One commenter, the manufacturer of a single use intraocular laser endoscope, indicated that the device used to accomplish CPT code 66711 is used to treat patients with glaucoma and retinal disease. The commenter had previously manufactured a multiple use version of the intraocular la ser endoscope, and claimed that the multiple use device had lower per unit costs per use than the new single use device, but that it could no longer be manufactured due to s upply constraints of a part used in the manufacturing process. The co mmenter stated that the most frequent service code used to deliver this service is represented by CPT code 66711, and stated that the multiple procedure discount typically applies, wh ich reduces the OPPS payment rate to approximately $616 for CY 2011. The commenter stated that the procedure is also performed in the ASC setting with a payment rate of approximately $694 for CY 2011, but a multiple procedure discount typically appl ies, for a payment rate of approximately $347. The commenter requested that CMS use one of several suggested approaches to pay for the higher costs associated with the single use device. One approach the commenter mentioned was to establish a devi ce pass-through category for the single use intraocular laser endoscope, while noting that it had filed an OPPS pass-through application, and that it exp ected a separate decision on the pass-through application. Another alternative suggeste d by the commenter was for CMS to use its equitable adjustment authority under section 1833(t)(2 )(E) of the SSA, to adjust payment rates when necessary to ensure patients’ treatment options are not inappropriately limited as a result of CMS policies. The third option th e commenter listed was to temporarily assign the CPT code 66711 procedure to a different clinical APC or to a new technology APC,CMS-1525-FC 449

I based on external data provided by the comm enter, until Medicare claims data are available for ratesetting. Response : As stated above, CPT code 66711 is assigned to APC 0233 for CY 2011, which has a CY 2011 final rule median cost of approximately $1,168. CPT code 66711 has a CY 2012 final median cost of approximately $1,430. The commenter stated that the CPT code 66711 procedure will not change with use of the single use laser endoscope over the multi-use endoscope. We do not believe that it is necessary to invoke the equitable adjustment clause in this case. There are several clinical APCs for anterior segment eye procedures that are potential APCs fo r this type of servic e, and the particular APC assignment depends in part on the underl ying claims data for the procedure. Upon further review of the various procedures in APC 0233 and APC 0234 (Level IV Anterior Segment Eye Procedures), we believe that CP T code 66711 is more c linically similar to the range of procedures in APC 0234 than the procedures in APC 0233. Both APCs 0233 and 0234 consist of anterior segment eye procedures, but APC 0234 includes several intraocular procedures for the treatment of glaucoma, which also describes CPT code 66711. From a resource perspective, CPT code 66711 fits in either APC 0233 or APC 0234, which have CY 2012 final median costs of approximately $1,164 and $1,631, respectively. Therefore, we are reassi gning CPT code 66711 to APC 0234 for CY 2012. We agree with the commenter that we will decide on any device pass-through application by means of our normal process for that payment mechanism. 6. Orthopedic and Musculoskeletal Services a. Percutaneous Laminotomy/Laminectomy (APC 0208)CMS-1525-FC 450

I We created new HCPCS code C9729 (Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with ligamentous resection, discectomy, facetectomy and/or foraminotomy, when performed) any method under indirect image guidance, with the use of an endoscope when performed, single or multiple levels, unilateral or bilatera l; lumbar), and assigned it to APC 0208 (Laminotomies and Laminectomies) eff ective April 1, 2011. AMA’s CPT Editorial Panel thereafter created CPT code 0275T (Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetecto my and/or foraminotomy) any method under indirect image guidance (eg, fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or bila teral; lumbar) effective July 1, 2011. We assigned CPT code 0275T to APC 0208 a nd deleted HCPCS code C9729 effective July 1, 2011. For CY 2011, APC 0208 has a payment rate of $3,535.92. For CY 2012 we proposed to maintain assignment of pe rcutaneous laminotomy/laminectomy (HCPCS code C9729 is used in the CY 2012 proposed ru le, while CPT code 0275T is used in this CY 2012 final rule with comment period) to APC 0208, because we believe the service is similar clinically and with regard to resources to ot her APC 0208 procedures, APC 0208 had a CY 2012 proposed rule median cost of approximately $3,676, and has a final rule median cost of approximately $3,553
Comment : One commenter believed it is a ppropriate to assign CPT code 0275T to APC 0208, in the case of “unilateral” percutaneous laminotomy/laminectomy, but not in the case of bilateral or multiple level procedures, which are, according to theCMS-1525-FC 451

I commenter, more resource intensive. The comm enter claimed that the phrase “unilateral or bilateral” in the CPT code 0275T descriptor suggests to providers that the code must be reported unmodified when the procedure is performed either unilaterally or bilaterally, which will preclude the use of modifier “50” when the bilateral approach is employed, even though additional physician and facili ties resources are used. Additionally, the commenter believed that the CPT code 0275T descriptor’s inclusion of “single or multiple levels” will preclude providers from reporting modifier “51” with CPT code 0275T, to reflect the additional resources cons umed when the procedure is performed on multiple levels of the spine. Therefor e, the commenter believed that the APC 0208 payment rate is not adequate when CPT code 0275T is performed bilaterally or on multiple levels. The commenter recommende d that, for CY 2012, CMS either allow the use of modifiers when CPT code 0275T is us ed, or that CMS create a HCPCS G-code that describes the service when performed bilaterally or on multiple levels. The commenter anticipated that the CPT Editorial Pa nel will take up the i ssue of bilateral or multiple levels in the CPT code 0275T code descriptor for CY 2013. Response : Concerning the reques t for availability of modifiers 50 or 51, or modification to the descriptor for CPT code 0275T, we refer the commenter to the CPT Editorial Panel. CPT code 0275T is the pr operty of the AMA, and CMS may not modify any CPT codes. We also will wait to s ee if the CPT Editorial Panel changes the descriptor for CY 2013, and we will not create a HCPCS G-code for CY 2012. CPT code 0275T is a new code effectiv e July 1, 2011 (as was its predecessor code, HCPCS code C9729, which was av ailable for one quarter, beginningCMS-1525-FC 452

I April 1, 2011), and as such we have no claims data at this time. For CY 2013, we should have partial CY 2011 data for both HCPCS code C9729 and CPT code 0275T, which we can use to reevaluate any APC assignment fo r percutaneous laminotomy/laminectomy for CY 2013. These claims data will include the hospital costs related to all of the various clinical options to perform this service, (that is, unilateral versus bilateral, and single versus multiple levels) to the extent they were performed. Based on those claims, we will reevaluate the APC placement of CPT code 0275T. After consideration of the public comments we receive d, we are finalizing our proposed assignment of CPT code 0275T to APC 0208 for CY 2012, which is clinically similar to the procedures in APC 0208, and which has a median cost of approximately $3,553.CMS-1525-FC 453

I b. Level II Arthroscopy (APC 0042) The CY 2012 proposed rule median cost for APC 0042 (Level II Arthroscopy) was approximately $3,485, based on 5,676 single bill claims from the 28 procedures assigned to APC 0042. The CY 2011 final rule median is $3,301, based on 6,297 single bill claims from those 28 arthroscopic procedures. Our CY 2012 final rule data consist of a median cost of approximately $3,996, base d on 3,140 single bill claims based on 234 procedures.
Comment : One commenter believed that the procedures currently assigned to APC 0042 have widely varying median costs, which range from approximately $88 to more than $10,000, according to the CY 2012 proposed rule data. The commenter claimed that the APC currently violates the 2 times rule. The commenter recommended that CMS reconfigure APC 0042 and create two additional APCs in order to group procedures similar in clinical features and resources together. The commenter recommended that CMS place the following hi p procedures in the reconfigured APC 0042: CPT codes 29861 (Arthroscopy, hip, surg ical; with removal of loose body or foreign body), 29914 (Arthroscopy, hip, surgical; wi th femoroplasty (ie, treatment of cam lesion)), 29915 (Arthrosc opy, hip, surgical; with acetabuloplas ty (ie, treatment of pincer lesion)), and 29916 (Arthroscopy, hi p, surgical; with labral repa ir). The commenter also recommended that CMS separate the remain ing CPT codes in APC 0042 into new APC 0043 (proposed descriptor “Level III U pper Extremity Arthroscopy”) and APC 0044 (Level IV Lower Extremity Arthroscopy), with respective payment amounts based on the median costs of those service groupings.CMS-1525-FC 454

I Response : We do not agree that the HCPC S codes comprising APC 0042 have widely varying median costs or that there is a 2 times rule violation for services currently assigned to APC 0042, as claimed by the co mmenter. As we stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42231), in a ccordance 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 comp arability of the use of resources, if the median cost of the highest cost item or serv ice within an APC group is more than 2 times greater than the median of the lowest cost item or service within that same group. In making this determination, we consider onl y those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule , we consider codes that have more than 1,000 single major claims or code s that have both greater than 99 single major claims and contribute at least 2 percent of the single majo r claims used to establish the APC median cost to be significant (75 FR 71832). Based on this rule, we have no 2 times rule violations in APC 0042. Us ing our CY 2012 final rule claims data, the highest significant procedure in APC 0042 is CPT c ode 29827 (Arthroscopy, shoulder, surgical; with rotator cuff repair) with a final median cost of approximately $4,817, and the lowest significant procedure in the APC is CPT code 29823 (Arthroscopy, shoulder, surgical; debridement, extensive), with a final median cost of approximately $2,959, leading to a ratio of approximately 1.6, well below the 2.0 re quired for a violation. Furthermore, we do not agree with the commenter’s recomm endation to establish an arthroscopy APC with the four hip arthroscopy proced ures, specifically, CPT codes 29861, 29914, 29915,CMS-1525-FC 455

I and 29916, as a viable alternative, because a ll four of those CPT codes have no CY 2010 median costs. Therefore, there would be no basis for establishing an APC median cost and payment amount for those four procedures . We see no compelling reason to revise the current procedures of APC 0042 for CY 2012 because they are similar both clinically and in terms of resource utiliz ation. We will keep the curr ent HCPCS code configuration of APC 0042 for CY 2012, a nd will review the APC 0042 and component HCPCS code median costs again next year for clinical and resource similarity. c. Closed Treatment Fracture of Finger, Toe, and Trunk (APCs 0129, 0138, and 0139) In Addendum A (Proposed OPPS APCs fo r CY 2012) of the CY 2012 OPPS/ASC proposed rule, we proposed to continue w ith the existing group titles for APCs 0129, 0138, and 0139 to read as follows:

● APC 0129 (Level I Closed Trea tment Fracture Finger/Toe/Trunk)

● APC 0138 (Level II Closed Trea tment Fracture Finger/Toe/Trunk)

● APC 0139 (Level III Closed Trea tment Fracture Finger/Toe/Trunk) We note that Addendum A did not app ear in the printed version of the Federal Register as part of the CY 2012 OPPS/ASC propos ed rule. Rather, it was published and made available only via the Inte rnet on the CMS Web site at: http://www.cms. gov/

. Comment : One commenter recommended that CMS remove the words "Finger/Toe/Trunk" from the group titles for APCs 0129, 0138, and 0139 because there is no need to make this distinction since ther e are no other APCs that describe closed treatment fractures.CMS-1525-FC 456

I Response : We appreciate the commenter' s suggestion, and we accept this recommendation. We agree that removing th e words “Finger/Toe/Trunk” from the group titles for APCs 0129, 0138, and 0139 more a ppropriately describe these APCs. After consideration of the public comment we received, we are revising the group titles for APCs 0129, 0138, and 0139 to ensure th at the title describes all procedures assigned to these APCs. Table 25 shows th e final group titles for APCs 0129, 0138, and 0139 for CY 2012.

TABLE 25.—FINAL GROUP TITLES FOR APCs 0129, 0138, AND 0139 FOR CY 2012 APC Group Title 0129 Level I Closed Treatment Fracture 0138 Level II Closed Treatment Fracture 0139 Level III Closed Tr eatment Fracture

d. Level I and II Strapping and Ca st Application (APCs 0058 and 0426) In Addendum A (Proposed OPPS APCs fo r CY 2012) of the CY 2012 OPPS/ASC proposed rule, we proposed to continue with the existing group titles for APCs 0058 and 0426 to read as follows:

● APC 0058 (Level I Strappi ng and Cast Application)

● APC 0426 (Level II Strapping and Cast Application) We note that Addendum A did not app ear in the printed version of the Federal Register as part of the CY 2012 OPPS/ASC propos ed rule. Rather, it was published and made available only via the Inte rnet on the CMS Web site at: http://www.cms. gov/

.CMS-1525-FC 457

I Comment : One commenter stated there is only a single level APC for the strapping procedures; th erefore, the designation “Level I” is not appropriate in the group title because there is no “Level II.” Response : We disagree with the commenter. There is another level APC for the strapping procedures, specifically, APC 0426 wh ich reads “Level II Strapping and Cast Application.” Under the OPPS, APC 0426 was made effective January 1, 2005. We remind hospitals that APCs with multiple levels are not always in sequential order and, as a result, may not always appear close to each other in Addendum B. After consideration of the public comment we received, we are finalizing our CY 2012 proposal, without modification, to cont inue to title APC 0058 to read “Level I Strapping and Cast Applicatio n” and APC 0426 to read “Level II Strapping and Cast Application.” 7. Radiology Services a. Proton Beam Therapy (APC 0664 and 0667) For CY 2012, we proposed to contin ue to assign CPT codes 77520 (Proton treatment delivery; simple, without compen sation) and 77522 (Proton treatment delivery; simple, with compensation) to APC 0664 (L evel I Proton Beam Radiation Therapy), which had a proposed payment rate of approxi mately $992. We also proposed to continue to assign CPT codes 77523 (Proton treatment delivery; intermedia te) and 77525 (Proton treatment delivery; complex) to APC 0667 (L evel II Proton Beam Radiation Therapy), which had a proposed payment rate of approximately $1,298.CMS-1525-FC 458

I Comment: Some commenters appreciated the relative stability in the hospital outpatient proton therapy rates and supported the proposed payments for the proton beam treatment CPT codes. Other commenters indicated that they were pleased with CMS’ proposal to exempt APC 0667 from the 2 times rule based on the list of APCs that appeared in Table 18 of the CY 2012 OPPS/ASC proposed rule, but expressed concern with the proposed decrease in payments for th e proton beam therapy APCs. Response : In accordance with sectionS 1833( t)(2)(B) and 1833(t)(9)(A) of the Act and §§ 419.31 and 419.50 of the regulations, we annually review the items and services within an APC group to determine, w ith respect to comparab ility of the use of resources and clinical homoge neity. The payment rates, including the relative weights, set annually for these services are based on review of the claims data used for ratesetting. For the CY 2012 update, the payment rates for APCs 0664 and 0667 are based on data from claims submitted during CY 2010 accordin g to the standard OPPS ratesetting methodology. Specifically, we used 12,263 singl e claims (out of 13,364 total claims) from CY 2012 proposed rule claims data (and we used 13,437 single claims (out of 14,519 total claims) from CY 2012 final rule clai ms data) to calculate the median cost upon which the CY 2012 payment rate for APC 0664 is based. In addition, we used 3,379 single claims (out of 3,879 total claims) from CY 2012 proposed rule claims data (and we used 3,638 single claims (out of 4,145 total claims) from CY 2012 final rule claims data) to calculate the median cost for APC 0667.CMS-1525-FC 459

I For CY 2012, we are setting the final paym ent rate for proton beam therapy based on median costs of approximately $1,184 for APC 0664 and approximately $1,549 for APC 0667. We note that these median costs are higher than the median costs upon which the CY 2012 proposed payment rates for these APCs were based ($1,028.10 and $1,344.90, respectively) and higher than the me dian costs upon which the final CY 2011 payment rates were based ($1,020.72 and $1,335.24, re spectively). As we have in the past (75 FR 71916), we note that our cost-fin ding methodology is based on reducing each hospital’s charge for its serv ices to an estimated cost by applying the most discrete hospital-specific CCR available for the hospital th at submitted the claim. Therefore, it is the hospitals’ claims and cost reports that determine the estimated costs that are used to calculate the median cost for each service and, when aggregated into APC groups, the hospital data are used to calculate the median cost for the APC on which the APC payment rate is based. After consideration of the public comments we received, we are finalizing our CY 2012 proposal, without modification, to pay for proton beam therapy through APCs 0664 and 0667, with payment rates based upon the most current claims and cost report data for these services. Specifically, we will con tinue to assign CPT codes 77520 and 77522 to APC 0664, with a final CY 2012 APC median cost of approximately $1,184, and CPT codes 77523 and 77525 to APC 0667, with a final CY 2012 APC median cost of approximately $1,549 because we continue to be lieve these placements are appropriate in light of the resource cost and clinical intensity of the services describe by these CPT codes.CMS-1525-FC 460

I b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, 0067, and 0127) For CY 2012, we proposed to continue to assign CPT code 77371 (Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consisting of 1 session; multi-source Cobalt 60 based) to APC 0127 (Level IV Stereotactic Radiosurgery, MRgF US, and MEG), with a proposed payment rate of approximately $7,368. We also proposed to continue to recognize four existing HCPCS G-codes that describe linear accelerator -based SRS treatment delivery services for separate payment in CY 2012. Specifica lly, we proposed the following: to assign HCPCS code G0173 (Linear accelerator based st ereotactic radiosurgery, complete course of therapy in one session) and HCPCS code G0339 (Image-guided robotic linear accelerator-based stereotactic radiosurgery, co mplete course of therapy in one session or first session of fractionated treatment) to APC 0067 (Level III Stereo tactic Radiosurgery, MRgFUS, and MEG), with a proposed payment rate of approximately $3,251; to assign HCPCS code G0251 (Linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom pluggi ng, fractionated treatment, all lesions, per session, maximum five sessions per course of treatment) to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment rate of approximately $864; and to assign HCPCS code G0340 (Image-guided robotic linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, second through fifth sessions, maximum five sessions per course of treatment) to APC 0066 (Level IICMS-1525-FC 461

I Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment rate of approximately $2,447. Further, we proposed to continue to assign SRS CPT codes 77372 (Radiation treatment delivery, stereotactic radiosurgery (SRS) (complete course of treatment of cerebral lesion(s) consisting of 1 session); linear accelerator based) and 77373 (Stereotactic body radiation therapy, trea tment delivery, per fraction to 1 or more lesions, including image guidance, entire course not to exceed 5 fractions) status indicator “B” (Codes that are not recognized by O PPS when submitted on an outpatient hospital Part B bill type (12x and 13x)) under the OPPS, to indicate that these CPT codes are not payable under the OPPS.
Comment : One commenter requested that CMS continue to recognize HCPCS codes G0173, G0251, G0339, and G0340 for CY 2012 as proposed and supported the proposed assignment of status indica tor “B” to CPT codes 77372 and 77373. The commenter also recommended that CMS revi se the code descriptors for HCPCS code G0173, G0251, G0339, and G0340 to distingu ish between robotic and nonrobotic gantry-based SRS systems. Based on analys is of claims data for HCPCS codes G0339 and G0340, the commenter found that 41 and 42 percent of the claims submitted for HCPCS codes G0339 and G0340, respectively, during CY 2010 were paid to hospitals without image-guided robotic SRS systems. The commenter suggested specific code descriptor changes for the f our HCPCS G-codes to ensure submission of co rrectly coded claims. Alternatively, the commenter re quested that CMS provide guidance on the reporting of the existing SRS HCPCS G-codes if no change is made to the HCPCS code descriptors.CMS-1525-FC 462

I Response : As we have stated in the past (75 FR 71915), these HCPCS G-codes for SRS have been in effect for several ye ars and, based on questions brought to our attention by hospitals, we have no reason to be lieve that hospitals are confused about the reporting of these codes. Moreover, based on our analysis of the hospital outpatient claims data that we use for ratesetting, we see resource differences reflected in the median costs of the four HCPCS G-codes that are reasonably consistent with our expectations for different median costs fo r the services based on the current code descriptors. We continue to believe it woul d be confusing to hosp itals if we were to revise the code descriptors for HCPC S codes G0173, G0251, G0339, and G0340 at this point in time and could lead to instability in our median costs and inaccurate payments for some services. Therefore, we believe that modifying the HCPC S G-code descriptors is not necessary for us to c ontinue to provide appropriate payment for the services they describe. Further, we have provided instruct ion on the reporting of these SRS codes in Chapter 4, Section 200.3 of the Medicare Clai ms Processing Manual of the Internet-Only Manual. After consideration of the public comment we received, we are finalizing our CY 2012 proposals, without modification, to maintain the existing CY 2011 APC assignments for the SRS HCPCS codes for CY 2012. Specifically, we are continuing to assign HCPCS G-codes G0173 and G0339 to APC 0067, which has a final CY 2012 APC median cost of approximately $3,374; HCPC S G-code G0251 to APC 0065, which has a final CY 2012 APC median cost of approxi mately $903; HCPCS G-code G0340 to APC 0066, which has a final CY 2012 APC median cost of approximately $2,521; and CPTCMS-1525-FC 463

I code 77371 to APC 0127, which has a final CY 2012 APC median cost of approximately $7,461 because we continue to believe these pl acements are appropria te in light of the resource cost and clinical intensity of the services describe by these CPT codes. In addition, we are finalizing our proposals, wit hout modification, to continue to assign CPT codes 77372 and 77373 to status indicator “B” under the OPPS. c. Adrenal Imaging (APC 0408) For CY 2012, we proposed to reassign CP T code 78075 (Adrenal imaging, cortex and/or medulla) from APC 0408 (Level III Tumor/Infection Imaging), which had a proposed payment rate of approximately $953, to APC 0414 (Level II Tumor/Infection Imaging), which had a proposed payment rate of approximately $485.
Comment : Commenters questioned CMS’ rationa le for the proposal to reassign CPT code 78075 from APC 0408 to APC 0414, ci ting a lack of clinical reasoning to justify its movement as well as CPT code 78075’ s cost similarity to a clinically similar procedure assigned to APC 0408. Commenters requested that CMS reevaluate the reassignment of CPT code 78075 and consider maintaining its placement in APC 0408. Commenters further recommended that CMS prov ide rationale in all proposed rules when any CPT code placement change is proposed. Response : After revisiting this issue and an alyzing the final CY 2012 median cost for CPT code 78075, we agree with co mmenters’ assertion that CPT code 78075 should remain in APC 0408 and, therefore, we will continue to assign CPT code 78075 to APC 0408 for CY 2012 based on its final median cost of approximately $997 (calculated using 99 single claims out of 127 total claims), which is similar to the APC median costCMS-1525-FC 464

I of APC 0408 of approximately $958. . We note that the proposed ru le does not include service-specific discussions for each separately paid HCPCS code reassignment or for each APC. Rather, we discuss the genera l methodology used to calculate the median costs upon which the proposed payment ra tes are based (76 FR 42183 through 42190) and the principles applied in determining APC configurations (76 FR 42230 through 42232). We discuss specific APCs or services in the proposed rule only when we have a specific reason to do so, such as when we apply a nonstandard ratesetting methodology to calculate a proposed payment rate for a partic ular item or service. In most cases, a proposed reduction of a median cost for an AP C or for a HCPCS code that is calculated from actual charges and cost da ta will not result in a serv ice specific discussion in the propose rule. The number of APCs and the volume of HCPCS codes for which median costs are calculated prohibit a detailed explanation of each in the proposed rule. After consideration of th e public comments we receiv ed, we are modifying our CY 2012 proposal to reassign CPT code 78075 to APC 0414 and will instead continue to assign it to APC 0408, with a final CY 2012 APC median cost of approximately $958. d. Positron Emission Tomography (PET) Imaging (APC 0308) (Created from Myocardial Positron Emission Tomogra phy (PET) Imaging (APC 0307) and Nonmyocardial Positron Emission Tomography (PET) Imaging (APC 0308)) For CY 2012, we proposed to continue to assign CPT codes 78459 (Myocardial imaging, positron emission tomography (PET), metabolic evaluation), 78491 (Myocardial imaging, positron emission tomogr aphy (PET), perfusion; single study at rest or stress), and 78492 (Myocardial imaging, positron emission tomography (PET),CMS-1525-FC 465

I perfusion; multiple studies at rest and/or stress) to APC 0307 (Myocardial Position Emission Tomography (PET) Imaging), for wh ich we proposed a national unadjusted payment rate of approximately $921. The CY 2011 national unadjusted payment rate is approximately $1,107. For CY 2012, we proposed to contin ue to assign CPT codes 78608 (Brain imaging, positron emission tomography (PET) ; metabolic evaluation), 78811 (Tumor imaging, positron emission tomography (PET) imaging; limited area (eg, chest, head/neck)), 78812 (Tumor imaging, positron em ission tomography (PET) imaging; skull base to mid-thigh), 78813 (Tumor imaging, positron emission tomography (PET) imaging; whole body), 78814 (Tumor imag ing, positron emission tomography (PET) with concurrently acquired computed tom ography (CT) for attenuation correction and anatomical localization imaging; limited ar ea (eg, chest, head/neck)), 78815 (Tumor imaging, positron emission tomography (PET) with concurrently acquired computed tomography (CT) for attenuati on correction and anatomical localization imaging; skull base to mid-thigh), and 78816 (Tumor imaging, positron emission tomography (PET) with concurrently acquired computed tom ography (CT) for attenuation correction and anatomical localization imaging; whole body) to APC 0308 (Non-M yocardial Positron Emission Tomography (PET) imaging), for wh ich we proposed a national unadjusted payment rate of $1,015. The CY 2011 nationa l unadjusted payment rate for APC 0308 is approximately $1,042.
Comment : Commenters objected to the proposed decrease in the payment rate for APC 0307. Commenters were concerned with the volatility of the payment rates fromCMS-1525-FC 466

I one year to the next and the proposed reduction in the payment rate for CY 2012, particularly in view of th e reduction in the payment rate from CY 2010 to CY 2011. The commenters urged CMS to valida te the costs estimated from the CY 2010 hospital claims and cost report data for the limited nu mber of hospitals reporting CPT codes 78459, 78491, and 78492 to determine the reason for the proposed change in payment. Several commenters asked that CMS limit to 5 to 10 percent the amount of decrease in the payment rate for CY 2012 compared to CY 2011 because they believed that the reduction CMS proposed for myocardial PET for CY 2012 would jeopardize access to the service. One commenter asked that CMS combine APC 0307 and APC 0308 into one single PET imaging APC because the commenter believed that myocardial PET and non-myocardial PET are clinically similar and have similar resource requirements. The commenter also believe that merging the APCs would result in more appropriate payment for myocardial PET services and would increase the stabilit y of payment for myocardial PET services. Several commenters indicated that they believed that aberrant CCRs for a few hospitals that furnish myocardial PET servic es are affecting the median cost for APC 0307 and that the methodology must be flawed to permit this to occur. Commenters stated that their analyses of the claims data showed that 4 of the top 25 hospitals contribute 34 percent of all single bills used in ratesetting for CPT code 78492 and that these hospitals have substantially lower cal culated costs as compared to their peer institutions. The commenters believed that th e CCRs of these institutions are aberrantly low and have skewed the data and lowered the overall median cost for APC 0307 due to the significant percentage of single bills attributable to them. The commenterCMS-1525-FC 467

I recommended that CMS delete claims from hospitals with a CCR lower than 0.15 or 0.20 from ratesetting for APC 0307 to remove the effect of these hospitals on the APC 0307 median cost. In contrast, a nother commenter asked that CM S ensure that claims from every hospital that furnished a service assigned to APC 0307 are included in the calculation of the median for APC 0307. One commenter stated that the median cost for myocardial PET services is decreasing because they are pe rformed at a relatively sma ll number of hospitals and because hospitals do not always align the co sts and charges for the service properly in their accounts and, therefore, the CCRs that re sult from the cost reports understate the cost of the services. Commenters also stated that they were concer ned that hospitals had not charged appropriately for the services a nd the radiopharmaceutical that is needed to furnish the service. Some commenters objecte d to the absence of a strict definition of what costs should be included in each cost cen ter because this results in a wide variance in the calculation of costs. One commenter stated that the absence of CMS guidance to hospitals with regard to how to charge for serv ices results in the potential for hospitals to set charges at 4 to 5 times the cost for establ ished procedures but to establish charges at 1.5 times the cost for new, more expensive procedures. One commenter urged CMS to remind hospitals to accurately report all m yocardial PET costs on their Medicare cost reports to improve the accur acy of the CCRs in the futures, while another commenter suggested that CMS establish a new cost center or CCRs for PET to moderate the fluctuations in the median cost calculation for PET services.CMS-1525-FC 468

I Response : We agree that myocardial PET and non-myocardial PET have similar clinical characteristics and, currently, appear to have somewhat similar resource requirements. Therefore, for CY 2012, we are deleting the myocardial PET APC (APC 0307) and are reassigning CPT codes 78459, 78491, and 78492 to APC 0308, which we have renamed “Positron Emission Tomography (PET) Imaging.” The CY 2012 final rule median cost for newly reconfi gured APC 0308 is approximately $1,038. We were influenced in this decisi on by a significant unexpected and unusual decrease in the median cost for CPT code 78492 between the proposed rule data and the final rule data for the CY 2012 OPPS. CPT code 78492 comprises approximately 98 percent of the volume of the 3 myocardial P ET services that were assigned to APC 0307 and therefore largely would c ontrol the median cost for AP C 0307 if it had been retained for CY 2012 OPPS. The proposed rule median cost for CPT code 78492 was approximately $954, but the final rule median cost for CPT code 78492 is approximately $778, a decrease of approximately 18 percent fr om the proposed rule median cost and a decrease of approximately 29 percent fr om the CY 2011 OPPS median cost of approximately $1,096. APC 0307 had a median cost of approximately $1,096 for CY 2011, a median cost of approximately $954 for the CY 2012 proposed rule, and had we not deleted it for this final rule, AP C 0307 would have had a median cost of approximately $809, a 15-percent decrease fr om the median cost on which the CY 2012 proposed payment rate was based. We examined the claims and cost report data for the single procedure claims for CPT code 78492 to determine why it declined substantially from the CY 2011 OPPS finalCMS-1525-FC 469

I rule data and the CY 2012 proposed rule a nd yet further between the CY 2012 proposed rule and the CY 2012 final rule data. We belie ve that there are multip le reasons that the median cost for APC 0307 declined from CY 2011 to CY 2012. Specifically, we looked at the following elements for CPT code 78492 across the three data sets: line item CCRs; line item charges; line item costs; packaged co sts; number of hospitals billing the service; and number of single bills. Our findi ngs are contained in Table 26 below.CMS-1525-FC 470

I TABLE 26.—SELECT DAT A FOR CPT CODE 78492 Single and “Pseudo” Single Bill Data for CPT Code 78492 CY 2011 Final Rule Data CY 2012 Proposed Rule Data CY 2012 Final Rule Data Median Line Item CCR 0.1708 0.1350 0.1272 Median Line Item Charge 3,858.75 4,051.70 4,051.70 Median Line Item Cost $649.85 $539.07 $492.02 Median Packaged Cost $391.06 $327.69 $273.43 Hospitals Reporting 48 60 64 Single Bills 3,910 8,617 9,727 Total Frequency 5,922 10,531 11,912

We note three significan t observations from these data for CPT code 78492, which is the myocardial PET imaging service that represents 98 per cent of the volume of APC 0307. First, the median line item CCR for CPT code 78492 decreased 21 percent from the CY 2011 final rule claims data to the CY 2012 proposed rule claims data, although the median charge increased only 5 percent over the same time between the two data sets. Similarly, the median lin e item CCR for CPT code 78492 decreased 5.8 percent from the CY 2012 proposed rule data to the CY 2012 final rule data, although the line item charge remained the same in both data sets. Therefore, the median line item CCR for CPT code 78492 decreased 25.5 percent fr om the CT 2011 final rule data to the CY 2012 final rule data alt hough the median line item charge increased only 5 percent over the same period, thus resulting in a si gnificant decrease in the CY 2012 final rule line item median cost compared to both the CY 2011 line item median cost and the CY 2012 line item median cost. Secondly the estimated median cost of the packaged radiopharmaceutical and other supplies necessary to furnish the service decreased in eachCMS-1525-FC 471

I data set. Specifica lly, the estimated median packaged cost decreased by 16.2 percent from the CY 2011 final rule data to the CY 2012 proposed rule data and by 16.6 percent from the CY 2012 proposed rule data to the CY 2012 final rule data, or a decrease of 30.1 percent from the CY 2012 final rule data to the CY 2012 final rule data. Third, we observed that the number of hospitals that fu rnished the service increased in a significant proportion and that the volume of services furnished increased by 25 percent from CY 2009 (CY 2011 final rule data) to CY 2010 (CY 2012 proposed and final rule data sets) and by an additional 6.7 percent from the CY 2012 proposed rule data set to the CY 2012 final rule data set, or a total increase from CY 2009 to CY 2010 of 33.3 percent. We are particularly concerned with the vol atility that is displayed in the data, particularly from the CY 2012 proposed rule data to the CY 2012 final rule data. In particular, there seems to be a transition in CCRs underway that should stabilize itself once the number of hospitals that furnish th e service is stable and once the volume of services being furnished each year is stab le. We believe that the CCR changes are increasing the instability in the median co sts for CY 2012 and that combining the two APCs is a reasonable respons e for the CY 2012 final rule, particularly because both former APC 0307 and APC 0308 are for PET imaging services and because it is reasonable to expect that the costs would be similar. However, we will reevaluate the relative resource utilization of the services afte r the cost center transitions are complete. In general, large volumes of services enhan ce stability of median costs, and we believe that by reassigning CPT codes 78459, 78491 a nd 78492 to APC 0308, we can lessen the volatility of payment changes for these serv ices for CY 2012. There are many legitimateCMS-1525-FC 472

I reasons why costs for these services may go down (for example, hospitals are becoming more efficient as they provide greater vol umes of these services without incurring additional substantial costs for equipment a nd staff, the radiopharmaceuticals used to provide these services are furnished by use of a generator that produces a dose periodically for 28 days and, therefore, additi onal doses are no more costly during the life of the generator, among others). If we de termine that the per un it costs for providing myocardial PET have genuinely decreased over time and stabili zed, we believe that it is appropriate that our payment rates w ould reflect these diminishing costs. With regard to the comments that we s hould exclude claims from hospitals with CCRs less than 0.15 or 0.20, we note that we applied our standard policy regarding calculation of CCRs to the calculation of the median cost of myocardial PET services for the proposed and final rule data for the CY 2012 OPPS. Specifically, as we discuss in detail in the claims accounting description that accompanies this final rule with comment period, we excluded claims from hospitals w hose CCRs were flagged as invalid. These included claims for hospitals w ithout a CCR, for hospitals paid an all inclusive rate, for CAHs, for hospitals with obvious ly erroneous CCRs (greater than 90 or less than .0001), and for hospitals with CCRs that were identif ied as outliers (3 sta ndard deviations from the geometric mean after removing error CCRs ). This longstanding practice has resulted in enhancing the number of claims we use fo r ratesetting, while eliminating claims that cannot be reduced to cost or for which hospita l CCRs are clearly erroneous. In the case of myocardial PET services, the commenter i ndicated that the claims that the commenter requested be deleted from the set of claims us ed for ratesetting comprise 34 percent of theCMS-1525-FC 473

I set of single bills and were submitted by hosp itals with CCRs lower than 0.15. Assuming that the commenter's statement is correct, we believe that to remove 34 percent of the claims (more than 1 in every 3 single bills) from hospitals because their CCRs are lower than 0.15 would result in a skewed set of singl e bills and that the resulting median cost would not be an accurate representation of the relative cost of the service furnished by the full population of providers that furnish the serv ice. These claims would be retained in the dataset used to set median costs under our standard process because they would not be affected by the standard claim trims. We re fer readers to section II.A.2.c. of this final rule with comment period for discussion of our policy with regard to trimming of claim records before median cost calculation. The OPPS is a system of averages in which the measure of central tendency is used as the basis for the payment for a service, and to delete 34 percent of the data points would neces sarily result in a median cost that would be a less accurate, if perhaps hi gher, reflection of the cost of the service. We believe that the low CCRs that are of concern to the commenter may be only one element in the transition in the data for these codes. Fo r CY 2012, we believe that deleting APC 0307 and reassigning CPT codes 78459, 78491, and 78492 to APC 0308 is a more reasonable response than deleting 34 percent of the single bills for the procedures. Similarly, we do not believe that it is necessary to create a service-specific cost cen ter for the purpose of calculating a PET-specific CCR because correct and consistent reporting of the costs of PET services on the Medicare hospital cost report and accurate crosswalking of the charges for PET to the cost center in which the costs are housed will result in appropriateCMS-1525-FC 474

I estimates of the cost of PET services when the CCR for the cost cente r is applied to the charges for the services. With regard to what the commenter viewed as the absence of CMS guidance regarding what cost centers should be used to record the costs of services and how hospitals should charge for services, we note that CMS provides extensive instructions on how cost reports should be completed in th e Provider Reimbursement Manual. However, hospitals charges are a reflection of the mone tary value that the hospital establishes for service it is furnishing and the only CMS rest riction on hospital char ges is that charges must be reasonably related to cost and that th e same amount must be charged to all payers for the same service (we refer readers to th e definition of “charges” for cost reporting purposes in 42 CFR 413.53(b)). We recogni ze that some hospitals may charge at different markups over cost for similar services . However, as long as the cost report is correctly completed and the charges are mapped to the cost center in which the costs for the service are recorded, the CCRs should repr esent a valid reflection of the relationship between the costs and the char ges in the aggregate for serv ices for which the cost is reported in that cost center. The OPPS, like all other prospective payment systems, assumes that hospitals complete the cost report properly, including mapping the charges for a service to the cost center in which the costs for that service are captured. Therefore, when the appropriate CCR is applied to the charge for a service for which the costs are housed in the cost center from which the CCR is calculated, the result should be a reasonable estimate of the cost of the service.CMS-1525-FC 475

I With regard to the comment that we should limit the decline in payment for APC 0307 in CY 2012 to 5 to 10 percent compared to the payment for these services in CY 2011, we do not believe that it is appropriate to limit the decrease in payment in such an arbitrary manner for CY 2012. Moreover, for the reasons we discuss above, we have deleted APC 0307 for CY 2012. Accordingly, we also believe that there will be no adverse impact on access to care as a resu lt of deleting APC 0307 and reassigning CPT codes 78459, 78491 and 78492 to APC 0308.
Comment : One commenter asked CMS to explain why it proposed to pay more for the non-myocardial PET APC (APC 0308) than for the myocardial PET APC (APC 0307). Response : We proposed to pay more for non-my cardial PET (APC 0308) than for myocardial PET (APC 0307) because the propos ed rule median cost we calculated for APC 0308 of approximately $1,051 was higher than the proposed rule median cost we calculated for APC 0307 of approximately $954. We calculated both median costs using our longstanding standard cost estimati on methodology which applied each hospital’s most current, hospital-specific and department al-specific CCR to that hospital’s charge for services furnished in CY 2010. Howe ver, we are deleting APC 0307 for CY 2012 and, therefore, all PET imaging services wi ll be paid at the same payment rate for CY 2012, based on the APC 0308 median cost of approximately $1,038.
Comment: Commenters noted that the median cost for single myocardial PET scans, represented by CPT code 78491, has been higher than the median cost for multiple scans, represented by CPT code 78492 in CYs 2007, 2009 and 2010. The commentersCMS-1525-FC 476

I believed that this is evidence indicating that the data on which CMS is basing the payment rate are flawed. One commenter al so stated that the CY 2012 proposed payment rate for APC 0307 is below the mean cost fo r each of the codes assigned to APC 0307 (CPT codes 78459, 78491, and 78492) and is also below the median cost for three of the codes in APC 0307 that comprise 10,929 of the 11,060 total claims for the APC. Response : We do not believe that the presence of a median cost for multiple scans that is greater than the median cost fo r a single scan indicates that the data are flawed. There are many reasons that the medi an cost for a single scan could be higher than the median cost for multiple scans, including different charging practices and cost structures across hospitals and different hospital utilization of single versus multiple scans. Our standard ratesetting methodology converts the hospital’s charge to cost by application of the most specific departmental or overall hospital- specific CCR and after trimming claims for which the cost exceeds +/- 3 standard deviations from the geometric mean, and calculates the 50 th percentile, that is, the median cost, the array of costs. Variation in hospital patterns of utilization combined with differential hospital charging practices can result in valid re lative costs, as we define th em for the OPPS, in which the median cost for single scans exceeds the median cost for multiple scans. With respect to the commenter’s observation that the proposed rule mean cost for APC 0307 as it was proposed is higher than its proposed rule median cost, we note that it is very common for the mean cost to be higher than the median cost for services that are paid under the OPPS because there is frequen tly a wide range between the minimum cost and the maximum cost. For example, fo r CPT code 78492, the CY 2012 proposed ruleCMS-1525-FC 477

I minimum cost on a single bill was appr oximately $175 and the maximum cost was approximately $7,828, although the median cost was approximately $954 and the mean cost was approximately $1,186. Therefore, it is clear that the cost of most of the single bills were closer to $175 than they were to $7,827, but when all of the single bill costs were averaged, the mean cost (approximately $1,186) was great er than the median cost (approximately $954). We do not understa nd what is meant by the commenter’s additional statement that the CY 2012 proposed rule median cost for APC 0307 “is also below the median cost for three of the codes in APC 0307 that comprise 10,929 of the 11,060 total claims for the APC” because ther e were only three codes in APC 0307. CPT codes 78459, 78491, and 78492 were the only CPT codes assigned to now deleted APC 0307. We note that it is not surprising th at the median cost for APC 0307 in the CY 2012 proposed rule data was equal to the median cost for CPT code 78492 because CPT code 78492 contained 98 percent of the single bills in APC 0307 (deleted for CY 2012) and, therefore, CPT code 78492 would be likely to control the median co st in the array of single procedure bills.
Comment : One commenter objected to the absence of a CMS presentation and explanation of the change in median cost for APC 0307 at either the winter or summer APC Panel meetings in 2011 and to the limite d amount of information furnished in the proposed rule. Response: We do not discuss all services paid under the OPPS at the APC Panel meetings. The APC Panel meetings offer the opportunity for any member of the public to make presentations on any issue of interest that is within scope of the Panel’s charter andCMS-1525-FC 478

I for CMS to seek Panel comment and advice on issues for which CMS believes such comment and advice would be useful. The wi nter APC Panel meeti ng generally reviews concerns of the public with re gard to the final rule for that year and provides an opportunity for the public and CMS to seek th e Panel’s comment and advice on issues for the forthcoming year’s OPPS. The summe r APC Panel meeting occurs during the comment period of the proposed rule and is ge nerally limited to hear ing the views of the public on the proposed rule for the upcoming ye ar. No member of the public asked to make a presentation on the payment rate for AP C 0307 at either the Panel’s winter or the summer meetings in 2011. Moreover, we had no clinical or res ource-related question related to APC 0307 for which we believed th at APC Panel input would be useful. Therefore, like many other topics appli cable to the CY 2012 OPPS, there was no discussion of the proposed payment for APC 0307 for CY 2012. We also note that the proposed rule does not include service-specific discussions of the calculation of median cost for each separately paid HCPCS code or for each APC. Rather, we discuss the general methodology used to calculate the median costs on which the proposed payment rates are based and th e principles applied in determining APC configurations. We discuss specific APCs or services in the proposed rule only when we have a specific reason to do so, such as when we apply a nonstandard ratesetting methodology to calculate a proposed payment rate for a particular item or service. In most cases, a proposed reduction of a median co st for an APC or for a HCPCS code that is calculated from actual charges and cost data does not result in a service-specific discussion in the proposed rule. The number of APCs and the volume of HCPCS codesCMS-1525-FC 479

I for which median costs are calc ulated prohibit a detailed expl anation of each change in a median cost in the proposed rule because annual changes to hospital charges and costs generally result in changes to median costs fo r each HCPCS code and, therefore, for each APC each year.
Comment : Commenters objected to the proposed decrease in the payment rate for non-myocardial PET imaging services assigned to APC 0308. Response: For CY 2012, the payment rate fo r APC 0308 is based on data from claims submitted during CY 2010 accordi ng to the standard OPPS ratesetting methodology after the reassignment of CPT codes 78459, 78491, and 78492 to APC 0308 for the reasons we discuss above. Specifi cally, we used 249,026 si ngle procedure bills (out of 289,786 total claims) from CY 2012 final rule claims data to calculate the final median cost upon which the CY 2012 payment rate for APC 0308 is based. For CY 2012, we are setting the final payment rate fo r all PET imaging services (including CPT codes 78459, 78491 and 78492 that were in AP C 0307 for CY 2011) based on final rule median costs of approximately $1,038 for APC 0308. This median cost results in a modest decline in the final CY 2012 median cost for PET imaging services compared to the CY 2011 median cost for non-myocardial PET imaging services. We note that our cost-finding methodology is based on converting each hospital’s charge for its services to an estimated cost by applying the most disc rete hospital-specific CCR available for the hospital that submitted the claim. Therefore, it is each hospital’s claims and cost reports that determine the estimated costs that are us ed to calculate the median cost for eachCMS-1525-FC 480

I service and, when aggregated into APC groups, the hospital data are used to calculate the median cost for the APC on which the APC payment rate is based. In summary, based on our review of the claims and cost report data and our assessment of the similarity of the services in APCs 0307 and 0308, we have reassigned CPT codes 78459, 78491, and 78492 to APC 0308, for which we have calculated a median cost of approximately $1,038 for CY 2012. We have revised the description of APC 0308 to be “Positron Emission Tomography (PET) Imaging,” so that it will describe both nonmyocardial PET and myocardial PET services, and we have deleted APC 0307 for CY 2012 for the reasons we discuss previo usly in this section. We have made no other reassignments to APC 0308 nor have we removed codes that are assigned to APC 0308 for CY 2011 from APC 0308 for CY 2012. We will reassess whether it continues to be appropriate to assign both the nonmyocardial PET and the myo cardial PET services to the same APC for CY 2013 based on the CY 2013 OPPS cost data. We would propose to make any reassignments that we may believe to be necessary through the st andard annual notice-a nd-comment rulemaking
process. e. Device Construction for Intensity Modulat ed Radiation Therapy (IMRT) (APC 0305) CPT code 77338 (Multi-leaf collimator (M LC) device(s) for intensity modulated radiation therapy (IMRT), design and c onstruction per IMRT plan) was new for CY 2010. The service was previously reported using multiple units of CPT code 77334 (Treatment devices, design and construction; co mplex (irregular blocks, special shields, compensators, wedges, molds or casts)). For CY 2012, the first year of claims data forCMS-1525-FC 481

I CPT code 77338, we proposed to assign CPT code 77338 to APC 0305 (Level II Therapeutic Radiation Treatment Preparat ion), with a proposed median cost of approximately $266 because we calculated a pr oposed rule median cost for CPT code 77338 of approximately $186 based on a single bill frequency of 32,547 (out of a total bill frequency of 41,663) in the CY 2010 claims data that we used to establish the proposed payment rates for the CY 2012 OPPS. For CY 2011, we had assigned CPT code 77338 to APC 0310 (Level III Therapeutic Radiation Treatment Preparati on) based on a simulated median cost of approximately $792 that we calculated usi ng CY 2009 claims data for CPT code 77334, the predecessor code to CPT code 77338. Usi ng CY 2009 claims data, we estimated that hospitals would furnish 4 units of CPT code 77334 per IMRT treatment plan and that the estimated CY 2009 cost per unit for CPT code 77334 was $198, thus resulting in an estimated cost per IMRT plan of $792. Base d on this simulated median cost for CPT code 77338, we assigned the c ode to APC 0310 which had a CY 2011 median cost of approximately $917. We stated that, for the CY 2012 OPPS, we planned to use our standard cost estimation process using the CY 2010 claims data and the most recent cost report data to establish a median cost fo r CPT code 77338, and that, based on that data, we would assess whether placement of CPT code 77338 in APC 0310 would remain appropriate for the CY 2012 OPPS (75 FR 71916). Using the claims data from CY 201 0, upon which we proposed to base the CY 2012 OPPS payment rates, we proposed to move CPT code 77338 from APC 0310 to APC 0305 for CY 2012 because its presence in APC 0310 would have created a 2 timesCMS-1525-FC 482

I rule violation. We refer readers to section III. B. of this final rule with comment period for discussion of the 2 times rule. Specifi cally, the proposed rule median cost for APC 0310 of approximately $953 was more than twic e the median cost of approximately $186 that we calculated for CPT code 77338, and the single bill frequency for CPT code 77338 of 32,547 caused it to meet th e criteria as a significant procedure in APC 0310. To resolve the 2 times rule violation, we pr oposed to move CPT code 77338 to APC 0305 for CY 2012 OPPS.
Comment: Commenters objected to our pr oposal to move CPT code 77338 from APC 0310 to APC 0305. They believed that ev en if assigned to APC 0310, the code is being underpaid because the predecessor code CPT code 77334 would have been charged 3 to 9 units for the initial IMRT treatment a nd that additional units would be charged 3 to 9 units for the successive IMRT treatments. Therefore, the commenters stated that if CPT code 77334 had not been replaced by CPT code 77338, they would have charged and been paid approximately $4,625 for 18 total units of CPT code 77334. Commenters stated that it is illogical that the proposed rule median cost of $213 for CPT code 77334, which is for one device, would be greater than the median cost of $186 for CPT code 77338, which is for all devices in an IMRT plan of treatment. One co mmenter stated that its analysis revealed there is huge variab ility in hospital charges for CPT code 77338, specifically, that 25 percent of hospitals charge less than $500 and 8.5 percent of hospitals charge more than $5,000 for one unit of CPT code 77338. This commenter noted that this variability is carried thr ough the CMS cost data, with CMS finding costs of less than $100 for 17.5 percent of hospita ls and costs of more than $1,000 for 10CMS-1525-FC 483

I percent of hospitals. Another commenter indicated that its an alysis of the proposed rule claims data indicated that only 13 percent of hospitals submitted claims in line with CMS expectations of the charges for CPT code 77338. Many commenters stat ed that it is clear that hospitals require guidance w ith regard to billing for this service before improved data should be used to establish payment rates. Commenters asked that CMS reassign CPT code 77338 to APC 0301 (Level II Radiation Therapy), or alternativel y assign the procedure to an APC that would pay for c onstruction of 10 to 20 devices or assign the code to a new technology APC. Commenters also asked that CMS provide guidance to ensure that hospitals bill appropriately for this new service because they believed that their data analysis shows that me dian costs are not accurate. Response : After consideration of the public comments, the nature of the service being reported by CPT code 77338, and our claims data, we are finalizing our placement of CPT code 77338 in APC 0305, consistent with the median cost that we calculated based on the actual charges reported by 965 hos pitals for CPT code 77338, converted to cost by application of the CCRs we calculated from the billing hos pitals’ most recently submitted cost reports. CPT code 77338 has similar clinical characteristics to the services in APC 0305 (Level II Therapeuti c Radiation Treatment Preparation). In addition, the final rule median cost for CPT code 77338 of approximately $188 is more similar to the median cost for APC 0305 of approximately $264 than it is similar to the median cost for APC 0310 of approximately $955. Our examination of the CY 2010 claims that we used to calculate the final median cost of approximately $188 for CPT code 77338 reveals that the median charge in theCMS-1525-FC 484

I single bills used for ratesetting for CPT code 77338 was approximately $826. The median CCR that we used to reduce the hos pital established charge s to costs was 0.23. We used 36,860 single procedure bills from 965 hospitals (out of 47,589 total lines) or approximately 78 percent of the total lines containing act ual charges for CPT code 77338, to calculate the final rule median cost fo r CPT code 77338, which is defined as including all devices required for an IMRT treatment plan. We recognize that there is considerable variability in the charges that hospitals established for these new codes, but it is not uncommon for there to be a high level of variability in the charges for a service, and it is normal that such variability would be carried through to the calculation of estimated costs for the service. We do not advise hospitals with regard to what they should char ge for a service other than to require that the charges be reasonably related to their cost for the service and that they must charge all payers the same amount for the same service. However, our use of the median charges to establish payment levels was specifically desi gned to address wide variances in hospital cost accounting systems and billing patterns, and has also consistently been a reliable mechanism for promoting increased cons istency without introducing additional regulations. We recognize that it is peculiar th at the estimated cost for CPT code 77334, which represents the cost of a single device, would be greater than the estimated cost for CPT code 77338, which represents the cost of all devices in a single IMRT plan of treatment, but our estimated costs are base d on the amounts of the charges established by hospitals for the service a nd the hospitals’ CCRs, which are calculated from their Medicare cost reports. There are many reas ons why this apparent anomaly could exist,CMS-1525-FC 485

I including clinical rationales such as the in clusion of labor-inten sive physical blocks, shields, and molds in the service desc ribed by CPT code 77334, as well as accounting rationales such as the crossw alking of a single collimator se tting to the charges for the construction of a physical block, also in th e service described by CPT code 77334. It is not unusual for hospitals to establish charges that do not comport with our expectation of the charges they would establish based on the definition of the code for the service for which they are establishing charges and on which we based simulated medians. The OPPS is based on the expectation that hospital charges reflect the relative resources that are required to furnish the se rvice for which they are requesting a specified amount of payment. This self-selected hospita l charge is converted to an estimated cost by the application of a CCR for the billing hos pital which is calculated from the billing hospital’s own cost report. As described previo usly, in this case the single bills used to calculate the median cost were submitted in significant volume by 965 hospitals (36,860 single bills were used for ra tesetting out of 47,589 total lines). Therefore, we have no reason to believe that the median cost we ha ve calculated from such a robust submission of charge data from a significant number of hos pitals should not be us ed to establish the payment for the service reported by CPT c ode 77338 for CY 2012. To the extent that hospitals determine that their charges should be revised to better reflect the resources required to furnish the service as define d by CPT code 77338, the revised charges would be reflected in future years’ OPPS paymen t rates. However, for CY 2012, based on the robust set of single procedure bills cont aining actual charges for CPT code 77338 by 965 hospitals, we believe that it is approp riate to apply our longstanding cost-findingCMS-1525-FC 486

I methodology, as we proposed, to calculate th e median cost on which the payment for CPT code 77338 is based for CY 2012. We see no basis to ignore our robust set of single procedure claims submitted by a significant number of hospitals by continuing to simulate a median cost for CPT code 77338. In conclusion, we see no irregularities in our calculation of the median cost for CPT code 77338 based on the actual charges reported on 36,860 single procedure bills submitted by 965 hospitals. Therefore, we ar e finalizing our assignment of CPT code 77338, which has a final median cost of a pproximately $188 to APC 0305, which has a final median cost of $264 for CY 2012. f. Computed Tomography of Abdo men and Pelvis (APC 0331 and 0334) The AMA CPT Editorial Panel created three codes for computed tomography (CT) of abdominal and pelvis that were e ffective January 1, 2011, specifically, CPT code 74176 (Computed tomography, abdomen and pelv is; without contrast material); CPT code 74177 (Computed tomography, abdomen and pe lvis; with contrast material(s)); and CPT code 74178 (Computed tomography, abdomen and pelvis; without contrast material in one or both body regions, followed by contra st material(s) and furt her sections in one or both body regions). As with all new CP T codes for CY 2011, these new codes were announced through the publication of the CY 2011 CPT in November 2010, effective on January 1, 2011. In accordance with our longstanding policy, we made an interim APC assignment for each new code for CY 2011 based on our understanding of the resources required to furnish the service as the service was defined in the new code (75 FR 71898).CMS-1525-FC 487

I Specifically, for CY 2011, we assigned new CPT code 74176 to APC 0332 (Computed Tomography without Contrast), which has a CY 2011 payment rate of approximately $194; we assigned CPT code 74177 to AP C 0283 (Computed Tomography with Contrast), which has a CY 2011 payment ra te of approximately$300; and we assigned CPT code 74178 to APC 0333 (Computed Tom ography Without Contrast Followed by with Contrast), which has a CY 2011 paymen t rate of approximately $334. For CY 2011, we also made these codes eligible for composite payment under the multiple imaging composite APC methodology when they are furn ished with other CT procedures to the same patient on the same day. As is our standard practice each year, our clinicians review each of the many CPT code changes that will be effective in the fo rthcoming year and make a decision regarding status indicator and/or APC assignment based on their understanding of the nature of the services furnished. We are unable to incl ude a proposed status indicator and/or APC assignment in the proposed rule for codes that are not announced by the AMA CPT Editorial Board prior to the proposed rule . Therefore, in accordance with our longstanding policy, we include, in the final rule with comm ent period, an interim status indicator and/or APC assignment for all ne w CPT codes that are announced by the AMA CPT Editorial Board subsequent to the OPPS/AS C proposed rule to enable payment to be made for new services as soon as the code is effective. In accordance with our longstanding practice, we id entified the new codes for a bdominal/pelvis CT for CY 2011 in Addendum B of the CY 2011 OPPS/ASC fina l rule with comment period as having new interim APC assignments by showing a co mment indicator of “NI,” and we providedCMS-1525-FC 488

I a public comment period. As we do with al l new CPT codes, we are responding to the public comments in this OPPS/ASC final rule with comment period for CY 2012. This longstanding process enables us to pay for new services as soon as the new CPT codes for them go into effect, despite the fact that they first become publicly available around the same time the final rule with comment period for the upcoming year is made public. At its February 28-March 1, 2011 m eeting, the APC Panel heard public presentations on this issue and recommended that CMS provide more data on the new CPT codes for combined abdomen and pelvis CT as soon as these data are available. In the CY 2012 OPPS/ASC proposed rule (76 FR 42235), we stated that we were accepting this recommendation, and we would provide claims data as soon as the data are available. We noted that, because these codes were e ffective January 1, 2011, the first available claims data for these codes will be the APC Panel claims data for the CY 2013 OPPS rulemaking. These data will be for date s of service January 1, 2011 through and including September 30, 2011, as processed through the Common Working File on or before September 30, 2011. As we described in the proposed rule, in general, stakeholders who provided comments on the interim assignment of these codes for CY 2011 stated that the most appropriate approach to establishing paymen t for these new codes is to assign these procedures to APCs that recognize that each of the new codes reflects the reporting under a single code of two services that were prev iously reported under two separate codes and that, therefore, payments would be more accura te and better reflective of the relative cost of the services under the OPPS if we were to establish pa yment rates for the codes forCMS-1525-FC 489

I CY 2012 using claim data that reflect the comb ined cost of the two predecessor codes. They noted that when these services were reported in CY 2010 using two CPT codes, rather than a single code, th e services that are being re ported under CPT code 74176 were assigned to imaging composite APC 8005 (CT and CTA without Contrast) for which the CY 2010 payment was $419.45. Similarly, the se rvices being reported under CPT code 74177 or CPT code 74178 were assigned to composite APC 8006 (CT and CTA with Contrast) for which the CY 2010 payment was $628.49. They indicated that they believed that simulating the median cost for CPT codes 74176, 74177, and 74178 using historic claims data from the predecessor code s in a manner similar to that used to create the composite APC medians would result in th e best estimates of costs for these codes and, therefore, the most accurate payment rate for these codes. After considering the presentations at the APC Panel meeting, the views of stakeholders who met with us to discuss this issue, and th e comments in response to the CY 2011 final rule with public comment period, and after examining our claims data for the predecessor codes, we stated in the proposed rule that we believe that establishment of payment rates for these serv ices based on historic claims data for the combinations of predecessor codes that are now reported by CPT codes 74176, 74177, and 74178 would result in a more accurate and appropriate payment for these services for CY 2012 because it would take into account the full cost of bot h services that are now reported by a single CPT code. We indicated that we believe that the best way to secure the most appropriate payments for CY 2012 is to use the claims data from the predecessor codes under which the new codes were reported for CY 2010 to simulate median costs for the new codes andCMS-1525-FC 490

I to create APCs that are appropriate to the services. To do so should reflect both the full cost of the service as reported by the new code and should also reflect the efficiencies of reporting the service represented by the singl e new code. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42234), we proposed to establish two APCs to which we proposed to assign the combined abdominal and pelvis CT services. Specifically, we proposed to create new APC 0331 (Combine d Abdominal and Pelvis CT Without Contrast), to which we proposed to assign CPT code 74176 and for which we proposed to base the CY 2012 OPPS payment rate on a medi an cost of approximately $417. We also proposed to create new APC 0334 (Combined A bdominal and Pelvis CT With Contrast), to which we proposed to assign CPT codes 74177 and 74178 for the CY 2012 OPPS and for which we proposed to base the CY 2012 OPPS payment rate on a median cost of approximately $592. We proposed to create two new APCs to which to assign these codes, rather than one, because CPT code 74176 is furnished without contrast, while CPT codes 74177 and 74178 are furnished with cont rast. Section 1833(t)(2)(G) of the Act requires that services with contrast may not be assigned to APCs that contain services without contrast. Therefore, we coul d not assign CPT code 74176, which does not require contrast, to the same APC as CPT codes 74177 and 74178, which require

contrast. We proposed to create new APC 0331 to which we proposed to assign CPT code 74176 and to create new APC 0334 to which we proposed to assign CPT codes 74177 and 74178 because the proposed methodology for simulating the median costs for CPT codes 74176, 74177, and 74178, which uses claims data for the predecessor codes isCMS-1525-FC 491

I unique to these CPT codes. Therefore, we be lieve that it is appropriate to create APCs comprised only of services for which we calculated medians using claims data for the predecessor codes. We stated in the proposed rule that, to the extent this policy is finalized, we would reassess whether it conti nues to be appropriate to pay these codes under APCs 0331 and 0334 once the median costs for the proposed CY 2013 OPPS are calculated using our standard methodology, based on hospitals’ CY 2011 charges for CPT codes 74176, 74177, and 74178. To calculate the proposed median co sts for proposed APCs 0331 and 0334 for CY 2012, we selected claims that containe d one unit of both of the predecessor CPT codes that appear in the CY 2011 CPT for CPT codes 74176, 74177, and 74178. The predecessor codes were limited to the codes in Table 20 of the proposed rule (now Table 27 of this final rule with comment period).
TABLE 27.--CPT CODES THAT WE RE COMBINED TO CREATE NEW ABDOMINAL AND PELVIS CPT CODES FOR CY 2011

CPT Code Descriptor 72192 Computed tomography, pelvis; without contrast material 72193 Computed tomography, pelvis; with contrast material(s)

72194 Computed tomography, pelvis; without contrast material, followed by contrast material(s) and further sections 74150 Computed tomography, abdomen; without contrast material 74160 Computed tomography, abdomen; with contrast material(s)

74170 Computed tomography, abdomen; wit hout contrast material, followed by contrast material(s) and further sections For purposes of selecting claims to be us ed to calculate simulated median costs, we selected only claims that contained one (and only one) unit of each of the predecessorCMS-1525-FC 492

I codes in the allowed combinations identified in Table 21 of the proposed rule (now Table 28 of this final rule with comment period). We used only claims that contained one and only one unit of each of the code combinations because we believe that it represents the best simulation of the definition of the new code s. Where more than one unit of either or both codes were reported, the claim would be paid under an imaging composite APC, not under APC 0331 or 0334. For median calculation, claims that contained more than one unit of either or both codes were assigned to the applicable imaging composite APC. We refer readers to section II.A.2.e.5. of the propos ed rule and this final rule with comment period for discussion of the imaging composite APCs.
TABLE 28.--COMBINATIONS OF PRED ECESSOR CPT CODES USED TO SIMULATE MEDIAN COSTS FOR TH E COMBINED ABDOMINAL AND PELVIS CT CODES THAT ARE NEW FOR CY 2011

Combined Abdominal and pelvis CT code Predecessor CT Abdomen

without contrast Predecessor CT Pelvis

without contrast Predecessor CT Abdomen with contrast Predecessor CT Pelvis with contrast 74176 74150 72192 -- -- 74177 -- -- 74160 72193 74178 74150 -- -- 72193 74178 74150 -- -- 72194 74178 -- 72192 74160 -- 74178 -- -- 74160 72194 74178 -- 72192 74170 -- 74178 -- -- 74170 72193 74178 -- -- 74170 72194

After we selected the claims that contai ned one and only one unit of each code in each combination, we deleted claims that co ntained other separately paid HCPCS codesCMS-1525-FC 493

I if those codes did not appear on the bypass list (we refer read ers to section II.A.1.b. of the proposed rule and this final rule with co mment period, and to A ddendum N, which was available via the Internet on the CMS Web s ite). We bypassed the costs for codes that appeared on the bypass list to create simula ted single procedure claims for CPT codes 74176, 74177, and 74178. Using the remaining simula ted single procedure claims for the combined abdominal and pelvis CT serv ices, we applied ou r standard trimming, packaging, and wage standardization methodolog y to calculate the median cost for each combined abdominal and pelvis CT code for the two proposed APCs. We refer readers to section II.A.2.c. of the proposed rule and this final rule with comment period for discussion of our standard trimming, packag ing, and wage standardization methodology. We found that using the pr oposed methodology resulted in a simulated median cost for CPT code 74176 of approximately $417, and that, because we proposed that CPT code 74176 would be the only HCPCS code assigned to APC 0331, the simulated median cost for APC 0331 also would be approxi mately $417. We found that using this proposed methodology, the simulated me dian cost for CPT code 74177 was approximately $570 and the simulated median cost for CPT code 74178 was approximately $638, and that the simulate d median cost for proposed APC 0334 was approximately $592. We proposed to use this simulation methodology to establish proposed median costs for proposed APCs 0331 and 0334 for the CY 2012 OPPS. We also proposed that, in cases where CPT code 74176 is reported with CT codes that describe CT services for other regions of the body other than the abdomen and pelvis in which contrast is not used, it would be assigned to imaging composite APC 8005 (CTCMS-1525-FC 494

I and CTA without Contrast), for which we pr oposed a median cost of approximately $445 for the CY 2012 OPPS. In cases where CPT code 74177 or 74178 is reported with CT codes that describe CT services for regions of the body other than abdomen and pelvis in which contrast is used, we proposed that the code would be assigned to APC 8006 (CT and CTA with Contrast), for which we propos ed a median cost of approximately $744 for the CY 2012 OPPS. We proposed to assi gn CPT codes 74176 to imaging composite APC 8005 and to assign CPT codes 74177 and 74178 to imaging composite APC 8006 because the predecessor codes for CP T codes 74176, 74177, and 74178 (identified in Table 20 of the proposed rule) continue to be reported when either abdominal CT or pelvis CT (but not both) is furnished, and we proposed to continue to assign them to imaging composite APCs 8005 and 8006. We stat ed that we believe that it would be inconsistent with our proposed imaging compos ite policy if we did not propose to assign CPT codes 74176, 74177, and 74178 to the applicable imaging composite APC for CY 2012. We refer readers to section II.A.2.e.(5) of the proposed rule and this final rule with comment period for the discussion of the calculation of our median costs for APCs 8005 and 8006 for CY 2012. In summary, we proposed to establ ish new APCs 0331 and 0334 to which we would assign the abdominal and pelvis CT codes that were created by the AMA CPT Editorial Panel for CY 2011 and to use the simulation methodology we describe above to establish simulated median costs on whic h we would base the CY 2012 payment rates because we believe that to do so would resu lt in relative payment weights for these new services that will more accurately reflect the resources required to furnish these servicesCMS-1525-FC 495

I as defined by CPT than would be true of c ontinued assignment of the codes to the single service APCs to which we made interim assi gnments for CY 2011. We noted that claims and cost data for these services will be available for the CY 2013 OPPS rulemaking, and we will reassess the payment policy for these codes based on the cost data that are used to establish the CY 2013 OPPS median cost and payment rates. At its August 10-11, 2011 meeting, the AP C Panel recommended that CMS adopt the proposal to create new APC 0331 (Com bined Abdomen and Pelvis CT [computed tomography] without Contrast), for paym ent of CPT code 74176 (Computed tomography, abdomen and pelvis; without contrast material); and new APC 0334 (Combined Abdomen and Pelvis CT with Contrast), for payment of CPT code 74177 (Computed tomography, abdomen and pelvis; with c ontrast material(s)); and CPT code 74178 (Computed tomography, abdomen and pelvis; wi thout contrast materi al in one or both body regions, followed by contrast material(s) and further sections in one or both body regions). We respond to the Panel’s reco mmendation as part of the response to comments below.
Comment : Commenters supported the use of data for the predecessor codes for the services that were combined in to CPT codes 74176, 74177, and 74178 to create simulated median costs for use in establishing payments for CY 2012. Commenters supported the creation of APC 0331, to whic h we proposed to assign CPT code 74176, and APC 0334, to which we proposed to assign CPT codes 74177 and 74178 for CY 2012. As described previously, comme nters on the CY 2011 OPPS/ASC final rule with comment period also stated that the most appropriate approach to establishingCMS-1525-FC 496

I payment for these new codes is to assign thes e procedures to APCs that recognize that each of the new codes reflects the reporting under a single code of two services that were previously reported under two separate code s and that, therefore, payments would be more accurate and better reflectiv e of the relative cost of th e services under the OPPS if we were to establish payment rates for the codes for CY 2012 usi ng claims data that reflect the combined cost of the two predecessor codes. Response : We continue to believe that it is appropriate to base payment for CPT codes 74176, 74177, and 74178 on simulated median costs established using the cost data for predecessor codes for CY 2012 for the reasons we stated in the proposed rule, as summarized in the discussion above. Theref ore, the median costs for CPT codes 74176, 74177, and 74178 for CY 2012 are based on the cost data for the predecessor codes, and we are establishing new APCs 0331 and 0334 to which these codes are assigned, as we proposed. The final rule median cost for CPT code 74176, which is the only code in APC 0331, is approximately $406. The final median cost for CPT code 74177 is approximately $561 and the final median co st for CPT code 74178 is approximately$631. The final median cost for APC 0334 to which CPT codes 74177 and 74178 are assigned is approximately $581. We have a large volume of services in th e predecessor data on which to base the simulated median costs for APCs 0331 and 0334. Specifically, to calculate the medians for CPT code 71476, we used 222,193 claims; for CPT code 71477, we used 331,262 claims; and for CPT code 74178, we used 201,693 claims. Because these codes were created effective January 1, 2011, we will have claims data containing actual charges forCMS-1525-FC 497

I use in calculating the median cost of these services for the CY 2013 OPPS. We expect to have a very robust set of claims data cont aining actual hospital charges to which we expect to apply our standard processes to calculate the median costs for these codes for CY 2013 because of the large volume of serv ices that we found in the predecessor data that meet the definition of the new codes. At that time, we will decide whether it is necessary and appropriate to propose to retain APCs 0331 and 0334. However, we note that the extent to which hospitals establish charges in a manner that reflects that the new codes report both the abdominal and pelvis CT services will greatly affect the median costs that are calculated, using our lo ngstanding methodology, from the charge data present on claims for services in CY 2011.
Comment : One commenter on the CY 2012 proposed rule and several commenters on the CY 2011 final rule with comment period asked that CMS increase payment for the services described by CPT codes 74176, 74177, and 74178 for CY 2011 because they believe that CMS inappropriately reduced payment for these services as a result of the assignment of CPT code 74176 to APC 0332 and the assignment of CPT codes 74177 and 74178 to APC 0333 for CY 2011. Commenters on the CY 2011 final rule with comment period objected to th e assignment of CPT code 74176 to APC 0332 and to the assignment of CPT codes 74177 and 741178 to APC 0333 on the basis that the payments for these single service APCs re duced the payment for the services which, when coded using multiple CPT codes in CY 2010, would have been paid as imaging composite APCs at much higher payment rates.CMS-1525-FC 498

I Response : The prospective payments that were established as a result of publication of the CY 2011 OPPS/ASC final rule with comment period are generally final payments, with the exception of any outlier payment or transitional outpatient payment to which the hospital may be entitle d. We generally do not change payments that we implement as a result of the standard regulatory process dur ing the year in which the payments are in effect unless required by legislation. We followed our longstanding policy when we made an interim assignme nt of CPT code 74176 to APC 0332 and when we made an interim assignment of CPT codes 74177 and 74178 to APC 0333 for CY 2011, based on our understanding of the hos pital resources required to furnish these services. It is our longstanding practice to assign new CPT code s to interim APCs without having an opportunity to acquire comment from the public because the new codes are not announced to the public until af ter the opportunity for public comment has ended. This interim assignment remains in effect for the cale ndar year under this established process. The first opportunity to change the APC assignment for new codes is the final rule with comment period following the year the new codes are first recognized for OPPS payment. After consideration of the public comments we rece ived, for CY 2012, for the reasons we discussed previously in this section, we are creating new APC 0331, to which we are assigning CPT code 74176, and new APC 0334, to which we are assigning CPT codes 74177 and 74178. Using the claims da ta for the predecessor codes and the methodology we identify above and in the pr oposed rule, we calculated a simulated median cost of approximately $406 for AP C 0331 and a simulated median cost ofCMS-1525-FC 499

I approximately $581 for APC 0334 for CY 2012. We will reassess whether there is a continued need for these APCs for the CY 2013 OPPS once we have actual charges for these services. For the reasons we discuss previously in this section, we also are finalizing our proposal to assign CPT code 74176 to imag ing composite APC 8005 where CPT code 74176 is reported with CT codes that describe CT services for regions of the body other than the abdomen and pelvis in which contra st is not used and to assign CPT codes 74177 and 74178 to APC 8006 when either of them is reported with CT code s that describe CT services for regions of the body other than abdom en and pelvis in which contrast is used. For CY 2012, APC 8005 has a median cost of approximately $432 and APC 8006 has a median cost of approximately $722. g. Complex Interstitial Radia tion Source Application (APC 0651) APC 0651 (Complex Interstitial Radiation Source Application) consists of one service described by CPT code 77778 (Interstitial radiation source application; complex). Composite APC 8001 (Low Dose Rate Pros tate Brachytherapy Composite) employs claims on which both CPT code 77778 and CPT code 55875 (Transperineal placement of needles or catheters into prosta te for interstitial radioelement application, with or without cystoscopy) are found on the same date of servic e, as described in se ction II.A.2.e.(2) of this final rule with comment period. For the CY 2012 proposed rule, APC 0651 had a median cost of approximately $897, based on 96 claims. APC 0651 has a final CY 2012 median cost of approximately $835, based on 92 single claims.CMS-1525-FC 500

I Comment : Several commenters expressed concern about the low volume of single and “pseudo” single claims used for APC 0651 ratesetting. They pointed out that both CY 2011 and CY 2012 payment rates fo r APC 0651 are based on fewer than 100 claims, and that the proposed CY 2012 pa yment rate for APC 0651 of $866.08 is a 23.3 percent decrease from the final CY 2011 payment rate of $1,129.46. The commenters believed the 96 claims used to set th e proposed CY 2012 rate for APC 0651 are inadequate, and recommended that CMS contin ue to explore additi onal methodologies to increase the number of multiple procedure claims used for brachytherapy ratesetting. Response : While we agree that 96 single cl aims associated with CPT code 77778 is not optimal for APC 0651 ratesetting, we believe that a low vol ume of single claims for this code is not unexpected due to the cl inical nature of the procedure. As we describe in section II.A.2.e.(2) of this fina l rule with comment pe riod, the application of brachytherapy sources described by CPT code 77778 and the placement of needles or catheters into the prostate described by CPT code 55875 are genera lly provided in the same operative session in the same hospital on the same date of service to the Medicare beneficiary being treated with LDR brachytherapy for prostate cancer. For this reason, we are continuing to pay for these two procedures when performed together through composite APC 8001. However, as we indicate in that section, we understand that there are a few occasions when a physician places the needles or catheters outside the hospital and the patient is then transferred to a hos pital for brachytherapy source application, in which case CPT code 77778 would be reported alone in the hospita l outpatient setting. While we agree with the commenter that it would be preferable if we had more singleCMS-1525-FC 501

I bills on which to base the payment for APC 0651, we believe the variation in the median costs for CPT code 77778 between the CY 2011 final rule and the CY 2012 final rule appears to be normal variation that we would expect to see for low-volume services. We also found from examining the single bills for CPT code 77778 that they are from different hospitals from year to year, which also c ould result in fluctuations in the median costs. We will continue to evaluate additional refinements and improvements to our ratesetting methodologies to maximize our use of claims data generally and continue to study means by which we can use more claims da ta to establish the payment rate for APC 0651 in particular. For CY 2012, the final median cost fo r APC 0651 is approximately $835, based on 92 single bills. We will continue to use this median cost to establish payment for APC 0651 for CY 2012, and are finali zing our policy for CY 2012 that CPT code 77778, when billed alone, will be paid at the APC 0651 payment rate. h. Radioelement Applications (APC 0312) APC 0312 consists of six radioelement appl ication codes, one of which is unlisted CPT code 77799 (Unlisted procedure, clin ical brachytherapy). For the CY 2012 proposed rule, APC 0312 had a median cost of approximately $338 based on 168 single claims. For CY 2011, APC 0312 had a final rule median cost of $351.17, based on 254 single claims.
Comment : One commenter stated that the number of APC 0312 single claims is sparse and shows large and ra ndom variations in yearly me dian costs. The commenter pointed to a decrease in single claims from the CY 2011 final rule to the CY 2012CMS-1525-FC 502

I proposed rule of 33 percent, and a decrease in the CY 2011 final payment rate to the CY 2012 proposed payment rate of 8.1 percen t. The commenter recommended that CMS continue to explore additional methodologi es to increase the number of multiple procedure claims used for brachythera py ratesetting, such as for APC 0312. Response : The CY 2012 final median cost of approximately $378 shows an increase of 7.8 percent from the CY 2011 final median of $351.17. We believe the variation in the median costs between the CY 2011 final rule and the CY 2012 final rule appears to be normal variation that we would expect to see for low-volume services. We agree with the commenter that it would be preferable if we had more single bills on which to base the payment for APC 0312, and we will continue to evaluate additional refinements and improvements to our ratese tting methodologies generally to maximize our use of claims data generally and conti nue to study means by which we can use more claims data to establish the payment rate for APC 0312 in particular. However, we note that 268, or approximately 36 percent, of the 736 total lines reported fo r services that are assigned to APC 0312 in the CY 2012 final ru le data, were reported as CPT code 77799, which we do not use for setting the median cost for the APC because there is no definition of the service that was furnished. Therefore, some of the approximately 36 percent of the lines paid under APC 0312 might be used to establish the median cost for services in APC 0312 if they had been coded sp ecifically, or in cases in which there is no existing code for the service, a new code were to be created to descri be the services being furnished.CMS-1525-FC 503

I After consideration of th e public comments we received, we are finalizing a CY 2012 median cost for APC 0312 of appr oximately $378, based on 183 single claims. 8. Respiratory Services a. Pulmonary Rehabilitation (APC 0102) Section 144(a)(1) of Pub. L. 110–275 (MI PPA) added section 1861(fff) to the Act to provide Medicare Part B coverage and payment for a comprehensive program of pulmonary rehabilitation services furnished to beneficiaries with chronic obstructive pulmonary disease, effective January 1, 2010. Accordingly, in the CY 2010 OPPS/ASC final rule with comment period, we esta blished a policy to pay for pulmonary rehabilitation services furnished as a part of the comprehensive pulmonary rehabilitation program benefit (74 FR 60567). There was and continues to be no single CPT code that fully and accurately describes the compre hensive pulmonary rehabilitation benefit provided in section 1861(fff) of the Act. Moreover, at that time, there were no alphanumeric HCPCS codes that described th e comprehensive pulmonary rehabilitation benefit in effect for CY 2008 (on which th e CY 2010 OPPS was based) or CY 2009 (on which the CY 2011 OPPS was based). Theref ore, for CY 2010, we created new HCPCS code G0424 (Pulmonary rehabilitation, incl uding exercise (includes monitoring), one hour, per session, up to two sessions per day) and assigned the code to APC 0102 (Level II Pulmonary Treatment), which we also cr eated for the CY 2010 OPPS. Because none of the pulmonary treatment codes for which there were charges for CY 2008 or CY 2009 accurately described the comprehensive pul monary rehabilitation service for which MIPPA provided coverage, we did not assume that the charge reported on any one of theCMS-1525-FC 504

I previously existing HCPCS codes under which pulmonary treatments were reported would represent the full charge for the comp rehensive pulmonary rehabilitation service. Instead, for the CY 2010 OPPS, which wa s based on claims for services in CY 2008, we calculated a median “per session” cost that we simulated from historical hospital claims data for pulmona ry therapy services that were billed in combination with one another, much like we create composite APC median costs by summing the costs of multiple procedures that are typically provi ded on the same date. Our methodology for calculating the “per session” median cost that we used as the basis for the CY 2010 OPPS payment rate for HCPCS code G0424 and APC 0102 is discussed in detail in the CY 2010 OPPS final rule with comment period (74 FR 60567 through 60570). Specifically, to simulate the “per sess ion” median cost of new HCPCS code G0424 from claims data for existing services, we used only claims that contained at least one unit of HCPCS code G0239 (Therapeutic pr ocedures to improve respiratory function or increase strength or endur ance of respiratory muscles, two or more individuals (includes monitoring), the group code that is without lim itation on time duration, and one unit of HCPCS code G0237 (Therapeutic procedur es to increase stre ngth or endurance of respiratory muscles, one on one, face to face, per 15 minutes (includes monitoring) or HCPCS code G0238 (Therapeutic procedures to improve respiratory function or increase strength or endurance of respiratory muscle s, one on one, face to face, per 15 minutes (includes monitoring), the indivi dual, face-to-face codes that report 15 minutes of service, on the same date of service. We reasoned that patients in a pulmonary rehabilitation program would typically receive individual and group services in each session ofCMS-1525-FC 505

I approximately 1 hour in duration. This wa s consistent with public comments that suggested that pulmonary rehabilitation is of ten provided in group sessions in the HOPD, although patients commonly re quire additional one-on-one care in order to fully participate in the program. We note that ou r use of “per session” claims reporting one unit of HCPCS code G0237 or G0238 and one unit of HCPCS code G0239 in this simulation methodology was also consistent wi th our overall finding of approximately 2.4 service units of the HCPCS G-codes per day on a single date of service, usually consisting of both individual and group se rvices, for patients receiving pulmonary therapy services in the HOPD based upon CY 2008 claims. We concluded that the typical session of pulmonary rehabilitati on would be 1 hour based on public comments that indicated that a session of pulmonary rehabilitation is typically 1 hour and based on our findings that the most commonly reported HCPCS code for pulmonary treatment is HCPCS code G0239, which has no time definition for this group service. We included all costs of the related test s and assessment services (CPT codes 94620 (Pulmonary stress testing; simple (e.g., 6- minute walk test, prolonged exercise test for bronchospasm with pre- and post-spirometry and oxi metry)); 94664 (Demonstration and/or evaluation of patient utilization of an aerosol gene rator, nebulizer, metered dose inhaler or IPPB device); and 94667 (Mani pulation chest wall, such as cupping, percussion and vibration to facilitate lung function; in itial demonstration and/or evaluation), and all CPT codes for established patient clinic visits, on the same date of service as the HCPCS G-codes in the claims we used to simulate the median cost for HCPCS code G0424. After identif ying these “per session” claims, which we believe toCMS-1525-FC 506

I represent 1 hour of care, we su mmed the costs on them and ca lculated the median cost for the set of selected claims. In light of the cost and clinical sim ilarities of pulmonary rehabilitation and the ex isting services described by HCPCS codes G0237, G0238, and G0239 and the CPT codes for related assessments and tests, and the significant number of “per session” hospital claims we found, we believed that th e simulated median cost for HCPCS code G0424, constructed to include the costs of these services where furnished, was our best estimate of the expected hospita l cost of a pulmonary rehabilitation session, given that we did not have hospital charges for the comprehensive pulmonary rehabilitation service provided by MIPPA for which we created HCPCS code G0424. We indicated in our discussion of the simulate d median that we expected hospitals would establish charges for pulmonary rehabilitation that would reflec t all of the services that are included in comprehensive benefit that would be reported by one unit of HCPCS code G0424 (76 FR 42240). We used the resulting simulated median “per session” cost of approximately $50 as the basis for the payment for pulmonary rehabilitation service for CY 2010, the first year in which the comprehensive pulmonary rehabilitation benefit was covered. For CY 2011, which was based on claims for servic es furnished in CY 2009, we continued to assign HCPCS code G0424 to APC 0102 and to apply the simulation methodology that we used in CY 2010 to claims for services in CY 2009 to calculate a median “per session” cost simulated from hi storical hospital claims data for similar pulmonary therapy services for the CY 2011 OPPS. The CY 2011 OPPS final rule median cost ofCMS-1525-FC 507

I approximately $62 resulted in a national unadjusted payment rate for CY 2011 of approximately $63. For the CY 2012 OPPS, however, we have a very robust set of claims for HCPCS code G0424 on which hospitals reported the charges for the comprehensive pulmonary rehabilitation service for which MIPPA pr ovided the pulmonary rehabilitation benefit beginning on January 1, 2010. Specificall y, the CY 2012 OPPS proposed rule data, based on CY 2010 claims, contained a total frequency of 393,056 lines of HCPCS code G0424, of which we were able to use 391,901 single procedure bills or almost 100 percent of the claims submitted for HCPCS code G0424. This is an extremely robust volume of single procedure bills containing charges for HCPCS code G0424 on which to base a median cost. In general, we have f ound that higher volumes of single bills both in absolute numbers and as a percentage of tota l frequency provide very stable estimates of hospital costs. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42239 and 42240), we proposed that the payment rate for HC PCS code G0424 and, ther efore, for APC 102, would be based on the median cost for the se rvice as derived from claims for services furnished in CY 2010 and the most current av ailable cost report information, using our longstanding process for estimating the median cost of a service described by a HCPCS code. We refer readers to section II. of the proposed rule and this final rule with comment period for a descripti on of our longstanding standard process for calculating the median costs on which the OPPS payment rate s are based. Using our standard median calculation process for HCPCS code G0424 re sulted in a proposed median cost ofCMS-1525-FC 508

I approximately $38 for HCPCS code G0424 and, th erefore, for APC 0102. Given that the volume of claims in the CY 2012 OPPS proposed rule data was so robust for HCPCS code G0424, we believed that the proposed me dian cost we calculated for HCPCS code G0424 was a valid reflection of the relativ e cost of the comprehensive pulmonary rehabilitation service described by HCPCS code G0424 and that the proposed median cost for HCPCS code G0424 was an appropriate basis on which to establish the proposed national unadjusted payment rate for APC 0102. We indicated in the proposed rule that we recognized that there is a significant difference between our simulated median cost for CY 2011 and the CY 2012 proposed rule median cost of approximately $38 that wa s derived from applicat ion of our standard median calculation process to hospital claims data for CY 2010. We believe that this difference arises because the median si mulation methodology we used for CY 2010 and CY 2011 selected claims that contained multip le procedures and packaged the costs of numerous services into the “per session” cost for the simulated code where numerous services appeared on the same date of serv ice. Our simulation methodology assumed that hospitals would include the charges for th ese additional servic es in their CY 2010 charges for HCPCS code G0424 because the se rvices are included in the definition of comprehensive pulmonary rehabilitation. In response to the CY 2012 OPPS proposed median cost of approximately $38 for HCPCS code G0424, we looked at our claims data in more depth. We found that 1,048 hospitals, approximately 25 pe rcent of hospitals paid unde r the OPPS, reported HCPCS code G0424 and that the median line item medi an cost (exclusive of packaging) wasCMS-1525-FC 509

I approximately $38, virtually no different from the median cost per unit that we derived from the single bills. We also examined the charges that were submitted for HCPCS code G0424 in CY 2010 and the CCRs that were applied to the charges for HCPCS code G0424 to calculate the estimated median cost for the code for the CY 2012 proposed rule. We also looked at the revenue codes unde r which charges for HCPCS code G0424 were reported and the percentage of cost that was associated with packaged costs, such as oxygen, drugs, and medical supplies. We f ound that the median line item charge for HCPCS code G0424 in the CY 2012 proposed ru le data was approximately $150 and that the median CCR was 0.29. We also found that th e most frequently reported revenue code for HCPCS code G0424 was revenue code 410 (Respiratory therapy), approximately 108,000 single bills, and with revenue c ode 948 (Pulmonary Rehabilitation), approximately 81,000 single bills, being the second most commonly reported revenue code for HCPCS code G0424. We found that only 0.02 percent of the cost of HCPCS code G0424 was packaged cost (for example, oxygen, drugs, and supplies). In general, our detailed examination of to tal and line item charges for pulmonary rehabilitation, the CCRs used to reduce the charges to estimated costs on the single bills, the revenue codes reported, and the absence of packaging on th e single bills supports the proposed median cost of approximately $38 per unit as a valid es timate of the relative cost of one unit of HCPCS code G0424. In summary, our examination of the cl aims and cost data for HCPCS code G0424 caused us to believe that the proposed median cost that we calculated from claims data for HCPCS code G0424 was calculated correct ly according to our longstanding standardCMS-1525-FC 510

I median cost calculation methodology. Theref ore, we proposed to base the CY 2012 OPPS payment rate for HCPCS code G0424 a nd APC 0102 on the median cost that we derive from applying our standard medi an calculation methodology to the CY 2010 charges and cost data for HCPCS code G0424.
Comment : Commenters objected to the proposed CY 2012 payment because it proposed a significant reduction in payment fr om the payment that resulted from the simulated median cost for pulmonary rehabi litation for CY 2010 and CY 2011. They stated that such a reduction in payment would not cover the labor cost of the service and would result in hospitals ceasing to furnis h the service and, therefore, would reduce access to care for beneficiaries. Commenters believed that hospitals do not understand the nature of HCPCS code G0424 as a unit of a comprehensive service. They believed that hospitals are very familiar with HCPCS code G0237, which is for 15 minutes of care for patients with chronic pulmonary diseases, and they believed that hospitals presumed that a single code for very similar services correlated to a different diagnosis would also be a 15 minute code and that they set the charge for HCPCS code G0424, which is for similar services but is limited to persons with chronic obstructiv e pulmonary disease (COPD), accordingly. Commenters stated that CMS data support that hospitals are not reporting charges associated with the corollar y services that are part of HCPCS code G0424. They urged CMS to freeze the payment for pulmonary rehabilitation for CY 2012 at the CY 2011 rate and to shift from th e use of a standard cost center to the use of a nonstandard cost center fo r determining the re lative cost of pulm onary rehabilitation services because they believed that using a standard cost center does not adequatelyCMS-1525-FC 511

I capture the cost of the services. The co mmenters believed that continuing the CY 2011 payment for CY 2012 is justifie d because there is strong hist orical data for HCPCS codes G0237 through G0239 and a weak data base for HCPCS code G0424 and that using 10 years of data for HCPCS codes G0237 through G0239 is wiser than using one year of artifact data for HCPCS code G0424 as th e basis for the payment for HCPCS code G0424. They indicated that the proposed payment for pulmonary rehabilitation will reduce access to care and thereby result in CMS losing an important tool for reducing readmissions and decreasing le ngth of stay in inpatient hospital settings. The commenters stated that HCPC S codes G0237 through G0239 are used to report individual pulmonary services while HCPCS code G0424 is generally recognized as a group code with a maximum ratio of one staff to four patient s. However, they stated that this is not always the case and that HC PCS code G0424 is sometimes re quires a one-to-one staff to patient ratio. Therefore, until such time as a more robust set of data is available, the commenters asked that CMS continue to base payment for HCPCS code G0424 on the data for HCPCS codes G0237 through G0239 us ing the simulated median methodology that was the basis for payments for HCPCS code G0424 for CY 2010 and 2011. Response : After considering the comments a nd reexamining our claims data, we are establishing the CY 2012 median cost on which the CY 2012 payment for HCPCS code G0424 will be based on our claims and cost report data. The final rule median cost for APC 0102 to which HCPCS code G0424 is assigned is approximately $37. Our final rule data shows that hospitals billed a total frequency of 448,396 lines of pulmonary rehabilitation, of which we were able to use 446,456 or nearly 100 percent of the billedCMS-1525-FC 512

I lines, for the calculation of the final median cost for HCPCS code G0424 for CY 2012. We disagree with commenters that these clai ms are artifact claims that should not be used. For this final rule we expanded our data analysis to look not only at the charges and CCRs for HCPCS code G0424, but also to look at the charges and CCRs for HCPCS code G0237 through G0239, which the commenters indicated are similar services, and also to also at the cost cent ers that were used to reduce th e charges to cost s. We found that the median charge for one unit of HC PCS code G0424 is approximately $152 and the median charge for HCPCS code G0239, which is defined to include services to two or more persons, rather than one on one servi ce, is approximately $120. Commenters stated that HCPCS code G0424 is generally, but not always, considered to be a group service with a staff to patient ratio of 1:4. Therefor e, we view it as most similar to HCPCS code G0239, which is defined as a group service and which was the basis for the simulated median cost methodology on which we based the OPPS payments for CY 2010 and CY 2011. Therefore, it seems logical that hos pitals charged more for the comprehensive pulmonary rehabilitation service of HCPC S code G0424 than for HCPCS code G0239 which is not a comprehensive service but whic h is a group service for which time is not limited. Hospital charges represent the hospita l’s statement of the dollar value of the service they furnish and we conclude that hospitals place a highe r dollar value on HCPCS code G0424 than on G0239. We do not view HCPCS code G0237 or G0238, which have median charges of approximately $88 a nd $85, respectively, and which represent 15 minutes of care to be similar to HCPCS code G0424 because each of them is forCMS-1525-FC 513

I one-on-one care, as opposed to the group nature of HCPCS codes G0239 and G0424. For that reason, when we simulated median costs for CY 2010 and CY 2011, we based the simulation on the presence of HCPCS c ode G0239 on the claim, with HCPCS code G0237 and/or HCPCS code G0238 be ing a secondary requirement. We next looked at the revenue codes under which hospitals reported HCPCS code G0424 and G0239. We found that the most commonly repor ted revenue codes on the lines with the single bills for HCPCS code G0424 were 0410, Respiratory Services, with 108,154 single bills; 0948, Pulmonary Rehabilitation, with 84,126 single bills; 0460, Pulmonary Function, with 64,641 single bills; 0419, Other Resp iratory Services, with 37,833 single bills, and 0940, Other Therapeutic, with 59,533 single bills. Therefore, of the 446,456 single bills used to set the medi an cost for APC 102, 345,738 bills (excluding the single bills reported as “Other therapeutic”), or 77 percent, were reported under revenue codes that were specifi c to respiratory services of some nature (that is, revenue codes 0410, 0948, 0460, and 0419). The remaining single bills were reported under a variety of revenue codes. We next looked at the cost centers that were applied to the charges on the single bills, and we found that we used the respiratory therapy cost center, cost center 4900 on the hospital cost repor t CMS 2552-96, to reduce the charges on the line to costs on 63 percent of the single bi lls. When we looked at the CCRs used to reduce charges to cost for HCPCS code s G0424 and G0239, we found that the both HCPCS codes G0424 and G0239 have a CCR of 0.25, which is consistent with our finding that charges for both codes were usually reduced by the CCR for cost center 4900, Respiratory Therapy. We disagree with th e commenters’ request that we create aCMS-1525-FC 514

I nonstandard cost center for pulmonary rehabil itation because we believe that it is not necessary and would not result in more accurate estimated median costs for pulmonary rehabilitation. Stakeholders ha ve repeatedly told us that respiratory therapists furnish most pulmonary rehabilitation. Therefore, we expect that the costs of pulmonary rehabilitation are captured in the standard cost center 4900 (Respiratory Therapy), which is used to convert charges to costs for pulmonary rehabilitation for approximately 63 percent of single bills used to establish the median cost fo r pulmonary rehabilitation. We note also that a nonstandard cost center, whic h commenters’ requested, is not required to be used to report costs. However, a standa rd cost center, like cost center 4900, must be completed by a hospital if it has a cost accoun t for those costs in its general ledger. Hence, the creation of a nonstandard cost center would not necessarily be used. Everything we observe in the claims da ta for the 446,456 single bills used to report the CY 2010 charges from which we cal culated the median cost for HCPCS code G0424 leads us to believe that the calculati on of the median cost of approximately $37 for HCPCS code G0424 is appropriate, based on the charge that hospitals set for the service. The median cost was calculated using charges, the majority of which are reported under pulmonary specific revenue codes and using CCRs, and which mostly used the respiratory therapy cost center. With regard to the comment that the paym ent that results from a median cost of approximately $37 would be insufficient to pa y the labor cost for the service, we note that, given that HCPCS code G0424 is gene rally recognized to be a group service,CMS-1525-FC 515

I generally with a ratio of 1 staff to 4 patient s, the payment for an hour of service would usually be 3 to 4 times the paymen t for one unit of HCPCS code G0424. We do not agree with the commenters th at freezing the payment for HCPCS code G0424 at the rate that was based on the si mulated median cost for CY 2011 would be appropriate, given the results of our analysis of the robust charge data and cost report data that hospitals submitted. Similarly, we see no basis for continuing to use the simulated methodology to calculate median costs for pulmonary rehabilitation because we now have an abundant number of single bills containing the actual charges that hospitals requested in payment for the service they ar e furnishing. With regard to the comment that hospitals established their charges ba sed on misunderstanding of the nature of the service or based on charges for services that they wrongly viewed to be similar, we note that the median hospital charge for HCPCS c ode G0424 is higher than the median charge for HCPCS code G0239, the group respiratory se rvice as we would expect given that HCPCS code G0424 is a comprehensive service. The charges that hos pitals establish for services are the amount they seek to be paid for the service they furnish, and therefore, we view them as being a reflection of th e monetary value the hospital places on the service. Under our longstanding methodology, we use hospital charges to calculate the median costs on which the OPPS payment is based. Lastly, we do not agree with commenters that payment based on the median cost we derived from hospital’s costs and char ges for CY 2010 will necessarily result in reduced access to care for Medicare patient s. We note that the respiratory therapy services reported under HCPCS code G0239, whic h commenters stated is for an hour ofCMS-1525-FC 516

I group respiratory therapy and is the most similar code to HCPCS code G0424, has a median cost of approximately $31, which compares reasonably to the median cost of approximately $37 which we found for HCPCS code G0424, a service of more complexity. We note that in CY 2010, wh en the payment rate for HCPCS code G0239 was $27.39, hospitals reported a total fre quency of 146,616, which indicates no absence of access to care at a payment rate significan tly less than the median cost for HCPCS code G0424 in CY 2012.
Comment : Commenters also stated that so me CMS instructions to contractors were not issued until May 2010 and that so me MACs did not permit billing of HCPCS code G0424 until October of 2010. Moreover, th ey stated that some MACs instructed hospitals to report HCPCS codes G0237 throug h G0239 for pulmonary rehabilitation for COPD patients contrary to CMS instructions. They added that, give n these issues with implementation of billing and payment for HC PCS code G0424, it is understandable that hospitals struggled with developing charges for a one hour code for COPD patients when charges were already in place for very simila r services for patients with other chronic pulmonary diseases. Response : Hospitals are responsible for updating their billing systems to recognize changes to codes and payment for se rvices, particularly with regard to the quarterly changes to HCPCS codes, including the addition of new codes. CMS posts all instructions regarding new codes on the CMS Web site, issues Medicare Learning Network (MLN) Matters articl es on new codes and hosts Hospital Open Door Forum calls regularly to provide easy ways for hos pitals to stay up to date on changes inCMS-1525-FC 517

I Medicare payment policy. The instructions to MACs are av ailable to the public via the Web site. If a hospital believes that a MAC is not in compliance with the instructions and cannot achieve satisfaction from discussing th e issue with the MAC, the hospital should bring it to the attention of the CMS regional o ffice staff for the area in which the hospital is located. We acknowledge that Change Request (CR) 6823 regarding coverage and implementation of pulmonary rehabilitation was issued by CMS on May 7, 2010, effective for services furnished on an d after January 1, 2010. However, the Federal Register notice of the OPPS for CY 2010, which was posted to http://www.cms.gov/HospitalOutpatientPPS/ on October 30, 2009, contained the coverage and payment policy for the pulmonary rehabilitation benefit, a discussion of how the services should be coded, including a full discus sion of HCPCS code G0424 and an explanation of how the simulated medi an was created, including how CMS viewed HCPCS code G0424 to be similar to HCPCS codes G0237 through G0239 (74 FR 60569). Moreover, CMS hosted regu lar Hospital Open Door Forum calls between November 2009 and January 1, 2010 at which CMS staff was available to discuss any issue arising from the Medicare hos pital OPPS. CMS expected that hospitals would use the detailed explanat ion of how we arrived at the simulated median that was articulated in the CY 2010 OPPS/ASC final ru le with comment period that was posted on the CMS Web site as a basis for establishi ng charges for the services for HCPCS code G0424 for CY 2010, because CMS advised hospitals of how the simulated median was created. Therefore, notwithstanding the de lay in the issuance of CR 6823, we believe that hospitals had access to al l of the information that was necessary to report the newCMS-1525-FC 518

I codes and to establish appr opriate charges for HCPCS c ode G0424 beginning with the January 1, 2010 effective date.
Comment: Commenters asked that, for hospi tal cost reports filed January 1, 2012 and later, CMS require that pulmonary rehabil itation to be reported in a nonstandard cost center rather than a standard cost center. Th ey believed that the recommendations of RTI in its 2006 report, with regard to the creation of a new nonsta ndard cost center for cardiac rehabilitation, should also apply to pulmona ry rehabilitation because the authorizing legislation is almost identical and because th ey believed that this would result in more accurate charge data and cost reports for pulmonary rehabilitation. Response : We do not agree that the accuracy of median calculation would be improved if CMS would create a nonstandard cost center for pulmonary rehabilitation. There is already a cost center in which hospitals can isol ate the costs of respiratory services (which may include the cost of hosp ital staff other than respiratory therapists who furnish respiratory therapy): cost center 4900, Respiratory Therapy, on the CMS form 2552-96 and cost center 6600, Respir atory Therapy, on the CMS form 2552-10. However, we believe that respiratory ther apists provide the majority of pulmonary rehabilitation and that the co sts of respiratory therapists are largely reported on the cost report under the respirat ory therapy cost center. Therefor e, we believe that most of the costs of pulmonary rehabilitation are alrea dy carried in the Respiratory Therapy cost center, based on our finding that the CCR for the Respiratory Therapy cost center (4900 in the CMS hospital cost report form 2552-96) is reported sufficientl y often that it was used to reduce the charge for 279,803 of the 446,456 single bills, or 63 percent of theCMS-1525-FC 519

I single bills, to cost. In view of the existence of the standa rd cost center for respiratory therapy on both the CMS form 2552-96 and the CMS form 2552-10 hospital cost reports, we have no reason to believe that creation of a nonstandard cost center would result in more specific and accurate cost data fo r HCPCS code G0424. In contrast, unlike respiratory therapy, which has l ong had a dedicated cost center, the costs of the staff who furnish cardiac rehabilitation were not pre dominantly carried in a single cost center before the creation of the cardiac rehabilitation cost center. For this reason, the creation of a cardiac rehabilitation cost center doe s not justify the creation of a pulmonary rehabilitation cost center.
Comment : One commenter asked that CMS reco nsider the valuation of the cost of HCPCS code G0424 to appropriately accoun t for the services delivered by physical therapists. The commenter asked that, alte rnatively, CMS create a separate HCPCS code that can be used to delineate those patients who require individualiz ed physical therapy within the pulmonary rehabilita tion program. The commenter stated that the need for the service that would be repor ted by the new code would be determined by conducting separate screening that has clea r and distinct criteria that ju stify the need for the physical therapy services. Response : Pulmonary rehabilitation is a comprehensive service in which it would be inappropriate to create a code for a particul ar type of professiona l who participates in providing the service. The charge a hosp ital establishes for HC PCS code G0424 is a charge for the comprehensive package of services that are encompassed in the pulmonary rehabilitation benefit and incl udes the charge for whatever po rtion of those services mayCMS-1525-FC 520

I be furnished by a physical therapist. We do not believe that it woul d be appropriate to create a new and separate code for the services furnished by a physical therapist as part of a comprehensive pulmonary rehabilitation se rvice because those services are already included in the charge for HCPCS code G 0424. Similarly no additional payment should be made for those services because paym ent for HCPCS code G0424 includes payment for the comprehensive package of services fo r which payment is claimed when a hospital reports HCPCS code G0424. In summary, for CY 2010, we are es tablishing payment for APC 0102, for which HCPCS code G0424 is the only assigned code, based on the median cost of approximately $37 that we calculated using 446,456 single bills of 448,396 total frequency, or nearly 100 percent, of the bill ed lines for HCPCS code G0424 and the most recent hospital cost reports for the hospitals whose bills are being used. We are not establishing a special purpose cost center for pulmonary rehabilitation because the service is largely furnished by respiratory th erapists for which there is standard cost center (4900, Respiratory Therapy), which is already used to reduce most charges for HCPCS code G0424 to costs. Therefore, we do not believe that creating a pulmonary rehabilitation cost center in addition to the standard respiratory therapy cost center is necessary to the calculation of th e median cost of HCPCS code G0424. b. Bronchial Thermoplasty (APC 0415) We created two new HCPCS codes, C9730 (Bronchoscopic bronchial thermoplasty with imaging guidance (if perf ormed), radiofrequency ablation of airway smooth muscle, 1 lobe) and C9731 (Bronchoscopi c bronchial thermoplasty with imagingCMS-1525-FC 521

I guidance (if performed), radiofrequency abla tion of airway smooth muscle, 2 or more lobes), also known as bronchi al thermoplasty, and assigne d them to APC 0415 (Level II Endoscopy lower airway), effective July 1, 2011. Bronchial thermoplasty is indicated for the treatment of severe persistent asthma, a nd the bronchial thermoplasty system consists of a radiofrequency (RF) contro ller and a single use device with an electrode array that is delivered through the working channel of a bronchoscope. The bronchial thermoplasty services, technology, and estimated costs came to our attention via an application for the services to be placed into a New Technol ogy APC. The APC 0415 median cost for the CY 2012 proposed rule is $2,094.64. AMA’s CP T Editorial Panel has recently created two new Category III CPT codes to be eff ective January 1, 2012, specifically, CPT codes 0276T (Bronchoscopy, rigid or flexible, in cluding fluoroscopi c guidance, when performed; with bronchial thermoplast y, 1 lobe) and 0277T (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with bronchial thermoplasty, 2 or more lobes). At the August 2011 APC Panel meeting, the APC Panel heard from a presenter regarding APC placement for bronchi al thermoplasty, but the Panel did not make any recommendations to CMS. We indicated at the August 2011 APC Panel meeting that we anticipate retiring HCPC S codes C9730 and C9731, and replacing them with CPT codes 0276T and 0277T, respectiv ely, effective January 1, 2012. For CY 2012, we proposed maintaining assignment of bronchial thermoplasty services to
APC 0415.
Comment : One commenter stated that the br onchial thermoplasty codes, HCPCS codes C9730 and C9731, should not be assigne d to APC 0415 for CY 2012 because theCMS-1525-FC 522

I resources are not covered by the CY 2012 pr oposed rule median cost for APC 0415 of $2,094.64. The commenter’s estimated costs for the bronchial thermoplasty procedures range from approximately $4,130 to $5,087, which includes its estimated cost of $2,500 for the single use catheter, while the CY 2012 proposed rule median costs of service codes assigned to APC 0415 range from approximately $1,780 to $3,122. The commenter contended that no existing clinical APCs are appropriate both in terms of clinical characteristics and resource costs. On the other hand, the commenter requested that CMS consider an assignment of the bronchial thermoplasty codes to APC 0423 (Level II percutaneous abdomi nal and biliary procedures). The commenter argued that APC 0423 includes CPT code 32998 (Ablation th erapy for reduction or eradication of one or more pulmonary tumor(s) including pleura or chest wall when involved by tumor extension, percutaneous, radiofrequency, un ilateral), a service that the commenter claimed is a better comparator for bronchial th ermoplasty in terms of procedural costs as well as clinical similarity. The commenter st ated that, clinically, the two procedures entail similar supplies and equipment and i nvolve ablative techniques. However, the commenter stated that CPT code 32998 is pe rformed percutaneously, while bronchial thermoplasty is performed through a bronc hoscope. The commenter asserted that bronchial thermoplasty requires a disposab le catheter costing $2,500, while CPT code 32998 requires a disposable probe costing approximately $1,375. Also, the commenter asserted that because the CY 2012 proposed median cost of CPT code 32998 is approximately $3,962 and the CY 2012 proposed median cost of APC 0423 is about $4,112, bronchial thermoplasty should be a ssigned to APC 0423 because of greaterCMS-1525-FC 523

I resource similarity as reflected in th e higher median cost. The second option recommended by the commenter is to revi se existing APC 0415 into APCs “0415A” and “0415B” and place the two bronchial thermopl asty codes into an APC 0415B with CPT codes 31626 (Bronchoscopy, rigid or flexible , including fluoroscopic guidance, when performed; with placement of fiducia l markers, single or multiple), 31631 (Bronchoscopy, rigid or flexible, including fluor oscopic guidance, when performed; with placement of tracheal stent(s) (includes trac heal/bronchial dilati on as required)), and 31636 (Bronchoscopy, rigid or flexible, in cluding fluoroscopic guidance, when performed; with placement of bronchial stent( s) (includes tracheal/b ronchial dilation as required), initial bronchus). The commente r’s third, final and preferred recommendation was to assign bronchial thermopl asty codes to a New Technology APC. Response : As stated above, effective Ja nuary 1, 2012, newly created CPT codes 0276T and 0277T will be the codes used to report bronchial thermoplasty, and HCPCS codes C9730 and C9731 will be deleted effectiv e that date. Regarding the commenter’s recommended option to assign bronchial th ermoplasty codes to APC 0423, we do not believe that the bronchial therm oplasty service is clinically similar to the procedures in APC 0423. APC 0423 consists of percutaneous procedures, while CPT codes 0276T and 0277T are bronchoscopic procedures, clinically similar to services in bronchoscopy APCs. We also do not agree that APC 0415 needs to be split into 2 APCs at this time. All of the bronchoscopy procedures in APC 0415 are clinically similar, and the final rule median costs for procedures within APC 0415 range from approximately $1,745 to approximately $3,300, with an overall median cost of approximately $2,048. WeCMS-1525-FC 524

I proposed to assign bronchial thermoplasty to APC 0415 because it is si milar clinically to the bronchoscopy procedures in APC 0415, pa rticularly CPT code 31641 (Bronchoscopy, with destruction of tumor or relief of stenosis by any method other than excision (eg, laser therapy, cryotherapy)), a nd because the estimated resource costs are approximately similar to the upper end of th e range of median costs for procedures assigned to APC 0415. We generally prefer to wait until median cost claims data are available before reassignment of a service to a new APC. We also note that, according to our usual practice, when adequate actua l hospital reported cost data become available for these procedures, we reevaluate their APC assignmen ts and may reassign them to another APC, as appropriate. Regarding th e option to assign the service to a New Technology APC, we believe that APC 0415 is an appropriate c linical APC for bronchial thermoplasty procedures. Therefore, we are maintaining assignment of the bronchial thermoplasty services to APC 0415. We are finalizing our proposal to ma intain the assignment of bronchial thermoplasty procedures (CPT codes 0276T and 0277T beginning January 1, 2012) to APC 0415 for CY 2012, which has a final median cost of approximately $2,024. c. Insertion of Bronchial Valve (APC 0415) AMA’s CPT Editorial Panel created CPT code 0250T (Airway sizing and insertion of bronchial valve(s) , each lobe) effective January 1, 2011 to report insertion of a bronchial valve for treatment of prolonged ai r leaks of the lung. CPT code 0250T is an add-on code; therefore, hospitals must li st the code in addition to the primary bronchoscopy procedure code. For 2011, we assigned CPT code 0250T to APC 0415CMS-1525-FC 525

I (Level II Endoscopy lower airw ay), with a payment rate of $1,971.77. We believe CPT code 0250T is similar to other services in AP C 0415 in its clinical ch aracteristics. For 2012, we proposed to maintain the assignm ent of CPT code 0250T to APC 0415, which had a proposed rule median cost of appr oximately $2,095, and a proposed payment rate of approximately $2,022. The CPT code 0250T procedure is performed with a bronchial valve intended to control prolonged air leaks of the lung following th ree specific surgical procedures: lobectomy, segmentectomy, or lung volume reduction surgery (LVRS).
Comment : One commenter stated that AP C 0415 does not adequately cover the resource costs of CPT code 0250T, and reco mmended that CMS create a new clinical APC that would accurately reflect the device and procedural costs associated with CPT code 0250T. The commenter claimed that th e cost for the bronchial valve that is necessary to perform the CPT code 0250T pr ocedure is $2,750, and that a total device cost based on the number of valves (2.4 m ean, or median of 2.0 valves) is $6,600 based on the mean number of valves and $5,500 based on the median valves. The commenter asserted that it certified to the FDA that the current price of $2,750 complies with Humanitarian Device Exemption (HDE) regulat ions governing the price of the device. The commenter estimated that the CY 2012 tota l procedural cost for CPT code 0250T is $7,268.91 (based on the mean number of valv es) or $6,168.91 (based on the median). The commenter asserted that the highes t paying bronchoscopy in APC 0415 does not adequately pay for the cost of CPT code 0250T and requested that CMS create a new clinical APC for bronchial valve insertion and reassign CPT code 0250T to that APC for
CY 2012.CMS-1525-FC 526

I Response : CPT code 0250T is a new code as of January 1, 2011, and therefore, we have no CY 2010 claims data for this service for CY 2012 ratesetting. The commenter apparently agrees that the br onchoscopy APC classification is the correct clinical APC type for the CPT code 0250T pr ocedure, but that the estimated resource costs support a higher paying bronchoscopy APC. We generally wait until median cost claims data are available before reassignment to a new APC, particularly when there are no comparable clinical procedures that would al low us to easily estimate the cost of this new procedure. We again note that CPT code 0250T is an add-on code to a base bronchoscopy code. After consideration of the public comments we received, we are maintaining our assignment of CPT code 0250T to APC 0415 for CY 2012, which has a final median cost of approximately $2,024, because it is clinically similar to the services in APC 0415. We will review this assignment for CY 2013, when we should have some claims data for CPT code 0250T to determine the cost of the procedure. 9. Other Services a. Skin Repair (APCs 0133, 0134, and 0135) For CY 2012, we proposed to reassign CPT code 15004 (Surgical preparation or creation of recipient site by excision of open wounds, burn eschar, or scar (including subcutaneous tissues), or incisional release of scar contracture, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm or 1% of body area of infants and children) from APC 0135 (Level III Skin Repair) to APC 0134 (Level II Skin Repair). Similarly, we also proposed to reassign CPT code 15430CMS-1525-FC 527

I (Acellular xenograft implant; first 100 sq cm or less, or 1% of body area of infants and children) from APC 0135 (Level III Skin Repa ir) to APC 0134 (Level II Skin Repair). We reassigned CPT codes 15004 and 15430 fr om APC 0135 to AP C 0134 to avoid a 2 times rule violation in APC 0135. For CY 2012, the AMA’s CPT Editorial Panel deleted 24 skin replacement and skin substitute-related CPT codes and repl aced them with 8 new CPT codes in the Integumentary System section of the 2012 CP T code book to describe more accurately the services associated with skin replacement procedures. In particular, the CPT Editorial deleted 24 skin replacement and skin substitu te-related CPT codes in the range between CPT code 15170 through 15431 and created 8 new CPT codes in the range between 15271 through 15278, which will be effective January 1, 2012. Our standard process for dealing with new CPT codes is to assi gn the code to the APC that we believe contains services that are comparable with respect to clinical characteristics and resources required to furnis h the service. The new CPT code is given a comment indicator of “NI” (New code, interim APC assignment; comments will be accepted on the interim APC assignment for the ne w code) to identify it as a new interim APC assignment for the new year and the APC assignment for the new codes is then open to public comment. In the case of the new the skin replacement and skin substituterelated CPT codes, we crosswalked the ex isting CY 2011 CPT codes to the new CY 2012 CPT codes that appropriately describes th em. In assigning the new codes to their appropriate APCs, we took into consideration the size of th e wound described in the codeCMS-1525-FC 528

I descriptor. Specifically, we assigned the new codes to thei r appropriate APCs based on the following factors:

● New codes whose long descriptors included the words “each additional 25 sq cm” were assigned to APC 0133;

● New codes whose long descriptors include d the words “first 25 sq cm or less” or “each additional 100 sq cm” we re assigned to APC 0134; and

● New codes whose long descriptors incl uded the words “first 100 sq cm” were assigned to APC 0135 Table 29 below lists the CY 2011 APC a ssignments for the CY 2011 CPT codes that will be deleted on December 31, 2011, and crosswalked to the replacement codes, which are described by the new CY 2012 CPT codes that will be effective January 1, 2012. We note that because the ei ght new CPT codes will be effective January 1, 2012, they are flagged with comment indicator “NI” in Addendum B of this final rule, which will be published and made available onl y via the Internet on the CMS Web site at http://www.cms. gov/

. TABLE 29.—CPT CODE CHANGES FO R THE SKIN REPLACEMENT AND SKIN SUBSTITUTE CODES EFFECTIVE JANUARY 1, 2012
CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC

15170 Acellular dermal replacement, trunk, arms, legs; first 100 sq cm or less, or 1% of body area of infants and children 0135 15273 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135CMS-1525-FC 529

I CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC

15171 Acellular dermal replacement, trunk, arms, legs; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof 0134 15274 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof 0134

15175 Acellular dermal replacement, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm or less, or 1% of body area of infants and children 0135 15277 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15176 Acellular dermal replacement, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof 0135 15278 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof 0134

15300 Allograft skin for temporary wound closure, trunk, arms, legs; first 100 sq cm or less, or 1% of body area of infants and children 0135 15273 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15301 Allograft skin for temporary wound closure, trunk, arms, 0135 15274 Application of skin substitute graft to trunk, arms, legs, total wound 0134CMS-1525-FC 530

I CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC legs; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof

15320 Allograft skin for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm or less, or 1% of body area of infants and children 0135 15277 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15321 Allograft skin for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof 0135 15278 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof 0134

15330 Acellular dermal allograft, trunk, arms, legs; first 100 sq cm or less, or 1% of body area of infants and children 0135 15273 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15331 Acellular dermal allograft, trunk, arms, legs; each additional 100 sq cm, or each additional 1% of body area of 0135 15274 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq 0134CMS-1525-FC 531

I CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC infants and children, or part thereof cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof

15335 Acellular dermal allograft, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm or less, or 1% of body area of infants and children 0135 15277 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15336 Acellular dermal allograft, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof 0135 15278 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof 0134

15271 Application of skin substitute graft to trunk, arms, legs, total wound surface area up to 100 sq cm; first 25 sq cm or less wound surface area 0134

15340 Tissue cultured allogeneic skin substitute; first 25 sq cm or less 0134

15275 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area up to 100 sq cm; first 25 sq cm or less wound surface area 0134

15341 Tissue cultured allogeneic skin substitute; each additional 25 sq 0134 15272 Application of skin substitute graft to trunk, arms, legs, total wound 0133CMS-1525-FC 532

I CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC surface area up to 100 sq cm; each additional 25 sq cm wound surface area, or part thereof
cm, or part thereof 15276 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area up to 100 sq cm; each additional 25 sq cm wound surface area, or part thereof 0133

15360 Tissue cultured allogeneic dermal substitute, trunk, arms, legs; first 100 sq cm or less, or 1% of body area of infants and children 0134 15273 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15361 Tissue cultured allogeneic dermal substitute, trunk, arms, legs; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof 0134 15274 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof 0134

15365 Tissue cultured allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm or less, or 1% of body area of infants and children 0134 15277 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15366 Tissue cultured allogeneic dermal substitute, face, scalp, 0134 15278 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, 0134CMS-1525-FC 533

I CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof

15400 Xenograft, skin (dermal), for temporary wound closure, trunk, arms, legs; first 100 sq cm or less, or 1% of body area of infants and children 0135 15273 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15401 Xenograft, skin (dermal), for temporary wound closure, trunk, arms, legs; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof 0135 15274 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof 0134

15420 Xenograft skin (dermal), for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm or less, or 1% of body area of infants and children 0135 15277 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15421 Xenograft skin (dermal), for temporary wound closure, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, 0135 15278 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound 0134CMS-1525-FC 534

I CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC feet, and/or multiple digits; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof

15273 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15430 Acellular xenograft implant; first 100 sq cm or less, or 1% of body area of infants and children 0135

15277 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; first 100 sq cm wound surface area, or 1% of body area of infants and children 0135

15274 Application of skin substitute graft to trunk, arms, legs, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof 0134

15431 Acellular xenograft implant; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof 0135

15278 Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, gen italia, hands, feet, and/or multiple di gits, total wound surface area greater th an or equal to 100 sq cm; each additional 100 sq 0134CMS-1525-FC 535

I CY 2011 CPT Code CY 2011 Long Descriptor CY 2011 APC CY 2012 CPT Code CY 2012 Long Descriptor CY 2012 APC cm wound surface area, or part thereof, or each additional 1% of body area of infants and children, or part thereof

Comment : Some commenters requested CMS to continue to assign CPT code 15004 to APC 0135 because the procedure is clinically similar to CPT codes 15002, 15003, and 15005, which are in APC 0135. Response : As we stated above, we r eassigned CPT code 15004 from APC 0135 to APC 0134 to eliminate a 2 times rule vi olation in APC 0135. Based on our analysis, our claims data show a CPT median co st of approximately $278 for CPT code 15004 based on 1,529 single claims (out of 5,116 to tal claims). The median cost of approximately $278 for CPT code 15004 is closer to the median cost of approximately $227 for APC 0134 than to the median co st of approximately $345 for APC 0135. Moreover, the range of the median costs for th e procedures with signi ficant claims data that are assigned to APC 0134 is betw een $157 and $291, while the range for the procedures with significant claims data that are assigned to APC 0135 is between $284 and $642. The median cost of approximatel y $278 for CPT code 15004 is in the range of median costs for the procedures with signifi cant claims data in AP C 0134 but not in the range of median costs for the procedures with significant claims data in APC 0135. Further, we believe that CP T code 15004 is similar to the procedures in APC 0134 based on clinical homogeneity and resource costs. We remind hospitals that we have more thanCMS-1525-FC 536

I two levels of skin repair APCs. Specifically, we have five levels of skin repair APCs as follows:

• APC 0133 (Level I Skin Repair)

• APC 0134 (Level II Skin Repair)

• APC 0135 (Level III Skin Repair)

• APC 0136 (Level IV Skin Repair)

• APC 0137 (Level V Skin Repair) Therefore, after considera tion of the public comments that we received, we are finalizing our CY 2012 proposal, without modi fication, to reassign CPT code 15004 from APC 0135 to APC 0134, which has a final CY 2012 APC median cost of approximately $227.
Comment : Several commenters urged CMS not to finalize its proposal to assign CPT code 15430 to APC 0134 and requested that CMS continue to assign the code to APC 0135, which is the same APC that is assigned to its add-on CPT code 15431 (Acellular xenograft implant; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereo f). The commenters st ated that APC 0135 is the appropriate APC assignment for CPT code 15430 based on its clinical homogeneity and resource costs to other procedures a ssigned in APC 0135. One commenter indicated that the proposed CPT median cost of a pproximately $300 is closer to the proposed payment rate of approximately $361 for APC 01 35 than to the proposed payment rate of approximately $228 for APC 0134.CMS-1525-FC 537

I Response : Although we proposed to reassi gn CPT code 15430 from APC 0135 to APC 0134, the code will be deleted on December 31, 2011, and replaced with new CPT codes effective January 1, 2012. As listed in Table 29, the replacement codes for CPT code 15430 have been crosswalked to AP C 0135 based on the code descriptor.
Comment : One commenter recommended that CMS provide proper notice and comment before deleting HCPCS codes from the system. The commenter indicated that, in the case of HCPCS code Q4109 (Tissuem end, per square centimeter), the public should be provided adequate notice before the co de is deleted with an explanation for its deletion. This same commenter requested th at CMS temporarily r eassign HCPCS code Q4109 to status indicator “K” (Nonpass-Through Drugs and Nonimplantable Biologicals, Including Therapeutic Radiopharmaceuticals) for CY 2012. Response : HCPCS code Q4109 was deleted on December 31, 2010. We are not considering a status indicator reassignment for this code because the HCPCS code is no longer active. This HCPCS code was assign ed to status indicator “D” (Discontinued Codes) in Addendum B of the CY 2011 O PPS/ASC final rule with comment period. Every year hundreds of new codes are created, revised, and deleted as part of the annual HCPCS cycle. In its role as the Level II Alphanumeric HCPCS code set maintainer, the CMS HCPCS Workgroup identifies redundanc ies across the HCPCS Level II national code set which reduces opportunities for duplic ate billing. Because we are not aware of all the coding changes for the upcoming year when we publish our proposed rules, we do not address the coding changes in the proposed rule. Any interested party that disagrees with the coding actions for the Level II Alphanumeric HCPCS codes is welcome toCMS-1525-FC 538

I submit a request to CMS to review the matter by submitting an application using CMS’ standard procedures. The application will be considered as part of CMS’ standard code review process, including an opportunity fo r public comment in reaction to a published preliminary HCPCS coding decision. The app lication can be downloaded from this CMS Web site: https://www.cms.gov/MedHCPCSGenInfo/01a_A pplication_Form_and_Instructions.asp #TopOfPage. b. Nasal Sinus Endoscopy (APC 0075) For CY 2012, we proposed to assign CPT codes 31295 (Nasal/sinus endoscopy, surgical; with dilation of ma xillary sinus ostium (eg, balloon dilation), transnasal or via canine fossa), 31296 (Nasal/sinus endoscopy, su rgical; with dilation of frontal sinus ostium (eg, balloon dilation), and 31297 (Nasal /sinus endoscopy, surg ical; with dilation of sphenoid sinus ostium (eg, balloon dila tion) to APC 0075 (Level V Endoscopy Upper Airway).
Comment : One commenter on the CY 2012 OPPS/ASC proposed rule objected to the assignment of CPT codes 31295, 31296, and 31297 to APC 0075 because the commenter believed that the payment rate for APC 0075 substantially underpays providers. Commenters on the CY 2011 O PPS/ASC final rule with comment period (75 FR 71800) relating to the interim APC a ssignments and/or status indicators of HCPCS codes identified with comment indicator “NI” in Addendum B to that final rule with comment period addressed the same issu e. The commenters suggested that instead of assigning CPT codes 31295, 31296, and 31297 to APC 0075, CMS create a newCMS-1525-FC 539

I device-dependent APC for these three CPT code s. Or, if CMS does not decide to create a new device-dependent APC, the commenters s uggested that the three CPT codes should instead be assigned to one of four altern ative APCs. The commenters believed that assigning these codes to APCs 0056 (Level II Foot Musculoskeletal Procedures), 0083 (Level I Endovascular Revasculariza tion of the Lower Extremity), or 0114 (Thyroid/Lymphadenectomy Procedures) would be justified because the payment rates for these APCs more closely reflect th e costs associated with CPT codes 31295, 31296, and 31297. Commenters also suggested that another option would be to assign these CPTs to the new technology APC 1525 (New Technology - Level XXV ($3500-$4000)) until more claims data are accumulated and an appropriate clinical APC can be assigned. Response : We do not agree that CPT codes 31295, 31296, and 31297 should be assigned to a new device-dependent APC. When assigning procedures to an APC, we first consider the clinical and resource char acteristics of a procedure and determine the most appropriate APC assignment. We believe that the most clinically appropriate APC is APC 0075, which includes other nasal and sinus endoscopy procedures. The APCs suggested by the commenters (APCs 0056, 0083, a nd 0114) are clinically unrelated to the procedures described by CPT codes 31295, 31296, and 31297. Regarding the resource costs of the procedures in question, the co mmenters asserted costs of approximately $4,000 for these procedures, which are currently assigne d to the highest paying clinically appropriate APC (APC 0075), which is level 5 out of 5 levels of APCs for “endoscopy upper airway.” The highest median cost of a ll of the procedures assigned to APC 0075 is approximately $4,000. Therefore, even the non-cl aims data-based cost estimate for theseCMS-1525-FC 540

I procedures offered by the commenters is within the approximate range (although on the high end of the range) of median costs for pr ocedures assigned to APC 0075. Therefore, we believe that, until we have claims data to better inform an APC assignment, the current APC assignment is the most appropriate . We have no further information at this time that indicates that a device-dependent APC, the assignment of status indicator “S” instead of status indicator “T,” or a new technology APC would be more appropriate at this time. Once OPPS claims data are availa ble for these procedures, we will reevaluate their APC assignments, as we do for all procedures on an ongoing and annual basis. c. Bioimpedance Spectroscopy (APC 0097) CPT code 0239T (Bioimpedance spectroscopy (BIS), measuring 100 frequencies or greater, direct measurement of extracellu lar fluid differences between the limbs) was effective January 1, 2011. In accordance with our standard policy, we assessed the properties of the service as CPT code 0239T was defined by the AMA’s CPT Editorial Board. We assigned it to the APC that we be lieved to have the most similar clinical characteristics and resource requirements. In the case of CPT code 0239T, we assigned bioimpedance spectroscopy to APC 0099 (E lectrocardiogram/Cardiography). For CY 2012, we proposed to continue to a ssign CPT code 0239T, for which we had no claims data on which to calculate a medi an cost, to APC 0099 for CY 2012. We proposed a median cost of approximately $28 for APC 0099.
Comment : One commenter objected to the proposed assignment of CPT code 0239T to APC 0099 for CY 2012 on the basis that the proposed payment rate for APC 0099 would be inadequate to pay hospitals’ costs and, therefore, would jeopardizeCMS-1525-FC 541

I beneficiary access to the service. The comm enter stated that BIS is a method to aid surgeons and oncologists in the pre-surgical assessment and post-operative monitoring of unilateral lymphedema of the ar m. The commenter also stat ed that BIS is an aid for therapists to assess and monitor the meas urement of extra cellular fluid volume differences between the arms during the treat ment phase for early stage lymphedema. The commenter stated that BIS is not a diagnost ic test but rather an aid to the physician in the clinical assessment of th e patient because the results require interpretation by the physician and review of previous results for clinical relevance. The commenter asked that CMS reassi gn CPT code 0239T from APC 0099 to APC 0096 (Level II Noninvasive Physiologic St udies). The commenter stated that CPT code 239T is not similar to 93701 (Bioimpe dance-derived physiologic cardiovascular analysis), which the commenter assumed wa s the CMS rationale for also placing 0239T into APC 0099. Instead the commenter indicate d that CPT code 239T is more similar in resource time, for which the commenter stated that physician time is a proxy to CPT code 93924 (Noninvasive physiologic studies of lower extremity arteries, at rest and following treadmill stress testing, (ie, bidirectional Doppler waveform or volume plethysmography recording and analysis at rest with ankle/br achial indices immediatel y after and at timed intervals following performance of a standardized protocol on a motorized treadmill plus recording of time of onset of claudication or other symptoms, maximal walking time, and time to recovery) complete bilateral study) . The commenter stated that the work description for CPT code 93924 of setting the patient up, taking diagnostic measurements, and analyzing and interpreting th e records is similar to the work involvedCMS-1525-FC 542

I for CPT code 0239T and, therefore, CPT c ode 0239T should be assigned to APC 0096 rather than to APC 0099. The commenter also stated that the resour ce time for CPT code 0239T is similar to the resource time, us ing physician time as a proxy, for CPT code 99214 (Office or other outpatient visit for the evaluation and management of an established patient, which requires at least 2 of these 3 key components: A detailed history; A detailed examination; Medical deci sion making of moderate complexity). The commenter believed that because CPT code 99214 is assigned to APC 0606, which has a median cost of approximately $99, CPT code 0239T should be assigned to an APC with a comparable payment rate. In addition, the commenter stated that the proposed payment for APC 0099 is not adequate to compensate hospitals for what the commenter indicated are the cost of the necessary mach ine (approximately $27,000) and supplies (approximately $50 per unit). The commente r stated that compensation under APC 0099 would not be adequate and without adequate compensation, hospitals would not provide the service. Response : We have no CY 2010 claims data for the service reported by CPT code 239T because the CPT code is new for CY 2011. Therefore, under our longstanding policy, we assigned the new code to the APC that we believed to be most similar clinically and with regard to homogeneity of hospital resources. Specifically, we assigned HCPCS code 0239T to APC 0099 for CY 2011, and we proposed to continue that assignment for CY 2012. We disagree with the commenter that BIS is not a diagnostic service because the service is used for the diagnosis of a clinical condition. However, after examination of the informa tion furnished by the commenter, we agreeCMS-1525-FC 543

I with the commenter that CPT code 0239T appear s to be somewhat di ssimilar in resource utilization to the se rvices assigned to APC 0099. Howe ver, we do not agree with the commenters that CPT code 0239T should be assigned to APC 0096 because we do not believe that CPT code 0239T rises to the same level of complexity as codes that are assigned to APC 0096. For example, we be lieve that CPT code 93924, to which the commenters compared CPT code 239T, reports a service that is more complex clinically and more costly to hospitals than the service re ported by CPT code 0239T. Similarly, we believe that there is neither clinical similar ity nor similarity of hos pital resources between the services reported by CPT code 0239T, whic h is used to diagnose lymphedema and CPT code 99214, which is an established patient outpatient visit. Although we do not believe that CPT c ode 0239T should be assigned to APC 0096, we believe that CPT code 0239T is suffi ciently more complex than the services that are assigned to APC 0099 that it would be more appropriatel y placed in APC 0097, based on its clinical homogeneity and resource similarity to other procedures in APC 0097. For example, we believe that CPT c ode 0239T is more similar to CPT code 93922 (Limited bilateral noninvasive physiologic studi es of upper or lower extremity arteries, (eg, for lower extremity: ankle/brachial indice s at distal posterio r tibial and anterior tibial/dorsalis pedis arteries plus bidirectiona l, Doppler waveform recording and analysis at 1-2 levels, or ankle/brachial indices at distal posterior tib ial and anterior tibial/dorsalis pedis arteries plus volume plethysmography at 1-2 levels, or ankle/brachial indices at distal posterior tibial and ante rior tibial/dorsalis pedis arteri es with transcutaneous oxygen tension measurements at 1-2 levels)), whic h is assigned to APC 0097, both clinically andCMS-1525-FC 544

I in resource requirements, than to CPT c ode 93924. Therefore, we are reassigning CPT code 0239T from APC 0099 to APC 0097, wh ich has a final median cost of approximately $65 for CY 2012. We will reassess the APC placement for CPT code 0239T when we have claims data for services furnished on and after January 1, 2011, the effective date for CPT code 0239T. d. Autologous Blood Salvage (APC 0345) For CY 2012, we proposed to assign CPT code 86891 (Autologous blood or component, collection processing and storage; intra- or postoperative salvage) to APC 0345 (Level I Transfusion Laboratory Procedures).
Comment : One commenter objected to th e assignment of CPT code 86891 to APC 0345 because the commenter believed that the payment rate for APC 0345 underpays providers. The commenter stated th at the reason for the inappropriately low payment is that CPT 86891 would never appear on a single procedure claim. The commenter suggested that this service should be further anal yzed and a more appropriate payment level established based upon analys is using external data. The commenter further stated that the current way in which the groupings and payment levels for services under APCs are calculated does not appropria tely address the au tologous blood salvage service performed at hospitals. Response : The calculated median cost for CPT code 86891 based on 2010 claims data for this final rule with comment pe riod is approximately $21 based on 124 single procedure claims out of 332 total claims. Th e calculated median cost of approximately $21 for CPT code 86891 is within the range of the median costs of the other proceduresCMS-1525-FC 545

I assigned to APC 0345, and there is no violation of the 2 times rule. Therefore, assignment of CPT code 86891 to APC 0345 satisfies the APC assignment requirements of clinical and resource homogeneity. We do not agree that additional analysis of external data is necessary. We set the payment rates for APCs using our standard OPPS methodology based on relative costs from hosp ital outpatient claims and the most recent cost report data that are available. We have no reason to believe that our claims and cost report data, as reported by hospitals, do not accurately reflect hospitals’ costs of the services assigned to APC 0345, including the service described by CPT code 86891. Furthermore, as the service described by CPT code 86891 is a transfusion laboratory procedure, this service is appropriately as signed to APC 0345, which is titled "Level I Transfusion Laboratory Procedures" and in cludes other transf usion laboratory procedures. Therefore, we are finalizing our proposal to assign CPT code 86891 to APC 0345 for CY 2012, which has a final rule median cost of approximately $15 for CY 2012.CMS-1525-FC 546 IV. OPPS Payment for Devices A. Pass-Through Payments for Devices 1. Expiration of Transitional Pass- Through Payments for Certain Devices a. Background Section 1833(t)(6)(B)(iii) of the Act requires that, unde r the OPPS, a category of devices be eligible for transi tional pass-through payments for at least 2, but not more than 3, years. This pass-through pa yment eligibility period begins with the first date on which transitional pass-through payments may be made for any medical device that is described by the category. We may establish a new device category for pass-through payment in any quarter. Under our established policy, we base the pass-through status expiration date for a device category on the date on whic h pass-through payment is effective for the category. The date on which a pass-through categor y is in effect is the first date on which pass-through payment may be made for any medical device that is described by such category. We propose and fina lize 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 p ackage the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the cl aims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now se parately paid in accordance with section 1833(t)(2)(H) of the Act, are an exception to this established policy. There currently are three new device categories eligible for pass-through payment. These device categories are described by HCPCS code C1749 (Endoscope,CMS-1525-FC 547 retrograde imaging/illumination colonoscope device (implantable)), which we announced in the October 2010 OPPS Update (Transmittal 2050, Change Request 7117, dated September 17, 2010); and HCPCS codes C1830 (Powered bone marrow biopsy needle), and C1840 (Lens, intraocular (telescopic)), which were made effective for pass-through payment October 1, 2011, and announced in Transmittal 2296, Change Request 7545, dated September 2, 2011. There are no categor ies for which we proposed expiration of pass-through status in CY 2011. If we create new device categories for pass-through payment status during the remainder of CY 2011, we will propose future expiration dates in accordance with the statutory requiremen t that they be eligible for pass-through payments for at least 2, but not more than 3, years from the date on which pass-through payment for any medical device describe d by the category may first be made. b. CY 2012 Policy As stated above, section 1833(t)(6)(B)(i ii) of the Act requires that, under the OPPS, a category of devices be eligible for transitional pass-through pa yments for at least 2, but not more than 3 years. Device pa ss-through category C1749 was established for pass-through payments on October 1, 2010, and will have been eligible for pass-through payments for more than 2 years but less than 3 years as of the end of CY 2012. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42242), we proposed an expiration date for pass-through pa yment for device category C1749 of December 31, 2012. Therefore, under our pr oposal, beginning January 1, 2013, device category C1749 will no longer be eligible for pass-through payments. We will proposeCMS-1525-FC 548 expiration dates for pass-through payment for device categories C1830 and C1840 in a future rulemaking.
Comment : Two commenters indicated that there was only one currently approved device for pass-through payment, noting that in the CY 2012 OPPS /ASC proposed rule, we stated that there was onl y one device category eligible for pass-through payment for CY 2012. These commenters opined that ther e has been a decrease in the number of categories eligible for pass-through payment ove r the past several years, and encouraged CMS to approve additional device categories fo r technologies that meet the criteria for pass-through payments. One commenter reco mmended that CMS reevaluate the criteria and approval process for device category pass- through eligibility. The commenter also recommended that CMS annually publish a list of all pass-through app lications filed with CMS, along with CMS’ determinations a nd rationale for the resulting decisions. Response : As indicated, we currently have three device categories eligible for pass-through payment, rather than one categ ory as stated in th e CY 2012 proposed rule, and we believe this shows that we have a robust device pass-through evaluation and approval process. The number of device pass-through categories e ligible for payment will always vary, and we believe that the number of active device pass-through categories eligible for pass-through paymen t at any time is a function of the quality of applications under consideration, that is, whether they fu lly meet the device pass-through criteria, rather than a function of our criteria and approval proce ss, which we believe to be appropriate. As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71922), we will take the recommenda tion to publish a list of all pass-throughCMS-1525-FC 549 applications filed with us under advisement as we consider our device pass-through criteria and process in the future. After consideration of th e public comments we receive d, we are finalizing our proposal of an expiration date for pass-th rough payment for device category C1749 of December 31, 2012. Therefore, beginning January 1, 2013, device category C1749 will no longer be eligible for pass-th rough payments. We remind th e public that as of January 1, 2013, device category C1749 will s till be active for the billing and reporting of devices and their charges along with the HCPCS codes of the procedures w ith which they are used. When billing for procedures utilizi ng devices that have active device codes, hospitals are required to report the codes for th e devices on their claims for the procedure. 2. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background We have an established policy to estima te the portion of each APC payment rate that could reasonably be attribut ed to the cost of the associat ed devices that are eligible for pass-through payments (66 FR 59904). We deduct from the pass-through payments for identified device categories eligible for pa ss-through payments 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 AP C offset amount, as required by section 1833(t)(6)(D)(ii) of the Act. We have consistently employed an established methodology to estimate the portion of each AP C payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment, usingCMS-1525-FC 550 claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). We establish and update the ap plicable device APC offset amounts for eligible pass-t hrough device categories thr ough the transmittals that implement the quarterly OPPS updates. We publish a list of all procedural AP Cs with the CY 2011 portions (both percentages and dollar amounts) of the APC payment amounts that we determine are associated with the cost of devices, on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp . The dollar amounts are used as the device APC offset amounts. In addition, in accordance with our established practice, the device APC offset amounts in a related APC are used in order to evaluate whether the cost of a device in an applica tion for a new device category for pass-through payment is not insignifican t in relation to the APC pa yment amount for the service related to the category of devices, as specified in our regulations at §419.66(d). As of CY 2009, the costs of implantable biologicals without pass-through status are packaged into the payment for the procedur es in which they are inserted or implanted because implantable biologicals without pass- through status are not separately paid (73 FR 68633 through 68636). For CY 2010, we fi nalized a new policy to specify that the pass-through evaluation pro cess and pass-through payment methodology for implantable biologicals that ar e surgically inserted or implanted (through a surgical incision or a natural orifice; also referred to as “implantable biol ogicals”) and that are newly approved for pass-through status begi nning on or after January 1, 2010, be the device pass-through process and payment meth odology only. As a result, for CY 2010,CMS-1525-FC 551 we included implantable biologicals in our calculation of the device APC offset amounts (74 FR 60476). We calculated and set the device APC offset amount for a newly established device pass-thr ough category, which could include a newly eligible implantable biological, beginning in CY 2010 using the same methodology we have historically used to calcul ate and set device APC offset amounts for device categories eligible for pass-through pa yment (72 FR 66751 through 66752), with one modification. Because implantable biologicals are considered devices rather than drugs for purposes of pass-through evaluation and payment under our established policy, the device APC offset amounts include the costs of implantable biol ogicals. For CY 2010, we also finalized a policy to utilize the revised device APC offset amounts to evaluate whether the cost of an implantable biological in an applicati on for a new device category for pass-through payment is not insignifican t in relation to the APC pa yment amount for the service related to the category of devices. Fu rther, for CY 2010, we no longer used the “policy-packaged” drug APC offset amounts for evaluating the cost significance of implantable biological pass-through applica tions under review and for setting the APC offset amounts that woul d apply to pass-through paym ent for those implantable biologicals, effective for new pass-through status determinations beginning in CY 2010 (74 FR 60463). For CY 2011, we continued our policy th at the pass-through evaluation process and pass-through payment methodology for implantable biol ogicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newlyCMS-1525-FC 552 approved for pass-through status beginning on or after January 1, 2010, be the device pass-through process an d payment methodology only. b. CY 2012 Policy In the CY 2012 OPPS/ASC proposed ru le (76 FR 42243), we proposed to continue our policy, for CY 2012, that the pass-through evaluation process and pass-through payment methodology for implantable biolog icals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newly approved for pass-through status beginning on or after January 1, 2010, be the device pass-through process and paym ent methodology only. The rati onale for this policy is provided in the CY 2010 O PPS/ASC final rule with comment period (74 FR 60471 through 60477). We also proposed to conti nue our established policies for calculating and setting the device APC offset amounts fo r each device category eligible for passthrough payment. In addition, we proposed to continue to review each new device category on a case-by-case basis to determine whether device costs associated with the new category are already packaged into the existing APC structure. If device costs packaged into the existing APC structure are associated with the new category, we proposed to deduct the device APC offset am ount from the pass-through payment for the device category. As stated earlier, these de vice 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 insi gnificant in relation to the APC payment amount for the service related to th e category of devices (§419.66(d)).CMS-1525-FC 553 For CY 2012, 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 conti nue to calculate and set any device APC offset amount for a new device pass-through categ ory that includes a newly eligible implantable biological beginning in CY 2012 using the same methodology we have historically used to calculate and set device APC offset amounts for devi ce categories eligible for pass-through payment, and to include the costs of implant able biologicals in th e calculation of the device APC offset amounts, as we firs t finalized and implemented for CY 2010. In addition, we proposed to update, on the CMS Web site at http://www.cms.gov/HospitalOutpatientPPS , the list of all procedural APCs with the final CY 2012 portions of the APC payment amounts th at we determine are associated with the cost of devices so that this information is available for use by the public in developing potential CY 2012 device pass-through payment applications and by CMS in reviewing those applications. In summary, for CY 2012, consistent with the policy established for CY 2010, we proposed to continue the following policies re lated to pass-through payment for devices: (1) treating implantable biological s, that are surgically inse rted or implanted (through a surgical incision or a natural orifice) and that are newly a pproved for pass-through status on or after January 1, 2010, as devices for purposes of the OPPS pass-through evaluation process and payment methodology; (2) including implantable biologicals in calculating the device APC offset amounts; (3) using th e device APC offset amounts to evaluate whether the cost of a device (defined to incl ude implantable biological s) in an applicationCMS-1525-FC 554 for a new device category for pass-through paymen t is not insignificant in relation to the APC payment amount for the service related to the category of devi ces; and (4) reducing device pass-through payments based on device co sts already included in the associated procedural APCs, when we determine that devi ce costs associated with the new category are already packaged into the existing APC structure.
Comment : Several commenters recommended that all biological therapies, including implantable biologica ls that are approved by th e FDA under biological license applications (BLAs), be treated as drugs for pass-through payment status for CY 2012. The commenters claimed that Congress inte nded that all biologicals approved by the FDA under a BLA be paid under the current SCOD payment system, including according to the drug pass-through provision s. Another commenter requ ested that CMS clarify its policy to state that the device pass-through crit eria apply only to biol ogicals with an FDA approved indication or indicati ons that are only surgically implanted. This commenter believed that the current re gulation is unclear regardi ng how CMS would evaluate pass-through eligibility of a biological that has indications in which the biological is surgically implanted for one indication and nonimplantable for another indication. The commenter recommended that CMS revise th e regulations text at 42 CFR 419.64(a)(4) so that if refers to “a biologi cal that is not always surgic ally implanted into the body.” Response : As stated in the CY 2010 O PPS/ASC final rule with comment period and reiterated in th e CY 2011 OPPS/ASC final rule with comment period, we evaluate implantable biologicals that function as, and are substitutes for, implantable devices for OPPS payment purposes. This is done regardless of their FDA approvalCMS-1525-FC 555 route, the intent of which is to ensure their safety and e ffectiveness through appropriate scientific review (74 FR 60476; 75 FR 71924). We do not agree with the commenters who asserted that Congress intended biologicals approved under BLAs to be paid under the statutory provisions that apply to SCODs, including the pass-through provisions. Moreover, as we stated in the CY 2010 and CY 2011 OPPS/ASC final rules with co mment period, Congress did not specify in the statute that we must pay for implantable bi ologicals as biologicals rather than devices, if these products that function as medical de vices also meet our criteria for payment as devices (74 FR 60476; 75 FR 71924). We c ontinue to believe that implantable biologicals are devices for the purposes of OPPS payment, and therefore that it is appropriate for us to treat implantable biol ogicals as implantable devices and not as nonimplantable biologicals. We appreciate the commenter’s request that we clarify our meaning of the regulation text at 42 CFR 419.64(a)(4)(iii), whic h states that a biol ogical for pass-through status purposes must meet the following c ondition (among others): A biological that is not surgically implanted or inserted into the body.” By this regulatory language, we mean to exclude from consideration for drug and biological pa ss-through status any biological that has an indication such that it may function as a surgically implanted or inserted biological, even if there are also ot her indications in which the biological is not surgically implanted or inserted. After consideration of the public comments we receive d, we are finalizing our proposal, without modification, to continue the policy to specify that the pass-throughCMS-1525-FC 556 evaluation process and pass-through paymen t methodology for implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) and that are newly approved for pass-thr ough status on or after January 1, 2010, be the device pass-through process and payment metho dology only. We also are finalizing our other proposals, without modifica tion, to continue the following policies regarding device offsets: (1) including implantable biologi cals in calculating the device APC offset amounts; (2) using the device APC offset am ounts to evaluate whether the cost of a device (defined to include implantable biologi cals) in an application for a new device category for pass-through payment is not insi gnificant in relation to the APC payment amount for the service related to the category of devices; and (3) reducing device passthrough payments based on device costs alrea dy included in the associated procedural APCs, when we determine that device costs associated with the new category are already packaged into the existing APC structure. B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit Devices 1. Background In recent years, there have been severa l field actions on and recalls of medical devices as a result of implantable device failures. In many of these cases, the manufacturers have offered devi ces without cost to the hospi tal or with credit for the device being replaced if the patient required a more expensive device. In order to ensure that payment rates for procedures involving devices reflect only th e full costs of those devices, our standard ratesetting methodol ogy for device-dependent APCs uses only claims that contain the correct device c ode for the procedure, do not contain tokenCMS-1525-FC 557 charges, do not contain the “FB” modifier signifying that the device was furnished without cost or with a full credit, and do not contain the “FC” modifi er signifying that the device was furnished with partial credit. As discussed in section II. A.2.d.(1) of this final rule with comment period, as we propose d, we are continuing to use our standard ratesetting methodology for devi ce-dependent APCs for CY 2012. To ensure equitable payment when the hos pital receives a device without cost or with full credit, in CY 2007, we implem ented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals are instructed to report no cost/full credit ca ses using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the device is furnished without cost or with full credit, the hospital is instructed to report a token device charge of less than $1.01. In cas es in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospi tal is instructed 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 r eceived full credit. In CY 2008, we expanded this payment adjustment policy to include ca ses in which hospitals receive partial credit of 50 percent or more of the co st of a specified device. Hosp itals are instructed to append the “FC” modifier to the procedure code that reports the service provided to furnish theCMS-1525-FC 558 device when they receive a part ial credit of 50 percent or mo re of the cost of the new device. We reduce the OPPS payment for the implantation procedure by 100 percent of the device offset for no cost/full credit cases when both a specified device code is present on the claim and the procedure code maps to a specified APC. Payment for the implantation procedure is reduced by 50 percen t of the device offset for partial credit cases when both a specified device code is present on the claim and the procedure code maps to a specified APC. Beneficiary c opayment is based on the reduced payment amount when either the “FB” or the “FC” modi fier is billed and the procedure and device codes appear on the lists of procedures and devi ces to which this policy applies. We refer readers to the CY 2008 OPPS/AS C final rule with comment period for more background information on the “FB” and “FC” payment adjustment policies (72 FR 66743 through 66749). 2. APCs and Devices Subject to the Adjustment Policy In the CY 2012 OPPS/ASC proposed rule (76 FR 42244 through 42245), we proposed for CY 2012 to continue the exis ting policy of reducing OPPS payment for specified APCs by 100 percent of the device offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the specified device. Because th e APC payments for the related services are specifically constructed to ensure that the full cost of the device is included in the payment, we stated in the CY 2012 OPPS/ ASC proposed rule (76 FR 42244) that weCMS-1525-FC 559 continue to believe it is a ppropriate to reduce the APC payment in cases in which the hospital receives a device without cost, with full credit, or with partial credit, in order to provide equitable payment in these cases. (W e refer readers to section II.A.2.d.(1) of this final rule with comment period for a descri ption of our standard ratesetting methodology for device-dependent APCs.) Moreover, the payment for these devices comprises a large part of the APC payment on which the benefi ciary copayment is based, and we continue to believe it is equitable that the beneficiar y cost sharing reflects the reduced costs in these cases. In the CY 2012 OPPS/ASC proposed rule (76 FR 42244), we also proposed to continue using the three crit eria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which this policy applies (71 FR 68072 through 68077). Specifically: (1) all procedur es assigned to the selected APCs must involve implantable devices that would be re ported if device insertion procedures were performed; (2) the required devices must be su rgically inserted or implanted devices that remain in the patient’s body af ter the conclusion of the proc edure (at least temporarily); and (3) the device offset amount must be signif icant, which, for purposes of this policy, is defined as exceeding 40 percent of the APC co st. We also proposed to continue to restrict the devices to which the APC payment adjustment would apply to a specific set of costly devices to ensure that the adjustment would not be triggere d by the implantation of an inexpensive device whose cost would not constitute a significant proportion of the total payment rate for an APC. We st ated in the CY 2012 OPPS/ASC proposed rule (76 FR 42244) that we continue to believe these criteria are a ppropriate because freeCMS-1525-FC 560 devices and device credits are lik ely to be associated with pa rticular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the APC into which the device cost is packaged, and that the 40-percent threshold is a reasonable definition of a significant cost. As indicated in the CY 2012 OPPS/AS C proposed rule (76 FR 42244 through 42245), we examined the offset amounts calcul ated from the CY 2012 proposed rule data and the clinical characteristics of APCs to determine whether the APCs to which the no cost/full credit and partial cr edit device adjustment policy ap plied in CY 2011 continue to meet the criteria for CY 2012, and to determine whether other APCs to which the policy did not apply in CY 2011 would meet the cr iteria for CY 2012. Based on the CY 2010 claims data available for the proposed rule, we did not propose any changes to the APCs and devices to which this policy applies. Howe ver, as discussed in section II.A.2.e.(6) of the proposed rule, we proposed to delete AP C 0418 (Insertion of Left Ventricular Pacing Electrode) for CY 2012 and, therefore, proposed to remove this APC from the list of APCs to which the no cost/full credit and part ial credit device adjustment policy would apply in CY 2012. Table 24 of the CY 2012 OPPS/ASC propos ed rule (76 FR 42245) listed the proposed APCs to which the payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2012 and displayed the proposed payment adjustment percentages for both no cost/full credit and partial credit circumstances. We proposedCMS-1525-FC 561 that the no cost/full credit adjustment for each APC to which this policy would continue to apply would be the device o ffset percentage for the APC (t he estimated percentage of the APC cost that is attributable to the de vice costs that are already packaged into the APC). We also proposed that the partial credit device adjustment for each APC would continue to be 50 percent of the no cost/ full credit adjustment for the APC. Table 25 of the CY 2012 OPPS/ASC proposed rule (76 FR 42245) listed the proposed devices to which the payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2012. We stated in th e CY 2012 proposed rule (76 FR 42244) that we would update the lists of APCs and devices to which the no cost/full credit and partial credit device adjustment policy would a pply for CY 2012, consistent with the three criteria discussed earlier in this section, based on the final CY 2010 claims data available for the CY 2012 OPPS/ASC final rule with comment period.
Comment : One commenter asserted that th e proposed full offset amount of 60 percent and proposed partial offset amount of 30 percent for APC 0425 is not supported by real world cost data. The commenter s uggested that, based on its data on resource costs for the devices used in the procedures assigned to APC 0425, the full offset amount for this APC should be no greater than 40 percent. The commenter argued that a 60-percent offset would result in significant financial hardship to certain facilities and possibly lead to diminishing pa tient access to critical devices. Response : We do not agree with the commenter that the CY 2012 proposed device offset percentage for APC 0425 is in accurate. As we described in the CY 2011 OPPS/ASC final rule with co mment period (75 FR 71926), the device cost is estimatedCMS-1525-FC 562 from the device HCPCS codes present on hospital claims and charges in the lines for four specific revenue codes: 275 (Medica l/Surgical Supplies: Pacemaker); 276 (Medical/Surgical Suppl ies: Intraocular lens); 278 (M edical/Surgical Supplies: Other implants); and 624 (Medical/Surgical Supplie s: FDA investigational devices). The commenter did not provide the “real world cost data” upon which it based its assertion that the full offset amount fo r APC 0425 should be no greater than 40 percent. Therefore, we do not know why there would be a disc repancy between that estimate and our estimated device offset percentage of appr oximately 60 percent stated in the proposed rule that was based on actual hospital cost as calculated from hospital claims as described above. We have no reason to believe that this device offset percentage does not accurately reflect the percent of cost attributable to device s in APC 0425. Therefore, we do not agree that it is necessary to limit the device offset percentage for no cost/full credit cases for APC 0425 to 40 percent, as the commenter suggested.
Comment : One commenter asked for clarific ation of CMS’ policy for instances when a device upgrade occurs a nd the original device is refu nded at full cost and the upgraded device is charged at full cost. Acco rding to the commenter, the new device is often more expensive than the original device, thus yielding additional device acquisition costs. The commenter believes that the “FC” mo difier should be used in this situation. Response : As stated in the Medicare Claims Processing Manual (Pub. 100–04, Chapter 4, Section 61.3.2), when a hospital re places a device with a more expensive device and receives a credit in the amount that the device being replaced would otherwise cost, the hospital must append modifier “–FB” to the procedure code (not on the deviceCMS-1525-FC 563 code) that reports the service provided to replace the device. The hospital must charge the difference between its usual charge fo r the device being implanted and its usual charge for the device for which it received cred it. This charge should be billed in the covered charge field. As we stated in th e CY 2009 OPPS final rule with comment period (73 FR 68630), we do not agree that we need to modify the no cost/ full credit and partial credit device adjustment policy to account for the cost of more expensive replacement devices when manufacturers provide device upg rades. We continue to believe that making the full APC payment would result in significant overpayment because, as described above, we use only those claims th at reflect the full costs of devices in ratesetting for device-dependent APCs. In cases where a hospital incurs a cost for a device upgrade, the difference between the cost of the replacement device and the full credit the hospital receives for the device be ing replaced would likely be much less than the full cost of the device that is included in the device-dependent APC payment rate. To provide the full APC payment in these cases would favor a device upgr ade, rather than replacement with a comparable device, in wa rranty or recall cases where the surgical procedure to replace the devi ce is only medically necessary because of the original defective device, for which the manufacturer b ears responsibility. Moreover, we also are concerned that a new policy to apply a sma ller APC payment percentage reduction in an upgrade case, if we were eventually able to estimate such a percen tage from sufficient claims data, could also favor device upgrades , rather than replacement with a comparable device in those situations for which the upgr ade is only being provided because the old model failed (and for which the manufacturer provides a full credit) but is no longerCMS-1525-FC 564 available for use in the replacement procedure. We recognize that, in some cases, the estimated device cost and, therefore, the amount of the payment reduction will be more or less than the cost a hospital would otherwis e incur for a no cost/full credit device. However, because averaging is inherent in a prospective payment system, we do not believe this is inappropriate. Therefore, we continue to believe that the full device offset reduction should be made when hospitals recei ve full credit for the cost of a replaced device against the cost of a more expensive replacement device. After consideration of the public comments we receive d, we are finalizing our CY 2012 proposals, without modification, to co ntinue the establishe d no cost/full credit and partial credit adjustment policies. Table 30 below lists the APCs to whic h the payment adjustment policy for no cost/ full credit and partial credit devices will apply in CY 2012 and displays the final payment adjustment percentages for bot h no cost/full credit and partial credit circumstances. Table 31 below lists the de vices to which no cost/full credit and partial credit device adjustment policy will appl y for CY 2012, consistent with the three selection criteria discussed earlier in this section, based on the final CY 2010 claims data available for this final rule with comment period. For CY 2012, OPPS payments for implantation procedures to which the “FB” modifier is appended are reduced by 100 percent of the device offset fo r no cost/full credit cases when both a device code listed in Table 31 below, is present on the claim, and the procedure code maps to an APC listed in Table 30 below. OPPS payments for implantation procedures to which the “FC” modifier is appended are reduced by 50 percen t of the device offset when both a deviceCMS-1525-FC 565 code listed in Table 31 is present on the cl aim and the procedure code maps to an APC listed in Table 30. Beneficiary copayment is based on the reduced amount when either the “FB” modifier or the “FC” modifier is billed and the procedure and device codes appear on the lists of pro cedures and devices to wh ich this policy applies. We note that, as discussed in section II.A.2.e.(6) of this final rule with comment period, we are finalizing our proposal to delete APC 0418 for CY 2012 and, therefore, will remove this APC from the list of APCs to which the no cost/full credit and partial credit device adjustment policy will apply in CY 2012.

TABLE 30.—APCs TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY IN CY 2012

CY 2012

APC CY 2012 APC Title CY 2012 Device Offset Percentage for No Cost/ Full Credit Case CY 2012 Device Offset

Percentage for Partial Credit Case

0039 Level I Implantation of Neurostimulator Generator 86% 43%

0040 Level I Implantation/Revision/Replac ement of Neurostimulator Electrodes 55% 28%

0061 Level II Implantation/Revision/Replac ement of Neurostimulator Electrodes 64% 32%

0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 71% 36%

0090 Insertion/Replacement of Pacemaker Pulse Generator 73% 37%CMS-1525-FC 566

CY 2012

APC CY 2012 APC Title CY 2012 Device Offset Percentage for No Cost/ Full Credit Case CY 2012 Device Offset

Percentage for Partial Credit Case

0106 Insertion/Replacement of Pacemaker Leads and/or Electrodes 41% 21%

0107 Insertion of CardioverterDefibrillator 89% 45%

0108 Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes 87% 43%

0227 Implantation of Drug Infusion Device 81% 41% 0259 Level VII ENT Procedures 84% 42%

0315 Level II Implantation of Neurostimulator Generator 88% 44%

0318 Implantation of Cranial Neurostimulator Pulse Generator and Electrode 86% 43%

0385 Level I Prosthetic Urological Procedures 61% 31%

0386 Level II Prosthetic Urological Procedures 71% 35%

0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31% 0648 Level IV Breast Surgery 46% 23%

0654 Insertion/Replacement of a permanent dual chamber pacemaker 75% 37%

0655 Insertion/Replacement/Conve rsion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 74% 37%

0680 Insertion of Patient Activated Event Recorders 73% 36%CMS-1525-FC 567

TABLE 31.—DEVICES TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE ADJUSTME NT POLICY WILL APPLY IN CY 2012

CY 2012 Device

HCPCS Code CY 2012 Short Descriptor C1721 AICD, dual chamber C1722 AICD, single chamber C1728 Cath, brachytx seed adm C1764 Event recorder, cardiac C1767 Generator, neurostim, imp C1771 Rep dev, urinary, w/sling C1772 Infusion pump, programmable C1776 Joint device (implantable) C1777 Lead, AICD, endo single coil C1778 Lead, neurostimulator C1779 Lead, pmkr, transvenous VDD C1785 Pmkr, dual, rate-resp C1786 Pmkr, single, rate-resp C1789 Prosthesis, breast, imp C1813 Prosthesis, penile, inflatab C1815 Pros, urinary sph, imp C1820 Generator, neuro rechg bat sys C1881 Dialysis access system C1882 AICD, other than sing/dual C1891 Infusion pump, non-prog, perm C1895 Lead, AICD, endo dual coil C1896 Lead, AICD, non sing/dual C1897 Lead, neurostim, test kit C1898 Lead, pmkr, other than trans C1899 Lead, pmkr/AICD combination C1900 Lead coronary venous C2619 Pmkr, dual, non rate-resp C2620 Pmkr, single, non rate-resp C2621 Pmkr, other than sing/dual C2622 Prosthesis, penile, non-infCMS-1525-FC 568
CY 2012 Device

HCPCS Code CY 2012 Short Descriptor C2626 Infusion pump, non-prog, temp C2631 Rep dev, urinary, w/o sling L8600 Implant breast silicone/eq L8614 Cochlear device/system L8680 Implt neurostim elctr each L8685 Implt nrostm pls gen sng rec L8686 Implt nrostm pls gen sng non L8687 Implt nrostm pls gen dua rec L8688 Implt nrostm pls gen dua non L8690 Aud osseo dev, int/ext compCMS-1525-FC 569 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 paymen ts” for certain drugs and biol ogicals (also referred to as biologics). As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113) , this provision requires the Secretary to make additional payments to hospitals for current orphan drugs, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current drugs and biologicals and brachytherapy sour ces used for the trea tment of cancer; and current radiopharmaceutical drugs and biologi cals. For those drugs and biologicals referred to as “current,” the transitional pass-through payment began on the first date the hospital OPPS was implemented. Transitional pass-through 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 dr ug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “d rugs.” Under the statute, transitional pass-through payments for a drug or biologi cal described in sec tion 1833(t)(6 )(C)(i)(II) of the Act can be made for a period of at least 2 years, but not more than 3 years, after the product’s first payment as a hospital outpatient service under Medicare Part B. ProposedCMS-1525-FC 570 CY 2012 pass-through drugs and biologicals and their designated APCs were assigned status indicator “G” in Addenda A and B to the proposed rule, which are referenced in section XVII. of the proposed rule and this final rule with comment period and available via the Internet. 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 the 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 a nd adjusted by the Secretary. As we noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633), the Part B drug CAP progr am was postponed beginning in CY 2009 (Medicare Learning Network (MLN) Matters Special Edition 0833, available via the Web site: http://www.cms.gov ). As of publication of this fi nal rule with comment period, the postponement of the Part B drug CAP program re mains in effect, and there is no effective CAP program rate for pass-through drugs and biologicals as of January 1, 2009. Consistent with what we indicated in th e CY 2011 OPPS/ASC final rule with comment period (75 FR 71928), if the program is re instituted during CY 2012 and Part B drug CAP rates become available, we would again use the Part B drug CAP rate for pass-CMS-1525-FC 571 through drugs and biologicals if they are a part of the Part B drug CAP program. Otherwise, we would continue to use the rate that would be pa id in the physician’s office setting for all drugs and biol ogicals with pass-through status. This methodology for determining the pa ss-through payment amount is set forth in regulations at 42 CFR 419.64, which specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determines is associated with the drug or biol ogical. Section 1847A of the Act establishes the average sales price (ASP) methodology, which is used for payment for drugs and biologicals descri bed in section 1842(o )(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, the wholesale acquisition cost (WAC), and the aver age 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 descri bed therein. Additional information on the ASP methodology can be found on the CMS Web site at: http://www.cms.gov/McrPartBDrugAvgSalesPrice

. For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through payment amount for drugs and biologicals to be zero based on our interpretation that the “otherwise applicable Medicare OPD fee sc hedule” amount was equivalent to the amount to be paid for pass-through drugs and bi ologicals under section 1842( o) of the Act (or section 1847B of the Act, if the drug or bi ological is covered under a competitive acquisition contract). We conc luded for those years that th e resulting difference betweenCMS-1525-FC 572 these two rates would be zero. For CYs 2008 and 2009, we estimated the OPPS pass-through payment amount for drugs and biologicals to be $6.6 million and $23.3 million, respectively. For CY 2010, we estimated the OPPS pass-through payment estimate for drugs and biologicals to be $35.5 million. For CY 2011, we estimated the OPPS pass-through payment for drugs and biologicals to be $15.5 million. Our OPPS pass-through payment estimate for drugs and biologicals in CY 2012 is $19 million, which is discussed in section VI.B. of this final rule with comment period. The pass-through application and review process for dr ugs and biologicals is explained on the CMS Web site at: http://www.cms.gov/HospitalOutpati entPPS/04_passthrough_payment.asp

. 2. Drugs and Biologicals with E xpiring Pass-Through Status in CY 2011 In the CY 2012 OPPS/ASC proposed rule (76 FR 42246 through 42247), we proposed that the pass-through status of 19 drugs and biologicals would expire on December 31, 2011, as listed in Table 26 of the proposed rule (76 FR 42246 through 42247). All of these drugs and biologi cals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2011. These drugs and biologicals were approved for pass-through status on or before January 1, 2010. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through status, specifically diagnostic radiopharmaceuticals, contrast agents, and implantable bi ologicals, our standard methodology for providing payment for drugs an d biologicals with expiring pass-through status in an upcoming calendar year is to de termine the product’s estimated per day costCMS-1525-FC 573 and compare it with the OPPS drug packaging th reshold for that calendar year (which is $75), as discussed further in se ction V.B.2. of this final rule with comment period. If the drug’s or biological’s estimated per day cost is less than or equal to the applicable OPPS drug packaging threshold, we would package pa yment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost of the drug or biol ogical is greater than the O PPS drug packaging threshold, we would provide separate payment at the appl icable relative ASP-based payment amount (which is ASP+4 percent for CY 2012, as discu ssed further in section V.B.3. of this final rule with comment period). Section V.B .2.d. of this final rule with comment period discusses the packaging of all nonpass-through contra st agents, diagnostic radiopharmaceuticals, and im plantable biologicals.
Comment : A number of commenters request ed that CMS continue pass-through payments for a third year for certain dr ugs that, as of December 31, 2011, will have received pass-through payments for at least 2 years and no more than 3 years and which CMS proposed to remove from pass-through status in Table 26 of the CY 2012 OPPS/ASC proposed rule (76 CR 42246). Several commenters stated that the volume for products for which CMS proposed to expire pass-through status had been low for some portion of the pass-through peri od, and asserted that a thir d year of pass-through would permit CMS to collect more accurate and complete cost data on the products. Other commenters stated that the costs associated with certain drugs for which CMS proposed to expire pass-through status are high, so packaging the product in an APC is “not appropriate.” Several commenters urged CM S to adopt a 3-year pass-through period forCMS-1525-FC 574 all eligible products. One commenter request ed that CMS grant an additional year of pass-through payments for the product de scribed by HCPCS code C9248 (Injection, clevidipine butyrate, 1 mg) that was removed from the pass-through list on December 31, 2010, because the product had be en subject to a 10-month long voluntary manufacturer’s recall dur ing its pass-through period. Response : As described in section V.A.1 of this final rule with comment period, section 1833(t)(6)(C)(i)(II) of the Act permits CMS to make pass-through payments for a period of at least 2 years, but not more than 3 years, after the product’s first payment as a hospital outpatient service under Medicare Part B. We believe this period of payment facilitates dissemination of these new products into clinical practice and for the collection of hospital claims data reflective of thei r costs for future OPPS ratesetting. Our longstanding practice has been to provide pass-through payment for a period of 2 to 3 years, with expiration of pa ss-through status proposed a nd finalized through the annual rulemaking process. Each year, when propos ing to expire the pa ss-through status of certain drugs and biologicals, we examine our claims data for these products. We observe that hospitals typically have incorpor ated these products into their chargemasters based on the utilization and costs observed in our claims data. Under the existing pass-through policy, which has been generally supported by commenters, we begin passthrough payment on a quarterly basis that depe nds on when applications are submitted to us for consideration and, because we expire pass-through status only on an annual basis, there is no way to ensure that all pass-t hrough drugs and biologicals receive pass-through payment for a full 3 years, while also provi ding pass-through payment for no more than 3CMS-1525-FC 575 years as the statute requires. Further, ba sed on our review of av ailable data, we are confident that the period of time for which the products listed in Table 26 of the CY 2012 OPPS proposed rule (76 CR 42246) received pass-through payments is adequate for CMS to collect sufficient data to make a packagi ng determination and/or an APC assignment in CY 2012. We further note that, consistent with the Act, each of these products has received pass-through status for at least 2 years, but not more than 3 years. As noted in section V.A.1. of this final rule with comment period, when a product’s pass-through status expires, it is either packaged by CMS into an APC if it is either a relatively lowcost product that does not exceed the packaging threshold or is “policy packaged”, or, if it is a relatively high-cost pr oduct, it is paid separately on the basis of the product’s ASP (we refer readers to section V.B.3. of this fi nal rule with comment period for more details regarding our payment policy for separately payable drugs). Beca use our policies for drugs with expiring pass-through status r ecognize products’ relative costliness and establish either separate or bundled payment as appropriate, based on such costliness, we disagree with commenters that certain rela tively high cost products currently receiving pass-through payment would not be adequately paid if taken off pass-through, and as a result should continue with such status. Regarding the request for a third year of pass-through status for the product described by HCPCS code C9248 (Injection, clevidipine butyrate, 1 mg) which was subject to a 10-month recall during its pass-through period and for which pass-through status expired on December 31, 2010, we note that because CMS expires pass through status on an annual basis, if CMS were to extend the pass-through period for the productCMS-1525-FC 576 through CY 2012, as requested by the commenters , this would result in the pass-through period being in excess of 3 years; this result is not permitted under the statute. After consideration of the public comments we rece ived, we are finalizing, without modification, our proposal to expire the pass-through status of the 19 drugs and biologicals listed in Table 32 below. Table 32 lists the dr ugs and biologicals for which pass-through status will expire on December 31, 2011, the status indicator, and the assigned APC for CY 2012.
TABLE 32.—DRUGS AND BIOLOGICAL S FOR WHICH PASS-THROUGH STATUS WILL EXPIRE DECEMBER 31, 2011

CY 2012 HCPCS

Code CY 2012 Long Descriptor CY 2012 SI CY 2012 APC

A9582 Iodine I-123 iobengua ne, diagnostic, per study dose, up to 15 millicuries N N/A A9583 Injection, gadofosveset trisodium, 1 ml N N/A C9250 Human plasma fibrin sealant, vaporheated, solvent-detergent (Artiss), 2ml K 9250

C9360 Dermal substitute, native, non-denatured collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 square centimeters K 9360

C9361 Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter length N N/A

C9362 Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc N N/A

C9363 Skin substitute, Integra Meshed Bilayer Wound Matrix, per square centimeter K 9363 C9364 Porcine implant, Permacol, per square N N/ACMS-1525-FC 577

CY 2012 HCPCS

Code CY 2012 Long Descriptor CY 2012 SI CY 2012 APC
centimeter J0598 Injection, C-1 este rase inhibitor (human), Cinryze, 10 units K 9251

J0641 Injection, levoleucovorin calcium, 0.5 mg K 1236 J0718 Injection, certolizumab pegol, 1 mg K 9249 J1680 Injection, human fibrinogen concentrate, 100 mg K 1290 J2426 Injection, paliperidone palmitate, 1 mg K 9255 J2562 Injection, plerixafor, 1 mg K 9252 J7312 Injection, dexamethasone intravitreal implant, 0.1 mg K 9256 J8705 Topotecan, oral, 0.25 mg K 1238 J9155 Injection, degarelix, 1 mg K 1296 J9328 Injection, temozolomide, 1 mg K 9253 Q0138 Injection, Ferumoxytol, for treatment of iron deficiency anemia, 1 mg K 1297
3. Drugs, Biologicals, and Radiopharmaceutical s with New or Continuing Pass-Through Status in CY 2012 In the CY 2012 OPPS/ASC proposed rule (76 FR 42247 through 42249), we proposed to continue pass-through status in CY 2012 for 33 drugs and biologicals. None of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by Decem ber 31, 2011. These drugs and biologicals, which were approved for pass-through stat us between April 1, 2010 and July 1, 2011, were listed in Table 27 of the proposed rule (76 FR 42248 through 42249). The APCs and HCPCS codes for these drugs and biologicals were assigned status indicator “G” inCMS-1525-FC 578 Addenda A and B, which are referenced in se ction XVII. of the pr oposed rule and this final rule with comment period and available via the Internet. 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 (or, if the drug or biological is covered under a CAP 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 the year established under such section as calculated and adjusted by the Secretary) and the portion of the othe rwise applicable OPD fee schedule that the Secretary determines is associated with th e drug or biological. Payment for drugs and biologicals with pass-through st atus under the OPPS is currently made at the physician’s office payment rate of ASP+6 percent. We be lieve it is consistent with the statute to continue to provide payment for drugs and bi ologicals with pass-thr ough status at a rate of ASP+6 percent in CY 2012, the amount th at drugs and biologicals receive under section 1842(o) of the Act. Thus, for CY 2012, we proposed to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the ra te these drugs and biologicals would receive in the physician’s office sett ing in CY 2012. Therefore, the difference between ASP+6 percent and A SP+4 percent that we propos ed to pay for nonpass-through separately payable drugs under the CY 2012 OPPS would be the CY 2012 pass-through payment amount for these drugs and biologicals. In the case of pass-through contrast agents and diagnostic radiopharmaceuticals, the difference between ASP+6 percent and the “policy-packaged” drug APC offset amount for the associated clinical APC in whichCMS-1525-FC 579 the drug or biological is util ized would be the CY 2012 pass-through payment amount for these policy-packaged products. We note that we proposed to expire pa ss-through status for the remaining three implantable biologicals approved on or befo re January 1, 2010, under pass-through status as a drug or biological. Ther efore, as described in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60476) and in this final rule with comment period, implantable biologicals that ar e surgically inserted or implanted (through a surgical incision or a natural orifice) will be eval uated under the device pass-through process and paid according to the device payment methodology. Payment for nonpass-through implantable biologicals would continue to be packaged into the payment for the associated procedure as desc ribed in section V.B.2.d. of th is final rule with comment period. In addition, we proposed to continue to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2012 if later quarter ASP submissions (or more recent WAC or AWP information, as applicable) indicate that adjustments to the payment rates for these pass-through drugs or biologicals are necessary. For a full description of this policy, we refer readers to the CY 2006 OPPS/ASC final rule with comment period (70 FR 42722 and 42723). If the Part B drug CAP is reinstated during CY 2012, and a drug or biological that has been granted pa ss-through status for CY 2012 becomes covered under the Part B drug CA P, we proposed to provide pass-though payment at the Part B drug CAP rate and to make the adjustments to the payment rates for these drugs and biologicals on a quarterly basis, as appropriate.CMS-1525-FC 580 As is our standard methodology, we a nnually review new permanent HCPCS codes and delete temporary HCPCS C-codes if an alternate permanent HCPCS code is available for purposes of OPPS billing and payment. We specifically review drugs with pass-through status for CY 2012 that will chan ge from C-code to permanent J-code for CY 2012. For our CY 2012 review, we have determined that HCPCS code J1557 (Injection, immune globulin (Gammaplex), intravenous, non-lyophiliz ed (e.g. liquid), 500 mg) describes the product reported unde r HCPCS code C9270 (Injection, immune globulin (Gammaplex), intravenous, non-lyophi lized (e.g. liquid), 500 mg); HCPCS code J0894 (Injection, denosumab, 1 mg) describe s the product reported under HCPCS code C9272 (Injection, denosumab, 1 mg); HCPC S code J0840 (Crotalidae Polyvalent Immune Fab (Ovine), 1 vial) describes the product reported un der HCPCS code C9274 (Crotalidae Polyvalent Immune Fab (Ovine ), 1 vial); HCPCS code J9043 (Injection, cabazitaxel, 1 mg) describes the product reported under HCPCS code C9276 (Injection, cabazitaxel, 1 mg); HCPCS c ode J0221 (Injection, alglucosid ase alfa (Lumizyme), 1 mg) describes the product reported under HCPCS c ode C9277 (Injection, alglucosidase alfa (Lumizyme), 1 mg); HCPCS code J9179 (Injec tion, eribulin mesylate, 1 mg) describes the product reported under HCPCS code C9270 (Injection, eribulin mesylate, 1 mg); HCPCS code J2507 (Injection, pegloticase, 1 mg) describes the product reported under HCPCS code C9281 (Injection, pegloticase, 1 mg); HCPCS code J0712 (Injection, ceftaroline fosamil, 10 mg) describes the product reported under HCPCS code C9282 (Injection, ceftaroline fosamil, 10 mg); HCPCS code J0131 (Injection, acetaminophen, 10 mg) describes the product reported under HCPCS code C9283 (Injection, acetaminophen,CMS-1525-FC 581 10 mg); and, HCPCS code J9228 (Injecti on, ipilimumab, 1 mg) de scribes the product reported under HCPCS code C9284 (In jection, ipilimumab, 1 mg). In CY 2012, as is consistent with our CY 2011 policy fo r diagnostic and therapeutic radiopharmaceuticals, we proposed to provide payment for both diagnostic and therapeutic radiopharmaceuticals that ar e granted pass-through status based on the ASP methodology. As stated above, for purposes of pass-th rough payment, we consider radiopharmaceuticals to be dr ugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through status during CY 2012, we proposed to follow the standard ASP 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, th e equivalent payment provided to passthrough drugs and biologicals without ASP info rmation. If WAC information is also not available, we proposed to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.
Comment : Many commenters supported CMS’ proposal to continue providing pass-through payments for drugs, biological, and radiopharmaceuticals. One commenter stated that it viewed the provision of pass-through paymen ts as a “temporary solution,” and asserted that the global marketplace for Molybdenum and other medical isotopes could make historical payment data an inad equate indicator of costs. One commenter recommended that CMS require manufacturers to submit ASP data for all therapeutic radiopharmaceuticals currently paid under the OPPS.CMS-1525-FC 582 Response : We appreciate the commenters’ support for our pass-through payment policy. Although we acknowledge that pass -through payments are, by statute, “temporary” (section 1833(t)(6 )(C)(i)(II) of the Act permits CMS to make pass-through payments only for a period of at least 2 years, but not more than 3 years), we disagree with the commenter’s assertion th at historical payment data ar e an inadequate indicator of costs. We permit radiopharmaceutical manufact urers to voluntarily submit ASP data to us for therapeutic radiopharmaceuticals, a nd for diagnostic radiopharmaceuticals with pass-through status. These data are updated regularly, are as cu rrent as possible (the most recently available ASP data used for this final rule with comment period are from October 2011), and are an important component of payment. Therefore, we believe that CMS’ use of recent ASP data, together with th e most recently available cost and claims data, are adequately responsiv e to changes in global pri ces for Molybdenum and other medical isotopes. We do not believe, however, that requiri ng manufacturers to submit ASP data for all therapeutic radiopharmaceuticals currently pa id under the OPPS is appropriate. As we stated in the CY 2010 OPPS/AS C final rule with comment period (74 FR 60524 through 60525), the challenges involved in reporti ng ASP for a radiopharmaceutical are significant, given the variety of manufacturing processes in some cases. Therefore, due to the fact that the added administrative burden of direct repo rting outweighs the expected benefits, and given th e relative accuracy of hospital claims data regarding such drugs, payment based on mean unit cost from historical hospital claims data offers the best proxy for average hospital acquisition co st and associated handling costs for aCMS-1525-FC 583 radiopharmaceutical in the absence of ASP. If ASP information is unavailable for a therapeutic radiopharmaceutical, meaning that a ma nufacturer is not willing or not able to submit ASP information, we will provide payment based on the mean unit cost of the product that is applicable to payment rates for the year the nonpass-throug h therapeutic radiopharmaceutical is administered.
Comment : Several commenters supported CMS’ proposal to provide payment at ASP+6 percent for drugs, biologicals, contrast agents, and radiopharmaceuticals that are granted pass-through status. One commenter approved of the proposal to use the ASP methodology that would provide payment ba sed on WAC if ASP information is not available, and payment at 95 pe rcent of AWP if WAC informati on is not available. Some commenters requested that CMS provide an additional payment for radiopharmaceuticals that are granted pass-through status. Response : As discussed above, the statut orily mandated pass-through payment for pass-through drugs and biologicals fo r CY 2012 generally 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 (d etermined to be ASP+4 percent for CY 2012) from the amount determined under sec tion 1842(o) of the Act (ASP+6 percent). Regarding the comments that CMS should provide an additional payment for radiopharmaceuticals that are granted pass- through status, we note that for CY 2012, consistent with our CY 2011 payment policy for diagnostic and therapeuticCMS-1525-FC 584 radiopharmaceuticals, we proposed to provide payment for both diagnostic and therapeutic radiopharmaceuticals with pass-through status based on the ASP methodology. As stated above, the ASP met hodology, as applied under the OPPS, uses several sources of data as a basis for pa yment, including the ASP, WAC if ASP is unavailable, and 95 percent of the radiopharm aceutical’s most recent AWP if 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 status during CY 2012, we proposed to follow the standard ASP methodology to determine its pass-through payment rate under the OPPS. We have routinel y provided a single payment for drugs, biologicals, and radiopharmaceuticals under th e OPPS to account for the acquisition and pharmacy overhead costs, includ ing compounding costs. We c ontinue to believe that a single payment is appropriate for diagnos tic radiopharmaceuticals with pass-through status in CY 2012, and that the payment rate of ASP+6 percent (or payment based on the ASP methodology) is appropriate to provide payment for bot h the radiopharmaceutical’s acquisition cost and any associated nuclea r 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 the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/

. After consideration of the comments we received, we are finalizing our proposal to provide payment for both diagnostic and therapeutic radiopharmaceuticals that areCMS-1525-FC 585 granted pass-through status based on th e ASP methodology. If a diagnostic or therapeutic radiopharmaceutical receives pa ss-through status during CY 2012, we will follow the standard ASP methodology to dete rmine the pass-through payment rate that drugs receive under section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we will provide pass-through payment at WAC+6 percent, the equivalent payment pr ovided to pass-through dr ugs and biologicals without ASP information. If WAC informati on is also not available, we will provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP. As discussed in more detail in section V.B.2.d. of this final rule with comment period, over the last 4 years, we implem ented a policy whereby payment for all nonpass-through diagnostic radiopharmaceutical s, contrast agents, and implantable biologicals is packaged into payment for th e associated procedur e. In the CY 2012 OPPS/ASC proposed rule (76 FR 42247 thr ough 42248), we proposed to continue the packaging of these items, regard less of their per day cost. As stated earlier, pass-through payment is the difference between the amount authorized under sec tion 1842(o) of the Act (or, if the drug or biol ogical is covered under a CAP unde r section 1847B of the Act, an amount determined by the Secretary equa l to the average price for the drug or biological for all competitive acquisition areas and the year established under such section as calculated and adjusted by the S ecretary) and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Because payment for a drug that is either a diagnostic radiopharmaceutical or a contrast agent (identified as a “policy- packaged” drug, first de scribed in the CY 2009CMS-1525-FC 586 OPPS/ASC final rule with co mment period (73 FR 68639)) would otherwise be packaged if the product did not have pass-through status , we believe the otherwise applicable OPPS payment amount would be equal to the “pol icy-packaged” drug APC offset amount for the associated clinical APC in which the drug or biological is utilize d. The calculation of the “policy-packaged” drug APC offset amounts is described in more detail in section IV.A.2. of this final rule with comment peri od. It follows that the copayment for the nonpass-through payment portion (the otherwise a pplicable fee schedule amount that we would also offset from payment for the drug or biological if a paymen t offset applies) of the total OPPS payment for those drugs and biologicals would, therefore, be accounted for in the copayment for the associated clin ical 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 2011, we proposed to continue to set the associated copayment amount for pass-through diagnostic radiopha rmaceuticals and contrast ag ents that would otherwise be packaged if the item did not have pa ss-through status to zero for CY 2012. The separate OPPS payment to a hospital for th e pass-through diagnostic radiopharmaceutical or contrast agent, after taki ng into account any applicable payment offset for the item due to the device or “policy-packaged” APC offset policy, is the item’s pass-through payment, which is not subject to a copaymen t according to the statute. Therefore, we proposed to not publish a copayment amount fo r these items in Addenda A and B to theCMS-1525-FC 587 proposed rule (which are referenced in secti on XVII. of the proposed rule and this final rule with comment period and available via the Internet on the CMS Web site).
Comment : Several commenters supported th e CY 2012 proposal to continue to set the associated copayment amounts for pass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals that would otherwise be packaged if the product did not have pass-through status to zero. The comment ers noted that this policy is consistent with statutory requirement s and provides cost-saving benefits to beneficiaries. Response : We appreciate the commenters’ supp ort of our proposal. As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42248), we believe that, for drugs and biologicals that are “policy–packaged,” th e copayment for the nonpass-through payment portion of the total OPPS payment for this s ubset of drugs and bi ologicals is accounted for in the copayment for the associated clin ical 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 ad justment was not applied. Therefore, we believe that the copayment amount should be zero for drugs a nd biologicals that are “policy-packaged,” including diagnostic radiopharmaceuticals. After consideration of th e public comments we receive d, we are finalizing our proposal to continue to set the associated copayment amount for pass-through diagnostic radiopharmaceuticals and contrast agents that woul d otherwise be pack aged if the item did not have pass-through st atus to zero for CY 2012.CMS-1525-FC 588 The 33 drugs and biologicals that we propos ed to continue on pass-through status for CY 2012 or that have been granted pass-th rough status as of July 2011 were displayed in Table 27 of the proposed rule (76 FR 42248 through 42249). We note that, for CY 2010 and the first two quarters of CY 2011, HCPCS code J1572 (Injection, immune globulin, (flebogamma/flebogamma dif), intr avenous, non-lyophilized (e.g. liquid), 500 mg) was assigned a status indicator of “K,” m eaning that this product was paid separately as a nonpass-through separately payable dr ug. Beginning on July 1, 2011, HCPCS code J1572 is assigned a status indicator of “G” a nd will be given pass-through status for at least 2, but not more than 3 years. The payment rate reflecting a pass-through payment amount of ASP+6 percent was not included in Addenda A and B of the proposed rule because these Addenda solely reflect codes a nd prices effective as of the second quarter of CY 2011, or April 2011. The 38 drugs and biologicals that we are continuing on passthrough status for CY 2012 or that have been granted pass-through st atus as of January 2012 are displayed in Table 33.

TABLE 33.—DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2012

CY 2011 HCPCS

Code CY 2012 HCPCS

Code CY 2012 Long Descriptor Final CY 2012 SI Final CY 2012 APC C9406** A9584 Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries G 9406

C9275 C9275 Injection, hexaminolevulinate hydrochloride, 100 mg, per study dose G 9275 C9279 C9279 Injection, ib uprofen, 100 mg G 9279 C9285** C9285 Lidocaine 70 mg/tetracaine 70 mg, per patch G 9285

C9286 C9286 Injection, belatacept, 1 mg G 9286CMS-1525-FC 589

CY 2011 HCPCS

Code CY 2012 HCPCS

Code CY 2012 Long Descriptor Final CY 2012 SI Final CY 2012 APC N/A C9287 Injection, brentuximab vedotin, 1 mg G 9287 N/A C9366 EpiFix, per square centimeter G 9366 C9367 C9367 Skin substitute, Endoform Dermal Template, per square centimeter G 9367 C9283** J0131 Injection, acetaminophen, 10 mg G 9283

C9277 J0221 Injection, alglucosidas e alfa (Lumizyme), 1 mg G 1413 Q2044** J0490 Injection, belimumab, 10 mg G 1353

J0597 J0597 Injection, C-1 Esterase inhibitor (human), Berinert, 10 units G 9269 J0638 J0638 Injection, canakinumab, 1 mg G 1311 C9282 J0712 Injection, ceftaroline fosamil, 10 mg G 9282 J0775 J0775 Injection, collagenase cl ostridium histolyticum, 0.01 mg G 1340

C9274 J0840 Crotalidae polyvalent immune fab (ovine), 1 vial G 9274 C9272 J0897 Injection, denosumab, 1 mg G 9272 J1290 J1290 Injection, ecallantide, 1 mg G 9263

C9270 J1557 Injection, immune gl obulin (Gammaplex), intravenous, non-lyophilized (e.g. liquid), 500 mg G 9270

J1572*** J1572 Injection, immune globulin, (Flebogamma/Flebogamma Dif), intravenous, non-lyophilized (e.g. liquid), 500 mg G 0947 C9281 J2507 Injection, pegloticase, 1 mg G 9281 J3095 J3095 Injection, telavancin, 10 mg G 9258 J3262 J3262 Injection, tocilizumab, 1 mg G 9624 J3357 J3357 Injection, ustekinumab, 1 mg G 9261 J3385 J3385 Injection, velagluc erase alfa, 100 units G 9271 N/A J7180 Injection, factor xiii (antihemophilic factor, human), 1 i.u. G 1416 Q2041** J7183 Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco G 1352 J7335 J7335 Capsaicin 8% patch, per 10 square centimeters G 9268CMS-1525-FC 590

CY 2011 HCPCS

Code CY 2012 HCPCS

Code CY 2012 Long Descriptor Final CY 2012 SI Final CY 2012 APC J8562 J8562 Fludarabine phospha te, oral, 10 mg G 1339 C9276 J9043 Injection, cabazitaxel, 1 mg G 9276 C9280 J9179 Injection, eribulin mesylate, 1 mg G 1426 C9284** J9228 Injection, ipilimumab, 1 mg G 9284

J9302 J9302 Injection, ofatumumab, 10 mg G 9260 J9307 J9307 Injection, pralatrexate, 1 mg G 9259 J9315 J9315 Injection, romidepsin, 1 mg G 9625 Q2040** ** J0588 Injection, incobotulinumtoxin A, 1 unit G 9278

Q2043* Q2043* Sipuleucel-T, minimum of 50 million autologous CD54+ cells activated with PAPGM-CSF, including leukapheresis and all other preparatory procedures, per infusion G 9273

C9365** Q4124 Oasis Ultra Tri-Laye r Matrix, per square centimeter G 9365 *HCPCS code C9273 was deleted June 30, 2011, and replaced with HCPCS code Q2043 effective July 1, 2011. **These HCPCS codes were effective July 1, 2011, and are included in the Addenda to this final rule with comment period. ***HCPCS code J1572 has a status indicat or of “G,” effective July 1, 2011. **** HCPCS code C9278 was deleted March 31, 2011, and replaced with HCPCS code Q2040 effective April 1, 2011.

4. Provisions for Reducing Transitiona l Pass-Through Payments for Diagnostic Radiopharmaceuticals and Contrast Agents 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 ofCMS-1525-FC 591 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. For CY 2012, we proposed to continue to package payment for all nonpass-through diagnostic radio pharmaceuticals and contrast agents, as discussed in section V.B.2.d. of this final rule with comment period. b. Payment Offset Policy for Diagnostic Radiopharmaceuticals As previously noted, radiopharmaceuticals are considered to be drugs for OPPS pass-through payment purposes. As 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 (or the Part B drug CAP rate ) and the otherwise applicable OPD fee schedule amount. There is currently one radiopharmaceutical w ith pass-through stat us under the OPPS, HCPCS code A9584 (Iodine I-123 ioflupane , diagnostic, per study dose, up to 5 millicuries). This product, which is pr esently referred to using HCPCS code A9584, was granted pass-through status using HCPCS code C9406 beginning July 1, 2011, and we proposed that it continue receiving pass-through status in CY 2012. We currently apply the established radiopharmaceutical paym ent offset policy to pass-through payment for this product. As described earlier in se ction V.A.3. of this fi nal rule with commentCMS-1525-FC 592 period, we proposed that new pass-through di agnostic radiopharmaceuticals would be paid at ASP+6 percent, while those without ASP informatio n would be paid at WAC+6 percent or, if WAC is not available, payment would be based on 95 percent of the product’s most recently published AWP. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for radiopharmaceuticals an amount reflecting th e 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 coul d reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pa ss-through payment (73 FR 68638 through 68641). Specifically, we use the “policy-packaged” drug offset fraction for APCs containing nuclear medicine procedures, calculated as 1 minus (the cost from single procedure claims in the APC after removing the cost for “policy-packaged” drugs divided by the cost from single procedure claims in the APC). In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 through 60484), we finalized a policy to redefi ne “policy-packaged” drugs as only nonpass-through diagnostic radiopharmaceuticals a nd contrast agents, as a result of the policy discussed in sections V.A.4. and V. B.2.d. of the CY 2010 OP PS/ASC final rule with comment period (74 FR 60471 through 60477 and 60495 through 60499, respectively) that treats nonpa ss-through implantable biologi cals that are surgicallyCMS-1525-FC 593 inserted or implanted (through a surgical incision or a natu ral orifice) and implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) with newly approved pass-through status be ginning in CY 2010 or later as devices, rather than drugs. To determin e the actual APC offset amount for pass-through diagnostic radiopharmaceuticals that takes into consideration the ot herwise applicable OPPS payment amount, we multiply the “polic y-packaged” drug offset fraction by the APC payment amount for the nuclear medicine procedure with which the pass-through diagnostic radiopharmaceutical is used a nd, accordingly, reduce the separate OPPS payment for the pass-through diagnostic radiopharmaceutical by this amount. Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71934 through 719 36), we finalized a policy to require hospitals to append modifier “FB” to specifi ed nuclear medicine procedures when the diagnostic radiopharmaceutical is received at no cost/full credit. These instructions are contained within the I/OCE CMS speci fications on the CMS Web site at http://www.cms.gov/OutpatientCodeEdit/ 02_OCEQtrReleaseSpecs.asp#TopOfPage . For CY 2012 and future years, we proposed to continue to require hospitals to append modifier “FB” to specified nuclear medi cine procedures when the diagnostic radiopharmaceutical is received at no cost/full credit. In addition, we proposed to continue to require that when a hospital bills with an “FB” modifier with the nuclear medicine scan, the payment amount for procedur es in the APCs listed in Table 28 of the proposed rule (76 FR 42250) would be reduced by the full “policy-packaged” offset amount appropriate for diagnostic radiopharmaceu ticals. Finally, we also proposed toCMS-1525-FC 594 continue to require hospitals to report a t oken charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is furnis hed without cost or with full credit.
Comment : Several commenters supported CMS for continuing to require that hospitals append modifier “FB” to specified nuclear medicine procedures when the diagnostic pharmaceutical is rece ived at no cost/full credit. Response : We appreciate the commenters’ support for this proposed policy.
Comment : One commenter recommended that CMS extend modifier “FB” to all procedures involving nuclear medicine in which all diagnostic radiopharmaceuticals are received at no cost or full credit. Fu rther, the commenter recommended that CMS consider adopting this policy for all contrast -enhanced procedures in which the contrast agent is provided at no cost/full credit. The commenter stated that CMS could then publish a list of appropriate APCs to which c ontrast-enhanced proce dures are assigned in a calendar year, and hospitals would then be re quired to list the “FB” modifier with the appropriate APC for the cont rast-enhanced procedure; payment, according to the commenter, could then be reduced by a po licy-packaged offset amount for contrast agents. As in our policy for reporting of diagnostic radiopharmaceuticals in nuclear medicine procedures, the commenter suggested that CMS also require hospitals report a token charge of less than $1.01 in cases in wh ich the contrast agent is furnished without cost or with full credit. The commenter asserted that requiri ng hospitals to report modifier “FB” for contrast agents received at no cost/full credit would lead to more accurate payment and would lead to greater consistency between drugs.CMS-1525-FC 595 Response : In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71934 through 71936), we discussed our proposed and finalized policy requiring that hospitals append modifier “FB” to speci fied nuclear medicine procedures when the diagnostic pharmaceutical is received at no cost/full credit. The policy, which was finalized in the CY 2011 final rule with comment period and implemented in CY 2011, was prompted by questions from hospitals i nquiring how to properl y bill for diagnostic radiopharmaceuticals obtained free of ch arge, typically in cases when the radiopharmaceutical had been provided to th e hospital as a free sample. Although we have not received similar billing questions fr om hospitals regarding contrast agents, and have no indications about how widespread the practice of a manufacturer is of providing “sample” contrast agents at no cost to a hos pital, we agree with the commenter that requiring modifier “FB” in such circumstances would lead to more consistency between drugs and, potentially, to more accurate payment. As is the case with diagnostic radiopharmaceuticals, CMS also annually posts a proposed and final list of APCs to which a contrast offset may be applicable. We could foresee this list being a possible element of a future policy establishing a m odifier “FB” reporting policy, policy-packaged offset amount, and token ch arge reporting requirement. However, we note that contrast agents are different in some regards from diagnostic radiopharmaceuticals. Contrast agents are, in general, substantially less costly than diagnostic radiopharmaceuticals and are subject to a higher level of competition from generic competitors; this combination of lower price and higher potential for generic substitution may lead to fewer instances of manufacturers providing hospitalsCMS-1525-FC 596 with free samples. Furthermore, many ra diopharmaceuticals have a very limited shelf life, often requiring procurement for a specific patient or very narrow window. Contrast agents, on the other hand, have longer shel f lives, making it much more likely that “wastage” from a large vial could be used to reduce or eliminate the costs for a subsequent patient. Splitting single dose vials can be acceptable in ce rtain situations and may create “free” contrast agent for a patient that does not economically justify an “FB” adjustment by the hospital. These complex ities may reduce the utility of the “FB” modifier for contrast agents. Regardless of the differences and similarities between diagnostic radiopharmaceutical products, and notwithsta nding any possible policy merits of treating these two types of products similarly with regards to modifier “FB,” in the CY 2012 OPPS/ASC proposed rule, we di d not propose to extend the modifier “FB” policy to contrast agents. However, we are intere sted in receiving comments from hospitals, manufacturers and other interest ed parties regarding the possi ble application of modifier “FB” to contrast agents when the product is received at no cos t/full credit to the hospital, the establishment of a policy-packaged offset amount for contrast agents, and possible reporting of a token charge of less than $1.01 in cases in which the contrast agent is furnished without cost/full credit. Al though we are not accepting the commenter’s recommendation that CMS extend the modifier “F B” policy to contrast agents received at no cost/full credit to a ho spital because it was not proposed by CMS in CY 2012, we anticipate considering these modifications for future rulemaking.CMS-1525-FC 597 After consideration of the public comments we receive d, we are finalizing our proposal, without modification, to continue requiring hospitals to append modifier “FB” to specified nuclear medicine procedures when the diagnostic ra diopharmaceutical is received at no cost/full cr edit in CY 2012. In addition, we will continue to reduce the payment amount for procedures in the APCs lis ted in Table 34 in this final rule with comment period by the full “policy-packaged” offset amount appropriate for diagnostic radiopharmaceuticals. Finally, we also will con tinue to require hospitals to report a token charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is furnished without cost or with full credit. For CY 2011, we finalized a policy to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through di agnostic radiopharmaceuticals, as described above. For CY 2012, we proposed to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals.
Comment : One commenter requested that CMS post all data used to calculate the offset amounts and stated that, without thes e amounts, the public cannot make comments on the accuracy and appropriateness of CMS’ calculation of radiopharmaceutical costs packaged into the nuclear medicine APC or the corresponding offset amounts for pass-through radiopharmaceuticals. Response : The exact data used to calculate all of the proposed and final payment rates, including the associat ed offset amounts, for the CY 2012 OPPS are available for purchase under a CMS data use agreem ent through the CMS Web site at:CMS-1525-FC 598 http://www.cms.gov/hospitalOutpatientPPS

. This Web site includes information about purchasing the “OPPS Limited Data Set,” wh ich now includes the additional variables previously available only in the OPPS Id entifiable Data Set, including ICD-9-CMS diagnosis codes and revenue code payment am ounts. We typically have not posted the offset amounts by APC until publication of the final rule because we assign services to APCs based on our estimate of their full resource cost, includi ng, but not limited to, packaged diagnostic radiopharmaceuticals. The offset amount is the portion of each APC payment rate that could reasonably be attrib uted to the cost of predecessor diagnostic radiopharmaceuticals when considering a ne w diagnostic radiopharmaceutical for passthrough payment and has no bearing on APC assignment. After consideration of the public comments we receive d, we are finalizing our proposal to continue applying the diagnos tic radiopharmaceutical offset policy to payment for pass-through dia gnostic radiopharmaceuticals, as described in the CY 2012 OPPS/ASC proposed rule (76 FR 42249 through 42250). Table 34 below displays the APCs to whic h nuclear medicine procedures will be assigned in CY 2012 and for which we expect th at an APC offset could be applicable in the case of diagnostic radiopharmaceu ticals with pass-through status.
TABLE 34.--APCs TO WHICH NUCLEAR MEDICINE PROCEDURES WILL BE ASSIGNED FOR CY 2012

CY 2012 APC CY 2012 APC Title 0308 Positron Emission Tomography (PET) Imaging 0377 Level II Cardiac Imaging. 0378 Level II Pulmonary Imaging.CMS-1525-FC 599

CY 2012 APC CY 2012 APC Title 0389 Level I Non-imaging Nuclear Medicine. 0390 Level I Endocrine Imaging. 0391 Level II Endocrine Imaging. 0392 Level II Non-imaging Nuclear Medicine. 0393 Hematologic Processing & Studies. 0394 Hepatobiliary Imaging. 0395 GI Tract Imaging. 0396 Bone Imaging. 0397 Vascular Imaging. 0398 Level I Cardiac Imaging. 0400 Hematopoietic Imaging. 0401 Level I Pulmonary Imaging. 0402 Level II Nervous System Imaging. 0403 Level I Nervous System Imaging. 0404 Renal and Genitourinary Studies. 0406 Level I Tumor/Infection Imaging. 0408 Level III Tumor/Infection Imaging. 0414 Level II Tumor/Infection Imaging.

c. Payment Offset Policy for Contrast Agents Section 1833(t)(6)(D)(i) of the Act speci fies that the tran sitional 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 (or the Part B drug CAP rate) and the otherwise applicable OPD fee schedule amount. There is currently one contrast agent with pass-through status under the O PPS: HCPCS code C9275 (Injection, hexaminolevulinate hydrochloride, 100 m g, per study dose). HCPCS code C9275 was granted pass-through status beginning Janua ry 1, 2011, and was proposed to continue with pass-through status in CY 2012. As descri bed in section V.A.3 of the proposed rule,CMS-1525-FC 600 we proposed that new pass-through contrast ag ents would be paid at ASP+6 percent, while those without ASP inform ation would be paid at WAC+ 6 percent or, if WAC is not available, payment would be based on 95 percent of the product’s most recently published AWP. We believe that a payment offset is nece ssary in order to provide an appropriate transitional pass-through payment for contrast agents because all of these items are packaged when they do not have pass-through status. In accordance with our standard offset methodology, in the CY 2012 OPPS/ ASC proposed rule (76 FR 42250 through 42251), we proposed for CY 2012 to deduct from the payment for pass-through contrast agents an amount that reflects the porti on of the APC payment associated with predecessor contrast agents, in order to ensu re no duplicate contra st 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). For CY 2012, as we did in CY 2011, we proposed to continue to apply this same policy to contrast agents. Specifically, we proposed to utilize the “policy-packaged” drug offset fraction for clinical APCs calculated as 1 minus (the cost from single procedure claims in the APC after removing the cost for “policy- packaged” drugs divided by the cost from single procedure claims in the APC). In CY 2010, we finalized a policy to redefine “policy-packaged” drugs as only nonpass-th rough diagnostic radiopharmaceuticals and contrast agents (74 FR 60495 through 60499). To determine the actual APC offsetCMS-1525-FC 601 amount for pass-through contrast agents that takes into consideration the otherwise applicable OPPS payment amount, we proposed to multiply the “policy-packaged” drug offset fraction by the APC payment amount for the procedure with which the pass-through contrast agent is used and, accordingly, reduc e the separate OPPS payment for the pass-through contrast agent by this amount. We proposed to continue to apply this methodology for CY 2012 to recognize that when a contrast agent with pass-through status is billed with any pro cedural APC listed in Table 29 of the proposed rule, a specific offset based on the procedural APC would be applied to payments for the contrast agent to ensure that duplicate payment is not made for the contrast agent. We did not receive any public comment s on our proposal to deduct, from the payment for pass-through contra st agents, an amount that reflects the portion of the APC payment associated with predecessor contrast agents in order to ensure no duplicate contrast agent payment is made. We are finalizing, as proposed, our policy to deduct from the payment for pass-through contrast agen ts an amount that reflects the portion of the APC payment for pass-through contrast agents, as described in the CY 2012 OPPS/ASC proposed rule (76 FR 42250 thr ough 42251). We also are finalizing the proposed CY 2012 pass-through contrast agent o ffset policy to specify the procedural APCs to which offsets for pass through contra st agents would apply. In addition, as we proposed, for this final rule with comment pe riod, procedural APCs for which we expect a contrast agent offset could be applicable in the case of a pass -through contrast agent have been identified as any procedural APC with a “policy-packaged” drug amount greater than $20 that is not a nuclear medicine APC identified in Table 34 above, andCMS-1525-FC 602 these APCs are displayed in Table 35 below. The methodology used to determine a threshold cost for application of a contrast agent offset policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60483 through 60484). We are finalizing this methodology for CY 2012 to continue to recognize that, when a contrast agent with pass-through status is bi lled with any procedural APC listed in Table 35, a specific offset based on the procedural APC would be applied to payment for the contrast agent to ensure that duplicate paym ent is not made for the contrast agent. As we proposed, for this final rule with comment period, we will continue to post annually on the CMS Web site at http://www.cms.gov/HospitalOutpatientPPS a file that contains the APC offset amounts that will be used for that year for purposes of both evaluating cost significance for candidate pass-through device categ ories and drugs and biologicals, including contra st agents, and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide the amount s and percentages of APC payment associated with packaged impl antable devices, “policy-packaged” drugs, and “threshold-packaged” dr ugs and biologicals for every OPPS clinical APC. Procedural APCs for which we expect a cont rast offset could be applicable in the case of a pass-through contrast agent have been identified as any procedural APC with a “policy-packaged” drug amount greater than $20 that is not a nuc lear medicine APC identified in Table 34 above and these APCs are displayed in Table 35 below. The methodology used to determine a proposed thresh old cost for application of a contrast agent offset policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period (70 FR 60483 through 60484). For CY 2012, we proposed to continueCMS-1525-FC 603 to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 29 of the pr oposed rule (76 FR 42251), a specific offset based on the procedural APC w ould 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 comments re garding this proposal and, therefore, are adopting it for CY 2012 without modification.
TABLE 35.--APCs TO WHICH A CO NTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2012

CY 2012 APC CY 2012 APC Title 0080 Diagnostic Cardiac Catheterization. 0082 Coronary or Non-Coronary Atherectomy.

0083 Coronary Angioplasty, Valvulopl asty, and Level I Endovascular Revascularization 0093 Vascular Reconstruction/Fist ula Repair without Device. 0104 Transcathether Placement of Intracoronary Stents. 0128 Echocardiogram with Contrast. 0152 Level I Percutaneous Abdomi nal and Biliary Procedures. 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 Contrast. 0333 Computed Tomography without Contrast followed by Contrast. 0334 Combined Abdomen and Pelvis CT with Contrast

0337 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast. 0375 Ancillary Outpatient Services When Patient Expires. 0383 Cardiac Computed Tomographic Imaging.CMS-1525-FC 604
CY 2012 APC CY 2012 APC Title 0388 Discography. 0442 Dosimetric Drug Administration. 0653 Vascular Reconstruction/Fi stula Repair with Device. 0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents. 0662 CT Angiography. 0668 Level I Angiography and Venography. 8006 CT and CTA with Contrast Composite. 8008 MRI and MRA with Contrast Composite. B. OPPS Payment for Drugs, Biologi cals, and Radiopharmaceuticals without Pass-Through Status 1. Background Under the CY 2011 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-thro ugh status in one of two ways: as a packaged payment included in the payment fo r the associated service or as a separate payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with comment period (65 FR 18450) that we generally package the cost of drugs and radiopharmaceuticals into the APC payment 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 associated pro cedure or service. (Transmittal A-01-133, issued on November 20, 2001, explains in gr eater detail the rules regarding separate payment for packaged services.)CMS-1525-FC 605 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 the 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. Section 1833(t)(16)(B) of th e Act set the threshold for establishing separate APCs for drugs and biologicals at $50 per admini stration for CYs 2005 and 2006. Therefore, for CYs 2005 and 2006, we paid separa tely for drugs, biologicals, and radiopharmaceuticals whose per da y cost exceeded $50 and pack aged the costs of drugs, biologicals, and radiopharmaceuticals whose per day cost was equal to or less than $50 into the procedures with which they were billed. For CY 2007, the packaging threshold for drugs, biologicals, and radiopharmaceutical s that were not new and did not have pass-through status was es tablished at $55. For CYs 2008 and 2009, the packaging threshold for drugs, biologicals, and radiopharm aceuticals that were not new and did not have pass-through status was established at $60. For CY 2010, the packaging threshold for drugs, biologicals, and radiopharmaceuticals that were not new and did not have passthrough status was established at $65. For CY 2011, the pack aging threshold for drugs, biologicals, and radiopharmaceuticals that we re not new and did not have pass-through status was established at $70. The methodology used to establish the $55 threshold for CY 2007, the $60 threshold for CYs 2008 and 2009, the $65 threshold for CY 2010, theCMS-1525-FC 606 $70 threshold for CY 2011, and our proposed approach for CY 2012 are discussed in more detail in section V.B.2.b. of th is final rule with comment period. 2. Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals a. Background As indicated in section V.B.1. of this final rule with comment period, in accordance with section 1833(t)(16) (B) of the Act, the 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 $60 for CYs 2008 and 2009. For CY 2010, we set the packaging threshold at $65; and for CY 2011, we set the packagi ng threshold at $70. Following the CY 2007 methodology, in the CY 2012 OPPS/ASC proposed rule, we used the most recently available four qua rter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2012 and rounded the resulting dollar amount ( $77.63) to the nearest $5 increment, which yielded a figure of $80, which we proposed as the packaging threshold for CY 2012. InCMS-1525-FC 607 performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS’ Office of the Actuary (OACT). (We note that we did not propose a change to the PPI that is used to calculate the threshold for CY 2012; rather, this change in termi nology reflects a change to the BLS naming convention for this series.) We refer belo w to this series gene rally as the PPI for Prescription Drugs. We chose this PPI as it reflects price ch anges associated with the average mix of all pharmaceuticals in the overa ll economy. In addition, we chose this price series because it is publicly available and re gularly published, improving public access and transparency. Forecasts of the PPI for Pres cription Drugs are developed by IHS Global Insight, Inc., a nationally recognized economic and financial forecasting firm. As actual inflation for past quarters replaced forecas ted amounts, the PPI estimates for prior quarters have been revised (compared with those used in the CY 2007 OPPS/ASC final rule with comment period) and have been in corporated into our calculation. Based on the calculations described above, we proposed a packaging thre shold for CY 2012 of $80. (For a more detailed discussion of the OPPS drug packaging threshold and the use of the PPI for Prescription Drugs, we refer reader s to the CY 2007 OPPS/AS C final rule with comment period (71 FR 68085 through 68086).) b. Cost Threshold for Packaging of Paymen t for HCPCS Codes That Describe Certain Drugs, Nonimplantable Biologicals, and Th erapeutic Radiopharmaceuticals (“ThresholdPackaged Drugs”)CMS-1525-FC 608 In the CY 2012 OPPS/ASC proposed rule (76 FR 42252 through 42253), we calculated on a HCPCS code-specific basis the per day cost of all drugs, nonimplantable biologicals, and therapeutic radiopharm aceuticals (collectively called “thresholdpackaged” drugs) that had a HCPCS code in CY 2010 and were paid (via packaged or separate payment) under the OPPS in order to determine their proposed CY 2012 packaging status. We used data from CY 2010 claims processed before January 1, 2011 for this calculation. However, we did not perform this calculation for those drugs and biologicals with multiple HCPCS codes that in clude different dosages as described in section V.B.2.c. of this final rule with comment period or for diagnostic radiopharmaceuticals, contrast agents, and implantable biolog icals that we proposed to continue to package in CY 2012, as discussed in section V.B.2.d. of this final rule with comment period. In order to calculate the per day cost s for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals to determin e their proposed packaging status in CY 2012, we used the methodology that was de scribed in detail inthe CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 70 FR 68638). For each drug and nonimplantable biological HCPCS code, we us ed an estimated payment rate of ASP+4 percent (which is the payment rate we proposed for separately payable drugs and nonimplantable biologicals for CY 2012, as di scussed in more detail in section V.B.3.b. of the proposed rule and this final rule w ith comment period) to calculate the CY 2012 proposed rule per day costs. We used the manufacturer submitted ASP data from theCMS-1525-FC 609 fourth quarter of CY 2010 (d ata that were used for payment purposes in the physician’s office setting, effective April 1, 2011) to determine the proposed rule per day cost. As is our standard methodology, for CY 2012 we proposed to use payment rates based on the ASP data from the fourth quarter of CY 2010 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to the proposed rule (which were referen ced in section XVII. of the proposed rule and available via the Internet) because these are th e most recent data available for use at the time of development of the proposed rule. These data were also the basis for drug payments in the physician’s office setting, eff ective April 1, 2011. For items that did not have an ASP-based payment rate, such as some therapeutic radi opharmaceuticals, we used their mean unit cost derived from the CY 2010 hospital claims data to determine their per day cost. We proposed to package item s with a per day cost less than or equal to $80 and identified items with a per day cost greater than $80 as separately payable. Consistent with our past practice, we crossw alked historical OPPS claims data from the CY 2010 HCPCS codes that were reported to the CY 2011 HCPCS codes that we displayed in Addendum B of the proposed rule (which was referenced in section XVII. of the proposed rule and available via the Internet) for payment in CY 2012.
Comment : The majority of commenters objected to the proposed increase in the OPPS packaging threshold to $80 for CY 2012. Ma ny stated that the $10 increase in the threshold from CY 2011 was larger than expected because recent increases in the packaging threshold have occurred in $5 in crements. Several commenters recommended that CMS consider either eliminating th e drug packaging threshold and providingCMS-1525-FC 610 separate payment for all drugs with HCPCS c odes or freezing the packaging threshold at $70 for CY 2012. One commenter, in part icular, suggested that CMS freeze the packaging threshold at $70 for at least 3 year s. Many commenters objected to the use of a packaging threshold under the OPPS when one is not used for physician’s office payment. These commenters expressed c oncern that the pack aging threshold may impede beneficiary access to lower cost packaged drugs in the HOPD setting. A few commenters suggested that CMS limit increases in the packaging th reshold amount to the market basket update for the year. One commenter also recommended that CMS not round up the threshold amount to the nearest $5 increment and, instead, defer increases in the threshold until changes in prices exceed $5. Some commenters believed that elimina ting the packaging threshold and paying separately for all drugs in the HOPD setting would allow a more accurate calculation of the separately payable payment amount for drugs (otherwise referred to as the ASP+X calculation). Response : As discussed in de tail in the CY 2008 OPPS/ ASC final rule with comment period (72 FR 66757 through 66758), the CY 2009 OPPS/ASC final rule with comment period (73 FR 68643), the CY 2010 O PPS/ASC final rule with comment period (74 FR 60485 through 60487), and the CY 2011 final rule with comment period (75 FR 71940 through 71943), we continue to be lieve that unpackaging payment for all drugs, biologicals and radiopharmaceuticals is inconsistent with the concept of a prospective payment system and that such a change could create an additional reporting burden for hospitals. The OPPS and the MPFS that applies to physician’s services areCMS-1525-FC 611 fundamentally different payment systems with essential differences in their payment policies and structures. Specifically, the O PPS is a prospective payment system based on the concept of payment for groups of services that sh are clinical and resource characteristics. Payment is made under th e OPPS according to pros pectively established payment rates that are related to the relative costs of hospital resources for services. When physician’s services are furnished in an office sett ing, they are paid under the MPFS, which is a fee schedule based on the realative value of each component. Under the MPFS, separate payment is made for each service provided in the physician’s office; when individual drugs are furnished in the physician’s office, they are generally paid under the ASP methodology. In contrast, th e OPPS includes various drugs within a prospective payment system, where payment for certain drugs is packaged into the associated procedure payment for the APC gr oup. Given the fundamental differences in the way payment is made in an HOPD and a physician’s office setting, differences in payment are to be expected. In general, we do not believe that our packaging methodology under the OPPS results in limited beneficiary access to dr ugs because packaging is a fundamental component of a prospective payment system that accounts for the cost of certain items and services in larger paymen t bundles, recognizing that some clinical cases may be more costly and others less costl y, but that, on average, OPPS pa yment is appropriate for the services provided. The growing utilizati on associated with packaged drugs and biologicals in our claims data suggests Medi care beneficiaries have sufficient access to these items.CMS-1525-FC 612 We note that, in CYs 2005 and 2006, the statutorily mandated drug packaging threshold was set at $50, and we continue to believe that it is appr opriate to continue a modest drug packaging threshold for the CY 2012 OPPS for the reasons set forth below. As stated in the CY 2007 O PPS/ASC final rule with comm ent period (71 FR 68086), we believe that packaging certain items is a fundamental component of a prospective payment system, that packaging these items doe s not lead to benefi ciary access issues and does not create a problematic site of service differential, that the packaging threshold is reasonable based on the initial establishmen t in law of a $50 threshold for the CY 2005 OPPS, that updating the $50 threshold is cons istent with industry and government practices, and that the PPI for Prescription Dr ugs is an appropriate mechanism to gauge Part B drug inflation. Therefore, because of our continued belief that packaging is a fundamental component of a prospective pa yment system that continues to provide important flexibility and efficiency in the delivery of high quality hospital outpatient services, we are not adopting the commenters’ recommendations to pay separately for all drugs, biologicals, and radiopharmaceuticals for CY 2012 or to eliminate or to freeze the packaging threshold at $70. We disagree with the commenters who s uggested that CMS should limit increases in the outpatient drug packagi ng threshold amount to the ma rket basket update for the year. As stated above, we continue to believe that updating the $50 threshold is consistent with industry and government practic es and that the PPI for Prescription Drugs is an appropriate mechanism to gauge Part B drug inflation. As we stated in the CY 2007 OPPS/ASC final rule with co mment period (71 FR 68085), we believe that the PPI forCMS-1525-FC 613 Prescription Drugs reflects price changes at the wholesale or ma nufacturer stage. Because OPPS payment rates for drugs and biologicals are generally based on the ASP data that are reported by their manufacturers , we believe that the PPI for Prescription Drugs is an appropriate price index to use to update the p ackaging threshold for CY 2007 and beyond. In contrast, the market basket update c ontains numerous pr ice proxies, including, but not limited to, proxies for wages and sala ries, utilities, and nonlabor-related expenses, that are not related to price increases for prescription drugs. Therefore, we believe that the market basket as a whole is not an appropriate mechanism for determining the outpatient drug packaging threshold amount. Wi thin the calculation of the market basket update, we use the PPI for Prescription Drugs sp ecifically to measure the price growth for prescription drugs, but price changes for pr escription drugs are only one component of price changes for the numerous items and se rvices hospitals purchase. Additionally, we disagree with the commenters’ suggestion that we not round up the packaging threshold to the nearest $5 in crement and, instead, defer any increases in the threshold until changes in prices exceed $5. We note that we equally round up or round down to the nearest $5 increment, and we continue to believe that rounding to the nearest $5 increment more accurately updates the 2005 statutorily mandated drug packaging threshold. Finally, we believe that our continued application of the methodology initially adopted in CY 2007 to update the drug packagin g threshold does not inhibit our ability to pay accurately for drugs and biologicals. We have made several refinements to theCMS-1525-FC 614 ASP+X drug payment methodology under th e OPPS for nonpass-th rough drugs and biologicals over the past several years to improve its accuracy. During that time, we have continued to implement our establishe d methodology for annually updating the drug packaging threshold. For CY 2010, we fina lized an overhead adjustment methodology for determining payment for separately paya ble drugs without pass-through status while we have continued to consis tently apply the methodology de scribed above to update the drug packaging threshold. Since publication of the CY 2012 OPPS/ASC proposed rule, consistent with our policy of updating the packaging threshold with more recently available data for the final rule, we have again followed the CY 2007 methodology for CY 2012 and used updated four quarter moving average PPI index levels provided by the CMS Office of the Actuary to trend the $50 threshold forward from the th ird quarter of CY 2005 to the third quarter of CY 2012. We then rounded the resulting dollar updated dollar amount ($77.44) to the nearest $5 increment, which yielded a figure of $75. We note that this calculation, by using the most recent forecast of the quarterly PPI index levels, resulted in a decrease in the trended dollar amount from $77.63 in the CY 2012 proposed rule to $77.44 for this final rule with comment period. Because it is our policy to round the dollar amount to the nearest $5 increment, the slight decrease in the trended dollar amount has resulted in a reduced packaging threshold, from $80 in the proposed rule, to a final CY 2012 packaging threshold of $75. Therefore, afte r consideration of th e public comments we received, and consistent with our established methodology for establishing the packagingCMS-1525-FC 615 threshold using the most recent PPI forecast data, we are adopting a CY 2012 packaging threshold of $75. Our policy during previous cycles of the OPPS has been to use updated ASP and claims data to make final determinations of the packaging status of HCPCS codes for drugs, nonimplantable biologicals, and therapeu tic radiopharmaceuticals for the final rule with comment period. We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/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 codes for drugs and nonimplant able biologicals in this CY 2012 OPPS/ASC final rule with comm ent period, we proposed to use ASP data from the first quarter of CY 2011, which is the basis for calculating payment rates for drugs and biologicals in the physician’ s office setting using the ASP methodology, effective July 1, 2011, along with updated hospita l claims data from CY 2010. We note that we also proposed to use these data for budget neutrality estimates and impact analyses for this CY 2012 OPPS/ASC final rule with comment period. Payment rates for HCPCS codes for separately payable drugs and nonimplantable biologicals included in Addenda A and B to this final rule with comment period are based on ASP data from the second quarter of CY 2011. These data are the basis for calculating payment rates for drugs and biologic als in the physician’s office setting using the ASP methodology, effective October 1, 2011. These physician’s office payment rates will then be updated in the January 2012 O PPS update, based on the most recent ASPCMS-1525-FC 616 data to be used for physician’s office and OPPS payment as of January 1, 2012. For items that do not currently have an ASP-ba sed payment rate as pr oposed, we recalculate their mean unit cost from all of the CY 2010 claims data and updated cost report information available for this CY 2012 final ru le with comment period to determine their final per day cost. Consequently, the packaging status of some HCPCS codes for drugs, nonimplantable biologicals, and therapeu tic radiopharmaceuticals in this CY 2012 OPPS/ASC final rule with co mment period may be different from the same drug HCPCS code’s packaging status determined based on the data used for the proposed rule. Under such circumstances, we proposed to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose median cost fluctuates re lative to the propos ed CY 2012 OPPS drug packaging threshold and the drug’s payment stat us (packaged or separately payable) in CY 2011. Specifically, consistent with our hi storical practice, we applied the following policies to these HCPCS codes for drugs, non implantable biologicals, and therapeutic radiopharmaceuticals whose relationship to the $75 drug packagi ng threshold changes based on the updated drug packaging th reshold and on the final updated data:

● HCPCS codes for drugs and nonimpla ntable biologicals that were paid separately in CY 2011 and that were proposed for separate payment in CY 2012, and that then have per day costs equal to or less than $75, based on the updated ASPs and hospital claims data used for this CY 2012 final ru le with comment period, will continue to receive separate payment in CY 2012.CMS-1525-FC 617

● HCPCS codes for drugs and nonimplantab le biologicals that were packaged in CY 2011 and that are proposed for separate pa yment in CY 2012, and that then have per day costs equal to or less than $75, based on the updated ASPs and hospital claims data used for this CY 2012 final rule with comme nt period, will remain packaged in CY 2012.

● HCPCS codes for drugs and nonimplant able biologicals for which we proposed packaged payment in CY 2012 but then have pe r day costs greater than $75, based on the updated ASPs and hospital claims data used for this CY 2012 final rule with comment period, will receive separate payment in CY 2012. 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 median co st fluctuates relative to the CY 2012 OPPS drug packaging threshold and the drug’s payment status (packaged or separately payable) in CY 2011. Therefore, we are finalizi ng our proposal, without modification, for
CY 2012. We note that HCPCS codes J2513 (Pentastarch 10% solution), J3310 (Perphenazine injection), and J9351 (Topotecan ) were paid separately for CY 2011 and were proposed for separate payment in CY 2012 and had final per day costs of less than the $75 drug packaging threshold, based on updated ASPs and the CY 2010 hospital claims data available for this CY 2012 fina l rule with comment period. Therefore, HCPCS codes J2513, J3310, and J9351 will continue to be paid separately in CY 2012 according to the established methodology set forth above.CMS-1525-FC 618 In addition, we proposed to provide se parate payment for HCPCS code J2597 (Inj desmopressin acetate) in CY 2012, which was packaged in CY 2011. Using updated ASPs and the CY 2010 hospital claims data av ailable for this final rule with comment period, HCPCS code J2597 now has a per day cost of less than $75. In accordance with our established policy for such cases, fo r CY 2012, we are packaging payment for HCPCS code J2597. We also proposed to package HCPCS codes 90378 (Rsv ig, im, 50mg), J0364 (Apomorphine hydrochloride), J1324 (Enfuvirt ide injection), J1642 (Inj heparin sodium per 10 u), J1644 (Inj heparin sodium per 1000u), J1756 (Iron sucrose injection), J2700 (Oxacillin sodium injeciton), J3030 (S umatriptan succinate / 6 MG), J9070 (Cyclophosphamide 100 MG inj), J9185 (Fluda rabine phosphate inj), J9206 (Irinotecan injection), J9390 (Vinorelbine tartrate inj), and Q4103 (O asis burn matrix) . Using updated ASPs and the CY 2010 hospital claims da ta available for this final rule with comment period, HCPCS codes 90378, J0364, J1324, J1642, J1644, J1756, J2700, J3030, J9070, J9185, J9206, J9390, and Q4103 now have per day costs greater than $75. In accordance with our established policy for such cases, for CY 2012 we will pay for HCPCS codes 90378, J0364, J1324, J1642, J1644, J1756, J2700, J3030, J9070, J9185, J9206, J9390, and Q4103 separately. Finally, because we did not have clai ms data for HCPCS code J9213 (Interferon alfa-2a inj) in the CY 2012 OPPS/ASC proposed rule, we had proposed a status indicator of “E” for this product in CY 2012. However, since publication of the proposed rule, we have received claims data and, because the pe r day cost for this product of approximatelyCMS-1525-FC 619 $70 is less than the final $75 CY 2012 packag ing threshold, the product is packaged and has a CY 2012 status indicator of “N.” In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60485 through 60489), we implemented a policy to treat oral and injectable forms of 5-HT3 antiemetics comparably to all other threshold packag ed drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals under our standard packaging methodology of packaging drugs with a per day cost less th an $65. In the CY 2012 OPPS/ASC proposed rule (76 FR 42252), we proposed for CY 2012 to continue our policy of not exempting these 5-HT3 antiemetic products from our standard packaging methodology. For CY 2012, we proposed to package payment for all of the 5-HT3 antiemetics except palonosetron hydrochloride, which for CY 2012 has an estimated per day cost, from the CY 2010 claims data, above the proposed CY 2012 drug packaging threshold. Our rationale for this policy is outlined in th e CY 2010 OPPS/ASC final rule with comment period (74 FR 60487 through 60488).
Comment : Several commenters suggested that CMS reinstate its policy of separate payment for 5-HT3 antiemetics, which ar e a class of drugs often used as part of an anti-cancer treatment regimen to treat nausea. Response : We continue to believe that use of these antiemetics is an integral part of an anti-cancer treatment regimen and that OPPS claims data demonstrate their increasingly common hospital outpatient utilization. As we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60488), we no longer believe that a specific exemption to our standard drug pa yment methodology is necessary to ensureCMS-1525-FC 620 access to the most appropriate antiemetic products for Medicare beneficiaries. We continue to believe that our analysis conducted in the CY 2010 OPPS/ASC proposed rule on 5-HT3 antiemetics (74 FR 35320), along with th e historical stability in prescribing patterns for these products and the availability of generic alternatives for several of these products, allow us to continue our policy of specifically not exempting these products from the OPPS drug packaging threshold.
Comment : One commenter recommended that CMS not package any drugs used in anti-cancer regimens. Response : We disagree with the commenter for the reasons mentioned above. We believe that packaging certain items, incl uding items used in anti-cancer regimens, is a fundamental component of a prospective pa yment system, and is an essential feature that distinguishes a prospective payment syst em from a fee schedule. We do not believe that packaging drugs used in an anti-cancer regimen or in outpatient treatment of other significant diseases leads to beneficiary access issues. This finding is confirmed by our analysis of hospital claims data in which we have found that benefici aries appear to have adequate access to cancer treatments, as is signified by ongoing volume growth in cancerrelated APCs and stability in prescribing products for anti- cancer drugs such as 5-HT3 antiemetics, for which CMS has continued to observe volume growth, even after we ended our multiyear exemption from the packaging threshold for these products. In summary, after considerat ion of the public comments we received, we are finalizing our proposal to continue our policy of not exempting 5-HT3 antiemetics from the drug packaging threshold for CY 2012. In additi on, we are not providi ng any exceptions toCMS-1525-FC 621 the standard drug packaging methodology for a ny class of drugs, in cluding anti-cancer therapies, for CY 2012. However, we note th at the 5-HT3 antiemetic product described by HCPCS code J2469 (palonosetron hydrochol ride) has a CY 2012 estimated per day cost, from the CY 2010 claims data, above the CY 2012 drug packaging threshold and, therefore, will receive sepa rate payment in CY 2012. c. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological But Different Dosages In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we began recognizing, for OPPS payment 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 dosage of a drug or biological. We extended this recognition to multiple HCPCS codes for se veral other drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, we app lied a policy that as signed the status indicator of the previ ously recognized HCPCS code to the associated newly recognized code(s), reflecting the packaged or separately payable status of the new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we explained that once claims data were available for these previously unrecognized HCPCS codes, we would determine the packaging status and resu lting status indicator for each HCPCS code according to the general, established HCPC S code-specific methodology for determining a code’s packaging status for a given update year. However, we also stated that weCMS-1525-FC 622 planned to closely follow our claims data to ensure that our annual packaging determinations for the different HCPCS codes describing the same dr ug or biological did not create inappropriate payment incentives for hospitals to repor t certain HCPCS codes instead of others. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages. We analyzed CY 2008 cl aims data for the HCPCS codes describing different dosages of the same drug or biol ogical that were newl y recognized in CY 2008 and found that our claims data would result in several different packaging determinations for different codes describing the same drug or biological. Furthermore, we found that our claims data included few units and days for a number of newly recognized HCPCS codes, resulting in our concer n that these data reflected claims from only a small number of hospitals, even though the drug or biolog ical itself may be reported by many other hospitals under the most common HCPCS code . Based on these findings from our first available claims data for the newly recogni zed HCPCS codes, we believed that adopting our standard HCPCS code-specific packaging determinations for these codes could lead to payment incentives for hospitals to repor t certain HCPCS codes instead of others, particularly because we do not currently require hospitals to report al l drug and biological HCPCS codes under the OPPS in consideration of our previous policy that generally recognized only the lowest dosage HCPCS code for a drug or biological for OPPS payment.CMS-1525-FC 623 For CY 2012, we continue to believ e that adopting the standard HCPCS code-specific packaging determin ations for these codes could lead to payment incentives for hospitals to report certain HCPCS code s for drugs instead of others. Making packaging determinations on a drug-specific ba sis eliminates these incentives and allows hospitals flexibility in choosing to report a ll HCPCS codes for different dosages of the same drug or only the lowest dosage HC PCS code. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42253 through 42255), we proposed to continue our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same dr ug or biological but different dosages in CY 2012. For CY 2012, 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 2010 claims data and our pricing information at ASP+4 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 descriptor . All HCPCS codes li sted in Table 30 of the proposed rule (76 FR 42254 through 42255) had ASP pricing information available for the CY 2012 OPPS/ASC proposed rule. Therefore, we multiplied the weighted average ASP+4 percent per unit payment amoun t across all dosage levels of a specific drug or biological by the estimated units per da y for all HCPCS codes that describe each drug or biological from our claims data to de termine the estimated per day cost of each drug or biological at less th an or equal to $80 (whereupon a ll HCPCS codes for the sameCMS-1525-FC 624 drug or biological would be packaged) or greater than $80 (whereupon all HCPCS codes for the same drug or biological would be separately payable). Although we did not receive any public comments regarding this methodology, as noted in section V.B.2.b. of this final rule with comment period, the final CY 2012 drug packaging threshold is $75, and not $80 as had been proposed in the CY 2012 OPPS proposed rule. Therefore, in preparation fo r the CY 2012 final rule with comment period, we again aggregated both our CY 2010 claims data and our pricing information at ASP+4 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 descriptor for those drugs liste d in Table 30 of the proposed rule (76 FR 42254 through 42255). We then multiplied the weighted average ASP+4 percent per unit payment amount across all dosage levels of a specific drug or biological by the estimated units per day for all HCPCS codes that describe each drug or biological from our claims data to determine the estimated per day cost of each drug or biological at less than or e qual to $75 (whereupon all HCPC S codes for the same drug or biological would be packaged) or greater th an $75 (whereupon all HCPCS codes for the same drug or biological would be separately payable). In repeating this analysis, we found that two products for which we had pr oposed a CY 2012 status indicator of “N,” HCPCS J1642 (Injection, heparin sodium, (hepar in lock flush), per 10 units) and J1644 (Injection, heparin sodium, per 1000 units) had a recalculated per day cost in excess of the $75 packaging threshold. Therefore, HCPCS J1642 and J1644 are assigned status indicator “K” and will be se parately payable in CY 2012.CMS-1525-FC 625 With the exception of the changed status indicators for HCPCS J1642 and J1644, we are adopting as final the proposed pack aging status of each drug and biological HCPCS code to which the aforementioned me thodology applies. The products affected are displayed in Table 36 below.
TABLE 36.--HCPCS CODES TO WHICH THE CY 2012 DRUG-SPECIFIC PACKAGING DE TERMINATION METHODOLOGY APPLIES

CY 2012 HCPCS

Code CY 2012 Long Descriptor CY 2012 SI C9257 Injection, bevacizumab, 0.25 mg K J9035 Injection, bevacizumab, 10 mg K J1020 Injection, methylprednisolone acetate, 20 mg N J1030 Injection, methylprednisolone acetate, 40 mg N J1040 Injection, methylprednisolone acetate, 80 mg N J1070 Injection, testosterone cypionate, up to 100 mg N J1080 Injection, testosterone cypionate, 1 cc, 200 mg N J1440 Injection, filgrastim (g-csf), 300 mcg K J1441 Injection, filgrastim (g-csf), 480 mcg K J1460 Injection, gamma globulin, intramuscular, 1 cc K J1560 Injection, gamma globuli n, intramuscular over 10 cc K

J1642 Injection, heparin sodium, (h eparin lock flush), per 10 units K J1644 Injection, heparin sodium, per 1000 units K 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 N J2271 Injection, morphine sulfate, 100mg N

J2788 Injection, rho d immune gl obulin, human, minidose, 50 micrograms (250 i.u.) K

J2790 Injection, rho d immune gl obulin, human, full dose, 300 micrograms (1500 i.u.) K

J2920 Injection, methylprednisolone sodium succinate, up to 40 mg NCMS-1525-FC 626
CY 2012 HCPCS

Code CY 2012 Long Descriptor CY 2012 SI

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, ovi ne, preservative free, per 1000 usp units N J7050 Infusion, normal saline solution , 250 cc N J7040 Infusion, normal saline solution, sterile (500 ml=1 unit) N J7030 Infusion, normal saline solution , 1000 cc N J7515 Cyclosporine, oral, 25 mg N J7502 Cyclosporine, oral, 100 mg N J8520 Capecitabine, oral, 150 mg K J8521 Capecitabine, oral, 500 mg K J9250 Methotrexate sodium, 5 mg N J9260 Methotrexate sodium, 50 mg N

Q0164 Prochlorperazine maleate, 5 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0165 Prochlorperazine maleate, 10 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0167 Dronabinol, 2.5 mg, oral, F DA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0168 Dronabinol, 5 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen NCMS-1525-FC 627
CY 2012 HCPCS

Code CY 2012 Long Descriptor CY 2012 SI

Q0169 Promethazine hydrochloride, 12.5 mg, oral, FDA approved prescription anti-eme tic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0170 Promethazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0171 Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription antiemetic , for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0172 Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-eme tic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0175 Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0176 Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0177 Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen NCMS-1525-FC 628
CY 2012 HCPCS

Code CY 2012 Long Descriptor CY 2012 SI

Q0178 Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

d. Packaging of Payment for Diagnostic Ra diopharmaceuticals, Contrast Agents, and Implantable Biologicals (“Policy -Packaged” Drugs and Devices) Prior to CY 2008, the methodology of calcu lating a product’s estimated per day cost and comparing it to the annual OPPS drug packaging threshold was used to determine the packaging status of drugs, biologicals, and radiopharmaceuticals under the OPPS (except for our CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66766 through 66768), we began packaging payment for all diagnostic radiopharmaceuticals and contrast agents into the payment for the associated procedure, regardless of their per day co sts. In addition, in CY 2009, we adopted a policy that packaged the payment for nonpass-through impl antable biologicals into payment for the associated surgical procedure on the cl aim (73 FR 68633 through 68636). We refer to diagnostic radiopharmaceuticals and contrast ag ents collectively as “policy-packaged” drugs and implantable biologi cals as devices because, in CY 2010, we began to treat implantable biologicals as devices for all OPPS payment purposes. According to our regulations at §419.2(b) , as a prospective payment system, the OPPS establishes a national payment rate that includes operating and capital-related costsCMS-1525-FC 629 that are directly related and integral to pe rforming a procedure or furnishing a service on an outpatient basis including, but not limited to, implantable prosthetics, implantable durable medical equipment, a nd medical and surgical supplie s. Packaging costs into a single aggregate payment for a service, enc ounter, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with whic h they are associated encourages hospital efficiencies and also enables hospitals to manage thei r resources with maximum flexibility. Prior to CY 2008, we noted that the proportion of drugs, biologicals, and radiopharmaceuticals that were separately pa id under the OPPS had increased in recent years, a pattern that we also observed for pr ocedural services under the OPPS. Our final CY 2008 policy that packaged paymen t for all nonpass- through diagnostic radiopharmaceuticals and contrast agents, regardless of their per day costs, contributed significantly to expanding the size of the O PPS payment bundles and is consistent with the principles of a prospective payment system. As discussed in more detail in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645 through 68649), we presented several reasons suppo rting our initial policy to package payment of diagnostic radiopharmaceuticals and contrast agents into their associated procedures on a claim. Specifically, we stated that we believed packaging was appropriate because: (1) the statutorily required OPPS drug packaging threshold has expired; (2) we believe that diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provisio n of an independentCMS-1525-FC 630 service; and (3) section 1833(t) (14)(A)(iii) of the Act requires that payment for specified covered outpatient drugs (SCODs) be set pr ospectively based on a measure of average hospital acquisition cost. For these reasons, we believe it is appropriate to con tinue to treat diagnostic radiopharmaceuticals and cont rast agents differently from SCODs for CY 2012. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42255 through 42256), we proposed to continue packaging payment for all contrast agents and diagnostic radiopharmaceuticals, collectivel y referred to as “policy-pa ckaged” drugs, regardless of their per day costs, for CY 2012. We also pr oposed to continue to package the payment for diagnostic radiopharmaceuticals into the pa yment for the associated nuclear medicine procedure and to package the payment for c ontrast agents into the payment of the associated echocardiography imaging procedure, regardless of whether the agent met the OPPS drug packaging threshold. We refer re aders to the CY 2010 OPPS/ASC final rule with comment period for a detailed discussi on of nuclear medicine and echocardiography services (74 FR 35269 through 35277).
Comment : Several commenters objected to CMS’ proposal to package payment for all diagnostic radiopharmaceuticals and contrast agents in CY 2012. A number of commenters stated that diagnostic radiopharmaceu ticals and contrast agents with per day costs over the proposed OPPS drug packaging threshold are define d as SCODs and, therefore, should be assigned separate APC payments. In particular, the commenters questioned CMS’ authority to classify groups of drugs, such as diagnostic radiopharmaceuticals and cont rast agents, and implement packaging and paymentCMS-1525-FC 631 policies that do not reflect th eir status as SCODs. Seve ral comments disagreed with CMS’ labeling of radiopharmaceuticals as supplies and stated instead that they should be treated as other SCODs. The comme nters recommended that diagnostic radiopharmaceuticals should be subject to the same per day cost drug packaging threshold that applies to othe r drugs, in order to determin e whether their payment would be packaged or made separately. Response : As discussed in the CY 2008 O PPS/ASC final rule with comment period (72 FR 66766), the CY 2009 OPPS/AS C final rule with comment period (73 FR 68645), the CY 2010 OPPS/ASC final ru le with comment period (74 FR 60497), and the CY 2011 final rule with comment peri od (75 FR 71949), we continue to believe that diagnostic radiopharmaceuticals and contrast agents are different from other drugs and biologicals for several re asons. We note that the st atutorily required OPPS drug packaging threshold has expired, and we continue to believe that diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provision of an independent service and are always anci llary and supportive to an independent service, rather than themselves serving as the ther apeutic modality. We packaged their payment in CYs 2008, 2009, 2010, and 2011 as ancillary and supportive services in order to provide incentives for great er efficiency and to provide hospitals with additional flexibility in managing their resources . In order for payment to be packaged, it is not necessary that all products be interc hangeable in every case, and we recognized that, in some cases, hospitals may utilize hi gher cost products and, in some cases, lower cost products, taking into consideration the c linical needs of the pa tient and efficiencyCMS-1525-FC 632 incentives. While we recognize this vari ability from case to case, on average under a prospective payment system, we expect paym ent to pay appropriately for the services furnished. In the past, we have classified different groups of drugs for specific payment purposes, as evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3 antiemetics and their exemption from the dr ug packaging threshold. We note that we treat diagnostic radiopharmaceuticals and cont rast agents as “policy-packaged” drugs because our policy is to package payment for all of the products in the category. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we also began packaging the payment for a ll nonpass-through implantable biologicals into payment for the associated surgical proce dure because we consider these products to always be ancillary and supportive to inde pendent services, similar to implantable nonbiological devices that are always packag ed. Therefore, we currently package payment for nonpass-through implantable biologi cals, also known as devices that are surgically inserted or implan ted (through a surgical incision or a natural orifice) into the body. As we stated in the CY 2012 O PPS/ASC proposed rule (76 FR 42256), we continue to believe that payment should be packaged for nonpass-through implantable biologicals for CY 2012. Although our final CY 2009 policy (which we are continuing for CY 2012 as discussed below) packages payment for all diagnostic radiopharmaceuticals, contrast agents, and nonpass-through implanta ble biologicals into the pa yment for their associated procedures, we are continuing to provide pa yment for these items in CY 2012 based on a proxy for average acquisition cost, as we did in CY 2009. We continue to believe thatCMS-1525-FC 633 the line-item estimated cost for a diagnostic radiopharmaceutical, contrast agent, or nonpass-through implantable biologi cal in our claims data is a reasonable approximation of average acquisition and preparati on and handling costs for diagnostic radiopharmaceuticals, contra st agents, and nonpass-through implantable biologicals, respectively. As we discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645), we believe that hospi tals have adapted to the CY 2006 coding changes for radiopharmaceuticals and responded to our instructi ons to include charges for radiopharmaceutical handling in their charge s for the radiopharmaceutical products. Further, because the standard OPPS packag ing methodology packages the total estimated cost of each radiopharmaceutical, contrast ag ent, or nonimplantable biological on each claim (including the full range of costs observed on the claims) with the cost of associated procedures for ratesetting, this packaging approach is consistent with considering the average cost for radi opharmaceuticals, contrast agents, or nonpass-through implantable biologicals, rather th an the median cost. In addition, as we noted in the CY 2009 OPPS/AS C final rule with comment period (72 FR 68646), these drugs, biologicals, or radiopharmaceuticals for which we have not established a separate APC and therefore, for which payment woul d be packaged rather than separately provided under the OPPS, are considered to not be SCODs. Similarly, drugs and biologicals with per day costs of less than $75 in CY 2012 that are packaged and for which a separate APC has not been establis hed also are not SCODs . This reading is consistent with our final payment policy whereby we package payment for diagnosticCMS-1525-FC 634 radiopharmaceuticals, contrast agents, and nonpass-through imp lantable biologicals and provide payment for these products through pa yment for their associated procedures.
Comment : Several commenters disagreed with the proposal to distinguish between diagnostic and therapeutic radiopha rmaceuticals for payment purposes under the OPPS. The commenters noted that CMS’ id entification of HCPCS code A9544 (Iodine I131 tositumomab, diagnostic, per study dose) as a diagnostic radiopharmaceutical is inappropriate because this radiopharm aceutical functions as a dosimetric radiopharmaceutical and not as a diagnostic radiopharmaceutical. A few commenters explained that this particular radiopharmaceutic al product is used as part of a therapeutic regimen and, therefore, should be consider ed therapeutic for OPPS payment purposes. Response : As discussed above and in th e CY 2008 OPPS/ASC final rule with comment period (72 FR 66641), the CY 2009 O PPS/ASC final rule with comment period (73 FR 68645), the CY 2010 OPPS/ASC final ru le with comment period (74 FR 60498), and the CY 2011 OPPS/ASC final rule w ith comment period (75 FR 71949), we classified each radiopharmaceutical into one of the two groups according to whether its long descriptor contained the term “diagnos tic” or “therapeutic”. HCPCS code A9544 contains the term “diagnostic” in its long code descriptor. Therefore, according to our established methodology, we continue to classi fy it as diagnostic for the purposes of CY 2012 OPPS payment. While we understand th at this item is provided in conjunction with additional supplies, imaging tests, and therapeutic radiopharmaceuticals for patients already diagnosed with cancer, we continue to believe that the purpose of administering the product described by HCPCS code A9544 is di agnostic in nature. As we first statedCMS-1525-FC 635 in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66641), we continue to believe that the product describe d by HCPCS code A9544 is a diagnostic radiopharmaceutical. While it is not used to ne cessarily diagnose a ge neral disease state, it is used to determine whether future therap eutic services would be beneficial to the patient and to determine how to proceed with therapy. We note that this is no different than the use of a lab test to guide therapy; the fact that th e diagnostic test, a service which provides information, is used to guide therapy does not make it a ther apeutic service, one which intended to improve a patient’s clin ical condition. While a group of associated services may be considered a therapeutic regimen by some commenters, HCPCS code A9544 is provided in conjunction with a series of nuclear medicine imaging scans. Many nuclear medicine studies using diagnostic ra diopharmaceuticals are provided to patients who already have an established diagnosis. We continue to cons ider HCPCS code A9544 to be diagnostic because this item is pr ovided for the purpose of conducting a diagnostic imaging procedure and is used to identify the proposed dose of the th erapeutic agent to be provided at a later time.
Comment : Some commenters r ecommended using the ASP methodology to make payment for nonpass-through diagnostic radioph armaceuticals, noting that it would be inconsistent for CMS to treat diagnos tic radiopharmaceuticals as “drugs” for pass-through payment purposes and provide payment for diagnostic radiopharmaceuticals that have pass-through status based on the ASP methodology, and, then, after the diagnostic radiopharmaceutical’s pass-through paym ent status expires, package the costs included in historical hospita l claims data, rather than use the ASP methodology to payCMS-1525-FC 636 for the product and treat the drug as a s upply. A few commenters suggested that diagnostic radiopharmaceuticals could be paid separately as therapeutic radiopharmaceuticals are paid, which would a llow manufacturers to voluntarily submit ASP data, and then default to the mean unit cost when ASP data are unavailable. One commenter asserted that CMS, by paying sepa rately for diagnostic radiopharmaceuticals, could reduce Medicare program expend itures through reduced outlier payments, decreased variability in packaged costs, and more accurate payments for nuclear medicine procedures. The commenter stated that this would occur at “only a modest cost” to the OPPS. Response : As we stated above, the stat utorily required OPPS drug packaging threshold has expired, and we continue to believe that diagnostic radiopharmaceuticals and contrast agents are always ancillary and supportive to an independent service, rather than services themselves as the therapeutic modality. We disagree with commenters who suggest that nonpass-through dia gnostic radiopharmaceutical s should be paid under the ASP methodology, that nonpass-through diagnos tic radiopharmaceuticals should be paid as pass-through drugs and biologicals, or that nonpass-through diagnostic radiopharmaceuticals should be pa id similarly to therapeuti c radiopharmaceuticals. We continue to believe that nonpass-through dia gnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provisio n of an independent service. As we noted in the CY 2009 OPPS/ASC final rule with comment period (72 FR 68646) and restate above, drugs biol ogicals, or radiopharmaceuticals for which we have not established a separate APC will receive packaged payment under the OPPS,CMS-1525-FC 637 and are considered to not be SCODs. We are continuing to provide payment for these items in CY 2012 based on a proxy for average ac quisition cost. We continue to believe that the line-item estimated cost for a dia gnostic radiopharmaceutical, contrast agent, or nonpass-through implantable biologi cal in our claims data is a reasonable approximation of average acquisition and preparati on and handling costs for diagnostic radiopharmaceuticals, contra st agents and nonpass-through implantable biologicals, respectively. Further, as we have stated above, we be lieve that packaging costs into a single aggregate payment for a service, encounter, or episode-of-care is a fundamental principle that distinguishes a prospective payment sy stem from a fee schedule. Our policy of packaging payment for diagnostic radiopharmaceu ticals, contrast agents, and implantable biologicals into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. Paying separately for diagnostic radiopharmaceuticals, contrast agents, or implantable biologi cals, when each of these items is ancillary and supportive to an independent service, is c ontrary to this principle of a prospective payment system. Moreover, we note that SCODs, the payment methodology for which the commenters s uggest that CMS adopt for diagnostic radiopharmaceuticals and contra st agents, receive OPPS payments based on the ASP+X methodology, which has consistently resulted in payment rates for SCODs that are equal to some amount greater than 100 percent of average sales price for these products; in CY 2012, as discussed in section V.B.3.b. of this final rule with comment period, SCODs willCMS-1525-FC 638 receive payment equal to 104 percent of ASP (ASP +4). We do not agree that payment for diagnostic radiopharmaceuticals and cont rast agents, were it equal to the SCOD reimbursement amount calculated usi ng the ASP+X methodology (or ASP+4 in CY 2012), could reduce outlier payments or APC variability to an extent sufficient enough to offset higher payment rates fo r these products under the ASP+X methodology. Finally, we do not agree with the commente r’s assertion that separate payment for diagnostic radiopharmaceuticals would result in more accurate payment for these products. When CMS discussed possibl e ASP-based payment for diagnostic radiopharmaceuticals in the proposed and fi nal rules for OPPS in CY 2006 (70 FR 68653 through 68657), numerous public commenters advised CMS that radiopharmaceuticals are formulated, distributed, compounded, a nd administered in unique distribution channels that preclude the determination of ASP relevant to a radiopharmaceutical HCPCS code. Further, comm enters advised CMS that th e manufacturer has no way to calculate the ASP of the end product patient dose and, consequently, could not supply CMS with accurate ASP data. In the interv ening period between the CY 2006 final rule with comment period and the present, dia gnostic radiopharmaceutical use has become more widespread, and their formulation more complex. Moreover, we believe that the phenomena described by commenters (includi ng radiopharmaceutical manufacturers) in the comment period preceding the CY 2006 OPPS final rule, including the many preparatory and compounding steps between manufacturer and the patient’s bedside, remain an impediment to manufacturers’ calc ulations of accurate ASP, and thus accurate payment, for these products. Therefor e, we do not believe that diagnosticCMS-1525-FC 639 radiopharmaceuticals should be paid separately under the OPPS such that manufacturers voluntarily can submit ASP data and then default to mean un it cost when ASP data are unavailable. We believe they are appropriately packaged in to a single aggregate payment for the accompanying service provided.
Comment : A few commenters recommended th at CMS provide separate payment for all diagnostic radiopharmaceuticals with a median per day cost greater than $200. The commenters believed that this recomme ndation is most consistent with the APC Panel’s recommendation to CMS at the Pa nel’s September 2007 meeting (described below). One commenter recommended that if CMS does not adopt the recommended $200 packaging threshold for diagnostic radioph armaceuticals, that CMS adopt alternate packaging criteria providing separate paymen t when the cost of the product is greater than the total APC payment or when the coefficient of variation of the radiopharmaceutical exceeds a certain threshold. Response : As we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60499), at the September 2007 APC Panel meeting, the APC Panel recommended that CMS package radiopharmaceuticals with a median per day cost of less than $200 but pay separately for radiopharmaceu ticals with a median per day cost of $200 or more. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66638), we did not accept the APC Panel’ s recommendation, citing an inability to determine an empirical basis for paying se parately for radiopharmaceuticals with a median per day cost in excess of $200. Inst ead, as proposed, for CY 2008, we finalized the packaging of payment for all diagnostic radiopharmaceuticals. Consistent with theCMS-1525-FC 640 CY 2012 OPPS/ASC proposed rule, for this fina l rule with comment period, we continue to believe that diagnostic radiopharmaceutical s are ancillary and s upportive to the nuclear medicine procedures in which they are used and that their costs should be packaged into the primary procedures with which they are associated. We do not believe it would be appropriate to set a cost threshold fo r packaging diagnostic radiopharmaceuticals because, regardless of their per day cost, th ey are always supportive of an independent procedure that is the basis for administration of the dia gnostic radiopharmaceutical. We also do not believe that it is appropriate to consider alte rnate packaging criteria for nonpass-through diagnostic radiopharmaceutical s. We continue to believe that, regardless of their per-day co st, these items are always s upportive of an independent procedure that is the basis for administra tion of the diagnostic radiopharmaceutical. Therefore, our policy of packaging costs fo r these products into an associated APC continues to be the approach best suited for use in a prospective payment system. Further, we note that the OPPS, as a prospective payment system, already includes the costs associated with diagnostic radiopharmaceuticals into the APCs for which the product is ancillary or supportive. We believe that the cost associated with a given product at a given point in time is immaterial because the OPPS, as a prospective payment system with payments based on av erage costs associated with a covered procedure, already takes into account both hi gher and lower input co sts associated with that procedure. We also note that the OPPS, like many of Medicare’s prospective payment systems, has policies in place to provide hospitals with additional outlier payments for certain high-cost cases whose co sts exceed certain thresholds. This systemCMS-1525-FC 641 of outliers already provides hospitals (or, in the case of partial hospitalization services, community mental health centers) with additio nal reimbursement to offset costs that are high relative to the prosp ective payment amount, regardle ss of whether the costs are associated with radiopharmaceuticals or another relatively high-cost element in the patient’s course of care.
Comment: Several commenters requested that CMS provide the public with data detailing how the full costs of diagnostic radiopharmaceuticals and contrast agents are reflected in procedural APC payments. Response : The exact data used to calculat e all of the proposed and final APC assignments and rates, including costs associ ated with diagnostic radiopharmaceuticals and contrast agents, for the CY 2012 OPPS are available for purchase under a CMS data use agreement through the CMS Web site at: http://www.cms.gov/hospitalOutpatientPPS

. This Web site includes information about purchasing the “OPPS Limited Data Set,” wh ich now includes the additional variables previously available only in the OPPS Id entifiable Data Set, including ICD-9-CMS diagnosis codes and revenue code payment am ounts. We typically have not posted the offset amounts by APC until publication of the final rule because we assign services to APCs based on our estimate of their full resource cost, includi ng, but not limited to, packaged diagnostic radiopharmaceuticals. In CY 2009, we adopted a final policy to package payment for all nonpass-through implantable biolog icals that are surgically inserted or implanted (through a surgical incision or a natural or ifice) like our longstanding policy thatCMS-1525-FC 642 packaged payment for all implantable nonbiolog ical devices without pass-through status. We finalized a policy in CY 2010 to pack age payment for nonpass-through implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) into the body, considering them to be devices. For CY 2012, we proposed to continue to package payment for nonpass-through implantable biologicals that ar e surgically inserted or implanted (through a surgical incision or a natural orifice) into the body, considering them to be devices. Three of the products with expiring pass-through status fo r CY 2012 are biologicals that, according to their FDA-approved indications, are only su rgically implanted. These products are described by HCPCS codes C9361 (Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter length), C9362 (Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc), and C9364 (Porcine implant, Permacol, pe r square centimeter). Like the two implantable biologicals with expiring pass-through status in CY 2011 that were discussed in the CY 2011 OPPS/ASC final rule with comment pe riod (75 FR 71948 through 71950), we believe that the three biologicals sp ecified above with expiring pa ss-through status for CY 2012 differ from other biologicals paid under the OPPS in that they specifically function as surgically implanted devices. As a re sult of our proposed packaged payment methodology for nonpass-through implantable bi ologicals, we proposed to package payment for HCPCS codes C9361, C9362, and C 9364 and assign them status indicator “N” for CY 2012. In addition, any new biologica ls without pass-through status that are surgically inserted or implan ted (through a surgical incision or a natural orifice) would beCMS-1525-FC 643 packaged in CY 2012. Moreover, for nonpa ss-through biologicals that may sometimes be used as implantable devices, we continue to instruct hospitals to not bill separately for the HCPCS codes for the products when used as implantable devices . This reporting ensures that the costs of these products that may be, but are not always, used as implanted biologicals are appropriately packaged into payment for the associated implantation procedures. We received no comments re garding our proposed packaging of nonpassthrough implantable biologicals that are surg ically inserted or implanted (through a surgical incision or a natu ral orifice) into the body. After consideration of th e public comments we receive d, we are finalizing our CY 2012 proposals, without modification, to continue to packag e payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents, and implantable biologicals that are surgically inserted or implanted into the body through a surgical incision or a natural orifice, re gardless of their per day costs. Given the inherent function of contrast agents and diagnostic radiopharm aceuticals as ancillary and supportive to the performance of an independent procedure and the similar functions of implantable biologicals and nonbiological device s as integral to and suppor tive of the separately paid surgical procedures in which either may be used, we continue to view the packaging of payment for contrast agents, diagnosti c radiopharmaceuticals, and implantable biologicals as a logical expansion of packag ing payment for drugs and biologicals. In addition, as we initially established in th e CY 2008 OPPS/ASC final rule with comment period (72 FR 66768), we will continue to identify diagnostic radiopharmaceuticals specifically as those Level II HCPCS codes th at include the term “diagnostic” along withCMS-1525-FC 644 a radiopharmaceutical in their long c ode descriptors, and therapeutic radiopharmaceuticals as those Le vel II HCPCS codes that incl ude the term “therapeutic” along with a radiopharmaceutical in their long co de descriptors. We believe that the current descriptors accurately discriminate between those pharmaceuticals which are used to gather information and those which are intended to improve the patient’s medical condition. In addition, any new biological lacking pass-through status th at is surgically inserted or implanted through a surgical incisi on or natural orifice w ould be packaged in CY 2012. For three biologicals with expiring pass-through status a nd which differ from other biologicals paid under the OPPS in that they specifically function as surgically implanted devices, we are fina lizing our proposal to packag e the products described by HCPCS code C9361, C9362, and C9364 and assign them status indictor “N” for this final rule with comment period. We also are finalizing our proposal to p ackage payment for contrast agents into the payment of the associated echocardi ography imaging procedure, regardless of whether the agent met the OPPS drug packaging threshold. We refer readers to section III.D.1.e. of this final rule with comment period for more information on CMS’ final echocardiography payment policy. For mo re information on how we set CY 2012 payment rates for nuclear medicine procedur es in which diagnostic radiopharmaceuticals are used and echocardiography se rvices provided with and wi thout contrast agents, we refer readers to the CY 2010 OPPS/ASC final rule with comment period for a detailedCMS-1525-FC 645 discussion of nuclear medi cine and echocardiography se rvices (74 FR 35269 through 35277).CMS-1525-FC 646 3. Payment for Drugs and Biologicals w ithout Pass-Through Stat us 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” (SCOD) is a covered outpatient drug, as de fined in section 1927(k)(2) of the Act, for which a separate APC has been established a nd that either is a radiopharmaceutical agent or is a drug or biological for which pa yment was made on a pass-through basis on or before December 31, 2002. Under section 1833(t)(14)(B )(ii) of the Act, certain drugs and biologicals are designated as exceptions and are not included in the definition of “specified covered outpatient drugs”.. 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 forCMS-1525-FC 647 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 sections 1842(o) and 1847A of the Act. Section 1833(t)(14)(E ) of the Act provides for an adjustment in OPPS payment rates for overhead and related expenses, such as pharmacy services and handling costs. Section 1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead and related expenses and to make recommendations to the Secretary regarding whether, and if so how, a payment adjustment should be made to compensate hospitals for overhead and related expenses. Section 1833(t) (14)(E)(ii) of the Ac t authorizes the Se cretary to adjust the weights for ambulatory procedure classifica tions for SCODs to take into account the findings of the MedPAC study. In the CY 2006 OPPS proposed rule ( 70 FR 42728 through 42731), we discussed the June 2005 report by MedPAC regardi ng pharmacy overhead costs in HOPDs and summarized the findings of that study:

● Handling costs for drugs, biological s, and radiopharmaceuticals administered in the HOPD are not insignificant;CMS-1525-FC 648

● Little information is available ab out the magnitude of pharmacy overhead costs;

● Hospitals set charges for drugs, biologi cals, and radiopharmaceuticals at levels that reflect their respec tive handling costs; and

● Hospitals vary considerably in their li kelihood of providing se rvices that utilize drugs, biologicals, or radiopharmaceutic als with different handling costs. As a result of these findings, MedP AC developed seven drug categories for pharmacy and nuclear medicine handling cost s based on the estimated level of hospital resources used to prepare the products (70 FR 42729). Associated with these categories were two recommendations for accurate payment of pharmacy overhead under the OPPS. 1. CMS should establish separate, budge t neutral payments to cover the costs hospitals incur for handling separate ly payable drugs, biologicals, and radiopharmaceuticals. 2. CMS should define a set of handling fee APCs that group drugs, biologicals, and radiopharmaceuticals based on attributes of the products that affect handling costs; CMS should instruct hospitals to submit char ges for these APCs and base payment rates for the handling fee APCs on submitted charges reduced to costs. In response to the MedPAC findings, in the CY 2006 OPPS proposed rule (70 FR 42729), we discussed our belief that, because of the varied handling resources required to prepare different forms of drugs , it would be impossible to exclusively and appropriately assign a drug to a certain overhea d category that would apply to all hospital outpatient uses of the drug. Therefore, our CY 2006 OPPS proposed rule included aCMS-1525-FC 649 proposal to establish three distinct Leve l II HCPCS C-codes and three corresponding APCs for drug handling categories to diffe rentiate overhead costs for drugs and biologicals (70 FR 42730). We also propos ed: (1) to combine several overhead categories recommended by MedPAC; (2) to esta blish three drug handl ing categories, as we believed that larger groups would minimize the number of drugs that may fit into more than one category and would lessen any undesirable payment po licy incentives to utilize particular forms of dr ugs or specific preparation met hods; (3) to collect hospital charges for these HCPCS C-codes for 2 years; and (4) to ultimately base payment for the corresponding drug handling APCs on CY 2006 claims data available for the CY 2008
OPPS. In the CY 2006 OPPS final rule with comment period (70 FR 68659 through 68665), we discussed the public comments we received on our proposal regarding pharmacy overhead. The overwhelming majo rity of commenters did not support our proposal regarding pharmacy overhead and urge d us not to finalize this policy, as it would be administratively burdensome for hos pitals to establish charges for HCPCS codes for pharmacy overhead and to report them . Therefore, we did not finalize this proposal for CY 2006. Instead, we established payment for separately payable drugs and biologicals at ASP+6 percent, which we calcu lated by comparing the estimated aggregate cost of separately payable drugs and biologi cals in our claims data to the estimated aggregate ASP dollars for separately payabl e drugs and biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642). Hereinafter, we refer to this methodology as our standard drug payment methodology. We concluded that paymentCMS-1525-FC 650 for drugs and biologicals and pharmacy overh ead at a combined ASP+6 percent rate would serve as an acceptable proxy for the combined acquisition and overhead costs of each of these products. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we finalized our proposed policy to provide a single payment of ASP+6 percent for the hospital’s acquisition cost for the drug or biological and all associated pharmacy overhead and handling costs. The ASP+6 percen t rate that we finalized was higher than the equivalent average ASP-based amount cal culated from claims of ASP+4 percent according to our standard drug payment methodology, but we adopted payment at ASP+6 percent for stability while we continued to examine the issue of the costs of pharmacy overhead in the HOPD and awaited the accumulati on of CY 2006 data as discussed in the CY 2006 OPPS/ASC final rule with comment period. In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to ongoing discussions with interested parties, we proposed to continue our methodology of providing a combined payment rate for dr ug and biological acquisition and pharmacy overhead costs while continuing our efforts to improve the available data. We also proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged and separately payable drugs and biologicals fr om the charge for the drug or biological and report the pharmacy overhead charge on an uncoded revenue code line on the claim. We believed that this would provide us with an avenue for collecting pharmacy handling cost data specific to drugs in order to package the overhead costs of these items into the associated procedures, most likely drug administration servi ces. Similar to the publicCMS-1525-FC 651 response to our CY 2006 pharmacy overhead proposal, the overwhelming majority of commenters did not support our CY 2008 proposal and urged us to not finalize this policy (72 FR 66761). At its September 2007 mee ting, the APC Panel recommended that hospitals not be required to separately report charges for pharmacy overhead and handling and that payment for overhead be in cluded as part of drug payment. The APC Panel also recommended that CMS continue to evaluate alternative methods to standardize the capture of pharmacy overhead costs in a manner that is simple to implement at the organizational level (72 FR 66761). Because of concerns expressed by the APC Panel and public commenters, we did not finalize the proposal to instruct hospita ls to separately report pharmacy overhead charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66763), we finalized a policy of providing payment for separately payable drugs and biologicals and their pharmacy overh ead at ASP+5 percent as a transition from their CY 2007 payment of ASP+ 6 percent to payment based on the equivalent average ASP-based payment rate calculated from hosp ital claims according to our standard drug payment methodology, which was ASP+3 percent for the CY 2008 OPPS/ASC final rule with comment period. Hospitals continued to include charges for pharmacy overhead costs in the line-item charges for the associated drugs reported on claims. For CY 2009, we proposed to pay separa tely payable drugs and biologicals at ASP+4 percent, including both SCODs and other drugs without CY 2009 OPPS pass-through status, based on our standa rd drug payment methodology. We also continued to explore mechanisms to improve th e available data. We proposed to split theCMS-1525-FC 652 “Drugs Charged to Patients” cost center into two cost centers: one for drugs with high pharmacy overhead costs and one for dr ugs with low pharmacy overhead costs (73 FR 41492). We noted that we expected that CCRs from th e proposed new cost centers would be available in 2 to 3 y ears to refine OPPS drug cost estimates by accounting for differential hospital markup pr actices for drugs with high and low overhead costs. After consideration of th e public comments received and the APC Panel recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide payment for separately payable nonpass-through drugs and biologicals based on costs calculated from hospital claims at a 1-year transitional rate of ASP+4 percent, in the context of an equivalent average ASP-based payment rate of ASP+2 percent calculated according to our standard drug payment methodology from the final rule claims data and cost report data. We did not finalize our proposal to split the single standard “Drugs Charged to Patients” cost center into two cost centers largely due to concerns raised by hospitals about the associated admini strative burden. Instead, we indicated in the CY 2009 OPPS/ASC final rule with co mment period (73 FR 68659) that we would continue to explore other potential appr oaches to improve our dr ug cost estimation methodology, thereby increasing payment accuracy for se parately payable drugs and biologicals. In response to our proposals for the CY 2008 and CY 2009 OPPS, a group of pharmacy stakeholders (hereinafter referred to as the pharmacy stakeholders), including some cancer hospitals, some pharmaceutical manufacturers, and some hospital and professional associations, commented that we should pay an acquisition cost of ASP+6 percent for separately payable drugs, should substitute ASP+6 percent for theCMS-1525-FC 653 packaged cost of all packaged drugs and biologicals on procedure claims, and should redistribute the difference between the aggregate estimated packaged drug cost in claims and payment for all drugs, including packag ed drugs at ASP+6 percent, as separate pharmacy overhead payments for separately pa yable drugs. They i ndicated that this approach would preserve the aggregate drug cost observed in the claims data, while significantly increasing payment accuracy for individual drugs and procedures by redistributing drug cost from packaged drugs. Their suggested approach would provide a separate overhead payment for each separately payable drug or biological at one of three different levels, depending on the pharmacy stakeholders’ assessment of the complexity of pharmacy handling associated with each specific drug or biological (73 FR 68651 through 68652). Each separately payable dr ug or biological HC PCS code would be assigned to one of the thr ee overhead categories, and the separate pharmacy overhead payment applicable to the category would be made when each of the separately payable drugs or biologicals was paid. In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we acknowledged the limitations of our data and our av ailability to find a method to improve that data in a way that did not impose unacceptable administra tive burdens on providers. Accepting that charge compression was a reasonable but unverifiable supposition, we proposed to redistribute between one-third and one-half of the estimated overhead cost associated with coded packaged drugs and biologicals w ith an ASP. This proposed redistribution resulted in our proposal to pay for the acquisition and pharmacy overhead costs of separately payable drugs and bi ologicals that did not have pass-through payment status atCMS-1525-FC 654 ASP+4 percent. We calculated estimated ove rhead cost for coded packaged drugs and biologicals by determining the difference betw een the aggregate claims cost for coded packaged drugs and biologicals with an A SP and the ASP dollars (ASP multiplied by the drug’s or biological’s units in the claims data) for those same coded drugs and biologicals. This difference was our estimated overhead cost for coded packaged drugs and biologicals. In the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 35333), we stated that we believed that between one- third and one-half of the estimated $395 million total in pharmacy overhead costs included in our claims data for coded packaged drugs and biologicals with reported ASP data, sp ecifically approximate ly $150 million of those costs, should be attributed to separately paya ble drugs and biologicals. We stated that the $150 million serves as the adjustment for the pharmacy overhead costs of separately payable drugs and biologicals. As a result, we also proposed to re duce the costs of coded drugs and biologicals that are packaged into payment for procedural APCs to offset the $150 million adjustment to payment for separa tely payable drugs and biologicals. In addition, we proposed that any redistribution of pharmacy overhead cost that may arise from the CY 2010 final rule with comment period data would occur only from some drugs and biologicals to othe r drugs and biologic als, thereby maintaining the estimated total cost of drugs and biol ogicals that we calculate ba sed on the charges and costs reported by hospitals on claims and cost repo rts. As a result of this approach, no redistribution of cost would occur from other services to drugs and biologicals or vice

versa.CMS-1525-FC 655 Using our CY 2010 proposed rule da ta, and applying our longstanding methodology for calculating the total cost of se parately payable drugs and biologicals in our claims compared to the ASP dollars fo r the same drugs and biologicals, without applying the proposed overhead cost redistribution, we determined that the estimated aggregate cost of separately payable drugs and biologicals (status indicators “K” and “G”), including acquisition and pharmacy ove rhead costs, was equivalent to ASP-2 percent. Therefore, under the standa rd methodology for establishing payment for separately payable drugs and biologicals, we would have paid for those drugs and biologicals at ASP-2 percent for CY 2010, thei r equivalent average ASP-based payment rate. We also determined that the estimate d aggregate cost of coded packaged drugs and biologicals with an ASP (status indicato r “N”), including acquisition and pharmacy overhead costs, was equivalent to ASP+247 percent. While we had no way of assessing whethe r this current distribution of overhead cost to coded packaged drugs and biologi cals with an ASP was appropriate, we acknowledged in the CY 2010 OPPS/ASC fina l rule with comment period (74 FR 60499 through 60518) that the establis hed method of converting bille d charges to costs had the potential to “compress” the calculated costs to some degree. Furthe r, we recognized that the attribution of pharmacy overhead costs to packaged or separate ly payable drugs and biologicals through our standard drug payment methodology of a combined payment for acquisition and pharmacy overhead costs depends , in part, on the treatment of all drugs and biologicals each year under our annual drug packaging threshold. Changes to the packaging threshold may result in changes to payment for the overhead cost of drugs andCMS-1525-FC 656 biologicals that do not reflect actual changes in hospital pharmacy overhead cost for those products. For these reasons, we stated that we believed some portion, but not all, of the total overhead cost that is associated w ith coded packaged drugs and biologicals (the difference between aggregate cost for those drugs and biologicals on the claims and ASP dollars for the same drugs and biologicals), s hould, at least for CY 2010, be attributed to separately payable drugs and biologi cals based on our standard methodology. We acknowledged that the observed combined payment for acquisition and pharmacy overhead costs of ASP- 2 percent for separately pa yable drugs and biologicals may be too low and ASP+247 percent for coded packaged drugs and biologicals with reported ASP data in the CY 2010 claims data may be too high (74 FR 35327 and 35328). In addition, we stated that we be lieved that the pharmacy stakeholders’ recommendation to set packaged drug and bi ological dollars to ASP+6 percent was inappropriate, given our understanding that an equal allocation of indirect overhead costs among packaged and separately payable drugs and biologicals would lead to a higher observed ASP+X percent than ASP+6 percen t for packaged drugs and biologicals. Further, we indicated that indirect overhead costs that are common to all drugs and biologicals have no relationship to the cost of an individual drug or biological or to the complexity of the handling, preparation, or stor age of that individual drug or biological. Therefore, we indicated that we believed that indirect overhead cost alone for an inexpensive drug or biological which would be packaged could be far in excess of the ASP for that inexpensive product. We also ex plained that layered on these indirect costs are direct costs of staff, supp lies, and equipment that are dire ctly attributable only to theCMS-1525-FC 657 storage, handling, preparation, and distribu tion of drugs and biologicals and which do vary, sometimes considerably, depending upon the drug being furnished. Therefore, we stated that a middle gr ound would represent the most accurate redistribution of pharmacy overhead cost. Our assumption was that approximately one-third to one-half of the total pharmacy ove rhead cost currently a ssociated with coded packaged drugs and biologicals in the CY 2008 claims data offered a more appropriate allocation of drug and biological cost to separately payable drugs and biologicals (74 FR 35328). One third of the $395 million of pharmacy overhead cost associated with packaged drugs and biologicals was $132 million, whereas one-half was $198 million. Within the one-third to one-half parameters, we proposed that reallocating $150 million in drug and biological cost obser ved in the claims data from coded packaged drugs and biologicals with an ASP to separately payable drugs and biologicals for CY 2010 would more appropriately distribute pharmacy overhead cost among packaged and separately payable drugs and bi ologicals. Based on th is redistribution, we proposed a CY 2010 payment rate for separate ly payable drugs and biologicals of ASP+4 percent. Redistributing $150 million represente d a reduction in cost of coded packaged drugs and biologicals with reported ASP data in the CY 2010 proposed rule claims data of 27 percent. We also proposed that any redistribu tion of pharmacy overhead cost that may arise from CY 2010 final rule data would occu r only from some drugs and biologicals to other drugs and biologicals, thereby maintaining the estimated total cost of drugs and biologicals in our claims data (no redistribution of cost woul d occur from other servicesCMS-1525-FC 658 to drugs and biologicals or vice versa) ( 74 FR 35332). We further proposed that the claims data for 340B hospitals be included in the calculation of payment for drugs and biologicals under the CY 2010 OPPS, and that hospitals that participate in the 340B program would be paid the same amounts for se parately payable drugs and biologicals as hospitals that do not part icipate in the 340B program (74 FR 35332 through 35333). Finally, we proposed that, in accordance with our standard drug payment methodology, the estimated payments for separately payabl e drugs and biologicals would be taken into account in the calculation of th e weight scaler that would ap ply to the relative weights for all procedural services (but would not apply to separately payable drugs and biologicals) paid under the OPPS, as required by secti on 1833(t)(14)(H) of the Act (74 FR 35333). In the CY 2010 OPPS final rule with comment period, we adopted a transitional payment rate of ASP+4 percent based on a pharmacy overhead adjustment methodology for CY 2010 that redistributed $200 million from packaged drug and biological cost to separately payable drug cost. We refer read ers to the CY 2010 OPPS/ASC final rule with comment period for a complete discussi on of the pharmacy overhead adjustment methodology (74 FR 60499 through 60518). This $200 million included the proposed $150 million redistribution from the pharmacy overhead cost of coded packaged drugs and biologicals for which an ASP is reported and an additional $50 million dollars from the total uncoded drug and biologi cal cost to separately paya ble drugs and biologicals as a conservative estimate of the pharmacy overhead cost of uncoded packaged drugs and biologicals that should be appropr iately associated with the cost of separately payable drugs and biologicals (74 FR 60517). We belie ved that our proposal to reallocate $150CMS-1525-FC 659 million of costs from coded packaged drugs a nd biologicals, or one-third of the pharmacy overhead costs of these products, based upon th e claims data available for the CY 2010 final rule, to separately payable drugs a nd biologicals was appr opriate (74 FR 60511). We also acknowledged that, to some unknown extent, there are pharmacy overhead costs being attributed to the items and services reported under the pharmacy revenue code without HCPCS codes that are likely pharmacy overhead for separately payable drugs. Therefore, we reallocated $50 million or 8 perc ent of the total cost of uncoded packaged drug and biological cost in order to repres ent the pharmacy overhead cost of uncoded packaged drugs and biologicals that should be appropriately associated with the cost of separately payable drugs and biologicals. This was an intentionally conservative estimate as we could not identify definitive evidence that uncoded packaged drug and biological cost included a pharmacy overhead amount compar able to that of coded packaged drugs and biologicals with an ASP. We stated that we could not know the amount of overhead associated with these drugs without making significant assumptions about the amount of pharmacy overhead cost associated with th e drug and biologicals captured by these uncoded packaged drug costs (74 FR 60511 through 60513). We noted that our final CY 2010 payment policy for separately payable drugs and biologicals at ASP+4 percent fell within the range of ASP-3 percen t (that would have resulted from no pharmacy overhead cost redi stribution from packaged to separately payable drugs and biologicals), to ASP+7 percent (that would have resulted from redistribution of pharmacy overhead cost ba sed on expansive assumptions about the nature of uncoded packaged drug and biol ogical cost). We finalized a policy ofCMS-1525-FC 660 redistributing pharmacy overhead cost from some drugs and biologi cals to other drugs and biologicals, thereby mainta ining the estimated total cost of drugs and biologicals in our claims data (no redistribu tion of cost would occur from other services to drugs and biologicals or vice versa). We also reiterated our commitment to continue in our efforts to refine our analyses. For CY 2011, we continued the CY 2010 pharmacy overhead adjustment methodology (74 FR 60500 through 60512). We determ ined the total cost of separately payable drugs using CY 2009 claims data and compared these costs to the ASP dollars (April 2010 ASP quarterly payment rates multip lied by units for the separately payable drugs and biologicals in the claims data) for the same drugs and biologicals. We determined that the total estimated payment for separately payable drugs and biologicals (status indicators “K” and “G”), including ac quisition and pharmacy overhead costs, was ASP-1 percent, which also would be the A SP-based payment rate under the standard methodology that we established in CY 2006 (75 FR 46275). Additionally, we determined that the total estimated aggregat e cost for packaged drugs and biologicals with a HCPCS code for which manufacturers report ASP data (status indicator “N”), including acquisition and pharmacy overhead costs, was equivalent to ASP+296 percent. Finally, we determined that the total es timated cost for both packaged drugs and biologicals with a HCPCS code and separate ly payable drugs and biologicals (status indicators “N,” “K,” and “G”) for which we also have ASP data, including acquisition and pharmacy overhead costs, was ASP+13 percent. Consistent with our supposition that the combined payment for average acquisition and pharmacy overhead costs under ourCMS-1525-FC 661 standard methodology may understate the co st of separately payable drugs and biologicals and related pharmacy overhead for those drugs and biologicals, we redistributed $150 million from the pharmacy ove rhead cost of coded packaged drugs and biologicals with an ASP and redistributed $50 million from the cost of uncoded packaged drugs and biologicals, for a total redistribu tion of $200 million from costs for coded and uncoded packaged drugs to separately payable drugs and biologicals, with the result that we pay separately paid drugs and biologi cals at ASP+5 percent for CY 2011. The redistribution amount of $150 million in overhead cost from coded packaged drugs and biologicals with an ASP and $50 million in costs from uncoded packaged drugs and biologicals without an ASP we re within the parameters established in the CY 2010 OPPS/ASC final rule. In additi on, as in prior years, we described some of our work to improve our analyses during the preceding year, and reiterated our commitment to continue to refine our drug pricing methodology. b. CY 2012 Payment Policy Section 1833(t)(14)(A)(iii) of the Act, as describe d above, continues to be applicable to determining payments for SCODs for CY 2012. This provision requires that payment for SCODs be equal to the averag e acquisition cost for th e drug for that year as determined by the Secretary, subject to a ny adjustment for overhead costs and taking into account the hospital acqui sition cost survey data co llected by the GAO in CYs 2004 and 2005 and later periodic surveys conducted by th e Secretary as set forth in the statute. If hospital acquisition cost data are not avai lable, section 1833(t)( 14)(A)(iii)(II) of the Act requires that payment be equal to pa yment rates establis hed under the methodologyCMS-1525-FC 662 described in section 1842(o) of the Act, section 1847A of the Act (ASP+6 percent as paid for physician Part B drugs), or section 1847B of the Act (CAP), as the case may be, as calculated and adjusted by the Secretar y as necessary. In accordance with sections 1842(o) and 1847A of the Act, pa yments for most Medicare non-OPPS Part B drugs furnished on or after January 1, 2005, are paid based on the ASP methodology. Medicare Part B drugs generally fall into th ree categories: physician-administered drugs (drugs furnished incident to a physician's se rvice), drugs delivered through DME (drugs furnished under the durable medical equipmen t benefit), and drugs specifically covered by a statutory provision (certa in oral anti-cancer and im munosuppressive drugs). Section 1833(t)(14)(E)(ii) of the Act authorizes, but does not require, the Secretary to adjust APC weights to take into account the 2005 MedPAC report relating to overhead and related expenses, such as pharmacy servi ces and handling costs. As discussed in V.B.3.a. of this final rule with comment period, since CY 2006, we have used ASP data and costs estimated from charges on hospital claims data as a proxy for the sum of the average hospital acquisition cost that the st atute requires for payment of SCODs and the associated pharmacy overhead cost in order to establish a combined payment rate for acquisition cost and pharmacy overhead. Pr ior to CY 2010, we applied this methodology to payment for all separately payable drugs and biologicals without pass-through status, including both SCODs and other drugs and bi ologicals that do not meet the statutory definition of SCODs. For the CY 2010 OPPS, as part of our ongoing efforts to improve the validity of our payments, we revised the standard me thodology to include an adjustment forCMS-1525-FC 663 pharmacy overhead. As explained previousl y, we have acknowledged, and continue to believe, that the established me thod of converting billed char ges to costs had the potential to “compress” the calculated costs to some degree. We recognized that the attribution of pharmacy overhead costs to packaged or se parately payable drugs and biologicals through our standard drug payment methodol ogy of a combined payment for acquisition and pharmacy overhead costs depends, in pa rt, on the treatment of all drugs and biologicals each year under our annual drug packaging threshold. To some unknown extent, we believe that some pharmacy overhead costs attributed to packaged drugs and biologicals may include pharmacy overhead costs for separately payable drugs. For the CY 2012 OPPS/ASC proposed rule, we proposed to continue to use our standard methodology for determining the tota l cost of separately payable drugs and biologicals in our CY 2010 claims data and comparing these costs to the ASP dollars (April 2011 ASP quarterly payment rates multip lied by units for the separately payable drugs and biologicals in the claims data) for the same drugs and biologicals. We determined that the total estimated payment for separately payable drugs and biologicals (status indicators “K” and “G”), including ac quisition and pharmacy overhead costs, is ASP-2 percent, which also would be the A SP-based payment rate under the standard methodology that we established in CY 2006 (75 FR 46275). Additionally, we determined that the total estimated aggregat e cost for packaged drugs and biologicals with a HCPCS code for which manufacturers report ASP data (status indicator “N”), including acquisition and pharmacy overhead costs, is equiva lent to ASP+188 percent. Finally, we determined that the total es timated cost for both packaged drugs andCMS-1525-FC 664 biologicals with a HCPCS code and separate ly payable drugs and biologicals (status indicators “N,” “K,” and “G”) for which we also have ASP data, including acquisition and pharmacy overhead costs, is ASP+11 pe rcent. Table 31 of the proposed rule (76 FR 42260) displays our findings with regard to the percentage of ASP in comparison to the cost for packaged coded drugs and bi ologicals and for separately payable coded drugs and biologicals before applicati on of the proposed overhead adjustment methodology.
Comment : Although many commenters urged CMS to adopt a payment rate for separately payable drugs that was at least equivalent to the ASP+6 payment provided for similar drugs in the physician offices and used the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, commenters were generally supportive of our proposal to not use the st andard methodology for establishing payment in CY 2012. Many commenters stated that th ey believe charge compression, which is the hospital practice of attaching a higher mark- up to charges for low cost supplies and a lower mark-up to charges for higher cost supplies, continues to have a distorting influence on the standard me thodology. Commenters further asserted that payment for SCODs that is based on the standard met hodology of ASP -2 would be far below many hospitals’ acquisition costs for separately pa yable drugs, and may force hospitals to be unable to provide a full range of necessary treatment options. Response : We appreciate the commenters’ support. Our findings, based on final rule claims da ta, with regard to the percentage of ASP in comparison to the cost for pack aged coded drugs and biologicals and forCMS-1525-FC 665 separately payable coded drugs and biologi cals before application of the proposed overhead adjustment methodology is displayed in Table 37 below.

TABLE 37.—CY 2012 FINAL RULE DATA: ASP+X CALCULATION UNDER STANDARD METHODOLOGY

Total ASP Dollars for Drugs and Biologicals in Claims Data (in millions)* Total Cost of Drugs and Biologicals in Claims Data (in millions)** Ratio of Cost to ASP (column 3/column 2) ASP+X Percent

Uncoded Packaged Pharmaceutical Revenue Code Costs Unknown $666*** Unknown Unknown

Coded Packaged Drugs and Biologicals with a reported ASP $251 $734 2.92 ASP+192

Separately Payable Drugs and Biologicals with a reported ASP $4,137 $4,043 0.98 ASP-2

All Coded Drugs and Biologicals with a reported ASP $4,388 $4,777 1.09 ASP+9

*Total July 2011 ASP dollars (ASP multiplied by drug or biologicals units in CY 2010 claims) for drugs and biologicals with a HCPCS code and ASP information. **Total cost in the CY 2010 claims data for drugs and biologicals ***Pharmacy revenue code costs without HCPCS codes.CMS-1525-FC 666 We acknowledge that the combined payment for average acquisition and pharmacy overhead costs under our standard methodology may understate the cost of separately payable drugs and biologicals a nd related pharmacy overhead for those drugs and biologicals. Specificall y, we recognize that payment at ASP-2 percent for such costs may not be sufficient. We also acknowle dge that ASP +188 per cent may overstate the combined acquisition and pharmacy overhead co st of packaged drugs and biologicals. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42260 through 42262), we proposed to continue the CY 2010 and CY 2011 overhead adjustment methodology, as first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60501 through 60517), which redistributes $200 million in cost from packaged drugs with an ASP and uncoded packaged drugs. For CY 2012, we proposed to continue to make an overhead adjustment for another year because we believed it was appr opriate to account for inflation that has occurred since the overhead redistribu tion amount of $200 million was applied in CY 2011. Therefore, we proposed to apply an inflation allowance to account for inflation and changes in the prices of pharmaceutical s in the overall econom y. We proposed to adjust the overhead redistribution amount of $200 million using the PPI for Pharmaceuticals for Human Use. The PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistic s (BLS) series code WPUSI07003), provided through CMS’ Office of the Actuary (OACT), is a price series that re flects price changes associated with the average mix of all pharm aceuticals in the overall economy. We refer to this series generally as the PPI for Prescrip tion Drugs. We believe th at this price seriesCMS-1525-FC 667 is appropriate to use to update the overh ead redistribution amount because the PPI for Prescription Drugs is publicly available a nd regularly published and because we have successfully utilized the PPI fo r Prescription Drugs for the pa st 5 years to update the drug packaging threshold as descri bed in section V.B.2.a. of th is final rule with comment period. In order to apply the infla tion allowance to the overh ead redistribution amount for CY 2012, we used the most recent forecast of yearly index levels for the PPI for Prescription Drugs to calculate an upda ted overhead redistribution amount. After adjusting the $200 million overhead redistributi on amount for inflation using the PPI for Prescription Drugs, we determined that $161 m illion would need to be redistributed from coded packaged drugs and biologicals with reported ASP data and $54 million would need to be redistributed from the cost of uncoded packaged drugs and biologicals without an ASP to separately payable drugs and biol ogicals. The proposed redistribution amount of $161 million in overhead cost from coded pack aged drugs and biologicals is within the redistribution parameters established in th e CY 2010 OPPS/ASC final rule with comment period of roughly one-third to one-half of overhead cost in coded packaged drugs and biologicals. The total proposed redistri bution amount from both coded and uncoded packaged drugs and biologicals to separately paid drugs and biologicals would therefore be $215 million. Having determined to redistribute over head, in the proposed rule, we also continued to believe that the methodol ogy to redistribute a portion of drug overhead cost from packaged coded and uncoded drugs and bi ologicals to separate ly payable drugs andCMS-1525-FC 668 biologicals while keeping the to tal cost of drugs and biolog icals in the claims data constant continued to be a ppropriate for the reasons set forth in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60501 through 60517). Therefore, for CY 2012, we proposed to redistribute a total overhead redistribution amount, adjusted for inflation, of $215 million from coded and uncoded packag ed drugs and biologicals to separately payable drugs and biologicals. In the CY 2010 OPPS/ASC final rule w ith comment period, we reallocated $150 million in overhead cost from coded packag ed drugs and biologicals with an ASP to separately payable drugs and biologicals wi th an ASP, or one-third of the pharmacy overhead cost of these products based upon th e claims data available for the CY 2010 final rule. In addition, we noted that some of the cost associated with uncoded packaged drugs and biologicals was appropriate to redi stribute to separately payable drugs and biologicals. Therefore, we ma de a conservative estimate, as compared with the case of coded packaged drugs and biologicals with an ASP for which we had a specific pharmacy overhead cost estimate in relationship to their known ASPs, and reallocated $50 million, or 8 percent of the total cost of uncoded packaged drugs and biologicals with no ASP. We made the assumption that whatever pharmacy overhead cost inappropriately associated with uncoded packaged drugs and bi ologicals would not be less than 8 percent of total uncoded drugs and biologicals cost. In the CY 2012 OPPS/ASC proposed rule , we noted that continuing to redistribute $200 million (or $215 million with the adjustment for inflation) falls within the parameters originally established in the CY 2010 OPPS/ASC final rule with commentCMS-1525-FC 669 period. A redistribution amount of $161 million in overhead cost from coded packaged drugs and biologicals with an ASP or approxi mately 35 percent falls within one-third to one-half of the estimated pharmacy overhead cost. In addition, we noted that a redistribution amount of $54 million in overhea d cost from uncoded packaged drugs and biologicals, or approximately 11 percent, is not less than 8 percent of the total cost of uncoded packaged drugs and biologicals. Therefore, our propos al to redistribute $215 million is consistent with the overhead adjustment methodology first implemented in CY 2010. We continue to believe that a middle ground of approximately one-third to one-half of the total pharmacy overhead cost currently associated with coded packaged drugs and biologicals in the CY 2010 claims data represents the most accurate redistribution of pharmacy overhead cost. In the CY 2012 OPPS/ASC proposed rule, we estimated the overhead cost for coded packaged drugs to be $544 million ($705 million in total cost for coded packaged drugs and biologicals with a reported A SP, less $161 million in total ASP dollars for coded packaged drugs and biologicals with a reported ASP). As we did in CY 2010 and CY 2011, we proposed for CY 2012 that any re distribution of pharmacy overhead cost would occur only among drugs and biologi cals in our claims data, and that no redistribution of cost would occur from other services to drugs and biologicals or vice versa. We believe that redistributing $215 million from packaged to separately payable drugs and biologicals, which includes an adju stment for inflation, is an appropriate redistribution of pharmacy overhead costs to address any charge compression in the standard methodology. We indicated that this would result in a proposed CY 2012CMS-1525-FC 670 payment rate for separately payable drugs a nd biologicals of ASP+4 percent. We noted that, in past years, the proposed ASP+X amount decreased by at least 1 percentage point when we updated the ASP data, claims data, and cost report data between the proposed rule and the final rule with comment period. As indicated in Table 31 of the proposed rule (76 FR 42260), if we were to propose to establish payment for separate ly payable drugs and biologicals under the standard methodology established in CY 2006 without applying a pharmacy overhead adjustment, we would have had to propose to pay for separately payable drugs and biologicals at ASP-2 percent. However, b ecause we are concerned about the possibility of underpaying for separately payable drugs and biologicals, we be lieve that a pharmacy overhead adjustment using a redistributi on methodology for determining the amount of payment for drugs and biologicals, as we di d for CY 2011, is appropriate for CY 2012. We acknowledge that the observed ASP-2 per cent may reflect some amount of charge compression and variability attributable to the choice of a packaging threshold. We displayed the effect of this proposed adju stment payment methodology in Table 32 of the proposed rule (76 FR 42262).
Comment : The majority of commenters ur ged CMS to adopt an ASP+X amount that is higher than ASP+4 for CY 2012. Many commenters stated that CMS should simply adopt the default payment rate of A SP+6 percent for CY 2012, rather than use the redistribution methodology proposed in the CY 2012 OPPS/ ASC proposed rule. Noting that section 1833(t)(14)(A) of the Act requires CMS to pay for separately payable drugs at a rate that is equal to the average acquisi tion cost for the drug for a year, as determinedCMS-1525-FC 671 by the GAO or CMS surveys of hospital acquisiti on cost, and that the most recent survey available is “outdated” because it wa s performed in CY 2004 by the GAO, the commenters urged CMS to pay for separately pa yable drugs at ASP+6 percent or the rate applicable in the physician’s office setting. The commenters stated that CMS has the authority to pay for separately payable drugs at ASP+6 percent unde r the statute. Many of these commenters suggested that CM S discontinue the use of the standard methodology and the overhead redistributi on methodology, and instead use the default payment rate of ASP+6 percent, as is given by Congress in statute. Response : While the commenters are correct th at the statute provides for the use of the methodology described in section 1842( o), section 1847A, or section 1847B of the Act, as the case may be, as calculated a nd adjusted by the Secretary as necessary, payment under these provisions for a SCOD is required only when the average hospital acquisition cost for the drug for that year are unavailable (which at the option of the Secretary may vary by hospital group (as de fined by the Secretary based on the volume of covered OPD services or other relevant characteristics)), as determined by the Secretary taking into account the hospita l acquisition cost survey data under subparagraph (D). We continue to believe that we have established both our hospital claims data and ASP data as an appropriate proxy for average hospital acquisition cost, taking the GAO survey information into accoun t for the base year (70 FR 68641). Many of the drugs and biologicals covered under the OPPS are provided a majority of the time in the hospital setting, and we be lieve that the ASP information we collect is an adequate proxy for hospital acquisition cost. Further, the commenters have not disputed theCMS-1525-FC 672 accuracy of the total drug and biological co st estimated in our claims data, only the estimated cost of separately payable drugs a nd biologicals. We continue to believe that average sales prices for separately paid drugs and biologicals represent a generally appropriate source of hospital av erage acquisition cost for drug s and biologicals. As we stated in the CY 2006 OPPS final rule, we intend for the quarterly updates of the ASPbased payment rates for separately paid drugs and biologicals to function as the surveys of hospital acquisition costs that are requi red by section 1833(t)(14)(D)(ii) of the Act (70 FR 68641). Prices calculated using the ASP methodology account for sales to all purchasers, and are net of most discounts, nominal sales, and other sales that are otherwise exempt from the Medi caid Best Price calculations. Given that purchase price generally equals sales price fo r any transaction, we believe th at the ASP is an accurate proxy for hospitals’ average acquisition cost fo r separately paid drugs and biologicals. Therefore, we disagree that we are not complying with the statute by not performing a survey and not paying at the physician’s office rate. For the reasons explained above, we do not believe that it is appropriate at this time to provide payment at an amount other than average acquisition cost based on the dr ug and biological costs observed in hospital claims data and pricing information obser ved in ASP data, as adjusted with a redistribution for pharmacy overhead.
Comment : One commenter stated that th e statute requires that CMS make payment for SCODs at ASP+6 percent, citing th at cost data derived from claims data cannot accurately be said to equal average acquisition cost. The commenter noted that CMS’ methodology in using claims data redu ced by CCRs to derive proxies for hospitalCMS-1525-FC 673 costs is a methodology dependent on assumptions about the relationship between charges and costs and, therefore, does not typify actua l hospital costs for drugs and biologicals. These cost data, the commenter argued, ther efore cannot equal average acquisition cost for drugs and biologicals. Response : As we discussed in the response to the previous comment, we believe that ASP is an appropriate proxy for the acq uisition cost of drugs. With respect to establishing the total estimated cost of dr ugs and biologicals, including both pharmacy overhead and acquisition cost of drugs and biol ogicals, we use hospital charges and cost report data. We believe that our claims da ta and cost report data provide the best estimate of the national aggregate total cost of drugs and biologicals. We do not believe that this methodology for estimating the total cost of drugs and biologicals, including pharmacy overhead cost, is based on assumptions about costs and charges, but the actual relationship between costs and charges for the same hospital for the same services. We estimate costs from charges submitted on claims for payment, and cost and charge information from cost report data that are certified to be correct by the hospital. We note that we view the ASP data, not the cost da ta, to be the appropriate proxy for hospital acquisition cost for drugs and biologicals, without pharmacy overhead costs, while the cost of drugs and biologicals that we estimate fr om claims and cost report data is the only source of the total cost of drugs and biol ogicals, that includes both pharmacy overhead and acquisition cost.
Comment : MedPAC remained concerned a bout our policy of setting payment rates for drugs and biologicals as a percen tage of ASP because, as MedPAC stated,CMS-1525-FC 674 pharmacy overhead, as a percentage of total cost s, varies widely across individual drugs. MedPAC previously had recommended that CMS collect data on hospitals’ pharmacy overhead costs separately from drug acquisition co sts and that these data could be used to create separate payment to hospitals for pharmacy overhead and drug acquisition costs. Response : While we acknowledge that pharm acy overhead varies by the drug to which it applies, we believe that as long as payment is distributed among hospitals in a manner that, on average, reflects relative co sts of drugs and biologicals they furnish, including pharmacy overhead, the goals of the OPPS are met as it is a system of averages. With regard to the comment that CMS s hould collect data on hospitals’ pharmacy overhead costs separately from drug acquisition co sts and that these data could be used to create separate payment to hospitals for pha rmacy overhead and drug acquisition costs, as we discussed in detail above, we propos ed to create HCPCS codes for pharmacy overhead services so that hospitals could char ge for these services and provide us a basis for making separate payments for pharmacy overhead. However, hospitals strongly objected and provided convinci ng arguments that to do so would impose an enormous burden on them and on other payers that woul d not provide an offsetting benefit. We believe that hospitals would fi nd any option requiring them to id entify the cost associated with the overhead component of a drug or biol ogical or a class of drugs or biologicals burdensome and imprecise.
Comment : A few commenters expressed concern that when CMS applies a single CCR to adjust charges to costs for drugs a nd biologicals, charge compression leads to misallocation of pharmacy overhead costs asso ciated with high and low cost drugs andCMS-1525-FC 675 biologicals during ratesetting. The commenters noted that hospitals disproportionately mark up their charges for low cost drugs and biologicals to account for pharmacy overhead costs. Therefore, some commenters suggested using the costs of both packaged drugs and separately payable drugs when cal culating the equivalent average ASP-based payment amount for separately payable drugs. They argued that this would provide a more accurate ASP-based payment amount fo r separately payable drugs. As an alternative, the commenters recommended that CMS eliminate the drug packaging threshold and provide separate payment fo r all Part B drugs under the OPPS at an ASP+X percent amount calculated from the co st for all drugs with HCPCS codes. Several commenters objected to the inclusi on of data from hospitals that receive Federal discounts on drug prices under th e 340B program in the ASP calculation for separately payable drugs and biologicals. The commenters pointed out that hospital participation in the 340B program had grown s ubstantially over the past few years, and will further increase due to the provisions in the Affordable Care Act. The commenters believed that the costs from these hospitals now constituted a signi ficant proportion of hospital drug costs on CY 2010 OPPS claims. The commenters stated that including 340B hospital claims data when comparing ag gregate hospital costs based on claims data to ASP rates contributed to an artificially low equivalent average ASP-based payment rate because ASP data specifically ex clude drug sales under the 340B program. In addition, MedPAC encouraged CMS to exclude data from 340B hospitals from the ratesetting. MedPAC stat ed that analysis indicates that exclusion of the 340B hospitals would increase CMS’ estimates of th e cost of separately paid drugs by aboutCMS-1525-FC 676 3.5 percent above the estimate obtained when th e 340B hospital claims data are included in the ratesetting ca lculations and that excluding the 340B hospital claims data would result in payment rates for separately paid drugs that more accurately reflect the costs incurred by other hospitals. Response : In proposing to continue our CY 2010 overhead adjustment methodology for CY 2012, we attempted to ad dress the issue of charge compression by redistributing some portion of the estimate d overhead cost equivalent to the CY 2011 redistribution amount indexed for the increase in the PPI for Prescription Drugs for coded packaged drugs ($161 million), and a conser vative estimate of ove rhead cost in the uncoded packaged drug cost ($54 million). Furt her, we have made several proposals in the past to more precisely identify pharm acy overhead costs and to address charge compression in the pharmacy revenue center, wh ich were not finalized due to objections raised in public comments. As we noted in our discussion of the MedPAC comment above, for the CY 2006 OPPS, we proposed to establish three dist inct Level II HCPCS C-codes and three corresponding APCs for dr ug handling categories to differentiate overhead costs for drugs and biological s (70 FR 42730). In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), we proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged and separate ly payable drugs and biologicals from the charge for the drug or biological and report the pharmacy overhead charge on an uncoded revenue code line on the claim. We believed th at this would provide us with an avenue for collecting pharmacy handling cost data specific to drugs in order to package the overhead costs of these items into the associated procedures, most likely drugCMS-1525-FC 677 administration services. However, we di d not finalize these pr oposals due to strong objection from hospitals. For CY 2009, we pr oposed to split the “Drugs Charged to Patients” cost center into two cost centers: one for drugs with high pharmacy overhead costs and one for drugs with low pharmacy ove rhead costs (73 FR 41492). We noted that we expected that CCRs from the proposed new cost centers would be available in 2 to 3 years to refine OPPS drug cost estimates by accounting for differential hospital markup practices for drugs with high and low overhead costs. However, we did not finalize any of these proposals due to concerns from the hospital community that these proposals would create an overwhelming burden on hospita ls and staff. By proposing to continue our CY 2010 overhead adjustment methodol ogy, we were once again attempting to address the issue of charge compression wit hout requiring any change s to current hospital reporting practices. It has been our policy since CY 2006 to only use separately payable drugs and biologicals in the calculati on of the equivalent average ASP-based payment amount under the OPPS. We do not include packaged drugs and biologicals in this standard analysis because cost data for these item s are already accounted for within the APC ratesetting process through the median cost calculation methodology discussed in section II.A. of this final rule with comment peri od. To include the costs of coded packaged drugs and biologicals in both our APC ratese tting process (for associated procedures present on the same claim) and in our rate setting process to esta blish an equivalent average ASP-based payment amount for separa tely payable drugs a nd biologicals would give these data disproportionate emphasis in the OPPS by skewing our analyses, as theCMS-1525-FC 678 costs of these packaged items would be, in effect, counted twice. Accordingly, we are not adopting the suggestion from commenters that we include all packaged and separately payable drugs and biologicals when establishi ng an equivalent average ASP-based rate to provide payment for the hospital acquisition and pharmacy handling costs of drugs and biologicals. However, we remind commenters that because the costs of packaged drugs and biologicals, including their pharmacy overh ead costs, are packaged into the payment for the procedures in which they are admi nistered, the OPPS provides payment for both the drugs and the associated pharmacy overhead costs through the a pplicable procedural APC payments. Furthermore, we disagree with the comm enters who recommended that we should pay separately for all drugs and biologicals w ith HCPCS codes. We continue to believe that packaging is a fundamental component of a prospective payment system that contributes to important flexib ility and efficiency in the de livery of high quality hospital outpatient services. Therefore, we believe it is appropriate to maintain a modest drug packaging threshold that packages the costs of inexpensive drugs into payment for the associated procedures. We also note that hosp itals have been particularly sensitive to any increased administrative burden, and we are aw are that the burden of separate reporting for a multitude of very low cost packaged drugs is significant. With respect to the comment that we shoul d not include data from hospitals that receive discounts on outpatient drug prices und er the 340B program in our estimation of the total cost of separately paid drugs and biologicals and pharmacy overhead, as we stated in the CY 2010 OPPS/AS C final rule with comment period (74 FR 60517) and theCMS-1525-FC 679 CY 2011 OPPS/ASC final rule with comment period (75 FR 71963), we continue to believe that excluding data from hospitals th at participate in the 340B program from our ASP+X calculation, and paying those hospitals at that derived payment amount, would inappropriately redistribute payment to dr ugs and biologicals from payment for other services under the OPPS. The ASP-equivale nt cost of drugs under the OPPS that would be calculated only from claims data for hos pitals that do not participate in the 340B program, would likely be higher th an the cost of all drugs fr om our aggregate claims from all hospitals. To set drug payment rates for a ll hospitals based on a subset of hospital cost data, determined only from claims data from hos pitals that do not participate in the 340B program would increase the final APC payment weights for drugs in a manner that does not reflect the drug costs of a ll hospitals, although all hospita ls, including 340B hospitals, would be paid at these rates for drugs. Furthermore, as a consequence of the statutory requirement for budget neutrality, increasing the payment weights for drugs by excluding 340B hospital claims would reduce the relative payment weight for other services in a manner that does not reflect the procedural cost s of all hospitals relative to the drug costs of all hospitals, thereby distor ting the relativity of payment weights for services based on hospital costs. Many commenters on the CY 2009 OPPS/ASC final rule with comment period were generally opposed to differentia l payment for hospitals based on their 340B participation status, and we do not believe it would be appropriate to exclude claims from this subset of hospitals in the context of a CY 2012 dr ug and biological payment policy that is based on average acqui sition cost and pays all hosp itals at the same rate for separately payable drugs and biologicals.CMS-1525-FC 680
Comment : One commenter requested that CMS provide more information regarding the outcomes of the analysis refe renced in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71962) finding that matching the ASP data with the time of the cost report would remove a downward bias in the standard methodology, but that the upward bias of later charges from claims gene rally offsets the increases in prices in a more recent ASP file. The commenter further stated that they believed the use of later ASP data in a final rule may be directly at tributable to the tendency of the relationship between ASP and total costs of separately pa yable drugs to decline by 1 percentage point in the final rule. Response : We are uncertain what additional information the commenters are seeking regarding our finding in the CY 2011 OPPS/ASC final rule with comment period that the slightly higher estimated cost crea ted by using a CCR from the year prior to the claim year generally offsets the increases in prices in a more recent ASP file (75 FR 71962). However, as described be low, in our analysis of the ASP+X methodology for this CY 2012 final rule with comment period, we have found that a primary cause in the decline of the met hodologically-derived A SP+X percent is the inclusion of a whole year’s data for the final rule wh ile keeping the drug overhead redistribution amount constant, and not the use of later ASP data, as the commenter suggested. Had we finalized our pro posed redistribution methodology without modification in CY 2012, this would have agai n yielded a 1 percent decline, from ASP+4 to ASP+3, in the final CY 2012 ASP+X percent.CMS-1525-FC 681
Comment : A few commenters recommended th at CMS require hospitals to bill all drugs with HCPCS codes under revenue c ode 0636 in order to improve its data on packaged drugs. The commenter also recommen ded that CMS require hospitals to report J3490 (Unclassified drugs) for drugs without a HCPCS code. One commenter asserted that requiring that hospitals take these a dditional steps for packaged drugs could occur with minimal additional administrative burde n to hospitals since hospitals are now required to report national drug codes (NDCs) to State Medicaid programs. Other commenters asked that CMS re quire mandatory reporting of all drugs using either specific HCPCS codes or J3490, and that CM S should leave the c hoice of the revenue code that must be reported on the line to the discretion of the hospital. Response : We did not propose to require hos pitals to report all drugs and biologicals using HCPCS codes a nd report drugs and biologicals that do not have specific HCPCS codes using HCPCS code J3490 for th e CY 2012 OPPS. Therefore, we do not accept the commenters’ recommendation that CMS require these products to be reported. We do not believe that it would be appropriate to impose such a requirement without first proposing it and considering the comments of the public. However, we continue to believe that OPPS ratesetting is most accurate when hospitals report charges for all items and se rvices that have HCPCS codes using those HCPCS codes, regardless of whether payment fo r the items and services is packaged. As we state in this final rule with comment period, it is our standard ratesetting methodology to rely on hospital cost report and charge information as it is reported to us through the claims data. We continue to believe that mo re complete data from hospitals identifyingCMS-1525-FC 682 the specific drugs that were provided during an episode of care will improve payment accuracy for separately payable drugs in the fu ture. Therefore, we continue to encourage hospitals to change their reporting practices if they are not already reporting HCPCS codes for all drugs and biologicals furnished, where specific HCPCS codes are available for those drugs and biologicals.
Comment : Several commenters character ized our proposed redistribution methodology as arbitrary in nature, in part because CMS does not truly know the amount of overhead to move for the proposed overhead adjustment. A few commenters generally agreed with CMS’ proposal to redistribute pharmacy overhead cost from packaged drugs and biologicals to separately payable dr ugs and biologicals. However, several commenters expressed concern that, unde r this methodology, the projected CY 2012 ASP+X amount of ASP+4 percent may decline to ASP+3 percent in the final rule with comment period. The commenters reasserted their belief that payment at less than ASP+6 percent is insufficient for payment fo r separately payable drugs and biologicals. Several commenters supported the payment of ASP+6 percent for separately paid drugs and biologicals and the redistributi on methodology on a whole, but did not support the proposed redistribution amount of $215 milli on from packaged drugs and biologicals ($161 million from coded packaged drugs and biologicals and $54 million from uncoded packaged drugs and biologicals). A majority of commenters recommended that CMS increase the amount redistributed from coded and uncoded packaged drugs and biologicals to separately paya ble drugs and biologicals. A few of these commenters stated that a larger portion of the overhead costs should be reallocated from uncodedCMS-1525-FC 683 packaged drugs and biologicals to separately payable drugs and bi ologicals, noting that coded and uncoded drugs and biologicals ha ve similar overall charge mark-up and, therefore, warrant a similar redistribution of costs. Several commenters recommended that an equal or close to equal amount of cost should be redistributed from packaged coded and uncoded drug and biological cost to separately payable dr ugs and biologicals. Response : We are not convinced by the commenters that we should pay separately paid drugs and biologicals at ASP+6 percent or higher for CY 2012. We disagree with commenters’ assertions that payment at less than ASP+6 percent would be insufficient to adequately pay for the costs of separately paid drugs and biologicals because our review of claims and cost report data provides no evidence that supports that payment at less than ASP+6 percent is insuffi cient to pay adequately for the costs of separately paid drugs and biologicals. To the contrary, the util ization of drugs and biologicals continues to incr ease. In addition, we note that payment for pharmacy overhead is not only paid through paymen t for specifically identified drugs and biologicals, but pharmacy overhead payment al so is packaged into payment for the procedure in which the cost of packaged drugs and biologicals is included. When a separately paid drug or biological is furnis hed during a procedure, pharmacy overhead is being paid both through the ASP+X percent payment for the separately paid drug and biological and, to some extent, in the pa yment for the procedure, because the APC payment for any procedure includes the cost of packaged drugs a nd the overhead cost associated with those packag ed drugs and biologicals.CMS-1525-FC 684 Although several commenters recommended that CMS reallocate a larger portion of the estimated pharmacy overhead costs from packaged drugs to separately payable drugs for CY 2012 under the overhead adju stment methodology, and other commenters argued that we should redistri bute an equal or nearly equal amount of cost from both packaged drugs and biologicals with HCPCS codes and packaged drugs and biologicals without HCPCS codes, for the reasons set fort h below and consistent with our rationale outlined in the CY 2010 OPPS/ASC final rule with public comment period (74 FR 60511 through 60512) and the CY 2011 OPPS/ASC final rule with comment period (75 FR 71955), we do not believe that we s hould redistribute a hi gher portion of drug cost from coded packaged drugs and biol ogicals, nor can we assume that uncoded packaged drugs and biologicals have the sa me or higher pharmacy overhead costs as coded packaged drugs and biologicals. Theref ore, we do not believe that we can treat them comparably for purposes of estimating overhead. With regard to redistributing more from uncoded packaged drugs and biologica ls, first, as indicated in the preamble to the CY 2011 OPPS/ASC proposed rule (75 FR 46277 through 46278), conversations with stakeholders and hospitals have suggested that hospitals do not always report HCPCS codes for drugs for a variety of reasons. A key premise of the pharmacy overhead adjustment redistribution met hodology is our assessment of the amount of drug cost in the claims data above aggregate ASP avai lable as “overhead” for redistribution. Knowing the specific HCPCS codes for packaged drugs and their associated ASP allows us to assess the difference betw een the aggregate ASP and claims cost for packaged drugs and to assess the intensity of pharmacy ove rhead associated with these drugs. TheCMS-1525-FC 685 inability to know which drugs are captur ed by uncoded drug charges on a claim is challenging because we cannot know the hospita ls’ charges for the drug, which include overhead costs, or what the overhead comple xity may be. Therefore, we cannot be certain that the amount of uncoded pharmacy ove rhead costs is as high as the public has suggested or that hospitals mark up these uncoded drugs and biologicals in the same way as packaged drugs and biologicals with HCPC S codes. Second, we continue to believe that the information supplied to us by comment ers urging us to redist ribute a greater (or equivalent) fraction of costs for uncoded packag ed drugs and biologicals is insufficient to enable us to isolate the porti on of the uncoded packaged drug and biological cost that is pharmacy overhead cost. In order to isolat e the portion of uncoded packaged drug and biological cost that is pharmacy overhead cost , we believe that we would need more drug specific information reported to us by hos pitals, either throu gh more reporting of packaged drugs on claims or through more gra nular cost centers on the cost report. In addition, we note that in our preparation for the CY 2011 rulemaking cycle, and as indicated in the CY 2011 OPPS/AS C proposed rule, we have al so evaluated claims data in an effort to assess how much uncoded pack aged drugs resemble coded packaged drugs (75 FR 46278). We found that most uncoded pa ckaged drug costs appear with surgical services and that most coded packaged drug co sts appear with medical services. In light of this information, we are not confident th at the drugs captured by uncoded drug costs are the same drugs captured by the coded packaged drug co st. Therefore, we do not agree that we can assume that they are th e same drugs, with comparable overhead and handling costs. Without being able to calcula te an ASP for these drugs and without beingCMS-1525-FC 686 able to gauge the magnitude of the overhead co mplexity associated with these drugs, we do not believe we should assume the same or a greater proportional overhead is appropriate for redistribution. Third, we also disagree with the commenter’s assertions that pharmacy services and overhead costs fo r all uncoded packaged drugs are similar to the costs associated with coded packaged drugs and are a sufficient basis for redistributing equal or close to equal amount of dollars from uncoded packaged drugs as from coded packaged drugs to separately paid drugs under this overhead adjustment policy. This would be contrary to findings from MedPAC in Chapter 6 of its June 2005 Report to Congress that linked overhead to the seven complex ity categories of delivery; this report can be viewed on the MedPAC Web site at: http://www.medpac.gov/publications%5Ccongr essional_reports%5C June05_ch6.pdf. As we have stated elsewhere, we remain committe d to using hospital data as reported to us by hospitals to set OPPS payment rates. Theref ore, we continue to believe that it would be inappropriate to assume that the cost s reported under uncoded pharmacy revenue code lines are for the same drugs and biologicals w ith the same ASPs, as the costs of packaged drugs and biologicals reported with HCPCS codes. Therefore, for the reasons set forth above, we continue to believe that we shoul d not make broad assumptions that the same overall charge markup exists for both code d and uncoded packaged drugs or that we should redistribute a similar or greater am ount of cost from both coded and uncoded packaged cost to separately payable drugs and biologicals. We also do not agree that our pharmacy overhead adjustment methodology is arbitrary. The basis for the proposed and final CY 2012 pharmacy overhead adjustmentCMS-1525-FC 687 methodology is the same as our CY 2011 and 2010 final rules, but with one refinement for this final rule with comment period to enhance the intra-rulemaking stability of the ASP+X amount, as described be low. As we stated in our CY 2010 proposed rule, we remain concerned that the ASP value deri ved using the standard methodology has the potential to “compress” costs for relatively high-cost products, including SCODs, due to hospital charging practices, and thus may unders tate the cost of separately payable drugs and biologicals and related pharmacy overhead fo r those drugs and biologicals. We cited the relatively low CY 2010 ASP value of ASP-2 for separately covered drugs and biologicals and the relatively high ASP va lue of ASP+247 for packaged drugs and biologicals as evidence of this distortion. We further stated that we believe that, according industry stakeholders and MedP AC, approximately $150 million of handling and pharmacy overhead cost for coded packaged drugs, and approximately $50 million of costs attributed to pharmacy overhead cost fo r uncoded packaged drugs were appropriate to redistribute to separately payable drugs in CY 2010. We believed, and continue to believe, that between approximately one-t hird and one-half of the overhead cost associated with coded packaged drugs could be attributable to charge compression due to our cost estimation methodology an d our choice of a packaging threshold. In addition, redistributing $50 million of the total cost a ssociated with uncoded packaged drugs and biologicals to separately payabl e drugs and biologicals falls in the approximate 8 percent range of total uncoded drug and biological costs using CY 2009 claims and the most recently available cost report data. This is a conservative estimate as we remain unwilling to make sweeping assumptions that uncoded packaged drugs and biologicalsCMS-1525-FC 688 included a pharmacy overhead amount comparable to those of coded packaged drugs and biologicals with an ASP. Us ing our standard methodology to calculate ASP values in the CY 2011 OPPS/ASC proposed rule, we again found a relatively low ASP value for separately payable drugs and biologicals (A SP +0), and a relatively high ASP value for packaged drugs and biologicals (ASP+283). T hus, in the CY 2011 OPPS final rule with comment period (75 FR71953 through 71967), we again finalized our proposed redistribution methodology, and redistribute d $200 million in pharmacy overhead costs from packaged to separately payable drugs and biologicals. We note that our proposed CY 2012 policy of redistributing $161 million in overhead from coded packaged drugs and biologicals with an ASP, or 35 percent, falls within th e one-third to one-half of the estimated pharmacy overhead cost in code d packaged drugs and biologicals. The CY 2010 policy for redistributing $150 m illion from coded packaged drugs and biologicals to separately pa yable drugs and biologicals was based on our assessments using both industry and MedPAC data ( 74 FR 60505 through 60507). We believed and continue to believe that be tween approximately one-third and one-half of the overhead cost in coded packaged drugs could be attributable to char ge compression due to our cost estimation methodology and our choi ce of a packaging threshold. The proposed CY 2012 policy of redistribut ing $53 million of the total cost of uncoded packaged drugs and biologicals to se parately payable drugs and biologicals, or approximately 11 percent in overhead cost fr om uncoded packaged drugs and biologicals, falls into the parameter of not less than 8 per cent of cost associated with these items, as discussed in the CY 2010 OPPS/ ASC final rule with commen t period. Further, as weCMS-1525-FC 689 indicated in the CY 2010 OPPS/ASC final ru le with comment period, the proportion of uncoded packaged drug cost that is redistribu ted is a conservative estimate, as compared to the case of coded packaged drugs and biologicals with an ASP and for which we have a specific pharmacy overhead cost estimate in relationship to their known ASPs. As discussed in the CY 2010 OPPS/ ASC final rule with comm ent period (74 FR 60511), we remain unwilling to make sweeping assump tions that uncoded packaged drug and biological cost included a pharmacy overhead amount comparable to those of coded packaged drugs and biologicals with an ASP. We continue to be confident that a conservative estimate of approximately 11 pe rcent (or $54 million fo r redistribution in the proposed rule) from the cost of uncoded p ackaged drugs and biologicals to separately payable drugs and biologicals is an appropriate amount in li ght of our uncertainty about the relationship between ASP and pharmacy overhead costs for the uncoded drugs and biologicals. We also do not believe our re distribution policy is arbitrary because we finalized our CY 2010 policy for an overhead adjustment methodology in response to public commenter consensus that this approach was an appropriate avenue for addressing charge compression in the drug and biological payment rates fo r separately paid drugs. We believe that the consensus among co mmenters regarding the necessity of a redistribution methodology to correct for relatively high and low ASP values for packaged and separately payable drugs using our standard methodology is further evidence that the policy adopted in CY 2010 and CY 2011, and which we are continuing for CY 2012 with one refinement (as discu ssed below), has a rational basis and is not arbitrary.CMS-1525-FC 690 Although we proposed to continue our establ ished policy to redi stribute one-third to one-half of overhead cost for coded packaged drugs, and not less than 8 percent of cost for uncoded packaged drugs and are finalizi ng this aspect of the proposed policy, we believe the intra-rulemaking fluctuation th at can occur with the proposed methodology can be minimized, as requested by commenters. As commenters have stated, and as we warned in the CY 2012 OPPS/ASC proposed rule (76 FR 42261), the overhead redistribution methodology which we finalized in CY 2010 to redistribute $200 million in cost for packaged drugs, used again in CY 2011 to redistribute $200 million in cost for packaged drugs, and proposed to redistribute $215 million in cost for packaged drugs in CY 2012, has led to a decreas e in the ASP+X amount between the proposed and final rules. Although in CY 2010 the magnitude wa s not large enough to prompt a decline in the final ASP+X percent due to rounding and due to the addition of $50 million in cost for uncoded packaged drugs in the CY 2010 fina l rule with comment period, it did result in a 1 percent decline in CY 2011 between th e proposed rule and the final rule with comment period. We believe that this possi ble decrease in the A SP+X percent between the CY 2012 proposed rule and this final ru le with comment period prompted several commenters, especially those commente rs representing hospitals and hospital associations, to characterize the propos ed overhead redistribution methodology as unstable. In our consideration of commenters’ c oncerns regarding this observed intrarulemaking variability (that is, the fluctuat ion in the derived ASP+X value between the OPPS proposed rule and the final rule), in pr eparation for this CY 2012 final rule withCMS-1525-FC 691 comment period, we revisited this issue and analyzed cost and cl aims data in an effort to determine the cause of the fluctu ation. We observed that much of this fluctuation occurs as a result of CMS adding additional cost and claims data between the proposed rule and the final rule with comment period in order to include a full year of data and, to a much lesser extent, our regular update of the ASP data.. For exam ple, in the CY 2012 proposed rule, we proposed to update the CY 2011 redistribution amount of $200 million by the PPI for Prescription Drugs and redistribute $215 million in overhead cost for packaged drugs, or about $161 million in overhead cost for coded packaged drugs and about $54 million in overhead cost for uncoded packaged drugs. This proposed redistribution amount resulted in a proposed ASP+X percen t of ASP+4, because of the mathematical relationship between the proposed $215 million in redistributed drug overhead cost to the amount of total drug cost which, for the pr oposed rule, was approximately $4.7 billion based on the partial year data available to CMS at the time of the proposed rule. However, in our analysis of drug cost to derive the final CY 2012 ASP+X percent, we observed that, due to the inclus ion of an entire year’s wort h of cost data (amounting to approximately $5.4 billion) in the calcula tion, the ASP+X percent based on the proposed $215 million redistribution of packaged drug over head cost again dropped 1 percent from ASP+4 in the CY 2012 proposed rule to A SP+3 if the proposed methodology was used, without modification, for the final calcul ation. We then analyzed our ASP+X calculations in 2011, and found the same effect, na mely that inclusion of an entire year’s worth of cost data for each respective year’s final rule relative to a fixed redistribution amount resulted in a different and lower A SP+X value in the final rule than wasCMS-1525-FC 692 proposed. Although the change in CY 2010 wa s less than one-half percent and thus prompted no change in the final ASP+X pe rcent due to rounding, the inclusion of a whole year of costs caused a 1 percent declin e in the ASP+X percent in CY 2011, just as it would in CY 2012 were CMS to finalize our proposed redistribution methodology with a fixed $215 million redistribution. This effect is illustrated in the following Table 38.
TABLE 38.—INTRA-RULEMAKING CHANGES IN THE ASP+X CALCULATION USING FIXED-AMOUNT REDISTRIBUTION METHODOLOGY Packaged Drug Redistribution Amount (in millions) Total Drug Costs (in millions) ASP+X Percent

Proposed Final Proposed Final Proposed Final CY 2010 $200 $200 $3,671 $4,136 ASP+4 ASP+4 CY 2011 $200 $200 $4,155 $4,604 ASP+6 ASP+5 CY 2012 $215 $215 $4,680 $5,443 ASP+4 ASP+3* * ASP+3 is displayed here for illustrative purposes onl y, and would have only occurred had CMS finalized its proposed drug distribution methodology in CY 2012 without modification.
The observed decline in the ASP+X percent occurs because during the CY 2012 proposed rule CMS has only a partial year’s wo rth of cost data to calculate the ASP+X percentage, which is itself an expression of the ratio of cost to ASP. However, when the analysis is repeated for each year’s final rule , we use an entire year of cost data but a fixed dollar overhead redistribut ion amount. Because the amount of total drug cost data analyzed for the final rule is larger than it was for the proposed rule but the redistribution amount remains unchanged, the ASP+X value will always experience a decline in the intra-rulemaking period. We proj ect that for most years this shrinking in the redistributed cost to total drug cost ratio that derives th e ASP+X percent will cause a decrease in theCMS-1525-FC 693 ASP+X percent of at least 1 percent betw een the proposed and final rules when the proposed methodology is used. Specifically, as indicated in Table 38, if CMS were to finalize for CY 2012 our proposed redistributio n of $161 million in overhead cost from coded packaged drugs and $54 million in ove rhead cost from uncoded packaged drugs, the ASP+X percent would decline from ASP+4 in the proposed rule to ASP+3 in the final rule. This occurs because an increase in total drug costs of $763 million analyzed for the final rule with no change to the redistribut ion amount changes the ratio of redistributed cost to total drug cost cha nges and prompts a 1 percent d ecrease in the ASP+X percent.
Comment : In general, commenters urged CMS to increase the stability and decrease the volatility of its payment policie s wherever possible. The commenters stated that instability in the OPPS rates create s budgeting, planning, and operating problems for hospitals, and that as more care is provided on an outpatient, rather than inpatient basis, the need for stable payment rates from one y ear to the next becomes more important to hospitals. Regarding payment for SCODs and the ASP+X methodology in particular, commenters also cited instabil ity as being problematic, particularly because of the intra-rulemaking decline in the ASP+X percent. Response : For several years now we have made policy changes in our payment for separately payable drugs to ensure ad equate and accurate payment and enhance the predictability of Medicare payment for th ese products. Although we had adopted the standard method in the CY 2006 final rule with comment period, we adopted an ASP+X percent of ASP+6 in the CY 2007 final rule with comment period in order to provide stability while we continued to examine the costs of pharmacy overhead. ObservingCMS-1525-FC 694 declines in the equivalent average ASP+ X percent calculated using the standard methodology, we provided a transitional rate of ASP+5 and ASP+4 for the CY 2008 and 2009 final rules, respectively, in order to en hance the stability of the ASP+X percent for those years. In CY 2010, we concluded that charge compression wa s likely distorting the equivalent average ASP+X percent calcu lated using the standard methodology. Therefore, in order to ensure adequate and stable payment, we implemented the overhead cost redistribution methodology described above and redistributed $200 million from packaged drug overhead cost to separa tely payable drugs in CY 2010 and 2011. As in each of these prior years, in CY 2012, CMS’ goal is to provide accurate payment for separately payable drugs that is based upon acquisition costs, while still ensuring stability to the payment levels. In continued pursuit of this goal, in CY 2012, we stated that we believe it is appropriate to account for infl ation that has occurred since the overhead redistribution amount of $200 m illion was applied in CY 2011. Therefore, we proposed to apply an infl ation allowance equal to the PPI for Prescription Drugs to the redistribution amount. The CY 2011 re distribution amount of $200 million updated by the PPI for Prescription Drugs yielded a proposed redistribution amount of $215 million in CY 2012 ($150 million in overhead co st from coded packaged drugs updated by the PPI for Prescription Drugs was $161.25 million; $50 million in overhead from uncoded packaged drugs updated by the PPI for Prescription Drugs was $53.75 million) and prompted our proposed ASP+X value of ASP+4 in CY 2012. However, when we updated our analysis using a whole year of co st data in preparation for the CY 2012 final rule, holding the redistribution amount of $215 million constant but updating the analysisCMS-1525-FC 695 using a full year of costs, we observed a d ecline of 1 percent in the ASP+X amount to ASP+3. This result, and the concerns raised by commenters regarding the intrarulemaking fluctuation in the methodologica lly-derived ASP+X percent with a fixed redistribution amount, prompted us to reexamin e this issue in or der to better understand the principal source of the intra-rulemaking fluctuation. We note that since the implementation of the cost redistribution methodology, while we have always used an entire year of cost data to calculate the ASP+X percent in the final rule with comment period, we have not made adjustments in the redistribution amount to account for these additional data in the final rule. After further analysis, including 3 years of cost, claims, and re distribution data pert aining to the ASP+X calculation, we have determined that holding the redistribution amount constant between the proposed and final rules (as we did in the CY 2011 OPPS/ASC final rule with comment period and had proposed to again do for CY 2012) is the principal contributing factor to the intra-rulemaking fluctuati on observed by commenters in CMS’ current ASP+X methodology. After performing the analysis described above, we believe the fluctuation in the methodologically-derived ASP+X percent in the intra-rulemaking period (that is, the period of time between the proposed and fina l rule) identified by commenters can be minimized, and greater stability in the ASP+ X percent during the intra-rulemaking period achieved if CMS implements in CY 2012 a refinement to our ASP+X methodology that adjusts for the additional cost and claims data analyzed for the final rule. This refinement, in which we will redistribute a proportional amount of pharmacy overheadCMS-1525-FC 696 and handling costs from packaged to separate ly payable drugs instead of a fixed amount, is explained in detail below. In the proposed rule, the $161 million of coded drug cost and $54 million in uncoded drug cost that we calculated usi ng the CY 2011 redistribution amounts for coded and uncoded drugs indexed by the PPI for Pres cription Drugs consti tuted 35 percent and 10.7 percent, respectively, of the drug handling and overhead costs for these categories. If we had redistributed the same amount s ($161 million of coded drug costs and $54 million of uncoded drug costs) for the fina l rule with comment period, due to the inclusion of a whole year’s cost data in the final ASP+X calculation, each amount would constitute a substantially smaller proporti on of all drug handling and pharmacy overhead costs and would cause the ASP+X to drop. However, because the final rule ASP+X calculation uses a whole year of data, while the proposed rule is based on a partial year, and because this additional data will, in most years, cause a decline in the ASP+X between the proposed rule and the final rule with comment period, we now believe that it is appropriate to hold constant the proportions of redistributed packaged drug cost from the proposed rule to the final rule with co mment period instead of finalizing our prior years’ methodology of redistributing a fixed amount of cost from coded and uncoded packaged drugs, and holding constant this amount of overhead that is redistributed from the proposed to the final rule. We now believe that redistributing th e same proportion, rather than the same amount, of coded and uncoded packaged drug cost in the final rule is appropriate because we believe this approach will enhance the intra-rulemaking stability for SCOD paymentCMS-1525-FC 697 rates; the refinement will yield a final ASP +X value that in most cases does not change between the proposed rule and the final rule with comment period. Such a result occurs because this approach mainta ins the mathematical relati onship between redistributed packaged drug pharmacy overhead and hand ling cost and total drug overhead and handling cost, so that when a whole year of co st data are analyzed for the final rule, the same proportional amount of coded and uncoded packaged drug cost is redistributed in order to calculate the ASP+X percent. Therefor e, we believe that this approach is a small but important refinement in the redistribu tion methodology used to calculate the ASP+X amount and will lead to great er intra-rulemaking stability for SCOD payment rates. It is important to note that this met hodology redistributes a fixed proportion of the calculated overhead attributable to coded a nd uncoded packaged drugs so that the percent of overhead will not change be tween the proposed rule and the final rule with comment period. However, the percentage of total drug cost that is redistributed will be expected to change slightly between the proposed rule and the final rule with comment period. This is because each drug has a different frac tion of its total cost attributed to pharmacy overhead and handling, and the “mix” of produc ts (each with an individual pharmacy overhead cost) prescribed by physicians and billed to Medicare vari es from month to month. The additional cost and claim data used to derive the ASP+X percent in the final rule with comment period will therefore reflect a slightly different mix of drugs and therefore a slightly different ratio of handling cost s to total drug costs, when compared with the ratio from the proposed rule, which us ed less than a whole y ear of data. Table 39 below displays our findings with regard to the percentage of ASP in comparison to theCMS-1525-FC 698 cost for packaged coded drugs and biological s and for separately payable coded drugs and biologicals after application of the final CY 2012 overhead adjustment methodology and amounts.
TABLE 39.—CY 2012 PHARMACY OVERHEAD ADJUSTMENT

PAYMENT METHODOLOGY: ASP+X CALCULATION

Total ASP Dollars for Drugs and Biologicals in Claims Data (in millions)* Total Cost of Drugs and Biologicals in Claims Data after adjustment

(in millions)** Ratio of Cost to

ASP (column 3/column 2) ASP+X Percent

Uncoded Packaged Pharmaceutical Revenue Code Costs Unknown $595*** Unknown Unknown Coded Packaged Drugs and Biologicals with a reported ASP $251 $565 2.25 ASP+125 Separately Payable Drugs and Biologicals with a reported ASP $4,137 $4,284 1.04 ASP+4 All Coded Drugs and Biologicals with a reported ASP $4,388 $4,777 1.09 ASP+9
*Total July 2011 ASP dollars (ASP multiplied by drug or biological units in CY 2010 claims) for drugs and biologicals with a HCPCS code and ASP information. **Total cost in the CY 2010 claims data for drugs and biologicals ***Pharmacy revenue code costs without HCPCS codes. In summary, for the reasons set forth a bove and considering the data limitations we have previously discussed, we are fina lizing our proposal to continue our prior CY 2010 and CY 2011 acquisition cost proxy methodology and pharmacy overhead redistribution methodology in CY 2012, but with one refinement discussed below. In addition, we are finalizing our proposal to adjust the $200 million redistribution amountCMS-1525-FC 699 finalized in CY 2011 for inflati on using the PPI for Prescription Drugs. For this final rule with comment period, we have analyzed the PPI-updated amount of $215 million, which is comprised of $161 million in overhead costs from coded packaged drugs and biologicals and $54 million in overhead co sts from uncoded packaged drugs and biologicals, and noted that these updated am ounts translate to approximately 35 percent of coded packaged drug overhead costs, and approximately 10.7 percent of uncoded packaged drug overhead costs. Rather than holding the redistribution amounts constant between the proposed rule and the final ru le, for this CY 2012 OPPS final rule with comment period, we are instead holding cons tant the redistribution proportions of overhead cost for coded and uncoded packaged drugs in order to maintain the 35 percent and 10.7 percent ratios. Consequently, although the final redistributi on amount is higher in this final rule with comment period than it was in the propose d rule, the proportion of redistributed overhead cost for coded and uncoded packaged drugs remains constant between the proposed and final rule. Ther efore, for CY 2012, we will update the CY 2011 redistribution amounts by the PPI for Prescription Drugs (yielding $215 million, as described in the proposed rule), and then hold the proportions constant between the proposed rule and the final rule with comment period in order to redistribute $169 million (or 35 percent) of coded packaged drug overhead cost, and $71.3 million (or 10.7 percent) of uncoded packaged drug overhead cost, resulting in a total redistribution amount of $240.3 million. The redistribution amount of $169 million in overhead cost from coded packaged drugs and biologicals is with in the redistribution paramete rs established in the CY 2010CMS-1525-FC 700 OPPS/ASC final rule with comm ent period of roughly one-third to one-half of overhead cost in coded packaged drugs and biologicals . The amount of 10.7 percent of drug cost in uncoded packaged drugs and biologicals would be redistributed to separately payable drugs for CY 2012. Therefore, this amount con tinues to be no less than 8 percent of the total uncoded drug and biological cost. The result of this methodology is an ASP+4 percent amount for CY 2012 when applied using July 2011 ASPs, data for claims for services furnished during CY 2010 and pr ocessed through the Common Working File before January 1, 2010, and the most current submitted cost reports as of January 1, 2011. For the reasons set forth above, we are fi nalizing an ASP+X percent of ASP+4 for separately payable drugs in CY 2012. Further, we are finalizing our proposal to continue to include the claims data for 340B hospitals in the calculation of paymen t for drugs and biologicals under the CY 2012 OPPS. We believe excluding data from hospita ls that participate in the 340B program from our ASP+X calculation, but paying those ho spitals at that derived payment amount, would effectively redistribute payment to dr ugs or biologicals from payment for other services under the OPPS. Furthermore, we do not believe it woul d be appropriate to exclude claims from this subset of hospita ls in the context of a proposed CY 2012 drug and biological payment policy that pays all hos pitals the same rate for separately payable drugs and biologicals (74 FR 60517). In addi tion, we are finalizing our proposal that 340B hospitals continue to be paid the same amounts for separately payable drugs and biologicals as hospitals that do not particip ate in the 340B program for CY 2012 becauseCMS-1525-FC 701 commenters have generally oppos ed differential payment fo r hospitals based on their 340B participation status. Finally, we are finalizing our proposal that the estimated payments for separately payable drugs and biologicals be taken into acco unt in the calculation of the weight scaler that would apply to the relative weights for all procedural services (but would not apply to separately payable drugs and biologicals) paid under the OPPS, as required by section 1833(t)(14)(H) of the Act. We note that although it is CMS’ longsta nding policy under the OPPS to refrain from instructing hospitals on th e appropriate revenue code to use to charge for specific services, we continue to encourage hospitals to bill all drugs and bi ologicals with HCPCS codes, regardless of whether they are separate ly payable or packaged, and to ensure that drug costs are completely reported, using approp riate revenue codes. We also note that we make packaging determinations for dr ugs and biologicals annually based on cost information reported under HCPCS codes, and the OPPS ratesetting is best served when hospitals report charges for all items and services with HCPCS codes when they are available, whether or not Medicare makes se parate payment for the items and services. We also note that we continue to pur sue the most appropriate methodology for establishing payment for drugs and biologicals under the OPPS. Because we are always trying to improve the integrity of our da ta, we have previously proposed multiple mechanisms to improve the cost data availa ble to us, but have not implemented those proposals due to hospital concerns about the ad ministrative burden. We continue to be interested in developing mechan isms that improve the cost data available to us whileCMS-1525-FC 702 minimizing, to the extent possible, the admini strative burden on hospitals. For the past 3 years, we have proposed an internal ad justment to redistribute an amount from packaged coded and uncoded drugs and biologi cals to separately payable drugs and biologicals because the results of our sta ndard drug payment methodology are unlikely to accurately reflect the full cost of acquisi tion and pharmacy overhead for separately payable and packaged drugs and biologicals due to hospital charging practices and our use of an annual drug packaging threshold. As we continue to work to refine our payment systems, a goal to which we have been consistently committed over the past several years, we encourage public input on alternative cost-based methodologies to aid in our ongoing evaluations that coul d improve upon the adopted methodology. c. Payment Policy for Therapeutic Radiopharmaceuticals Beginning in the CY 2005 OPPS final rule with comment period, we exempted radiopharmaceutical manufacturers from repor ting ASP data for all radiopharmaceuticals for payment purposes under the OPPS. (For more information, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811) and the CY 2006 OPPS final rule with comment period (70 FR 68655) .) Consequently, we did not have ASP data for radiopharmaceuticals for consideration for OPPS ratesetting until we began collecting ASP for nonpass-through separately paid therapeutic radiopharmaceuticals for CY 2010. In accordance with section 1833(t)(14)(B )(i)(I) of the Act, we have classified therapeutic radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for radiopharmaceuticals at average acquisition co st as determined by the Secretary and subject to any adjustment for overhead costs. For CYs 2006 and 2007, we used meanCMS-1525-FC 703 unit cost data from hospital claims to determine each radiopharmaceutical’s packaging status and implemented a temporary po licy to pay for separately payable radiopharmaceuticals based on the hospita l’s charge for each radiopharmaceutical adjusted to cost using the hospital’s overall CCR. The methodology of providing separate radiopharmaceutical payment base d on charges adjusted to cost through application of an individual hospital’s overall CCR for CYs 2006 and 2007 was finalized as an interim proxy for average acquisition cost. In CY 2008, we packaged payment for all diagnostic radiopharmaceuticals and we proposed and finalized a methodology to pr ovide prospective paym ent for therapeutic radiopharmaceuticals (defined as those Level II HCPCS c odes that include the term “therapeutic” along with a radiopharmaceutical in their long code descriptors) using mean costs derived from the CY 2006 claims data, where the costs were determined using our standard methodology of applying hospital-specific departmental CCRs to radiopharmaceutical charges, defaulting to hospital-specific overall CCRs only if appropriate departmental CCRs were unavailable (72 FR 66772). Following issuance of the CY 2009 OPPS/ASC proposed rule, secti on 142 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110–275) amended section 1833(t)(16)(C) of the Act, as amended by section 106(a) of th e Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173), to further exte nd the payment period for therapeutic radiopharmaceuticals based on hospitals’ charges adjusted to cost through December 31, 2009. Therefore, for CY 2009, we finalized a policy to continue to payCMS-1525-FC 704 hospitals for therapeutic radi opharmaceuticals at charges adju sted to cost through the end of CY 2009. For CY 2010, we proposed and finalized a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biologicals. We allowe d manufacturers to submit the ASP data in a patient-specific dose or patient-ready form in order to properly calcu late the ASP amount for a given HCPCS code. This resulted in payment for nonpass-through separately paid therapeutic radiopharmaceuticals at ASP+4 pe rcent for CY 2010 for products for which the manufacturer submitted ASP. We also finalized a policy to base therapeutic radiopharmaceutical payment on CY 2008 mean unit cost data derived from hospital claims if ASP information was unavailable. For CY 2011, we continued to pay for nonpass-through separately paid therap eutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biological s, resulting in a payment rate for nonpass-through separately paid therapeutic radiopharmaceuticals of ASP+5 percent. We also continued to base therapeutic radiopharmaceutical payment on CY 2009 mean unit cost data derived from hospital claims if ASP information was unavailable. We believe that the rationale outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for applying the principles of separately payable drug pricing to therapeutic radiopha rmaceuticals continues to be appropriate for nonpass-through separately payable therap eutic radiopharmaceuticals in CY 2012. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42263), we proposed toCMS-1525-FC 705 continue to pay all nonpass-through, separate ly payable therapeutic radiopharmaceuticals under the ASP+X payment level established using the proposed pharmacy overhead adjustment based on a redistribution methodolog y to set payment for separately payable drugs and biologicals (proposed at ASP+4 pe rcent, as discussed in section V.B.3.b. of this final rule with comment period) based on ASP information, if available, for a “patient ready” dose and updated on a quarterly basis for products for which manufacturers report ASP data. For a full di scussion of how a “pat ient ready” dose is defined, we refer readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We also proposed to rely on CY 2010 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, acco rding 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. The proposed CY 2012 payment rates fo r nonpass-through separately payable therapeutic radiopharmaceuticals were included in Addenda A and B to the proposed rule (which is referenced in secti on XVII. of the proposed rule an d available via the Internet).
Comment : A large number of commenters from consumers and disease-focused advocacy groups submitted comments re garding CMS’ payment for BEXXAR® (Tositumomab and Iodine I 131 Tositumoma b). The commenters stated that CMS payment for this product is inadequate and that payment rates may cause hospitals and physicians to be unable to make BEXXAR® av ailable. Commenters also stated thatCMS-1525-FC 706 CMS erred in treating certain portions of the BEXXAR® product as diagnostic, rather than therapeutic, because the presence of disease has already been diagnosed and affirmed prior to the administration of BE XXAR®. A few commenter s characterized the proposed CY 2012 payment rate for BEXXAR® as being motivated by saving money. Some of these commenters stated that CMS was attempting to “cut stipends” or failing to fund cancer research. Other commenters suggested that CMS would no longer cover BEXXAR® or other radioimmunotherapies. One commenter submitted information on studies regarding the efficacy of BEXXA R® for treating Lymphoma. Several commenters stated that they were concerned about their ability to afford radioimmunotherapy services. One commenter suggested that CMS negotiate with drug manufacturers to reduce their charges. Response : We do not agree with commenters’ assertions that Medicare payment through the OPPS for BEXXAR® is inadequate. We analyzed this assertion against our standard methodologies and did not find evid ence to support the co mmenters’ assertion that OPPS payment for BEXXAR® is unusually lo w. In the comment letter to CMS, the manufacturer of BEXXAR® stated that it believed hospital acquisition cost for BEXXAR® is approximately $35,657, but the am ount that Medicare has proposed to pay for CY 2012 is $33,982. We note that we pay fo r the majority of the cost of BEXXAR® treatment under the OPPS based on the manufacturer-supplied ASP plus, in CY 2012, 4 percent for hospital pharmacy handling and overhead, an amount calculated using hospital claims data. We also note that part of the administration costs for any therapy is typically bundled into prospect ive payments such as chemotherapy administration codes.CMS-1525-FC 707 In analyzing the elements of the treatment regimen described by co mmenters, we believe that all costs are accounted for in the various payment methods used by CMS to reimburse for the hot (therapeutic) and warm (diagnostic) doses of Tositumomab. We also do not agree that our policy in paying portions of BEXXAR® as a diagnostic (rather than therapeutic) radiopha rmaceutical is inappropriate. Although we acknowledge that certain components of BE XXAR® are therapeutic, other components of the therapy, most notably the “warm” dose of Tositumomab, are diagnostic in nature and are used in conjunction with imaging studies to determine whether future therapeutic services would be beneficial to the patient , and how to proceed with therapy. We note that diagnostic uses are char acterized both by the inclusion of the word “diagnostic” in HCPCS long descriptors and by the use of the service to obtain information as opposed to improving the medical condition of the patient. We believe that commenters claiming that CMS is cutting stipends or failing to fund cancer resear ch are mistaken; the Medicare program generally, and the OPPS in particul ar, does not provide stipends to cancer researchers, nor does it direc tly fund cancer research. We also wish to emphasize that CMS has not changed its coverage status for BEXXAR®, which remains a Medicarecovered treatment in the hospital outpatient de partment. Further, CMS has not made its proposed payment for BEXXAR® to save th e Medicare program money. Payment for BEXXAR®, like most drugs and procedures in the OPPS, is determined by statute and is based on acquisition data furnished by drug ma nufacturers and costs reported to CMS by hospitals. Year-to-year fluctuations in pa yment for individual items and treatments areCMS-1525-FC 708 often the result of fluctuations in the submitted co st data, as it is in this case, and not the result of a policy decision to save the Medicare program money. Finally, we are sympathetic to commente rs’ concern regarding the high cost of radioimmunotherapy services. We note that the national unadjuste d copayment for the “hot” dose of Iodine I-131 Tositumomab is approximately $6,000, and can appreciate how many Medicare beneficiaries would have difficulties affording such a large coinsurance amount. Although we share comm enters’ concerns a bout the growth in health costs, CMS does not have the aut hority to directly negotiate with drug manufacturers on behalf of Me dicare beneficiaries to get manufacturers to reduce their drug prices.
Comment : Several commenters requested that CMS create a HCPCS J-code for tositumomab, currently provided under a radi oimmunotherapy regimen and billed as part of HCPCS code G3001 (Administration a nd supply of tositumomab, 450 mg). The commenter argued that because tositumomab is approved by the FDA as part of the BEXXAR® regimen and has its own Nati onal Drug Code (NDC), it should be recognized as a drug and, therefore, be pa id as other drugs are paid under the OPPS methodology, instead of having a payment rate determined by hospital claims data. The commenters recommended that nonradiolabeled Tositumomab receive separate payment. Response : We have consistently noted that unlabeled tositumomab is not approved as either a drug or a radiopharmaceutical. It is a supply that is required as part of the radioimmunotherapy treatment regime n (the CY 2009 OPPS/AS C final rule with comment period (73 FR 68658), the CY 2008 OPPS final rule with comment periodCMS-1525-FC 709 (72 FR 66765), the CY 2006 OPPS final rule with comment period (70 FR 68654), and the CY 2004 OPPS final rule with comment pe riod (68 FR 63443)). We do not make separate payment for supplies used in servic es provided under the OPPS. Payments for necessary supplies are packaged into paymen ts for the separately payable services provided by the hospital. Specifically, it is the administration of unlabeled tositumomab (the “cold” or diagnostic dose) that is a complete service that qualifies for separate payment under its own clinical APC, 0442. This diagnostic (information collecting, nontherapeutic) complete service is curre ntly described by HCPCS code G3001, which includes tositumomab as a supply. Therefor e, we do not agree with the commenter’s recommendation that we should assign a separate HCPCS code to the supply of unlabeled tositumomab. Rather, we will continue to make separate payment for the administration of tositumomab, and payment for the supply of unlabeled tositumomab is packaged into the administration payment.
Comment : A majority of commenters suppor ted CMS’ proposal to continue to pay for separately payable therapeutic radiopharmaceuticals under the ASP+X payment level established using the proposed pha rmacy overhead adjustment based on a redistribution methodology to set payment fo r separately payable drugs and biologicals based on ASP information, if available, for a “patient ready” dose and updated on a quarterly basis for products for which manufacturers report ASP data. Several commenters disagreed with the proposed paym ent rate for nonpass- through separately payable drugs, biologicals, and therapeutic radiopharmaceuticals at ASP+4 and instead recommended that CMS reimburse for these products at a set rate of ASP+6.CMS-1525-FC 710 Several commenters disagreed with CMS’ proposal to rely on CY 2010 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable. The commenters suggested that CMS instead use hospitals’ charges adjust ed to cost when ASP data are unavailable for nonpass-through separately payable th erapeutic radiopharmaceuticals. Some commenters also recommended that CMS provide cost-based payment to hospitals when ASP is not available. A few commenters further noted that CM S should require all manufacturers of therapeutic radiopharmaceutic als to submit ASP data for all therapeutic radiopharmaceuticals currently paid under the OPPS. Response : We appreciate the commenters’ suppor t. We continue to believe that providing payment for nonpass-through se parately payable therapeutic radiopharmaceuticals based on ASP information, if available, for a “patient ready” dose, and updated quarterly for products for which the manufacturer reported ASP data or mean unit cost if ASP information is not available would provide appropriate payment for these products. As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46276), we believe that the ASP information collect ed under section 1847A (b)(1)(A) of the Act and our hospital claims data is a suitable proxy for the acquisition cost data, and that ASP+6 is an accurate payment for separately covered drugs and biological when it is derived using these data and our standard methodology. Therefore, we do not agree with commenters’ assertion that we should as a ma tter of policy set payment for these items at ASP+6. When ASP data are not available, we believe that paying for therapeutic radiopharmaceuticals using mean unit cost would appropriately pay for the averageCMS-1525-FC 711 hospital acquisition and associated handling costs of nonpass-through separately payable therapeutic radiopharmaceuticals. As we st ated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71968) and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60523), although usi ng mean unit cost for payment for therapeutic radiopharmaceuticals when ASP data are not available is not the usual OPPS process (that relies on alternative data source, 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 belie ve that WAC or AWP is not an appropriate proxy to provide OPPS payment for average th erapeutic radiopharmaceutical acquisition cost and associated handling costs when ma nufacturers are not re quired to submit ASP data. In addition, we do not believe that we should provide payment at charges reduced to cost or reasonable cost when ASP data is not available. As we have stated previously in the CY 2008 OPPS/ASC final rule with comme nt period, we continue to believe that payment on a claim-specific basis is not c onsistent with the payment of items and services in a prospective payment system unde r the OPPS and may also lead to extremely high or low payments to hospitals for ra diopharmaceuticals, even when those products would be expected to have relatively predic table and consistent ac quisition and handling costs across individual clinic al cases and hospitals. For CY 2012, Medicare will pay for only a few outpatient services at reasonable co st. These include, but are not limited to, corneal tissue acquisition and influenza v accines. Corneal tissue acquisition and influenza vaccines are paid at reasonable cost in part because the input costs for future years are hugely unpredictable and to set a pr ospective payment rate for them may resultCMS-1525-FC 712 in payment that is so deficient that hospitals would not be able to pr ovide the services and the general public could be denied the benefits. In particular, it is no t possible to forecast with confidence what the cost of influenza vaccine would be a year in advance because the composition of the vaccine is not constant from year to year. In contrast, however, the input costs of therapeutic radiopharm aceuticals are not hugely unpredictable. Therefore, we do not believe that therapeu tic radiopharmaceuticals should be paid in the same manner as the few outpatient services pa id at reasonable cost. We continue to believe that when ASP data are unavaila ble for therapeutic radiopharmaceuticals, payment based upon mean unit cost is an a ppropriate proxy for hospitals’ acquisition and handling data. We disagree with the commenters w ho suggested that CMS require all manufacturers of therapeutic radiopharmaceutic als to submit ASP data for all therapeutic radiopharmaceuticals currently paid under th e OPPS. We continue to believe that requiring ASP data for all therapeutic ra diopharmaceuticals currently paid under the OPPS would potentially be burdens ome for manufacturers. More over, as we stated in the CY 2011 OPPS/ASC final rule with comme nt period (75 FR 71969) and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524), the challenges involved in reporting ASP for a radiopharmaceutical are sign ificant in many cases, given the variety of manufacturing processes a nd the frequent need for patie nt specific pre-processing. Therefore, due to the fact that the adde d administrative burden of direct reporting outweighs the expected benefits, and given th e relative accuracy of hospital claims data regarding such drugs, payment based on mean unit cost from histor ical hospital claimsCMS-1525-FC 713 data offers the best proxy for average hospi tal acquisition cost and associated handling costs for a radiopharmaceutical in many situati ons. We continue to believe that we should allow, but not require, manufacturers to submit ASP information for therapeutic radiopharmaceuticals. If ASP informa tion is unavailable for a therapeutic radiopharmaceutical because a manufacturer is not willing or not able to submit ASP information, we will provide payment based on the mean unit cost of the product that is applicable to payment rates for the year the nonpass-through therapeutic radiopharmaceutical is administered.
Comment : One commenter stated that wh ile it supported paying separately payable therapeutic radiopharmaceutical s under the ASP+X payment methodology established in the CY 2012 proposed rule, it believed that payment for radiopharmaceuticals should be made at a highe r level than other dr ugs and biologicals because of the unique pharmacy handling and overhead costs associated with radiopharmaceuticals. Therefore, the commenter recommended that CMS pay for radiopharmaceuticals at a payment rate of at least ASP+10 percent while continuing to develop detailed data on the overhead and handling costs associated with radiopharmaceuticals. Response : We continue to believe that paying for therapeutic radiopharmaceuticals under the ASP+X paym ent amount established for separately payable drugs and biologicals under the OPPS, established at ASP+4 percent for CY 2012, is the most appropriate proxy for acqui sition and pharmacy overhead and handling costs for separately payable therapeutic radiopharmaceuticals, regardless of the amountCMS-1525-FC 714 of pre-processing needed to create a “patient ready” dose. As we stated in the CY 2010 OPPS/ASC final rule with comment pe riod (74 FR 60522), we established our interpretation of “patient-ready” for purposes of the OPPS to mean that the ASP, reported in terms that reflect the app licable HCPCS code descriptor , should include the price for all component materials of the radiopharmaceutic al as well as any a dditional processing, including radiolabeling, that is reflected in the price th e manufacturer charges for the radiopharmaceutical, so long as the fees paid for such additional processing meet the “bona fide service fee” test under the regulati ons implementing section 1847A of the Act. We explicitly noted that because radiopharm aceuticals uniquely require radiolabeling of their component materials, we believe that radiolabeling could constitute a bona fide service on behalf of the manufacturer and the fees could meet the “bona fide service fee” test, for purposes of OPPS ASP reporting. Given our position on radiolabeling, we similarly believe that significant manufacturer processing costs associated with handling radiopharmaceuticals may be reflected in the pr ices used to calculate the manufacturer’sASP data for OPPS purposes. Therefore, the combined single payment for nonpassthrough separately payable therapeutic radiopharmaceutical acquisition and overhead costs embodied in the ASP+4 percent paymen t rate for CY 2012 would address any other processing by the manufacturer for purposes of the OPPS, and we continue to believe this payment is sufficient to cover additiona l handling costs borne by the hospital (as calculated by hospital cost data ). Under this interpretation of “patient-ready” dose, we do not believe that making an additional paym ent for more intensive handling costs is
necessary.CMS-1525-FC 715 After consideration of the public comments we receive d, we are finalizing our proposal, without modification, to conti nue to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals unde r the ASP+X payment level established using the pharmacy overhead adjustment based on a redistribution methodology to set payment for separately payable drugs and biol ogicals (as discussed in section V.B.3.b. of this final rule with comment period) based on ASP information, if available, for a “patient ready” dose and updated on a quarterly basis for products for which manufacturers report ASP data. For CY 2012, nonpass-through se parately payable therapeutic radiopharmaceuticals will be paid at ASP+4 percent under the ASP+X payment methodology for nonpass-through separately payable drugs and biologicals. We will base nonpass-through, separately paya ble therapeutic radiopharmaceutical payment rates on mean unit cost derived from CY 2010 claims data when ASP pricing is not available. The final CY 2012 payment ra tes for nonpass-through separately payable therapeutic radiopharmaceuticals are included in Addenda A and B to this final rule with comment period (which are referenced in sec tion XVII. of this final rule with comment period and available via the Internet). 4. Payment for Blood Clotting Factors For CY 2011, we provided payment for 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 2011, we provided payment for blood clotting factors unde r the OPPS at ASP+5 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors areCMS-1525-FC 716 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 2011 updated furnishing fee is $0.176 per unit. In the CY 2012 OPPS/ASC proposed rule (76 FR 42263 through 42264), for CY 2012, we proposed to pay for blood clotting factors at ASP+4 percent, consistent with our proposed payment policy for othe r nonpass-through separa tely payable drugs and biologicals, and to con tinue our policy for payment of the furnishing fee using an updated amount. Our rationale for this propos ed policy was first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and then later discussed in the CY 2008 OPPS/ASC final rule with co mment period (72 FR 66765). The proposed furnishing fee update was based on the percenta ge increase in the Consumer Price Index (CPI) for medical care for the 12-month period ending with June of the previous year. Because the Bureau of Labor St atistics releases the applicab le CPI data after the MPFS and OPPS/ASC proposed rules are published, we are not able to include the actual updated furnishing fee in the proposed rules. Therefore, in accordance with our policy, as finalized in the CY 2008 OPPS/ASC fina l rule with comment period (72 FR 66765), we would announce the actual figure for the pe rcent change in the applicable CPI and the updated furnishing fee calculated based on that figure through applicable program instructions and posting on the CMS Web site at: http://www.cms.gov/McrPartBDrugAvgSalesPrice/

. Comment : A few commenters supported CMS’ proposal to continue to apply the furnishing fee for blood clotting factors provided in the OPD. One commenter stated thatCMS-1525-FC 717 the furnishing fee helps ensure patient access to blood clotting factors by increasing the payment rate for these items. Other commenters supported payment for blood clotting factors at no less than ASP+6 percent for CY 2011 and stated that payment at less than ASP+6 percent for all drugs and biologicals, especially blood clot ting factors and all drugs and biologicals, is inappropriate. Response : We appreciate the commenters’ suppor t. We continue to believe that applying the furnishing fee for blood clotti ng factors is appropriate for CY 2012. However, we see no compelling reason to provide payment for blood clotting factors under a different methodology for OPPS purposes at this time. For CY 2012, under this final rule with comment period, we will pa y for blood clotting factors under the same methodology as other separately payable drugs and biologicals under the OPPS, and we will continue paying an updated furnishing fee. For the reasons we discussed in section V.B.3. of this final rule with comment period, we believe that the payment rate of ASP+4 percent is appropriate payment for the acquisition cost and pharmacy overhead related to drugs and biologicals that are not package d, which includes blood clotting factors. In addition, because we recognize that there is additional work involved in acquiring the product, that is neither ac quisition cost nor pharmacy ove rhead, we believe that it continues to be appropriate to pay a furn ishing fee for blood clotting factors under the OPPS as is done in the physician’s office setting and the inpatient hospital setting. After consideration of the public comments we receive d, we are finalizing our CY 2012 proposal, without modification, to provide payment for blood clotting factors under the same methodology as other separately payable drugs and biologicals under theCMS-1525-FC 718 OPPS and to continue paying an updated fu rnishing fee. We will announce the actual figure for the percent change in the app licable CPI and the updated furnishing fee calculation based on that figure through the applicable program instructions and postings on the CMS Web site. 5. Payment for Nonpass-Through Drugs, Biol ogicals, 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) does not address the OPPS payment in CY 2005 and after for drugs, biologicals, and radiopharmaceuticals that ha ve assigned HCPCS codes, but that do not have a reference AWP or approval for paym ent as pass-through drugs or biologicals. Because there is no statutory provision that di ctated payment for such drugs, biologicals, and radiopharmaceuticals in CY 2005, and because we had no hospital claims data to use in establishing a payment rate for them, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799). For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and 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 adjust ed to cost for radiopharmaceuticals. ForCMS-1525-FC 719 CYs 2008 and 2009, we finalized a policy to pr ovide payment for new drugs (excluding contrast agents and diagnostic radiopha rmaceuticals) and biologicals (excluding implantable biologicals for CY 2009) with HCPCS codes, but which did not have pass-through status and were without OPPS hospital claims data, at ASP+5 percent and ASP+4 percent, respectively, consistent w ith the final OPPS payment methodology for other separately payable drugs and biologi cals. New therapeutic radiopharmaceuticals were paid at charges adjusted to cost ba sed on the statutory requirement for CY 2008 and CY 2009 and payment for new diagnostic radiopharmaceuticals was packaged in both
years. For CY 2010, we continued to provide pa yment for new drugs (excluding contrast agents) and nonimplantable biologicals with HCPCS codes that do not have pass-through status and are without OPPS hospital claims da ta at ASP+4 percent, consistent with the CY 2010 payment methodology for other sepa rately payable nonpass-through drugs and nonimplantable biologicals. We also fina lized a policy to extend the CY 2009 payment methodology to new therapeutic radiopharmaceutic al HCPCS codes, consistent with our final policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60581 through 60526), providing separate payment fo r therapeutic radiopharmaceuticals that do not crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and are without OPPS hospital claims da ta at ASP+4 percent. This policy was continued in the CY 2011 OPPS/ASC final rule with co mment period (75 FR 71970 through 71973), paying for new drugs, nonimplantable biologi cals, and radiopharmaceuticals that do notCMS-1525-FC 720 crosswalk to CY 2010 HCPCS codes, do not ha ve pass-through stat us, and are without OPPS hospital claims data at ASP+5 percent. In the CY 2012 OPPS/ASC proposed rule (76 FR 42264 through 42266), we proposed to continue our payment policies fo r new drugs (excluding contrast agents and diagnostic radiopharmaceuticals), nonimplantable biologicals, and therapeutic radiopharmaceuticals that have HCPCS code s that do not crosswalk to CY 2011 HCPCS codes, do not have pass-through status, and ar e without OPPS hospital claims data. We proposed to provide payment for new CY 2012 drugs (excluding contrast agents and diagnostic radiopharmaceuticals), nonimplantable biologicals, and therapeutic radiopharmaceuticals, at ASP+4 percent, c onsistent with the proposed CY 2012 payment methodology for other separately paya ble nonpass-through drugs, nonimplantable biologicals, and therapeutic radiopharmaceutic als. We believed this proposed policy would ensure that new nonpass-through dr ugs, nonimplantable biologicals and therapeutic radiopharmaceuticals would be treated like other drugs, nonimplantable biologicals, and therapeutic radiopharm aceuticals under the OPPS, unless they are granted pass-through status. Only pass-th rough drugs, nonimplantable biologicals, or therapeutic radiopharmaceuticals would receive a different payment for CY 2012, which would be generally equivalent to the paymen t these drugs and biologicals would receive in the physician’s office setting, consistent with the requirements of the statute. We also proposed to continue our CY 2011 policy of packaging payment for all new nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals with HCPCS codes but without claims data (t hose new CY 2012 diagnosticCMS-1525-FC 721 radiopharmaceuticals, contrast agents, and implantable biolog ical HCPCS codes that do not crosswalk to predecessor HCPCS codes). This is consistent with the proposed policy packaging all existing nonpass-through diagnostic radiopharmaceuticals, contrast agents and implantable biologicals, as discussed in more detail in sections V.B.2.d. and IV.A.2. of this final rule with comment period. In accordance with the OPPS ASP methodology, in the absence of ASP data, for CY 2012, we proposed to continue the polic y we implemented beginning in CY 2005 of using the WAC for the product to estab lish the initial paym ent rate for new nonpass-through drugs and biologic als with HCPCS codes, but which are without OPPS claims data. However, we noted that if th e WAC is also unavailable, we would make payment at 95 percent of the product’s most recent AWP. We also proposed to assign status indicator “K” (for separately paid nonpass-through drugs and nonimplantable biologicals, including therapeutic radiopharm aceuticals) to HCPCS codes for new drugs and nonimplantable biologicals without OPPS cl aims data and for which we have not granted pass-through status. With respect to new, nonpass-through drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals for which we do not have ASP data, we proposed that once their A SP data become available in later quarterly submissions, their payment rates under the O PPS would be adjusted so that the rates would be based on the ASP methodology and set to the finalized ASP-based amount (proposed for CY 2012 at ASP+4 percent) for items that have not been granted pass-through status. This propos ed policy, which is consistent with prior years’ policies for these items, would ensure that new nonpass-through drugs, nonimplantableCMS-1525-FC 722 biologicals, and therapeutic radiopharmaceu ticals would be treated like other drugs, nonimplantable biologicals, and therapeuti c radiopharmaceuticals under the OPPS, unless they are granted pass-through status. Only pass- through drugs, nonimplantable biologicals, or therapeutic radiopharmaceuti cals would receive a different payment for CY 2012, which would be generally equiva lent to the payment these drugs and biologicals would receive in the physicia n’s office setting, consistent with the requirements of the statute. Similarly, we proposed to continue our CY 2011 policy to base the initial payment for new therapeutic radiopharmaceutic als with HCPCS codes, but which do not have pass-through status and ar e without claims data, on the WACs for these products if ASP data for these therapeutic radiopharmaceuti cals are not available. If the WACs are also unavailable, we proposed to make payment for new therapeutic radiopharmaceuticals at 95 per cent of the products’ most recent AWP because we would not have mean costs from hospital claims da ta upon which to base payment. As we proposed with new drugs and biologicals, we proposed to con tinue our policy of assigning status indicator “K” to HCPCS codes for new therap eutic radiopharmaceuticals without OPPS claims data for which we have not granted pass-through status. Consistent with other ASP-based paymen t, we proposed to announce any changes to the payment amounts for new drugs and bi ologicals in this CY 2012 OPPS/ASC final rule with comment period and also on a quarterly basis on the CMS Web site during CY 2012 if later quarter ASP su bmissions (or more recent WACs or AWPs) indicate that changes to the payment rates for these drugs and biologicals are necessary. The paymentCMS-1525-FC 723 rates for new therapeutic radiopharmaceuticals would also be changed accordingly based on later quarter ASP submissions. We not e that the new CY 2012 HCPCS codes for drugs, biologicals and therapeutic radiopharmaceu ticals were not available at the time of development of the proposed rule. Howeve r, these agents are included in Addendum B to this CY 2012 OPPS/ASC fina l rule with comment period (which is referenced in section XVII. of this final rule with comment period and available vi a the Internet on the CMS Web site) where they are assigned comment indicator “NI.” This comment indicator reflects that their interim final OPPS treatment is open to public comment in this CY 2012 OPPS/ASC final rule with comment period. There are several nonpass-through drugs a nd biologicals that were payable in CY 2010 and/or CY 2011 for which we did not have CY 2010 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, but which have pricing information available for the ASP methodology. We note that there are currently no therapeutic radiopharmaceuticals in this cate gory. In order to determine the packaging status of these products for CY 2012, we calculated an estimate of the per day cost of each of these items by multiplying the payment rate of each product based on ASP+4 percent, similar to other nonpass-through drugs and biologicals paid separa tely under the OPPS, by an estimated average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatien t setting. This rationale was first adopted in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68666 and 68667).CMS-1525-FC 724 We proposed to package items for which we estimated the per day administration cost to be less than or equal to $80, which is the general packagi ng threshold that we proposed for drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY 2012. We proposed to pay separately for ite ms with an estimated per day cost greater than $80 (with the exception of diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals, which we proposed to continue to package regardless of cost as discussed in more detail in section V.B.2.d. of this final rule with comment period) in CY 2012. We proposed that the CY 2012 paymen t for separately payable items without CY 2010 claims data would be ASP+4 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 phys ician’s office setting, in th e absence of ASP data we proposed to use the WAC for the product to esta blish the initial payment rate. However, we noted that if the WAC is also unavailabl e, we would make payment at 95 percent of the most recent AWP available. The proposed estimated units per day and status indicators for these items are displayed in Table 33 of the proposed rule (76 FR 42265).
Comment : One commenter stated that it had been advised by the American Hospital Association Central office on HCPC S to report HCPCS code J1826 (Injection, interferon beta-1A-1A, 30 mcg). The co mmenter noted that HCPCS code J1826 currently has a status indicator of “E” and is not payable under OPPS but, because it is reportable, believed that it shoul d receive a status indicator of “K” and be assigned to an APC. The commenter noted that HCPCS code Q3025 (K Interferon beta 1-a, 11 mcg forCMS-1525-FC 725 IM use) is reportable and is assigned to APC 9022 with a CY 2011 rate of approximately $222. Response : HCPCS code J1826 was made e ffective January 1, 2011, and assigned a status indicator of “E” unde r the hospital OPPS and given a coverage indicator of “Not payable by Medicare” by the HCPCS Work Group. Although the HCPCS code is not payable by Medicare, other insurers may recogni ze it. Therefore, we advise hospitals to contact their health insurers for further repo rting and/or payment information related to HCPCS code J1826. The commenter is correct that hospitals can report HCPCS code Q3025, which is separately reportable under the OPPS. HCPCS code Q3025 is assigned to APC 9022, and for the July 2011 update, its payment rate is approximately $235. Hospitals are reminded that payments for OPPS drugs ar e updated quarterly and posted on the CMS OPPS website, specifically at https://www.cms.gov/HospitalOutpa tientPPS/AU/list.asp#TopOfPage . Because payments for OPPS drugs are updated on a quarter ly basis, hospitals are advised to refer to either Addendum A, which is in APC orde r, or Addendum B, which is in HCPCS code order, for the latest payment information fo r items and services paid under the OPPS.
Comment : One commenter remarked that th e “list of acceptable analgesics for long bone fractures” does not include products such as Motrin and ibuprofen. The commenter recommended that CMS add thes e products to the “list of acceptable medications” to treat pain for long bone fractures.CMS-1525-FC 726 Response : We are uncertain what the commenter means in reference to a list of acceptable medications to treat long bone fractures as we are not aware of any such list established for Medicare payment in the hospita l outpatient department for such injuries. In the CY 2012 OPPS/ASC proposed rule, we did not make any specific proposals regarding a list of analgesics, nor have we finalized any policie s that pertain to a list of analgesics. Therefore, we believe that this co mment is outside the scope of this final rule with comment period. However, we note that this discussion of drugs and biologicals discusses payment for all medi cally necessary drugs and ther efore applies to those that are necessary for the treatment of pain in the HOPD, including NSAIDS such as ibuprofen. We further note that, although in mo st cases drugs necessa ry for the treatment of pain, including NSAIDS such as ibuprof en, do not receive separate payment under OPPS, their costs, as with costs associated w ith other supplies neces sary during the visit, may be packaged into emergency de partment or clinic visit codes. Although we did not receive any spec ific public comments regarding our proposed payment for nonpass-through drugs, bi ologicals, and radiopharmaceuticals with HCPCS codes, but without OPPS hospital cl aims data, many commenters supported our proposal to pay for separately payable dr ugs at ASP+4 percent in CY 2012, and other commenters recommended that we pay no le ss than ASP+6 percent for separately payable drugs in CY 2012. However, these co mments were not specific to new drugs and biologicals with HCPCS codes but without OPPS claims data. For more information regarding payment for separately payable drugs, including general public comments and our responses, we refer readers to section V.B .3.b. of this final rule with comment period.CMS-1525-FC 727 In addition, commenters on the CY 2012 OPPS/AS C proposed rule objected to packaging payment for diagnostic radiopharmaceuticals and contrast agents in general, but these comments were not directed to new diagnos tic radiopharmaceuticals or contrast agents with HCPCS codes but without OPPS claims data. We summarize these comments and provide our response in section V.A.2.d. of this final rule with comment period. We are finalizing our CY 2012 proposal , without modification, as follows: payment for new drugs (excluding contrast ag ents and diagnostic radiopharmaceuticals), nonimplantable biologicals, and therapeu tic radiopharmaceuticals with HCPCS codes that do not crosswalk to CY 2011 HCPCS c odes, but which do not have pass-through status and for which we do not have OPPS hos pital claims data, will be made at ASP+4 percent for CY 2012, consistent with the final CY 2012 payment methodology for other new separately payable nonpass-through dr ugs, nonimplantable biologicals and therapeutic radiopharmaceuticals, described in section V.B.3.b. of this final rule with comment period. In cases where ASP information is not available, payment will be made using WAC, and, if WAC is also unavailable, payment will be made at 95 percent of the product’s most recent AWP. Further, payment for all new nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable bi ologicals with HCPCS codes but for which we do not have OPPS claims da ta will be packaged for CY 2012. Finally, we are assigning status indicator “K” to HCPCS codes for new drugs and nonimplantable biologicals for which we do not have OPPS cl aims data and for which we have not granted pass-through status for CY 2012. With respect to new items for which we do not have ASP data, once their ASP data becomes available in later quarterly submissions,CMS-1525-FC 728 their payments will be adjusted so that the rates will be base d on the ASP methodology and set to the finalized ASP amount of ASP+4 percent. Th is policy will ensure that payment is made for actual acquisition cost and pharmacy overhead for these new products. For CY 2012, we also proposed to continue our CY 2011 policy to base payment for new therapeutic radiopharmaceuticals with HCPCS codes, but which do not have pass-through status and for wh ich we do not have claims data, on the WACs for these products if ASP data for these therapeutic ra diopharmaceuticals are not available. If the WACs are also unavailable, we proposed to make payment for a new therapeutic radiopharmaceutical at 95 percent of the product’s most recent AWP because we would not have mean costs from hospital claims da ta upon which to base payment. Analogous to new drugs and biologicals, we proposed to continue our policy of assigning status indicator “K” to HCPCS codes for new th erapeutic radiopharmaceuticals without OPPS claims data for which we have not granted pass-through status. We did not receive any public comment s specific to our proposal for new therapeutic radiopharmaceuticals with HCPCS codes but without pass-through status. However, commenters on the CY 2012 OPPS/ ASC proposed rule were generally supportive of the ASP methodology for payment for therapeutic radiopharmaceuticals in the HOPD, and we are finalizing an ASP payment methodology for separately payable therapeutic radiopharmaceuticals for CY 2012, as discussed in section V.B.3.c. of this final rule with comment period.CMS-1525-FC 729 We are finalizing our CY 2012 proposals, without modification, to provide payment based on WAC for new therapeuti c radiopharmaceuticals with HCPCS codes but without pass-through status and for which we do not have cl aims data, if ASP data for these therapeutic radiopharmaceuticals is not available. If WAC information is also unavailable, we will make payment for new therapeutic radiopharmaceuticals at 95 percent of the product’s most recent AWP. In addition, we are assign ing status indicator “K” to HCPCS codes for new therapeutic ra diopharmaceuticals without claims data in CY 2012 that do not have pass-through status. Consistent with other ASP-based pa yments, for CY 2012, we proposed to announce any changes to the payment amounts for new drugs and bi ologicals in the CY 2012 OPPS/ASC final rule with comment pe riod and also on a quarterly basis on the CMS Web site during CY 2012 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 will also be changed accordingly, based on later quarter ASP submissions. We note that the new CY 2012 HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals were not available at the time of development of the proposed rule. However, they are included in Addendum B to this CY 2012 OPPS /ASC final rule with comment period. They are assigned comment indicator “NI” in Addendum B to reflect that their interim final OPPS treatment is open to public co mment on this CY 2012 OPPS/ASC final rule with comment period.CMS-1525-FC 730 We did not receive any public comment s on our proposal to announce, via the CMS Web site, any changes to the OPPS paym ent amounts for new drugs and biologicals on a quarterly basis. Therefore, for the r easons described in th e CY 2012 proposed rule, we are finalizing our proposal and will update payment rates for new drugs, biologicals, and therapeutic radiopharmaceuticals, as neces sary, in association with our quarterly update process and provide this information on the CMS Web site. There are several nonpass-through drugs and biologicals that were payable in CY 2010 and/or CY 2011, for which we did not have CY 2010 hospital claims data available for the proposed rule and for wh ich there were no other HCPCS codes that describe different doses of the same drug. These drugs and biologicals do have pricing information available for the ASP met hodology. In the CY 2012 OPPS/ASC proposed rule (76 FR 42265), we noted that there are cu rrently no therapeutic radiopharmaceuticals in this category. In order to determine the packaging status of these products for CY 2012, we calculated an estimate of the per day cost of each of these items by multiplying the payment rate for each product based on ASP+4 percent, similar to other nonpass-through drugs and biologic als paid separately under the OPPS, by an estimated average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatient se tting. We proposed to package items for which we estimated the per day cost to be less than or equal to $80, which was the general packaging thre shold that we proposed for drugs , nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY 2012. We proposed to pay separately for items with an estimated per day cost greater than $80 (with the exce ption of diagnosticCMS-1525-FC 731 radiopharmaceuticals, contrast agents, and implantable biolog icals, which we proposed to continue to package regardless of cost (as discussed in more detail in section V.B.2.d. of this final rule with comment period)) in CY 2012. We proposed that the CY 2012 payment for separately payable items without CY 2010 claims data would be ASP+4 percent, similar to payment for ot her separately payable nonpass-through drugs and biologicals under the OPPS. In accordan ce with the ASP methodology used in the physician’s office setting, in the absence of ASP data, we proposed to use the WAC for the product to establish the ini tial payment rate. However, we noted that if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available. We did not receive any public comments on our proposal to use estimated per day costs for these drugs and biologicals or on th e resulting packaging status of these drugs and biologicals. However, upon receivi ng updated CY 2011 claims data for HCPCS codes J0364 (Injection, apomorphine hydrochl oride, 1 mg), J0630 (Injection, calcitonin salmon, up to 400 units), and J9216 (Injection, interferon, gamma 1-b, 3 million units) for this final rule with comment period, we determ ined that we no longer needed to calculate an estimated average number of units for these three items because we now have sufficient data upon which to base payment. Therefore, for CY 2011, we calculated the packaging status for HCPCS codes J0364, J0630, and J9216 using our standard methodology as described above. These codes and their packaging status are discussed further in section V.B.2.b. of this final rule with comment period. Therefore, for the reasons described in our proposed rule, we are finalizing our CY 2012 proposal, withCMS-1525-FC 732 modification, to use the estimated number of units per day included in Table 40 below to determine estimated per day costs for the corresponding drugs and biologicals for CY 2012. Further, as we note in section V.B.2.b. of this final rule with comment period, the packaging threshold for CY 2012 has change d from $80 in the proposed rule to $75 in this final rule with comment period. As a re sult of this change, which occurred because of our use of the most recent forecast of th e quarterly PPI index levels in our update of the CY 2012 packaging threshold for the fi nal rule with comment period, we will package those drugs with an estimated per day cost less than or equal to $75 and provide separate payment for those drugs an d biologicals (other than diagnostic radiopharmaceuticals, contrast agents and implantable biologi cals) with estimated per day costs over $75 for CY 2012. For those dr ugs and biologicals without CY 2010 claims data that we determine to be separately payable in CY 2012, payment will be made at ASP+4 percent. If ASP information is not available, payment will be based on WAC, or 95 percent of the most recently published AW P if WAC is not available. The final estimated units per day and status indicator s for these items are displayed in Table 40 below.
TABLE 40.— DRUGS AND BIOLOGICALS WITHOUT CY 2010 CLAIMS DATA

CY 2012 HCPCS

Code CY 2012 Long Descriptor Estimated Average Number of Units Per Day CY 2012

SI CY 2012 APC J0205 Injection, alglucerase, per 10 units 420 K 0900

J1680 Injection, human fibrinogen concentrate, 100 mg 49 K 1290 J2513 Injection, pentastarch, 10% solution, 100 ml 4 K 1222CMS-1525-FC 733

CY 2012 HCPCS

Code CY 2012 Long Descriptor Estimated Average Number of Units Per Day CY 2012

SI CY 2012 APC

J2724 Injection, protein c conc entrate, intravenous, human, 10 iu 1540 K 1139 J3355 Injection, urofollitropin, 75 IU 2 K 1741 Q0515 Injection, sermorelin acetate, 1 microgram 70 K 3050

Finally, there were five drugs and biologicals , shown in Table 34 of the proposed rule (76 FR 42266), that were payable in CY 2010, but for which we lacked CY 2010 claims data and any other pricing inform ation for the ASP methodology for the CY 2012 OPPS/ASC proposed rule. In CY 2009, for si milar items without CY 2007 claims data and without pricing information for the ASP methodology, we previously stated that we were unable to determine their per day cost and we packaged these items for the year, assigning these items status indicator “N.” For CY 2010, we finalized a policy to cha nge the status indicator for drugs and biologicals previously assigned a payable status indicator to status indicator “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)) whenever we lacked claims data and prici ng information and were unable to determine the per day cost. In addition, we noted that we would provide separate payment for these drugs and biologicals if pricing informati on reflecting recent sales becomes available mid-year in CY 2010 for the ASP methodology. If pricing information became available, we would assign the products status indicato r “K” and pay for them separately for the remainder of CY 2010. In the CY 2011 O PPS/ASC final rule with comment period (75 FR 71973), for CY 2011, we continued our CY 2010 policy to assign status indicatorCMS-1525-FC 734 “E” to drugs and biologicals th at lacked CY 2009 claims data and pricing information for the ASP methodology. We also continued our po licy to change the status indicator for these products to “K” if pricing information became available, and pay for them separately for the remainder of CY 2011. For CY 2012, we proposed to continue our CY 2011 policy to assign status indicator “E” to drugs and biologicals th at lack CY 2010 claims data and pricing information for the ASP methodology. All drugs and biologicals without CY 2010 hospital claims data and data based on th e ASP methodology that ar e assigned status indicator “E” on this basis at the time of th e proposed rule for CY 2012 are displayed in Table 34 of the proposed rule (76 FR 42266). If pricing information becomes available, we proposed to assign the produc ts status indicator “K” and pay for them separately for the remainder of CY 2012. We did not re ceive any public comments on these proposals. We did not receive any public comments on our proposal to change the status indicators of drugs and biologicals without CY 2010 claims data or pricing information for the ASP methodology. After the proposed rule was published, we received pricing information for HCPCS code J9213 (Injection, interferon, alfa-2a, recombinant, 3 million units) for CY 2012, and it is included in A ddendum B to this CY 2012 OPPS/ASC final rule with comment period (which is referenced in section XVII. of this final rule with comment period and available vi a the Internet on the CMS Web site) with an assigned CY 2012 status indicator of “N.” Further, as we have used updated claims data and ASP pricing information for this final rule with comment period, we have newly identified HCPCS codes J2265CMS-1525-FC 735 (Injection, minocycline hydrochloride, 1 mg), Q4123 (Alloskin RT), Q4125 (Arthroflex), Q4126 (Memoderm), Q4127 (Talymed), Q412 8 (Flexhd or alopatch hd), and Q4129 (Unite biomatrix) as lacki ng CY 2010 claims data and any other pricing information for the ASP methodology. Therefore, in addi tion to the HCPCS codes for which we proposed to assign status indicator “E” for CY 2012 due to a lack of claims data and any other pricing information in the proposed rule , we are assigning stat us indicator “E” to HCPCS codes J2265, Q4123, Q4125, Q4126, Q4127, Q4128, and Q4129. We are finalizing our CY 2012 proposal, without modifi cation, to assign status indicator “E” to these drugs and biologicals. As was our policy in CY 2011, if pricing information becomes available for these products in CY 2012 we will assign the products status indicator “K” and pay for them sepa rately for the remainder of CY 2012. All drugs and biologicals without CY 2010 hos pital claims data and data based on the ASP methodology that are assi gned status indicator “E” on this basis at the time of this final rule with comment period for CY 2012 are displayed in Table 41 below.
TABLE 41.— DRUGS AND BIOLOGICALS WITHOUT CY 2010 CLAIMS DATA AND WITHOUT PRICING INFORMATION FOR THE ASP METHODOLOGY

CY 2012 HCPCS Code CY 2012 Long Descriptor CY 2012 SI J2265 Injection, minocycline hydrochloride, 1 mg E J2940 Injection, somatrem, 1 mg E J3305 Injection, trimetrexate glucuronate, per 25 mg E J8650 Nabilone, oral, 1 mg E J9165 Injection, diethylstilbestrol diphosphate, 250 mg E Q4123 Alloskin RT E Q4125 Arthroflex E Q4126 Memoderm E Q4127 Talymed ECMS-1525-FC 736
CY 2012 HCPCS Code CY 2012 Long Descriptor CY 2012 SI Q4128 Flexhd or alopatch hd E Q4129 Unite biomatrix ECMS-1525-FC 737
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 th e total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable pe rcentage” (currently 2.0 percent, as stated below) of total program payments estimated to be made for all covered services under the hospital OPPS furnished for that year. For a y ear (or portion of a year) before CY 2004, the applicable percentage was 2.5 percent; for CY 2004 and subsequent years, the applicable percentage is a percentage specified by the Secretary up to (but not to exceed) 2.0 percent. If we estimate before the beginning of th e calendar year that the total amount of pass-through payments in that year w ould exceed the applicable percentage, section 1833(t)(6)(E)(iii) of the Act require s a uniform prospective reduction in the amount of each of the transitional pass-through pa yments made in that year to ensure that the limit is not exceeded. We make an es timate of pass-through spending to determine not only whether payments exceed the applicab le percentage, but al so to determine the appropriate pro rata reducti on to the conversion factor for the projected level of pass-through spending in the following year in order to ensure that total estimated pass-through spending for the pr ospective payment year is b udget neutral, as required by section 1883(t)(6)(E) of the Act.CMS-1525-FC 738 For devices, developing an estimate of pass-through spending in CY 2012 entails estimating spending for two groups of items. Th e first group of items consists of device categories that were recently made elig ible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2012. 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. Th e second group contains items that we know are newly elig ible, or project may be newly eligible, for device pass-through payment in the remaining quart ers of CY 2011 or beginning in CY 2012. Beginning in CY 2010, the pass-through eval uation process and pass-through payment for implantable biologicals newly approve d for pass-through payment beginning on or after January 1, 2010, that are surgically inserted or im planted (through a surgical incision or a natural orifice; also referred to herein as “implantable biologicals”) is the device pass-through process and payment methodology only (74 FR 60476). In the CY 2012 OPPS/ASC proposed rule (76 FR 42266), we proposed for the CY 2012 OPPS that the estimate of pass-t hrough spending for implantable bi ologicals newly eligible for pass-through payment beginning in CY 2012 be included in the pass-through spending estimate for this second group of device categories. The su m of the CY 2012 pass-through estimates for these two groups of device categories w ould equal the total CY 2012 pass-through spending estimate for de vice categories with pass-through status. For devices eligible for pa ss-through payment, section 1833(t)(6)(D)(ii) of the Act establishes the pass-through payment amount as the amount by which the hospital’sCMS-1525-FC 739 charges for the device, adjusted to cost, ex ceeds the portion of the otherwise applicable OPPS fee schedule payment that the Secretary de termines is associated with the device. As discussed in section IV.A .2. of the proposed rule and this final rule with comment period, we deduct from the pass-through paym ent for an identified device category eligible for pass-through paym ent an amount that reflects the portion of the APC payment amount that we determine is associated with th e cost of the device, defined as the device APC offset amount, when we believe that the predecessor device costs for the device category newly approved for pass-through pa yment are already p ackaged into the existing APC structure. For each device cate gory that becomes newly eligible for device pass-through payment, including implantabl e biologicals from CY 2010 forward, we estimate pass-through spending to be the di fference between payment for the device category and the device APC offset amount, if applicable, for the procedures that would use the device. If we determine that the predecessor device costs for the new device category are not already included in the existing APC structure, the pass-through spending estimate for the device category is th e full payment at charges adjusted to cost. 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 amount 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 applicableCMS-1525-FC 740 fee schedule amount that the Secretary dete rmines is associated with the drug or biological. Because we proposed to pay for most nonpass-through separately payable drugs and nonimplantable biologicals under the CY 2012 OPPS at ASP+4 percent, which represented the othe rwise applicable fee schedule amount associated with most pass-through drugs and biologicals, and because we proposed to pay for CY 2012 pass-through drugs and nonimplant able biologicals at ASP+6 percent or the Part B drug CAP rate, if applicable, our estimate of drug and nonimplantable biological pass-through payment for CY 2012 would not be zero, as di scussed below. Furthermore, payment for certain drugs, specifically diagnostic ra diopharmaceuticals, co ntrast agents, and implantable biologicals without pass-through status, will always be packaged into payment for the associated procedures becau se these products will never be separately paid. However, all pass-through diagnostic radiopharmaceuticals and contrast agents with pass-through status approved prior to CY 2012 would be paid at ASP+6 percent or the Part B drug CAP rate, if applicable, lik e other pass-through dr ugs and biologicals. Therefore, our estimate of pass-through pa yment for all diagnostic radiopharmaceuticals and contrast agents with pass- through status approved prior to CY 2012 is also not zero. We note that there are no implantable biol ogicals proposed to continue on pass-through status for CY 2012 and, therefore, we did not propose to include implantable biologicals in our estimate of pass-through payment. Payment for nonpass-through implantable biologicals will continue to be packaged into the payment for the associated procedure as described in section V.B.2.d of the proposed rule.CMS-1525-FC 741 In section V.A.4. of the proposed rule and this final rule with comment period, we discuss our proposed and final policy to de termine if the cost of certain “policypackaged” drugs, including diagnostic radioph armaceuticals and contrast agents, are already packaged into the existing APC structure. If we determine that a “policy-packaged” drug approved for pa ss-through payment resembles predecessor diagnostic radiopharmaceuticals or contrast agen ts already included in the costs of the APCs that would be associated with the drug receiving pass-through payment, in the proposed rule, we proposed to offset the am ount of pass-through payment for diagnostic radiopharmaceuticals and contrast agents. For these drugs, the APC offset amount would be the portion of the APC payment for the specific procedure performed with the pass-through diagnostic radiopharm aceutical or contrast agent that is attributable to diagnostic radiopharmaceuticals or contrast agents, which we refer to as the “policy-packaged” drug APC offset amount. If we determine that an offset is appropriate for a specific diagnostic radi opharmaceutical or contrast agent receiving pass-through payment, we would reduce our estimate of pass-through payment for these drugs by this

amount. We note that the Part B drug CAP program has been postponed since January 1, 2009. We refer re aders to the Medicare Lear ning Network (M LN) Matters Special Edition article SE0833 fo r more information, availabl e via the CMS Web site at: http://www.cms.gov/MLNMatters Articles/downloads/SE0833.pdf . As of the publication of the proposed rule and this final rule with comment period, the postponement of the Part B drug CAP program is still in effect. As in past year s, for the proposed rule andCMS-1525-FC 742 this final rule with comment period, we do not have an effective Part B drug CAP rate for pass-through drugs and biologicals. Similar to pass-through estimates for de vices, the first group of drugs and nonimplantable biologicals requiring a pass-th rough payment estimate consists of those products that were recently made eligible fo r pass-through payment and that will continue to be eligible for pass-through payment in CY 2012. The second group contains drugs and nonimplantable biologicals that we know are newly eligible, or project will be newly eligible, in the remaining quarters of CY 2011 or beginning in CY 2012. The sum of the CY 2012 pass-through estimates for these two groups of drugs and biologicals would equal the total CY 2012 pass-through spending estimate for drugs and biologicals with pass-through status. B. Estimate of Pass-Through Spending In the CY 2012 OPPS/ASC proposed rule (76 FR 42267), we proposed to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2012, consistent with our OPPS policy from CY 2004 through CY 2011 (75 FR 71975). At the time of the proposed rule, for th e first group of de vices for pass-through payment estimation purposes, there was one device category eligib le for pass-through payment for CY 2012, C1749 (Endoscope, retrogr ade imaging/illumination colonoscope device (implantable)). We estimated that CY 2012 pass-through expenditures related to device category C 1749 would be approximately $35 million. However, for this final rule with comment period, for the first group of devices for pass-through payment estimateCMS-1525-FC 743 purposes, there currently are three device cate gories eligible for pa ss-through payment in CY 2012: C1749 that became effective Oc tober 1, 2010; C1830 (Powered bone marrow biopsy needle) that became effective Oc tober 1, 2011; and C1840 (Lens, intraocular (telescopic)) that became effective October 1, 2011. For this final rule with comment period, we estimate that CY 2012 pass-through e xpenditures related to these 3 categories will be approximately $47 million. In estimating our proposed CY 2012 pass-th rough spending for device categories in the second group, which also includes any estimate for implantable biologicals that are eligible for pass-through paymen t, we include: device categori es that we know at the time of the development of the proposed rule would be newly eligible for pass-through payment in CY 2012 (of which there were none ); additional device ca tegories (including categories that describe implant able biologicals) that we es timate could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2012; and contingent projecti ons for new device categories (including categories that describe implant able biologicals) established in the second through fourth quarters of CY 2012. We proposed to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in a pproving new pass-through device categories. For the proposed rule, the estimate of CY 2012 pass-through spending for this second group of device categories was $10 million. Using our established methodology, we proposed that the total estimated pass-t hrough spending for device categories forCMS-1525-FC 744 CY 2012 (spending for the first group of de vice categories ($35 million) plus spending for the second group of device categories ($10 million)) be $45 million.
Comment : One commenter was pleased with our estimate based on the one device category, C1749, in the CY 2012 OPPS/ASC proposed rule. Response : We appreciate this comment. For this CY 2012 OPPS/ASC final rule with comment period, 3 device categories, C1749, C1830, and C1840, will be eligible for pass-through payment for CY 2012, as mentioned earlier, and the pass-through sp ending estimate for those categories in $47 million. There also are possible new device categories for pass-through payment based on current applications and future a pplications. Therefore, the estimate of CY 2011 pass-through spending for the second group of device categories is $10 million. For this CY 2012 final rule with comment period, we are finalizing the continued use of our established methodology. Empl oying our established methodology that the estimate of pass-through devi ce spending in CY 2012 incorpor ates CY 2012 estimates of pass-through spending for known device categor ies with continuing pass-through status in CY 2012, those known or projected to be first effective January 1, 2012, and those device categories projected to be approve d during subsequent qua rters of CY 2011 or CY 2012, we estimate for this CY 2012 OPPS/ ASC final rule with comment period the total pass-through spending for device categ ories for CY 2011 to be $57 million. To estimate CY 2012 proposed pass-through spending for drugs andnonimplantable biologicals in the first group, specifically t hose drugs (including radiopharmaceuticals and contrast agents) and nonimplantable biologicals recently madeCMS-1525-FC 745 eligible for pass-through paym ent and continuing on pass-th rough status for CY 2012, we proposed to utilize the most recent Medica re physician’s office data regarding their utilization, information provided in the resp ective pass-through app lications, historical hospital claims data, pharmaceutical industr y information, and clinical information regarding those drugs or nonimplantable biologicals, to project the CY 2012 OPPS utilization of the products. For the known drugs and nonimplantable biologicals (excluding diagnostic radiopharmaceuticals and cont rast agents) that would be continuing on pass-through status in CY 2012, we estimated the propos ed pass-through payment amount as the difference between ASP+6 percent or the Part B drug CAP rate, as applicable, and the proposed payment rate for nonpass-through drug s and nonimplantable biologicals that would be separately paid at ASP+4 percen t, aggregated across the projected CY 2012 OPPS utilization of these products. Because payment for a diagnostic radiopharmaceutical or contrast agent would be packaged if the product were not paid separately due to its pass-through status, we proposed to include in the proposed CY 2012 pass-through estimate the difference between payment for the drug or nonimplantable biological at ASP+6 percent (o r WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the “policy-packaged” drug APC offset amount, if we have determined that the dia gnostic radiopharmaceutical or contrast agent approved for pass-through payment resembles predecessor diagnostic radiopharmaceuticals or contrast agents alrea dy included in the costs of the APCs that would be associated with the drug recei ving pass-through payment. For the CY 2012CMS-1525-FC 746 proposed rule, we proposed to continue to use the methodology used in CY 2011 to calculate a proposed spending estimate for this first group of drugs and biologicals to be approximately $5.7 million. We did not receive any public co mments on our proposed methodology for calculating the spending estimate for this first group of drugs and nonimplantable biologicals. Therefore, for this final rule with comment period, we are finalizing our proposed methodology. Using th at methodology, we calculated a final spending estimate for this first group of drugs and biologicals to be $21.5 million. To estimate CY 2012 pass-through spending for drugs and nonimplantable biologicals in the second gr oup (that is, drugs and nonimpla ntable biologicals that we knew at the time of development of the pr oposed rule would be newly eligible for pass-through payment in CY 2012, additional drugs and nonimplantab le biologicals that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2012, and projections for new drugs and nonimplantable biologicals that could be initia lly eligible for pass-th rough payment in the second through fourth quarters of CY 2012), we proposed to use ut ilization estimates from pass-through applicants, pharmaceutical indu stry data, clinical information, recent trends in the per unit ASPs of hospital outpa tient drugs, and projec ted annual changes in service volume and intensity as our basi s for making the CY 2012 proposed pass-through payment estimate. We also considered the most recent OPPS experience in approving new pass-through drugs and nonimplantable biologicals. Using our proposed methodology for estimating CY 2012 pass-throu gh payments for this second group ofCMS-1525-FC 747 drugs, we calculated a proposed spending es timate for this second group of drugs and nonimplantable biologicals to be approximately $13.8 million. We did not receive any public comment s on our proposed policy and, therefore, are finalizing our proposed methodology fo r estimating CY 2012 pass-through payments for this second group of drugs. For this fina l rule with comment period, we calculated a final spending estimate for this second group of drugs and biologicals to be $10.6 million. As discussed in section V.A. of the pr oposed rule and this final rule with comment period, radiopharmaceuticals are c onsidered drugs for pass-through purposes. Therefore, we included radiopharmaceuti cals in our proposed CY 2012 pass-through spending estimate for drugs and biologicals. Our proposed CY 2012 estimate for total pass-through spending for drugs and biologi cals (spending for the first group of drugs and nonimplantable biologicals ($5.7 million) plus spending for the second group of drugs and nonimplantable biologica ls ($13.8 million)) equaled $19.5 million. The final estimate for pass-through spending for the first group of drugs and biologicals is $21.5 million for CY 2012. The final estimate for pass-through spending for the second group of drugs and biologicals is $10.6 million for CY 2012. As discussed in section V.A. of this final rule w ith comment period, radiopharmaceuticals are considered drugs for pass-through pu rposes. Therefore, we included radiopharmaceuticals in our final CY 2012 pa ss-through spending estimate for drugs and biologicals. Our CY 2012 allocation in this final rule with comment period for total estimated pass-through spending for drugs and biologicals is $32.1 million.CMS-1525-FC 748 In summary, in accordance with the met hodology 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 nonimpla ntable biologicals that are continuing to receive pass-through payment in CY 2012 a nd those device categories, drugs, and nonimplantable biologicals that first beco me eligible for pass-through payment during CY 2012 will be approximately $89.1 million (approximately $57 million for device categories and approximately $32.1 million for drugs and nonimplantable biologicals), which represents 0.22 percent of total pr ojected OPPS payments for CY 2012. We estimate that pass-through spending in CY 2012 will not amount to 2.0 percent of total projected OPPS CY 2012 program spending.CMS-1525-FC 749 VII. OPPS Payment for Ho spital Outpatient Visits A. Background Currently, hospitals report HCPCS visit codes to describe three types of OPPS services: clinic visits; emergency department visits; and critical care services. For OPPS purposes, we recognize clinic visit codes as those codes defined in the CPT code book to report evaluation and management (E/M) servic es provided in the physician’s office or in an outpatient or other ambulatory facility. We recognize emergency department visit codes as those codes used to report E/M serv ices provided in the emergency department. Emergency department visit codes consist of five CPT codes that apply to Type A emergency departments and five Level II HCPC S codes that apply to Type B emergency departments. For OPPS purposes, we recogni ze critical care codes as those CPT codes used by hospitals to report critical care se rvices that involve th e “direct delivery by a physician(s) of medical care for a critically ill or critically injured patient,” as defined by the CPT code book. In Transmittal 1139, Change Request 5438, dated December 22, 2006, we stated that, under the OPPS, the time that can be reported as critical care is the time spent by a physic ian and/or hospital staff engaged in active face-to-face critical care of a critically ill or critically injured pa tient. Under the OPPS, we also recognize HCPCS code G0390 (Trauma response team associated with hospital critical care service) for th e reporting of a trauma response in association with critical care services. As we proposed in the CY 2012 OPPS/A SC proposed rule (76 FR 42268), we are continuing to recognize these CPT and HCPCS c odes describing clinic visits, Type A andCMS-1525-FC 750 Type B emergency department visits, critical care services, and trauma team activation provided in association with critical care services for CY 2012. These codes are listed below in Table 42.

TABLE 42.—HCPCS CODES USED TO REPORT CLINIC AND EMERGENCY DEPARTMENT VISITS AND CRITICAL CARE SERVICES

CY 2012 HCPCS

Code CY 2012 Descriptor

Clinic Visit HCPCS Codes

99201 Office or other outpatient visit for the evaluation and management of a new patient (Level 1)

99202 Office or other outpatient visit for the evaluation and management of a new patient (Level 2)

99203 Office or other outpatient visit for the evaluation and management of a new patient (Level 3)

99204 Office or other outpatient visit for the evaluation and management of a new patient (Level 4)

99205 Office or other outpatient visit for the evaluation and management of a new patient (Level 5)

99211 Office or other outpatient visit for the evaluation and management of an established patient (Level 1)

99212 Office or other outpatient visit for the evaluation and management of an established patient (Level 2)

99213 Office or other outpatient visit for the evaluation and management of an established patient (Level 3)

99214 Office or other outpatient visit for the evaluation and management of an established patient (Level 4)

99215 Office or other outpatient visit for the evaluation and management of an established patient (Level 5) Emergency Department Visit HCPCS Codes

99281 Emergency department visit for th e evaluation and management of a patient (Level 1)CMS-1525-FC 751

99282 Emergency department visit for th e evaluation and management of a patient (Level 2)

99283 Emergency department visit for th e evaluation and management of a patient (Level 3)

99284 Emergency department visit for th e evaluation and management of a patient (Level 4)

99285 Emergency department visit for th e evaluation and management of a patient (Level 5) G0380 Type B emergency department visit (Level 1) G0381 Type B emergency department visit (Level 2) G0382 Type B emergency department visit (Level 3) G0383 Type B emergency department visit (Level 4) G0384 Type B emergency department visit (Level 5) Critical Care Services HCPCS Codes

99291 Critical care, evaluation and manage ment of the critically ill or critically injured patient; first 30-74 minutes

99292 Critical care, evaluation and manage ment of the critically ill or critically injured patient; each additional 30 minutes G0390 Trauma response associated w ith hospital critical care service

During the February 28-March 1 2011 APC Panel meeting, the APC Panel recommended that CMS continue to report claims data for clinic and emergency department visits and observation, and, if CMS identifies chan ges in patterns of utilization or cost, it bring those issues be fore the Visits and Observation Subcommittee for future consideration. The APC Panel also recommended that the work of the Visits and Observation Subcommittee continue. In the CY 2012 OPPS/ ASC proposed rule (76 FR 42269), we indicated that we are a dopting these recommendations and plan to provide the requested data and analyses to the APC Panel at an upcoming meeting.CMS-1525-FC 752 At its August 10-11 2011 mee ting, the APC Panel recommended that the work of the Visits and Observation Subcomm ittee continue. We are accepting this recommendation. B. Policies for Hospital Outpatient Visits 1. Clinic Visits: New and Established Patient Visits As reflected in Table 42, hospitals use diffe rent CPT codes for clinic visits based on whether the patient being treated is a new pa tient or an established patient. Beginning in CY 2009, we refined the definitions of a new patient and an established patient to reflect whether or not the patien t has been registered as an in patient or outpatient of the hospital within the past 3 years. A patient who has been registered as an inpatient or outpatient of the hospital within the 3 years prio r to a visit would be considered to be an established patient for that visit, while a patient who has not been registered as an inpatient or outpatient of the hospital with in the 3 years prior to a visit would be considered to be a new patient for that visi t. We refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68677 through 68680) for a full discussion of the refined definitions. We stated in the CY 2012 OPPS/ASC pr oposed rule (76 FR 42269) that we continue to believe that defi ning new or established patien t status based on whether the patient has been registered as an inpatient or outpatient of the hospital within the 3 years prior to a visit will reduce hospitals’ administrative burde n associated with reporting appropriate clinic visit CPT codes, as we stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68677 through 68680). For CY 2012, we proposed toCMS-1525-FC 753 continue recognizing the refined definitions of a new patient and an established patient, and applying our policy of calculating median costs for clinic visits under the OPPS using historical hospital claims data. As discusse d in section II.A.2.e.(1 ) of the proposed rule and consistent with our CY 2011 policy, when ca lculating the median costs for the clinic visit APCs (0604 through 0608), we proposed to continue to utili ze our methodology that excludes those claims for visits that ar e eligible for payment through the extended assessment and management composite AP C 8002 (Level I Extended Assessment and Management Composite). We stated in the propo sed rule that we continue to believe that this approach results in the most accurate cost estimates for APCs 0604 through 0608 for
CY 2012.
Comment : Some commenters recommended th at CMS remove the distinction between new and established patie nt clinic visits, arguing that the length of time between a patient’s hospital visits has no bearing on services or resources provided during a specific hospital visit. Accordi ng to commenters, facilities mu st expend the same level of resources to evaluate, manage, and treat th e patient’s current c ondition, regardless of whether the patient was register ed as an inpatient or an out patient in the hospital within the past 3 years. In addition, some comme nters stated that th ere are significant operational issues involv ed with implementing the 3-year criterion for hospital clinic visit billing purposes. Some commenters acknowledged that CMS’ claims data indicate a new patient visit involves more resources than an established patient visi t, but argued that any differences in costs that are evident in cl aims data for new patient visits versus established patient visits woul d be the result of hospitals’ erroneous reporting of theseCMS-1525-FC 754 codes, rather than any real difference in the level of resources expended treating a new versus an established patient. The comme nters suggested that CMS recognize only the established patient visit code s and calculate payment rates for those codes by blending median costs for both the new and establ ished patient visits. The commenters acknowledged this may result in reductions to the APC payment rates for established patient visits. The commenters stated that , if CMS chooses to continue to require hospitals to report both new and established pa tient visit codes, the distinction should be based upon whether the patient has a medical record. Response : As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71986) and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60547), because hospital claims data con tinue to show significant cost differences between new and established patient visits, we continue to believe it is necessary and appropriate to recognize the CPT codes for both new and established patient visits and, in some cases, provide differential payment for new and established patient visits of the same level. Therefore, we do not believe it is appropriate to recognize only the established patient visit code s and calculate payment rates for those codes by blending median costs for both the new and established patient visits. For example, the final CY 2012 median cost for the Level 3 new patient clinic visit, described by CPT code 99203 and calculated using over 259,000 single claims from CY 2010, is approximately $103, while the final CY 2012 median cost for the Level 3 established patient clinic visit, described by CPT code 99213 and calculated us ing over 5.1 million si ngle claims fromCMS-1525-FC 755 CY 2010, is approximately $75. We believe th is difference in median costs warrants continued assignment of these CPT c odes to different APCs for CY 2012. Given that we have a substantial volume of single claims from a significant number of hospitals upon which to calculate the median costs for all levels of clinic visits, we do not agree with the commenters th at the differences in costs for new versus established patient visits are fl awed or the result of hospita ls’ erroneous reporting of these codes. We expect hospitals to report all HC PCS codes in accordance with correct coding principles, CPT code descriptions, and rele vant CMS guidance, which, in this case, specifies that the meanings of “new” and “esta blished” patients as included in the clinic visit CPT code descriptors pertai n to whether or not the patient has been registered as an inpatient or an outpatient of the hospital within the past 3 years (73 FR 68679). As we have stated in the past (74 FR 60547 and 75 FR 71986), we have no reason to believe that hospitals are systematically disregarding these principles to the extent that it would cause our median costs for clinic visits, which are based on data from millions of single claims, to be artificially skewed. As we stated in the CY 2009 OPPS/ ASC final rule with comment period (73 FR 68678) and the CY 2011 OPPS/ASC final rule with comment period (75 FR 71986) concerning the commenters’ requ est that the distinct ion between new and established patients be based upon whether the patient has a medical record, we continue to believe it is appropriate to include a time limit when determining whether a patient is new or established because we would expect th at care of a patient who was not treated atCMS-1525-FC 756 the hospital for several years prior to a visi t could require signifi cantly greater hospital resources than care for a patient who was recently treated at the hospital.
Comment: One commenter recommended th at CMS reassign HCPCS code G0379 (Direct admission of patient for hospi tal observation care) to APC 0616 (Level 5 Type A Emergency Visits) because of the consistent 2 times rule violation in APC 0604 (Level 1 Hospital Clinic Visits) and HCPCS code G0379’s si milarity in both median cost and clinical characteristics to CPT code 99285 (Emergency Department Visit Level 5). The commenter stated that CMS should cr eate a new APC and assign HCPCS code G0379 as a single code to this separate APC if CMS does not agree with G0379’s assignment to APC 0616. The commenter also stated that HCPCS code G0379 should be eligible for assignment to composite APC 8003 (Level II Extended Assessment and Management) along with CPT codes 99284 (Eme rgency Department Visit Level 4), 99285 (Emergency Department Visit Level 5) , 99291 (Critical Care First Hour), and G0384 (Level 5 Hospital Type B ED Visit) b ecause of the clinical similarity with the higher evaluation and management level codes. According to the commenter, the median costs for CPT codes 99205 (Office/Outpa tient Visit New Level 5) and 99215 (Office/Outpatient Visit Establis hed Level 5) are significantly lower than the median cost for HCPCS code G0379 and, therefore, woul d remain assigned to composite APC 8002 (Level I Extended Assessment and Management.) Response: Consistent with our longstanding and established policy to pay for the direct referral for observation through the lowest level clinic APC, originally outlined in the CY 2003 OPPS final rule (67 FR 66794 though 66796), we believe HCPCS codeCMS-1525-FC 757 G0379 is appropriately assigned to APC 0604. We continue to believe that the original rationale set forth in the CY 2003 OPPS final rule (67 FR 66794 through 66796) with respect to HCPCS code G0264 (Initial nursing as sessment of patient di rectly admitted to observation with a diagnosis other than congest ive heart failure, chest pain, or asthma), being assigned to the lowest level clinic visit APC is applicable to HCPCS code G0379, as HCPCS code G0379 may be used to descri be services previous ly identified by HCPCS code G0264. Accordingly, we disagree with the commenter that HCPCS code G0379 is clinically similar to HCPCS codes 99284, 99285, 99291, and G0384 and should be eligible for assignment to composite APC 8003, and we also disagree that HCPCS code G0379 should be assigned to APC 0616 or as a single code to a newly created APC. Therefore, we are finalizing our proposal to continue to assign HCPCS code G0379 to APC 0604 and composite APC 8002. After consideration of the public comments we receive d, we are finalizing our CY 2012 proposal, without modifica tion, to continue to define new or established patient status for the purpose of reporti ng the clinic visit CPT codes, on the basis of whether or not the patient has been register ed as an inpatient or outpatie nt of the hospital within the past 3 years. We also are finalizing our CY 2012 proposal, without modification, to continue our policy of calculating median co sts for clinic visits under the OPPS using historical hospital claims data. As discussed in detail in section II.A.2.e.(1) of this final rule with comment period and consistent with our CY 2011 policy, when calculating the median costs for the clinic visit APCs (0604 through 0608), we utilized our methodology that excludes those claims for visits that are eligible fo r payment through the extendedCMS-1525-FC 758 assessment and management composite AP C 8002 (Level I Extended Assessment and Management Composite). We continue to beli eve that this approach results in the most accurate cost estimates for APCs 0604 through 0608 for CY 2012. 2. Emergency Department Visits Since CY 2007, we have recognized two different types of emergency departments for payment purposes under th e OPPS—Type A emergency departments and Type B emergency departments. As descri bed in greater detail below, by providing payment for two types of emergency depart ments, we recognize, for OPPS payment purposes, both the CPT definition of an em ergency department, which requires the facility to be available 24 hours a day, and the requirements for emergency departments specified in the provisions of the Em ergency Medical Treatment and Labor Act (EMTALA) (Pub. L. 99-272), which do not sti pulate 24-hour availabi lity but do specify other obligations for Medicare- participating hospitals with emergency departments. For more detailed information on the EMTALA provisions, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68680). In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68132), we finalized the definition of a Type A emerge ncy department to distinguish it from a Type B emergency department. A Type A em ergency department must be available to provide services 24 hours a day, 7 days a wee k, and meet one or both of the following requirements related to the EMTALA defin ition of a dedicated emergency department specified at 42 CFR 489.24(b), spec ifically: (1) it is licensed by the State in which it is located under the applicable State law as an emergency room or emergency department;CMS-1525-FC 759 or (2) it is held out to the public (by name, posted signs, adve rtising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment. For CY 2007 (71 FR 68140), we assigned the five CPT E/M emergency department vis it codes for services provided in Type A emergency departments to five Emergency Visit APCs, specifically APC 0609 (Level 1 Emergency Visits), APC 0613 (Level 2 Emergency Visits), APC 0614 (Level 3 Emergency Visits), APC 0615 (Level 4 Emer gency Visits), and APC 0616 (Level 5 Emergency Visits). We defined a Type B emergency department as any dedicated emergency department that incurred EMTALA obligations but did not meet the CPT definition of an emergency department. For example, a hospital department that may be characterized as a Type B emergency depa rtment would meet the definition of a dedicated emergency department but may not be available 24 hours a day, 7 days a week. Hospitals with such dedicated emergency de partments incur EMTALA obligations with respect to an individu al who presents to the department and requests, or has a request made on his or her behalf, examination or treatment for a medical condition. To determine whether visits to Type B emergency departments have different resource costs than visits to either clinic s or Type A emergency departments, in the CY 2007 OPPS/ASC final rule with comment pe riod (71 FR 68132), we finalized a set of five HCPCS G-codes for use by hospitals to re port visits to all en tities that meet the definition of a dedicated emergency departme nt under the EMTALA regulations but that are not Type A emergency departments. These codes are called “Type B emergency department visit codes.” In the CY 2007 OPPS/ASC final rule with comment periodCMS-1525-FC 760 (71 FR 68132), we explained that these new HC PCS G-codes would serve as a vehicle to capture median cost and resource differe nces among visits provided by Type A emergency departments, Type B emergency depart ments, and clinics. We stated that the reporting of specific HCPCS G-codes for em ergency department visits provided in Type B emergency departments would permit us to specifically co llect and analyze the hospital resource costs of visits to these facilities in order to determine if, in the future, a proposal for an alternative payment policy might be warranted. We expected hospitals to adjust their charges appropriately to reflect differences in Type A and Type B emergency department visit costs. As we noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68681), the CY 2007 claims data used for that rulemaking were from the first year of claims data available for analysis th at included hospitals’ cost data for these new Type B emergency department HCPCS visit codes. Based on our analysis of the CY 2007 claims data, we confirmed that the median costs of Type B emergency department visits were less th an the median costs of Type A emergency department visits for all but the Level 5 visit. In other words, the median costs from the CY 2007 hospital claims represented real differences in the hos pital resource costs for the same level of visits in a Type A or Type B emergenc y department. Therefore, for CY 2009, we adopted the August 2008 APC Panel recomm endation to assign Levels 1 through 4 Type B emergency department visits to thei r own APCs and to assign the Level 5 Type B emergency department visit to the same APC as the Level 5 Type A emergency department visit.CMS-1525-FC 761 As discussed in the CY 2010 OPPS/AS C final rule with comment period (74 FR 60548 through 60551), analyses of CY 20 08 hospitals’ cost data from claims data used for CY 2010 ratesetting for the emergency department HCPCS G-codes demonstrated that the pattern of relative cost differences between Type A and Type B emergency department visits was largely consis tent with the distribut ions we observed in the CY 2007 data, with the exception that, in the CY 2008 data, we observed a relatively lower HCPCS code-specific median cost a ssociated with Level 5 Type B emergency department visits compared to the HCPCS c ode-specific median cost of Level 5 Type A emergency department visits. As a result, for CY 2010, we finalized a policy to continue to pay Levels 1 through 4 Type B emergency department visits through four levels of APCs, and to pay for Level 5 Type B emer gency department visits through new APC 0630 (Level 5 Type B Emergency Department Visit), to which the Level 5 Type B emergency department visit HCPCS code is the only service assigned. As we noted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71987), the pattern of relative cost differences between Type A and Type B emergency department visits is consistent with the distributions we observed in the CY 2008 claims data. Therefore, we finalized our proposal to continue to pay for Type B emergency department visits in CY 2011 base d on their median cost s through five levels of APCs: APC 0626 (Level 1 Type B Emerge ncy Department Visit), APC 0627 (Level 2 Type B Emergency Department Visit), APC 0628 (Level 3 Type B Emergency Department Visit), APC 0629 (Level 4 Type B Emergency Department Visit), and
APC 0630.CMS-1525-FC 762 We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42270) that we continue to believe that this configuration pays appropriately for each level of Type B emergency department visits based on estimat ed resource costs from the most recent CY 2010 claims data. Therefore, we proposed to continue to pay for Type B emergency department visits in CY 2012 based on their me dian costs through the five levels of Type B emergency department APCs (APCs 0626 through 0630). We also noted that, as discussed in section II.A.2.e.( 1) of the proposed rule and consistent with our CY 2011 policy, when calculating the median costs for the emergency department visit and critical care APCs (0609 through 0617 and 0626 throug h 0630), we proposed to utilize our methodology that excludes those claims for vi sits that are eligible for payment through the extended assessment and management co mposite APC 8002. We stated that we continue to believe that this approach will re sult in the most accurate cost estimates for APCs 0604 through 0608 for CY 2012. Table 36 of the proposed rule displayed the proposed median costs for each level of Type B emergency department visit APCs under the proposed CY 2012 configuration, compared to the proposed CY 2012 median costs for each level of clinic visit APCs and each level of Type A emergency department visit
APCs. We did not receive any public comment s on this proposal. We are finalizing our CY 2012 proposal, without modification, to continue paying for Type B emergency department visits in CY 2012, consistent with their median costs through five levels of Type B emergency department visit APCs: APC 0626 (Level 1 Type B Emergency Visits), APC 0627 (Level 2 Type B Emerge ncy Visits), APC 0628 (Level 3 Type BCMS-1525-FC 763 Emergency Visits), APC 0629 (Level 4 Type B Emergency Visits), and APC 0630 (Level 5 Type B Emergency Visits). We ar e assigning HCPCS codes G0380, G0381, G0382, G0383, and G0384 (the levels 1, 2, 3, 4, and 5 Type B emergency department visit Level II HCPCS codes) to APCs 0626, 0627, 0628, 0629, and 0630, respectively, for CY 2012. We continue to believe that this configurati on pays appropriately for each level of Type B emergency department visits based on estimat ed resource costs from the most recent claims data. We also note that, as discussed in sec tion II.A.2.e.(1) of this final rule with comment period and consistent with our CY 2011 policy, when calculating the median costs for the emergency department visit and critical care APCs (0609 through 0617 and 0626 through 0630), we utilized our methodology th at excludes those claims for visits that are eligible for payment through the extended assessment and management composite APC 8002 (Level I Extended Asse ssment and Management Composite). We continue to believe that this approach will re sult in the most accurate cost estimates for APCs 0604 through 0608 for CY 2012. Table 43 below displays the final me dian costs for each level of Type B emergency department visit APCs under th e CY 2012 configuration, compared to the final CY 2012 median costs for each level of cl inic visit APCs and each level of Type A emergency department visit APCs.

TABLE 43.—COMPARISON OF MEDIAN COSTS FOR CLINIC VISIT APCs, TYPE B EMERGENCY DEPARTME NT VISIT APCs, AND TYPE A EMERGENCY DEPARTMENT VISIT APCsCMS-1525-FC 764

Visit Level CY 2012 Clinic Visit Approximate APC Median Cost CY 2012 Type B Emergency Department Approximate APC Median Cost CY 2012 Type A Emergency Visit Approximate APC Median Cost
Level 1 $50 $41 $52 Level 2 $75 $59 $89 Level 3 $105 $94 $142 Level 4 $138 $141 $229 Level 5 $178 $271 $340

For CY 2010 and in prior years, the AM A CPT Editorial Panel defined critical care CPT codes 99291 (Critical care , evaluation and management of the critically ill or critically injured patient; first 30-74 minut es) and 99292 (Critical care, evaluation and management of the critically ill or critica lly injured patient; each additional 30 minutes (List separately in addition to code for pr imary service)) to include a wide range of ancillary services such as electrocardiogram s, chest X-rays and pulse oximetry. As we have stated in manual instruction, we expect hospitals to report in accordance with CPT guidance unless we instruct otherwise. For cr itical care in particular, we instructed hospitals that any services that the CPT Ed itorial Panel indicates are included in the reporting of CPT code 99291 (including those serv ices that would otherwise be reported by and paid to hospitals using any of the CP T codes specified by the CPT Editorial Panel) should not be billed separately. Instead, hospi tals were instructed to report charges for any services provided as part of the critical care services. In establishing payment rates for critical care services, and other services , CMS packages the costs of certain items and services separately reported by HCPCS codes in to payment for critical care services andCMS-1525-FC 765 other services, according to the standard OPPS methodology for packaging costs (Medicare Claims Processing Manual, Pub. 100-04, Chapter 4, Section 160.1). For CY 2011, the AMA CPT Editorial Panel revised its guidance for the critical care codes to specifically state that, for hosp ital reporting purposes, cr itical care codes do not include the specified anci llary services. Beginning in CY 2011, hospitals that report in accordance with the CPT guidelines should re port all of the ancillary services and their associated charges separately when they are provided in conjunction with critical care. Because the CY 2011 payment rate for critical care services is based on hospital claims data from CY 2009, during which time hospita ls would have reported charges for any ancillary services provided as part of the cr itical care services, we stated in the CY 2011 OPPS/ASC final rule with comm ent period that we believe it is inappropriate to pay separately in CY 2011 for the an cillary services that hospita ls may now report in addition to critical care services ( 75 FR 71988). Therefore, for CY 2011, we continued to recognize the existing CPT codes for critical ca re services and estab lished a payment rate based on historical data, into which the cost of the ancillary services is intrinsically packaged. We also implemented claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment . We noted in the CY 2011 OPPS/ASC final rule with comment period that the payment stat us of the ancillary services will not change when they are not provided in conjunction with critical care services . We assigned status indicator “Q3” (Codes That May Be Paid Th rough a Composite APC) to the ancillary services to indicate that paym ent for them is packaged into a single payment for specificCMS-1525-FC 766 combinations of services and made through a separate APC payment or packaged in all other circumstances, in accordance with th e OPPS payment status indicated for status indicator “Q3” in Addendum D1 to the CY 2011 OPPS/ASC final rule with comment period. The ancillary services th at were included in the definiti on of critical care prior to CY 2011 and that will be conditionally pack aged into the payment for critical care services when provided on the same date of se rvice as critical care services for CY 2011 were listed in Addendum M to that final ru le with comment period. We noted in the CY 2011 OPPS/ASC final rule with comment pe riod that our treatment of the revised CY 2011 critical care codes was open to public comment for 60 days following issuance of the CY 2011 OPPS/ASC final rule with comment period, and that we would respond to the comments in the CY 2012 final rule with comment period. Because the proposed CY 2012 median costs fo r critical care services were based upon CY 2010 claims data, which reflect the CPT billing guidan ce that was in effect prior to CY 2011, in the CY 2012 OPPS/ASC proposed rule (76 FR 42271), we proposed to continue the methodology established in the CY 2011 OPPS/ASC final rule with comment period of calculating a payment rate for critical care services based on our historical data, into which the cost of the anc illary services is intrinsically packaged. We proposed to continue to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment.
Comment : Several commenters who responded to the CY 2011 OPPS/ASC final rule with comment period and the CY 2012 OPPS/ASC proposed rule supported theCMS-1525-FC 767 proposed policy to continue to conditionally package payment for ancillary services that are reported on the same date of service as critical care services. Some commenters recommended that a modifier be implemente d to allow the identification of ancillary services provided to critical care patients dur ing the same date of service as critical care services, but outside the critical care period, so that those se rvices are not inappropriately packaged into the critical care services payment. Commenters also recommended that CMS, in setting the payment rate for critical care services by estimating the costs of the packaged ancillary services, establish a me thodology that includes review of multiple cost report revenue centers and that CMS consult with the hospital industry on the appropriate methodology used to calculate th e actual cost related to the provision of critical care services. Response : We believe all services provided in conjunction with critical care, as part of a single clinical enc ounter, are included in the crit ical care period and, therefore, do not support the commenters’ recommendation that a modifier be implemented to allow the identification of ancillary services provide d to critical care pa tients during the same date of service as critical care services, but outside the critical care period. Hospitals may use HCPCS modifier “-59” to indicate when an ancillary procedure or service is distinct or independent from critical care when perf ormed on the same day but during a different encounter. For CY 2012, CMS will continue to conditionally package payment for the ancillary services previously included in CP T’s definition of cri tical care prior to CY 2011, when they are reported on the same da te of service as critical care services.CMS-1525-FC 768 In regard to the commenter who suggeste d that CMS include review of multiple cost report revenue centers wh en calculating the costs of th e packaged ancillary services, we note that the methodology the commenter s recommended is consistent with the methodology we already have in place. As disc ussed in section II.A.1.c. of this final rule with comment period, we calculate hosp ital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we have claims data. We apply the hospital-specific CCR to the hospi tal’s charges at the most detailed level possible, based on a revenue code-to-cost cente r crosswalk that cont ains a hierarchy of CCRs used to estimate costs from charges for e ach revenue code. Therefore, we base our cost estimation of each packaged ancillary se rvice on the most spec ific cost center to which the revenue code reported with that serv ice maps. We then package the cost that we estimate as a result of that process into the median cost calculation for critical care. After consideration of the public comments we receive d, we are finalizing our CY 2012 proposal, without modification, to c ontinue the methodology established in the CY 2011 OPPS/ASC final rule with comment period of calculating a payment rate for critical care services based on our historical data, into wh ich the cost of the ancillary services is intrinsically packag ed. We also will continue to implement claims processing edits that conditionally package payment for th e ancillary services that are reported on the same date of service as critical car e services in order to avoid overpayment. 3. Visit Reporting Guidelines Since April 7, 2000, we have instructed hos pitals to report facility resources for clinic and emergency department hospital out patient visits using the CPT E/M codes andCMS-1525-FC 769 to develop internal hospital gui delines for reporting the appropria te visit level. Because a national set of hospital- specific codes and guidelines do not curren tly exist, we have advised hospitals that each hospital’s internal guidelines that determine the levels of clinic and emergency department visits to be reported should follow the intent of the CPT code descriptors, in that the guidelines should be designe d to reasonably relate the intensity of hospital resources to the different levels of effort represented by the codes. As noted in detail in the CY 2008 O PPS/ASC final rule with comment period (72 FR 66802 through 66805), we observed a normal and stable distribution of clinic and emergency department visit levels in hospita l claims over the past several years. The data indicated that hospitals, on average, were billing all five levels of visit codes with varying frequency, in a consistent pattern over time. Overall, both the clinic and emergency department visit distributions indica ted that hospitals were billing consistently over time and in a manner that distinguished between visit levels, re sulting in relatively normal distributions nationally for the OPPS, as well as for specific classes of hospitals. The results of these analyses were generall y consistent with our understanding of the clinical and resource characteristics of differe nt levels of hospital outpatient clinic and emergency department visits. In the CY 2008 OPPS/ASC proposed rule (72 FR 42764 through 42765), we specifically invited public comment as to whether there was still a pressing need for national guidelines at this poi nt in the maturation of the OPPS, or if the current system where hospitals create and appl y their own internal guidelines to report visits was more practical and appropriately flexible for hospitals. We explained that, although we have reiterated our goal since CY 2000 of creatin g national guidelines, thisCMS-1525-FC 770 complex undertaking for these important and common hospital services was proving more challenging than we initially anticip ated as we received new and expanded information from the public on current hospital reporting practices that led to appropriate payment for the hospital resources associated with clinic and emergency department visits. We stated our belief that many hosp itals had worked diligently and carefully to develop and implement their own internal guidelines that refl ected the scope and types of services they provided throughout the hospi tal outpatient system. Based on public comments, as well as our own knowledge of how clinics operate, it seemed unlikely that one set of straightforward national guidelines co uld apply to the report ing of visits in all hospitals and specialty clinic s. In addition, the stable distribution of clinic and emergency department visits reported unde r the OPPS over the past several years indicated that hospitals, both nationally in the aggregate and groupe d by specific hospital classes, were generally billing in an appr opriate and consistent manner as we would expect in a system that accurately distingui shed among different levels of service based on the associated hospital resources. Therefore, we did not propose to implement national visit guidelin es for clinic or emergency department visits for CY 2008. As we have done since publication of the CY 2008 OPPS/ASC final rule with comment pe riod, we again examined the distribution of clinic and Type A emergency depart ment visit levels based upon updated CY 2010 claims data available for the CY 2012 proposed rule and this final rule with comment period. Analysis of these data confirm th at we continue to observe a normal and relatively stable distribution of clinic and emergency departme nt visit levels in hospitalCMS-1525-FC 771 claims compared to CY 2009 data. As we did in the proposed rule (76 FR 42272), we note that we have observed a slight shift over time toward higher numbers of Level 4 and Level 5 visits relative to the lower level vis its, when comparing the distributions of Type A emergency department visit levels from CY 2005 claims data to those from CY 2010. We also note that, in aggreg ate, hospitals’ charges for these higher level emergency department visits seem to be trending upw ard year over year. In the CY 2012 proposed rule, we welcomed comment on whether this is consistent with individual hospitals’ experiences in developing, implementing, and refining their own guidelines over the last several years.
Comment : Commenters requested that, with respect to the slight shift over time toward higher numbers of Level 4 and Level 5 visits relative to the lower visit levels, CMS provide data regarding whether it has obs erved any shift in reporting “new” versus “established” patient visits af ter instituting the new definiti on of established patient in CY 2009, noting that CMS has 2 years of clai ms data since the definition change. According to commenters, if hospitals changed their reporting based on the new definition, the data should reflect a shift to ward the higher level visits, because more patients would have been “established” pa tients under the new definition. The commenters stated that if CMS has not noticed this shift in th e proportion of new and established patient visits be ginning with CY 2009 claims, it suggested that hospitals may not have begun applying the revi sed definition and a shift in le vel 4 and 5 visits may have occurred more in response to the increasing trend of comorbid conditions in emergency department visits than from hospitals’ re sponse to CMS’ visit guidelines. TheCMS-1525-FC 772 commenters suggested that CM S evaluate secondary diagnoses on Level 4 and Level 5 Type A emergency department visit claims. Another commenter stated thatthis trend is consistent with its observations and listed the following as possible reasons for the higher Medicare acu ity: some patients with low acuity problems are seeking care elsewhere because of long emergency department wait times and higher copaymen ts; increasing options for faster, less expensive care for lower acuity problems (reta il and hospital-based clinics and extended physician and urgent care office hours); public education regarding appropriate reasons for going to the emergency department; and patients delaying care fo r the above reasons and then presenting to the emergency depa rtment in a relatively sicker condition. Response : We appreciate the commenters’ discussion of possible contributing factors to the shift toward increasing nu mbers of higher level Type A emergency department visits. We will continue to examine our data and explore any changes or trends that correlate to the slight shift ove r time toward higher numbers of Level 4 and Level 5 Type A emergency department visits relative to the lower Type A emergency department visit levels. We note that info rmation about claims volume for particular HCPCS codes for a given calenda r year, including new and esta blished patient visits, is publicly available in the median cost file ma de available for each OPPS final rule with comment period and located on the CMS Web site. As we stated in the proposed rule, we continue to believe that, generally, hospitals are billing in an appr opriate and consistent manner that distinguishes among different levels of visits based on their required hospital

resources.CMS-1525-FC 773
Comment: Some commenters suppo rted CMS’ proposal to continue to recognize hospital-specific visit guidelines rather than implement national guidelines because hospitals have grown accustomed to using thei r own coding systems to assign visit levels. In contrast, many commenters urged CMS to move forward with the implementation of national guidelines for hospitals to report visits, asserting that CMS has poor data upon which to calculate visit APC payment rates because there are no standard definitions, and citing the challenges of having different gui delines in place by different payers. The commenters recommended that, in the absen ce of national guidelines for hospital visit reporting, CMS support a request to the Amer ican Medical Association CPT Editorial Panel to create unique CPT codes for hospita l reporting of emergency department and clinic visits based on intern ally developed guidelines. In addition, some commenters expressed their appreciation for CMS’ enc ouragement of its contractors to use a hospital’s own guidelines when auditing a nd evaluating the appropriateness of codes assigned, but requested that hospitals be exempt from audits of visit billing until national guidelines are implemented. Response: As we have in the past (74 FR 60553 and 75 FR 71989 through 71990), we acknowledge that it would be desira ble to many hospitals to have national guidelines. However, we also understand that it would be disruptiv e and administratively burdensome to other hospitals that have su ccessfully adopted internal guidelines to implement any new set of national guidelines while we address the problems that would be inevitable in the case of any new set of guidelines that would be applied by thousands of hospitals. We will continue to regularly reevaluate patterns of hospital outpatient visitCMS-1525-FC 774 reporting at varying levels of disaggregation below the national level to ensure that hospitals continue to bill appr opriately and differentially for these services. We reiterate our expectation that hospitals’ internal guidelines fully comply with the principles listed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 68805), and we encourage hospitals with more specific ques tions related to the creation of internal guidelines to contact their servicing fiscal in termediary or MAC. Also, as originally noted in detail in the CY 2008 OPPS/ASC fi nal rule with comment period (72 FR 66648 through 66649), we continue to expect that hos pitals will not purposely change their visit guidelines or otherwise upcode clinic and em ergency department visits for purposes of extended assessment and management composite APC payment. We continue to encourage fiscal intermed iaries and MACs to review a hospital’s internal guidelines when an audit occurs, as indicated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66806). As we have stated in th e past (75 FR 71990), if the AMA were to create facility-specifi c CPT codes for reporti ng visits provided in HOPDs [based on internally developed guideli nes], we would consider such codes for
OPPS use. After consideration of th e public comments we receiv ed, we are continuing to encourage hospitals to use their own internal guidelines to determine the appropriate reporting of different levels of clinic and emergency departme nt visits. We note that it remains our goal to ensure that OPPS nationa l or hospital-specific visit guidelines continue to facilitate consistent and accurate reporting of hospital outpatient visits in aCMS-1525-FC 775 manner that is resource-based and supportiv e of appropriate OPPS payments for the efficient and effective provision of vi sits in hospital outpatient settings.CMS-1525-FC 776 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. Sections 1861(ff )(1) and (ff)(2) of the Act specify the items and services that are defined as partial hospi talization services and some conditions under which Medicare payment for the items and serv ices will be made. Section 1861(ff)(3) of the Act specifies that a partial hospitalization program (PHP) is a program furnished by a hospital or community mental health cen ter (CMHC) that meets the requirements specified under that subsection of the Act. 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 the program mu st be a distinct a nd organized intensive ambulatory treatment program offering less than 24-hour daily care “other than in an individual’s home or in an inpatient or re sidential setting.” In addition, in accordance with section 1301(a) of HCERA 2010, we re vised the definition of a CMHC in the regulations to conform to the revised definition now set fort h at section 18 61(ff)(3)(B) of the Act. We discussed our finalized polic ies for these two provisions of HCERA 2010 under section X.C. of the CY 2011 OPPS/ ASC final rule with comment period (75 FR 71990). Section 1833(t)(1 )(B)(i) of the Act provides the Secretary with the authority to designate the OPD services to be covered under the OPPS. The existing Medicare regulations that implement th is provision specify, at 42 CFR 419.21, thatCMS-1525-FC 777 payments under the OPPS will be made for part ial hospitalization serv ices furnished by CMHCs as well as those services furnishe d by hospitals to their outpatients. Section 1833(t)(2)(C) of the Act, in pertinent part, requires the Secretary to “establish relative payment weights for covered OPD se rvices (and any groups of such services described in subparagraph (B)) based on median (or, at the election of the Secretary, mean) hospital costs” using data on claims from 1996 and data from the most recent available cost reports. In pertinent part , subparagraph (B) provides that the Secretary may establish groups of covered OPD services , within a classification system developed by the Secretary for covered OPD services, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, CMS developed the APCs. Section 1833(t)(9)(A) of the Act requires the Secretary to “review not less often than annually and revise th e groups, the relative payment weights, and the wage and other adju stments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.” Because a day of care is the unit that defines the structure and scheduling of partial hos pitalization services, we established a per diem payment methodology for the PHP APCs, effective for services furnished on or after August 1, 2000 (65 FR 18452 through 18455). Under this methodology, the median per diem costs are us ed to calculate th e relative payment weights for PHP APCs. From CY 2003 through CY 2006, the median per diem cost for CMHCs fluctuated significantly from year to y ear, while the median per diem cost forCMS-1525-FC 778 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 in th e CY 2008 update (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: the first remapped 10 revenue codes that are common among hospital-based PHP claims to the most appropriate cost centers; and the s econd refined our methodology for computing the PHP median per diem costs by computing a se parate per diem cost for each day rather than for each bill. A complete discussion of these refinements can be found in the CY 2008 OPPS/ASC final rule with co mment period (72 FR 66671 through 66676). In CY 2009, we implemented several regu latory, 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 (Level I Partial Hospitalization)) and a higher amount for days with 4 or more services (APC 0173 (Level II Partial Hospitalization)). We refer readers to s ection X.C.2. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693) for a full discussion of the two-tiered payment system. In addition, fo r CY 2009, we finalized our policy to deny payment for any PHP claims for days when fewe r than 3 units of therapeutic services are provided. Furthermore, for CY 2009, we revised th e regulations at 42 CFR 410.43 to codify existing basic PHP patient eligibility criteria and to add a reference to current physician certification requirements at 42 CFR 424.24 to conform our regulations to ourCMS-1525-FC 779 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.2. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695 through 68697) for a full discussion of these requirements. For CY 2010, we retained th e two-tiered payment approa ch for PHP services and used only hospital-based PHP da ta in computing the per diem payment rates. We used only hospital-based PHP data because we we re concerned about further reducing both PHP APC per diem payment rates without know ing the impact of the policy and payment changes we made in CY 2009. Because of th e 2-year lag between data collection and rulemaking, the changes we made in CY 2009 were reflected for the first time in the claims data that we used to determin e payment rates for the CY 2011 rulemaking. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we established four separate PHP APC per diem payment rates, two for CMHCs (for Level I and Level II services) and tw o for hospital-based PHPs (f or Level I and Level II services). We proposed that CMHC APC ra tes would be based only on CMHC data and hospital-based PHP APC rates would be base d only on hospital-based PHP data (75 FR 46300). As stated in the CY 2011 OPPS/ASC pr oposed rule (75 FR 46300) and final rule with comment period (75 FR 71991), for CY 2011, using CY 2009 cost data, CMHC costs had significantly decreased again. We attributed the decrease to the lower cost structure of CMHCs compared to hospitals, and not the impact of CY 2009 policies. CMHCs have a lower cost structure than hos pital-based PHP providers, in part becauseCMS-1525-FC 780 the data showed that CMHCs provide fewer PHP services in a day and use less costly staff than hospital-based PHPs. Therefore, it was inappropriate to continue to treat CMHCs and hospital-based providers in the same manner regarding payment, particularly in light of such disparate differences in cost s. We were concerned that paying hospital-based PHP programs at a lower rate than their cost structure reflects could lead to closures and possible acce ss problems for hospital-based programs for Medicare beneficiaries. Cr eating the four payment rates (two for CMHCs and two for hospital-based PHPs) supported continued acc ess to the PHP benefit, while also providing appropriate payment based on the unique cost structures of CMHCs and hospital-based PHPs. In addition, separation of cost data by provi der type was supported by several hospital-based PHP commenters who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992). For CY 2011, we instituted a 2-year transition period fo r CMHC providers to the CMHC APC per diem payment rates based solely on CMHC data. For CY 2011, under the transition methodology, CMHC APC Level I and Level II rates were calculated by taking 50 percent of the difference between the CY 2010 final hospital-based medians and the CY 2011 final CMHC medians and then adding that number to the CY 2011 final CMHC medians. A 2-year transition under this methodology moved us in the direction of our goal, which is to pay appropriately for PHP services based on each provider type’s cost data, while at the same time allowi ng providers time to adjust their business operations and protect access to care for benefi ciaries. We also stated that we would review and analyze the data during the CY 2012 rulemaking cycle and may, based onCMS-1525-FC 781 these analyses, further refine the payment mech anism. 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 of these four payment rates. 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 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). See Paladin Cmty. Mental Health Ctr. v. Sebelius , No. 10-949, 2011 WL 3102049 (W.D.Tex.), appeal
docketed , No. 11-50682 (5th Cir. July 29, 2011) ( Paladin ). The plaintiffs in the Paladin case challenged the agency’s use of cost data derived from both hospitals and CMHCs (in determining the relative payment weights fo r the OPPS rates for PHP services furnished by CMHCs), alleging that section 1833(t)(2)(C ) of the Act requires that such relative payment weights be based on cost data deri ved solely from hospitals. As discussed above, section 1833(t)(2)(C) of the Act requires CMS to “establish relative payment weights for covered OPD services (and any groups of such services . . .) . . . based on . . . hospital costs.” Numerous courts have he ld that “based on” does not mean “based exclusively on.” Thus, on July 25, 2011, the di strict court dismissed the plaintiffs’ complaint and dismissed the plaintiffs’ applic ation for preliminary injunction. The Court found that “the Secretary has exercised her statutory authority a nd broad discretion to establish the 2011 payment rates for PHP services based on her interpretation of the terms of the Act.” ( Paladin at *4).CMS-1525-FC 782 For CY 2012, as discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42274 through 42275), we proposed to determine the relative payment weights for PHP services by CMHCs based on cost da ta derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital cost data. The statute is r easonably interpreted to allow th e relative payment weights for the OPPS rates for PHP services provided by CMHCs to be based solely on CMHC cost data and relative payment weights for hos pital-based PHP services to be based exclusively on hospital cost data. Section 1833 (t)(2)(C) of the Act requires the Secretary to “establish relative payment weights for c overed OPD services (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), CMS developed the APCs, as set forth in § 419.31 of the regulations (65 FR 18446 and 18447; 63 FR 47559 and 47560). As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42274) and this final rule with comment period, PH P 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 creati ng the original APC fo r PHP services (APC 0033), we did “establish” the in itial relative payment weight for PHP services, provided in hospital-based and CMHC-based setti ngs, on the basis of only hospital data.CMS-1525-FC 783 Subsequently, from CY 2003 through CY 2008, the relative payment weights for PHP services were based on a combination of hospital and CMHC data. Similarly, we subsequently established new APCs for PHP se rvices based exclusively on hospital costs. For CY 2009, we adopted a two-tiered AP C 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 APCs for CMHC-provided PHP services in CY 2011 were “based on” hospital data, no less than the relative payment weights for the two APCs for hospital-provided PHP services. Although we used only hospital data to establish the original relative payment weights for APC 0033 and later used hospital data to establish four new relative payment weights for PHP services, we believe that we have the authority to discontinue the use of hospital data after the original establishment of the relative payment weights for a given APC. Other parts of section 1833(t)(2)(C) of th e Act make plain that the data source for the relative payment weights is subject to ch ange from one period to another. Section 1833(t)(2)(C) of the Act provides that, in establishing the rela tive payment weights, “theCMS-1525-FC 784 Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from the most recent available cost reports.” However, we us ed 1996 data (plus 1997 data) in determining only the original relative payment weights for 2000; in the ensuing calendar year updates, we continually used more recent cost report data. Moreover, section 1833(t)(9)(A ) of the Act requires the Secretary to “review not less often than annually and revise the groups, the 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 by CMHCs based on “new cost data, and other relevant information and factors.” B. PHP APC Update for CY 2012 In the CY 2012 OPPS/ASC proposed ru le (76 FR 42274 ), to develop the proposed payment rates for the PHP APCs for CY 2012, we used CY 2010 claims data and computed median per diem costs in the following categories: days with 3 services; and days with 4 or more services. These pr oposed median per diem costs were computed separately for CMHCs and hospital-based PH Ps, as shown in Table 37 of the proposed rule, which is reprinted below.
PROPOSED RULE TABLE 37.—PROPOSED PHP MEDIAN PER DIEM COSTS FOR CMHC AND HOSPITAL-BASED PH Ps, BY CATEGORY, BASED ON CY 2010 CLAIMS DATA Category CMHC PHPs Hospital-Based PHPsCMS-1525-FC 785 Days with 3 services $97.78 $162.34 Days with 4 or more services $113.62 $189.87

Using updated CY 2010 claims data a nd the refined methodology for computing PHP per diem costs adopted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671 through 66676), we computed proposed median per diem costs for CY 2012 for each provider type using provider- specific claims data. The data indicate that both CMHCs and hospital-based PHPs have a decrease in costs for Level I and Level II services from CY 2011 to CY 2012. However, the median per diem costs for CMHCs continue to be substantially lower than th e median per diem costs for hospital-based PHPs for the same units of service. For CY 2012, the proposed median per diem costs for days with 3 services (Level I) were approximately $98 for CMHCs and approximately $162 for hospital-based PHPs. The proposed medi an per diem costs for days with 4 or more services (Level II) were approx imately $114 for CMHCs and approximately $190 for hospital-based PHPs. The differen ce in costs between CMHC PHPs and hospital-based PHPs underscores the need to pay each provider type based on use of its own data. As stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994), CMHCs’ costs decreased from approximately $139 in CY 2009 (using CY 2007 data) to approxi mately $108 for CY 2011 (using CY 2009 data) for Level I services (days with 3 services) and from ap proximately $172 for CY 2009 to approximately $116 for CY 2011 for Le vel II services (days with 4 or more services) using only CMHC data. For the CY 2012 proposed rule, our analysis of claimsCMS-1525-FC 786 data (using CY 2010 claims data) showed th at CMHCs’ approximate median per diem costs continued to decrease to approximatel y $98 for CY 2012 for Level I services (days with 3 services), and to approximately $114 fo r CY 2012 for Level II services (days with 4 or more services). We reasonably attributed some of the decrease in costs to targeted fraud and abuse efforts implemented by the De partment’s Center for Program Integrity and the Office of Inspector General, and by th e U.S. Department of Justice, collectively (76 FR 42275). In the CY 2012 OPPS/ASC pr oposed rule (76 FR 42275), we also noted that hospital-based PHPs showed a decrease in costs for CY 2012 (using CY 2010 claims data). Although hospital-based PHPs have been historically consistent in their median costs since the inception of the OPPS, the CY 2010 claims data indicated a decrease in their proposed median per diem costs since last year. In the CY 2011 OPPS/ASC final rule with comment period (using CY 2009 clai ms data), hospital-based PHPs’ median per diem costs were approximately $203 for Leve l I services (days with 3 services) and approximately $236 for Level II services (days with 4 or more services). In the CY 2012 OPPS/ASC proposed rule (usi ng CY 2010 claims data), these numbers decreased to approximately $162 for Level I services (day s with 3 services) and to approximately $190 for Level II services (days with 4 or more services). As explained in the CY 2012 OPPS/ASC proposed rule (76 FR 42275 ), we at tributed this decrease in costs for CY 2012 to one provider whose costs inflated the CY 2011 hospital-ba sed cost data and increased the CY 2011 hospital-based PH P median for Level II services by approximately $30. We included this provide r in the CY 2011 ratesetting because this provider had paid claims in CY 2009. Subsequently, this provider did not bill for PHPCMS-1525-FC 787 services during CY 2010 and, therefore, wa s not included in the proposed CY 2012 rate setting. Based on the results of our analysis of the CY 2010 claims data, in the OPPS/ASC proposed rule (76 FR 42275) for CY 2012, we proposed to calculate the CMHC PHP APC per diem payment rates for Level I and Level II services using only CMHC data and to calculate the hospital-based PHPs APC pe r diem payment rates for Level I and Level II services using only hospital- based PHP data. Basing paym ent rates specific to each type of provider’s own data would conti nue to support access to the PHP benefit, including a more intensive le vel of care, while also pr oviding appropriate payment commensurate with the cost structures of CMHC PHPs and hospita l-based PHPs. We invited public comment on our proposal to calculate the CMHC PHP APC per diem payment rates using only CMHC claims data and the hospital-based PHP APC per diem payment rates using only hospital data.
Comment : Both hospital-based PHP provide rs and CMHCs expressed concern regarding the proposed rate reductions. Se veral commenters requested that CMS freeze the PHP rates at current CY 2011 levels or mitigate the rate reductions for both CMHCs and hospital-based PHPs. These commenters stated that, by freezing the rates or mitigating any payment reductions, providers would be allowed time to assess the impact of the rate reductions while ensuring continued beneficiary access to the PHP benefit. Response : We understand the concerns raised by commenters about the proposed CMHC and hospital-based PHP per diem rate reductions and the potential impact the reductions may have on access to the PHP benef it in both provider settings. In responseCMS-1525-FC 788 to hospital-based PHP providers’ concerns re garding the proposed rate reductions, we believe that the CY 2012 medians reflect hospit al-based PHP providers’ typical medians. For example, the CY 2009 median per diem costs (using CY 2007 claims data) were approximately $157 for Level I services and $200 for Level II se rvices (73 FR 68689) and the CY 2010 median per diem costs (usi ng CY 2008 claims data) were approximately $148 for Level I services and $209 for Level II services. The CY 2011 median per diem costs (using CY 2009 claims data) were a pproximately $203 for Level I services and approximately $236 for Level II services. In the CY 2012 proposed rule (using CY 2010 data), these numbers decreased to approximate ly $162 for Level I services (for days with 3 services) and to approximately $190 for Level II services (for days with 4 or more services). We attributed the majority of the decrease in costs for CY 2012 to one provider whose costs inflated the CY 2011 hos pital-based cost data and increased the CY 2011 hospital-based PHP me dian for Level II services by approximately $30. For this CY 2012 final rule with comment period, our analysis of claims data (using CY 2010 claims data) shows that hosp ital-based PHP median per diem costs are approximately $161 for Level I services (for days with 3 services) and approximately $191 for Level II services (for days with 4 or more services ). Again, these median per diem costs are more consistent with past me dian per diem costs for this provider type and we believe accurately reflect the cost data of the hospital-based PHP provider. In response to CMHCs concerns about the rate reductions, in the past, we have attempted to control the cost fluctuations in CMHCs in order to pr otect access to care and with the hope that the cost structures for both provider types would eventually becomeCMS-1525-FC 789 more consistent. However, the data continue to show the decline in costs for CMHCs. We believe that the proposed median per diem costs for CMHCs accurately reflect the cost data of the CMHCs. For example, for this CY 2012 final rule with comment period, our analysis of claims data (using CY 2010 claims data fo r CMHCs only) shows that CMHCs’ median per diem costs continue to decrease from approximately $108 for CY 2011 (using CY 2009 claims data for CMHCs only) to approximately $98 for CY 2012 for Level I services (days with 3 services), and from approximately $116 for CY 2011 (using CY 2009 claims data for CMHCs only) to approximately $114 for CY 2012 for Level II services (days with 4 or more services). Although we are not exac tly clear about why the CMHC costs continue to decrease, we can reas onably attribute some of the decrease in costs to targeted fraud and abuse efforts implemented by the Department’s Center for Program Integrity and the Office of Inspector General, and by the U.S. Department of Justice, collectively. We have considered all suggestions, including the request to freeze the PHP payment rates at the CY 2011 levels or to m itigate rate reductions. However, we cannot continue to establish payment rates that do not accurately reflect the cost data, particularly given a further decline in the data for CY 2012. Moreover, we believe we have already allowed numerous opportunitie s for providers to adjust their business operations, including mitigating th e rate reductions for CY 2011. For these reasons, for CY 2012, we are not mitigating or freezing the payment rates and are finalizing our proposal to calcu late the CMHC PHP APC per diem paymentCMS-1525-FC 790 rates for Level I and Level II services us ing only CMHC data and to calculate the hospital-based PHP APC per diem payment rate s for Level I and Level II services using only hospital-based PHP data. The CY 2012 PHP median per diem costs are as follows: for CMHCs, $97.64 for Level I services a nd $113.83 for Level II services and for hospital-based PHPs, $160.74 for Level I servic es and $191.16 for Level II services. We remain committed to the PHP benefit, including preserving access for our Medicare beneficiaries, and we plan to continue to monitor access to ca re for the benefit.
Comment : Almost all commenters expressed so me concern that the proposed rate reductions would result in adverse outcomes, including program closures and subsequent access to care issues, exacer bating an existing problem of inadequate inpatient and outpatient hospital capacities in many commun ities caring for individuals with mental illness. The commenters reasoned that if closures were to result, this would have substantial and serious cons equences for hospitals and for Medicare beneficiaries requiring PHP services. Seve ral commenters stated that the reduction in CMHC rates will lead to closures, where critical acce ss points for Medicare beneficiaries would no longer be available. The co mmenters reasoned that if this “vulnerable population” of Medicare beneficiaries were to go untreated, these patients could end up in inpatient hospitals, or in emergency departments. B ecause these are Medicare aged and disabled beneficiaries, their care in the inpatient or emergency room setting could potentially be more expensive than their PHP treatment w ould have been, thus increasing the overall Medicare costs if PHP care is eliminated due to closures. Other commenters also reasoned that, without the PHP services, this vulnerable popul ation may also enter prisonCMS-1525-FC 791 systems, or wind up dead if they do not re ceive their medication. Some commenters asserted that CMS has essentially contra dicted its principles , by acknowledging a patient’s disability; but on the other hand, re ducing the rate of reimbursement for their care. The commenters stated that this ha s the effect of denyi ng access to treatment, which runs counter to ensuring esse ntial care. Response : The proposed median per diem costs for CY 2012 reflect each PHP provider type’s (hospital-based and CMHC) co sts, derived from CY 2010 claims data. We discussed in our proposed rule ( 76 FR 42274 and 42275) how the data results indicate that, although both CMHCs and hospi tal-based PHPs have decreased costs for Level I and Level II services from CY 2011 to CY 2012, the median per diem costs for CMHCs continue to be subs tantially lower than the median per diem costs for hospital-based PHPs. We also noted that hospital-based PH Ps show a decrease in costs for CY 2012 based on CY 2010 claims data (76 FR 42275). Payment rates are based according to each specific provider type’s ow n data, that is, CMHC rates are based on CMHC cost data and hospital-based PHP provi ders are based on their own cost data. The rates reflect the cost of what each provider type expends to maintain such programs so it is unclear why this would lead to program cl osure. The closure of PHPs may be due to any number of reasons, such as poor busin ess management or marketing decisions, competition, over-saturation of certain geographic areas, Federal and State fraud and abuse efforts, among others. However, it doe s not directly follow th at closure could be due to reduced reimbursement rates alone, especi ally when these rates reflect actual costs of PHP providers. CMS remains steadfast in its concern over acce ss to care for allCMS-1525-FC 792 beneficiaries while also providing appropriate payments for such care. In terms of access to care, PHP for mental health treatment is not the only manner in which a Medicare beneficiary is able to receive needed care. Although not the equivalent of PHP, Medicare provides payment for outpatient mental hea lth services in addition to PHP. Many beneficiaries in need of mental health trea tment receive other outpatient services, and no evidence suggests that there is an increase in adverse outcomes, as the commenters suggested, due to lack of access to care. Othe r forms of access to mental health services remain available. If certain PHP providers decide for whatever reason to close their doors, we do not believe that access to care w ill become an issue, and we do not believe we have acted in a manner that is contradictor y to our principles. In addition, the Social Security Administration has the authority to determine a person’s disability, not CMS.
Comment : Some commenters noted that CMS recently issued the proposed conditions of participation (CoPs) for CMHCs that they will need to observe and, as a result of the Affordable Care Act, will now have to provide at least 40 percent of their services to non-Medicare patients. The co mmenters believed that, by adding a payment reduction on top of these requirements, CM HCs would be potentially facing closure. Response : We acknowledge the commenters’ concerns with section 1301 of HCERA, a component of the Affordable Care Act (Pub. L. 111-152, enacted on March 30, 2010). Section 1301 requires CMHCs to provide at least 40 percent of their services to non-Medicare patients. On June 17, 2011, CMS published a proposed rule to enforce this provision (76 FR 35684, 35693) as well as to propose conditions ofCMS-1525-FC 793 participation addressing basic he alth and safety issues in CMHCs. By law, CMS must update the OPPS payment rates on an annual ba sis using the most current cost data.
Comment : Some commenters reco mmended that CMS establish a ratesetting task force to develop a new rate methodology that captures all relevant data and reflects realtime costs to providers. The commenters s uggested that the recommended ratesetting task force be composed of CMS staff and a diverse group of stakeholders that include front-line providers of partial hospitalization services, representatives from the National Council for Community Behavioral Healthcare , the National Associat ion of Psychiatric Health Systems, the American Associati on of Behavioral Healthcare, the National Alliance for the Mentally Ill, and the Medicare Payment Advisory Committee. Response : CMS already has positive working relationships with various industry leaders representing both CMHCs and hospital- based PHP providers with whom we have consistently met with over the years to di scuss industry concerns and ideas. These relationships have provided significant and valued input into PHP rate setting. Furthermore, CMS holds Hospital Outpatient Open Door Forum calls monthly, when individuals are welcome to par ticipate and/or submit questions regarding specific issues, including questions related to PHP programs. Given the relationships that CMS has already established with various industry leaders, we believe that we receive adequate input regarding rate setting a nd take that input into cons ideration when applying the payment rates. We continue to welcome any input and information that the industry is willing to provide.CMS-1525-FC 794
Comment : A few commenters stated that CMS misinterpreted the original intent of section 1833(t)(2)(C) of the Act and is now making a new in terpretation of the statute by eliminating the requirement in section 1833(t)(2)(C) of the Act. Response : As discussed above in this secti on, we believe the st atute is reasonably interpreted to allow the relative payment weights for the OPPS rates for PHP services provided by CMHCs to be based solely on CM HC cost data and the relative payment weights for hospital-provided PHP services to be based exclusively on hospital cost data. Section 1833(t)(2)(C) of the Act requires th e Secretary to “establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on . . . hospital cost s.” In pertinent part, subparagraph (B) provides that “the Secretary may establish gr oups of covered OPD services . . . so that services classified within each group are compar able clinically and with respect to the use of resources.” In accordance with subparagr aph (B), CMS developed the APCs, as set forth in § 419.31 of the regulations (65 FR 18446 and 18447; 63 FR 47559 and 47560). 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 creati ng the original APC fo r PHP services (APC 0033), we did “establish” the in itial relative payment weight for PHP services, provided in hospital-based and CMHC-based setti ngs, on the basis of only hospital data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for PHP services were based on a combination of hospital and CMHC data. Similarly, weCMS-1525-FC 795 subsequently established new APCs for PHP se rvices based exclusively on hospital costs. For CY 2009, we adopted a two-tiered AP C 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 APCs for CMHC-provided PHP services in CY 2011 were “based on” hospital data, no less than the relative payment weights for the two APCs for hospital-provided PHP services. Although we used only hospital data to es tablish the original relative payment weights for APC 0033 and later used hospital data to establish four new relative payment weights for PHP services, we believe that we have the authority to discontinue the use of hospital data after the original establishment of the relative payment weights for a given APC. Other parts of section 1833(t)(2)(C) of th e Act make plain that the data source for the relative payment weights is subject to ch ange from one period to another. Section 1833(t)(2)(C) of the Act provides that, in establishing the rela tive payment weights, “the Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from the most recent available cost reports.” However, we us ed 1996 data (plus 1997 data) in determiningCMS-1525-FC 796 only the original relative payment weights for 2000; in the ensuing calendar year updates, we continually used more recent cost report data. Moreover, section 1833(t)(9)(A ) of the Act requires the Secretary to “review not less often than annually and revise the groups, the 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 by CMHCs based on “new cost data, and other relevant information and factors.”
Comment : Several commenters questioned how one provider’s co st data could impact the rates so dramatica lly and how can CMS reasonably attribute some of the rate fluctuation to targeted fraud and abuse effort s on the part of CMS and other agencies. Commenters stated that fraud and abuse effo rts did not decrease the operating cost of providers, but instead resulted in eliminati ng fraudulent providers from the program. Commenters also posed the question of wh ether CMS took into account the number of CMHCs that closed their doors in CY 2010 or only partially operated in CY 2010 due to inability to continue to operate. Response : We calculate the PHP per diem me dians using all PHP claims data. However, a provider who has a high volume of claims will impact the medians by either increasing the medians or decreasing the me dians, depending on its cost data. For example, if a provider that has high cost data and a high volume of claims will saturateCMS-1525-FC 797 the overall cost data, resulting in high medi ans. Although fraud and abuse efforts do not decrease the operating cost of providers, the removal of a particular provider may have dramatic results on the overall medians. We acknowledge the commenters’ concerns and plan to continue monitoring the data. We do study the number of PHP provider closings and openings. We will continue to monitor any potential access problems.
Comment : A few commenters expressed conc erns that the technical data on which CMS relies during the ratesetting pro cess are fundamentally flawed, in that the data do not reflect the full scope of CMHC cost s. These commenters also stated that, due to insufficient cost reporting instructions for CMHCs, they continue to incorrectly exclude owner’s salary costs from their cost reports, contributing to their low median

costs. Response : Data within the cost report re main an essential component for CMS rate setting, and it is imperative that cost reports be completed with accuracy. Medicare cost reports are Federal documents in whic h providers certify and attest that the information contained in them is accurate. As a Medicare participa ting provider, it is the responsibility of the provider to complete and submit an accurate Medicare cost report. Because all providers must certif y and attest to the accuracy of the report, we trust that the data are, in fact, accurate. We calcu late rates using the data submitted to us. There are several free resources available to providers who have questions or need help completing cost reports. Providers are al ways encouraged to work with their fiscal intermediaries/MACs to resolve any questions, including those related to cost reports.CMS-1525-FC 798 CMS provides manual instructions in Chapte r 18 of the Provider Reimbursement Manual, Part II, located on the CMS Web site at: https://www.cms.gov/Manuals/PBM/itemdeta il.asp?filterType= none&filterByDID=- 99&sortByDID=1&sortOrder=ascendi ng&itemID=CMS021935&intNumPerPage=10

. CMS regional office and central office em ployees, including those in the Division of Cost Reporting, are also available resour ces who can answer questions. Furthermore, CMS offers cost reporting so ftware free of charge at: http://www.mutualmedicare.com/star/providers/

. All of the abovementioned resources are free of charge. A provider may also purchase the services of accounting professionals to help with completing cost reports. We do caution that providers should choose a trusted accountant. We have become aware of some providers purchasing the se rvices of accountants who profess to know Medicare cost report ing requirements, but in reality do not. Again, if an accountant completes the cost report, the provider is still responsible for the content of the cost report via certification and attestation. In summary, after consid eration of the public comme nts we received, we are finalizing our CY 2012 proposal, without modifi cation, to update the four PHP per diem payment rates based on the median cost levels calculated using the most recent claims data for each provider type. The updated PH P APCs median per diem costs for PHP services that we are finalizing for CY 2012 are shown in Tables 44 and 45 below:CMS-1525-FC 799
TABLE 44.--FINAL CY 2012 MEDIAN PER DIEM COSTS FOR CMHC PHP SERVICES APC Group Title Final Median Per Diem Costs 0172 Level I Partial Hospitalization (3 services) for CMHCs $97.64

0173 Level II Partial Hospitalization (4 or more services) for CMHCs $113.83

TABLE 45.--FINAL CY 2012 ME DIAN PER DIEM COSTS FOR HOSPITAL-BASED PHP SERVICES APC Group Title Final Median Per Diem Costs 0175 Level I Partial Hospitalization (3 services) for hospital-based PHPs $160.74

0176 Level II Partial Hospitalization (4 or more services) for hospital-based PHPs $191.16

C. Separate Threshold for Outlier Payments to CMHCs In the CY 2004 OPPS final rule with comment period (68 FR 63469 through 63470), we indicated that, give n the difference in PHP char ges between hospitals and CMHCs, we did not believe it was appropria te to make outlier payments to CMHCs using the outlier percentage target amount a nd threshold established for hospitals. Prior to that time, there was a significant differen ce in the amount of outlier payments made to hospitals and CMHCs for PHP services. In ad dition, further analysis indicated that using the same OPPS outlier threshold for both hospitals and CMHCs did not limit outlier payments to high-cost cases and resulted in excessive outlier payments to CMHCs. Therefore, beginning in CY 2004, we estab lished a separate ou tlier threshold forCMS-1525-FC 800 CMHCs. The separate outlier threshold fo r CMHCs has resulted in more commensurate outlier payments. The separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs in CY 2004 and $0.5 million in outlier payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We believe this difference in out lier 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 2012 OPPS/ASC proposed ru le (76 FR 42275), we proposed to continue our policy of identif ying 1.0 percent of the aggreg ate total payments under the OPPS for outlier payments for CY 2012. We pr oposed that a portion of that 1.0 percent, an amount equal to 0.14 percent of outlier payments (or 0.0014 per cent of total OPPS payments), would be allocated to CMHCs for PHP outlier payments. In section II.G. of the proposed rule, for hospital outpatient out lier payments policy, we proposed to set a dollar threshold in addition to an APC multip lier threshold. Because the PHP APCs are the only APCs for which CMHCs may receiv e payment under the OPPS, we would not expect to redirect outlier payments by imposi ng a dollar threshold. Th erefore, we did not propose to set a dollar threshold for CMHC outlier payments. We proposed to set the outlier threshold for CMHC s for CY 2012 at 3.40 times the APC payment amount and the CY 2012 outlier payment percentage applicab le to costs in excess of the threshold at 50 percent. Specifically, we proposed to esta blish that if a CMHC's cost for partial hospitalization services, pa id under either APC 0172 or APC 0173, exceeds 3.40 timesCMS-1525-FC 801 the payment for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3. 40 times the APC 0173 payment rate. We did not receive any public comments regarding our proposed outlier policy. Therefore, we are finalizing our CY 2012 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 that 1.00 percent, an amount equal to 0.12 percent of outlier payments or 0.0012 percent of total estimated OPPS payments to CMHCs for PHP outlier payments. For CY 2012, as proposed, we are setting the outlier threshold at 3.40 multiplied by the APC payment amount and th e CY 2012 outlier percentage applicable to costs in excess of the threshold at 50 percent.CMS-1525-FC 802 IX. Procedures That Will Be Paid Only as Inpatient Procedures A. Background Section 1833(t)(1)(B)(i) of the Act gi ves the Secretary broad authority to determine the services to be covered and paid for under the OPPS. Before implementation of the OPPS in August 2000, Medi care paid reasonable costs for services provided in the HOPD. The claims submitte d were subject to medical review by the fiscal intermediaries to determine the appropr iateness of providing cert ain services in the outpatient setting. We did not specify in our regulations those services that were appropriate to provide only in the inpatient setting and that, therefore, should be payable only when provided in that setting. In the April 7, 2000 final rule with co mment period (65 FR 18455), we identified procedures that are typically provided only in an inpatient setting and, therefore, would not be paid by Medicare under the OPPS. These procedures comprise what is referred to as the “inpatient list.” The inpatient list sp ecifies those services for which the hospital will be paid only when provided in the inpati ent setting because of the nature of the procedure, the underlying physical condition of the patient, or the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged. As we discussed in that rule and in the N ovember 30, 2001 final rule with comment period (66 FR 59884), we may use an y of a number of criteria we have specified when reviewing procedures to determine whether or not they should be removed from the inpatient list and assi gned to an APC group for payment under theCMS-1525-FC 803 OPPS when provided in the hospital outpatie nt setting. Those criteria include the following:

● Most outpatient departments are equi pped to provide the services to the Medicare population.

● The simplest procedure described by the code may be performed in most outpatient departments.

● The procedure is related to codes th at we have already removed from the inpatient list. In the November 1, 2002 final rule with comment period (67 FR 66741), we added the following criteria for use in review ing procedures to determine whether they should be removed from the inpatient list and assigned to an APC group for payment under the OPPS:

● A determination is made that the pr ocedure is being performed in numerous hospitals on an outpatient basis; or

● 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. The list of codes that will be paid by Medicare in CY 2012 only as inpatient procedures is included as Addendum E to this final rule with comme nt period (which is referenced in section XVII. of this final ru le with comment period and available via the Internet on the CMS Web site).CMS-1525-FC 804 B. Changes to the Inpatient List In the CY 2012 OPPS/ASC proposed rule (76 FR 42276), we proposed to use the same methodology for the CY 2012 OPPS descri bed in the November 15, 2004 final rule with comment period (69 FR 65835) to identify a subset of procedures currently on the inpatient list that are being performed a si gnificant amount of the time on an outpatient basis. Using this methodology, we identified two procedures that met the criteria for potential removal from the inpa tient list for CY 2012. We then clinically reviewed these two potential procedures for possible removal fr om the inpatient list and found them to be appropriate candidates for removal fr om the inpatient list. During the February 8-March 1, 2011 meeting of the APC Panel, we solicited the APC Panel’s input on the appropriateness of removing these two procedures from the CY 2012 inpatient list: CPT codes 21346 (Open treatment of nasomaxilla ry complex fracture (Lefort II type); with wiring and/or local fixation) and 54411 (Removal and replacement of all components of a multi-component inflatable peni le prosthesis through an infected field at the same operative session, including irriga tion and debridement of infected tissue). As we indicated in the CY 2011 final rule with comment period (75 FR 71996), we solicited the APC Panel’s i nput on the appropriateness of removing the procedures described by CPT codes 35045 (Direct repair of aneurysm, pseudoaneurysm, or excision (partial or total) and graft insertion, w ith or without patch graft; for aneurysm, pseudoaneurysm, and associated occlusive disease, radial or ulnar artery) and 54650 (Orchiopexy, abdominal approach, for intra- abdominal testis (eg, Fowler-Stephens)), from the CY 2012 inpatient list. We also solicited the APC Panel’s input on theCMS-1525-FC 805 appropriateness of removing the following pr ocedures identified in a comment letter addressed to the APC Panel: CPT codes 61154 (Burr hole(s) with evacuation and/or drainage of hematoma, extra dural or subdural); 61156 (Burr hole(s); with aspiration of hematoma or cyst, intracerebral); and 61210 (Burr hole(s); for implanting ventricular catheter, reservoir, eeg elect rode(s), pressure recording device, or other cerebral monitoring device (separate procedure )). Following the discussion at its February 28-March 1, 2011 meeting, the APC Panel recommended that CMS remove from the CY 2012 inpatient list CPT codes 21346, 54411, 35045, 54650, and 61210. The APC Panel made no recommendati on regarding CPT codes 61154 and 61156. Additionally, during th e February 28-March 1, 2011 m eeting of the APC Panel, an APC Panel member requested removal of the following CPT codes from the CY 2012 inpatient list: 22551 (Arthrodesi s, anterior interbody, includ ing disc space preparation, discectomy, osteophytectomy and decompression of spinal cord and/or nerve roots; cervical below C2); 22552 (Arthrodesis, anterior interbody, including disc space preparation, discectomy, oste ophytectomy and decompression of spinal cord and/or nerve roots; cervical below C2, each additional inters pace (List separately in addition to code for separate procedure)); 22554 (Arthrodesis, anterior interbody technique, including minimal discectomy to prepare interspace (oth er than for decompression); cervical below C2); 22585 (Arthrodesis, anteri or interbody technique, includ ing minimal discectomy to prepare interspace (other than for decomp ression); cervical below C2, each additional interspace (List separately in addition to code for primary procedure)); 61107 (Twist drill hole(s) for subdural, intracerebral, or vent ricular puncture; for im planting ventricularCMS-1525-FC 806 catheter, pressure recording device, or ot her intracerebral monitoring device); and 63267 (Laminectomy for excision or evacuation of intraspinal lesion other than neoplasm, extradural; lumbar). Following the discus sion at its February 28-March 1, 2011 meeting, the APC Panel recommended that CMS rem ove from the CY 2012 inpatient list CPT codes 22551, 22552, 22554, 22585, 61107, and 63267. In the CY 2012 OPPS/ASC proposed rule, for CY 2012, we proposed to accept the APC Panel’s recommendation to remove the procedures described by CPT codes 21346, 35045, and 54650 from the inpatient list b ecause we agree with the APC Panel that the procedures may be appropriately pr ovided as hospital outpatient procedures for some Medicare beneficiaries, based upon the evaluation criteria mentioned above. We also proposed to not accept the APC Panel’ s recommendations to remove the procedures described by CPT codes 22551, 22552, 22554, 22585, 54411, 61107, 61210, and 63267 from the CY 2012 inpatient only list because upo n further clinical review subsequent to the February 28-March 1, 2011 APC Panel m eeting, we did not believe that these procedures may be appropriately provided as hospital outpatient procedures for some Medicare beneficiaries, based upon the evalua tion criteria mentioned above, due to the clinical intensity of the servic es provided. Furthermore, according to our utilization data, the procedures described by CPT codes 22551, 22552, 22554, 22585, 54411, 61107, 61210, and 63267 have very low volume in the outp atient hospital setting. We noted that despite its low overall volume, CPT code 54411 is performed a signifi cant percentage of the time in the outpatient hospital setting; how ever, we do not believe that the outpatient procedures being performed are truly reflective of the intensity of services requisite whenCMS-1525-FC 807 performing the procedure as described by the CPT code’s long desc riptor. We invited public comment on the inclusion of CPT code 54411 on the CY 2012 inpatient list. At its August 10-12, 2011 meeting, the AP C Panel recommended again that CMS remove CPT codes 22551, 22552, 22554, 22585, and 63267 from the CY 2012 inpatient only list and that CMS provide the APC Panel with clinical information on the appropriateness of removing HCPCS code 43279 (Laparoscopy, surgical, esophagomyotomy (Heller type), with fundoplas ty, when performed) from the inpatientonly list and, if removed, to which APC it should be assigned.
Comment : Commenters supported the CM S proposal to accept the APC recommendation to remove CPT pro cedures codes 21346, 35045, and 54650 from the CY 2012 inpatient only list. Response : We appreciate the commenters’ support.
Comment : One commenter requested that CMS remove CPT code 54411 from the CY 2012 inpatient only list based on th e specialty society’s experience and additionally requested that CMS remove CPT code 54417 (Removal and replacement of a non-inflatable (semi-rigid) or inflatable (s elf-contained) penile prosthesis through an infected field at the same operative session) from the inpatient only list. Response : We reevaluated data on CPT codes 54411 and 54417, utilizing further clinical review by CMS’ medical advisors , and we remain convinced that these procedures can be safely performed only in the inpatient setting due to the invasive and complicated nature of these procedures.CMS-1525-FC 808
Comment : One commenter requested that CMS create a modifier similar to modifier –CA (procedure payable only in the inpatient setting when performed emergently on an outpatient who expires pr ior to admission) to indicate procedure payable only in the inpatient setting when performed emergen tly on an outpatient who is transferred to another acute ca re facility prior to admission. Response : We appreciate this comment. Ho wever, the issues discussed within this comment are outside the scope of the pr ovisions of the proposed rule. We will take this comment into consideration in developing future rulemaking.
Comment : Several commenters requested that CMS remove all of the CPT codes recommended by the APC Panel, as well as remove 42 additional CPT codes from the CY 2012 inpatient only list based on thei r own experience, specialty society recommendation, or designation of a procedure as safe in the outpatient setting under one of the many clinical guidelines available, such as Milliman Care Guidelines. Response : We reevaluated data on the 42 a dditional CPT codes requested by the commenters using more recent utilization da ta and further clinical review by CMS medical advisors. These codes are listed in Table 47 below. As a result of the reevaluation, we agree with the commenters that it would be appropriate to remove the following seven CPT codes from the CY 2012 inpatient only list because patients undergoing these procedures can typically be managed postope ratively as outpatients: 0184T (Excision of rectal tumor, transana l endoscopic microsurgical approach (ie, TEMS), including muscularis propria (ie, fu ll thickness)); 20930 (Allograft for spine surgery; morselized); 20931 (All ograft for spine surg ery only; structural (List separatelyCMS-1525-FC 809 in addition to code for primary procedure) ); 43281 (Laparoscopy, surgical, repair of paraesophageal hernia, include s fundoplasty, when performed; without implantation of mesh); 43770 (Laparoscopy, surgical, gastric restrictive procedure; placement of adjustable gastric restrictive device (e g, gastric band and subcutaneous port components)); 22551 (Arthrodesis, anterior in terbody, including disc space preparation, discectomy, osteophytectomy and decompression of spinal cord and/or nerve roots; cervical below C2); and 22554 (Arthrodesis, an terior interbody technique, including minimal discectomy to prepare interspace (oth er than for decompression); cervical below C2). We also note that although co mmenters requested that CPT code 37221(Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, initial vessel; with transluminal stent placem ent(s), includes angioplasty within the same vessel, when performed) be removed from the CY 2012 inpatient only list, CPT code 37221 is not on the current inpatient only list, but is currently assigne d a status indicator of “T.” In regard to the other 36 CPT c odes that the commenters requested to be removed from the CY 2012 inpatient only list, we remain convinced that these procedures can be safely performed only in the inpatient setting due to the complexity and intensity of these services and the need for postoperative inpatient monitoring.
Comment : A number of commenters suggest ed that regulations should not supersede the physician’ s level of knowledge and assessmen t of the patient’s condition, and that the physician can appr opriately determine whether a procedure can be performed in a hospital outpatient setting. Other commen ters stated that physician’s payment should be aligned with the hospital payment; if th e hospital is not paid, the physician paymentCMS-1525-FC 810 should not be allowed. The commenters furt her stated that physicians have little incentive to ensure that inpatient only pro cedures are performed in the correct setting because their payments are not impacted by an incorrect site of service. One commenter believed that CMS and hospital efforts to edu cate physicians have not been effective. Many commenters suggested that th e inpatient only list be eliminated in its entirety. The commenters indicated that hos pitals already meet minimum safety standards through Joint Commission accreditation and the Medicar e hospital conditions of participation. Commenters suggested that, if the inpatient only list cannot be eliminated in its entirety, an appeals process be developed. Commenter s believed that an a ppeal process would give the hospital the opport unity to submit documentation on the physician’s intent, the patient’s clinical condition, a nd the circumstances that enabled the patient to be sent home safely without an inpatient stay. One commenter requested that CMS push its Medicare contractors’ medical directors to develop local cove rage determinations (LCDs) that define when selected procedures should be performed as inpati ent or outpatient and that CMS develop a process to more quickly evaluate procedures for removal from the inpatient only list outside of the rulemaking process. Response : We appreciate these comments and thoughtful suggestions. We continue to believe that the inpatient only lis t is a valuable tool for ensuring that the OPPS only pays for services that can safely be performed in the hospital outpatient setting, and we will not eliminate the inpatient only list at this time. We believe that there are many surgical procedures that ar e never safely perfor med for a Medicare beneficiary in the hospital outpa tient setting. Therefore, it would be inappropriate for usCMS-1525-FC 811 to assign them separately paya ble status indicators and es tablish payment rates in the OPPS. We recognize that hos pitals already meet minimu m safety standards through accreditation or State surveys which assure compliance with the Medicare hospital conditions of participation. However, while accreditation or State survey and certification of compliance with the hospital conditions of participation ensure that a hospital is generally a safe and appropriat e environment for provi ding care, they do not determine whether a particular service can be sa fely provided in the outpatient setting to Medicare beneficiaries. Although the commenters suggested that we apply the same payment restrictions to physicians and hospitals when inpatient procedures are perfor med inappropriately, payment for physicians’ services is outside the scope of the payment policies governed by the OPPS and the provisions of this O PPS/ASC final rule with comment period. Notwithstanding concern that education has not yet been able to stop some physicians from performing a procedure on the inpatient only list in the hosp ital outpatient setting, we continue to believe that education is critical to ensuring that physicians do not inadvertently provide services in a hospital outpatient setting that are paid for only during an inpatient stay. We expect hospitals to be aware of the services that are being provided in the outpatient setting. Th erefore, we do not believe that it is appropriate to pay the hospital for the ancillary serv ices furnished when the pati ent receives an inpatient only service in the hospital outpatient setting. Further, we expect hospitals to use this knowledge and to educate physicians with re gard to the appropriate setting for the procedures they furnish. We recognize that there are cases in which the patient expiresCMS-1525-FC 812 before he or she can be admitted and has rece ived an inpatient only service without being admitted. In these cases, we have a longstanding policy of making payment for the ancillary services provided to Me dicare beneficiar ies under APC 0375. As we have stated in the past, we al so are concerned about the impact of eliminating the inpatient only list on Medicare beneficiary liability. Elimination of the inpatient only list might lead to longer periods of stay in the hospital outpatient setting, during which Medicare benefi ciaries are responsible for copayments for a complex surgery and any individual serv ices supporting that surgery, as well as financial liability for most self-administrable drugs which are not covered under Medicare Part B. Costsharing is very different between the hospita l inpatient setting and the hospital outpatient setting, and Medicare benefici aries may incur higher out-of-pocket costs in the hospital outpatient setting for complex surgical procedur es. We do not plan to adopt a specific appeals process for claims related to inpatie nt only procedures performed in the HOPD. Stakeholders can request ch anges to the inpatient only list through annual rulemaking, but they are responsible for know ing what procedures are current ly on the list. We do not believe that a dedicated app eals process for cases involvi ng inpatient only procedures performed in the outpatient se tting is warranted and such a process could potentially undermine the disincentive for performing inpa tient only procedures in an outpatient setting. We remain committed to reviewi ng the inpatient only lis t timely to reflect changes in medical practice, and we plan to continue our current practice of reviewing procedures for removal from the inpatient only list through th e notice-and-comment rulemaking process.CMS-1525-FC 813 After consideration of the public comments receiv ed, for CY 2012, we are modifying our proposal to accept the APC Pa nel’s recommendations to remove the procedures described by CPT codes 22551a nd 22554 from the CY 2012 inpatient only list because after additional discussi on during the August 10-12, 2011 APC Panel meeting and further clinical review subs equent to the August 10-12, 2011 APC Panel meeting, we agree with the APC Panel that th e procedures may be appropriately provided as hospital outpatient procedures for some Medicare beneficiaries, based upon the evaluation criteria mentioned above. We also are accepting the APC Panel’s recommendation to provide the APC Pane l with clinical information on the appropriateness of removing HCPCS code 43279 from the inpatient-only list and, if removed, to which APC it should be assigned. However, we are not accepting the APC Panel’s recommendations to remove the procedures described by CPT codes, 22552, 22585, 54411, 61107, 61210, and 63267, because, upon further clinical review subsequent to the August 10-12, 2011 APC Pane l meeting, we do not believe that these procedures may be appropriately provided as hospital outpatient procedures for some Medicare beneficiaries, based upon the evalua tion criteria mentioned above, due to the clinical intensity of services provided. We are finalizing our proposal, with m odifications, to remove CPT codes 0184T, 20930, 20931, 21346, 22551, 22554, 35045, 43281, 43770, and 54650 from the inpatient only list. The 10 procedures we are removing from the inpa tient only list for CY 2012 and their CPT codes, long descriptors, AP C assignments, and st atus indictors are displayed in Table 46 below.CMS-1525-FC 814
TABLE 46.—PROCEDURES REMOVED FROM THE INPATIENT ONLY LIST AND THEIR APC A SSIGNMENTS FOR CY 2012

HCPCS

Code Long Descriptor CY 2012 APC Assignment CY 2012 Status Indicator

0184T Excision of rectal tumor, transanal endoscopic microsurgical approach (ie, TEMS), including muscularis propria (ie, full thickness) 0149 T

20930 Allograft, morselized, or placement of osteopromotive material, for spine surgery only (List separately in addition to code for primary procedure) N

20931 Allograft, structural, fo r spine surgery only (List separately in addition to code for primary procedure) N

21346 Open treatment of nasomaxillary complex fracture (Lefort II type); with wiring and/or local fixation 0254 T

22551 Arthrodesis, anterior interbody, including disc space preparation, discectomy, osteophytectomy and decompression of spin al cord and/or nerve roots; cervical below C2 0208 T

22554 Arthrodesis, anterior interbody technique, including minimal discectomy to prepare interspace (other than for decompression); cervical below C2 0208 T

35045 Direct repair of aneurysm, pseudoaneurysm, or excision (partial or total) and graft insertion, with or without patch graft; for aneurysm, pseudoaneurysm, and associated occlusive disease, radial or ulnar artery 0093 T

43281 Laparoscopy, surgical, repair of paraesophageal hernia, includes fundoplasty, when performed; without implantation of mesh 0132 TCMS-1525-FC 815
HCPCS

Code Long Descriptor CY 2012 APC Assignment CY 2012 Status Indicator

43770 Laparoscopy, surgical, gastric restrictive procedure; placement of adjustable gastric restrictive device (e g, gastric band and subcutaneous port components) 0131 T

54650 Orchiopexy, abdominal approach, for intraabdominal testis (eg, Fowler-Stephens) 0154 TCMS-1525-FC 816 TABLE 47.—ADDITIONAL PROCEDURES REQUESTED BY COMMENTERS TO BE REMOVED FROM THE INPA TIENT ONLY LIST FOR CY 2012

HCPCS

Code Long Descriptor CY 2012 Status Indicator

0075T Transcatheter placement of extracr anial vertebral or intrathoracic carotid artery stent(s), incl uding radiologic supervision and interpretation, percutaneous; initial vessel C

0184T Excision of rectal tumor, transanal endoscopic microsurgical approach (ie, TEMS), including muscularis propria (ie, full thickness) T 20661 Application of halo, including removal; cranial C

20664 Application of halo, including rem oval, cranial, 6 or more pins placed, for thin skull osteology (eg, pediatric patients, hydrocephalus, osteogenesis imperfecta) C

20930 Allograft, morselized, or placem ent of osteopromotive material, for spine surgery only (List separately in addition to code for primary procedure) N

20931 Allograft, structural, for spine surgery only (List separately in addition to code for primary procedure) N

20936 Autograft for spine surgery only (includes harvesting the graft); local (eg, ribs, spinous process, or laminar fragments) obtained from same incision (list separately in addition to code for primary procedure) C

21141 Reconstruction midface, LeFort I; single piece, segment movement in any direction (eg, for long face syndrome), without bone graft C

21196 Reconstruction of mandibular rami and/or body, sagi ttal split; with internal rigid fixation C

22114 Partial excision of vertebral body, for intrinsic bony lesion, without decompression of spinal cord or nerve root(s), single vertebral segment; lumbar C

22585 Arthrodesis, anterior inter body technique, including minimal discectomy to prepare interspace (other than for decompression); cervical below C2, each additional interspace (List separately in addition to code for primary procedure) C

22855 Removal of anterior instrumentation CCMS-1525-FC 817

HCPCS

Code Long Descriptor CY 2012 Status Indicator 22862 Revision including replacement of total disc arthroplasty (artificial disc) anteri or approach, lumbar C

22840 Posterior non-segmental instru mentation (eg, Harrington rod technique, pedicle fixation acro ss one interspace, atlantoaxial transarticular screw fixation, s ublaminar wiring at C1, facet screw fixation) (list separately in addition to code for primary procedure) C

23472 Arthroplasty, glenohumeral join t; total shoulder (glenoid and proximal humeral replacement (eg, total shoulder)) C 27702 Arthroplasty, ankle; with implant (total ankle) C 32662 Thoracoscopy, surgical; with excisi on of mediastinal cyst, tumor, or mass C

35141 Direct repair of aneurysm, pse udoaneurysm, or excision (partial or total) and graft insertion, w ith or without patch graft; for aneurysm, pseudoaneurysm, and associated occlusive disease, common femoral artery (profunda femoris, superficial femoral) C
35221 Repair blood vessel, di rect; intra-abdominal C 35372 Thromboendarterectomy, including patch graft, if performed; deep (profunda) femoral C

35721 Exploration (not followed by surgic al repair), with or without lysis of artery; femoral artery C

35800 Exploration for postoperative hemorrhage, thrombosis or infection; neck C

37182 Insertion of transvenou s intrahepatic portosyst emic shunt(s) (tips) (includes venous access, hepatic a nd portal vein catheterization, portography with hemodynamic evaluation, intrahepatic tract formation/ dilatation, stent plac ement and all associated ima C

37221 Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, initial vesse l; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed T
37617 Ligation, major artery (eg, post- traumatic, rupture); abdomen C 38562 Limited lymphadenectomy for st aging (separate procedure); pelvic and para-aortic CCMS-1525-FC 818

HCPCS

Code Long Descriptor CY 2012 Status Indicator 43281 Laparoscopy, surgical, repair of paraesophageal hernia, includes fundoplasty, when performed; w ithout implantation of mesh T

43770 Laparoscopy, surgical, gastric restrictive procedure; placement of adjustable gastric band restrict ive device (eg, gastric band and subcutaneous port components) T

43774 Laparoscopy, surgical, gastric rest rictive procedure; removal of adjustable gastric band restrictiv e device and subcutaneous port components C

43840 Gastrorrhaphy, suture of perforated duodenal or gastric ulcer, wound, or injury C

44300 Placement, enterostomy or cecostomy, tube open (eg, for feeding or decompression or feeding) (separate procedure) C

44314 Revision of ileostomy; complicat ed (reconstruction in-depth) (separate procedure) C

44345 Revision of colostomy; compli cated (reconstruction in-depth) (separate procedure) C

44346 Revision of colostomy; with repair of paracolostomy hernia (separate procedure) C

44602 Suture of small intestine (enter orrhaphy) for perforated ulcer, diverticulum, wound, injury or rupture; single perforation C

49010 Exploration, retroper itoneal area with or without biopsy(s) (separate procedure) C

49255 Omentectomy, epiploectomy, resection of omentum (separate procedure) C

51840 Anterior vesicourethropexy, or urethropexy (eg, marshallmarchetti-krantz, burch); simple C 56630 Vulvectomy, radical, partial; C

61624 Transcatheter permanent occlusi on or embolization (eg, for tumor destruction, to achieve hemost asis, to occlude a vascular malformation), percutaneous, any method; central nervous system (intracranial, spinal cord) CCMS-1525-FC 819

HCPCS

Code Long Descriptor CY 2012 Status Indicator

63044 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated interverte bral disc, reexploration, single interspace; each additional lumbar interspace (list separately in addition to code for primary procedure) C

63710 Dural graft, spinal CCMS-1525-FC 820 X. Policies for the Supervision of Outp atient Services in Hospitals and CAHs A. Background In the CY 2000 OPPS final rule with comment peri od, CMS established the hospital OPPS and indicated that direct supe rvision is the standard for all hospital outpatient therapeutic services covered and paid by Medicare in hospitals and in provider-based department s (PBDs) of hospitals (65 FR 18524 through 18526). Currently, as discussed in the CY 2011 O PPS/ASC final rule with comment period (75 FR 72008), this standard requires the supervisory practitioner to be immediately available to furnish assistance and direct ion throughout the performance of a hospital outpatient therapeutic service or procedur e. In the CY 2000 OPPS final rule with comment period, we established in the regula tion at § 410.28(e) that outpatient diagnostic services furnished in PBDs of hospitals must be supervised at the level indicated in the Medicare Physician Fee Schedule (MPFS) for each service, that is, general, direct or personal supervision. Since that time, we have clarified and refined these rules in several ways. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71998 through 72001), we provided a comprehensive review of the history of the supervision policies for both outpatient therapeutic and diagnostic services from the inception of the OPPS through CY 2010. In this section, we provi de a more condensed overview of our supervision policy during that time period, and present background on issues that have arisen during the CY 2011 payment year. By way of overview, we have defined supervision in the hospital outpatient setting by using the three levels of supervisi on that CMS defined for the physician officeCMS-1525-FC 821 setting at § 410.32(b) prior to establishment of the OPPS: general, direct, and personal supervision. Over time, we have tailored these definitions as needed to apply them in the hospital outpatient setting, so th e definitions or applicati ons in the OPPS may differ slightly from those in the physician office se tting. This is the case in defining direct supervision, where the MPFS requires presen ce “in the office suite,” and the OPPS currently does not require pr esence within any specific physi cal boundary (in the past, the OPPS rules for direct supervision required presence on the hospital campus or in the PBD) (75 FR 72008, 72012). To date, for purposes of the hospital outpatient setting, we have only defined direct and general supervision, and we have only defined general supervision insofar as it applies to the provision of nonsurgical extende d duration therapeutic services (extended duration services) for which we require dire ct supervision during an initiation period, followed by a minimum standard of general s upervision for the durat ion of the service (75 FR 72012). Under the OPPS, general superv ision means that the service is furnished under the overall dir ection and control of the physician or appropriate nonphysician practitioner (NPP), but his or her physical pr esence is not required during the performance of the service. Direct superv ision means that the physician or appropriate NPP is immediately availabl e to furnish assistance a nd direction throughout the performance of a therapeutic service or proced ure; however, he or sh e does not have to be present in the room where the servi ce or procedure is being performed. In the CY 2000 OPPS final rule with comment period (65 FR 18524 through 18526), we adopted physician supervision polic ies as a condition of payment under theCMS-1525-FC 822 OPPS to ensure that Medicare pays for high qua lity hospital outpatient services that are furnished in a safe and effective manner and c onsistent with Medicare requirements. The agency has long divided hospital outpatient services into th e two categories of “diagnostic” services and “therape utic” services that aid the physician in the treatment of patients (Section 3112 of the Medicare Part A Intermediary Manual (July 1987)). Thus, we considered all nondiagnostic services to be “therapeutic services” which would include, but not be limited to, the services listed under section 1861(s)(2 )(B) of the Act as incident to the services of physicians. As early as 1985, the agency defined therapeutic services as those services a nd supplies (including the use of hospital facilities) that are incident to the services of physicians in the treatment of patie nts (Section 3112.4 of the Medicare Part A Intermediary Manual (May 1985)). In recognition of this historic classification of services, we established a direct superv ision standard for outpatient therapeutic services under our regulation at § 410.27, which es tablishes the conditions for payment for outpatient hospital services provi ded “incident to” physic ians’ services. In the text of § 410.27, we also established st andards requiring that these services be furnished either by or under arrangeme nts made by the par ticipating hospital (§ 410.27(a)(1)(i)), and either in the hospital or in a location that the agency designates as a department of a provider under § 413.65 of the regulations (§ 410.27(a)(1)(iii)). Since 2000, we have maintained the classification of se rvices as either diagnostic or therapeutic in our manual guidance that establishes the c onditions of payment for hospital outpatient services under the OPPS (Sections 20.4 a nd 20.5, Chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-02)). In the requirements for therapeu tic services, in addition toCMS-1525-FC 823 the direct supervision sta ndard, we applied the require ments of § 410.27(a)(1)(i) and (a)(1)(iii) regarding under arra ngement and provider-based site of service to all outpatient therapeutic services that are paid under the OPPS (Sect ion 20.5, Chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-02)). In the CY 2000 OPPS final ru le with comment period, we amended our regulation at § 410.27 to specify that direct supervision is required for outpatie nt hospital services and supplies furnished incident to a physician's service in a location we designate as a department of a provider under § 413.65 of our regulations. We speci fied further in the regulation that direct supervis ion means the physician must be present on the premises of the location and immediately available to fu rnish assistance and direction throughout the performance of the service or procedure. The requirement to be “immediately available” was included in the regulati on, although at that time we did not define the term. Although the regulation required the physician to be present on the premises of the location where services were being furnished, it specified that the physician did not have to be present in the room when the proce dure was performed. In the CY 2000 OPPS final rule with comment period (65 FR 18525), we emphasized the importance of establishing a supervision standard for services furnished in departments of the hospital that are not located on campus, indicating that our amendm ent applies to services furnished at an entity that is located off the campus of a hospital that we designate as having provider-based status in accordance with th e provisions of § 413.65. In response to a commenter, we stated that, in accordance with Section 3112.4(A) of the Intermediary Manual, we assume that the direct supe rvision standard is met when outpatientCMS-1525-FC 824 therapeutic services are provi ded incident to a physician’ s service in an on-campus department of a hospital. In the CY 2000 OPPS final rule with comment period, we also defined the supervision standards for outpa tient hospital diagnostic servi ces furnished in PBDs of hospitals in § 410.28(e) of our regulations. The regulation at § 410.28(e) provided that diagnostic services furnished at facilities ha ving provider-based status must be performed under the level of supervision indicated for the diagnostic test under the MPFS in accordance with the definitions in §§ 410.32(b)(3)(i ), (b)(3)(ii), and (b)(3)(iii). In the CY 2010 OPPS/ASC final rule with comme nt period (74 FR 60588 through 60591, and 60680), we revised §410.28(e) to extend the supe rvision standards we had established for hospital outpatient diagnostic tests furnished in PBDs to also apply to services furnished in the hospital setting or any other location where diagnostic services may be provided under arrangement. The supervision rules fo r diagnostic services under the regulation at § 410.28(e) explicitly apply to hospitals that are paid in accordance with section 1833(t) of the Act, which is the st atutory authority for the OPPS . As noted in the CY 2010 OPPS/ASC final rule with comment period, Medicare makes payments to CAHs in accordance with section 1834(g) of the Act. Accordingly, CAHs are not subject to the supervision requirements for hospital outpatient diagnostic services at this time. The supervision requirements for hospital outpatient diagnostic services were also set forth in Section 20.4, Chapter 6, of the Me dicare Benefit Policy Manual. In the years following establ ishment of the initial OPPS regulations, we began to receive inquiries from providers about the supervision requirements. Many of theseCMS-1525-FC 825 inquiries led us to believe th at some hospitals may have misunderstood our statement to the effect that we assume physician supe rvision requirements are met for services furnished on the hospital premises, and that so me hospitals were providing either general supervision or no supervision for therapeutic services furnished incident to physicians’ services in the outpatient setting and for whic h we had established a requirement of direct supervision. Therefore, in the CY 2009 O PPS/ASC proposed rule and final rule with comment period (73 FR 41518 throu gh 41519 and 73 FR 68702 through 68704, respectively), we clarified and restated the various supervision requirements for outpatient hospital therapeutic and diagnostic services. We clarified that outpatient therapeutic services furnished in the hospital and in all PBDs of the hospital, specifically both on-campus and off-campus PBDs, must be provided under the dire ct supervision of physicians. We also reiterated that all outpatient diagnostic services furnished in PBDs, whether on or off the hospital’s main campus , should be supervised according to the levels assigned for the individual tests unde r the MPFS. We received very few public comments regarding this cl arification and restatement during the comment period. In response to concerns about our policy restatement articulated by stakeholders after publication of the CY 2009 OPPS/ASC final rule with comment period, we further refined our supervision policies in the CY 2010 OPPS/ASC proposed rule and final rule with comment period (74 FR 35365 and 74 FR 60679 through 60680, respectively). We established rules for hospital out patient diagnostic services furnished in locations other than PBDs (that is, in th e hospital and under arrangement in nonhospital facilities). Accordingly, we expanded and refined th e regulatory language regarding directCMS-1525-FC 826 supervision of diagnostic serv ices in those locations to refer to presence of the supervisory practitioner in the hospital or PBD (for services furnishe d in those locations) or in the office suite (for services furnis hed under arrangement in nonhospital space). For therapeutic services, we increased hospitals’ flexibility regarding the direct supervision requirement by allowing all NPPs whose servi ces are those the practitioner is legally authorized to perform under State law that “would otherwise be covered if furnished by a physician or as an incident to a physician’s service” (“would be physic ians’ services”) to supervise hospital outpatient therapeutic servi ces that are within their scope of practice under State law and their hospital-granted or CAH-granted privileges (sections 1861(s)(2)(K) through (N) of the Act; §§ 410.71 through 410.77 of the regulations). However, in implementing the new benefits for pulmonary rehabilitation (PR), cardiac rehabilitation (CR) and intensive cardiac reha bilitation (ICR) servic es, we required that direct supervision of those services furnishe d in the hospital outpatient setting must be provided by a doctor of medicine or a doctor of osteopathy because, as we discussed in the CY 2010 and CY 2011 OPPS/ASC final rules with comment period (74 FR 60573 and 60582 and 75 FR 72009, respectively), the st atute specifies that these services are physician-supervised (section 144(a) of th e Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 110-275). In addition, in the CY 2011 OPPS/ASC final rule with comment period, we revised our re gulations at § 410.27 to remove the physical boundary requirements for direct supervision of hospital outpatient therapeutic services, and instead allow the supervis ory practitioner to be “immed iately available,” meaning physically present, interruptible, and able to furnish assistance a nd direction throughoutCMS-1525-FC 827 the performance of the procedure, but wit hout reference to any particular physical boundary. In the CY 2010 OPPS/ASC final rule with comment period, we finalized a technical correction to the re gulation at § 410.27 to clarify that the direct supervision requirement under that section applies to serv ices furnished in CAHs as well as other types of hospitals. Specifically, we adde d the phrase “or CAH” in the title and throughout the regulation text wherever the text referred only to “hospital,” to clarify that the requirements for payment of hospital outpa tient therapeutic services in that section apply to CAHs as well as other types of hospitals. As we discussed in the CY 2011 OPPS/ASC final rule with comm ent period (75 FR 72000), we vi ewed this as a technical correction because the Act applies the same regulations to hospitals and CAHs when appropriate (CAHs are included if “the contex t otherwise requires” under section 1861(e) of the Act). In response to our clarification that CAHs are subject to the direct supervision standard for payment of outpatient ther apeutic services, CAHs and the hospital community at large suggested that CAHs should be exempt from this requirement because the requirement is at odds with l ongstanding and prevailing practices of many CAHs. For example, commenters noted that, due to a low volume of services, a practitioner retained on the cam pus of a small rural hospital or CAH to meet supervision requirements may not have other concurrent re sponsibilities or pati ent care, which could lead to inefficiencies. In their corresp ondence and discussion in public forums, CAHs and small rural hospitals exp licitly raised concerns about services that extend afterCMS-1525-FC 828 regular operating hours, especially observati on services. They asserted that direct supervision is not clinic ally necessary for some outpatient services that have a significant monitoring component that is typically perf ormed by nursing or ot her auxiliary staff, including IV hydration, blood transfusions, a nd chemotherapy. They stated that their facilities have protocols to safely deliver all of these services, relying on nursing or other hospital staff to provide the service and having a physician or NPP available by phone to furnish assistance and direction throughout th e duration of the therapeutic service. We provided guidance regarding the flexibil ity that we believe exists within our requirement for direct supervision for an em ergency physician or NPP, who would be the most likely practitioners staffing a small rural hospital or CAH, to provide the supervision, on the CMS Web site at: http://www.cms.gov/HospitalOutpatien tPPS/05_OPPSGuidance.asp#TopOfPage

. However, these hospitals continued to expre ss that they have difficulty in meeting the standard. Small rural hospitals and CAHs indicated that, regulat ions notwithstanding, many of them did not have appropriate st aff arrangements to provide the required supervision of some services , particularly serv ices being provided after hours or consisting of a significant monitoring component that last for an extended period of time. In addition, the broader hospita l community began requesting that we modify our policy to permit a lower level of supervision for outpatient therapeutic services for all hospitals. After consideration of these requ ests, on March 15, 2010, we issued a Federal Register notice of nonenforcement of the requirement for direct supervision of outpatient therapeutic services in CAHs (which is available on the CMS Web site at:CMS-1525-FC 829 http://www.cms.gov/HospitalOutpatien tPPS/Downloads/CMS_1504FC_OPPS_2011_FR _Physician_Supervision_Nonenf_Notice.pdf ). While CAHs remained subject to the direct supervision standard, we instructed our contractors not to evaluate or enforce the standard in CY 2010 until the agency could revisit the supervision policy during the CY 2011 rulemaking cycle. As indicated above, in the CY 2011 OPPS/ ASC final rule with comment period (75 FR 71998 through 72013), we further adjusted the direct supervision standard for hospital outpatient therapeutic services to increase flexibility for hospitals while maintaining an appropriate level of quality a nd safety and consistent with the Medicare statute. Specifically, for these services we redefined direct supe rvision to remove all requirements that the supervisor y practitioner remain present within a particular physical boundary, although we continued to require immediate availabili ty. We also established a new category of services, “nonsurgical extended duration therapeutic services” (extended duration services), which have a substantial monitoring component. We specified that direct supervis ion is required for these servic es during an initiation period, but once the supervising physician or NPP has de termined that the patient is stable, the service can continue un der general supervision. In addition, in response to concerns e xpressed by the industr y about appropriate levels of supervision for certain outpatient therapeutic services furnished in various settings (for example, chemotherapy ad ministration, and post-operative recovery services), we stated our intent to cr eate through the CY 2012 rulemaking cycle an independent advisory review process for cons ideration of stakeholder requests that CMSCMS-1525-FC 830 assign supervision levels othe r than direct supervision fo r specific outpatient hospital therapeutic services. We stated that the review entity would evaluate services and recommend that CMS assign the same level of supervision (direct supervision), a lower level of supervision (general supervision), or a higher le vel of supervision (personal supervision) because in the course of evaluating a given service, the review entity may find that personal supervision is the most appropriate level (75 FR 72006). We also indicated that, as an interim measure while we are in the process of establishing an advisory review body, we would extend the none nforcement policy for direct supervision of outpatient therapeutic serv ices provided in CAHs for a second year through CY 2011 (which is available at the CMS Website at: http://www.cms.gov/HospitalOutpatien tPPS/Downloads/CMS_1504FC_OPPS_2011_FR _Physician_Supervision_Nonenf_Notice.pdf ). In addition, we expanded the nonenforcement notice to include small and rura l hospitals that have 100 or fewer beds, as defined by Transitional Outpatient Payments (TOPs) criteria, because we believe that these hospitals experience resource cons traints that are similar to CAHs. We indicated that we would consider the Federal Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) as a potential candidate to serve as the independent review entity to consider requests for alternative service-specific supervision standards, and we requested public comment bot h on that idea and on other aspects of the review process, such as evaluation criteria a nd the potential structure of the process. We suggested the APC Panel could serve as the review entity because it is already funded and established by law under the Federal Advisory Committee Act (FACA, Pub. L.CMS-1525-FC 831 92-463) to make independent recommendations to CMS. The APC Panel membership is geographically diverse, and it includes member s with clinical as well as administrative, hospital billing, and coding expertise. In response to our discussion in the CY 2011 OPPS/ASC final rule with comment period, we received public comments and other considerable input on these topics from the hospital and CAH community and from rural stakeholders. In the CY 2012 OPPS/ASC proposed rule (76 FR 42277 thr ough 42285), we discussed these comments and further developed our proposals for th e independent review process in CY 2012, taking into account the comments received in response to the CY 2011 OPPS/ASC final rule with comment period. With respect to outpatient hospital diagnos tic services, following our revisions to the regulation at §410.28(e) in the CY 2010 OP PS/ASC final rule with comment period described above, we have received very few comments from stakeholders regarding our revised policy. Therefore, we did not propos e any changes to those requirements in the CY 2012 proposed rule.CMS-1525-FC 832 B. Issues Regarding the Supervision of Hosp ital Outpatient Therapeutic Services Raised by Hospitals and Other Stakeholders 1. Independent Review Process In the CY 2012 OPPS/ASC proposed rule (76 FR 42277 through 42285), we proposed to establish an independent techni cal review process to consider servicespecific requests that CMS assign supervision levels other than direct supervision to hospital outpatient therapeutic services. Our proposals focused on three primary topics: the potential nature of the review entity; the potential nature and stru cture of the review process; and potential means of evaluating services. a. Selection of Review Entity We proposed that the existing APC Panel serve as the independent review entity. However, we proposed to modify the APC Panel’s scope and composition in order to create a body that is prepared to address s upervision standards and that reflects the full range of parties subject to the standards. Specifically, we proposed to use the discretionary authority in the Panel charter to expand its scope to include the topic of supervision standards. We proposed to add se veral (2 to 4) repres entatives of CAHs as Panel members because CAHs are subject to the supervision rules for payment. We proposed that we would continue to exclude these members from deliberations about APC assignments under the OPPS, as these a ssignments do not affect CAHs. CAHs are not paid under the OPPS, and we do not believ e that they are “appropr iate representative providers” for the Panel’s delib erations on APC groups and we ights under the authorizing section 1833(t)(9) of the Act.CMS-1525-FC 833 We proposed to use the APC Panel for many reasons. In addition to being already established and funded, we believed that the APC Panel would be inclusive and well-balanced because it is subject to the FACA rules. We also proposed to use the APC Panel because we believed it will be important to obtain advice that carries the weight of a Federal advisory recommendation, which may have greater legitimacy both with stakeholders and with CMS compared to the opinions of other types of groups.
Comment : Most commenters were in favor of the proposal to use the APC Panel, provided that CAHs and small rural PPS hospita ls received appropria te representation. Many commenters requested that CMS add 4 re presentatives of CAHs and an additional 4 representatives of small rura l PPS hospitals to the current 15 Panel members, to ensure a strong voice for small and rural hospitals and because both CAH and non-CAH rural hospitals are having difficulty complying with the direct supervisi on requirement. The commenters also recommended that small rural hospitals paid under the OPPS be permitted to participate in the Panel’s delib erations about APC groupings and weights. One commenter requested an equal number of rural and urban provi der representatives on the Panel. Another commenter urged CMS to ensure adherence to the FACA rules. Response : We agree with commenters that th e APC Panel is an appropriate entity to serve as the review body, provided CAHs and small rural hospitals are given appropriate representation on th e Panel. Therefore, we are finalizing the APC Panel as the entity that will advise and make i ndependent recommendations to the agency regarding the appropriate supervision level for individual hospital outpatient therapeutic services. We believe that it will be important to obtain advice that carries the weight of aCMS-1525-FC 834 Federal advisory recommendation. In additi on to being already established and funded, the Federal advisory APC Panel will, of necessity, be inclusive and well-balanced because it is subject to the FACA rules. Panel members bring relevant clinical and nonclinical expertise to the discussions. Th rough amendment of the Panel charter, the Panel will be authorized under section 222 of the Public Health Service Act (42 U.S.C. 217(a)) to advise the Se cretary of the Department of H ealth and Human Services and the CMS Administrator on the appropriate supervis ion level for individua l hospital outpatient therapeutic services. Under this authority, we will also designate representatives of CAHs to serve on the Panel to advise CMS regarding supervision but they will not advise CMS regarding APC groups and weights. As we discuss below, a recent study indi cated significant differences between CAHs and non-CAH small rura l hospitals in resources, qua lity of care, and outcomes (Joynt K, Harris Y, et al. Quality of Care and Patient Outcomes in Critical Access Rural Hospitals. JAMA. 2011;306(1):45-52). Ho wever, as we stated in our CY 2011 OPPS/ASC final rule with comment period (75 FR 72007), we believe that CAHs and small rural PPS hospitals may, at times, face similar resource constraints such as workforce shortages, which could lead to difficulty in meeting certain supervision standards. We believe that it would be appropriate for both small rural PPS hospitals and CAHs to have added representation on the Pa nel in a manner that would be balanced under the FACA rules. Therefore, as part of our final policy we are adding four new seats to the Panel. Two of these seats will be designated for representatives of CAHs and the other two will be designated for representa tives of small rural PPS hospitals. We areCMS-1525-FC 835 defining “small rural PPS hospital” in the same manner as we defined “small rural hospital” for the notice of nonenforcement of dir ect supervision of ther apeutic services in CAHs and small rural hospitals, that is, hos pitals with 100 or fewer beds and either geographically located in a rura l area or paid under the hosp ital OPPS with a rural wage index (75 FR 72007; https://www.cms.gov/HospitalOutpatien tPPS/downloads/CMS_1504FC_OPPS_2011_FR _Physician_Supervision_Nonenf_Notice.pdf ). This is the same definition of small rural hospital that Congress recognizes for TOPs unde r section 1833(t)(7) of the Act. All PPS hospital representatives on the Panel, includ ing the representatives of small rural PPS hospitals, will continue to advise CMS on the APC groups and weights as well as the appropriate supervision levels for individual hospital outpatient therapeutic services.
Comment : Several commenters addressed the types of practitioners that should be appointed to the Panel, and the degree to which CMS and the Panel should rely on clinical and specialty expert ise. Two commenters suggested that recommendations and decisions about supervision leve ls be made only by clinicians , and that nonclinicians not be permitted to participate in the review process. One co mmenter supported the concept of an independent review process but opposed use of the APC Panel, stating that the Panel’s members are selected based on thei r knowledge of payment and reimbursement systems rather than clinical judgment and expertise. The commenter believed that the Panel’s recommendations should be based sole ly on clinical judgme nt, and pointed out that several current Panel members do not have clinical expertise. The commenter expressed concern that these individu als’ recommendations would be based uponCMS-1525-FC 836 payment implications rather than clinical criteria. One commenter recommended that CMS involve its specialty society in its re views. Another commenter encouraged CMS to include experts on the Panel that specialize in the particular service that is being evaluated, and to seek out the resources of specialty societie s. One commenter noted that in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72011), in making the decision to exclude chemotherapy administ ration from the list of extended duration services pending an independent assessment, CMS noted a safety standard that was published by the American Society of C linical Oncology and the Oncology Nursing Society. The commenter requested informa tion as to how CMS mi ght consider such specialty association guidelines in future decision-making. Response : As we stated in the proposed ru le (76 FR 42280), we believe that the APC Panel is an appropriate body to review supervision levels because, under the FACA rules, it must have a “balanced” composition. The Panel members must reflect expertise in the areas that are important for in formed, representative decision-making on supervision which we believe includes both c linical and other types of expertise. In evaluating the supervision levels that are requi red for payment, we believe that the Panel will need input from individuals with knowledge in hospital billing, coding, and administration, as well as clinical matters. For example, in the past several OPPS rulemaking cycles, commenters have requested that CMS evaluate the surgical recovery period for a change in superv ision level from direct to general supervision. Several commenters to the current (CY 2012) proposed rule were seeking additional information on how to request a change in supervision level for a “service” like the recovery periodCMS-1525-FC 837 that is not defined by a CPT code but rather by phases assi gned by a specialty society. As we discuss below, one commenter request ed that CMS synchronize the supervision requirement for the recovery period with the phases into which the American Society of Anesthesiology (ASA) divides th e recovery period. Individuals with billing and coding expertise may help inform these and similar issues. In addition, we note that it is possible for both clinicians and nonclinicians to make recommendations that are inappropriate ly based on payment implications rather than clinical or othe r criteria that may be set forth. Clinicians must adhere to the supervision rules in order to receive payment for thei r services, and furnishing supervision uses resources that might othe rwise be devoted to increasing payment by furnishing additional services. Thus, we belie ve there is some potential among clinicians and nonclinicians to give ina ppropriate weight to payment implications in making their recommendations. Excluding nonclinicians from the Panel would not necessarily prevent these types of considerations from affecting decision-making. In accordance with the FACA rules, we will maintain balanced membership on the Panel. We encourage specialty associ ations and other entities with specialized expertise in services that may be under the Panel’s consideration to nominate representatives to the Panel. We also encourage these group s to participate in the public Panel meetings, and to submit public presentations that would inform the Panel’s deliberations. In setting supervision levels , CMS will continue to consider safety and other guidelines published by specialty associa tions, and the Panel may consider them as well.CMS-1525-FC 838
Comment : Several commenters requested that Panel members include clinicians furnishing hospital outpatient services, certified registered nurse anesthetists (CRNAs), and other NPPs who furnish high volume servic es, especially registered nurses (RNs), physical therapists, and respiratory therapists . One commenter indicated that the Panel should seek input from providers who compet e with physicians in the marketplace, and not restrict opportunities to inform the Panel to medical doctors only. Several commenters expressed concern a bout CMS’ policy to not allow certain NPPs to supervise hospital outpatient therapeutic services, especially CRNAs and pharmacists. One commenter indicated that it will ask the Pa nel to consider allowing pharmacists to supervise hospital outpatient therapeutic servi ces as appropriate, for example, medication management and, in States where it is authorized, collaborative drug therapy management. The commenter requested that, in the course of the review process, the Panel consider pharmacists to be NPPs who may furnish supervision. Another commenter believed that supervision of RN s by physicians will not necessarily prevent medical errors, and also stated that physicia ns have been implicated in the increase in wrong-patient and wrong-si te surgical errors. Response : We note again that, in accordance with the FACA rules, CMS will follow a balance plan for the Panel memb ership. For purposes of supervision deliberations, we believe that the clinicians on the Panel should largely represent the types of practitioners who furnish hospital out patient services and those with supervisory responsibilities because they are most directly impacted by the rules. As we discussed in the proposed rule (76 FR 42282), the agency does not allow RNs to supervise hospitalCMS-1525-FC 839 outpatient therapeutic services because th ey are not authorized under the Act to independently furnish “would be physicians’ services.” For the same reason, CMS does not permit pharmacists to supervise these services. CRNAs have a narrow scope of practice, and we typically would seek practiti oners that furnish a br oader array of hospital outpatient services to serve as Panel members. However, these practitioners are eligible to serve on the Panel, depending on their areas of expertise. We note that, currently, one Panel member is an RN and Panel members in the past have been pharmacists. While we did not receive any comments directly on th e number of nurse practitioners, physician assistants or other supervisor y NPPs that should serve on the Panel, we would encourage nominations of these types of practitioners, especially for the CAH seats because these types of practitioners might be used more frequently to furnish supervision in CAHs. Regarding the Panel’s supervision deliberat ions, we note that, as we proposed, the Panel’s scope of review will be limited to addr essing the level of supervision that should be furnished for a given hospital outpatient th erapeutic service, and will not include the type of practitioner that should be permitted to furnish the supervision. The Panel will recommend the appropriate superv ision level for a particular service, given the type of practitioner that is permitted to furnish and supervise the service under the current laws and regulations. b. Review Process We proposed to issue agency decisi ons based on APC Panel recommendations through a subregulatory process. We proposed a process similar to the one currently used to set supervision levels for diagnostic services under the MPFS, which are alsoCMS-1525-FC 840 applicable to those services when furnis hed in the hospital outpatient setting. We proposed that CMS’ decisions, whic h would be based upon the Panel’s recommendations, would be posted on the OPPS Web site for public review and comment, and would be effective either in Ju ly or January following the most recent APC Panel meeting, or only in January of th e upcoming payment year. In setting the supervision levels for diagnostic services under the MPFS, there is no provision for public comment. However, given the strong stakeholder interest in the supervision requirements and the extent of prior dialogue with the various stakeholders, we proposed to provide a period of notice and comment on our posted decisions prior to finalizing them. We reasoned that the flexibility of a subregulatory process in comparison to annual notice and comment rulemaking would al low stakeholders to submit, and for the APC Panel to consider, requests for evaluations of services on a more frequent basis (at least twice a year at APC Panel meetings ) rather than only annually, which most commenters to the CY 2011 OPPS/ASC final ru le with comment period had requested (75 FR 42280). It also would give CMS the abil ity to respond more rapidly to any issues that may arise in access to car e or patterns of care. Subject ing CMS’ decisions to noticeand-comment rulemaking would provide a more structured, formal review of decisions, but changes could only be made once a y ear due to the annual OPPS/ASC rulemaking cycle.
Comment : Most commenters opposed the agen cy issuing its decisions through a subregulatory process. The commenters requested that, to ensure the greatestCMS-1525-FC 841 transparency and allow sufficient time and opportunity for public comment, CMS subject its decisions to notice and comment through rulemaking. One commenter requested a 45- to 60-day comment period. A few commenters suggested that, to facilitate evaluations more than once a year, CMS could address supervision standards using both the OPPS rule and another non-OPPS rule. In response to the concerns expressed by the agency in the proposed rule that the revi ew process should be nimble and flexible enough to address access or other urgent needs, several commenters noted that the agency possesses other means of assuring access, for example notic es of nonenforcement, additional rulemaking, and other administrative powers. Several commenters reque sted that CMS not use any information that is presented by stakeholders in the course of the review process for enforcement purposes. Response : As we indicated in the proposed rule, we believe that employing a subregulatory process to establish our final decisions will best serve the interests of beneficiaries and also meet the needs of other stakeholders. While rulemaking would arguably provide some additional procedural protections to stakeholders in terms of a more formal opportunity for notice and co mment, due to practical considerations involved in rulemaking, it is very likely th at we would only be able to accomplish changes in supervision levels once a year. We agree with commenters that the agency has several administrative means to respond to urgent problems associated with supervision levels, for example exercising our enforcement discretion. However, we believe it is preferable to have a more nimb le means of addressing access or pattern-ofcare concerns within a short timeframe. In addition, as we noted in the proposed rule,CMS-1525-FC 842 CMS has historically used subregulatory pr ocesses rather than rulemaking to issue changes in certain administrati ve specifications at the leve l of individual CPT codes due to a need for agility in making such changes. For example, CMS has used a subregulatory process to set supervision levels for indivi dual diagnostic services under the MPFS, which are also applicable to thos e services when furnished in the hospital outpatient setting. Given the strong stakeholder interest in our consideration of changes in supervision levels for hospital outpatient therapeutic services, we continue to believe that we should provide an opportunity for public comment on our decisions (which will be based upon the Panel’s recommendations) prior to finalizing them. Therefore, we are finalizing our proposal to issue our decisi ons based on Panel recommendations at the subregulatory level. We will post our preliminary decisions on the OPPS Web site for public review and comment. Gi ven that the issues will be service-specific and therefore narrow, we will allow for a 30-day public comment period. We will give careful consideration to the comments that we receive, and we anticipate finalizing decisions within 60 days of the end of the comment period. Our final decisions will be effective either in July or January following the most recent APC Panel meeting. c. Evaluation Criteria To begin evaluating services in CY 2012, we proposed to use the same APC Panel process that is currently used to solicit requests fr om stakeholders for APC and status indicator changes for serv ices or categories of services to construct the agenda to solicit potential services for consideration of a change in supervision level. In addition,CMS-1525-FC 843 we proposed that CMS would have the ability to request that th e Panel review the supervision level for services as necessary. If we receive an unmanageable number of requests, we proposed to prioritize requests by service volume, total expenditures and/or frequency of requests. We also proposed to gi ve priority to services requested for review through public comment on the CY 2010 and CY 2011 OPPS/ASC rules. We proposed to require that requests include a justificati on for the change in supe rvision level that is sought, supported to the extent possible with clinical evidence. We also proposed that we would consider these justific ations in deciding which serv ices to forward to the APC Panel for evaluation. We proposed to charge the Panel with r ecommending a supervision level (general, direct, or personal) to ensure an appropriate level of quality and safety for delivery of a given service, as defined by a CPT code. We proposed that the Panel should take into consideration the context in wh ich the service is delivered, that is, the clinical, payment, and quality context of a patient encounter. In recommending a supervision level to CMS, we proposed that the Panel assess whether th ere is a significant likelihood that the supervisory practitioner would need to reas sess the patient and m odify treatment during or immediately following the therapeutic in tervention, or provide guidance or advice to the individual who provides the service. In answering that question, the Panel would consider the following:

● Complexity of the service;

● Acuity of the patients receiving the service;

● Probability of unexpected or adverse patient event; andCMS-1525-FC 844

● Expectation of rapid clinical changes during the therapeutic service or procedure. We noted that these crite ria include, but extend well be yond, the likelihood of the need to manage medical emergencies during or after the provision of the service. As we have stated in previous rules ( 74 FR 60580, 75 FR 72007, and 75 FR 72010 through 72012), the supervisory responsibility is more than the mere capacity to respond to an emergency. It also includes being available to reassess the patient and potentially modify treatment as needed on a nonemergency basis. The supervisory practitioner must have, within his or her State scope of practice and hospital-granted pr ivileges, the knowledge, skills, ability, and privileges to perform the service or pr ocedure. Specially trained ancillary staff and technicians are the primary operators of so me specialized diagnostic or therapeutic equipment, and while in such cases CMS does not expe ct the supervisory practitioner to operate this equipment instead of a technician, CMS does expect the practitioner that supervises pr ovision of the service to be knowledgeable about the test and clinically appropriate to furnish the test . The supervisory responsibility includes the ability to furnish assistance and direction th roughout the performanc e of a procedure and, as appropriate to the supervisory practitioner an d the patient, to change a procedure or the course of care for a particular patient. CMS would not expect that the supervisory practitioner would make all de cisions unilaterally without co nsulting the patient’s treating physician or NPP. The supervisory practit ioner should have the training and knowledge to clinically redirect the serv ice or provide additional orders.CMS-1525-FC 845 We proposed that, in the event there ha s been a previous consideration and decision on the supervision standard for a serv ice, we would consider the request and, as warranted, forward the request to the APC Pane l for its review. We proposed to require the requestor to submit new evidence to support a change in policy, for example, evidence of a change in clinical practi ce patterns due to new techniques or new technology. We proposed that if sufficient new information was provided with the request, CMS would send the request to the AP C Panel, and the Panel would reconsider the service and make another recommendation to CMS, which could be the same or a different level of supervision than the current level for the service. Finally, we stated that we anticipa ted extending through CY 2012 the notice of nonenforcement of the requirement for dire ct supervision in CAHs and small rural hospitals as defined by the notice (a vailable on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp ). This extension would allow these facilities time to meet the appr opriate supervision standard and allow us to complete supervision policy decisi ons on many key services during 2012.
Comment : Commenters largely supported the proposed four clin ical criteria. One commenter requested that CMS expand thes e criteria to allow exceptions based on changes in technology. Response : We believe that a change in techno logy or practice patt erns that affects a procedure’s level of safety is an appropriate additional criterion. Th erefore, as part of our final policy, we are adding a fifth criterion, “Recent changes in technology or practice patterns that affect a procedure’ s safety.” This criterion is similar to the criteria CMSCMS-1525-FC 846 will use to determine whether there is a need fo r reconsideration of a particular service as discussed below.
Comment : Several commenters continued to request that CMS establish a default supervision standard of gene ral supervision for all hospital outpatient therapeutic services, and assign direct s upervision only as recommende d by the review entity. The commenters reiterated public comments on prior rules, stating that the review entity and CMS should not consider services for assi gnment of personal supervision because many services that might qualify for personal supervision are al ready personally performed by a physician or NPP. They again noted that ce rtain services are not furnished personally by these practitioners and instead are furnishe d personally by auxiliar y personnel such as technicians or RNs. Howeve r, the commenters maintained that hospitals currently furnish adequate supervision of those services by higher level practiti oners. Further, they requested that any evaluation for personal s upervision be based on clinical evidence and evidence of a current deficiency in the quali ty of care. In contrast, one commenter suggested that, to shorten the list of se rvices that need c onsideration, CMS assign personal supervision to all services that requ ire the practitioner to personally furnish the service and limit the Panel’s scope to cons ideration of any remaining services. One commenter requested that the Panel be perm itted to advise the agency on “alternative” forms of supervision such as sa tellite offices and telemedicine. Response : In the CY 2012 OPPS/ASC proposed rule and the CY 2011 OPPS/ASC final rule with commen t period (76 FR 42281 and 75 FR 72006, respectively), we expressed our belief that dir ect supervision is the most appropriate levelCMS-1525-FC 847 of supervision for most hospital outpatient th erapeutic services due to the “incident to” nature of most hospital outpatient ther apeutic services. We discussed how our requirements for physician (or NPP) orders a nd direct physician involvement in patient care stem from our interpretation of the nature of incident to physicians’ services under the law. We reviewed our regulations and other guidance over the years which reflect these beliefs and interpretations (75 FR 71999 and 72005). We stated in the proposed rule and conti nue to believe that, while the statute does not explicitly mandate direct supervision, direct supervision is the most appropriate level of supervision for most hospital outpatient se rvices that are authorized for payment as “incident to” physicians’ services. We believe that the “incident to” nature of hospital outpatient therapeutic services under the law permits us to recognize specific circumstances in which general supervision is appropriate, as we have for extended duration services, and that CMS has author ity to accept a recommendation by the review entity of general supervision for a given servi ce. However, we continue to believe that direct supervision is the most appropriate level of supervisi on for the majority of hospital outpatient therapeutic services and, as such, it is the de fault supervision standard. In the course of evaluating a stakeholde r request for review of the supervision level required for a given service, the APC Panel may recommend that personal supervision is the most appropria te level of supervision for that service. It may also be appropriate for the Panel to recommend pers onal supervision for certain services to ensure that auxiliary personne l or personnel in training (suc h as medical students) are adequately supervised. As we indicated in la st year’s final rule with comment period, ourCMS-1525-FC 848 supervision policy is designed to preserve both the quality and safety of the hospital outpatient services that are paid for by Medi care. Accordingly, we believe that the APC Panel should have authority to recommend pers onal supervision for a service if, in the course of its evaluation, it believes that personal supervision is most appropriate and safe. Therefore, we are finalizing our proposal that the Panel shal l recommend general, direct or personal supervis ion for a service. For situations where the supervisory pract itioner is not availa ble in person, but only by “telemedicine” or in a location such as a “satellite office,” the Panel shall apply the definitions of direct, ge neral and personal supervisi on in accordance with the regulations. For example, if a supervisory pr actitioner is only available via telemedicine, meaning telephone or Internet, and is not able to be immediately physically present, the supervisory practitioner would be furnishi ng general supervision. If a supervisory practitioner is present in a sate llite office such as an off-campus PBD and is able to be immediately physically present but is not pres ent in the room where the service is being furnished, he or she would be furnishing direct supervision. As we previously noted in the CY 2011 OPPS/ASC final rule with comm ent period (75 FR 72008), with regard to recognizing availability by phone or modes other than in-p erson, we believe that the requirement for physical presence distingui shes direct supervision from general supervision because the regulations define general supervision as “the procedure is furnished under the physician’s overall directi on and control, but the physician’s presence is not required during the performance of the procedure” (§ 410.32(b )(3)(i)). We believe that it would be out of the APC Panel’s scope of activities for it to deliberate on theCMS-1525-FC 849 underlying definitions of direct, general or pe rsonal supervision, or for it to consider recommending yet another type of supervis ion based on a supervisory practitioner’s location. Any changes to the definitions would be proposed and finalized through the notice and comment rulemaking process. The APC Panel must base its recommendations on the available clinical evidence. It shall also take into cons ideration any known impacts of th e level of supervision on the quality of care. As we have previously not ed (75 FR 72005), while l iterature or clinical opinions may exist on the risk of adverse out comes and susceptibility to medical error associated with the provision of specific hos pital outpatient proce dures when a physician is not present, we do not know of any analyses that have directly examined levels of supervision and patient outcome s in the hospital outpatient se tting. This may be an area for future study.
Comment : With respect to a starting age nda, several commenters continued to request that the Panel begin by evaluating all therapeutic se rvices with a work RVU < 1.0 under the MPFS, which includes many extende d duration services. Many commenters requested that the Panel revi ew surgical procedures and the surgical recovery period, chemotherapy administration, and blood transfus ions. A few commenters also requested that the Panel evaluate therapies that acco mpany chemotherapy administration such as hydration and anti-emetics. One commenter asked how stakeholders could request evaluation of services that ar e not defined by CPT codes, not ably the surgical recovery period. The commenter requested that CMS allow general supe rvision after “phase 1” of the recovery period as designated by the Am erican Anesthesiology Association (ASA),CMS-1525-FC 850 and asked that CMS synchronize its supervis ion requirements for the recovery period with the phases established by the ASA. A nother commenter requested that CMS place on the agenda services that are high volume or of high priority for CAHs and small rural hospitals. Response : In considering our final policy for the appropriate unit of service evaluation, we noted that the HCPCS code is a broader unit of service than the CPT code, and concluded that it would be more appropria te for use to identify services that do not have an assigned CPT code. Therefore, we will consider requests, and forward them to the APC Panel for evaluation as described a bove, for service(s) that are identified by either a HCPCS code or a CPT code. With regard to setting an agenda, we noted in the proposed rule that we may receive more requests for evaluation than can be addressed at a give n Panel meeting. We did not receive any public comments regard ing criteria for prioritizing requests and services to be reviewed at each meeting. Th erefore, we will prioritize requests based on service volume, total expenditures for the se rvice, and frequency of requests. As proposed, we will also give priority to se rvices that the public has requested for evaluation in the CY 2010 through CY 2012 OPPS/ ASC rules. In addition, we will give priority to services that ha ve not previously been evalua ted by the Panel. As we proposed, requests must include ju stification for the change in supervision level that is sought, supported to the extent possible with clinical evidence. In prioritizing services for review, we also will take thes e justifications in to consideration.CMS-1525-FC 851 We did not receive any public comments on our proposal that the agency would retain the independent discreti on to request that the Panel ev aluate supervision levels for one or more services. Therefore, we are finalizi ng that provision.
Comment : Several commenters requested that CMS explicitly include the place of service as an evaluation crit erion, especially when the serv ice is furnished in a CAH or rural facility. However, several other commenters recommended that supervision requirements should be applied based on se rvice type and safety requirements, irrespective of location. Response : We continue to believe that the overall patient expe rience for a given encounter may differ significantly by facili ty depending on physician practice patterns, the facility’s patient and payer mix, Medicare payment structure for the facility, applicable regulations, quality of care, avai lable resources and pr actitioners, and many other factors. In recent years, researchers have noted an undesirabl e amount of variation in the care that is furnished to Me dicare patients in both metropolitan and nonmetropolitan areas of the country (Med PAC Report to the Congress: Regional Variation in Medicare Service Us e, January 2011, available at: http://www.medpac.gov/documents/Jan11_RegionalVariation_report.pdf ). In addition, according to a recent study, the quality of care that is furnished in CAHs appears to be worse in comparison to small rural hospitals (Joy nt K, Harris Y, et al.: Quality of Care and Patient Outcomes in Critical Access Ru ral Hospitals, JAMA. 2011; 306(1):45-52). Joynt et al. found significant differences between CAHs and non-CAH small rural hospitals in resources, quality of care, and outcomes. In public comments to date, thereCMS-1525-FC 852 has not been consensus on whether or not CMS should set supervision levels for individual services that ar e unique to CAHs or rural facilities. Many commenters opposed the agency’s requirement of direct supervision of outpatient chemotherapy administration in rural areas, citing access concerns and potentially lengthy patient commutes for care. However, as we discus sed above, published safe ty standards appear to recommend direct supervision of chemotherapy administration. We continue to believe that in maki ng its recommendations, the Panel should consider the context in which care is furnis hed and that CMS should seek balanced input from various groups on these issues, and this be lief is reflected in our proposed charge to the Panel. To emphasize this point, in our final policy, we are incorporating the clinical setting as a specific evaluati on criterion, thereby instructi ng the Panel to consider the clinical context in which the service is delivered when making recommendations on supervision levels.
Comment : One commenter recommended that, to ensure consistency among settings, the Panel should be allowed to se t supervision requirements no higher than the supervision requirements for a given serv ice under the MPFS. Several commenters recommended that CMS require the same supe rvision levels in the hospital outpatient setting and ASCs, or among the hospital outpati ent setting, ASCs, and physician offices. Response : We disagree with this commenter. We do not believe that supervision requirements should necessarily be the same in the hospital outpatient setting and the physician office setting for therapeutic servi ces. Various factors contribute to the appropriate level of supervis ion that is needed in diffe rent settings, for example,CMS-1525-FC 853 differences in patient populations. Patients receiving treatment in a hospital are generally sicker that patients treated in physician offices . Therefore, in some cases the appropriate level of supervision would be higher in the hospital than in a physician office setting.
Comment : One commenter suggested that CM S allow reconsideration requests. One commenter requested that CMS expand its proposed criteria to include unique circumstances generally, rather than li miting the criteria for conducting another evaluation to changes in t echnology or practice patterns. Response : As we indicated in the propos ed rule, conducting evaluations of services that the Panel has previously considered without ne w evidence supporting a change in the supervision level coul d become burdensome and consume a disproportionate amount of the Agency’s and the Panel’s resources. As our final policy, we are providing that the Panel may consider requests for re-review of a service that has already been evaluated. The public may request reconsider ation of a service if new information indicates recent changes in tec hnology or practice patterns that affect a procedure’s safety. Such a re quest must be substantiated with new information such as a change in clinical practice patterns due to new techniques or new technology. If CMS believes that another evaluation is warrante d, the Panel shall review the service again using the same process that it uses to ev aluate new requests, and shall make another recommendation to CMS that could be the sa me or a different level of supervision.
Comment : Most commenters supported ex tending through CY 2012 the notice of nonenforcement of the requirement for di rect supervision of hospital outpatient therapeutic services in CAHs and small rural hospitals with 100 or fewer beds.CMS-1525-FC 854 Response : Because we will not complete s upervision policy decisions on many key services until sometime in CY 2012, we are extending the no tice of nonenforcement for CAHs and small rural hospitals with 100 or fewer beds as defined in the notice another year, through CY 2012. The purpose of the nonenforcement extension is to allow these facilities time to meet the appropriate supervision st andard, and to give us an opportunity to use the new APC Panel review process to consider certain changes in required supervision levels. We will post a notice of the extension on the CMS Web site

at: http://www.cms.gov/HospitalO utpatientPPS/01_overview.asp

. We noted in the proposed rule that we have not yet defined the terms “personal supervision” or “general supervision” fo r the hospital outpatient setting, except, as explained above, for general supervision in relation to extended duration services in § 410.27(a)(1)(v)(A). Because we proposed to allow the independent review entity to recommend that CMS assign either personal or general supervision to hospital outpatient therapeutic services, we proposed to define these terms in the regulations. We proposed to use the definitions established for purposes of the MPFS as specified at § 410.32(b)(3). Specifically, we proposed that “personal supe rvision” would have the same meaning as the definition specified at § 410.32(b)(3)(iii) and “general supervision” would have the same meaning as the definition specified in § 410.32(b)(3)(i), which is the definition that we established for the general supervision portion of an extended duration service. We did not receive any public comme nts on this proposal. Therefore, in § 410.27(a)(1)(iv)(B), we are finalizing our proposed definitions of “personal supervision” for hospital outpati ent therapeutic services to mean the definition specifiedCMS-1525-FC 855 at § 410.32(b)(3)(iii), and “gen eral supervision” for hosp ital outpatient therapeutic services to mean the definiti on specified in § 410.32( b)(3)(i). In addition, we are revising the language in § 410.27(a)(1)(iv)(C) to clarify that the NPPs th at are authorized in this section to furnish direct supervision may also furnish general or personal supervision (as required by CMS). Specifically, we are removing the word “d irectly” and inserting “the required” to provide that “nonphysician practitioners may provide the required supervision of services that they may persona lly furnish in accordance with State law and all additional requirements, includi ng those specified in §§ 410.71, 410.73, 410.74, 410.75, 410.76, and 410.77.”
Comment : One commenter raised an issue that CMS has discussed in recent OPPS rules, namely that under the CAH CoP at § 485.618 governing standards for emergency personnel, in most areas, a physicia n or NPP with training or experience in emergency care must be on call and immediatel y available only by telephone or radio contact, and available on site within 30 minut es. The commenter suggested that hospitals are only required to adhere to the CoPs in or der to submit a claim; therefore, they are not required to follow the more strict direct supe rvision rule for payment of services. The commenter also recommended that CMS require the same level of supervision for payment as the level that is required under the CAH CoP. Response : We refer readers to the CY 2011 OPPS/ASC final rule with comment period (75 FR 72000 through 72010) for a more deta iled discussion of this issue. We continue to believe that the supervisi on rules are a condition of payment for CAH services, irrespective of their CoP staffing st andard. In the CY 2011 final rule, we alsoCMS-1525-FC 856 discussed our position that the CoP is a gene ral condition of the CAH’s participation in the Medicare program, while the supervision standards apply to particular individual services furnished by the CAH. The Co P and the supervision requirements serve different purposes and are not inconsistent with each other. As such, there is no need to reconcile them. 2. Conditions of Payment and Hospital Outpatient Therapeutic Services Described by Different Benefit Categories Another issue that we addressed in the CY 2012 OPPS/ASC pr oposed rule (76 FR 42277 through 42285) is the applicability of the payment conditions for hospital outpatient therapeutic services in § 410.27 to services de scribed in paragraphs or subparagraphs of section 1861(s) of the Act ot her than section 1861(s)(2)(B) of the Act, which describes outpatient hospital services in cident to physicians’ services. Over the years, and particularly in recent months, we have received inquiries asking that we explain or clarify our application of the payment conditions under our regulation at § 410.27, which explicitly applies to “hospital se rvices and supplies furnished incident to a physician service to ou tpatients,” to outpatient therapeu tic services other than those specified under section 1861(s )(2)(B) of the Act. For example, we have received inquiries as to whether it is permissible for hospitals to furnish radiation therapy (described under section 1861(s )(4) of the Act) or ambulator y surgical center services (described under section 1832(a )(2)(F)(i) of the Ac t) under arrangement in locations that are not provider-based. Some inquirers have suggested th at the language in § 410.27 is not applicable to services described by bene fit categories in sect ion 1861(s) of the ActCMS-1525-FC 857 other than section 1861(s)(2)(B) of the Act because § 410.27 only refers to “incident to” services. In the proposed rule, we acknowledged that the language of § 410.27 could be read as limited to services and supplies desc ribed under section 1861(s)(2)(B) of the Act, hospital services incident to physicians’ services furnished to outpatients. However, we noted that CMS has not interpreted the regul ation so narrowly. For instance, in the CY 2010 OPPS/ASC final rule with comment period, we noted that, long before the OPPS, we required that hospital services and supplies furnished to out patients incident to a physician’s service must be furnished “on a physician’s order by hospital personnel and under a physician’s supervision” (section 3112.4 of the Medicare Intermediary Manual). We also clearly treated all nondiagnostic services that are fu rnished to hospital outpatients as “incident to services ” (sections 3112 and 3112.4 of the Medicare Intermediary Manual; Section 20.5, Chapter 6, of the Medicare Benefit Policy Manual (Pub. 100-02)). While we have not delineated th is position as clearly in the regulations, and while the regulation text of § 410.27 only ex plicitly refers to “incident to” services, we noted that our policy is longstanding and, in fact, predates the O PPS. In longstanding manual guidance, we have expressed our view that direct superv ision is required for hospital outpatient therapeutic services, and s uggested that this requirement stems from the “incident to” nature of those services. In the CY 2010 OPPS/ASC final rule with comment period, we stated, “Therapeutic serv ices and supplies which hospitals provide on an outpatient basis are those services and supplies (including the use of hospital facilities) which are incident to the servic es of physicians and practitioners in theCMS-1525-FC 858 treatment of patients” (74 FR 60584 through 60585). We indicated that outpatient therapeutic services and supplies must be furnished under the order of a physician or other appropriate NPP, and by hospital pers onnel under the direct supervision of a physician or appropriate NPP. Thus, we have long maintained that all hospital outpatient th erapeutic services are, according to our policy, furnished “inc ident to” a physician’s service even when described by benefit categories other than the specific “incident to” provision in section 1861(s)(2)(B) of the Act. Because hospital out patient therapeutic services are furnished “incident to” a physician’s prof essional service, we believe the conditions for payment, including the direct superv ision standard, should apply to all hospital outpatient therapeutic services. As discussed ab ove, because the statute includes specific requirements for physician supervision of PR , CR, and ICR, we believe that those statutory specifications take precedence over the agency’s general requirements. In the CY 2012 OPPS/ASC proposed rule, we proposed to amend our regulations to clarify our policy as follows. Therapeuti c services and supplies described by benefit categories other than the hospital outpatie nt “incident to” services under section 1861(s)(2)(B) of the Act are su bject to the conditions of payment in § 410.27 when they are furnished to hospital outpatients and pa id under the OPPS or to CAHs under section 1834(g) of the Act. We stated our belief that this clarific ation could most readily be accomplished by more specifically defining the services and supplies described in th e regulation text to which the requirements at § 410.27 apply. A ccordingly, we proposed to revise theCMS-1525-FC 859 description of the services and supplies addressed in § 410.27(a) by adding the term “therapeutic” so that paragraph (a) would r ead, “Medicare Part B pays for therapeutic hospital or CAH services and supplies furnis hed incident to a physician’s or nonphysician practitioner’s service” to outpatients. We propos ed to define these services, similar to the way they are currently defined in Section 20.5, Chapter 6, of the Medicare Benefit Policy Manual, to mean “all services and supplies fu rnished to hospital out patients that are not diagnostic services and that aid the physicia n or practitioner in the treatment of the patient.” We also proposed to add the term “t herapeutic” to the title of § 410.27 so that it would read, “Therapeutic outpatient hospital or CAH services and supplies incident to a physician’s or nonphysician practiti oner’s service: Conditions.”
Comment : Several commenters requested that CMS clarify that certain services which are not paid under the OPPS are excl uded from the requirements of § 410.27 and thus from our proposed clarif ication, especially physical therapy (PT), speech language pathology (SLP) and occupational therapy (O T); diabetes self management training (DSMT); medical nutrition therapy; end-st age renal disease (ESRD) services; and services paid under the MPFS or the C linical Laboratory Fee Schedule (CLFS). Response : The requirements of § 410.27 must be met for payment of the facility component of hospital outpatient therapeu tic services. They do not apply to the professional component of the services or to services that are paid under other fee schedules such as the CLFS.
Comment : One commenter noted that because CAHs are paid based on reasonable cost and not under the OPPS or th e MPFS for outpatient PT/SLP/OT services,CMS-1525-FC 860 under the proposed clarification, the supe rvision and other requirements of § 410.27 would apply to CAHs but not to hospitals th at are paid for those services under the MPFS. They expressed concern that CAHs w ill be disproportionately affected by CMS’ clarification regardi ng the applicability of the requirements of § 410.27 to outpatient therapeutic services furnished in CAHs. Response : CAHs have long been paid at r easonable cost rather than under the MPFS for PT/SLP/OT services, and, as discus sed above, CAHs and other hospitals have long been subject to the requirements of § 410.27. We are not imposing any new requirements on CAHs through this clarifi cation. We are finalizing our proposed amendment to our regulations to clarify our policy as follows. Hospital outpatient therapeutic services and supp lies, including those services described by benefit categories other than the hospital outp atient “incident to” categor y under section 1861(s)(2)(B) of the Act, are subject to the conditions of payment in § 410.27 when they are paid under the OPPS or paid to CAHs unde r section 1834(g) of the Act. We proposed to define more specifically in the regulation text the services and supplies to which the requirements at § 410.27 a pply. Accordingly, we are finalizing our proposed revision of the descri ption of the services and s upplies addressed in § 410.27(a) by adding the term “therapeutic” so that para graph (a) reads, “Medicare Part B pays for therapeutic hospital or CAH se rvices and supplies furnished incident to a physician’s or nonphysician practitioner’s servic e” to outpatients. We are defining these services, similar to the way they are defined in Sec tion 20.5, Chapter 6, of the Medicare Benefit Policy Manual, to mean “all services and suppl ies furnished to hospital outpatients thatCMS-1525-FC 861 are not diagnostic services and that aid the physician or practitioner in the treatment of the patient.” Also, as we proposed, we are a dding the term “therape utic” to the title of § 410.27 so that it reads, “Therapeutic outpati ent hospital or CAH services and supplies incident to a physician’s or nonphysician practitioner’s service: Conditions.” 3. Technical Corrections to the Supervision Standards for Hospital Outpatient Therapeutic Services Furnished in Hospitals or CAHs In the proposed rule, we noted that C AHs are not specifically named in the definition of nonsurgical extended duration ther apeutic services at § 410.27(a)(1)(v). We proposed to make a technical correction to inse rt the words “or CAH” after “hospital” in this paragraph. This is the same techni cal correction that we made throughout § 410.27 in the CY 2010 OPPS/ASC final rule with co mment period, discussed above. We did not receive any public comments on this proposal. Therefore, we are inserting the words “or CAH” after “hospital” in revi sed § 410.27(a)(1)(iv)(E) to clarif y that CAHs are subject to all of the requirements of § 410.27 in the same manner as other types of hospitals. As we discussed in the proposed rule (76 FR 42284 through 42285), we recently noted that the text of § 410.27(b) and (c) includes cross-referen ces to section § 410.168 of the regulations, which is obsolete. We believe that § 410.27(b) refers to § 410.168 in error and should instead refe rence § 410.29 (Limitations on drugs and biologicals). We proposed to correct § 410.27(b) so that it cr oss-references § 410.29. It would then read, “Drugs and biological are also subject to the limitations specified in § 410.29.” In addition, we proposed to update § 410.27(c) to cross-reference the sections of the regulation that have replaced § 410.168, that is, Part 424, Subparts G and H. For thisCMS-1525-FC 862 update, we proposed to revise paragraph (c) to read, “Rules on emergency services furnished to outpatients by nonparticipating hosp itals are specified in subpart G of Part 424 of this chapter” and to add a new pa ragraph (d) to read, “Rules on emergency services furnished to outpatients in a forei gn country are specified in subpart H of Part 424 of this chapter”. Accordingly, we proposed to redesignate the existing paragraphs (d) through (f) of § 410.27 as paragra phs (e) through (g), respectively. We did not receive any public comment s on this proposal. Therefore, we are finalizing our proposal to corre ct § 410.27(b) so that it cr oss-references § 410.29 rather than § 410.168 and now reads, “Drugs and biol ogical are also subj ect to the limitations specified in § 410.29.” In a ddition, we are updating § 410.27(c) to cross-reference the sections of the regulation that have re placed §410.168, that is, Part 424, Subparts G and H. For this update, as we proposed, we ar e revising paragraph (c) to read, “Rules on emergency services furnished to outpatients by nonparticipating hospitals are specified in subpart G of Part 424 of this chapter” and ar e adding a new paragraph (d) to read, “Rules on emergency services furnished to outpatien ts in a foreign country are specified in subpart H of Part 424 of this chapter”. Accordingly, as we proposed, we are redesignating the existing pa ragraphs (d) through (f) of § 410.27 as paragraphs (e) through (g), respectively. C. Summary of CY 2012 Final Policies on Supervision Standards for Outpatient Therapeutic Services in Hospitals and CAHs As we have indicated earlier in this section, after consider ation of the public comments we received, we are fi nalizing the following policies.CMS-1525-FC 863 1. Independent Review Process We are designating the APC Panel as the body that will review and advise the agency regarding the appropria te level of supervision for individual hospital outpatient therapeutic services. We will amend the Panel Charter to add the appropriate statutory authority and to allow represen tatives of CAHs to serve on the Panel for purposes of the supervision deliberations. We will add 4 voting seats to the Panel (for a current total of 19), and will designate two of these seats for representatives of CAHs and two for representatives of small ru ral PPS hospitals. “Small ru ral PPS hospital” means the definition of small rural hospital that is us ed by the Congress for purposes of TOPs, and that is used in CMS’ notice of nonenforcem ent of direct supervision of outpatient therapeutic services in CAHs and small rura l hospitals. With respect to supervision policy, the scope of the Panel’s activity is limited to recommending to CMS the appropriate level of supervis ion (general, direct, or pers onal) for individual hospital outpatient therapeutic services. We will issue agency decisions based on Panel recommendations through a subregulatory process. We will post our pr eliminary decisions on the OPPS Web site for a 30-day period of public review and comme nt. After consideration of any public comments that we receive, we will issue our fi nal decisions which will be effective either in July or January following the most recent APC Panel meeting. The Panel will be charged with recommending to CMS a supervision level (general, direct, or personal) th at will ensure an appropriate level of quality and safety for delivery of a given service, as defined by a HCPCS or CPT code. In recommending aCMS-1525-FC 864 supervision level to CMS, the Panel will as sess whether there is a significant likelihood that the supervisory practitioner would need to reassess the patient and modify treatment during or immediately following the therapeu tic intervention, or provide guidance or advice to the individual who pr ovides the service. In answ ering that question, the Panel will consider the following factors but may also consider others as appropriate:

• Complexity of the service.

• Acuity of the patients receiving the service.

• Probability of unexpected or adverse patient event.

• Expectation of rapid clinical changes during the therapeu tic service or procedure.

• Recent changes in technology or practice patt erns that affect a procedure’s safety.

• The clinical context in which the service is delivered. As we have discussed above, these crite ria include, but extend well beyond, the likelihood of the need to manage medical emer gencies during or afte r the provision of the service. The supervisory responsibility is mo re than the mere capacity to respond to an emergency, and includes being available to reassess the patient and potentially modify treatment as needed on a nonemergency basis. We will prioritize stakeholder requests for APC Panel review of specific services base d upon service volume, total expenditures for the service and frequency of requests. We also will give priority to services that the public has requested we evaluate in the CY 2010 through CY 2012 OPPS/ASC rules, and to services that have not been previously been evaluated by the Panel. All requests must include justification for the change in superv ision level that is sought, supported to theCMS-1525-FC 865 extent possible with clinical evidence. In prioritizing serv ices for the agenda, we also will take these justifications into consideration. We may ask the Panel to consider requests for review of a service that has already been evaluated. If there has been a previous consideration and decision on the supervision standard for a se rvice, the requestor should s ubmit new evidence to support a change in policy. For example, the public co uld request another review of a previously reviewed service if new information indicates recent changes in t echnology or practice patterns that affect a procedur e’s safety. Such a request mu st be substantiated with new information such as a change in clinical practice patterns due to new techniques or new technology. If CMS believes that another eval uation is warranted, th e agency will ask the APC Panel to review the service again using th e same process that it uses to evaluate new requests. The Panel will then make anot her recommendation to CM S that could be the same or a different level of supervis ion than the previous recommendation. Because the agency will not complete APC Panel review or consideration of changes to supervision levels for many key services until sometime in CY 2012, we are extending the notice of nonenfor cement of the requirement fo r direct supervision of outpatient therapeutic services in CAHs and small rural hospitals as defined by the notice (available on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp ) another year, through CY 2012. The purpose of this nonenforcement exte nsion is to allow th ese facilities time to meet the appropriate supervision standard, and to allow us time to complete our review of supervision levels for at least some services.CMS-1525-FC 866 Because the APC Panel may recommend th at CMS assign either personal or general supervision to servi ces, we are defining these te rms for hospital outpatient therapeutic services in the regulations at new § 410.27(a )(1)(iv)(B). We are revising the language in § 410.27(a)(1)(iv)(C) to provide that the NPPs that are authorized in this section to furnish direct supervision may also furnish general or personal supervision as required by CMS. 2. Conditions of Payment and Hospital Outpatient Therapeutic Services Described by Different Benefit Categories We are finalizing our clarification that therapeutic services and supplies described by benefit categories other than the hospita l outpatient “incident to” services under section 1861(s)(2)(B) of the Act are subject to the conditions of payment in § 410.27 when they are furnished to hospital outpatient s and paid under the OPPS or paid to CAHs under section 1834(g) of the Act. To that end, we are redefining the services described in §410.27 to clarify the nature and scope of the included services. 3. Technical Corrections We are correcting § 410.27(b) so that it cross-references § 410.29 rather than § 410.168 and now reads, “Drugs and biological are also subject to the limitations specified in § 410.29.” In a ddition, we are updating § 410.27(c) to cross-reference the sections of the regulation that have repl aced § 410.168, that is, Part 424, Subparts G and H. For this update, we are revising paragra ph (c) to read, “Rules on emergency services furnished to outpatients by nonparticipating hosp itals are specified in subpart G of Part 424 of this chapter” and are adding a new pa ragraph (d) to read, “Rules on emergencyCMS-1525-FC 867 services furnished to outpatients in a forei gn country are specified in subpart H of Part 424 of this chapter”. Accordingly, we are redesignating the existing paragraphs (d) through (f) of § 410.27 as paragraphs (e) through (g), respectively. We are inserting the words “or CAH” after “hospital” in the revised §410.27(a)(1)(iv)(E) to clarify th at CAHs are subject to th e requirements of § 410.27 in the same manner as othe r types of hospitals.CMS-1525-FC 868 XI. Final CY 2012 OPPS Payment Status and Comment Indicators A. Final CY 2012 OPPS Payment Status Indicator Definitions Payment status indicators (SIs) that we assign to HCPCS codes and APCs play an important role in determining payment for services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and also whether particul ar OPPS policies apply to the code. The CY 2012 status indicator assignments fo r APCs and HCPCS codes are shown in Addendum A and Addendum B, respectiv ely, on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS . We note that, in the past, a majority of the Addenda referred to throughout the preamble of our OPPS/ASC proposed and final rules appeared in the printed version of the Federal Register as part of the annual rulemakings. However, beginning with th e CY 2012 proposed rule, the Addenda will no longer appear in the printed version of the OPPS/ASC rules that are found in the Federal Register . Instead, these Addenda will be published and available only via the Internet on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS

. As we proposed in the CY 2012 OPPS/A SC proposed rule (76 FR 42285 through 42287), for CY 2012, we are not making any changes to the definitions of status indicators that were listed in Addendum D1 of the CY 2011 OPPS/ASC final rule with comment period. The final CY 2012 status indicators and thei r definitions are listed in the tables under sections XI.A.1., 2., 3., and 4. of this final rule with comment period.CMS-1525-FC 869 1. Payment Status Indicators to Designa te Services That Are Paid under the OPPS Indicator Item/Code/Service OPPS Payment Status G Pass-Through Drugs and Biologicals Paid under OPPS; separate APC payment. H Pass-Through Device Categories Separate cost-based pass-through payment; not subject to copayment.
K Nonpass-Through Drugs and Nonimplantable Biologicals, including Therapeutic Radiopharmaceuticals Paid under OPPS; separate APC payment.

N Items and Services Packaged into APC Rates Paid under OPPS; payment is packaged into payment for other services. Therefore, there is no separate APC payment. P Partial Hospitalization Paid under OPPS; per diem APC payment. Q1 STVX-Packaged Codes Paid under OPPS; Addendum B displays APC assignments when services are separately payable. (1) Packaged APC payment if billed on the same date of service as a HCPCS code assigned status indicator “S,” “T,” “V,” or “X.” (2) In all other circumstances, payment is made through a separate APC payment. Q2 T-Packaged Codes Paid under OPPS; Addendum B displays APC assignments when services are separately payable. (1) Packaged APC payment if billed on the same date of service as a HCPCS code assigned status indicator “T.” (2) In all other circumstances, payment is made through a separate APC payment.CMS-1525-FC 870 Indicator Item/Code/Service OPPS Payment Status Q3 Codes that may be paid through a composite APC Paid under OPPS; Addendum B displays APC assignments when services are separately payable. Addendum M displays composite APC assignments when codes are paid through a composite APC. (1) Composite APC payment based on OPPS composite-specific payment criteria. Payment is packaged into a single payment for specific combinations of services. (2) In all other circumstances, payment is made through a separate APC payment or packaged into payment for other services. R Blood and Blood Products Pa id under OPPS; separate APC payment. S Significant Procedure, Not Discounted When Multiple Paid under OPPS; separate APC payment. T Significant Procedure, Multiple Reduction Applies Paid under OPPS; separate APC payment. U Brachytherapy Sources Pa id under OPPS; separate APC payment. V Clinic or Emergency Department Visit Paid under OPPS; separate APC payment. X Ancillary Services Paid under OPPS; separate APC payment.

We did not receive any public comments related to the definitions of payment status indicators to designate services that are paid under O PPS. We continue to believe that the proposed definitions of the OPPS stat us indicators continue to be appropriate, and therefore, we are finalizi ng, without modification, our CY 2012 proposal. The finalCMS-1525-FC 871 CY 2012 status indicators and their definitions are displayed in both the table above and in Addendum D1 on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS

. 2. Payment Status Indicators to Designate Services That Are Paid under a Payment System Other Than the OPPS In the CY 2012 OPPS/ASC proposed rule (76 FR 42286), we did not propose to make any changes to the definitions of st atus indicators listed below for the CY 2012
OPPS. Indicator Item/Code/Service OPPS Payment Status Services furnished to a hospital outpatient that are paid under a fee schedule or payment system other than OPPS, for example: Not paid under OPPS. Paid by fiscal intermediaries/MACs under a fee schedule or payment system other than OPPS. Services are subject to the deductible and coinsurance unless indicated otherwise.
● Ambulance Services
● Clinical Diagnos tic Laboratory Services Not subject to deductible or coinsurance.
● Non-Implantable Prosthetic and Orthotic Devices
● EPO for ESRD Patients
● Physical, Occupational, and Speech Therapy
● Routine Dialysis Services for ESRD Patients Provided in a Certified Dialysis Unit of a Hospital
● Diagnostic Mammography A

● Screening Mammography Not subject to deductible or coinsurance. C Inpatient Procedures Not paid under OPPS. Admit patient. Bill as inpatient.CMS-1525-FC 872 Indicator Item/Code/Service OPPS Payment Status F Corneal Tissue Acquisition; Certain CRNA Services; and Hepatitis B Vaccines Not paid under OPPS. Paid at reasonable cost. L Influenza Vaccine; Pneumococcal Pneumonia Vaccine Not paid under OPPS. Paid at reasonable cost; not subject to deductible or coinsurance. M Items and Services Not Billable to the Fiscal Intermediary/MAC Not paid under OPPS. Y Non-Implantable Durable Medical Equipment Not paid under OPPS. All institutional providers other than home health agencies bill to DMERC.

We did not receive any public comment s regarding the definitions of payment status indicators that designate services that are not recognized under the OPPS but that may be recognized by other institutional provid ers. We continue to believe that the proposed definitions of the OPPS status i ndicators continue to be appropriate, and therefore, we are finalizi ng, without modification, our CY 2012 proposal. The final CY 2012 status indicators and their definitions displayed in the table above are also displayed in Addendum D1 on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS

. 3. Payment Status Indicators to Designate Services That Are Not Recognized under the OPPS But That May Be Recognized by Other Institutional Providers In the CY 2012 OPPS/ASC proposed ru le (76 FR 42286 through 42287), we did not propose to make changes to the definitions of status indicators listed below for the
CY 2012 OPPS. Indicator Item/Code/Service OPPS Payment StatusCMS-1525-FC 873 Indicator Item/Code/Service OPPS Payment Status Not paid under OPPS.
● May be paid by fiscal intermediaries/MACs when submitted on a different bill type, for example, 75x (CORF), but not paid under OPPS. B Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and13x)

● An alternate code that is recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x) may be available.

We did not receive any public comments related to the definitions of payment status indicators that designate services that are paid under a payment system other than the OPPS. We continue to believe that th e proposed definitions of the OPPS status indicators continue to be appropriate, and therefore, we are finalizing, without modification, our proposal for CY 2012. The fina l status indicators and their definitions listed in the table above are also displaye d in Addendum D1 on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS

. 4. Payment Status Indicators to Designate Services That Are Not Payable by Medicare on Outpatient Claims In the CY 2012 OPPS/ASC proposed rule (76 FR 42287), we did not propose to make changes to the definitions of paymen t status indicators listed below for the
CY 2012 OPPS.CMS-1525-FC 874
Indicator Item/Code/Service OPPS Payment Status D Discontinued Codes Not paid under OPPS or any other Medicare payment system. Items, Codes, and Services:
● That are not covered by any Medicare outpatient benefit based on statutory exclusion
● That are not covered by any Medicare outpatient benefit for reasons other than statutory exclusion.
● That are not recognized by Medicare for outpatient claims; alternate code for the same item or service may be available E

● For which separate payment is not provided on outpatient claims Not paid by Medicare when submitted on outpatient claims (any outpatient bill type).

We did not receive any public comments related to the definitions of payment status indicators that designate services that are not payable by Medicare on outpatient claims. We continue to believe that th e proposed definitions of the OPPS status indicators continue to be appropriate, and therefore, we are finalizing, without modification, our proposal for CY 2012. The final CY 2012 payment status indicators and their definitions listed in the table a bove are also displayed in Addendum D1 on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS

.CMS-1525-FC 875 B. Final CY 2012 Comment Indicator Definitions As we proposed in the CY 2012 OPPS/A SC proposed rule (76 FR 42287 through 42288), for the CY 2012 OPPS, we are using the sa me two comment indicators that are in effect for the CY 2011 OPPS.

● “CH”—Active HCPCS codes 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 in the CY 2012 OPPS/ASC pr oposed rule (76 FR 42287) to use the “CH” comment indicator in this CY 2012 O PPS/ASC final rule with comment period to indicate HCPCS codes for which the status indicator or APC assignment, or both, will change in CY 2012 compared to their assi gnment as of December 31, 2011. We believe that using the “CH” indicator in this CY 2012 OPPS/ASC fina l rule with comment period will facilitate the public’s revi ew of the changes that we are making for CY 2012. The use of the comment indicator “CH” in associ ation with a composite APC indicates that the configuration of the composite APC is ch anged in this CY 2012 OPPS/ASC final rule with comment period.CMS-1525-FC 876 We did not proposed any changes to our current policy rega rding the use of comment indicator “NI.” Any existing HCPCS code numbers with substantial revisions to the code descriptors for CY 2012 compared to the CY 2011 descriptors is labeled with comment indicator “NI” in Addendum B to this CY 2012 OPPS/ASC final rule with comment period. However, in order to receive the comment indicat or “NI,” the CY 2012 revision to the code descriptor (compared to the CY 2011 descriptor) must be significant such that the new code descriptor de scribes a new service or pr ocedure for which the OPPS treatment may change. We use comment indi cator “NI” to indicate that these HCPCS codes are open to comment on this CY 2012 OP PS/ASC final rule with comment period. Like all codes labeled with comment indica tor “NI,” we will respond to public comments and finalize their OPPS treatment in the CY 2013 OPPS/ASC final rule with comment period. In accordance with our usual practice, CPT and Level II HCPCS code numbers that are new for CY 2012 are also labeled with comment indicator “NI” in Addendum B to this CY 2012 OPPS/ASC fina l rule with comment period. Only HCPCS codes with comment indicat or “NI” in this CY 2012 OPPS/ASC final rule with comment period are subject to comment. HCPCS codes that do not appear with comment indicator “NI” in this CY 2012 OPPS/ASC fina l rule with comment period are not open to public comment, unless we specifically request additional comments elsewhere in this final rule with comment period. The CY 2012 treatment of HCPCS codes that appear in this CY 2012 OPPS/ASC final rule with comment period to whichCMS-1525-FC 877 comment indicator “NI” is not appended were open to public comment during the comment period for the proposed rule, and we are responding to those comments in this CY 2012 OPPS/ASC final rule with comment period. We did not receive any public comment s on the proposed comment indicators. We continue to believe that the proposed definitions of the OPPS status indicators continue to be appropriate, and therefore, we are finaliz ing, without modification, our CY 2012 proposal and are continuing to us e comment indicators “CH” and “NI” for CY 2012. Their final definitions are listed in Addendum D2 on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS

.CMS-1525-FC 878 XII. OPPS Policy and Payment Recommendations A. MedPAC Recommendations MedPAC was established under sect ion 1805 of the Act to advise the U.S. Congress on issues affecting the Medicare program. As required under the statute, MedPAC submits reports to Congress not late r than March and June of each year that contain its Medicare payment policy recommendations. This section describes recent recommendations relevant to the O PPS that have been made by MedPAC. The March 1, 2011 MedPAC “Report to Congress: Medicare Payment Policy” included the following recommendation relating to the Medicare hospital IPPS and, in part, to the Medica re hospital OPPS: Recommendation 3 : “The Congress should increase payment rates for the acute care hospital inpatient and outpa tient prospective payment systems in 2012 by 1 percent. The Congress should also require the Secretar y of Health and Human Services to make adjustments to inpatient payment rates in fu ture years to fully recover all overpayments due to documentation and coding improvements.” (page 60) MedPAC further stated that: “For outp atient hospital services, the Commission is concerned that significant payment disp arities among Medicare’s ambulatory care settings (hospital outpatien t departments, ambulatory surgical centers, and physician offices) for similar services are fostering undesirable financial incentives. Physician practices and ambulatory surgical centers ar e being reorganized as hospital outpatient entities in part to receive higher reimbur sements. The Commission believes that Medicare should seek to pay similar amounts for similar services, taking into accountCMS-1525-FC 879 differences in quality of care and in the re lative risks of the patient populations. The Commission is concerned by the trend to re organize for higher reimbursement and will examine this issue. However, in the interim, the modest update of 1 percent is warranted in the hospital outpatient setting to slow the growing payment rate disparities among ambulatory care settings.” (page 61) CMS Response : We note that MedPAC’s recommendation is for the Congress to increase IPPS and OPPS payment rates by 1 percent in 2012. Absent action by Congress, we are following the statutor y requirements that govern the amount of the annual OPD fee schedule increase factor to the OPPS for CY 2012. We discuss the CY 2012 OPD fee schedule increase factor in section II.B. of this fina l rule with comment period. We look forward to reviewing the results of MedPAC’s examination of what it perceives as a trend towards reorganization of ambulatory surgical centers and physician offices as hospital outpatient departments to maximize program payment. The full March 2011 MedPAC report can be downloaded from MedPAC’s Web site at: http://www.medpac.gov/docum ents/Mar11_EntireReport.pdf

. On June 15, 2011, MedPAC released a repor t to Congress entit led “Medicare and the Health Care Delivery System.” The report did not contain recommendations with regard to payment under the OPPS or the AS C payment system. The full report can be downloaded from MedPAC’s website at: http://www.medpac.gov/documents/Jun11_EntireReport.pdf

.CMS-1525-FC 880 On August 30, 2011, MedPAC submitted comments to CMS on the CY 2012 OPPS/ASC proposed rule. MedPAC submitted comments on the following topics, each of which is discussed in the indicated sect ion of this final rule with comment period.

● Adjustment to payments for dedicate d cancer hospitals (sec tion II.F. of this final rule with comment period)

● Payment for pharmacy overhead (section V. B. of this final rule with comment period)

● Hospital wage index policy (section II. C. of this final rule with comment period)

● Composite APC 8009 cardiac resynchroni zation therapy (section II.A.2.e.(6) of this final rule with comment period)

● Hospital outpatient qualit y reporting measures (section X.G. of this final rule with comment period)

● Ambulatory surgical cent er quality reporting measures (section X.K. of this final rule with comment period)

● Hospital inpatient value based purchasi ng (section XVI. of this final rule with comment period) B. APC Panel Recommendations Recommendations made by the APC Pa nel meeting held on February 28 and March 1, 2011 and August 10-12, 2011 are discussed in the sections of th is final rule with comment period that correspond to topics addr essed by the APC Panel. The reports and recommendations from the APC Pane l’s February 28 and March 1, 2011 andCMS-1525-FC 881 August 10-12, 2011 meetings regarding payment under the OPPS for CY 2012 are available on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanel onAmbulatoryPaymentClassificationGrou
ps.asp
. C. OIG Recommendations The mission of the Office of the Insp ector General (OIG), as mandated by Pub. L. 95–452, as amended, is to protect the inte grity of the U.S. Department of Health and Human Services (HHS) progr ams, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried ou t through a nationwide network of audits, inves tigations, and inspections. On October 22, 2010, the OIG published a memorandum report entitled “Payment for Drugs under the Hospital Outpatie nt Prospective Payment System” (OIG-03-09-00420). The report may be viewed on the Web site at: http://oig.hhs.gov/oei/ reports/oei-03-09-00420.pdf . The OIG did not make any recommendations to CMS regarding Medicare payment for drugs and biologicals under the OPPS. CMS Response: We appreciate the work of th e OIG regarding the payment for drugs under the OPPS, and we have taken the fi ndings in its report into consideration in the development of our final payment policy for CY 2012.CMS-1525-FC 882 XIII. Updates to the Ambulatory Sur gical Center (ASC) Payment System A. Background 1. Legislative Authority for the ASC Payment System Section 1832(a)(2)(F)(i) of the Act provi des that benefits und er Medicare Part B include payment for facility services furnis hed in connection with surgical procedures specified by the Secretary that are performed in an Ambulatory Surgical Center (ASC). To participate in the Medicare program as an ASC, a facility must meet the standards specified in section 1832(a)(2)(F )(i) of the Act, which are set forth in 42 CFR Part 416, Subpart B and Subpart C of our regulations. The regulations at 42 CFR Part 416, Subpart B describe the general conditions and requi rements for ASCs, and the regulations at Subpart C explain the specific cond itions for coverage for ASCs. Section 141(b) of the Social Security Act Amendments of 1994, Pub. L. 103-432, required establishment of a process for revi ewing the appropriateness of the payment amount provided under section 1833 (i)(2)(A)(iii) of the Act fo r intraocular lenses (IOLs) that belong to a class of new technology intrao cular lenses (NTIOLs) . That process was the subject of a final rule entitled “Adj ustment in Payment Amounts for New Technology Intraocular Lenses Furn ished by Ambulatory Surgical Centers,” published on June 16, 1999, in the Federal Register (64 FR 32198). Section 626(b) of the Medicare Pr escription Drug, Improvement, and Modernization Act of 2003 (MMA), Pub. L. 108-173, added subparagraph (D) to section 1833(i)(2) of the Act, which required the S ecretary to implement a revised ASC payment system to be effective no t later than January 1, 2008. Section 626(c) of the MMACMS-1525-FC 883 amended section 1833(a)(1) of the Act by addi ng new subparagraph (G), which requires that, beginning with implementation of the revised ASC payment system, payment for surgical procedures furnished in ASCs sha ll be 80 percent of the lesser of the actual charge for the services or the amount de termined by the Secretary under the revised payment system. Section 109(b) of the Medicare Improve ments and Extension Act of 2006 of the Tax Relief and Health Care Act of 2 006 (MIEA-TRHCA), Pub. L. 109-432, amended section 1833(i) of the Act by redesignating cl ause (iv) as clause (v) and adding a new clause (iv) to paragraph (2)(D) and by adding new paragraph (7). Section 1833(i)(2)(D)(iv) of the Act authorizes, but does not require, the Secretary to implement the revised ASC paym ent system “in a manner so as to provide for a reduction in any annual update for fa ilure to report on quality measures in accordance with paragraph (7).” Section 1833(i)(7)(A) of the Act states that the Secretary may provide that any ASC that does not submit quality measures to the Secretary in accordance with pa ragraph (7) will incur a 2.0 percentage point reduction to any annual increase provided under the revi sed ASC payment system for such year. Section 1833(i)(7)(B) of the Act provides that, “[e]xcept as the Secretary may otherwise provide,” the hospita l outpatient quality data provisions of subparagraphs (B) through (E) of section 1833(t) (17) of the Act, added by section 109(a) of the MIEATRHCA, shall apply to ASCs in a similar manner to the manner in which they apply under these paragraphs to hospitals under the Hospital OQR Program.CMS-1525-FC 884 Sections 4104 and 10406 of the Affordable Care Act, Pub. L. 111-148, amended section 1833(a)(1) and (b)(1) of the Act to waive the coinsurance and the Part B deductible for those preventive services unde r section 1861(ddd)(3)( A) of the Act as described in section 1861(ww)(2) of the Ac t (excluding electrocardiograms) that are recommended by the United States Preventive Services Task Force (USPSTF) with a grade of A or B for any indication or popul ation and that are appropriate for the individual. Section 4104(c) of the Affordable Care Act amended section 1833(b)(1) of the Act to waive the Part B deductible for colo rectal cancer screening tests that become diagnostic. These provisions a pply to these items and services furnished in an ASC on or after January 1, 2011. Section 3401(k) of the Affordable Care Act amended section 1833(i)(2)(D) of the Act to require that, effective for CY 2011 a nd subsequent years, any annual update under the ASC payment system be reduced by a produc tivity adjustment, which is equal to the 10-year moving average of changes in a nnual economy-wide private nonfarm business multi-factor productivity (as projected by th e Secretary for the 10-year period ending with the applicable fiscal y ear, year, cost reporting peri od, or other annual period). Application of this pr oductivity adjustment to the ASC payment system may result in the update to the ASC payment syst em being less than zero for a year and may result in payment rates under the ASC payment system for a year being less than such payment rates for the preceding year. For a detailed discussion of the legisl ative history related to ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291 through 32292).CMS-1525-FC 885 2. Prior Rulemaking On August 2, 2007, we published in the Federal Register (72 FR 42470) the final rule for the revised ASC payment system , effective January 1, 2008 (the “August 2, 2007 final rule”). In that final rule, we revised our criteria for identifyi ng surgical procedures that are eligible for Medicare payment when furnished in ASCs and adopted the method we would use to set payment rates for ASC covered surgical procedures and covered ancillary services furnished in associati on with those covered surgical procedures beginning in CY 2008. We also establishe d a policy for treating new and revised Healthcare Common Procedure Coding Syst em (HCPCS) and Current Procedural Terminology (CPT) codes under the ASC payment sy stem. This policy is consistent with the OPPS to the extent possible (72 FR 42533). In addition, we established a standard ASC ratesetting methodology that bases payment for most services on the list of AS C covered surgical procedures on the OPPS relative payment weight multiplied by the AS C conversion factor. We also established modifications to this methodology for subsets of services, such as device-intensive services (where the estimated device portion of the ASC payment is the same as that paid under the OPPS) and services that are predom inantly performed in the office setting and covered ancillary radiology se rvices (where ASC payment may be based on the MPFS nonfacility practice expense (PE) Relative Value Units (RVUs)). Additionally, we established a policy for updating the conversion factor, the relative payment weights, and the ASC payment rates on an annual basis. We also annually update the list of procedures for which Medicare does not make an ASC payment.CMS-1525-FC 886 In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66827), we updated and finalized the CY 2008 ASC rates an d lists of covered surgical procedures and covered ancillary services. We also made regulatory changes to 42 CFR Parts 411, 414, and 416 related to our final policies to pr ovide payments to physicians who perform non-covered ASC procedures in ASCs based on the facility PE RVUs, to exclude covered ancillary radiology services and covered ancillary drugs and biologicals from the categories of designated health services (DHS) that are subject to the physician self-referral prohibition, and to reduce ASC payments for surgical procedures when the ASC receives full or partial credit toward the cost of the implantable device. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68722), we updated and finalized the CY 2009 ASC rates an d lists of covered surgical procedures and covered ancillary services. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60596), we updated and finalized the CY 2010 ASC rates an d lists of covered surgical procedures and covered ancillary services. We also corrected some of those ASC rates in a correction notice published in the Federal Register on December 31, 2009 (74 FR 69502). In that correction notice, we revised the ASC rates to reflect changes in the MPFS conversion factor and PE RVUs lis ted for some CPT codes in Addendum B to the CY 2010 MPFS final rule with comment pe riod (74 FR 62017), which were incorrect due to methodological errors and were subse quently corrected in a correction notice to that final rule with comment period ( 74 FR 65449). We also published a second correction notice in the Federal Register to address changes to the ASC rates resultingCMS-1525-FC 887 from corrections to the PE RVUs iden tified subsequent to publication of the December 31, 2009 correction notice (75 FR 45700). Finally, we published a notice in the Federal Register to reflect changes to CY 2010 AS C payment rates for certain ASC services due to changes to the OPPS and MPFS under the Affordable Care Act and to reflect technical changes to the ASC payment rates announced in prior corre ction notices (75 FR 45769). In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71800), we updated and finalized the CY 2011 ASC rates an d lists of covered surgical procedures and covered ancillary services. We corrected some of the ASC rate s that were published in Addenda AA and BB, as well as errors in the preamble text, in a correction notice published in the Federal Register on March 11, 2011 (76 FR 13292). The corrections to the ASC Addenda were primarily due to cha nges to the MPFS conversion factor and PE RVUs listed for some CPT codes in Addendum B and Addendum C to the MPFS for CY 2011 which, in turn, affect ed office-based and ancillary radiology payment under the ASC payment system. Following legisl ative changes to the MPFS for CY 2011 associated with passage of s ection 101 of the Medicare a nd Medicaid Extenders Act of 2010 that occurred after public ation of the CY 2011 OPPS/ASC and MPFS final rules with comment periods, we posted revised ASC Addenda on our Web site to reflect associated changes to office-based and ancillary radiology payment under the ASC payment system.CMS-1525-FC 888 3. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services The August 2, 2007 final rule establishe d our policies for determining which procedures are ASC covered su rgical procedures and covere d ancillary services. Under § 416.2 and § 416.166 of the regulations, subject to certain exclusions , covered surgical procedures are surgical procedures that are separately paid under the OPPS, that would not be expected to pose a significant risk to beneficiary safety when performed in an ASC, and that would not be expected to re quire active medical mon itoring and care at midnight following the procedure (“overnight stay”). We adopted this standard for defining which surgical procedures are c overed surgical proc edures under the ASC payment system as an indicator of th e complexity of the procedure and its appropriateness for Medicare payment in ASCs. We use this standard only for purposes of evaluating procedures to determine whethe r or not they are appropriate for 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 codes that cr osswalk or are clinically similar to ASC covered surgical procedures (72 FR 42478). We note that we added over 800 surgical procedures to the list of covered surgical procedures for ASC payment in CY 2008, the first year of the revised ASC payment system , based on the criteria for payment that we adopted in the August 2, 2007 final rule as described above in this section. 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 providedCMS-1525-FC 889 integral to ASC covered surgical procedures : brachytherapy sources; certain implantable items that have pass-through status under the OPPS; certain items and services that we designate as contractor-price d, including, but not limited to, procurement of corneal tissue; certain drugs and biologicals for wh ich separate payment is allowed under the OPPS; and certain radiology services for wh ich separate payment is allowed under the OPPS. These covered ancillary services ar e specified in § 416.164(b) and, as stated previously, are eligible for separate ASC payment (72 FR 42495). Payment for ancillary items and services that are not paid sepa rately under the ASC payment system is packaged into the ASC payment for the covered surgical procedure. We update the lists of, and payment rates for, covered surgic al procedures and covered ancillary services in conjunction with the annual proposed and final rulemaking process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In addition, as discussed in detail in section XIII. B. of the proposed rule and this final rule with comment period, because we base AS C payment policies for covered surgical procedures, drugs, biologicals, and certain other covered an cillary services on the OPPS payment policies, we also provide quarterl y updates for ASC services throughout the year (January, April, July, and October). The upda tes are to implement newly created Level II HCPCS and Category III CPT codes for ASC payment and to update the payment rates for separately paid drugs and biologicals ba sed on the most recently submitted ASP data. New Category I CPT codes, except vaccine co des, are released only once a year and, therefore, are implemented through the Janua ry quarterly update. New Category I CPTCMS-1525-FC 890 vaccine codes are released tw ice a year and thus are implemented through the January and July quarterly updates. In our annual updates to the ASC list of, a nd 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 surgical procedures or covered ancill ary services. Updating the lists of covered surgical procedures and covered ancillary services, as well as their payment rates, in association with the annual OPPS rulemaking cycle is particularly important because the OPPS relative payment weights and, in some cases, 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.
Comment : Several commenters provided a number of general suggestions related to the ASC list of covered surgical proce dures. The commenters contended that CMS should not restrict which pro cedures are payable in ASCs any more than CMS restricts which procedures are payable in HOPDs. According to the commenters, when CMS declines to add a service to the ASC list that can be perf ormed in hospitals and physician offices, CMS should articulate a clinical ra tionale for why the procedure should be excluded from the ASC setting. Commenters also stated that the frequency that a surgical procedure is performed in an o ffice setting should be included as one of theCMS-1525-FC 891 criteria for inclusion on the ASC list of cove red surgical procedures. Some commenters urged CMS to eliminate unlisted codes from the exclusionary crit eria at § 416.166(c), and other commenters requested that ASCs be a llowed to use unlisted codes to bill for procedures that are from anatomic sites th at could not possibly pose a potential risk to beneficiary safety. The comme nters reported that unlisted codes enable surgeons to utilize innovative techniques or new technol ogies and are paid under the OPPS and by commercial insurers. Response : We appreciate the commenters’ s uggestions related to our decisions about which procedures are excluded from the ASC list of covered su rgical procedures. However, as we explained in the August 2, 2007 final rule (72 FR 42479), we do not believe that all procedures th at are appropriate for performa nce in HOPDs are appropriate in ASCs. HOPDs are able to provide much higher acuity care than ASCs. ASCs have neither patient safety standards consistent wi th those in place for hospitals, nor are they required to have the trained staff and equipment needed to provide the breadth and intensity of care that hospita ls are required to maintain. Therefore, there are some procedures that we believe may be appropria tely provided in the HOPD setting that are unsafe for performance in ASCs. Thus, we are not modifying our policy and will continue to exclude certain procedures for which payment is made in HOPDs from the ASC list of covered surgical procedures. We do not agree with the commenters’ re quest that we provide specific reasons for our decisions to exclude each procedure from the ASC list of covered surgical procedures that can be performed in hospita ls and physician offices. Our decisions toCMS-1525-FC 892 exclude procedures from the ASC list are based on a number of the criteria listed at § 416.166 of the regulations, and we believe that it would be unnecessary and overly burdensome to list each reason for those decisi ons. As we have stated in the past (74 FR 60598), we continue to believe that these reasons are sufficiently specific to enable the public to provide meaningf ul comments on our decisions to exclude procedures from the list of covered surgical procedures. We believe that we should not use the fre quency that a procedure is performed in the office setting as one of our criteria for a dditions to the ASC list of covered surgical procedures. Because a surgical procedure is performed in significant volume in the office setting does not automatically mean that the procedure would not be expected to pose a significant risk to beneficiary safety when performed in an ASC or would not be expected to require active medical mon itoring and care at midnight fo llowing the procedure. We believe that such procedures still need to be evaluated using the criteria listed at § 416.166 of the regulations. We also do not agree with the comment ers’ recommendation that we include unlisted codes or unlisted codes for procedures from certain anatomic sites on the list of covered surgical procedures. Even though it may be highly unlikely that procedures reported by unlisted codes or by unlisted codes fo r procedures from certain anatomic sites would be expected to pose a risk to benefi ciary safety when performed in an ASC or would be expected to require an overnight stay, we cannot know exactly what surgical procedure is being reported by an unlisted code. Therefore, as we have explained in the CY 2011 OPPS/ASC final rule with comme nt period (75 FR 72026 and 72027), becauseCMS-1525-FC 893 we cannot evaluate any such procedure, we continue to believe th at we must exclude unlisted codes as a group from the li st of covered surgical procedures. After consideration of th e public comments we receiv ed, we are continuing our established policies without modification fo r determining which procedures are ASC covered surgical procedures a nd covered ancillary services. B. Treatment of New Codes 1. Process for Recognizing New Category I and Category III CPT Codes and Level II HCPCS Codes CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the ASC payment system. Specifically, we recognize the following codes on ASC claims: (1) Category I CPT code s, which describe medical services and procedures; (2) Category III CPT codes, whic h describe new and emerging technologies, services, and procedures; and (3) Level II HCPCS codes, wh ich are used primarily to identify products, supplies, temporary pr ocedures, and services not described by CPT codes. CPT codes are established by th e American Medical A ssociation (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 ASCs are addressed both th rough the ASC quarterly update Change Requests (CRs) and through the annual rulemaking cycle. CMS re leases new Level II HCPCS codes to the public or recognizes the release of new CP T codes by the AMA and makes these codes effective (that is, the codes are recognized on Medicare claims) outside of the formal rulemaking process via ASC quarterly update CR s. This quarterly process offers ASCsCMS-1525-FC 894 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 more timely manner than if we waited for the annual rule making process. We solicit comments on the new codes recognized for ASC payment and fina lize our proposals rela ted to these codes through our annual rulemaking process. We finalized a policy in the August 2, 2007 fi nal 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 prelimin ary determinations in the annual OPPS/ASC final rule with comment period regarding wh ether or not they meet the criteria for payment in the ASC setting as covered surgical procedures and, if so, whether they are office-based procedures (72 FR 42533 thr ough 42535). In addition, we identify new codes as ASC covered ancillary services ba sed upon the final payment policies of the revised ASC payment system. In Table 41 of the CY 2012 OPPS/AS C proposed rule (76 FR 42291), we summarized our process for updating the HCPCS codes recognized under the ASC payment system. This process is discussed in detail below. We have separated our discussion into two sections based on whether we proposed to solicit public comments in the CY 2012 OPPS/ASC proposed rule (and respond to t hose comments in this CY 2012 OPPS/ASC final rule with comment period) or whethe r we are soliciting public comments in this CY 2012 OPPS/ASC final rule with comment period (and responding to those comments in the CY 2013 OPPS/ASC final rule with co mment period). We note that we soughtCMS-1525-FC 895 public comment in the CY 2011 OPPS/ASC fina l rule with comment period on the new CPT and Level II HCPCS codes that were e ffective January 1, 2011. We also sought public comments in the CY 2011 OPPS/ASC fina l rule with comment period on the new Level II HCPCS codes effective October 1, 2010 . These new codes, with an effective date of October 1, 2010, or January 1, 2011, we re flagged with comment indicator “N1” in Addenda AA and BB to the CY2011 OPPS/AS C 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 2011 OPPS/ASC final rule with comm ent period. We stated that we would respond to public comments and finalize our proposed ASC treat ment of these codes in this CY 2012 OPPS/ASC final rule with comment period. We did not receive any public comments regarding our process for recognizing new HCPCS codes under the ASC payment system and are implementing our proposed policy as final, without modification, for CY 2012. 2. Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April and July 2011 for Which We Solic ited Public Comments in the CY 2012 OPPS/ASC Proposed Rule In the April and July CRs, we made effec tive for April 1 or July 1, 2011, a total of 13 new Level II HCPCS codes and 6 new Ca tegory III CPT codes that were not addressed in the CY 2011 OPPS/ASC final rule with comment period. The 13 new Level II HCPCS codes describe c overed ancillary services.CMS-1525-FC 896 In the April 2011 ASC quarterly update (Transmittal 2185, CR 7343, dated March 25, 2011), we added four new drug and biological Level II HCPCS codes to the list of covered ancillary serv ices. Specifically, as displa yed in Table 42 of the CY 2012 OPPS/ASC proposed rule (76 FR 42292), thes e included HCPCS codes C9280 (Injection, eribulin mesylate, 1 mg), C9281 (Injecti on, pegloticase, 1 mg), C9282 (Injection, ceftaroline fosamil, 10 mg), and Q2040 (Inje ction, incobotulinumtoxin A, 1 unit). We note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection, incobotulinumtoxin A, 1 unit) beginn ing April 1, 2011. HCPCS code C9278 was effective January 1, 2011, and deleted for dates of service April 1, 2011 and forward, because it was replaced with HCPCS code Q2040. In the July 2011 quarterly update (Transmittal 2235, Change Request 7445, dated June 03, 2011), we added nine new drug and bi ological Level II HCPC S codes to the list of covered ancillary services. Specifical ly, as displayed in Table 43 of the CY 2012 OPPS/ASC proposed rule (76 FR 42292), we provided separate payment for HCPCS codes C9283 (Injection, acetaminophen, 10 mg), C9284 (Injection, ip ilimumab, 1 mg), C9285 (Lidocaine 70 mg/tetracaine 70mg, pe r patch), C9365 (Oasis Ultra Tri-Layer matrix, per square centimeter), C9406 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries), Q2041 (Injection, von wille brand factor complex (human), Wilate, 1 i.u. vwf:rco), Q2042 (Injection, hydr oxyprogesterone caproate, 1 mg), Q2043 (Sipuleucel-t, minimum of 50 million autologou s cd54+ cells activated with pap-gm-csf, including leukapheresis and all other prepar atory procedures, per infusion), and Q2044CMS-1525-FC 897 (Injection, belimumab, 10 mg). We note that HCPCS code Q2041 replaced HCPCS code J7184 and HCPCS code Q2043 replaced HCPCS code C9273 beginning July 1, 2011. We assigned payment indicator “K2” (Drugs and biologicals paid separately when provided integral to a surgic al procedure on the ASC list; payment based on OPPS rate) to these 13 new Level II HCPCS codes to indica te that they are separately paid when provided in ASCs. In the CY 2012 OPPS/ ASC proposed rule, we solicited public comment on the proposed CY 2012 ASC paymen t indicators and payment rates for the drugs and biologicals, as listed in Tables 42 and 43 of the CY 2012 OPPS/ASC proposed rule (76 FR 42292). Those HCPCS codes beca me payable in ASCs, beginning in April or July 2011, and are paid at the ASC rates posted for the appropriate calendar quarter on the CMS Web site at http://www.cms.gov/ASCPayment/

. The HCPCS codes listed in Table 42 were included in Addendum BB to the CY 2012 OPPS/ASC proposed rule. We note th at all ASC addenda were only available via the Internet on the CMS Web site. Becau se HCPCS codes that became effective for July (listed in Table 43 of the CY 2012 O PPS/ASC proposed rule) were not available to us in time for incorporation into the Adde nda to the OPPS/ASC proposed rule, our policy is to include these HCPCS codes and thei r proposed payment indicators and payment rates in the preamble to the proposed rule bu t not in the Addenda to the proposed rule. These codes and their final payment indicators and rates are include d in the appropriate Addendum to this CY 2012 OPPS/ASC final rule with comment period. Thus, the codes implemented by the July 2011 ASC quarterly update CR and their proposed CY 2012 payment rates (based on July 2011 ASP data ) that are displayed in Table 43 of theCMS-1525-FC 898 CY 2012 OPPS/ASC proposed rule were not in cluded in Addendum BB to that proposed rule. The final list of covered ancillary se rvices and the associat ed payment weights and payment indicators is included in Addendum BB to this CY 2012 OPPS/ASC final rule with comment period, consistent with our annual update policy. We did not receive any public comment s regarding our proposals. We are continuing our established policy for recognizi ng new mid-year HCPCS codes. We also are adopting as final for CY 2012 the ASC paym ent indicators for the ancillary services described by the new Level II HCPCS codes implemented in April and July 2011 through the quarterly update CRs as shown below, in Tables 48 and 49, respectively. These new HCPCS codes also are displa yed in Addendum BB to this final rule with comment period. We note that after publication of the CY 2012 OPPS/ASC proposed rule, the CMS HCPCS Workgroup created permanent HCPCS J-codes for CY 2012 to replace certain temporary HCPCS C-codes made effective for CY 2011. These permanent CY 2012 HCPCS J-codes are lis ted alongside the temporary CY 2011 HCPCS C-codes in Tables 48 and 49 below.
TABLE 48.—NEW LEVEL II HCPCS CO DES FOR COVERED ANCILLARY SERVICES IMPLEMENTED IN APRIL 2011
CY 2012 HCPCS

Code CY 2011 HCPCS

Code CY 2012 Long Descriptor Final CY 2012 Payment Indicator J9179 C9280 Injection, eribulin mesylate, 1 mg K2 J2507 C9281 Injection, pegloticase, 1 mg K2 J0712 C9282 Injection, ceftaroline fosamil, 10 mg K2 J0588 Q2040* Injection, incobotulinumtoxin A, 1 unit K2 *Level II HCPCS code C9278 was deleted March 31, 2011, and replaced with HCPCS code Q2040 effective April 1, 2011CMS-1525-FC 899

TABLE 49.—NEW LEVEL II HCPCS CO DES FOR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2011

CY 2012 HCPCS

Code CY 2011 HCPCS

Code CY 2012 Long Descriptor Final CY 2012 Payment Indicator J0131 C9283 Injection, acetaminophen, 10 mg K2 J9288 C9284 Injection, ipilimumab, 1 mg K2 C9285 C9285 Lidocaine 70 mg/tetracaine 70mg, per patch K2 Q4124 C9365 Oasis Ultra Tri-Layer matrix, per square centimeter K2
A9584 C9406 Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries K2
J7183 Q2041* Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco K2
J1725 Q2042 Injection, hydroxyprogesterone caproate, 1 mg K2

Q2043 Q2043* Sipuleucel-t, minimum of 50 millionautologous cd54+ cells activated with papgm-csf, including leukapheresis and all other preparatory pro cedures, per infusion K2

J0490 Q2044 Injection, belimumab, 10 mg K2 *Level II HCPCS codes J7184 and C9273 were deleted June 30, 2011 and were repl aced with HCPCS codes Q2041 and Q2043, respectively, effective July 1, 2011 Through the July 2011 quarterly update CR, we also implemented ASC payment for six new Category III CPT codes as ASC covered surgical procedures, effective July 1, 2011. These codes were listed in Table 44 of the CY 2012 OPPS/ASC proposed rule (76 FR 42292 and 42293), along with their proposed payment indicators and proposed payment rates for CY 2012. B ecause new Category III CPT and Level II HCPCS codes that became effective for July were not available to us in time forCMS-1525-FC 900 incorporation into the Addenda to the OPPS/ASC proposed rule , our policy is to include the codes, their proposed payment indicat ors, and proposed payment rates in the preamble to the proposed rule but not in the Addenda to the proposed rule. These codes and their final payment indicators and ra tes are included in Addendum AA to this CY 2012 OPPS/ASC final rule with comment period. We proposed to assign payment indicator “G2” (Non-office-based surgical pr ocedure added in CY 2008 or later; payment based on OPPS relative payment weight) to a ll six of the new Category III CPT codes to be implemented in July 2011. We believe that these procedures would not pose a significant safety risk to Medica re beneficiaries or would not require an overnight stay if performed in ASCs. We solicited public co mment on these proposed payment indicators and the payment rates for the new Category II I CPT codes that were newly recognized as ASC covered surgical procedures in July 2011 through the quarterly update CR, as listed in Table 44 of the CY 2012 OPPS/ASC pr oposed rule (76 FR 42292 and 42293). We proposed to finalize their pa yment indicators and their pa yment rates in this CY 2012 OPPS/ASC final rule with comment period. We did not receive any public comment s regarding this proposal. We are continuing our established policy for recogni zing new mid-year CPT codes for CY 2012. We also are adopting as final for CY 2012 th e ASC payment indicators for the covered surgical procedures described by the new Category III CPT codes implemented in the July 2011 CR as shown below in Table 50. The new CPT codes implemented in July 2011 are also displayed in Addendum AA to this final rule with comment period (which is available via the Internet on the CMS Web site).CMS-1525-FC 901
TABLE 50.—NEW CATEGORY III CPT CODES IMPLEMENTED IN

JULY 2011 AS ASC COVERED SURGICAL PROCEDURES

CY 2012 CPT Code CY 2012 Long Descriptor Final CY 2012 Payment Indicator

0263T Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure including unilateral or bilateral bone marrow harvest G2

0264T Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; complete procedure excluding bone marrow harvest G2

0265T Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if performed; unilateral or bilateral bone marrow harvest only for intramuscular autologous bone marrow cell therapy G2

0269T Revision or removal of caroti d sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and repositioning, when performed) G2

0270T Revision or removal of caroti d sinus baroreflex activation device; lead only, unilateral (includes intra-operative interrogation, programming, and repositioning, when performed) G2

0271T Revision or removal of caroti d sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, programming, and repositioning, when performed) G2CMS-1525-FC 902 3. Process for New Level II HCPCS Codes and Category I and III CPT Codes for Which We Are Soliciting Public Comments in this CY 2012 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 ASC quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October ASC quarterly update CRs and incorporated these new codes in the final rule with 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 indicat or ‘‘NI’’ are open to public comment in the OPPS/ASC final rule with comment period, and we respond to these comments in the final rule with comment period for the next calendar y ear’s OPPS/ASC update. In the CY 2012 OPPS/ASC proposed rule (76 FR 42293), we proposed to continue this process for CY 2012. Specifically, for CY 2012, we proposed to include in Addenda AA and BB to the CY 2012 OPPS/ASC final rule with comm ent period the new Category I and III CPT codes effective January 1, 2012 that would be incorporated in the January 2012 ASCCMS-1525-FC 903 quarterly update CR and the new Level II HCPCS codes, effective October 1, 2011 or January 1, 2012, that would be released by CMS in its October 2011 and January 2012 ASC quarterly update CRs. We stated that these codes would be flagged with comment indicator “NI” in Addenda AA and BB to this CY 2012 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim payment status. We also stated that their payment indicators and payment rates, if applicable, would be open to public comment in the CY 2012 OPPS/ASC final rule with comment period and would be finalized in the CY 2013 OPPS/AS C final rule with comment period. We did not receive any public comments regarding this proposed process. For CY 2012, 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 for the following year, as described above. C. Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Additions to the List of ASC Covered Surgical Procedures We conducted a review of all HCPCS c odes 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 changed the clinical appropriateness of these procedures for the ASC setting. Upon review, we did not identify any procedures that are currently excluded from the ASC list of procedures that met the definition of aCMS-1525-FC 904 covered surgical procedure based on our expectation that they would not pose a significant safety risk to Medi care beneficiaries or would re quire an overnight stay if performed in ASCs. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42293) we did not propose additions to the list of AS C covered surgical procedures for CY 2012.
Comment : Commenters requested that CMS add the procedures described by the 232 CPT codes displayed in Table 51 belo w to the list of ASC covered surgical procedures as well as several CPT unlisted codes. The commenter s argued that these procedures are less complex and/or as sa fe as procedures already paid for when performed in the ASC setting.

TABLE 51.—SURGICAL PROCEDURES REQUESTED FOR ADDITION TO THE CY 2012 ASC LIST OF COVERED SURGICAL PROCEDURES
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor 19260 Excision of chest wall tumor including ribs

19307 Mastectomy, modified radical, includ ing axillary lymph nodes, with or without pectoralis minor muscle, but excluding pectoralis major muscle 20100 Exploration of penetrating w ound (separate procedure); neck 20101 Exploration of penetrating w ound (separate procedure); chest

20102 Exploration of penetrating wound (separate procedure); abdomen/flank/back

20660 Application of cranial tongs, caliper, or stereo tactic frame, including removal (separate procedure)

21049 Excision of benign tumor or cyst of maxilla; requiring extra-oral osteotomy and partial maxillectom y (eg, locally aggressive or destructive lesion(s)) 21089 Unlisted maxillofacial prosthetic procedure

21141 Reconstruction midface, lefort i; si ngle piece, segment movement in any direction (eg, for long face syndrome), without bone graft 21142 Reconstruction midface, lefort i; two pieces, segment movement in anyCMS-1525-FC 905
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor direction, without bone graft

21143 Reconstruction midface, lefort i; three or more pieces, segment movement in any direction, without bone graft

21145 Reconstruction midface, lefort i; si ngle piece, segment movement in any direction, requiring bone grafts (includes obtaining autografts)

21146 Reconstruction midface, lefort i; tw o pieces, segment movement in any direction, requiring bone grafts (inc ludes obtaining autografts) (eg, ungrafted unilateral alveolar cleft)

21147 Reconstruction midface, lefort i; three or more pieces, segment movement in any direction, requiring bone grafts (includes obtaining autografts) (eg, ungrafted bilatera l alveolar cleft or multiple osteotomies)

21151 Reconstruction midface, lefort ii; any direction, requiring bone grafts (includes obtain ing autografts)

21172 Reconstruction superior-lateral orbital rim and lower forehead, advancement or alteration, with or without grafts (i ncludes obtaining autografts)

21188 Reconstruction midface, osteotomies (o ther than lefort type) and bone grafts (includes obtaining autografts)

21193 Reconstruction of mandibular rami, horizontal, vertical, c, or l osteotomy; without bone graft

21194 Reconstruction of mandibular rami, horizontal, vertical, c, or l osteotomy; with bone graft (includes obtaining graft)

21195 Reconstruction of mandibular rami a nd/or body, sagittal split; without internal rigid fixation

21196 Reconstruction of mandibular rami and/or body, sagittal split; with internal rigid fixation

21247 Reconstruction of mandibular c ondyle with bone and cartilage autografts (includes ob taining grafts) (eg, for hemifacial microsomia)

21256 Reconstruction of orbit with osteot omies (extracranial) and with bone grafts (includes obtaining au tografts) (eg, micro-ophthalmia) 21343 Open treatment of depre ssed frontal sinus fracture

21346 Open treatment of nasomaxillary complex fracture (lefort ii type); with wiring and/or local fixationCMS-1525-FC 906
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor

21365 Open treatment of complicated (eg, comminuted or involving cranial nerve foramina) fracture(s) of malar area, including zygomatic arch and malar tripod; with internal fixation and multiple surgical approaches

21385 Open treatment of orbital floor blow out fracture; transantral approach (caldwell-luc t ype operation) 21386 Open treatment of orbital floor bl owout fracture; periorbital approach 21387 Open treatment of orbital floor bl owout fracture; combined approach

21395 Open treatment of orbital floor blow out fracture; periorbital approach with bone graft (includes obtaining graft)

21408 Open treatment of fracture of orb it, except blowout; with bone grafting (includes obtaining graft) 21422 Open treatment of palatal or ma xillary fracture (lefort i type);

21423 Open treatment of palatal or maxillary fracture (lefort i type); complicated (comminuted or involving cranial nerve foramina), multiple approaches

21431 Closed treatment of craniofacial separation (lefort iii type) using interdental wire fixation of denture or splint

21470 Open treatment of complicated mandibular fracture by multiple surgical approaches including inte rnal fixation, interdental fixation, and/or wiring of de ntures or splints

22100 Partial excision of posterior verteb ral component (eg, spinous process, lamina or facet) for intrinsic bony lesion, single vertebral segment; cervical

22222 Osteotomy of spine, including disc ectomy, anterior approach, single vertebral segment; thoracic

22612 Arthrodesis, posterior or posterolate ral technique, single level; lumbar (with or without latera l transverse technique)

22614 Arthrodesis, posterior or posterola teral technique, single level; each additional vertebral segment (list separately in addition to code for primary procedure)

22851 Application of intervertebral biom echanical device(s) (eg, synthetic cage(s), methylmethacrylate) to verteb ral defect or interspace (list separately in addition to c ode for primary procedure) 23470 Arthroplasty, glenohumeral joint; hemiarthroplastyCMS-1525-FC 907
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor 23929 Unlisted procedure, shoulder

27006 Tenotomy, abductors and/or extens or(s) of hip, open (separate procedure)

27027 Decompression fasciotomy(ies), pelvic (buttock) compartment(s) (eg, gluteus medius-minimus, gluteus ma ximus, iliopsoas, and/or tensor fascia lata muscle), unilateral

27035 Denervation, hip joint, intrapelvi c or extrapelvic intra-articular branches of sciatic, femora l, or obturator nerves

27524 Open treatment of patellar fracture, w ith internal fixation and/or partial or complete patellectomy and soft tissue repair 28805 Amputation, foo t; transmetatarsal

31292 Nasal/sinus endoscopy, surgical; with medial or inferior orbital wall decompression 31600 Tracheostomy, planned (separate procedure); 31610 Tracheostomy, fenestration pr ocedure with skin flaps 31785 Excision of tracheal tumor or carcinoma; cervical 32201 Pneumonostomy; with percutaneous drainage of abscess or cyst

32551 Tube thoracostomy with or wit hout water seal (eg, for abscess, hemothorax, empyema) (separate procedure) 32560 Chemical pleurodesis (eg, for recu rrent or persistent pneumothorax)

32601 Thoracoscopy, diagnostic (separate pr ocedure); lungs, pericardial sac, mediastinal or pleural space, without biopsy

32602 Thoracoscopy, diagnostic (separate procedure); lungs and pleural space, with biopsy

32606 Thoracoscopy, diagnostic (separate pro cedure); mediastinal space, with biopsy

33244 Removal of single or dual chamber pacing cardioverter-defibrillator electrode(s); by transvenous extraction

34101 Embolectomy or thrombectomy, with or without catheter; axillary, brachial, innominate, subclavian artery, by arm incision

34111 Embolectomy or thrombectomy, with or without catheter; radial or ulnar artery, by arm incision

34201 Embolectomy or thrombectomy, with or without catheter; femoropopliteal, aortoiliac artery, by leg incisionCMS-1525-FC 908
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor

34203 Embolectomy or thrombectomy, with or without catheter; poplitealtibio-peroneal artery, by leg incision

34421 Thrombectomy, direct or with catheter; vena cava, iliac, femoropopliteal vein, by leg incision 34501 Valvuloplasty, femoral vein 34520 Cross-over vein graft to venous system

35011 Direct repair of aneurysm, pseudoa neurysm, or excision (partial or total) and graft inserti on, with or without patch graft; for aneurysm and associated occlusive disease, axillary-brachial artery, by arm incision 35180 Repair, congenital arteriove nous fistula; head and neck 35184 Repair, congenital arteriov enous fistula; extremities 35190 Repair, acquired or traumatic ar teriovenous fistula; extremities 35206 Repair blood vessel, direct; upper extremity 35226 Repair blood vessel, direct; lower extremity 35231 Repair blood vessel with vein graft; neck 35236 Repair blood vessel with vein graft; upper extremity 35256 Repair blood vessel with vein graft; lower extremity 35266 Repair blood vessel with graft other than vein; upper extremity 35286 Repair blood vessel with graft other than vein; lower extremity

35321 Thromboendarterectomy, including patc h graft, if performed; axillarybrachial

35458 Transluminal balloon angioplasty, open; brachiocephalic trunk or branches, each vessel 35471 Transluminal balloon angioplasty, perc utaneous; renal or visceral artery 35472 Transluminal balloon angiopl asty, percutaneous; aortic

35494 Transluminal peripheral atherect omy, percutaneous; brachiocephalic trunk or branches, each vessel

35500 Harvest of upper extremity vein, one segment, for lower extremity or coronary artery bypass procedure (list separately in addition to code for primary procedure)

35686 Creation of distal arte riovenous fistula during lower extremity bypass surgery (non-hemodialysis) (list sepa rately in addition to code for primary procedure) 35860 Exploration for postoperative hemorrh age, thrombosis or infection;CMS-1525-FC 909
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor extremity

35879 Revision, lower extremity arterial bypass, without thrombectomy, open; with vein patch angioplasty

35881 Revision, lower extremity arterial bypass, without thrombectomy, open; with segmental vein interposition

35884 Revision, femoral anastomosis of s ynthetic arterial bypass graft in groin, open; with autogenous vein patch graft 35903 Excision of infected graft; extremity

36838 Distal revascularization and interv al ligation (dril) , upper extremity hemodialysis access (steal syndrome)

37183 Revision of transvenous intrahepat ic portosystemic shunt(s) (tips) (includes venous access, hepatic a nd portal vein catheterization, portography with hemodynamic evaluation, intrahepatic tract recanulization/ dilatation, stent placement and all associated 37195 Thrombolysis, cerebral, by intravenous infusion 37201 Transcatheter therapy, infusion for thrombolysis other than coronary

37202 Transcatheter therapy, infusion other than for thrombolysis, any type (eg, spasmolytic, vasoconstrictive)

37205 Transcatheter placement of an intrav ascular stent(s) (except coronary, carotid, and vertebral vessel), percutaneous; initial vessel

37206 Transcatheter placement of an intrav ascular stent(s) (except coronary, carotid, and vertebral vessel), percut aneous; each additional vessel (List separately in addition to c ode for primary procedure)

37207 Transcatheter placement of an intr avascular stent(s) (non-coronary vessel other than iliac and lower extr emity arteries), open; initial vessel

37208 Transcatheter placement of an intr avascular stent(s) (non-coronary vessel other than iliac and lower extremity arteries), open; each additional vessel (List separately in addition to code for primary procedure)

37209 Exchange of a previously placed intravascular catheter during thrombolytic therapy

37224 Revascularization, endovascul ar, open or percutaneous, femoral/popliteal artery(s), unilatera l; with transluminal angioplasty 37225 Revascularization, endovascul ar, open or percutaneous,CMS-1525-FC 910
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor femoral/popliteal artery(s), unilate ral; with atherectomy, includes angioplasty within the same vessel, when performed

37226 Revascularization, endovascul ar, open or percutaneous, femoral/popliteal artery(s), unilateral; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed

37227 Revascularization, endovascul ar, open or percutaneous, femoral/popliteal artery(s), unilateral; with transluminal stent placement(s) and atherectomy, includes angioplasty within the same vessel, when performed

37228 Revascularization, endova scular, open or percutaneous, tibial/peroneal artery, unilateral, initial vessel; with transluminal angioplasty

37229 Revascularization, endova scular, open or percut aneous, tibial/peroneal artery, unilateral, initial vessel; w ith atherectomy, includes angioplasty within the same vessel, when performed

37230 Revascularization, endova scular, open or percut aneous, tibial/peroneal artery, unilateral, initial vessel; w ith transluminal stent placement(s), includes angioplasty within the same vessel, when performed

37231 Revascularization, endova scular, open or percutaneous, tibial/peroneal artery, unilateral, initial vessel; w ith transluminal stent placement(s) and atherectomy, includes angioplast y within the same vessel, when performed

37232 Revascularization, endova scular, open or percutaneous, tibial/peroneal artery, unilateral, each additional ve ssel; with transluminal angioplasty (List separately in addition to code for primary procedure)

37233 Revascularization, endova scular, open or percut aneous, tibial/peroneal artery, unilateral, each additional vessel; with atherectomy, includes angioplasty within the same vessel, when performed (List separately in addition to code for primary procedure)

37234 Revascularization, endova scular, open or percut aneous, tibial/peroneal artery, unilateral, each additional vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed (List separately in addition to code for primary procedure)

37235 Revascularization, endova scular, open or percutaneous, tibial/peroneal artery, unilateral, each additional vessel; with transluminal stentCMS-1525-FC 911
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor placement(s) and atherectomy, includes angioplasty within the same vessel, when performed (List separately in addition to code for primary procedure) 37501 Unlisted vascular endoscopy procedure 37605 Ligation; internal or common carotid artery 37615 Ligation, major artery (eg, post-traumatic, rupture); neck

37620 Interruption, partial or complete, of inferior vena cava by suture, ligation, plication, clip, extravascular, intravas cular (umbrella device) 38120 Laparoscopy, surgical, splenectomy

38240 Bone marrow or blood-derived periphe ral stem cell transplantation; allogenic 38720 Cervical lymphadenectomy (complete) 39400 Mediastinoscopy, with biops y(ies), when performed

42842 Radical resection of tons il, tonsillar pillars, an d/or retromolar trigone; without closure

42844 Radical resection of tons il, tonsillar pillars, an d/or retromolar trigone; closure with local flap (eg, tongue, buccal)

43280 Laparoscopy, surgical, esophagogastri c fundoplasty (eg, nissen, toupet procedures) 43420 Closure of esophagostomy or fistula; cervical approach

43510 Gastrotomy; with esophageal dilati on and insertion of permanent intraluminal tube (eg, cele stin or mousseaux-barbin) 43659 Unlisted laparoscopy procedure, stomach

43830 Gastrostomy, open; without construc tion of gastric tube (eg, stamm procedure) (separate procedure)

44180 Laparoscopy, surgical, enterolysis (freeing of intes tinal adhesion) (separate procedure) 44186 Laparoscopy, surgical; jejunostomy (eg, for decompression or feeding)

44206 Laparoscopy, surgical; colectomy, pa rtial, with end colostomy and closure of distal segment (hartmann type procedure)

44207 Laparoscopy, surgical; colectomy, pa rtial, with anastomosis, with coloproctostomy (low pelvic anastomosis)

44208 Laparoscopy, surgical; colectomy, pa rtial, with anastomosis, with coloproctostomy (low pelvic anastomosis) with colostomyCMS-1525-FC 912
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor

44213 Laparoscopy, surgical, mobilization (take-down) of splenic flexure performed in conjunction with partial colectomy (list separately in addition to primary procedure) 44238 Unlisted laparoscopy procedure, intestine (except rectum) 44901 Incision and drainage of appe ndiceal abscess; percutaneous 44950 Appendectomy;

44955 Appendectomy; when done for indicated purpose at time of other major procedure (not as separate procedur e) (list separately in addition to code for primary procedure) 44970 Laparoscopy, surgical, appendectomy

47011 Hepatotomy; for percutaneous drainage of abscess or cyst, one or two stages

47371 Laparoscopy, surgical, ablation of one or more liver tumor(s); cryosurgical 47379 Unlisted laparoscopic procedure, liver

47490 Cholecystostomy, percutaneous, complete procedure, including imaging guidance, catheter placement, cholecystogram when performed, and radiological s upervision and interpretation 47579 Unlisted laparoscopy procedure, biliary tract 48511 External drainage, pseudocyst of pancreas; percutaneous

49021 Drainage of peritoneal abscess or localized peritonitis, exclusive of appendiceal abscess; percutaneous 49041 Drainage of subdiaphragmatic or subphrenic abscess; percutaneous 49061 Drainage of retroperiton eal abscess; percutaneous 49323 Laparoscopy, surgical; with drainage of lymphocele to peritoneal cavity 49329 Unlisted laparoscopy procedure, abdomen, peritoneum and omentum

49659 Unlisted laparoscopy procedure, hernioplasty, herniorrhaphy, herniotomy 50020 Drainage of perirenal or renal abscess; open 50021 Drainage of perirenal or renal abscess; percutaneous

50542 Laparoscopy, surgical; ablation of renal mass lesion(s), including intraoperative ultrasound guidance and monitoring, when performed 50543 Laparoscopy, surgica l; partial nephrectomy 50544 Laparoscopy, surgical; pyeloplastyCMS-1525-FC 913
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor 50945 Laparoscopy, surgical; ureterolithotomy 50949 Unlisted laparoscopy procedure, ureter

51845 Abdomino-vaginal vesical neck susp ension, with or without endoscopic control (eg, stamey, raz, modified pereyra) 51860 Cystorrhaphy, suture of bladder wound, injury or rupture; simple

52649 Laser enucleation of th e prostate with morce llation, includ ing control of postoperative bleeding, comp lete (vasectomy, meatotomy, cystourethroscopy, urethral calibra tion and/or d ilation, internal urethrotomy and transurethral resect ion of prostate are included if performed (Do not report 52649 with 52000, 52276, 52281, 52601, 52647, 52648, 53020, 55250)

53500 Urethrolysis, transvaginal , secondary, open, including cystourethroscopy (eg, postsurg ical obstruction, scarring)

54332 One stage proximal penile or penos crotal hypospadias repair requiring extensive dissection to correct chord ee and urethroplasty by use of skin graft tube and/or island flap

54336 One stage perineal hypospadias repair requiring extens ive dissection to correct chordee and urethroplasty by use of skin graft tube and/or island flap

54411 Removal and replacement of all components of a multi-component inflatable penile prosthesis thr ough an infected field at the same operative session, including irrigatio n and debridement of infected tissue

54417 Removal and replacement of non-inflat able (semi-rigid) or inflatable (self-contained) penile prosthesis th rough an infected field at the same operative session, including irrigatio n and debridement of infected tissue 54535 Orchiectomy, radical, for tumo r; with abdominal exploration

54650 Orchiopexy, abdominal approach, for intra-abdominal testis (eg, fowler-stephens) 57106 Vaginectomy, partial re moval of vaginal wall;

57107 Vaginectomy, partial removal of vaginal wall; with removal of paravaginal tissue (radical vaginectomy) 57120 Colpocleisis (le fort type)CMS-1525-FC 914
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor

57282 Colpopexy, vaginal; extra-perit oneal approach (sacrospinous, iliococcygeus)

57283 Colpopexy, vaginal; intra-peritoneal approach (uterosacral, levator myorrhaphy)

57284 Paravaginal defect repair (including repair of cystocele, stress urinary incontinence, and/or incomplete va ginal prolapse if performed); open abdominal approach (do not re port 57284 in conjunction with 51840, 51841, 51990, 57240, 57260, 57265, 58152, 58267)

57285 Paravaginal defect repair (including repair of cystocele, stress urinary incontinence, and/or incomplete vagi nal prolapse if performed); vaginal approach (do not report 57285 in conjunction with 51990, 57240, 57260, 57265, 58267) 57310 Closure of urethrovaginal fistula; 57330 Closure of vesicovagina l fistula; transvesical and vaginal approach

57423 Paravaginal defect repair (including re pair of cystocele, if performed), laparoscopic approach (do not report 57423 in conjunction with 49320, 51840, 51841, 51990, 57240, 57260, 58152, 58267) 57425 Laparoscopy, surgical, colpopexy (suspension of vaginal apex) 58260 Vaginal hysterectomy, fo r uterus 250 g or less;

58262 Vaginal hysterectomy, for ut erus 250 g or less; with removal of tube(s), and/or ovary(s)

58263 Vaginal hysterectomy, for ut erus 250 g or less; with removal of tube(s), and/or ovary(s), with repair of enterocele

58270 Vaginal hysterectomy, for uterus 250 g or less; with repair of enterocele

58291 Vaginal hysterectomy, for uterus greater than 250 g; with removal of tube(s) and/or ovary(s)

58541 Laparoscopy, surgical, supracervical hysterectomy, for uterus 250 g or less;

58542 Laparoscopy, surgical, supracervical hysterectomy, for uterus 250 g or less; with removal of tube(s) and/or ovary(s)

58544 Laparoscopy, surgical, supracervical hysterectomy, for uterus greater than 250 g; with removal of tube(s) and/or ovary(s) 58553 Laparoscopy, surgical, with vagina l hysterectomy, for uterus greaterCMS-1525-FC 915
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor than 250 g;

58554 Laparoscopy, surgical, with vagina l hysterectomy, for uterus greater than 250 g; with removal of tube(s) and/or ovary(s) 58570 Laparoscopy, surgical, with total hyst erectomy, for uterus 250 g or less;

58571 Laparoscopy, surgical, with total hyst erectomy, for uterus 250 g or less; with removal of tube (s) and/or ovary(s) 58578 Unlisted laparoscopy procedure, uterus 58770 Salpingostomy (salpingoneostomy)

58823 Drainage of pelvic abscess, tran svaginal or transrectal approach, percutaneous (eg, ovarian, pericolic) 58925 Ovarian cystectomy, unilateral or bilateral

59074 Fetal fluid drainage (eg, vesicocentes is, thoracocentesis, paracentesis), including ultrasound guidance 59409 Vaginal delivery only (with or without episiotomy and/or forceps); 60240 Thyroidectomy, total or complete

60252 Thyroidectomy, total or subtotal for malignancy; with limited neck dissection

60260 Thyroidectomy, removal of all re maining thyroid tissue following previous removal of a portion of thyroid 60271 Thyroidectomy, including substern al thyroid; cerv ical approach 60500 Parathyroidectomy or expl oration of parathyroid(s);

60512 Parathyroid autotransplantation (list separately in addition to code for primary procedure)

61623 Endovascular temporary balloon arteri al occlusion, head or neck (extracranial/intracranial) including selective catheterization of vessel to be occluded, positioning and inflation of occlusion balloon, concomitant neurological monitoring , and radiologic supervision and interpretation of all angiography re quired for balloon occlusion and to exclude vascualr injury post occlusion

61626 Transcatheter permanent occlusi on or embolization (eg, for tumor destruction, to achieve hemost asis, to occlude a vascular malformation), percutaneous, any me thod; non-central nervous system, head or neck (extracranial, brachiocephalic branch) 61720 Creation of lesion by stereotactic method, including burr hole(s) andCMS-1525-FC 916
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor localizing and recording techniques, single or multiple stages; globus pallidus or thalamus 62000 Elevation of depressed skull fracture; simple, extradural

62351 Implantation, revision or repositio ning of tunneled intrathecal or epidural catheter, for long-term medication administration via an external pump or implantable reservoir/infusion pump; with laminectomy

63001 Laminectomy with exploration and/or decompression of spinal cord and/or cauda equina, without facetectomy, foraminotomy or discectomy, (eg, spinal stenosis), one or two vertebral segments; cervical

63003 Laminectomy with exploration and/or decompression of spinal cord and/or cauda equina, without facetectomy, foraminotomy or discectomy, (eg, spinal stenosis), one or two vertebral segments; thoracic

63005 Laminectomy with exploration and/or decompression of spinal cord and/or cauda equina, without facetectomy, foraminotomy or discectomy, (eg, spinal stenosis), one or two vertebral segments; lumbar, except for spondylolisthesis

63011 Laminectomy with exploration and/or decompression of spinal cord and/or cauda equina, without facetectomy, foraminotomy or discectomy, (eg, spinal stenosis), on e or two vertebral segments; sacral

63012 Laminectomy with removal of abnormal facets and/or pars interarticularis with decompression of cauda equina and nerve roots for spondylolisthesis, lumbar (gill type procedure)

63015 Laminectomy with exploration and/or decompression of spinal cord and/or cauda equina, without facetectomy, foraminotomy or discectomy, (eg, spinal stenosis), more than 2 vertebral segments; cervical

63016 Laminectomy with exploration and/or decompression of spinal cord and/or cauda equina, without facetectomy, foraminotomy or discectomy, (eg, spinal stenosis), more than 2 vertebral segments; thoracic

63017 Laminectomy with exploration and/or decompression of spinal cord and/or cauda equina, without facetectomy, foraminotomy orCMS-1525-FC 917
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor discectomy, (eg, spinal stenosis), more than 2 vertebral segments; lumbar

63020 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, fo raminotomy and/or excision of herniated intervertebral disc, including open and endoscopicallyassisted approaches; 1 interspace, cervical

63030 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, fo raminotomy and/or excision of herniated intervertebral disc, including open and endoscopicallyassisted approaches; 1 interspace, lumbar

63035 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, fo raminotomy and/or excision of herniated intervertebral disc, including open and endoscopicallyassisted approaches; each additi onal interspace, cervical or lumbar (List separately in addition to code for primary procedure)

63040 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, fo raminotomy and/or excision of herniated intervertebral disc, ree xploration, single interspace; cervical

63042 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, fo raminotomy and/or excision of herniated intervertebral disc, ree xploration, single interspace; lumbar

63045 Laminectomy, facetectomy and forami notomy (unilatera l or bilateral with decompression of spinal cord, ca uda equina and/or nerve root(s), (eg, spinal or lateral recess stenosis)), single vertebral segment; cervical

63046 Laminectomy, facetectomy and forami notomy (unilatera l or bilateral with decompression of spinal cord, ca uda equina and/or nerve root(s), (eg, spinal or lateral recess stenosis)), single vertebral segment; thoracic

63047 Laminectomy, facetectomy and forami notomy (unilatera l or bilateral with decompression of spinal cord, ca uda equina and/or nerve root(s), (eg, spinal or lateral recess stenosis)), single vertebral segment; lumbar

63048 Laminectomy, facetectomy and forami notomy (unilatera l or bilateral with decompression of spinal cord, ca uda equina and/or nerve root(s), (eg, spinal or lateral recess stenosis)), single vertebral segment; each additional segment, cervical, thoracic , or lumbar (list separately in addition to code for primary pr ocedure) (Use 63048 with 63045-63047)CMS-1525-FC 918
CY 2012 CPT/HCPCS Code CY 2012 CPT/HCPCS Long Descriptor

63055 Transpedicular approach with deco mpression of spinal cord, equina and/or nerve root(s) (eg, herniated in tervertebral disc), single segment; thoracic

63056 Transpedicular approach with deco mpression of spinal cord, equina and/or nerve root(s) (eg, herniated in tervertebral disc), single segment; lumbar (including transfacet, or lateral extraforaminal approach) (eg, far lateral herniated intervertebral disc)

63057 Transpedicular approach with deco mpression of spinal cord, equina and/or nerve root(s) (eg, herniated in tervertebral disc), single segment; each additional segment, thoracic or lumbar (list separately in addition to code for primary procedure)

63075 Discectomy, anterior, with decompressi on of spinal cord and/ or nerve root(s), including osteophytectomy; cervical, single interspace

63076 Discectomy, anterior, with decompressi on of spinal cord and/ or nerve root(s), including osteophytectomy; cervical, each additional interspace (list separately in addition to code for primary procedure) 69970 Removal of tumor, temporal bone

0171T Insertion of posterior spinous pr ocess distraction device (including necessary removal of bone or ligament for insertion and imaging guidance), lumbar; single level

0172T Insertion of posterior spinous pr ocess distraction device (including necessary removal of bone or ligament for insertion and imaging guidance), lumbar; each additional leve l (list separately in addition to code for primary procedure)

G0365 Vessel mapping of vessels for he modialysis access (services for preoperative vessel mapping prior to creation of hemodialysis access using an autogenous hemodialysis c onduit, including arterial inflow and venous outflow)

G0413 Percutaneous skeletal fixation of pos terior pelvic bone fracture and/or dislocation, for fracture patterns which disrupt the pelvic ring, unilateral or bilateral, (includes iliu m, sacroiliac joint and/or sacrum)CMS-1525-FC 919 Response : We reviewed all of the surgical procedures that commenters requested be added to the ASC list of covered surgical procedures. We did not review any of the procedures that may be reported by the CPT unlisted codes because those codes are not eligible for addition to the ASC list, consistent with our final policy which is discussed in detail in the August 2, 2007 final rule (72 FR 42484 through 42486). We do not agree that most of the procedures recomme nded by the commenters are appropriate for provision to Medicare benefici aries in ASCs. Although the co mmenters asserted that the procedures they were requesting for addition to the list are less complex than and as safe as procedures already on the list, our revi ew did not support thos e assertions. We exclude from ASC payment any procedure for which standard medical practice dictates that the beneficiary who under goes the procedure would typically be expected to require active medical monitoring and care at midnight following the procedure (overnight stay) as well as all surgical procedures that our me dical advisors determin e may be expected to pose a significant safety risk to Medicare bene ficiaries when performed in an ASC. The criteria used under the revised ASC payment sy stem to identify procedures that would be expected to pose a significant safety risk wh en performed in an ASC include, but are not limited to, those procedures that: generally result in extensive bl ood loss; require major or prolonged invasion of body cavities; dire ctly involve major blood vessels; are emergent or life threatening in nature; comm only require systemic th rombolytic therapy; are designated as requiring inpatient care under § 419.22(n); can only be reported using a CPT unlisted surgical procedure code; or are otherwise excluded under § 411.15 (we refer readers to § 416.166).CMS-1525-FC 920 In our review of the procedures listed in Table 51, we found that most of the procedures either may be expected to pose a th reat to beneficiary sa fety or require active medical monitoring at midnight following the procedure. Specifically, we found that prevailing medical practice called for inpatien t hospital stays for be neficiaries undergoing many of the procedures and that some of the procedures directly involve major blood vessels and/or may result in extensive blood loss. However, we do agree with commenters that the procedures described by CPT codes 37201, 37202, 37207, 37208, 59074, and HCPCS code G0365 meet the criter ia under § 416.166 and would be safely performed in the ASC setting and would not require overnight stays. We are adding these CPT/HCPCS codes to the ASC list of covered surgical procedures for CY 2012. After consideration of the public comments we received, we are adding six of the procedures requested by the commenters to the CY 2012 ASC list of covered surgical procedures. The procedures, their descriptor s, and payment indicators are displayed in Table 52 below.
TABLE 52.—NEW ASC COVERED SURGICAL PROCEDURES FOR CY 2012

CY 2012 CPT/HCPCS Code CY 2012 Long Descriptor CY 2012 ASC Payment Indicator 37201 Transcatheter therapy, infusion for thrombolysis other than coronary G2

37202 Transcatheter therapy, infusion other than for thrombolysis, any type (eg, spasmolytic, vasoconstrictive) G2

37207 Transcatheter placement of an intravascular stent(s) (non-coronary vessel other than iliac and lower extremity arteries), open; initial vessel G2CMS-1525-FC 921
CY 2012 CPT/HCPCS Code CY 2012 Long Descriptor CY 2012 ASC Payment Indicator

37208 Transcatheter placement of an intravascular stent(s) (non-coronary vessel other than iliac and lower extremity arteries), open; each additional vessel (List separately in addition to code for primary procedure) G2

59074 Fetal fluid drainage (eg, vesicocentesis, thoracocentesis, paracentesis), including ultrasound guidance G2

G0365 Vessel mapping of vessels for hemodialysis access (services for preoperative vessel mapping prior to creation of hemodialysis access using an autogenous hemodialysis conduit, incl uding arterial inflow and venous outflow) 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 policy to 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 byCMS-1525-FC 922 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 payment 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 it would be paid according to the standard ASC payment methodology based on its OPPS relati ve payment weight or at the MPFS nonfacility PE RVU-based amount. Consistent with our final policy to annually review and update the list of surgical procedures eligible for payment in ASCs, each year we identify surgical procedures as either temporarily office-based, permanently office-based, or non-office-based, after taking into account updated volume and utilization data. (2) Changes for CY 2012 to Covered Surgic al Procedures Designa ted as Office-Based In developing the CY 2012 OPPS/ASC proposed rule (76 FR 42293 through 42296), we followed our policy to annually review and update th e surgical procedures for which ASC payment is made and to identify new procedures that may be appropriate for ASC payment, including their potential desi gnation as office-based. We reviewed CY 2010 volume and utilization data and the cl inical characteristics for all surgical procedures that are assigned payment indicat or “G2” in CY 2011, as well as for those procedures assigned one of the temporary o ffice-based payment indi cators, specificallyCMS-1525-FC 923 “P2*,” “P3*,” or “R2*” in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72033 through 72038). In the CY 2012 OPPS/ASC proposed rule (76 FR 42294), we stated that our review of the CY 2010 volume and utilization data resulted in our identif ication of 10 surgical procedures that we believe meet the criteria for de signation as office-based. We stated that the data indicated that the pro cedures are performed more than 50 percent of the time in physicians’ offices, and that our me dical advisors believed the services are of a level of complexity consiste nt with other procedures perf ormed routinely in physicians’ offices. The 10 CPT codes we proposed to pe rmanently designate as office-based are listed in Table 45 of the CY 2012 OPPS/ASC pr oposed rule (76 FR 42294), and are listed in Table 53 below.
Comment : Some commenters expr essed their continued disagreement with the policy to make payment at the lower of the ASC rate or the MPFS nonfacility PE RVU payment amount for procedures we identify as office-based and requested that these services be subject to the same payment methodology as all other Medicare covered ASC procedures. Commenters also recomme nded that CMS establish a minimum volume threshold before designating a procedure office-based and use multiple years of data in the calculation in order to en sure that the data used to apply this policy are reliable. Response : We have responded to this commen t in the past and we continue to believe that our policy of identifying low comp lexity procedures that are usually provided in physicians’ offices and limiting their payment in ASCs to the physician’s office payment amount is necessary and valid. We belie ve this is the most appropriate approachCMS-1525-FC 924 to preventing the creat ion of payment incentiv es for services to move from physicians’ offices to ASCs for the many newly covered lo w complexity procedures on the ASC list. We refer readers to our response to this comment in final rules with comment period from prior years: 74 FR 60605 th rough 60606 and 75 FR 72034 through 72035. After consideration of th e public comments we receive d, we are finalizing our CY 2012 proposal to designate the proce dures displayed in Table 53 below as permanently office-based for CY 2012.
TABLE 53.—ASC COVERED SURGICAL PROCEDURES NEWLY DESIGNATED AS PERMANENTLY OFFICE-BASED FOR CY 2012

CY 2012 CPT Code CY 2012 Long Descriptor CY 2011 ASC Payment Indicator Proposed CY 2012

ASC Payment Indicator Final CY 2012

ASC Payment Indicator*

0213T Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, cervical or thoracic; single level G2 R2 R2

0214T Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, cervical or thoracic; second level (list separately in addition to code for primary procedure) G2 R2 R2CMS-1525-FC 925

CY 2012 CPT Code CY 2012 Long Descriptor CY 2011 ASC Payment Indicator Proposed CY 2012

ASC Payment Indicator Final CY 2012

ASC Payment Indicator*

0215T Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, cervical or thoracic; third and any additional level(s) (list separately in addition to code for primary procedure) G2 R2 R2

0216T Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, lumbar or sacral; single level G2 R2 R2

0217T Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, lumbar or sacral; second level (list separately in addition to code for primary procedure) G2 R2 R2CMS-1525-FC 926

CY 2012 CPT Code CY 2012 Long Descriptor CY 2011 ASC Payment Indicator Proposed CY 2012

ASC Payment Indicator Final CY 2012

ASC Payment Indicator*

0218T Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, lumbar or sacral; third and any additional level(s) (list separately in addition to code for primary procedure) G2 R2 R2

35475 Transluminal balloon angioplasty, percutaneous; brachiocephalic trunk or branches, each vessel G2 P3 P3

35476 Transluminal balloon angioplasty, percutaneous; venous G2 P3 P3

41530 Submucosal ablation of the tongue base, radiofrequency, one or more sites, per session G2 P2 P2

69801 Labyrinthotomy, with or without cryosurgery including other nonexcisional destructive procedures or perfusion of vestibuloactive drugs (single or multiple perfusions); transcanal G2 P3 P3

*Payment indicators are based on a comparison of the final rates according to the ASC standard ratesetting methodology and the MPFS final rates. At th e time this final rule with comment period is being finalized for publication, current law authorizes a negative update to the MPFS payment rates forCMS-1525-FC 927 CY 2012. Therefore, this final ru le with comment period reflects a negative update to the MPFS payment rates for CY 2012. If Congress revises the MPFS up date for CY 2012, we will recalculate the ASC payment rates using the revised update factor in the Ja nuary 2012 payment rate files issued to contractors.
We also reviewed CY 2010 volume and util ization data and other information for the 23 procedures finalized for temporary o ffice-based status in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72036 through 72038). Among these 23 procedures, there were very few claims data for eight procedures: CPT code 0099T (Implantation of intrastromal corneal ring segments); CPT code 0124T (Conjunctival incision with posterior extrascleral placemen t of pharmacological agent (does not include supply of medication)); CPT code 0226T (Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancemen t); diagnostic, incl uding collection of specimen(s) by brushing or washing when performed); CPT code 0227T (Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); with biopsy(ies)); CPT code 0232T (Injection(s), pl atelet rich plasma, any tissue, including image guidance, harvesting and preparation when performed); 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 37761 (Ligation of perforator vein(s), subfas cial, open, including ultrasound guidance, when performed, 1 leg); and CPT code 67229 (Tre atment of extensive or progressive retinopathy, one or more sessions; preterm infant (less than 37 weeks gestation at birth), performed from birth up to 1 year of age (eg, retinopathy of prematurity), photocoagulation or cryotherapy). Cons equently, we proposed in the CY 2012CMS-1525-FC 928 OPPS/ASC proposed rule (76 FR 42294) to maintain their temporary office-based designations for CY 2012. As a result of our review of the rema ining 15 procedures that have temporary office-based designations for CY 2011 for wh ich we do have claims data, we proposed that none of the procedures be designated as office-based in CY 2012. The 15 surgical procedure codes are:

● CPT code 21015 (Radical resection of tumor (eg, malignant neoplasm), soft tissue of face or scalp; less than 2 cm);

● CPT code 21555 (Excision, tumor, soft tissue of neck or anterior thorax, subcutaneous; less than 3 cm);

● CPT code 21930 (Excision, tumor, soft tissue of back or flank, subcutaneous; less than 3 cm);

● CPT code 23075 (Excision, tumor, soft tissue of shoulder area, subcutaneous; less than 3 cm);

● CPT code 24075 (Excision, tumor, soft tissue of upper arm or elbow area, subcutaneous; less than 3 cm);

● CPT code 25075 (Excision, tumor, soft tissue of forearm and/or wrist area, subcutaneous; less than 3 cm);

● CPT code 26115 (Excision, tumor or vasc ular malformation, soft tissue of hand or finger, subcutaneous ; less than 1.5 cm);

● CPT code 27047 (Excision, tumor, soft tissue of pelvis and hip area, subcutaneous; less than 3 cm);CMS-1525-FC 929

● CPT code 27327 (Excision, tumor, soft tissue of thigh or knee area, subcutaneous; less than 3 cm);

● CPT code 27618 (Excision, tumor, soft tissue of leg or ankle area, subcutaneous; less than 3 cm);

● CPT code 28039 (Excision, tumor, soft tissue of foot or toe, subcutaneous; 1.5 cm or greater);

● CPT code 28041 (Excision, tumor, soft ti ssue of foot or toe, subfascial (eg, intramuscular); 1.5 cm or greater);

● CPT code 28043 (Excision, tumor, soft tissue of foot or toe, subcutaneous; less than 1.5 cm);

● CPT code 28045 (Excision, tumor, soft ti ssue of foot or toe, subfascial (eg, intramuscular); less than 1.5 cm); and

● CPT code 28046 (Radical resection of tumor (eg, malignant neoplasm), soft tissue of foot or toe; less than 3 cm). The volume and utilization data for these CP T codes are sufficient to indicate that these procedures are not perf ormed predominantly in physicia ns’ offices and, therefore, should not be assigned an office-ba sed payment indicator in CY 2012. The CY 2012 payment indicator desi gnations that we proposed for the 23 procedures that were temporarily desi gnated as office-based in CY 2011 were displayed in Table 46 of the CY 2012 O PPS/ASC proposed rule (76 FR 42295). The procedures for which the proposed office-ba sed designations for CY 2012 are temporaryCMS-1525-FC 930 also were indicated by asterisks in Addendum AA to the proposed rule (which was available via the Internet on the CMS Web site). We did not receive any public comments th at addressed our proposal to continue to designate the eigh t procedures listed in Table 46 of the CY 2012 OPPS/ASC proposed rule (76 FR 42294) as temporarily office- based for CY 2012. Therefore, we are finalizing our proposal to desi gnate the eight procedures listed in Table 46 of the CY 2012 OPPS/ASC proposed rule and restat ed in Table 54 below, which were designated as temporarily office-based for CY 2011, as temporarily office-based for CY 2012. In addition, we did not receive any public comments that addressed our proposal to not designate a ny of the remaining 15 procedures as office-based for CY 2012 that were listed in Table 46 of the CY 2012 OPPS/ASC proposed rule (76 FR 42295) and designated as temporaril y office-based in CY 2011. Therefore, we are finalizing our proposal to not prov ide an office-based designation to the 15 procedures listed in Table 46 of the CY 2012 OPPS/ASC proposed rule, and restated below in Table 54, which were designated as temporarily office-based for CY 2011.
TABLE 54.—CY 2012 PAYMENT INDI CATORS FOR ASC COVEREDSURGICAL PROCEDURES DESIGNATED AS TEMPORARILY OFFICEBASED IN THE CY 2011 OPPS/ASC FI NAL RULE WITH COMMENT PERIOD

CY 2012 CPT Code CY 2012 Long Descriptor CY 2011 ASC Payment Indicator CY 2012 ASC Payment Indicator**

21015 Radical resection of tumor (eg, malignant neoplasm), soft tissue of face or scalp; less than 2 cm) R2* G2 21555 Excision, tumor, soft tissue of neck or P3* G2CMS-1525-FC 931
CY 2012 CPT Code CY 2012 Long Descriptor CY 2011 ASC Payment Indicator CY 2012 ASC Payment Indicator** anterior thorax, subcutaneous; less than 3 cm 21930 Excision, tumor, soft tissue of back or flank, subcutaneous; less than 3 cm P3* G2

23075 Excision, tumor, soft tis sue of shoulder area, subcutaneous; less than 3 cm P3* G2

24075 Excision, tumor, soft tissue of upper arm or elbow area, subcutaneous; less than 3 cm P3* G2

25075 Excision, tumor, soft tissue of forearm and/or wrist area, subcutaneous; less than 3 cm P3* G2

26115 Excision, tumor or vascular malformation, soft tissue of hand or finger, subcutaneous; less than 1.5 cm P3* G2

27047 Excision, tumor, soft tis sue of pelvis and hip area, subcutaneous; less than 3 cm P3* G2

27327 Excision, tumor, soft tis sue of thigh or knee area, subcutaneous; less than 3 cm P3* G2

27618 Excision, tumor, soft tis sue of leg or ankle area, subcutaneous; less than 3 cm P3* G2

28039 Excision, tumor, soft tis sue of foot or toe, subcutaneous; 1.5 cm or greater P3* G2

28041 Excision, tumor, soft tis sue of foot or toe, subfascial (eg, intram uscular); 1.5 cm or greater R2* G2

28043 Excision, tumor, soft tis sue of foot or toe, subcutaneous; less than 1.5 cm P3* G2

28045 Excision, tumor, soft tis sue of foot or toe, subfascial (eg, intram uscular); less than 1.5 cm P3* G2

28046 Radical resection of tumor (eg, malignant neoplasm), soft tissue of foot or toe; less than 3 cm R2* G2 37761 Ligation of perforator ve in(s), subfascial, R2* R2*CMS-1525-FC 932
CY 2012 CPT Code CY 2012 Long Descriptor CY 2011 ASC Payment Indicator CY 2012 ASC Payment Indicator** open, including ultrasound guidance, when performed, 1 leg

67229 Treatment of extensive or progressive retinopathy, one or more sessions; preterm infant (less than 37 weeks gestation at birth), performed from birth up to 1 year of age (eg, retinopathy of prematurity), photocoagulation or cryotherapy R2* R2*

0099T Implantation of intrastromal corneal ring segments R2* R2*

0124T Conjunctival incision with posterior extrascleral placement of pharmacological agent (does not include supply of medication) R2* R2*

0226T Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); diagnostic, including collection of specimen(s) by brushing or washing when performed R2* R2*

0227T Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); with biopsy(ies) R2* R2*

0232T Injection(s), platelet ri ch plasma, any tissue, including image guidance, harvesting and preparation when performed R2* R2*

C9800 Dermal injection procedure(s) for facial lipodystrophy syndrome (LDS) and provision of Radiesse or Sculptra dermal filler, including al l items and supplies R2* R2*

* If designation is temporary. **Payment indicators are based on a comparison of the final rates according to the ASC standard ratesetting methodology and the MPFS final rates. At the time this final rule with comment period is being finalized for publication, current law author izes a negative update to the MPFS payment rates for CY 2012. Therefore, this final rule with comment period reflects a negative update to the MPFSCMS-1525-FC 933 payment rates for CY 2012. If Congress revises the MPFS update for CY 2012, we will recalculate the ASC payment rates using the revised update factor in the January 2012 payment rate files issued to contractors. c. ASC Covered Surgical Procedur es Designated as Device-Intensive (1) Background As discussed in the August 2, 2007 fi nal 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 impl antable devices used in thos e procedures. We assigned payment indicators “H8” (Device-intensive procedure on ASC list in CY 2007; paid at adjusted rate) and “J8” (Dev ice-intensive procedure adde d to ASC list in CY 2008 or later; paid at adjusted rate) to identify the procedures that were el igible for ASC payment calculated according to the modified me thodology, depending on whether the procedure was included on the ASC list of covered su rgical procedures prior to CY 2008 and, therefore, subject to transitional payment as discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68739 through 68742). As discussed in section XIII.F.2. of the CY 2012 OPPS/ASC proposed rule (76 FR 42309 and 42310), because the 4-year tr ansition to the ASC payment rates under the standard methodology is complete and, ther efore, identification of device-intensive procedures that are subject to transiti onal payment methodology is no longer necessary, we proposed to delete payment indicator “H 8” (Device-intensive procedure on ASC listCMS-1525-FC 934 in CY 2007; paid at adjusted ra te). We proposed that the de vice-intensive procedures for which the device-intensive payment methodology would apply in CY 2012 or later would be assigned payment indicator “J8” (Device-inte nsive procedure; paid at adjusted rate). (2) Changes to List of Covered Surgical Procedures Designated as Device-Intensive for
CY 2012 In the CY 2012 OPPS/ASC proposed rule (76 FR 42296), we proposed to update the ASC list of covered surgical procedures th at are eligible for payment according to the device-intensive procedure payment met hodology for CY 2012, consistent with the proposed OPPS device-dependent APC update, reflecting the proposed APC assignments of procedures, designation of APCs as device-dependent, and APC device offset percentages based on the CY 2010 OPPS claims and cost report data available for the proposed rule. The OPPS device-dependent APCs were discussed further in section II.A.2.d.(1) of the proposed rule (76 FR 42190 through 42191). The ASC covered surgical procedures thatwe proposed to designate as deviceintensive and that would be subject to the device-intensive procedure payment methodology for CY 2012 were listed in Tabl e 47 of the CY 2012 OPPS/ASC proposed rule (76 FR 42296 through 42297). The CPT c ode, the CPT code short descriptor, the proposed CY 2012 ASC payment indicator, the proposed CY 2012 OPPS APC assignment and title, and the proposed CY 2012 OPPS APC device offset percentage were also listed in Table 47 of the proposed ru le. All of these procedures were included in Addendum AA to the proposed rule (which was available via the Internet on the CMS Web site).CMS-1525-FC 935 We invited public comments on these proposals.
Comment : Some commenters expre ssed the same general concerns made in prior rulemakings – that is concerns regarding the sufficiency of ASC payment for devicerelated services and recomme nded modifications to the AS C device-intensive payment methodology. The commenters argued that CMS should not apply the ASC conversion factor to the device-related portion of the payment for all procedures for which CMS can establish a median device cost, regardless ofwhether they are designated as deviceintensive under the established methodology. In a re lated suggestion, the commenters urged CMS to lower the threshold used to de termine device-intensive procedures stating that the designation of a devi ce-intensive procedure based on whether the device portion of the cost is greater th an 50 percent of the APC me dian cost excludes too many procedures from a reasonable modification to the standard ASC payment methodology. Commenters suggested that APCs with a devi ce offset percentage greater than 23 percent of the APC median cost under the OPPS ma y be a more appropriate threshold to determine device-intensive procedures in ASCs. The commenters also made the same argument as made in prior rulemakings -- that CMS should not adjust the device portion of the ASC payment for device -intensive procedures by the wage index. According to the commenters, the acquisition of devices occu rs on a national market, and the price is the same regardless of the location of the ASC. Commenters also suggested that application of device-intens ive status should supersede the office-based designation. Commenters believed that CMS has misapplied its policy in a limited number of cases byCMS-1525-FC 936 designating a device-intensive procedure as office-based a nd setting the payment for the procedure at the physicia n fee schedule rate. Response : In the August 2, 2007 final rule (72 FR 42504), we established that the modified payment methodology for calculating ASC payment rates for device-intensive procedures shall apply to ASC covered surgical procedures that are assigned to devicedependent APCs under the OPPS for the same calendar year, where those APCs have a device cost of greater than 50 percent of the APC cost (that is, the device offset percentage is greater than 50). We continue to believe these criteria ensure that ASC payment rates are adequate to provide p ackaged payment for high cost implantable devices and ensure Medicare beneficiaries have access to these procedures in all appropriate settings of care. As we have stated in the past, we do not agree that we should change our criteria and treat device-intensive services that are as signed to APCs for which the device offset percentage is less than 50 percent or ASC services that are not assigned to devicedependent APCs and we continue to believe that when device costs comprise less than 50 percent of total procedure costs, those cost s are less likely to be as predictable across sites-of-service. Accordingly, we believe that it is possible for ASCs to achieve efficiencies relative to HOPDs when providing those procedures, and that the application of the ASC conversion factor to the entire AS C payment weight is appropriate. We refer readers to our response to this comment in final rules with comment period from prior years: 74 FR 60608 and 60609; 75 FR 72039.CMS-1525-FC 937 We also continue to believe it would not be appropriate to vary the portion of the national payment that is wage adjusted for di fferent services, such as applying the wage index only to the service portion of the ASC payment for device-intensive procedures, as the commenters requested. Consistent w ith the OPPS, we apply the ASC geographic wage adjustment to the entire ASC payment rate for device-intensi ve procedures. We refer readers to our response to this comment in final rules with comment period from prior years: 73 FR 68735; 74 FR 60608 and 60609; 75 FR 72039. As we have noted in the past (73 FR 68735; 74 FR 60609; 75 FR 72039), MedPAC has indicated its intent to evalua te CMS’ method for adjusting payments for variations in labor costs in light of differences in labor-related costs for deviceimplantation services. We look forward to re viewing the results of its evaluation, as well as any recommendations it may provide, rega rding the OPPS or ASC wage adjustment policy. Although the commenter suggested that CMS has applied the office-based payment methodology to procedures that have been designated as device-intensive, the commenter did not provide examples where th is situation has occurred. If a deviceintensive procedure were to meet the criteria for the office-based payment methodology, we note that the designation of a procedure as device-intensive does supersede the officebased designation when setting the ASC pa yment rates. We have reviewed all procedures that are on the ASC list of covere d services, are in device-dependent APCs, and have device offset percentages greater than 50 percent and have ensured that all of these device-intensive procedures have a payment indicator of “J8.”CMS-1525-FC 938
Comment : One commenter expressed appreciation for the proposed increase in payment rates calculated according to the ASC device-intensive payment methodology for procedures involving auditory osseoint egrated devices. However, the commenter indicated that the proposed pa yment rates remain insufficient for covering ASCs’ costs for providing the procedures and requested that CMS further increase these rates for CY 2012. The commenter believed that the rates might have a negative impact on the availability of these services in an ASC setting and therefore might limit patient access. Response : We appreciate the commenter’s support of the proposed payment rates for procedures involving auditory osseoint egrated devices, but we disagree with the commenters’ assertion that we should increase payment rates for these procedures further in order to maintain beneficiary access. We believe that the final CY 2012 ASC payment rates for these procedures, calculated accordi ng to the ASC device-intensive ratesetting methodology, are appropriate and adequate to cover costs for providing the procedures and to ensure beneficiaries have access to these procedures in the ASC setting. After consideration of th e public comments we receiv ed, we are designating the ASC covered surgical procedures displayed in Table 55 below as device-intensive for CY 2012. The CPT code, the CPT code s hort descriptor, the final CY 2012 ASC payment indicator, the final CY 2012 O PPS APC assignment, the CY 2012 OPPS APC Title, and the final CY 2012 device-dependent APC offset percentage are listed in Table 55. As we discuss in section XIII.B.3. of the CY 2012 OPPS/ASC proposed rule (76 FR 42293) and this final rule with comment period, we incorporate new Category I and Category III CPT codes and new Level II HCPCS codes that are effectiveCMS-1525-FC 939 October 1, 2011 and January 1, 2012 in this final rule with comment period. Because these codes were not available to us un til after the CY 2012 OPPS/ASC proposed rule was published, these codes were not included in that rule. We have reviewed these new codes and have added twelve of these CPT codes to Table 55 because they are ASC covered surgical procedures and are assigned to device-dep endent APCs that meet the ASC device-intensive criteria. It is also our standard methodology to review deleted CPT codes annually and remove them from all releva nt tables in the OPPS/ASC final rule with comment period. Therefore, we have also removed CPT codes 64560 (percutaneous implantation of neurostimulator electrode s; autonomic nerve) and 64577 (Incision for implantation of neurostimulator electrodes; autonomic nerve) because these CPT codes have been deleted for CY 2012. Each device -intensive procedure is assigned payment indicator “J8.” All of these procedures are included in A ddendum AA to this final rule with comment period (which is available vi a the Internet on the CMS Web site). The OPPS device-dependent APCs are discussed furt her in section II.A.2.d.( 1) of this final rule with comment period.
TABLE 55.—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE-INTENSIVE FOR CY 2012

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage 0282T Periph field stimul trial J8 0040 Level I Implantation/Revision/Re 55%CMS-1525-FC 940

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage placement of Neurostimulator Electrodes

0283T Periph field stimul perm J8 0318 Implantation of Cranial Neurostimulator Pulse Generator and Electrode 86%

24361 Reconstruct elbow joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

24363 Replace elbow joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

24366 Reconstruct head of radius J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

25441 Reconstruct wrist joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

25442 Reconstruct wrist joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

25446 Wrist replacement J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

27446 Revision of knee joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

33206 Insertion of heart pacemaker J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 71%CMS-1525-FC 941

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage

33207 Insertion of heart pacemaker J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 71%

33208 Insertion of heart pacemaker J8 0655 Insertion/Replacement/Co nversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 74%

33212 Insertion of pulse generator J8 0090 Insertion/Replacement of Pacemaker Pulse Generator 73%

33213 Insertion of pulse generator J8 0654 Insertion/Replacement of a Permanent Dual Chamber Pacemaker 75%

33214 Upgrade of pacemaker system J8 0655 Insertion/Replacement/Co nversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 74%

33221 Insert pulse gen mult leads J8 0654 Level II Insertion/Replacement of Permanent Pacemaker 75%

33224 Insert pacing lead & connect J8 0655 Insertion/Replacement/Co nversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 74%

33225 Lventric pacing lead add-on J8 0655 Insertion/Replacement/Co nversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 74%

33227 Remove&re place pm gen singl J8 0090 Insertion/Replacement of Pacemaker Pulse Generator 73%CMS-1525-FC 942

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage

33228 Remv&repl c pm gen dual lead J8 0654 Level II Insertion/Replacement of Permanent Pacemaker 75%

33229 Remv&repl c pm gen mult leads J8 0654 Level II Insertion/Replacement of Permanent Pacemaker 75%

33230 Insrt pulse gen w/dual leads J8 0107 Insertion of CardioverterDefibrillator Pulse Generator 89%

33231 Insrt pulse gen w/dual leads J8 0107 Insertion of CardioverterDefibrillator Pulse Generator 89%

33240 Insert pulse generator J8 0107 Insertion of CardioverterDefibrillator 89%

33249 Eltrd/insert pace-defib J8 0108 Insertion/Replacement/Re pair of AICD Leads, Generator, and Pacing Electrodes 87%

33262 Remv&repl c cvd gen sing lead J8 0107 Insertion of CardioverterDefibrillator Pulse Generator 89%

33263 Remv&repl c cvd gen dual lead J8 0107 Insertion of CardioverterDefibrillator Pulse Generator 89%

33264 Remv&repl c cvd gen mult lead J8 0107 Insertion of CardioverterDefibrillator Pulse Generator 89%

33282 Implant patactive ht record J8 0680 Insertion of Patient Activated Event Recorders 73%
53440 Male sling J8 0385 Level I Prosthetic 61%CMS-1525-FC 943

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage procedure Urological Procedures

53444 Insert tandem cuff J8 0385 Level I Prosthetic Urological Procedures 61%

53445 Insert uro/ves nck sphincter J8 0386 Level II Prosthetic Urological Procedures 71%

53447 Remove/rep lace ur sphincter J8 0386 Level II Prosthetic Urological Procedures 71%

54400 Insert semirigid prosthesis J8 0385 Level I Prosthetic Urological Procedures 61%

54401 Insert selfcontd prosthesis J8 0386 Level II Prosthetic Urological Procedures 71%

54405 Insert multi-comp penis pros J8 0386 Level II Prosthetic Urological Procedures 71%

54410 Remove/rep lace penis prosth J8 0386 Level II Prosthetic Urological Procedures 71%

54416 Remv/repl penis contain pros J8 0386 Level II Prosthetic Urological Procedures 71%

55873 Cryoablate prostate J8 0674 Prostate Cryoablation 59%

61885 Insrt/redo neurostim 1 array J8 0039 Level I Implantation of Neurostimulator Generator 86%

61886 Implant neurostim J8 0315 Level II Implantation of Neurostimulator 88%CMS-1525-FC 944

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage arrays Generator

62361 Implant spine infusion pump J8 0227 Implantation of Drug Infusion Device 81%

62362 Implant spine infusion pump J8 0227 Implantation of Drug Infusion Device 81%

63650 Implant neuroelectr odes J8 0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes 55%

63655 Implantneuroelectrodes J8 0061 Level II Implantation/Revision/Re placement of Neurostimulator Electrodes 64%

63663 Revise spine eltrd perq aray J8 0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes 55%

63664 Revise spine eltrd plate J8 0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes 55%

63685 Insrt/redo spine n J8 0039 Level I Implantation of Neurostimulator 86%CMS-1525-FC 945

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage generator Generator

64553 Implantneuroelectrodes J8 0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes 55%

64555 Implantneuroelectrodes J8 0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes 55%

64561 Implantneuroelectrodes J8 0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes 55%

64565 Implantneuroelectrodes J8 0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes 55%

64568 Implantneuroelectrodes J8 0318 Implantation of Cranial Neurostimulator Pulse Generator and Electrode 86%

64575 Implantneuroelectrodes J8 0061 Level II Implantation/Revision/Re placement of Neurostimulator Electrodes 64%CMS-1525-FC 946

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage

64580 Implantneuroelectrodes J8 0061 Level II Implantation/Revision/Re placement of Neurostimulator Electrodes 64%

64581 Implantneuroelectrodes J8 0061 Level II Implantation/Revision/Re placement of Neurostimulator Electrodes 64%

64590 Insrt/redo pn/gastr stimul J8 0039 Level I Implantation of Neurostimulator Generator 85%

65770 Revise cornea with implant J8 0293 Level VI Anterior Segment Eye Procedures 66%

69714 Implant temple bone w/stimul J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

69715 Temple bne implnt w/stimulat J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

69717 Temple bone implant revision J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

69718 Revise temple bone implant J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61%

69930 Implant cochlear J8 0259 Level VII ENT Procedures 84%CMS-1525-FC 947

CPT Code Short Descriptor Final CY 2012

ASC Payment Indicator Final CY 2012

OPPS APC CY 2012 OPPS APC Title Final CY 2012DeviceDependent APC Offset Percentage device

G0448 Place perm pacing cardiovert J8 0108 Insertion/Replacement/Re pair of AICD Leads, Generator, and Pacing Electrodes 87%

d. ASC Treatment of Surgical Procedures Removed from the OPPS Inpatient List for
CY 2012 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. For the CY 2012 OPPS/ ASC proposed rule, we evaluated each of the three procedures we proposed to remove from the OPPS inpatient list for CY 2012 according to the criteria for exclusion from th e list of covered ASC surgical procedures (76 FR 42298). We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42298) that we believe that these three procedures shoul d continue to be excluded from the ASC list of covered surgical procedures for CY 2012 because they would be expected to pose a significant risk to beneficiary safety or to require an overnight stay in ASCs. A full discussion about the APC Panel’s recomme ndations regarding the procedures we proposed to remove from the OPPS inpatien t list for CY 2012 may be found in sectionCMS-1525-FC 948 IX.B. of the CY 2012 OPPS/ASC proposed rule (76 FR 42276 and 42277). The CPT codes for these three procedures and their long descriptors were listed in Table 48 of the CY 2012 OPPS/ASC proposed rule (76 FR 42298). We did not receive any public comments regarding the procedures proposed for exclusion from the ASC list of covered pro cedures for CY 2012, that were proposed for removal from the CY 2012 OPPS inpatient li st. Therefore, we are finalizing our proposal, without modification, to continue to exclude the procedures described by the CPT codes listed in Table 48 of the CY 2012 OPPS/ASC proposed rule, and restated in Table 56 below, from the ASC list of covered surgical procedures.
TABLE 56.—PROCEDURES EXCLUDED FROM THE ASC LIST OF COVERED PROCEDURES FOR CY 2012 TH AT WERE REMOVED FROM THE CY 2012 OPPS INPATIENT LIST
CPT Code Long Descriptor 21346 Open treatment of nasomaxillary complex fracture (Lefort II type); with wiring an d/or local fixation

35045 Direct repair of aneurysm, pseudoaneurysm, or excision (partial or total) and graft in sertion, with or without patch graft; for aneurysm, pseudoaneurysm, and associated occlusive disease, radial or ulnar artery 54650 Orchiopexy, abdominal approac h, for intra-abdominal testis (eg, Fowler-Stephens)

2. Covered Ancillary Services Consistent with the established ASC payment system policy, in the CY 2012 OPPS/ASC proposed rule (76 FR 42298), we proposed to updat e the ASC list of covered ancillary services to reflect the proposed payment status for the services under the CY 2012 OPPS. Maintaining consistency with the OPPS may result in proposed changesCMS-1525-FC 949 to ASC payment indicators for some covered ancillary items and se rvices because of changes that are being proposed under the OPPS for CY 2012. For example, a covered ancillary service that was se parately paid under the revised ASC payment system in CY 2011 may be proposed for packaged status under the CY 2012 O PPS and, therefore, also under the ASC payment system for CY 2012. Comment indicat or “CH,” discussed in section XIII.F. of the CY 2012 OPPS/ASC proposed rule (76 FR 42309), was used in Addendum BB to that proposed rule (which is available via the Internet on the CMS Web site) to indicate covered anci llary services for which we proposed a change in the ASC payment indicator to reflect a proposed change in the OPPS treatment of the service for
CY 2012. Except for the Level II HCPCS code s listed in Table 43 of the CY 2012 OPPS/ASC proposed rule (76 FR 42292), all AS C covered ancillary services and their proposed payment indicators for CY 2012 were included in Addendum BB to that proposed rule. We did not receive any public comment s on our proposal. Therefore, we are finalizing, without modification, our proposal to update the AS C list of covered ancillary services to reflect the paym ent status for the services under the OPPS. All CY 2012 ASC covered ancillary services a nd their final payment indicators are included in Addendum BB to this final rule with comment period (whi ch is available via the Internet on the CMS Web site).CMS-1525-FC 950 D. ASC Payment for Covered Surgical Pr ocedures and Covered Ancillary Services 1. 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 indicator “G2.” For procedures assigned payment indicator “A2,” our final policy established blended rates to be used during the transitional period and, beginning in CY 2011, ASC rates calculated accordi ng to the ASC sta ndard ratesetting methodology. The rate calculation established fo r device-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 2011 OPPS /ASC final rule with comment period (75 FR 72024 through 72064), we updated the CY 2010 ASC payment rates for ASC covered surgical procedures with payment indicators of “A2,” “G2,” “H8,” and “J8” using CY 2009 data, consistent with th e CY 2011 OPPS update. Payment rates for device-intensive procedures also were updated to incorporate the CY 2011 OPPS device offset percentages. Because transitional payments were no longer required in CY 2011, we calculated CY 2011 payments for procedur es formerly subject to the transitionalCMS-1525-FC 951 payment methodology (payment indicators “A2” and “H8”) using the standard rate setting methodology, incorporating the devi ce-intensive methodol ogy, as appropriate. 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 2012 MPFS final rule with comment pe riod) or the amount calculated using the ASC standard ratesetting methodology for the procedure. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72024 through 72064), we updated the payment amounts for office-based procedures (payment indicators “P2,” “P3,” and “R2”) using the most recent available MPFS and OPPS data. We compared the estimated CY 2011 rate for each of the office-based procedures, ca lculated according to the ASC standard ratesetting methodology, to the MPFS nonfacility PE RVU-based amount to determine which was lower and, therefore, would be the CY 2011 payment rate for the procedure according to the final policy of the revised ASC payment system (§ 416.171(d)). b. Update to ASC-Covered Surgical Procedure Payment Rates for CY 2012 In the CY 2012 OPPS/ASC proposed ru le (76 FR 42298 and 42299), we proposed to update ASC payment rates for CY 2012 using the established rate calculation methodologies under § 416.171. Under § 416.171(c )(4), the transitional payment rates are no longer used for CY 2011 and subseque nt calendar years for a covered surgical procedure designated in accordance with § 416.166. Thus, we proposed to calculate CY 2012 payments for procedures formerly subject to the transitional payment methodology (payment indicators “A2” and “H 8”) using the proposed CY 2012 ASC rate calculated according to the ASC standard ratesetting methodol ogy, incorporating theCMS-1525-FC 952 device-intensive procedure methodology, as appr opriate. We proposed to continue to use the amount calculated under the ASC standa rd ratesetting methodology for procedures assigned payment indicator “G2.” We propos ed to modify or delete the payment indicators for procedures that were subject to transitional payment prior to CY 2011 (we refer readers to our discussion in section XIII.F.2. of the proposed rule (76 FR 42309 through 42310). We proposed that payment rates for offi ce-based procedures (payment indicators “P2,” “P3,” and “R2”) and device-intensive procedures that we re not subject to transitional payment (payment indicator “J8”) be calculated according to our established policies, incorporating the device-intensive procedure methodology as appropriate. Thus, we proposed to update the payment amounts for device-intensive procedures based on the CY 2012 OPPS proposal that reflects updated OPPS device offset percentages, and to make payment for office-based procedures at the lesser of the proposed CY 2012 MPFS nonfacility PE RVU-based amount or th e proposed CY 2012 ASC payment amount calculated according to the st andard ratesetting methodology. We did not receive any comments on our proposal to calculate CY 2012 payment rates for ASC-covered surgical procedures a ccording to our established methodologies. Therefore, we are finalizing our CY 2012 proposal, without modi fication, to calculate the CY 2012 final ASC payment rates for ASC-covered surgical procedures according to our established methodologies.CMS-1525-FC 953 c. Adjustment to ASC Payments for No Co st/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 partial credit as set forth in § 416.179 is c onsistent with the OPPS policy. The proposed CY 2012 OPPS APCs and devices subject to the adjustment policy are discussed in section IV.B .2. of the proposed rule and this final rule with comment period. The established ASC policy include s adoption of the OPPS policy for reduced payment to providers when a specified device is furnished without cost/full credit or partial credit for the cost of the device for t hose ASC covered surgical procedures that are assigned to APCs under the OPPS to which this policy applies. We refer readers to the CY 2009 OPPS/ASC final rule with comment period for a full discussion of the ASC payment adjustment policy for no cost/full cr edit and partial credit devices (73 FR 68742 through 68745). In the CY 2012 OPPS/ASC proposed rule (76 FR 42299 through 42301), consistent with the OPPS, we proposed to update the list of ASC covered deviceintensive procedures and devi ces that would be subject to the no cost/full credit and partial credit device adjustment policy for CY 2012. Table 49 of the CY 2012 OPPS/ASC proposed rule (76 FR 42299 th rough 42301) displayed the ASC covered device-intensive procedures that we proposed would be subject to the no cost/full credit or partial credit device adjustment policy for CY 2012. Specifically, when a procedure that is listed in Table 49 is performed to implant a device that is listed in Table 50 of the CY 2012 OPPS/ASC proposed rule (76 FR 42301), where that device is furnished at no cost or with full credit from the manufact urer, the ASC would a ppend the HCPCS “FB”CMS-1525-FC 954 modifier on the line with the procedure to implant the device. The contractor would reduce payment to the ASC by the device offset amount that we estimate represents the cost of the device when the necessary device is furnished without cost to the ASC or with full credit. We would provide the same amount of payment reduction based on the device offset amount in ASCs that would apply under the OPPS under the same circumstances. We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42299) that we continue to believe that the reduction of ASC payment in these circumstances is necessary to pay appropriately for the covere d surgical procedure being furnished by the
ASC. We also proposed to reduce the paymen t for implantation procedures listed in Table 49 of the CY 2012 OPPS/ASC propos ed rule (76 FR 42299 through 42301) by one-half of the device offset amount that woul d be applied if a devi ce was provided at no cost or with full credit, if the credit to the ASC is 50 percent or more of the cost of the new device. The ASC would append the HCPC S “FC” modifier to the HCPCS code for a surgical procedure listed in Table 49 when the facility receives a partial credit of 50 percent or more of the cost of a device listed in Table 50 of the proposed rule (76 FR 42301). In order to report that they received a partial credit of 50 percent or more of the cost of a new device, ASCs would have the option of either: (1) submitting the claim for the device replacement procedure to their Medicare contractor after the procedure’s performance but prior to manu facturer acknowledgment of credit for the device, and subsequently contacting the contra ctor regarding a claim adjustment once the credit determination is made; or (2) hol ding the claim for the device implantationCMS-1525-FC 955 procedure until a determination is made by th e manufacturer on the partial credit and submitting the claim with the “FC” modifier appended to the implantation procedure HCPCS code if the partial credit is 50 per cent or more of the cost of the replacement device. Beneficiary coinsurance would cont inue to be based on the reduced payment

amount. We did not receive any comments on our CY 2012 proposal to continue the no cost/full credit and partial credit device adju stment policy for ASCs. For CY 2012, as we proposed, we will reduce the payment for the device implantation procedures listed in Table 57, below, by the full device offset am ount for no cost/full credit cases. ASCs must append the modifier “FB” to the HCPC S procedure code when the device furnished without cost or with full cr edit is listed in Table 58, below, and the associated implantation procedure code is listed in Table 57. In addition, for CY 2012, we will reduce the payment for implantation procedures listed in Table 57 by one half of the device offset amount if a device is provided with partial credit, if the credit to the ASC is 50 percent or more of the device cost. If th e ASC receives a partial credit of 50 percent or more of the cost of a device listed in Table 58, the ASC must append the modifier “FC” to the associated implantation procedure code if the procedure is listed in Table 57. As we discuss in section XIII.B.3. of the CY 2012 OPPS/ASC proposed rule (76 FR 42293) and this final rule with comment period, we incorporate new Category I and Category III CPT codes and new Level II HCPCS codes that are effective October 1, 2011 and January 1, 2012 in this final rule with comment period. Because these codes were not available to us un til after the CY 2012 OPPS/ASC proposed ruleCMS-1525-FC 956 was published, these codes were not included in that rule. We have reviewed these new codes and have added eleven of these CP T codes to Table 57 because they are ASC covered surgical procedures that are assigned to APCs unde r the OPPS to which the no cost/full credit and partial credit device adjustment policy applies. It is also our standard methodology to review deleted CPT codes annua lly and remove them from all relevant tables in the OPPS/ASC final rule with co mment period. Therefore, we have also removed CPT codes 64560 (Percutaneous implan tation of neurostimulator electrodes; autonomic nerve) and 64577 (Incision for im plantation of neurostimulator electrodes; autonomic nerve) because these CPT codes ha ve been deleted for CY 2012. We also have added two device HCPCS codes to Table 58, C1777 (Lead, cardioverterdefibrillator, endocardial single coil (implantable)) a nd C1895 (Lead, cardioverterdefibrillator, endocardial dual coil (imp lantable)) because these devices are now associated with CPT code 33249 (Insertion or replacement of permanent pacing cardioverter-defibrillator system with transve nous lead(s), single or dual chamber) due to a descriptor change effective January 1, 2012.

TABLE 57.—CY 2012 PROCEDURES TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVI CE ADJUSTMENT POLICY APPLIES

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage 0282T Periph field J8 0040 Level I 55% 28%CMS-1525-FC 957

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage stimul trial Implantation/Revision/ Replacement of Neurostimulator Electrodes

0283T Periph field stimul perm J8 0318 Implantation of Cranial Neurostimulator Pulse Generator and Electrode 86% 43%

24361 Reconstruct elbow joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

24363 Replace elbow joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

24366 Reconstruct head of radius J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

25441 Reconstruct wrist joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

25442 Reconstruct wrist joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

25446 Wrist replacement J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

27446 Revision of knee joint J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%
33206 Insertion of J8 0089 Insertion/Replacement 71% 36%CMS-1525-FC 958

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage heart pacemaker of Permanent Pacemaker and Electrodes

33207 Insertion of heart pacemaker J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 71% 36%

33208 Insertion of heart pacemaker J8 0655 Insertion/Replacement /Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 74% 37%

33212 Insertion of pulse generator J8 0090 Insertion/Replacement of Pacemaker Pulse Generator 73% 37%

33213 Insertion of pulse generator J8 0654 Level II Insertion/Replacement of Permanent Pacemaker 75% 37%

33214 Upgrade of pacemaker system J8 0655 Insertion/Replacement /Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 73% 37%

33221 Insert pulse gen mult leads J8 0654 Level II Insertion/Replacement of Permanent Pacemaker 75% 37%CMS-1525-FC 959

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage

33224 Insert pacing lead & connect J8 0655 Insertion/Replacement /Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 73% 37%

33225 Lventric pacing lead add-on J8 0655 Insertion/Replacement /Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode 73% 37%

33227 Remove&repla ce pm gen singl J8 0090 Insertion/Replacement of Pacemaker Pulse Generator 73% 37%

33228 Remv&replc pm gen dual lead J8 0654 Level II Insertion/Replacement of Permanent Pacemaker 75% 37%

33229 Remv&replc pm gen mult leads J8 0654 Level II Insertion/Replacement of Permanent Pacemaker 75% 37%

33230 Insrt pulse gen w/dual leads J8 0107 Insertion ofCardioverterDefibrillator Pulse Generator 89% 45%

33231 Insrt pulse gen w/mult leads J8 0107 Insertion ofCardioverterDefibrillator Pulse Generator 89% 45%

33240 Insert pulse generator J8 0107 Insertion of Cardioverter- 89% 45%CMS-1525-FC 960

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage Defibrillator Pulse Generator

33249 Eltrd/insert pace-defib J8 0108 Insertion/Replacement /Repair of AICD Leads, Generator, and Pacing Electrodes 87% 43%

33262 Remv&replc cvd gen sing lead J8 0107 Insertion ofCardioverterDefibrillator Pulse Generator 89% 45%

33263 Remv&replc cvd gen dual lead J8 0107 Insertion ofCardioverterDefibrillator Pulse Generator 89% 45%

33264 Remv&replc cvd gen mult lead J8 0107 Insertion ofCardioverterDefibrillator Pulse Generator 89% 45%

33282 Implant patactive ht record J8 0680 Insertion of Patient Activated Event Recorders 73% 36%

53440 Male sling procedure J8 0385 Level I Prosthetic Urological Procedures 61% 31%

53444 Insert tandem cuff J8 0385 Level I Prosthetic Urological Procedures 61% 31%

53445 Insert uro/ves nck sphincter J8 0386 Level II Prosthetic Urological Procedures 71% 35%

53447 Remove/replac e ur sphincter J8 0386 Level II Prosthetic Urological Procedures 71% 35%

54400 Insert semirigid prosthesis J8 0385 Level I Prosthetic Urological Procedures 61% 31%CMS-1525-FC 961

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage

54401 Insert selfcontd prosthesis J8 0386 Level II Prosthetic Urological Procedures 71% 35%

54405 Insert multicomp penis pros J8 0386 Level II Prosthetic Urological Procedures 71% 35%

54410 Remove/replac e penis prosth J8 0386 Level II Prosthetic Urological Procedures 71% 35%

54416 Remv/repl penis contain pros J8 0386 Level II Prosthetic Urological Procedures 71% 35%

61885 Insrt/redo neurostim 1 array J8 0039 Level I Implantation of Neurostimulator Generator 86% 43%

61886 Implant neurostim arrays J8 0315 Level II Implantation of Neurostimulator Generator 88% 44%

62361 Implant spine infusion pump J8 0227 Implantation of Drug Infusion Device 81% 41%

62362 Implant spine infusion pump J8 0227 Implantation of Drug Infusion Device 81% 41%

63650 Implant neuroelectrodes J8 0040 Level I Implantation/Revision/ Replacement of Neurostimulator Electrodes 55% 28%

63655 Implant neuroelectrodes J8 0061 Level II Implantation/Revision/ Replacement of Neurostimulator Electrodes 64% 32%CMS-1525-FC 962

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage

63663 Revise spine eltrd perq aray J8 0040 Level I Implantation/Revision/ Replacement of Neurostimulator Electrodes 55% 28%

63664 Revise spine eltrd plate J8 0040 Level I Implantation/Revision/ Replacement of Neurostimulator Electrodes 55% 28%

63685 Insrt/redo spine n generator J8 0039 Level I Implantation of Neurostimulator Generator 86% 43%

64553 Implant neuroelectrodes J8 0040 Level I Implantation/Revision/ Replacement of Neurostimulator Electrodes 55% 28%

64555 Implant neuroelectrodes J8 0040 Level I Implantation/Revision/ Replacement of Neurostimulator Electrodes 55% 28%

64561 Implant neuroelectrodes J8 0040 Level I Implantation/Revision/ Replacement of Neurostimulator Electrodes 55% 28%

64565 Implant neuroelectrodes J8 0040 Level I Implantation/Revision/ Replacement of 55% 28%CMS-1525-FC 963

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage Neurostimulator Electrodes

64568 Implant neuroelectrodes J8 0318 Implantation of Cranial Neurostimulator Pulse Generator and Electrode 86% 43%

64575 Implant neuroelectrodes J8 0061 Level II Implantation/Revision/ Replacement of Neurostimulator Electrodes 64% 32%

64580 Implant neuroelectrodes J8 0061 Level II Implantation/Revision/ Replacement of Neurostimulator Electrodes 64% 32%

64581 Implant neuroelectrodes J8 0061 Level II Implantation/Revision/ Replacement of Neurostimulator Electrodes 64% 32%

64590 Insrt/redo pn/gastr stimul J8 0039 Level I Implantation of Neurostimulator Generator 86% 43%

69714 Implant temple bone w/stimul J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

69715 Temple bne implnt w/stimulat J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%CMS-1525-FC 964

CPT Code Short Descriptor Final CY 2012 ASC Payment Indicator Final CY 2012 OPPS APC OPPS APC Title Final CY 2012 OPPS Full APC Offset Percentage Final CY 2012 OPPS Partial APC Offset Percentage

69717 Temple bone implant revision J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

69718 Revise temple bone implant J8 0425 Level II Arthroplasty or Implantation with Prosthesis 61% 31%

69930 Implant cochlear device J8 0259 Level VII ENT Procedures 84% 42%

TABLE 58.—DEVICES FOR WHICH TH E “FB” OR “FC” MODIFIER MUST BE REPORTED WITH THE PR OCEDURE CODE IN CY 2012 WHEN FURNISHED AT NO COST OR WI TH FULL OR PARTIAL CREDIT

CY 2012 Device HCPCS Code CY 2012 Short Descriptor C1721 AICD, dual chamber C1722 AICD, single chamber C1762 Conn tiss, human(inc fascia) C1763 Conn tiss, non-human C1764 Event recorder, cardiac C1767 Generator, neurostim, imp C1771 Rep dev, urinary, w/sling C1772 Infusion pump, programmable C1776 Joint device (implantable) C1777 Stent, non-coat/cov w/o del C1778 Lead, neurostimulator C1779 Lead, pmkr, transvenous VDD C1781 Mesh (implantable)CMS-1525-FC 965
CY 2012 Device HCPCS Code CY 2012 Short Descriptor C1785 Pmkr, dual, rate-resp C1786 Pmkr, single, rate-resp C1813 Prosthesis, penile, inflatab C1815 Pros, urinary sph, imp C1820 Generator, neuro rechg bat sys C1881 Dialysis access system C1882 AICD, other than sing/dual C1891 Infusion pump, non-prog, perm C1895 Lead, AICD, endo dual coil C1897 Lead, neurostim, test kit C1898 Lead, pmkr, other than trans C1900 Lead coronary venous C2618 Probe, cryoablation C2619 Pmkr, dual, non rate-resp C2620 Pmkr, single, non rate-resp C2621 Pmkr, other than sing/dual C2622 Prosthesis, penile, non-inf C2626 Infusion pump, non-prog, temp C2631 Rep dev, urinary, w/o sling L8614 Cochlear device/system L8680 Implt neurostim elctr each L8685 Implt nrostm pls gen sng rec L8686 Implt nrostm pls gen sng non L8687 Implt nrostm pls gen dua rec L8688 Implt nrostm pls gen dua non L8690 Aud osseo dev, int/ext comp
d. Waiver of Coinsurance and Deduc tible for Certain Preventive Services As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42301), sections 1833(a)(1) and (b)(1) of the Ac t waives the coinsurance a nd the Part B deductible for those preventive services under section 1861(ddd)(3)(A) of the Act as described in section 1861(ww)(2) of the Ac t (excluding electrocardiogra ms) that are recommended byCMS-1525-FC 966 the United States Preventive Services Task Force (USPSTF) with a grade of A or B for any indication or population and that are appr opriate for the indivi dual. 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/AS C final rule with comment period, we finalized our policies with respect to thes e provisions and iden tified the ASC covered surgical and ancillary servi ces that are preventive services that are recommended by the USPSTF with a grade of A or B for which the coinsurance and the deductible are waived. For a complete discussion of our policies and identified services, we refer readers to the CY 2011 OPPS/ASC final rule with comment period (75 FR 72047 through 72049). We did not propose any changes to our policie s or the list of services in the CY 2012 OPPS/ASC proposed rule. We identify these se rvices with a double asterisk in Addenda AA and BB to this CY 2012 OPPS/ASC final rule with comment period. e. Payment for the Cardiac Re synchronization Therapy Composite 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.” As detailed in section II.A.2.e.(6) of the CY 2012 OPPS/ASC proposed rule (76 FR 42203 through 42206), we proposed to create an OPPS composite APC (Composite APC 8009 (Cardiac Resynchronization Therapy - ICD Pulse Generator and Leads)) which would be used when CPT code 33225 (Insertion of pacing electrode, cardiac venous system, for left ventri cular pacing, at time of insertion of pacingCMS-1525-FC 967 cardioverter-defibrillator or pacemaker pulse generator (including upgrade to dual chamber system)) and CPT code 33249 (Insertion or repositioning of el ectrode lead(s) for single or dual chamber pacing cardioverter-def ibrillator and inserti on of pulse generator) are performed on the same date of service. We also proposed to cap the OPPS payment rate for composite APC 8009 at the most comp arable Medicare severity diagnosis-related group (MS-DRG) payment rate established und er the IPPS that w ould be provided to acute care hospitals for providing CRT-D services to hospital inpatients. In other words, we proposed to pay APC 8009 at the lesser of the APC 8009 median cost or the IPPS standardized payment rate for MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac Catheterization without Major Comp lication or Comorbidity). This would ensure appropriate and equitable payment to hospitals and that we do not create an inappropriate payment incentive to provide CRT -D services in one setting of care over another by paying more for CRT-D services in the outpatient setting compared to the inpatient setting. Because CPT code 33225 and CPT code 33249 are on the list of ASC covered surgical procedures, in the proposed rule (76 FR 42302), we proposed to establish an ASC payment rate that is based on the OPPS payment rate applicable to APC 8009 when these procedures are performed on the same date of service in an ASC. Again, we do not want to create an inappropriate payment in centive to provide CRT -D services in one setting of care over another by paying more for CRT-D services furnished in ASCs compared to those furnished in the hosp ital outpatient setting. Because CPT codes 33225 and 33249 are on the proposed list of device -intensive procedures for CY 2012, weCMS-1525-FC 968 proposed to apply the usual device-inte nsive methodology based on the OPPS payment rate applicable to APC 8009 (which is the le sser of the APC 8009 me dian cost that we will calculate for the CY 2012 OPPS/ASC fi nal rule with comment period or the FY 2012 IPPS standardized payment rate for MS -DRG 227). We also proposed to create a HCPCS Level II G-code so that ASCs can properly report when the procedures described by CPT codes 33225 and 33249 are perfo rmed on the same date of service and, therefore, receive the appropr iate payment amount for CRT-D services performed in an
ASC. In a related issue, as detailed in section III.D .6 of the CY 2012 OPPS/ASC proposed rule (76 FR 42241 through 42242) , CPT codes 33225 and 33249 are the only procedures proposed for inclusion in APC 0108. We proposed that these codes would be paid under APC 0108 only if they are not reporte d on the same date of service. Further, we proposed to pay the OPPS payment rate for services that are assigned to APC 0108 at the lesser of the APC 0108 median cost or the IPPS standardized payment rate for MS-DRG 227. For ASC payment in CY 2012, we proposed to apply the device-intensive methodology to calculate payment for CPT codes 33225 and 33249 based on the OPPS payment rate applicable to APC 0108 (which is the lesser of the APC 0108 median cost that we would calculate for this CY 2012 O PPS/ASC final rule with comment period or the FY 2012 IPPS standardized pa yment rate for MS-DRG 227). We did not receive any public comments on our CY 2012 proposal to establish an ASC payment rate for CRT-D services, us ing the device-intensive methodology, based on the OPPS payment rate applicable to com posite APC 8009 when procedures describedCMS-1525-FC 969 by CPT codes 33225 and 33249 are performed on the same date of service in an ASC. However, as detailed in section II.A.2.e.(6) of this final rule with comment period, after consideration public comments regarding OPPS payment for CRT-D services, we are not finalizing our proposal to implement a pa yment cap for CRT-D services and ICD implantation procedures performed in a hos pital outpatient department based upon the payment rate for IPPS MS-DRG 227 as pr oposed. Instead, under the OPPS, we will recognize CPT codes 33225 and 33249 as a single, composite service when they are performed on the same day as proposed. Ho wever, for CY 2012, rather than assigning the procedures described by CPT codes 33225 and 33249 when they are performed on the same day to composite APC 8009, we are a ssigning them to existing APC 0108. When not performed on the same day as the service described by CPT code 33225, the service described by CPT code 33249 will continue to be assigned to APC 0108. When not performed on the same day as the service described by CPT code 33249, the service described by CPT code 33225 will be assigne d to APC 0655 (we note that this is a modification from our proposal to assign CPT code 33225 when it does not appear with CPT code 33249 to APC 0108). Based on the above modifications to establish the OPPS payment amount for CRT-D services, the payment rate for CRT-D services in ASCs for CY 2012 will be based on the OPPS payment rate applicable to APC 0108 when procedures described by CPT codes 33225 and 33249 are performed on the sa me date of service in an ASC. Because CPT codes 33225 and 33249 are on the lis t of device-intensive procedures finalized for CY 2012, APC payment for CRT-D services will be established using theCMS-1525-FC 970 device-intensive payment methodology. ASCs will use the corresponding HCPCS Level II G-code (G0448) for proper reporting when the procedures described by CPT codes 33225 and 33249 are performed on the same date of service. When not performed on the same day as the service described by CP T code 33225, ASC payment for the service described by CPT code 33249 will to be ba sed on APC 0108 using the device-intensive methodology. When not performed on the same day as the service described by CPT code 33249, ASC payment for the service described by CPT code 33225 will be based on APC 0655 using the device-intensive methodology. 2. Payment for Covered Ancillary Services a. Background Our final payment policies under the revised ASC payment system for covered ancillary services vary according to the part icular type of servi ce 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 packag ed under the OPPS. Thus, we established a final policy to align ASC payment bundles with those under the OPPS (72 FR 42495). In all cases, in order for those an cillary services also to be pa id, ancillary 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, while we generally pay forCMS-1525-FC 971 separately payable radiology services 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 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 methodol ogy 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 suggeste d it is inappropriate to use the MPFSbased payment methodology for nuclear medici ne procedures because the associated diagnostic radiopharmaceutical, although packaged under the ASC payment system, is separately paid under the MFPS. We set th e payment indicator to “Z2” for nuclear medicine procedures in the ASC setting so th at payment for these procedures would be based on the OPPS relative payment wei ght rather than the MPFS nonfacility PE RVU-based amount to ensure that the ASC will be compensated for the cost associated with the diagnostic radiopharmaceuticals. ASC payment policy for brachytherapy sources generally mirrors the payment policy under the OPPS. We finalized our policy in the CY 2008 OPPS/ASC final rule with comment period (72 FR 42499) to pay for brachytherapy sources applied in ASCs at the same prospective rates that were a dopted under the OPPS or, if OPPS rates wereCMS-1525-FC 972 unavailable, at contractor-price d rates. After publication of that rule, section 106 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173) mandated that, for the period January 1, 2008 through J une 30, 2008, brachytherapy sources be paid under the OPPS at charges adjusted to cost. Th erefore, consistent wi th our final overall ASC payment policy, we paid ASCs at contra ctor-priced rates for brachytherapy sources provided in ASCs during that period of time. Begi nning July 1, 2008, brachytherapy sources applied in ASCs were to be paid at the same prospectively set rates that were finalized in the CY 2008 O PPS/ASC final rule with comment period (72 FR 67165 through 67188). Immediately prior to th e publication of th e CY 2009 OPPS/ASC proposed rule, section 142 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275) amended section 1833 (t)(16)(C) of the Act (as amended by section 106 of the Medicare, Medica id, and SCHIP Extension Act of 2007, Pub. L. 110-173) to extend the re quirement that brachytherapy sources be paid under the OPPS at charges adjusted to cost through D ecember 31, 2009. Therefor e, consistent with final ASC payment policy, ASCs continued to be paid at contractor-priced rates for brachytherapy sources provided in tegral to ASC covered surgi cal procedures during that period of time. Since December 31, 2009, AS Cs have been paid for brachytherapy sources provided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS. Other separately paid covered ancillary services in ASCs, specifically corneal tissue acquisition and device categories with OPPS pass-through status, do not have prospectively established ASC payment rates a ccording to the final policies of the revisedCMS-1525-FC 973 ASC payment system (72 FR 42502 and 42509; § 416.164(b)). Under the revised ASC payment system, corneal tissue acquisition is paid based on the invoiced costs for acquiring the corneal tissue for transplantati on. Devices that are e ligible for pass-through payment under the OPPS are separately paid under the ASC payment system. Currently, the three devices that are e ligible for pass-through paymen t in the OPPS are described by HCPCS code C1749 (Endoscope, retrograde im aging/illumination colonoscope device (Implantable), HCPCS code C1830 (Powered bone marrow biopsy needle), and HCPCS code C1840 (Lens, intraocula r (telescopic)). Payment amounts for HCPCS codes C1749, C1830, and C1840 under the ASC payment system are contractor priced. b. Payment for Covered Ancillary Services for CY 2012 For CY 2012, we proposed to update the ASC payment rates and make changes to ASC payment indicators as necessary to maintain consistency between the OPPS and ASC payment system regarding the packaged or separately payable status of services and the proposed CY 2012 OPPS and ASC payment rates (76 FR 42303). The proposed CY 2012 OPPS payment methodologies for separa tely payable drugs and biologicals and brachytherapy sources were discussed in sectio n II.A. and section V.B. of that proposed rule, respectively, and we proposed to se t the CY 2012 ASC payment rates for those services equal to the proposed CY 2012 OPPS rates. Consistent with established ASC pa yment policy (72 FR 42497), the proposed CY 2012 payment for separately payable c overed radiology services was based on a comparison of the CY 2012 proposed MPFS nonfacility PE RVU-based amounts (we referred readers to the CY 2012 MPFS propos ed rule) and the proposed CY 2012 ASCCMS-1525-FC 974 payment rates calculated according to the ASC standard ratesetting methodology and then set at the lower of the two amounts. Alternatively, payment for a radiology service may be packaged into the payment for the ASC covered surgical procedure if the radiology service is packaged under the OPPS. The payment indicators in Addendum BB to the proposed rule indicate whether the pr oposed payment rates for radiology services are based on the MPFS nonfacility PE RVU-based amount or the ASC standard ratesetting methodology, or whether payment for a radiology service is packaged into the payment for the covered surgical procedur e (payment indicator “N1”). Radiology services that we proposed to pay based on the ASC standard ratesetting methodology are assigned payment indicator “Z2” (Radiology service paid separately when provided integral to a surgical procedure on ASC list; payment based on OPPS relative payment weight) and those for which the proposed pa yment is based on the MPFS nonfacility PE RVU-based amount are assigned payment i ndicator “Z3” (Radiology service paid separately when provided integral to a su rgical 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 is made based on the OPPS relative payment weights rather than the MPFS nonfacility PE RVU-based amount, regardless of which is lower. In the CY 2012 OPPS/ASC proposed rule (76 FR 42303), we proposed to continue thisCMS-1525-FC 975 modification to the payment methodology and, th erefore, set the payment indicator to “Z2” for these nuclear medicine procedures in CY 2012. In addition, because the same issue exists for radiology procedures that us e contrast agents (the contrast agent is packaged under the ASC payment system but is separately paid under the MFPS), we proposed to set the payment indicator to “Z2” for radiology services that use contrast agents so that payment for these procedures will be based on the OPPS relative payment weight and will, therefore, include the cost for the contrast agent. We made proposed changes to the regulation text at § 416.171(d) to refl ect this proposal. Most covered ancillary services and their proposed payment indicators were listed in Addendum BB to the CY 2012 OPPS/ASC propos ed rule (which was available via the Internet on the CMS Web site).
Comment : One commenter urged CMS to modify the payment methodology for separately payable covered radiology services such that the amounts paid are equivalent to the OPPS payment rates, as is the cas e for brachytherapy sources and separately payable drugs and biologicals, instead of th e lower of the amount calculated according to the standard methodology of the ASC pa yment system or the MPFS nonfacility PE RVU-based amount. The commenter expres sed concern that the payment rates for certain separately payable covered radiology services that are ba sed on the established methodology are far below the amounts necessa ry to cover the costs involved in providing the service. Response : We do not agree with the comm enter that we should alter our established policy to pay for separately payable covered ra diology services at the lowerCMS-1525-FC 976 of the MPFS nonfacility PE RVU-based amount s and the ASC payment rates calculated according to the ASC standard ratesetting methodology. We believe that this approach is the most appropriate to prevent the creation of payment incentives fo r services to move from physicians’ offices to ASCs and that the ASC payment rates established under this methodology are adequate to the cover costs for providing covered ra diology services in
ASCs.
Comment : Commenters requested that CMS pay for low dose rate (LDR) prostate brachytherapy services under the ASC payment system based on the composite APC methodology used under the OPPS rather than making two separate payments for the service reported by CPT codes 55675 (Tra nsperineal placement of needles or catheters into prostate for interstitial radioelement appl ication, with or without cystoscopy) and 77778 (Interst itial radiation source appl ication; complex). The composite APCs were developed for proce dures like LDR prostate brachytherapy in which two procedures are frequently perf ormed in a single ho spital visit. The commenters asserted that basing ASC paymen ts for the services on the composite APC methodology in which one payment is made for the combination of the two services would result in a more accurate payment than is currently being made to ASCs because ASC payment is based on the median costs from single-service claims that CMS has acknowledged are mostly incorrectly coded claims. Response : Although we have tried to al ign the ASC and OPPS packaging policies to the fullest extent, we have not done so in the case of the LDR prostate brachytherapy composite (APC 8001). We w ill take the commenter’s request intoCMS-1525-FC 977 consideration in future rulemaking, recognizi ng the lead time that is necessary for the creation of the associated G-code that would be used to identify when the procedures in the LDR prostate brachytherapy composite are performed on the same date of service in
an ASC.
Comment : One commenter indicated that AS Cs are experienci ng problems with obtaining payment from severa l of the ASC contractors for the pass-through device identified by HCPCS code C1749 (Endos cope, retrograde imaging/illumination colonoscope device (Implantable) ) and requests that CMS prov ide further guidance in the final rule with comment period as to the ASC pricing level for the pass-through device. Response : Devices that are e ligible for pass-through pa yment under the OPPS are separately paid under the ASC pa yment system and are paid at contractor-priced rates. CMS will remind contractors that payment fo r HCPCS code C1749 is not packaged into the payment for the associated procedure. However, the local contractor makes final decisions regarding coverage determinations and the payment amount for the pass-through device. After consideration of th e public comments we rece ived, we are providing CY 2012 payment for covered ancillary services in accordance with the policies finalized in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72050), with one modification. As described above, we are setting 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. We also are finalizing proposed changes to § 416.171(d). However, weCMS-1525-FC 978 are making a technical change to the proposed regulation text to make it clear that the proposed reference to paragraphs (d)(1) and (2) is a reference to paragraphs (d)(1) and (d)(2). Covered ancillary services and th eir final CY 2012 paymen t indicators are listed in Addendum BB (which is available via the In ternet on the CMS Web site) to this final rule with comment period. E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Cycle and Evaluation Criteria In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68176), we finalized our current process for reviewing a pplications to establish new classes of new technology intraocular lenses (NTIOLs) and for recognizing new ca ndidate intraocular lenses (IOLs) inserted during or subsequent to cataract ex traction as belonging to an NTIOL class that is qualified for a payment adjustment. Specifically, we established the following process:

● We announce annually in the proposed rule updating the ASC and OPPS payment rates for the following calendar year , a list of all requests to establish new NTIOL classes accepted for review during 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—CMS-1525-FC 979

○ Provide a list of determinations made as a result of our review of all new NTIOL class requests and public comments; and

○ Announce the deadline for submitting requests for review of an application for a new NTIOL class for the following calendar year. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68227), we finalized our proposal to base our determinations on consid eration of the following three major criteria set out at 42 CFR 416.195:

● Criterion 1 (42 CFR 416.195( a)(1),(2)): The IOL must have been approved by the FDA and claims of specific clinical be nefits and/or lens characteristics with established clinical relevance in comparison with currently available IOLs must have been approved by the FDA for use in labeling and advertising;

● Criterion 2 (42 CFR 416.195(a)(3)): The IOL is not described by an active or expired NTIOL class; that is, it does not share the pr edominant, class-defining characteristic associated with the improved cl inical outcome with designated members of an active or expired NTIOL class; and

● Criterion 3 (42 CFR 416.195(a)(4)): Ev idence demonstrates that use of the IOL results in measurable, clinically mean ingful, improved outcomes in comparison with use of currently available IOLs. The stat ute requires us to consider the following superior outcomes:

○ Reduced risk of intraoperative or postoperative complication or trauma;

○ Accelerated postoperative recovery;

○ Reduced induced astigmatism;CMS-1525-FC 980

○ Improved postoperative visual acuity;

○ More stable postoperative vision; or

○ Other comparable clinical advantages. Since implementation of the process for adjustment of payment amounts for NTIOLs that was established in the June 16, 1999 Federal Register , we have approved three classes of NTIOLs, as shown in the table entitled CMS Approved NTIOLs , with the associated qualifying IOL models, posted on the CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage

. 2. NTIOL Application Proce ss for Payment Adjustment For a request to be considered complete, we require submission of the information that is found in the guidance document ent itled “Application Process and Information Requirements for Requests for a New Cla ss of New Technology Intraocular Lens (NTIOL)” posted on the CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage . For each completed request for a new class that is received by the established deadline, a determination is announced annually in the fina l rule updating the ASC and OPPS payment rates for the next calendar year. We also summarize briefly in the final ru le the evidence that we reviewed, the public comments we received timely, and the basis for our determinations in consideration of applications for establishment of a new NTIOL class. When a new NTIOL class is created, we identify the pre dominant characteristic of NTIOLs in that class that sets them apart from other IO Ls (including those previously approved asCMS-1525-FC 981 members of other expired or active NTIOL cl asses) and that is associated with an improved clinical outcome. The date of implementation of a payment adjustment in the case of approval of an IOL as a member of a new NTIOL class would be set prospectively as of 30 days after publicat ion of the ASC payment update final rule, consistent with the statutory requirement. 3. Requests to Establish Ne w NTIOL Classes for CY 2012 As discussed in the CY 2012 OPPS/ ASC proposed rule (76 FR 42303 through 42309), we received four requests for review to establish a new NTIOL class for CY 2012 by the March 5, 2011 due date. Belo w we summarize the evidence that we reviewed, the public comments we received ti mely, and the basis for our determinations in consideration of the applic ations for establishment of a new NTIOL class. For each application, we invited public comments on certai n specific questions as well as all of the NTIOL evaluation criteria. We thank th e public for their co mments concerning our review of the four CY 2012 NTIOL requests.

a. Requestor/Manufacturer: Alcon Laboratories, Inc. (Alcon) Lens Model Numbers : AcrySof Natural IQ and AcrySof Natural IOLs, Models SN60WF (aspheric optic, single piece) , SN60AT (spherical op tic, single piece), MN60MA (spherical optic, multi-piece), MN60AC (spherical optic, multi-piece). Summary of the Request : Alcon submitted a request for CMS to determine that its AcrySof Natural IOLs meet the criteria fo r recognition as NTIOLs and to concurrently establish a new class of NTIOLs for “blue-light -filtering IOLs that im prove driving safety under glare conditions,” with these IOLs as me mbers of the class. These IOLs will beCMS-1525-FC 982 referred to as either blue-light-filtering IOLs or blue blocking IOLs. We reviewed a similar request by Alcon during the CY 2011 NTIOL application cy cle (75 FR 72052). As part of its CY 2012 request, Alcon submitted descriptive information about the candidate IOLs as outlined in the guidance document that is available on the CMS Web site for the establishment of a new class of NTIOLs, as well as information regarding approval of the candidate IOLs by the FDA. This information included the approved labeling for the candidate IOLs, a summary of the IOLs’ safety and effectiveness, a copy of the FDA’s approval notifications, and instructions for their use. In its CY 2012 request, Alcon asserted that its request is based on studies demonstrating that the AcrySof Natural IO Ls with a blue-light-filtering chromophore filter light in a manner that approximates the human crystalline lens in the 400-475 nm blue light wavelength range to reduce glar e that impairs the ability of the eye to differentiate objects from the background. Alco n further stated that glare reduction can help beneficiaries avoid hazards that can be caused by glare. Alcon also stated that at present there are no active or expired NTIOL classes that de scribe IOLs similar to the AcrySof Natural IOLs. We established in the CY 2007 OPPS/ASC final rule with comment period that when reviewing a request for recognition of an IOL as an NTIOL and a concurrent request to establish a new class of NTIO Ls, we would base our determination on consideration of the three major criteria at 42 CFR 416.195(a) and listed above. We solicited public comment on these candidate IOLs with respect to the established three major NTIOL criteria and certain specific issues related to this application in theCMS-1525-FC 983 CY 2012 OPPS/ASC proposed rule (76 FR 42303 through 42309). We have reviewed Alcon's request to recognize its AcrySof Natural IOLs as NTIOLs and concurrently establish a new class of NTIOLs and all of the related comments. First, for an IOL to be recognized as an NTIOL we require that the IOL must have been approved by the FDA and claims of specific clinical benefits and/or lens characteristics with established clinical rele vance in comparison with currently available IOLs must have been approved by the FDA fo r use in labeling and advertising. The approved labels for the Alcon IOLs all stat e the following: “Alc on’s proprietary blue light filtering chromophore filters light in a manner that approximates the human crystalline lens in the 400-475 nm blue light wavelength range.” The FDA-approved labeling for these IOLs do not otherwise reference specific clinical benefits of blue-light-filtering. We were interested in public comments on the clinical relevance of blue-light-filtering in an IOL. Specifical ly, in the proposed rule (76 FR 42303 through 42309), we stated that we were interested in public comments regardi ng the assertion that the specific blue-light-filte ring properties associated with the candidate IOLs improve driving safety via the redu ction of glare disability. Second, according to 42 CFR 416.195(a)(3), we also require th at the candidate IOL not be described by an active or expire d NTIOL class; that is, it does not share the predominant, class-defining characteristic associated with improved clinical outcomes with designated members of an active or expired NTIOL class. In the CY 2007 OPPS final rule, in response to a comment we explained our interpretation of 42 CFR 416.195(a)(3) as follows:CMS-1525-FC 984 “[R]evised § 416.195(a)(3) does not preclude from consideration as a member of a new class of NTIOL a lens that includes as one of its characterist ics a class-defining characteristic associated with members of an active or expired class. Only if that shared characteristic were the predominant characteri stic of the lens would it be precluded from approval as a new class of NTIO L. However, if the lens f eatured other characteristics, one or more of which predominated, that were clearly tied with improved clinical outcomes, the lens would not be disqualifie d from consideration as an NTIOL just because it also shared a characteristic with members of an active or expired class.” (71 FR 68178.) As noted above, since implementation of the process for adjustment of payment amounts for NTIOLs that was established in the June 16, 1999 Federal Register , we have approved three classes of NTIOLs: Multifocal and Reduction in Preexisting Astigmatism classes, both of which were cr eated in 2000 and expired in 2005; and the Reduced Spherical Aberration class, wh ich was created in 2006 and expired on February 26, 2011. As mentioned above , a table entitled CMS Approved NTIOLs , with the associated qualifying IOL models, is posted on the CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage . The class-defining characteristic specific to IOLs that are members of these three expired classes is evident in the name assigned to the class. For ex ample, IOLs recognized as members of the reduced spherical aberration class are characte rized by their aspheric design that results in reduced spherical aberration. Based on th e information in the table entitled CMSCMS-1525-FC 985 Approved NTIOLs , a candidate IOL’s predominant ch aracteristic may not be described by any of the three expired NTIOL classes. In the case of one of four of Alcon’ s candidate IOLs, the AcrySof Natural IQ Aspheric IOL model SN60WF, it is a member of the expired reduced spherical aberration NTIOL class (75 FR 72052). For the purposes of satisfying § 416.195(a)(3), CMS must be able to determine which lens charact eristic is predominant for Alcon’s model SN60WF, asphericity (resulting in reduced spherical aberration) or blue-light-filtering. If the predominant characteristic is aspheric ity, then the model SN60WF IOL would be disqualified under § 416.195(a)(3). This determination is partic ularly relevant given that the clinical benefit attributed to both of these lens char acteristics is improved driving under glare conditions. In the proposed ru le (76 FR 42303 through 42309), we solicited public comments on whether blue-light-filteri ng can be considered the predominant IOL characteristic for the model SN60WF IOL. We also welcomed public comments that addressed whether blue-light-filtering and the associated clinical be nefits of the other three of Alcon’s candidate IOLs (that is , SN60AT, MN60MA, MN60AC) are described by any of the expired NTIOL classes. Third, our NTIOL evaluation criteria al so require that an applicant submit evidence demonstrating that use of the IOL re sults in measurable, clinically meaningful, improved outcomes in comparison to currently available IOLs. Importantly, the statute specifies the following outcomes: (1) reduced risk of intraoperative or postoperative complication or trauma; (2) accelerated postoperative recovery; (3) reduced induced astigmatism; (4) improved postoperative visual acuity; (5) more stable postoperativeCMS-1525-FC 986 vision; or (6) other comparable clinical advantages. We note that in the CY 2007 OPPS/ASC final rule with co mment period, we sought comments as to what constitutes currently available IOLs for purposes of such comparisons, and we received several comments in response to our solicitation ( 71 FR 68178). We agreed with commenters that we should remain flexible with respect to our view of “currently available lenses” for purposes of reviewing NTIOL requests, in order to allow fo r consideration of technological advances in lenses over time. This means that we do not expect that “currently available lenses” would remain static over time and always necessarily default to the classic spherical monofocal IOL for ev ery candidate NTIOL class. Therefore, we believe that “currently available lenses” for purposes of reviewing NTIOL requests should depend upon the class-defining charac teristic and the associated purported improved clinical outcome of the candidate NTIOL. For example, for some candidate NTIOLs the most appropriate comparison IO L would be a spherical monofocal IOL, while other candidate NTIOLs may be more appropriately compared to aspheric IOLs. For purposes of reviewing Alcon’s request to establish a new NTIOL class for CY 2012, in the proposed rule (76 FR 42304 through 42309), we proposed that aspheric monofocal IOLs represent th e currently available IOLs against which the candidate NTIOLs should be compared in order to esta blish a new class. According to publicly available data from Market Scope, LLC, IO Ls with aspheric optics accounted for over 86 percent of the IOLs implanted in the Un ited States during 2010. In addition, data submitted by Alcon shows that the overwhelming majority of IOLs sold by Alcon have aspheric optics. Furthermore, the aspheric design that results in reduced sphericalCMS-1525-FC 987 aberration was the class defining characteristi c for IOLs recognized as members of the expired reduced spherical ab erration NTIOL class. The primary clinical outcome associated with reduced spherical aberration (for purposes of estab lishing it as an NTIOL class) was safer night driving (71 FR 4588) . Alcon asserted that what makes its candidate IOLs superior to other currently available IOLs is improved driving safety under glare conditions. Glare c onditions during driving primar ily occur at night due to headlights from oncoming cars. The primar y improved clinical outcome from reduced spherical aberration IOLs (an expired NTIOL class) was safe r night driving. We believed that Alcon was also claiming that its blue- light-filtering IOLs resu lted in safer night driving. Therefore, we proposed that the most relevant type of cu rrently available IOLs against which the Alcon blue- light-filtering IOLs should be compared is aspheric IOLs. In particular, we proposed that the relevant comparison would be the performance of an aspheric blue-light-filtering IO L versus an aspheric nonblue-li ght-filtering IOL. In the proposed rule, we sought public comment on our view of “currently available lenses” for the purposes of evaluating Alcon’s candidate IOLs against currently available IOLs. We reviewed the evidence submitted with Alcon’s CY 2012 request. Although Alcon submitted various types of literature in support of its application, it relies primarily on two studies in support of its hypothesis that blue light filtering IOLs improve driving safety under glare conditions as compared to cu rrently available IOLs. The first of these two submitted articles is: Hammond B, et al., “Contralateral comparison of blue-filtering intraocular lenses: glare disability, hetero chromic contrast, and photostress recovery,” Clinical Ophthalmology . 2010;4:1465-1473 (Hammond 2010). This article comparedCMS-1525-FC 988 visual performance (as measured by glare disa bility, heterochromic contrast threshold, and photostress recovery time) in eyes with bl ue-light-filteri ng IOLs versus contralateral eyes with IOLs that do not filter blue light. The second article, which Alcon describes as its “pivotal study,” is: Gray R, et al., “R educed effect of glar e disability on driving performance in patients with blue-light-filtering in traocular lenses,” J Cataract Refract Surg ., 2011;37:38-44. This study compared the e ffects of glare on driving performance using a driving simulator in patients who had implantation of a blue-light-filtering acrylic IOL and those who had implantation of an acryl ic IOL with no blue-light-filter. Overall, the evidence submitted provides us with important information that is critical to our review of this request. However, in making our decision as to whether to establish a new class of NTIOL based on the primary characterist ic of the candidate lenses, we also were interested in what other information the public could contribute rela ted to the asserted benefits of the blue-light-f iltering IOL. Specifically, in the proposed rule (76 FR 42304 through 42309), we sought public comment a nd relevant data on the following:

● Are there other peer-reviewed studies or other information that would support or disprove the claims of clin ical benefit made by Alcon?

● How would you interpret the result s of the Hammond 2010 study, given that the blue-light-filtering group in cluded patients with spherica l blue-light-filtering IOLs and patients with aspheric blue-light-filtering IOLs?

● Does the Maxwellian optical system that was employed in the Hammond 2010 study mitigate the impact of the aspheric op tics of some of the study subjects in the blue light-filtering group?CMS-1525-FC 989

● Is the sample size used in both st udies sufficient to conclude that a blue-light-filtering IOL would reduce glare disability and im prove driving safety in the Medicare population?

● What kind of study design would be appropriate to prove the claim of significant clinical benefit due to glare reduction on which th e new class would be based?

● Are the submitted data enough to prove that the blue-light-filtering optic is responsible for reduction in glare di sability as assert ed by applicant?

● Did these studies use an appropriate comparator IOL? Furthermore, in accordance with our esta blished NTIOL review process, in the proposed rule, we also so ught public comments on all of the review criteria for establishing a new NTIOL cla ss that would be based on the ability of the AcrySof Natural IOLs to filter blue light and subsequently help be neficiaries avoid hazards that can be caused by glare while driving. We st ated that we would give all comments full consideration regarding Alcon’s candidate IOLs.
Comment : Regarding criterion 1, the reque stor asserted that the AcrySof Natural IOLs contain a blue-li ght-filtering chromophore that re duces glare disability that impairs the ability of indi viduals to differentiate obj ects from the background. The blue-light-filtering chro mophore is a characteristic of th e AcrySof Natural IOLs that is listed in the FDA-approved labeling. Whet her the blue-light-filtering chromophore has established clinical relevance in comparison with currently available IOLs is discussed below under the discussion of criterion 3, as th e clinical relevance of the blue-lightfiltering chromophore in comparison with currently available IOLs depends uponCMS-1525-FC 990 whether, as required by criterion 3, evidence demonstrates that use of the IOL (and in particular the blue-light-filtering chromophor e) results in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IOLs. One commenter stated that because Alcon’s submission lacks the requisite FDA-approved labeling references regarding c linical benefit or established clinical relevance for the AcrySof Natural IOLs, it does not satisfy criterion 1. Response : Our current interpretation of criterion 1, which is based on 42 CFR 416.195(a)(1),(2), is th at the candidate IOL must have been approved by the FDA and have claims of specific clinical benefits and/or lens characteristics with established clinical relevance in comparis on with currently available IOLs in the FDA-approved labeling. Therefore, there can be either claims of speci fic clinical benefits in the FDA-approved labeling or lens charac teristics in the FDA-approved labeling with evidence of established clini cal relevance in comparison wi th currently available IOLs outside of the FDA-approved labeling, such as in peer-reviewed journals. If the evidence for clinical relevance of the IOL characteristic was required to be contained in the FDAapproved labeling, that would be the same as requiring a claim of specific clinical benefit of the IOL in the FDA-approved labeling, whic h would be redundant. As stated above, the clinical relevance of the blue-light-filtering chromophore will depend on whether Alcon’s blue-light-filtering IOLs satisfy criterion 3, which is discussed below. In future rulemaking, we may consider exploring refineme nts to the regulations such that a claim of specific clinical benefit of the IOL in comparison with cu rrently available IOLs would be required in the FDA-approved labeling.CMS-1525-FC 991
Comment : Regarding criterion 2, the appli cant and several other commenters stated that the measured clinical benefit of Alcon’s blue-light-filtering IOLs is improved driving safety under daytime driving conditions with glare simulating low-angle sun, not nighttime driving conditions with and without glare. They stated that low angle sun occurs at sunrise and sunset and cited the article by Gray (w hich Alcon describes as its pivotal study) which states th e following: “In a real-world ta sk such as driving, 2 major contributors of glare are the headlights of an oncoming car during nighttime driving and low-angle sun conditions (eg, sunset).” In submitted comments, Alcon clarified that its blue-light-filtering IOLs only aid drivers with glare due to low angle sun, and not that blue-light-filtering IOLs aid with glare fr om the headlights of an oncoming car during nighttime driving. Prior to its clarifying comments, we or iginally believed that Alcon was claiming that its blue-light-filtering IOLs aided drivers with both nighttime glare and daytime glare. We now understand that the purported clinical benefit of the blue-light-filtering IOLs is improved driving during the daytime wh en the sun is at a low angle and not at nighttime when headlights cause glare. Th is distinction is important in evaluating criterion 2, which requires that the blue-light -filtering IOLs not be described by an active or expired NTIOL class; th at is, the blue-light-filter ing IOLs do not share the predominant, class-defining characteristic a ssociated with the improved clinical outcome with designated members of an active or expi red NTIOL class. One of the four candidate blue-light-filtering IOLs, the AcrySof Natu ral IQ Aspheric IOL model SN60WF, is a member of the expired reduced spheri cal aberration NTIOL class (75 FR 72052).CMS-1525-FC 992 The requestor and other commenters ar gued that because asphericity does not contribute to visual performance during da ytime driving conditi ons due to pupillary constriction during daytime driving conditions , blue-light-filtering is the predominant characteristic of the AcrySof Natural IQ As pheric IOL model SN60WF for the associated outcome of improved driving safety under da ytime driving conditions with glare from low-angle sun. Another commenter stated that because no evidence exists to establish the clinical benefit of blue-light-filtering, it is impossible to separate the predominant characteristic of reduced spherical aberra tion in the AcrySof Natural IQ Aspheric IOL model SN60WF from any other le ns characteristic with regard to clinical benefit. Therefore, this commenter stated that, b ecause the AcrySof Natural IQ Aspheric IOL model SN60WF is a member of a recently e xpired category, it should be disqualified from new NTIOL category consideration. Response : For the purposes of satisfying § 416.195(a)(3), we must determine which lens characteristic is predominan t for Alcon’s model SN60WF, asphericity (resulting in reduced spherica l aberration) or blue-light-f iltering. If the predominant characteristic is aspheric ity, the model SN60WF IOL would be ineligible under § 416.195(a)(3). Although we briefly discusse d our interpretation of § 416.195(a)(3) and the concept of a predominant characteristic as it relates to § 416.195(a)(3) in the CY 2007 final rule (71 FR 68178), we have not further elaborated on the fact ors that influence a determination of predominance regarding differe nt IOL characteristics. We believe that when the clinical outcomes associated with different lens charact eristics are related, comparative clinical data are required to demonstrate that one characteristic isCMS-1525-FC 993 predominant over another. However, when the clinical outcomes associated with the different lens characteristics are sufficiently unrelated, comparative clinical data are not required to demonstrate the predominance of a ch aracteristic as it relates to the clinical outcome associated with the lens characteris tic that is the subject of NTIOL review. We agree with the requestor and othe r commenters that, with respect to the purported outcome of improved driving safe ty under daytime driving conditions with glare simulating low-angle sun, the predominan t characteristic of the model SN60WF is blue-light blocking. Pupillary constriction from the sun diminishes or negates the benefits of asphericity, which was shown to reduce spherical aberration and positively affect night driving performance. If a night driving benefit were claimed instead of only a daytime driving benefit for Alcon’s blue-li ght-filtering IOLs, the determination of the predominant characteristic for the mode l SN60WF would be more complicated. However, because the purported clinical benefi t of the blue-light-fil tering IOLs is limited to improved driving safety under daytime dr iving conditions with glare simulating lowangle sun, under these conditions the blue-lig ht-filtering characteristic is predominant. Also, the description of the requestor’s propos ed new class of NTIOLs should be revised as follows: “blue-light-filtering intraocular lenses that improve driving safety under daytime glare from low angle sun conditions.”
Comment : Comments on the question regard ing whether the bl ue-light-filtering characteristic has established clinical re levance and whether the Acrysof blue-lightfiltering IOLs satisfy criterion 3, addressed that the first issue is what are the appropriate currently available IOLs to which Alcon’s blue blocking IO Ls should be compared. TheCMS-1525-FC 994 requestor and several other commenters believ ed that an appropriate comparator IOL for the blue-light-filtering IOL is a spherica l monofocal IOL for the following reasons:

● Because market share was not menti oned as a factor in considering which lenses are appropriate comparat ors for other NTIOL requests, it should not be a factor in the blue-light-filtering request;

● Because the requestor has not claimed th at the blue-light-fi ltering IOLs affect or improve night driving, it would be illogical to suggest that the blue blocker IOL should be compared to an aspheric IOL;

● Because in prior rulemaking cycles CM S mentioned PMMA IOLs as part of a group of “currently available IOLs,” and PMMA IOLs have had a low market share for many years, there is a precedent for consideri ng low market share IOLs to be currently available IOLs;

● Because an aspheric colorless Ac rysof IOL does not exist, and other manufacturers’ aspheric colorless IOLs are different from Acrysof IOLs in many ways, the model SN60WF IOL cannot be appropriately compared to an aspheric colorless IOL; and

● It is unfair for CMS to propose an as pheric comparator IOL by applying a new definition of “currently available IOLs” afte r this year’s NTIOL application deadline. Response : The requestor, through its comments on the proposed rule, has made clear that the only claimed clinical benefit of the blue-light-filte ring IOLs is improved daytime driving under simulated low angle s un conditions and not improved night driving under glare from car headlights. Therefore, we agree that it is not necessary that theCMS-1525-FC 995 blue-light-filtering IOLs be compared to an aspheric IOL because under daytime low angle sun glare conditions pupillary constricti on would generally limit the effect of the aspheric optics. However, we believe that it would be beneficial to clarify the meaning of our flexible approach to “currently availabl e IOLs.” Our flexible approach means that the appropriate comparator can vary depending upon the candidate IOL and the associated claimed clinical outcome and can al so change over time. With some candidate IOLs, lens optics may be the focus of the claimed benefit, while with others, the IOL material may be the focus of the claimed bene fit. For example, a new IOL material that claimed the elimination of posterior capsular opacity (PCO) would have to be compared to IOL materials in which PCO occurred. Howe ver, the particular optics of the IOLs in this hypothetical case would likely not necessari ly matter. If the claim was that the candidate IOL corrected some type of highe r order optical aberra tion that resulted in improved night driving, such an IOL would have to be compared to an aspheric IOL to determine whether it improved night driv ing beyond that of an aspheric IOL. Furthermore, as IOL use patterns change over time, what is considered “currently available” will also change over time. Although spherical monofocal IOLs have represented the standard, conventional IOL, they now represent a relatively small minority of IOLs implanted in the United States. This trend is at least partially attributed to the NTIOL program for aspheric IOLs a nd the CMS Rulings for presbyopia correcting IOLs and astigmatism correcting IOLs. Theref ore, our flexible approach to currently available comparator IOLs means that ma nufacturers should account for contemporary practices among U.S. cataract surgeons when designing studies and resist the temptationCMS-1525-FC 996 to select a comparator IOL that would most likely yield a stat istically significant result in a study but that may not best fit the proposed hypothesis or NTIOL regulatory requirements. Regarding the evidence submitted by the requestor in support of its proposition that the blue-light-filtering characteristic has established clinical relevance and that evidence demonstrates that use of the blue-light-filtering IOL results in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IOLs, the requestor submitted a variety of supporting information. However, the requestor relied primarily on the studies by Ha mmond et al. and Gray et al. that are cited above. Therefore, although we will discu ss other submitted supporting information as appropriate, we will focus primarily on the Hammond and Gray studies as they are the primary support for the requestor’s clinical benefit hypothesis. We begin with the Hammond study.
Comment : Some commenters remarked that the Hammond study provides important evidence that suppor ts the requestor’s hypothesi s that blue blocking IOLs improve driving performance while drivi ng in low angle sun conditions. Other commenters provided detailed critiques of the Hammond study. Because the requestor submitted a similar application last year and some of the same comments were made in response to last year’s applic ation, the requestor has had an opportunity to rebut many of these comments. The main points made by some of the commenters on the Hammond study and the associated rebuttals by th e requestor are summarized below:CMS-1525-FC 997

● Figure 3 in the Hammond study mislab els the gray and blue traces. A commenter claims that Xenon’s spike is actually in the blue part of the spectrum. The commenter claims that this mislabeling hide s a study bias of having a blue glare source (which would be filtered by the blue blocker) but a different wavelength for the target illumination source. Rebuttal by requestor : Although the figure labels were inadvertently reversed, the glare and target sources were correctly de scribed in the body of the Hammond paper, and a correction has been made through a letter to the journal’s editor.

● No IOL or optical filter can decrease disability glare when target and glare illumination have the same spectrum because every filter decreases target and glare illumination in exactly the same proportion. Th us, the retinal image contrast cannot be increased by a color filter; therefore, disabi lity glare cannot be d ecreased by the filter. The commenter cited several articles in support of this proposition, including a 2007 article (Optom Vis Sci 84: 859-64, 2007) by Hammond et al ., one of the investigators for the study submitted by the requestors as primary support for their NTIOL application. In this 2007 study macular pigment (MP) was the li ght filter, and Hammond et al. stated the following: “Increased MP density will also not reduce glare disability when the wavelength conditions between th e target and surround are the sa me. If MP absorbs light from both the target and the surround in equa l proportion, that ratio will stay the same irrespective of the MP level. In such instances, high MP levels might reduce photostress and glare discomfort but it will not make a target more visible (t hat is, improve glare disability). This same interpretation could be applied to other yellow filters (for example,CMS-1525-FC 998 tinted intra-ocular lenses) and may explain w hy yellow filters improve visibility in some situations but not in others.” Rebuttal by requestor : In the real world it is rare that the wavelength of the target and the glare source are the same, because mo st glare sources are broad spectrum and most targets have a color such that the targ et absorbs certain wave lengths and reflects others.

● Hammond’s heterochromatic contrast threshold testing is designed to advantage the blue-light-filtering IOL because it used a small yellow target surrounded by a large violet-blue glare source, which woul d be preferentially filtered out by blue blocking IOLs. Rebuttal by requestor : There is no extant literatur e suggesting that the glare and target sources should have the same spectral characteristics, and shor ter wavelengths such as blue light are scattered more than longer wavelengths, which makes shorter wavelengths more common glare sources and therefore more appropriate for testing.

● The mix of aspheric and spherical blue blocking IOLs in that study group is a confounding variable. Rebuttal by requestor : The use of the Maxwellian optical system controls for these differences in IOL design. (Several othe r commenters also stre ssed this point about the importance of Maxwellian optics in the Hammond et al. study design.)

● Hammond’s photostress tests have no value for assessing the visual performance of older adults in real world si tuations because people do not ordinarily stare directly into brilliant, uncomfortable light sources for many seconds, and any colored orCMS-1525-FC 999 neutral density filter that reduces light e xposure will decrease recovery time from flash blindness. Response : We agree with the requestor that the use of the Maxwellian optical system eliminates any potential confounding due to the mix of aspheric and spherical lens designs in the blue-light-filtering IOL study group. However, we agree with the commenters that a violet-blue glare source surrounding a yellow target may advantage the blue-light-filtering IOL in some of th e testing conducted in the Hammond study. In the real world, it would seem that, under some circumstances, target and glare sources would have similar wavelength profiles, and therefore, according to the literature, a filter would not affect disability glare. Under other circumstances, the target and glares sources may have a different wavelength profile, and then a filter such as the blue blocker IOL could be of some benefit. We also agree with the commenters that there are significant unanswered questions regarding whether the photostress test results are clinically meaningful in proving that blue-light-filte ring IOLs reduce the effects of glare. Overall, there appears to be some signifi cant unanswered questions as to how well the Hammond study supports the requestor’s hypothesis in the real world si tuation of driving during low angle sun conditions. While the Hammond study was offered as underlying support for the hypothesis that blue-light-filtering IOLs reduce the effects of glare on certain aspects of visual performance or visual function, we now tu rn to the study that the requestor has characterized as the “pivotal ” study for its application, whic h was performed by Gray et al., and is described above. The Gray st udy is the primary evidence for the purportedCMS-1525-FC 1000 improved outcome attributed to the blue-light -filtering IOLs of improved driving safety under daytime driving conditions with glare simulating low-angle sun.
Comment : The requestor and several other co mmenters stated that the Gray study is sufficient evidentiary support for the blue blocker NTIOL application. The requestor and several other commenters stated th at the Gray study documents a 0.33 second improvement in the safety margin for patients with blue-light-filtering IOLs as compared to those with colorless IOLs. They maintained that the 0.33 second improvement is clinically significant because driving safety experts agree on the safety benefits of the Center High Mounted Stop Light, which s howed an improvement in stopping time of 0.11 seconds, and has been demonstrated to ha ve prevented automobile accidents. Some commenters suggested that th ere are flaws in the Gray study. (Again, because the requestor submitted a similar application last year and some of the same comments were made in response to last year’s applica tion, the requestor has rebutted many of these comments.) The key points made by some of the commenters in critiquing the Gray study and the associated rebutta ls by the requestor and other commenters are summarized below:

● The computer monitor simulation used by Gray et al. created an unlikely situation in which the pseudopha kic Medicare beneficiary is driving into low-lying sun toward a 4-way intersection on a 2 lane rural highway at 55 miles an hour and must make a left hand turn with one eye shut in front of an oncoming car that is also approaching the intersection at 55 miles per hour.CMS-1525-FC 1001 Rebuttal by requestor : The Gray study represents a real-world test of subject performance to determine critic al patient safety information.

● The Gray driving simulator was a com puter monitor test and not a realistic driving simulator with a car body on a moving base with a wide-field viewing screen. Rebuttal by requestor : The driving simulator used in the Gray study is a validated driving simulator.

● The driving simulator used in the Gr ay study did not conform to guidelines for driving simulators outlined in ANSI Z 80.12-2007, Annex G. In particular, the commenters stated that the simulation should ha ve been performed binocularly instead of monocularly; the study did not mention matching on age, gender, or driving experience; the study did not have exclusion criteria for me dication that may have affected vision or motor abilities; the study did not mention ex clusion criteria for capsular haze or large capsulotomy. Rebuttal by requestor : Patients with pathology including PCO were excluded from the Gray study.

● Sampling approach and bias may be problematic because of the lack of detail on exactly how the subjects were recruited into the study. Potential confounding due to use of a convenience sample, meaning that the sample was chosen at the convenience of the researcher and that there was little or no demonstrated attempt to ensure that the sample accurately represen ts the target population. Rebuttal by requestor : Selection bias was addres sed by enrolling subjects who were matched for age, time after cataract surgery, and visual acuity.CMS-1525-FC 1002

● Commenters further stated that di fferences in judging distance to oncoming vehicles could be attributable to motion pr ocessing differences between the two groups, which is impaired in older drivers.

● The driving simulator used in the Gr ay study is not a valid representation of on-road driving performance in older driver s because the validation study cited in the Gray article was done with novice drivers. Rebuttal by requestor : The trial by Gray et al. used a validated driving simulator system that represents the real-w orld visual experience by drivers. Response : We believe that the commenters raise important questions about the Gray trial design and the driving simulator. The requestor has responded to many of these questions and criticisms, but some remain at issue. Questions also remain about whether the Gray study accurate ly represents real istic driving by Medi care beneficiaries in low angle sun conditions and whether su ch a small study accurately represents the population of Medicare benefici aries. Furthermore, the Gray study is a single 17 patient-per-study arm driving simulator study that is the primary support for the requestor’s assertion that bl ue-light-filtering IOLs result in superior outcomes for Medicare beneficiaries as compared to other IOLs. We must evaluate this study in the context of the totality of the evidence of the impact of glare on driving and the significance of this problem for Medicare bene ficiaries. We believe that a significant question remains as to whether the Gray study results are suffi cient to support the conclusion of a significant re al world improved outcome for blue-light-filtering IOLs in Medicare beneficiaries. We discuss these issues below.CMS-1525-FC 1003
Comment : Commenters asserted that “studi es over the past two decades show that glare problems are not associated with crash involvement in older drivers.” In support of this assertion the commenters cited several studies, including studies by Owsley and Cross. The requestor rebutted th e commenters’ asserti on by stating that none of the studies cited by the commenters invol ved driving simulation or other real-world situations, and that be cause of historical limitations in studying glare, th e cited studies’ methods of driving safety are inaccurate and that the studies are otherwise methodologically flawed. Response : The commenters raise an important issue. The following summary on this issue is from a very recent 2010 revi ew article by Owsley and McGwin (that was submitted by the requestor in its application) and that summarizes the conclusions of the literature (some of which was cited by the commenters): “Disability glare (increased glare sensitivity), particularly among older driv ers, is discussed as a serious threat to the safety of older drivers (e. g., Wolbarsht, 1977) but studies have not scientifically supported this notion (Ball, et al. 1993; Owsle y, Ball, et al., 1998; Owsley, et al., 2001). This failure to find an association between gl are and road safety may be attributed to methodological difficulties in defining “g lare” and in measuring a multifaceted phenomenon (for example, discomfort glare, disability glare), as well as to a poor understanding of what people mean when they say they have “glare” problems. Rubin et al. (2007) reported a seemingl y paradoxical relationship betw een disability glare and motor vehicle collisions. They found that di sability glare reduced crash risk in older drivers with good vision, which c ould not be attributed to cha nges in driving habits (e.g.,CMS-1525-FC 1004 reduced exposure).” Section 416.195(a)(2) of our regulations requires that the lens characteristic of the candidate IOL have esta blished clinical relevance in comparison to currently available IOLs. If, as stated above by Owsley and McGwin, the association between glare and decreased driving safety among the elderly has not been supported by the published scientific evidence as of 2010, a significant question remains as to whether the single new 17-patient-per-group study by Gr ay sufficiently establishes the clinical relevance of blue-light-filte ring IOLs for improving driving safety under glare conditions from low angle sun. We believe that in light of the totality of all of the published evidence regarding glare and driving in ol der adults, as summarized above by Owsley and McGwin, the lone study by Gray is currentl y insufficient to establish the clinical relevance of the blue -light-filtering IOLs.
Comment : One commenter stated that most drivers would use the windshield visor and/or sunglasses, or take other common- sense precautions to mitigate the effects of glare from low angle sun. Response : We believe that this comment introduces a topic that is worthy of further discussion. The intent of the Gray study was to test driving ability during simulated glare from low-angle sun during th e daytime. Glare from low angle sun is encountered when driving east shortly after s unrise and when driving west shortly before sunset. We believe that there is a signifi cant question as to whet her the results of the experiment performed by Gray (assuming for th e purpose of this respon se that the results are valid within Gray’s experimental contex t) represent a real-wor ld improved clinical outcome or clinical benefit in the context of real-world daytime driving during times ofCMS-1525-FC 1005 low angle sun by Medicare beneficiaries. Most people have experienced the bothersome effects of low angle sun (or having the “sun in your eyes”) during a variety of daytime activities including driving. As the commente r pointed out, there are currently several daytime glare countermeasures that are bot h widely recommended by ophthalmologists, optometrists, and others and that have been widely adopted by the public for mitigating the bothersome effects of low angle sun duri ng daytime driving. These include (but are not necessarily limited to) the automobile’s s un visor, tinted windshield glass, polarized sunglasses, and antireflective (AR) coa tings on glasses. Such daytime glare countermeasures are included in the followi ng recommendations for mitigation of the effects of glare from low angle sun during driving by the Vision Council of America:

● Drive cautiously and leave a proper distance to ensure ample reaction time;

● Make it a habit to lower visors , to help block the reflected light;

● Avoid using high-gloss cleaners on dashboards;

● Keep the car windshield clean and th e windshield washer fluid reservoir full;

● When possible, take an al ternate route lined with trees or tall buildings instead of one with extreme glare;

● Turn on headlights to reduce the possibl e poor visibility of oncoming drivers;

● Most importantly, wear s unglasses at all times. Even more important is to wear sunglasses with polarized lenses to re duce glare, and lenses with UV protection to shield the eyes from damage (emphasis added). The benefits of these daytime glare countermeasures are well known by both eye care professionals and the gene ral public. Given all of these common countermeasuresCMS-1525-FC 1006 for managing glare from the sun during driv ing, we do not know, despite the Gray study, exactly what additional benefit blue-light-f iltering IOLs (when combined with the common glare countermeasures described above) would provide to Medicare beneficiaries while driving at times of low angle sun. For example, the Gray study does not assess the function of bl ue-light-filtering IO Ls underneath polariz ed sunglasses that already typically absorb a broad spectrum of light including blue light and also reduce glare through the polarized prope rty of the lenses in the sunglasses. We believe that it would be important to account for these co mmon daytime glare count ermeasures that are in widespread use when assessing the real-wor ld benefit of blue-li ght-filtering IOLs for problems associated with low angle sun while driving.
Comment : One commenter stated that Gray’s decision to limit his experiments to daytime conditions is a critical problem, b ecause nighttime conditions are the greatest challenge to Medicare beneficiaries, causi ng many older drivers to self-restrict their driving to avoid driving at night. Response : The commenter raises the issue of daytime versus nighttime driving, which we believe is an importa nt issue as it relates to th e purported clinic al benefit of blue blocking IOLs to Medicare benefici aries. Specifically, the issue is whether improved driving performance during low angle sun conditions is a clinical outcome that would satisfy 42 CFR 416.195(a)(4), which stat es that there must be evidence that demonstrates that use of the IOL results in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IOLs. The statutory provision that is the basis of this regulation specifie s the following outcomes: (1) reduced risk ofCMS-1525-FC 1007 intraoperative or postoperative complication or trauma; (2 ) accelerated postoperative recovery; (3) reduced induced astigmatism; (4) improved postoperative visual acuity; (5) more stable postoperative vision; or (6) other comparable clinical advantages. The question is whether improved driving performance during lo w angle sun conditions is a “comparable clinical advantage” and, theref ore, an outcome that would satisfy the statutory and regulat ory requirements. The most analogous clinical outcome asso ciated with an expired NTIOL class is the improved night driving associated with the expired reduced spherical aberration NTIOL class. However, there are significan t differences between daytime driving with glare from low angle sun and nighttime dr iving with glare from headlights. The nighttime driving benefit of re duced spherical aberration IOLs was a clinical benefit to Medicare beneficiaries because (other than abst aining from driving at night) there is very little that drivers can do at nighttime to mitig ate the effect of glare from headlights. Therefore, even a modest night driving be nefit from a reduced spherical aberration IOL can have an overall significant impact on Me dicare beneficiaries’ night driving because of the lack of other countermeasures that can assist with night dr iving. However, with daytime driving during low angle sun, an IOL th at possibly mitigates the effects of glare under these conditions appears less signi ficant given all of the other glare countermeasures available to the daytime driver. Furthermore, the most effective means of mitigating the effects of glare is avoidance of the glare source. During night time, this is a significant inconvenience because to do so means not driving at ni ght. However, for glare from the sun, asCMS-1525-FC 1008 mentioned above, there are many countermeas ures for glare cause d by low-angle sun, which is only a problem for certain drivers (tho se driving east in the morning and west in the evening) during a relatively short peri od of time each day. For these drivers, avoidance can be a practical al ternative to driving into the bright sun. As mentioned above, the Vision Council of America recommen ds that drivers take a shady route if available. However, even if an alternat e non-sunny route is not available, Medicare beneficiaries who are particularly bothered (despite using all of the daytime glare countermeasures such as polarized sunglasses, the car’s sun visor, among others) by glare from low-angle sun could simply wait a shor t period of time before driving while the angle of the sun changes so that the sun is in a less glare- inducing position relative to the earth. Unlike nightfall that lasts for hours each day and, therefore, is inconvenient to avoid, waiting a short period of time for the sun to move a bit higher in the sky would be a relatively minor inconvenience for those Me dicare beneficiaries who are particularly sensitive to glare from low angle sun. While this may not be true for the larger working-age population who may be locked into a relatively rigid commuting sche dule and, therefore, may find it difficult due to job obligations to shift their commuting schedules even sligh tly, the overwhelming majority of Medicare beneficiaries tend to be retirees who generally do not face such rigid transportation schedul e restrictions. In their 2007 study, Gray and Regan acknowledge this point as follows : “Our present study is rest ricted to disability glare produced by low sun as experienced by very many drivers on their way to work or returning from work ” (emphasis added). Furthermore, waiting to drive until the low-CMS-1525-FC 1009 angle sun has moved slightly in the morning could have a collateral benefit if doing so allowed the driver to avoid ru sh hour traffic. Driving in lower density traffic would likely lower the probability of a traffic accide nt thereby promoting driving safety, which seems to be one goal of this NTIOL applica tion and other recent developments in IOL technology. Therefore, given the significant di fferences between nighttime driving and daytime driving, we do not believe that im proved driving performance limited only to daytime under conditions of glare from low angl e sun in this context is a “comparable clinical advantage” when comp ared to those outcomes listed above and in the statute and the outcomes associated with the three expired NTIOL classe s, including improved night driving under conditions of glar e from headlights. For this reason (and others discussed elsewhere in this preamble), the reques t does not satisfy 42 CFR 416.195(a)(4) because the purported outcome is not a comparable clin ical advantage for Medi care beneficiaries.
Comment : Some commenters mentioned certain detrimental effects of blue-lightfiltering IOLs, such as blue-light-filtering IOLs negatively affecting: (1) certain aspects of photoreceptor function; (2) as pects of night vision; (3) sl eep and mood; and (4) visual function due to glistenings. Other commenters stated that blue-light -filtering IOLs have none of these detrimental effects. Response : We are aware that there has been, and con tinues to be, a vigorous debate in the literature regarding some of these issues. We do not have enough information to evaluate these issues, wh ich we consider important but somewhat collateral to the issues unde r review for this NTIOL application. The decision on theCMS-1525-FC 1010 blue-light-filtering NTIOL reque st is not based on and does not take into account these particular comments except to acknowledge them and the arguments and data supporting both sides of these issues. Also, we believe that FDA is best situated to address any problems from glistenings. In summary, we have reviewed the application and evidence submitted by the requestor and the public comments received. We conclude that, based on the totality of the available information and our analysis, th e evidence is insufficient to conclude that the blue-light-filtering characteristic of the Acrysof blue-light-filtering IOLs has established clinical relevance in comparis on to currently available IOLs. We also conclude that the evidence does not demonstr ate that the use of the Acrysof blue-lightfiltering IOLs results in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IO Ls. Therefore, Alcon’s request for NTIOL status for its Acrysof blue-li ght-filtering IOLs is denied. b. Requestor/Manufacturer : Bausch & Lomb, Inc. (B&L) Lens Model Numbers : Xact Foldable Hydrophobi c Acrylic Ultraviolet Light-Absorbing Posterior Chamber Intraocu lar Lenses, Models X-60 and X-70 (Xact IOLs). Summary of the Request : B&L submitted a request for CMS to determine that its Xact IOLs meet the criteria for recognition as NTIOLs and to concurrently establish a new class of NTIOLs for “glistening-free” IOLs. Glistenings are fluid-filled microvacuoles that can form within an IO L optic when the IOL is in an aqueous environment. According to B&L, “glisteni ngs have been associated with decreasedCMS-1525-FC 1011 contrast sensitivity, increased glare, decr eased visual acuity, and impaired fundus visualization.” B&L further states that “in some cases, this has led to IOL explantation and exchange, which carries significant ri sks that increase the longer the IOL is implanted.” As part of its request, B&L submitted descriptive information about the candidate IOLs as outlined in the guidance document that is available on the CMS Web site for the establishment of a new class of NTIOLs, as well as information regarding approval of the candidate IOL by the F DA. This information included draft FDA-approved labeling for the Xact IOLs. In its CY 2012 request, B&L asserts that because the Xact IOLs are glistening-free, they eliminate the decrea sed contrast sensitiv ity, increased glare, decreased visual acuity, and im paired fundus visualization as sociated with glistenings, and may likewise decrease the need for explan tations associated with those conditions. B&L also concludes that use of a glistening-free IOL results in measurable, clinically meaningful, improved outcomes in comparison wi th currently available IOLs. B&L also states that the glistening-free characteristic is not described by a previously-approved NTIOL class. As with the other CY 2012 NTIOL app lications discussed in the CY 2012 OPPS/ASC proposed rule, we base our de termination of the B&L application on consideration of the three ma jor evaluation criteria that are discussed above. We reviewed B&L's request to recognize its Xact IOLs as NTIOLs and concurrently establish a new class of NTIOLs, and in the proposed rule we solicited public comment on these candidate IOLs with respect to the established NTIOL criteria as discussed above.CMS-1525-FC 1012 First, for an IOL to be recognized as an NTIOL, we require that the IOL must have been approved by the FDA and claims of specific clinical benefits and/or lens characteristics with established clinical rele vance in comparison with currently available IOLs must have been approved by the FDA fo r use in labeling and advertising. The submitted FDA-approved labeling for the Xact IOLs states the following: “In the IDE [investigational device exemption] clinical trial, ‘glistenings’ were observed in some cases. Glistenings, known to sometimes occur in some other hydrophobic acrylic IOLs, are microscopic vacuoles within the optic of the IOL that are visible through the slit lamp as multiple small refractile specks. Analysis of the clinical data confirmed no effect of glistenings on visual outcomes ” [emphasis added]. “Testing established that glistenings we re eliminated by a change in the IOL hydration solution from 10.0% saline to 0.9% saline. This was confirmed in an additional clinical trial conducte d outside of the United States. In this study, 172 eyes of 142 patients were examined at least once be tween 1 and 6 months, and 123 eyes of 101 patients were examined at least once between 6 months and 2 years. No glistenings were observed at any time.” The FDA-approved labeling for the Xact IOLs does not otherwise reference specific clinical benefits of the glistening-free property. In fact, the above-quoted language on the IDE study from the FDA-approve d labeling states that an “[a]nalysis of the clinical data confirmed no effect of glistenings on visual outcomes.” In the proposed rule (76 FR 42303 through 42309), we stated that we were interested in public comments on the clinical relevance of glistenings in IO Ls, and the incidence of glistenings severeCMS-1525-FC 1013 enough to cause measurable visual symptoms in recently pseudophakic Medicare beneficiaries. In addition, we were interest ed in public comments regarding the assertion by B&L that the glistening-free property associ ated with the Xact IOLs would eliminate the decreased contrast sensitivity, increased glare, decreased visual acuity, and impaired fundus visualization associated with glistenings, and may lik ewise decrease the need for explantations associated with those conditions. Second, we also require that the candidate IOL not be described by an active or expired NTIOL class; that is, it does not share the pr edominant, class-defining characteristic associated with improved clinic al outcomes with designated members of an active or expired NTIOL class. We refer readers to the discussion above for more information on the three expired NTIOL classes. The propos ed class-defining characteristic and associated clinical be nefits of the Xact IOLs, specifically the glistening-free property, cannot be similar to the class-de fining characteristics and associated benefits of the three expired NT IOL classes. In the proposed rule (76 FR 42303 through 42309), we welcomed public comment s that address whether the proposed class-defining characteristic and associated clinical benefits of the candidate B&L IOLs are described by the expired NTIOL classes. Third, our NTIOL evaluation criteria al so require that an applicant submit evidence demonstrating that use of the IOL re sults in measurable, clinically meaningful, improved outcomes in comparison to currently available IOLs. As discussed above, we remain flexible with respect to our view of “currently available lenses” for purposes of reviewing NTIOL requests, in order to allow for consideration of technological advancesCMS-1525-FC 1014 in lenses over time. We al so believe that “currently av ailable lenses” for purposes of reviewing NTIOL requests should depend upon th e class-defining characteristic and the associated purported improved clinical outco me of the candidate NTIOL class. For purposes of reviewing B&L’s request to es tablish a new NTIOL class for CY 2012, we believe that the full spectrum of currently av ailable IOL materials should be represented in the comparator IOLs, but that the particul ar design of the optic (for example, aspheric versus spherical) is less critic al to evaluating the benefits of glistening-free IOLs as glistenings are related more to the IOL op tic material than to the optical surface characteristics of the IOL. In the propos ed rule (76 FR 42303 through 42309), we sought public comment on our view of “currently available lenses” for the purposes of evaluating B&L’s candidate IOLs against currently available IOLs. We reviewed the evidence submitted with B&L’s CY 2012 request. B&L submitted a variety of articles including studies and case reports focused on IOLs with glistenings. It is apparent from these articles that glis tenings are a real phenomenon and that glistenings are primarily associated with acrylic hydrophobic IOLs, but they can also occur to some degree in IOLs of other mate rial types. However, there are several significant questions with respect to glis tenings, and we solicited public comment on these questions as follows:

● Is there a particular IO L material type that is more likely to result in symptomatic glistenings relative to other material types?CMS-1525-FC 1015

● What is the clinical significance (from th e patient’s perspectiv e) of glistenings? More specifically, what evidence is available to demonstrate that glistenings cause any of the following:

○ Decreased contrast sensitivity;

○ Increased glare disability;

○ Decreased visual acuity;

○ Impaired fundus visualization;

○ Symptoms resulting in IOL explantations.

● What is the incidence of glistenings in IOLs currently available in the United
States?

● If a certain level of se verity of glistenings is required before they cause symptoms, what is the incidence of glistenings of this severity level in IOLs currently available in the United States?
Comment : The requestor asserted that th e FDA-approved labeling for the Xact IOLs states that these IOLs are glistening

− free and that such a statement qualifies as a “lens characteristic” that satisfies 42 CFR 416.195(a)(2 ), and that glistening

− free IOLs are not described by an expired NTIOL class. One commenter remarked that the term glistening

− free is imprecise, and wonders whether it means the complete absence of any glistenings whatsoever, regardless of severit y, and whether subclini cal glistenings could be present to some degree in a glistening

− free IOL. Another commenter argued that because the Xact IOL label doe s not identify any approved claim of clinical benefit orCMS-1525-FC 1016 any lens characteristic with established c linical relevance, it does not satisfy the requirements of 42 CFR 416.195(a)(2). Response : We agree with the requestor. As stated above, 42 CFR 416.195(a)(2) can be satisfied by a lens characteristic li sted in the FDA-approved labeling with the evidence of established clini cal relevance in comparison wi th currently available IOLs provided outside of the FDA-approved labeling, such as in peer-rev iewed journals. The Xact IOL FDA-approved labeling states that for patient fo llow-up up to 2 years, “[n]o glistenings were observed at any time.” We accept that statement to mean that the Xact IOLs are glistening

− free, at least for the time period of the study referenced in the FDAapproved labeling. In response to the co mmenter who remarked that the term glistening

− free is imprecise, and asked whether it means the complete absence of any glistenings whatsoever, regardless of severit y, and whether subclini cal glistenings could be present to some degree in a glistening

− free IOL, we believe that, although this is an important point, it will not be discussed further because it is rendered moot by the discussion below. We also agree with th e requester and other commenters that the proposed glistening

− free Xact IOLs are not describe d by an expired NTIOL class.
Comment : The requestor reiterated its belie f that glistenings cause compromised visual performance in patients, and that “[t]he growing con cern regarding glistenings is evidenced by the high level of attention that has been paid to them in the medical literature. A 2010 review article cited ove r 70 studies related to glistenings, most published after 2000, a staggering figure that it self demonstrates that glistenings are widely viewed by clinicians as problematic.” Therefore, accordi ng to the requestor, aCMS-1525-FC 1017 glistening

− free IOL offers the clinical benefit of avoiding visual pr oblems associated with glistenings. The requestor offers the foll owing information as specific evidence that glistenings are clinically significant:

● A study by Gunenc et al. that showed a statistically significant difference in contrast sensitivity at high spatial frequency be tween eyes with and without glistenings;

● A study by Christiansen et al. that show ed decreased visual acuity with a glare source versus without a glare source in patien ts with glistenings and decreased visual acuity in patients with severe glistenings versus patients with mild glistenings;

● A case study by Werner et al. in which an IOL with glistenings was explanted due to impaired fundus visualization;

● There were 24 reports between 19 97 and 2011 of IOL explantation due to glistenings from the FDA medical device adverse event database. Other commenters asserted that the current ly available peer-reviewed literature does not yield any clinical studies supporti ng a clinical benefit associated with the “glistening-free” property of the Xact IOLs. Response : We agree with the commenters who conclude that the clinical significance of glistenings is not established in the ophthalmic literature and, therefore, there is no proven clinical benef it of glistening-free IOLs. Th e requestor is correct that a high level of attention has been paid to glistenings in the ophthalmic literature. However, the majority of the literature on glistenings is either inconclusive with respect to the clinical significance of g listenings or shows no effect on visual function from the glistenings.CMS-1525-FC 1018 The limited evidence offered by the requestor is not dispositive. The requestor is correct that the 2001 Gunenc et al. study showed a statistically significant difference in contrast sensitivity at high spatial frequency be tween eyes with and without glistenings. However, that study showed no difference in vi sual acuity and contrast sensitivity at low or medium spatial frequencies between eyes with and without glistenings. Furthermore, the overall conclusion of the Gunenc et al. study is as follows: “Although glistenings and folding marks were observed after the implantation of Acrysof IOLs, they did not significantly affect visual function ” (emphasis added). Similarly, the conclusion of the 2001 Ch ristiansen et al. study was as follows: “Glistenings occurred frequently in AcrySof IO Ls, with most cases mild. A larger study of this lens is needed to determine whether severe presentations aff ect visual function and to understand how glistenings change over time .” As noted by some commenters, further studies have been performed on the AcrySo f IOLs by Colin, Monestam and others who did not find that glistenings affected visual function. The 2008 Werner et al. paper mentioned by the requestor is a single case report of an explanted IOL due to glistenings. Regarding this patient, Werner stated th at “[a]lthough it was diffi cult to ascertain the exact effect on the patient’s visual function, the pattern of glistening formation was very unusual.” The investigator’s characterization of the glistening pattern in this case makes this case seem more anomalous than typica l. More importantly, considering that the Werner et al. case report is relatively recent, the authors state that “[t]here is still controversy about whether glis tenings affect the visual function of the patient andCMS-1525-FC 1019 whether they progress over ti me[,]” and they cite seven articles in support of this

statement. The lack of a consensus in the literatur e regarding the clinical significance of glistenings is significant for the purposes of this NTIOL application because 42 CFR 416.195(a)(2) requires that the lens characteristic ha ve established clinical relevance, not merely theoretical clinical re levance. If glisteni ngs are not proven through proper scientific studies to aff ect visual function, the clinic al relevance of the glisteningfree lens characteristic is not es tablished. Regarding this point, the requestor stated in its comment letter that “[t]he effects of glis tenings on a patient’s vision are not easily captured using existing tests.” Assuming that th is statement is true, it presents an issue for this application, because 42 CFR 416.195(a)(4 ) requires evidence that demonstrates that use of the IOL results in measurable , clinically meaningful, improved outcomes in comparison with use of currently available IO Ls (emphasis added). If clinical visual function testing cannot measure the effect of glistenings, then it is impossible to determine the extent to which glistenings a ffects patients’ vision. The fourth piece of evidence offered by the requestor regarding the cl inical significance of glistenings is that there were 24 reports between 1997 and 2011 of IOL explantation due to glistenings from the FDA medical device adverse event database . Assuming that these explantations can be accurately attributed to glistenings, 24 cases, among the tens of millions of cataract surgeries performed in the United States sin ce 1997, is too small to establish clinical relevance. In essence, the requestor correct ed a perceived problem (glistenings) with theCMS-1525-FC 1020 Xact IOLs by changing the IOL storage soluti on that eliminated the glistenings, although the glistenings had no effect on visual f unction in patients with the Xact IOLs. In summary, because the applicant has not demonstrated the established clinical relevance of the glistening-free characteristic of the Xact IOLs in co mparison to currently available IOLs, these IOLs do not satis fy 42 CFR 416.195(a)(2). And, because the evidence is insufficient to demonstrate that use of the Xact IOLs result in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IOLs, they fail to satisfy 42 CFR 416.195(a )(4). Therefore, the Xact IOL NTIOL application is denied. c. Requestor/Manufacturer : Hoya Surgical Optics, Inc. (Hoya) Lens Model Numbers : iSert IOL System, Model PY-60R Summary of the Request : Hoya submitted a request for CMS to determine that its iSert IOL System satisfies the criteria for recognition as an NTIOL and to concurrently establish a new class of NTIOLs for “aseptica lly integrated IOL and injector systems.” The iSert IOL System is an IOL preloaded in a plastic, sterile, disposable injection system. According to Hoya, the iSert System provides a lens injector with an integrated IOL inside it within a single, sterile p ackage for delivery to the operating field. According to Hoya, the iSert System has the fo llowing benefits, in th at compared to other IOLs it:

● Eliminates the risk of complications associated with improper processing of reusable forceps or injectors used for all other foldable IOLs;CMS-1525-FC 1021

● Accelerates postoperative recovery through decreased risk of ocular damage due to complications associated with improper processing of re usable forceps or injectors used for other foldable IOLs;

● Provides a clinical advantage compar ed to existing IOLs by allowing the IOL to be placed in the eye wit hout contacting external ocular tissues or reusable injection instruments; and

● Improves overall safety of catarac t/IOL surgery by reducing the number of reusable instruments that must be proper ly cleaned and sterilized between cases. As part of its request, Hoya submitted descriptive information about the iSert System as outlined in the guidance document described above that is available on the CMS Web site for the establis hment of a new class of NTIOLs, as well as information regarding approval of the candidate IOL by the FDA. This information included the FDA-approved labeling, the FDA letter of a pproval, and the summary of safety and effectiveness for the iSert System. As with the other CY 2012 NTIOL requests, we based our determination of the Hoya request on consideration of the three ma jor criteria that are discussed above. We reviewed Hoya's request to recognize its iS ert System as an NTIOL and concurrently establish a new class of NTIOLs. In th e CY 2012 OPPS/ASC proposed rule, we solicited public comment on this candidate IOL with re spect to the established NTIOL criteria. First, for an IOL to be recognized as an NTIOL we require that the IOL must have been approved by the FDA and claims of specific clinical benefits and/or lens characteristics with established clinical rele vance in comparison with currently availableCMS-1525-FC 1022 IOLs must have been approved by the FDA fo r use in labeling and advertising. The FDA-approved labeling for the iSert System states the following under the heading
“DEVICE DESCRIPTION”: “The Hoya iSert TM Model PY-60R Intraocular Lens (IOL) is an ultraviolet absorbing posterior chamber intraocular lens de signed to be implanted posterior to the iris where the lens will replace the optical function of the natural crystalline lens. However, accommodation will not be replaced. PY-60R is lo aded in a disposable injector consists [sic] of Case, Tip, Body, Slider, Rod, Plunger, and Screw.” The FDA-approved labeling for the iSert System states the following under the heading INDICATIONS: “The Hoya iSert TM Model PY-60R Intraocular Le ns is indicated for primary implantation in the capsular bag of the eye fo r the visual correction of aphakia in adult patients in whom a cataractous lens has been removed.” The FDA-approved labeling for the iSer t System does not otherwise reference claims of specific clinical benefits and/or le ns characteristics with established clinical relevance in comparison with currently av ailable IOLs. Secti on 416.195(a)(2) requires that “[c]laims of specific clinical benefits and/or lens characteristics with established clinical relevance in compar ison with currently available IOLs are approved by the FDA for use in labeling and advertising.” The FDA-approved labeling for the iSert System lacks any such claims. The only statement in the above-quoted language from the FDAapproved labeling that is any di fferent from the typical device description and indications for a standard spherical monofocal IOL is the statement that the “PY-60R is loaded in aCMS-1525-FC 1023 disposable injector consists [sic] of Case , Tip, Body, Slider, Rod, Plunger, and Screw.” However, this statement merely describes the IO L as loaded in a disposable injector. It does not appear to describe a benefit or char acteristic of the IOL itself. Therefore, it would appear that the Hoya iSert System PY-60R IOL would not satisfy the requirements of 42 CFR 416.195(a)(2). However, in the pr oposed rule, we solicited public comments on this matter and stated that we would gi ve all comments full c onsideration regarding Hoya’s candidate IOL.
Comment : With regard to whether the Hoya iSert System PY-60R IOL describes a benefit or characteristic of the IOL itself su ch that it would satisfy the requirements of 42 CFR 416.195(a)(2), two commenters stated that the HOYA iSert System has neither an approved claim of clinical benefit nor a characteristic with established clinical relevance attributable to the actual IOL that is a part of the HOYA iSert System, and therefore, the HOYA iSert System is not eligible for NTIOL status. Response : We agree with these commenters. Because the IOL itself within the Hoya iSert System lacks an associated claim or IOL characteristic as required by 42 CFR 416.195(a)(2), the Hoya iSert System is not eligible for NTIOL status, and Hoya’s requ est for NTIOL status for the Hoya iSert System is denied. d. Requestor/Manufacturer : Lenstec, Inc. (Lenstec) Lens Model Numbers : Softec HD PS Summary of the Request : Lenstec submitted a request for CMS to determine that its Softec HD PS meets the criteria for recogn ition as an NTIOL and to concurrentlyCMS-1525-FC 1024 establish a new class of NTIOLs that resu lt in a “reduction of postoperative residual refractive error.” According to Lenstec, the Softec HD PS IOL achieves a “reduction of postoperative residual re fractive error” by its av ailability in 0.25 di opter (D) increments with a tolerance of ±0.11 D, while all other cu rrent monofocal IOLs are available in only 0.50 D increments with tolerances allowed up to ±0.40 D. According to Lenstec, patients implanted with the Softec HD PS are much more likely to be closer to the intended refractive outcome than those implanted with IOLs available only in 0.50 D increments. This greater refractive accur acy of the Softec HD PS is due to the chosen IOL power likely being closer to the calculated (des ired) IOL power and because the tighter tolerance of the 0.25 D increment IOL results in the actual power of the implanted IOL to be closer to the power that the surgeon expect s to implant into the patient. Lenstec also asserts that because the 0.25 D increment IOL provides greater IOL power accuracy, patients have less postoperative residual refr active error and hence reduced postoperative blur. As part of its request, Lenstec submitted descriptive information about the candidate IOLs as outlined in the guidance document that is available on the CMS Web site for the establishment of a new class of NTIOLs, as well as information regarding approval of the candidate IOL by the FDA. This information included the FDA-approved labeling, FDA approval letter, and summary of safety and effectiveness for the Softec HD
PS IOL. As with the other three CY 2012 NTIOL applications discussed above, we based our determination of the Lenstec applica tion on consideration of the three major evaluation criteria that are di scussed above. We reviewed Lenstec's request to recognizeCMS-1525-FC 1025 its Softec HD PS IOL as an NTIOL and concu rrently establish a new class of NTIOLs. In the CY 2012 OPPS/ASC proposed rule, we solicited public comment on this candidate IOL with respect to the establishe d NTIOL criteria as discussed above. First, for an IOL to be recognized as an NTIOL we require that the IOL must have been approved by the FDA and claims of specific clinical benefits and/or lens characteristics with established clinical rele vance in comparison with currently available IOLs must have been approved by the FDA fo r use in labeling and advertising. The submitted FDA-approved labeling for the So ftec HD PS IOL states under the heading DEVICE DESCRIPTION that “[t]he [LENSTEC Softec HD PS] IOL is offered in quarter diopter increments from 15.0 to 25.0.” The FDA-approved labeling for the Softec HD PS IOL does not otherwise reference claims of specific clinical benefits and/or lens characteristics with established clinical rele vance in comparison with currently available IOLs. We were interested in public comments on whether an IOL being offered in quarter diopter increments can be consider ed a “lens characteristic with established clinical relevance in compar ison with currently available IOLs,” as required by 42 CFR 416.195(a)(2), or whether IOL availability in quarter diopter increments is more appropriately considered not a lens characteri stic per se, but instead just a manufacturer specification. In the proposed rule (76 FR 42303 through 42309), we also sought public comments on the clinical relevance of an IOL being available in quarter diopter increments. Second, as required by 42 CFR 416.195(a)(3 ), the candidate IOL must not be described by an active or expired NTIOL class; that is, it does not share the predominant,CMS-1525-FC 1026 class-defining characteristic associated with improved clinical outcomes with designated members of an active or expired NTIOL class. Refer to the discussion above for more information on the three expired NTIOL classe s. Lenstec states the following in its application: “The Softec HD IOL, the parent to th e Softec HD PS, was first approved for marketing in the United States on April 17, 2010 and on March 15, 2006 in the ‘Outside the US’ (OUS) environment. This IOL is in cluded in the just-close d ‘Reduced Spherical Aberration’ NTIOL category. The Softec HD PS was approved for marketing by the FDA on February 2, 2011. It is currently pending approval for OUS marketing. Both IOLs are single piece, hydrophilic acrylic, aspheric, monofocal IOLs. The difference between the two is that the Softec HD has pr eviously been available in whole, 0.50 and 0.25 diopter increments, based on dioptric power. The Softec HD PS is offered only in the dioptric range of 15.0 D to 25.0 D, in 0.25 diopter increments (each of which is manufactured to a tolerance of ±0.11D).” Based on this statement by Lenstec, the Softec HD PS is the same lens as the Softec HD, but the Softec HD PS is available only in 0.25 D increments for a specific power range instead of being available (as is the Softec HD) in 1.0, 0.5, and 0.25 D increments. The Softec HD was included in the expired Reduced Spherical Aberration NTIOL class, and both of these IOLs share the asphericity characterist ic that defines the expired Reduced Spherical Aberration NTIOL cl ass. It appears that the predominant characteristic of the Softec HD PS could be asphericity, as it affects the optical characteristics of the lens. Although the availability of the Softec HD PS in 0.25 DCMS-1525-FC 1027 increments allows more IOL power choices fo r the surgeon, it does not appear to affect the functionality of the IOL. In the propos ed rule, we requested comments regarding what characteristic of the Softec HD PS is predominant, asphericity or availability of the IOL in 0.25 D increments. Third, our NTIOL evaluation criteria al so require that an applicant submit evidence demonstrating that use of the IOL re sults in measurable, clinically meaningful, improved outcomes in comparison to currently available IOLs. As discussed above, we remain flexible with respect to our view of “currently available lenses” for purposes of reviewing NTIOL requests, in order to allow for consideration of technological advances in lenses over time. We al so believe that “currently av ailable lenses” for purposes of reviewing NTIOL requests should depend upon th e class-defining characteristic and the associated purported improved clinical outco me of the candidate NTIOL class. For purposes of reviewing Lenstec’s request to establish a new NTIOL class for CY 2012, we believe that the full spectrum of currently available monofocal IOLs should be represented in the comparator IOLs. Lenst ec asserts that what makes its candidate IOL superior to other currently available IOLs is improved IOL power accuracy as compared to IOLs available in 0.50 D increments, and because the Softec HD PS provides greater IOL power accuracy patients implanted with it have less postoperative residual refractive error and hence reduced post-operative blur. We reviewed the evidence submitted with Lenstec’s CY 2012 request. Lenstec submitted information and reviewed the litera ture on IOL optics related to the Softec HD PS. Lenstec relies primarily on one study that is the subject of an arti cle that is currentlyCMS-1525-FC 1028 in press and another unpublished study to support its hypothesis that the Softec HD PS IOL results in less postoperative refractiv e error than other IOLs. The first study submitted by Lenstec was the study that it c onducted under an IDE for FDA approval of the Softec HD PS IOL. This study is being pub lished in the journal, Contact Lens and Anterior Eye ( Brown DC , Gills JP 3rd , et al. Prospective multicenter trial assessing effectiveness, refractive predictability and safety of a new aberra tion free, bi-aspheric intraocular lens. Cont Lens Anterior Eye. 2011 May 24 (electronic publication in advance of print release), and is av ailable on the Internet at http://www.sciencedirect.co m/science/article/pii/S1367048411000634 . Refractive accuracy was not a planned outcome variable in this study. There was no control group in this study that would have allowed the inve stigators to control for all of the variables that impact post-cataract su rgery refractive outcome and/or isolate the effect of the availability of the Softec HD PS IOL in quart er diopter increments. Lenstec compared the postoperative refractive erro rs of these study subjects to th e results from an unrelated study performed outside of the United States (using IOLs that were available only in 0.50 D increments) and concluded based on th is comparison that implantation of the Softec HD PS IOL, which is available in quart er diopter increments, results in superior refractive outcomes as compared to other IOLs. The second study is a retrospective st udy of cataract cases with aspheric monofocal IOL implantation between 2009 and 2011. Of the 118 eligible eyes, 67 were implanted with IOLs available in 0.25 D in crements and labeled with a manufacturing tolerance of ±0.11D (the labe led group) and 51 were implan ted with IOLs available inCMS-1525-FC 1029 0.50 D increments without a labeled manufact uring tolerance (the unlabeled group). Postoperative outcomes were assessed, and pr ediction error was calculated and compared between groups. Mean erro r of prediction was -0.03 (±0.35) D for the labeled group and -0.05 (±0.46) D for the unlabeled group (p=0.64) post optimization. Mean absolute error of prediction was statistical ly significantly smaller in the labeled group (0.26±0.23 D) than the unlabeled group (0.37±0.28 D, p=0.04). It was observed th at within ±0.25 D prediction error was achieved in 63 percent of the patients in the labeled group compared to 43 percent in the unlabel ed group (p=0.03), and for with in ±0.50 D, 84 percent and 69 percent (p=0.06), respectively. In the proposed rule (76 FR 42303 through 42309), we requested comments from the public regard ing the Lenstec NTIOL request and the evidence submitted by Lenstec, and in partic ular we requested public comment on the following:

● What is the clinical significance (from the patient’s perspective) of a small amount of residual spherical refract ive error after cat aract surgery?

● What is the likelihood that a Medicar e beneficiary receiving a monofocal IOL will require some form of postoperative re fractive correction (that is, post-cataract surgery glasses), which is a Medicare benefit?

● If the overwhelming majority of Medi care beneficiaries r eceiving a monofocal IOL will require some form of postoperative refractive correction (that is, post-cataract surgery glasses), does that lessen the clini cal significance of reduced postoperative residual refractive error?

● Are the studies described above properl y designed to test Le nstec’s hypothesis?CMS-1525-FC 1030

● Do the studies described above ad equately prove Lenstec’s hypothesis?
Comment : Several commenters stated that av ailability in 0.25 D increments with a tolerance of +/- 0.11 D is a lens characteristi c that satisfies criter ion 1. One commenter argued that lens power increments are not a characteristic within the meaning of the NTIOL regulations, and, even if they are, th ey have no established clinical relevance. Response : We agree with the majority of the commenters that, for the purposes of this NTIOL application, availability in 0.25 D increments with a tolerance of ± 0.11 D for the HD PS IOL is a lens characteristic within the meaning of the regulation. Whether the requestor has established the clinical re levance of this characteristic is discussed further below.
Comment : Several commenters believed th at, for the purposes of this NTIOL application, the predominant characteristic of the HD PS IOL is availability in 0.25 D increments with a tolerance of ± 0.11 D and not asphericity re sulting in reduced spherical aberration. One commenter stated that becau se Lenstec has not presented evidence to distinguish the contribution of the 0.25 D in crements from the contribution of the aspheric optic (an expired NTIOL class) to the optical performance of the lens, the 0.25 D increments cannot be considered the predominant characteristic and the Lenstec application should be dis qualified from consideration for a new NTIOL category. Response : We agree with the majority of commenters. As discussed above, we believe that when the clinical outcomes associ ated with different lens characteristics are related, then comparative clinical data are required to demonstrate that one characteristic is predominant over another. However, if the clinical outcomes associated with theCMS-1525-FC 1031 different lens characteristics are sufficiently unrelated, then comparative clinical data are not required to demonstrate the predominance of a characteristic as it relates to the clinical outcome associated with the lens ch aracteristic that is the subject of NTIOL review. In the case of this candidate IOL, the purported clinical benefit is greater refractive precision whereas the clinical be nefit of reduced spherical aberration is improved night driving. We be lieve that these outcomes ar e sufficiently unrelated such that comparative clinical data are not requ ired to demonstrate the predominance of the 0.25 D increments as it relates to greater refractive precision.
Comment : Many commenters supported NTIO L designation for the HD PS IOL. The commenters are primarily ophthalmologist s who related their anecdotal experience with the HD PS lens stating that it was their belief that their patients benefited from this IOL. Many commenters also believed that th e studies described above are sufficient to demonstrate a clinical benefit for the HD PS IOL. Some of thes e commenters reported the results of case series from their practi ces that, according to them, support greater refractive precision of the HD PS IOL versus another lens. One commenter summarized data to support the position th at the HD PS remains in a more stable position in the eye postoperatively. Several commenters stated th at whether or not a patient must wear distance correction postoperatively has no bear ing on whether greater refractive precision should be considered an improved outcome for patients. Response : We appreciate these comments and that several ophthalmologists believe that the HD PS benefits their patients. However, NTIOL status requires evidence of an improved clinical outcome versus currently available IOLs, and the underlyingCMS-1525-FC 1032 studies must be well-controlled such that the improved outcome can be appropriately attributed to the candidate IOL characterist ic. We discuss clinical outcomes and the evidentiary requirements in greater detail below.
Comment : One commenter stated that the results of the HD PS are not significantly different than those of other cu rrently available IOLs. The commenter cited studies by Aristodemou et al. a nd Norrby et al. using IOLs av ailable in 0.5 D increments showing results that are similar to Brown et al., one of the studies submitted by the requestor summarized above. The commenter also stated that the results of Brown et al. are average and that similar or better results can be obtained with lenses supplied in 0.5 D increments by manufacturers adhering to th e ISO 11979-2 tolerances. In addition, the commenter remarked that Brown et al. has several study design flaws and other deficiencies, including refrac tive predictability not being a planned outcome of the study, no comparator lens in the study resulting in bias, and inappropriat e comparison studies. Also, this commenter stated th at the number of subjects requ ired to show a statistically significant difference in refractive error for lenses provided in 0.25 D steps versus 0.5 D steps would be many thousands for each IOL type. The commenter also criticized the retrospective design of the second study subm itted by the requestor (summarized above), and stated that the results are not significantl y different from those of published studies of refractive outcomes for IOLs available in 0.5 D increments. Response : We agree with this commenter a nd believe that these points merit further discussion. As cataract surgery has improved in all aspects over the past several decades, refractive outcomes have become even more important as many of the otherCMS-1525-FC 1033 issues that historically have affected the ultimate postopera tive outcome, that is, how well the patient sees after surgery, have been solve d. There is a certain intuitive appeal to the hypothesis proffered by the requestor that sma ller dioptric increments and, therefore, a greater number of available individual lens powers requires less rounding or approximation of the implant pow er and therefore a postoperativ e refractive state that is closer to the target. As intuitively appealing as this concept is, we believe that it should be evaluated in the context of the many factors that affect the ultimate refractive state of the patient after cataract surgery. These include, but are not limited to, the anatomy and functioning of the patient’s eye, the surgical technique , aspects of the IOL unrelated to the power increment, preoperative refractive error, sy stemic factors, A-scan method, IOL power calculation, and surgeon specific factors, among others. All of these factors would have to be properly controlled in a la rge, prospective randomized clinic al trial in order to try to prove the underlying hypothesis. An appropriate control/com parator IOL is absolutely essential. The studies submitted by the requestor and the anecdotal reports submitted by the commenters who use the HD PS IOL fall far s hort of this evidentiary requirement. In addition, greater refractive pr ecision alone is not enough, as one would have to prove a superior outcome of significance to the aver age Medicare beneficiary, such as true spectacle independence for dist ance vision. Most patients would not notice (even if it were the case) that their postoperative refrac tive state was a bit closer (that is, within measurement error) to their target refraction if they still had to wear spectacles to achieve functional distance vision.CMS-1525-FC 1034
Comment : One commenter stated that as a practical matter the variability in postoperative refractive state due to other factors exceeds 0.25 D, and that patients will not benefit from this “pseudo-accuracy.” The commenter suggested that the actual limitation in postoperative refractive stat e currently lies with the preoperative measurement techniques, and that when the ac curacy of these techniques improve, IOLs with 0.25 D increments may be of benefit to patients. Response : We generally agree with this comm enter, but we are not sure whether the HD PS IOL would provide greater actual refractive accuracy or, as the commenter stated, “pseudoaccuracy.” We also agree that the preoperative measurements are critical for accuracy but suffer from limitations and are highly variable from surgeon to surgeon. That is why a large, prospectiv e, randomized, controlled clinical trial is necessary, with careful attention in the trial design to all of the factors that influence refractive outcome. In summary, we have reviewed the application and evidence submitted by the requestor and the comments received. We conclude that because the evidence submitted is insufficient to conclude that the 0.25 D increment ± 0.11 D tolerance characteristic of the Lenstec HD PS IOL has established clinical relevance in comparison to currently available IOLs, and because the evidence pres ented does not demonstr ate that the use of the HD PS IOL results in measurable, clin ically meaningful, improved outcomes in comparison with use of currently available IO Ls for Medicare beneficiaries, Lentec’s request for NTIOL status for its HD PS IOL is denied.
Comment : One commenter suggested certain changes to the NTIOL regulations, including having FDA as the onl y evaluator of clinical bene fit for candidate IOLs andCMS-1525-FC 1035 establishing a timeframe for when a candidate IOL can be considered new and therefore eligible for NTIOL payments. Response : We believe these suggestions may have some merit and will consider exploring them in future rulemaking. We would like to briefly address what may be a misunderstanding or misconception among some of the commenters regarding the purpose and role of the NTIOL payment adjustment. Several commen t letters from ophthalmologists included a statement similar to the following: “I w ould like to have lens X or a lens with characteristic X available to my patients.” We want to make it clear that the FDA has approved all of the IOLs that are the subject of the CY 2012 NTIOL applications, and the NTIOL candidate lenses are available on the U.S. market to ophthalmologists. Those ophthalmologists along with ASCs can freely choose to implant any of this year’s candidate IOLs, with payment for the IOL bundled into the facility payment for the cataract with IOL implantation surgery. From the comments, it appears that at least three of the four candidate IOLs have a current following among ophthalm ologists. In fact, one of this year’s candidate IOLs is the curr ent U.S. market leader. NTIOL status does not affect U.S. market availability or Medica re coverage of an IO L. Instead, the NTIOL payment adjustment is reserved for ne w technology IOLs with sound evidence of measurable, clinically meaningful, improve d outcomes in comparison with currently available IOLs, and these outcomes must have a meaningful impact on Medicare beneficiaries.CMS-1525-FC 1036 Finally, we appreciate IOL manufacturers’ interest in the NTIOL program, and encourage the submission of future applica tions as new IOL tec hnology is developed. However, we strongly encourage applican ts to pay close attention to the NTIOL regulatory requirements, which are rigorous and are discussed extensively above in this final rule with comment period and in prior OPPS/ASC rules. We emphasize that an IOL characteristic or claim of supe riority and associated data that may be useful for marketing purposes are not necessarily sufficient for NT IOL status, which requires sound scientific proof of measurable, clinically meaningf ul, improved outcomes in comparison with currently available IOLs for Medicare beneficiaries. 4. Payment Adjustment The current payment adjustment for a 5-year period from the implementation date of a new NTIOL class is $50 per lens. Since implementation of the process for adjustment of payment amounts for NTIOLs in 1999, we have not revised the payment adjustment amount, and we did not propose to revise the payment adjustment amount for
CY 2012. We did not receive any public comments on the amount of the payment adjustment, and we are not revising th e payment adjustment amount for CY 2012. 5. Announcement of CY 2012 Deadline for Submitting Requests for CMS Review of Appropriateness of ASC Payment for Inserti on of an NTIOL Following Cataract Surgery In accordance with 42 CFR 416.185(a) of our regulations, CMS announces that in order to be considered for payment eff ective January 1, 2013, requests for review of applications for a new class of new technol ogy IOLs must be received at CMS by 5 p.m.CMS-1525-FC 1037 EST, on March 2, 2012. Send requests to ASC/ NTIOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Servi ces, 7500 Security Boulevard, Baltimore, MD 21244-1850. To be considered, requests for NTIOL reviews must include the information requested on the CMS Web site at: http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf

. F. ASC Payment and Comment Indicators 1. Background In addition to the payment indicators that we introduced in the August 2, 2007 final rule, we also created final comment indicators for the ASC payment system in the CY 2008 OPPS/ASC final rule with 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 services including radiology services , brachytherapy sources, OPPS pass-through devices, corneal tissue acquisition services, drugs or biologicals, or NTIOLs. We also created Addendum DD2 that lis ts the ASC comment indicators. The ASC comment indicators used in Addenda AA and BB to the proposed rules and finalCMS-1525-FC 1038 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 new HCPCS codes for the next calendar year for which the interim payment indicator assi gned is subject to comment. The comment indicator “NI” is also assigned to existing codes with substantial revisions to their descriptors such that we consid er them to be describing new services, as discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60622). In this CY 2012 OPPS/ASC final rule with comm ent period, we respond to public comments and finalize the ASC treatment of all codes that are labeled with comment indicator “NI” in Addenda AA and BB to the CY 2011 OPPS/ASC final rule with comment period. These addenda can be found in a file labeled “January 2011 ASC Approved HCPCS Code and Payment Rates to Reflect the Medicare and Medicaid Extenders Act of 2010” in the ASC Addenda Update section of the CMS Web site. The “CH” comment indicator was used in Addenda AA and BB to the CY 2012 OPPS/ASC proposed rule (which were available via the Intern et on the CMS Web site) to indicate that the payment i ndicator assignment has changed for an active HCPCS code; an active HCPCS code is newly recognized as payable in ASCs; or an active HCPCS code is discontinued at the end of the current calendar year. The “CH” comment indicators that are publ ished in the final rule with comme nt period are provided to alert readers that a change has been made from one calendar year to the next, but do not indicate that the change is subject to comment. The fu ll definitions of the proposedCMS-1525-FC 1039 payment indicators and comment indicators we re provided in Adde nda DD1 and DD2 to the CY 2012 OPPS/ASC proposed rule (which were available via the Internet on the CMS Web site). 2. ASC Payment and Comment Indicators The revised ASC payment system included a 4-year transition to payment rates under the standard methodology for the procedures on the ASC list in CY 2007. CY 2011 was the first year of full paymen t under the standard methodology for the revised ASC payment system. Payment indi cators “A2” (Surgical procedure on ASC list in CY 2007, payment based on OPPS relative payment weight) and “H8” (Device-intensive procedure on ASC list in CY 2007; paid at adjusted rate) were developed to identify procedur es that were included on the list of ASC covered surgical procedures in CY 2007 and were, therefore, subject to transitional payment prior to
CY 2011. Because the 4-year transi tional payment period has ended and it is no longer necessary to identify device-intensive pro cedures that are subject to transitional payments, in the CY 2012 OPPS/ASC proposed rule (76 FR 42310), we proposed to delete the ASC payment indicator “H8.” We proposed that all device-intensive procedures, for which the modified rate ca lculation methodology will apply, be assigned payment indicator “J8” in CY 2012 and later. In addition, we proposed to modify the definition for payment indicator “J8” by removing “added to ASC list in CY 2008 or later” as this distinct ion is no longer necessary.CMS-1525-FC 1040 Although payment indicator “A2” is no longer required to identify surgical procedures subject to transitional payment, we proposed to retain payment indicator “A2” because it is used to identify procedures that are exempted from application of the officebased designation. As detailed in section XIV.K. of the proposed rule (76 FR 42336 through 42349), we proposed to establish an ASC Quality Repo rting Program with the collection of seven claims-based quality measures beginning in CY 2012. We proposed to require ASCs to report on ASC claims a quality data code (QDC ) to be used for reporting quality data. We proposed that an ASC would need to add a QDC to any claim involving a proposed claims-based quality measure. CMS is in the process of developing QDCs for each adopted claims-based quality measure. The QDC will be a CPT Category II code or a HCPCS Level II G-code if an appropriate CPT code is not available. More information on the ASC Quality Reporting Program is provided in section XIV.K. of this CY 2012 OPPS/ASC final rule with co mment period. Additionally, CMS proposed to create a new ASC payment indicator “M5” (Quality meas urement code used for reporting purposes only; no payment made) for assignment to the QDCs to clarify that no payment is associated with the QDC for that claim. We proposed that this payment indicator would be effective January 1, 2012. We did not propose any changes to the defi nitions of the ASC comment indicators for CY 2012. We refer readers to Addenda DD1 and DD2 to the CY 2012 OPPS/ASC proposed rule (which were referenced in sec tion XVII. of the proposed rule and availableCMS-1525-FC 1041 via the Internet on the CMS Web site) for the complete list of ASC payment and comment indicators proposed for the CY 2012 update. We did not receive any public comments on the ASC payment and comment indicators. Therefore, we are finalizing our proposed CY 2012 payment and comment indicators, without modification, in Addenda DD1 and DD2 to this final rule with comment period (which are available vi a the Internet on the CMS Web site). G. ASC Policy and Payment Recommendations MedPAC was established under section 1805 of the Act to advise Congress on issues affecting the Medicare program. Subpa ragraphs (C) and (D) of section 1805(b)(1) of the Act require MedPAC to submit reports to Congress not late r than March 15 and June 15 of each year that present it s Medicare payment policy reviews and recommendations and its examination of issues affecting the Medicare program, respectively. The March 2011 MedPAC “Re port to the Congress: Medicare Payment Policy” included the following recommendation relating specifically to the ASC payment system for CY 2012: Recommendation 5 : The Congress should implemen t a 0.5 percent increase in payment rates for ambulatory surgical center services in calendar year 2012 concurrent with requiring ambulatory surgical cent ers to submit cost and quality data. CMS Response : In the August 2, 2007 final rule (72 FR 42518 through 42519), we adopted a policy to update the ASC conversion factor for consistency with section 1833(i)(2)(C) of the Act, which require s that, if the Secretary has not updated the ASC payment amounts in a calendar year, the payment amounts shall be increased by theCMS-1525-FC 1042 percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U) as estimated by the Secretary for the 12-month pe riod ending with the midpoint of the year involved. The statute set the update at ze ro for CY 2008 and CY 2009. We indicated that we planned to implement the annual upda tes through an adjustment to the conversion factor under the ASC payment system be ginning in CY 2010 when the statutory requirement for a zero update no longer applie d. Further, we noted that that we would update the conversion factor for the CY 2010 ASC payment system by the percentage increase in the CPI-U (c odified at § 416.171(a)(2)). As we indicated in the CY 2010 OPPS/A SC final rule with comment period (74 FR 60622), we did not require ASCs to submit cost data to the Secretary for CY 2010. We explained that the 2006 GAO repo rt, “Medicare: Payment for Ambulatory Surgical Centers Should Be Based on the Hospital Outpatient Payment System” (GAO-07-86), concluded that the APC groups in the OPPS reflect the relative costs of surgical procedures performed in ASCs in the same way they reflect the relative costs of the same procedures when they are performed in HOPDs. Consistent with the GAO findings, CMS is using the OPPS as the basis for the ASC payment system, which provides for an annual revision of the AS C payment rates under the budget neutral ASC payment system. In addition, we noted that, under the methodology of the revised ASC payment system, we do not utilize ASC cost information to set and revise the payment rates for ASCs, but instead rely on the relativity of hospital outpatient costs developed for the OPPS, consistent with the recommendati on of the GAO. Furthermore, we explainedCMS-1525-FC 1043 that we have never required ASCs to rou tinely submit cost data and expressed our concern that requiring this could be administratively burdensome for ASCs. In 2009, MedPAC made a similar r ecommendation to that made in Recommendation 5 above. In light of that MedPAC recommendation, in the CY 2010 OPPS/ASC proposed rule (74 FR 35391), we so licited public comment on the feasibility of ASCs submitting cost information to CMS, including whether costs should be collected from a sample or the universe of ASCs, the administrative burden associated with such an activity, the form that such a submission could take considering existing Medicare requirements for other types of facilities and the scope of ASC services, the expected accuracy of such cost information, and any other issu es or concerns of interest to the public on this topic. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60623), we summarized and responded to these comments. As noted in that final rule with comment period, commenters expressed varied opinions re garding the feasibility of requiring ASCs to submit cost data to the Secretary. Some commenters believed th at requiring ASCs to submit such data would not be an insurmount able obstacle and pointed out that other small facilities submit cost reports to CMS. They argued that ASC cost reports are necessary to assess the adequacy of Medica re payments and evaluate the ASC update. Other commenters, however, opposed the requir ement that ASCs submit cost data to CMS because they believed such a requirement would be unnecessary and administratively burdensome. Commenters ge nerally supported a requirement that ASCs report quality data. We refer readers to the CY 2010 OPPS/ASC final rule with commentCMS-1525-FC 1044 period for a full discussion of the comments we received on the feas ibility of requiring ASCs to report cost and quality data ( 74 FR 60623). Consistent with our CY 2010 policy, we proposed not to require ASCs to s ubmit cost data to the Secretary for CY 2011 (75 FR 46356 through 463557). We stated that we continue to believe that our established methodology results in appropriate payment rates for ASCs. For CY 2012, consistent with this policy and for the same reasons, we did not propose to require ASCs to submit cost data (76 FR 42311). However, we did propose to require ASCs to submit quality data beginning in CY 2012. Section 109(b) of the MIEA-TRHCA (P ub. L. 109-432) gives the Secretary the authority to implement ASC quality measure re porting and to reduce the payment update for ASCs that fail to report those requ ired measures. In the CY 2012 OPPS/ASC proposed rule, we proposed to require ASCs to report seven quality measures in CY 2012. Details associated with ASC quality reporting proposed for CY 2012 were discussed in section XIV.K. of the CY 2012 OPPS/ASC proposed rule (76 FR 42336 through 42349). Finally, in the CY 2012 OPPS/ASC proposed rule ( 76 FR 42311), we did not propose to implement MedPAC’s recomme nded CY 2012 ASC update of 0.5 percent. The annual update to the ASC payment system is the CPI-U . Section 3401(k) of the Affordable Care Act requires that the annual ASC payment update be reduced by a productivity adjustment. As discussed in section XIII.H.2.b. of the proposed rule (76 FR 42312 through 42313), the Secretary esti mated that the CPI-U is 2.3 percent andCMS-1525-FC 1045 the MFP adjustment is 1.4 percent. Ther efore, we proposed a 0.9 percent update for
CY 2012.
Comment : Commenters urged CMS to require AS Cs to routinely report cost data to allow for future validation of the relati ve appropriateness of ASC payment weights and rates. MedPAC commented th at ASCs should be required to submit cost and quality data, arguing that ASC cost data are needed to examine whether an existing input price index is an appropriate proxy for the costs of ASCs or whether an ASC-specific market basket should be developed. MedPAC poi nted out that businesses such as ASCs typically keep records of their costs for f iling taxes and other purposes, and other small providers, such as home health agencies and hospices, submit cost data to CMS. MedPAC stated that CMS should create a stre amlined process for ASCs to submit cost data in order to minimize the burden on ASCs and CMS. Other commenters, however, supported CMS’ proposal not to require ASCs to routinely submit cost data, a process that the commenters characterized as administratively burdensome. The commenters stated that the quality of such data, if required, would be questionable because of the varying types of services and cost structures among ASCs and would not be suitable for ratesetting. Response : We did not propose to require AS Cs to submit cost data to the Secretary for CY 2012 because, as noted previo usly in this section and in the CY 2011 OPPS/ASC final rule with co mment period (75 FR 72058), we continue to believe that our established methodology results in appropria te payment rates for ASCs. Therefore, we are finalizing our proposal not to require co st reporting in this final rule withCMS-1525-FC 1046 comment period. We will keep the commente rs’ perspectives about collecting cost information from ASCs in mind as we furthe r consider the adequacy of the Medicare ASC payment rates. We also appreciate th e commenters’ perspectives regarding ASC quality reporting and refer read ers to section XIV.K. of th is final rule with comment period for more detailed discus sion of ASC quality data reporting. H. Calculation of the ASC Conversion Factor and the ASC Payment Rates 1. Background In the August 2, 2007 final rule (72 FR 42493), we established our policy to base ASC relative payment weights and payment ra tes under the revised ASC payment system on APC groups and relative payment weights. Consistent with that policy and the requirement at section 1833(i)(2)(D)(ii) of th e Act that the 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 equal to aggreg ate Medicare expenditu res that would have occurred in CY 2008 in the ab sence of the revised system, taking into consideration the cap on ASC payments in CY 2007 as require d under section 1833( i)(2)(E) of the Act (72 FR 42522).CMS-1525-FC 1047 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 expenditures 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 hospital outpatient, ASC, and MPFS payment systems. However, because coinsurance is almost always 20 percent for ASC services, this interpretation of expe nditures 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 XIII. D.2.b. of this final rule with comment period)CMS-1525-FC 1048 the established policy is to set the rela tive payment weights so that the national unadjusted ASC payment rate does not ex ceed the MPFS unadjusted nonfacility PE RVU-based amount. Further, as discussed in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66841 through 66843), we also adopted altern ative ratesetting methodologies for specific types of services (f or example, device-intensive procedures). As discussed in the August 2, 2007 final rule (72 FR 42518) and as codified at § 416.172(c) of the regulations, the revised ASC payment system accounts for geographic wage variation when calculating individual ASC payments by applying the pre-floor and pre-reclassified hospital wage indices to th e labor-related share, which is 50 percent of the ASC payment amount. Beginning in CY 2008, CMS accounted for geographic wage variation in labor cost 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, using updated Core Based Statis tical Areas (CBSAs) issued by OMB in June 2003. The reclassification provision prov ided at section 1886(d)(10) of the Act is specific to hospitals. We believe that using the most recently availa ble raw pre-floor and pre-reclassified hospital wage indices results in the most appropriate adjustment to the labor portion of ASC costs. In addition, use of the unadjusted hospital wage data avoids further reductions in certai n rural statewide wage inde x values that result from reclassification. We continue to believe that the unadjusted hospita l wage indices, which are updated yearly and are used by many other Medicare payment systems, appropriately account for geographic variati on in labor costs for ASCs.CMS-1525-FC 1049 We note that in certain instances there might be urban or rural areas for which there is no IPPS hospital whose wage index data would be used to set the wage index for that area. For these areas, our policy has been to use the average of the wage indices for CBSAs (or metropolitan divisions as applicable ) that are contiguous to the area that has no wage index (where “contiguous” is defined as sharing a border). We have applied a proxy wage index based on this met hodology to ASCs located in CBSA 25980 Hinesville-Fort Stewart, GA, and CBSA 22 Rural Massachusetts. In CY 2011, we identified another area, sp ecifically, CBSA 11340 Anderson, SC for which there is no IPPS hospital whose wage index data would be us ed to set the wage index for that area. Generally, we would use the methodology describe d above; however, in this situation, all of the areas contiguous to CBSA 11340 Anderson, SC are rural. Therefore, in the CY 2011 OPPS/ASC final rule with co mment (75 FR 72058 through 72059), we finalized our proposal to set the ASC wage index by calculati ng the average of all wage indices for urban areas in the State when all contiguous areas to a CBSA are rural and there is no IPPS hospital whose wage index data could be used to se t the wage index for that area. In other situations, where there ar e no IPPS hospitals located in a relevant labor market area, we will continue our current policy of calculating an urban or rural area’s wage index by calculating the average of th e wage indices for CBSAs (or metropolitan divisions where applicable) that are contiguous to the area with no wage index.
Comment : Several commenters made the same comment that was made in the CY 2011 rulemaking – that is that CMS adopt for the ASC payment system the same wage index values used for hospital paym ent under the OPPS (75 FR 72059 contains anCMS-1525-FC 1050 explanation of such comment). At a mi nimum, commenters recommended that CMS apply the out-migration adjustment to ASCs in qualifying counties. Response : We have responded to this commen t in the past, and believe our prior rationale for using unadjusted wa ge indices is still a sound one. We refer readers to our response to this comment in last year’s fi nal rule with comment period (75 FR 72059). We discuss our budget neutrality adjustment for changes to the wage indices below in section XIII.H.2.b. of this final rule with comment period. After consideration of th e public comments we receiv ed, we are continuing our established policy to account for geographi c wage variation in labor cost when calculating individual ASC payment by applyi ng the pre-floor and pre-reclassified hospital wage index values that CMS calcula ted for payment, using updated CBSAs. For CY 2012, we also are continuing our policy established in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72058 th rough 72059) to set the ASC wage index by calculating the average of all wage indices for urban areas in the state when there is no IPPS hospital whose wage index data could be used to set the wage index for that area, and all contiguous areas to the CBSA are rural. 2. Calculation of the ASC Payment Rates a. Updating the ASC Relative Payment Weights for CY 2012 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 neut ral (72 FR 42531 through 42532). ConsistentCMS-1525-FC 1051 with our established policy, in the CY 2012 OPPS/ASC proposed rule (76 FR 42312), we proposed to scale the CY 2012 relative paym ent weights for ASCs according to the following method. Holding ASC utilization a nd the mix of services constant from CY 2010, we proposed to compare the total payment weight using the CY 2011 ASC relative payment weights (calculated under the ASC standard ratesetting methodology) with the total payment weight using the CY 2012 ASC relative payment weights (calculated under the ASC standard rateset ting methodology) to take into account the changes in the OPPS relative payment weights between CY 2011 and CY 2012. We proposed to use the ratio of CY 2011 to CY 2012 total payment weight (the weight scaler) to scale the ASC re lative payment weights for CY 2012. The proposed CY 2012 ASC scaler was 0.9373 (76 FR 42312) and sca ling would apply to the ASC relative payment weights of the covered surgical procedures and covered ancillary radiology services for which the ASC payment rates ar e based on OPPS relative payment weights. Scaling would not apply in the case of ASC payment for separately payable covered ancillary services that have a pr edetermined national payment amount (that is, their national ASC payment amounts are not ba sed on OPPS relative payment weights), such as drugs and biologicals that are separa tely paid or services that are contractorpriced or paid at reasonable cost in ASCs . Any service with a predetermined national payment amount would be included in the ASC budget neutrality comparison, but scaling of the ASC relative payment weights woul d not apply to those services. The ASC payment weights for those services without predetermined national payment amounts (that is, those services w ith national payment amounts th at would be based on OPPSCMS-1525-FC 1052 relative payment weights) would be scaled to eliminate any difference in the total payment weight between the curr ent year and the update year. For any given year’s ratese tting, we typically use the most recent full calendar year of claims data to model budget neutrality adjustments. At the time of the CY 2012 proposed rule, we had available 98 percent of CY 2010 ASC claims data. For this final rule with comment period, we have approxima tely 99 percent of all ASC claims data for
CY 2010. To create an analytic file to support calculation of th e weight scalar and budget neutrality adjustment for the wage index (discussed below), we summarized available CY 2010 ASC claims by provider and by HCPCS code. We used the National Provider Identifier for the purpose of identifying uni que ASCs within the CY 2010 claims data. 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/ASCPayment/ASCRN/itemd etail.asp?filterType=none&filterByDID

=- 99&sortByDID=3&sortOrder=descendi ng&itemID=CMS1249114&intNumPerPage=10

. Comment : Many commenters again expresse d their opposition to scaling the ASC relative payment weights. Many of the commenters on the CY 2012 OPPS/ASC proposed rule offered the same views as the public commenters on each rule since the CY 2009 OPPS/ASC proposed rule CY 2009 was the year when CMS first applied the scaling policy that was finalized in th e August 2, 2007 final rule. The commentersCMS-1525-FC 1053 expressed many concerns, including that scali ng is contrary to the intent of using the cost-based OPPS relative payment weights as the basis for determining the relative payments for the same services in ASCs a nd that scaling would continue to erode the payment relationship between the OPPS and ASC payment system. They asserted that, although scaling is intended to maintain budget neutrality within the ASC payment system, it is instead creating increasingly la rge payment differentials between the ASC and OPPS payments for the same services wi thout evidence of growing differences in capital and operating costs between the tw o settings, and depriving ASCs of real increases in the relative cost s of procedures. The commenters believed that the OPPS relative payment weights represent real grow th in the costs of services provided in HOPDs and the annual change in relative wei ghts should move in the same direction in both the ASC and HOPD setting. The commen ters argued that the difference in payments between the ASC and HOPD servi ces at the aggregate and procedure level should be driven only by cha nges in the conversion factor. The commenters also pointed out that, wh ile CMS has suggested that scaling of the relative weights is a design element that will protect ASCs from changes in the OPPS relative weights that could significantly decr ease payments for certain procedures, the trend in the OPPS relative weights suggests th at the scaling factor for ASCs will rarely result in an increase in ASC relative weights. The commenters argued that CMS is not required to scale the ASC relative weights and that it should use its authority to suspend the application of scaling the ASC relative weights for CY 2012. They noted that the regulations establishing the revisedCMS-1525-FC 1054 ASC payment system give CMS the flexibility to scale “as needed.” In addition, some commenters stated that Congress imposed a budget neutrality requirement on the ASC payment system only during the CY 2008 implementation year, and that CMS is under no legal obligation to continue to apply a scaling factor. Response : Many of these comments are similar to public comments on the proposal for the revised ASC payment system that we responded to in the August 2, 2007 final rule (72 FR 42531 through 42533). For example, with regard to scaling, we addressed these same concerns raised by co mmenters that annual re scaling would cause divergence of the re lative weights between the OPPS and the revised ASC payment system for individual procedures in the August 2, 2007 final rule (72 FR 42532). We refer the commenters to that discussion for our detailed response in promulgating the scaling policy that was initially applied in CY 2009 (72 FR 42531 through 42533). As we have stated in the past (74 FR 60627), the ASC weight scaling methodology is entirely consistent with th e OPPS methodology for scaling the relative payment weights and, for the most part, the increasing payment differentials between the ASC and OPPS payments for the same servi ces are not attributab le to scaling ASC relative payment weights. Considerations of differences between the capital and operating costs of ASCs and HOPDs are not part of the ASC st andard ratesetting methodology, which relies only on maintaining the same relativity of payments for services under the two payment systems, as well as budget neutrality within each payment system. Furthermore, unlike HOPDs, we do not have information about the costs of ASC services in order to assess di fferences in capital and operating costs overCMS-1525-FC 1055 time between the two settings. In order to maintain budget neutrality of the ASC payment system, we need to adjust for the e ffects of changes in re lative weights. The ASC payment system adopts the OPPS rela tive weights as the mechanism for apportioning total payments, after application of the upda te factor, among all of the services covered by the ASC payment system. The OPPS relative weights serve the same purpose in the OPPS. The OPPS relative weight s do not represent an estimate of absolute cost of any given procedure; rather, they refl ect our estimate of the cost of the procedure within the context of our cost estimation methodology for the OPPS. With the exception of services with a predetermined national payment amount, the use of a uniform scaling factor for changes in total weight between years in the ASC payment system does not alter the relativity of the O PPS payment weights as used in the ASC payment system. Differences in the relativity between the ASC relative pa yment weights and the OPPS relative payment weights are not driven by the application of the uniform scaling factor. The ASC weight scaling methodol ogy is entirely consistent with the OPPS weight scaling methodology and the weights serve the same pur pose in both systems, to apportion total budget neutral payment allowed under the update. We do not agree with commenters’ asserti on that we should eliminate the scaling methodology because the scaling factor will rare ly result in an increase in ASC relative weights, therefore continuing to hurt rather than protect ASCs in the future. As we stated in the August 2, 2007 final rule (72 FR 42532), a ggregate payments to ASCs could, in the absence of rescaling, be affected by changes in the cost structure of HOPDs that ought to be relevant only under the OPPS. A sudden in crease in the costs of hospital outpatientCMS-1525-FC 1056 emergency department or clinical visits due, for instance, to an in crease in the volume of cases, would have the effect of increasing the weights for these services relative to the weights for surgical procedures in the hospi tal outpatient setting. In the absence of scaling the ASC payment weights, this change in the relative weights under the OPPS would result in a decrease in the relative we ights for surgical procedures under the ASC payment system, and, therefore, a decrease in aggregate ASC payments for these same procedures. We continue to believe that ch anges in relative wei ghts each year under the OPPS should not, in and of themselves, cause aggregate payments under the revised ASC payment system to increase or decrease. It is important to note that the specific adjustment factor applied in the scaling pr ocess could be positive or negative in any particular year; the fact that the scaler has not resulted in an increase to the ASC payment weights in any given year or series of year s does not mean the same trend will continue, nor does it mean that the principle of pr eventing the ASC payment weights from being affected by fluctuations in the OPPS pa yment weights is inherently flawed. As we stated in the CY 2009 OPPS/AS C final rule with comment period (73 FR 68754), with respect to the use of “as needed” in th e text of § 416.171(e)(2) that commenters have interpreted to mean that CM S has the authority to suspend scaling the relative payment weights if it determines ther e is not a need to do so, the phrase does not mean that we will determine whether or not to adjust for budget neutrality. Rather, it means that we adjust the rela tive payment weights as needed to ensure budget neutrality. Therefore, we do not agree with the commen ters’ assertion that we are under no legalCMS-1525-FC 1057 obligation to continue to apply a scaling factor. If we were not to scale the ASC relative payment weights, we estimate that the CY 2012 revisions would not be budget neutral. Establishing budget neutrality under the OPPS does not result in budget neutrality under the revised ASC payment system; it only maintains budget neutrality under the OPPS. Scaling the ASC relative payment weight s is an integral and separate process for maintaining budget neutrality under the ASC pros pective payment system. Scaling is the budget neutrality adjustment that ensures that changes in the rela tive weights do not, in and of themselves, change aggregate payment to ASCs. It ensures a specific amount of payment for ASCs in any given year. Without scaling, total ASC payment could increase or decrease relative to changes in hospital outpatient payment. Although the commenters believe that sca ling prevents increases in ASC spending that may be appropriate because ASC costs have increased over time, increases in cost in a prospective payment system are handled by the update factor. In a budget neutral system, we remove the independent effects of increases or decreases in payments as a result of changes in the relative payment weights or the wage indices and constrain increases to the allowed update factor. Therefore, changes in aggregate ASC expenditures related to payment rates are determined by the update to the ASC conversion factor, not by changes in the relative payment weights. For this final rule with comment pe riod, we used our proposed methodology described above to calculate the scaler adju stment using updated ASC claims data. The final CY 2012 scaler adjustment is 0.9466. This scaler adjustment is necessary to budget neutralize the difference in aggregate ASC payments calc ulated using the CY 2011 ASCCMS-1525-FC 1058 relative payment weights and the CY 2012 relati ve payment weights. We calculated the difference in aggregate payments due to the change in relative payment weights (including drugs and biologicals ) holding constant the ASC conversion factor, the most recent CY 2010 ASC utilization from our cl aims data, and the CY 2011 wage index values. For this final CY 2012 calculation, we used the CY 2011 ASC conversion factor updated by the CY 2012 CPI–U, which is estimated as 2.7 percent, less the multifactor productivity adjustment of 1.1 percent, as discussed below in section XV.H.2.b. of this final rule with comment period. After consideration of the public comments we receive d, we are finalizing our CY 2012 ASC relative payment weight sca ling methodology, without modification. The final CY 2012 ASC payment weight scaler is 0.9466. b. Updating the ASC Conversion Factor Under the OPPS, we typically apply a budget neutrality adjustment for provider level changes, most notably a change in the wage index values for the upcoming year, to the conversion factor. Consistent with our final ASC payment policy, for the CY 2012 ASC payment system, in the CY 2012 OPPS/ASC proposed rule (76 FR 42312 through 42313), we proposed to calculate and apply th e pre-floor and pre-re classified hospital wage indices that are used for ASC paymen t adjustment to the ASC conversion factor, just as the OPPS wage index adjustment is calculated and applied to the OPPS conversion factor. For CY 2012, we calculated this proposed adjustment for the ASC payment system by using the most recent CY 2010 claims data available and estimating the difference in total payment that would be created by introduci ng the proposed CY 2012CMS-1525-FC 1059 pre-floor and pre-reclassified hospital wage indices. Specifically, holding CY 2010 ASC utilization and service-mix and the propos ed CY 2012 national payment rates after application of the weight scal er constant, we calculated th e total adjusted payment using the CY 2011 pre-floor and pre-r eclassified hospital wage indi ces and the total adjusted payment using the proposed CY 2012 pre-floor and pre-reclassified hospital wage indices. We used the 50-percent labor-related share for both total adjusted payment calculations. We then compared the total adjusted payment calcu lated with the CY 2011 pre-floor and pre-reclassified hospital wage indices to the total adjusted payment calculated with the proposed CY 2012 pre-fl oor and pre-reclassified hospital wage indices and applied the resu lting ratio of 1.0003 (the propo sed CY 2012 ASC wage index budget neutrality adjustment) to the CY 2011 ASC conversion factor to calculate the proposed CY 2012 ASC conversion factor. Section 1833(i)(2)(C)(i) of the Act require s that, if the Secretary has not updated the ASC payment amounts in a calendar year , the payment amounts “shall be increased by the percentage increase in the Consumer Price Index for all urban consumers (U.S. city average) as estimated by the Secretary for the 12-month period ending with the midpoint of the year involved.” Becaus e the Secretary does update the ASC payment amounts annually, we adopted a policy, which we codified at § 416.171(a)(2)(ii), to update the ASC conversion factor using the CP I-U for CY 2010 and subsequent calendar years. Therefore, the annual update to the ASC payment system is the CPI-U (referred to as the CPI-U update factor).CMS-1525-FC 1060 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)(x i)(II)” of the Act (which we refer to as the MFP adjustment) effec tive with the calendar year beginning January 1, 2011. Clause (iv) au thorizes the Secretary to pr ovide for a reduction in any annual update for failure to repor t on quality measures. Clause (v) states that application of the MFP adjustment to the ASC payment system may result in the update to the ASC payment system being less than zero for a year and may result in payment rates under the ASC payment system for a year being less than such payment rates for the preceding year. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72062 through 72064), we revised § 416.160 and § 416.171 to reflect this provision of the Affordable Care Act (we note that these regulations do not reflect any reducti on in the annual update for failure to report on quality measures because CMS had not implemented an ASC quality reporting program). As discussed in section XIV.K. of the CY 2012 OPPS/ASC proposed rule (76 FR 42336 through 42349), we proposed that ASCs begin submitting data on quality measures in CY 2012 for the CY 2014 payment determination. Because any reduction to the annual update under the ASC Quality Reporting Program will not occur until CY 2014, we did not propose any changes to the payment methodology. We stated that we intend to address payment changes based on failure to submit quality data under the ASC Quality Reporting Program in a future rulemaking.CMS-1525-FC 1061 Without regard to the ASC Quality Reporting Program and in accordance with section 1833(i)(2)(C)(i) of the Act, before applying the MFP adjustment, the Secretary first determines the “percenta ge increase” in the CPI-U, whic h we interpret cannot be a negative number. Thus, in the instance where the percentage change in the CPI-U for a year is negative, in the CY 2012 OPPS/ASC proposed rule (76 FR 42313), we proposed to hold the CPI-U update factor for the ASC payment system to zero. Section 1833(i)(2)(D)(v) of the Act, as added by section 3401(k) of the Affordable Care Act, requires that the Secretary re duce the CPI-U update factor (w hich would be held to zero if the CPI-U percentage cha nge is negative) by the MFP adjustment, and states that application of the MFP adjustment may reduce this percentage change below zero. If the application of the MFP adjustment to the CP I-U percentage increas e would result in an MFP-adjusted CPI-U update factor that is less than zero, the annua l update to the ASC payment rates would be negative and payments would decrease relative to the prior year. Illustrative examples of how the MFP adjust ment would be applied to the ASC payment system update are found in the CY 2011 O PPS/ASC final rule with comment period (75 FR 72062 through 72064). In the CY 2012 OPPS/ASC proposed rule (76 FR 42313), for the 12-month period ending with the midpoint of CY 2012, the Secretary estimated that the CPI-U is 2.3 percent. The Secretary estimated that the MFP adjustment is 1.4 percentage points based on the methodology for calculating the MFP adjustment finalized in the CY 2011 MPFS final rule with comment period (75 FR 73391 through 73399) as revised by the proposal discussed in the CY 2012 MPFS propos ed rule. We proposed to reduce theCMS-1525-FC 1062 CPI-U of 2.3 percent by the M FP adjustment specific to th is CPI-U of 1.4 percentage points, resulting in an MFP-adjusted CPI-U upda te factor of 0.9 percent. Therefore, we proposed to apply a 0.9 percent MFP-adjust ed update to the CY 2011 ASC conversion factor. For CY 2012, we also proposed to adju st the CY 2011 ASC conversion factor ($41.939) by the wage adjustment for budget neutrality of 1.0003 in addition to the MFP-adjusted update factor of 0.9 percent di scussed above, which resulted in a proposed CY 2012 ASC conversion factor of $42.329 (76 FR 42313).
Comment : As in prior years, many commen ters requested that CMS adopt the hospital market basket to update the ASC payment system. The commenters explained that not only is the CPI–U lower than the hospi tal market basket but it is not appropriate for updating health care providers because, unlike the hospital market basket which analyzes hospital spending, the CPI–U is de signed to capture household spending. The commenters stated that, in the most recen t years, the CPI–U has been dominated by inflation in the housing sector rather than healthcare provider spending, and that the goods and services provided by ASCs are ve ry similar to those provided by hospitals. The commenters also argued that the CPI-U is a poor proxy of ASC cost inflation, noting that the CPI-U has faced criticism fr om independent researchers and economists, who indicate that the CPI-U cons istently underestimates the rate of inflation according to the commenters. In addition, because commen ters view the CPI-U as a highly volatile index, the commenters suggest ed that CMS adjust for prior year forecast errors.CMS-1525-FC 1063 Commenters stated that adopting the hosp ital market basket would minimize the divergence in CY 2012 payment between the ASC payment system and the OPPS and prevent the update from causing further diverg ence when the productivity adjustment is applied to both settings in the future. The commenters asserted that CMS has the authority to use an alterna tive update mechanism, and be lieved CMS should adopt the hospital market basket as the update for the ASC payment system. Commenters also indicated that the hospital market basket is a more appropriate index to use for the ASC update now that CM S is required to apply the MFP adjustment to the ASC annual update. Commenters stated that, as an output price index, the CPI-U index already accounts for productivity thus ASCs, in essence, are receiving a productivity adjustment that is twice that applied to the HOPD update. Because CMS has discretion regarding the index used to update ASCs, but is requir ed in statute to adjust the ASC update by the MFP, commenters urged CMS to use the hospital market basket, which is an input price index that does not already account for productivity, to update ASC payment rates and thereby allow the appropriate application of the required productivity adjustment. With regard to the MFP adjustment itself, commenters requested that, because the MFP is a volatile m easure that is subject to substantial yearto-year fluctuations, the MFP measuremen t period be uniform across providers. As mentioned in section XV.G. of this final rule with comment period, MedPAC commented that ASCs should be required to su bmit cost and quality data, concurrent with a 0.5 percent increase in ASC payment rates for CY 2012, arguing that ASC cost data areCMS-1525-FC 1064 needed to examine whether an existing input price index is an a ppropriate proxy for the costs of ASCs or whether an ASC-speci fic market basket should be developed. Response : While commenters argue that the items included in the CPI-U index may not adequately measure inflation for th e goods and services provided by ASCs and that use of the hospital market basket w ould minimize the divergence in the payment rates between the OPPS and ASC payment syst em, we believe that the hospital market basket does not align with the cost structures of ASCs. A much wider range of services, such as room and board and emergency serv ices, are provided by hospitals but are not costs associated with providing services in ASCs. Therefore, at this time, we do not believe that it is appropriate to use the hospital market basket for the ASC annual update. We may consider, in future rulemaking, sugge stions by MedPAC to find a way to obtain cost data from ASCs, in a manner that wi ll minimize the burden on ASCs and CMS, so that we can examine whether an alternative input price i ndex would be an appropriate proxy for ASC costs or whether an ASC-speci fic market basket should be developed. We recognize that the CPI-U is an output price index that accounts for productivity. However, the agency is require d by law to apply the MFP adjustment to provider payments according to section 3401(k) of the Affordable Care Act and, for the reasons stated above, we do not believe that the hospital market basket reflects the cost structures of ASCs. Regarding alignment of the MFP adjustment across payment systems, for reasons stated in the CY 2011 MPFS final rule (75 FR 73396), we believe that it is more appropriate to align the MFP adjustment with the CPI-U timeframes rather than aligning the MFP adjustment across payment systems. In regards to theCMS-1525-FC 1065 commenters’ statement on the volatility of the MFP and its year-to-year fluctuations, the statute requires the MFP adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multi-factor productivity which lessens and often negates any large year-to-year fluctuations. Although commenters raise concerns rega rding the difference in the CPI-U forecast and the actual inflation using historic al data, we do not believe it is appropriate to provide an adjustment to the ASC annual update to correct prev ious forecast errors. The ASC system is prospective and the update provided is based on the most current data available to establish a forecast for inflation. After consideration of th e public comments we receiv ed, we are applying our established methodology for determining th e final CY 2012 ASC conversion factor. Using more complete CY 2010 data for this final rule with comment period than was available for the proposed rule, we calculated a wage index budget neutrality adjustment of 1.0004. Based on updated data, the CPI-U for the 12-month period ending with the midpoint of CY 2012 is now estimated to be 2.7 percent, while the MFP adjustment (using the revised IGI series to proxy the labor index used in the MFP forecast calculation as discussed and finalized in the CY 2012 MPFS final rule with comment period) is 1.1 percent, resulti ng in an MFP-adjusted CPI-U upda te factor of 1.6 percent. The final ASC conversion factor of $42.627 is the product of the CY 2011 conversion factor of $41.939 multiplied by the wage inde x budget neutrality adjustment of 1.0004 and the MFP-adjusted CPI-U payment update of 1.6 percent.CMS-1525-FC 1066 3. Display of CY 2012 ASC Payment Rates Addenda AA and BB to this CY 2012 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 2012 for covered surg ical procedures and covered ancillary services, respectively. These addenda contain several types of information related to the CY 2012 payment rates. Specifically, in Addendum AA, a “Y” in the column titled “Subject to Multiple Procedure Discounting” indi cates that the surgical procedure will be subject to the multiple procedure payment re duction policy. As discussed in the CY 2008 OPPS/ASC final rule with comment peri od (72 FR 66829 through 66830), most covered surgical procedures are subject to a 50-pe rcent reduction in the ASC payment for the lower-paying procedure when mo re than one procedure is pe rformed in a single operative session. Display of the comment indicator “CH” in the column titled “Comment Indicator” indicates a cha nge in payment policy for th e item or service, including identifying discontinued HCPCS codes, desi gnating items or services newly payable under the ASC payment system, and identifying items or services with changes in the ASC payment indicator for CY 2012. Displa y of the comment indi cator “NI” in the column titled “Comment Indicator” indicates that the code is new (or substantially revised) and that the payment indicator assignment is an inte rim assignment that is open to comment on the final rule with comment period. The values displayed in the column titled “CY 2012 Payment Weight” are the relative payment weights for each of the li sted services for CY 2012. The payment weights for all covered surgical procedures and covered ancillar y services whose ASCCMS-1525-FC 1067 payment rates are based on OPPS relative payment weights were scaled for budget neutrality. Thus, scaling was not applied to the device port ion of the device-intensive procedures, services that are paid at the MPFS nonfacility PE RVU-based amount, separately payable covered anci llary services that have a predetermined national payment amount, such as drugs and biologicals that are separately paid under the OPPS, or services that are contractor-priced or paid at reasonable cost in ASCs. To derive the CY 2012 payment rate displayed in the “CY 2012 Payment” column, each ASC payment weight in the “CY 2012 Payment Weight” column was multiplied by the CY 2012 conversion factor of $42.627. The conversion factor includes a budget neutrality adjustment for changes in the wage index values and the CPI-U update factor as reduced by the productivity adjustment (as discussed in section XV.H.2.b. of this final rule with comment period). In Addendum BB, there are no relative payment weights displayed in the “CY 2012 Payment Weight” column for items a nd services with predetermined national payment amounts, such as separately pa yable drugs and biologicals. The “CY 2012 Payment” column displays the CY 2012 national unadjusted ASC payment rates for all items and services. The CY 2012 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 2011. We did not receive any public comments regarding the continuation of our policy to provide CY 2012 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 areCMS-1525-FC 1068 available via the Internet on the CMS Web s ite) display the updated ASC payment rates for CY 2012 for covered surgical procedures and covered ancillary services, respectively, and provide additional informati on related to the CY 2012 rates.CMS-1525-FC 1069 XIV. Hospital Outpatient Quality Re porting Program Updates and ASC Quality Reporting Program A. Background 1. Overview CMS has implemented quality measure reporting programs for multiple settings of care. These programs promote higher qualit y, more efficient health care for Medicare beneficiaries. The quality data reporting program for hospital outpatient care, known as the Hospital Outpatient Quality Reporti ng (Hospital OQR) Program , formerly known as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been generally modeled after the qual ity data reporting program for hospital inpatient services known as the Hospital Inpatient Quality Re porting (Hospital IQR) Program (formerly known as the Reporting Hospital Quality Da ta for Annual Payment Update (RHQDAPU) Program). Both of these quality reporting programs for hospital services, as well as the program for physicians and other eligible pr ofessionals, known as the Physician Quality Reporting System (PQRS) (formerly known as th e Physician Quality Reporting Initiative (PQRI)), have financial incentives for the re porting of quality data to CMS. CMS also has implemented quality reporting programs fo r home health agencies and skilled nursing facilities that are based on conditions of pa rticipation, and an end-stage renal disease (ESRD) Quality Incentive Program (76 FR 628 through 646) that links payment to performance. In implementing the Hospital OQR Pr ogram and other quality reporting programs, we have focused on measures th at have high impact and support CMS andCMS-1525-FC 1070 HHS priorities for improved quality and effici ency of care for Medicare beneficiaries. Our goal is ultimately to align the clinical qu ality measure requirements of the Hospital OQR Program and various other programs, including the Hospital IQR Program, and the proposed ASC Quality Reporting Program, with the reporting requirements implemented under the Health Information Technology for Economic and Clinical Health (HITECH) Act, so that the burden of reporting can be re duced. In developing th is and other quality reporting programs, as well as the Hospital Inpatient Value-Based Purchasing (Hospital Inpatient VBP) Program, we applied the fo llowing principles for the development and use of measures:

● Pay-for-reporting, public reporting, and value-based purchasing programs should rely on a mix of standard s, processes, outcomes, and patient experience of care measures, including measures of care transitions and changes in patient functional status. Across all programs, we seek to move as qui ckly as possible to the use of primarily outcome and patient experience of care meas ures. To the extent practicable and appropriate, outcome and patient experience of care measures should be adjusted for risk factors or other appropriate patient population or provider characteristics.

● To the extent possible and recognizing differences in payment system maturity and statutory authorities, meas ures should be aligned acro ss public reporting and payment systems under Medicare and Medicaid. The meas ure sets should evolve so that they include a focused set of measures appropria te to the specific provider category that reflects the level of care and the most importa nt areas of service and measures for that provider category.CMS-1525-FC 1071

● The collection of information burden on providers should be minimized to the extent possible. To this end, we continuous ly seek to align our measures with the adoption of meaningful use st andards for health information technology (HIT), so that data can be submitted and calculated via ce rtified EHR technology with minimal burden.

● To the extent practicable and feasible , and recognizing differe nces in statutory authorities, measures used by CMS should be endorsed by a national, multi-stakeholder organization. Measures should be aligned with best practi ces among other payers and the needs of the end users of the measures. In the CY 2012 OPPS/ASC proposed rule (76 FR 42314), we invited public comment on these principles.
Comment : Several commenters commended CMS for creating the synergy between the Hospital OQR Program and the Hosp ital IQR Program and noted that this is a great opportunity to foster meaningful links between the two Medicare programs. The commenters encouraged adherence to the Na tional Quality Strategy which transforms national priorities into th e focal point for measurement, reporting, and financial incentives. Commenters added that all HOPD Program measures should be thoroughly tested for accuracy, valid ity and applicability to hos pital-level care prior to implementation. A commenter recommended that CMS adopt only measures endorsed by the National Quality Forum (NQF) and the Measures Application Partnership (MAP), and approved by the Hospital Quality Allianc e (HQA). The commenter also supported public reporting and CMS’ approach to propose measures well in advance of the payment year affected.CMS-1525-FC 1072 Response : We appreciate the commenters’ support and valuable input. Generally, we follow the framework of the Na tional Quality Strategy to prioritize our measure selection, and implement quality re porting initiatives. We are required by statute to select measures for the Hospita l OQR Program that reflect consensus among affected parties and, to the ex tent feasible and practicable, that these measures include measures set forth by one or more national consensus building entities. The NQF, MAP, and HQA are organizations composed of a dive rse representation of consumer, purchaser, provider, academic, clinical, a nd other health care stakeholders with which we consult or convene for their input. In instances where we develop our own measures, we generally employ a rigorous consensus-based measure deve lopment process that incorporates broad stakeholder input. Details rega rding the process we have us ed in connection with some measures are available on our Web site at: http://www.cms.gov/MMS/19_MeasuresManage mentSystemBlueprint.asp#TopOfPage

. Also, we will continue our multi-year approa ch for proposing and finalizing of measures as it has been well-received by most providers.
Comment : Several commenters praised CMS’ shifting approach to focus more on outcome measures but they also believed there is value in th e process measures that are linked to outcomes. One commenter specifi cally urged CMS not to dismiss process measures when there is evidence that suppor ts a direct link between the process being measured and the patient outcome. One commenter suggested that CMS follow The Joint Commission (TJC) (a not-for-profit organizati on that accredits and certifies health care organizations and programs in the U.S.) acc ountability measure crite ria as a guide toCMS-1525-FC 1073 select quality measures for the Hospital OQR Program. The commenter stated that TJC defines accountability measures as those for which there are large volumes of research linking the measure to improved clinical outc omes; the measure accurately captures the evidence-based care delivered; and imple mentation of the measure has minimal unintended adverse consequences. Response : We agree with the commenters that evidence-based process measures that are associated with better outcomes ar e important to include in the Hospital OQR Program and we have taken steps to include these types of measures each year. We are aware of TJC’s accountability criteria for a ssessment of measures, and consider these criteria, among others, in selecting measur es for the Hospital OQR Program because we agree that accountability is crucial in quali ty improvement processes. We thank the commenters for their support.
Comment : A commenter expressed concerns that the time span between the finalization of the Hospital OQR Program m easures and their implementation generally does not provide sufficient time for hospitals to implement process changes to capture quality data. The commenter stated that insufficient preparati on would hinder hospital performance improvement and accurate reporting of quality data. Response : We thank the commenter for this in put. We agree that when measures require the capture or coll ection of new chart-abstracted measure information not previously captured, hospitals need a suffi cient amount of time to prepare operationally to meet the new data submission requirements. We generally provide four to six months lead time to hospitals to collect and submit new data that are needed for new measures.CMS-1525-FC 1074 However, not all new measures finalized fo r the Hospital OQR Program may require the capture or collection of new data elem ents for chart-abstracted measures.
Comment : A commenter strongly urged CMS to include an update on the NQF status of each quality measure in every pr oposed and final rule, to foster an open and transparent environment, given the significan t statutory and contra ctual roles that NQF plays in the hospital quality measures. Response : We thank the commenter for the input. We note that in our rulemakings, we provide the NQF endorsement number and endorsement status of each measure when applicable.
Comment : One commenter urged CMS to consider the relevance of Hospital OQR Program measures in rural hospitals and to make modifi cations of the measures as necessary to minimize the bur den on the small hospitals. Response : We believe that the current Hospital OQR Program measures are relevant to rural hospitals because they addr ess topics that are broadly applicable to hospital outpatient departments, including ru ral hospital outpatient departments. We agree that it is important to seek to mini mize the collection burden associated with measurement, and that some types of pr oviders may be more greatly impacted by collection burden than others. In maintain ing the measures, we have sought and will continue to seek to streamline the data elements needed for the measures to the extent possible.CMS-1525-FC 1075
Comment : A commenter requested that CM S clarify the patient population to which the Hospital OQR Program measure appl ies, for example, traditional Medicare patients, Medicare Advantage, and Medicare replacement policyholders. Response : The Hospital OQR chart-abstracted and NHSN measures apply to all patients meeting the inclusion criteria for th e measure regardless of payer, while the claims-based measures are calculated usi ng only Medicare Fee-for-Service claims. The structural measures apply to th e hospital outpati ent department. 2. Statutory History of the Hospital Outp atient Quality Reporting (Hospital OQR) Program We refer readers to the CY 2011 OPPS/A SC final rule with comment period (75 FR 72064) for a detailed discussion of th e statutory history of the Hospital OQR Program. 3. Technical Specification U pdates and Data Publication a. Maintenance of Technical Specifications for Quality Measures Technical specifications for each Hospita l OQR measure are listed in the Hospital OQR Specifications Manual, which is poste d on the CMS QualityNet Web site at http://www.QualityNet.org . We maintain the technical specifications for the measures by updating this Hospital OQR Specifications Manu al and including de tailed instructions and calculation algorithms. In some cases where the specifications are available elsewhere, we may include links to Web s ites hosting technical specifications. These resources are for hospitals to use when collecting and submitting data on required

measures.CMS-1525-FC 1076 In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 68767), we established a subregulatory pro cess for making updates to the technical specifications that we use to calculate Hosp ital OQR measures. Th is process is used when changes to the measure specifications are necessary due to ch anges in scientific evidence, treatment guidelines, or consensus among affected parties. Changes due to these reasons may not coincide with the timi ng of our regulatory actions, but nevertheless should be made so that the Hospital OQR m easures are calculated based on the most upto-date scientific and consensus standards. We indicated that notif ication of technical changes to the measure specifications is made via the QualityNet Web site, http://www.QualityNet.org , and in the Hospital OQR Sp ecifications Manual. The notification of changes to the measure t echnical specifications occurs no less than 3 months before any changes become e ffective for purposes of reporting under the Hospital OQR Program. The Hospital OQR Specifications Manual is released every 6 months and addenda are released as necessary. This release sc hedule provides at least 3 months of advance notice for substantial change s such as changes to ICD-9, CPT, NUBC, and HCPCS codes, and at least 6 months of advance noti ce for changes to data elements that would require significant systems changes.
Comment : A commenter requested that for future new measure proposals, CMS also post the associated measure specification pu blicly at least 6 mont hs prior to inclusion in a proposed rule.CMS-1525-FC 1077 Response : We provide specificatio ns or links to specifications as part of the proposal. We also seek to incorporate measur e specifications as quickly as possible into the Hospital OQR Specifications Manual in or der to provide enough lead time (generally six months) prior to the beginning of data co llection for the measure under the Hospital OQR Program. b. Publication of Hospital OQR Program Data Section 1833(t)(17)(E) of th e Act requires that the Secretary establish procedures to make data collected under Hospital OQR ava ilable to the public. It also states that such procedures must ensure that a hospital ha s the opportunity to review the data that are to be made public with respect to the hospita l prior to such data being made public. To meet these requirements, data that a hospital has submitted for the Hospital OQR Program are typically displayed on CMS We b sites such as the Hospital Compare Web site, http://www.hospitalcompare.hhs.gov , after a preview period. The Hospital Compare Web site is an interactive Web tool that as sists beneficiaries by pr oviding information on hospital quality of care. This information mo tivates beneficiaries to work with their doctors and hospitals to discuss the quality of care hospitals provide to patients, providing additional incentives to hospitals to improve the quality of care that they furnish. Under our current policy, we publish quality data by the corresponding hospital CCN, and indicate instances where data from tw o or more hospitals are combined to form the publicly reported measur es on the Hospital Compare Web site. This approach is consistent with the approach taken under th e Hospital IQR Program. Consistent with ourCMS-1525-FC 1078 current policy, we make Hospital OQR data publ icly available whether or not the data have been validated for payment purposes. In general, we strive to display hos pital quality measures on the Hospital Compare Web site as soon as possible after th ey have been adopted and have been reported to CMS. However, if there are unresolved display issues or pending design considerations, we may make th e data available on other, non-interactive, CMS Web sites such as http://www.cms.hhs.gov/HospitalQualityInits/ . Publicly reporting the information in this manner, though not on the interactive Hospital Compare Web site, allows us to meet the requirement under sec tion 1833(t)(17)(E) of th e Act for establishing procedures to make quality data submitted available to the public following a preview period. When we display hospital quality in formation on non-interactive CMS Web sites, affected parties will be notified via CMS lis tservs, CMS e-mail blasts, national provider calls, and QualityNet announcements regardi ng the release of preview reports followed by the posting of data on a Web s ite other than Hospital Compare

. We also require hospitals to complete and submit a registration form (“participation form”) in order to partic ipate in the Hospital OQR Program. With submission of this participation form, participating hospitals agree that they will allow CMS to publicly report the quality measure data submitted under the Hospital OQR Program, including measures that we calculate using Medicare claims.
Comment : A commenter urged CMS to continue using both the stakeholder and focus groups to develop and evaluate termi nology for presenting measurement data to the public to avoid misleading and alarming the public unnecessarily.CMS-1525-FC 1079 Response : We appreciate this feedback. Pr ior to presenting new measurement topics or new types of measures on the Hospital Compare Web site ̧ we strive to incorporate stakeholder feedback into the disp lay, and to test the display with consumers in order to ensure that the concepts ar e easily understood by consumers and that the display and accompanying text will not lead to misinterpretation or inappropriate comparisons.
Comment : Two commenters believed that th e imaging measures displayed on the Hospital Compare Web site have caused confusi on regarding how they should be interpreted. Response : Currently, we are displaying the im aging efficiency measures as rates or ratios as well as observed averages a nd rates by percentile am ong all those facilities that meet the minimum case count (a minimum case count is needed for statistical validity purposes. We plan to evaluate whethe r alternative ways of displaying efficiency measures, such as categorical displays, may be more informative to consumers than the current method of displaying the measures.
Comment : A commenter suggested linking cost data to publicly displayed quality data. Another commenter was concerned that posting data in multiple places other than Hospital Compare may cause confusion. A commenter recommended that CMS postpone the display of data w ith issues on Hospital Compare to a later date when the issues are resolved rather than displaying them at a different site temporary. A few commenters were concerned that the Hospital OQR data on Hospital Compare may be outdated, and urged CMS to consider a more current time frame for displaying outpatientCMS-1525-FC 1080 quality measures to provide more timely a nd accurate information for the public. For future display of e-measures, a commenter urged CMS to indicate the method of data collection (that is, electr onic versus chart-abstracted) on Hospital Compare so that consumers are aware of the diffe rent collection methods used. Response : We use the Hospital Compare Web site as the primary vehicle for displaying hospital quality data reported for th e Hospital OQR Program. As we stated in the CY 2011 OPPS/ASC final rule with co mment period (75 FR 72070), the data we display on Web sites other than Hospital Compare is displayed on a temporary basis because of pending display design and other unresolved issues so as to not confuse beneficiaries who intend to use data in making healthcare decisions. Once an appropriate display mechanism has been determined, th e information is added to the Hospital Compare Web site. The data for the Hospital OQR Program are made available on the Hospital Compare Web site as soon as possible, and the most recent time periods for the data that are available to us are posted on the Web site. The chart-abstracted measure data are refreshed on a quarterly basis, and th e claims-based and structural measures are refreshed once annually. We currently provide information on the data sources for the various measures on Hospital Compare under the “information fo r professionals” link, which is accessible to the public. We will cons ider alternatives to make this information more transparent to the public.CMS-1525-FC 1081 B. Revision to Measures Previously A dopted for the Hospital OQR Program for the CY 2013, and CY 2014 Payment Determinations 1. Background We refer readers to the following OPPS/ ASC final rules with comment periods for a history of measures adopted for the Hospital OQR Program, including lists of: 11 measures adopted for the CY 2011 payment determination (74 FR 60637); 15 measures adopted for the CY 2012 pa yment determination (75 FR 72083 through 72084); 23 measures adopted for the CY 2013 payment determination (75 FR 72090); and 23 measures adopted for the CY 2014 pa yment determination (75 FR 72094). The table below also shows the 23 measures previously adopted for these payment determinations:

Hospital OQR Program Measures Previously Adopted for the CY 2011, CY 2012, CY 2013, and CY 2014*** Payment Determinations OP-1: Median Time to Fibrinolysis OP-2: Fibrinolytic Thera py Received Within 30 Minutes OP-3: Median Time to Transfer to Anothe r Facility for Acute Coronary Intervention OP-4: Aspirin at Arrival OP-5: Median Time to ECG OP-6: Timing of Antibiotic Prophylaxis OP-7: Prophylactic Antibiotic Se lection for Surgical Patients OP-8: MRI Lumbar Spine for Low Back Pain OP-9: Mammography Follow-up Rates OP-10: Abdomen CT – Us e of Contrast Material OP-11: Thorax CT – Use of Contrast Material OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data*CMS-1525-FC 1082 Hospital OQR Program Measures Previously Adopted for the CY 2011, CY 2012, CY 2013, and CY 2014*** Payment Determinations OP-13: Cardiac Imaging for Preoperati ve Risk Assessment for Non Cardiac Low Risk Surgery* OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT)* OP-15: Use of Brain Computed Tomogra phy (CT) in the Emergency Department for Atraumatic Headache* OP-16: Troponin Results for Emergency De partment acute myocardial infarction (AMI) patients or chest pain patien ts (with Probable Cardiac Chest Pain ) Received Within 60 minutes of Arrival** OP-17: Tracking Clinical Results between Visits** OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients** OP-19: Transition Record with Specified Elements Received by Discharged Patients** OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional** OP-21: ED- Median Time to Pain Management for Long Bone Fracture ** OP-22: ED- 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 mi nutes of Arrival **
* New measure adopted beginning with the CY 2012 payment determination. ** New measure adopted beginning with the CY 2013 payment determination. *** All 23 measures were adopted for the CY 2014 payment determination. We received specific comments, discusse d below, on some of these previously finalized measures.

● OP-3 Median time to transfer to anot her facility for acute coronary intervention
Comment : One commenter recommended the retirement of this measure but provided no rationale for the recommendation. Response : Periodically, we perform measur e review for relevancy, potential topped-out status, program alignment, and ha rmonization. We have not observed anyCMS-1525-FC 1083 evidence indicating that the measure should be retired at this time. This measure is important because it measures the promptne ss of care intervention for life threatening coronary events, which is associated with be tter outcomes for patients experiencing such

events.

● OP-4: Aspirin at Arrival a nd OP-5: Median Time to ECG
Comment : A commenter disagreed with the in clusion code for "Chest Pain Not Elsewhere Classified (NEC)" for the identifi cation of probable cardiac chest pain cases in these two measures. Response : We disagree with the commenter that this code should be excluded. By including this code, we take into account the wide variability of patient symptoms and how health care providers use codes to capture symptoms of chest pain. According to the ICD-9 manual, this code applie s to symptoms of discomfort in chest, chest pressure and tightness in chest. These symptoms are also associated with cardiac chest pain. Because OP-4 and OP-5 are process measures which a ssess the use of aspirin and ECG in patients suspected of having cardiac chest pain, we belie ve that all codes in the claims data that indicate capture chest pain should be used to identify these types of patients.

● OP-9: Mammography Follow-up Rates

● OP-10: Abdomen CT – Us e of Contrast Material

● OP-14: Simultaneous Use of Brain Computed Tomogra phy (CT) and Sinus Computed Tomography (CT)*
Comment : A few commenters urged CMS to remove the above imaging efficiency measures because they have not received NQF endorsement and are notCMS-1525-FC 1084 HQA-approved. A few co mmenters were concerned that measures OP-9 and OP-10 may cause potential harm. Response : Many of the concerns raised by the commenters about the imaging efficiency measures we adopted for the CY 2011 payment determination were also raised at the time these measures were first propos ed for the CY 2010 payment determination. We responded to these concerns when we adopted the measures (73 FR 68762 through 68766). We stated that the measures meet the statutory require ment of reflecting consensus among affected parties because of their consensus-based development, and that the measures address important patient safety concerns related to exposure to unnecessary radiation and contrast materials. We also stated that the Secretary is not required to limit measures considered for Hospital OQR Program adoption only to those adopted by the HQA or endorsed by the NQF. We have not found any evidence that implementation of these three meas ures results in patient harm.

● OP-13: Cardiac imaging for preoperative risk assessment for non-cardiac low risk
surgery

● OP-14: Simultaneous use of brain com puted tomography (CT) and sinus computed tomography (CT)

● OP-15: Use of brain computed tomogra phy (CT) in the ED for atraumatic headache
Comment : A commenter recommended that for initial implementation of new imaging measures, CMS should keep the “with in range” rates broad so that hospital performance would not be unfairly presented.CMS-1525-FC 1085 Response : Generally, the hospital outpatient im aging efficiency measures that we have implemented do not provide for any ta rgets or ranges. However, the OP-9: Mammography Follow-Up rates measure uses ranges because the literature supports specified ranges. For the othe r imaging efficiency measures , we provide rates or ratios as well as observed averages and rates by pe rcentile among all those f acilities that meet the minimum case count (a minimum case c ount is needed for statistical validity purposes).

● OP-13: Cardiac imaging for preoperative risk assessment for non-cardiac low risk
surgery Comment : A commenter stated that imaging measures included in the Hospital OQR Program are claims-based and may not indicate the exclusions and justify the clinical information in contex t to support the clinical decisi ons for the imaging studies. The commenter gave the example of meas ure OP-13. The commenter believed that exclusions should be added that would rec ognize appropriate use of stress imaging in patients with certain clinical events coincidentally around the time of the “non-cardiac”
surgery. Response : We believe that the use of claims data is a non-burdensome data collection approach because hospitals rout inely submit claims to Medicare for billing purposes. We are also committed to regularly review whether additional codes should be added to determine exclusions and related clinical information. We are aware of the commenter’s concerns for measure OP-13. During development of the imaging measures, our t echnical experts determined that additionalCMS-1525-FC 1086 clinical information beyond what is presen t on claims is not necessary to identify exclusions. However, we will further consid er whether additional clinical information would improve the capture of exclusions for this and other imaging measures during the regular maintenance process for these measures.

● OP-14: Simultaneous use of brain com puted tomography (CT) and sinus computed tomography (CT)
Comment : A commenter believed that pr ior to measure implementation, CMS should include explicit exclusi on criteria for patients with signs of serious infection. Response : We appreciate the commenter’s conc erns. During the development of this imaging efficiency measure, we complete d extensive literature reviews and analyzed appropriate medical guidelines to determine the appropriateness of imaging studies for various medical conditions and ex clusions. Currently, we exclude claims with primary or secondary diagnosis codes related to trauma, tumor, orbital celluliti s, or intracranial abscess from the measure as long as thes e diagnoses were included in one of the diagnoses fields on the Brain CT claim. We regularly review measures to determine whether additional codes should be added in or der to determine exclusions. To date, we have not identified any scientific literature or guidelines that would indicate that simultaneous brain and sinus CT imaging would be necessary for patients with signs of serious infection. However, we will review this suggestion with our technical experts during regular maintenance of the measure.
Comment : A commenter noted that OP-14 has too many similarities with measure OP-15. The commenter believed that there is little bene fit in this measureCMS-1525-FC 1087 because the sample size for patients having bot h scans may be small at many facilities and that more and more facilities have multi-slice scanners that are capable of reconstructing the data to better evaluate the sinuses without re quiring rescanning with additional radiation. Response : While we recognize that OP-14 a nd OP-15 may be similar, OP-14’s specific focus is reducing unnecessary scans of adjacent body parts, when one scan is clinically appropriate. We recognize that small case coun ts can be problematic for facilities that do not perform a sufficient volume of CT imag ing studies. For this reason, we will establish a minimum case count requirement for these measures for public reporting purposes. Regard ing the comment on the impact of imaging technology on imaging efficiency measure results, curre ntly, we do not collect any information regarding what level of CT technology is em ployed by a facility. Therefore, it is not currently possible to adjust the CT measures in this manner.

● OP-15: Use of brain computed tomogra phy (CT) in the ED for atraumatic headache
Comment : A commenter noted that certain co nditions such as HIV/AIDS, cancer, visual disturbance, protracted nausea and vomiting should be added to the exclusions, as well as structural pathologies and all codes for neurological signs of cerebral origin. Response : We thank the commenter for the su ggestions and will take them into consideration in our meas ure maintenance process.
Comment : A few commenters opposed measure OP-15 because it is not NQF-endorsed. Commenters stated that the meas ure is a utilization measure rather than an efficiency measure. The commenters ad ded that there was no scientific basis toCMS-1525-FC 1088 suggest this measure addresses patient safet y. Commenters urged CMS to reconsider the adoption of measure OP-15, consid ering potential tort liability in the ED if imaging does not occur, and the potentia l positive impact on quality of life for patients. Response : The objective of imaging efficien cy measures, including OP-15, is to promote efficient and high quality patient ca re in the hospital outpatient setting that neither underutilizes nor over utilizes healthcare resources. Unnecessary or duplicative studies are inefficient and detrimental to th e patient because CT exposes the patient to higher doses of radiation than conventional x rays and increases the patient’s risk for cancer. An analysis of 2007 Medicare clai ms data indicated th at approximately 200,000 Medicare beneficiaries had a vi sit to the ED with a primar y diagnosis of headache with about half of them receiving a brain CT during the ED visit. We encourage use of this important diagnostic tool wh en clinically indicated. Earlier this year, we conducted a dr y run of the measure and received many suggestions for refinements to the measure in order to better addr ess circumstances in which such imaging is clinically indicated. We intend to have our technical expert panel examine the suggestions we have received regarding the measure during the dry run as well as the comments we have received dur ing this public comment period and during the maintenance process for this measure. We in tend to incorporate refinements arising out of this process , such as the formulation and incorporat ion of addition excl usion criteria to be applied to the measure specifications and calculations, prior to implementing public reporting of the measure.CMS-1525-FC 1089

● OP-16: Troponin results for ED acute myo cardial infarction patients or chest pain patients received within 60 minutes of arrival
Comment : One commenter urged CMS not to adopt this measure, based on the assertion that the measure is not a good marker for quality and it may have the unintended consequences of prolonging other ED patients’ wait times for lab results. Response : We are aware that Troponin assessment may not be the only component of a diagnostic workup of patients wi th chest pain. The focus of this measure is on the timeliness of the receipt of the Troponin resu lts and not on its use or interpretation by HOPDs. However, we believe that use of the Tr oponin test facilitates decision making in the treatment of time sensitive conditions such as AMI. For this reason, we believe timeliness of the availability of the test results is a marker of quality because it results more timely treatment deci sions and treatment delivery, which in turn results in better outcomes for patients.

● OP-17: Tracking clini cal results between visits
Comment : A commenter suggested the inclus ion of a “N/A” op tion for hospital outpatient departments, in the event that la b tests or diagnostic studies are ordered by physicians or outside vendors not working for the hospital. One commenter believed this measure is more appropriate for the HITEC H EHR Incentive Program as a meaningful use decision support or surveillance element. Response : The use of a “N/A” option would be inconsistent with the intent of the measure. The structural measure is designe d to assess the ability of HOPDs to track results of clinical tests between the patient vis its. This would be true of the facility evenCMS-1525-FC 1090 in cases where tests are ordered by someone not employed by the facility. The ability to track these results allows facilities to see any changes in values or trends which may indicate a change in a pa tient’s condition over time.

● OP-19: Transition record with specifie d elements received by discharged patient
Comment : A few commenters supported provid ing patients with full transition information including diagnosis at discharge or chief complaint, patient instructions, plan for follow-up care, and list of new medications with quantity dispensed. However, other commenters were concerned about the burden in generating and providing patients with a copy of all major procedures and tests perf ormed during ED visits. Some commenters recommended delaying implementation of this measure until EHRs have the functionality to generate real time diagnosis information and copies of all major procedures and tests performed during an ED visit for patients. Response : We appreciate the support a nd the recommendations from the commenters. This measure covers outpat ient ED encounters only (not other HOPD encounters), and we believe that the HOPD should be able to accurately document diagnostic tests and procedures performed at th e facility during the ED visit. If the principal diagnosis has not been determined pr ior to discharge, the specifications state that the chief complaint can be us ed to comply with the measure. We do not believe it is necessary to de lay the implementation of this measure because many EDs are already keeping track of patient encounters and related tests and procedures during the ED visit. We do not be lieve it will incur much burden to report the data. Additionally, certified EHR technology al ready has the functionality to generateCMS-1525-FC 1091 real time diagnosis information and copies of procedures and tests performed during an ED visit.
Comment : Some commenters requested that CMS clarify on the applicability of this measure for patients put on observation. Some commenters noted that observations patients may be under the car e of non-ED physicians. Response : Currently, observation patients di scharged from the ED would be captured. However, not all observation patie nts at the hospital may be seen in or discharged through the ED. We believe this information should be provided for all observation patients, regardless of whether an ED physician was responsible for their care. We intend to revisit how this populat ion can be better defined for the hospital outpatient department as a whole with our t echnical expert panel during the maintenance of this measure.
Comment : A commenter requested the exclus ion of the discontinued medications from the specified elements for this measur e. The commenter recommended that only medications prescribed or dispensed by the ED should be included since changes to a patient’s home medication list seldom occur in ED visit. Another commenter inquired if all the required data elements for this meas ure are included in the Specifications Manual. Response : There is only one data element (Transition Record received) in this measure and this data element contains seve ral components. Discontinued medications is one of the components in this data element on the ED Measure Information Form: List of new medications and changes to continued medi cations that patient should take after ED discharge, with quantity prescribed and/or dispensed (OR intended duration) andCMS-1525-FC 1092 instructions for each medication. The medicatio ns discontinued as a result of the ED visit should be listed to ensure that the patient doe s not continue taking th em after discharge. This would mean a change to the list of home medications. Thus, documentation of discontinued medication is an essential part of the instru ctions given to a patient upon discharge. Therefore, the transition reco rd should contain a summary of the care, including discontinued medication instru ction provided during the ED encounter.

● OP-21: ED- Median time to pain management for long bone fracture
Comment : Two commenters believed that th is measure should include NSAIDS, such as ibuprofen on the analgesic medication list as some ED physicians use them to treat pain for long bone fractures. Response : W e acknowledge the importance of listi ng all possible analgesics in the treatment of long bone fractures in the lis t of analgesics for OP-21 provided in Table OP 9.1 Analgesic Medications of the Hospital OQR Specifications Manual. We will consider including ibuprofen as a recommended medication in the list of analgesics during the next Specifications Manual update. However, we emphasize that the purpose of OP-21 is to measure the median time to analgesic administration in long bone fractures rather than to measure the type of anal gesic administered. The list of analgesic medications in the Specificati on Manual are only suggestions.
Comment : A commenter contended that this measure does not account for those patients that do not receive pain medication, and questioned how patie nts not being treated would be appropriately captured.CMS-1525-FC 1093 Response : The commenter is correct, this m easure assesses whether patients with long bone fracture who received analgesics did so in a timely manner. During measure development, our technical expert pane l decided not to create a measure of administration/lack of administration. We will revisit whether a separate measure is needed, or whether lack of administration should be addr essed in the existing measure with our technical expert panel.

● OP-23: ED-Head CT scan results for acute ischemic stroke or hemorrhage stroke who received head CT scan interpreta tion within 45 minutes of arrival
Comment : One commenter believed that this measure is more appropriate as an inpatient measure rather than an outpatient measure. Response : We believe that timely interpretati on of head CT scan results for acute ischemic stroke or hemorrhage stroke pati ents is important in both inpatient and outpatient settings. This measure is appropria te to measure the qua lity of care in the outpatient setting, given that the goals of this measure are to encourag e hospitals to assess and improve timeliness of diagnostic reports, clinical decision making, and as a result, reduce unnecessary length of stay in the ED. We exp ect the measure would reduce radiology report turnaround times and expedite the formulation of ED patient treatment plans. The measure is limited to patients seen in the ED and subsequently discharged or transferred. This measure is designed to capture those patients that are not admitted to the facility associated with th e ED that sees them initially, which would be a significant population not accounted for with an inpatient measure.CMS-1525-FC 1094
Comment : One commenter supported measur e OP-23 but requested that CMS exclude patients who present to the ED in cardiopulmonary arrest and patients who suffer a cardiac or pulmonary arrest requiring resusc itation within 45 minutes of arrival to the ED for stabilization, before even considering sending them to CT for a head CT. Response : We believe that the number of patients who present to the ED in cardiopulmonary arrest and who suffer a cardiac or pulmonary arrest requiring resuscitation within 45 minutes of arrival to the ED for stabilization and eventually survive will be minimal (patients who expire are excluded from the measure). However, we will explore whether excl uding cases with diagnosis codes for either Respiratory Arrest (799.1) or Cardiac A rrest (427.5) would be feasib le and appropriate during the maintenance of the measure.
Comment : A commenter requested that CMS model measure OP-23 after a TJC stroke care measure that requires a brain imag ing study to be read in the hospital within 45 minutes of the time it was ordered, as opposed to within 45 minutes of a patient’s arrival (which OP-23 measures). Response : We appreciate this feedback. Because the therapeutic time window for treatment possibilities is critical, timely completion and results of the CT or MRI scan soon after patient arrival are imperative a nd will directly impact the quality of care a patient receives. Because results will only be delivered if ordered, this measure implies that tests will be ordered timely as well, so th at they can be read w ithin 45 minutes of a patient’s arrival.CMS-1525-FC 1095
Comment : A commenter stated that current evidence indicates that as an acute stroke brain imaging modality, MRI is equa lly good or better than CT in diagnosing stroke. Therefore, the comment er recommended changing the title of the measure to read Brain CT or MRI scan results from acute is chemic stroke or hemorrhagic stroke who received brain CT or MRI scan interp retation within 45 minutes of arrival. Response : We appreciate the feedback and w ill consider this suggestion in our measure review.
Comment : Several commenters recommended the retirement of all structural measures adopted in the Hospital OQR Program as the commenters did not believe these measures can be validated and usually they are not tied to quality. Response : We do not agree with the commen ters’ statements that structural measures are not tied to quali ty. Structural measures asse ss operational conditions that are associated with better quality, and therefore warrant measurement and inclusion in this and other quality reporting programs. 2. Revision to OP-22-Le ft Without Being Seen In the CY 2011 OPPS/ASC final rule with comment period, we finalized the adoption of the chart-abstracted measure OP -22 – Left Without Being Seen (75 FR 72088 through 72089). This measure was endorsed (N QF # 0499) as part of an NQF project entitled “National Voluntary C onsensus Standards for Emergency Care.” This measure assesses the percentage of patients who leav e the Emergency Department (ED) without being evaluated by qualified medical pers onnel, which is an indication of ED overcrowding, and lack of timely access to care. In the CY 2012 OPPS/ASC proposedCMS-1525-FC 1096 rule (76 FR 42315), we proposed that beginning with the CY 2013 payment determination, hospitals woul d submit aggregate numerator and denominator counts once a year using a Web-based form available th rough the QualityNet Web site for this measure. We stated that this proposed proce ss would be different from that which is used to collect other chart-abstracted measures be cause it would not require hospitals to submit patient-level information for this measure, and would not require qua rterly submission of data. We believe this proposed process w ill reduce the potential data collection and submission burden for this measure. We proposed that for the CY 2013 payment determination, data submission for this measure would occur between July 1, 2012 and August 15, 2012. We also proposed that for the CY 2013 payment determination, th e aggregate counts for the numerator (the total number of patients who left without be ing evaluated by a physician/advance practice nurse/physician’s assistant) and the denominat or (total number of patients who signed in to be evaluated for emergency services) would be submitted by hospitals and would span the time period from January 1, 2011 th rough December 31, 2011. We invited public comment on this proposed approach to da ta collection for OP-22 for the CY 2013 Hospital OQR Program and subsequent paymen t determinations, and on the time period to be assessed for this measure for the CY 2013 payment determination. We made the proposed updated specifications for this m easure available in the July 2011 Hospital OQR Specifications Manual.
Comment : A few commenters supported the proposed revision for the collection of aggregate counts of the numerator and th e denominator for measure OP-22 for burdenCMS-1525-FC 1097 reduction purposes. A commenter suggested CMS study the results for systematically higher rates for certain types of hospitals such as safety net hospitals so th at appropriate adjustments can be made. One commenter was concerned about including this measure in pay for reporting or public reporting but did not provide a reason. Furthermore, the commenter recommended changing this measure into a structural measure and having it reported on an annual basis. One commenter c ontended that the measure is not a quality of care measure and is hard to validate si nce there are underlying patient records from which to pull the data and added that the measure should not be implemented. Response : We thank the commenters for thei r support of aggregate reporting for this measure and their suggestions for monitori ng this measure for differences by type of hospital (for example, safety net hospitals). We point out that the measure would be reported once annually by hospitals. This m easure is NQF-endorsed as a measure of ED quality. We have not proposed to validate this measure.
Comment : Several commenters stated that it is burdensome to retrieve the aggregate data retroactively since hospitals may not have been accustomed to collecting the data for aggregate reporting purposes, a nd indicated that the time period hospitals should begin reporting for this measure should begin after this final rule with comment period is issued rather than CY 2011 as propos ed. Other commenters believed that the long lapse of time between 2011 and 2013 woul d make the data irrelevant. One commenter suggested moving the reporting window to July 1, 2013 to August 15, 2013 instead of July 1, 2012 and August 15, 2012 as proposed. Another commenter suggested delaying implementation of this measure unt il the data can be submitted electronically.CMS-1525-FC 1098 Response : We believe that most HOPDs ar e already tracking the number of patients that leave the emergency department without being seen through various logs (for example, triage or presentation logs). We note that electronic systems are not needed to report the measure. However, in re sponse to the public comments we received regarding the burden for retroactive retrieval of aggregate data, we will finalize the time window for the initial reporti ng of this measure for the CY 2013 payment determination to begin on January 1, 2012 through June 30, 2012. The data submission window for this measure for the CY 2013 payment determination will be July 1, 2012 through August 15, 2012.
Comment : One commenter requested clar ification regarding whether the proposed revisions to the measure are endorse d by the NQF. A commenter requested the definitions of “being seen,” “left without bei ng seen,” as well as clarifications for the inclusion or exclusion of patients who have been tria ged but not evaluated by a physician/advance practice nurse /physician’s assistant, fo r data collection purposes. Response : The revisions do not cha nge the NQF endorsed measure specifications. Only the form, manner, and timing of data submission to CMS are changed. We have not revised this measure or its measure specifications. In the current measure specification, we defined “being seen ” as being evaluated by a physician or advance practice nurse or physician’s assistant. After consideration of public comment re ceived, we are fina lizing our proposal that for the CY 2013 payment determination, w ith respect to OP-22-Left Without Being Seen, HOPDs will be required to report only aggr egate counts for the numerator (the totalCMS-1525-FC 1099 number of patients who left without bei ng evaluated by a physician/advance practice nurse/physician’s assistant) and the denominat or (total number of patients who signed in to be evaluated for emergency services). In response to comments, we are finalizing that HOPDs will be required to submit the da ta between July 1, 2012 and August 15, 2012 with respect to the period January 1, 2 012 through June 30, 2012, and will be required to submit the data using a Web-based form for this measure available on the QualityNet Web site. C. New Quality Measures for the CY 2014 and CY 2015 Payment Determinations 1. Considerations in Expanding and Updati ng Quality Measures under the Hospital OQR Program In general, when selecting measures fo r the Hospital OQR Program, we take into account several considerations and goals. Th ese include: (a) e xpanding the types of measures beyond process of care measures to include an increased number of outcome measures, efficiency measures, and patients' experience-of-care measures; (b) expanding the scope of hospital services to which the measures apply; (c) considering the burden on hospitals in collecting chart-abstracted data ; (d) harmonizing the measures used in the Hospital OQR Program with other CMS qua lity programs to align incentives and promote coordinated efforts to improve quali ty; (e) seeking to use measures based on alternative sources of data that do not require chart abstractio n or that utilize data already being reported by many hospitals , such as data that hospita ls report to clinical data registries, or all-payer claims data bases; a nd (f) weighing the relevance and utility of theCMS-1525-FC 1100 measures compared to the burden on hospita ls in submitting data under the Hospital OQR Program. Specifically, we assign priority to quality measures that assess performance on: (a) conditions that result in the greates t mortality and morbidity in the Medicare population; (b) conditions that are high volume and high cost for the Medicare program; and (c) conditions for which wide cost and treatment variations have been reported, despite established clinical gui delines. We used and continue to use these criteria to guide our decisions regarding what measur es to add to the Hospital OQR Program

measure set. In the CY 2009 OPPS/ASC final rule w ith comment period, we adopted four claims–based quality measures that do not re quire a hospital to submit chart-abstracted clinical data (73 FR 68766). This supports our goal of expanding the measures for the Hospital OQR Program while minimizing the burden upon hospitals and, in particular, without significantly increasing the chart abst raction burden. In addition to claims-based measures, we are considering registries and EHRs as alternative ways to collect data from hospitals. A registry is a collection of clinical data for purposes of assessing clinical performance, quality of care, and opportuni ties for quality improvement. Many hospitals submit data to and participate in existing regi stries. In addition, registries often capture outcome information and provide ongoing quali ty improvement feedback to registry participants. Instead of requiring hospitals to submit the same data to CMS that they are already submitting to registries, we could collect the data directly from the registries withCMS-1525-FC 1101 the permission of the hospital, thereby enabli ng us to expand the Hospital OQR Program measure set without increasing the burden of data collection for those hospitals participating in the registries. The data that we would receive from registries would be used to calculate quality m easures required under the Hosp ital OQR Program, and would be publicly reported like other Hospital OQR Program quality measures, encouraging improvements in the quality of care. In th e CY 2010 OPPS/ASC final rule with comment period (74 FR 60633), we responded to publ ic comments on such an approach. In the CY 2009 OPPS/ASC final rule with comment period, we also stated our intention to explore mechanisms for data submission using EHRs (73 FR 68769). When we refer to the term “Qualified EHR,” we intend for it to have the same meaning as set forth by the Office of the National Coordi nator for Health Information Technology (ONC) (45 CFR 170.102) which has adopted th e statutory definition of Qualified EHR found in section 3000(13) of the Public Health Service Act. That section defines a Qualified EHR as “an electronic record of health-related information on an individual that -- (A) includes patie nt demographic and clinical hea lth information, such as medical history and problem lists; and (B) has the ca pacity -- (i) to provi de clinical decision support; (ii) to support physician order entry; (iii) to capture and query information relevant to health care quality; and (iv) to exchange electr onic health information with, and integrate such information from other sour ces.” Additionally, when we refer to the term, Certified EHR Technology, we intend for it to have the same meaning as set forth by the ONC at 45 CFR 170.102 as follows: “C ertified EHR Technology” means (1) A complete EHR that meets the requirements incl uded in the definition of a Qualified EHRCMS-1525-FC 1102 and has been tested and certified in accordan ce with the certification program established by the National Coordinator as having met all applicable cert ification criter ia adopted by the Secretary; or (2) a combination of EHR Modules in which each constituent EHR Module of the combination has been tested and certified in accordance with the certification program established by the National Coordinator as having met all applicable certification criteria adopted by the Secretary, and the resultant combination also meets the requirements included in the definition of a Qualified EHR. Establishing a data submission mechanism using EHRs will require interoperability between EHRs and our data collection systems, additional infrastructure development on the part of hospitals and CM S, and the adoption of standards for the capturing, formatting, and transmission of data elements that make up the measures. However, once these activities are accomplishe d, the adoption of measures that rely on data obtained directly from EHRs would enable us to expand the Hospital OQR Program measure set with less cost and burden to hos pitals. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60633 through 606 34), we responded to public comments on such an approach. Continuing to reduce our reliance on th e chart-abstraction mechanism would allow us and hospital outpatient department s to devote available resources towards maximizing the potential of registries and EH Rs for quality measurement reporting. Both mechanisms hold the promise of more sophi sticated and timely reporting of clinical quality measures. Clinical data registries allow the collection of more detailed data, including outcomes. Registri es can also provide feedb ack and quality improvementCMS-1525-FC 1103 information based on reported data. Finally, clin ical data registries can also receive data from EHRs, and therefore, serve as an altern ative means to reporting clinical quality data extracted from an EHR. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 72174), we added new measures over a three year period for the CY 2012, CY 2013, and CY 2014 payment determinations. We believe this process will assist hospitals in planning, meeting future reporting requirement s, and implementing quality improvement efforts. We will also have more time to de velop, align, and implement the infrastructure necessary to collect data on the measures a nd make payment determinations. The fact that we finalized measures for a three year period of time (for example, for the CY 2012, CY 2013 and CY 2014 payment determinations in the CY 2011 OPPS/ASC final rule with comment period) does not preclude us from proposing to adopt additional measures or changing the list of measures for these payment determinations through subsequent rulemaking cycles that affect thes e future payment determinations. We have previously expanded th e Hospital OQR Program measure set dramatically by adopting measures over severa l payment determinations in order to allow hospital outpatient departments adequate time to plan and implement the reporting of quality data for the CY 2012, CY 2013 and CY 2014 payment determinations. In the CY 2012 OPPS/ASC proposed rule (76 FR 42317), we proposed to add new measures to the existing Hospital OQR measure set for the CY 2014 payment determination and proposed to add new measures for the CY 2015 payment determination.CMS-1525-FC 1104
Comment : Many commenters strongly supported CMS’ goal to move from process measures to primarily outcome a nd patient experience of care measures. Commenters encouraged measure alig nment across payers using NQF-endorsed measures. To alleviate burden from chart-abstraction, commenters provided the following suggestions for CMS:

● Identify measures suitable for regist ry-based reporting in the near future. Commenters described many advantages in usi ng registries such as less resources are needed to report data, and timel y analysis of existing practices to improve the quality of

care.

● Retire unnecessary measures

● Add measures linked to health outcomes

● Limit the number of new chart-abst racted measures in the Hospital OQR Program. Response : We appreciate the valuable input from commenters. As discussed in previous rules, we are suppor tive of registry-bas ed measurement which holds promise for reducing burden. During our measure mainte nance process, we review the improvement potential for a measure, the measure’s con tinued support by scientific evidence, any new evidence indicating the measure may cause harm to patients or no longer represents best practice, duplicative measures, and whether a measure could be replaced by an outcome measure. In our discussion of measure selection criteria, we state our intention to focus on outcome measures whenever possible. A dditionally, our goal is to reduce burden and minimize the number of chart-abstracted measures.CMS-1525-FC 1105
Comment : A commenter strongly recommended that in future measure proposals, CMS should: (1) clearly articu late the specific patient inclus ion criteria for the measure; and (2) select codes that ar e appropriate for claims-based measures in HOPD settings. Response : We note that we provide measure specifications or links to measure specifications, including patient inclusi on criteria and the ap propriate codes for claims-based measures for the proposed measur es, at the time we propose them to assist the public, during the public comment process. 2. New Hospital OQR Program Quality Measures for the CY 2014 Payment Determination As stated above, the CY 2014 measure set for the Hospital OQR Program currently contains 23 measures that we adopted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72094). In the CY 2012 OPPS/ASC proposed rule (76 FR 42317 through 42323), we proposed to adopt a number of additional measures for the CY 2014 measure set. a. Proposed National Healthcare Safety Network (NHSN) Healthcare Associated Infection (HAI) Measure for the CY 2014 Pa yment Determination: Surgical Site Infection (NQF #0299) Healthcare Associated Infections (HAIs) is a topic area widely acknowledged by HHS, the Institute of Medicine (IOM), the Nati onal Priorities Partnership, and others as a high priority requiring measurement and im provement. HAIs are among the leading causes of death in the United States. CDC estim ates that as many as 2 million infectionsCMS-1525-FC 1106 are acquired each year in hospitals and result in approximately 90,000 deaths. 1 It is estimated that more Americans die each y ear from HAIs than from auto accidents and homicides combined. HAIs not onl y put the patient at risk, but also increase the days of hospitalization required for patients and add co nsiderable health care costs. HAIs are largely preventable through interventions such as be tter hygiene and advanced scientifically tested techniques for surgical patients. Therefore, many health care consumers and organizations are calling for public disclosure of HAIs, arguing that public reporting of HAI rates provides the in formation health care consumers need to choose the safest hospitals, and gives hospitals an incentive to improve infection control efforts. This proposed measure is currently collected by the Nationa l Healthcare Safety Network (NHSN) as part of State-mandated reporting and surveillance requirements for hospitals in some States. Additionally, da ta submission for this measure through EHRs may be possible in the near future. The NHSN is a secure, Internet-based surveillance system maintained and managed by the CDC, and can be used by all t ypes of healthcare facilities in the United States, including acute care hospitals, l ong term acute care ho spitals, psychiatric hospitals, rehabilitation hospitals, outpatient dialysis cen ters, ambulatory surgery centers, and long term care facilities. The NHSN is provided free of charge to hospitals. The NHSN enables healthcare facilities to collect and use data about HAIs, clinical practices known to prevent HAIs, the incidence or pr evalence of multidrug -resistant organisms within their organizations, and other advers e events. Some States use the NHSN as a

1 McKibben. L., Horan, T.: Guidance on public reporting of healthcareassociated infections: recommendations of the Healthcare Infection Control Practices Advisory Committee. AJIC 2005; 33:217–26.CMS-1525-FC 1107 means for healthcare facilitie s to submit data on HAIs mandated through their specific State statute. Currently, 21 States require hospitals to report HAIs using the NHSN, and the CDC supports more than 4,000 hospitals that are using NHSN. Increasingly, more surgical procedures are being perfor med in hospital outpatient department settings and ASCs. Therefore, we have determined that this measure is “appropriate for the measurement of the qua lity of care furnished by hospitals in outpatient settings” as required under section 1833(t)(17)(C)(i) of the Act. This proposed HAI measure assesses the percentage of surgi cal site infections occurring within 30 days after an NHSN-defined operative procedure if no implant is left in place or within one year if an implant is in place, and the inf ection appears to be related to the operative procedure. Infections are identified on original admission or upon readmission to the facility of original operative procedure within the relevant time frame (30 days for no implants; within 1 year for implants). Th e specifications for this proposed HAI measure can be found at http://www.cdc.gov/nhsn/psc.html

. We also believe that this measure meets the requirement under

se ction 1833(t)(17)(C)(i) of the Act that measures selected for the Hospital OQR Program

“ reflect consensus among affected parties and, to the extent f easible and practicable, shall include measures set forth by one or more national consensus building entities.” This measure was NQF-endorsed in 2007 and was adopted by the Hospital Quality Alliance in 2008. We note that this measure also was adopted for the Hospital IQR Program beginning with the FY 2014 payment determin ation (75 FR 50211) and its adoption intoCMS-1525-FC 1108 the Hospital OQR Program would further our goal of aligning meas ures across programs where feasible. We proposed that submission of data fo r this proposed NHSN measure for the CY 2014 payment determination would relate to infection events occurring between January 1, 2013 and June 30, 2013. We proposed that hospital outpatient departments use the existing NHSN infrastructure and prot ocols that already exist for this proposed measure to report it for Hospital OQR Program purposes. We invited public comment on our proposal to adopt this HAI measure in to the Hospital OQR Program for the CY 2014 payment determination.
Comment : Some commenters stated it is inappr opriate to include the surgical site infection measure in the Hospital OQR Program based on the measure’s NQF endorsement status as an i npatient setting measure. The commenters noted that the measure is appropriate for the inpatient setting because the majority of patients stay in the hospital several days post-surgery. Howeve r, the commenters stated that, in the outpatient settings, patients are discharg ed within hours of surgery and potential outpatient surgery related infections may not occurred until after discharge. Commenters cited the examples of colon surgery and a bdominal hysterectomy, specified for reporting in the Hospital IQR Program, which are sel dom performed in hospital outpatient settings. Response : We agree that currently, the pr ocedures included in the proposed surgical site infection measure do not repres ent a large number of procedures that are performed in hospital outpatient department s or in ASCs. Based on the public comments we received, we are not finalizing the surgic al site infection measure for HOPDs for theCMS-1525-FC 1109 CY 2014 payment determination at this time. We intend to re-propose the measure through future rulemaking once measurement and operational issues for HOPDs are resolved. We will continue to coordinate with the CDC and monitor efforts for adapting the surgical site infection measure to the outpatient setting, and w ill propose a surgical site infection measure for the Hospital OQR Program when a more suitable set of procedures has been defined for the outpatient setting.
Comment : A commenter contended that curren tly, less than half of the States required hospitals to report to NHSN. The commenter sought clarification on CMS’ plan to collect data from facilities that do not currently report to NHSN. A commenter requested more detailed discussion of the NHSN validation process for HOPDs, such as what kind of sample list of patients that hospita ls have to provide, and what format would be used. Response : As of September 2011, 26 States have opted to use NHSN as the operational system for HAI re porting mandates in their State. As of January 1, 2011, subsection (d) hospitals participating in the Hospital IQR Program began submitting CLABSI data to the NHSN. At this time, we are not finalizing our adoption of the NHSN SSI measures for HOPDs for the CY 2014 pa yment determination. Should we require reporting through NHSN for this program in the future, facilities not currently participating in NHSN would need to enroll and submit data to NHSN in order to meet the requirements for the Hospital OQR Program. Also, in the event that a surgical site infection measure is implemented in the future through the NHSN, CMS and CDC will collaborate to develop a validation stra tegy for surgical site infection data.CMS-1525-FC 1110
Comment : Some commenters applauded the add ition of the surgical site infection measure in recognition of the significant nega tive impact of HAIs on hospital patients. Commenters recommended that CMS adopt one to two of the NQF-endorsed CDC/NHSN outpatient surgical procedures init ially and they encourag ed the inclusion of more HAI measures in the Hospital OQR Progr am in the future. A commenter indicated that proposal of this measure aligns with The Joint Commission’s National Patient Safety Goals. Response : We thank the commenters for their support and encouragement for HAI measures. To advance the goals of the HHS Action Plan to Reduce HAIs in healthcare facilities, we will strive to incl ude more HAI measures in the Hospital OQR Program as appropriate in the future. As explained above, we are not finalizing our proposal to adopt the NHSN HAI surgical site infection measure at this time. We intend to propose a surgical site infection measure at such time as a set of procedures more suitable for the outpatient setting is identified.
Comment : A commenter was skeptical about the CDC’s system capability to handle the influx of NHSN measure data from the Hospital OQR and Hospital IQR Programs, as well as the quality reporti ng programs for ASCs, LTCHs and Inpatient Rehabilitation Facilities. A commenter noted that CDC is still conducting pilot testing of vendor capability to electr onically transfer data. Response : In preparation for the upcoming influx of data, CDC is adding capacity, both personnel and tech nical infrastructure, to s upport the additional use ofCMS-1525-FC 1111 NHSN. CDC is confident that these upgrades will enable the system to successfully accept data that is reported under our quality programs.
Comment : A commenter stated that some HOP Ds could have high surgical site infection rates because they have adopted more comprehensive and sophisticated surveillance systems. Response : Surveillance efforts may initiall y result in an increased number of infections being detected that previously may have gone undetected for all HOPDS’s participating in the program, because they are now required to submit data for this measure. However, accurate measurement is necessary in order to assess meaningful improvements in outcomes. Accurate measur ement of surgical site infections is dependent upon standardized data collection pr otocols for such thi ngs as post-procedure follow up and data validation programs that are consistent with already existing postprocedure protocols in HOPDs or that can be incorporated into those protocols where they need to be introduced. With initiation of this me asure, all facilities will be submitting the same type of data using a standardized collection protocol, and therefore more comprehensive and sophisticated survei llance systems would not necessarily equate to a greater number of surgical site inf ections. In many ways those facilities with comprehensive and sophisticated surveillance systems ma y be at an advantage, relative to those without sophisticated surveillance system s, in the identification of surgical site infections earlier on.
Comment : A commenter noted that CDC is cu rrently collaborating with surgical associations to develop and harmonize a more robust surgical site in fection measure thatCMS-1525-FC 1112 would be consistent with the approaches and expertise of both organizations. Therefore, the commenter urged postponing the surgic al site infection measure until the harmonization process is complete. Response : The commenter is correct in that the CDC is currently working with the American College of Surgeons (ACS) to develop a harmonized surg ical site infection measure. When a measure that is better su ited for the HOPD setting is fully developed, we will re-propose the measure. As previ ously indicated, CMS is not finalizing the surgical site infection measure for HOPDs at this time. After consideration of th e public comments we receive d, we are not finalizing the surgical site infection measure that we proposed to adopt for Hospital OQR Program. We intend to re-propose the surgical site infection measure though future rulemaking once measurement and operational issues for HOPDs are resolved. b. New Chart-Abstracted Measures for the CY 2014 Payment Determination In the CY 2011 OPPS/ASC final rule with comment period, we stated that we would not finalize five proposed NQF-endorsed di abetes care measures because we were in the process of refining the chart-abstract ed numerator definitions for these measures (75 FR 72091). We also stated that we intend ed to again propose to adopt these measures for the CY 2014 payment determination. In the CY 2012 OPPS/ASC proposed rule (76 FR 42317 through 42319), we proposed to ad opt these five diabetes care measures for the CY 2014 payment determination as chart-abstracted measures. These five measures are: (1) Hemoglobin A1c Mana gement (NQF #0059); (2) Diabetes Measure Pair: A. Lipid Management: Low Density Lipoprotein Cholesterol (LDL-C) < 130, B.CMS-1525-FC 1113 Lipid Management: LDL-C < 100 (NQF #0064); (3) Diabetes: Blood Pressure Management (NQF #0061); (4) Diabetes: Ey e Exam (NQF #0055); and (5) Diabetes: Urine Protein Screening ( NQF #0062). We note that these five measures are electronically specified. We hope to be able to collect such information via EHRs in the future, and in the proposed rule we solicite d comments on using EHR for data collection in the future. In addition, in the CY 2012 OPPS/ASC proposed rule (76 FR 42319 through 42320), we proposed to adopt a sixt h new chart-abstracted measure, Cardiac Rehabilitation Patient Referral from an Ou tpatient Setting (NQF #0643), for the CY 2014 payment determination.

● Five Diabetes Care Measures For detailed descriptions of the five diabetes care measures we proposed to adopt for the Hospital OQR Program, please refer to the CY 2012 OPPS/ASC proposed rule (76 FR 42317 through 42319).
Comment : A few commenters supported the addition of the proposed chart-abstracted measures for the CY 2014 payment determination. Response : We thank the commenters for th eir support of thes e measures. We believe they will help assess care provided to patients seen in hospital outpatient clinics for management of chronic conditions.
Comment : Many commenters noted that the proposed addition of six chart-abstracted measures in the Hosp ital OQR Program for the CY 2014 payment determination does not appear to be consis tent with CMS’ goal to reduce burden for providers. One commenter suggested that CMS provide per case abstraction time burdenCMS-1525-FC 1114 in the proposal. Commenters strongly recommended that no ne w chart-abstracted measures should be introduced while provi ders are in transition to ICD-10. Manycommenters were very concerned about the burden from the proposed addition of chartabstracted measures, in terms of staff tr aining, coordination of data submission, data quality checks, and staff resources. Commenters recommended delaying the implementation of the proposed chart-abst racted measures to the CY 2015 payment determination as the target date. Other commenters suggested that we delay the implementation for these chart-abstracted m easures until NQF finishes retooling and testing the related specifications, and EH R technology can facilitate electronic data transmission. Response : We are aware of the burden that HOP Ds would face if we finalized all of the proposed chart-abstracted measures, as well as the challenges that providers may face as they adopt ICD-10. Based upon c onsideration of the public comments we received regarding this burden and the n eed to further specify these diabetes care measures for the hospital out patient setting, we have d ecided not to finalize the 5 proposed diabetes care measures at this time. We intend to further refine the measures for use in the hospital outpatient setting and re-propose these measures at a future date when the denominators and numerators are more refined for the HOPD setting and they would be less burdensome for HOPDs to implement.
Comment : Many commenters strongly supporte d the diabetes care measure set and believed it would improve quality of care for diabetic patients with co-morbidities. However, these commenters were very concerned that data collection may beCMS-1525-FC 1115 overwhelming without a clear definition of the target patient popul ation. Commenters asserted that CMS needs to provide more preci se specifications to identify the appropriate patient population inclusions and exclusions for these measures. The commenters explained that many patients that visited hospi tal outpatient departments do so to receive diagnostic reports, lab work, and treatments ordered by their primary care physicians. Therefore, these commenters believed that hospitals that do not ha ve diabetes clinics should be held accountable for outpatients’ di abetes lab work ordered by primary care physicians practice outside the hospital out patient setting. So me commenters opposed the diabetes care measure set and believed they would be better suited for the PQRS Program where patients are be ing followed on a long-term basis whereas much of the care in the HOPD setting is episodic or even fragmented. One commenter recommended that CMS use data being submitted by HOPDs to diabetes registries instead of collecting data. Response : Diabetes is prevalent in the Medicare population, and many patients with diabetes receive ongoing evaluation ma nagement services in hospital outpatient department clinics. These diabetes meas ures align with measures which are also currently in use in the PQRS and HITECH EHR Incentive Program. We also believe that both the facility and the affiliated physician(s) play a role in ensuring that their patients received quality and coordinated care. We thank the commenter for the suggestion of using registries. Based upon consideration of the public comment regarding the burden and the need to further specify these measures for the hospital outpatie nt setting, we have decided not to finalize these 5 diab etes care measures at this time.CMS-1525-FC 1116
Comment : A few commenters provided suggesti ons to modify the diabetes care measure specifications to: (1) limit the de nominator population to capture only primary care provider-based clinics that are under th e OPPS system; (2) incorporate electronic lab data; (3) evaluate the appropria teness of using CPT-category II codes (not currently used in OPPS billing) or a corresponding algorithm to convey quality data codes; (4) use NPI specialty numbers to track associated clinic s responsible for the di abetes care measures; and (5) include at least a mini mum number of visits per patient before a patient would be included in the denominator. Response : We thank the commenters for the valuable suggestions and will take them into consideration in refinement of the measures for the hos pital outpatient setting. After consideration of the public comment regardi ng burden and the need to further specify these measures for the hospita l outpatient setting, we have decided not to finalize these 5 diabetes care measures at this time. We intend to further refine the measures for use in the hospital outpatient setting and re-propose th ese measures at a future date. Cardiac Rehabilitation Measure: Patient Referral from an Outpatient Setting (NQF #0643) Cardiac rehabilitation improves the qu ality of life, reduces modifiable cardiovascular risk factors, enhances adhere nce to preventable medications, and lowers morbidity and mortality. 2 Despite these benefits, cardiac rehabilitation is significantly underused by patients with heart disease and th ere is significant geogr aphical variation in referral rates and lower use in women, non-whites, older patients and patients on

2 Wenger, N.K.: Current status of cardiac rehab ilitation. J. Am Coll Cardiol 2008; 51:1619-1631.CMS-1525-FC 1117 Medicaid. 3 A recent study of Medicare benefi ciaries, using 70,040 matched pairs of patients hospitalized for corona ry conditions or revasculariz ation procedures, found that mortality rates were 21 percent to 34 percen t lower in cardiac rehabilitation users compared to nonusers. 4 Evidence from registries which include a cardiac rehabilitation performance measure indicated that only a bout 18 percent of e ligible patients were referred to cardiac rehabilitation. 5 Under our regulations, 42 CFR 410.49, cardiac rehabilitation is covered for pa tients who have had one or more of the following: an acute myocardial infarction within the preceding 12 months, curren t stable angina, individuals who have undergone coronary bypass surgery, a percutaneous coronary intervention or coronary stenting, heart valve repair or replacement, or a heart-lung transplant. In May 2010, the NQF endorsed two cardi ac rehabilitation re ferral performance measures as part of the call for care coordi nation performance measures. These measures are: (1) Cardiac Rehabilitation: Patient Re ferral From an Inpatient Setting (NQF #0642). The percentage of patients admitted to the hospital with a qualifying cardiovascular disease (CVD) event who are referre d to an early outpatient cardiac rehabilitation/secondary prevention program; and (2) Cardiac Rehabilitation: Patient Referral From an Outpatient Setting (NQF #0643 ) – The percentage of patients evaluated in an outpatient setting who in the previous 12 months experienced an acute myocardial infarction or chronic stable angina or who have undergone coronary artery bypass

3 Suaya, J.A., Shepard, D.S. , Normand, S.L., et al.: Use of cardi ac rehabilitation by Medicare beneficiaries after myocardial infarction or coronary bypass surgery. Circulation. 2007;116:1653-62 4 Suaya, J.A., Stason, W.B., Ades, P.A., et al.: Cardiac rehabilitation and survival in older coronary patients. J. Am Coll Cardiol. 2009;54:25-33. 5 Chan, P.S., Oetgen, W.J., Buchanan, D., Mitchell, K. et al.: Cardiac performance measure compliance on outpatients: the American College of cardiology and National Cardiovascular data registry’s PINNACLE (Practice Innovation and Clinical Excellence) program. J. Am Coll Cardiol 2010 56(1) 8-14)CMS-1525-FC 1118 (CABG) surgery, a percutaneous coronary intervention (PCI), cardiac valve surgery (CVS), or cardiac transplantati on who have not already particip ated in an early outpatient cardiac rehabilitation/secondary prevention pr ogram for the qualifying event and who are referred to an early outpatient cardiac rehabilita tion/secondary prevention program unless there is a documented medical or patient or iented reason why a referral was not made. We proposed to adopt the second (NQF #0643) of these measures for the CY 2014 Hospital OQR Program. The measure specifica tions are located in Appendix A (Pages A4 and A5) of the 2010 NQF consensus re port entitled “ Prefe rred Practices and Performance Measures for Measuring and Reporting Care Coordination” which is available at the following link: http://www.qualityforum.org/Publications/ 2010/10/Preferred_Practices_and_Performanc e_Measures_for_Measuring_and_Re porting_Care_Coordination.aspx

. This proposed measure targets patien ts who have experienced a qualifying cardiovascular event. These patients ar e commonly seen in hospital outpatient departments and, for this reason, we believe th at the proposed measur e is appropriate for the measurement of the quality of care (i ncluding medication errors) furnished by hospitals in outpatient settings as required under section 1833(t)(17)(C )(i) of the Act. The measure also is NQF-endorsed, and theref ore meets the requirement that measures selected for the program “reflect consensus among affected parties and, to the extent feasible and practicable, that these measures include measures set forth by one or more national consensus building entities” under section 1833(t) (17)(C)(i) of the Act.CMS-1525-FC 1119 We proposed to adopt the NQF-endorsed Ca rdiac Rehabilitation Patient Referral from an Outpatient Setting measure for CY 2014 payment determination. The goal of this measure is to improve the delivery of cardiac care in order to reduce cardiovascular mortality and morbidity and optimize the health of patients suffering from CVD. In the proposed rule we invited publi c comment on this proposed measure.
Comment : Many commenters were very supporti ve of the cardiac rehabilitation referral measure which they believed would en courage hospitals to take responsibility for patient care beyond the cardiovascular interven tions. Commenters stat ed that facilities with electronic patient management systems would generate more physician referrals to cardiac rehabilitation. A commenter recommen ded that the measure should be included in the Hospital IQR Program as well so that the continuity of car e for cardiovascular events can be better enhanced. A commenter alerted CMS that some registries already integrate both the inpatient and outpatient car diac referral measures in their systems to collect data. Response : We thank the commenters for the support. We agree that a similar measure in the hospital inpatient setting would be beneficial from a continuity of care perspective and we thank the commenter for the suggestion which we will consider in future Hospital IQR Program rulemaking.
Comment : Some commenters did not support th is measure for various reasons. A commenter did not see the reason for hos pitals to report this measure because presumably, the cardiologist in the cardiac clinic would be reporting this measure. Furthermore, the commenter stated the calculati on of the percentage of patients evaluatedCMS-1525-FC 1120 in an outpatient setting who in the previous 12 months experienced a major cardiac event, such as heart attack, and received treatment for the event in an outpatient setting would be very burdensome. The commenter believ ed that only highly integrated care system with well-structured coordi nation like Accountable Care Organizations (ACOs) or comprehensive medical homes have the capability to compile the data needed for this

measure. Response : We understand that a cardiologist, who works in a cardiology clinic for a hospital outpatient department, may repor t cardiac rehabilitation referral to other reporting programs. However, we continue to believe that the measure is valuable because it encourages HOPDs to coordinate the care that their patients receive. We want to clarify that Cardiac Rehabilitation: Patient Referral From an Outpatient Setting (NQF #0643 ) measures the percentage of patients ev aluated in an outpatient setting who, in the previous 12 months, experienced a qualifying cardiovascular event (which is defined in the NQF-endorsed measure specificati ons). Hospital outpatient departments are not required under the meas ure specifications to track whether these patients were actually following the qualifying cardiovasc ular event in the last 12 months. The measure focuses on the process of referring a patient to a cardiac rehabilitation or secondary prevention program. The NQF m easure specification for this measure available at the link above includes the definition of a referral as “an official communication between the healthcare provide r and the patient to recommend and carry out a referral order to an ear ly outpatient cardiac rehabil itation program.” This includes the provision of all necessary information to the patient that would allow the patient toCMS-1525-FC 1121 enroll in an early outpatient cardiac rehabil itation program. This also includes written or electronic communication between the healthcar e provider or healthcare system and the cardiac rehabilitation program that includes th e patient’s enrollment information for the
program. Comment : A commenter believed that this measure would be very challenging and burdensome for a safety net hospital, because such a hospital usually does not have an affiliation with a cardiac rehabilitation facili ty, to collect patient data, since its patients do not visit the hospital on a regular basis. Another commenter viewed this measure as merely reporting whether a referral was made without regard to whether the patient ultimately could access or actually received car diac rehabilitation services. Therefore, the commenter did not see the tie of this measure to quality improvement. Response : We recognize that this measure does not focus on whether the patient actually enrolls in a cardi ac rehabilitation or secondary prevention program. The measure focuses on the process of referring a patient to a cardiac rehabilitation or secondary prevention program. We believe that care coordination pro cesses such as this are an indicator of high quality of care deliv ered to HOPD patients by hospitals including safety net hospitals.
Comment : A commenter urged delaying implementation of this measure until it is e-specified and can be reported via EHRs. Response : We do not believe we should de lay the implementation of this measure given its beneficial impact on patie nt care. We thank the commenter for theCMS-1525-FC 1122 input for e-measure specification and we w ill take this into c onsideration in our e-measure development. After consideration of the public comments we received, we are finalizing the chart-abstracted Cardiac Rehabilitation Measur e: Cardiac Rehabilitation Patient Referral from an Outpatient Setting measure for CY 2014 payment determination. The data collection requirements for this measure are detailed in the “Form, Manner, and Timing” section of this final rule with comment period. c. New Structural Measures In the CY 2012 OPPS/ASC proposed rule (76 FR 42320 through 42323), for the CY 2014 payment determination, we proposed to add two structural measures: (1) Safe Surgery Checklist Use; and (2) Hospital Outpatient Volume for Selected Outpatient Surgical Procedures. In ge neral, structural measures assess the characteristics and capacity of the provider to de liver quality health care. (1) Safe Surgery Checklist Use Measure This proposed structural measure as sesses whether a hospital outpatient department utilizes a Safe Surgery ch ecklist that assesses whether effective communication and safe practi ces are performed during thr ee distinct perioperative periods: (1) the period prior to the administration of anesth esia; (2) the period prior to skin incision; and (3) the period of closure of incision and prior to the patient leaving the operating room. The use of such checklists ha s been credited with dramatic decreases in preventable harm, complications and post-surgical mortality 6 . In November 2010, the

6 Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al (2009) . “A Surgical Safety Checklist to Reduce Morbidity and Mortality in a Global Population.”. New England Journal of Medicine. 360: 491-499.CMS-1525-FC 1123 New England Journal of Medicine (NEJM) published a study concl uding that surgical complications were reduced by one-third, and mortality by nearly half, when a safe surgery checklist was used. 7
We believe that effective communication a nd the use of safe surgical practices during surgical procedures will significantly reduce preventable surgical deaths and complications. For example, mistakes in su rgery can be prevente d by ensuring that the correct surgery is pe rformed on the correct patient and at the correct place on the patient’s body. 8 A safe surgery checklist would also reduce the potential for human error, which we believe would increase the sa fety of the surgical environment. The safe surgery checklists of which we are aware typically include safe surgery practices corresponding to three critical perioperative peri ods: the period prior to the administration of anesthesia, the period prior to skin incision, and the period of closure of incision and prior to the patient leaving th e operating room. Some examples of safe surgery practices that can be performed duri ng each of these three perioperative periods are shown in the table below:

First critical point (period

prior to administering anesthesia) Second critical point (period prior to skin incision) Third critical point (period of closure of incision and prior to patient leaving the operating room)
● Verbal confirmation of patient identity
● Mark surgical site
● Check anesthesia machine/medication ● Confirm surgical team members and roles
● Confirm patient identity, procedure, and surgical incision site ● Confirm the procedure
● Complete count of surgical instruments and accessories
● Identify key patient

7 de Vries EN, Prins HA, Crolla RMPH, et al. Effect of a comprehensive surgical safety system on patient outcomes. N Engl J Med 2010;363: 1928-37 8 Hospital National Patient Safety Goals. The Joint Commission Accreditation Hospital Manual, 2011. http://www.jointcommission.org/standards_information/npsgs.aspxCMS-1525-FC 1124 First critical point (period

prior to administering anesthesia) Second critical point (period prior to skin incision) Third critical point (period of closure of incision and prior to patient leaving the operating room)
● Assessment of allergies, airway and aspiration risk ● Administration of antibiotic prophylaxis within 60 minutes before incision
● Communication among surgical team members of anticipated critical events
● Display of essential imaging as appropriate concerns for recovery and management of the patient

One example of a checklist that lists safe surgery practices during each of these three perioperative periods is the World Heal th Organization Surgic al Safety Checklist, which was adopted by The World Federation of Societies of Anesthesiologists as an international standard of practice. This checklist can be found at: http://www.who.int/patientsafety/saf esurgery/ss_checklist/en/index.html

. The adoption of a structural measure that assesses Safe Surgery Checklist use would align our patient safety initiatives with those of several surgical specialty societies including: The American College of Surg eons’ Nora Institute for Patient Safety, the American Society of Anesthesiologists, TJC, the National Association for Healthcare Quality and the Association of periOperative Registered Nurses (AORN). For this proposed structural measure, a hospital outpatie nt department would indicate whether or not it uses a safe surgery checklist for its su rgical procedures that includes safe surgery practices during each of the three critical perioperative periods discussed above. TheCMS-1525-FC 1125 measure would assess whether the hospital uses a safe surgery checklist in the hospital outpatient department for surgical procedures , but would not require a hospital to report whether it uses a checklist in connection w ith any individual outpatient procedures. The proposed Safe Surgery Checklist st ructural measure is not NQF-endorsed. However, we believe that consensus among affected parties can be reflected through means other than NQF endorsement including: consensus achieved during the measure development process; consensus shown thr ough broad acceptance and use of measures; and consensus through public comment. The proposed safe surgery checklist measure assesses the adoption of a best practice for surgical care that is broadly accepted and in widespread use among affected parties. In addition to being adopted by The World Federal of Societies of Anesthesiologists, the use of a safe surgery checklist is one of the safe surgery principles e ndorsed by the Council on Surgical and Perioperative Safety, which is comprised of the American Asso ciation of Nurse Anesthetists, American College of Surgeons, American Association of Surgical Physician Assistants, American Society of Anesthesiologists, American So ciety of PeriAnesthes ia Nurses, AORN, and Association of Surgical Tec hnologists. Two State agencies (Oregon, South Carolina), the Veterans Health Administration, 9 numerous hospital systems, State hospital associations (such as California, and South Carolina), national accrediting organizations and large private insurers have endorsed the use of a safe surgery checklist as a best practice for reducing morbidity, mortality, and medical errors. 10, 11 Because the use of a safe surgery

9 Neily, J; Mills, PD, Young-Xu, Y. (2010). “Ass ociation between implementation of a Medical Team Training Program and Surgical Mortality”. JAMA. 304 (15): 1693-1700. 10 Haynes, AB; Weiser, TG; Berry, WR et al (2009) “A Surgical Safety Checklist to Reduce Morbidity and Mortality in a Global Population”. NEJM. 360:491-499.CMS-1525-FC 1126 checklist is a widely accepted best practice for surgical care, we believe that the proposed structural measure of Safe Surgery Checkli st use reflects consensus among affected parties. We also note that TJC included safe surgery checklist pr actices among those to be used to achieve National Patient Safety Goals (NPSGs) adopted for 2011 for surgeries performed in ambulatory settings and hospitals. For the CY 2014 payment determination, we pr oposed that data collection for this structural measure for hospital outpatient departments will be from July 1, 2013 through August 15, 2013 for the time period January 1, 2012 through December 31, 2012. These data will be collected via a Web-based tool available on the QualityNet Web site that is currently employed for the co llection of structural meas ures for the Hospital IQR Program and the Hospital OQR Program. In the proposed rule we invited public comments on our proposal to add this new st ructural measure to the CY 2014 Hospital OQR Program measure set.
Comment : Many commenters supported the m easure and were pleased that CMS cited the WHO’s Surgical Safety Checklist as a reference. A commenter recommended incorporating the WHO’s Surgical Safety Check list as an Appendix in the Specifications Manual. A few commenters commended CM S’ efforts to align the Safe Surgery Checklist measure in both hospita l outpatient departments and ASCs to ensure quality of care across settings. Some commenters sugg ested that CMS adopt the measure in the hospital inpatient setting.

11 Birkmeyer, JD (2010) “Strategies for Improving Su rgical Quality – Checklists and Beyond.” NEJM. 363: 1963-1965.CMS-1525-FC 1127 Some commenters appreciate d the flexibility provided under the measure that would allow facilities to deve lop a safe surgery checklist based on their own needs and populations served. A commente r noted that a mandated specific checklist may interfere with the ability to rapidly implement new evidence-based processes. A commenter requested finalization of a generic checklist(s ) that is acceptable to have data elements contained in more than one form (for exampl e, intra-operative record, anesthesia record, etc.) as appropriate. Response : We appreciate the support for th e measure designed to assess the adoption of a best practice fo r surgical care to reduce pr eventable medical errors and mortality while giving HOPDs the flexibility to develop their own checklist that meets their needs. We chose not to finalize any specific checklist but will consider providing links to specific examples of Surgical Safety Checklists as an Appendix in the Specifications Manual as recommended by the commenter. We have proposed the same measure for ASC Quality Reporting Program and will consider its inclusion in the Hospital IQR Program, as suggested by the commenters, in the future.
Comment : Some commenters recommended that after implementation, CMS should evaluate the appropriate implementati on and utilization of the use of the safe surgery checklist by providers as indicated in this measure. Commenters were concerned that the use of a surgical checklist may re sult in a documentation task which does not result in the improved delivery of car e for which the checklist is intended. Response : We agree with the commenters that the use of a safe surgery checklist as indicated in this measure should be im plemented appropriately to achieve improvedCMS-1525-FC 1128 delivery rather than just cr eate additional documentation. The use of a checklist is intended to help prevent serious medical errors involving surgical care such as anesthesia dosing errors and allergic reactions, wr ong site surgery, wrong procedure or wrong patient surgery, and the reten tion of foreign objects in the body. During our measure maintenance process, we will review the impr ovement potential for this measure, like all the measures we adopted for the Hospital OQR Program, for indication of best practices, among other review criteria.
Comment : A commenter suggested that th is measure should only apply to surgeries performed in an operating room setting because many hospital outpatient departments perform procedures (for ex ample, prostate biopsy, PEG replacement, endoscopy, etc.) in procedure units where safe surgery checklist is no t used routinely in procedure units. Response : This measure applies to any facili ty where a surgery or other invasive procedures occurs rather than to specific surgical procedures performed in a HOPD or individual surgical patients. Therefore ex clusions of this nature are not needed.
Comment : A few commenters asserted that the proposal is only a concept and that it is not fully developed or NQF-endorse d. Additionally, one commenter noted that the introduction of this meas ure would create an undue burden on hospitals because Medicare National Coverage De terminations already specify no Medicare reimbursement for any adverse event from any aspects of a surgery. Furthermore, The Joint Commission surveys all accredited institutions for surgery checklists as part of its patient safety requirements. A few commenters urged CM S to seek NQF endorsement. AnotherCMS-1525-FC 1129 commenter was skeptical that the proposed Sa fe Surgery Checklist attestation could be validated by CMS and therefore, does not warrant consideration as a structural measure. A commenter viewed that the managing of th e processes around surgical care is what improves quality of care, not the mere use of a checklist. Response : We disagree that this measure is only a concept and not a measure because it highlights critical el ements that HOPDs could include in their checklist to avoid preventable medical errors. We belie ve the Safe Surgery Checklist complements the management of surgical care processes and ultimately contributes to better patient outcomes by increasing safe surgery practices and by reducing preventable human error, and minimizing complications and post-surgica l mortality. To that end, we believe it warrants inclusion in the Hospital OQR Program. At this time we have not proposed to validate this measure. We note that even though this measure is not NQF-endorsed, as we had indicated in the proposed rule, the measure reflects signi ficant consensus among affected parties. As stated in the CY 2012 O PPS/ASC proposed rule (76 FR 42321), the adoption of this structural measure would align our patient safety initiatives with those of several surgical specialty societies including: the American College of Surgeons’ Nora Institute for Patient Safety, the American Society of Anesthesiol ogists, TJC, the National Association for Healthcare Quality and the Association of PeriOperative Register ed Nurses (AORN). Furthermore, consensus for this measure wa s reflected through broad acceptance and the use of measures. In addition to being adopted by the World Federation of Societies of Anesthesiologists, the use of a safe surgery ch ecklist is one of the safe surgery principlesCMS-1525-FC 1130 endorsed by the Council on Surgical and Peri operative Safety. Some State agencies, State hospital associations, accrediting or ganizations, and the Veterans Health Administration also have endorse d the use of a safe surgery ch ecklist as a best practice. Although most of the measures we have adopted for the Hospital OQR Program are NQF-endorsed and we prefer to select NQF-endorsed measures for the Hospital OQR Program whenever possible, we are not re quired to adopt only NQF-endorsed measures for the Hospital OQR Program. We will take the comment regarding seeking endorsement of this meas ure under consideration.
Comment : A commenter supported the proposed Web-based tool to submit data as it was perceived as least burdensome. One commenter indicted that additional operational details of the Web-ba sed tool should be provided, su ch as specification of the file format for data submission, given that the formats submitted to the QualityNet warehouse and to Medicare billing (claims data) are different. Response : We thank the commenter, and agr ee that this collection method places minimal burden on HOPDs. The Web-based to ol will not require uploading files to QualityNet, rather it will require entry of responses directly into a Web form. Details regarding submission deadlines are provided in the “Form, Manner and Timing” section of the program requirements included in this final rule with comment period. After consideration of the public comments we received, we are finalizing the Safe Surgery Checklist Use measure for the CY 2014 payment determination. Data collection and submission requirements are shown in the “Form, Manner and Timing” section of the Hospital OQR Program requi rements contained in this final rule.CMS-1525-FC 1131 (2) Hospital Outpatient Department Volume for Selected Outpatient Surgical Procedures
Measure There is substantial evidence in recent peer-reviewed clinical literature that volume of surgical procedures, particularly of high risk surgical pro cedures, is related to better patient outcomes, including decr eased surgical errors and mortality. 12, 13 , 14 This may be attributable to greater experience and/ or surgical skill, gr eater comfort with and, hence, likelihood of application of standardi zed best practices, and increased experience in monitoring and management of surgical pati ents for the particular procedure. For this reason, the National Quality Forum has previous ly endorsed measures of total al l-patient surgical volume for Isolated CABG and Valve Surgeries (NQF #0124), Percutaneous Coronary Intervention (PCI) (NQF #0165) , Pediatric Heart Surgery (NQF #0340), Abdominal Aortic Aneurism Repair ( NQF #357), Esophageal Resection (#0361), and Pancreatic Resection (NQF #0366). Additi onally, many consumer-oriented Web sites that display health care quality informati on required to be reported under State law (California, New York, Texas, Washington, Florida, Illinois, Mi chigan, Oregon) and private organizations (Leapfrog Group, U.S. News & World Report) are reporting procedure volume, in addition to provider performance on surgical process (SCIP measures) and outcome measures (surgical site infection, Patient Safety Indicators, and

12 Livingston, E.H.; Cao, J “Pro cedure Volume as a Predicto r of Surgical Outcomes”. JAMA. 2010;304(1):95-97. 13 David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Delli nger, E.P.; Cheadle, A. Chan, L. “Early Mortality Among Medicare Beneficiaries Undergoing Bariatric Surgical Procedures”. JAMA. 2005;294(15):1903- 1908. 14 Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, A.M. ; Warren, J.L.; Begg, C.B “ Influence of Hospital Procedure Volume on Outcomes Fo llowing Surgery for Colon Cancer” JAMA. 2000; 284 (23): 3028-3035. 14 Maltezou, H.C., Drancourt, M.: Nosocomial influen za in children. Journal of Hospital Infection 2003; 55:83-91.CMS-1525-FC 1132 Mortality), in order to provide more cont ext to consumers choosing a health care provider. The current NQF-endorsed measures of procedure volume (noted above) relate to surgeries performed only in inpatient settin gs, and would not be applicable to the types of procedures approved to be performed in HOPDs and ASCs. The table below, which shows the pr oportion of procedures during CY 2010 performed in hospital outpatient departments stratified by broad categories, reveals that most hospital outpatient procedures (99 pe rcent) fall into one of 8 categories: Cardiovascular, Eye, Gastrointestinal, Gen itourinary, Musculoskeletal, Nervous System, Respiratory, and Skin. CY 2010 Hospital Outpatient Data Procedure Category % of Total Services Cardiovascular 75.50% Chest 0.00% Ear 0.20% Endocrine 0.10% Eye 1.70% Gastrointestinal 5.70% Genitourinary 2.70% Hemic & Lymphatic 0.30% Maternity 0.00% Musculoskeletal 3.80% Nervous System 2.80% Radiology 0.10% Respiratory 1.00% Skin 6.20% Total 100.00%CMS-1525-FC 1133 Because surgical volume is associated w ith better quality, and surgical procedures are performed in hospital outpa tient departments, we believe that surgical volume is appropriate for measuring the quality of these eight categor ies of surgical procedures performed in an HOPD. For the CY 2014 payment determination, we proposed that HOPDs would report all-patient volume data with respect to these eight categories between the dates July 1, 2013 and August 15, 2013 with respect to the time period January 1, 2012 through December 31, 2012. In other words, under this proposal, an HOPD would report its CY 2012 a ll-patient volume data for these eight categories of procedures during the 45 day window of July 1, 2013 to August 15, 2013. The table below lists the specific HCPCS codes for each of the 8 procedure categories for which hospitals would be required to report the all-patient vol ume data. Like the other structural measures in the Hospital OQR Pr ogram, data on this proposed measure would be collected via an online Web-based tool th at will be made available to HOPDs via the QualityNet Web site. In the proposed rule we invited public comment on this proposal.
Comment : A few commenters agreed that surgical volume can be associated with quality but recommended that the volume data should always be linked to the corresponding surgical procedures and not th e type of broad procedure categories as proposed. The commenters asserted that th e measure as proposed without associated information on outcomes or patient-reported a ssessment of care may have the potential to mislead patients and Medicare about the ca re that providers delivered. Another commenter requested that CMS provide data that indicate a correlation between all-payerCMS-1525-FC 1134 data and Medicare-specific data related to outpatient procedure volumes. A commenter requested a snapshot of how the surgical pr ocedures volume data would be displayed on the Hospital Compare Web site. Some commenters opposed the inclusion of the hospital outpa tient volume for selected outpatient surgical procedures m easure because of concerns regarding the categories and because of concerns regarding CPT codes. Some commenters stated that the proposed procedures are broad based catego ries. The commenter stated that without an associated list of individual CPT codes or families of CPT codes for these proposed surgical procedures, it would be difficult to differentiate volume variations for different procedures within the broad su rgical procedure categories. Therefore, the broad-based surgical procedure volume information may be misinterpreted as overall indicator of quality for these particular services. The commenters urged CMS to provide the measure specifications for the public to review and comment prior to implementation. Response : We appreciate the commenters’ i nput on selected surgical categories and CPT codes. As discussed in the proposed rule, our goal for this measure is to provide consumers with useful information on surgic al procedure volume in order to assist patients in making informed healthcare decisi ons. Based on the public comment received suggesting that the eight broad categories wi ll not be meaningful to consumers, we will further identify groupings of key procedure t ypes within the 8 broad categories so that they will be more meaningful to consumers. We will include these refinements in the specifications for the measure that will be in an upcoming release of the Hospital OQR Specifications Manual.CMS-1525-FC 1135
Comment : Some commenters recommended le ss burdensome alternatives to implement this measure as follows: (1) impl ement it as a claims-based measure using the HCPCS codes or CPT codes for hospitals to count numerators and denominators; (2) place it in the HITECH EHR Incentive Program as one of the meaningful use objectives; (3) reduce the num ber of categories; (4) expand the submission window beyond the proposed 45-day time frame; (5 ) only collect information on the most frequently performed outpatient surgeries for all patients and for Medicare patients rather than the collection of surgical volume by body system category; or (6) use a structural measure to assess whether hospitals participat e in a surgical outcomes registry to build the evidence base in this area (that is , linking high volume to better outcomes). Response : We thank the commenters for th ese suggestions. This information will be submitted in aggregate counts once an nually and the counts can be generated by the HOPD using administrative data that is already being collected by the HOPD in order to obtain payment for the servi ces they render. As a result , we do not believe it would be overly burdensome for hospitals to submit this information based on all-patient data. Currently, we use a standard 45 day collection window for all of the structural measures. As previously indicated based on public comment, we will further group procedure types within the 8 broad categories so that they are more meaningful to consumers. We will include these refinements in the specificat ions for the measure that will be in an upcoming release of the Hospital OQR Specifications Manual.
Comment : A commenter stated that it is impe rative that the volume of procedures be compared to the number of physicians performi ng such procedures at the facility level.CMS-1525-FC 1136 The commenter stated the quality implication of a hospital reporting 1,000 procedures in a category with 50 physicians is very differe nt from a hospital reporting 1,000 procedures with 500 physicians. Response : . We do not have informati on about the volume of physicians performing the procedures with in each facility and did not propose to collect such information from facilities in this year’s rule. We will consider this comment, as well as the feasibility and burden of HOPDs reporti ng this information, for future rules.
Comment : Some commenters did not support th is measure based on the assertion that the measure is not NQF-endorsed, not approved by HQA, not evidence-based, not a quality measure, and does not meet The Joint Commission definition of an accountability measure. Furthermore, the commenters stated that the data are already available on many State-supported or hospital-spec ific Web sites, and registries. In addition, some commenters believed that data collection for this measur e would create tremendous burden if the population include all patie nts and not just Medicare patients. A commenter contended that the proposed measure is only a crude measurement tool to monitor surgical volume. A few commen ters noted that there is a lack of evidence linking volume of surgical procedure pe rformed in HOPDs or ASCs to quality, notwithstanding the non-HOPD- or ASC-specifi c literature linking volume of specific high-risk procedures to outcomes cited by CMS. Response : We do not agree with the comments regarding the suitability of this measure. As we indicated in the proposed rule, we believe that this measure reflects significant consensus among affected parties because of evidence in the peer-reviewedCMS-1525-FC 1137 literature and because this type of inform ation is frequently displayed on consumeroriented Web sites that feature quality information. We do not believe that all-patient volume is burdensome to report, as hospitals could use data to generate the aggregate coun ts that they would submit once annually. In the Specifications Manual, we will include furt her reporting instructions if hospitals do not perform certain procedures. We disagree with the concern expresse d regarding the inpa tient focus of the literature we cited. We believe that this literature is also relevant to HOPDs. We note that the number of Medicare-cer tified HOPDs has increased dram atically over the years. In addition, an increasing number of procedur es that were formerly performed primarily in the inpatient setting are now being performed in outpatient settings such as HOPDs and ASCs. We believe that this growth in HOPDs and procedures performed in HOPDs underscores the importance of providing a cont ext for beneficiaries to assess the number of selected procedures performed annually by any given HOPD.
Comment : Several commenters asked CMS to identify which procedures are considered high risk in HOPDs and ASCs. According to the commenters, high-risk procedures are generally not performed in HOPDs or ASCs. Response : We disagree with this comment. High risk procedures are performed in HOPD facilities. For example, in 2010 there were more than 25,000 arterial transposition procedures and more than 31,000 endovascular repairs of the aorta and its branches performed in HOPDs. Further, th ere are risks associated with all surgical procedures, and we believe that the more of ten a surgery is performed in a HOPD, theCMS-1525-FC 1138 greater the incentive for the HOPD to impl ement standardized practices that can minimize these risks. At this time, a gr eater number and types of surgery are being performed in HOPDs and other outpatient settings. By collecting volume of procedures, we will be able to provide information about whether facilitie s perform a specific procedure type, and how many per year. This information is crucial for consumers trying to make informed decisions about where to have surgery performed. Based on commenters’ suggestions, we will further defi ne key procedure types within each of the 8 broad categories in the Hospital OQR Specifi cations Manual so that the information will be more useful to consumers. After consideration of the public comments we received, we are finalizing the Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures measure for the Hospital OQR Program CY 2014 payment determination. In response to concerns regarding the utility of the 8 broadly specified categories to consumers, we will further identify key procedure types with in each of the 8 broad catego ries for hospitals to report. In summary, in addition to the 23 me asures we previously adopted for the CY 2014 payment determination in the CY 2011 OPPS/ASC final rule with comment period, we are finalizing 1 new chart-abstracted measure and 2 new structural measures. The complete measure set (26 measures) for the Hospital OQR Program CY 2014 payment determination, including the measur es we adopted in the CY 2011 OPPS/ASC final rule with comment period, is set out in the table below.

CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously Adopted and the Addition of 1 Chart-Abstr acted Measure, and 2 Structural Measures OP-1: Median Time to FibrinolysisCMS-1525-FC 1139 CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously Adopted and the Addition of 1 Chart-Abstr acted Measure, and 2 Structural Measures OP-2: Fibrinolytic Thera py Received Within 30 Minutes OP-3: Median Time to Transfer to Anothe r Facility for Acute Coronary Intervention OP-4: Aspirin at Arrival OP-5: Median Time to ECG OP-6: Timing of Antibiotic Prophylaxis OP-7: Prophylactic Antibiotic Se lection for Surgical Patients OP-8: MRI Lumbar Spine for Low Back Pain OP-9: Mammography Follow-up Rates OP-10: Abdomen CT – Us e of Contrast Material OP-11: Thorax CT – Use of Contrast Material OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data* OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery * OP-14: Simultaneous Use of Brain Comput ed Tomography (CT) and Sinus Computed Tomography (CT)* OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache* OP-16: Troponin Results for Emergency Depart ment acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac Chest Pain ) Received Within 60 minutes of Arrival ** OP-17: Tracking Clinical Results between Visits** OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients** OP-19: Transition Record with Specified Elements Received by Discharged Patients** OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional** OP-21: ED- Median Time to Pain Ma nagement for Long Bone Fracture ** OP-22: ED Patient Left Without Being Seen** OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interpretati on Within 45 minutes of Arrival ** OP-24: Cardiac Rehabilitation Patient Re ferral From an Outpatient Setting *** OP-25: Safe Surgery Checklist Use***

OP-26: Hospital Outpatient Volume Data on Se lected Outpatient Surgical Procedures*** Procedure Category Corresponding HCPCS Codes Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716,CMS-1525-FC 1140 CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously Adopted and the Addition of 1 Chart-Abstr acted Measure, and 2 Structural Measures C9724, C9725, 0170T Eye 65000 through 68999, G0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T, 76510, 0099T Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727 Genitourinary 50000 through 58999, 0193T, 58805
Cardiovascular 33000 through 37999 Respiratory 30000 through 32999

* New measure for the CY 2012 payment determination. ** New measure for the CY 2013 payment determination. *** New measure for the CY 2014 payment determination.

3. Hospital OQR Program Measures fo r the CY 2015 Payment Determination a. Retention of CY 2014 Hospital OQR Measures for the CY 2015 Payment Determination In general, unless otherwise specified, we retain measures from one payment determination to the next. Accordingl y, in the CY 2012 OPPS/ASC proposed rule (76 FR 42323), we proposed that all of the measures we finalize for the CY 2014 payment determination continue to be used for the CY 2015 payment determination. We invited public comment on this proposal.CMS-1525-FC 1141 We did not receive any comments object ing to the retention of CY 2014 Hospital OQR Measures for the CY 2015 payment determin ation. Therefore, we are finalizing the retention of the 26 measures finalized fo r the CY 2014 payment determination for the CY 2015 payment determination. b. Proposed NHSN HAI Measure for the CY 2015 Payment Determination In the CY 2012 OPPS/ASC proposed rule (76 FR 42323 through 42324), for the measure set to be used for the CY 2015 paym ent determination, we proposed to adopt an additional HAI measure entitled Influen za Vaccination Coverage among Healthcare Personnel (HCP) (NQF # 0431). This measure is currently collected by the CDC via the
NHSN. Rates of serious illness and death resulting from influenza and its complications are increased in high-risk populations such as persons over 50 years or under four years of age, and persons of any age who have underlying conditions that put them at an increased risk. HCP can acquire influenza from patients and can transmit influenza to patients and other HCP. Many HCP provide care for, or are in frequent contact with, patients with influenza or pati ents at high risk for complications of influenza. The involvement of HCP in influenza transm ission has been a long-standing concern. 15,16,17

15 Maltezou, H.C., Drancourt, M.: Nosocomial influen za in children. Journal of Hospital Infection 2003; 55:83-91 16 Hurley, J.C., Flockhart, S.: An influenza outbreak in a regional residential facility. Journal of Infection Prevention 2010; 11:58-61 17 Salgado, C.D., Farr, B.M., Hall, K.K., Hayden, F.G. : Influenza in the acute hospital setting. The Lancet Infectious Diseases 2002; 2:145-155.CMS-1525-FC 1142 Vaccination is an effective preventive meas ure against influenza, and can prevent many illnesses, deaths, and losses in productivity. 18 HCP are consider ed a high priority for expanding influenza vaccine use. Achieving and sustaining high influenza vaccination coverage among HCP is intended to help protect HCP and their patients and reduce disease burden and healthcare costs. Resu lts of several studies indicate that higher vaccination coverage among HCP is associated with lower incidence of nosocomial influenza. 19,20,21 Such findings have led some to call for mandatory influenza vaccination of HCP. 22,23,24,25, 26 Until recently, vaccination coverage among HCP has been well below the national Healthy People 2010 target of 60 percent, 27 but preliminary data suggest 62 percent of

18 Wilde, J.A., McMillan, J. A., Serwint, J., Butta, J., O’Riordan, M.A., Steinhoff, M.C.: Effectiveness of influenza vaccine in health care professionals: a rand omized trial. The Journal of the American Medical Association 1999; 281:908-913. 19 Salgado, C.D., Giannetta, E.T., Ha yden, F.G., Farr, B.M.: Preventing in fluenza by improving the vaccine acceptance rate of clinicians. Infection Control and Hospital Epidemiology 2004; 25: 923-928. 20 Potter, J., Stott, D.J., Roberts, M.A., et al.: In fluenza vaccination of health -care workers in long-termcare hospitals reduces the mortality of elderly patients. Journal of Infectious Diseases 1997; 175:1-6. 21 Hayward, A.C., Harling, R., Wetten, S., et al.: Eff ectiveness of an influenza vaccine programme for care home staff to prevent death, morbidity, and health service use among residents: cluster randomised controlled trial. British Medical Journal 2006; 333:1241-1246. 22 Talbot, T.R., Bradley, S.F., Cosgrove, S.E., et al .: SHEA position paper: Influenza vaccination of healthcare workers and vaccine allo cation for healthcare wo rkers during vaccine shortages. Infection Control and Hospital Epidemiology 2005; 26:882-890 23 American College of Physicians (ACP), ACP polic y on influenza vaccination of health care workers. http://www.acponline.org/runni ng_practice/quality_improvement/projects/adult_immuniz ation/flu_hcw.pdf

. 24 Greene, L.R., Cain, T.A., Dolan, S.A. et al. : APIC position paper: influenza immunization of healthcare personnel. Association of Professionals in Infection Control (APIC)

. November 2008

. http://www.apic.org/Content/NavigationMenu/Practi ceGuidance/Topics/Influenza/APIC_Position_Paper_I nfluenza_11_7_08final_revised.pdfhttp://www.apic.or g/Content/NavigationMenu/PracticeGuidance/Topics /Influenza/APIC_Position_Paper_Influenza_11_7_08final_revised.pdf

. 25 National Patient Safety Foundation (NPSF) , Mandatory flu vaccinations for healthcare workers. Press Release, November 18, 2009. http://www.npsf.org/pr/p ressrel/2009-11- 18.php

. 26 Infectious Diseases Society of America (IDSA) , IDSA policy on mandatory immunization of health care workers against seasonal and 2009 H1N1 influenza. I nfectious Diseases Society of America (IDSA). September 30, 2009. http://www.idsociety.org/HCWimmunization/

. 27 Walker, F.J., Singleton, J.A., Lu, P., Wooten, K.G., Strika s, R.A.: Influenza vacci nation of healthcare workers in the United States, 1989-2002. Infection Control and Hospital Epidemiology 2006; 27:257-265.CMS-1525-FC 1143 HCP reported receiving seasonal influenza vaccine in 2009-2010. 28 Only 37 percent reported receiving the 2009 pandemic A/H1N1 vaccine. 29 HCP refers to all personnel working in h ealthcare settings who have the potential for exposure to patients and/or to infec tious materials, including body substances, contaminated medical supplies and equipment, contaminated environmental surfaces, or contaminated air. 30 HCP may include (but are not lim ited to) physicians, nurses, nursing assistants, therapists, technici ans, emergency medical service personnel, dental personnel, pharmacists, laboratory personnel, autopsy pers onnel, students and trainees, contractual staff not employed by the healthcar e facility, and persons (for example, clerical, dietary, house-keeping, laundry, security, maintenance, billing, and volunteers) not directly involved in patient care but potentially exposed to infec tious agents that can be transmitted to and from HCP and patients. Se ttings in which HCP may work include, but are not limited to, acute care hosp itals, long-term care facilities, skilled nursing facilities, rehabilitation centers, physicians’ offices, ur gent care centers, out patient clinics, home health agencies, and emergency medical services. Currently, four States have “offer” la ws for influenza vaccination of HCP, meaning that vaccine must be offered to HC P by healthcare facilities; and three States

28 http://www.cdc.gov/mmwr/preview/mmwrhtml/rr55e209a1.htm Influenza Vaccination of Health-Care Personnel Recommendations of the Healthcare Infection Contro l Practices Advisory Committee (HICPAC) and the Advisory Committee on Immunization Practices. 29 Centers for Disease Control and Prevention., Interim results: Influenza A (H1N1) 2009 and Monovalent Seasonal Influenza Vaccination Coverage Among H ealth-Care Personnel—Unite d States August 2009- January 2010. Morbidity and Mortality Weekly Report (MMWR); 59:357-362. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5912a1.htm 30 Adapted from: Pearson ML., Bridge s CB., Harper SA., : Influenza v accination of health-care personnel: Recommendations of the Healthcare Infection Contro l Practices Advisory Committee (HICPAC) and the Advisory Committee on Immunization Practices (ACI P). Morbidity and Mortality Weekly Report (MMWR) 2006; 55:1-16. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/rr5502a1.htmCMS-1525-FC 1144 (Alabama, California, and New Hampshire) ha ve “ensure” laws for influenza vaccination of HCP, meaning that vaccination of non-immu ne HCP is mandatory in the absence of a specified exemption or refusal; and, additionall y, numerous hospitals and other healthcare facilities have established policies requiring mandatory influenza vaccination of their
HCP. 31 Currently, no State requires that hospita ls report this measure to NHSN. However, approximately 13 hospitals (including long term acute care and rehabilitation), outpatient hemodialysis centers, long term car e facilities, and ambulatory surgical centers are currently reporting HCP immunization da ta to the NHSN. In September 2009, CDC released the Healthcare Personnel Safety (HPS) Component of the NHSN, which complements Patient Safety and Biovigilan ce components available in NHSN. The HPS Component replaced CDC’s National Surveill ance System for Health Care Workers (NaSH) and is comprised of two modules: the Blood/Body Flui d Exposure Module and the Influenza Vaccination and Ma nagement and Exposure Module. 32 Currently, participation in either module is volunt ary. The current Influenza Vaccination and Management and Exposure Module may soon offe r options for healthcare facilities to submit vaccination summary data. NHSN plans to partner with vendor-based surveillance systems to permit periodic data extractions into NHSN. The modules feature basic, custom, and a dvanced analysis cap abilities available in real-time, which allow individual healthcare facilities to compile and analyze their own data, as well as benchmark these results to aggregate NHSN estimates. The HPS

31 For additional information regarding healthcare f acilities’ influenza vaccine policies, please see: http://www.immunize. org/honor%2Droll/

. http://www.immunize.org/honor%2Droll/

. 32 Available at: http://www.cdc.gov/nhsn/hps.htmlh ttp://www.cdc.gov/nhsn/hps.html

.CMS-1525-FC 1145 Component can assist participating faciliti es in developing surv eillance and analysis capabilities to permit the timely recogniti on of HCP safety problems and prompt interventions with appropriate measures. Influenza vaccination data submitted to CDC will ultimately capture regional trends on the yearly uptake of the vaccine, prophylaxis and treatment for healthcare personnel, as well as the elements within yearly influenza campaigns that succeed or require improvement . At the State and national levels, the HPS Component will aid in monitoring rates and trends. Due to the significant impact of HCP in fluenza vaccination on patient outcomes, we believe this measure is appropriate for measuring the quality of care in hospital outpatient departments. Healthcare Personne l (HCP) Influenza Vaccination is one of the HAI measures that we proposed to adopt for the FY 2015 Hospital IQR Program in the FY 2012 IPPS/LTCH PPS proposed rule. This measure assesses the percentage of healthcare personnel who have been immunized for influenza during the flu season. The specifications for this measure are available at http://www.cdc.gov/nhsn/PDFs /HSPmanual/HPS_Manual.pdf

. The proposed HCP Influenza Vaccination measure is NQF-endorsed for the hospital setting and applies to the hospital outpatien t setting. Therefore, this measure meets the requirement for measure selection und er section 1833(t)(17)(C )(i) of the Act. We proposed to adopt the Influenza Vacci nation Coverage among Healthcare Personnel measure that is collected by the CDC vi a the NHSN. The NHSN proposed reporting mechanism for this proposed HAI measur e is discussed in greater detail in sections XIV.C.2.a. of the proposed rule and this final rule with comment period. WeCMS-1525-FC 1146 proposed that hospital outpatient department s use the NHSN infrastructure and protocol to report the measure for Hospital OQR pur poses. We invited public comment on our proposal to adopt this HAI measure into the Hospital OQR Program for the CY 2015 payment determination.
Comment : Many commenters applauded th e reporting of the Influenza vaccination coverage among healthcare pe rsonnel measure in recognition of its importance in preventing transmission of influenza in hospital and ASC settings. However, commenters were concerned that the associated data collection is too labor-intensive, since the NQF specifications for denominator and numerator involve both employees and non-employees. To overc ome the data collec tion challenges, the commenters recommended CMS/CDC testing of the NHSN-HCP module, which is being modified to accept aggregate data instead of individual level data, in inpatient settings prior to implementation in the outpatient se tting. Commenters noted that the measure should not be finalized until NQF has finished its review on the proposed modifications for the denominator submitted by CDC. Furthermore, commenters remarked that delaying the measure to CY 2016 would allow HOPDs to gain experience with the revised NHSN module as well as synchronize the implementa tion date of this measure with that of the ASC Quality Reporting Program. Response : We thank the commenters for their support of the measure and recognize its significance in preventing influenza transmission. CDC has submitted a revised measure proposal to NQF based on resu lts of field testing, in its efforts to streamline data collection. The revised m easure proposal reduces denominator dataCMS-1525-FC 1147 collection to employee h ealthcare personnel, defined as sta ff on facility payroll, and two categories of non-employee healthcare personnel : (1) licensed indepe ndent practitioners, that is, physicians, advance practice nurses, and physician assistants, and (2) student trainees and adult volunteers. CDC has indi cated that NQF’s final review of the NHSNHCP module and an endorsement decision are pending. Therefore, we are not finalizing this measure for CY 2015 payment determin ation in this rulemaking, but intend to propose an influenza vaccination measure for the CY 2016 payment determination.
Comment : A few commenters stated that the influenza vaccination coverage among healthcare personnel measure lacks th e supporting evidence that links patients contracting influenza to ambulatory procedures. Response : Several randomized clinical trials in healthy working-age adults have shown that influenza vaccination reduces inf ection, illness, antibiotic use, medical visits, and lost work days. 33 34 Influenza vaccination also reduces influenza virus shedding and reduces transmission of influen za to others through prevention of infection. In addition, studies show that healthcare personnel continue to work while ill, including when ill with influenza 35 . Therefore, preventing influenza illnes s in healthcare pers onnel is important to reduce patient exposures to influenza-in fected persons in the healthcare setting.

33 Bridges CB, Thompson WW, Meltzer MI, et al. Eff ectiveness and cost-benefit of influenza vaccination of healthy working adults: a randomized controlled trial. JAMA 2000; 284: 1655-63. (adults employed at a manufacturing plant) 34 Bridges CB, Thompson WW, Meltzer MI, et al. Eff ectiveness and cost-benefit of influenza vaccination of healthy working adults: a randomized controlled trial. JAMA 2000; 284: 1655-63. (adults employed at a manufacturing plant) 35 Wilde JA, McMillan JA, Serwint J, Butta J, O’Rior dan MA, Steinhoff MC. Effectiveness of influenza vaccine in health care professionals. A ra ndomized trial. JA MA 1999;281:908–13.CMS-1525-FC 1148 Although no studies have been done in the ou tpatient setting to assess reductions in illness among patients due to healthcare pers onnel vaccination, studies have been done in hospitals and nursing homes demonstrating the risk of h ealthcare-acquired influenza in these settings. One study in a hospital and th ree studies in long-term care facilities have demonstrated reductions in patient illne ss and mortality with healthcare personnel influenza vaccination. The evidence that in fluenza vaccination of healthcare personnel reduces disease in hospital and nursing home residents should be generalizable to outpatient settings based on knowledge of the benefits of influenza vaccination in working-age adults and an understa nding of influenza transmission.
Comment : A commenter was concerned that hospitals may be unfairly penalized when there is a shortage of flu vaccines. Response : We are not finalizing this measur e at this time, but we intend to re-propose this measure for a future payment determination in order to allow more time for CDC to address infrastructure capacity to accept the data from an increasing number of provider types. The purpose of the measure is to track vaccination rates; therefore, in the event of a vaccination shortage, it is still important to monitor and track this measure. However, if such a measure is adopted and a large scale vaccination shortage occurs, we will consider temporarily suspending di splay of the measure on Hospital Compare

. Comment : A commenter was concerned about potential duplicative efforts since some States already mandate vaccination of healthcare workers and public reporting of healthcare vaccination rates.CMS-1525-FC 1149 Response : We were informed by CDC that in the event that the measure is adopted in the Hospital OQR Pr ogram, it will strive to standardize the reportable quality measure at State and federal levels. St andardizing reportable healthcare quality measurements is a priority because that reduces reporting burden while preserving the opportunities to use those data for different purposes at the State and federal levels.
Comment : A commenter recommended the influenza vaccination measure for healthcare personnel be inclusive of all employees of the facility and not split out as inpatient and outpatient settings. Another commenter stated that the measure should allow healthcare personnel to choose the vacc ination type or brand most appropriate for them. Response : The measure does not specify which vaccination types or brand the healthcare personnel should receive. As stat ed previously, we are not finalizing this measure for the Hospital OQR Program at this time. After consideration of th e public comments we receive d, we are not finalizing the HCP Influenza Vaccination measure for CY 2015 payment determination in this final rule with comment period, but intend to propose a HCP Influenza Vaccination measure for the CY 2016 payment determination once me asure refinements and operational issues have been addressed. The complete measure set for the Hospital OQR Program CY 2015 payment determination, is set out in the table below. CY 2015 Hospital OQR Program Measure Set OP-1: Median Time to Fibrinolysis OP-2: Fibrinolytic Thera py Received Within 30 MinutesCMS-1525-FC 1150 CY 2015 Hospital OQR Program Measure Set OP-3: Median Time to Transfer to Anothe r Facility for Acute Coronary Intervention OP-4: Aspirin at Arrival OP-5: Median Time to ECG OP-6: Timing of Antibiotic Prophylaxis OP-7: Prophylactic Antibiotic Se lection for Surgical Patients OP-8: MRI Lumbar Spine for Low Back Pain OP-9: Mammography Follow-up Rates OP-10: Abdomen CT – Us e of Contrast Material OP-11: Thorax CT – Use of Contrast Material OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data* OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery * OP-14: Simultaneous Use of Brain Comput ed Tomography (CT) and Sinus Computed Tomography (CT)* OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache* OP-16: Troponin Results for Emergency Depart ment acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac Chest Pain ) Received Within 60 minutes of Arrival ** OP-17: Tracking Clinical Results between Visits** OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients** OP-19: Transition Record with Specified Elements Received by Discharged Patients** OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional** Op-21: ED- Median Time to Pain Ma nagement for Long Bone Fracture ** OP-22: ED Patient Left Without Being Seen** OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interpretati on Within 45 minutes of Arrival ** OP-24: Cardiac Rehabilitation Patient Re ferral From an Outpatient Setting *** OP-25: Safe Surgery Checklist Use***

OP-26: Hospital Outpatient Volume Data on Se lected Outpatient Surgical Procedures*** Procedure Category Corresponding HCPCS Codes Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, C9724, C9725, 0170T Eye 65000 through 68999, 0186, 0124T, 0099T, 0017T,CMS-1525-FC 1151 CY 2015 Hospital OQR Program Measure Set 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T, 76510, 0099T Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727 Genitourinary 50000 through 58999, 0193T, 58805
Cardiovascular 33000 through 37999 Respiratory 30000 through 32999

* New measure for the CY 2012 payment determination. ** New measure for the CY 2013 payment determination. *** New measure for the CY 2014 payment determination.
D. Possible Quality Measures under Considera tion for Future Inclusion in the Hospital OQR Program The current measure set for Hospital OQR includes measures that assess imaging efficiency patterns, care transitions, and the use of HIT. In the CY 2012 OPPS/ASC proposed rule, we proposed to add measures to the CY 2014 and CY 2015 measure sets addressing care coordination, patient safety, volume, and prevention of influenza. In previous years’ rulemaki ngs, we have provided lists of measures that are under consideration for future adoption into the Hosp ital OQR measure set. Below is a list of potential measurement areas that we set out in the CY 2012 O PPS/ASC proposed rule that we are considering for future Hospital OQR payment determinations (beginning with CY 2015) for which we solicited public commen t. In particular, we sought comment onCMS-1525-FC 1152 the inclusion of Patient Experience of Care Measures in the Hospital OQR measure set for a future payment determination, such as existing Consumer Assessment of Healthcare Providers and Systems ( CAHPS) surveys for clinicians/groups and the CAHPS Surgical Care Survey, sponsored and submitted by the American College of Surgeons (ACS) and the Surgical Quality Alliance (SQA). We also intend to align the surgical safety measures across the HOPD and ASC settings and would seek to utilize comparab le data to assess patient safety in these settings. Therefore, in the proposed rule, we sought comment on the potential submission of such measures by HOPDs via quality codes submitted on claims in the future. We also sought comment on the inclusion of measures of Anesthesia related Complications in the Hospital OQR measurement set.

Measures and Measurement Topics Under Consideration for Future Hospital OQR Program Payment Det erminations Beginning with CY 2015 Measures for future development: Procedure Specific Measures Colonoscopy and other Endoscopy measures Cataract Surgery measures Cancer Care Adjuvant Chemotherapy is Considered or Ad ministered within 4 Months of Surgery to Patients Under Age 80 with AJCC III Colon Cancer. Adjuvant Hormonal Therapy for Patients with Breast Cancer Needle Biopsy to Establish Diagnosis of Cancer Precedes Surgical Excision/Resection. Heart Failure Heart Failure: Angiotensi n-Converting Enzyme (ACE) Inhibitor or Angiotensin Receptor Blocker (ARB) Therapy for Left Ventricular Systolic Dysfunction (LVSD) Heart Failure: Left Ventricula r Ejection Fraction AssessmentCMS-1525-FC 1153 Measures and Measurement Topics Under Consideration for Future Hospital OQR Program Payment Det erminations Beginning with CY 2015 Heart Failure: Combination Medical Th erapy for Left Ventricular Systolic Dysfunction Heart Failure: Beta-Blocker Therapy fo r Left Ventricular Systolic Dysfunction Heart Failure: Counseling re garding Implantable Cardiove rter-Defibrillator (ICD) Implantation for Patients with Left Ventri cular Systolic Dysfunction on Combination Medical Therapy Heart Failure: Patients with Left Vent ricular Systolic Dysfunction on Combination Medical Therapy Heart Failure: Symptom Management Heart Failure: Symptom and Activity Assessment Heart Failure: Patient Education Heart Failure: Overuse of Echocardiography Heart Failure: Post-Discharge Appoi ntment for Heart Failure Patients Surgical Safety Patient Fall Patient Burn Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant Hospital Transfer/Admission Patient Experience-of-Care Consumer Assessment of Healthcare Provi ders and Systems (CAHPS) surveys for clinicians/groups CAHPS Surgical Care Survey Anesthesia Related Complications Death Cardiac Arrest Perioperative Myocardial Infarction Anaphylaxis Hyperthermia Transfusion Reaction Stroke, Cerebral Vascular Accide nt, or Coma following anesthesia Visual Loss Medication Error Unplanned ICU admission Patient intraoperative awarenessCMS-1525-FC 1154 Measures and Measurement Topics Under Consideration for Future Hospital OQR Program Payment Det erminations Beginning with CY 2015 Unrecognized difficult airway Reintubation Dental Trauma Perioperative aspiration Vascular access complication, including vascular injury or pneumothorax Pneumothorax following attempted vasc ular access or regional anesthesia Infection following epidural or spinal anesthesia Epidural hematoma following spin al or epidural anesthesia High Spinal Postdural puncture headache Major systemic local anesthetic toxicity Peripheral neurologic deficit following regional anesthesia Infection following pe ripheral nerve block Additional Measurement Topics NQF Serious Reportable Events in Healthcare Medication Reconciliation Chemotherapy Post-discharge follow up Post-discharge ED vi sit within 72 hours Breast cancer detection rate

We invited public comment on these measur es and other topics that we might consider proposing to adopt beginnin g with the Hospital OQR Program CY 2015 payment determination. We also sought suggestions and rati onales to support the adoption of measures and topics for the Ho spital OQR Program which do not appear in the table above. We received many comments on measures and measurement topics considered for the future. We describe them as follows.CMS-1525-FC 1155

○ Cancer care
Comment : A commenter noted that the cancer care measures listed are duplicative measures of those used in the PQRS. A co mmenter did not support the Needle Biopsy to Establish Diagnosis of Cancer Precedes Su rgical Excision/Resection measure because many cancers do not have needle biopsy as an option for diagnosis. Response : We thank the commenters for their views and will consider them during future measure selection activity.

○ Heart failure
Comment : A few commenters supported the h eart failure measures on the list. Two commenters noted the Overuse of ec hocardiography, Left ventricular ejection fraction assessment, and the Patients with left ventricular systolic dysfunction on combination medical therapy have inherent f undamental incompatibilities, given that the first measure would likely prohibit the use of echocardiography wh ile the latter two measures would presumably encourage the use of echocardiography. The commenters were specifically concerned th at the first measure may have unintended consequences of deterring physicians from or dering echocardiography to identify potential heart failure patients. Response : We thank the commenters for the valuable suggestions and will take them into consideration in our future measure review and selection activity.

○ Patient experience-of-care
Comment : Many commenters strongly supported the inclusion of patient experience of care measures listed.CMS-1525-FC 1156 Response : We thank the commenters for this input and will cons ider them during future measure selection activity.

○ Anesthesia related complication measures
Comment : One commenter requested that CMS collaborate with anesthesiologists and CRNAs to revise the list of anesthesia-related complications to codify the definitions of anesthesia related complications. Response : We thank the commenter for this input and will consider it during future measure selection activity.

○ Additional measure topics
Comment : A commenter believed the Medi cation reconciliation measure is inappropriate for ED setting since emergency room patients may not have the ability to accurately report current medications taken a nd the data collection process may cause a delay in patient care. A commenter was con cerned that the Post discharge follow-up and the post discharge ED visit within 72 hours measure may lead to unintended consequences if not constructed prudently, given there are many variables affecting a patient’s return to an ED. A commenter suppo rted the listed Breast ca ncer detection rate measure for future consideration. Response : We thank the commenters for thes e suggestions and support, and will take them into consider ation during our future m easure selection activity.CMS-1525-FC 1157 E. Payment Reduction for Hospitals That Fail to Meet the Hospital OQR Program Requirements for the CY 2012 Payment Update 1. Background Section 1833(t)(17)(A) of the Act, which applies to subsection (d) hospitals (as defined under section 1886(d)(1)(B) of the Act), requires that hos pitals 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 Secr etary under section 1833(t) (17) of the Act, incur a 2.0 percentage point reduction to thei r OPD fee schedule increase factor, that is, the annual payment update factor. Section 1833(t )(17)(A)(ii) of the Ac t 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. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 through 68772), we discussed how the payment reduction for failure to meet the administrative, data collection, and data submission requireme nts of the Hospital OQR Program affected the CY 2009 payment update applicable to OPPS payments for HOPD services furnished by the hospitals defined under section 1886(d)(1 )(B) of the Act to which the program applies. The application of a reduced OPD fee schedule increas e 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 requirements. All other hospitals paid under the OPPS receive the full OPPS payment update without the reduction.CMS-1525-FC 1158 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 weight for the APC to which the service is assigned. Th e 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 fo llowing status indicators (listed in Addendum B to this final rule with comment period, which is availabl e via the Internet on the CMS Web site): “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V ,” “U,” or “X.” In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68770), we adopted a policy that payment for all services assigned these status indicators woul d be subject to the reduction of the national unadjusted payment rates for applicable hospitals , with the exception of services assigned to New Technology APCs with assigned status indicator “S” or “T ,” and brachytherapy sources with assigned status indicator “U,” whic h were paid at charges adjusted to cost in CY 2009. We excluded services assigned to New Technology APCs from the list of services subject to the reduced national unadjusted payment rates because the OPD fee schedule increase factor is not used to update the payment rates for these APCs. In addition, section 1833(t)(16)(C) of the Act, as amended by section 142 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), specifically required that brachythera py sources be paid during CY 2009 on the basis of charges adjusted to cost, rather than under the standard OPPS methodology. Therefore, the reduced conversio n factor also was not applicable to CY 2009 payment for brachytherapy sources b ecause payment would not be based on the OPPS conversion factor and, consequently, the payment rates for these services were notCMS-1525-FC 1159 updated by the OPD fee schedule increase factor . However, in accordance with section 1833(t)(16)(C) of the Act, as amended by section 142 of the MIPPA, payment for brachytherapy sources at charges adjusted to cost expired on January 1, 2010. Therefore, in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60641), we finalized our CY 2010 proposal, without modification, to apply the reduction to payment for brachytherapy sources to hospitals that fail to meet the quality data reporting requirements of the Hospital OQR Program fo r brachytherapy services furnished on and after January 1, 2010. The OPD fee schedule increase factor is an input into the OPPS conversion factor, which is used to calculate OPPS payment rate s. To implement the requirement to reduce the OPD fee schedule increase factor for hospitals that fail to meet reporting requirements, we calculate two conversion factor s: a full market basket conversion factor (that is, the full conversion fact or), and a reduced market ba sket conversion factor (that is, the reduced convers ion factor). We then calculat e a reduction ratio by dividing the reduced conversion factor by the full conversio n factor. We refer to this reduction ratio as the “reporting ratio” to indicate that it applie s to payment for hospitals that fail to meet their reporting requirements. Applying this reporting ratio to the OPPS payment amounts results in reduced national unadjusted paymen t rates that are mathematically equivalent to the reduced national unadjusted payment ra tes that would result if we multiplied the scaled OPPS relative weights by the reduced conversion factor. To determine the reduced national unadjusted payment rates that applied to hospitals that failed to meet their quality reporting requirements for the CY 2010 OPPS, we multiply the final fullCMS-1525-FC 1160 national unadjusted payment rate in Adde ndum B to the CY 2010 OPPS/ASC final rule with comment period by the CY 2010 OPPS fi nal 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 minimum unadjusted copayment and national unadjusted c opayment for those hospitals that receive the payment reduction for failure to meet the Hospital OQR Program reporting requirements. This application of the re porting ratio to the national unadjusted and minimum unadjusted copayments is calcula ted according to §419.41 of our regulations, prior to any adjustment for a hospital’s fa ilure 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 in those cases when the OPD fee schedule increase factor is reduced for hospitals that fail to meet th e requirements of the Hospital OQR Program. For example, the following standard adjustme nts apply to the redu ced national unadjusted payment rates: the wage index adjustment; the multiple procedure adjustment; the interrupted procedure adjustment; the rural sole community hospital adjustment; and theCMS-1525-FC 1161 adjustment for devices furnished with full or partial credit or wit hout cost. We believe that these adjustments continue to be equally applicable to payments for hospitals that do not meet the Hospital OQR Program requirements. Similarly, outlier payments will continue to be made when the criteria are met. For hospitals that fail to meet the quality data reporting requirements, the hospitals' co sts are compared to the reduced payments for purposes of outlier eligibility and paym ent calculation. This policy conforms to current practice under the IPPS. We con tinued this policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60642), and in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72099). For a complete discussion of the OPPS outlier calculation and eligibility criteria, we refer read ers to section II.G. of this final rule with comment period. 2. Reporting Ratio Application and Asso ciated Adjustment Policy for CY 2012 In the CY 2012 OPPS/ASC proposed rule (76 FR 42327 through 42328), we proposed to continue our established polic y of applying the reduc tion of the OPD fee schedule increase factor through th e use of a reporting ratio for those hospitals that fail to meet the Hospital OQR Program requirements for the full CY 2012 annual payment update factor. For the CY 2012 OPPS, the proposed reporting ratio was 0.980, calculated by dividing the proposed reduced conversi on factor of $68.052 by the proposed full conversion factor of $69.420. The fi nal CY 2012 OPPS reporting ratio is 0.980, calculated by dividing the re duced conversion factor of $68.616 by the full conversion factor of $70.016. We proposed to continue to apply the reporting ra tio to all services calculated using the OPPS conversion factor . For the CY 2012 OPPS, we proposed toCMS-1525-FC 1162 apply the reporting ratio, when applicable , to all HCPCS codes to which we have assigned status indicators “P,” “Q1,” “Q2,” “Q 3,” “R,” “S,” “T,” “V,” “U,” and “X” (other than new technology APCs to which we have assigned status indicators “S” and “T”). We proposed to continue to exclude services paid under New Technology APCs. We proposed to continue to apply the repor ting ratio to the national unadjusted payment rates and the minimum unadjusted and nati onal 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 unadj usted payment rates for hospitals that fail to meet the requirements of the Hospital OQR Program. Similarly, we proposed to continue to calculate OPPS outlier eligibilit y and outlier payment based on the reduced payment rates for those hospitals that fa il to meet the reporting requirements. We invited public comments on these propos als. We did not receive any public comments on our CY 2012 proposal to appl y the HOP QDRP reduction in the manner described in the paragraph above and, ther efore, are finalizing our proposal, without modification. Therefore, for the CY 2012 OPPS, we ar e 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 HOP QDRP reporting requirements. This reporting ratio applies to HCPCS codes assigned status indicators “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X,” excluding services paid under New Technology APCs. All other applicable standardCMS-1525-FC 1163 adjustments to the OPPS national unadjusted paym ent rates for hospitals that fail to meet the requirements of the HOP QDRP will contin ue to apply. We continue to calculate OPPS outlier eligibility and outlier payment based on the reduced rates for those hospitals that fail to meet the reporting requirements. F. Extraordinary Circumstances Extension or Waiver for CY 2012 and Subsequent Years In our experience, there have been tim es when hospitals have been unable to submit required quality data due to extraordinary circumstances that are not within their control. It is our goal to not penalize hospitals for such circumstances and we do not want to unduly increase their burden during these times. Therefore, in the CY 2010 OPPS/ASC final rule with comment peri od (74 FR 60046 through 600647), we adopted a process for hospitals to request and for CMS to grant extensions or waivers with respect to the reporting of required quality data wh en there are extraordinary circumstances beyond the control of the hospital. In th e CY 2011 OPPS/ASC final rule with comment period (75 FR 72103), we retained these proc edures with some modifications. For CY 2012 and subsequent years, we proposed to retain these procedures with one modification. In the CY 2012 OPPS/ASC pr oposed rule (76 FR 42328), we proposed to extend these procedures to the submission of medical record documentation for purposes of complying with our validation requ irement for the Hospital OQR Program. Under this process, in the event of extr aordinary circumstances, such as a natural disaster, not within the control of the hospital, for the hospital to receive consideration for an extension or waiver of the requirement to submit quality data or medical record documentation for one or more quarters, a hos pital would submit to CMS a request formCMS-1525-FC 1164 that would be made available on the QualityNet Web site. The following information should be noted on the form:

● Hospital CCN;

● Hospital Name;

● CEO and any other designated personne l contact information, including name, email address, telephone number, and mailing ad dress (must include a physical address, a post office box address is not acceptable);

● Hospital’s reason for requesti ng an extension or waiver;

● Evidence of the impact of the extrao rdinary circumstances, including but not limited to photographs, newspaper and other media articles; and

● A date when the hospital would agai n be able to submit Hospital OQR data and/or medical record documentation, a nd a justification for the proposed date. The request form would be signed by th e hospital’s CEO. A request form would be required to be submitted within 45 days of the date that the extraordinary circumstance occurred. Following receipt of such a request, CMS would— (1) Provide a written acknowledgement us ing the contact information provided in the request, to the CEO and any additional designated hospital personnel, notifying them that the hospital’s reque st has been received; (2) Provide a formal response to the CEO and any additional designated hospital personnel using the contact information provi ded in the request notifying them of our decision; andCMS-1525-FC 1165 (3) Complete our review of any CY 2012 request and communicate our response within 90 days following our receipt of such a request. We note that we might also decide to gran t waivers or extensions to hospitals that have not requested them when we determine th at an extraordinary circumstance, such as an act of nature (for example, hurricane) aff ects an entire region or locale. If we make the determination to grant a waiver or extens ion to hospitals in a region or locale, we would communicate this decision to hospitals and vendor s through routine communication channels, including but not limited to e-mails and notices on the QualityNet Web site. In the proposed rule we invited public comment on this proposal to retain our existing process for granting extraordinary circ umstances extensions or waivers, and to extend this process to the submission of me dical record documentation, for the Hospital OQR Program.
Comment : Several commenters supported the proposal to continue the existing process for granting extraordinary circumstances extensions or waivers and to extend this process to the submission of medical r ecord documentation for the Hospital OQR Program. One commenter noted direct experience with medical record documentation destroyed by a recent disaster. Response : We thank these commenters for supporting our proposal to extend our process for granting extraordinary circumstance s extensions or waivers to the submission of medical record documentation.CMS-1525-FC 1166 After consideration of th e public comments we receive d, we are finalizing our proposal without modification; to continue th e existing process for granting extraordinary circumstances extensions or waivers, to exte nd this process to the submission of medical record documentation for the Hospital OQR Program, and to use this process for CY 2012 and subsequent years. G. Requirements for Reporting of Hospita l OQR Data for CY 2013 and Subsequent
Years To participate in the Hospital OQR Program, hospitals must meet administrative, data collection and submission, and data va lidation requirements (if applicable). Hospitals that do not meet Hospital OQR Progr am requirements, as we ll as hospitals not participating in the Program and hospitals that withdraw from the Program, will not receive the full OPPS payment rate update . Instead, in accordance with section 1833(t)(17)(A) of the Act, those hospitals will receive a reduction of 2.0 percentage points to their OPD fee schedul e increase factor for the app licable payment year. We established the payment determination requirements for the CY 2012 payment update in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72099 through 72106). In the CY 2012 OPPS/ASC proposed rule (76 FR 42328 through 42333), with respect to the payment determinations for CY 2013 and subsequent years, we proposed to implement the requirements listed below. Most of these requirements are the same as the requirements we implemented for the CY 2012 payment determination, with some proposed modifications.CMS-1525-FC 1167 1. Administrative Requirements for CY 2013 and Subsequent Years To participate in the Hospital OQR Program, we proposed that several administrative steps be completed. These steps are the same as those we finalized for the CY 2012 payment determination and w ould require the hospital to:

● Identify a QualityNet security admi nistrator who follows the registration process located on the QualityNet Web site ( http://www.QualityNet.org ) and submits the information to the appropriate CMS-de signated contractor. All CMS-designated contractors would be identified on the QualityNet Web site. The same person may be the QualityNet security administrator for both the Hospital IQR Program and the Hospital OQR Program. Based on our experi ence, we believe that the QualityNet security administrator typically fulfills a variety of tasks related to the hospital’s ability to participate in the Hospital OQR Program, su ch as: creating, approving, editing and/or terminating QualityNet user accounts within the organization; monitoring QualityNet usage to maintain proper security and confidentiality measures; and serving as a point of contac t for information regarding QualityNet and the Hospital OQR Program. However, the main purpose of the QualityNet Administrator is to serve as a contact for security purposes. Because of CMS information systems security requirement s, the hospital would be required to maintain a current QualityNet security administrator for as long as the hospital participates in the Program. While only a single QualityNet security administrator would be required for Program purposes, we suggest to hospitals that it may beCMS-1525-FC 1168 beneficial to have more than one QualityNet security administrator for back-up
purposes.

● Register with QualityN et, regardless of the method used for data submission.

● Complete and submit an online particip ation form if this form (or a paper Notice of Participation form) has not been previously complete d, if a hospital has previously withdrawn, or if the hospital acquires a ne w CCN. For Hospital OQR Program purposes, hospitals that share the sa me CCN would be required to complete a single online participation form. At this ti me, the participation form for the Hospital OQR Program is separate from the partic ipation form required for the Hospital IQR Program and completing a form for each progra m is required. Agreeing to participate includes acknowledging that the data submitted to the CMS-designated contractor would be submitted to CMS, shared with one or more other CMS contractors that support the implementation of the Hospital OQR Program, and be publicly reported. We proposed to retain the procedures and update the deadlines for submitting the participation form which we established in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72100): Hospitals with Medicare acceptance dates on or after January 1 of the year prior to the annual payment update affected: For the CY 2013 and subsequent years payment updates, we proposed that any hospi tal that has a Medica re acceptance date on or after January 1 of the year prior to the annual payment update affected (for example, 2012 would be the year prior to the affected CY 2013 annual payment update), including a new hospital and hospitals that have merg ed, must submit a completed participationCMS-1525-FC 1169 form no later than 180 days from the date identified as its Medicare acceptance date on the CMS Certification and Survey Provide r Enhanced Reporting (CASPER) system. Hospitals typically receive a package notifying them of thei r new CCN after they receive their Medicare acceptance date. The Medicare acceptance date is the earliest date that a hospital can receive Medicare pa yment for the services that it furnishes. Completing the participation form would include supplyi ng the name and address of each hospital campus that shares the same CCN. The use of the Medicare acceptance date as beginning the timeline for Hospital OQR Program participation allows us to m onitor more effectively hospital compliance with the requirement to complete a partic ipation form because a hospital’s Medicare acceptance date is readily available to CM S through its data systems. In addition, providing an extended time period to regi ster for the program would allow newly functioning hospitals sufficient time to get thei r operations fully functional before having to collect and submit quality data. We are aware that Medicare acceptan ce dates may be back-dated; we had experience with reported occurrence s as such over the past year. In that event, we would consider a hospital’s request to allow a dditional time to elect to participate. Hospitals with Medicare acceptance dates before January 1 of the year prior to the affected annual payment update: For the CY 2013 and subsequent years payment update, we proposed that any hos pital that has a Medicare acceptance date before January 1 of the year prior to the affected annual payment update (for example, 2012 would be the year prior to the affected CY 2013 annual payment update) that is notCMS-1525-FC 1170 currently participating in Hospital OQR and wishes to participate in the Hospital OQR Program must submit a participation form by Ma rch 31 of the year pr ior to the affected annual payment update. We proposed a deadli ne of March 31, because we believe it would give hospitals sufficient time to decide whether they wish to participate in the Hospital OQR Program, as well as put into place the necessary staff and resources to timely report data for first quarter of the yea r’s services. This requirement would apply to all hospitals whether or not the ho spital billed for payment under the OPPS. For the CY 2013 and subsequent years pa yment updates, we proposed that any Hospital OQR-participating hospital that wants to withdraw may do so at any time from January 1 to November 1 of the year prio r to the affected annual payment update. A hospital that withdraws during this time period for any annua l payment update would not be able to later sign up to participate for that payment update, would receive a 2.0 percentage point reduction to its OPD fee schedule increase factor for that year, and would be required to submit a ne w participation form in order to participate in any future year of the Hospital OQR Program. We note that once a hospital has submitted a participation form, it is considered to be an active Hospital OQR Program participant until such time as the hospital submits a withdrawal form to CMS or is designated as closed in the CMS CASPER system. In the proposed rule we i nvited public comment on thes e proposed Hospital OQR Program administrative requirements for th e CY 2013 and subsequent years’ payment determinations.CMS-1525-FC 1171
Comment : Some commenters supported requiring hospital outpatient departments to report quality data and the 2.0 percent reduction for hospitals that do not successfully report quality data to CMS. Response : We thank these commenters for supporting hospital outpatient quality data reporting under the Hospital OQR Program and the use of the 2.0 percentage point reduction for hospitals that do not succe ssfully report quality data to CMS.
Comment : Some commenters supported the proposed administrative requirements for the Hospital OQR Program in general. Response : We thank these commenters for supporting our proposed administrative Hospital OQR Program requirements. After consideration of th e public comments we receive d, we are finalizing our proposals for Hospital OQR Program administ rative requirements without modification. 2. Form, Manner, and Timing of Data Subm ission for CY 2013 and Subsequent Years In the CY 2012 OPPS/ASC proposed rule (76 FR 42329 through 42332),we proposed that, to be eligible to receive th e full OPD fee schedule increase factor for any payment determination, hospitals must comp ly with our submission requirements for chart-abstracted data, population and samp ling data, claims-based measure data, and structural quality measure data, including all-patient volume data: a. CY 2013 and CY 2014 Data Submission Re quirements for Chart-Abstracted Measure Data Submitted Directly to CMS In the CY 2012 OPPS/ASC proposed rule (76 FR 42329 through 42330), with respect to the proposed chart- abstracted measures for which hospitals would submit dataCMS-1525-FC 1172 directly to CMS, we proposed for CY 2013 and CY 2014 that par ticipating hospitals submit chart-abstracted data for each applic able quarter by the deadline posted on the QualityNet Web site; there must be no la pse in data submission. For the CY 2013 Hospital OQR Program, we proposed that the ap plicable quarters woul d be as follows:
3 rd quarter CY 2011, 4 th quarter CY 2011, 1 st quarter CY 2012, and 2 nd quarter CY 2012. Hospitals that did not partic ipate in the CY 2012 Hospital OQR Program, but would like to participate in the CY 2013 Hospital OQR Program, and that have a Medicare acceptance date on the CASPER system befo re January 1, 2012, would begin data submission with respect to 1 st quarter CY 2012 encounters using the CY 2013 measure set that was finalized in this final rule with comment peri od. For those hospitals with Medicare acceptance dates on or after Janua ry 1, 2012, data submission must begin with the first full quarter following the submission of a completed online participation form. For the CY 2014 Hospital OQR Program, we proposed that the applicable quarters for previously finalized me asures would be as follows: 3 rd quarter CY 2012, 4 th quarter CY 2012, 1 st quarter CY 2013, and 2 nd quarter CY 2013. W ith respect to our proposed additional measures for CY 2014 (5 Diabetes measures and 1 Cardiac Rehabilitation measure), the a pplicable quarters would be 1 st quarter CY 2013 and 2 nd quarter CY 2013. Hospitals that did not participate in the CY 2013 Hospital OQR Program, but would like to pa rticipate in the CY 2014 Hosp ital OQR Program, and that have a Medicare acceptance date on the CA SPER system before January 1, 2013, would begin data submission with respect to 1 st quarter CY 2013 encount ers using the CY 2014 measure set that we are finalizing in this final rule with comment period. For thoseCMS-1525-FC 1173 hospitals with Medicare acceptance dates on or after January 1, 2013, data submission must begin with the first full quarter fo llowing the submission of a completed online participation form. We proposed that hospitals must submit all required data according to the data submission schedule that is made available on the QualityNet Web site ( https://www.QualityNet.org ). This Web site meets or exceeds all current HIPAA requirements. Submission deadlines would be, in general, approximately 4 months after the last day of each calendar quarter. T hus, for example, the proposed submission deadline for data for services furnis hed during the first quarter of CY 2012 (January - March, 2012) would be on or around August 1, 2012. The actual submission deadlines would be posted on the http://www.QualityNet.org Web site. We proposed that hospitals submit chart- abstracted data to the OPPS Clinical Warehouse using either the CMS Abstrac tion and Reporting Tool for Outpatient Department (CART-OPD) measures or the t ool of a third-party vendor that meets the measure specification requirements for data transmission to QualityNet. We proposed that hospitals must coll ect Hospital OQR data from outpatient hospital encounters to which the required meas ures apply. In prev ious rulemakings, we have used various terms for describing the unit of care for outpati ent hospital reporting, including encounter, episode, epis ode of care, and discharge. We note that for outpatient hospital services, the te rm encounter is explicitly used and defined in the Medicare Benefit Policy Manual (Pub. 100-02), Chapter 6, Section 20.3, which states “A hospital outpatient ‘encounter’ is a dire ct personal contact between a patient and a physician, orCMS-1525-FC 1174 other person who is authorized by State licen sure law and, if applic able, by hospital or CAH staff bylaws, to order or furnish hospital services for diagnosis or treatment of the patient.” For Medicare outpatient services, th e terms episode and episode of care also are used. When discussing inpatient servi ces, the Medicare Benefit Policy Manual specifically refers to discharges; the term enc ounter is not used in reference to inpatient services. Thus, for the Hospital OQR Program , we are examining encounters, episodes, or episodes of care and will use these terms in connec tion with the Hospital OQR Program. We will make every effort to ensure that data elements common to both inpatient and outpatient settings are defined consisten tly for purposes of quality reporting (such as “time of arrival”). We proposed that hospitals must submit quality data using the CCN under which the care was furnished. To be accepted into the OPPS Clinical Warehouse and to meet data submission requirements, data submissions, at a minimum, must be timely, complete, and accurate. Data submissions are considered to be “timel y” when data are successfully accepted into the OPPS Clinical Warehouse on or before the reporting deadline. A “complete” submission would be determined based on whet her the data satisfy the sampling criteria that are published and maintained in the Ho spital OQR Specifications Manual, and must correspond to both the aggregate number of encounters submitted by a hospital and the number of Medicare claims the hospital submits for payment; requirements for utilizing the option of sampling are discussed below.CMS-1525-FC 1175 We strongly recommend that hospita ls review OPPS Clinical Warehouse feedback reports and the Hospital OQR Provide r Participation Reports that are accessible through their QualityNet accounts. These report s enable hospitals to verify whether the data they or their vendors submitted were accepted into the OPPS Clinical Warehouse and the date/time that such acceptance occurr ed. We also note that irrespective of whether a hospital submits data to the OPPS Clinical Warehous e itself or uses a vendor to complete the submissions, the hospital is responsible for ensuring that Hospital OQR requirements are met.
Comment : One commenter requested clarification on data submission dates for the chart-abstracted measures OP-16, OP-18 through OP-21, and OP-23 due to statements in the CY 2011 OPPS/ASC final rule with comment period that data collection for these measur es would be due in August 2012, whereas, in the CY 2012 OPPS/ASC proposed rule, the proposed timi ng for data collection for the CY 2013 payment determination is to begin July 1, 2011. Response : In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72090), we finalized 23 quality measures for the CY 2013 payment determination, which included OP-16 through OP- 23. We stated in that final rule that data submission of the new chart-abstracted measures for the CY 2013 payment determination will be due in August 2012. We also stated that collection for OP-16: Troponin results for Emergency Depart ment acute myocardial infarction (AMI) patients or chest pain patients (with Proba ble Cardiac Chest Pain) Received Within 60 minutes of Arrival would begin with January 1, 2012 discharges (75 FR 72083).CMS-1525-FC 1176 However, in the CY 2012 OPPS/ASC proposed rule, we proposed changes to the form and manner for data collection for th e chart-abstracted measure OP-22: Left Without Being Seen (76 FR 42332). We are finalizing this proposal below in section XIV.G.2.g. of this fina l rule with comment period. OP-16, OP-18 through OP-21, and OP-23 are chart-abstracted measures for which data are submitted directly to CMS. We proposed the form and manner for submitting chart-abstracted data for these measures for the CY 2013 payment determination in the CY 2012 OPPS/ASC proposed rule (76 FR 42329 through 42330). As discussed above, we have in this fi nal rule with comment period finalized our proposal to modify the collection mechanism fo r OP-22: Left Without Being Seen. With respect to the CY 2013 payment determina tion, hospitals must submit data on this measure between July 1, 2012 and Augus t 15, 2012 with resp ect to the period January 1, 2011 through December 31, 2011.
Comment : One commenter appreciated the discussion related to the harmonization of terminology around the use of the terms encounters, episodes, and episodes of care as consistent defi nitions are vital to data accuracy. Response : We thank this commenter for th eir appreciation of the discussion related to harmonizati on of this terminology.
Comment : Some commenters supported the proposed data submission requirements for the Hospital OQR Program in general. Response : We thank these commenters for their support of our proposed data submission requirements.CMS-1525-FC 1177 After consideration of th e public comments we receive d, we are finalizing our proposals, without modification, regardi ng CY 2013 and CY 2014 data submission requirements for chart-abstracted measur e data for OP-16, OP-18 through OP-21, and OP-23 submitted directly to CMS. Speci fically, for the CY 2013 Hospital OQR Program, the applicable quarters will be as follows: 3 rd quarter CY 2011, 4 th quarter CY 2011,
1 st quarter CY 2012, and 2 nd quarter CY 2012. Submission d eadlines will be, in general, approximately 4 months after the last day of each calendar quarter. Thus, for example, the proposed submission deadline for data for services furnished during the first quarter of CY 2012 (January to March, 2012 ) will be on or around August 1, 2012. b
. Eligibility to Voluntarily Sample and Data Submission Exception for Low Patient Volume for CY 2013 and Subsequent Years If a hospital has a sufficiently large number of eligible encounters with respect to a measure, the hospital has the option to sa mple those encounters and submit data only for these sampled encounters, rather than submitting data on all of the eligible encounters. This sampling scheme, which in cludes the minimum number of encounters that a hospital must have in order to sample , is set out in the Hospital OQR Specifications Manual at least 3 months in advance of each data submission deadline. We note that sampling is not required and hospitals may submit more cases than the minimum set by our sampling scheme and may submit up to all of their cases if they desire to do so. We changed the notification timeframe for this samp ling scheme to at leas t 3 months from at least 4 months to be consistent with th e Hospital OQR Specificat ions Manual releaseCMS-1525-FC 1178 schedule. If a hospital chooses to sample fo r a particular quarter, the hospital must meet the sampling requirements for the required ch art-abstracted measures that quarter. In addition, to reduce the burden on hospitals that treat a low number of patients but otherwise meet the submission requirement s for a particular quality measure, we proposed to continue our policy that hospitals that have five or fewer encounters (both Medicare and non-Medicare) for any measure included in a measure topic in a quarter would not be required to submit patient level data for the entire measure topic for that quarter. Even if hospitals would not be requi red to submit patient level data because they have five or fewer encount ers (both Medicare and non- Medicare) for any measure included in a measure topic in a quarter, we note that they may voluntarily do so. We did not receive any public comme nts on our proposal fo r voluntary sampling and data submission exception for low patient volume for CY 2013 and subsequent years; therefore, we are finalizing our proposal without modification. c. Population and Sampling Data Require ments Beginning with the CY 2013 Payment Determination and for Subsequent Years During the past three years of the Hospital OQR Program, the submission of population and sampling data was not requ ired, though hospitals could submit, on a voluntary basis, the aggregate numbers of out patient encounters which are eligible for submission under the Hospital OQR Program and sample size counts. These aggregated numbers of outpatient encounters represent th e number of outpatie nt encounters in the universe of all possible cases eligible for data reporting under the Hospital OQRCMS-1525-FC 1179 Program. For the CY 2012 payment update, we proposed, but did not adopt, a policy to require submission of this popul ation and sample size data. In the CY 2012 OPPS/ASC proposed rule (76 FR 42330 through 42331), we proposed that beginning with the CY 2013 pa yment determination, hospitals must submit on a quarterly basis, aggregate population a nd sample size counts for Medicare and nonMedicare encounters for the measure populations for which chart-abstracted data must be submitted. Under this proposal, a hospital would s ubmit on a quarterly basis an aggregate population and sample size count with respect to each measure regard less of whether any patients met the inclusion criteria for the m easure population. For example, if a hospital did not treat any patients who met the incl usion criteria for a specific measure, the hospital would still be required to submit a zero for its quarterly aggregate population and sample count to meet the requirement. Our analysis of third quarter CY 2010 outpatient hospital submitted data shows that for hospitals that submitted abstracted data for encounters, at least 99 percent of these providers voluntarily reported both population and sampling data. Data completeness was also assessed by comparing reported Medicare cases to submitted claim counts, minimum encount er count thresholds based on reported population sizes, and minimum sample size thresholds based on reported population size s. We found that less than 10 percent of hospita ls differed significantly in their Medicare self-reported encounters versus Medicare claim counts in the Clinical Warehouse, and less than 20 percent did not meet case count or sample size minimum thresholds. Based upon thisCMS-1525-FC 1180 analysis, we believe that hospitals have had sufficient time to become familiar with Hospital OQR data reporting and have devel oped data systems necessary to support this proposed requirement; in fact, recent data suggest that the vast majority of hospitals have done so. We proposed that the deadlines for the reporting of aggregate numbers of outpatient hospital encounters and sample si ze counts would be the same as those for reporting data for chart–abstracted measures , and these deadlines would be posted on the data submission schedule that would be avai lable on the QualityNet Web site. Hospitals would be permitted to submit this information prior to the deadline; this would allow us to advise hospitals regarding their incomplete submission status as appropriate and give hospitals sufficient time to make appropria te revisions before the data submission deadline. We stated that we plan to use the ag gregate population and sample size data to assess data submission completeness to th e OPPS Clinical Warehouse and adherence to sampling requirements for Medica re and non-Medicare patients.
Comment : One commenter was concerned that only 80 percent of hospitals are able to submit outpatient quality data mee ting requirements for case count and sampling minimums aggregate population and sample size data. This commenter believed that this should be of concern to CMS because the co mmenter believed that the 20 percent of hospitals not meeting the case count or sa mpling minimum requirements are ones that have systematic issues such as “complex out patient services,” high volume or services, and/or have some clinics th at have patients who should ha ve data reported to CMS underCMS-1525-FC 1181 the Hospital OQR Program, while some othe r clinics owned by the hospital do not that make it difficult for them to accurately dete rmine what minimum number of cases or cases sampled are to be submitted to meet program requirements. Response : The percent of hospitals that s how evidence of having issues with meeting sampling thresholds is less than 20 percent: more precisely, 17.3 percent in the Hospital OQR data examined. Over 99 per cent of hospitals are voluntarily reporting aggregate population and sampling data. Howeve r, due to data accuracy concerns that may exist for this small set of reporting hosp itals, we have decided to not finalize this requirement for the CY 2013 payment determination. After consideration of th e public comments we receive d, we have decided to not finalize our proposal to require the reporting of population and sample size data and instead will continue our policy of accepti ng the submission of this information on a voluntary basis for the CY 2013 payment determination. d. Claims-Based Measure Data Requirements for the CY 2013 and CY 2014 Payment Determinations In the CY 2012 OPPS/ASC proposed rule (76 FR 42331), for the claims-based measures, we proposed to calculate the meas ures using the hospital’s Medicare claims data as specified in the Hospital OQR Specifications Manual; no additional data submission is required for hospitals. For the CY 2013 and CY 2014 payment updates, we would utilize paid Medicare FFS claims for services furnished from January 1, 2010 to December 31, 2010 and January 1, 2011 to December 31, 2011, respectively.CMS-1525-FC 1182 We did not receive any comments on our proposal regarding the time periods for Medicare FFS claims for calculating clai ms-based measures for the CY 2013 and CY 2014 payment determinations; therefore, we are finalizing these proposals without modification. e. Structural Measure Data Requireme nts for the CY 2013 and CY 2014 Payment Determinations In the CY 2012 OPPS/ASC proposed rule (76 FR 42331), for the CY 2013 payment determination, we proposed that hosp itals would be required to submit data on the structural measures, including OP-17: Tr acking Clinical Results between Visits, between July 1, 2012 and August 15, 2012 w ith respect to the time period of January 1, 2011 to December 31, 2011. As discussed above, we proposed to adopt two new structural measures for the CY 2014 payment determination, OP-31: Safe Surgery Checklist Use, and OP-32: Hospital Outpatient Department Volume for Se lected Outpatient Surgical Procedures. We proposed that for the CY 2014 payment dete rmination, hospitals would be required to submit data on all structural measures between July 1, 2013 and August 15, 2013 with respect to the time period from January 1, 2012 to December 31, 2012.
Comment : One commenter requested clarification on data submission dates for the structural measure OP-17: Tracking C linical Results between Visits, due to statements in the CY 2011 OPPS/ASC final rule with comment period that data collection for this measure would star t January 1, 2012, whereas, in the CY 2012CMS-1525-FC 1183 OPPS/ASC proposed rule, CMS pr oposed that the for submission of data for CY 2013 payment determinations would begin July 1, 2011. Response : In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72090), we finalized 23 quality measures for the CY 2013 payment determination, which included the structural measure OP-17: Tracking Clinical Results between Visits. We stated that hospitals w ould be required to begin submitting data on OP-17 via a Web-based tool on the QualityNet Web site in July 2012 for the time period January 1, 2012 through June 2012. In the CY 2012 OPPS/ASC proposed rule , we proposed a modification to the timeframe for data collection. We stated that for all of the proposed structural measures, including OP-17: Tracking Clin ical Results between Visits, hospitals would be required to submit data between July 1, 2012 and Augus t 15, 2012 with respect to the time period of January 1, 2011 to December 31, 2011 (76 FR 42331). After consideration of the public comme nt we received on our proposal regarding structural measure data requirement s for the CY 2013 and CY 2014 payment determinations; we are finalizing our proposal s, with modification. With respect to structural measures for the CY 2013 payment de termination, hospitals wi ll be required to submit data between July 1, 2012 and August 15, 2012 with respect to the time period from January 1, 2012 to June 30, 2012.CMS-1525-FC 1184 f. Data Submission Deadlines for the NHSN HA I Surgical Site Infection Measure for the CY 2014 Payment Determination As discussed above, we proposed to adopt a new HAI measure for the CY 2014 payment determination: surgical site infec tion. We proposed to use the data submission and reporting standard procedures that have been set forth by CDC for NHSN participation in general and for submission of this measure to NHSN. We refer readers to the CDC’s NHSN Web site ( http://www.cdc.gov/nhsn ) for detailed data submission and reporting procedures. We believe that these procedures are feasible because they are already widely used by over 4,000 hospitals reporting HAI data to the NHSN. Our proposal seeks to reduce hospital burden by aligning CMS data submission and reporting procedures with NHSN procedures currently used by hospitals, including hospitals complying with 28 State HAI reporting requir ements. The submission timeframes for the CY 2014 payment determination that we proposed to use for the proposed HAI measure are shown below. Hospitals would be requi red to submit their quarterly data to the NHSN for Hospital OQR purposes according to the schedule shown in the table below (any updates to this schedule made by CMS will be posted on the QualityNet Web site).

Proposed Submission Timeframe for the Pr oposed Surgical Site Infection Measure for the CY 2014 Payment Determination CY 2013 Infection Events CDC-NHSN Collection and Quarterly Report Final Submission Deadline for Hospital OQR Program CY 2014 Payment Determination Q1 (Jan 1 to Mar 31, 2013) January 31 st to August 1 st August 1, 2013 Q2 (Apr 1 to Jun 30, 2013) April 30 th to November 1 st November 1, 2013CMS-1525-FC 1185 Hospitals would have until the Hospital OQR final submission deadline to submit their quarterly data to NHSN. After the final Hospital OQR Program submission deadline has occurred for each CY 2013 quarter to be used toward the CY 2014 payment determination, we will obtain the hospital-specific calculations generated by the NHSN for the Hospital OQR Program.
Comment : Many commenters stated their be lief that data collection on NHSN measures by outpatient hospitals should be defe rred. Commenters cited issues related to NHSN capacity, lack of experience with NHSN measures, and applicability to outpatient procedures of the NHSN Surgi cal Site Infection measure. Response : We thank the commenters for their input. As discussed above, we are not finalizing the collection of any NHSN m easures at this time. Thus, we are not finalizing our proposals regarding data submi ssion deadlines for these measures at this time. g. Data Submission Requirements for OP-22, ED-Patient Left Without Being Seen, for the CY 2013 and CY 2014 Payment Determinations In the CY 2012 OPPS/ASC proposed rule (76 FR 42328 through 42333), with respect to OP-22: ED-Patient Left Without Being Seen, we proposed that hospitals would be required to submit data once for each of the CY 2013 and CY 2014 payment determinations via a Web-based tool located on the QualityNet Web site. For the CY 2013 payment determination, hospitals w ould be required to submit data between July 1, 2012 and August 15, 2012 with respect to the time period from January 1, 2011 to December 31, 2011. For the CY 2014 paymen t determination, hospitals would beCMS-1525-FC 1186 required to submit data between July 1, 2013 and August 15, 2013 with respect to the time period of January 1, 2012 to December 31, 2012. We invited public comment on these propos als for data collection and submission requirements and these comments are discussed in section XIV.B.2.a., above, of this final rule with comment period. After consideration of th e public comments we receive d, for OP-22: ED-Patient Left Without Being Seen we are finalizing our proposal on the form and manner of data collection, with a modification. Specifically, as proposed we are finalizing that for the CY 2013 payment determination, numerator and denominator counts will be collected for this measure and that these data are to be submitted to CMS via a Web-based tool from July 1, 2012 to August 15, 2012. However, ba sed on the comments we received, we are modifying the time frames so that data coll ection will be prospective, and will begin for the time period from January 1, 2012 to June 30, 2012. 3. Hospital OQR Program Validation Requireme nts for Chart-Abstracted Measure Data Submitted Directly to CMS: Data Valid ation Approach for the CY 2013 Payment Determination a. Randomly Selected Hospitals In the CY 2012 OPPS/ASC proposed rule (76 FR 42332), similar to our approach for the CY 2012 payment determination (75 FR 72103 through 72106), we proposed to validate chart-abstracted data submitted directly to CMS from randomly selected hospitals for the CY 2013 payment determina tion. To reduce hospital burden and to facilitate our efforts to reallocate resources in the event that we finalize the targetingCMS-1525-FC 1187 proposal discussed below, for the CY 2013 payment determination, we proposed to reduce the number of randomly selected hosp itals from 800 to 450. We have found that hospitals are consistently reporting high accuracy rates for chart-abstracted measures and that variation among hospitals is relatively low. We belie ve that this low level of variation between hospitals will allow us to reduce the sample size while not diminishing our ability to make statistical inferences from the sample. Thus, we believe that we can safely reduce sample size and still have sufficient case numbers for purposes of validation. Because these 450 hospitals will be selected randomly, every Hospital OQR Program participating hospital wi ll be eligible each year fo r validation selection. To be eligible for random selection for validation, a hospital must be coded as open in the CASPER system at the time of selection a nd must have submitted at least 10 encounters to the OPPS Clinical Warehouse during th e data collection period for the CY 2013 payment determination. In our proposed rule, we mistakenly stated that a hospital must be coded as open in the OSCAR system; this system has been replaced by CASPER. We proposed this 10 encounter minimum so that we have a sufficient sample size for calculating a statistically valid validation score.
Comment : Several commenters supported the proposal to reduce the number of hospitals randomly selected for validation from 800 to 450. One of these commenters applauded this proposal, and en couraged continued reductions in the number of hospitals selected for validation as hos pital accuracy increased. One commenter believed that the total number of hospitals (up to 500) will remain adequate to assess the reporting accuracy of various types of hospitals.CMS-1525-FC 1188 One commenter expressed concern at the severe reduction in the number of hospitals sampled for validation seemingl y without justification. One commenter strongly opposed this proposal and believe d that this reduced CMS’ burden at the expense of validity of data pub licly reported on Hospital Compare . One commenter opposed the proposed reduction and believed that the number of hospitals selected for validation should be increased. Response : We thank all of these commenter s for their views on the number of hospitals that should be selected for valida tion. Our proposal attempts to balance the burden to hospitals and cost to us with ensuring the validity of data made publicly available on Hospital Compare . As we stated, we have observed high levels of data accuracy, we believe that we can reduce the number of hospitals selected for validation for the CY 2013 payment determination without compromising the accuracy of the data. Under this proposal a sample of approxima tely 21,600 randomly selected records would be selected for validation each year, and records submitted by up to 50 additional targeted hospitals would also be va lidated (discussed below).
Comment : One commenter believed that the minimum number of cases a hospital should have to be subject to selection for validation should be 25 cases rather than 10. Response : We considered larger threshold values for hospitals to be selected for validation. However, we concluded that because measure data submitted by hospitals with small case counts in the denominator currently are published on Hospital Compare, we have sought to select a minimum number as a threshold for validation. We haveCMS-1525-FC 1189 selected an absolute minimum threshold of 10 cases for validation selection in order for a sufficient sample size for calculating a statistically valid validation score.
Comment : Several commenters noted that CMS proposed separate and specific procedures for data validation of anot her NHSN measure under the Hospital IQR Program and requested that CMS discuss its plans for validation of data submitted through the NHSN for the Hospital OQR Program . Some of these commenters requested that in discussing such procedures, CMS pr ovide more detail on how hospital outpatient departments would submit a list of patients and what format should be used. One commenter noted the importance of robust a nd accurate data and encouraged CMS to explicitly discuss its intended plan to validate data submitted on the NHSN measures. Response : We thank the commenters for their suggestions and agree that separate and specific procedures for vali dation of NHSN measure data are warranted. We intend to learn from our experiences with valid ating NHSN measure data under the Hospital IQR Program and apply these lessons to our future proposals for validating NHSN measure data under the Hospital OQR Program. After consideration of th e public comments we receive d, we are finalizing our proposals for validation without modification. b. Use of Targeting Criteria for Da ta Validation Selection for CY 2013 (1) Background In the CY 2011 OPPS/ASC proposed rule ( 75 FR 46381), we stated that we were considering building upon what we proposed as a validation approach for the Hospital OQR Program. We noted that we were cons idering, in addition to selecting a randomCMS-1525-FC 1190 sample of hospitals for validation purposes, selecting targeted hosp itals based on criteria designed to measure whether the data these hospitals have reporte d raises a concern regarding data accuracy. Because hospitals ha d gained little experi ence with validation under the Hospital OQR at that time, we noted th at we were considering this approach for possible use beginning with the CY 2013 paymen t determination. Examples of targeting criteria suggested for inclusion:

● Abnormal data patterns identified such as consistently high Hospital OQR measure denominator exclusion rates resulti ng in unexpectedly low denominator counts;

● Whether a hospital had pr eviously failed validation;

● Whether a hospital had not been previ ously selected for validation for 2 or more consecutive years;

● Whether a hospital had low submitte d case numbers relative to population sizes; or

● Whether a hospital had any extreme outlier values for submitted data elements. We invited comment on whether, in a ddition to random sampling for validation, we should use targeted validation and, if so, what criteria for targe ting we should adopt. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72106) we responded to the comments we received and noted that for the CY 2013 payment determination, Hospital OQR Program data repor ting will have been completed for four payment determinations: CYs 2009, 2010, 2011, and 2012. Further, hospitals will have had the opportunity to learn from the validation process. We also stated that we intendedCMS-1525-FC 1191 to propose to implement validation targeting cr iteria for CY 2013 and subsequent years in the CY 2012 OPPS/ASC proposed rule. (2) Targeting Criteri a for Data Validation Selection for CY 2013 In the CY 2012 OPPS/ASC proposed ru le (76 FR 42332), in addition to proposing to randomly selecting 450 hospitals for validation, we proposed to select up to an additional 50 hospitals based upon targeting criteria. A hospital could be selected for validation based on targeting criteria if it:

● Fails the validation requirement that applies to the CY 2012 payment determination; or

● Has an outlier value for a measure based on the data it submits. We proposed to define an “outlier value” fo r purposes of this targeting as a measure value that appears to deviate markedly from the measure values for other hospitals. For a normally distributed variable, nearly all values of the variable lie with in 3 standard deviations of the mean; very few values lie past the 3 sta ndard deviation mark. One definition of an outlier is a value that exceeds this threshold. 36 In order to target very extreme values, we proposed to target hospitals that greatly exceed this threshold because such extreme values strongly suggest that the data subm itted is inaccurate. Specifically, we proposed to select hospitals for validation if their measure value for a measure is greater than 5 standard deviations from the mean, placi ng the expected occurrence of such a value outside of this range at 1 in 1,744,278. If more than 50 hospitals meet either of the above targeting criteria, then up to 50 would be se lected randomly from this pool of hospitals.

36 Ruan, Da, Chen, Guoguing, Kerre, Etienne E., an d Wets, Geert, (2010), Intelligent Data Mining: Techniques and Applications, Studies in Computational Intelligence , Vol. 5, Page 318.CMS-1525-FC 1192
Comment : Several commenters supported th e use of extreme outliers as a criterion for selecting hospita ls for validation. Some commenters supported using data quality concerns for targeting hos pitals for validation selection. Response : We thank these commenters for their support of our extreme outlier proposal and the use of data quality concer ns for targeting hospitals for validation selection. We note that in our proposal we used a standard normal distribution for the selected outlier threshold. We have al so examined data submitted under the Hospital OQR Program and found the 5 standard de viation threshold suitable for detecting extreme values for targeting hospita ls based upon data quality concerns. After consideration of th e public comments we receive d, we are finalizing our proposal without modification. c. Encounter Selection In the CY 2012 OPPS/ASC proposed rule (76 FR 42332 through 42333), for each selected hospital (random or targeted), we proposed to validate up to 48 randomly selected patient encounters (12 per quarter; 48 per yea r) from the total number of encounters that the hospital successfully subm itted to the OPPS Clinic al Warehouse. If a selected hospital has submitted less than 12 encounters in one or more quarters, only those encounters available would be validate d. For each selected encounter, a designated CMS contractor would request that the hospital submit th e supporting medical record documentation that corresponds to the encounter. We continue to believe that validating a larger number of encounters per hospital for fewer hospitals at the measure level has several benefits. We believe that thisCMS-1525-FC 1193 approach is suitable for the Hospital OQR Pr ogram because it will: (1) produce a more reliable estimate of whether a hospital’s submitt ed data have been abstracted accurately; (2) provide more statistically reliable estima tes of the quality of care delivered in each measured hospital as well as at a nati onal level; and (3) redu ce overall burden, for example, in submitting validation documentation, because hospitals most likely will not be selected to undergo validation each year, and a smaller number hospitals per year will selected. For all selected hospitals, we would not be selecting cases stratified by measure or topic; our interest is whether the data submitted by hospitals accurately reflects the care delivered and documented in the medical record, not what the accuracy is by measure or whether there are differences by measure or t opic. We proposed to validate data for April 1, 2011 to March 31, 2012 encounters as this provides a full year of the most recent data possible to use for purposes of comp leting the validation in time to make the CY 2013 payment determinations.
Comment : One commenter requested that CMS re-evaluate the sampling requirements for the Hospital OQR Program to better align them with the Hospital IQR Program and requested a reduction in samp le size requirements to reduce burden on hospitals. Response : We interpret the commenter as referring to the Hospital IQR Program sampling requirements for validation which strati fy by measure and/or topic. As we have stated, we are interested in whether the data submitted by hospitals accurately reflects the care delivered and documented in the medical record, not what the accuracy is byCMS-1525-FC 1194 measure or whether there are differences by measure or topic. In addition, by not stratifying by measure and/or topic, it is po ssible to sample fewer cases and maintain precision for reliability estimates for validation purposes.
Comment : One commenter opposed the proposal to continue the CY 2012 policy of sampling up to 12 records per quarter from hospitals selected for validation, stating their belief that this number should be reduced as burden to hospitals should be reduced, not just the burden to CMS. One commenter believed that validati ng a larger number of cases from a sample of hospitals has advant ages over sampling a smaller number of cases from a pool of all hospitals. Response : We thank the commenters for their views on the number of cases to be sampled from hospitals selected for validation. In setting a sample size we are attempting to balance burden to hospitals with data accuracy; sentiments mirrored in the comments received. We discussed our basis for the se lection of up to 12 records per quarter or 48 per year in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72104), and the CY 2012 OPPS/ASC proposed rule (76 FR 42332 through 42333). After consideration of th e public comments we receive d, we are finalizing our proposals without modification. d. Validation Score Calculation In the CY 2012 OPPS/ASC proposed rule (76 FR 42333), for the CY 2013 payment determination, we proposed to use th e validation calculation approach finalized for the CY 2012 payment determination with validation being done for each selected hospital. Specifically, we proposed to conduc t a measures level validation by calculatingCMS-1525-FC 1195 each measure within a submitted record using th e independently abstracted data and then comparing this to the measure reported by th e hospital; a percent agreement would then be calculated. We would also compare the measure category for quality measures with continuous units of measurement, such as time, so that for these measures, both the category and the measure would need to match. To receive the full OPPS OPD fee sc hedule increase factor for CY 2013, we proposed that hospitals must attain at leas t a 75 percent reliability score, based upon the proposed validation process. We proposed to use the upper bound of a two-tailed 95 percent confidence interval to estimate the va lidation score. If th e calculated upper limit is above the required 75 percent reliability threshol d, we would consider a hospital’s data to be “validated” for payment purposes. Becau se we are more interested in whether the measure has been accurately reported, we would continue to focus on whether the measure data reported by the hospital matches the data documented in the medical record as determined by our reabstraction. We propos ed to calculate the validation score using the same methodology we finalized fo r the CY 2012 payment determination (75 FR 72105). We also proposed to use the same medical record documentation submission procedures that we also fina lized for the CY 2012 payment determination (75 FR 72104) with one modification. We proposed to shorten the time peri od given to hospitals to submit medical record documentation to the CMS contractor from 45 calendar days to 30 calendar days. This proposed change in submission timeframe will align the process with requirements in 42 CFR 476.78(b)(2), which allow 30 days fo r chart submission in the context of QIOCMS-1525-FC 1196 review. We proposed this deadline of 30 days also to reduce the time for data validation completion to increase timeliness of pr oviding hospitals with feedback on their abstraction accuracy.
Comment : Many commenters opposed the proposal to reduce the time for hospitals to submit medical record docume ntation for validation. Some of these commenters cited burden as an issue. So me commenters expressed concern that the shortened timeframe would not allow adequate time to review records before submission for validation purposes. One commenter stated that hospitals also have records they are required to prepare for Recovery Audit C ontractor (RAC) purposes. One commenter believed that this proposal would be a burde n on medical and quality staff if a hospital had been selected for both outpatient a nd inpatient hospital quality reporting. Response : We thank these commenters for expressing their concerns regarding this proposal. Based on these comments, we ha ve decided to not fina lize our proposal to reduce the time for hospitals to submit medical record documentation and, instead, due to issues of burden as well as consistency with other CMS programs (for example, the RAC, PERM, and CERT programs), we will retain our existing policy. Under this existing policy, the CMS contractor must receive the requested documentation by 45 calendar days from the date of the request as documented in the request letter. Other details of this policy, including the issuance of a second request letter if th e hospital does not respond to the initial request with in 30 days are detailed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72104).CMS-1525-FC 1197
Comment : Some commenters agreed with reducing the time from 45 days to 30 days if the timeliness of feedback was improved. Response : We thank these commenters for supporting our propos al to reduce the time to submit medical records for validation from 45 days to 30 days if timeliness of feedback could be improved. We agree that improved timelines of feedback is important for quality improvement. After consideration of th e public comments we receive d, we have decided to not finalize our proposal to reduce the time for hospitals to submit medical record documentation. As stated above, we will retain the medical record re turn policy that we finalized in the CY 2011 OPPS/ ASC final rule for the Hospital OQR Program CY 2012 payment determination. We did not receive any comments on our proposal regarding validation score calculation. Therefore, we are finalizing this proposal without modification. 4. Additional Data Validation Conditions under Consideration for CY 2014 and Subsequent Years We continue to consider building upo n our validation approach of targeting hospitals to address data quali ty concerns and to ensure th at our payment decisions are made using accurate data. Thus, in the CY 2012 OPPS/ASC proposed rule (76 FR 42333),we requested public comment on the following additional targeting criteria to select ho spitals for validation:

● Whether a hospital that was open unde r its current CCN and had not been selected for validation in the pr evious 3 years. This is cons istent with validation targetingCMS-1525-FC 1198 criteria we recently proposed to impl ement for the CY 2015 Hospital IQR Program (76 FR 25920 through 25921).

● Whether a hospital had submitted a low number of encounters relative to population sizes; or

● Whether a hospital reported significant numbers of “Unable to Determine” data elements. In the proposed rule we welcomed pub lic comment on these proposals, and noted that we were specifically interested in r eceiving public comments on definitions of low numbers relative to population sizes and what would constitute significant numbers of “Unable to Determine” data elements.
Comment : Several commenters supported the id ea of selecting eligible hospitals for validation if not selected in the previous 3 years, or, in other words, at least once every 4 years for validation. One commenter suggested that the time allowance for targeting a hospital for validation due to non- selection be increased from 3 years to 4
years. Response : We appreciate the commenters’ s upport. Regarding the suggestion that the time allowance for targeting a hos pital for validation due to non-selection be increased from three years to four, if the tim e was increased to four years, the maximum number of years that a hospital could avoi d being selected for validation would be 5 years. We believe that this timeframe is too long for a hospital that has submitted quality measure information to go without their data being validated.CMS-1525-FC 1199
Comment : One commenter expressed concerns about the criteria for how to define low numbers relative to population size and significant numb ers of “unable to determine” data elements. The commenter st ated that without a quality strategy for outpatient care, it is difficult to evalua te a low number of encounters relative to population or significant numb ers of “unable to determ ine.” Another commenter suggested that statistical te sting be used to determine thresholds for these proposed criteria. Response : We thank these commenters for their thoughts on how to define low numbers relative to population si ze and significant numbers of “unable to determine” data elements in formulating these factors as targ eting criteria for valid ation. We will take these views under consideration as we devel op future proposals on these issues. We thank the commenters for all their views on these proposed criteria and will take them into account as we consider future proposals. H. Hospital OQR Reconsider ation and Appeals Procedures for CY 2013 and Subsequent
Years When the Hospital IQR Program was init ially implemented, it did not include a reconsideration process for hospitals. S ubsequently, we received many requests for reconsideration of those payment decisions and, as a result, established a process by which participating hospitals would submit requests for recons ideration. We anticipated similar concerns with th e Hospital OQR Program and, therefore, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66875), we stated our intent to implement for the Hospital OQR Program a reconsideration proce ss modeled after theCMS-1525-FC 1200 reconsideration process we implemented fo r the Hospital IQR Program. In the CY 2009 OPPS/ASC final rule with co mment period (73 FR 68779), we adopted a reconsideration process that applied to the CY 2010 paymen t decisions. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60654 th rough 60655), we continued this process for the CY 2011 payment update. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72106 through 72108), we continued this process for the CY 2012 payment update with some modification. In the CY 2012 OPPS/ASC proposed rule (76 FR 42333 through 42334), we proposed to continue this process for the CY 2013 payment determination and subsequent years. Under this proposed process, a hospital seeking reconsideration must--

● Submit to CMS, via QualityNet, a Reconsideration Request form that will be made available on the QualityNet Web site; this form must be submitted by February 3 of the affected payment year (for example, for the CY 2013 payment determination, the request must be submitted by February 3, 2013) and must contain the following information:

○ Hospital CCN.

○ Hospital Name.

○ CMS-identified reason for not meeting the requirements of the affected payment year’s Hospital OQR Program as provided in any CMS notification to the hospital.CMS-1525-FC 1201

○ Hospital basis for requesting recons ideration. This must identify the hospital’s specific reason(s) for believing it met the affected year’s Hospital OQR Program requirements and should receive the full OPD fee schedule increase factor.

○ CEO and any additional designated hospital personnel contact information, including name, e-mail address, telephone number, and mailing address (must include physical address, not just a post office box).

○ A copy of all materials that the hospital submitted to comply with the requirements of the affected year’s Hospital OQR Program. Such material might include, but does not need to be limited to, the a pplicable Notice of Participation form or completed online registration form, and measure data that the hospital submitted via QualityNet.

● Paper copies of all the medical record documentation that it submitted for the initial validation (if applicable). We proposed that hospitals would submit this documentation to a designated CMS contractor which would have authority to review patient level information. We would post th e address where hospitals are to send this documentation on the QualityNet Web site.

● To the extent that the hospital is re questing reconsideration on the basis that CMS has determined it did not meet an a ffected year’s validation requirement, the hospital must provide a written justification for each appealed data element classified during the validation process as a mismatch. On ly data elements that affect a hospital’s validation score would be elig ible to be reconsidered. We would review the dataCMS-1525-FC 1202 elements that were labeled as mismatched as well as the written justifications provided by the hospital, and make a decisi on on the reconsideration request. We note that, consistent with our policy for CY 2012 reconsiderations, reconsideration request forms would not n eed to be signed by the hospital’s CEO. Following receipt of a request for reconsideration, CMS would--

● Provide an e-mail acknowledgement, using the contact information provided in the reconsideration request, to the CEO a nd any additional designated hospital personnel notifying them that the hospital’ s request has been received.

● Provide a formal response to the hospital CEO and any additional designated hospital personnel, using the contact informa tion provided in the reconsideration request, notifying the hospital of the outcome of the reconsideration process. We intend to complete any reconsiderat ion reviews and communicate the results of these determinations within 90 days fo llowing the deadline for submitting requests for reconsideration. We also proposed to apply the same policies that we fina lized for the CY 2012 payment determination regarding the scope of our review when a hospital requests reconsideration because it failed our valid ation requirement. These policies are as follows:

● If a hospital requests reconsideration on the basis that it disagrees with a determination that one or more data elements were classified as mismatches, we would only consider the hospital’s request if the hospital timely submitted all requested medical record documentation to the CMS contractor each quarter under the validation process.CMS-1525-FC 1203

● If a hospital requests reconsideration on the basis that it disagrees with a determination that one or more medical records it submitted during the quarterly validation process was classified as an i nvalid record selectio n (that is, the CMS contractor determined that one or more me dical records submitted by the hospital did not match what was requested, thus resulting in a zero validation score for the encounter(s)), our review would initially be limited to determining whether the medical documentation submitted in response to the designated CM S contractor’s request was the correct documentation. If we determine that th e hospital did submit the correct medical documentation, we would abstract the data el ements and compute a new validation score for the encounter. If we conc lude that the hospital did not submit the correct medical record documentation, we would not furt her consider the hospital’s request.

● If a hospital requests reconsideration on the basis that it disagrees with a determination that it did not submit the reque sted medical record documentation to the CMS contractor within the proposed 30 cal endar day timeframe, our review would initially be limited to determining whether the CMS contractor received the requested medical record documentation within 30 calendar days, and wh ether the hospital received the initial medical record request and reminder notice. If we determine that the CMS contractor timely received paper copi es of the requested medical record documentation, we would abstract data elemen ts from the medical record documentation submitted by the hospital and compute a validation score for the hospital. If we determine that the hospital received two letters requesti ng medical documentation butCMS-1525-FC 1204 did not submit the requested documentation wi thin the 30 calendar day period, we would not further consider the hospital’s request. If a hospital is dissatisfied with th e result of a Hospital OQR reconsideration decision, the hospital would be able to file an appeal under 42 CFR Part 405, Subpart R (PRRB appeal). In the proposed rule we invited public comment on our proposed CY 2013 Hospital OQR Program reconsideration and appeals procedures.
Comment : Some commenters supported our proposal to continue for CY 2013 and subsequent years’ payment determinati ons our program reconsideration and appeals procedures currently in place. Response : We thank these commenters fo r their support of our Hospital OQR Program reconsideration and appeals procedures.
Comment : One commenter encouraged CMS to be more prescriptive than, as stated in the proposal , the intention of ha ving reconsideration reviews completed and communication of the results of these determinations to hospitals within 90 days given that hospitals were not allowed this leeway in submission timeframes. Response : We believe that the commenter is stating a desire for a commitment that we will complete reconsideration re views and communicate decisions results to hospitals in 90 day days or less after the submission deadline timeframe. As reconsideration requests can i nvolve extensive research a nd information review, among other time consuming processes, often th e full 90 day time-frame is necessary to complete the process in a thorough manner. In some more complex cases, the 90 daysCMS-1525-FC 1205 may not be enough. Note that, when the recons ideration process can be completed in a shorter time-frame, we can and have communicat ed the results in less than 90 days. We intend where possible to complete any rec onsideration requests a nd to communicate the results of our decision within 90 days. After consideration of th e public comments we receive d, we are finalizing our proposals without modification. I. Electronic Health Records (EHRs) Starting with the FY 2006 IPPS final rule, we have encouraged hospitals to take steps toward the adoption of EHRs (also refe rred to in previous rulemaking documents as electronic medical records) that will allow for reporting of clinical quality data from EHRs to a CMS data repository (70 FR 47420 through 47421). We sought to prepare for future EHR submission of quality measures by sponsoring the creation of electronic specifications for quality measures under c onsideration for the Hospital IQR Program. Through the EHR Incentive Programs, we expect that the submission of quality data through EHRs will provide a foundation for esta blishing the capacity of hospitals to send, and for CMS, in the future, to receive, qua lity measures via hospital EHRs for Hospital IQR and OQR Program measures. We e xpect the Hospital IQR and Hospital OQR Programs to transition to the use of ce rtified EHR technology, for measures that otherwise require information fr om the clinical record. This would allow us to collect data for measures without the ne ed for manual chart abstraction. In the FY 2012 IPPS/LTCH PPS proposed rule (75 FR 25894), we identified FY 2015 as a potential transition date to move to EHR-base d submission and phase outCMS-1525-FC 1206 manual chart abstraction. We also anticipate such a transition for hospital outpatient measures, although likely somewhat after the tr ansition for hospital inpatient measures. This is a result of the fact that the clinical quality measures in the EHR Incentive Program currently are primarily aligned with the Hosp ital IQR Program, rather than the Hospital OQR Program. Our goals are to align the hospi tal quality reporting programs, to seek to avoid redundant and duplicative reporting of quality measures for hospitals, and to rely largely on EHR submission for measures based on clinical record data.
Comment : A commenter recommended that prior to CY 2015, CMS offer a voluntary test period of at le ast one year and omit public reporting, in order to allow hospitals to submit data, refine electronic submission process to ensure accuracy and validity of data flows. The commenter was al so concerned about the potential inaccurate calculations generated from cer tified EHRs and urged CMS not to publicly report the Stage 1 clinical quality measure (CQM) data re ported and not to use them as a baseline for future quality reporting programs, such as a value-based purchasing program. Response : We understand that hospitals need to gain experience in electronic data submission. The 2012 Medicare EHR Incentive Program Elect ronic Reporting Pilot (2012 Electronic Reporting Pilot) (discussed be low) that we proposed is voluntary and last for one year. This Pilot would provide eligible hospitals a nd CAHs the opportunity to report clinical quality measures us ing certified EHR technology. We thank the commenter for the feedback on certified EH R technology and we will communicate that to the ONC for further evaluation. We also note that at presen t, CQMs reported through attestation under the EHR Incen tive Program are not publicly reported and we do not planCMS-1525-FC 1207 to publish the CQMs reported through the 2012 Electronic Reporting Pilot. The only information that we expect to make publicly available are the names of hospitals that have received an incentive payment under the EHR Incentive Program. We will provide further education and outreach to stake holders on the reporting process for the 2012 Electronic Reporting Pilot in FY 2012. For hospitals that may be concerned about the accuracy of the results calculated by their certified EHR technology, we would suggest that they contact th eir vendors about these issues.
Comment : A commenter requested clarifi cation regarding th e validation of quality measures submitted through certified EHR technology after manual chartabstraction is phased out. Response : For reporting clini cal quality measures under the EHR Incentive Program, the eligible hospital or CAH must attest to the output that is generated from its certified EHR technology. We are still in th e process of developing validation strategy for quality measures submitted through certified EHR technology after manual chart-abstraction is phased out.
Comment : A commenter stated that CMS must ensure that the electronic measure is comparable to the original manual chart- abstracted measure. The commenter noted that any potential electronic re tooling of the measures must not undermine the scientific basis and data integrity of the measures. Another commenter suggested that for easy understanding by healthcare professionals, the e-specifications for EH R submission of quality measures should be written in simple language while maintaining the accuracy of data element definitions.CMS-1525-FC 1208 The commenter believed it is critical for CMS to create measure specifications to ensure discrete data are app licable to measures without cont radicting documentation in “free text” and “scanned document” ar eas of the medical record. Response : We agree that electronic measures should be comparable to the original manual chart-abstracted measures and we thank the commenter for the suggestions on the creation of user-friendly e-sp ecifications that ali gn with medial record documentations. We are collaborating with the NQF, measure stewards, and the ONC to develop the accurate, easy to understand, a nd medical-record comp atible electronic specifications while maintaining the inte grity of the measures as endorsed.
Comment : Some commenters discussed their CQM reporting experience for Stage 1 meaningful use. Commenters indi cated that extra effo rts were required to manipulate the certified EHR products to genera te accurate quality data. For this reason, some commenters had misgivings about the te sting of the e-measure specifications. In addition, commenters were concerned whethe r corrections or updates, such as new medications to treat patients with stro ke, were communicated and adopted timely by vendors. Some commenters di d not believe EHR vendors have the capacity to keep up with the constant changes in electronic measures and re lated specifications. Moving forward, some commenters requested that CMS establish a transparen t process to manage specification updates to quality measures, as well as a mechanism through which vendors and providers can provide feedback on pr oblematic measures. The commenters noted that the existing CQMs require a level of c linical documentation and the use of coded data fields that are far more extensive th an other Stage 1 Meaningful Use objectives.CMS-1525-FC 1209 Response : We thank the commenters for th e feedback. We are continuing to work with ONC to resolve the identified concerns. Generally, the e-measure specifications we adopt undergo rigorous development processes and e-specification updates and new specifications are timely communicated to vendors. We thank the commenters for their suggestions on the tran sparent process to manage updates and will take them into considera tion for future planning.
Comment : Commenters recommended that CMS conduct a different pilot program to field test the measures used in the HITECH EHR Incentive Program for the purpose of determining the ability of vendor s and hospitals to accurately capture the necessary data in the required formats to ge nerate, valid, reliable and comparable quality measures directly from the EHRs. Response : CMS agrees that it is important to obtain input from the vendors, providers, and measure stewards about the electronic specifications. We thank the commenters for the suggestions for a pilot pr ogram to test measures in the field. Currently, we are working with the various stakeholders to define this process.
Comment : A commenter requested clarificat ion whether the information related to the Hospital IQR Program contained in CMS’ FAQ (Answer ID10589: “CMS does not require any additional information beyond what is generated from certified EHR technology in order to satisfy the requirem ent for submitting CQM information”) also applies to e-measures in the Hospital OQR Program. If it does, the amount of data obtained from e-measures will differ in the Hospital IQR and Hospital OQR Programs.CMS-1525-FC 1210 Response : The reporting requirements are sepa rate for each program. At this time there are different and separate reporting requirements for the EHR Incentive Program, the Hospital IQR Program, and the Hospital OQR Program. J. 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible Hospitals and CAHs 1. Background In the CY 2012 OPPS/ASC proposed rule (76 FR 42334 through 42336), we proposed changes to the methods by which e ligible hospitals a nd CAHs would report clinical quality measures for the 2012 paym ent year and subsequent years for the Medicare EHR Incentive Program. Specifical ly, we proposed that for the 2012 payment year and subsequent years, eligible hospitals and CAHs may continue to report clinical quality measure results as calculated by certified EHR t echnology by attestation, as for the 2011 payment year. Altern atively, for the 2012 payment y ear, eligible hospitals and CAHs would be able to participate in a proposed 2012 Electronic Reporting Pilot. We proposed to revise our regulations at §495.8(b)(2)(ii) and proposed to add §495.8(b)(2)(vi), which would reflect thes e proposals for reporting CQMs through attestation and the 2012 El ectronic Reporting Pilot. 2. Electronic Reporting Pilot Section 1886(n)(3)(B)(ii ) of the Act provides authority for the Secretary to accept information on CQMs electronically on a pilot basis. We proposed that eligible hospitals and CAHs participating in the Medicare EHR Incentive Program may meet the CQM reporting requirement of the EHR Incen tive Program for payment year 2012 byCMS-1525-FC 1211 participating in an Electronic Reporting Pilot. We proposed that participation in this Electronic Reporting Pilot would be voluntary and that eligib le hospitals and CAHs may continue to attest to the results of CQMs calculated by certified EHR technology as they did for the 2011 payment year. We encouraged participation in the propos ed Electronic Reporting Pilot in view of our desire to adequately pilot electronic submission of CQ Ms and to move to a system of reporting where eligible hospitals and CAHs can qualify for CQM reporting for both the Hospital IQR and Hospital OQR Program s, and the EHR Incentive Program. We strongly encouraged eligible hos pitals and CAHs to participate in the proposed Electronic Reporting Pilot as it provides oppor tunities to test the interope rability and functionality of the certified EHR technology that they ha ve implemented. We believe that the participation of eligible hospitals and CAHs in the proposed Electronic Reporting Pilot would help advance EHR-based reporti ng in the Hospital IQR and Hospital OQR Programs. Eligible hospitals and CAHs w ould need to be registered in order to participate in the proposed Electronic Reporting Pilot. El igible hospitals and CAHs wishing to participate in the proposed Electronic Repor ting Pilot for the CQMs would register by indicating their desire and inte nt to participate in the pr oposed Electronic Reporting Pilot as part of the attestation process for the Medicare EHR Incentive Program. We proposed that eligible hospita ls and CAHs that participate in the proposed Electronic Reporting Pilot and meet its submission requirements would satisfy the requirements for reporting clinical quality measures under the Medicare EHR Incentiv e Program. Such eligibleCMS-1525-FC 1212 hospitals and CAHs would theref ore not need to attest to th e results of clinical quality measures calculated by certified EHR technolog y. As described below, for the purpose of the proposed Electronic Reporting Pilot, CMS would calculate the results of the clinical quality measures for eligible hosp itals and CAHs based on patient level data submitted for Medicare patients. The proposed Electronic Reporting Pilot would require eligible hospitals and CAHs to submit inform ation on the same 15 CQMs that were listed in Table 10 of the final rule for the Medi care and Medicaid EH R Incentive Programs (75 FR 44418 through 44420) and such informati on would be obtained from the certified EHR technology used by the el igible hospital or CAH. We proposed that electronic submission of the 15 CQMs through this proposed Electronic Reporting Pilot woul d be sufficient to meet the core objective for reporting CQMs for the Medicare EHR Incentive Progr am for the 2012 payment year. Since the reporting of CQMs is only one of the 14 core meaningful use objectives for eligible hospitals and CAHs for the Medicare EHR In centive Program, an eligible hospital or CAH that chooses to participate in the propos ed Electronic Reporting Pilot would still be required to meet and attest to the other core and menu set ob jectives and their associated measures using the attestation module for the program on the CMS Web site. We stated that after the eligible hos pital or CAH had at tested and CMS had received electronic submission of the CQMs from an eligible hospital or CAH participating in the proposed Electronic Re porting Pilot, CMS would determine whether the eligible hospital or CAH has successfully met all the requirements for the Medicare EHR Incentive Program. We expect this dete rmination would be made within 2 monthsCMS-1525-FC 1213 after the end of the payment year and not later than November 30, 2013. Eligible hospitals and CAHs that do not meet the reporting requirements through the Electronic Reporting Pilot may meet such requiremen t through attestation. We proposed that eligible hospitals and CAHs, alternatively, may attest, but still participate in the proposed Electronic Reporting Pilot.
Comment : A commenter requested more clarif ication on the purpose of this Pilot, which appears to duplicate other quality measurement programs. Response : The specific purpose of the 2012 El ectronic Reporting Pilot is to provide a method for eligible hospitals and C AHs to electronically report the clinical quality measures for the EHR Incentive Progr am. We recognize that there may be some overlap between the 2012 Electronic Repor ting Pilot and other quality reporting programs but we expect electronic reporti ng will be aligned and harmonized across Medicare quality reporting programs over time.
Comment : Some commenters strongly s upported the proposed 2012 Electronic Reporting Pilot, which they perceived as a great opportunity for hospitals to test interoperability and functionality of thei r certified EHR technology while allowing CMS to evaluate the compatibility of electronic measure specifications and chart-abstracted data. Commenters recommended that CMS s hould be flexible with the implementation timelines for the pilot to ensure the viabil ity and successful functionality of this new reporting method. Response : We appreciate the commente rs’ support of the proposed 2012 Electronic Reporting Pilot. If the proposed timelines for the Electronic Reporting PilotCMS-1525-FC 1214 are not feasible for an eligible hospital or CAH, attestation would continue to be an acceptable method for reporting the clinical qu ality measures for the 2012 payment year.
Comment : Some commenters believed that the 2012 Electronic Reporting Pilot would be instrumental in shaping and facili tating the mechanisms for electronic reporting by eligible hospitals and CAHs in the near future. A commenter asked CMS to clarify the options for attestation and participa tion in the 2012 Electronic Reporting Pilot. Response : We thank the commenters for thei r support. As we stated in the proposed rule, the 2012 Electronic Reporting Pilo t would be an altern ative to reporting CQMs by attestation for the 2012 payment year . Eligible hospitals and CAHs may choose to report CQMs by attestation and volunt arily participate in the 2012 Electronic Reporting Pilot simultaneously. We will pr ovide more education and outreach to stakeholders on the repor ting process for the 2012 Elect ronic Reporting Pilot in 2012.
Comment : A commenter recommended making the 2012 Electronic Reporting Pilot a viable option for all hospitals, including safety net hospitals, so that CMS can gauge the unique challenges to electronic reporting by a diverse group of hospitals. Another commenter suggested CMS should allo w all hospitals to pa rticipate in the 2012 Electronic Reporting Pilot regardless of whethe r they participated in the EHR Incentive Program. A commenter recommended provi ding an additional incentive for 2012 Electronic Reporting Pilot participan ts to increase participation. Response : We plan to engage a variety of hos pitals and vendors in the testing of the submission of patient level reports for th e clinical quality measures required in the pilot. The submitter will not be required to register in the registration and attestationCMS-1525-FC 1215 module before submitting the test files. More information about the testing period will be available in 2012. Although we appreciat e the commenter’s recommendation, the amounts of the incentive payments are limited by statute and we do not have the authority to award additional amounts for participati on in the 2012 Electronic Reporting Pilot.
Comment : One commenter requested dela ying the 2012 Electronic Reporting Pilot until 2013. Response : Based on the amount of support fr om public comments and our desire to advance the electronic reporting of quality measures, we have decided to implement the Electronic Reporting Pilot for the 2012 paym ent year as proposed. We recognize that the 2012 Electronic Reporting Pilot may not be suitable for all eligible hospitals and CAHs. To that end, we anticipate only those eligible hospitals and CAHs that are most ready to transmit clinical quality measur e information from their certified EHR technology would participate in the 2012 Electronic Reporting Pilo t. Participation in the pilot is not required to be a meaningful us er of certified EHR technology. Eligible hospitals and CAHs that are not interested in participating in the pilot would report the clinical quality measures by attestation as was required for the 2011 payment year. We refer readers to the discussion of the repor ting method for the 2011 payment year in the HITECH EHR Incentive Program fina l rule (75 FR 44430 through 44431).
Comment : A commenter requested a detailed an alysis of the incapability of the PQRI 2009 Registry XML Speci fication content exchange standard in conveying aggregate hospital quality measures data fr om EHRs. The commenter also suggestedCMS-1525-FC 1216 CMS consult with hospitals and vendors on the need to move to electronic reporting from the current attestation model, gi ven relative costs and benefits. Response : We suggest that the commenter should contact the Office of the National Coordinator for Health Informati on Technology (ONC) with any questions or concerns about the PQRI 2009 Registry XML Specification content ex change standard. ONC’s Web site address is http://healthit.hhs.gov . We appreciate the suggestion to consult with hospitals and ve ndors about the need to move from the current attestation model to electronic reporting and will take it into consideratio n for future planning. After consideration of the public comments we receive d, we are finalizing as proposed the voluntary 2012 Electronic Reporting Pilot for eligible hospitals and CAHs participating in the Medicare EHR Incen tive Program for the 2012 payment year. Eligible hospitals and CAHs also may choose to attest to the resu lts of CQMs calculated by certified EHR technology as for the 2011 pa yment year. We also are revising our regulations at §495.8(b)(2) as proposed. Su ccessful electronic submission of the 15 CQMs required for eligible hospitals and CAHs through this 2012 Electronic Reporting Pilot will be sufficient to meet the core objective of reporting hospital CQMs to CMS under the Medicare EHR Incentive Program for the 2012 payment year. 3. CQM Reporting under the Electronic Reporting Pilot In the CY 2012 OPPS/ASC proposed rule (76 FR 42336), we proposed that eligible hospitals and CAHs participating in the proposed 2012 Electronic Reporting Pilot must submit CQM data on all 15 CQMs listed in Table 10 of the final rule (75 FR 44418CMS-1525-FC 1217 through 44420) to CMS via a secure portal and based on data obtained from the eligible hospital or CAH’s certified EHR technology. We proposed that eligible hospitals a nd CAHs participating in the proposed Electronic Reporting Pilot would: (1) s ubmit CQM data on Medicare patients only; (2) submit Medicare patient-level data fr om which CMS may calculate CQM results using a uniform calculation process, rather than aggregate results calculated by the eligible hospital or CAH’s cer tified EHR technology; (3) su bmit one full Federal fiscal year of CQM data, regardless of the eligible hospital or CAH’s year of participation in the Medicare and Medicaid EHR Incentive Programs; and (4) use electronic specifications for transmission as specifie d by CMS, which we expected would be Quality Data Reporting Architecture (QRDA) Le vel I. (We note that we used the term “Level 1” in the CY 2012 OPPS/ASC proposed rule (76 FR 42336). “Level 1” is used interchangeably with the term “Category I” to denote patient-level data. In order to be consistent with the Implementation Guide for Clinical Document Architecture Release 2, we are using the term “Category 1” instead of the term “Level I” in this final rule with comment period.) As noted previously, for the proposed 2012 Electronic Reporting Pilot, CQM data on which the eligible hospital or CAH’s s ubmission is based would be obtained from certified EHR technology. However, the func tionality of reporti ng these CQMs to CMS would not rely on the certific ation process. We proposed that eligible hospitals and CAHs participating in the proposed Electronic Reporting Pi lot would report CQMs based on a pilot measurement period of one full Fe deral fiscal year (October 1, 2011 throughCMS-1525-FC 1218 September 30, 2012), regardless of whether the eligible hospital or CAH is in its first year of participation in the Medicare a nd Medicaid EHR Incentive Programs. The period for submitting information on CQMs under th e proposed 2012 Electronic Reporting Pilot would be October 1, 2012 through November 30, 2012, which is the 60 days following the close of the measurement period. The CQ M reporting format would be as specified by CMS, which we expected would be QRDA Ca tegory I. We proposed to offer a test period beginning July 1, 2012, which would a llow eligible hospitals, CAHs, or their designee to submit CQM reports to CMS with th e requirements that would be used in the proposed 2012 Electronic Reporting Pilot.
Comment : Some commenters stat ed that if QRDA Cate gory I is going to be implemented, vendors will need time to deve lop, test, and deploy this functionality. Commenters urged CMS to provi de a Web site for vendors to test their implementation of the transmission standard and a sample set of test data to ensure that the results are consistent. Response : We will provide a test period be fore and during the submission period as well as additional education and outreach to the industry in advance to assist 2012 Electronic Reporting Pilot participants wi th transmitting electronic quality measure data. We thank the commenters for the suggestio ns for sample test data and will take that into consideration should the Pilot be extended beyond the one-year time frame.
Comment : A commenter supported the collecti on of patient-level data. Another commenter was concerned about the significant resource a nd system burden from the submission of patient-level data. Furthermor e, the structure and c ontent of the patient-CMS-1525-FC 1219 level data elements were not clear to th e commenter. The commenter urged CMS to accept the submission of aggregate-level data which can be compiled from certified EHR technology. Additionally, a commenter was con cerned that QRDA is not a sufficiently well-tested and mature standard, compared to the PQRI XML format (contained in the certified EHR technology), which the commente r believed is well-tested for submission of aggregate quality measure data. The co mmenter strongly urged CMS to strive to modify the PQRI XML format for suitability for electronic transmission of patient-level quality measure data for the 2012 Electronic Reporting Pilot. Response : We do not believe there will be additional burdens from thesubmission of patient-level data because eligible hospitals are already submitting patientlevel data to CMS under the Hospital IQR Progr am. Also, we anticip ate that the certified EHR technology vendors will work with the requ irements necessitated by the Pilot to serve the best interest of hospitals. We will st rive to ensure that hospitals participating in the Pilot are provided with th e resources needed to understand the structure and content of the patient-level data elements. On e important purpose of the 2012 Electronic Reporting Pilot is to test the QRDA Category I format for the transmission of patientlevel CQM data. Therefore, we do not in tend to modify the PQRI XML format for suitability to transmit patient-level data.
Comment : A commenter stated that the proposed 2012 Electronic Reporting Pilot seems to require a reporting period of one full year, while the reporting period for eligible hospitals and CAHs not participating in the pilot is only 90 days. The commenter requested standardizing the reporting period to 90 days for both the 2012 ElectronicCMS-1525-FC 1220 Reporting Pilot participants and non-participan ts to level the playing field, based on concerns that requiring one full year of data would delay the receipt of incentive payments for eligible hospita ls and CAHs that are in their first payment year. The commenter strongly believed that the propos ed one-year measurement period is a disincentive for provider particip ation in the pilot, as eligib le hospitals and CAHs would have to complete one whole year of data co llection before receiving their EHR incentive payment. Response : We understand the commenter’s co ncerns. However, for testing purposes, we believe the pilot measurement period should be one full year for consistency with the EHR reporting period that is required for eligible hospitals and CAHs beginning in their second payment year under the Medicare EHR Incentive Program. Eligible hospitals and CAHs should note that the 2012 Electronic Reporting Pilot is voluntary. Hospitals that begi n Stage 1 in FY 2012 would have a 90-day reporting period if they choose to repor t CQMs by attestatio n. We encourage participation in the 2012 Electronic Reporting Pi lot because we believe it is a valuable learning process as we move to electronic submission of CQMs.
Comment : Some commenters recommended that CMS should only collect numerator, denominator, and exclusionary da ta. Commenters also requested CMS to provide explanation why aggregate data submission is not piloted. Response : We still collect numerator, denom inator, and exclusion data from eligible hospitals and CAHs who choose to report CQMs by attesta tion. The reason we collect patient-level da ta in the 2012 Electronic Reporting Pi lot is to align with the dataCMS-1525-FC 1221 reported to the Hospital IQR Program, as part of our efforts to reduce burdens on the hospitals that particip ate in that program.
Comment : A few commenters assumed that CM S intends to test the use of the HL7 Standard QRDA Category I, which ha s been developed to support reporting on quality data from EHRs, and may use it for the future. Based on this assumption, some commenters requested CMS to collaborate wi th ONC to remove the PQRI 2009 Registry content exchange standards from the certificat ion requirements, as they will not be used. Response : Because this is a pilot and is meant to test alternative ways for electronic reporting to take pl ace, we do not believe it is n ecessary or appropriate to collaborate with ONC to remove the PQRI 2009 XML Registry specification as the basis of certification.
Comment : One commenter was concerned that the collection of patient-level data would not comply with the HIPAA requirements. Response : The HIPAA Privacy Rule at 45 CF R 164.512(a) permits disclosures of protected health information that are required by law, incl uding regulation. Eligible hospitals and CAHs that choose to particip ate in the 2012 Electronic Reporting Pilot would be required to su bmit patient-level data.
Comment : A commenter recommended the collect ion of all-payer data, instead of just Medicare data, in order to advan ce the utilization of all-payer database. Response : We thank the commenter for the sugg estion. The pilot is designed to collect Medicare patient data. We will analy ze the Medicare patient data we receive inCMS-1525-FC 1222 this 2012 Electronic Reporting Pilot and evalua te the feasibility of collecting all-payer data in the future.
Comment : A commenter was concerned a bout the significant resource and system burden from the submission of patient-level data using QRDA. The commenter questioned CMS’ ability to receive and analyz e the huge amount of pa tient-level data and was concerned that the huge QRDA Cate gory I files may slow down CMS’ data processing. Some commenter s recommended that CMS and other measure vendors work with HL7 to create, ballot, and test a ge neric standard (perhaps QRDA Category II) conformable to NQF’s Quality Data Mode l and the Model and the Health Quality Measure Format (HQMF) standard that would allow for computer-to-computer interoperable exchange of discrete data. Response : We thank the commenters for their valuable input. QRDA Category I will be piloted in the 2012 Electronic Reporti ng Pilot, but it may not be the eventual transmission format used for all EHR CQ M reporting. We will use the 2012 Electronic Reporting Pilot experience to evaluate the leve l of complexity, effort, and burden created by this transmission format. This analysis wi ll be considered in future program designs.
Comment : A commenter was concerned abou t the potential security risks of patient data and urged CMS to build a secu rity protection mechanism modeled after the Quality Improvement Organization (QIO) warehouse system. Some commenters recommended that CMS should require provider s to submit their patient-level data to a QIO Clinical Data Warehouse, which woul d then transmit quality data to CMS.CMS-1525-FC 1223 Response : We have security standards in pla ce to receive patient-level data in the Hospital IQR and OQR Programs. We will con tinue to utilize secure data transmission standards in all reporting programs at CMS. We also note that certified EHR technology is a requirement of participation in the pilot, and that a core object ive of meaningful use addresses security validation.
Comment : A commenter suggested that the 2012 Electronic Reporting Pilot also test electronic measures and not just tr ansmission of quality data to CMS. The commenter also encouraged CMS to solic it feedback from participants and nonparticipants of the 2012 Electronic Reporting Pilot. Response : The 2012 Electronic Reporting Pilo t will test file submission while certified EHR technology is certified for its ability to electroni cally calculate CQM specifications required by CMS. We welc ome feedback from participants and nonparticipants in the 2012 Electronic Reporting Pilot. After consideration of the public comments we receive d, we are finalizing our proposals for reporting CQM data under the 2012 Electronic Reporting Pilot. Among other requirements, eligible hospitals a nd CAHs participating in the 2012 Electronic Reporting Pilot must: (1) submit CQM data on Medicare patients only; (2) submit Medicare patient-level data from which CM S may calculate CQM results using a uniform calculation process, rather than aggregate re sults calculated by the eligible hospital or CAH’s certified EHR technology; (3) submit one full Federal fiscal year of CQM data, regardless of the eligible hospital or CAH’s year of participation in the Medicare andCMS-1525-FC 1224 Medicaid EHR Incentive Programs; and (4 ) use QRDA Category I format data transmission. K. ASC Qualit y Reporting Program 1. Background Section 109(b) of the MIEA TRHCA am ended section 1833(i) of the Act by re-designating clause (iv) as clause (v) and adding new clause (iv) to paragraph (2)(D) and by adding new paragraph (7). Section 1833(i)(2)(D)(iv) of the Act authorizes, but does not require, the Secret ary to implement the revised ASC payment system “in a manner so as to provide for a reduction in any annual update for failure to report on quality measures in accordance with paragr aph (7).” Section 1833(i)(7)(A) of the Act states that the Secretary may provide that any ASC that does not submit quality measures to the Secretary in accordance with para graph (7) will incur a 2.0 percentage point reduction to any annual increase provided under the revised ASC payment system for such year. It also specifies that a reducti on for one year cannot be taken into account in computing any annual increase f actor for a subsequent year. Section 1833(i)(7)(B) of the Act provides that, “[e]xcept as the Secretary may otherwise provide,” the hospita l outpatient quality data provisions of subparagraphs (B) through (E) of section 1833(t)(17) of the Act shall apply to ASCs in a similar manner to the manner in which they apply under these paragraphs to hospita ls under the Hospital OQR Program and any reference to a hospital, outpatient setting, or outpatient hospital services is deemed a reference to an ASC, th e setting of an ASC, or services of an ASC,CMS-1525-FC 1225 respectively. Section 1833(t)( 17)(B) of the Act requires that hospitals submit quality data in a form and manner, and at a ti me, that the Secretary specifies. Section 1833(t)(17)(C)(i) of the Act requires the Secret ary to develop measures appropriate for the measurement of the qua lity of care (including medication errors) furnished by hospitals in outpatient settings, that these measures reflect consensus among affected parties and, to the ex tent feasible and practicable, that these measures include measures set forth by one or more nationa l consensus building entities. Section 1833(t)(17)(C)(ii) of the Act allo ws the Secretary to select m easures that are the same as (or a subset of) the measures for which data are required to be submitted under the Hospital IQR Program. Section 1833(t)(17)(D) of the Act gives the Secretary the authority to replace measures or indicators as appropriate, such as where all hospitals are effectively in compliance or the measures or indicators have been subsequently shown not to represent the best clinical practice. Section 1833(t)(17)(E) of the Act requires the Secretary to establish procedures for making data submitted under the Hospital OQR Program available to the public. Such procedures in clude providing hospitals with the opportunity to review their data before these data are re leased to the public. For a more detailed discussion of the provisions in section1833(t) (17) of the Act, please see the CY 2011 OPPS/ASC final rule with comment peri od (75 FR 72064 through 72065) and this final rule with comment period. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66875), the CY 2009 OPPS/ASC final rule with co mment period (73 FR 68780), the CY 2010CMS-1525-FC 1226 OPPS/ASC final rule with comment peri od (74 FR 60656), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 72109) , we did not implement a quality data reporting program for ASCs. We determined th at it would be more appropriate to allow ASCs to acquire some experience with the revised ASC payment system, which was implemented for CY 2008, before implemen ting new requirements, such as public reporting of quality measures. However, in th ese rules, we indicated that we intend to implement the provisions of section 109(b) of the MIEA-TRHCA in the future. In preparation for proposing an ASC Quality Reporting Program, in the CY 2011 OPPS/ASC proposed rule, we solicited public comment on the following measures under consideration for ASC quality da ta reporting: (1) Patient Fall in the ASC; (2) Patient Burn; (3) Hospital Transfer/Admission; (4 ) Wrong Site, Side, Patient, Procedure, Implant; (5) Prophylactic IV Antibiotic Timing; (6) Appropriate Surgical Site Hair Removal; (7) Surgical Site Infection; (8 ) Medication Administra tion Variance (MAV); (9) Medication Reconciliation; and (10) VTE Measures: Outcome/Assessment/Prophylaxis (75 FR 46383). In addition to preparing to propose imple mentation of an ASC Quality Reporting Program, HHS developed a plan to implemen t a value-based purchasing (VBP) program for payments under the Medicare program under title XVIII of the Act for ASCs as required by section 3006(f) of the Affordable Care Act, as added by section 10301(a) of the Affordable Care Act. We also submitte d a Report to Congress, as required by section 3006(f)(4) of the Affordable Care Act, enti tled “Medicare Ambulatory Surgical Center Value-Based Purchasing Implementation Plan” th at contains this plan. This report isCMS-1525-FC 1227 found on our Web site at: http://www.cms.gov/ASCPaymen t/downloads/C_ASC_RTC%202011.pdf . Currently, we do not have express statutory authority to implement an ASC VBP program. Should there be legislation to authorize CMS to implement an ASC VBP program, we will develop the program and propose it through rulemaking. In the CY 2012 OPPS/ASC proposed rule (76 FR 42336 through 42349), we proposed to implement the ASC Quality Reporting Program beginning with the CY 2014 payment determination, with data collec tion beginning in CY 2012 for most of the measures to be used for the CY 2014 payment determination.
Comment : One commenter stated that it was unclear if there are any payment penalties for not participating in ASC quality da ta reporting and that if there are payment penalties, how would they be calculated. Se veral commenters stated their belief that the payment penalty for non-reporting or not meet ing reporting requirements be lowered for at least the initial payment penalty year, recommending a 0.4 percen tage point reduction for CY 2014, rather than a 2 percentage poi nt reduction. Some of these commenters noted that a 0.4 percentage poi nt reduction is consistent with the Hospital IQR Program. Response : The payment reduction for not participating in ASC quality reporting is set by statute. Section 1833( i)(7)(A) of the Act states th at the Secretar y may provide that any ASC that does not submit quality meas ures to the Secretary as specified will incur a 2.0 percentage point reduction to a ny annual increase provi ded under the revised ASC payment system for such year. We intend to propose in the CY 2013 OPPS/ASC proposed rule the method for how these paymen t penalties will be calculated. We noteCMS-1525-FC 1228 that although the payment re duction under the Hospital IQR Program was initially a 0.4 percentage point reduction to the applicable percentage increase, the payment reduction has, since FY 2007, been 2.0 percentage point s. (Beginning with FY 2015, the payment reduction will be one-quarter of the applicab le percentage increase (determined without regard to sections 1886(b)(3)(B)(ix) , (xi), or (xii) of the Act).)
Comment : Many commenters appreciated CM S’ plan to implement an ASC Quality Reporting Program but strongly urged CMS to delay the start of required data submission from the proposed January 1, 2012 to October 1, 2012 at the earliest, in order for ASCs to have sufficient time to prepare and adapt to the new reporting procedures. A few commenters noted that a new quality repo rting program warrants at least 6 months of advance notice to providers, who would have to make substantive changes to data elements and operation systems. Commenter s cited the example of ASCs’ inexperience in reporting data using Qual ity Data Codes (QDCs) as well as reporting to NHSN as efforts that would require tremendous tim e, training and resources to initiate. Many commenters believed it would be prudent for CMS to allow ASCs to submit quality data initially on a trial basis for a time period from January 1, 2012 through September 30, 2012. Commenters asserted that ASCs need this trial period to test their systems and resolve any problems that may arise. Response : We thank the commenters for their support for the ASC Quality Reporting Program. We strongly believe this program is an important milestone in the alignment of quality of care across HOPDs and ASC settings. We acknowledge the new challenges faced by ASCs in preparation for this quality reporting program. Based onCMS-1525-FC 1229 public comments, we will delay required data submission until October 1, 2012 for the CY 2014 payment determination. More information regarding measure submission timeframes and other program requirements can be found in the “Form, Manner and Timing” section of this final rule with comment period. After consideration of th e public comments we received, we are finalizing the ASC Quality Reporting Program, with data collection to begin on October 1, 2012. 2. ASC Quality Reporting Program Measure Selection a. Timetable for Selecting ASC Quality Measures In the CY 2012 OPPS/ASC proposed rule (76 FR 42337), we proposed to adopt measures for three CY payment determinations for the ASC Quality Reporting Program in this rulemaking. We proposed to adopt measures for the CYs 2014, 2015, and 2016 payment determinations. We stated, to the ex tent that we finalize some or all of the measures for future payment determinations , we would not be pr ecluded from adopting additional measures or changing the list of measures for future payment determinations through annual rulemaking cycles so that we may address changing program needs arising from new legislation or from changes in HHS and CMS priorities. Under this approach, in the CY 2013 or CY 2014 rulemaki ng cycle, we could propose any additions or revisions to the measures we adopted in the CY 2012 rulemaking cycle for the CY 2014 payment determination or for future payment determinations. This is consistent with our approach to proposing measures fo r multiple payment determinations for the Hospital IQR and Hospital OQR Programs. We believe this proposed process will assist ASCs in planning, meeting future reporti ng requirements, and implementing qualityCMS-1525-FC 1230 improvement efforts. We also would have more time to develop, align, and implement the infrastructure necessary to collect data on the measures and make payment determinations. This flexibility would enable us to adapt the program to support changes in HHS and CMS priorities a nd any new legislative requireme nts. In the proposed rule, we invited public comments on this proposal.
Comment : A few commenters supported the multi-year approach which is perceived as great opportunities for AS Cs to gain understanding of measure specifications, data collection and data s ubmission methodologies while CMS develops needed infrastructure to collect quality data on ASCs. Response : We thank the commenters for th e support of the multi-year proposals for ASC quality measures. After consideration of th e public comments we receive d, we are finalizing our proposal to adopt quality measures fo r the CY 2014, CY 2015, and CY 2016 payment determinations. We discuss the quality measures that we are finalizing for these CYs below. b. Considerations in the Selection of Measures for the ASC Quality Reporting Program Section 1833(i)(7)(B) of the Act states th at section 1833(t)(17)(C ) of the Act shall apply with respect to ASC services in a sim ilar manner in which they apply to hospitals for the Hospital OQR Program, except as the Secretary may otherwise provide. The requirements at section 1833(t)(17)(C)(i) of th e Act state that measures developed shall “be appropriate for the measurement of the quality of care (including medication errors) furnished by hospitals in outpatient settings and that reflect consensus among affectedCMS-1525-FC 1231 parties and, to the extent feas ible and practicable, shall include measures set forth by one or more national consen sus building entities.” In selecting proposed measures for the ASC Quality Reporting Program and other quality reporting programs, we have focused on measures that have a high impact on and support HHS and CMS priorities for improve d health care outcomes, quality, safety, efficiency and satisfaction for patients. Our goal for the future is to expand any measure set adopted for ASC quality reporting to address these priorities more fully and to align ASC quality measure requirements with those of other reporting programs as appropriate, including the Hospital OQR Program, the Hospital IQR Program, the PQRS, and reporting requirements implemented under th e HITECH Act so that the burden for reporting will be reduced. In general, we pr efer to adopt measures that have been endorsed by the NQF because it is a national multi-stakeholder organization with a welldocumented and rigorous approach to consensu s development. However, as we have noted in previous rulemaking for the Hospital OQR Program (75 FR 72065), the requirement that measures reflect consensus among affected parties can be achieved in other ways, including through the measur e development process, through broad acceptance and use of the measure(s), and through public comment. In developing this and other quality re porting programs, as well as the Hospital VBP Program, we applied the following prin ciples for the development and use of measures. In the proposed rule, we invite d public comment on thes e principles in the ASC quality reporting context.CMS-1525-FC 1232

● Pay-for-reporting, public reporting, and value-based purchasing programs should rely on a mix of standa rds, process, outcomes, and patient experience of care measures, including measures of care transitions and changes in patient functional status. Across all programs, we seek to move as qui ckly as possible to the use of primarily outcome and patient experience measures. To the extent practicable and appropriate, outcome and patient experience measures should be adjusted for risk or other appropriate patient population or provider/supplier characteristics.

● To the extent possible and recognizing differences in payment system maturity and statutory authorities, meas ures should be aligned acro ss public reporting and payment systems under Medicare and Medicaid. The meas ure sets should evolve so that they include a focused core set of measures a ppropriate to the spec ific provider/supplier category that reflects the level of care a nd the most important areas of service and measures for that provider/supplier.

● The collection of information s hould minimize the burden on providers/ suppliers to the extent possible. To this end, we will continuously seek to align our measures with the adoption of meaningful use standards for HIT, so that data can be submitted and calculated via certifie d EHR technology with minimal burden.

● To the extent practicable and feasible , and within the scope of our statutory authorities for various quality reporting a nd value-based purchasi ng programs, measures used by CMS should be endorsed by a natio nal, multi-stakeholder organization. Measures should be aligned with best practic es among other payers and the needs of the end users of the measures.CMS-1525-FC 1233 We believe that ASC facilities are similar, insofar as the delivery of surgical and related nonsurgical services, to HOPDs. Sim ilar standards and guide lines can be applied between hospital outpatient de partments and ASCs with re spect to surgical care improvement, given that many of the same su rgical procedures are provided in both settings. Measure harmonization assures that comparable care in different settings can be evaluated in similar ways, which further assu res that quality measurement can focus more on the needs of a patient with a particular cond ition rather than on th e specific program or policy attributes of the setting in which the ca re is provided. In general, our goal is to adopt harmonized measures that assess the quality of care given across settings and providers/suppliers and to us e the same measure specificatio ns based on clinical evidence and guidelines for the care being assessed rega rdless of provider/supplie r type or setting. This harmonization goal is also supporte d by a commenter to the CY 2011 OPPS/ASC proposed rule, who recommended CMS align AS C quality measures with State and other Federal requirements (75 FR 72109). Our CY 2014 measure proposals for ASCs align closely with those discussed in the Report to Congress entitled “Medicare Am bulatory Surgical Center Value-Based Purchasing Implementation Plan” and with thos e proposed for future consideration in the CY 2011 OPPS/ASC proposed rule (75 FR 46383). Furthermore, the measures that we proposed for ASCs fall into the parameter of our stated framework for the ASC Quality Reporting Program, discussed above. The initia l measure set that we proposed for the CY 2014 payment determination addresses ou tcome measures and infection control process measures. Six of the eight initial measures that we proposed for the CY 2014CMS-1525-FC 1234 payment determination are recommended by the ASC Quality Collaborative (ASC QC) and are NQF-endorsed. The seventh measure that we proposed is appropriate for measuring ambulatory surgical care, is NQF-e ndorsed, is currently in use in the PQRS, and is similar to a measure that is being us ed in the Hospital OQR Program, and therefore aligns across settings in wh ich outpatient surgery is perf ormed. We proposed collecting these seven measures via “quality data codes” to be placed on Part B claims submitted by ASCs for Medicare fee-for-service patie nts beginning January 1, 2012. The eighth measure we proposed for the CY 2014 payment determination is an outcome measure of surgical site infection to be submitted in 2013 via the CDC’s NHSN. Similarly, hospital inpatient departments will begin reporting th is measure to the CDC under the Hospital IQR Program in 2012, and we also proposed th at hospital outpatient departments begin reporting this measure to the CDC under th e Hospital OQR Program in 2013. Thus, this measure would be aligned across quality reporting programs for facilities performing
surgery. Comment : Several commenters supporte d all the proposed NQF-endorsed measures for ASCs and also believed that all ASC quality reporting measures should be NQF-endorsed, regardless of the meas ures’ endorsement by other national multi-stakeholder organizations. Some comme nters noted that ASC measures should focus on facility-level data and not physician-level data. Response : Under section 1833(i)(7)( B) and (t)(17)(C)(i) of the Act, except as the Secretary may otherwise provide, the Secret ary must develop measures that reflect consensus among affected parties and, to the ex tent feasible and practicable, must includeCMS-1525-FC 1235 measures set forth by a national consensus build ing entity. Whenever possible, we strive to adopt NQF-endorsed measures because thes e measures will meet these requirements, as discussed above. However, we believe th at the requirement that measures reflect consensus among affected parties can be ach ieved in other ways, including through the measure development process, through broa d acceptance and use of the measure, and through public comments. Further, 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 th e Act does not require that ea ch measure we adopt for the ASC Quality Reporting Program be endorsed by a national consensus building entity, or by the NQF specifically. Further, secti on 1833(i)(7)(B) of the Act states that section 1833(t)(17) of the Act, which contai ns this requirement, applies to the ASC Quality Reporting Program, except as the Secretary may otherwise provide. Under this provision, the Secretary has fu rther authority to adopt me asures that do not reflect consensus among affected parties and are not endorsed by a nationa l consensus building entity. We wish to clarify that these m easures would be submitted by facilities, not physicians, and that the data for the measures will be displayed at the facility level.
Comment : A commenter stated that several di stinct factors should be considered in the selection of measures for ASCs: (1) th e diversity in the case mix across ASCs (that is, a single subspecialty ASC (for example, endoscopy centers) versus a “multi-specialty” ASC may require exemptions based on cas e mix or low volume); (2) Hospital OQR Program measure specifications may not be relevant for all ASCs; (3) the reportingCMS-1525-FC 1236 burden for most ASCs which are classified as small business; and (4) the use of EHRs in ASCs is not widespread. Response : We have considered these factor s in selecting measures for the ASC Quality Reporting Program. In general, we have sought to select measures that are broadly applicable to ASCs, given the dive rsity in case mix and ASC specialty. The majority of the measures selected for CY 2014, CY 2015 and CY 2016 for this program are applicable regardless of th e types of procedures performed at a particular facility. We will consider the usefulness of specialty-specific measures as well as exemptions based on case mix or low volume for ASCs as we ga in experience with the measures we are adopting and as we develop future measures. We also sought to align the ASC measures with measures selected for other settings/p roviders that perform surgeries, such as HOPDs. However, we acknowledge that not all procedures th at are performed in HOPDs are performed in ASCs, and hence that so me Hospital OQR measures may not be as relevant for ASCs or may need to be tailored to the types of pro cedures approved to be performed in ASCs. We also understand that most ASCs are small businesses for which data collection burden or EHR adoption may pos e challenges. Therefore, in order to reduce burden, we proposed and are finalizing only claims-based measures for the first year of the program and adding only structur al measures in the second year of the
program. Comment : A few commenters were disappointed that no patient experience of care measures were proposed for ASCs. The commenters encouraged CMS to facilitate voluntary patient experience of care measures for ASCs.CMS-1525-FC 1237 Response : We are considering a patient experience of care survey for the ASC Quality Reporting Program, and will also cons ider the operational feasibility of allowing voluntary reporting of such a measure in the future. 3. ASC Quality Measures for the CY 2014 Payment Determination a. Claims-Based Measures Requiring Submission of Quality Data Codes (QDCs) beginning January 1, 2012 In the CY 2012 OPPS/ASC proposed rule (76 FR 42338 through 42342), we proposed to adopt seven NQF -endorsed claims-based measures, six of which were developed by the ASC QC. The ASC QC is a cooperative effort of organizations and companies formed in 2006 with a common interest in ensuring that ASC quality data is measured and reported in a meaningful way. Stakeholders in the ASC QC include ASC corporations, ASC associations, professional societies and accrediti ng bodies that focus on ASC quality and safety. The ASC QC in itiated a process of standardizing ASC quality measure development through evalua tion of existing nati onally endorsed quality measures to determine which could be directly applied to the outpatient surgery facility setting. The ASC QC in its ASC Quality Measure Implementation Guide version 1.4 states that “it focused on outcomes and proce sses that ASC facilities could influence or impact, outcomes that ASC facilities would be aware of given their limited contact with the patient, and outcomes that would be understandable and important to key stakeholders in ASC care, includi ng patients, providers and payers.” The ASC QC developed and pilot-tested fi ve facility-level measures (Patient Burn; Patient Fall in th e ASC; Wrong Site, Wrong Side, Wrong Patient, WrongCMS-1525-FC 1238 Procedure, Wrong Implant; Hospital Transf er/Admission, and Prophyl actic IV Antibiotic Timing) for feasibility and usability. On November 15, 2007, these five measures were endorsed by the NQF. On September 25, 2008, a sixth ASC QC-developed facility-level measure, “Appropriate Surgical Site Hair Removal” was NQF-endorsed as “Ambulatory Surgery Patients with Appropriate Method of Hair Removal.” Of the six ASC QC measures, the Prophylactic IV Antibiotic Ti ming and Ambulatory Surgery Patients with Appropriate Method of Hair Removal measures are infection control process measures, and the rest are outcome measures. All si x of these measures were listed as under consideration in the CY 2011 OPPS/ASC pr oposed rule (75 FR 46383). We proposed these six measures for use in the CY 2014 payment determination. The seventh claims-based measure we proposed for the CY 2014 payment determination is Selection of Prophylactic Antibiotic: First OR Second Generation Cephalosporin. This measure was developed by the AMA’s Physician Consortium for Performance Improvement, a national, divers e, physician-led group that identifies, develops, and promotes implementation of ev idence-based clinical performance measures that reflect best practices. This measure is NQF-endorsed. It is an infection control process measure and is currently adopted in the Hospital IQR Program and the PQRS. We proposed to collect all seven measures using the claims-based quality data codes (QDCs) data collection mechanism. We proposed to require ASCs to report on ASC claims a quality data code (QDC) to be used for reporting quality data. We proposed that an ASC would need to a dd a QDC to any claim involving a proposed claims-based quality measure. We stated th at CMS is in the process of developing QDCsCMS-1525-FC 1239 for each proposed claims-based quality m easure and the QDC would be a CPT Category II code or a HCPCS Level II G-code if an a ppropriate CPT code is not available. We stated that more information on the QDCs that would be associated with the proposed quality measures will be provided in this CY 2012 OPPS/ASC final rule with comment period. Additionally, we proposed to create a new ASC payment indicator “M5” (Quality measurement code used for reporting purposes only; no payment made) for assignment to the QDC to clarify that no payment is associated with the QDC for that claim. We stated that, if one or more of these measures are finalized as proposed, an ASC would need to begin submitting these QDCs on any Medicare Part B claims pertaining to the measures on January 1, 2012. For the first six measures listed, the AS C QC measures specifications can be found at http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd f. 37 For the seventh measure, the specificati ons can be found on the PQRS Web site at: http://www.cms.gov/pqrs/downloads/2011_Phys QualRptg_MeasuresGroups_Specificatio nsManual_033111.pdf?agree=yes&next=Accept

. Comment : Commenters generally supported mo st of the proposed measures for CY 2014 and requested harmonization of the measures with the Hospital OQR Program as appropriate, so that comparative quality da ta is available to c onsumers. A commenter requested that CMS provide measure benchmar ks for ASCs to assess how they stack up against their peers.

37 ASC Quality Measures: Implementation Guide Versio n 1.4, ASC Quality Collaboration, December 2010.CMS-1525-FC 1240 Response : We thank the commenters for the support of our inte nt to align and harmonize measures across Hospital OQR a nd ASC Quality Reporting Programs to keep consumers better informed when making out patient care decisions. When publicly displaying measures, we provide State and national averages whenever possible for comparative purposes. For the Hospital IQR Program, we provide benchmarks using the Achievable Benchmarks of Care methodology at: http://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228768205297 . We also provide such benchmarks for the Hospital OQR measures at: http://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228768205213 . However, such information is provided for informational purposes and quality improveme nt purposes and should not be interpreted as performance standards.
Comment : Several commenters believed that the number of measures proposed for ASCs is excessive and recommended that CMS adopt three patient safety measures initially to allow ASCs more time to gain experience with quality reporting. Response : We are mindful of the poten tial burden on ASCs when we contemplated measures for ASCs. We de termined that the initial adoption of claims-based measures would ease the data collection burden on ASCs while providing sufficient time for ASCs to gain experience w ith quality reporting. To that end, instead of proposing chart-abstracted measures, we proposed seven claims-based measures and 1 NHSN-based reporting measure for the first y ear of ASC Quality Reporting Program.CMS-1525-FC 1241 As discussed below, in this final rule with comment period, we are finalizing only five of the seven claims-based measures we proposed for CY 2014 payment determination. In addition, we are delaying the data collecti on until October 1, 2012 for the claims-based measures for the CY 2014 payment determination.
Comment : Several commenters supported the submission of QDCs on administrative claims which they believed ar e less burdensome, given that ASCs already submit a CMS-1500 form for each Medicare bene ficiary served. A few commenters were concerned about the poten tial burden caused by the us e CPT II codes -QDCs and questioned why CMS cannot adopt the same data collection code process used in Hospital OQR Program claims-based measures. Some commenters were very concerned that proposed method of collection via QDCs has not been tested for the ASC setting. One commenter believed that the PQRS experienced problems using QDCs. Response : We agree with the commenters that stated that QDCs are a low-burden method of collecting quality data. The inform ation needed for the current claims-based measures used in the Hospital OQR Program can be captured using solely ICD-9 codes and CPT-I codes placed on claims submitted to CMS. This is not the case for the ASC quality measures, because the type of information needed to assess whether numerator events occurred for these measures (and for some of the measures, events that help define the denominator) are not captured in these two coding systems. This type of information can be captured using the CPT-II and G-codes that would be placed on claims in addition to the ICD-9 codes and CPT-I codes used to capture diagnoses and procedure codes.CMS-1525-FC 1242 The other method that could have been used to collect information for these measures is submission of retrospectively chart-abstracted data elements to CMS separately from claims. However, we determin ed that this method of data collection for these measures may be more burdensome for ASCs than submitting CPT-II codes and G-codes on the claims for these measures in addition to the ICD-9 and CPT-I codes that they submit to CMS for payment purposes . In order to submit quality data using CPT-II and HCPCS codes, ASCs would need to add the appropriate QDCs for measure numerators and denominators on Medicare Pa rt B claim forms. Based on the public comments we received, we are deferring the st art date of required submissions of QDCs for the ASC Quality Reporting Program to October 1, 2012. The QDCs are a means of data collection fo r quality measures th at is already in use in PQRS. PQRS has received quality measure information via QDCs reported via claims since the program’s inception in 2007. From 2007 through 2008, there were instances where QDCs were reported incorrectly and therefore deemed invalid due to a number of reasons. These reasons include d: diagnosis mismatch; gender mismatch; reporting the QDC on a denominator code not contained within the measure; and reporting an invalid modifier (PQRS uses 1P , 2P, 3P and 8P modifiers to represent performance exclusions and performance not met instances). However, in recent reporting years, we have seen the QDC errors decrease to a very low percentage (less than 1 percent errors are QDC-related) attrib uted to providers’ progressive experience with QDCs, our education and outreach efforts, as well as our streamlining of diagnosis-CMS-1525-FC 1243 specific QDCs. Therefore, we believe that over time, ASCs will have the same success as PQRS with QDC-based measures.
Comment : For future options for data submission, a commenter suggested using ASC-specific registry which is under c onsideration for development by registry developers. Response : We thank the commenter for the su ggestion. In our search for future quality measures for ASCs, we will consider ASC-specific registry-based measures. The seven proposed claims-based measures are discussed in more detail below: (1) Patient Burns (NQF #0263) The ASC Quality Measures: Implementati on Guide Version 1.4 states that every patient receiving care in an ASC setting has th e potential to experi ence a burn during an episode of care, given the multitude of factors that could pose risks for patient burns in the surgical and procedural settings. The Guide cited a recent publication from the ECRI Institute that relates an incr eased risk of burns associated with newer electrosurgical devices due to their application of higher electrical current for l onger time intervals. Other common sources of burns in a surgic al setting include chemical and thermal sources, and radiation, scalds, and fires. Clin ical practice guidelines for reducing the risk of burns have been established by the Ameri can Society of Anesthesiologists (ASA) and Association of Operating Room Nurses (AORN). This NQF-endorsed measure assesses the percentage of ASC admissions experiencing a burn prior to discharge. The specifications for this NQF-endorsed measure developed by the ASC QC can be found at:CMS-1525-FC 1244 http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd
f

. The ASC QC in their ASC Quality Meas ure Implementation Guide version 1.4 defines a “burn” for purposes of this measure as “[ u]nintended tissue injury caused by any of the six recognized mechanisms: scalds, contact, fi re, chemical, electrica l or radiation (for example, warming devices, prep solutions, and electrosurgical unit or laser).” We believe that this measure would allow stakeholders to develop a better understanding of the incidence of these events and furthe r refine means to ensure prevention. Read together, section 1833( i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more national consensus building entities. We believe that this measure is appropriate to measure quality in ASCs since they serve surgical pa tients who may face the risk of burns during ambulatory surgical procedures. Furthermore, we believe that this measure meets the consensus requirement and the requirement th at it be set forth by a national consensus building entity because it was developed by the ASC QC and is endorsed by the NQF. In the proposed rule, we invited public comment on our proposal to adopt this measure for the CY 2014 payment determina tion using the claims-based QDC data collection mechanism for ASC services furnished for Medicare patients from January 1, 2012 through December 31, 2012 ( 76 FR 42339). While the NQF-endorsed specification for this measure includes all ASC admissions, our proposal to useCMS-1525-FC 1245 information submitted on claims to calculate th ese measures requires that we restrict the measure population to the population for which CMS receives claims. Therefore, for this program, we would need to calculate the measures based on claims submitted for ASC services furnished to Medicare fee-for-service beneficiaries. NQF has indicated to us that our proposal to use Medicare Part B claims submitted by ASCs to calculate the measure consistently with the measure specification is an appropriate application of the NQFendorsed measure to a subset of patients w ho are part of the broader population to which the measure applies. As stated in the CY 2012 OPPS/ASC proposed rule, if this measure is finalized, ASCs would need to place QDCs relevant to this measure on Medicare Part B claims beginning January 1, 2012 in order to report this measure for purposes of the CY 2014 payment determination.
Comment : Several commenters supported the proposed measure, but noted that this measure does not apply to GI ASCs si nce the risk of burn in conjunction with endoscopic procedures is rare and minor. Response : We thank the commenters for the support of the measure. The denominator for the NQF-endorsed measure is all ASC admissions. NQF has indicated to us that our proposal to use Medicare Part B claims submitted by ASCs to calculate the measure consistently with the measure specifi cation is an appropriate application of the NQF-endorsed measure. Therefore, the measur e is applicable to all Medicare Part B ASC admissions It addresse s “[u]nintended tissue injury caused by any of the six recognized mechanisms: scalds, contact, fire, chemical, electrical or radiation (for example, warming devices, prep solutions, a nd electrosurgical unit or laser).” AlthoughCMS-1525-FC 1246 patient burns may be rare in GI ASCs, we be lieve that inclusion of the measure in the ASC Quality Reporting Program will help ensure that such burns never happen. We refer commenters to the specifications for this measure for more information. After consideration of th e public comments we received, we are finalizing this measure for the CY 2014 payment determina tion with data collection to begin on October 1, 2012 (as discussed in section XI V.K.1. of this final rule with comment period). (2) Patient Fall (NQF #0266) Falls, particularly in the elderly, can cause injury and loss of functional status, and falls in healthcare settings can be prevente d through assessment of risk, care planning, and patient monitoring. Health care settings are being calle d upon to report patient falls and to take steps to reduce the risk of falls . The ASC QC indicates in their ASC quality measure implementation guide the use of anxiol ytics, sedatives, and anesthetic agents may put patients undergoing outpatient surgery at increased risk for falls. Guidelines and best practices for the prevention of falls, and management of patients after falls have been made available by the Agency for Healthcare Research and Quality ( http://www.ahrq.gov/qual/transform.htm ), and the National Center for Patient Safety ( http://www.patientsafety.gov ). This NQF-endorsed measure assesses the percentage of ASC admissions experiencing a fall in the ASC. The sp ecifications for this NQF-endorsed measure developed by the ASC QC can be found at:CMS-1525-FC 1247 http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd
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. The ASC QC in its ASC Quality Measure Implementation Guide version 1.4 defines a “fall” as “a sudden, uncontrolled, un intentional, downward displacement of the body to the ground or other object, excluding fa lls resulting from violent blows or other purposeful actions”, which is consistent w ith the definition set forth by the National Center for Patient Safety. Read together, section 1833( i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more national consensus building entities. We believe that this measure is appropriate to measure quality in ASCs because it was specifically de veloped to measure quality of surgical care furnished by ASCs, as measured by patient fa lls. Furthermore, we believe that this measure meets the consensus requirement and the requirement that it be set forth by a national consensus building en tity because it was developed by the ASC QC and is NQF-endorsed. In the proposed rule, we invited public comment on our proposal to adopt this measure for the CY 2014 payment determina tion using the claims-based QDC data collection mechanism for ASC services fu rnished for Medicare fee-for-service beneficiaries from January 1, 2012 through December 31, 2012 (76 FR 42339). WhileCMS-1525-FC 1248 the NQF-endorsed specification for this m easure includes all ASC admissions, our proposal to use information submitted on claims to calculate the measures requires that we restrict the measure population to the population for which CMS receives claims. Therefore, for this program, we would need to calculate the measures based on claims submitted for ASC services furnished to Medicare fee-for-service beneficiaries. NQF has indicated to us that our proposal to use Me dicare Part B claims submitted by ASCs to calculate the measure consistently with th e measure specificati on is an appropriate application of the NQF-endorsed measure to a subset of patients who are part of the broader population to which the measure appl ies. As stated in the CY 2012 OPPS/ASC proposed rule, if this measure is finalized, ASCs would need to place QDCs relevant to this measure on Medicare Part B claims begi nning January 1, 2012 in or der to report this measure for purposes of the CY 2014 payment determination.
Comment : All the commenters who commented on this measure supported the proposed measure but were concerned about the proposed data collection starting on January 1, 2012. Response : We thank the commenters for the su pport of the measure. As stated in XIV.K.1. of this final rule with comment period, we are delaying the beginning of the data collection until October 1, 2012. After consideration of the public comments we received, we are finalizing this measure for the CY 2014 payment determina tion with data collection to begin on October 1, 2012.CMS-1525-FC 1249 (3) Wrong Site, Wrong Side, Wrong Pa tient, Wrong Procedure, Wrong Implant (NQF #0267) Surgeries and procedures performed on th e wrong site/side, and wrong patient can result in significant impact on patients, in cluding complications, se rious disability or death. While the prevalence of such serious errors may be rare, such events are considered serious reportable events, and ar e included in the NQF’s Serious Reportable Events in Healthcare 2006 Update. 38 The Joint Commission has issued a Universal Protocol to prevent such serious surgical errors. 39 The proposed NQF-endorsed measure assesses the percentage of ASC admissions experiencing a wrong site, wrong side, wrong patient, wrong procedure, or wrong implant. The ASC QC in its ASC Quality Measures: Implementation Guide Version 1.4 defines “wrong” as “not in accordance with intended site, side, patient, procedure or implant.” The specifications for this NQF-endorsed measure developed by the ASC QC can be found at: http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd f. Read together, section 1833( i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the

38 http://www.qualityforum.org/Publications/2007/03/S erious_Reportable_Events_in_Healthcare%E2%80%9 32006_Update.aspx 39 Joint Commission. Universal Protocol for Preventing Wrong Site, Wrong Procedure, Wrong Person Surgery. Available at http://www.jointcommission. org/standards_informati on/up.aspx. Last accessed December 14 , 2010.CMS-1525-FC 1250 extent feasible and practicable, that include measures set forth by one or more national consensus building entities. We believe that this measure is appropriate to measure quality in ASCs because the measure assesses the quality of surgical care provided in ASCs as measured by the percenta ge of surgical errors. Furthermore, we believe that this measure meets the consensus requirement and the requirement that it be set forth by a national consensus building en tity because it was developed by the ASC QC and is endorsed by the NQF. In the proposed rule we i nvited public comment on our proposal to adopt this measure for the CY 2014 payment determina tion using the claims-based QDC data collection mechanism for ASC services furnished for Medicare patients from January 1, 2012 through December 31, 2012 ( 76 FR 42340). While the NQF-endorsed specification for this measure includes all ASC admissions, our proposal to use information submitted on claims to calculate th ese measures requires that we restrict the measure population to the population for which CMS receives claims. Therefore, for this program, we would need to calculate the measures based on claims submitted for ASC services furnished to Medicare fee-for-service beneficiaries. NQF has indicated to us that our proposal to use Medicare Part B claims submitted by ASCs to calculate the measure consistently with the measure specificati on is an appropriate application of the NQF-endorsed measure to a subset of patients who are part of the broader population to which the measure applies. As stated in the CY 2012 OPPS/ASC proposed rule, if this measure is finalized, ASCs would need to place QDCs relevant to this measure onCMS-1525-FC 1251 Medicare Part B claims begi nning January 1, 2012 in order to report this measure for purposes of the CY 2014 payment determination.
Comment : All of the commenters who comment ed on this measure supported the proposed measure. However, some comment ers indicated that this measure may not apply to GI ASCs since the risk of pe rforming wrong site, wrong side, wrong patient, wrong procedure, and wrong implant in ASC endos copic procedures is rare (for example, confusion over an upper GI endoscopy and co lonoscopy, or a single procedure in one encounter versus both an upper endoscopy and colonoscopy in the same encounter). Also, commenters were concerned about the proposed data collection starting on January 1, 2012. Response : We thank the commenters for the support of the measure. As discussed above, this measure is applicable to all Medicare Part B ASC admissions. Although this type of mishap may be rare, we believe that inclusion of the measure in the ASC Quality Reporting Program will help ensure they will never happen. Note that, as stated in section XIV.K.1. of this final ru le with comment peri od, we are delaying the beginning of the data collection until October 1, 2012. After consideration of th e public comments we receive d, we are finalizing this measure for the CY 2014 payment determina tion with data collection to being on October 1, 2012. (4) Hospital Transfer/Admission (NQF #0265) The transfer or admission of a surgical patient from an outpatient setting to an acute care setting can be an indication of a complication, serious medical error, or otherCMS-1525-FC 1252 unplanned negative patient outcome. While acute intervention may be necessary in these circumstances, a high rate of such incidents may indicate suboptimal practices or patient selection criteria. The proposed NQF-endor sed measure assesses the rate of ASC admissions requiring a hospital transfer or hospital admission upon discharge from the ASC. The ASC QC defines “hospital transf er/admission” as “any transfer/admission from an ASC directly to an acute care hos pital, including hospital emergency room.” The specifications for this NQF-endor sed measure developed by the ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd
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. The ASC QC believes that this “measure would allow ASCs to assess their guidelines for procedures performed in the facility and patient selection if tr ansfers/admissions are determined to be at a level higher than exp ected. If commonalities are found in patients who are transferred or admitted, guidelines may require revision.” Read together, section 1833( i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more national consensus building entities. We believe this measure is appropriate to measure quality in ASCs because it assesses outpatient surgical care quality in the form of the rate of surgical outpatients needing acute care interven tions. Furthermore, we believe that this measure meets the consensus requirement and the requirement that it be set forth by aCMS-1525-FC 1253 national consensus building en tity because it was developed by the ASC QC and is endorsed by the NQF. In the proposed rule we i nvited public comment on our proposal to adopt this measure for the CY 2014 payment determina tion using the claims-based QDC data collection mechanism for ASC services furnished for Medicare patients from January 1, 2012 through December 31, 2012 ( 76 FR 42340). While the NQF-endorsed specification for this measure includes all ASC admissions, our proposal to use information submitted on claims to calculate th ese measures requires that we restrict the measure population to the population for which CMS receives claims. Therefore, for this program, we would need to calculate the measures based on claims submitted for ASC services furnished to Medicare fee-for-service beneficiaries. NQF has indicated to us that our proposal to use Medicare Part B claims submitted by ASCs to calculate the measure consistently with the measure specification is an appropriate application of the NQFendorsed measure to a subset of patients w ho are part of the broader population to which the measure applies. As stated in the CY 2012 OPPS/ASC proposed rule, if the measure is finalized, ASCs would need to place QDCs relevant to this measure on Medicare Part B claims beginning January 1, 2012 in order to report this measure for purposes of the CY 2014 payment determination.
Comment : All of the commenters who comment ed on this measure supported the proposed measure. However, one commenter noted that the measure should be expanded to include patients who return home after ASC procedure, but are then admitted to aCMS-1525-FC 1254 hospital shortly after for a procedure-related issue. The commenter urged CMS to create methods to track the adverse outcomes of these patients. Response : We thank the commenters for th eir support. We also thank the commenter for the suggestion, and will consider it in future measure development and refinement. After consideration of th e public comments we received, we are finalizing this measure for the CY 2014 payment determina tion with data collection to begin on October 1, 2012 (as discussed in section XI V.K.1. of this final rule with comment period). (5) Prophylactic Intravenous (IV ) Antibiotic Timing (NQF #0264) Timely preoperative administration of in travenous antibiotics to surgical patients is an effective practice in reducing the risk of developing a surgical site infection, which in turn is associated with reduced health care burden and cost, and better patient

outcomes. 40 41 42 The measurement of timely antibiotic administration for surgical patients is occurring in the Hospital IQ R Program, Hospital OQR Program and the PQRS. The NQF-endorsed ASC QC measure assesses the rate of ASC patients who received IV antibiotics ordered for surgical site infection prop hylaxis on time. The specifications for this NQF-endorsed measur e developed by the ASC QC measure can be found at:

40 Classen, D. et al.: The timing of prophylactic administration of antibiotics and the risk of surgical wound infection. NEJM. 1992;326(5):281-286. 41 Silver, A. et al.: Timeliness and use of antibiotic pr ophylaxis in selected inpatient surgical procedures. The Antibiotic Prophylaxis Study Group. Am J Surg. 1996;171(6):548-552. 42 Dounis, E., Tsourvakas, S., Kalivas, L., and Giam acellou, H.: Effect of time interval on tissue concentrations of cephalosporins after tourniquet infl ation. Highest levels achieved by administration 20 minutes before inflation. Acta Orthop Scand. 1995;66(2):158-60.CMS-1525-FC 1255 http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd
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. The ASC QC measure implementation guide defines “antibiotic administered on time” as “[a]ntibiotic infusion ... initiated within one hour prio r to the time of the initial surgical incision or the beginning of the procedure (e.g., introduction of endoscope, insertion of needle, inflati on of tourniquet) or two hours prior if vancomycin or fluoroquinolones are administered.” The meas ure also defines “prophylactic antibiotic” as “an antibiotic prescribed with the intent of reducing the probability of an infection related to an invasive proce dure. For purposes of this me asure, the following antibiotics are considered prophylaxis for surgical s ite infections: Ampicillin/sulbactam, Aztreonam, Cefazolin, Cefmetazole, Cefote tan, Cefoxitin, Cefuroxime, Ciprofloxacin, Clindamycin, Ertapenem, Erythromycin, Gatifloxacin, Gentamicin, Levofloxacin, Metronidazole, Moxifloxacin, Neomycin a nd Vancomycin.” All prophylactic IV antibiotics administered for surgical site infection would need to have their infusion initiated within the one hour time frame, except for vancomycin or fluoroquinolones, where infusion must be initiated within th e two hours time frame. The ASC QC Guide states that “[i]n cases involving more than one antibiotic, all antib iotics must be given within the appropriate time frame in order fo r the case to meet criteria.” The timing of the antibiotic starts at the time the antibiotic is initiated with a preoperative order. Read together, section 1833( i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medicationCMS-1525-FC 1256 errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more national consensus building entities. We believe this measure is appropriate to measure quality in ASCs because it assesses the quality of care for surgical patients in an outpatient setting as measured by timely antibiotic administrati on. Furthermore, we believe that this measure meets the consensus requirement and the requirement that it be set forth by a national consensus building en tity because it was developed by the ASC QC and is endorsed by the NQF. In the proposed rule, we invited public comment on our proposal to adopt this measure for the CY 2014 payment determina tion using the claims-based QDCs data collection mechanism for ASC services furnished for Medicare patients from January 1, 2012 through December 31, 2012 ( 76 FR 42341). While the NQF-endorsed specification for this measure includes all AS C admissions with a preoperative order for a prophylactic IV antibiotic for pr evention of surgical site in fection, our proposal to use information submitted on claims to calculate th ese measures requires that we restrict the measure population to the population for which CMS receives claims. Therefore, for this program, we would need to calculate the measures based on claims submitted for ASC services furnished to Medicare fee-for-service beneficiaries. NQF has indicated to us that our proposal to use Medicare Part B claims submitted by ASCs to calculate the measure consistently with the measure specification is an appropriate application of the NQFendorsed measure to a subset of patients w ho are part of the broader population to which the measure applies. As stated in the CY 2012 OPPS/ASC proposed rule, if the measureCMS-1525-FC 1257 is finalized, ASCs would need to place QDCs relevant to this measure on Medicare Part B claims beginning January 1, 2012 in order to report this measure for purposes of the CY 2014 payment determination.
Comment : A few commenters opposed the measure and believed that this measure is not applicable to ASC GI endosc opic centers. A few co mmenters considered the proposed data collection to be gin on January 1, 2012 unreasonable. Response : The measure assesses whether an antibiotic is given on time prior to a procedure if it was ordered. We note that the specifications for the measure list endoscopy as one of the examples of procedures . As stated in sect ion XIV.K.1. of this final rule with comment period, we are dela ying the beginning of data collection until October 1, 2012 for the CY 2014 payment determination.
Comment : A few commenters did not believe this measure is burdensome since it is a claims-based measure, but urged that CM S provide training to ASCs regarding when to enter the specific QDCs appropriately. A commenter asked for clarification whether the proposed QDC-codes should be reported with every claim for an ASC procedure or only if the adverse event has occurred. One commenter suggested that CMS provide education to ASCs regarding whether QDCs need to be reported with every claim, or only for those where an adverse event occurred. Response : We also do not believe submitting QDCs on claims is burdensome. In order to submit quality data using CPT-II a nd HCPCS codes, ASCs would need to add the appropriate QDCs for measure numerato rs and denominators on Medicare Part B claim forms. We intend to provide educa tion and outreach on data submission for theCMS-1525-FC 1258 reporting program, and we will publish detail s about the QDCs and whether they will need to be submitted for numerators and denominators in the ASC Quality Reporting Program Specifications Manual. We anticipate releasing th is manual in second quarter
2012.
Comment : One commenter noted that CMS incorrectly stated that the NQF-endorsed specification for this measur e includes all ASC admissions. The commenter stated that the NQF specifica tion limits the denominator to all ASC admissions with a pre-operative order for a prophylactic IV antibio tic for the prevention of surgical site infection. The commenter recommended giving th e public the opportunity to comment on the QDC descriptors that CMS develops in the future. Specifically, the commenter requested the following corrections: (1) the requ ired timing of antibiotics begins with the initiation of the IV antibiotic , not the pre-operative order; and (2) the specifications limit the denominator to all ASC admissions with a preoperative order for IV antibiotics, not all ASC admissions. The commenter believed that three QDCs are needed to describe: (1) timely administration; (2) untimely admi nistration; and (3) circumstances where no prophylactic was ordered. Response : The commenter is correct, th e denominator for the NQF-endorsed measure is all ASC admissions with a pre-oper ative order for a prophylactic IV antibiotic for prevention of surgical site infections. NQF has indicated to us that our proposal to use Medicare Part B claims submitted by ASCs to calculate the measure consistently with the measure specification is an appropriate application of the NQF-endorsed measure.CMS-1525-FC 1259 We correctly described the measure initially but then did not stat e it completely when describing the application of the measure to a subset of patients. As the commenter stated, the assessment of appropriateness of timing begins with th e initiation of IV antibiotics relative to the ini tial surgical incision or the begi nning of the procedure. We will ensure these aspects of the measure ar e clarified in the Specifications Manual CMS issues for this program.
Comment : A commenter recommended the discontinuation of this measure once the proposed surgical site infection measur e is implemented to include additional ASC procedures. Response : We thank the commenter for the su ggestion. As discussed in section XIV.K.3.b. below, for the ASC Quality Repo rting Program, we are not finalizing the surgical site infection measure in this rulemaking. After consideration of th e public comments we received, we are finalizing this measure for the CY 2014 payment determina tion with data collection to begin on October 1, 2012 (as discussed in section XIV.K.1 of this final rule with comment period). (6) Ambulatory Surgery Patients with Appropriate Method of Hair Removal (NQF #0515) The ASC QC 43 cited evidence that “[r]azors can cause microscopic cuts and nicks to the skin, not visible to the eye. Use of razors prior to surgery increases the incidence of wound infection when compared to clippi ng, depilatory use or no hair removal at

43 ASC QC Quality measures: Implementation Guide ve rsion 1.4. ASC Quality Collaboration. December 2010.CMS-1525-FC 1260 all.” 44 A 1999 guideline issued by the CDC suggests that if hair must be removed from a surgical site, that it preferably be done with clippers rather than razors in order to minimize cuts and nicks to the skin which may increase the risk of a surgical site infection. 45 In 2002, the Association of Opera ting Room Nurses published similar guidelines for appropriate hair removal. 46 While a similar measure is being considered for retirement from the Hospital IQR Progr am because it displays a high degree of performance with little variab ility or room for improvement , we believe that there is significant variability in practice and the level of adherence to this guideline in outpatient surgical settings such as ASCs is not known. Therefore, we believe that this measure is still appropriate for use in the ASC sett ing. In the CY 2012 O PPS/ASC proposed rule (76 FR 42341 through 42342), we proposed to adopt the NQF-endorsed measure to capture the percentage of ASC admissions with appropriate surg ical site hair removal. The specifications for this NQF-endorsed m easure developed by the ASC QC can be found at: http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd
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. Read together, sections 1833(i)(7)(B) a nd 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Secretary may ot herwise provide, to develop measures appropriate for the measurement of the qua lity of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include m easures set forth by one or more national

44 Seropian, R., Reynolds, B.M.: Wound infections afte r preoperative depilatory versus razor preparation. Am J Surg.1971 Mar;121(3):251-4. 45 http://www.cdc.gov/ncidod/dhqp/pdf/guidelines/SSI.pdf 46 Association of Operating Room Nurses. Recommended pr actices for skin prepara tion of patients. AORN J. 2002 Jan;75(1):184-7.CMS-1525-FC 1261 consensus building entities. We believe this measure is appropriate to measure quality in ASCs because it assesses quality of surgical care performed in ASCs, as measured by appropriate surgical site hair removal. Furthermore, we be lieve that this measure meets the consensus requirement and the requirement that it be set forth by a national consensus building entity because it was developed by the ASC QC and is endorsed by the NQF. In the proposed rule, we invited public comment on our proposal to adopt this measure for the CY 2014 payment determina tion using the claims-based QDC data collection mechanism for ASC services furnished for Medicare patients from January 1, 2012 through December 31, 2012 ( 76 FR 42341). While the NQF-endorsed specification for this measure includes all ASC admissions with surgical site hair removal, our proposal to use information subm itted on claims to calculate these measures necessitates that we restrict the measur e population to the population for which CMS receives claims. Therefore, for this program , we would need to calculate the measures based on claims submitted for ASC services furnished to Medicare fee-for-service beneficiaries. NQF indicated to us that our proposal to use Medi care Part B claims submitted by ASCs to calculate the measure c onsistently with the measure specification is an appropriate application of the NQF-e ndorsed measure to a subset of patients who are part of the broader popul ation to which the measure applies. As stated in the CY 2012 OPPS/ASC proposed rule, if the meas ure is finalized, ASCs would need to place QDCs relevant to this measure on Medicare Part B claims beginning January 1, 2012 in order to report this measure for purposes of CY 2014 payment determination.CMS-1525-FC 1262
Comment : A few commenters stated that the measure does not apply to endoscopy centers. Several commenters opposed this measure because they stated that there is no conclusive clinical evidence that clipping, rather than other hair removal techniques, reduces surgical site infec tions across a broad spectrum of surgical procedures. Furthermore, the scrotal surgery exclusion does not appear to be present in the ASC specifications. Two commenters f ound it confusing that CMS has currentlysuspended this measure from the Hospital IQR Program due to the measure’s “toppedout” status. Response : CMS agrees with these comments, and is not finalizing this measure for the ASC Quality Reporting Program. A recently published systematic review by Alexander JW et al. (Annals of Surgery.2001; 253(6):1082-1093) also indicates that not removing hair is associated with the least probabi lity of infection.
Comment : One commenter indicated that CMS incorrectly stated that the NQF-endorsed specification for this measur e includes all ASC admissions. The commenter clarified that the NQF specifications limit the denominator to all ASC admissions with surgical site hair removal. A commenter noted that the public should have the opportunity to comment on the de scriptors CMS develops. The commenter believed that a correction that needs to be made in the rule: the specifications limit the denominator to all ASC admissions with su rgical site hair removal, not all ASC admissions. Additionally, the commenter beli eved that a set of three QDCs would be needed to describe: (1) appr opriate hair removal; (2) inappropriate hair removal; and (3) circumstances where no hair wa s removed or other exclusions.CMS-1525-FC 1263 Response : As discussed above, we are not finalizing this measure for the ASC Quality Reporting Program. After consideration of the public comments we received, we are not finalizing this measure for CY 2014 payment determination. (7) Selection of Prophylactic Antibiotic: First OR Sec ond Generation Cephalosporin (NQF #0268) Surgical outcomes are affected by the sele ction of appropriate antibiotics. Current guidelines indicate that first or second ge neration cephalosporins are effective for prevention of surgical site infections in most cases. The goal of this proposed measure is to ensure safe, cost-effective, broad spectrum antibiotics are used as a first line prophylaxis unless otherwise indicated. Th is measure was developed by the AMA’s Physician Consortium for Performance Improvement, a national, diverse, physician-led group that identifies, develops, and promotes implementation of evidence-based clinical performance measures that reflect best practices. This measure received NQF endorsement under a 2008 project entitled “Hospital Care: Sp ecialty Clinician Performance Measures,” and it a ssesses the percentage of surgical patients aged 18 years and older undergoing procedures with the in dications for a first OR second generation cephalosporin prophylactic antibiotic, who had an order for cefazolin or cefuroxime for antimicrobial prophylaxis. While we recogni ze that this measure is not specifically endorsed for the ASC setting, we believe that th is measure is highly relevant for use in ASCs because it assesses adherence to best practices for use of prophylactic antibiotics for outpatient surgical patients. Accordingly, we proposed to adopt an application of thisCMS-1525-FC 1264 NQF-endorsed measure for use in the ASC Quality Reporting Program. The measure specifications for this proposed measure can be found at: http://www.cms.gov/pqrs/downloads/2011_Phys QualRptg_MeasuresGroups_Specificatio nsManual_033111.pdf?agree=yes&next=Accept

. Read together, section 1 833(i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more national consensus building entities. We believe this measure is appropriate for measurement of quality care in an ASC because it specifically assesses quality care, as measured by adherence to best practices for prophylactic antibiotics provided for outpatient surgical patients. We believe that consensus among affected parties can be reflected through means other than NQF endorsement, includi ng consensus achieved during the measure development process; consensus shown thr ough broad acceptance and use of measures; and consensus through public comment. The measure development process employed the same process used by the American Medical Association Physician Consortium for Performance Improvement (AMA-PCPI). The AMA PCPI is a consorti um of physicians dedicated to improving patient safety by developing evidence ba sed performance measures, promoting the implementation of effective and relevant cl inical performance improvement activities , and advancing the science of clinical perf ormance measurement and improvement. TheCMS-1525-FC 1265 AMA-PCPI develops many measures fo r the PQRS program. The AMA-PCPI development process for this measure is a consensus-based process that involves stakeholder input, including su rgeons performing procedures in outpatient settings such as ASCs. Because of this, we believe this measure meets the requirement of reflecting consensus among affected parties. Further, it is not feasib le or practicable to adop t an NQF-endorsed measure of prophylactic antibiotic selection specifically for AS Cs because there is no such NQF-endorsed measure. We note that secti on 1833(t)(17) of the Act does not require that each measure we adopt for the ASC Quality Reporting Program be endorsed by a national consensus building entity, or by the NQF specifically. Further, 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 ASC Quality Reporting Program, except as the Secretary may otherwise provide. Under this provision, th e Secretary has furthe r authority to adopt measures that are not NQF-endorsed or measur es that have not been endorsed for the ASC setting. The proposed adoption of this measure in the ASC Quality Reporting Program also is consistent with our goal to align measur es across settings, as it is also used in the PQRS, and a similar measure (NQF #0528) ha s been implemented in the Hospital OQR Program and the Hospital IQR Program. In the proposed rule, we invited public comment on our proposal to adopt this measure for the CY 2014 payment determina tion using the claims-based QDC data collection mechanism for ASC services furnished for Medicare patients fromCMS-1525-FC 1266 January 1, 2012 through December 31, 2012 ( 76 FR 42342). While the NQF-endorsed specification for this measure includes all surgical patients aged 18 years and older undergoing procedures with the indicatio ns for a first OR second generation cephalosporin prophylactic antibiotic, who had an order for cefazolin OR cefuroxime for antimicrobial prophylaxis, our proposal to use information submitted on claims to calculate these measures requires that we restrict the measure population to the population for which CMS receives claims. Ther efore, for this program, we would need to calculate the measures based on claims submitted for ASC services furnished to Medicare fee-for-service benefici aries. NQF has indicated to us that our proposal to use Medicare Part B claims submitted by ASCs to calculate the measure consistently with the measure specification is an appropriate appl ication of the NQF-endorsed measure to a subset of patients who are part of the broa der population to which the measure applies. As stated in the CY 2012 O PPS/ASC proposed rule, if the measure is finalized, ASCs would need to place QDCs relevant to this measure on Medicare Part B claims beginning January 1, 2012 in order to report this me asure for purposes of the CY 2014 payment determination.
Comment : Several commenters expressed various concerns regarding this measure: A commenter believed this is a physician-level measure and not an ASC-level measure. Therefore, the commenter suggested that CMS report the antibiotic selection data submitted by physicians for this meas ure by place of service (POS) and aggregate physician performance data across surgical settings, including hospital inpatient and outpatient settings, and ASC setting.CMS-1525-FC 1267 A commenter believed that this measure does not represent the most prevalent area of services provided by AS Cs. A commenter stated that data collection for this measure is very burdensome. One commente r requested clarifica tion on what procedure codes would allow for the best comparis on since very few codes in the current denominator set are relevant to the ASC se tting (according to the commenter, ASCs only accounted for 0.16 percent of to tal Medicare procedures in 2009). A commenter asked that CMS clarify and educate ASCs as to whether the proposed QDC-codes should be reported with every claim for an ASC pro cedure or only if the adverse event has occurred. A commenter stated that this meas ure should be phased out after the surgical site infection measure has been expanded to include additional ASC procedures. Given the NQF’s endorsement for this measure is non-ASC-specific, another commenter encouraged CMS to seek NQF endorsemen t specific to the ASC setting to ensure accuracy in data collection and implementation. Response : We agree that the measure may not address the most prevalent procedures performed by ASCs and we will need to examine how the measure may be modified in order to capture those proce dures most commonly performed in ASCs. Therefore, we are not finaliz ing this measure for the CY 2014 payment determination at this time. After consideration of th e public comments we receive d, we are not finalizing the selection of prophylactic antib iotic: first OR second gene ration cephalosporin measure for ASCs for the CY 2014 payment determination.CMS-1525-FC 1268 b. Surgical Site Infection Rate (NQF #0299) HAIs are among the leading causes of death in the United States. CDC estimates that as many as 2 million infections are acq uired each year in hospitals and result in approximately 90,000 deaths. 47 It is estimated that more Americans die each year from HAIs than from auto accidents and homicides combined. HAIs not only put the patient at risk, but also increase the days of hos pitalization required for patients and add considerable health care costs. HAIs are la rgely preventable for surgical patients through application of perioperativ e best practices such as those listed in the CDC’s Surgical Site Infection prevention guidelines. Ther efore, many health care consumers and organizations are calling for public disclosu re of HAIs, arguing that public reporting of HAI rates provides the information health care consumers need to choose the safest hospitals, and gives hospitals an incentive to improve infection control efforts. This proposed measure is currently collected by th e NHSN as part of State-mandated reporting and surveillance requirements for hospitals in some States. Additi onally, data submission for this measure through EHRs may be possible in the near future. This measure is NQF-endorsed and we proposed to adopt it for the CY 2014 Hospital OQR Program. It also has b een adopted for the FY 2014 Hospital IQR Program. Because we proposed the same measure for Hospital OQR Program, we refer readers to the discussion of this measure in se ctions XIV.C.2.a. of the proposed rule and this final rule with comment period. Th e measure specifications can be found at http://www.cdc.gov/nhsn/psc.html . The NQF describes this measure as the “percentage

47 McKibben. L., Horan, T.: Guidance on public reporting of healthcareassociated infections: recommendations of the Healthcare Infection Control Practices Advisory Committee. AJIC 2005;33:217–26.CMS-1525-FC 1269 of surgical site infection even ts occurring within thirty days after the operative procedure if no implant is left in place, or [within] one year if an implant is in place in patients who had an NHSN operative procedure performed during a specified time period and the infection appears to be related to the operative procedure.” Read together, section 1 833(i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more national consensus building entities. Increasingly, su rgical procedures are being performed in hospital outpatient department settings a nd ASCs. We believe this measure is appropriate for measuring quality of care in ASCs because it applies to outcomes for surgical patients undergoing procedur es that are performed in ASCs. Furthermore, we believe that this m easure meets the consensus requirement and the requirement that it be set forth by a na tional consensus building entity because it is endorsed by the NQF. The proposed adoption of this measure in the ASC Quality Reporting Program also is consistent with our goal to align meas ures across settings because we have proposed this measure for the Hospital OQR Program for CY 2014 payment determination and have previously adopted it for Hospital IQR Program for the FY 2014 payment determination. Therefore, we proposed to adopt the Surgical Site Infection Rate measure that is collected by the CDC via the NHSN for the ASC Quality Reporting Program for the CY 2014 payment determination.CMS-1525-FC 1270 Data submission for this measure for the CY 2014 payment determination would begin with infection events occurring on or after January 1, 2013 through June 30, 2013. The proposed reporting mechanism for this proposed HAI measure via the NHSN is discussed in greater detail in sections XIV.C.2.a. of the propos ed rule and this final rule with comment period. In the proposed rule, we invited public comm ent on this proposed measure and the reporting mechanism.
Comment : Some commenters requested clarif ication on how infections will be identified by ASCs in cases where patients go home on the same day or go to another hospital for the infection. Commenters believ ed that it would be challenging to survey outpatients, including ASC patients, to determ ine whether an infection has developed and if it meets the NHSN definition for surgical site infection. Some commenters believed that the NHSN module was not relevant for ASCs. A commenter cited the measure specification that “SSI [surgical site infections] are to be identified on original admission or upon read mission to the facility of the original operative procedures” and concluded this m easure is inappropriate for ASCs due to patients’ short length of stay and their likely admission to a hospital when an infection occurs. Because the commenter believed that the 10 NHSN-defined operative procedure categories have little relevance to the pre dominant procedures performed in ASCs, the commenter recommended that CDC re-speci fy the measure to include common ASCspecific procedures to identify related infections in the numerator. One commenter urged CMS to consider facility exemptions in implementing this measure. The commenter stated that ASCs seldom perform operative procedures asCMS-1525-FC 1271 defined by the CDC: “an operative procedures as the one in which a surgeon makes at least one incision through the skin or mucous membrane, including laparoscopic approach, and closes the incision before the patient leaves the operating room.” Another commenter stated that ASCs normally do not have an ongoing relationship with patients and recomme nded that CMS require ASCs to conduct follow-up phone calls with patients, caregiv ers or physicians within 30 days of procedures to identify patients who have deve loped surgical site infections. Commenters also recommended that CMS require that AS Cs include this information in medical records as part of the data submission to NHSN, preferably via electronic submission. Several commenters supported the surg ical site infection measure but the disparate codes used by hospital outpatient departments and ASCs and the ICD codes used in the NHSN module w ould create potentia l inaccurate data submission. The commenters believed that the uncommon use of NHSN in ASCs would add challenges to follow-up surveillance. Response : We thank the commenters for their views. As discussed below, we are not finalizing this proposed measure.
Comment : One commenter encouraged CMS to accelerate the timeframe for making the surgical site infection measure data for ASCs publicly available. The commenter believed that once this outcome measure is implemented, two ASC surgical infection control measures (ASC-5: Prophylactic IV an tibiotic timing, and ASC-7: Prophylactic antibiotic se lection for surgical patients) can be eliminated from theCMS-1525-FC 1272 Hospital OQR Program. The commenter suggest ed harmonization of this measure across different HOPD surgical and ASC settings. Response : We appreciate this supportive comm ent. At this time, we are not finalizing surgical site infection measures for the Hospital OQR Program or the ASC Quality Reporting Program. We will consider proposing a surgical site infection measure for the ASC Quality Reporting Program in the future. We agree with the commenters that a number of procedures frequently perf ormed in outpatient surg ical settings like ASCs are not addressed in the current surgic al site infection m easure adopted for the Hospital IQR Program, and that a follow-up and co llection protocol that is better suited to outpatient surgical settings for such a measur e should be developed. We also agree with the suggestion that we harmonize measures between the ASC Quality Reporting Program and the Hospital OQR Program, to the extent feasible. These comments will be taken into consideration in future surgical site infection measurement proposals for the ASC Quality Reporting Program.
Comment : A commenter believed that the m easure should facilitate comparisons across ASCs and hospital outpatient surg ery setting by making the data more patient-centered for easy comprehension. Response : We appreciate the input from th e commenter. Although we are not adopting this measure at this time, we will take this view into consideration as we consider proposing a surgical site infection measure in the future.
Comment : A commenter was very concerned about the burden to report to NHSN and cited that 40 ASCs that are cu rrently participating in NHSN reportedCMS-1525-FC 1273 registration and data submi ssion are very time-consuming. The commenter urged CDC to streamline these processes to make them more user-friendly. Response : We appreciate the input from the commenter regarding potential burden and the need for user-friendly processes. As stated above, we are not finalizing this measure for the CY 2014 payment determination.
Comment : Some commenters requested that CMS delay implementation of the surgical site infection measure to the CY 2015 payment determination with data collection starting on January 1, 2014 through June 30, 2014 to allow ASC to gain experience with the NHSN module. Response : As stated above, we are not fina lizing the surgical site infection measure for the CY 2014 payment determination. After consideration of th e public comments we receive d, we are not finalizing the surgical site infection measure for ASCs for CY 2014 payment determination. We will consider proposing the measure once a suitable set of procedures and a protocol for ASCs and HOPDs has been developed. In summary, we are finalizing five clai ms-based measures total using the QDC data collection mechanism for the CY 2014 payment determination. Based upon the public comment we received, we are finalizing the data submission for these five claims-based measures to begin on October 1, 2012. This issue is discussed in more detail in the Form, Manner and Timing secti on for this program. The quality measures we are adopting for ASCs for the CY 2014 payment determination are listed below with the ASC prefix:CMS-1525-FC 1274

ASC Program Measurement Set for the CY 2014 Payment Determination (Data submission to begin on October 1, 2012) ASC-1: Patient Burn ASC-2: Patient Fall ASC-3: Wrong Site, Wrong Side, Wrong Pa tient, Wrong Procedure, Wrong Implant ASC-4: Hospital Transfer/Admission ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing

4. ASC Quality Measures for CY 2015 Payment Determination a. Retention of Measures Adopted for the CY 2014 Payment Determination in the CY 2015 Payment Determination In general, unless we otherwise specify in the retirement section of a rule, we proposed to retain measures from one CY pa yment determination to another. In the CY 2012 OPPS/ASC proposed rule (76 FR 42343), we proposed to retain the measures we proposed to adopt for the CY 2014 payment de termination, if they are finalized in the CY 2012 OPPS/ASC final rule with co mment period, for the CY 2015 payment determination. In the proposed rule, we invited public comments on this proposal.
Comment : One commenter supported the propo sed retention of the measures we finalized for the CY 2014 payment determination for the CY 2015 payment determination. Response : We thank the commenter for supporting the retention of these

measures. After consideration of the public comment we received, we are finalizing our proposal to retain measures from one CY pa yment determination to the next. For theCMS-1525-FC 1275 CY 2014 payment determination, as discussed a bove, we are finalizing five claims-based measures. Therefore, we will retain these five measures for the CY 2015 payment determination. b. Structural Measures for the CY 2015 Payment Determination In the CY 2012 OPPS/ASC proposed rule (76 FR 42343 through 42346), for the CY 2015 payment determination, we proposed to adopt two structural measures: Safe Surgery Checklist Use, and ASC Facility Volume Data on Selected ASC Surgical Procedures. We discuss these proposals below. (1) Safe Surgery Checklist Use A sound surgery safety checklist could minimize the most common and avoidable risks endangering the lives and well-being of surgical patients. The purpose of this proposed structural measure is to assess whet her ASCs are using a safe surgery checklist that covers effective communication and help s ensure that safe practices are being performed at three critical perioperative peri ods: prior to administration of anesthesia, prior to incision, and prior to the patient l eaving the operating room. The use of such checklists has been credited with dramatic decreases in preventable harm, complications and post-surgical mortality. 48 In November 2010, the New England Journal of Medicine published a study concluding that surgical complications we re reduced by one-third, and mortality by nearly half, when a safe surgery checklist was used. 49

48 Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al (2009). “A Surgical Safety Checklist to Reduce Morbidity and Mortality in a Global Population”. New England Journal of Medicine. 360: 491-499. 49 de Vries EN, Prins HA, Crolla RMPH, et al. Effect of a comprehensive surgical safety system on patient outcomes. N Engl J Med 2010;363: 1928-37CMS-1525-FC 1276 We believe that effective communication and the use of safe surgical practices during surgical procedures will significantly reduce preventable surgical deaths and complications. Some examples of safe surg ery practices that can be performed during each of these three perioperative peri ods are shown in the table below:

First critical point (prior to administering anesthesia ) Second critical point (prior to skin incision) Third critical point (prior to patient leaving the operating
room )
● Verbal confirmation of patient identity
● Mark surgical site
● Check anesthesia machine/medication
● Assessment of allergies, airway and aspiration risk ● Confirm surgical team members and roles
● Confirm patient identity, procedure, and surgical incision site
● Administration of antibiotic prophylaxis within 60 minutes before incision
● Communication among surgical team members of anticipated critical events
● Display of essential imaging as appropriate ● Confirm the procedure
● Complete count of surgical instruments and accessories
● Identify key patient concerns for recovery and management of the patient

For example, mistakes in surgery can be prevented by ensuring that the correct surgery is performed on the correct patient and at the correct place on the patient’s body. 50 A safe surgery checklist would redu ce the potential for human error, which would increase the safety of the surgical e nvironment. Another example of a checklist that employs safe surgery practices at each of these three perioperative periods is the World Health Organization Surgical Safety Checklist, which was adopted by The World Federation of Societies of Anesthesiologists as an international standard of practice. This

50 Hospital National Patient Safety Goals. The Joint Commission Accreditation Hospital Manual, 2011. http://www.jointcommission.org/standards_information/npsgs.aspxCMS-1525-FC 1277 checklist can be found at: http://www.who.int/patientsafety/saf esurgery/ss_checklist/en/index.html

. The adoption of a structural measure that assesses Safe Surgery Checklist Use would align our patient safety in itiatives with those of several surgical specialty societies including: the American College of Surg eons’ Nora Institute for Patient Safety, the American Society of Anesthesiologists, TJC, the National Association for Healthcare Quality and the AORN. The measure would assess whether the ASC uses a safe surgery checklist in general, and would not require an ASC to report wh ether it uses a checklist in connection with any individual procedures. Read together, section 1833( i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more national consensus building entities. This measure is appropriate for the measurement of quality of care furnished by ASCs because it pertains to best practices for surgeries, and ASCs perform ambulatory surgeries. It also reflects consensus among affected parties. As stated in sections XIV.C.2.c.1 of the proposed rule and this final rule with comment period, we believe that consensus among affect ed parties can be reflected through means other than NQF endorsement, including consensus achieved during the measure development process; consensus shown thr ough broad acceptance and use of measures; and consensus through public comment.CMS-1525-FC 1278 The proposed safe surgery checklist m easure assesses the adoption of a best practice for surgical care th at is broadly accepted and in widespread use among affected parties. In addition to being adopted by The World Federation of Societies of Anesthesiologists, the use of a safe surgery ch ecklist is one of the safe surgery principles endorsed by the Council on Surgic al and Perioperative Safety 51 , which is comprised of the American Association of Nurse Anesthetists, the American College of Surgeons, the American Association of Surgical Physic ian Assistants, the American Society of Anesthesiologists, the American Society of PeriAnesthesia Nurses, AORN, and the Association of Surgical Tec hnologists. Two State agencies (Oregon, South Carolina), the Veterans Health Administration 52 , numerous hospital systems, State hospital associations (such as California and South Carolina), national accrediting organizations and large private insurers have endorsed the use of a safe surgery checklist as a best practice for reducing morbidity, mortality, and medical errors. 53, 54 Because the use of a safe surgery checklist is a widely accepted best practice for surgical care, we believe that the proposed structural measure of Safe Surgery Checkli st Use reflects consensus among affected parties. We also note that TJC has include d safe surgery checklis t practices among those to be used to achieve NPSGs adopted fo r 2011 for surgeries performed in ambulatory settings and hospitals 55

.

51 http://www.cspsteam.org/safesurgery checklist/safesurgerychecklist.html 52 Neily, J; Mills, PD, Young-Xu, Y. (2010). “Ass ociation between implementation of a Medical Team Training Program and Surgical Mortality”. JAMA. 304 (15): 1693-1700. 53 Haynes, AB; Weiser, TG; Berry, WR et al (2009) “A Surgical Safety Checklist to Reduce Morbidity and Mortality in a Global Population”. NEJM. 360:491-499. 54 Birkmeyer, JD (2010) “Strategies for Improving Su rgical Quality – Checklists and Beyond.” NEJM. 363: 1963-1965. 55 http://www.jointcommission.org/standards_information/npsgs.aspxCMS-1525-FC 1279 The Safe Surgery Checklist Use struct ural measure is not NQF-endorsed, and there is no NQF-endorsed measure of safe surgery checklist use despite the broad acceptance and widespread endorsement of this pr actice. Therefore, it is not feasible or practicable to adopt an NQF-endorsed measur e of safe surgery checklist use because there is no such NQF-endorsed measure. We note that section 1833(t)(17) of the Act does not require that each measure we adopt for the ASC Quality Reporting Program be endorsed by a national consensus building entit y, or by the NQF specifically. Further, 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 ASC Quality Reporting Program, except as the Secretary may otherwise provide. Under this provision, th e Secretary has furthe r authority to adopt non-endorsed measures. We note that the propos ed adoption of this measure in the ASC Quality Reporting Program is consistent with our goal to align measures across settings because we also proposed the same measure for the Hospital OQR Program for CY 2014 payment determination. For the CY 2015 payment determination, we pr oposed that data collection for this structural measure for ASCs would begin on July 1, 2013 and end on August 15, 2013 for the entire time period from January 1, 2012 through December 31, 2012. In other words, an ASC would report whether their facility employed a sa fe surgery checklist that covered each of the three critical periopera tive periods for the entire calendar year of 2012 during the 45-day window from July 1 through August 15, 2013. The information for this structural measure would be collected via an online Web-based tool that will be made available to ASCs via the QualityNet Web site. This collection mechanism is alsoCMS-1525-FC 1280 used to collect structural measures and othe r information for other programs, specifically for the Hospital IQR and Hospital OQR Programs. In the proposed rule, we invited public co mments on our proposal to add this new structural measure to the ASC quality meas urement set and the submission process for the CY 2015 payment determination.
Comment : Several commenters fully supported the Safe Surgery Checklist measure and believed the measure helps to en sure safe surgical practices prior to administration of anesthesia, incision, and the patient’s departure from the operating room. A commenter did not believe this measure would impose substantial burden on ASCs because the data is collected via a Web-based tool. Some commenters appreciated the flexibility given to ASCs in the design and use of a specific checklist to meet their needs. Commenters urged CMS to revi se the measure name to include, "safe surgery/procedure checklist" and modify its purpose statement to indicate the intent of the measure as “an assessment whether ASCs use a safe surgery/procedure checklist that addresses effective communication and helps ensure that safe practices are being performed at three critical perioperative or periprocedural periods: (1) prior to the administrative of anesthesia or sedation; (2 ) prior to incision or the beginning of the procedure; and (3) prior to the patient leaving the operating or procedure room.” Commenters urged harmonization with the sa me measure proposed in the Hospital OQR Program. Response : We agree with the commenter that this measure would impose minimal burden because the data are submitted using a Web-based data submission tool.CMS-1525-FC 1281 The ASC safe surgery checklist measure is aligned with the safe surgery checklist measure that we are adopting for HOPDs.
Comment : A few commenters recommende d a 60-day time period for data submission rather than the 45-day window and suggested that CMS change this measure into a claims-based measure rather than us ing an online tool. Co mmenters recommended changing the proposed collection time period from January 1, 2012 through December 31, 2012 to January 1, 2013 through December 31, 2013 and delay the data submission period until early 2014. The commenters did not provide a rationale for this suggestion. Response : The goal of this measure is to as sess whether a particular ASC is using a safe surgery checklist from January 1, 2012 until December 31, 2012, requiring one yes/no response for this measure, not to asse ss whether a safe surgery checklist is used for each Medicare Part B patient. Therefor e, a claims-based measure would not be appropriate to measure whether an ASC is us ing a safe surgery checklist because we are not measuring its use on an individual claims-based level. We note that the Web based reporting t ool is a minimally burdensome method of collecting this facility level information, and is current ly in use for similar types of measures for both the Hospital IQR and Hospita l OQR Programs. We seek to align the reporting periods for the reporting programs and currently, a 45-day window is being used for data collection for some structural measures in the Hospital IQR and Hospital OQR Programs. At this time, we are not ch anging the time periods for the structural measures because there is minimal burden and advance preparation to collect and report this information to CMS.CMS-1525-FC 1282
Comment : A few commenters did not support th is measure for different reasons. Some commenters believed that the use of a checklist cannot be validated by CMS, and therefore, it should not be considered as a meas ure. Some commenters noted that it is not NQF-endorsed. Some commenters objected to the collection of patient- or procedure-detailed level data. Commen ters were also concerned about the implementation of this measure simultaneous ly with ICD-10 conversion would further tax facilities’ resources. A commenter stat ed this measure is duplicative because all accredited ASCs are already required to use a safe surgery checklist. Another commenter noted that the safe surgery checklist as requi red in the Conditions for Coverage could also meet the criteria for this measure. A few co mmenters stated this measure does not apply to ASCs performing GI surgical procedures and requested the adoption of a safe surgery checklist that is specific to GI procedures performed in ASCs. Response : We acknowledge that this measure cannot be validated because it does not use charts or claims. Nonetheless, we believe the measure would heighten ASCs’ awareness of patient safety during surgical procedures and safeguard against preventable human errors. As discussed above, we be lieve this measure meets the statutory requirements, even if it is not NQF-endorse d. There is no NQF-endorsed measure for safe surgery checklist use despite the broa d acceptance and widesp read endorsement of this practice. Therefore, it is not feasible or practi cable to adopt an NQF-endorsed measure of safe surgery checklist use b ecause there is no such NQF-endorsed measure. As stated in previous rule making, we believe that consensus among affected parties can be reflected through means other than NQF endorsement, including consensus achievedCMS-1525-FC 1283 during measure development processes, c onsensus shown through broad acceptance and use of measure; and consensus through pub lic comment. The use of a safe surgery checklist has been adopted by the World Fede ration of Societies of Anesthesiologists, and is one of the safe surgery principl es endorsed by the Council on Surgical and Perioperative Safety which is comprised of multiple medical prof essional organizations. We disagree with the commenters who s uggested that a safe surgery checklist would not apply to GI proce dures. Some GI procedures are performed under anesthesia, and wrong site surgery and wrong procedure is possible for GI procedures, all of which are general topics that would be covered under a safe surger y checklist. Therefore, we believe that a well-designed, comprehensive generic safe surgery checklist should cover GI-specific surgical procedure elements as well. We do not believe that the reporting of th is structural measure to CMS for this quality reporting program and subsequent publ ic reporting is duplica tive of accreditation requirements or conditions of coverage for ASCs, because these other requirements do not require the reporting this information to CMS annually by each eligible facility and the subsequent public reporting of this in formation on a CMS Web site. As stated previously, this measure is not collected on an individual patient or procedure level and does not involve the use of ICD-9 codes or ICD-10 codes. After consideration of th e public comments we received, we are finalizing this measure for CY 2015 payment determination. We are finalizing our proposal for the CY 2015 payment determination that ASCs w ould report their yes/ no response regarding use of a safe surgery checklist between July 1, 2013 and August 15, 2013 for the timeCMS-1525-FC 1284 period from January 1, 2012 through Decem ber 31, 2012 using an online measure submission Web page available on http://www.qualitynet.org . Details regarding measure submission timelines and collection periods are discussed in the Form, Manner and Timing section for this program in th is final rule with comment period. (2) ASC Facility Volume Data on Selected ASC Surgical Procedures There is substantial evidence in recent peer-reviewed clinical literature that volume of surgical procedures, particularly of high risk surgical pro cedures, is related to better patient outcomes, including decr eased surgical errors and mortality. 56, 57, 58 This may be attributable to greater experience and/ or surgical skill, greater comfort with and hence likelihood of application of standardized best practices, and increased experience in monitoring and management of surgical pati ents for the particular procedure. For this reason, the National Quality Foru m has endorsed measures of total all-patient surgical volume for Isolated CABG and Valve Surger ies (NQF #0124), Percutaneous Coronary Intervention (PCI) (NQF #0165), Pediatri c Heart Surgery (NQF #0340), Abdominal Aortic Aneurism Repair (NQF #357), Esopha geal Resection (#0361), and Pancreatic Resection (NQF #0366). Additionally, many consumer-oriented Web sites reporting health care quality information sponsored by States (California, New York, Texas, Washington, Florida, Illinoi s, Michigan, Oregon) and pr ivate organizations (Leapfrog Group, U.S. News & World Report) are repo rting procedure volume, in addition to

56 Livingston, E.H.; Cao, J “P rocedure Volume as a Predicto r of Surgical Outcomes”. JAMA. 2010;304(1):95-97. 57 David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Delli nger, E.P.; Cheadle, A. Chan, L. “Early Mortality Among Medicare Beneficiaries Undergoing Bariatric Surgical Procedures”. JAMA. 2005;294(15):1903- 1908. 58 Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, A.M. ; Warren, J.L.; Begg, C.B “ Influence of Hospital Procedure Volume on Outcomes Fo llowing Surgery for Colon Cancer” JAMA. 2000; 284 (23): 3028-3035.CMS-1525-FC 1285 provider performance on surgical process (SCIP measures) and outcome measures (surgical site infection, Patie nt Safety Indicators, and Mo rtality), because it provides beneficial performance information to consum ers choosing a health care provider,. The currently NQF-endorsed measures of procedur e volume (noted above) relate to surgeries only performed in inpatient settings, and w ould not be applicable to the types of procedures approved to be performed in HOPDs and ASCs. The recently issued Report to Congress entitled “Medicare Ambulatory Surgical Center Value-Based Purchasing Implementation Plan” included an analysis of CY 2009 ASC claims for Medicare bene ficiaries. When stratified by specialty category, CMS identified six procedure categor ies that historically consti tute 98.5 percent of the total volume of procedures perfor med in ASCs: Gastrointestinal, Eye, Nervous System, Musculoskeletal, Skin, and Genitourinary. In the CY 2012 OPPS/ASC proposed rule (76 FR 42345), we proposed that ASCs submit al l patient volume data on these six broad categories of surgical procedures as a struct ural measure to be used for the ASC Quality Reporting Program CY 2015 payment determina tion. In section XIV.C.2.c.(2) of the proposed rule, we also proposed that HOPDs submit similar all patient volume data for eight broad procedure categories. Structural measures assess whether a provi der/facility possesses conditions for the care of patients that are associated with better quality. Read together, section 1833(i)(7)(B) of the Act and secti on 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Secretary may ot herwise provide, to develop measures appropriate for the measurement of the qua lity of care (including medication errors)CMS-1525-FC 1286 furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include m easures set forth by one or more national consensus building entities. Because surgical volume is associated with better quality, and surgical procedures are performed in ASCs, we believe that surgical volume is appropriate for measuring the quality of these six categorie s of surgical procedures performed in ASCs. We have previously esta blished for other programs that we believe consensus among affected parties can be reflected through various means including widespread use among industry stakeholders. We believe that the ASC Facility Volume Data on Selected ASC Surgical Procedures st ructural measure reflects consensus among affected parties as being associated with quality of surgical care because of recent evidence published in well-respected and wi dely circulated peer-reviewed clinical literature, and because of its widespread re porting among States and private stakeholders on Web sites featuring quality information. Because the current volume measures are endorsed for inpatient procedures, many of whic h are not performed in outpatient settings such as ASCs, it is not feasible or practic able to use NQF-endorsed measures of volume for ASCs. Further, section 1833( i)(7)(B) of the Act st ates that section 1833(t)(17) of the Act, which contains this requirement, app lies to the ASC Quality Reporting Program, except as the Secretary may otherwise provide . Under this provision, the Secretary has further authority to a dopt non-endorsed measures. For the CY 2015 payment determination, we proposed that ASCs would report these data with respect to these six categor ies between the dates July 1, 2013 and August 15, 2013 with respect to the time period January 1, 2012 through December 31, 2012. InCMS-1525-FC 1287 other words, under this proposal, an ASC would report its CY 2012 all-patient volume data for these six categories of procedur es during the 45-day window of July 1 to August 15, 2013. In the CY 2012 OPPS/ASC propos ed rule (76 FR 42346), we included a table which listed the HCPCS codes for which hospitals would be requ ired to report allpatient volume data. Like the structural m easures in the Hospita l OQR Program, data on this proposed measure would be collected vi a an online Web-based tool that would be made available to ASCs via the QualityNet Web site. This collection mechanism is also used to collect structural measures and ot her information for othe r programs (Hospital IQR and Hospital OQR). In the proposed rule, we invited public comment on this proposal.
Comment : A commenter questioned why cardi ovascular and respiratory codes are included for the same measure proposed in the Hospital OQR Program and not in the ASC Quality Reporting Program. The commen ter recommended harmonizing the same categories for both programs for consistency. Response : The procedures approved for HOP Ds and for ASCs are not the same in type or frequency. For HOPDs, an analys is of prior years’ data indicated that procedures performed in the eight br oad categories that we proposed (eye, cardiovascular, gastrointestin al, genitourinary, musculoskele tal, nervous, respiratory, and skin systems) accounted for 99 percent of th e procedures performed in HOPDs. When we assessed the frequency of procedures pe rformed by ASCs using prior year’s claims, we found that the six procedure categories of gastrointestinal, eye, nervous system, musculoskeletal, skin and genitourinary c onstitute 98.5 percent of the total volume ofCMS-1525-FC 1288 procedures performed in ASCs. Theref ore, unlike HOPDs, cardiovascular and respiratory system procedures were not incl uded in the list of most common procedures performed in ASCs. These two categories combined would account for 1.5 percent of procedures performed in ASCs. This is th e reason why procedures performed in these two anatomic areas were not included in the ASC procedure volume list of procedure codes. We will continue to examine claims data on an ongoing basis, and should we become aware of commonly performed procedur es in the Cardiovasc ular and Respiratory categories for which we should collect volume in the future, we will propose to collect ASC procedures for those categories in a future rule.
Comment : A few commenters fully supported the collection of all-patient volume data on surgical procedure measure and ur ged harmonization with the same measure adopted in the Hospital OQR Program. Anot her commenter noted that the provision of data on high volume procedures across hospita l outpatient setting and ASC setting would facilitate comparisons and subsequent inform ed decisions. A commenter believed that this measure would create incentives for ASCs to increase their procedure volumes and improve their performance. Response : We appreciate the commenters ’ support and their insights and recommendations. We will continue to work towards harmonizing measures, when possible, between different settings and facilities.
Comment : A few commenters believed that the measure is poorly specified, and should be refined to provide meaningful in formation to the consumer. Commenters recommended clarification on the most co mmon ASC specialty-specific proceduresCMS-1525-FC 1289 performed, prior to creation of a clearly spec ified measure. Commen ters also urged CMS to solicit input from the ASC community to determine how to make publication of volume data meaningful prior to implementa tion. A commenter stated this measure is unwarranted as volume data is already av ailable on many State- supported or hospitalspecific Web sites. Commenters believed that reporting volume without providing pertinent information on outcomes or patient -reported assessments of care may mislead patients about the quality of care delivered. Response : Although this measure is not NQF-endorsed, we believed it reflects consensus among affected parties as evidenced by peer reviewed literature and widespread use on Web sites featuring quality in formation. We believe it is important to provide this information to consumers. We agree with commenters that information on outcomes should be provided to consumers as well, and we have adopted several surgical outcome measures in the ASC Quality Reporting Program so that this information can be provided to consumers. As discussed in the pr oposed rule, our goal for this measure is to provide consumers with useful information on surgical procedure volume in order to assist patients in making informed healthca re decisions. We are aware of Web sites reporting volume for some procedures perfor med in hospitals. However, we are not aware of Web-sites that are reporting ASC volume by facility for commonly performed procedures. We want to create a standardiz ed platform for consumers to be able to compare volume information based on proce dure types commonly performed in ASCs within the 6 broad categories.CMS-1525-FC 1290 However, we agree with commenters th at collecting and displaying information on the broad categories as currently specified may not be meaningful to consumers. Based on the public comments we received that the six broad categories will not be meaningful to consumers, we will further refine the specification for the categories by grouping the codes into procedure types co mmonly performed in ASCs within the 6 broad categories so that they are more m eaningful to consumers. The codes in the 6 broad categories that ASCs would use to collect volume remain the same, but the information would be reported to CMS in the subcategories that will be defined in the Specifications Manual. We will include these refinements in the specifications for the measure that will be in an upcoming releas e of the ASC Specifications Manual. We agree with the commenter that obtaining stak eholder input as well as consumer testing prior to public reporting of th e volume information will be be neficial, and will strive to do so, as we have done previously for inform ation made available to the public from other quality reporting programs.
Comment : A commenter believed the propos ed volume data submission via the QualityNet Web site is cumbersome and the implementation should be delayed to allow ASCs to gain experience with the online tool. Response : The online tool is a low burden me thod of collecting facility level structural measures, and is cu rrently in use for structural measures for both the Hospital IQR and Hospital OQR Programs. While th e time period for the measure for CY 2015 would be calendar year 2012, the information would not be submitted by ASCs untilCMS-1525-FC 1291 mid-2013. Therefore, we do not believe furthe r delay in the collect ion and submission of the measure is necessary. After consideration of th e public comments we received, we are finalizing the proposed ASC facility volume data on selected ASC surgical procedures measure for the CY 2015 payment determination, with a modification. Based upon public comment received, we will further group the codes for commonly performed procedure types within the 6 broad categories. This information will be provided in an upcoming Specifications Manual release. We are fina lizing our proposal for the CY 2015 payment determination that ASCs would report data wi th respect to these six categories between July 1, 2013 and August 15, 2013 for the entire time period from January 1, 2012 through December 31, 2012 using an online measure submission Web page available on http://www.qualitynet.org . More information regardi ng the collection and submission requirements for this measure can be found in the Form, Manner and Timing section for this program in this final rule with comment period. In summary, for the CY 2015 payment de termination, we are retaining the five claims-QDC-based measures finalized for the CY 2014 payment determination, and adding two structural measures, safe surgery checklist use and ASC facility volume data on selected ASC surgical procedur es, for a total of 7 measures. The measures for ASCs for the CY 2015 pa yment determination are listed below:

ASC Program Measurement Set for the CY 2015 Payment Determination ASC-1: Patient Burn ASC-2: Patient FallCMS-1525-FC 1292 ASC Program Measurement Set for the CY 2015 Payment Determination ASC-3: Wrong Site, Wrong Side, Wrong Pa tient, Wrong Procedure, Wrong Implant ASC-4: Hospital Transfer/Admission ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing ASC-6: Safe Surgery Checklist Use* ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures* Procedure Category Corresponding HCPCS Codes Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, C9724, C9725, 0170T Eye 65000 through 68999, 0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T, 76510, 0099T Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727 Genitourinary 50000 through 58999, 0193T, 58805 *New measures for CY 2015 payment determination. 5. ASC Quality Measures for the CY 2016 Payment Determination a. Retention of Measures Adopted for the CY 2015 Payment Determination in the CY 2016 Payment Determination In general, unless otherwise specified in the retirement section of a rule, we proposed to retain measures from one CY pa yment determination to the next. In the CY 2012 OPPS/ASC proposed rule (76 FR 42346), we proposed to retain the measures we proposed to adopt for the CY 2015 payment de termination, if they are finalized in an OPPS/ASC final rule with co mment period, for the CY 2016 payment determination. In the proposed rule, we invited pub lic comment on this proposal.CMS-1525-FC 1293 As discussed previously, we finalized our proposal to retain measures from one CY payment determination to another. We did not receive any comments objecting to the retention of the measures finalized fo r the CY 2015 payment determination for the CY 2016 payment determination. Thus, we ar e finalizing the retention of the seven measures finalized in the CY 2015 payment determination for the CY 2016 payment determination. b. HAI Measure: Influenza Vaccination Coverage among Health care Personnel (HCP) (NQF #0431) The Influenza Vaccination among Health care Personnel measure assesses the percentage of healthcare personnel who have been immunized for influenza during the flu season. The specifications for this measure are available at http://www.cdc.gov/nhsn/PDFs /HSPmanual/HPS_Manual.pdf

. In the CY 2012 OPPS/ASC proposed rule (76 FR 42346), for the ASC CY 2016 payment determination, we proposed to adopt this NQF-endorsed HAI measure. We also proposed to adopt this meas ure for the Hospital OQR Program for the CY 2015 payment determination. We refer readers to the disc ussion in sections XI V.C.3.b. of the proposed rule and this final rule with comment period for detailed descriptions of this measure. Read together, section 1833( i)(7)(B) of the Act and s ection 1833(t)(17)(C)(i) of the Act require the Secretary, except as the Se cretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by ASCs, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more nationalCMS-1525-FC 1294 consensus building entities. We believe this measure is appropriate for measuring quality of care in ASCs due to the significant impact of HCP influenza vaccination on the spread of influenza among patients. Furthermore, we believe that this measure meets the consensus requirement and the requirement th at it be set forth by a national consensus building entity because it is endorsed by the NQF. We proposed that ASCs use the NHSN infr astructure and protocol to report the measure for ASC Quality Reporting Program pur poses. Collection of data via the NHSN for this measure would begin with immuniza tions from October 1, 2013 to March 31, 2014 for the CY 2016 payment determination. In the proposed rule, we invited public comment on our proposal to adopt this HAI measure into the ASC Quality Reporting Program for the CY 2016 payment determination.
Comment : A few commenters supported the m easure, but were concerned that ASCs will require many resources to initiate this reporting process since they are not accustomed to reporting to NHSN. A comm enter recommended that the measure be re-specified for the ASC setting to include only those employees for which ASCs can reasonably report vaccination status. The commenter r ecommended that CMS postpone data collection for immunizat ions from the proposed October 1, 2013 to March 31, 2014 to October 1, 2014 through March 31, 2015 for the CY 2016 payment determination. Response : CMS and CDC recognize the poten tial challenges faced by ASCs in data collection for this measure. Recently, CDC submitted a revised measure proposal to NQF, based on results of field testing. The revised measure proposal reduces denominator data collection to employee healthcare personnel, defined as staff on facilityCMS-1525-FC 1295 payroll, and two categories of non-empl oyee healthcare pers onnel: (1) licensed independent practitioners, that is, physic ians, advance practice nurses, and physician assistants; and (2) student tr ainees and adult volunteers. Based on the public comments we receive d, we are changing the proposed initial reporting period for HCP influenza vaccinati on coverage so that a less burdensome, updated CDC protocol for the measures as well as infrastructure upgrades can be incorporated into the collection system and ASCs will have enough time to obtain training to collect and report the updated measure to NHSN. The reporting period will begin October 1, 2014 and continue through March 31, 2015 for ASCs as recommended by commenters. Further details on the submi ssion requirements for this measure will be proposed in the Form Manner and Timing section for this program in a future rulemaking.
Comment : A commenter cautioned potential du plicative reporting efforts since some States already mandate vaccination of healthcare workers and public reporting of healthcare vaccination rates. Response : We appreciate the commenter’ s cautionary note and recognize that requirements for measurem ent and reporting of HCP vaccina tion rates, as is the case for other measureable healthcare processes and outcomes, may exist at the State and federal levels. Standardizing reportable hea lthcare quality measurements is a priority because that reduces reporting burden while preserving the opportunitie s to use those data for different purposes at th e State and federal levels.CMS-1525-FC 1296
Comment : A commenter stated that the measure should allow healthcare personnel to choose the vaccination type or brand most appropriate for them. Response : The measure does not require he althcare personnel to receive a specific type or brand of in fluenza vaccine in order to be included in the measure. After consideration of the public comments we received, we are finalizing the proposed Influenza Vaccination Coverage among Healthcare Personnel measure for the CY 2016 payment determination, with a modifi cation. Because NQF’s final review and an endorsement decision are pending with re spect to the CDC’s revised measure proposal and at the request of commenters, as discus sed above, we are changing the data collection timeframe from what we proposed. Data collection via NHSN will begin on October 1, 2014 and continue through Marc h 31, 2015. Details for submission of this measure will be proposed in a future rulemaking. In summary, for the CY 2016 payment determination, we are retaining the seven measures that we adopted for the CY 2015 payment determination and are adding one NHSN HAI measure for a total of eight measures. The measures for ASCs for the CY 2016 pa yment determination are listed below:

ASC Program Measurement Set for the CY 2016 Payment Determination ASC-1: Patient Burn ASC-2: Patient Fall ASC-3: Wrong Site, Wrong Side, Wrong Pa tient, Wrong Procedure, Wrong Implant ASC-4: Hospital Transfer/Admission ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing ASC-6: Safe Surgery Checklist Use ASC-7: ASC Facility Volume Data on Selected ASC Surgical ProceduresCMS-1525-FC 1297 ASC Program Measurement Set for the CY 2016 Payment Determination Procedure Category Corresponding HCPCS Codes Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, C9724, C9725, 0170T Eye 65000 through 68999, G0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T, 76510, 0099T Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727 Genitourinary 50000 through 58999, 0193T, 58805 ASC- 8: Influenza Vaccination C overage among Healthcare Personnel * *New measure for CY 2016 payment determination. 6. ASC Measure Topics fo r Future Consideration Below is a list of future measurement ar eas that we are considering for future ASC Quality Reporting Program payment dete rminations for which we sought comment in the CY 2012 OPPS/ASC proposed rule (76 FR 42347 through 42348). In particular, we sought comment on the in clusion of Patient E xperience of Care Measures in the ASC Qualit y Reporting Program measure set for a future payment determination, such as existing Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys for clinicians/gr oups and the CAHPS Surgical Care Survey, sponsored and submitted by the American Colle ge of Surgeons (ACS) and the Surgical Quality Alliance (SQA). We also, in part icular, sought comment on the inclusion of procedure-specific measures for cataract surgery, colonoscopy and endoscopy, and forCMS-1525-FC 1298 measures of Anesthesia Related Complicati ons in the ASC Quality Reporting Program

measure set. Measures and Measurement Topics under Consideration for Future Payment Determinations Patient Experience of Care: Consumer Assessment of Healthcare Provi ders and Systems (CAHPS) surveys for clinicians/groups CAHPS Surgical Care Survey Procedure Specific Measures Colonoscopy and other Endoscopy measures Cataract Surgery measures Anesthesia Related Complications: Death Cardiac Arrest Perioperative Myocardial Infarction Anaphylaxis Hyperthermia Transfusion Reaction Stroke, Cerebral Vascular Accide nt, or Coma following anesthesia Visual Loss Medication Error Unplanned ICU admission Patient intraoperative awareness Unrecognized difficult airway Reintubation Dental Trauma Perioperative aspiration Vascular access complication, including vascular injury or pneumothorax Pneumothorax following attempted vasc ular access or regional anesthesia Infection following epidural or spinal anesthesia Epidural hematoma following spin al or epidural anesthesia High Spinal Postdural puncture headache Major systemic local anesthetic toxicityCMS-1525-FC 1299 Measures and Measurement Topics under Consideration for Future Payment Determinations Peripheral neurologic deficit following regional anesthesia Infection following pe ripheral nerve block Additional Future Measurement Topics: NQF Serious Reportable Events in Healthcare Medication administration variance Medication reconciliation Venous thromboembolism measures: outcome/assessment/prophylaxis. Presence of Physician duri ng Entire Recovery Period Post-discharge follow up Post-discharge ED vi sit within 72 hours

In the proposed rule, we invited public comment on these quality measures and measurement topics so that we may consider proposing to adopt them for future ASC Quality Reporting Program payment determinations beginning with the CY 2015 payment determination. We also sought suggestions for additional measures and rationales for the ASC Quality Reporting Program that are not listed in the table above.

● Patient’s experience of care measure
Comment : One commenter noted that the CAHPS surgical care survey was not appropriate for ASCs since it may not addres s the short patient experience with staff performance at ASCs. Response : We thank the commenter for th e input and we will take it into consideration in future measure se lection efforts for this program.

● Anesthesia related complications measures
Comment : A commenter supported the anes thesia related complications measures listed, including, Use of Reversal Ag ents, Type of Anesthesia and CredentialsCMS-1525-FC 1300 of the Professional Administering Anesth esia When a Complication is Reported, Presence of Physician During Entire Recove ry Period, and Post Discharge ED Visit within 72 Hours. Response : We thank the commenter for the input on anesthesia related complications. We will take this input into consideration in future measure selection efforts for this program.

● Additional future measurement topics
Comment : A commenter recommended CMS taking a cautious approach for the venous thromboembolism measures: outcome /assessment/prophylaxis measure because the incidence of deep vein thrombosis ( DVT) and pulmonary embolism (PE) following total knee and hip replacement can be reduced but not eliminated. The commenter noted the trade off for lower DVT/PE rates is mo re wound complications, including surgical site infections. Response : We thank the commenter for the input and recommendation. We will take them into consideration in future measure selection efforts for this program.

● Other measure topics
Comment : A commenter recommended the future inclusion of ASC specialty-specific measures, especially ASC- specific GI measures, plan for reprocessing endoscope, more measures related to safe injection practices, accreditation status, participation in a registry, sedation safet y, and nursing sensitive structural measures.CMS-1525-FC 1301 Response : We thank the commenter for the input and recommendations for future measurement topics. We will take them into consideration in future measure selection efforts for this program. 7. Technical Specification U pdates and Data Publication a. Maintenance of Technical Specifications for Quality Measures In the CY 2012 OPPS/ASC proposed rule (76 FR 42348), we proposed to provide technical specifications, and in some cases, links to technical sp ecifications hosted on external third party Web sites, for the ASC Quality Reporting Program measure in a Specifications Manual, to be posted after publication of the CY 2012 OPPS/ASC final rule with comment period, on the CMS QualityNet Web site at http://www.QualityNet.org . Currently, the specifications for the proposed ASC measures for the CY 2014, CY 2015 and CY 2016 paymen t determinations, w ith the exception of the two structural measures, can be found at: http://www.ascquality.org/documents/ASCQu alityCollaborationImplementationGuide.pd
f

; http://www.cms.gov/pqrs/downloads/2011_Phys QualRptg_MeasuresGroups_Specificatio nsManual_033111.pdf?agree=yes&next=Accept ; http://www.cdc.gov/nhsn/psc.html ; and http://www.cdc.gov/nhsn/PDFs /HSPmanual/HPS_Manual.pdf . The specifications for the two structural measures ar e included in the discussion. We proposed to maintain the technical sp ecifications for the measures adopted for the ASC Quality Reporting Progr am by updating this Specific ations Manual, including updating the detailed instructions and the calc ulation of algorithms as appropriate. InCMS-1525-FC 1302 some cases where the specifications are ava ilable elsewhere, we may include links to Web sites hosting technical sp ecifications. We currently use this same process for Hospital OQR Program measures, as discusse d in sections XIV.A.3.a. of the proposed rule and this final rule with comment peri od. We proposed to follow the same technical specification maintenance process for the AS C Quality Reporting Program measures as for the Hospital OQR Program measures a nd we invited public comments on this proposal. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 68767), we established a subregul atory process for updates to th e technical specifications that we use to calculate Hospital OQR Program measures. This process is used when changes to the measure specifications are necessa ry due to changes in scientific evidence or other substantive changes, thereby giving CMS the option to seek re-endorsement of that measure. The legal standard for a dopting Hospital OQR measures is the measure must be appropriate to measure quality of care in the setting, there must be consensus among affected parties, and to the extent feas ible and practicable, measures must be set forth by a consensus building entity. We not e that NQF endorsement of an OQR measure is not required under sections 1833(i)(2)(D)(iv), (i)(7) or (t)(17) of the Act. The legal standard for adopting ASC measures is this same standard, except as the Secretary may otherwise provide. Changes of this nature to measures adopted for the ASC Quality Reporting Program may not coincide with the timing of our regulatory actions, but nevertheless require inclusion in the meas ure specifications so that measures areCMS-1525-FC 1303 calculated based on the most up-to-date scient ific standards and ̧ in some instances ̧ consensus standards. For the Hospital OQR Program, we indicated that notification of changes to the measure specifications is availabl e on the QualityNet Web site, http://www.QualityNet.org , and in the Hospital OQR Sp ecifications Manual and would occur no less than 3 months before any changes become effective for purposes of reporting under the Hospital OQR Program. The Hospital OQR Specifications Manual is released every 6 months and addenda are released as necessary providing at least 3 months of advance notice fo r substantial changes, such as changes to ICD-9, CPT, NUBC, and HCPCS codes, and at least 6 mont hs notice for substantive changes to data elements that would require significant sy stems changes. We proposed to follow the same subregulatory process for the ASC Qu ality Reporting Program for updates to the technical specifications. In the proposed rule, we invited public comments on this proposal.
Comment : A few commenters expressed appreciation of the technical specifications maintenance timeline, which pr oposes that at least 6 months of advance notice will be provided to participants for s ubstantive changes to data elements that would require significant syst em changes and at least th ree months for substantial changes. A commenter noted that the implementation of a new reporting program requires even more advance notice and no less than a minimum of 6 months. Response : We appreciate the commenters’ support for our proposed technical specifications maintenance timeline. We will st rive to provide as much advance notice asCMS-1525-FC 1304 possible when substantive changes to tec hnical specifications are made. We are providing more start up time for the program by delaying the start of required data submission for the program to October 1, 2012. After consideration of the public comme nt we received, we are finalizing the policy of providing technical sp ecifications and links to technical specifications in a Specifications Manual to be pos ted after publication of this final rule with comment period. However, we are finalizing a policy of posting it not only the CMS QualityNet Web site as we proposed, but also on a CMS Web site such as http://www.cms.gov because we wish to utilize multiple Web sites to increase ASC awareness of our technical and measure specifications in our outreach and education. We believe that posting the information on the QualityNet Web site woul d increase ASC awareness of our program’s specifications. However, we also believe that many ASC’s will review the CMS Web site, since CMS posts claims processing manua ls and other documentation that are used by providers and practitioners to submit claims to CMS. We also are finalizing our proposal to follow the same maintenance process used for the Hospital OQR Program, including mainte nance of the technical specifications for the measures adopted by updating the Specifi cations Manual, and updating the detailed instructions and the calculati on of algorithms as appropriate. We also are finalizing our policy to follow the same subregulatory pro cess for the ASC Quality Reporting Program as used for the Hospital OQR Program for updates to the technical specifications, including issuing regular manual releases at six month intervals, to provide addenda as necessary, and providing at least 3 months of advance notice for subs tantial changes suchCMS-1525-FC 1305 as changes to ICD-9, CPT, NUB C, and HCPCS codes, and at least 6 months notice for substantive changes to data elements that would require significant systems changes. b. Publication of ASC Qua lity Reporting Program Data Section 1833(t)(17)(E) of th e Act requires that the Secretary establish procedures to make data collected under the Hospital OQR Program available to the public. It also states that such procedures must ensure th at a hospital has the oppor tunity to review the data that are to be made public with respect to the hospital prior to such data being made public. These requirements under section 1833(t )(17)(E) of the Act also apply to the ASC Quality Reporting Program except as the Secretary may otherwise provide. In the CY 2012 OPPS/ASC proposed rule (76 FR 42348), we proposed to make data that an ASC has submitted for the ASC Quality Repor ting Program available on a CMS Web site after providing an ASC an opportunity to pr eview the data to be made public. We proposed that these data would be displaye d at the CMS Certification Number (CCN) level. Publishing this information encourages beneficiaries to work with their doctors and ASCs to discuss the quality of care ASCs provide to patients, thereby providing an additional incentive to ASCs to improve the qua lity of care that they furnish. We intend to propose more detail on the publication of da ta in a later rulemaking. In the proposed rule, we solicited public comment on these proposed processes of making ASC quality data available to the public.
Comment : Commenters overwhelmingly supported transparency in ASC quality reporting and cost information and some recommended CMS publish the ASC quality data at the earliest opportunity.CMS-1525-FC 1306 Commenters believed the ASC quality in formation should be displayed in a manner that allows easy comparisons for quality and cost between HOPDs and ASCs. Commenters expressed concerns regarding potential inappropriat e data displayed on Hospital Compare . These commenters suggested that , in publicly di splaying ASC data, CMS should: (1) provide contact inform ation for program content area experts; (2) provide a provider-specific narrative section that would allow providers to advise consumers on any concerns the provider has regarding the reliability or accuracy of data posted; (3) provide each ASC’s accreditation status; (4) display Medicare rates and patients’ out-of-pocket costs for services provided in both HOPD and ASC settings; (5) distinguish ASCs where onl y GI procedures are done, thos e where they are also done, and those where they are not done; and (6) stratify performance data when it is publicly posted based on risk profiles. Response : We thank the commenters for their support and suggestions. We will take the suggestions into consideration for future public reporting of the data.
Comment : Some commenters believed that ASCs should have one year of confidential feedback on meas ure participation, data completeness, QDC submission errors, and performance details at CCN level, prior to publication of the data. Some commenters recommended that an appeals pro cess should be put in place for dispute of data accuracy. Response : We will consider these suggestions. We are required to make the data submitted under this program available to the pu blic. Prior to making the data available to the public, we also are required to provide facilities with the opportunity to reviewCMS-1525-FC 1307 their data. We intend to propose a recons ideration and appeals process in future rulemaking.
Comment : A few commenters urged CMS to st rive for user friendly data on the CMS Web site for the ASC Quality Reporting Program. Response : We thank the commenters for thei r suggestion; we intend to make the display as consumer friendly as possible. After consideration of the public comments we receive d, we are finalizing our proposed policy to make data that an ASC has submitted for the ASC Quality Reporting Program available on a CMS Web site after pr oviding an ASC an opportunity to preview the data to be made public. As we propose d, these data will be displayed at the CCN level. 8. Requirements for Reporting of ASC Quality Data for the CY 2014 Payment Determination In the CY 2012 OPPS/ASC proposed rule (76 FR 42348 through 42349), to participate in the ASC Quality Reporting Program for the CY 2014 payment determination, we proposed that ASCs must meet data collection and data submission requirements. We stated that we intend to propose administrativ e requirements, data validation and data completeness requirements, reconsideration and appeals processes, and CY 2015 payment determination reporting requirements in the CY 2013 OPPS/ASC proposed rule.
Comment : Several commenters stated their concern that administrative requirements, data validation and data comp leteness requirements, and reconsiderationCMS-1525-FC 1308 and appeal processes were not proposed or provided in detail. Several commenters suggested that rules for data validation and completeness as well as the proposed process for reconsideration and appeals be specified in an interim rule in the first quarter of 2012. One commenter stated their belief that since th e use of claims-based quality data codes is a new approach to quality data reporting, data validation procedures mu st be included in a final ASC Quality Reporting Program. One commenter wished to consider the more detailed proposals intended for publication in later rulemaking and encouraged CMS to issue these proposals at the earliest opportunity. One co mmenter believed that the uncertainty associated with not knowing what is necessary to be a successful participant in the program is an unwanted deterrent to full participation. Response : We thank these commenters for expressing their concerns regarding the deferring of proposals for administrative requirements, data validation and data completeness requirements, and reconsidera tion and appeals processes requirements until the CY 2013 OPPS/ASC proposed rule. We fully intend to put forth these proposals as soon as possible using the public comment s we received on the CY 2012 OPPS/ASC proposed rule. We agree that it is preferable to i ssue these proposals as soon as possible and based upon the comments received intend to do so in the FY 2013 IPPS/LTCH PPS proposed rule rather than th e CY 2013 OPPS/ASC proposed rule. We intend to take this approach because the FY 2013 IPPS/LTCH PPS pr oposed rule is scheduled to finalize earlier and prior to data co llection beginning with October 2012 services. We disagree with the comment that the use of claims-based quality codes is a new approach to qualityCMS-1525-FC 1309 data reporting; this mechanism is used to collect such information under the PQRS. However, regarding the necessity to include data validation proce dures in a final ASC Quality Reporting Program, we will consider these comments for future rulemaking. We note that claims-based and structural measur es historically have not been validated through independent medical record review in our hospital and physician quality reporting programs due to the lack of re levant information in medical record documentation for specific data elements, such as use of a safe surgery checklist.
Comment : One commenter stated that QualityNet accounts are automatically deactivated after a 120-day pe riod of inactivity and yet as proposed, ASCs would only use the QualityNet for data submission infrequently. This commenter urged CMS to establish a process to av ert account deactivation. Response : We thank the commenter for raisi ng this issue. While we did not make any proposals specifically addressing th e need for a QualityNet account, we made proposals regarding the entering of structural measure data which may necessitate the need for a QualityNet account. In finalizi ng our proposals regardi ng structural measure data entry, we note that we have deferred the data entry for structural measure data until 2013; note that a QualityNet account is not nece ssary to access information that is posted to the Web site, such as speci fications manuals and educationa l materials. We intend to address any QualityNet account requirements for the ASC Quality Reporting Program for program requirements in later rulemaking.CMS-1525-FC 1310 a. Data Collection and Submission Requi rements for the Claims-Based Measures In the CY 2012 OPPS/ASC proposed rule (76 FR 42348 through 42349), we proposed that, to be eligible for the fu ll CY 2014 ASC annual payment update, ASCs would be required to submit complete da ta on individual quality measures through a claims-based reporting mechanism by subm itting the appropriate QDCs on the ASC’s Medicare claims. For the CY 2014 payment determination, we proposed to use Medicare fee-for-service ASC claims for services furnished between January 1, 2012 and December 31, 2012. We proposed to consider an ASC as participating in the ASC Quality Reporting Program for CY 2014 payment determination if the ASC includes QDCs specified for the program on their CY 2012 claims relating to th e proposed measures if finalized. As no determinations will be made affecting payment until the CY 2014 annual payment update, we proposed this approach in order to reduce ASC burden. We stated that we intend to provide additional details regard ing participation notification and other administrative requirements in CY 2013 rulemaking. We proposed that data completeness for claims-based measures would be determined by comparing the number of claims meeting measure specifications that contain the appropriate QDCs with the num ber of claims that would meet measure specifications, but did not have the appropriate QDCs on the submitted claim. We stated that we intend to propose how we will assess data completeness for claims-based measures in the CY 2013 OPPS/ASC propos ed rule. In the CY 2012 OPPS/ASC proposed rule, we requested public commen t on these proposals and were specificallyCMS-1525-FC 1311 interested in receiving public comment on what constitutes comp lete data in regard to our proposed ASC claims-based measures utilizing QDCs and methods to assess completeness.
Comment : Some commenters suppo rted the proposal to consider an ASC as participating in the ASC Quality Reporting Program if the ASC includes the QDCs established for finalized claims-based measures on its submitted claim forms during the reporting period for the CY 2014 payment determination as this approach was seen as reasonable and reduced burden. Response : We thank these commenters for th eir support. We agree that this method is reasonable and will reduce burden.
Comment : Many commenters expressed thei r belief that the time line for beginning the reporting of quality data was too aggressive, citing issues of time to adapt billing systems and personnel training. Many commenters suggested th at data collection be delayed, beginning with October 1, 2012 serv ices, rather than January 1, 2012 services as proposed. Response : We thank the commenters for their views. Based upon the many comments received regarding the data coll ection time period for the CY 2014 payment determination, we are delaying the beginning of the data collection until October 1, 2012. Thus, we will be using the claims-based QDC data collection mechanism for ASC services furnished for Medicare patients from October 1, 2012 through December 31, 2012 for the CY 2014 payment dete rmination measures, as discussed in sectionXIV.K.3.a. of this fina l rule with comment period.CMS-1525-FC 1312
Comment : One commenter believed that a low threshold for data completeness should be established for data collection during CY 2012 because ASCs will not know the rules by which they are being judged until late in 2012 and that reporting thresholds of less than 100 percent for initial reporting periods are consistent with other CMS reporting programs. Some commenters sugges ted, that due to ASCs not being familiar with reporting, successful reporting on a lim ited number of claims, for example, 50 percent should be permitted, a level similar to that in the PQRS. Response : We thank these commenters fo r responding to our request on what constitutes complete data for our proposed ASC claims-based measures. We agree that for the initial year of the progr am, a low threshold should be used and that a level such as the 50 percent used in the PQRS would be reas onable. As previously stated, we intend to propose how we will assess data completeness for claims-based measures in the FY 2013 IPPS/LTCH PPS proposed rule and will consid er the comments when developing our proposals.
Comment : Some commenters believed that, given the variability in ASC case mix, it can reasonably be anticipated that some measures will not apply to all ASCs, and, therefore, that CMS should c onsider the need for exemptions based on case-mix. One commenter believed that some smaller faciliti es may not have any cases for the proposed ASC quality measures and that to maintain a process that limits burden, waiving data submission requirements when a facility has 5 or fewer cases for a measure as is done under the Hospital IQR and Hospital OQR Programs could be implemented.CMS-1525-FC 1313 Response : We thank the commenters for th eir views regarding criteria for reporting exemptions under the ASC Quality Reporting Program. We will consider these comments as we develop our proposals in fu ture rulemaking. As stated above, based upon the comments received, we intend to make further proposals on data completeness in the FY 2013 IPPS/LTCH PPS proposed ru le rather than the CY 2013 OPPS/ASC proposed rule as the former rule is scheduled to finalize earlier. We agree that waiving data submission requirements for low case load s is reasonable and we will consider this comment with all others when developing our proposals.
Comment : One commenter believed that, sin ce the full complement of measures are not applicable to all AS Cs, G-codes that ASCs can submit once during a performance period that indicates the measure is not a pplicable to the ASC should be developed, thereby exempting the ASC from data subm ission for the measure. One commenter believed that it is unclear how a facility shoul d report with respect to a measure that may not be applicable to the services furnished by that type of ASC. One commenter sought clarification that ASCs would not need to re port on all measures, but only those measures that applied. Response : We thank the commenters for thei r views regarding methods to report when an ASC does not have cases for a qual ity measure. We understand that a measure may not be applicable to the services furnis hed by a type of ASC. For the reporting of quality data using QDCs, as stated in Section XIV.K.1.a.5, ASCs would add the appropriate QDCs for measure numerators a nd denominators on Medicare Part B claim forms to submit quality data. We intend to provide education and outreach on dataCMS-1525-FC 1314 submission for the reporting program, and we will publish details about the QDCs and whether they will need to be submitted for numerators and denominators in the ASC Quality Reporting Program Specifications Manual. We anticipate releasing this manual in second quarter 2012.
Comment : Some commenters believed that what CMS proposed as constituting “successful” reporting, that is complete submission, was vague. Response : We are finalizing our proposal s to assess the completeness of reporting by comparing the number of claims meeting measure specifications that contain the appropriate QDCs with the number of clai ms that would meet measure specifications, but did not have the appropriate QDCs on the submitted claims. We will be using public comments we received that addressed this issue in the developm ent of our future proposals. As stated above, we intend to propose a specific definition of reporting completeness in the FY 2013 IPPS/LTCH PPS proposed rule in order to provide opportunity for notice and comment prior to October 2012 services. After consideration of the public comments receive d, we are finalizing our proposals with some modification. As proposed , we are finalizing our proposal that, to be eligible for the full CY 2014 ASC annual payment update, an ASC must submit complete data on individual quality m easures through a claims-based reporting mechanism by submitting the appropriate QDCs on the ASC’s Medicare claims. Further, as proposed, we are finalizing our proposal that data completeness for claims-based measures be determined by comparing the number of claims meeting measure specifications that contain the appropriate QDC s with the number of claims that wouldCMS-1525-FC 1315 meet measure specifications, but did not have the appropriate QDCs on the submitted claim. Finally, we are deferring the data collection time period for the CY 2014 payment determination to a later date, beginning da ta collection with services beginning October 1, 2012, rather than January 1, 2012, while maintaining the end date of December 31, 2012. We also are finalizing our proposal to c onsider an ASC as participating in the ASC Quality Reporting Program for CY 2014 payment determination if the ASC includes QDCs specified for the program on th eir CY 2012 claims relating to finalized

measures. b. Data Submission Deadlines for the Su rgical Site Infection Rate Measure As discussed above, we proposed to adopt a HAI measure, Surgical Site Infection Rate, for the CY 2014 payment determination. We proposed to use the data submission and reporting standard procedures that have been set forth by the CDC for NHSN participation in general and for submission of this measure to the NHSN. We referred readers to the CDC’s NHSN Web site ( http://www.cdc.gov/nhsn ) for detailed data submission and reporting procedures. Our proposal seeks to reduce ASC burden by aligning CMS data submission and reporti ng procedures with NHSN procedures currently used by healthcare pr oviders and suppliers. The submission timeframes for the CY 2014 payment determination that we proposed to use for the proposed Surgical Site Infection Rate measure were shown in the CY 2012 OPPS/ASC proposed rule (76 FR 42349). We stated that ASCs must submit their quarterly data to the NHSN for ASC Quality Data Reporting purposes within the date intervals shown in the table set out inCMS-1525-FC 1316 the proposed rule (76 FR 43249) (any updates to this schedule would be posted on the QualityNet and CMS Web sites). In the proposed rule, we requested pub lic comments on these proposals. We did not receive any comments specifically on the proposed timeframes. However, as discussed above, we are not fina lizing this measure at this time; therefore, we are not finalizing this time table for data collection.CMS-1525-FC 1317 XV. Changes to Whole Hospital and Rura l Provider Exceptions to the Physician Self-Referral Prohibition: Exception for Expansion of Facility Capacity; and Changes to Provider Agreement Regulation s Relating to Patient Notification Requirements A. Background Section 1877 of the Act, also known as the physician self-referral law: (1) prohibits a physician from making referrals for certain “designated health services” (DHS) payable by Medicare to an entity wi th which the physician (or an immediate family member) has a financial relationshi p (ownership or compensation), unless an exception applies; and (2) prohib its the entity from filing cl aims with Medicare (or billing another individual, entity, or third party payer) for those DHS furnished as a result of a prohibited referral. The Act establishes a number of specific exceptions and grants the Secretary the authority to crea te regulatory exceptions that pose no risk of program or patient abuse. Section 1877(d) of the Act sets forth a dditional exceptions related to ownership or investment interests held by a physician (or an immediate family member of a physician) in an entity that furnishes DHS. Section 1877(d)(2) of the Act provides an exception for ownership or investment interests in rural provi ders. In order for an entity to qualify for the exception, the DHS must be furnished in a rural area (as define d in section 1886(d)(2) of the Act) and substantially all of the DHS furnished by the entity must be furnished to individuals residing in a rura l area. Section 1877(d)(3) of the Act provides an exception, known as the “whole hospital” exception, for ow nership or investment interests in aCMS-1525-FC 1318 hospital located outside of Puerto Rico, provided that the re ferring physician is authorized to perform services at the hospital and the ownershi p or investment interest is in the hospital itself (and not mere ly in a subdivision of the hospital). B. Changes Made by the Affordable Care Act 1. Provisions Relating to Exceptions to Ownership and Investment Prohibition (Section 6001(a) of the Affordable Care Act) Section 6001(a) of the Affordable Care Act amended the whole hospital and rural provider exceptions to impose additional restrictions on physician ownership or investment in hospitals. The statute defines a “physician owne r or investor” in a hospital as a physician or immediate family member of a physician who has a direct or indirect ownership or investment interest in a hospita l. We will refer to hospitals with such “physician owners or investors” as “physician-owned hospitals.” We addressed section 6001(a) of the Affordable Care Act in the CY 2011 OPPS/ASC final rule with comment pe riod (75 FR 71800). In 42 CFR 411.362, we implemented most of the requirements of s ection 6001(a) of the Affordable Care Act, including patient safety requirements. In sections XV.B.2. and C. of the CY 2012 OPPS/ASC proposed rule (76 FR 42350) and th is final rule with comment period, we address the process for a hospital to request an exception to the prohibition on expansion of facility capacity under section 6001(a)(3) of the Affordable Care Act. In section XV.D. of the proposed rule and this final rule with comment period, we address related patient notificati on requirements in the provider agreement regulations.CMS-1525-FC 1319 2. Provisions of Section 6001(a)(3 ) of the Affordable Care Act The amended whole hospital and rural prov ider 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 have a provider agreement in effect as of this date, but did have a provider agreement in effect on December 31, 2010, the date of effect of such agreement). Section 6001(a)(3) of the Affordable Care Act added new section 1877(i)(3)(A)(i) of the Act to set forth that the Secretary shall establis h and implement an exception process to the prohibition on expansion of facility capacit y. Referrals are prohibited if made by physician owners or investors after facility expansion and prior to the Secretary granting an exception. Exceptions for expanding facility capacity will protect only those referrals made after the exception is granted. In the CY 2012 OPPS/ASC proposed rule (76 FR 42350), we set forth proposed regula tions for this process at §411.362(c) and related definitions at §411.362(a). The proposed regulations at new §411.362(c) set forth the proce ss for a hospital to request an exception. Proposed new §411.362(c) (2) outlined the requirements for an applicable hospital request and §411.362(c)(3) outlined the requirements for a high Medicaid facility request. These terms are defined at sections 1877(i)(3)(E) and 1877(i)(3)(F) of the Act. The statute is clear that an applicable hospital may apply for an exception up to once every 2 years. Using our rulemaking authority under sections 1871 and 1877(i)(3)(A)(i) of the Act, we proposed to interpret the statute to impose the sameCMS-1525-FC 1320 2-year frequency limit on high Medicaid facilitie s (as discussed in section XV.C.2. of this final rule with comment period). We proposed to set forth the elements required for a complete request for an exception under proposed new § 411.362(c)(4). The opportunity for community input (required by section 1877(i)(3)(A )(ii) of the Act) and timing of a complete request were described in proposed new § 411.362(c)(5). Under proposed new § 411.362(c)(5), we proposed to provide an opportunity for indi viduals and entities in the community in which the hospital is located to provide input with respect to the hospital’s request for an exception. For purposes of the proposed rule and this final rule with comment period, when the statute refers to an “appli cation,” we use the term “request.” Because section 1877(i)(3)(D) of the Act pr ovides that any increase in the number of operating rooms, procedure rooms, and be ds for which a hospital is licensed pursuant to being granted an exception may occur only in facilities on the hospital’s main campus, we proposed a definition of the “main cam pus of the hospital” at § 411.362(a), as discussed below. In addition, we proposed a definition of the “baseline number of operating rooms, procedure rooms, and beds” for purposes of section 1877(i)(3)(C)(ii) of the Act. Section 1877(i)(3)(H) of the Act provides that the Secretary shall publish the final decision with respect to an application in the Federal Register no later than 60 days after receiving a complete application. Under se ction XV.C.4. of the pr oposed rule and this final rule with comment period, we discuss our proposal for publis hing decisions in the Federal Register, as well as on the CMS Web site.CMS-1525-FC 1321 Under section 1877(i)(3)(A) of the Ac t, the Secretary must promulgate regulations by January 1, 2012, concerning the process for a hospital to apply for an exception, and implement this process on February 1, 2012. In the proposed rule, we proposed an effective date of January 1, 2012. Below, we set out our proposals and our final policies related to the excep tion process in greater detail. C. Process for Requesting an Exception to the Prohibition on Expansion of Facility Capacity In order to conform our regulations to the amendments made to the rural provider and whole hospital exceptions by section 6001(a)(3) of the Affo rdable Care Act, in the CY 2012 OPPS/ASC proposed rule (76 FR 42350), we proposed to add two definitions in § 411.362(a) and a new § 411.362(c) to establish the process by which an applicable hospital or high Medicaid facility may re quest an exception to the prohibition on expansion of facility capacity. We proposed to define the terms “baseline number of operating rooms, procedure rooms, and beds” and “main campus of the hospital.” The process we proposed set forth the relevant da ta sources and the required elements of a complete request for an exception. Below we address comments we received on this proposal. 1. General Comments
Comment : Commenters were generally suppor tive of CMS’ overall approach to the exception process. One commenter co ntended that the proposed rule honors the purpose and intent of the Affordable Care Act’s elimination of the whole hospitalCMS-1525-FC 1322 exception while permitting reasonable grandfathering policies to protect self-referrals for existing physician-owned hospitals. Response : We appreciate the commenters’ support.
Comment : In the proposed rule (76 FR 42350 and 42351), CMS proposed that data from the CMS Healthcare Cost Report Information System (HCRIS) be used to determine whether a hospital satisfies the inpatient Medicaid admissions, bed capacity, and bed occupancy criteria for applicable hos pitals or the inpatient Medicaid admissions criterion for high Medicaid f acilities. CMS currently c onsiders HCRIS to contain a sufficient amount of data for a particular fiscal year if HCRIS contains data from at least 6,100 hospitals for that fiscal year. Theref ore, CMS proposed that HCRIS must contain data from at least 6,100 hospitals for a particular year in order for that year’s data to be used under the exception process. CMS proposed that if HC RIS does not contain sufficient data for that year, data from the most recent year(s) that satisfy the threshold should be used. Some commenters supported the CMS proposal to require hospitals to use data maintained within HCRIS to demonstrate that they satisfy the relevant eligibility criteria. These commenters asserted that use of standa rdized data sets will minimize inconsistent application of the eligibility criteria. Response : We appreciate the commenters’ support.
Comment : One commenter recommended that CMS consider using the Dartmouth Atlas “Hospital Se rvice Areas” and the 24-kilome ter radius around a hospital in determining whether a hospital has a legitimate need to increase its number ofCMS-1525-FC 1323 operating rooms, procedure rooms, and beds under the exception process for both applicable hospitals and high Medicaid facilities. Response : The commenter did not provide details regarding how the suggested geographic areas should be cons idered in the exception proc ess. If the commenter is recommending that we use these areas in lieu of the county, State, or national data referred to in sections 1877(i)(3)(E) and 1877( i)(3)(F) of the Act, the recommendation is contrary to these statutor y directives, and, therefore, we decline to adopt it. 2. Applicable Hospital Below we separately discuss each of the statutory criteria th at a hospital must satisfy to qualify as an “applicable hosp ital.” In the CY 2012 OPPS/ASC proposed rule (76 FR 42350), we proposed the processes by wh ich a hospital can determine whether it satisfies each criterion. The proposed data requirements for each criterion are further discussed in each section below. We stated in the proposed rule that we will post the average percent of total inpatient Medicaid admissions per county, th e average bed capacity per State, the national average bed capacity, and the averag e bed occupancy per State on the CMS Web site at: http://www.cms.gov/physicianselfref erral/85_physician_owned_hospitals.asp

. We stated that hospitals could access thes e data to assess whether they satisfy the respective criteria to qualify as an applicable hospital. We also stated that we would make a reasonable effort to ensure that th e data contained in HCRIS are correct and complete at the time of disclosure. We invited public comment on proposing and justifying alternative data sources other than HCRIS that could result in more accurateCMS-1525-FC 1324 determinations as to whether a hospital satisfi es the relevant criteria. We received the following comment regarding the requirement th at hospitals must use data maintained within HCRIS to demonstrate satisfa ction of the eligibility criteria.
Comment : One commenter recommended that CMS permit applicable hospitals to use State agency-maintained data to demonstr ate that they meet the eligibility criteria concerning inpatient Medicaid admissions, bed capacity, and bed occupancy. The commenter asserted that State agency-maintaine d data are as accurate as data maintained within HCRIS and are often available more quickly. Response : We are not persuaded to adopt the commenter’s recommendation. We will require hospitals to use data maintained wi thin HCRIS. We believe this will result in the use of uniform and consistent data, whic h will minimize inconsis tent application of the eligibility criteria. a. Percentage Increase in Population Section 1877(i)(3)(E)(i) of the Act provides that an a pplicable hospital must be located in a county in which the percentage increase in the popul ation during the most recent 5-year period (as of the application date) is at least 150 percent of the percentage increase in the population growth of the State in which the hospital is located during that period, as estimated by the Bureau of the Census. To determine the percentage increase in population in the county and State in which the hospital is located, we proposed at new § 411.362(c)(2)(i) that the hospital use population estimates provided by the Bureau of the Census. If the hospital is located in an area referred to by the Bureau of the Cens us as a county equivalent area, such as anCMS-1525-FC 1325 independent city, borough, or census area, we proposed that the hospital should use the Bureau of the Census estimates for the county equivalent area in which it is located. For the remainder of this subsection, “county” refe rs to both a county and a county equivalent

area. We acknowledged that the Bureau of the Census may not provide county and State population size estima tes that are current as of the date that a hospital submits its request for an exception. We proposed that a hospital s hould use only the most recent estimates available to perform the necessary calculations. For example, if a hospital submits a request for an exception in 2012, but the most recent year for which the Bureau of the Census has estimates is 2010, the hospital should perform the necessary calculations using estimates for the most rece nt 5-year period, which in this example, would include years 2006-2010. We also proposed that a hospital use county and State population estimates for the same years. For example, if a hospital s ubmits a request for an exception in 2012 and the most recent year for which the Bureau of the Census has State and county population estimates is 2011 and 2010, respectively, the hospital should perform the necessary calculations using estimates for the most recent 5-year period for which the Bureau of the Census has both State and county population estimates, which in this example, would include years 2006-2010. We proposed to re view a request based on the population estimates available as of the date that a hospi tal submits its request even if the Bureau of the Census updates its estimates after the hos pital submits its request and prior to ourCMS-1525-FC 1326 decision. We received the following comment regarding the populati on growth criterion for applicable hospitals.
Comment : Two commenters supported the prop osal to require hospitals to use estimates from the Bureau of the Census for the population growth criterion. The commenters asserted that use of common data sets will minimize inconsistent application of the eligibility criteria. Response : We appreciate the commente rs’ support for our proposal. After consideration of the public comment we received, we are adopting as final our proposed new § 411.362(c)(2)(i), without modification. b. Inpatient Admissions Section 1877(i)(3)(E)(ii) of the Act provides that an applicable hospital means a hospital that has an annual percent of tota l inpatient admissions under Medicaid that is equal to or greater than the average percent with respect to such admissions for all hospitals located in the county in which the hospital is located. We proposed at new §411.362(c)(2)(ii) to require hospitals to ca lculate inpatient ad missions using filed hospital cost report discharge data. We propos ed that, in calculati ng the hospital’s annual percent of total Medicaid inpatient admissi ons, the hospital should divide the number of discharges for the year that are paid for unde r Medicaid by the total number of discharges for the year paid for by any governmental or private payor. We invited public comment on other data sources that coul d be used to provide an ac curate estimate of the annual percent of total inpatient Medicaid admissi ons for the applicable hospital and for all hospitals in the same county.CMS-1525-FC 1327 We did not receive any public comment s on our proposal. Therefore, we are finalizing our proposal, without modification, to require hosp itals to use hospital cost report discharge data to estimate the annual percentages of total inpatient Medicaid admissions. The statute does not specify the number of years for which the hospital’s annual percent of total inpatient admi ssions under Medicaid must be equal to or greater than the average percent with respect to such admissions for all hospitals located in the county in which the hospital is located. We proposed at new § 411.362(c)(2)(ii) that a hospital must satisfy this criterion for each of the 3 most recent fiscal years for which data are available as of the date the hospital submits a request. We invited public comment on whether 3 years of data are sufficient to in dicate a legitimate need by the hospital to increase its number of operating rooms, pr ocedure rooms, and beds and, if not, how many years of data we should consider in evaluating a request for an exception. We proposed at new § 411.362(c)(2)(ii) th at the hospital would estimate its annual percentage of total inpatient admi ssions under Medicaid. The hospital would reference its own filed cost re ports for the 3 most recent fiscal years for which data are available. We proposed that we would review a request based on the data available as of the date the hospital submits its request. We stated that we plan to issue guidance to further address the process for a hospital to estimate its annual percentage of total inpatient admissions under Medicaid. The guidance will also explain how we will determine and provide the average percentage s of inpatient admissions under Medicaid for each county.CMS-1525-FC 1328
Comment : One commenter contended that CM S exceeded its statutory authority in proposing that applicable hospitals must satisfy the eligibilit y criteria concerning inpatient Medicaid admissions, bed capacity, a nd bed occupancy for each of the 3 most recent fiscal years. The commenter asserted that the proposal was not supported by the statutory text, which imposes such a requireme nt for high Medicaid facilities, but not for applicable hospitals. The commenter noted that the Congress could have required applicable hospitals to satisfy these criteria for each of the 3 most recent years, but did

not. Response : We disagree with the commenter that we exceeded our statutory authority in proposing the 3-year timeframe. The fact that Congress did not specify a timeframe for meeting this criterion does not preclude us from imposing a timeframe using our rulemaking authority under sections 1871 and 1877(i)(3)(A)(i) of the Act. We believe a general timeframe helps identify the need for an exception and ensure consistent application of the prohibition.
Comment : One commenter asserted that it wa s unreasonable to require 3 years of data to demonstrate a legitimate need by a hospital to expand its capacity. The commenter contended that such a requirement would make it virtually impossible for a hospital to qualify as an applicable hosp ital and would unreasona bly delay a hospital’s ability to qualify as an “applicable hospital.” The commenter recommended that CMS allow applicable hospitals to satisfy th e inpatient admission, bed capacity, and bed occupancy criteria using data fr om any 1 of the last 3 most re cent fiscal years prior to aCMS-1525-FC 1329 facility capacity expansion request, which would allow hospitals to apply for an exception to the capacity re striction much sooner. Another commenter expressed concern that 3 years of data on hospital admissions, bed capacity, and bed occupancy is too long to identify trends in the demand for health services, especially in high-gro wth markets with rapi dly changing populations, and, therefore, would be incapable of iden tifying legitimate expansion needs in some areas of the country. The commenter suggested that data be weighted to identify health care demand trends in States and coun ties with rapidly changing populations. Response : We are not persuaded to adopt the first commenter’s proposal. We believe that allowing hospitals to use data fr om any 1 of the last 3 most recent years may result in inconsistent application of the e ligibility criteria and the approval of an expansion request based on anomalous data. However, we have reconsidered our proposal to require hospitals to satisfy eligib ility criteria for each of the 3 most recent fiscal years for which data are available. We are adopting a modification of this proposal in this final rule with comment period. U nder this modification, a hospital’s eligibility for an exception to the prohibition against fac ility expansion can be established using the most recent year of data available regarding each of the criteria related to inpatient admission data, bed capacity, and bed occupancy rates. We believe that requiring 1 year of data on each of these crit eria, together with the requi rement to satisfy a 5-year population growth criterion, is sufficient to iden tify those hospitals with a legitimate need to expand capacity without risking the appr oval of exception requests based on aberrant data. In addition, we believe that requiring applicable hospitals to perform calculationsCMS-1525-FC 1330 and submit documentation for 1 year of data, as opposed to 3 years of data, will decrease the administrative burden on applicable hospitals. With respect to the comment regarding weighted data, the commenter did not set forth a specific recommendation demonstrati ng how the data can be weighted. Without further detail, we are unable to adopt the co mmenter’s suggestion. Moreover, we believe that our revised policy may address some of the commenter’s concerns. We are modifying proposed new § 411.362(c)(2)( ii), (iv), and (v) to provide that hospitals establish complianc e with the inpatient Medicaid admission, average bed capacity, and average bed occupancy criteria for applicable hospitals using the most recent available fiscal year data. A hosp ital may access these data on the CMS Web site

at: http://www.cms.gov/physicianselfref erral/85_physician_ owned_hospitals.asp . If the hospital filed its own cost report for the respective year a nd satisfies the criteria to qualify as an applicable hospital, the hospital may submit a requ est starting on February 1, 2012.
Comment : In the proposed rule (76 FR 42351 and 42352), CMS proposed that estimates of inpatient Medicaid admissions w ould be based on filed hospital cost report discharge data. In completing the hospital cost report, hospi tals report the number of discharges for whom Medicaid is the primary payer. On e commenter recommended that, to estimate the annual percent of total inpa tient Medicaid admissions , Medicaid should be considered as a whole and not broken down by primary and secondary payers. Response : We do not agree with the commen ter. The statute does not require Medicaid data to be consider ed as a whole. In addition, hospitals do not submit dischargeCMS-1525-FC 1331 data in the manner recommended by the comme nter, and therefore such data are not readily available for use in the exception process. After consideration of th e public comments we receive d, we are finalizing at § 411.362(c)(2)(ii) the Medicaid inpatient admi ssion criterion for applicable hospitals. As noted above, the final regu latory language has been modi fied to permit hospitals to satisfy this criterion using data for the most recent fiscal year for which data are available. c. Nondiscrimination Section 1877(i)(3)(E)( iii) of the Act provides that an applicable hospital does not discriminate against benefici aries of Federal health car e programs and does not permit physicians practicing at the hos pital to discriminate against such beneficiaries. We proposed to incorporate this requirement at new § 411.362(c)(2)(iii) of the regulations. We did not receive any public comments regarding the nondiscrimination criterion. Therefore, we are adopting, as final, the incorporation of the requirement at new § 411.362(c)(2)(iii) without modification. d. Bed Capacity Section 1877(i)(3)(E)(iv) of the Act provides that an applicable hospital means a hospital that is located in a State in which the average bed capacity in the State is less than the national average bed capacity. The statute does not specify a time period over which a State’s average bed capacity must be less than the national average bed capacity. We proposed at new § 411.362(c)(2)(iv) that th e State average bed capacity must be less than the national average bed capacity for each of the 3 most recent fiscal years for whichCMS-1525-FC 1332 data are available as of the date that a hos pital submits its request. We invited public comment on whether 3 years of data are suffi cient to indicate a legitimate need by the hospital to increase its number of operating rooms, procedure rooms, and beds and, if not, how many years of data we s hould consider in evaluating an y request for an exception. We note that, for the reasons stated in sect ion XV.C.1.b. of this final rule with comment period, we are modifying the proposed regulator y language to require applicable hospitals to satisfy the bed capacity criterion during only the most recent fiscal year for which data are available. Under our proposed process, we would us e filed hospital cost reporting data to determine State and national average bed capaciti es. We stated that we plan to issue guidance explaining how we will determine and provide the average bed capacities. We proposed that we would review a request base d on the data available as of the date a hospital submits its request. We discu ss below the significant points raised by commenters to our proposal.
Comment : One commenter recommended th at existing physician-owned hospitals should be permitted to expand in counties in which the hospital bed capacity per 1,000 population is below the national average. Response : Section 1877(i)(3)(E)( iv) of the Act provides that an applicable hospital must be located in a State that has an average bed capacity that is less than the national average bed capacity. We are oblig ated to follow the statutory directive. Therefore, we are not adopting the comme nter’s recommendation to consider bed capacity at the county level.CMS-1525-FC 1333
Comment : One commenter asserted that the pr oposed criteria appear sufficiently flexible to allow hospitals located in areas with a low bed capacity and high bed occupancy to be granted an exception from the expansion requirements. Response : We appreciate the commenter’s s upport for the proposed eligibility criteria for applicable hospitals. We believe that our modified ex ception process closely mirrors the statute and will provide sufficient fl exibility to allow hospitals in areas with a low bed capacity and high bed occupa ncy to be granted an exception. After consideration of th e public comments we receive d, we are adopting as final our proposed new § 411.362(c)(2)(iv) with the modification that the State average bed capacity must be less than the national average capacity for the most recent fiscal year for which data are available as of the date that a hospital submits its request, as discussed above in previous responses to comments. e. Bed Occupancy Section 1877(i)(3)(E)(v) of the Act provide s that an applicable hospital means a hospital that has an average bed occupancy ra te that is greater than the average bed occupancy rate in the State in which the hospi tal is located. The st atute does not specify the time period over which the hospital’s aver age bed occupancy rate must be greater than the State average bed occupancy rate . We proposed at new § 411.362(c)(2)(v) that the hospital’s bed occupancy rate must be gr eater than the State average bed occupancy rate for each of the 3 most recent fiscal year s for which data are available as of the date that a hospital submits its request. We invited public comment on whether 3 years of data are sufficient to indicate a legitimate n eed by the hospital to in crease the number ofCMS-1525-FC 1334 its operating rooms, procedure rooms, and be ds and, if not, how many years of data we should consider in evaluating any request for an exception. We note that, for the reasons stated in section XV.C.1.b. this final rule wi th comment period, we have modified this proposal and are requiring applicable hospitals to satisfy the bed occupancy criterion during only the most recent fiscal ye ar for which data are available. We proposed at new § 411.362(c)(2)(v) that the hospital use f iled hospital cost reporting data to calculate its own average bed oc cupancy rate. We stat ed that we plan to issue guidance explaining how the hospital can calculate its bed occupancy rate. The guidance would also explain how we will dete rmine and provide the State bed occupancy rates. We proposed that we would review a request based on the data available as of the date that the hospital submits its request. Except for the comments regarding the need to use 3 years of data to establish that the bed occupancy criterion is satisfied, we did not receive any public comments specific to this criterion. Therefore, as discussed in section XV.C .1.b. of this final rule with comment period, we are fina lizing at § 411.362(c)(2)(v) th e requirement that an applicable hospital must have an average be d occupancy rate that is greater than the average bed occupancy rate in the State in which the hospital is located for the most recent fiscal year for which data are available as of the date that a hospital submits its request. 3. High Medicaid Facility Below we separately discuss each of the statutory criteria th at a hospital must satisfy to qualify as a “hi gh Medicaid facility.” In the CY 2012 OPPS/ASC proposedCMS-1525-FC 1335 rule (76 FR 42351), we proposed the pro cesses by which a hospital can determine whether it satisfies each crit erion. The proposed data requi rements for each criterion are further discussed in the sections below. a. Number of Hospitals in County Section 1877(i)(3)(F)(i ) of the Act provides that a hi gh Medicaid facility must be a hospital that is not the sole hospital in a county. We proposed to incorporate this requirement into the regulations at new § 411.362(c)(3)(i). We received the following comment regarding our proposal.
Comment : One commenter stated that the pr oposed rule will not allow expansion or construction of a physician-owned hospital that is the sole hospital in a county or where no other hospitals exist and expresse d concern that this will reduce access to quality care. Response : Section 1877(i)(3)(F)(i ) of the Act provides that a high Medicaid facility cannot be the sole hospital in a count y. We are obligated to follow this statutory directive. Also, we do not believe that th e requirement reduces access to quality care. Therefore, we are not maki ng any changes in response to the commenter’s concern. After consideration of the public comment we received, we are adopting as final our proposed policy under new § 411.362( c)(3)(i) withou t modification. b. Inpatient Admissions Section 1877(i)(3)(F)(ii) of the Act provides that a high Medicaid facility must be a hospital that, with respect to each of th e 3 most recent years for which data are available, has an annual per cent of total inpatient admissi ons under Medicaid that isCMS-1525-FC 1336 estimated to be greater than such percent with respect to such admissions for any other hospital located in the county in which th e hospital is located. We proposed to incorporate this requirement at ne w § 411.362(c)(3)(ii) of the regulations. We proposed at new § 411.362(c)(3)(ii) that the hospital estimate its annual percentages of total inpatient admissions unde r Medicaid for each of the 3 most recent fiscal years for which data are available. We also proposed that th e hospital estimate the annual percentage of such admissions for a ll other hospitals located in the county in which the hospital is located for each of the 3 most recent fiscal ye ars for which data are available. We proposed that we would review a request base d on the data available as of the date that the hospital submits its request. We proposed to require the applicant hospi tal to use filed hos pital cost reporting discharge data as a proxy fo r inpatient admissions under Medi caid. We stated that we would post the data necessary for a hospital to calculate the annual percentage of total inpatient admissions under Medicaid for all othe r hospitals located in the county in which the hospital is located on the CMS Web site at: http://www.cms.gov/physicianselfref erral/85_physician_owned_hospitals.asp . We also stated that we plan to issue guidance that further describes the process for hospitals to estimate inpatient admissions under Medicaid. We address below the specific comments received in response to our proposal.
Comment : In the proposed rule (76 FR 42351 and 42352), CMS proposed that estimates of inpatient Medicaid admissions w ould be based on filed hospital cost report discharge data. In completing the hospital cost report, hospi tals report the number ofCMS-1525-FC 1337 discharges for whom Medicaid is the primary payer. On e commenter recommended that, to estimate the annual percent of total inpa tient Medicaid admissions , Medicaid should be considered as a whole and not broken down by primary and secondary payers. Response : We do not agree with the commen ter. The statute does not require Medicaid data to be consider ed as a whole. In addition, hospitals do not submit discharge data in the manner recommended by the comme nter, and therefore such data is not readily available for use in the exception process.
Comment : One commenter stated that the proposed rule did not specify whether the average is weighted by total admissions. Response : We believe the commenter’s statemen t refers to the inpatient Medicaid admissions criteria for high Medicaid facilitie s. We are unsure of the exact position taken by the commenter as the commenter di d not explain how the average could be weighted by total admissions. In the proposed rule (76 FR 42351), we stated that we would issue guidance that furthe r describes the process for hospitals to estimate inpatient admissions under Medicaid. After consideration of the public comme nt we received, we are finalizing our proposed policy at new § 411.362(c) (3)(ii) without modification. c. Nondiscrimination Section 1877(i)(3)(F)(iii) of the Act provides that a high Medicaid facility does not discriminate against be neficiaries of Federal hea lth care programs and does not permit physicians practicing at th e hospital to discriminate ag ainst such beneficiaries.CMS-1525-FC 1338 We proposed to incorporate this requir ement at new § 411.362(c )(3)(iii) of the regulations. We did not receive any public comments regarding the nondiscrimination criterion. Therefore, we are finalizing our proposal at new § 411.362(c)(3)(iii) without modification. 4. Procedure for Submitting a Request In the proposed rule, we stated that we are not creating an application form that a hospital must complete to apply for an exception to the prohibition on expansion of facility capacity. Rather, we proposed that a hospital submit to CMS a request that includes the information and documentation set forth in proposed new § 411.362(c)(4)(ii). We proposed that each request must incl ude: (i) the name and address, National Provider Identification number(s) (NPI), Ta x Identification Number(s) (TIN), and CMS Certification Number(s) (CCN) of the hospital; (ii) the count y in which the hospital is located; and (iii) the name, title, address, and daytime telephone number of a contact person who will be available to discuss the request with CMS on behalf of the hospital. Each request must include a clear statement as to whether the hospital is requesting an exception as an applicable hospital or a hi gh Medicaid facility. We proposed that each request submitted by a hospital must include a clear explanation of how it satisfies the criteria using the information discussed in sections XV.C.1. or 2. of the proposed rule. This includes performing, recording, and submitting all calculations necessary to submit a complete request. The hospital’s request must state that it does not discriminate againstCMS-1525-FC 1339 beneficiaries of Federal hea lth care programs and does not pe rmit physicians practicing at the hospital to discriminate against such bene ficiaries. Finally, we encouraged hospitals to clearly label all documentation submitted with a request and indicate the criteria for which the documentation provides supporting information. We proposed at new § 411.362(c)(4)(ii)(E ) that each request must include documentation supporting the hospital’s calcula tion of the hospital’s baseline number of operating rooms, procedure rooms, and beds as defined at section 1877(i)(3)(C)(iii) of the Act; the hospital’s number of operating rooms, procedure rooms, and beds for which the hospital is licensed as of the date that the hospital submits its request; and the additional number of operating rooms, procedure rooms, and beds by which the hospital requests to expand. We proposed at new § 411.362(c)(4)(iii) that each request must include a certification signed by an authori zed representative of the hospital attesting that all of the information provided is true and correct to the best of his or her knowledge and belief. We proposed at new § 411.362(c)(4)(i) that a hospital must either mail an original and one copy of its request to CMS or s ubmit its request electronically. If a hospital submits its request electronically, the hospital must also submit an or iginal, hard copy of the required certification. We received the following comment regarding the process for submitting a request. Comment : One commenter urged CMS to work with hospitals that would benefit from expanded capacity and to modify the appl ication process, as necessary, in responseCMS-1525-FC 1340 to difficulties in meeting its requirements. The commenter asserted the proposed exception process requires complex calculati ons and substantial documentation. Another commenter had no objections to the proposed exception process, while a third commenter would not support the elimination of any of the steps in the process. Response : The required documentation, set forth in proposed new § 411.362(c)(4), includes a statement of whethe r the hospital is seeking an exception as an applicable hospital or high Medicaid f acility, an explanation of how the hospital satisfies the criteria, the submission of the calculations used to support the application, and a certification statement that the hospital does not discriminate against beneficiaries of Federal health programs. We believe each of these requirements is necessary to verify compliance with the statutory criteria for an exception to the capacity restrictions. We also note that performing these calculations is necessary to demonstrate compliance with the statutory criteria. In a ddition, we carefully considered the burden associated with the calculations and documentation. As stated above, we have reduced the burden on hospitals applying for an exception by requiring certain data from only the most recent fiscal year for which data are available. We do not believe any other changes to the application process are needed at this time, although we may consid er changes after we have more experience with the process. After consideration of th e public comments we received, we are finalizing the proposed procedure for submitting a re quest under new § 411.362(c)(4) without modification.CMS-1525-FC 1341 5. Community Input Section 1877(i)(3)(A)(ii) of the Act provi des that individuals and entities in the community in which the applicable hospital is located shall have an opportunity to provide input on the applicable hospital’s re quest for an exception to the prohibition against facility expansion. In the proposed rule (76 FR 42352), we proposed to incorporate this provision in proposed new § 411.362(c)(5) of the regulations. We proposed that the community inpu t must take the form of written comments. In addition, using our rulemaking authority under sections 1871 and 1877(i)(3)(A)(i) of the Act, we proposed that individuals and entities in the community in which a high Medicaid facility is located have the same opportunity to submit written comments. We proposed at new § 411.362(c)(5) that a hospital must disclose on any public Web site for the hospital that it is requ esting an exception. The notice should be accessible to the public and should remain poste d from the time a request is submitted to CMS until a decision is finalized by CMS. Once CMS has received the statements, certifications, and documentation required for a hospital’s request, we stated that CMS will report that the hospital is requesti ng an exception on the CMS Hospital Listserv and will post the hospital’s request for an exception on the CMS Web site. For specific information on how to subscribe to the CMS Hospital Listserv , we refer readers to the CMS Web site at http://www.cms.gov/MLNProducts/dow nloads/MailingLists_FactSheet.pdf . In addition, we proposed that we will publish a noti ce of the hospital’ s request in the Federal Register . We proposed at new § 411.362(c)(5) to allow individuals a nd entities in theCMS-1525-FC 1342 community 30 days from the date of the notice’s publication in the Federal Register to submit written comments. We gave examples of community input , such as documentation demonstrating that the hospital does not satisfy one or more of the data cr iteria or that the hospital discriminates against beneficiaries of Federal health programs. These are examples only; we indicated that we were not restricting the type of community input that may be submitted. We proposed at new § 411.362(c )(5) that written comments must be submitted by mail or electronically to CMS. We proposed at new § 411.362(c)(5)(i) that we will consider a request complete if we do not receive any written comments dur ing the 30-day period after notice of the hospital’s request is published in the Federal Register

. In the proposed rule, we stated that if we receive written comments, we will notify the hospital in writing. We proposed at new § 411.362(c)(5)(ii) to allow the hospital 30 days after CMS notifies the hospital of the written comments to submit information and documentation that rebut the written commen ts. We stated that we would consider the request complete at the end of the 30-da y period provided for th e hospital’s rebuttal, regardless of whether the hospi tal submits additional inform ation or documentation. We also stated that we reserve the right to pe rform our own calculations based on a review of the material submitted and of information generally available to CMS. We address below the comments rece ived in response to our proposal.
Comment : Two commenters asserted that th e proposed exception process closely follows the statute and balances efficient processing with the statute’s requirements,CMS-1525-FC 1343 especially those regarding public and community input on CMS decisions to grant exceptions. One commenter suggested that CMS publish a notice of an exception request in the Federal Register within 60 days of receiving it. The commenter asserted that such a deadline would reduce delays in obtaining a decision, which would allow hospitals to increase capacity sooner, ultimately benefiting Me dicaid recipients in high growth areas. Response : We are not adopting the commenter ’s suggested deadline. There are many factors external to CMS that affect publicati on dates in the Federal Register. However, we will make every effort to expe dite our process for sending a notice of an exception request to the Office of th e Federal Register for publication.
Comment : One commenter expressed concern that entities wishing to offer comments or contest an expansion must do so within 30 days of a notice being published in the Federal Register . Other commenters asserted th at under the proposed rule, too much time will elapse between the date on which a hospital submits a request and the date when a final decision is received. Response : In proposing a 30-day comment peri od, we carefully considered the entire exception process from both the viewpoint of the requesting hospitals and the individuals and entities in the hospital’s community. We believe that the 30-day comment period balances a requesting hospital’ s interest in receiving a timely decision with that of the individuals and entities in the hospital’s community in having a reasonable amount of time to provide input.
Comment : One commenter expressed concer n that the proposed methods for notifying other area hospitals a nd the public of an exception request are not adequate.CMS-1525-FC 1344 The commenter stated that hospitals, employe rs, payors, and members of the community should not have to sign up for the CMS Hospital Listserv or search the Federal Register or CMS Web site to find out if an applic ation for an exception has been made. In addition to the proposed methods of notific ations set forth in new § 411.362(c)(5), the commenter suggested that CMS require the hospital requesting an exception to supply written notification to every other hospital in the Metropolitan Statistical Area (MSA) or within 50 miles of the hospital, if th e hospital is located in a rural area. Response : We disagree with the comment er’s statement that our proposed methods of notification are not adequate. Section 1877(i)(3)( A)(ii) of the Act requires that individuals and entities in the community of an appli cable hospital or high Medicaid facility be allowed an opportunity to provi de input on the hospita l’s request for an exception to the prohibition agai nst facility expansion. In the proposed rule, we proposed to add new § 411.362(c)(5) to specify that a ho spital is required to disclose on any public Web site for the hospital that it is reques ting an exception. We will report that the hospital is requesting an exception on the CMS Hospital Listserv . Also, we will post the hospital’s request for an exception on the CM S Web site and will have a notice of the hospital’s request published in the Federal Register . We believe the proposed methods of notification allow sufficient opportunity fo r individuals and enti ties in the community to provide input. Moreover, we are not pers uaded that the additional notice advocated by the commenter would be benefi cial. We believe that wr itten notice would be overly burdensome for hospitals requesting an excepti on and may not effec tively provide notice to all interested individuals and entities in the hospital’s communit y. For example, if aCMS-1525-FC 1345 nonrural hospital is located near the perimeter of its MSA, th ere may be other interested hospitals in close proximity to the hospital but still located outside that MSA that would not receive individualized notice pursuant to this proposal. Additionally, we are not convinced that a 50-mile radi us in some rural areas w ould include any interested hospitals. In summary, we do not believe th at the commenter’s suggested methods of providing written notice to hospitals will in form all individuals and entities in the community in a consistent, beneficial manner.
Comment : One commenter suggested that CMS require the hospital requesting an exception to place a notice of its request in the newspaper with the largest circulation in the MSA, or, if rural, the county in wh ich the hospital is located. The commenter proposed that the notice should provide (1) the location wher e copies of the expansion request are available, (2) the timeframe for submitting comments, and (3) the name of the designated representative who is ap pointed to receive the comments. Response : As stated in the preceding re sponse, we do not believe additional notice is necessary. We also are concerne d that the commenter’s proposal would be costly and burdensome for the hospital requesting an exception. After consideration of th e public comments we received, we are finalizing the proposals concerning community input and notification at new § 411.362(c)(5) without modification. 6. Permitted Increase Section 1877(i)(3)(C)(i) of the Act provi des that a hospital granted an exception from the Secretary may increase the number of operating rooms, procedure rooms, andCMS-1525-FC 1346 beds for which the hospital is licensed above its baseline number of operating rooms, procedure rooms, and beds. Section 1877(i)(3 )(C)(iii) of the Act defines the “baseline number of operating rooms, procedure rooms, and beds” as the number of operating rooms, procedure rooms, and beds for which the applicable hospital is licensed as of [March 23, 2010] (or, in the case of a hospital that did not have a provider agreement in effect as of such date but does have such an agreement in effect on December 31, 2010, the effective date of such provider agreement). We pr oposed to incorporate this definition, with the clarification that it also applies to high Medicai d facilities, at new § 411.362(a) of the regulations. Section 1877(i)(3)(C)(i) of the Act provides that if a hospital pr eviously has been granted an exception by the Secretary, the hospital may increase the number of its operating rooms, procedure rooms, and licen sed beds above the number of such rooms and beds for which the hospital is licensed af ter application of the most recent increase under such an exception. a. Amount of Permitted Increase Section 1877(i)(3)(C)(ii) of the Act provide s that the Secretary shall not permit an increase in the number of operating rooms, procedure rooms, and beds for which an applicable hospital is licensed to the extent such increase would re sult in the number of operating rooms, procedure rooms, and beds fo r which the applicable hospital is licensed exceeding 200 percent of the baseline number of operating rooms, procedure rooms, and beds of the applicable hosp ital. In the proposed rule (76 FR 42353), we proposed to incorporate this provision at new § 411.362(c)(6)(i) of the regulations.CMS-1525-FC 1347 Using our rulemaking authority under s ections 1871 and 1877(i)(3)(A)(i) of the Act, we proposed to adopt a parallel limit the increase in the number of operating rooms, procedure rooms, and beds for which a high Me dicaid facility may request an exception. We invited public comment on whether the pro posed limit would be sufficient to balance the intent of the general prohibition on expansion with the purpose of the exception process, which is to provide the opportunity to expand in areas wh ere a sufficient need for access to high Medicaid facilities is dem onstrated. We note that, although the statute provides that an applicable hospital may reque st an exception up to once every 2 years, we proposed to apply the same provision to hi gh Medicaid facilities. We believe that providing a high Medicaid faci lity the opportunity to request an exception once every 2 years, while also limiting its total growth, as discussed above, balances the Congress’ intent to prohibit expansion of physician- owned hospitals with the purpose of the exception process.
Comment : Commenters supported the pr oposal regarding the amount of permitted increase. Response : We appreciate the commenters’ support. Upon further review, however, we have concluded that the la nguage of our proposed § 411.362(c)(6)(i) is inconsistent with the limitation set forth in se ction 1877(i)(3)(C)(ii) of the Act. Proposed § 411.362(c)(6)(i) provides that “[a] permitte d increase under this section may not exceed 200 percent of the hospital’s ba seline number of operating ro oms, procedure rooms, and beds.” We have concluded that proposed § 411.362(c)(6)(i) does not clearly express that the 200 percent limitation applies to the total number of operating rooms, procedureCMS-1525-FC 1348 rooms, and beds for which the hospital is licensed after a permitted increase, as opposed to the number of operating rooms, procedure rooms, and beds by which the hospital requests to expand. Therefore, in this final rule with comment period, we are modifying our proposed new § 411.362(c)(6)(i) to more clos ely track the statute. The modification clarifies that a permitted increase may not result in the number of operating rooms, procedure rooms, and beds for which the hospital is licensed exceeding 200 percent of the hospital’s baseline number of operat ing rooms, procedure rooms, and beds.
Comment : One commenter supported the pr oposal to apply the same limit on total growth to both applicable hospitals a nd high Medicaid facilities. The commenter asserted that applying para llel requirements to both a pplicable hospitals and high Medicaid facilities would result in an efficient and consistent process. Response : We agree with the commenter re garding our application of parallel requirements. After consideration of the public comments we received, we are finalizing the proposed new § 411.362(c)(6)(i), with the modification discussed above. b. Location of Permitted Increase Section 1877(i)(3)(D) of the Act provides that any increase in the number of operating rooms, procedure rooms, and beds fo r which an applicable hospital is licensed may occur only in facilities on the main campus of the applicable hospital. In the proposed rule (76 FR 42353), we proposed to incorporate this provision at new § 411.362(c)(6)(ii) of the regulati ons. We proposed to define the term “main campus” as the term “campus” is defined at § 413.65(a)(2 ). Using our rulemaking authority underCMS-1525-FC 1349 sections 1871 and 1877(i)(3)(A)(i ) of the Act, we proposed that, with respect to high Medicaid facilities, the limita tion on expansion of hospital capac ity, as set forth at section 1877(i)(1)(B) of the Act, simila rly applies to the number of operating rooms, procedure rooms, and licensed beds on the “campus” of the high Medicaid facility. We believe that applying the same limitation to applicable hos pitals and high Medica id facilities will result in an efficient and consistent process. We did not receive any public comments regarding the location of the permitted increase. Therefore, we are finalizing the proposed new § 411.362(c)(6)(ii) without modification. 7. Decisions Section 1877(i)(3)(H) of the Act states that the Secretary shall publish in the Federal Register the final decision with respect to an application for an exception to the prohibition against facility e xpansion not later than 60 days after receiving a complete application. In the proposed rule (76 FR 42353), we proposed to codify this provision at new § 411.362(c)(7). To facilitate access to d ecisions, we proposed to post our decisions on the CMS Web site as well. We proposed that the posted information will include the hospital’s name, address, county, and our fina l decision. We also proposed that if an exception is granted under this section, we would post the number of operating rooms, procedure rooms, and beds by which th e hospital may expand under the granted exception. We stated that we believe that posting decisions on the CMS Web site will enable us to inform the public and the aff ected community of our decisions in a timely manner and in a centralized location.CMS-1525-FC 1350
Comment : One commenter recommended that a request for an exception as an applicable hospital should be considered approv ed if the agency fails to publish a final decision in the Federal Register within 60 days of when the request is considered complete. Response : We cannot adopt the comment er’s proposal. Although section 1877(i)(3)(H) of the Act provides that the Secretary shall publish in the Federal Register the final decision with respect to such applic ation not later than 60 days after receiving a complete application, section 1877(i)(3)(E) of the Act establishes criteria that must be met in order for a hospital to be granted an ex ception as an applicab le hospital. We are obligated to grant exceptions only to those hos pitals that meet the statutory criteria. After consideration of the public comme nt we received, we are finalizing the proposed new § 411.362(c)(7), without modification. 8. Limitation on Review Section 1877(i)(3)(I) of the Act provides that there shall be no administrative or judicial review of the pro cess, either under section 1869 or section 1878 of the Act, or otherwise. We proposed to incorporate this limitation on review at proposed new § 411.362(c)(8) of the regulations. We proposed to interpret this limitation on review to mean that CMS’ decision with respect to wh ether a hospital qualifies for an exception is not reviewable. We did not receive any public comments regarding the limitation of review. Therefore, we are finaliz ing the proposed § 411.362(c)(8) without modification.CMS-1525-FC 1351 9. Frequency of Request Section 1877(i)(3)(B) of the Act provides that the exception process shall permit an applicable hospital to apply for an exception up to once every 2 years. In the proposed rule (76 FR 42353), we proposed to incorpor ate this provision at new § 411.362(c)(1). Using our authority under sections 1871 and 1877 of the Act, we similarly proposed to permit a high Medicaid facility to submit a request for an exception up to once every 2 years from the date of a CMS decision on the hospital’s most recent request. We proposed to consider the date of a CMS decision to be the date of the decision letter sent to the requesting party. We did not receive any public comments regarding the frequency of request. Therefore, we are finalizi ng our proposed new § 411.362(c) (1) without modification. D. Changes Related to Provider Agreem ent Regulations on Patient Notification Requirements Section 1866 of the Act states that a pr ovider of services shall be qualified to participate in the Medicare program and shall be eligible for Medicare payments if it files a Medicare provider agreement and abides by the requirements appl icable to Medicare provider agreements. These requirements are incorporated in our existing regulations at 42 CFR Part 489, Subparts A and B (Provider Agreements and Supplier Approval). Section 5006 of the Deficit Reduction Act of 2005 required the Secretary to develop a strategic and implementing plan to address certain issues with respect to physician ownership of specialty hospitals. As part of that plan, we used our authority under sections 1866, 1820(e)(3), and 1861(e)(9) of the Act (as well as our general rulemakingCMS-1525-FC 1352 authority under sections 1102 and 1871 of the Act) to impose certain additional requirements on physician-owned hospitals as pa rt of their provider agreements. These new requirements were established in the FY 2008 IPPS final rule with comment period (72 FR 47385 through 47391) and the FY 2009 IPPS final rule (73 FR 48686 through 48688). Specifically, we added a new provision to require that all hospitals and CAHs: (1) furnish all patients written notice at the be ginning of their inpatient hospital stay or outpatient service if a doctor of medicine or osteopathy is not pr esent in the hospital 24 hours a day, 7 days a week; and (2) descri be how the hospital or CAH will meet the medical needs of any patient who develops an emergency medical condition at a time when no doctor of medicine or osteopathy is present in the hospital or CAH. These requirements are codified at § 489.20(w). The requirements of §§ 489.20(u) and (w) were made applicable to both inpatient hospi tal stays and outpatient services because, as we stated in the FY 2008 IPPS final rule with comment period, these provisions are in the interest of the health and safety of all individuals w ho receive services in these institutions. The notice requirements are in tended to permit indivi duals to make more informed decisions regarding their treatment. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72251), we stated that we saw no reason to treat the safety of hospital inpatients differently than hospital outpatients, and, thus, applied thes e patient safety requirements to hospital inpatients and outpatients. We continue to believe that both hospital inpatients and outpatients should receive these disclosures pr ior to admission. However, after hospitalsCMS-1525-FC 1353 in general informed us that it would be unduly burdensome to provide disclosures to all outpatients, and hospitals with emergency departments reported the individual notice requirement makes the registration process more cumbersome and time-consuming than is desirable in the emergency department setting, we revisited this issue. In the CY 2012 OPPS/ASC proposed rule ( 76 FR 42354), we stated that we have reconsidered the patient safe ty requirements related to pa tient notification of physician presence, and in the proposed rule, we propos ed that hospital outpatients would need to receive such disclosures only where the risk of an emergency or the length of the outpatient visit make their situations more lik e that of hospital inpa tients. Under this proposal, we proposed to require disclosu res only for those outpatients receiving observation services, surgery, or any other pr ocedure requirin g anesthesia. We proposed that signage would be required for hospital outpatients in the emergency department, as we recognize the merit of finding a less cu mbersome manner to provide the required notice in this setting. Othe r hospital outpatient encounters are relatively short and, in many cases, scheduled in advance. The risk of emergency is relatively low in most of these scheduled encounters. As a result, we be lieve the safety of these particular hospital outpatients would not be compromised in a ny way if hospitals were not required to provide disclosures in these circumstances. In the proposed rule, we proposed to revise paragraph (w)(1) of § 489.20 to reduce the categories of outpatients who must be notified if a hospital does not have a doctor of medicine or osteopathy on site 24 hours a day, 7 days a week. We proposed that only those outpatients who receive obs ervation services, surgery, or servicesCMS-1525-FC 1354 involving anesthesia, must receiv e such written notice. We st ated that we believe this change would reduce burden, but ensure that notice goes to those categories of patients who are more likely to find themselves in a situation where a doctor of medicine or osteopathy is not present when an emergenc y develops. (We noted that we were not proposing to make any changes to similar patient safety requirements for physicianowned hospitals at § 411.362(b)(5 )(i).) We proposed to add a provision that notice would be required at the beginning of a planned or unplanned inpatient stay or outpatient visit, and we provided explanation of when a planne d or unplanned stay or visit begins. We proposed to add a provision to st ate that an unplanned stay or visit begins at the earliest point at which the patient pres ents to the hospital. The cu rrent regulation describes when a stay or visit begins by referring to the tim e when a package of information is provided regarding scheduled preadmission testing and registration for a planned hospital admission or outpatient service. Howeve r, many admissions to the hospital are unplanned admissions of patients who present on an unscheduled visit to the emergency department. Therefore, it was necessary to clarify when we considered such unplanned stays or visits to begin. We proposed to add a new paragraph (w)(2) to § 489.20 (exi sting paragraph (w)(2) would be redesignated as discussed belo w) that would require a hospital that is a main provider that has one or more remote locat ions of the hospital or satellites, to make the determination of whether notice is requi red separately at each location providing inpatient services. We proposed to use the terms “main provider,” “remote location of a hospital,” and “satell ite” as these terms are defined at § 413.65(a)(2), § 412.22(h), orCMS-1525-FC 1355 § 412.25(e), as applicable. We proposed that notice would be require d for all applicable patients, that is, all inpatients and applicable outpatients, at each location at which inpatient services are furnished and at which a doctor of medicine or osteopathy is not present 24 hours a day, 7 days a week. We pr oposed to move language that is currently in paragraph (w)(1) to a new paragraph (w)(3 ), governing the content of the written notice. We proposed to redesignate exis ting paragraph (w)(2), which requires the hospital to receive a signed acknowledgment fr om the patient who has received a notice that the patient understands that a doctor of medicine or osteopathy may not be present during all hours in which services are furnishe d to the patient, as paragraph (w)(4) and to revise the redesignated paragr aph. We proposed to add a pr ovision to state that, before providing an outpatient service to an outpa tient for whom a notice is required, the hospital must receive the signed acknowledgm ent. This revision would make this requirement consistent with our proposed revisions to paragraph (w)(1) limiting the notice requirement to certain categories of outpatients. We proposed to add a new paragraph (w )(5) which would require every hospital that has a dedicated emergency department in which a doctor of me dicine or osteopathy is not present 24 hours a day, 7 days a week, to post a notice conspicuously in a place or places likely to be noticed by all indivi duals entering the dedicated emergency department. We proposed that “dedicated emergency department” would have the meaning found in existing § 489.24(b) of the regulations. We proposed to require the notice to state that the hospital does not have a doctor of medicine or osteopathy present in the hospital 24 hours a day, 7 days a week, and to indicate how the hospital will meetCMS-1525-FC 1356 the needs of any patient with an emergency me dical condition, as that term is defined in § 489.24(b), at a time when no doctor of medici ne or osteopathy is present within the hospital. In the event that there is a d ecision to admit a patient from the emergency department as an inpatient, we proposed that the individualized written disclosure and acknowledgment would have to be made at the time the patient is admitted.
Comment : A majority of commenters supporte d the proposal to limit the types of outpatient situations in which notice of physic ian availability is required. Several of these commenters added that, from the beginnin g, they had considered the requirement to provide notice to all outpatients as overly burdensome and unnecessary except in the limited circumstances reflected in the proposed revision. Response : We appreciate the commenters’ support.
Comment : Two commenters objected to a ny notice to patients concerning the onsite availability of a docto r of medicine or osteopathy. One commenter indicated the requirement would impose cost s and potentially alarm patient s without any evidence that it will make patients safer or improve quality of care. The other commenter believed that the information might not be accurate about physician availability because a physician who is not on site in a rural setting might be more readily available than a physician who is on site at a larger facility. Response : We believe our proposal will redu ce costs to hospitals and critical access hospitals because it would require signi ficantly fewer notices than are required under the current regulation, whic h requires notice to all outpatie nts in affected hospitals and CAHs. In the years since the current regulation first took effect, we have notCMS-1525-FC 1357 received any feedback of patients being unduly alarmed as a result of receiving notice. While there may be some indi vidual circumstances in whic h a doctor of medicine or osteopathy who is off site might be able to reach a patient experiencing an emergency more quickly than one who is on site, we believe that this scenario is likely the exception rather than the rule. The complete elimin ation of the notice requirement implicit in the commenters’ statements would not be appropria te. As we stated wh en this provision was first adopted, we believe consumers have certa in expectations concerning availability of care by doctors of medicine or osteopathy in hospitals and CAHs, and that, as patients, they have a right to make informed deci sions concerning their care. Consumers may have an expectation that a hospital or CAH, as a health care facility that provides services 24 hours a day, 7 days a week, always has a doc tor of medicine or osteopathy on site. Therefore, it is important to ensure that pati ents receive notice when a doctor of medicine or osteopathy is not always on site, and how the hospita l or CAH handles patient emergencies when a doctor of medici ne or osteopathy is not present.
Comment : One commenter described the proposal as requiring all physician-owned hospitals and CAHs to fu rnish outpatients receiving observation services, surgery or any othe r procedure requiring anesthesia a written notice that a doctor of medicine or osteopathy is not on site 24 hours a day, 7 days a week. Response : The patient notification provi sion at proposed § 489.20(w)(1) would apply to all hospitals, not just physician-owned hospitals, and CAHs that do not have a doctor of medicine or osteopathy on site 24 hours a day, 7 days a week, and would apply to all inpatients and certai n categories of outpatients.CMS-1525-FC 1358
Comment : Two commenters noted and objected to differences in requirements for physician-owned hospitals compared to other hospitals and CAHs. One commenter stated that the proposed rule at § 489. 20(w) would not apply to physician-owned hospitals and challenged the differential tr eatment. The commenter noted that CMS stated in the proposal that the safety of “these particular ou tpatients” [that is, those who would not receive notice under th e proposed rule] would not be compromised if hospitals were not required to provide disclosures, and questioned why CMS would not apply that rationale to make the change applicable to all hospitals. Response : It is not correct that § 489.20( w) does not apply to physician-owned hospitals. It applies to all hospitals and CAHs, in cluding those that ar e physician-owned. However, we believe the commenter is referri ng to the fact that there is an additional regulation at §411.362(b)(5)(i) that applies on ly to physician-owned hospitals. We did not propose a similar revision to this regulation, which requires physician-owned hospitals that do not have a doctor of medicine or osteopa thy on site 24 hours a day, 7 days a week, to provide notice to al l inpatients and all outpatients. Section 411.362(b)(5)(i) was adopt ed in order to implement provisions of section 6001(a) of the Affordable Care Act. That provisi on pertains specifica lly to physician-owned hospitals and governs the notice to be provi ded to patients when the physician-owned hospital does not have a doctor of medicine or osteopathy on site at all times.
Comment : One commenter requested guidance to ensure that the presence of a doctor of medicine or osteopathy in cludes the presence of residents.CMS-1525-FC 1359 Response : Residents who are doctors of medicine or osteopathy would be included when determining whether a hospita l or CAH has a doctor of medicine or osteopathy on site.
Comment : One commenter requested further clarification of the timing for the disclosure to, and acknowledgement by, an out patient who is not receiving observation services, surgery, or other procedure requiri ng anesthesia, and who experiences a change in medical condition which requires immediat e surgery or inpatient admission. The commenter stated that it might not always be feasible to make the disclosure and receive the acknowledgement under these circumstances. Response : When an outpatient encounter that does not require a notice involves a medical emergency that requires immediate su rgery or inpatient admission, the situation is similar to that of a patient who presents to a hospital or CAH emergency department and requires immediate admission for surgery or other treatment. In our proposal with respect to such emergency department patients, we stated that, in the event that there is a decision to admit a patient from the emer gency department as an inpatient, the individualized written disclosure and acknowle dgment would have to be made at the time the patient is admitted. At the same time, we acknowledge that in some circumstances the emergent nature of the pa tient’s condition and need to in itiate treatment immediately may result in some necessary delay in comp letion of the disclosure and acknowledgment requirements. After consideration of th e public comments we received, we are finalizing the proposed revisions to § 489.20(w), without modi fication, relating to patient notificationCMS-1525-FC 1360 when a doctor of medicine or osteopathy is not on site 24 hours a day, 7 days a week. Revised paragraph (w)(1) specifies that onl y those outpatients who receive observation services, surgery, or services involving anes thesia must receive written notice if the hospital does not have a doctor of medicine or osteopathy on site 24 hours a day, 7 days a week. New paragraph (w)(2) requ ires a hospital that is a main provider, that has one or more remote locations of the hospital or sate llites, to make the de termination of whether notice is required separately at each lo cation providing inpatient services. New paragraph (w)(3) includes provisions (moved from existing paragraph (w)(1)) governing the content of the written no tice. Paragraph (w)(4) requi res the hospital to receive a signed acknowledgement from the patient w ho has received a notice that the patient understands that a doctor of medicine or osteopathy may not be present during all hours in which services are furnished to the patient (previously language in existing paragraph (w)(2); and states that, before providing an out patient service to an outpatient for whom a notice is required, the hospital must r eceive the signed acknowledgement. New paragraph (w)(5) requires that every hospital that has a dedicated emergency department in which a doctor of medicine or osteopat hy is not present 24 hours a day, 7 days a week, to post a notice conspicuously in a place or places likely to be noticed by all individuals entering the dedicated emergency room and se ts forth the required statements for the notice.CMS-1525-FC 1361 XVI. Additional Hospital Value-Base d Purchasing (Hospital VBP) Program
Policies A. Hospital VBP Program 1. Legislative Background Section 3001(a) of the Affordable Care Act added section 1886(o) to the Act. This section requires the Secretary to es tablish a hospital inpatient value-based purchasing program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standa rds established for a performance period for such fiscal year. Both the performance stan dards and the performance period for a fiscal year are to be established by the Secretary. Section 1886(o)(1)(B) of the Act dir ects the Secretary to begin making value-based incentive payments under the Ho spital Inpatient Value-Based Purchasing Program (Hospital VBP Program) to hospitals for discharges occurring on or after October 1, 2012. These incentive paymen ts will be funded for FY 2013 through a reduction of 1.0 percent to the FY 2013 base operating DRG payment amount for each discharge, as required by section 1886(o)(7)(B)( i) of the Act, and this amount will rise to 1.25 percent in FY 2014. Section 1886(o)(1)(C) of the Act provides that the Hospital VBP Program applies to subsection (d) hospitals (as defined in se ction 1886(d)(1)(B) of th e Act), but excludes from the definition of the term “hospital,” with respect to a fiscal year: (1) a hospital that is subject to the payment reduction under se ction 1886(b)(3)(B)(viii) (I) of the Act (the Hospital IQR Program) for such fiscal ye ar; (2) a hospital for which, during theCMS-1525-FC 1362 performance period for the fiscal year, th e Secretary cited deficiencies that pose “immediate jeopardy” to the health or safety of patients; and (3) a hospital for which there are not a minimum number (as determin ed by the Secretary) of measures for the performance period for the fiscal year invol ved, or for which there are not a minimum number (as determined by the Secretary) of cases for the measures that apply to the hospital for the performance period for such fiscal year. 2. Overview of the Hospital I npatient VBP Program Final Rule We previously issued the Hospital In patient VBP Program Final Rule, which implemented the Hospital VBP Program under section 1886(o) of the Act (76 FR 26490 through 26547). The Hospital Inpatient VBP Program Final Rule was developed based on extensive research we conducted on hospital value-based purchasing, including research that formed the basis of a 20 07 report we submitted to Congress, entitled “Report to Congress: Plan to Implement a Medicare Hospital Va lue-Based Purchasing Program.” This report is available on our Web site ( https://www.cms.gov/AcuteInpatientPPS/dow nloads/HospitalVBPPlanRTCFINALSUB MITTED2007.pdf ) and takes into account input from stakeholders and other interested parties. As described more fully in the Hospita l Inpatient VBP Program Final Rule, we adopted for the FY 2013 Hospital VBP Program 13 measures that we have already adopted for the Hospital IQR Program, cat egorized into two domains (76 FR 26495 through 26511). We grouped 12 clinical process of care measures into a clinical process of care domain, and placed the HCAHPS survey measure into a patient experience ofCMS-1525-FC 1363 care domain. We adopted a 3-quarter pe rformance period from July 1, 2011 through March 31, 2012 for these measures (76 FR 26494 through 26495). To determine whether a hospital meets the performance standards for these measures, we will compare each hospital’s performance during this performance period to its performance during a 3- quarter baseline period from July 1, 2009 through March 31, 2010 (76 FR 26493 through 26495). We also finalized a methodology for asse ssing the total performance of each hospital based on performance standards under which we will score each hospital based on achievement and improvement ranges for each applicable measure. We will calculate a Total Performance Score for each hospital by combining the greater of the hospital’s achievement or improvement points for each measure to determine a score for each domain, weighting each domain score (f or the FY 2013 Hospital VBP Program, the weights will be clinical pr ocess of care = 70 percen t, patient experience of care = 30 percent), and adding together the weighted domain scores. We will convert each hospital’s Total Performance Score into a value-based incentive payment using a linear exchange function. We refer readers to the Hospital Inpatient VBP Program Final Rule for further explanation of the de tails of the FY 2013 Hospital VBP Program (76 FR 26490 through 26547). For FY 2014, we adopted 13 outcome m easures comprised of 3 mortality measures, 2 AHRQ composite measures, a nd 8 hospital-acquired condition (HAC) measures (76 FR 26511). These measures are discussed more fully in the Hospital Inpatient VBP Program Final Rule (76 FR 26510 through 26511). In the FY 2012CMS-1525-FC 1364 IPPS/LTCH Final Rule, we also adopted a new Medicare Spendi ng Per Beneficiary Measure for the FY 2014 Hospital Inpatient VB P Program and incorporated the measure into a new Efficiency Domain (76 FR 51654). We received a number of general comments in response to the proposals we made with respect to the FY 2014 Hospital VBP Progr am in the proposed rule. Our responses to these comments appear below.
Comment : Some commenters argued that the proposed performance periods for the HAC and AHRQ composite measures are not statutorily compliant because data on the measures will not have been included on Hospital Compare for one year prior to the March 3, 2012 performance period start date. The commenters also stated that the Medicare spending per beneficiar y measure is not statutorily compliant because it has not been properly specified and data on the meas ure has not been included on the Hospital Compare Web site for a minimum of one year prior to the start of the measure’s performance period. Commenters argued that in order for a m easure to be included in the Hospital VBP Program, the statute requi res that the measure be sp ecified under the Hospital IQR Program, which includes publicly releasing a document that outlines the numerator, denominator, exclusions, and any applicable risk adjustment, as well as following the process that the measure undergoes in the Hospital IQR Program. In addition, these commenters stated that the measure data must be displayed on the Hospital Compare Web site for a year prior to its inclusi on in the Hospital VBP Program. Citing their interpretation of the requirem ents in section 1886(o) of the Act, their view of Congress'CMS-1525-FC 1365 intent under the Affordable Care Act, and the need for hospitals to understand measures that will be used in the Hospital VBP Program, commenters urged CMS to choose different performance periods for the HAC, AHRQ, and Medicare spending per beneficiary measures for FY 2014, which c ould necessitate dela ying their introduction into the program until after FY 2014. Comm enters also argued that the proposed performance periods for the HAC and AHRQ meas ures are too short to fairly distinguish performance among hospitals. Response : One of our most pressing concerns is to improve patient safety and efficiency as quickly as the law allows a nd, therefore, we interpreted the requirements under section 1886(o) of the Act in a way that enabled us to move sw iftly. We also took into account comments submitted in respons e to the Hospital Inpatient VBP Program Proposed Rule that encouraged us to move with urgency in adopting measures for the Hospital VBP Program. We posted a brief description of each HAC and AHRQ measure on Hospital Compare more than 1 year pr ior to March 3, 2012, the beginning of the seven month performance period that we proposed to adopt for these measures. Likewise, we posted on Hospital Compare a brief description of the Medi care spending per beneficiary Measure on April 21, 2011, which is more than 1 year prior to the May 15, 2012 performance period start date. However, we acknowledge the suggestion fr om commenters that hospitals would benefit from seeing publicly posted performa nce data on measures before we include those measures in the Hospital VBP Program and make them part of the basis forCMS-1525-FC 1366 value-based incentive payments, and note th at we posted HAC and AHRQ measure data on Hospital Compare on October 13, 2011. We recognize that some commenters seek additional information related to the specifications for the Medicare spending per beneficiary measure th at we previously articulated. In light of these comments, we intend to publicly release further details related to the specifications for this meas ure and, in doing so, we will ensure that interested parties have an oppor tunity to comment on them. We also note that in light of comments received, we are wo rking expeditiously to a ppropriately post Medicare spending per beneficiary meas ure data on Hospital Compare

. In addition, we appreciate the commente rs’ concern that the proposed 7-month performance period for the HAC and AHRQ meas ures may be too short to fairly assess hospital performance on these measures. Although we do not believe that a low incidence of HAC events necessarily results in unstable HAC rates, or that a seven month performance period compromises the reliability of the AHRQ composite measures, we recognize that a longer performance peri od would provide more data on which to compare hospital performance. Taking all of these factors into account, we have concluded that we will publicly post hospital performance on all Hospital VBP Program candidate measures on Hospital Compare for at least one year pr ior to the time when the performance period for those measures would start under the Hospital VBP Program. Hospitals will, thus, have an opportunity to become familiar with their performance on a measure before the measure is included in the Hospital VBP Program.CMS-1525-FC 1367 In order to give full effect to the proce ss of posting hospital da ta for one year, and after consideration of the public comments we received, we have also decided to suspend the effective dates of the HAC, AHRQ, and Me dicare spending per beneficiary measures in the Hospital VBP Program because data on these measures will not have been made publicly available on Hospital Compare for at least one year prio r to these dates. Because there will not be enough time to both publicly post the measure da ta for a year, as well as collect a requisite amount of performance period data to calculate reliable measure scores for FY 2014, the result of this effective date suspension is that the HAC, AHRQ and Medicare spending per beneficiary measur es will not be included in the FY 2014 Hospital VBP Program. We note that our decisi on to suspend the effective dates of the HAC, AHRQ and Medicare spendi ng per beneficary measures in the FY 2014 Hospital VBP Program has no effect on the status of these measures under the Hospital IQR Program. We believe that the decision to suspe nd the effective dates of the HAC, AHRQ and Medicare spending per bene ficiary measures is a logical outgrowth of the comments we received in response to the CY 2012 O PPS/ASC proposed rule, a reasoned response to the concerns raised by the public in thos e comments, and, alternatively, is supported by good cause. The policies we proposed to adopt in the proposed rule with respect to the HAC, AHRQ, and Medicare spending per beneficiary measures re st squarely on the foundation that these measures were properly included in the Hospital VBP Program in the first place. To the extent that this foundation has been called into question by commenters,CMS-1525-FC 1368 and to the extent that we wish to implem ent a Hospital VBP Program that both responds to this concern and enjoys wide public support, we have concluded that it is, at this time, premature to adopt requiremen ts that would, in conjuncti on with the requirements we have previously adopted, in corporate these questioned measures into the FY 2014 program. And, because we do not interpret s ection 1886(o) of the Act to authorize the Secretary to include “place holder” measures in the Ho spital VBP Program by adopting them but giving them no effect, we believe that in order to both implement this posting of data process and comply with the statutory requirements, we must suspend the effective dates of these measures. Therefore, we conclude that we ha ve good cause to waive notice and an opportunity to comment under the Administra tive Procedure Act w ith respect to our decision to suspend the effective dates of the HAC, AHRQ and Medicare spending per beneficiary measures. We seek public comment on this issue. Finally, for all of the reasons explained above, we are not finalizing any proposals in the CY 2012 OPPS/ASC proposed rule rela ting to the HAC, AHRQ and Medicare spending per beneficiary measures at this ti me. We intend to adopt these measures for future years of the Hospital VBP Program and will take the comments into account as we develop our future policies.
Comment : Some commenters requested that CMS align Hospital VBP rulemaking processes in the future, noting that CMS published details on the Hospital VBP Program in three separate regulations.CMS-1525-FC 1369 Response : We have used more than one regulation to implement the Hospital VBP Program in order to meet the aggressive deadlines set forth in section 1886(o) of the Act. This approach also enabled us to give the public additional time to comment on our proposals. We will make every effort to, where possible, reduce the number of the rulemaking vehicles for future Hospital VBP Program proposals.
Comment : Some commenters objected to th e Hospital VBP Program's structure, arguing that hospitals should be rewarded for meeting objective performance criteria instead of competing with other hospitals. Response : The basic framework of the Hosp ital VBP Program is set forth in section 1886(o) of the Act, which we believe represents the culmin ation of substantial research and stakeholder outreac h on the topic of value-based purchasing. As detailed in the Hospital Inpatient VBP Program Final Rule (76 FR 26493), we developed the 2007 Report to Congress as a plan to develop a hospital value-based pur chasing program after implementing quality reporting in the hospital setting. This report is well-known to the public and formed the basis of the Hospital VBP Program as structured by the Affordable Care Act. We believe the finalized sc oring methodology for the Hospital VBP Program provides strong incentives to hospitals to pr ovide high quality care and to improve their performance over time.
Comment : Some commenters suggested t echnical changes to the HF-1 (Discharge Instructions) quality measure to improve providers’ compliance. Commenters argued that the measure should capture di scharge “orders,” and not the discharge “summary,” to avoid unintentionally pe nalizing hospitals when doctors changeCMS-1525-FC 1370 medication orders after the summary is crea ted. Commenters urge d CMS to not adopt the HF-1 measure for the Hospital VBP Program until such technical changes are made. Response : While we are aware of the diffi culties hospitals face in developing streamlined, effective discharge processes, we believe hospitals should be able to align discharge orders and summaries without fu rther modifications to this measure.
Comment : Some commenters reiterated th eir opposition to the use of HAC measures in the Hospital VBP Program, argui ng that hospitals are already not paid for those conditions and will be subjected to payment reductions based on HAC incidents beginning in 2015. Response : As noted above, we are suspe nding the effective date of these measures for the Hospital VBP Program. We will take these comments into consideration as we deve lop our future policies.
Comment : Some commenters called on CMS to thoroughly test and monitor measures for continued validit y. Commenters also suggested that claims-based measures need adequate risk adjustment to be valid for public reporting. Some commenters urged CMS to reconsider the policy on “topped-out” measures, arguing that we should continue monitoring topped-out measures to ensure th at hospitals continue to perform at high levels. Commenters also argued that topped- out status should not, by itself, be enough to disqualify measures from the Hospital VBP Program. Response : We agree that measures should be tested and monitored for continued validity. We believe that our analysis of “topped-out” measures described in the Hospital Inpatient VBP Program Final Rule (76 FR 26496 through 26497) is one component ofCMS-1525-FC 1371 that monitoring strategy, by continuing to measure whether a measure is still “toppedout” for each year of the program. Although we agree that some claims-based measures can and should be risk-adjusted, we do not believe that it is a ppropriate to risk adjust all claims-based measures. For example, many of the HAC measures are “never” events that we believe should be counted in every instan ce. We also note that the three mortality measures we have adopted for the FY 2014 Hospital VBP Program are currently undergoing maintenance by the NQF. Should th e NQF recommend that changes be made to any of these measures, we will take that recommendation under advisement as we develop future measure proposals for the Hospital VBP Program. With regard to “topped-out” measures, we have previously stated that, as a general matter, we would not adopt topped- out measures for the Hospital VBP Program because they present a number of scoring challenges and because their use would mask true performance differences among hospitals (76 FR 26497). We proposed to adopt an exception to this general approach for th e eight HAC measures for which we are suspending the effective date because we be lieve the HAC measures capture critical patient safety data that are strong indicators of the quality of hosp ital care. We do not believe we should create exceptions for other meas ures at this time. We also note that we are not finalizing our proposed HAC scori ng methodology at this time for the reasons discussed above.
Comment : Some commenters argued th at the Hospital VBP Program inappropriately captures mort ality data twice in the outcome domain, through both theCMS-1525-FC 1372 30-day mortality measures and the AHRQ comp osite measures. Commenters argued that such double-counting will harm tertiary care hos pitals that often receive dying patients. Response : As detailed in the Hospital Inpatient VBP Program Final Rule (76 FR 26495 through 26511), we believe the AHRQ composite measures and the 30-day mortality measures capture important patien t safety and quality data in the outcome domain. We note that the two sets of mo rtality measures do not measure the same concepts. The AHRQ mortality measures assess in-hospital deaths only and do not use a predefined index period. On the other hand, the 30-day mortality measures assess deaths that occur 30 days after admission, which, depending on the length of stay, may occur post-discharge. The 30-day mortality measur es also do not count patients receiving comfort care only or enrolled in hospice care. As noted above, we are suspending the e ffective date of the AHRQ measures for the Hospital VBP Program. Therefore, we will take these comments into consideration as we develop our future policies.
Comment : Some commenters expre ssed support for the use of the Medicare spending per beneficiary measure, arguing th at CMS has met the st atutory requirements for public display and suggesting that hos pitals have experience tracking spending through the Medicare low-cost county payments created by the Affordable Care Act. These commenters also noted that attempts to move toward a value-based payment system must include measures for enhancing the efficiency of health care delivery, and suggest that CMS’ proposed 20 percent weight for the effici ency domain underestimated its importance as a method to improve outcomes and patient care for Medicare.CMS-1525-FC 1373 One commenter expressed the belief that CMS’ plan to include the Medicare spending per beneficiary measure in the FY 2014 Hospital VBP Program is consistent with Congress’ intent, because Medicare spen ding per beneficiary is the only measure that Congress specifically included in the Affo rdable Care Act, mandating its inclusion in the Hospital VBP Program. Response : We agree that measurement of effici ency is an important goal for the Medicare program, and we thank the comment ers for their support. However, for the reasons explained above, we are suspending the effective date of th e Medicare spending per beneficiary measure in the Hospital VBP Program. We will take these comments into consideration as we develop future proposals regarding this measure.
Comment : Several commenters expressed thei r views regarding the Medicare spending per beneficiary measure, including the Medicare paymen ts to be included, adjustments to be made, length of the ep isode, period of performance, and measure endorsement. Some commenters also argued that the Medicare spending per beneficiary measure's performance standards do not suffici ently consider the si gnificant variation in health care costs per benefi ciary throughout the country. Other commenters suggested that CMS develop condition-specific spendi ng per beneficiary measures in order to appropriately capture each hospital's servic e mix. Several commenters stated that the measure should be adjusted for socio economic status and hospital case mix. Response : We appreciate these comments a nd refer commenters to the FY 2012 IPPS/LTCH PPS final rule where we finalized the Medicare spe nding per beneficiary measure for inclusion in the Hospital IQR Program (76 FR 51618 through 51628).CMS-1525-FC 1374 However, as noted above, we are suspending th e effective date of this measure in the Hospital VBP Program for FY 2014. Therefor e, we will take these comments into consideration as we develop future proposal s regarding this measure for the Hospital VBP Program. 3. Additional FY 2014 Hospital VBP Program Measures In the CY 2012 OPPS/ASC proposed rule (76 FR 42355 through 42356), for the FY 2014 Hospital VBP Program, we proposed to re tain all 13 of the measures that we adopted for the FY 2013 Hospital VBP Program , which include 12 clinical process of care measures and the patient experience of care survey. We also proposed to add one measure to the clinical process of care domain: SCIP-Inf-9: Postoperative Urinary Catheter Removal on Postoperative Day 1 or 2. This measure was specified for the Hospital IQR Program beginning with FY 2011 and subsequent payment determination years (74 FR 43869 through 43870), and informati on about the measure first appeared on Hospital Compare in December 2010. Thus, we believe that this measure meets the requirement in section 1886(o )(2)(C)(i) of the Act to be included in the Hospital VBP Program because it has been specified for the Hospital IQR Program and will have been displayed on Hospital Compare for at least one year before the applicable performance period begins. In addition, SCIP-Inf-9 is NQF-endorsed (#453). The measure is relevant to the Hosp ital VBP Program because it assesses a practice that reduces Catheter Associated Urinary Tract In fection (CAUTI), and improves patient safety, which is highlighted as one of the Institute of Medicine’s six quality aims along with effectiveness, patient-centeredne ss, timeliness, efficiency, and equity.CMS-1525-FC 1375 SCIP-Inf-9 is one of the NQF-endorsed SCIP infection prevention measures; these measures are referenced as a whole among th e metrics listed in the HHS Action Plan to Prevent HAIs. This Action Plan can be found at the following Web site: http://www.hhs.gov/ash/init iatives/hai/actionplan/ . Furthermore, this measure meets other criteria considered for measure selection for the Hospital VBP Program, such as not being “topped-out” and displaying meaningful variability among hospi tals. Therefore, we believe it would be a meaningful meas ure to include in the Hospital VBP Program. In the CY 2012 OPPS/ASC proposed rule (76 FR 42356), we listed the clinical process of care and patient experience of care measures we proposed to adopt for the FY 2014 Hospital VBP Program. We note that these measures are currently NQF-endorsed or undergoing NQF review for main tenance. We will continue to monitor these measures to ensure that they reli ably measure hospital quality, for example, ensuring that, among other things, these m easures are not “topped-out,” and their measurement criteria remain e ndorsed by NQF and/or are othe rwise appropriate. In the CY 2012 OPPS/ASC proposed rule (76 FR 42356) , we noted that to the extent we determine that these measures are topped- out, we may choose not to finalize them. We invited public comment on these proposals.
Comment : Many commenters expressed suppor t for the proposal to add the SCIP-Inf-9 measure to the FY 2014 Hospital VBP Program. Response : We thank commenters for their support.
Comment : Some commenters suggested altern ative measures as replacements for the SCIP clinical process measures in the Hospital VBP Program, such as surgicalCMS-1525-FC 1376 outcomes measures. Commenters argued the a lternative measures are risk-adjusted and better capture high quality surgeries than the current SCIP measures. Other commenters suggested that CMS consider adopting additi onal HAI process and outcome measures in future years. Response : We thank commenters for their suggestions. We will consider these categories of additional measures for the Hospital VBP Program in the future. After consideration of the public comments we received, we are finalizing for the FY 2014 Hospital VBP Program, the 13 clinical process of care measures, including SCIP-Inf-9, and the patient experience of care measure, composed of 8 dimensions of the HCAHPS survey. Set out in the table below are the finalized clinical process of care measure, the patient experience of care measure and the mortality measures that will be included in the FY 2014 Hospital VBP Program.

Clinical Process of Care, Patient Experi ence of Care and Outcome Measures for the FY 2014 Hospital VBP Program Clinical Process of Care Measures Measure ID Measure Description Acute myocardial infarction AMI-7a Fibrinolytic Thera py Received Within 30 Minutes of Hospital Arrival AMI-8a Primary PCI Received Within 90 Minutes of Hospital Arrival Heart Failure HF-1 Discharge Instructions Pneumonia PN-3b Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital PN-6 Initial Antibiotic Selection for CAP in Immunocompetent Patient Healthcare-associated infections SCIP-Inf-1 Prophylactic Antibiotic Received Within One Hour Prior to Surgical IncisionCMS-1525-FC 1377 Clinical Process of Care, Patient Experi ence of Care and Outcome Measures for the FY 2014 Hospital VBP Program SCIP-Inf-2 Prophylactic Antibiotic Se lection for Surgical Patients SCIP-Inf-3 Prophylactic Antibiotics Discon tinued Within 24 Hours After Surgery End Time SCIP-Inf-4 Cardiac Surgery Patients w ith Controlled 6AM Postoperative Serum Glucose SCIP-Inf-9 Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2 Surgeries SCIP-Card-2 Surgery Patients on a Beta Bloc ker Prior to Arriva l That Received a Beta Blocker During the Perioperative Period SCIP-VTE-1 Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered SCIP-VTE-2 Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery Patient Experience of Care Measures Measure ID Measure Description HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems Survey* Outcome Measures Measure ID Measure Description MORT-30- AMI Acute Myocardial Infarction (AMI) 30-Day Mortality Rate MORT-30-HF Heart Failure (H F) 30-Day Mortality Rate MORT-30 PN Pneumonia (PN) 30-Day Mortality Rate
*The finalized dimensions of the HCAHPS survey for use in the FY 2014 Hospital VBP Program are: Communication with Nurses, Communication with Doct ors, Responsiveness of Hospital Staff, Pain Management, Communication about Medicines, Cleanliness and Quietness of Hospital Environment, Discharge Information and Overall Rating of Hospital.CMS-1525-FC 1378 4. Minimum Numbers of Cases and Measures for the Outcome Domain for the FY 2014 Hospital VBP Program a. Background Section 1886(o)(1)(C)(ii)(III) of the Act requires the Secretary to exclude for the fiscal year hospitals that do not report a minimum number (as determined by the Secretary) of measures that apply to the hos pital for the performance period for the fiscal year. Section 1886(o)(1)(C)(ii)(I V) of the Act requires the Secretary to exclude for the fiscal year hospitals that do not report a minimum number (as determined by the Secretary) of cases for the measures that ap ply to the hospital for the performance period for the fiscal year. In the Hospital Inpa tient VBP Program Final Rule, we adopted 13 outcome measures for the FY 2014 Hospita l VBP Program (76 FR 26511), but we did not adopt a minimum number of cases for such measures to apply to hospitals, nor did we adopt a minimum number of m easures necessary for the outcome domain to be included in the Total Performance Score. Under section 1886(o)(1)(C)(i ii) of the Act, in determining the minimum number of reported measures and cases under sect ions 1886(o)(1)(C)(ii) (III) and (IV), the Secretary must conduct an independent anal ysis of what minimu m numbers would be appropriate. As described in the Hosp ital Inpatient VBP Final Rule (76 FR 26528 through 26529), to fulfill this requirement, we commissione d Brandeis University to perform an independent analysis that examin ed technical issues concerning the minimum number of cases per measure and the mini mum number of measures per hospital for clinical process of care measures needed to de rive reliable domain scores. Based on thatCMS-1525-FC 1379 analysis, we finalized our policy to exclude any clinical process of care measures for which a hospital reported fewer than 10 cas es, and to exclude from the Hospital VBP Program any hospital to which fewer than 4 of the clinical process of care measures applied. We also finalized our proposal to exclude any hospital reporting fewer than 100 HCAHPS surveys during the perfor mance period (76 FR 26529 through 26531). To determine the minimum numbers of measures and cases that should be required for the outcome domain, we agai n commissioned Brandeis University to perform an independent analysis. This an alysis examined hospital performance on the 13 finalized outcome measures using data from the proposed baseline periods (discussed below) for the FY 2014 Hospital VBP Program. As we did to analyze the reliability of scores in the clinical process of care doma in, different minimum numbers of cases and measures were tested to determine the co mbination of minimum numbers of cases and measures that would lead to reliable scores in the outcome domain while allowing the maximum number of hospitals to be scored for the Hospital VBP Program. Concurrent with the Brandeis analysis, we contracted with researchers at Mathematica Policy Research (Mathematica) to explore the mini mum number of cases a hospital would need to report for each individual outcome measure. b. Minimum Number of Cases for Mortalit y Measures, AHRQ Composite Measures, and
HAC Measures The analyses by Brandeis and Mathematica determined that in order to receive a score on a mortality measure, the hospital would need to report a minimum of 10 cases, and in order to receive a sc ore on an AHRQ composite measur e, a hospital would need toCMS-1525-FC 1380 report a minimum of 3 cases. Consistent with these analyses, we proposed that these case minimums would apply for the FY 2014 Hospital VBP Program. Mathematica also examined the minimum number of cases a hospital would need to report in order to receive a reliable score on each HAC measure. Along with reliability concerns, when conducting this analysis, Math ematica also took into consideration our view, more fully explained in section XVI.A .6.d. of the proposed rule , that the incidence of HACs raises significant safety and quality concerns for patients and for the Medicare program. Therefore, we believed that a hos pital should be held accountable when HACs occur in all instances in order to protect and promote patient safety. Mathematica concluded that a minimum of one Medicare claim would be sufficient to compute an accurate score on each HAC measure, and in accordance with this conclusion, we proposed that hospitals be evaluated ba sed on the presence or absence of HAC occurrences, regardless of the number of Medi care cases a hospital tr eats, as long as the hospital submits at least one Medicare cl aim during the performance period. As we discuss further below, we anticipated that all participating hospitals will submit at least one Medicare claim during the performance period, which would be sufficient for the hospitals to receive a score on se ven of the eight HAC measures. c. Minimum Numbers of Measures for Outcome Domain Brandeis researchers also analyzed the re liability of the outcome domain scores for hospitals depending upon the total numbe r of outcome measures on which they reported. The analysis showed that the da ta provide a meaningful and sufficiently reliable indication of outcomes for hospitals in the outcome domain as long as theCMS-1525-FC 1381 hospitals submit the minimum number of cas es (discussed above) on each of 11 outcome measures for FY 2014. Specifically, the anal ysis found that using at least 11 outcome measures per hospital provided sufficiently comp arable reliability of hospitals’ scores in the outcome domain (particularly in terms of rank ordering relative to other hospitals) as compared with what hospitals’ scores would have been if they had reported on more outcome measures. Brandeis concluded that this 11 measure minimum could be comprised of the 8 HAC measures, togeth er with 3 measures comprised of any combination of the 3 mortality measures and the 2 AHRQ composite measures. We note that, in conducting its analysis , Brandeis evaluate d how the outcome domain score would be affected if a hospital reported all ei ght finalized HAC measures. However, one of these HAC measures, Forei gn Object Retained After Surgery, will not apply to a very small subset of hospitals that do not perform surgerie s. Taking this into account, as well as our own further analysis which showed that the reliability of the outcome domain score would not be significantly different as a statistical matter, in the CY 2012 OPPS/ASC proposed rule (76 FR 42357),we proposed that the minimum number of measures a hospital would need to report in order to receive a score on the outcome domain is 10, comprised of 7 of the 8 HAC measures (all but the Foreign Object Retained After Surgery measure), along with 3 other measures comprised of any 3 of the other outcome measures (for example, 2 AHRQ composite measures and 1 mortality measure, or 3 mortality measures). We belie ved that this proposal was consistent with the conclusions reached by Brandeis. In addi tion, from an inclusiveness standpoint, weCMS-1525-FC 1382 believed that a 10 measure minimum would ma ximize hospital participation in the FY 2014 Hospital VBP Program. Furthermore, because we believed that every domain is an important component of an accurate Total Performance Score, we proposed that, in order for a hospital to receive a Total Performance Score and be included in the FY 2014 Hospital VBP Program, the hospital must have enough cases and measures to report on all finalized domains. This proposed requirement should not impose any new barri er to hospitals or greatly reduce the number of hospitals in the FY 2014 Hospital VBP Program as compared to the FY 2013 Hospital VBP Program , when hospitals will only be scored on clinical process of care and patient experien ce of care measures. This is because, as stated above, an analysis of the existing data shows th at virtually all hospitals participating in the FY 2014 Hospital VBP Pr ogram will report on a sufficient number of cases and measures to receive outcome domain scores in addition to the clinical process and patient experience domain scores for FY 2014. We invited public comment on the propos ed minimum numbers of cases and measures required for the outcome domain in the FY 2014 Hospital VBP Program. We also invited public comment on the proposed re quirement that hospitals must report on all four domains (if finalized) to receive a To tal Performance Score for the FY 2014 Hospital VBP Program.
Comment : Several commenters urged CMS to make public our independent analyses of the minimum cases and measur es required for the various Hospital VBPCMS-1525-FC 1383 Program domains, arguing that they could not provide inform ed comments in response to those proposals without the analyses. Response : To the extent that these analyses are not subject to privilege, we will make available additional information, incl uding the study results and methods, on the Hospital Value-Based Purchasing Web site at http://www.cms.gov/hospital-value-basedpurchasing/ within 30 to 45 days of this final rule with comment period.
Comment : Some commenters objected to th e proposals for minimum numbers of cases and measures in the outcome domain, arguing that the minimum numbers of cases proposed for HAC and AHRQ measures are t oo low. Commenters argued that these proposals will result in inaccurate performan ce measurement, especially for low-volume hospitals. Some commenters suggested th at CMS apply the AHRQ composite measures’ minimum number of cases to each component indicator. Response : We thank commenters for thei r input on appropriate minimum numbers of cases for HAC and AHRQ measures . We will consider these comments in future rulemaking.
Comment : Some commenters sought more clarity on the different minimum numbers of cases and measures required in various parts of the Hospital VBP Program. Commenters argued that CMS should choose a consistent standard for minimum cases and measures to avoid provider confusion. Response : As noted in the Hospital I npatient VBP Program Final Rule (76 FR 26528), we believe the most importa nt factor in setting minimum case and measure thresholds for the Hospital VBP Pr ogram is to determine a combination ofCMS-1525-FC 1384 thresholds that allows the maximum number of hospitals to be scored reliably. While we agree that a single minimum cases standard across domains may reduce the potential for confusion, we have proposed different standa rds where we believe them to be necessary to accommodate different types of measures a nd to be as inclusive as possible. We believe that our proposals appr opriately reflect the differe nt types of measure data captured, the relative importance of the measures with regard to patient safety and our belief that as many hospitals as possible shoul d be allowed to partic ipate in the program.
Comment : Some commenters suggested that CMS use a 25-case minimum for the mortality measures, arguing that 25 cases is the standard for reporting on Hospital Compare and is recommended by the Institute of Medicine. Response : We have used a 25-case minimum for public reporting. However, our analysis determined that a hospital only need ed to report a minimum of 10 cases in order to receive a reliable score on the mortality m easures. We note that this minimum number of cases is also consistent with the minimu m number of cases requi red in the clinical process of care domain. We believe that this minimum number of cases provides us with accurate mortality measure data for use in th e outcome domain and in the calculation of the Total Performance Score, while enabling hospital inclus ion and providing consistency with the case minimums in the clinical proce ss of care domain.
Comment : Some commenters note d that if CMS chose to include only the three mortality measures in the outcome domain in the FY 2014 program that it would need to re-evaluate the minimum number of measures re quired for a hospital to be eligible for the domain.CMS-1525-FC 1385 Response : We thank the commenters for this observation, and ag ree that because we have decided to suspend the effective date of the HAC and AHRQ measures, and use only the three mortality measures in the out come domain, we need to re-evaluate the minimum number of measures necessary for the domain. In conjunction with Brandeis, we reexamin ed the previous analyses regarding the sufficient number of measures needed to produce a reliable outcome domain score and have determined that hospitals must report on two of the three mortality measures in order to receive an outcome domain score. In the analysis, Brandeis noted that the vast majority of subsection (d) hospitals admit at least 10 congestive heart failure cases and at least 10 pneumonia cases each year. However, many fewer hospitals admit more than 10 acute myocardial infarction cases annually. The Brandeis study i ndicated that a large number of these hospitals (2,548) would re ceive an outcome domain score if the minimums of 10 mortality cases, 3 AHRQ cases, and 1 Medicare discharge for HAC measures are reported. A large number of the remaining hospitals ( 422) would receive an outcome domain score if the AMI mortality measure were excluded from this minimum measure threshold. This difference occurs be cause smaller hospitals typically do not treat a sufficient number of AMI cases to reach th e minimum threshold of ten cases needed to generate useful AMI mortality values. If the AMI mortality measure were excluded from the minimum measure threshold, approximate ly 3,000 hospitals would receive outcome domain scores in the FY 2014 Hospital Inpa tient VBP Program, which is approximately the same number of hospitals able to part icipate in the FY 2013 Hospital Inpatient VBP Program.CMS-1525-FC 1386 As we noted above, we are suspending the effective date of the AHRQ and HAC measures. Therefore, requiring two mortalit y measures to qualify for participation will allow many more hospitals to be include d in the Hospital VBP Program, which is consistent with our views on the appropriate balance between reliability and inclusiveness that we described in the Hospital Inpatient VBP Program Final Rule (76 FR 26529). Most hospitals will report suffi cient data on all three mortality measures, while almost all hospitals will report suffici ent data on at least two of the mortality measures. This approach allows us to in clude as many hospitals as possible in the program while ensuring the reliability of the domain score. In either case, the outcome domain is sufficiently reliable to include as part of the Total Performance Score.
Comment : Some commenters suppo rted the proposal to require hospitals to report on all four proposed domains in orde r to receive a Total Performance Score. Response : We thank commenters for their support. As stated above, we are not finalizi ng our proposal regarding the minimum numbers of cases and measures in the outcome domain insofar as that proposal relates to the HAC and AHRQ measures. However, af ter considering the comments, we are finalizing our proposal that a hospital must report a minimu m of 10cases to receive a score on a mortality measure, and we note th at this minimum is consistent with our previously finalized policy regarding the mini mum number of cases that a hospital must report in order to receive a scor e on a clinical process of care measure. As we stated in the proposed rule, this policy is consistent w ith the analyses performed by Brandeis and Mathematica (76 FR 42357).CMS-1525-FC 1387 Accordingly, we are finalizing that th e minimum number of measures that a hospital must report in order to receive a sc ore on the outcome domain is two measures. As discussed further below, we will normalize outcome domain scores in order to make fair comparisons in that domain between hospitals with scores on two mortality measures and those hospitals reporting su fficient data on all three. Concurrently, we are finalizing our propos al that hospitals must report the minimum number of cases and measures on all finalized domains in order to receive a Total Performance Score in FY 2014. Because we are suspending the effective date of the Medicare spending per beneficiary measure, the number of finalized domains will be three instead of four. 5. Performance Periods and Base line Periods for FY 2014 Measures Section 1886(o)(4) of the Ac t requires the Secretary to establish a performance period for the Hospital VBP Program for a fiscal year that begins a nd ends prior to the beginning of such fiscal year. a. Clinical Process of Care Domain and Pa tient Experience of Ca re Domain Performance Period and Baseline Period In the CY 2012 OPPS/ASC proposed rule (76 FR 42357 through 42358), for the FY 2014 Hospital VBP Program, we proposed a 9-month (3-quarter) performance period from April 1, 2012 to December 31, 2012 for the clinical process of care and patient experience of care domain measures. As described in the Hospital Inpatient VBP Program Final Rule (76 FR 26494 through 26495), due to various statutory deadlines and other challenges we faced in implementi ng the FY 2013 Hospital VBP Program in aCMS-1525-FC 1388 timely fashion, we adopted a 3-quarter performa nce period for the clin ical process of care and patient experience of care domains fo r the FY 2013 Hospital VBP Program. We have stated our intent to move to a 12-m onth performance period when feasible. We believe that this proposed 3- quarter performance period will allow us to notify hospitals of the amount of their value-based incentive pa yment at least 60 days before the start of FY 2014. It will also allow us to consider selecting CY 2013, a 12-month performance period, as the performance period for the FY 2015 Hospital VBP Program. In addition, this proposed performance period for FY 2014 would begin immediatel y after the end of the FY 2013 performance period, provide reliable performance information, and ensure that incentive payments can be made beginning with October 1, 2013 discharges. As we explained in the Hospital Inpatient VBP Program Final Rule (76 FR 26485), we believe that baseline data should be used from a comparable 9-month (3-quarter) period. Therefore, we propos ed April 1, 2010 to December 31, 2010 as the baseline period for these proposed measures for FY 2014. We invited public comment on these proposals.
Comment : Many commenters expressed support fo r the proposed clinical process and patient experience perf ormance periods for FY 2014. Response : We thank commenters for their support. After consideration of the public comments we receive d, we are finalizing the performance period and baseline period for FY 2014 clinical process of care and patient experience of care measures as proposed.CMS-1525-FC 1389 b. Outcome Domain and Performa nce Periods and Baseline Periods In the Hospital Inpatient VBP Program proposed rule, we proposed an 18-month performance period of July 1, 2011 to December 31, 2012 and an 18-month baseline period of July 1, 2008 to December 31, 2009 fo r the three mortality outcome measures currently specified under the Hospital IQ R Program (MORT-30-AMI, MORT-30-HF, MORT-30-PN). In response to public comment and for reasons discussed in the Hospital Inpatient VBP Program Final Rule (76 FR 26494), we adopted a 12-month performance period of July 1, 2011 to June 30, 2012 and a 12-month baseline period of July 1, 2009 to June 30, 2010 for these measures. In the Hospital Inpatient VB P Program Final Rule, we st ated that we would begin the performance period for the proposed HAC and AHRQ measures 1 year after such measures were included on Hospital Compare . Because all the finalized HAC and AHRQ measures were incl uded on Hospital Compare on March 3, 2011, we finalized March 3, 2012 as the start of the performance period for these measures in the Hospital Inpatient VBP Program Final Rule (76 FR 26494 through 26495). We stated in the Hospital Inpatient VBP Program Final Rule (76 FR 26495) that we would propose the performance period end date for these m easures in the CY 2012 OPPS/ASC proposed rule. We noted that in order for the HAC a nd AHRQ measures to be scored for the FY 2014 Hospital VBP Program, the performan ce period for these measures would need to end by the fourth quarter of FY 2012 to al low us sufficient time to collect and process the necessary claims data. We stated that this time period needs to be longer for HACCMS-1525-FC 1390 and AHRQ measures than for clinical proce ss and patient experience measures, which are based on chart-abstracted data and surveys rath er than claims. Claims data require at least three months following a given calenda r quarter to process and necessitate two additional months to complete measure calcul ation, including risk ad justment, statistical modeling, quality assurance, programming, and generating reports on patient-level data, which is provided to hospitals. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42358), we proposed to adopt a nearly 7-month performance period for the HAC and AHRQ measures for FY 2014 by selecting September 30, 2012 as th e end of the performance period. We stated that while we would prefer to use a 12-month performance period, analysis of existing data indicates that a 7-month pe rformance period would provide sufficiently robust values on these critical measures. We also stated that because we beli eve that a comparable period should be selected for the baseline data, we propos ed to set March 3, 2010 to September 30, 2010 as the baseline period for the proposed HAC and AHRQ measures for the FY 2014 Hospital VBP Program. We invited public comment on these proposals.
Comment : Some commenters opposed the pe rformance and baseline period proposals, arguing that the various performan ce period dates specified for the measures within each domain is conf using and impose hardships on hospitals' quality management staff. Commenters suggested that CMS instead propose to adopt harmonized performance periods.CMS-1525-FC 1391 Response : We agree that a single performan ce period that applie s to all of the Hospital VBP measures for a particular paymen t year would be desirable and we intend to move towards this goal in future program years. In the meantime, we proposed to adopt performance periods that take into acc ount the time limitations associated with collecting performance data and scoring for different measures. We note that for the FY 2014 Hospital VBP Program, the clinical process and patient experience of care measures will have the same performance peri od. We believe that all providers will work to track achievement and improvement across al l measures and we will continue to work towards harmonized periods in the future. As noted above, we are suspending the effective dates of the AHRQ and HAC measures for the Hospital VBP Program, and the mortality measures will be the only measures in the outcome domain in FY 2014. The following tables include all finalized baseline and performance periods for the FY 2013 and FY 2014 program years.

FY 2013 Hospital VBP Program Baseline and Performance Periods Domain Baseline Period Performance Period Clinical Proces of Cares July 1, 2009 – March 31, 2010 July 1, 2011 – March 31, 2012 Patient Experience of Care July 1, 2009 – March 31, 2010 July 1, 2011 – March 31, 2012

FY 2014 Hospital VBP Program Baseline and Performance Periods Domain Baseline Period Performance Period Clinical Process of Care* April 1, 2010 - December 31, 2010 April 1, 2012 - December 31, 2012CMS-1525-FC 1392
FY 2014 Hospital VBP Program Baseline and Performance Periods Domain Baseline Period Performance Period Patient Experience of Care * April 1, 2010 - December 31, 2010 April 1, 2012 - December 31, 2012 Outcome Mortality Mortality July 1, 2009 – June 30, 2010 July 1, 2011 – June 30, 2012 *Finalized in this final rule with comment period

6. Performance Standards for the FY 2014 Hospital VBP Program a. Background Section 1886(o)(3)(A) of the Act requires the Secretary to establish performance standards for the measures selected under the Hospital VBP Program for a performance period for the applicable fiscal year. The performance standards must include levels of achievement and improvement, as required by se ction 1886(o)(3)(B) of the Act, and must be established and announced not later th an 60 days before the beginning of the performance period for the fiscal year invol ved, as required by s ection 1886(o )(3)(C) of the Act. Achievement and improvement st andards are discussed more fully in the Hospital Inpatient VBP Program Final Ru le (76 FR 26511 through 26513). In addition, when establishing the performance standard s, section 1886(o)(3)(D) of the Act requires the Secretary to consider appr opriate factors, such as: (1 ) practical experience with the measures, including whether a significant propo rtion of hospitals failed to meet the performance standard during previous perfor mance periods; (2) hist orical performance standards; (3) improvement rates; and (4) the opportunity for continued improvement.CMS-1525-FC 1393 b. Mortality Measures In the Hospital Inpatient VBP Program Fi nal Rule, we finalized the achievement performance standard (achievement threshold) for each of the proposed FY 2014 Hospital VBP Program mortality measures at the median of hospital performance (50th percentile) during the applicable baseline pe riod. We also finalized the improvement performance standard (improvement thresh old) for each mortality measure at each specific hospital’s performance on each measure during the baseline period of July 1, 2009 to June 30, 2010 (76 FR 26511 through 76 FR 26512). In addition, we finalized the precise achievement thresholds and benchmarks for these mortality measures (76 FR 26513), as shown below:

Achievement Thresholds for the FY 2014 Hospital VBP Program Mortality Outcome Measures (D isplayed as Survival Rates) Mortality Outcome Measures Measure ID Measure Description Performance Standard (Achievement

Threshold) Benchmark

MORT30-AMI Acute Myocardial Infarction (AMI) 30-Day Mortality Rate 0.8477 0.8673

MORT30-HF Heart Failure (HF) 30-Day Mortality Rate 0.8861 0.9042

MORT30 PN Pneumonia (PN) 30-Day Mortality Rate 0.8818 0.9021

We received a few comments on the mort ality measure performance standards.CMS-1525-FC 1394
Comment : Some commenters ar gued that the performance standards for the mortality measures are so compressed or “topped-out” as to render them ineffective measures of quality for performance scoring. Response : We disagree with commenters’ as sertion. As described above, we finalized performance standards for the mortality measures selected for the FY 2014 Hospital VBP Program in the Hospital Inpatient VBP Final Rule and considered comments on this topic there (76 FR 26511 through 26513). As we noted in the Hospital Inpatient VBP Program Final Rule (76 FR 26496 through 26497), our analysis of possibly t opped-out measures was not limited to the breadth of the achievement range. We also analyzed the variation in measure scores achieved by hospitals, as a small coefficien t of variation would indicate that the distribution of individual hospi tal scores is clustered ti ghtly around the mean value, which would suggest that the measure is no t useful to draw di stinctions between individual hospital performance scores. We do not believe the mortality measures meet our criteria for topped-out measures. c. Clinical Process of Care and Pati ent Experience of Care FY 2014 Performance Standards As discussed in section XVI.A.5.a. of the CY 2012 OPPS/ASC proposed rule (76 FR 42359 through 42360), we proposed to adopt a 9-month (3-quarter) performance period of April 1, 2012 to December 31, 2012 for th e clinical process of care and patient experience of care measures for the FY 2014 Hospital VBP Program. To set achievement and improvement performance st andards for these proposed measures forCMS-1525-FC 1395 the FY 2014 Hospital VBP Program, in the CY 2012 OPPS/ASC proposed rule (76 FR 42359), we proposed to use the same a pproach adopted in the Hospital Inpatient VBP Program Final Rule for the FY 2013 Hospital VBP Program. That approach, as well as our rationale for adopting it, is explained in detail at 76 FR 26511 through
76 FR 26513. We proposed to set the achievement performance standard (achievement threshold) for each proposed measure at the median of hospital performance (50 th percentile) during the proposed ba seline period of April 1, 2010 through December 31, 2010. We also proposed to se t the improvement performance standard (improvement threshold) for each of the pr oposed measures at each specific hospital’s performance on the applicable measure during the proposed baseline period of April 1, 2010 through December 31, 2010. We propos ed to set each benchmark for each measure as the mean of the top decile perf ormance of applicable hospitals during the proposed baseline period. We invite d public comment on these proposals.
Comment : Some commenters asked CMS to release the HCAHPS floors for the FY 2014 program year to allow hospitals to plan for quality improvement efforts. Response : We published the floors (0 th percentile) for the eight HCAHPS dimensions included in the FY 2013 Hospita l VBP Program baseline period in the Hospital Inpatient VBP Program Final Rule (76 FR 26519). The FY 2014 Hospital VBP Program baseline period floor for each of the HCAHPS dimensions appears below.CMS-1525-FC 1396
Comment : Some commenters were concerned that the risk adjustment models for the HCAHPS survey are not adequate and do not control for the severity of a patient’s condition, socioeconomic status , and geographic differences. Response : HCAHPS dimensions are currently patient-mix adjusted. We adjust HCAHPS data for patient characteristics that ar e not under the control of the hospital that may affect patient reports of hospital experi ences. The goal of adjusting for patient-mix is to estimate how different hospitals woul d be rated if they all provided care to comparable groups of patients. As part of the endorsement process for HCAHPS, NQF endorsed the HCAHPS patient-mix adjustment currently in use. The HCAHPS patient-mix adjustment (PMA ) model incorporates important and statistically significant predictors of pa tients’ HCAHPS ratings that also vary meaningfully across hospitals (O’Malley et al., 2005). Th e PMA model includes seven variables, as follows: Self-reported health status, education, service line (medical, surgical, or maternity care), age, response order percentile (also known as “relative lag time,” which is based on the time between di scharge and survey completion), service line by linear age interactions, and prim ary language other than English. Initially the model also included ad mission through an emergency room, but because admission through an emergency r oom is no longer available on the UB–92 Form, this adjustor is no longer available fo r the patient-mix model. We are exploring other options to obtain that information in the future. We have found that evaluations of care in crease with self-rated health and age (at least through age 74), and decr ease with educational attainment. Maternity service hasCMS-1525-FC 1397 generally more positive evaluations than medi cal and surgical services. Response order percentile (relative lag time) findings show that late re sponders tend to provide less positive evaluations than earlier responde rs. From research conducted during the development of HCAHPS, we found little evidence that DRG matters beyond the service line, which is included in the patient mix model. To further address specific concerns about the adjustment model, it is important to note that self-reported health status is a wi dely accepted measure of a person’s overall health status. In general, “how would you ra te your health” is the most widely used single self-reported health item and is used in many national health surveys. Education also captures important aspect s of socio-economic status. Income is generally not available to adjust survey data. Patient-mix adjustment is based on variation by patientlevel factors within hospitals so that true differences between hosp itals are not included in the adjustment. Controlling for geographic region (a hospital- level factor) as part of a patient-mix adjustment model could mask im portant differences in quality across the country. Comment : A few commenters were concerne d that the HCAHPS scores publicly reported on Hospital Compare differ by bed size, type of hospital and geography and thought the HCAHPS scores should be adjusted for these factors. These commenters thought HCAHPS needs to be vetted more to und erstand these differences to ensure that HCAHPS is a reliable measure. Response : We recognize that HCAHPS re sults differ by bed size and other hospital characteristics. However, we do not in terpret these differing results to mean thatCMS-1525-FC 1398 the survey should be risk-adjusted for these factors. HCAHPS results also differ among hospitals with the same characteristics, wh ich we view as evidence that the results account for differences in the quality of care received by patients. In general, risk-adjustment models control for exogenous factors that are be yond the control of a hospital, not for hospital char acteristics that are endogenous, or within their control. We also believe that the HCAHPS surv ey has been thoroughly vetted, including through reviews in peer reviewed journals and through notice and comment rulemaking when we adopted it for the Hospital IQR Program. HCAHPS also has been endorsed by the NQF. After consideration of the public comments we receive d, we are finalizing the FY 2014 clinical process of care and patient e xperience of care performance standards as proposed. We set out final achievement perf ormance standards for the finalized FY 2014 clinical process of care and patient experience of care meas ures using the applicable baseline period data in the table below.
FY 2014 Achievement Performance Standards for Clinical Process of Care Measures Measure ID Measure Description Performance Standard (Achievement

Threshold) Benchmark

Process of Care Measures AMI-7a Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival 0.8066 0.9630 AMI-8a Primary PCI Received Within 90 Minutes of Hospital Arrival 0.9344 1.0000CMS-1525-FC 1399
FY 2014 Achievement Performance Standards for Clinical Process of Care Measures Measure ID Measure Description Performance Standard (Achievement

Threshold) Benchmark

HF-1 Discharge Instructions 0.9266 1.0000 PN-3b Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital 0.9730 1.0000 PN-6 Initial Antibiotic Selection for CAP in Immunocompetent Patient 0.9446 1.0000 SCIP-Inf-1 Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision 0.9807 1.0000 SCIP-Inf-2 Prophylactic Antibiotic Selection for Surgical Patients 0.9813 1.0000 SCIP-Inf-3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time 0.9663 0.9996 SCIP-Inf-4 Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose 0.9634 1.0000 SCIP-Inf-9 Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2 0.9286 0.9989SCIP-Card2 Surgery Patients on a Beta Blocker Prior to 0.9565 1.0000CMS-1525-FC 1400
FY 2014 Achievement Performance Standards for Clinical Process of Care Measures Measure ID Measure Description Performance Standard (Achievement

Threshold) Benchmark

Arrival That Received a Beta Blocker During the Perioperative PeriodSCIP-VTE1 Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered 0.9462 1.0000SCIP-VTE2 Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery 0.9492 0.9983

FY 2014 Achievement Performance Standards for Patient Experience of Care Measures Measure ID Measure Description Performance Standard (Achievement

Threshold) Benchmark Floor

Patient Experience of Care Measure HCAHPS Communication with Nurses 75.79% 84.99% 42.84%
Communication with Doctors 79.57% 88.45% 55.49% Responsiveness of Hospital Staff 62.21% 78.08% 32.15%CMS-1525-FC 1401
FY 2014 Achievement Performance Standards for Patient Experience of Care Measures Measure ID Measure Description Performance Standard (Achievement

Threshold) Benchmark Floor

Patient Experience of Care Measure Pain Management 68.99% 77.92% 40.79% Communication about Medicines 59.85% 71.54% 36.01% Hospital Cleanliness & Quietness 63.54% 78.10% 38.52% Discharge Information 82.72% 89.24% 54.73% Overall Rating of Hospital 67.33% 82.55% 30.91%

d. AHRQ Measures For the reasons we have discussed in the Hospital Inpatient VBP Program Final rule (76 FR 26514), in the CY 2012 OPPS/ ASC proposed rule (76 FR 42360), we proposed to set the achievement performance st andard (achievement threshold) for each AHRQ composite measure at the median of hos pital performance (50t h percentile) during the proposed baseline period of March 3, 2010 to September 30, 2010. We proposed to set the benchmark for each AHRQ composite meas ure at the mean of the top decile of hospital performance during the proposed base line period of March 3, 2010 to September 30, 2010. We also proposed to set the improve ment performance standard (improvement threshold) for each of the proposed measures at each specific hos pital’s performance on the applicable measure during the propos ed baseline period of March 3, 2010 to September 30, 2010.CMS-1525-FC 1402 We did not receive any comments on th e proposed AHRQ measures performance standards. However, as described above , we will not finalize these performance standards.
e. HAC Measures We adopted eight HAC measures in the Hospital Inpatient VBP Program Final Rule. For each of these eight HAC measures, at least one quarter of hospitals achieved a 100 percent rating based on administrative data for all IPPS hospitals participating in the Hospital IQR Program for Medicare di scharges from October 1, 2008 through June 30, 2010 (that is, they did not have any re portable HAC occurren ces). In addition, based on the administrative data from Oct ober 1, 2008 through June 30, 2010, at least one half of all hospitals achieved a measure ra te of 100 percent on six of the eight HAC measures (Foreign Object Retained After Su rgery; Air Embolism; Blood Incompatibility; Pressure Ulcer Stages III and IV; Catheter -Associated UTI; Manifestations of Poor Glycemic Control). Accordingly, the achieveme nt threshold for these measures would be zero if we proposed to set performance stan dards for each individual measure using the same methodology that we finalized with respect to the mortality measures. We believe that the HAC measures are ex tremely important in promoting patient safety, improving quality of care, and reduci ng costs. According to a 2010 HHS Office of the Inspector General report, entitled “A dverse Events in Hospitals: National Incidence Among Medicare Beneficiaries” ( http://oig.hhs.gov/oei/reports/oei-06-09-00090.pdf ), an estimated 13.5 percent of hosp italized Medicare beneficiarie s experienced adverse events during their hospital stay s. We believe that all the fi nalized HAC measures assess theCMS-1525-FC 1403 presence of conditions and outcomes that are reasonably preventable if high quality care is furnished to the Medicare beneficiary. We also believe that the incidence of HACs in general raises major patient safety issues fo r Medicare beneficiaries. Outcome measures, including HAC outcome measures, are widely regarded by the provider community as strongly indicative of the quali ty of medical care and as integral to reporting and improving quality and patient safety. Therefor e, we believe it is important to include HAC outcome measures in the Hospital VBP Program. For these reasons, in the CY 2012 OPPS/ASC proposed rule (76 FR 42360 through 42361), we proposed that our toppe d-out policy would not apply to the HAC measures. We also proposed to treat the eight individual HAC m easures as a single aggregate HAC score for purposes of performan ce scoring, and believe that this approach will enable us to calculate meaningful di stinction among hospitals and variation in hospital performance on these measures. In ad dition, this aggregation of the scores for the HAC measures ensures that the HAC m easures do not unduly outweigh the remainder of the measures in the outcome domain. Accordingly, in taking into account our HAC policy and reliability concerns, we proposed to set achievement performance standards, benchmarks, and improvement performan ce standards based on hospital combined performance on seven or eight HAC measur es, as applicable, during the proposed performance or baseline period. Because cert ain hospitals will report on only seven of the eight HAC measures, we proposed sepa rate performance standards depending on whether the hospitals report on seven or eight HAC measures.CMS-1525-FC 1404 We proposed to set the achievement performance standard (achievement threshold) for the HAC aggregate score for thos e hospitals that report on all eight of the HAC measures at the median of hospital perf ormance (50th percentile) of those hospitals reporting on all eight of the HAC measures during the proposed baseline period of March 3, 2010 to September 30, 2010. We propos ed to set the achie vement performance standard (achievement threshold) for the HAC aggregate score for those hospitals that report on seven of the HAC measures at th e median of hospital performance (50th percentile) on only those seven measures for those hospitals reporti ng on either seven or eight of the HAC measures during the proposed baseline period of March 3, 2010 to September 30, 2010. We proposed to set the benchmark fo r the HAC aggregate score for those hospitals that report on all eight of the HAC measures at the mean of the top decile of hospital performance for those hospitals repo rting on all eight HAC measures during the proposed baseline period of March 3, 2010 to September 30, 2010. We proposed to set the benchmark for the HAC aggregate score for those hospitals that report on seven of the HAC measures at the mean of the top decile of hospital performance on only those seven measures for hospitals reporting on either seven or eight of the HAC measures during the proposed baseline period of March 3, 2010 to September 30, 2010. We also proposed to set the improveme nt performance standard (improvement threshold) for the HAC aggregate score at each specific hospital’s performance during the proposed baseline period of March 3, 2010 to September 30, 2010, whether the hospitalsCMS-1525-FC 1405 report on seven or eigh t HAC measures. Please see belo w for further discussion of the proposed aggregate HAC scoring methodology. We noted that the proposed performance standards for the HAC aggregate score were shown as a score composed of all ei ght individual HAC measures. We recognized that all hospitals report on seven of these individual meas ures, and nearly all (about 95 percent) of hospitals report a ll eight. However, a small numb er of hospitals do not report on the Foreign Object Removal after Surgery HAC measure. We believe that any numerical differences between the HAC perfor mance standards for hospitals reporting on seven of eight HAC measures compared to the standards for hospitals reporting on all eight HAC measures will be statistically insignificant. However, in the CY 2012 OPPS/ASC proposed rule (76 FR 42361), we noted that we intended to provide updated performance standards in the CY 2012 OPPS/ ASC final rule with comment period for those hospitals only reporting on se ven of the eight HAC measures. We invited public comment on the proposed methodology for setting performance standards for the aggregate HAC score fo r HAC measures finalized for the FY 2014 Hospital VBP Program.
Comment : Some commenters aske d if CMS had considered how to transition performance data on claims-based measures from ICD-9 to ICD-10. Commenters asked if CMS would consider delaying claims-based measures given the burden on providers of implementing ICD-10.CMS-1525-FC 1406 Response : We are considering how to best conduct the transiti on from ICD-9 to ICD-10 for purposes of performance scoring and will provide more details in future rulemaking.
Comment : Some commenters expressed conc erns about the proposals to use HAC measures capturing healthcare-associated infections (HAI) data, especially vascular catheter-associated bloodstream infections and catheter-associated urinary tract infections. Some commenters argued that unintended conseque nces for patient care, such as patient falls, may result from catheter removal too quickly. Other commenters argued that scoring HAC measures in the aggregate will complicate CMS' stated intent to retire claims-based HAI measures when more appropriate measures become available. Commenters also argued that aggregati ng the HAC measures may mislead consumers and suggested that CMS remove all HACs related to HAIs from the aggregated HAC score. Some commenters suggested th at CMS use a different methodology to set performance standards for the HAC measures, arguing that they are very high standards to be attained as proposed. Other comment ers argued that HACs represent such rare events that the proposed separate perfo rmance standards for hospitals depending on whether they report 7 or 8 HACs could ex acerbate scoring reliability problems. Response : As explained above, we are not fi nalizing any proposals related to the HAC measures at this time. We thank comme nters for their input and will consider these comments in future rulemaking. After consideration of the public comments we received, we are not finalizing the performance standards proposed for the HAC measures.CMS-1525-FC 1407 7. FY 2014 Hospital VBP Program Scoring Methodology a. FY 2014 Domain Scoring Methodology In the Hospital Inpatient VBP Program Final Rule, we adopted a methodology for scoring all clinical process of care, patient experience of care, and outcome measures. As noted in the Hospital Inpatient VBP Program Final Rule, this methodology outlines an approach that we believe is well-underst ood by patient advocates, hospitals and other stakeholders because it was developed during a lengthy process that involved extensive stakeholder input, and was presented by us in a report to Congress. Further, we have conducted extensive research on a number of other scoring models for the Hospital VBP Program to ensure a high level of confid ence in the scoring methodology (76 FR 26514). In addition, we believe that, for simplicity a nd consistency of the Hospital VBP Program, it is important to score hospitals under the same general methodology for subsequent fiscal years, with appropriat e modifications to accommodate new domains and measures. We finalized a similar scoring methodology for the Medicare spending per beneficiary measure in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51654 through 51656). Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42361), we proposed to use the same scoring methodology for th ese measures in the FY 2014 Hospital VBP Program, with the changes discussed belo w for HAC measures. We invited public comment on this proposal.
Comment : Some commenters sought clarif ication on the outcome domain calculation, specifically asking if CMS intends to weight me asures equally within the domain.CMS-1525-FC 1408 Response : As described in the Hospital Inpatient VBP Program Final Rule (76 FR 26525), hospitals’ measure scores are “summed (weighted e qually) to determine the total earned points for the domain.” As we noted above, since some hospitals will not report the 30-day AMI mortality measure, we will convert the points earned for each of the remaining mortality measures to a percen tage of total points. The points earned for each measure that applies to the hospital would be summed (weighted equally) to determine the total earned points for the domain.
Comment : Some commenters asked CMS to clarify the Hospital VBP scoring methodology, arguing that it is unclear how Hospital Compare data are translated into value-based purchasing scores. Response : We interpret the commenter to er roneously believe that the measure rates currently posted on Hospital Compare are directly translated into Hospital VBP scores. That is not the case. Clinical process of care a nd patient experience of care measure rates currently displayed on Hospital Compare are calculated using four quarters of Hospital IQR Program data added on a rolling basis, while the HAC, AHRQ and mortality measure rates currently displayed on Hospital Compare are calculated using data from across multiple years.. Under the Hospital VBP Program, we will use the measure data submitted with respect to the applicable performance period to calculate performance scores using the scoring methodology fi nalized for the program.
Comment : Some commenters argued that CMS should align Hospital Compare data with Hospital VBP performance periods to allow hospitals to more easily track their performance in the Hospital VBP Program.CMS-1525-FC 1409
Comment : Some commenters opposed the pe rformance and baseline period proposals, arguing that the various dates speci fied are confusing a nd impose hardships on hospitals' quality management staff. Comm enters suggested that CMS instead propose harmonized performance periods. Response : We intend to work towards harmonized performance periods in the Hospital VBP Program in future program years, and we will take these comments into account as we determine how best to do so in the future. We intend to display Hospital VBP data on a section of the Hospital Compare Web site, as required by section 1886(o)(10) of the Act, and will provide deta ils on those postings in future rulemaking. After consideration of the public comments we receive d, we are finalizing our general scoring methodology for the clinical pr ocess and patient experience domains as outlined in the Hospital Inpatient VBP Program Final Rule. We are also finalizing our scoring methodology for the outcome domain, in sofar as it applies to the mortality

measures. b. HAC Measures Scoring Methodology In the CY 2012 OPPS/ASC proposed rule (76 FR 42361 through 42362), we proposed to score the HAC measures usi ng an aggregated HAC rate based on the unweighted average of the rates of the indivi dual HAC measures. However, as explained above, we are aware that hospitals may only report on seven of the eight finalized HAC measures. This is because some hospitals do not perform surgeries, and therefore would not submit eligible claims that would be the basis for the Foreign Object Retained After Surgery HAC measure. The remaining se ven HAC measures would apply to allCMS-1525-FC 1410 hospitals, however, because al l hospitals that participate in the Hospital VBP Program will submit eligible claims for these measures. We also anticipate that most hospitals will report on all eight of the individual HAC measures because most hospitals that participate in the Hospital VBP Program pe rform surgeries and would submit eligible surgical claims that would be the basis for the Foreign Object Retained After Surgery
HAC measure. Accordingly, we proposed that the aggr egate HAC score for each hospital be calculated as the equally-weighted average of the rates on all HAC measures for which the hospital reports Medicare claims, which will most often be an equally-weighted average of the rates on all eight measures, but may be rates on seven of the HAC measures. As stated above, the HAC aggreg ate score will be calculated if a hospital submits at least one Medicare claim during th e performance period. For example, if a hospital submits one or more Medicare cl aims during the performance period, and those claims do not indicate any HAC occurrences, the hospital will receive a perfect score on all applicable HAC measures. The aggregat e HAC rate would then be used to assign points in accordance with the proposed pe rformance standards discussed above to calculate an individual hospital’s aggregat e HAC achievement and improvement scores. The single aggregate HAC score would be the greater of the hospital’s achievement or improvement score. The hospital’s aggregat e HAC score would be combined with the hospital’s score on other outcome measures to derive an outco me domain score, with the aggregate HAC score weighted equally with the other outcome measures in the domain. We note that in assigning points for this aggregate HAC score, lower aggregate HACCMS-1525-FC 1411 scores represent better performance. We believe our proposed aggregate scoring methodology for HAC measures allows us to meaningfully score hospitals on these critical patient safety measures. We welcomed public comment on this proposal.
Comment : While many commenters generally objected to the proposals to use HAC measures, most commenters did not obj ect to the proposed aggregated scoring methodology. Commenters argue d that CMS must finalize a HAC scoring methodology that is statistically reliable in order to pr ovide reliable comparisons between hospitals on these measures. Response : We thank commenters for their s upport. However, for the reasons discussed above, we are not fi nalizing our proposed scoring methodology with respect to the HAC measures at this time. We will c onsider these comments in future rulemaking. After consideration of the public comments we received, we are not finalizing our proposed methodology to score HAC measures as an aggregate. 8. Ensuring HAC Reporting Accuracy As described in the FY 2012 IPPS/LTC H PPS proposed rule, for the FY 2013 Hospital VBP Program, the validation process we adopted for the Hospital IQR Program will ensure that the Hospital VBP data are accurate (76 FR 26537 through 26538). In addition, Medicare Administrative Contractors (MACs) review claims to ensure that accurate Medicare payments ar e made. This claims review ensures that HAC data included on the claims are accurately reporte d both for the Hospital IQR Program and the Hospital VBP Program. In addition, we are considering proposing to adopt additionalCMS-1525-FC 1412 targeting to assess the accur acy of HAC data reported on claims. Specifically, we are considering targeting a subset of hospitals that report ze ro or an aberrantly low percentage of HACs on Medicare fee-for-s ervice IPPS claims relative to the overall national average of HACs. This consideration is supported by our analysis of HAC rates calculated using data from Medicare fee-for-service clai ms from October 1, 2008 through June 30, 2010. We publicly released these rates in March 2011, and they can be found on our Web site

at: http://www.cms.gov/Hosp italQualityInits/06_HACPost.asp#TopOfPage . This analysis revealed a range in hospital-reporting of th e eight HACs from a low of 0.0001 percent (that is, 1 discharge out of ever y 100,000 applicable discharges) of hospital inpatient discharges (23 discharges) repor ting a blood incompatibility, to a high of 0.0564 percent (that is, 56.4 discharges out of ev ery 100,000 applicable discharges) reporting Falls and Trauma. According to this analys is, however, these HAC rates appear to be underreported occurrences when comp ared to similar HAI measures. For example, the Catheter Associated Urinary Tract Infect ion (CAUTI) measure rate was 5.4 percent, or 54 out of every 1,000 eligible discharges, as reported in the AHRQ 2008 National Healthcare Quality Report . This rate is more than 125 times greater than the national HAC reported CAUT I rate of 0.317 out of every 1,000 eligible discharges. While we recognize that defin itional differences in the measures might contribute to this rate differe nce, we also believe that unde rreporting of HAC claims data contributed to this difference. It is important to note that the 5.4 percent CAUTI rate was calculated using medical record documentation as a data source and a random sample ofCMS-1525-FC 1413 Medicare beneficiaries for acute care hospital stays, as discussed in a separate Federal report about healthcare qualit y (AHRQ 2008 National Healthcare Quality Report). We note that this analysis is exploratory in na ture, and we cannot definitively conclude any systematic underreporting by any particular hospitals. Nonethel ess, we believe that this analysis provides sufficient information fo r CMS to consider development of a HAC validation process to assess potential underre porting by hospitals and ensure accurate reporting among all hospitals repor ting HACs on Medicare claims. Our goal is to improve quality and patie nt safety through accurate reporting of hospital quality data and accurately linking quality to payment in the Hospital VBP Program. We strive to ensure accurate reporting, and we be lieve that validating a random subset of hospitals that repor t an aberrantly low number of HACs would strengthen our overall effort to link value to quality. We welcomed public comments regarding our consideration of a HAC valida tion process. We also noted that we intend to take appropriate action if we discover systema tic underreporting of HAC and other adverse event information, including, where appropria te, reporting such instances to the HHS Office of the Inspector General for its review.
Comment : Some commenters suppo rted the proposals to validate HAC data as long as it does not cause undue burden to hos pitals. Other commenters suggested that CMS target hospitals with aberrantly high HAC rates instead of those with aberrantly low rates. Some commenters noted that HAC validation may prove to be difficult and suggested that CMS could be tter identify HACs through data sources other than claims.CMS-1525-FC 1414 Response : We thank commenters for their support. We intend to validate HAC data in such a way as to avoid any u ndue burden on hospitals. We will consider commenters’ suggestion that we target hospitals with aber rantly high HAC rates in the future. We welcome commenters’ suggestion that we could identi fy HACs through other data sources and would apprec iate input on such sources an d methodologies. At this time, however, we believe the claims-based HAC measures are the best available source for HAC data. We thank the commenters for their views and will take them into account as we further develop our pol icies in this area. 9. Domain Weighting for the FY 2014 Hospital VBP Program For the FY 2013 Hospital VBP Program, we adopted a weighting scheme that weights the clinical process of care domain at 70 percent of the Tota l Performance Score, and weights the patient experi ence of care domain at 30 percen t. However, the addition of the outcome domain and the proposed addi tion of an efficiency domain necessitate the adoption of a different doma in weighting scheme than we adopted for the FY 2013 Hospital VBP Program. We discuss below the factors we considered in determining the appropriate weight to propose for each domain in the FY 2014 Hospital VBP Program. As we have previously stated, we believe that the patient’s experience associated with receiving inpatient services in a hospita l is important in determining the hospital’s overall quality of care for purposes of the Hosp ital VBP Program. Thus, as we finalized for the FY 2013 Hospital VBP Program, in the CY 2012 OPPS/ASC proposed rule (76 FR 42362 through 42363), we proposed to weight the patient experience of careCMS-1525-FC 1415 domain at 30 percent for the FY 2014 Hosp ital VBP Program. We believe that this weighting proposal appropriately encourages hospitals to provide patient-centered care across the full spectrum of their services. As we stated in the Hospital Inpatient VBP Program Final Rule (76 FR 26491), we believe that domains need not be given equal weight, and that over time, scoring methodologies should be weighted more towa rds outcomes, patient experience of care and functional status measures (measures assessing physical and mental capacity, capability, well-being and improvement). Consistent with this policy and our anal ysis showing that many of the clinical process of care measures are nearly toppe d-out, in the CY 2012 OPPS/ASC proposed rule (76 FR 42362 through 42363), we proposed to reduce the weighting for the clinical process of care domain in FY 2014 to 20 per cent. We also proposed to weight the outcome domain at 30 percent of the Total Performance Score for the FY 2014 Hospital VBP Program. Because we believe that sc oring hospitals on outcome measures will improve treatment outcomes and patient sa fety, we intend to propose increasing the weighting for the outcome domain in subsequent fiscal years as more outcome measures become available. As we indicated in the FY 2012 I PPS/LTCH PPS proposed rule (76 FR 25927 through 25928), we believe that efficiency is an important component of improving outcomes, the patient experience of care a nd the overall quality of care provided to Medicare beneficiaries in th e inpatient hospital setting. Accordingly, in the CY 2012 OPPS/ASC proposed rule (76 FR 42363), we proposed to weight the efficiency domain atCMS-1525-FC 1416 20 percent of the Total Performance Scor e for the FY 2014 Hospital VBP Program in order to encourage the delivery of high qua lity, coordinated, a nd efficient care to Medicare beneficiaries. Therefore, we proposed the following domain weights for the FY 2014 Total Performance Score: outcome domain = 30 percent; clinical process of care domain = 20 percent; patient experience of care domain = 30 percent; and efficiency domain = 20 percent. Under this proposed weighting scheme, the clinical care-related domains (process of care and outcome domains) would, together, constitute 50 percent of the total performance score (20 percent for clinical process of care and 30 percent for outcome), the patient experience of care domain would constitute 30 percent, and the efficiency domain would consti tute 20 percent. We believe that this proposed weighting scheme will hold hospitals accountable for all aspects of patient care, including clinical outcomes and efficiency. We invited public comment on the propos ed weighting of the four proposed domains to be used in the calculation of the Total Performance Score for the FY 2014 Hospital VBP Program.
Comment : Several commenters suggested a lternative weighting schemes for the FY 2014 Hospital VBP Program, some arguing that the patient experience of care domain would be weighted too high at 30 percent. So me commenters suggested we reconsider the distribution of the clinical pr ocess of care domain weighting. Response : We disagree with commenters’ ar gument that the patient experience domain is weighted too high at 30 percent. While hospitals have less direct control overCMS-1525-FC 1417 the patient experience domain than, for exam ple, the clinical process domain, we do not believe that the Hospital VB P Program should diminish the importance of the patient’s experience of care. We believe that hospita ls must strive to improve the patient’s experience concurrently with their efforts to improve their performance on other domains as part of a broad quality improvement effort . In determining the weighting for clinical process of care measures, we consider the available measures in each domain while balancing the importance of patient expe rience and our emphasis on outcomes, as discussed below.
Comment : Commenters disagreed with the proposed outcome domain weighting. Some commenters suggested th at CMS weight it less than proposed, while others suggested that CMS give more weight to the outcome measures. Some commenters suggested that CMS redistribu te the weight of the outco me domain and apply more weight to the clinical process of care domain. Response : We agree that the outcome domain should be weighted to encourage hospitals to improve treatment outcomes. However, because we are suspending the effective date of the HAC and AHRQ meas ures in the Hospital VBP Program, the outcome domain will only have three measures for the FY 2014 program. Therefore, we believe that it is necessary to reduce the weight applied to this domain as a result of our decision to suspend the effective date of the HAC and AHRQ measures. However, we still believe that outcome measur es are critical to patient safe ty. We believe that the three mortality measures serve as very good predic tors of the quality of care patients receive and that they will serve as a good basis to encourage hospitals to improve outcomes.CMS-1525-FC 1418 Taking this into account, and the fact that we are not finalizing an efficiency domain, we are finalizing a weighting met hodology that increases the weight of the clinical process of care domain, as had been supported by some commenters who requested a reduction to the weight of the outcome domain. We are also reducing the wei ght of the outcome domain to account for the fact that the domain will only include three measures. We believe that this approach reflects our belief regarding the importanc e of these measures and maintains the same weight for the patient experience of care domain. For these reasons, for FY 2014, we are finalizing a we ighting of 25 percent for the outcome domain, 45 percent for the clinical process of care domain, and 30 percent for the patient experience of care domain.
Comment : Some commenters expressed conc ern about the proposed weighting for the efficiency domain, arguing that 20 per cent is too high for its first year in the program, especially because it is composed of a single, non-NQF endorsed measure. Some commenters suggested th at CMS did not display this measure on Hospital Compare in a timely manner, did not fully specify the measure for the Hospital IQR Program, or did not provide hospitals with sufficient data on the measure, and that the efficiency domain should therefore be weighted at ze ro. Other commenters expressed general concern about weighting 50 percent of the pr ogram (patient experience and efficiency domains) on measures that are somewhat le ss under a hospital's c ontrol than clinical process and outcome measures. Response : In light of our decision to suspe nd the effective date of the Medicare spending per beneficiary measure in the Hosp ital VBP Program, there is no efficiencyCMS-1525-FC 1419 domain to weight. We will take these co mments into consideration as we develop policies in future rulemaking.
Comment : Some commenters argued that domain weighting changes should occur gradually to allow hospitals to adjust to program changes. Response : We reiterate our belief that str ong incentives for hosp itals to redesign care processes for the delivery of coordinated, efficient health care services to Medicare beneficiaries are a priority. We intend to re visit the domain weighti ng in the future. We believe the addition of the outcome domain in FY 2014 necessitates rapid adoption and significant weighting, particularly because it captures important information for quality improvement.
Comment : Some commenters expressed support for the domain weighting proposal, arguing that the emphasis on outcome s and efficiency, as well as reduced emphasis on clinical processes, is consistent with the National Quality Strategy to promote higher quality health care. Othe r commenters expressed support for giving the proposed outcome domain a higher weight than the clinical process domain. Response : We thank commenters for their s upport. After cons ideration of the public comments we received, we are not fi nalizing our FY 2014 domain weighting as proposed. Instead, we will finalize the FY 2014 domain weighting as follows: clinical process of care = 45 percent; pati ent experience of care = 30 percent; outcome = 25 percent.CMS-1525-FC 1420 B. Review and Correction Process under the Hospital VBP Program 1. Background Section 1886(o)(10)(A)(i) of the Act requires the Secretary to make information available to the public regarding individua l hospital performance in the Hospital VBP Program, including: (1) performance of the hos pital on each measure that applies to the hospital; (2) the performance of the hospital with respect to each condition or procedure; and (3) the hospital’s Total Performance Score. To meet this requirement, we stated our intent in the Hospital Inpatient VBP Program Final Rule to publish hospital scores with respect to each measure, each hospital’s condit ion-specific score (that is, the performance score with respect to each condi tion or procedure, for example, AMI, HF, PN, and SCIP), each hospital’s domain-specific score, and each hospital’s Total Performance Score on Hospital Compare (76 FR 26534 through 26536). We intend to make proposals related to making this information publicly available in future rulemaking. Section 1886(o)(10)(A)(ii) of the Act requires the Secretary to ensure that each hospital has the opportunity to review, and submit corrections for, the information to be made public with respect to each hospita l under section 1886(o)( 10)(A)(i) of the Act prior to such information being made public.For the FY 2013 Hospital VBP Program, the finalized measures consist of chartabstracted clinical process of care measures and a survey-based patient experience of care measure. In the CY 2012 OPPS/ASC propos ed rule (76 FR 42363 through 42365), we proposed that hospitals will have an opportunity to review and correct chart-abstracted data and patient experience da ta through the processes discus sed below. We intend toCMS-1525-FC 1421 make additional proposals regarding the revi ew and correction of outcome measures, efficiency measures, and do main, condition, and Total Performance Scores in future rulemaking. 2. Review and Corrections of Data Submitted to the QIO Clinical Warehouse on Chart-Abstracted Process of Ca re Measures and Measure Rates In the CY 2012 OPPS/ASC proposed rule (76 FR 42363 through 42364), we proposed that the process utili zed to give hospitals an opport unity to review and correct data submitted on the Hospital IQR Program char t-abstracted measures also be used to allow hospitals to correct data and measure rates on chart-abstracted measures for the Hospital VBP Program. Under this proposed pr ocess, hospitals woul d continue to have the opportunity to review a nd correct data they submit on all Hospital IQR Program chart-abstracted measures, whether or not th e measure is adopted as a measure for the Hospital VBP Program. We proposed to use the Hospital IQR Program’s data submission, review, and correction processes, which will allow for review and correction of data on a continuous basis as it is be ing submitted for the Hospital IQR Program, which in turn would allow hospitals to correct data and measure rate s used to calculate the Hospital VBP Program Total Performance Sc ore for those hospitals that participate in both programs. We believe this process would satisfy the requirement in section 1886(o)(10)(A)(ii) of the Act to allow hospitals to review and submit corrections for one of the pieces of information that will be ma de public with respect to each hospital – the measure rates for chart-abstracted measures. For hospitals that do not participate in the Hospital IQR Program but do participate in the Hospital VBP Program, such as MarylandCMS-1525-FC 1422 hospitals, we intend to make proposals regard ing how those hospitals will be able to review and correct their Hospital VBP data in future rulemaking. Under the Hospital IQR Program, hospitals currently have an opportunity to submit, review, and correct any of the chart-abstracted information submitted to the QIO Clinical Warehouse for the full 4 1⁄2 months follo wing the last discharg e date in a calendar quarter. (We note that in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25915), we proposed to reduce the submission period from 41⁄2 months to 104 days. However, we did not adopt this proposal in the FY 2012 I PPS/LTCH PPS final rule (76 FR 51640 through 51641).) Hospitals can begin submitting data on the first discharge day of any reporting quarter. Hospitals are encouraged to submit da ta early in the submission schedule so that they can identify errors and resubmit data before the quarterly submission deadline. Users are able to view and make corrections to the data that they submit within 24 hours of submission. The data are populated into repor ts that are updated ni ghtly with all data that have been submitted and successfully processed for the previous day. Hospitals are able to view a report each quarter which shows the numerator, denominator and percentage of total for each Clinical Measur e Set and Strata. That report contains the hospital’s performance on each measure set/strata submitted to the QIO Clinical Warehouse. The numerator is the number of cases that satisfies the conditions of the performance measure, and a denominator is th e number of successfully accepted cases in the measure population evaluated by the performan ce measure. The percentage of total is calculated by using the numerator divide d by the denominator multiplied by 100. TheCMS-1525-FC 1423 sum of the numerators and the denominato rs for each measure across the performance period is the same as the Hospital VBP measure rate for the quarter. We believe that 4 1⁄2 months is sufficient ti me for hospitals to be able to submit, review data, make corrections to the data, and view their percentage of total, or measure rate, on each Clinical Measure Set/Strata fo r use in both the Hospital IQR and Hospital VBP Programs. Additionally, because this process is familiar to most hospitals, use of this existing framework reduces the burden that could have been plac ed on hospitals that participate in the Hospital IQR Program if th ey had to learn a new process for submitting data for the Hospital VBP Program. Following the period in which hospitals can review and correct data and measure rates for chart- abstracted measures as specified above, we proposed that hospitals will have no further opp ortunity to correct such data or measure

rates. We proposed that once the hospital has an opportunity to review and correct quarterly data related to chart-abstracted measures submitted in the Hospital IQR Program, we will consider that the hospital ha s been given the opportunity to review and correct this data. We proposed to use this data to calcu late the measure scores for purposes of the Hospital VBP Program, and these measure scores will be used to calculate domain, condition, and Total Performance Scores for the Hospital VBP Program without further review and correc tion. We invited public comment on this proposal.CMS-1525-FC 1424
Comment : Many commenters expressed suppor t for the proposed review and corrections process for chart-abstracted measures, noting that the Hospital IQR Program’s review process is working well. Response : We thank commenters for their support.
Comment : Some commenters asked that CM S provide details on review and corrections for claims-based measures, part icularly because the Affordable Care Act requires that hospitals have an opportunity to appeal the measure data submitted. Response : We will provide more details on review and corrections for claims-based measures in future rulemaki ng. We also intend to propose an appeals process in future rulemaking. After consideration of the public comments we received, we are finalizing the review and corrections process for ch art-abstracted measures as proposed. 3. Review and Correction Process for Hosp ital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Data In the CY 2012 OPPS/ASC proposed rule (76 FR 42364 through 42365), we proposed a “two-phase” process for the revi ew and correction of HCAHPS data. Under this proposed process, hospitals would have the opportunity to revi ew and correct data they submitted on all HCAHPS Hospital IQR Program items in the first phase, whether or not such items or combination of items are adopted as HCAHPS dimensions for the Hospital VBP Program. In the second phase, hospitals would have the opportunity to review the patient-mix and mode adjusted HCAHPS scores (details on the HCAHPS adjustment process may be found at:CMS-1525-FC 1425 http://www.hcahpsonline.org/files/Fina l%20Draft%20Description%20of%20HCAHPS% 20Mode%20and%20PMA%20with%20botto m%20box%20modedoc%20April%2030,% 202008.pdf) on dimensions that we will use to score hospitals under the Hospital VBP Program to determine whether they belie ve CMS calculated their scores on these dimensions correctly. We believe that this proposal for a two-phase review process will expedite hospital review and correction of data. We also believe that this proposal will improve quality of care because hospitals will be able to timely review their HCAHPS scores and respond efficiently in improving patient care to address areas of weakness reflected in their scores. We are not propos ing to release any patient leve l data to the public. This proposed review process would only grant e ach hospital the authority to review and correct the hospital’s patient-level data. a. Phase One: Review and Correction of HCAHPS Data Submitted to the QIO Clinical Warehouse For the first phase of the HCAHPS review and correction process, we proposed to reduce the HCAHPS submission deadline under the Hospital IQR Program by one week in order to create a 1-week period for hospitals to review and correct their HCAHPS data. We included this proposal to reduce the submission deadline in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25916). Currently, hospitals have approximately 14 weeks after the end of a calendar qua rter to submit HCAHPS data for that quarter to the QIO Clinical Warehouse. Under this proposal, hospitals would have approximately 13 weeks after the end of a calendar qua rter to submit HCAHPS data for that quarter to the QIOCMS-1525-FC 1426 Clinical Warehouse and a 1-week period to re view and correct that data. During the 13-week submission period, hospitals would be able to resubmit their data to make corrections to the patient-level records. The 1-week review and correction period would occur immediately after the 13-w eek data submission deadline. The proposed 1-week review and corre ction period would allow hospitals to provide missing data or replace incorrect data in the data files they have submitted to the QIO Clinical Warehouse. The 1-week re view and correction period would allow hospitals to identify any issues with th e data they had submitted in the 13-week submission period. Hospitals will have the oppo rtunity to review fr equency distributions of all of their submitted data items, which include hospital summary information, patient administrative data, and patient survey res ponses, and resubmit their HCAHPS data files to correct identified i ssues during the 1-week review and correcti on period. We define the term “review and correct” to mean that hospitals can correct their existing data records, but not add new data records. A ccordingly, hospitals would not be allowed to add new patient-level records or remove exis ting patient-level records during the review and correction period. Following the conclusi on of the 1-week review and correction period, hospitals would not be allowed to review, correct, or submit additional HCAHPS data for the applicable calendar quarter. We finalized this proposal in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 51642).CMS-1525-FC 1427 b. Phase Two: Review and Correction of HCAHPS Scores for the Hospital VBP Program In the second phase of the proposed HCAHPS review and correction process, hospitals would be given the opportunity to review their scores on the HCAHPS items that will be used in the Hospital VBP Progr am. These HCAHPS scores are constructed after the data that hospitals had submitted have been analyzed to identify and remove incomplete surveys and after adjustments for the effects of patient-mix and survey mode have been applied. (Details on the HCAHP S adjustment process may be found at: http://www.hcahpsonline.org/files/Fina l%20Draft%20Description%20of%20HCAHPS% 20Mode%20and%20PMA%20with%20botto m%20box%20modedoc%20April%2030,% 202008.pdf .) Hospitals would have approximate ly 1 week to examine their HCAHPS dimension scores for the applicable Ho spital VBP Program performance period. A participating hospital would have the oppor tunity to question CMS if the hospital believes its scores were miscalculated. We would respond to a hospital’s inquiries by checking the calculation and, if necessary, re calculating the hospital’s HCAHPS scores. In this proposed second phase of the HCAHPS review and correction process, hospitals would not be allowed to change or submit new HCAHPS data or delete existing data. Their right to correct information during this period would be limited to reviewing their HCAHPS dimension scores and notifying CMS of any errors in its calculation of those

scores. We intend to propose the procedural aspects of the second phase of the proposed HCAHPS review and correction pr ocess in future rulemaking.CMS-1525-FC 1428 In summary, for the chart-abstracted a nd patient experience of care measures, we proposed that existing procedures for submi ssion, review, and correc tion related to chartabstracted measures under the Hospital IQR Program, coupled with the proposed two phase review of HCAHPS scores discussed above, would constitute an opportunity for review and correction of measure data and measure rates under the Hospital VBP Program. Because these procedures give hospi tals the opportunity to review and correct the data and/or measure rates, such data and measure rates may be used to calculate domain, condition, and Total Performance Sc ores for the Hospital VBP Program. We intend to make proposals related to making th is information publicly available, and to make additional proposals regarding the revi ew and correction of outcome measures, efficiency measures, and do main, condition, and Total Performance Scores in future rulemaking. We invited public comment on these proposals.
Comment : Some commenters expressed s upport for the proposed two-phase review and corrections process, agreeing that it provides an appropr iate opportunity to review data to be made public. Response : We thank commenters for their support.
Comment : Some commenters recommended that CMS provide clear guidance for missing and incorrect data correction in the first phase and suggested that CMS reconsider allowing new records to be submitted in the second phase. Response : In order to create stability in th e data submission process and ensure adequate time for data cleaning and proces sing, score calculation and report preparation, we have never allowed HCAHPS data to be submitted into the data warehouse after theCMS-1525-FC 1429 data submission deadline. Permitting post-deadline data submissions could result in the strategic submission, alteration or withholding of HCAHPS surveys. Maintaining a firm data submission deadline is also consistent with CMS Data Warehouse policy that applies to all measures. Accordingly, we will not a llow new records to be submitted or accepted in the data warehouse after the end of the da ta submission period for either Phase One or Two of the new Review and Correction process. As noted in the FY 2012 IPPS/LTCH PPS final rule and CY 2012 OPPS/ASC proposed rule, the data submission deadline w ill occur one week earlier than previously in order to allow time for the Phase One Re view and Correction period. During the data submission period, which will last approximately 13 weeks, hospitals and survey vendors can submit surveys and will also have the oppor tunity to resubmit su rveys to correct any issues regarding the patient records. Du ring the new one-week Phase One Review and Correction period, hospitals and survey vendors will be permitted to correct and resubmit any previously submitted patient records. Phase Two of the Review and Correction process will occur months afte r the relevant data submissi on deadlines and long after the HCAHPS Hospital VBP scores have been cal culated. Therefore, no HCAHPS records could be submitted or accepted at that time; otherwise, HCAHPS data could not be finalized in a timely manner. We will provide detailed information on the HCAHPS Review and Correction process closer to the inaugural Phas e One and Phase Two of the program.CMS-1525-FC 1430
Comment : Some commenters opposed the proposal to allow a one-week HCAHPS review period, arguing that hospitals need at l east two weeks or longer to review their results. Response : The one-week HCAHPS review and correction period allows a formal opportunity for hospitals (or their HCAHPS surv ey vendors) to resubmit data for patients in order to correct errors in the data submitted for those patients. Given the amount of time necessary for participating hospitals or their survey vendors to fully administer the HCAHPS surve y, receive survey responses, and create the necessary data files, we do not believe it is appropriate to further shorten the data submission period either by beginning th e period sooner, or ending it sooner. During the proposed one-week Review a nd Correction period for Phase One, hospitals or their survey vendors will have acce ss to a summary report of their data that had been submitted during the data submission period. HCAHPS scores would not be available until the Phase Two period. After consideration of the public comments we receive d, we are finalizing as proposed our two-phase review and co rrections process for HCAHPS data.CMS-1525-FC 1431
XVII. Files Available to th e Public via the Internet In the past, a majority of the Addenda to which we referred throughout the preamble of the OPPS/ASC proposed and final rules with comment periods appeared in the printed version of the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 OPPS/ASC propos ed rule (76 FR 42365 through 42366), the Addenda of the proposed rules and the final rules with comment period will be published and available only via the Inte rnet on the CMS Web site. Our existing regulations at §§ 416.166(b), 416.171(b), and 416.173 provide for th e publication of co vered surgical procedures, covered ancillary services, the payment methodology, and the payment rates under the ASC payment system in the Federal Register . In the proposed rule (76 FR 42365 and 42391 through 42392), we proposed to revise these three regulations to make the Addenda for the ASC payment syst em available via the Internet on the CMS Web site. We did not receive any public comment s regarding publication of the Addenda only via the Internet on the CMS Web site. Therefore, we are finalizing, without modification, our proposal for CY 2012. We also are finalizing the revisions to §§ 416.166(b), 416.171(b), and 416.173 to provide for the publication of covered surgical procedures, covered ancillary services, payment methodologies, and payment rates under the ASC payment system via the Internet on the CMS Web site. In the CY 2012 OPPS/ASC proposed rule, we inadvertently omitted the last sentence of existing § 416.171(b), which we did not propose to chan ge. In this final rule with commentCMS-1525-FC 1432 period, we are finalizing § 416.171(b) with the inclusion of language to correct this technical error. To view the Addenda of this final rule with comment period pertaining to the CY 2012 payments under the OPPS, go to the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD and select “1525-FC” from the list of regulations. All Addenda for this final rule with comment period are contained in the zipped folder entitled “2012 OPPS FC Addenda” at the bottom of the page. To view the Addenda of this final rule with comment period pertaining to the CY 2012 payments under the ASC payment system, go to the CMS Web site at: http://www.cms.gov/ASCPayment/ASCRN/ and select “1525-FC” from the list of regulations. All Addenda for this final rule with comment period are contained in the zipped folder entitled “Addenda AA, BB, DD1, and DD2”, and “Addendum EE” at the bottom of the page. A. Information in Addenda Re lated to the CY 2012 Hospital OPPS Addenda A and B provide various data pertaining to the CY 2012 payment for items and services under the OPPS. Speci fically, Addendum A includes a list of all APCs that are payable under the OPPS, includi ng the scaled relative weights, the national unadjusted payment rates, the national unadjusted copayments, and the minimum unadjusted copayments for each APC that we are adopting for CY 2012. Addendum B includes a list of all active HCPCS codes, including the APC assignments, the scaled relative weights, the national unadjusted payment rates, the national unadjustedCMS-1525-FC 1433 copayments, the minimum unadjusted copayments , and the payment status indicators and comment indicators for the CY 2012 OPPS. For the convenience of the public, we al so are including on the CMS Web site a table that displays the HCPCS code data in Addendum B sorted by APC assignment, identified as Addendum C. Addendum D1 defines the payment status indicators that we used in Addenda A and B. Addendum D2 defines the comment i ndicators that are used in Addendum B. Addendum E lists the HCPCS codes that ar e only payable to hosp itals as inpatient procedures and that are not payable under the OPPS for CY 2012. Addendum L contains the out-migra tion wage adjustment for CY 2012. Addendum M lists the HCPCS codes that are members of a composite APC and identifies the composite APC to which each is assigned. Addendum M also identifies the status indicator for each HCPCS code and a comm ent indicator if there is a change in the code’s status with regard to its membership in the composite APC. Each of the HCPCS codes included in Addendum M has a si ngle procedure payment APC, listed in Addendum B, to which it is assigned when the criteria for assignment to the composite APC are not met. When the criteria for payment of the code through the composite APC are met, one unit of the composite APC paym ent is paid, thereby providing packaged payment for all services that are assigned to the composite APC according to the specific I/OCE logic that applies to the APC. We refer readers to the discussion of composite APCs in section II.A.2.e. of this final ru le with comment period for a complete description of the composite APCs.CMS-1525-FC 1434 Addendum N, “Bypass Codes for Creating ‘Pseudo’ Single Procedure Claims for CY 2012 OPPS,” contains a list of the HCPCS codes that we used to create “pseudo” single claims from multiple procedure claims so that the most claims data can be used to set median costs for the CY 2012 OPPS. We re fer readers to section II.A.1.b. of this final rule with comment period for a full discussi on of the use of this file in the CY 2012 OPPS ratesetting process. Addendum N contains the following elements for the CY 2012 bypass codes: (1) HCPCS code; (2) short de scriptor; (3) overall bypass indicator; and (4) an indicator if the code was not used as a bypass code in ratesetting activities prior to this final rule with comment period. The data in Addendum N were previously issued as a table (usually Table 1) in th e preamble of the applicable pro posed or final rule. We are issuing it as an addendum to this final rule with comment period beca use it is lengthy and users can better analyze the file if it is furnished in Excel format on the CMS Web site. B. Information in Addenda Related to the CY 2012 ASC Payment System Addenda AA and BB provide various data pertaining to the CY 2012 payment for the covered surgical procedures and covere d ancillary services for which ASCs may receive separate payment. Addendum AA lis ts, for CY 2012, the ASC covered surgical procedures, whether the procedure is subj ect to multiple procedure discounting, the payment indicator for each procedure, the comment indicator if applicable, and the payment weight and rate for each procedur e. Addendum BB displays, for CY 2012, the ASC covered ancillary services, the payment indicator for each service, the comment indicator if applicable, and the payment weight and rate for each service.CMS-1525-FC 1435 Addendum DD1 defines the payment indicat ors that are used in Addenda AA and BB. Addendum DD2 defines the comment indi cators that are used in Addenda AA and
BB. Addendum EE lists the surgical proce dures to be excluded from Medicare payment if furnished in ASCs. The excl uded procedures listed in Addendum EE are surgical procedures that ar e assigned to the OPPS inpatient list, are not covered by Medicare, are reported using a CPT unlisted co de, or have been determined to pose a significant safety risk to a Me dicare beneficiary when perfor med in an ASC or for which standard medical practice dictates that the beneficiary typically re quires active medical monitoring and care at midnight following the procedure. The Medicare Physician Fee Schedule (MPFS) data files are located at the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/

. The links to all of the FY 2012 IPPS wage index-related tables (that are used for the CY 2012 OPPS) are accessible on the CMS Web site at: http://www.cms.gov/AcuteInpatientPPS/WIFN

. XVIII. Collection of Information Requirements A. Legislative Requirement s 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 collectionCMS-1525-FC 1436 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.

● 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 2012 OPPS/ASC proposed rule, we solicited public comments on each of the issues outlined above as discussed below that contained information collection requirements. B. Requirements in Regulation Text The CY 2012 OPPS/ASC proposed rule contained the following proposed information collection requirements specified in the regulatory text: 1. ICRs Regarding Basic Commit ments of Providers (§ 489.20) Section 489.20(w) contains a physician pr esence disclosure requirement that requires disclosure when a doctor of medici ne or a doctor of osteopathy is not onsite 24 hours per day, 7 days per week. The burde n associated with the physician presence disclosure requirement is the time and e ffort necessary for each hospital and CAH to develop a standard notice to furnish to its pa tient, obtain the required patients’ signatures, and maintain a copy in the patient’s medical re cord. Although this requirement is subject to the PRA, the associated burden is approved under OMB control number 0938-1034.CMS-1525-FC 1437 Our proposed amendment to § 489.20(w) w ould require that, for hospitals and CAHs that are not physician owned, the existing physician presence disclosure requirement regarding outpatient services would apply only to out patients receiving observation services, surgery, and procedur es requiring anesthesia. The burden associated with this requirement would be greatly reduced and includes revisions to the time and effort necessary for each hospital and CAH to revise and disseminate the existing standard notice to its patients. The requirements in § 489.20(w) apply to all hospitals as defined in § 489.24(b). We estimated that there are approximately 2,597 hospitals and CAHs that may not have a doc tor or medicine or a doctor of osteopathy onsite at all times. We estimated that it will take each hospita l or CAH 4 hours to develop or amend and review a disclosure form on a one-time basis, 30 seconds to make each disclosure, another 30 seconds to obtain th e patient’s signature, and an additional 30 seconds to include a copy of the notice in the patient’s medical record. We estimated that on average each hospital or CAH that is subj ect to the disclosure requirement will make 1,966 disclosures per year. Th e estimated annual burden asso ciated with developing an amended form, obtaining patient signatures , and copying and recording the form is 138,032 hours at a cost of approximately $2,557,733. We note that these numbers reflect correction of a minor arithmetic error reflec ted in our proposal, increasing the cost over our original estimate by $6,585. We did not receive any public comments on these information collection requirements. Therefore, we are finalizing the burden estimate as proposed, with the technical corre ction noted.CMS-1525-FC 1438 2. ICRs Regarding Exceptions Process Re lated to the Prohibition of Expansion of Facility Capacity (§ 411.362) As discussed in section XV. of the CY 2012 OPPS/ASC proposed rule (76 FR 42349 through 42354) and this final ru le with comment period, we proposed to add a new § 411.362(c) to establish and implem ent the process by which an applicable hospital or high Medicaid facility may a pply for an exception to the prohibition on expansion of facility capacity. We proposed that a physician-owned hospital would be allowed to request an exception under propos ed § 411.362(c) by providing information to CMS regarding the hospital’s baseline number of operating rooms, procedure rooms, and beds for which the hospital is licensed as of March 23, 2010, and specifying the increase in the number of operating rooms, procedur e rooms and beds it is requesting under the exceptions process. We proposed that an applicable hospital requesting an exception would have to satisfy eligibility criteria fo r 3 of the most recent fiscal years for which data are available. In addition, the ho spital would have to provide supporting documentation to CMS regarding the criteria it must satisfy. We estimated that 265 physician-owned hospitals would request an exception. As discussed in section XV. of this fi nal rule with comment period, we received a comment contending that 3 fiscal years worth of data was excessive. After consideration of this public comment, in this final rule with comment, we are modifying the regulations at § 411.362(c)(2)(ii), (iv), and (v ) to require applicable hospita ls to satisfy the respective criteria for the most recent fiscal year for wh ich data are available. Therefore, we have revised our proposed estimates. We estimat e that it will take each hospital 6 hours andCMS-1525-FC 1439 45 minutes to complete the request process at the cost of approximately $365.65 for each hospital. Overall, the annual burden for this process is estimated at approximately 1,789 hours, at the cost of approximately $96,897.25. These estimates do not include time or cost burden estimates for hospitals to read a nd provide rebuttal statements in response to community input comments, which is included in the final regulati on, and the associated time and costs for the hospital to send them to CMS. Due to the voluntary nature of this criterion, time and cost burden estimates are di fficult to anticipate, as this is an unknown variable.
REVISED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation Section(s) OMB Control

No. Number of Respondents Number of Responses Burden per Response (hours) Total Annual Burden (hours) Hourly Labor Cost of Reporting ($) Total Labor Cost of Reporting ($) Total Capital/ Maintenance

Costs ($) Total Cost ($) § 489.20 0938-1034 2,597 1,966 0.019 138,032* 18.50 2,551,148 0 2,557,733 § 411.362 0938-New 265 265 6.45 1,789 44.81 96,897 0 96,897 Total 2,862 2,231 139,821 2,654,630 *Represents the revised burden estim ate associated with the requiremen t. It does not reflect the burden currently approved under OCN 0938-1034.
C. Associated Information Collections Not Specified in Regulatory Text In the CY 2012 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 following is a discussion of those requirements for the proposals that we are adopting in this final rule with comment period. 1. Hospital Outpatient Quality Reporting (Hospital OQR) Program As previously stated in section XIV. of the CY 2012 OPPS/ASC proposed rule and this final rule with comment period, th e Hospital OQR Program has been generallyCMS-1525-FC 1440 modeled after the quality data reporting progr am for the Hospital IQR Program. We refer readers to the CY 2011 OPPS/ ASC final rule with comm ent period (75 FR 72064 through 72110 and 72111 through 72114) for a detailed discussion of Hospital OQR Program information collection requirements we have previously finalized. 2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014, and CY 2015 Payment Determinations a. Previously Adopted Hospital OQR Progr am Measures for the CY 2012, CY 2013, and CY 2014 Payment Determinations In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766), we retained the 7 chart-abstracted measures we used in CY 2009 and adopted 4 new claims-based imaging measures for the CY 2010 payment determination, bringing the total number of quality measures for which hospitals must submit data to 11 measures. In the CY 2010 OPPS/ASC final rule with co mment period (74 FR 60637), we required hospitals to continue to submit data on the same 11 measures for the CY 2011 payment determination. The burden associated with the aforementioned data submission requirements is currently approve d under OCN: 0938-1109 and expires October 31, 2013. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 72094), we adopted measures for the CY 2012, CY 2013, and CY 2014 payment determinations. For the CY 2012 payment determination, we retained the 7 chart-abstracted measures and the 4 claims-based imaging measures we used for the CY 2011 paymentCMS-1525-FC 1441 determination. We also adopted 1 structural HIT measure that tracks HOPDs’ ability to receive lab results electronically, and 3 claims -based imaging efficiency measures. These actions bring the total number of measures for the CY 2012 payment determination for which hospitals must submit data to 15 meas ures. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72112 through 72113) , we discussed the burden associated with these information collection requirements. For the CY 2013 payment determination, we required that hospitals continue to submit data for all of the quality measures that we adopted for the CY 2012 payment determination. We also adopted 1 structural HIT measure assessing the ability to track clinical results between visi ts, 6 new chart-abstracted me asures on the topics of HOPD care transitions and ED efficiency, as well as 1 chart-abstracted ED-AMI measure that we proposed for the CY 2012 payment determinatio n but which we decided to finalize for the CY 2013 payment determination. These actions bring the total number of quality measures for the CY 2013 payment determina tion for which hospitals must submit data
to 23 measures. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 72094), for the CY 2014 payment determina tion, we retained the CY 2013 payment determination measures, but did not adopt any additional measures. In the CY 2011 OPPS/ASC final rule with comment peri od (75 FR 72112 through 72113), we discussed the burden associated with these in formation collection requirements.CMS-1525-FC 1442 The 23 measures that we adopted in the CY 2011 OPPS/ASC final rule with comment period to be used for the CY 2012 through CY 2014 payment determinations are listed in the table below.

Hospital OQR Program Measurement Se t Adopted in the CY 2011 OPPS/ASC Final Rule with Comment Period to be Used for the CY 2012, CY 2013, and CY 2014 Payment Determinations OP-1: Median Time to Fibrinolysis OP-2: Fibrinolytic Therapy Received Within 30 Minutes OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention OP-4: Aspirin at Arrival OP-5: Median Time to ECG OP-6: Timing of Antibiotic Prophylaxis OP-7: Prophylactic Antibiotic Selection for Surgical Patients OP-8: MRI Lumbar Spine for Low Back Pain OP-9: Mammography Follow-up Rates OP-10: Abdomen CT – Use of Contrast Material OP-11: Thorax CT – Use of Contrast Material OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery OP-14: Simultaneous Use of Brain Co mputed Tomography (CT) and Sinus Computed Tomography (CT) OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache OP-16: Troponin Results for Emergency De partment acute myocardial infarction (AMI) patients or chest pain patien ts (with Probable Cardiac Chest Pain ) Received Within 60 minutes of Arrival OP-17: Tracking Clinical Results between Visits OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients OP-19: Transition Record with Specified Elements Received by Discharged Patients OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional OP-21: ED- Median Time to Pain Management for Long Bone Fracture OP-22: ED- Patient Left Without Being SeenCMS-1525-FC 1443 Hospital OQR Program Measurement Se t Adopted in the CY 2011 OPPS/ASC Final Rule with Comment Period to be Used for the CY 2012, CY 2013, and CY 2014 Payment Determinations 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

b. Additional Hospital OQR Pr ogram Measures for CY 2014 In the CY 2011 OPPS/ASC final rule with comment period, we did not adopt any new measures for the CY 2014 payment determin ation. In this final rule with comment period, we are adding, for the CY 2014 paym ent determination, 1 chart-abstracted measure and 2 structural meas ures (including hospital outpati ent volume data for selected outpatient surgical procedures). Thus, fo r the CY 2014 payment determination, there will be a total of 26 measures. The complete measure set we are adopting for the CY 2014 payment determination, including measures we have previously adopted, is shown below.

CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously Adopted and the Additions in this Final Rule with Comment Period OP-1: Median Time to Fibrinolysis OP-2: Fibrinolytic Thera py Received Within 30 Minutes OP-3: Median Time to Transfer to Anothe r Facility for Acute Coronary Intervention OP-4: Aspirin at Arrival OP-5: Median Time to ECG OP-6: Timing of Antibiotic Prophylaxis OP-7: Prophylactic Antibiotic Se lection for Surgical Patients OP-8: MRI Lumbar Spine for Low Back Pain OP-9: Mammography Follow-up Rates OP-10: Abdomen CT – Us e of Contrast Material OP-11: Thorax CT – Use of Contrast Material OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data*CMS-1525-FC 1444 CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously Adopted and the Additions in this Final Rule with Comment Period OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery * OP-14: Simultaneous Use of Brain Comput ed Tomography (CT) and Sinus Computed Tomography (CT)* OP-15: Use of Brain Computed Tomogra phy (CT) in the Emergency Department for Atraumatic Headache* OP-16: Troponin Results for Emergency Depa rtment acute myocardial infarction (AMI) patients or chest pain patients (with Proba ble Cardiac Chest Pain) Received Within 60 minutes of Arrival ** OP-17: Tracking Clinical Results between Visits** OP-18: Median Time from ED Arrival to ED Departure for Disc harged ED Patients** OP-19: Transition Record with Specified Elements Received by Discharged Patients** OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional** Op-21: ED- Median Time to Pain Management for Long Bone Fracture ** OP-22: ED Patient Left Without Being Seen** OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interpretati on Within 45 minutes of Arrival ** OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting*** OP-25: Safety Surgery Checklist***

OP-26: Hospital Outpatient Volume Data on Se lected Outpatient Surgical Procedures*** Procedure Category Corresponding HCPCS Codes Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, C9724, C9725, 0170T Eye 65000 through 68999, G0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T, 76510, 0099T Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727 Genitourinary 50000 through 58999, 0193T, 58805CMS-1525-FC 1445 CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously Adopted and the Additions in this Final Rule with Comment Period Cardiovascular 33000 through 37999 Respiratory 30000 through 32999

*New measure for the CY 2012 payment determination. **New measure for the CY 2013 payment determination. ***New measure for the CY 2014 payment determination adopted in this final rule with comment period.
We will calculate the seven claims-based measures using Medicare FFS claims data and do not require additional hospital data submissions. With the exception of OP-22, we are using the same data subm ission requirements related to the chartabstracted abstracted quality measures that are submitted directly to CMS that we used for the CY 2011 and CY 2012 payment determinati ons. For the four structural measures, including the collection of all-patient volume for selected outpatient procedures, hospitals will enter data into a Web-based collection tool during a specified collection period once annually. Under the Hospital OQR Program requirements, hospitals must complete and submit a notice of participation form for th e Hospital OQR Program if they not already done so or have withdrawn from participat ion. By submitting this document, hospitals agree that they will allow CM S to publicly report the measures for which they have submitted data under the Hospital OQR Program. For the CY 2014 payment determinati on, the burden associated with these requirements (including those prev iously adopted) is the time and effort associated with completing the notice of participation form, collecting and submitting the data on the 26 measures. For the 15 chart-abstracted measur es (including those measures for which dataCMS-1525-FC 1446 are data is submitted directly to CMS, as well as the OP-22 measure for which data will be submitted via a Web-based tool rather than via an electronic file), we estimate that there will be approximately 3,200 respondents pe r year. For hospitals to collect and submit the information on the chart-abstracted measures we estimate it will take 35 minutes per sampled case. Based upon the data submitted for the CY 2011 payment determination and our estimates for the addi tional proposed measures, we estimate there will be a total of 1,947,429 cases per year, approximately 609 cases per year per respondent. The estimated annual burden a ssociated with the submission requirements for these chart-abstracted measures is 1,136,000 hours (1,947, 429 cases per year x 0.583 hours per case). For the structural measures, exclud ing the proposed all-patient volume for selected surgical procedures measure, we estimate that each participating hospital will spend 10 minutes per year to collect and s ubmit the required data, making the estimated annual burden associated with these m easures 1,600 hours (3,200 hospitals x 0.167 hours per measure x 3 structural measures per hospital). For the collection of all-patient vol ume for selected outpatient surgical procedures, because hospitals must dete rmine their populations for data reporting purposes and most hospitals are voluntarily reporting populat ion and sampling data for Hospital OQR Program purposes, we believe th e only additional burden associated with this proposed requirement would be the reporting of the data using the Web-based tool. We estimate that each participating hospital wi ll spend 10 minutes per year to collect and submit the data, making the estimated annua l burden associated with this measureCMS-1525-FC 1447 533 hours (3,200 hospitals x 0.167 hours per measur e x 1 all-patient volume measure per hospital).
Comment : One commenter believed that the estimates within the proposed rule are reasonable for the chart-ab straction of cases, but that they underestimate the true burden by overlooking the time burden for startu p and biannual maintenance education of the measure specifications, educational resear ch for cases that do not fit within the specifications manual, education regarding el ectronic tool usage, coordination of data submission and data quality checks by management and/or information technology personnel, and recruitment of abstraction personnel by ma nagement. The commenter believed that the effect of these additional, required activities w ill double or triple the burden estimated within the original propos al document and should not be overlooked. Response : We thank the commenter for bringing our attention to these additional sources of burden and for their support of our es timates related to the ab straction of cases. We will consider whether future estimates w ill require consideration of the factors listed. c. Hospital OQR Program Measures for CY 2015 In this final rule with comment peri od, for the CY 2015 payment determination, we are retaining the requirement that hospi tals must complete and submit a notice of participation form for the Hospital OQR Program. For the CY 2015 payment determination, we also are retaining the measures used for CY 2014 payment determination (including the measures adopted in this final rule with comment period) and not adding any additional measures at this time.CMS-1525-FC 1448 For the CY 2015 payment determinati on, the burden associated with these requirements is the time and effort associated with completing the notice of participation form, collecting and submitting the data on the proposed measures, and collecting and submitting all-patient volume data for selected outpatient surgical procedures. For the chart-abstracted measures, we estimat e that there will be approximately 3,200 respondents per year. For hospitals to colle ct and submit the information on the chartabstracted measures where data is submitted directly to CMS, we estimate it will take 35 minutes per sampled case. Based upon the data submitted for the CY 2011 payment determination and our estimates for the additional measures, we estimate there will be a total of 1,947,429 cases per year, approximately 609 cases per year per respondent. The estimated annual burden associated with the aforementioned proposed submission requirements for the chart-abstracted da ta is 1,136,000 hours (1,947,429 cases per year x 0.583 hours per case). For the structural measur es, we estimate that each participating hospital will spend 10 minutes per year to collect and submit the data, making the estimated annual burden associated with th ese measures 1,603 hours (3,200 hospitals x 0.167 hours per hospital x 3 structur al measures per hospital). For the collection of all-patient volume data for selected outpatient surgical procedures, because hospitals must dete rmine their populations for data reporting purposes and most hospitals are voluntarily reporting populat ion and sampling data for Hospital OQR purposes, we believe the only additional burden associated with this requirement will be the reporting of the data using the Web-based tool. We estimate that each participating hospital will spend 10 minutes per year to collect and submit the data,CMS-1525-FC 1449 making the estimated annual burden associ ated with this measure 533 hours (3,200 hospitals x 0.167 hours per hospital). We invited public comment on the burde n associated with the information collection requirements but did not receive any public comment. We did not receive any additional comments on these information collection requirements. 3. Hospital OQR Program Validation Requirements for CY 2013 In this final rule with comment period, we are retaining most of the requirements related to data validation for CY 2013 th at we adopted in th e CY 2011 OPPS/ASC final rule with comment period (75 FR 72103 through 72106) for CY 2012, with some revisions. While these requirements are subjec t to the PRA, they are currently approved under OCN: 0938-1109 and expire October 31, 2013. Similar to our approach for the CY 2012 Hospital IQR Program payment determination (75 FR 72103 through 72106), we are validating data from randomly selected hospitals for the CY 2013 payment determination, but we are reducing the number of hospitals from 800 to 450. We note that, because hospitals would be selected randomly, every hospital partic ipating in the Hospital OQR Program would be eligible each year for validation selection. In the CY 2011 OPPS/ASC proposed rule and final rule with comment period (75 FR 46381 and 72106, respectively), we di scussed additional data validation conditions under consideration for CY 2013 and subs equent years. In th is final rule withCMS-1525-FC 1450 comment period, we are finalizing a policy unde r which we will select for validation up to 50 additional hospitals ba sed upon targeting criteria. For each selected hospital, generally we will randomly select up to 48 patient episodes of care per year (12 per quarter) for validation purposes from the total number of cases that the hospital successfully s ubmitted to the OPPS Clinical Warehouse during the applicable time period. However, if a selected hospital submitted less than 12 cases in one or more quarters, only those cases available would be validated. The burden associated with the CY 2013 requirement is the time and effort necessary to submit validation data to a CMS c ontractor. We estimate that it would take each of the sampled hospitals approximately 12 hours to comply with these data submission requirements. To comply with the requirements, we estimate each hospital must submit up to 48 cases for the affected year for review. All sel ected hospitals must comply with these requirements per year, which would result in a total of up to 24,000 charts being submitted by the sampled hospitals. The estimated annual burden associated with the data validation process fo r CY 2013 is approximately 6,000 hours. We are maintaining the deadline of 45 da ys for hospitals to submit requested medical record documentation to a CMS contra ctor to support our validation process. We invited public comment on the burde n associated with these information collection requirements. We received comme nts regarding increased burden related to reducing the deadline for hospitals to subm it requested medical record documentation from 45 to 30 days. We discuss these commen ts and state in section XIV.G.3.d. of this final rule with comment period that we ha ve decided to not fi nalize our proposal toCMS-1525-FC 1451 reduce the time for hospitals to submit medi cal record documentation, and that we are instead retaining our policy of 45 days after request. 4. Hospital OQR Program Reconsid eration and Appeals Procedures In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), we adopted a mandatory reconsideration pro cess that applied to the CY 2010 payment decisions. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60654 through 60655), we continued this process for the CY 2011 payment update. In the CY 2011 OPPS/ASC final rule with comme nt period (75 FR 72106 through 72108), we continued this process for the CY 2012 paym ent update with some modifications. We eliminated the requirement that the reconsid eration request form be signed by the hospital CEO to facilitate electronic submission of the form and reduce hospital burden. We are continuing this process for the CY 2013 and future years’ payment determinations. While there is burden associated with f iling a reconsideration request, 5 CFR 1320.4 of the Paperwork Reduction Act of 1995 regulations excludes collection activities during the conduct of administrative act ions such as redeterminations, reconsiderations, and/or appeals. We did not receive any comments on thes e information collection requirements. 5. ASC Quality Reporting Program In this final rule with comment peri od, we are adopting five claims-based measures for collection beginning on October 1, 2012; these measures will be used for the CY 2014 payment determination. We will co llect quality measure data for the five claims-based measures by using Quality Data Codes (QDCs) placed on submitted claimsCMS-1525-FC 1452 beginning with services furnished from October 1, 2012 through December 31, 2012. The five measures are:

● Patient Burns (NQF #0263)

● Patient Falls (NQF #0266)

● Wrong Site, Wrong Side, Wrong Patient , Wrong Procedure, Wrong Implant (NQF #0267)

● Hospital Transfer /Admission (NQF #0265)

● Prophylactic Intravenous (IV) Antibiotic Timing (NQF #0264) Approximately 71 percent of ASCs part icipate in Medical Event Reporting, which includes reporting on the first four proposed claims-based measures listed above. Between January 1995 and December 2007, ASCs reported 126 events, an average of 8.4 events per year (Florida Medical Quality Assu rance, Inc. and Health Services Advisory Group.: Ambulatory Surgery Center Environmental S can (July 2008) (Contract No. GS-10F-0096T)). Thus, we estimate th e burden to report QDCs on this number of claims per year for the first four claims-bas ed measures to be nominal due to the small number of cases (less than 1 case per month per ASC). The remaining claims-based measure is prophylatic IV antib iotic timing. We estimate the burden associated with submitting QDCs for this measures to be 231,851 hours (2,788,640 claims per year x 50 percen t of claims requiring QDC information x 0.167 hours per claim). We refer readers to the HHS Report to Congress: Medicare Ambulatory Surgical Center Value-Based Pu rchasing Implementation Plan, available at the Web site: https://www.cms.gov/ASCPaymen t/downloads/C_ASC_RTC%202011.pdfCMS-1525-FC 1453 as the source for the number of ASCs and nu mber of claims per year to calculate ASC burden estimates. For CY 2015 payment determination, we are retaining the five measures we are adopting for CY 2014 payment determination a nd we are adding two structural measures. For the structural measures, ASCs will enter required information using a Web-based collection tool between July 1, 2013 and August 15, 2013. For the Safe Surgery Checklist Use structural measure, we estimate that each participating ASC will spend 10 minutes per year to collect and s ubmit the required data, making the estimated annual burden associated with this meas ure 864 hours (5,175 ASCs x 1 measure x 0.167 hours per ASC). For the ASC Facility Volume Data on Selected ASC Surgical Procedures structural measure, we estimate that each participating ASC will spend 10 minutes per year to collect and submit the required data, making the estimated annual burden associated with this measure, 864 hours (5,175 ASCs x 1 measure 0.167 hours per ASC). Comments received regarding burden relate d to the collection of these data are discussed in section XIV.K.3., 4, and 5. of this final rule with comment period. 6. 2012 Electronic Reporting Pilot for Eligible Hospitals and CAHs Under 42 CFR 495.6(f)(9), we require eligib le hospitals and CAHs participating in the Medicare EHR Incentive Program (which would include those participating in the 2012 Electronic Reporting Pilot) to successfully report hospital CQMs to CMS in the manner specified by CMS. Although eligible hos pitals and CAHs may continue to attest CQMs in 2012, they may also choose to par ticipate in the 2012 Electronic ReportingCMS-1525-FC 1454 Pilot for Hospitals and CAHs which we are fi nalizing in this final rule with comment period. Eligible hospitals a nd CAHs participating in the 2012 Electronic Reporting Pilot must submit CQM data on all 15 CQMs (listed in Table 10 of the Medicare and Medicaid EHR Incentive Program final rule (75 FR 44418 through 44420)) to CMS, via a secure portal based on data obtained from the e ligible hospital’s or CAH’s certified EHR technology. Eligible hospitals and CAHs are required to report on core and menu set criteria for Stage 1 meaningful use. The reporting of cl inical quality measures is part of the core set. We estimate that it would take an eligible hospital or CAH 0.5 hour to submit the required CQM information under the 2012 Electr onic Reporting Pilot. Therefore, the estimated total burden shoul d all 4,922 Medicare eligible hospitals and CAHs (3,620 acute care hospitals and 1,302 CAHs) particip ate in the 2012 Electronic Reporting Pilot is 2,461 hours. We believe that an eligible hospita l or CAH might assi gn a Computer and Information Systems Manager to submit the CQM information on their behalf. We estimate the cost burden for an eligible hos pital or CAH to submit the CQMs and hospital quality requirements is $29.64 (0.5 hour x $59.27 (mean hourly rate for computer and information systems managers based on the 2010 Bureau of Labor Statistics) and the total estimated annual cost burden for all eligible hospitals and CAHs to submit the required CQMs is $145,863 ($29.64 x 4,922 hospitals and CAHs). We solicited public comments on the estimated numbers of eligible hospitals and CAHs that may register for the 2012 Electroni c Reporting Pilot and th at would submit theCMS-1525-FC 1455 CQM information via the 2012 Electronic Repo rting Pilot. We also invited public comments on the type of personnel or staff th at would mostly likely submit on behalf of eligible hospitals and CAHs. We did not receive any comments on thes e information collection requirements. 7. Additional Topics In addition to soliciting public comments as part of the OMB approval process for the proposed information collection require ments associated with the Hospital OQR Program, in the proposed rule we sought publ ic comment on several issues that may ultimately affect the burden associated with the Hospital OQR Program. Specifically, in the proposed rule, we proposed to retain measures for the CY 2015 payment determinations, to adopt new measures for the CY 2014 and CY 2015 payment determinations, and we sought comments on ot her possible measures under consideration for adoption into the Hospital OQR Program . We also sought public comments on collecting chart-abstracted data for one m easure for the CY 2013 payment determination via a Web-based tool, and on the continued use of an extraordinary circumstance extension or waiver for reporting quality data , and additional data validation conditions that we are considering adopting beginni ng with the CY 2014 payment determination. We also sought public comment on our proposals for an ASC Quality Reporting Program for the ASC payment determinations for CYs 2014, 2015 and 2016. We invited public comments on thes e potential information collection requirements.CMS-1525-FC 1456 Comments and responses for the proposed policies and burden associated with these proposed information collection requirement s are discussed in section XIV. of this final rule with comment period. XIX. 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-1525-FC 1457 XX. Economic Analyses A. Regulatory Impact Analysis 1. Introduction We have examined the impacts of this fi nal rule with comment period as required by Executive Order 12866 on Regulatory Pla nning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Contra ct with America Advancement Act of 1996 (Pub. L. 104-121) (5 U.S.C. 804(2)). 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 flexibilit y. This rule has been designated as an “economically” significant rule under secti on 3(f)(1) of Executive Order 12866 and a major rule under the Contract w ith America Advancement Act of 1996 (Pub. L. 104-121). Accordingly, the rule has been reviewed by the Office of Management and Budget. We have prepared a regulatory impact analysis that, to the best of our ability, presents the costs and benefits of this final rule with comment period. InCMS-1525-FC 1458 the proposed rule (76 FR 42371), we solicite d public comments on the regulatory impact analysis provided. 2. Statement of Need This final rule with comment period is necessary to update the Medicare hospital outpatient prospective paym ent rates and the ambulator y surgical center (ASC) prospective payment rates for CY 2012. The fi nal rule with comment period is necessary to adopt changes to payment policies and paym ent rates for outpatient services furnished by hospitals and CMHCs for CY 2012. We ar e required under section 1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion factor used to determine the APC payment rates. We also are required under section 1833(t)(9)(A) of the Act to review, not less often than annually, and revise the gr oups, the relative paym ent weights, and the wage and other adjustments described in sec tion 1833(t)(2) of the Act. In addition, we must review the clinical integrity of pa yment groups and relative weights at least annually. This final rule with comment period is also necessary to update the ASC payment rates for CY 2012. The final rule with comm ent period is necessary to enable CMS to adopt changes to payment policies and payment rates for covered surgical procedures and covered ancillary services th at are performed in an ASC for CY 2012. Because the ASC payment rates are based on the OPPS relative we ights for the majority of the procedures performed in ASCs, the ASC payment rate s are updated annually to reflect annual changes to the OPPS relative weights. In addition, because the services provided in ASCs are identified by HCPCS codes which are reviewed and revised either quarterly orCMS-1525-FC 1459 annually, depending on the HCPCS codes, it is necessary to upda te the ASC payment rates annually to reflect these changes to HCPCS codes. In addition, we are required under section 1833(i)(1) of the Ac t to review and update the li st of surgical procedures that can be performed in an ASC not less frequently than every 2 years. Section 1833(t)(17) of the Act requires that subsection (d) hospitals that fail to meet quality reporting requirements under the Hospital OQR Program to incur a reduction of 2.0 percentage point s to their OPD fee schedule in crease factor. In section XIV. of this final rule with comment peri od, we are adopting additi onal policies affecting the Hospital OQR Program for CY 2013, CY 201 4, and CY 2015 that hospitals will have to meet in order to receive the full OPD f ee schedule increase fact or. In the proposed rule, we solicited public comments on these pr oposed additional pol icies. Any public comments that we received are addressed in s ection XIV. of this final rule with comment period. This final rule with comment period is necessary to further implement section 6001(a)(3) of the Affordable Care Act. In se ction XV. of this fina l rule with comment period, we are adopting a process for a hospita l to request an excepti on to the prohibition on expansion of facility capacity under the w hole hospital and rural provider exceptions to the physician self-referral prohi bition. We also adopt amendm ents to the patient safety requirements in the provider agreement regula tions. In the proposed rule, we solicited public comments on these proposed changes. Any public comments that we received are addressed in section XV. of this final rule with comment period.CMS-1525-FC 1460 Section 1886(o)(1)(B) of the Act di rects the Secretary to begin making value-based incentive payments under the Hospital VBP Program to hospitals for discharges occurring on or af ter October 1, 2012. In section XVI. this final rule with comment period, we are adding one chart-ab stracted measure for the FY 2014 payment determination under the Hospital VBP Program. In the proposed rule, we solicited public comments on this proposed additional measure. Any public comments that we received are addressed in section XVI. of th is final rule with comment period. Section 109(b) of the MIEA-TRHCA stat es that the Secretary may implement a quality reporting system for ASCs in a ma nner so as to provide for a reduction of 2.0 percentage points in any annua l update with respect to the year involved, for failure to report on quality measures. In section XIV.K. of this final rule with comment period, we are establishing an ASC Quality Reporting Pr ogram with the collection of five quality measures beginning in CY 2012. In the pr oposed rule, we solicited public comments on this program. Any public comments that we received are addressed in section XIV.K. of this final rule with comment period. 3. Overall Impacts for OPPS and ASC Provisions We estimate that the effects of the OPPS provisions that will be implemented by this final rule with comment period will re sult in expenditures exceeding $100 million in any 1 year. We estimate the total increase, fr om changes in this final rule with comment period, in expenditures under the OPPS fo r CY 2012 compared to CY 2011 to be approximately $600 million. Because this final rule with comment period for the OPPS is “economically significant” as measur ed by the $100 million threshold, we haveCMS-1525-FC 1461 prepared a regulatory impact analysis that, to the best of our abil ity, presents the costs and benefits of this rulemaking. Table 59 of this final rule with comment period displays the redistributional impact of the CY 2012 changes on OPPS payment to various groups of hospitals and for CMHCs. We estimate that the effects of the AS C provisions that will be implemented by this final rule with comment period for the ASC payment system will result in expenditures exceeding $100 million in any 1 year . We estimate the total increase, from changes in this final rule with comment period, in expenditures under the ASC payment system for CY 2012 compared to CY 2011 to be approximately $45 million. Because this final rule with comment period for the ASC payment system is “economically significant” as measured by the $100 million threshold, we have prepared a regulatory impact analysis of changes to the ASC paymen t system that, to the best of our ability, presents the costs and benefits of this rulemaking. Tables 61 and Table 62 of this final rule with comment period di splay the redistributional imp act of the CY 2012 changes on ASC payment, grouped by specialty area and then grouped by procedures with the greatest ASC expenditu res, respectively. 4. Detailed Economic Analyses a. Effects of OPPS Changes in Th is Final Rule with Comment Period We are updating the OPPS payment rate s and revising several OPPS payment policies for CY 2012. We are required unde r section 1833(t)(3)(C)( ii) of the Act to update annually the conversion factor used to determine the APC payment rates. We also are required under section 1833(t)(9 )(A) of the Act to review , not less frequently thanCMS-1525-FC 1462 annually, and revise the groups, the relative payment weights, and the wage and other adjustments described in secti on 1833(t)(2) of the Act. In addition, we must review the clinical integrity of payment groups and weight s at least annually. Consistent with our historical practice in this final rule with comment period, we are updating the conversion factor and the wage index adjustment for hos pital outpatient services furnished beginning January 1, 2012, as we discuss in sections II.B . and II.C., respectively, of this final rule with comment period. We discuss our implementation of section 10324 of the Affordable Care Act, as amended by HC ERA, authorizing a wa ge index of 1.00 for certain frontier States. We also are revi sing the relative APC payment weights using claims data for services furnished on a nd after January 1, 2010, through and including December 31, 2010, and updated cost report info rmation. We are continuing the current payment adjustment for rural SCHs, including EACHs. Finally, we list the 19 drugs and biologicals in Table 32 of this final rule w ith comment period that we are removing from pass-through payment status for CY 2012. We estimate that the update change to th e conversion factor a nd other adjustments (but not including the effects of outlier pa yments, the pass-through estimates, and the application of the frontier State wage adjust ment for CY 2012) will increase total OPPS payments by 1.9 percent in CY 2012. The chan ges to the APC weights, the changes to the wage indices, the continuation of a paym ent adjustment for rural SCHs, including EACHs, and the payment adjustment for cancer hospitals will not increase OPPS payments because these changes to the OPPS are budget neutral. However, these updates will change the distribution of payments w ithin the budget neutral system as shown inCMS-1525-FC 1463 Table 59 below and described in more detail in this section. We al so estimate that the total change in payments between CY 2011 and CY 2012, considering all payments, including changes in estima ted total outlier payments, pass-through payments, and the application of the frontier State wage adjust ment outside of budget neutrality, in addition to the application of the OPD fee schedule in crease factor after all adjustments required by sections 1833(t)(3)(F) and 1833(t)(3)(G) of the Act, will increase total estimated OPPS payments by 1.9 percent. (1) Limitations of Our Analysis The distributional impacts presented here are the proj ected effects of the CY 2012 policy changes on various hospital groups. We post on the CMS Web site our hospital-specific estimated payments for CY 2012 with the other supporting documentation for this final rule with comme nt period. To view the hospital-specific estimates, we refer readers to the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/ . At the Web site, select “regulations and notices” from the left side of the page a nd then select “CMS-1525-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 59 below. We do not show hospital-specific impacts for hospitals whose claims we were unable to use. We refer readers to section II.A.2. 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.CMS-1525-FC 1464 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 encounters. In the proposed rule, as we have done in previous proposed rules, we solicited public comment and information about the anticipated effects of our proposed ch anges on providers and our methodology for estimating them. Any public comments that we received are addresse d in the applicable sections of this final rule with comment period that discuss the specific policies. (2) Estimated Effects of This Final Rule with Comment Period on Hospitals Table 59 below shows the estimated impact of this final rule with comment period on hospitals. Historically, the first line of the impact table, which estimates the proposed change in payments to all f acilities, has always included cancer and children’s hospitals, which are held harmless to their pre-BBA am ount. We also include CMHCs in the first line that includes all providers because we include CMHCs in our weight scalar estimate. As discussed in section II.F. of this final rule with comment peri od, we are finalizing an adjustment for certain cancer hospitals as required under section 3138 of the Affordable Care Act. Because these hospitals will continue to be eligible to receive hold harmless payments (under current law), we now include a second line for all hospitals, excluding permanently held harmless hospitals and CMHC s, and we also include a column that shows the impact on other hospitals of the budget neutral adjustment accounting for the payment adjustment to cancer hospitals.CMS-1525-FC 1465 We present separate impacts for CMHC s in Table 59 because CMHCs are paid only for partial hospitalization services and CMHCs are a di fferent provider type from hospitals. In CY 2011, we are paying CMHCs under APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) a nd APC 0173 (Level II Pa rtial Hospitalization (4 or more services) for CMHCs), and we ar e paying hospitals for partial hospitalization services under APC 0175 (Level I Partial Hosp italization (3 services) for hospital-based PHPs) and APC 0176 (Level II Partial Hosp italization (4 or more services) for hospital-based PHPs). For CY 2012, we are continuing this APC pa yment structure and basing payment fully on the median costs calcul ated using claims and cost report data for the type of provider for which rates are being set, that is, hospital or CMHC. We display the impact on CMHCs of this policy below, and we discuss the impact on hospitals as part of our discussion of the impact of changes on hospitals for CY 2012. The estimated increase in the total paym ents made under the OPPS is determined largely by the increase to the conversion factor set under the methodology in the statute. The distributional impacts pres ented do not include assumptions about changes in volume and service mix. Section 1833(t)(3)(C)(iv) of the Act provides that, for purposes of this subparagraph subject to paragr aph (17) and subparagraph (F) of this paragraph, the OPD fee schedule increase factor is equal to the market basket pe rcentage increase applicable under section 1886(b)(3)(B )(iii) of the Act. The market basket percentage increase applicable under section 1886(b )(3)(B)(iii) of the Act, which we refer to as the IPPS market basket percentage increase in this discussion, is 3.0 percent. However, section 1833(t)(3)(F)(i) of the Act re duces that 3.0 percent by th e productivity adjustmentCMS-1525-FC 1466 described in section 1886(b)(3 )(B)(xi)(II) of the Act, whic h is 1.0 percentage point (which is also the MFP adjustment for FY 2012 as adopted in the FY 2012 IPPS/LTCH PPS final rule), and sections 1833(t)(3)(F)(ii ) and 1833(t)(3)(G)(ii) of the Act further reduce the market basket percentage increas e by 0.1 percentage point, resulting in the OPD fee schedule increase factor of 1.9 percent, which we are using in the calculation of the CY 2012 OPPS conversion factor. We refer r eaders to section II.B. of this final rule with comment period for a detailed discussion of the calculation of the conversion factor and the source of its components. Section 103 24 of the Affordable Care Act, as amended by HCERA, further authorized additional expenditures outside budget neutrality for hospitals in certain frontie r States that have a wage index of 1.00. The amounts attributable to this frontier State wage index adjustment ar e incorporated in the CY 2012 estimates in Table 59. Additionally, in response to public comments on the proposed rule, we are providing the paym ent impact of the rural floo r and the imputed floor with budget neutrality at the State le vel in Table 60, as discussed in section II.C. of this final rule with comment period. Table 59 shows the estimated redistri bution of hospital and CMHC payments among providers as a result of the follow ing factors: APC reconfiguration and recalibration; wage indices and the rural adjustment; the combined impact of the APC recalibration, wage and rural adjustment e ffects, and the OPD fee schedule increase factor update to the conversion factor; the effect of the budget ne utral adjustment to payments made to the 11 dedica ted cancer hospitals that meet the classification criteria in section 1886(d)(1)(B )(v) of the Act; the frontier Stat e wage index adjustment; andCMS-1525-FC 1467 estimated redistribution considering all paym ents for CY 2012 relative to all payments for CY 2011, including the impact of changes in estimated outlier payments, and changes to the pass-through payment estimate. We did not model an explicit budget neutrality adjustment for the rural adjustment for SCHs because we are not making any changes to the policy for CY 2012. Because the updates to the conversion factor (including the update of the OPD fee schedul e increase factor, that is, the IPPS market basket percentage increase less the productivity adjustment requir ed by section 1833(t)(3)(F)(i) of the Act and less the adjustment re quired by sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Act; the subtraction of the estimated cost of the cancer hospital payment adjustment; the subtraction of the estimated cost of the rural adjustment; and the subtraction of the estimated cost of pr ojected pass-through payment for CY 2012) 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 would 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 2011 and CY 2012 by various groups of hospitals, which CMS cannot forecast. Overall, we estimate that the OPPS rate s for CY 2012 will have a positive effect for providers paid under the OPPS, resulti ng in a 1.9 percent es timated increase in Medicare payments. Removing payments to can cer and children’s hospitals because theirCMS-1525-FC 1468 payments are held harmless to the pre- OPPS ratio between payment and cost and removing payments to CMHCs suggest that these changes will result in a 1.9 percent estimated increase in Medicare pa yments to all other hospitals. To illustrate the impact of the CY 20 12 changes, our analysis begins with a baseline simulation model that uses the fi nal CY 2011 relative wei ghts, the FY 2011 final IPPS wage indices that include reclassifications, and the fi nal CY 2011 conversion factor. Column 2 in Table 59 shows the independent effect of the change s resulting from the reclassification of services among APC groups and the recalibration of APC relative weights, based on 12 months of CY 2010 OPPS hospital claims data and the most recent cost report data. We modeled the effect of the APC recalibration changes for CY 2012 by varying only the relative weights (the final CY 2011 relative weights versus the CY 2012 relative weights calculated using th e service-mix and volume in the CY 2010 claims used for this final rule with co mment period) and calculating the percent difference in the relative we ight. Column 2 also reflect s the effect of the changes resulting from the APC reclassification and recalibration changes and any changes in multiple procedure discount patterns or conditio nal packaging that occur as a result of the changes in the relative magn itude of payment weights. Column 3 reflects the independent effect s of the updated wage indices, including the application of budget neutrali ty for the rural floor policy on a nationwide basis. This column excludes the effects of the frontier State wage index adjustment, which is not budget neutral and is included in Column 6. We did not mode l a budget neutrality adjustment for the rural adjustment for SCHs because we are not making any changes toCMS-1525-FC 1469 the policy for CY 2012. We modeled the indepe ndent effect of updating the wage indices by varying only the wage indices, holding AP C relative weights, service-mix, and the rural adjustment constant and using the CY 2012 scaled weights and a CY 2011 conversion factor that included a budget neutrality adjustment for the effect of changing the wage indices between CY 2011 and CY 2012. Column 4 demonstrates the independent effect of the cancer hospital payment adjustment. The cancer hospital payment adju stment will be provided at cost report settlement rather than through an adjustment to APC payments on a claims basis as we proposed. Under this final rule with comment period, we will examine each cancer hospital’s data at cost report settlement, determine the cancer hosp ital’s PCR (before the cancer hospital payment adjustment) and in turn determine the lump sum necessary (if any) to make the cancer hospital’s PCR equal to the target PCR. To the extent at cost report settlement a cancer hospital’s P CR (before the cancer hospital payment adjustment) is above the target PCR, a cance r hospital will receive an aggregate payment equal to zero. We refer readers to section II.F. of this final rule with public comment for complete discussion of our policy for CY 2012 w ith regard to the payment adjustment for dedicated cancer hospitals. We refer read ers to Table 13 in section II.F. for the estimated CY 2012 percentage payment adjustment that will be provided to each cancer hospital at cost report settlement. The cancer hospital payment adjustment is estimated to result in an aggregate increase in OPPS paym ents to cancer hospita ls of 34.5 percent. After accounting for TOPs, the estimated aggregate increase in OPPS payments for CYCMS-1525-FC 1470 2012 is approximately 11.3 percent, after all CY 2012 payment updates have been included. Column 5 demonstrates the combin ed “budget neutral” impact of APC recalibration (that is, Column 2), the wage inde x update (that is, Column 3), as well as the impact of updating the convers ion factor with the OPD fee schedule increase factor, the 3.0 percent hospital market bask et percentage increase less the productivity adjustment required by section 1833(t)(3)(F)(i) of the Act, which is 1.0 percentage point, and less the 0.1 percentage point reducti on required by sections 1833(t)(3 )(F)(ii) and 1833( t)(3)(G)(ii) of the Act, which resulted in an OPD fee sc hedule increase factor of 1.9 percent. We modeled the independent effect of the budge t neutrality adjustments and the OPD fee schedule increase factor by using the relative weights and wage indices for each year, and using a CY 2011 conversion factor that in cluded the OPD fee schedule increase and a budget neutrality adjustment for differences in wage indices. Column 6 demonstrates the cumulative impact of the budget neutral adjustments from Columns 2 through 4, and the OPD fee schedule increase f actor of 1.9 percent reflected in Column 5, combined with the non-budget neutral frontie r State wage index adjustment, discussed in section II.C. of this final rule with comment period. This differs from Column 5 solely based on application of the non-budget neutral frontier State wage index adjustment. Column 7 depicts the full impact of the CY 2012 policies on each hospital group by including the effect of all the changes for CY 2012 (including the APC reconfiguration and recalibration shown in Column 2) and comparing them to allCMS-1525-FC 1471 estimated payments in CY 2011. Column 7 sh ows the combined budget neutral effects of Columns 2 through 4, plus the impact of the frontier State wage index adjustment; the change to the fixed-dollar out lier threshold from $2,100 to $1,900 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 hospi tals in our impact model that failed to meet the reporting requirements (discussed in section XIV.E. of this final rule with comment period); and the impact of increasing the estimate of the percentage of total OPPS payments dedicated to transitional pa ss-through payments. Of the 107 hospitals that failed to meet the Hospital OQR Program reporting requirements for the full CY 2011 update (and assumed, for modeling purposes, to be the same number for CY 2012), we included 34 hospitals in our m odel because they had both CY 2010 claims data and recent cost report data. We estimat e that the cumulative effect of all changes for CY 2012 will increase payments to all pr oviders by 1.9 percent for CY 2012. We modeled the independent effect of all cha nges in Column 7 using the final relative weights for CY 2011 and the rela tive weights for CY 2012. We used the final conversion factor for CY 2011 of $68.876 and the CY 2012 conversion factor of $70.016 discussed in section II.B. of this final rule with comment period in this model. Column 7 also contains simulated outlier payments for each year. We used the one year charge inflation factor used in the FY 2012 IPPS/LTCH PPS final rule of 3.89 percent (1.0389) to increase individual costs on the CY 2010 claims, and we used the most recent overall CCR in the July 2011 Outpatient Provider-Specific File (OPSF) (76 FR 51794) to estimate outlier payments for CY 2011. Using the CY 2010 claims andCMS-1525-FC 1472 a 3.89 percent charge inflation factor, we cu rrently estimate that outlier payments for CY 2011, using a multiple threshold of 1.75 a nd a fixed-dollar threshold of $2,100 should be approximately 0.93 percent of total payments. Outlier payments of 0.93 percent are incorporated in the CY 2012 comparison in Colu mn 7. We used the same set of claims and a charge inflation factor of 7.94 per cent (1.0794) and the CCRs in the July 2011 OPSF, with an adjustment of 0.9903, to reflec t relative changes in cost and charge inflation between CY 2010 and CY 2012, to mo del the CY 2012 outliers at 1.0 percent of estimated total payments using a multiple threshold of 1.75 and a final fixed-dollar threshold of $1,900. Column 1: Total Number of Hospitals The first line in Column 1 in Table 59 shows the total numbe r of facilities (4,161), including designated cancer a nd children’s hospitals and CMHCs, for which we were able to use CY 2010 hospital outpatient and CMHC claims data to model CY 2011 and CY 2012 payments, by classes of hospitals, for CMHCs and for dedicated cancer hospitals. We excluded all hospitals and CMHCs for which we could not accurately estimate CY 2011 or CY 2012 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 (DSH) variable for hospitals not participating in the IPPS. Hospitals for which we do not have a DSH variable are grouped separate ly and generally include freestandingCMS-1525-FC 1473 psychiatric hospitals, rehabil itation hospitals, and long-term care hospitals. We show the total number (3,895) of OPPS hospitals, excluding the hold-harmless cancer and children’s hospitals and CMHCs, on the second line of the table. We excluded cancer and children’s hospitals because section 1833(t)(7)(D) of the Act permanently holds harmless cancer hospitals and children’s 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 204 CMHCs at the bottom of the impact table and discuss that impact separately below. Column 2: APC Changes Due to Reassignment and Recalibration This column shows the combined effect s of the reconfigura tion, recalibration, and other policies (such as setting payment for separately pa yable drugs and biologicals at ASP+4 percent with an accompanying reduction in the amount of cost associated with packaged drugs and biologicals and changes in payment for PHP services). Overall, we estimate that changes in APC reassignment and recalibration across all services paid under the OPPS will increase payments to urba n hospitals by 0.2 percent. We estimate that both large and other urban hospitals wi ll experience an increas e of 0.2 percent, all attributable to recalibration. We estimate that urban hospitals billing fewer than 21,000 lines for OPPS services will experience decreases ranging from 0.6 percent to 5.5 percent. The decrease of 5.5 percent for ur ban hospitals billing fewer than 5,000 lines per year is attributable to the decline in the payment for APC 0034 (Mental Health Services Composite), for which the payment rate is se t at the payment rate for APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs). Urban hospitalsCMS-1525-FC 1474 billing 21,000 or more lines for OPPS services will experience increases of 0.2 to 0.5 percent. Overall, we estimate that rural hospitals will experience an increase of 0.1 percent as a result of changes to the APC structure. We estimate that rural hospitals of all bed sizes will experience no change or increases of 0.1 to 0.3 perc ent as a result of the APC recalibration. We estimate that rural hosp itals that report fewer than 5,000 lines for OPPS services will experience a decrease of 0.7 pe rcent, while rural hos pitals that report 5,000 or more lines for OPPS services will e xperience no change or increases of 0.3 to 0.7 percent in payment as a result of the APC recalibration. Among teaching hospitals, we estimate that the impact resulting from APC recalibration will include a decr ease of 0.1 percent for major teaching hospitals and an increase of 0.3 percent for minor teaching hospitals. We estimate that non-teaching hospitals will experience an increase of 0.2 percent. Classifying hospitals by type of owners hip suggests that voluntary, proprietary, and governmental hospitals will experience incr eases of 0.1 to 0.2 percent as a result of the APC recalibration. Finally, we estimate th at hospitals for which DSH payments are not available will experience a decrease of 6.0 percent and that urban hospitals for which DSH is not available will experience a decreas e of 6.3 percent. Hospitals for which DSH is not available furnish a large number of ps ychiatric services and we believe that the decline in payment for APC 0176 is the cause for this estimated decline in payment.CMS-1525-FC 1475 Column 3: New Wage Indices and the Effect of the Rural Adjustment This column estimates the impact of applying the FY 2012 IPPS wage indices for the CY 2012 OPPS without the influence of th e frontier State wage index adjustment, which is not budget neutral. The frontier State wage index adjustment is reflected in the combined impact shown in Columns 6 and 7. We are continuing the rural payment adjustment of 7.1 percent to rural SCHs fo r CY 2012, as described in section II.E.2. of this final rule with comment period. We es timate that the combination of updated wage data and nationwide application of rural floor budget neutrality will redistribute payment among regions. We also updated the list of counties qualifying for the section 505 out-migration adjustments. Overall, we estim ate that urban hospitals will experience no change from CY 2011 to CY 2012, although la rge urban hospitals will experience an increase of 0.1 percent as a result of the updated wage indices. Rural hospitals will experience decreases of 0.2 to 0.4 percent as a result of the updated wage indices. We estimate that urban hospitals located in the We st South Central, Pacific and Puerto Rico regions will experience increases of 0.1 to 0.4 percent. Urban regions other than New England will experience no change or decreases of 0.1 to 0.8 percent. Hospitals in urban New England are expected to see an incr ease of 4.2 percent as a result of the implementation of the rural floor. We refer read ers to section II.C. of this final rule with comment period for more information and Ta ble 60 for estimated im pact of the rural floor and the imputed floor with budget neutrality at the State level. Overall, we estimate that rural hospitals wi ll experience a decrease of 0.3 percent as a re sult of changes to the wage index for CY 2012. We estimate that hospitals in rural Mi ddle Atlantic, WestCMS-1525-FC 1476 North Central, and Pacific St ates will experience increase s of 0.1 to 1.0 percent, while other rural regions will experience decreases from 0.1 to 0.8 percent. Column 4: Cancer Hospital Payment Adjustment This column estimates the budget neutral impact of applying the hospital-specific CY 2012 cancer hospital payment adjustment authorized by section 3138 of the Affordable Care Act, which is estimated to result in an aggregate increase in OPPS payments to dedicated cancer hospitals of 11.3 percent for the CY 2012 OPPS after accounting for TOPs. We estimate that all other hospitals will experience a payment decrease of 0.2 percent in CY 2012 as a resu lt of the budget neutral payment adjustment for the dedicated cancer hospitals. Column 5: All Budget Neutrality Cha nges Combined with the OPD Fee Schedule
Increase We estimate that, for most classes of hospitals, the addition of the OPD fee schedule increase factor of 1.9 percent will m itigate the negative impacts created by the budget neutrality adjustments made in Columns 2 and 3. While most classes of hospitals will receive an increase that is more in line with the 1.9 percent overall increase after the upda te is applied to the budget neutrality adjustments, urban hospitals that bill fewer than 11,000 lin es and hospitals that do not report DSH or for which DSH information is not available will experience decreases. In particular, urban hospitals that report fewe r than 5,000 lines will experience a cumulative decrease, after application of the OPD fee schedule in crease factor and the budget neutrality adjustments, of 3.4 percent, largely as a result of the decrease in payment forCMS-1525-FC 1477 APC 0034 (Mental Health Services Composite). Similarly, urban hospitals for which DSH is not available, and for which DSH is zero will experience decreases of 0.1 to 4.0, also largely as a result of the decrease in payment for APC 0034. OPPS payment for APC 0034 is continuing to be set to the pa yment rate of APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs), which experienced a decline based on updated cost repo rt and hospital claims data. Overall, we estimate that these changes will increase payments to urban hospitals by 1.9 percent. We estimate that large urban hospitals and “other” urban hospitals will also experience increases of 2.0 and 1.9 percen t, respectively. Hospitals in urban New England will experience an increase of 5.7 perc ent, largely as a result of the change in wage index shown under column 3 and discusse d above. We estimate that rural hospitals will experience a 1.5 percent increase as a resu lt of the OPD fee sche dule increase factor and other budget neutrality adjustments. Among teaching hospitals, we estimate that the impacts resulting from the OPD fee schedule increase factor and other budge t neutrality adjustments will include an increase of 1.9 percent for major teaching hospitals, minor teaching hospitals and nonteaching hospitals. Classifying hospitals by type of ownershi p suggests that proprietary hospitals will experience an estimated increase of 1.7 percen t, while voluntary hospitals will experience an estimated increase of 2.0 percent and government hospitals will experience an estimated increase of 1.5 percent.CMS-1525-FC 1478 Column 6: All Adjustments with th e Frontier State Wage Index Adjustment This column shows the impact of all budget neutrality adjustments, application of the 1.9 percent OPD fee schedul e increase factor, and the non-budget neutral impact of applying the frontier State wage adjustment (tha t is, the frontier State wage index change in addition to all changes reflected in Colu mn 4). In general, we estimate that all facilities and all hospitals w ill experience a combined increa se of 2.0. Hospitals in the rural Mountain region will experience an in crease of 2.8 percent, most of which is attributable to the frontier State wage adjust ment. Similarly, hospitals in the rural West North Central region will experience an incr ease of 2.7 percent, while hospitals in the urban West North Central will experience an increase of 2.5 percent, most of which also is attributable to the fron tier State wage adjustment. Column 7: All Changes for CY 2012 Column 7 compares all changes for CY 2012 to estimated final payment for CY 2011, including the changes in the outlier threshold, paym ent reductions for hospitals that failed to meet the Hospital OQR Progr am reporting requiremen ts, and the difference in pass-through estimates that are not include d in the combined percentages shown in Column 5. This column includes estimate d payment for a few hospitals receiving reduced payment because they did not meet their Hospital OQR Program reporting requirements; however, we estimate that th e anticipated change in payment between CY 2011 and CY 2012 for these hospitals will be negligible. (We further discuss the estimated impacts of hospitals’ failure to meet these requirements in section XX.A.4.d. of this final rule with comment period.) Overall, we estimate that facilities will experienceCMS-1525-FC 1479 an increase of 1.9 percent under this final rule with comment period in CY 2012 relative to total spending in CY 2011. The projected 1.9 percent increase for all facilities in Column 7 of Table 59 reflects the 1.9 percen t OPD fee schedule increase factor, less 0.07 percent for the change in the pass-thr ough estimate between CY 2011 and CY 2012, plus 0.07 percent for the difference in estimated outlier payments between CY 2011 (0.93 percent) and CY 2012 (1.0 percent), less 0.09 percent due to the section 508 wage adjustment, plus 0.10 percent due to the frontie r State wage index adjustment. When we exclude cancer and children’s hospitals (which are held harmless to their pre-BBA amount) and CMHCs, the estimated increase is 1.9 percent after r ounding. We estimate that the combined effect of all changes for CY 2012 will increase payments to urban hospitals by 1.9 percent. We estimate that large urban hospitals will experience a 2.0 percent increase, while “other” urban hospitals will experience an increase of 1.9 percent. We estimate that urban hospitals that bill less than 5,000 lines of OPPS services will experience a decrease of 2.9 percent, largely attributable to the d ecline in payment for APC 0034 (Mental Health Services Composite). We estimate that urban hospitals that bill 11,000 or more lines of OPPS services will experience increases between 1.0 percent and 2.3 percent, while urban hospitals th at report between 5,0 00 and 10,999 lines will experience a decrease of 0.3 percent. Overall, we estimate that rural hospitals will experience a 1.5 percent increase as a result of the combined effects of all changes for CY 2012. We estimate that rural hospitals that bill less than 5,000 lines of OPPS services will experience an increase ofCMS-1525-FC 1480 0.6 percent and that rural hospi tals that bill 5,000 or more lin es of OPPS services will experience increases ranging from 1.5 to 2.7 percent. Among teaching hospitals, we estimate that the impacts resulting from the combined effects of all changes will include an increase of 1.9 per cent for major teaching hospitals and nonteaching hospitals. Minor teac hing hospitals will expe rience an increase of 1.8 percent. In our analysis, we also have stratified hospitals by type of ownership. Based on this analysis, we estimate that voluntary hospitals will experience an increase of 2.0 percent, proprietary hospitals will expe rience an increase of 1.7 percent, and governmental hospitals will experience an increase of 1.6 percent. (3) Estimated Effects of This Fina l Rule with Comment Period on CMHCs The last line of Table 59 demonstrates the isolated impact on CMHCs. In CY 2011, CMHCs are paid under four APCs fo r services under the OPPS: APC 0172 (Level I Partial Hospitalization (3 serv ices) for CMHCs); APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs); APC 0175 (Level I Partial Hospitalization (3 services) for hospital-ba sed PHPs); and APC 0176 (Level II Partial Hospitalization (4 or more services) for hos pital-based PHPs). We implemented these four APCs for CY 2011. We adopted payment rates for each APC based on the cost data derived from claims and cost reports for the provider type to which the APC is specific and provided a transition to CMHC rates ba sed solely on CMHC data for the two CMHC PHP per diem rates. For CY 2012, we are continuing the four APC provider-specific structure we adopted for CY 2011 and are finalizing our propos al to base payment fullyCMS-1525-FC 1481 on the cost data for the type of provider furn ishing the service. We modeled the impact of this APC policy assuming that CMHCs will continue to provide the same number of days of PHP care, with each day having either 3 services or 4 or more services, as seen in the CY 2010 claims data used for this CY 2012 OPPS/ASC final rule with comment period. We excluded days with 1 or 2 servic es because our policy only pays a per diem rate for partial hospitalization when 3 or mo re qualifying services are provided to the beneficiary. Because the relative paym ent weights for APC 0172 and APC 0173 for CMHCs both decline in CY 2012 due to CMHC cost data for partial hospitalization services provided by CMHCs, we estimate th at there will be a 32.4 percent decrease in payments to CMHCs due to these APC policy changes (shown in Column 2). Column 3 shows that the estimated imp act of adopting the CY 2012 wage index values will result in a decreas e of 0.3 percent to CMHCs. Column 4 shows that CMHCs will experience a 0.2 percent reduction as a result of the cancer hospital payment adjustment. We note that all providers paid under the OPPS, including CMHCs, will receive a 1.9 percent OPD fee schedule increas e factor. Column 5 shows that combining this OPD fee schedule increase factor, along with changes in APC policy for CY 2012 and the CY 2012 wage index updates, results in an estimated decrease of 30.8 percent. Column 6 shows that adding the frontier State wage adjustment resu lts in no change to the cumulative 30.8 percent decrease. Column 7 shows that adding th e changes in outlier and pass-though payments will result in no change to the 30.8 percent decrease in payment for CMHCs. This reflects all changes to CMHCs for CY 2012.CMS-1525-FC 1482 The impact of the changes to hospital payment rates for partial hospitalization services is reflected in the impact of all ch anges on hospitals. The impact of the decline in payment for APC 0034 appears most notably in small urban hospitals that furnish primarily outpatient psychiatric services and hospitals for which DSH is zero or not available. All providers paid under the OPPS will receive a 1.9 percent OPD fee schedule increase factor under this polic y. Combining this OPD fee sc hedule increase factor with changes in APC policy for CY 2012, the CY 2012 wage index updates, and with changes in outlier and pass-through pa yments, we estimate that the combined impact on hospitals within the OPPS system will be a 1.9 per cent increase in total payment for CY 2012. Table 59 presents the estimated impact of the changes to the OPPS for CY 2012.

TABLE 59.—ESTIMATED IMPACT OF THE FINAL CY 2012 CHANGES FOR THE HOSPITAL OUTPATIENT PROS PECTIVE PAYMENTS SYSTEM

Number of Hospitals (1) APC Recalibration (2) New Wage Index and

Rural Adjustment (3) New Cancer Hospital Adjustment (4) Comb (cols 2, 3, & 4) with Market Basket Update

(5) Column 5 with Frontier Wage Index Adjustment (6) All Changes (7)

ALL FACILITIES * 4,161 0.0 0.0 0.0 1.9 2.0 1.9 ALL HOSPITALS 3,895 0.2 0.0 -0.2 1.9 2.0 1.9 (excludes hospitals permanently held harmless and CMHCs) URBAN HOSPITALS 2,946 0.2 0.0 -0.2 1.9 2.0 1.9 LARGE URBAN 1,607 0.2 0.1 -0.2 2.0 2.0 2.0 (GT 1 MILL.) OTHER URBAN 1,339 0.2 0.0 -0.2 1.9 2.1 1.9CMS-1525-FC 1483

Number of Hospitals (1) APC Recalibration (2) New Wage Index and

Rural Adjustment (3) New Cancer Hospital Adjustment (4) Comb (cols 2, 3, & 4) with Market Basket Update

(5) Column 5 with Frontier Wage Index Adjustment (6) All Changes (7) (LE 1 MILL.)

RURAL HOSPITALS 949 0.1 -0.3 -0.2 1.5 1.7 1.5 SOLE COMMUNITY 384 0.0 -0.2 -0.2 1.5 2.0 1.5 OTHER RURAL 565 0.2 -0.4 -0.2 1.5 1.5 1.6 BEDS (URBAN) 0 - 99 BEDS 1,029 -0.5 0.1 -0.2 1.2 1.4 1.3 100-199 BEDS 841 0.3 0.2 -0.2 2.1 2.2 2.1 200-299 BEDS 454 0.4 0.1 -0.2 2.2 2.4 2.2 300-499 BEDS 419 0.3 -0.2 -0.2 1.8 1.9 1.8 500 + BEDS 203 0.1 0.1 -0.2 1.9 1.9 1.9 BEDS (RURAL) 0 - 49 BEDS 349 0.0 -0.1 -0.2 1.5 1.8 1.6 50- 100 BEDS 355 0.0 -0.3 -0.2 1.5 1.7 1.5 101- 149 BEDS 140 0.3 -0.2 -0.2 1.7 1.9 1.8 150- 199 BEDS 57 0.1 -0.5 -0.2 1.3 1.8 1.3 200 + BEDS 48 0.1 -0.3 -0.2 1.5 1.5 1.5 VOLUME (URBAN) LT 5,000 Line s 594 -5.5 0.4 -0.2 -3.4 -3.3 -2.9 5,000 - 10,999 Lines 148 -2.0 0.1 -0.2 -0.3 0.0 -0.3 11,000 - 20,999 Lines 229 -0.6 0.0 -0.2 1.0 1.0 1.0 21,000 - 42,999 Lines 476 0.3 -0.1 -0.2 1.9 1.9 1.8 42,999 - 89,999 Lines 713 0.5 0.2 -0.2 2.3 2.4 2.3 GT 89,999 Lines 786 0.2 0.0 -0.2 1.9 2.0 1.9 VOLUME (RURAL) LT 5,000 Lines 66 -0.7 -0.7 -0.2 0.3 2.9 0.6 5,000 - 10,999 Lines 70 0.7 0.3 -0.2 2.7 2.8 2.7 11,000 - 20,999 Lines 167 0.3 -0.2 -0.2 1.8 2.0 1.7 21,000 - 42,999 Lines 285 0.3 -0.2 -0.2 1.8 2.0 1.8 GT 42,999 Lines 361 0.0 -0.3 -0.2 1.4 1.6 1.5 REGION (URBAN) NEW ENGLAND 150 -0.2 4.2 -0.2 5.7 5.7 5.5CMS-1525-FC 1484

Number of Hospitals (1) APC Recalibration (2) New Wage Index and

Rural Adjustment (3) New Cancer Hospital Adjustment (4) Comb (cols 2, 3, & 4) with Market Basket Update

(5) Column 5 with Frontier Wage Index Adjustment (6) All Changes (7) MIDDLE ATLANTIC 355 0.1 0.0 -0.2 1.8 1.8 1.6 SOUTH ATLANTIC 449 0.3 -0.5 -0.2 1.5 1.5 1.6 EAST NORTH CENT. 473 0.3 -0.7 -0.2 1.3 1.3 1.2 EAST SOUTH CENT. 183 0.6 -0.8 -0.2 1.5 1.5 1.6 WEST NORTH CENT. 190 0.1 -0.1 -0.2 1.7 2.5 1.8 WEST SOUTH CENT. 498 0.3 0.1 -0.2 2.1 2.1 2.1 MOUNTAIN 208 0.1 -0.2 -0.2 1.6 2.0 1.7 PACIFIC 394 0.1 0.2 -0.2 2.0 2.0 2.1 PUERTO RICO 46 0.2 0.4 -0.2 2.3 2.3 2.3 REGION (RURAL) NEW ENGLAND 25 -0.9 -0.3 -0.2 0.5 0.5 0.7 MIDDLE ATLANTIC 67 -0.2 0.1 -0.2 1.6 1.6 1.7 SOUTH ATLANTIC 162 0.3 -0.2 -0.2 1.7 1.7 1.8 EAST NORTH CENT. 128 0.0 -0.8 -0.2 0.9 0.9 0.7 EAST SOUTH CENT. 170 0.6 -0.6 -0.2 1.7 1.7 1.7 WEST NORTH CENT. 101 -0.3 0.1 -0.2 1.5 2.7 1.7 WEST SOUTH CENT. 200 0.5 -0.1 -0.2 2.1 2.1 2.1 MOUNTAIN 67 0.1 -0.7 -0.2 1.0 2.8 1.1 PACIFIC 29 0.1 1.0 -0.2 2.7 2.7 2.9

TEACHING STATUS NON-TEACHING 2,896 0.2 -0.1 -0.2 1.9 2.0 1.9 MINOR 708 0.3 -0.1 -0.2 1.9 2.1 1.8 MAJOR 291 -0.1 0.3 -0.2 1.9 1.9 1.9

DSH PATIENT PERCENT 0 11 -1.6 -0.2 -0.2 -0.1 -0.1 0.5 GT 0 - 0.10 353 0.0 0.2 -0.2 1.9 2.0 1.9 0.10 - 0.16 357 0.3 -0.3 -0.2 1.6 1.7 1.6 0.16 - 0.23 734 0.3 -0.1 -0.2 1.9 2.1 1.9 0.23 - 0.35 1,040 0.3 0.0 -0.2 2.0 2.1 2.0 GE 0.35 785 0.1 0.1 -0.2 1.9 1.9 2.0 DSH NOT AVAILABLE ** 615 -6.0 0.6 -0.2 -3.8 -3.7 -3.6

URBAN TEACHING/DSHCMS-1525-FC 1485

Number of Hospitals (1) APC Recalibration (2) New Wage Index and

Rural Adjustment (3) New Cancer Hospital Adjustment (4) Comb (cols 2, 3, & 4) with Market Basket Update

(5) Column 5 with Frontier Wage Index Adjustment (6) All Changes (7) TEACHING & DSH 903 0.2 0.1 -0.2 1.9 2.0 1.9 NO TEACHING/DSH 1,456 0.4 0.0 -0.2 2.1 2.1 2.1 NO TEACHING/NO DSH 10 -1.6 -0.2 -0.2 -0.1 -0.1 0.5 DSH NOT AVAILABLE** 577 -6.3 0.7 -0.2 -4.0 -3.9 -3.8

TYPE OF OWNERSHIP VOLUNTARY 2,061 0.2 0.1 -0.2 2.0 2.1 2.0 PROPRIETARY 1,273 0.1 -0.1 -0.2 1.7 1.7 1.7 GOVERNMENT 561 0.1 -0.3 -0.2 1.5 1.5 1.6

CMHCs 204 -32.4 -0.3 -0.2 -30.8 -30.8 -30.8 Cancer Hospitals 11 0.6 0.3 11.3 14.1 14.1 13.7
Column (1) shows total hospitals and/or CMHCs. Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups and the final recalibration of APC weights based on CY 2010 hospital claims data. Column (3) shows the budget neutral impact of updating the wage index by applying the FY 2012 hospital inpatient wage index. Column (4) shows the budget neutral impact of the cancer hospital payment adjustment which is estimated to result in an aggrega te increase in OPPS payments to cancer hospitals of $71 million when TOPs are included.. Column (5) shows the impact of all budget neutrality adjustme nts and the addition of the 1.9 percent OPD fee schedule increase factor (3.0 percent reduced by 1.0 percentage point for the productivity adjustment and further reduced by 0.1 percentage point in order to satisfy statutory requirements set forth in the Affordable Care Act). Column (6) shows the non-budget neutral impact of applying the frontier State wage adjustment, after application of the CY 2012 final OPD fee schedule increase factor. Column (7) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate and adds final outlier payments. This column also shows the expiration of section 508 wages on September 30, 2011 and the application of the frontier State wage adjustment for CY 2012. *These 4,161 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.

In response to public comments we r eceived on the proposed rule, we are providing the payment impact of the rural fl oor and imputed floor with budget neutralityCMS-1525-FC 1486 at the State level in Table 60. Column 1 of the table displays the number of hospitals located in each State. Column 2 displays th e number of hospitals in each State that will be receiving the rural floor or imputed floor wage index for CY 2012. Column 3 displays the percentage of total payments each State rece ives or contributes to fund the rural floor and the imputed floor with national budget ne utrality. This column compares the post-reclassification CY 2012 wage index of providers before the rural floor and the imputed floor adjustment and the post-recla ssification CY 2012 wage index of providers with the rural floor and the imputed floor ad justment. Column 4 displays an estimated payment amount that each State will gain or lose due to the application of the rural floor and the imputed floor with national budget neutrality.
TABLE 60.—ESTIMATED PAYMENTS DUE TO RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY

State Number of hospitals Number of hospitals receiving rural floor or imputed floor Percentage change in payments due to application of rural floor and imputed floor with budget neutrality Difference (in millions)

Alabama 104 0 -0.5 -3.0 Alaska 6 4 3.3 1.7 Arizona 71 0 -0.5 -2.6 Arkansas 56 0 -0.5 -2.0 California 316 114 0.2 6.6 Colorado 55 10 0.3 1.5 Connecticut 35 15 1.6 8.3 Delaware 8 1 -0.5 -0.7 Florida 192 6 -0.4 -7.7 Georgia 125 0 -0.5 -4.9 Hawaii 14 0 -0.5 -0.5 Idaho 19 0 -0.4 -0.7CMS-1525-FC 1487

State Number of hospitals Number of hospitals receiving rural floor or imputed floor Percentage change in payments due to application of rural floor and imputed floor with budget neutrality Difference (in millions)

Illinois 139 0 -0.5 -8.4 Indiana 114 2 -0.4 -4.4 Iowa 35 5 -0.3 -1.4 Kansas 58 1 -0.5 -1.8 Kentucky 73 1 -0.4 -3.3 Louisiana 140 0 -0.4 -2.6 Maine 24 0 -0.4 -1.3 Massachusetts 82 83 7.6 92.1 Michigan 119 0 -0.5 -7.8 Minnesota 54 0 -0.5 -3.2 Mississippi 67 0 -0.4 -2.1 Missouri 92 3 -0.4 -4.2 Montana 14 1 -0.4 -0.6 Nebraska 24 0 -0.5 -1.2 Nevada 33 0 -0.5 -0.9 New Hampshire 14 9 1.3 3.7 New Jersey 79 53 1.4 14.0 New Mexico 34 0 -0.5 -0.9 New York 157 2 -0.5 -8.6 North Carolina 95 6 -0.4 -6.3 North Dakota 9 0 -0.4 -0.6 Ohio 157 13 -0.3 -5.1 Oklahoma 98 2 -0.5 -2.3 Oregon 34 3 -0.4 -1.4 Pennsylvania 186 24 -0.3 -4.5 Puerto Rico 46 12 0.0 0.0 Rhode Island 13 0 -0.5 -0.6 South Carolina 63 0 -0.5 -3.0 South Dakota 19 0 -0.4 -0.6 Tennessee 109 11 -0.3 -2.5 Texas 404 7 -0.5 -11.8 Utah 37 2 -0.4 -1.0CMS-1525-FC 1488

State Number of hospitals Number of hospitals receiving rural floor or imputed floor Percentage change in payments due to application of rural floor and imputed floor with budget neutrality Difference (in millions)

Vermont 7 0 -0.4 -0.5 Virginia 78 2 -0.4 -4.2 Washington 53 3 -0.3 -2.5 Washington, D.C. 11 0 -0.5 -0.7 West Virginia 39 4 -0.3 -0.9 Wisconsin 72 3 -0.4 -3.0 Wyoming 12 0 -0.4 -0.2 (4) Estimated Effect of This Final Ru le with Comment Period 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 fo r services for which the OPPS payments will fall. For example, for a service assi gned to Level IV Needle Biopsy/Aspiration Except Bone Marrow (APC 0037) in the CY 2011 OPPS, the national unadjusted copayment is $228.76, and the minimum unadjusted copayment is $215.24, 20 percent of the national unadjusted payment rate of $1,076.14 . For CY 2012, the national unadjusted copayment for APC 0037 is $227.40, a declin e from the copayment in effect for CY 2011. The minimum unadjusted copayment for APC 0037 is $215.00 or 20 percent of the CY 2012 national unadjusted paym ent rate for APC 0037 of $1,074.99. The minimum unadjusted copayment will decline because the CY 2011 payment rate for APC 0037 will decline for CY 2012. For further di scussion on the calculation of the national unadjusted copayments and minimum unadjusted copayments, we refer readers to sectionCMS-1525-FC 1489 II.I. of this final rule with comment period. In all cases, the stat ute limits beneficiary liability for copayment for a procedure to the hospital inpatient deductible for the applicable year. The CY 2011 hospital inpatient deductible is $1,132 (75 FR 68799 through 68800). The amount of the CY 2012 hospital inpatient deductible is $1,156. In order to better understand the impact of changes in copayment on beneficiaries, we modeled the percent change in total copa yment liability using CY 2010 claims. We estimate, using the claims of the 4,161 hosp itals and CMHCs on which our modeling is based, that total beneficiary liability fo r copayments will decrease as an overall percentage of total payments, from 22.0 percent in CY 2011 to 21.8 percent in CY 2012 due largely to changes in service-mix. (5) Effects on Other Providers The relative weights and payment amount s established under the OPPS affect the payments made to ASCs as discussed in sec tion XIII. of this final rule with comment period. No types of providers other than hos pitals, CMHCs and ASCs are affected by the changes in this final rule with comment period. (6) Effects on the Medi care and Medicaid Programs The effect on the Medicare program is expected to be $600 million in additional program payments for OPPS services furnishe d in CY 2012. 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 under section XX.A .4.a.(4). of this final rule with comment period.CMS-1525-FC 1490 (7) Alternatives Considered Alternatives to the changes we are making and the reasons for our selected alternatives are discussed throughout this fina l rule with comment pe riod. Some of the major issues discussed in this final rule with comment period and the alternatives considered are discussed below.

● Alternatives Considered for Payment of the Acquisition and Pharmacy Overhead Costs of Drugs and Biologicals That Do Not Have Pass-Through Status We are finalizing our proposal, with modification, that, for CY 2012, the OPPS will make payment for separately payable drugs and biologicals at ASP+4 percent, and this payment will continue to represent combined payment for both the acquisition and pharmacy overhead costs of separately paya ble drugs and biologi cals. In addition, because we are continuing to make a pharmacy overhead adjustment for CY 2012, we believe it is appropriate to account for inflation that has occurred since the overhead redistribution amount of $200 million was app lied in CY 2011. Further, in order to enhance the intra-rulemaking stability of the ASP+X amount between the proposed rule and this final rule with comment period, we are modifying the pr oposed redistribution amount of $215 million in order to keep th e mathematical relationship between the redistribution amount and amount of total drug costs (instead of the dollar amount, as was our policy in CY 2010 and 2011) the same between the proposed rule a nd the final rule. This approach, described briefly below and in greater depth in section V.B.3 of this final rule with comment period, results in a total CY 2012 redistribution amount of $240.3 million, or $169 million (or 35 percent) in pharm acy overhead cost currently attributed toCMS-1525-FC 1491 coded packaged drugs, and $71.3 million (or 10.7 percent) in pharmacy overhead cost attributed to uncoded packaged drugs. Therefore, as discussed in further detail in section V.B.3. of this final rule with comment period, we believe that approximate ly $169 million in pharmacy overhead cost for packaged drugs and biologicals with a separately-reported HCPCS code, and $71.3 million pharmacy overhead cost attributed to packaged uncoded drugs and biologicals should, instead, be attributed to separately payable drugs and biol ogicals to provide an adjustment for the pharmacy overhead costs of these separately payable products. As a result, we also are finalizing our proposal to reduce the cost of packaged drugs and biologicals that is included in the payment for procedural APCs to offset the $240.3 million adjustment to payment for separately payable drugs and biologicals. We are finalizing our proposal that any redistributi on of pharmacy overhead cost that may arise from CY 2012 final rule claims data will occu r only from some drugs and biologicals to other drugs and biologicals, thereby maintaining the estimated total cost of drugs and biologicals under the OPPS. We considered three alternatives for payment of the acquisition and pharmacy overhead costs of drugs and bi ologicals that do not have pa ss-through status for CY 2012. The first alternative we considered was to compare the estimated aggregate cost of separately payable drugs and bi ologicals 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, to calculate the estim ated percent of ASP that would serve as the best proxy for the combined acquisition and pharmacy overhead co sts of separatelyCMS-1525-FC 1492 payable drugs and biologicals (70 FR 68642), but without redistribution of estimated pharmacy overhead costs. Under this met hodology without redistribution, using July 2011 ASP information and costs derived from CY 2010 OPPS claims data, we estimated the combined acquisition and overhead costs of separately payable drugs and biologicals to be ASP-2 percent. As discussed in sect ion V.B.3. of this final rule with comment period, we also determined that the combined acquisition and overhead costs of packaged drugs are 192 percent of ASP. We did not c hoose this alternative because we believe that this analysis indicates that hospital chargi ng practices reflected in our standard drug payment methodology have the pote ntial to “compress” the calcu lated costs of separately payable drugs and biologicals to some degree when there is no redistribution of estimated pharmacy overhead costs. Further, we r ecognize that the attribution of pharmacy overhead costs to packaged or separately payable drugs and bi ologicals through our standard drug payment methodology of a combined payment for acquisition and pharmacy overhead costs depends, in part, on th e treatment of all drugs and biologicals each year under our annual drug packaging threshold. Changes to the packaging threshold may result in changes to payment fo r the overhead cost of drugs and biologicals that do not reflect actual changes in hospita l pharmacy overhead cost for those products. The second alternative we considered a nd the one we proposed for CY 2012 is to continue our pharmacy overhead redistribu tion methodology and to apply an inflation allowance and redistribute $215 million in overhead costs from packaged coded and uncoded drugs and biologicals to separately payable drugs and biologicals. Using this approach, we proposed to adjust the CY 2010 and 2011 pharmacy overhead and handlingCMS-1525-FC 1493 redistribution amount of $200 million using th e PPI for Pharmaceuticals for Human Use, resulting in a proposed CY 2012 redistributi on amount of $215 milli on and payments of ASP+4 percent. In the final rule, redi stributing $215 million in overhead between packaged drugs and biologicals to separate ly payable drugs and pharmaceuticals would have resulted in a combined payment of A SP+3 percent for the acquisition and pharmacy overhead costs, a 1-percent decrease in the ASP+X amount from the proposed ASP+4 percent. However, as we discuss in sect ion V.B.3.b of this final rule with comment period, we determined that th is decline of the methodologi cally derived ASP+X percent is due to increasing the interi m claims data used in the pr oposed rule calculations to a whole year’s data for the final rule wh ile keeping the drug ove rhead redistribution amount constant. Further, after additional anal ysis, we believe that this decline in the ASP+X amount for the final rule due to the in clusion of a whole year’s data will always occur if we were to continue to use a fixed overhead redistribution amount while updating the amount of total costs included in the analysis for the final rule to include a whole year worth of total cost data. Ther efore, because we believe another policy may promote more stability than the ASP+X percent calculation when based on a fixed redistribution amount, and because we believe that our proposals should always reflect the expected value of the final to the best of our ability, we did not finalize our proposal to redistribute a fixed $215 million pharmacy overhead amount for this final rule with comment period. The third option that we c onsidered, and the one that we selected for CY 2012, is to continue the overhead redistribution me thodology that we finalized in the CY 2010CMS-1525-FC 1494 OPPS/ASC final rule with comment peri od, employed in CY 2011, and proposed in CY 2012, but with a modification. Specifically , in this CY 2012 OPPS/ASC final rule with comment period, in order to enhance intra-rulemaking stability, we will instead keep the proportions of overh ead redistribution to total drug and biological costs constant between the proposed rule and the final rule, but change the dollar amount of the transfer. Consequently, instead of redistributing th e proposed $215 million in costs for coded and uncoded packaged drugs and biologicals ($54 million in redistributed costs for uncoded packaged drugs and biologicals, or 10.7 percen t of total drug and bi ological costs; and $161 million for coded packaged drugs and biologi cals, or 35 percent of total costs) we will update the redistribution amounts to k eep the proportion of redistributed costs constant between the proposed rule and the final rule. Therefore, for CY 2012 we will redistribute $169 million (or 35 percent) of co ded packaged drug and biological overhead cost, and $71.3 million (or 10.7 percent) of uncoded packaged drug and biological overhead cost, resulting in a total redistri bution amount of $240.3 million. This option keeps the percentage of coded packaged a nd uncoded packaged overhead cost that is redistributed constant between the proposed rule and the final rule, and results in a final CY 2012 ASP+X percent of ASP+4 percent that is identical to the ASP+X percent in the proposed rule. We chose this alternative because we believe that it substantially enhances the intra-rulemaking stability for the ASP+X amount between the proposed rule and the final rule. We believe that this redistribution amount provides an appropriate redistribution ofCMS-1525-FC 1495 pharmacy overhead costs associated with dr ugs and biologicals, based on the analyses discussed in section V.B.3. of this final rule with comment period.

● OPPS Payment Adjustment for Certain Cancer Hospitals Section 3138 of the Affordable Care Act instructs the Secretary to conduct a study to determine if outpatient costs, including th e cost of drugs and biologicals, incurred by cancer hospitals described in section 1886(d )(1)(B)(v) of the Ac t with respect to ambulatory classification groups exceed the co sts incurred by other hospitals furnishing services under this subsecti on (section 1833(t) of the Act). Further, section 3138 of the Affordable Care Act provides that if the cancer hospitals’ costs with respect to APC groups are determined to be greater than the costs of other hospitals paid under the OPPS, the Secretary shall provide an appropri ate budget neutral payment adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. As discussed in detail in section II. F. of this final rule with comment period, using the claims and cost report data that we used under the modeled proposed CY 2011 OPPS, we constructed our tr aditional provider-level data base of costs, modeled payments, units, service mix, wage index and other provider information that we typically use to establish class adjustment s under the OPPS. We observed that cancer hospitals were more costly w ith respect to APC groups than other hospitals paid under the OPPS, having a standardized cost pe r discounted unit of $150.12 compared to a standardized cost per discounted unit of $94.14 for all other hospitals. Having reviewed the cost data from the st andard analytic database and determined that cancer hospitals are more costly with respect to APC groups than other hospitalsCMS-1525-FC 1496 within the OPPS system, we are finalizi ng our proposal, with modification after consideration of the public comments we recei ved, to provide a payment adjustment for cancer hospitals for CY 2012 based on a compar ison of costliness relative to payments using cost report data. Speci fically, the cancer hospital pa yment adjustment amounts will be provided on an aggregate basis at cost re port settlement and will be equal to the amount of additional payment needed for a re sulting PCR that is equal to the weighted average PCR for other hospitals furnishing services under section 1833(t) of the Act, which we refer to as the “target PCR”. Th e target PCR for CY 2012, which is calculated using the most recently submitted or settled cost report data that is available at the time of this final rule, is 0.91. Based on this target PCR, OPPS payments to cancer hospitals are estimated to increase by 34.5 percent and tota l payments to cancer hospitals, including TOPs, are estimated to incr ease by 11.3 per cent in CY 2012. We considered three alternatives for th e proposed OPPS payment adjustment for certain cancer hospitals. The first alternativ e we considered was to use our standard payment regression model instead of cost report data to identify an appropriate payment adjustment for cancer hospitals . We used this approach in our CY 2006 OPPS final rule with comment period to establish the 7.1 pe rcent payment adjustment for rural SCHs (70 FR 68556 through 68561). However, in constructing our analysis of cancer hospitals’ costs relative to other hospitals, we considered whether our standard analytical approach would lead to valid results. The analyses presented in the CY 2006 OPPS proposed and final rules were designed to es tablish an adjustment for a large class of rural hospitals. In contrast, section 3138 of the Affordable Care Act is specificallyCMS-1525-FC 1497 limited to identifying an adjustment for 11 cance r hospitals to the extent that their costs with respect to APC groups exceeded the co sts incurred by other hospitals furnishing services under section 1833(t) of the Act. With such a small sample size (11 out of approximately 4,000 hospitals paid under th e OPPS), we were concerned that the standard explanatory and paym ent regression models used to establish the rural hospital adjustment would lead to imprecise estimates of payment adjustments for this small group of hospitals. Further, section 3138 of the Affordable Care Act specifies explicitly that cost comparisons between classes of hos pitals must include the cost of drugs and biologicals. In our CY 2006 an alysis of rural hospitals, we excluded the cost of drugs and biologicals in our model because the extr eme units associated with proper billing for some drugs and biologicals can bias the ca lculation of a service-mix index, or volume weighted average APC relative weight, for each hospital (70 FR 42698). Therefore, we chose not to pursue our standard combinat ion of explanatory and payment regression modeling to determine a can cer hospital adjustment. The second alternative we considered was to provide the same adjustment to all cancer hospitals based on the difference between the weighted average PCR for all cancer hospitals (0.674) and the weighted average PCR for all other hospitals (0.907). This class adjustment, instead of a hospital-specific adjustment, would pr ovide a 34.6 percent payment increase for each cancer hospital. Because this alternative did not seem equitable to other hospitals furnishing serv ices under OPPS as it would result in a PCR for most cancer hospitals that is higher than the weighted average PCR of other hospitalsCMS-1525-FC 1498 furnishing services under OPPS and a much la rger budget neutrality adjustment, we did not select this alternative. The third alternative we considered, and the one we selected for CY 2012, is to provide an aggregate payment am ount at cost report settlement that is equal to the amount of additional payment needed for a resulti ng PCR equal to the target PCR for those cancer hospitals that have a PCR that is less than the target PCR. For a cancer hospital with an individual PCR that is above the ta rget PCR (before the cancer hospital payment adjustment), the aggregate payment amount provi ded at cost report settlement is equal to zero. For purposes of calculating the aggregat e adjustment amounts to be provided in CY 2012, we chose to rely on this straightforwar d assessment of payments and costs from the cost report data because of the concerns out lined above with respect to the small number of hospitals, and because of the challenges a ssociated with accura tely including drug and biological costs in our standard regression models.

● Alternatives Considered for the Supervision of Hospital Outpatient Therapeutic Services We are finalizing our proposal to estab lish the APC Panel as the independent advisory body that will recommend to CM S the appropriate supervision level for individual hospital outpatient therapeutic serv ices. We will modify the Panel’s scope and composition in order to create a body that is prepared to address supervision standards and reflects the range of parties subject to th e standards. We will issue final decisions on the required supervision levels, taking the Panel’s recommendations into consideration,CMS-1525-FC 1499 through a subregulatory process that will incl ude a period of informal public notice and

comment. We considered several alternatives with respect to the number and nature of the representatives that we are adding to the APC Panel. Stakeholders requested that we add four positions for representatives of CAHs and an additional four seats for small rural hospitals that are paid under the OPPS. We did not choose th is alternative because we do not believe that it would maintain balanced membership on the Panel in accordance with the FACA requirements. The alternative that we considered and chose was to add four positions that will be divided evenly among representatives of CAHs and small rural PPS hospitals. We chose this alternative because we believe that it will lead to balanced Panel membership in accordance with the FACA requirement s. Because currently there is little representation of small rura l PPS hospitals on the Panel, we believe that additional representation of these pr oviders is appropriate. We also considered an alternative w ith respect to how CMS will issue final decisions on required supervision levels. We considered subjecting our decisions to notice and comment rulemaking because most pu blic commenters requested this option. We did not choose this alternative because we believe that a more flexible process that allows more frequent evaluations and reduces administrative burden will best meet the needs of hospitals and beneficiaries. P ublic commenters who responded to the proposed rule and to the CY 2011 OPPS/ ASC final rule with commen t period requested that CMS provide such flexibility. In addition, there is precedent for setting outpatient supervisionCMS-1525-FC 1500 levels using a subregulatory pr ocess. Our final policy is similar to the process that the agency uses to set the supe rvision levels for outpatient diagnostic services under the MPFS, which are then adopted for the OPPS. In contrast to the process for diagnostic services, we are providing a period of public notice and comment to increase transparency and opportunity for public input. In summary, the APC Panel has an exem plary history of providing valuable advice to CMS with regard to the payment a nd clinical issues asso ciated with the APC groupings of hospital outpatient therapeutic se rvices under the OPPS. We believe that extension of the function of the Panel to providing advice on supe rvision of individual hospital outpatient therapeutic services will re sult in both full consideration of the views of all types of hospitals and the best advi ce considering the full spectrum of hospital stakeholders. b. Effects of ASC Payment System Changes in This Final Rule with Comment Period On August 2, 2007, we published in the Federal Register the final rule for the revised ASC payment system, effective January 1, 2008 (72 FR 42470). In that final rule, we adopted the methodologies to set pa yment rates for covered ASC services to implement the revised payment system so that it would be designed to result in budget neutrality as required by s ection 626 of Pub. L. 108-173; established that the OPPS relative payment weights would be the basis for payment and that we would update the system annually as part of the OPPS rule making cycle; and provi ded that the revised ASC payment rates would be phased in over 4 ye ars. During the 4-year transition to full implementation of the ASC payment rates, pa yments for surgical procedures performedCMS-1525-FC 1501 in ASCs that were on the CY 2007 ASC list of covered surgical procedures were made using a blend of the CY 2007 ASC payment ra te and the ASC payment rate calculated according to the ASC standard ratesetting methodology for the applicable transitional year. In CY 2008, we paid ASCs using a 25/75 blend, in which payment was calculated by adding 75 percent of the CY 2007 ASC rate for a surgical procedure on the CY 2007 ASC list of covered surgical procedures and 25 percent of the CY 2008 ASC rate calculated according to the ASC standa rd ratesetting methodology for the same procedure. In CY 2009, we paid ASCs us ing a 50/50 blend, in which payment was calculated by adding 50 percent of the CY 2007 ASC rate for a surgical procedure on the CY 2007 ASC list of covered su rgical procedures and 50 percent of the CY 2009 ASC rate calculated according to the ASC sta ndard ratesetting methodology for the same procedure. For CY 2010, we transitioned th e blend to a 25/75 blend of the CY 2007 ASC rate and the CY 2010 ASC payment rate cal culated according to the ASC standard ratesetting methodology. In CY 2011, we are paying ASCs for all covered surgical procedures, including those on the CY 2007 ASC list, at the ASC payment rates calculated according to the ASC standard ratesetting methodology. ASC payment rates are calculated by mu ltiplying the ASC conversion factor by the ASC relative payment weight. As discussed fully in section XIII. of this final rule with comment period, we set the CY 2012 AS C relative payment weights by scaling CY 2012 ASC relative payment weights by the ASC scaler of 0.9466. The estimated effects of the updated relative payment wei ghts on payment rates du ring this second year of full implementation of the ASC paymen t rates calculated according to the ASCCMS-1525-FC 1502 standard ratesetting methodology are varied an d are reflected in the estimated payments displayed in Tables 61 and 62 below. Beginning in CY 2011, section 3401 of the Af fordable Care Act requires that the annual update to the ASC payment system, wh ich is the consumer price index for all urban consumers (CPI-U), be reduced by th e 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 projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost repor ting period, or other annual peri od). We calculated the CY 2012 ASC conversion factor by adjusti ng the CY 2011 ASC conversion factor by 1.0004 to account for changes in the pre-floor and pre-reclassified hospital wage indices between CY 2011 and CY 2012 and by appl ying the CY 2012 MFP-adjusted CPI-U update factor of 1.6 percent (2.7 percent CP I-U minus a productivity adjustment of 1.1 percentage points). The CY 2012 ASC conversion factor is $42.627. (1) Limitations of Our Analysis Presented here are the projected effect s of the changes for CY 2012 on Medicare payment to ASCs. A key limitation of our analys is is our inability to predict changes in ASC service-mix between CY 2010 and CY 2012 w ith precision. We believe that the net effect on Medicare expenditures resulting from the CY 2012 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 suchCMS-1525-FC 1503 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 This Final Rule with Comment Period on Payments to ASCs Some ASCs are multispecialty facilities that perform the gamut of surgical procedures, from excision of le sions to hernia repair to cat aract extraction; others focus on a single specialty and perform only a limited range of surgical procedures, such as eye, digestive system, or orthopedic procedur es. The combined effect on an individual ASC of the update to the CY 2012 paymen ts will depend on a number of factors, including, but not limited to, the mix of se rvices the ASC provides, the volume of specific services provided by the ASC, the pe rcentage of its patie nts who are Medicare beneficiaries, and the extent to which an ASC provides different services in the coming year. The following discussion presents tables that display estimates of the impact of the CY 2012 update to the revised ASC paymen t system on Medicare payments to ASCs, assuming the same mix of services as reflec ted in our CY 2010 claims data. Table 61 depicts the estimated aggregate percent cha nge in payment by surgical specialty or ancillary items and services group by co mparing estimated CY 2011 payments to estimated CY 2012 payments, and Table 62 shows a comparison of estimated CY 2011 payments to estimated CY 2012 payments for procedures that we estimate will receive the most Medicare payment in CY 2012. Table 61 shows the estimated effects on aggregate Medicare payments under the revised ASC payment system by surgical specia lty or ancillary items and services group. We have aggregated the surgical HCPCS codes by specialty group, grouped all HCPCSCMS-1525-FC 1504 codes for covered ancillary items and services into a single group, and then estimated the effect on aggregated payment for surgical specialty and ancillary items and services groups. The groups are sorted for display in descending order by estimated Medicare program payment to ASCs. The following is an explanation of the information presented in Table 61.

● Column 1—Surgical Specialty or Ancillary Items and Services Group indicates the surgical specialty into which ASC proce dures are grouped or th e 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 2011 ASC Payments were calculated using CY 2010 ASC utilization (the most recent fu ll year of ASC utilization) and CY 2011 ASC payment rates. The surg ical specialty and ancillary items and services groups are displayed in descending order base d on estimated CY 2011 ASC payments.

● Column 3—Estimated CY 2012 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 will be attributab le to updates to ASC payment rates for CY 2012 compared to CY 2011. As seen in Table 61, we estimate that the update to ASC rates for CY 2012 will result in a 1 percent change in aggregate payment amounts for eye and ocular adnexaCMS-1525-FC 1505 procedures, a 4 percent increase in aggreg ate payment amounts for digestive system procedures, and a 0 percent change in a ggregate payment amounts for nervous system procedures. Generally, for the surgical specialty gr oups that account for less ASC utilization and spending, we estimate that the payment effects of the CY 2012 update are variable. For instance, we estimate that, in the aggr egate, payment for genitourinary system procedures and hematologic and lymphatic systems procedures will increase by 5 percent, whereas auditory system proce dures will decrease by 2 percent under the
CY 2012 rates. An estimated increase in aggregate paym ent 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 2012 for genitour inary system procedures is likely due to an increase in the ASC payment weight for so me of the high volume procedures, such as CPT code 50590 (Fragmenting of kidney stone) where estimated payment will increase by 29 percent for CY 2012. Also displayed in Table 61 is a separa te estimate of Medicare ASC payments for the group of separately payable covered an cillary items and serv ices. The payment estimates for the covered surgical procedures include the costs of packaged ancillary items and services. Payment for New T echnology Intraocular Lenses (NTIOLs) is captured under this category. Because the NT IOL class for reduced spherical aberration expired on February 26, 2011, and a new NTIO L class was not approved during CY 2011 or CY 2012 rulemaking, we redistributed the es timated payment dedicated to separatelyCMS-1525-FC 1506 paid NTIOLs in CY 2011 while the NTIOL cl ass was active to othe r services for CY 2012. Therefore, we estimate that aggregate payments for these items and services will decrease by 26 percent for CY 2012.
TABLE 61.—ESTIMATED IMPACT OF THE FINAL CY 2012 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGR EGATE CY 2012 MEDICARE PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND SERVICES GROUP

Surgical Specialty Group (1) Estimated CY 2011

ASC Payments (in Millions) (2) Estimated CY 2012 Percent Change (3) Total $3,369 2% Eye and ocular adnexa $1,440 1% Digestive system $685 4% Nervous system $431 0% Musculoskeletal system $415 2% Genitourinary system $149 5% Integumentary system $130 1% Respiratory system $43 2% Cardiovascular system $31 -3% Ancillary items and services $29 -26% Auditory system $10 -2% Hematologic & lymphatic systems $4 5% Table 62 below shows the estimated impact of the updates to the revised ASC payment system on aggregate ASC payments for selected surgical procedures during CY 2012. The table displays 30 of the pro cedures receiving the greatest estimated CY 2011 aggregate Medicare payments to AS Cs. The HCPCS codes are sorted in descending order by estimated CY 2011 program payment.CMS-1525-FC 1507

● Column 1–HCPCS code

.

● Column 2–Short Descriptor of the HCPCS code.

● Column 3–Estimated CY 2011 ASC Payments were calculated using CY 2010 ASC utilization (the most recent full year of ASC utilization) and the CY 2011 ASC payment rates. The estimated CY 2011 paym ents are expressed in millions of dollars.

● Column 4–Estimated CY 2012 Percent Change reflects the percent differences between the estimated ASC payment for CY 2011 and the estimated payment for CY 2012 based on the update. As displayed in Table 62, 21 of the 30 procedures with the greatest estimated aggregate CY 2011 Medicare payment are included in the 3 surgical specialty groups that are estimated to account for the most Me dicare payment to ASCs in CY 2011, specifically eye and ocular adnexa, digestive sy stem, and nervous system surgical groups. Consistent with the estimated payment effect s on the surgical specialty groups displayed in Table 61 the estimated effects of the CY 2012 update on ASC payment for individual procedures shown in Table 62 are varied. The ASC procedure for which the most Medicare payment is estimated to be made in CY 2011 is the cataract remova l procedure reported with CPT code 66984 (Cataract surg w/iol 1 stage). We estimate th at the update to the ASC rates will result in a 1 percent increase for this procedure in CY 2012. The estimated payment effects on two of the other four eye and ocular adnexa procedures incl uded in Table 62 are slightly more significant. We estimate that the pa yment rate for CPT code 67904 (Repair eyelidCMS-1525-FC 1508 defect) will increase by 3 percent and payment for CPT code 67042 (Vit for macular hole) will increase by 4 percent. We estimate that the payment rates for all of the digestive system procedures included in Table 62 will change by -1 to +5 percent in CY 2012. During the previous 4- year transition to the revised ASC payment system, payment for most of the high volume digestive system procedures decreased each year because, under the previous ASC payment system, the payment rates for many high volume endoscopy procedures were almost the same as the payments for the procedures under the OPPS. The estimated effects of the CY 2012 update on the eight nervous system procedures for which the most Medicare ASC payment is estimated to be made in CY 2011 will be variable. Our estimates indi cate that the CY 2012 update will result in payment increases of 2 to 3 percent for 7 of the 8 procedures. The nervous system procedure for which we estimate a negative effect on CY 2012 payments is CPT code 63650 (Implant neuroelectrodes) which is expected to have payment decrease of 3 percent. The estimated payment effects for most of the remaining pr ocedures listed in Table 62 will be neutral or will increase by 2 to 4 percent except CPT code 29826 (Shoulder arthroscopy/surgery), which is es timated to decrease by 37 percent, code 29827 (Arthroscop rotator cuff repr), which is estimated to increase by 23 percent, and CPT code 52000 (Cystoscopy), which is es timated to decrease by 5 percent. Musculoskeletal procedures in general are exp ected to account for a gr eater percentage ofCMS-1525-FC 1509 CY 2012 Medicare ASC spending as we estimat e that payment for procedures in that surgical specialty group will increase unde r the revised payment system in CY 2012.
TABLE 62.--ESTIMATED IMPACT OF THE FINAL CY 2012 UPDATE TO THE

ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR SELECTED PROCEDURES

CPT/HCPCS Code*

(1) Short Descriptor (2) Estimated CY 2011

ASC Payments (in millions) (3) Estimated CY 2012 Percent Change (4) 66984 Cataract surg w/iol, 1 stage $1,080 1% 43239 Upper GI endoscopy, biopsy $155 -1% 45380 Colonoscopy and biopsy $133 4% 45378 Diagnostic colonoscopy $100 4% 45385 Lesion removal colonoscopy $85 4% 66982 Cataract surgery, complex $79 1% 62311 Inject spine l/s (cd) $67 2% 64483 Inj foramen epidural l/s $66 2% 66821 After cataract laser surgery $56 0% 29826 Shoulder arthroscopy/surgery $42 -37% 15823 Revision of upper eyelid $39 0% 63650 Implant neuroelectrodes $38 -3% 64493 Inj paravert f jnt l/s 1 lev $32 2% G0105 Colorectal scrn; hi risk ind $32 5% 29881 Knee arthroscopy/surgery $30 3% 64721 Carpal tunnel surgery $30 3% 63685 Insrt/redo spine n generator $26 3% 29880 Knee arthroscopy/surgery $25 3% G0121 Colon ca scrn not hi rsk ind $25 5% 43235 Uppr gi endoscopy, diagnosis $24 -1% 45384 Lesion remove colonoscopy $24 4% 52000 Cystoscopy $20 -5% 28285 Repair of hammertoe $19 2% 64590 Insrt/redo pn/gastr stimul $16 3%CMS-1525-FC 1510

CPT/HCPCS Code*

(1) Short Descriptor (2) Estimated CY 2011

ASC Payments (in millions) (3) Estimated CY 2012 Percent Change (4) 62310 Inject spine c/t $16 2% 67904 Repair eyelid defect $16 3% 26055 Incise finger tendon sheath $16 4% 29827 Arthroscop rotator cuf repr $15 23% 67042 Vit for macular hole $15 4% 50590 Fragmenting of kidney stone $15 29% *Note that HCPCS codes we are deleti ng for CY 2012 are not displayed in this table. The previous ASC payment system served as an incentive to ASCs to focus on providing procedures for which they determin ed Medicare payments would support their continued operation. We note that, historic ally, the ASC payment rates for many of the most frequently performed procedures in AS Cs were similar to the OPPS payment rates for the same procedures. Conversely, procedures with ASC payment rates that were substantially lower than the OPPS rates we re performed least often in ASCs. We believed that the revised ASC payment system would encourage greater efficiency in ASCs and would promote significant increase s in the breadth of surgical procedures performed in ASCs because it distributes paym ents across the entire spectrum of covered surgical procedures based on a coherent system of relative weights th at are related to the clinical and facility resource re quirements of those procedures. The CY 2010 claims data that we us ed to develop the CY 2012 ASC payment system relative payment weights and rates refl ect the third year of utilization under theCMS-1525-FC 1511 revised payment system. Although the changes in the claims data are not large, the data reflect increased Medicare ASC spending for procedures that were newly added to the ASC list in CY 2008. Our estimates based on CY 2010 data indicate that for CY 2012 there will be especially noticeable increas es in spending for the hematologic and lymphatic systems compared to the previous ASC payment system. (3) Estimated Effects of This Final Ru le with Comment Period on Beneficiaries We estimate that the CY 2012 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 2012. First, other than certain preventive services where coinsurance and the Part B deductible is waived to comp ly with sections 1833( a)(1) and (b) of the Act, the ASC coinsurance rate for all procedures is 20 percent. This contrasts with procedures performed in HOPDs, where the be neficiary is responsible for copayments that range from 20 percent to 40 percent of th e procedure payment. Second, in almost all cases, the ASC payment rates under the revised payment system are lower than payment rates for the same procedures under the OPPS. Therefore, the beneficiary coinsurance amount under the ASC payment system almost always will be less than the OPPS copayment amount for the same services. (T he only exceptions would be if the ASC coinsurance amount exceeds the inpatient de ductible. The statute requires that copayment amounts under the OPPS not exceed th e inpatient deductible.) Furthermore, the additions to the ASC list of covered surgical procedures will provide beneficiaries access to more surgical procedures in ASCs . Beneficiary coinsurance for servicesCMS-1525-FC 1512 migrating from physicians' offices to ASCs may decrease or incr ease under the revised ASC payment system, depending on the partic ular service and the relative payment amounts for that service in the physician's of fice compared to the ASC. However, for those additional procedures that we are designating as office-based in CY 2012, the beneficiary coinsurance amount would be no gr eater than the beneficiary coinsurance in the physician's office because the coinsura nce in both settings is 20 percent. (4) Alternatives Considered Alternatives to the changes we are maki ng and the reasons that we have chosen specific options are discussed throughout this final rule w ith comment period. Some of the major ASC issues discussed in this fina l rule with comment period and the options considered are discussed below.

● Alternatives Considered for Office-Based Procedures According to our final policy for the revised ASC payment system, we designate as office-based those procedures that are added to the ASC list of covered surgical procedures in CY 2008 or later years and that we determine are predominantly performed in physicians’ offices based on considerati on of the most recent available volume and utilization data for each individual proce dure HCPCS code and, if appropriate, the clinical characteristics, utilization, and volum e of related HCPCS codes. We establish payment for procedures designated as office-b ased at the lesser of the MPFS nonfacility practice expense payment amount or the ASC rate developed according to the standard methodology of the revised ASC payment system.CMS-1525-FC 1513 In developing this final rule with comment period, we reviewed CY 2010 utilization data for all surgical procedures added to the ASC list of covered surgical procedures in CY 2008 or later years and for those procedures for which the office-based designation is temporary in the CY 2011 O PPS/ASC final rule with comment period (75 FR 72036 through 72038). Based on that review and as discussed in section XIII.C.1.b. of this final rule with comment period, we are finalizing our proposal to newly designate 10 surgical procedures as permanently office-based and finalizing our proposal to make temporary office-based desi gnations for 8 procedures in CY 2012 that were designated as temporarily office- based for CY 2011. We considered two alternatives in developing this policy. The first alternative we considered wa s to make no change to the procedure payment designations. This would mean that we would pay for the 10 procedures we proposed to designate as permanently office- based and the 8 procedures we proposed to designate as temporarily office- based at an ASC payment rate calculated according to the standard ratesetting methodology of the revise d ASC payment system. We did not select this alternative because our analysis of the da ta and our clinical review indicated that all 10 procedures we proposed to designate as permanently office-based, as well as the 8 procedures that we proposed to designate te mporarily as office-based, are considered to be predominantly performed in physicians’ o ffices. Consistent with our final policy adopted in the August 2, 2007 final rule (72 FR 42509 through 42513), we were concerned that making payments at the standa rd ASC payment rate for the 10 procedures we proposed to designate as permanently o ffice-based and the 8 procedures we proposedCMS-1525-FC 1514 to designate as temporarily office-based could create financial incentives for the procedures to shift from physicians’ offices to ASCs for reasons unrelated to clinical decisions regarding the most a ppropriate setting for surgical care. Further, consistent with our policy, we believe that when adequate data become available to make permanent determinations about procedures with tem porary office-based desi gnations, maintaining the temporary designation is no longer appropriate. The second alternative we considered a nd the one we are selecting for CY 2012 is to designate 10 additional procedures as pe rmanently office-based for CY 2012 and to designate 8 procedures as temporarily office -based in CY 2012 that were designated as temporarily office-based for CY 2011. We chose this alterna tive because our claims data and clinical review indicate that these procedures could be considered to be predominantly performed in physicians’ offices. We believe that designating these procedures as office-based, which results in the CY 2012 ASC payment rate for these procedures potentially being capped at the CY 2012 physicians’ office rate (that is, the MPFS nonfacility practice expense payment amount), if applicab le, is an appropriate step to ensure that Medicare payment policy does not create financial incentives for such procedures to shift unnecessarily from physicia ns’ offices to ASCs, consistent with our final policy adopted in th e August 2, 2007 final rule. c. Accounting Statements and Tables As required by OMB Circ ular A-4 (available at http://www.whitehouse.gov/om b/circulars/a004/a-4.pdf ), we have prepared two accounting statements to illustrate the impacts of this final rule with comment period.CMS-1525-FC 1515 The first accounting statement, Table 63 below, illustrates the classification of expenditures for the CY 2012 estimated hospital OPPS incurred benefit impacts associated with the CY 2012 OPD fee schedule increase shown in this final rule with comment period, based on the FY 2012 Presid ent’s Budget. The second accounting statement, Table 64 below, illustrates the classification of expenditures associated with the 1.6 percent CY 2011 update to the revised ASC payment system, based on the provisions of this final rule with comment period and the baseline spending estimates for ASCs in the FY 2012 President’s Budget. La stly, both tables classify all estimated impacts as transfers.

TABLE 63.--ACCOUNTING STATEMENT: CY 2012 ESTIMATED HOSPITAL

OPPS TRANSFERS FROM CY 2011 TO CY 2012 ASSOCIATED WITH THE FINAL CY 2012 HOSPITAL OUTPATIENT OPD FEE SCHEDULE INCREASE Category Transfers Annualized Monetized Transfers $600 million From Whom to Whom Federal Govern ment to outpatient hospitals and other providers who received payment under the hospital OPPS Total $600 million

TABLE 64.--ACCOUNTING STATEM ENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2011 TO CY 2012 AS A RESULT OF THE FINAL CY 2012 UPDATE TO THE RE VISED ASC PAYM ENT SYSTEM Category Transfers Annualized Monetized Transfers $45 million

From Whom to Whom Federal Government to Medicare Providers and Suppliers Total $45 millionCMS-1525-FC 1516 d. Effects of Requirements for the Hosp ital Outpatient Quality Reporting (OQR) Program In section XVI. of the CY 2009 OPPS/A SC final rule with comment period (73 FR 68758 through 68781), section XVI. of the CY 2010 OPPS/ASC final rule with comment period (74 FR 60629 through 60655) , and section XVI. of the CY 2011 OPPS/ASC final rule with comment pe riod (75 FR72064 through 72110), we discussed our requirements for subsection (d) hospitals to report qual ity data under the Hospital OQR Program in order to receive the full OP D fee schedule increase factor for CY 2010, CY 2011, and CY 2012-2014, respectively. In sec tion XIV. of this final rule with comment period, we are finalizi ng our proposal to adopt addi tional policies affecting the Hospital OQR Program for CY 2013, CY 2014, and CY 2015. We determined that 107 hospitals did not meet the requirements to receive the full OPD fee schedule increase fact or for CY 2011. Most of thes e hospitals (over 90 of the 107) received little or no OPPS payment on an annual basis and did not participate in the Hospital OQR Program. We estimate that 120 hospitals may not receive the full OPD fee schedule increase factor in CY 2012. We are unable at this time to estimate the number of hospitals that may not receive the full OPD fee schedule increase factor in CY 2013, CY 2014 and CY 2015. In section XVI.E.3.a. of the CY 2010 O PPS/ASC final rule with comment period (74 FR 60647 through 60650), for the CY 2011 payment update, as part of the validation process, we required hospitals to submit pape r copies of requested medical records to a designated contractor within the required timeframe. Failure to submit requestedCMS-1525-FC 1517 documentation could result in a 2.0 percentage point reduction to a hospital’s CY 2011 OPD fee schedule increase factor, but the fail ure to attain a validation score threshold would not. In section XVI.D.3.b of the CY 2011 OPPS/ ASC final rule with comment period, we finalized our proposal to validate data submitted by 800 hospitals of the approximately 3,200 participating hospitals for purposes of the CY 2012 Hospital OQR Program payment determination. We stated our belief that this approach was suitable for the CY 2012 Hospital OQR Program because it w ould: produce a more reliable estimate of whether a hospital’s submitted data have been abstracted accurately; provide more statistically reliable estimates of the quality of care delivered in each selected hospital as well as at the national level; and reduce ove rall hospital burden becau se most hospitals would not be selected to undergo validati on each year. We adopted a threshold of 75 percent as the threshold for the validation score because we believed this level was reasonable for hospitals to achieve while still ensuring accuracy of the data. Additionally, this level is consistent with what we a dopted in the Hospital Inpatient Quality Reporting (IQR) Program (formerly re ferred to as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAP U) program)) (75 FR 50225 through 50229). As a result, we believed that the effect of our validation process for CY 2012 would be minimal in terms of the number of hosp itals that would not meet all program requirements. In this final rule with comment perio d, we are finalizing our proposal to validate data submitted by up to 500 of the approxi mately 3,200 participating hospitals forCMS-1525-FC 1518 purposes of the CY 2013 Hospital OQR Program payment determination. Under our policy for the CY 2011 and CY 2012 payment determinations, and under our proposal for CY 2013, we stated that we would conduc t a measure level validation by assessing whether the measure data submitted by the hospital matches the independently reabstracted measure data. As stated above, we are unable to estima te the number of hospitals that may not receive the full OPD fee schedule increase fa ctor in CY 2013. We also are unable to estimate the number of hospitals that woul d fail the validation documentation submission requirement for the proposed CY 2013 payment update. The validation requirements for CY 2011, CY 2012, and the validation requirement proposed for CY 2013 will result in result in medical record documentation for approximately 7,300 cases for CY 2011, 9,600 cases per quarter for CY 2012, and approximately 6,000 cases per quarter for CY 2013, respectively, being submitted to a designated CMS contractor. We will pay for the cost of sending this medical record documentation to the designated CMS contractor at the rate of 12 cents per page for copying and approximately $1.00 per case for postage. We have found that an outpatient medical chart is generally up to 10 pages. Thus, as a result of validation requirements effective for the CY 2011 and CY 2012 paymen t determinations, and finalized for the CY 2013 payment determination, respectiv ely, we will have expenditures of approximately $16,060 for CY 2011, $21,120 per quarter for CY 2012, and approximately $13,200 per quarter for CY 2013. Again, because we will pay for the data collection effort, we believe that a require ment for medical record documentation forCMS-1525-FC 1519 7,300 total cases for CY 2011, a maximum of 12 cases per quarter fo r 800 hospitals for CY 2012, and a maximum of 12 cases per quarter for up to 500 hospitals for CY 2013 represents a minimal burden to Hospital OQR Program participating hospitals. In previous years, medical record documentation was requested by a CMS contractor and hospitals were given 45 days from the date of the request to submit the requested documentation. In section XIV.G.3.d. of this final rule with comment period, for the CY 2013 payment determination, we ar e not finalizing our proposal to reduce the time from 45 days to 30 days for hospitals to submit requested medical record documentation to meet our validation requi rement. Instead, we are maintaining the 45-day timeframe. The total burden would be a maximum of 12 charts for each of the four quarters that must be copied and mailed within a 45-day period af ter the end of each quarter. e. Effects of Changes to Phys ician Self-Referral Regulations Section 6001(a) of the Affordable Care Act amended the whole hospital and rural provider exceptions (sections 1877(d)(2) and (d )(3) of the Act, respectively) to impose additional restrictions on phys ician ownership or investment in hospitals. The amended whole hospital and rural provider exceptions pr ovide that a hospital may not increase the number of operating rooms, procedure r ooms, and beds beyond that for which the hospital was licensed on March 23, 2010 (or, in the case of a hospital that did not have a provider agreement in effect as of this date, but did have a provider agreement in effect on December 31, 2010, the date of effect of such agreement). Section 6001(a)(3) of the Affordable Care Act added ne w section 1877(i)(3)(A)(i) of th e Act to set forth that theCMS-1525-FC 1520 Secretary shall establish and implement an exception process to the prohibition on expansion of facility capacity. Most physician-owned hospitals are unabl e to qualify for the ownership and investment exception at section 1877(d)(1) of the Act. Section 1877(d)(1) of the Act provides an exception for owners hip or investment in publicly traded securities in a corporation where there is stockholder e quity exceeding $75 million at the end of the corporation’s most recent fiscal year or on av erage during the previous 3 fiscal years; or the ownership involves mutual funds in a company that has assets greater than $75 million. Studies by the OIG and GAO have concluded that physician-owned hospitals tend to be smaller and are unable to meet the $75 million threshold. The regulations we are finalizing at § 411.362(c) set forth the process for a hospital to request an exception to the prohib ition on expansion of facility capacity. New § 411.362(c)(2) outlines the requirements for an applicable hosp ital request and § 411.362(c)(3) outlines the requirements for a high Medicaid facility request. Our new regulations require each hospital desiring an exception to access certain data and make estimates based on that data to determine if the hospital meets the relevant criteria. For example, a hospital is required to access data furnished by the CMS Healthcare Cost Report Information System (HCRIS) and by th e Bureau of the Census, in addition to referencing data from the hospital’s individua l cost reports and ma king certain estimates on the basis of its cost repor t data. We believe the impact of these requirements on affected hospitals will be minimal.CMS-1525-FC 1521 Our new regulations require each hospita l requesting an exception to provide documentation supporting its calculations to de monstrate that it satisfies the relevant criteria. Our new regulations further requi re each hospital to pr ovide documentation to support information related to its number of operating rooms, procedure rooms, and beds. This information includes, for example, the number of operating rooms, procedure rooms, and beds for which the hospital is licen sed as of the date that the hospital submits a request for an exception. Each hospita l also is required to provide a detailed explanation regarding whether and how it sati sfies each of the relevant criteria. We believe physician-owned hospitals will be mi nimally affected by these requirements. Our regulations require each hospital reque sting an exception to disclose on a public Web site for the hospital that it is requesting an exception. Our new regulations require each hospital to certify that it does not discriminate and does not permit physicians to discriminate against beneficiar ies of Federal health care programs. In addition, under our new regulati ons, if CMS were to receive input from the community related to a particular ho spital’s request for an exception, the hospital may submit a rebuttal statement in response to input from the community. We believe the impact of these requirements on physician-owned hospitals is minimal. We believe the proposals that we are fi nalizing will affect a relatively small number of physician-owned hospitals. We estimate that 265 physician-owned hospitals are eligible to apply for an exception. We believe accurately estimating the number of hospitals choosing to request an exception w ould be impracticable. Further, we are not aware of any existing data or projections that may produce an estimate with reasonableCMS-1525-FC 1522 certainty. As a result, we are choosing to estimate that each of the 265 eligible hospitals will request an exception in order to avoid underestimating the potential impact. We are not aware of any data that may indicate th e potential increase in operation rooms, procedure rooms, or beds pursuant to excepti ons potentially approved. We also have no data or projections that may help estimat e the number of physicians that would be affected by this final rule with comment period as a result of their ownership interests in hospitals. The requirements concerning the criteria and process for hosp itals seeking an exception to the prohibition on expansion of facility capacity are consistent with the physician self-referral statute a nd regulations and the current pr actices of most hospitals. Thus, our requirements will present a neglig ible impact on physician-owned hospitals. Physician-owned hospitals will bear costs as sociated with requesti ng an exception to the prohibition on facility expansion. In part, be cause hospitals are currently undertaking the costs of producing a cost report, we believe th at the cost of refere ncing the required data and making the required estimates will be negligible. In addi tion, we believe the costs of providing supporting documenta tion, certifying nondiscrimina tion against beneficiaries of Federal health care programs, and submitting other required information necessary to request an exception to CMS will be minimal. We believe that beneficiaries may be positively impacted by these provisions. 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 the number of hospital beds may also permit additional inpatient admissions and overnightCMS-1525-FC 1523 stays. Increased operating rooms, procedur e rooms, and beds may result in improved access to health care facilities and services. We believe th at our regulatory changes are necessary to conform our regulat ions to the amendments to section 1877 of the Act. We also believe the new regulations will help minimize anticompetitive behavior that can affect the decision as to where a beneficiar y receives health care services and would possibly enhance the services furnished. In the proposed rule, we solicited public comments on each of the issues outlined above that contain estimates of the costs and benefits of the proposed rule. We did not receive any public comments on our estimates. f. Effects of Changes to Provider Agr eement Regulations on Patient Notification Requirements In section XV.D. of this final rule wi th comment period, we discuss our proposal concerning the requirement that all hospitals and critical access hospitals must furnish written notice to their patients at the beginning of their hospital stay or outpatient visit if a doctor of medicine or a doctor of osteopathy is not present in the hospital 24 hours a day, 7 days a week, and that the notice must i ndicate how the hospital will meet the medical needs of any patient who develops an emerge ncy medical condition at a time when there is no physician present in the hospital. In this final rule with comment period, we are finalizing our proposal to modify the provi der agreement regulat ions to reduce the categories of outpatients who must be notif ied if hospital does not have a doctor of medicine or doctor of osteopathy on site 24 hou rs a day/7 days a wee k. We are finalizing our proposal that only thos e outpatients who receive observation services, surgery, orCMS-1525-FC 1524 services involving anesthesia must receive written notice. We are not making any changes to our patient safety requireme nts for physician-owned hospitals at § 411.362(b)(5)(i). We continue to believe that patients should be made aware of whether or not a doctor of medicine or a docto r of osteopathy is present in the hospital at all times, and the hospital’s plans to address patient’s emergency medical conditions when a doctor of medicine or a doc tor of osteopathy is not present. We believe our changes to the provider ag reement regulations will result in only a minor change in the number of hospitals that are subject to the disc losure requirements, specifically those multicampus hospitals that currently have 24 hours a day, 7 days a week presence of a doctor of medicine or a doctor of oste opathy on one, but not all, of their campuses with inpatient services. We anticipate that very few multicampus hospitals will fall into this category. Rather , the primary impact of the regulations is a change in the number of annual written disclo sures given by hospitals to patients. We believe the cost of implementing these provisi ons borne by hospitals will be limited to a one-time cost associated with completing mi nor revisions to portions of the hospitals policies and procedures related to patient admission and registration, as well as providing written notification to patients and affected sta ff. Therefore, we do not believe that these changes will have any significan t economic impact on hospitals. We do not anticipate that the proposals we are finalizing will have a significant economic impact on a substantial number of ph ysicians, other health care providers and suppliers, or the Medicare or Medicaid programs and their beneficiaries. Specifically, we believe that this final rule with comment period will affect mostly hospitals, physicians,CMS-1525-FC 1525 and beneficiaries. The changes we are fi nalizing concerning the disclosure of the presence of a doctor of medicine or a doctor of osteopathy in hospitals are consistent with the current practices of most hospitals. Thus , our physician presence disclosure proposal will present a negligible econom ic impact on the hospital. Overall, we believe that beneficiar ies will be positively impacted by these provisions. Specifically, disc losure of physician presence equips patients to make informed decisions about where they elect to receive care. Our new policies make no significant change that has the potential to impe de patient access to health care facilities and services. In fact, we believe that our policies will help minimize anti-competitive behavior that can affect th e decision as to where a bene ficiary receives health care services and possibly the quality of the services furnished. g. Effects of Additional Hospital VBP Program Requirements Section 1886(o)(1)(B) of the Act dir ects the Secretary to begin making value-based incentive payments under the Hospital VBP Program to hospitals for discharges occurring on or after Octobe r 1, 2012. These incentive payments will be funded for FY 2013 through a reduction to the FY 2013 base operating MS–DRG payment amount for each discharge of 1 per cent, as required by s ection 1886(o)(7)(B)(i) of the Act. The applicable percentage for FY 2014 is 1.25 percent, for FY 2015 is 1.5 percent, for FY 2016 is 1.75 percent, and for FY 2017 and subsequent years is 2.0 percent. In section XVI.A.3. of this final rule with comment period, we are finalizing additional requirements for the FY 2014 Hosp ital VBP Program. Specifically, we areCMS-1525-FC 1526 finalizing our proposal to add one chart-abstr acted measure to the Hospital VBP measure set for the FY 2014 payment determination. Although this additional measure is chart-abstracted, it is required for the Hospita l IQR Program. Therefore, its inclusion in the Hospital VBP Program does not result in any additional burden because the Hospital VBP Program uses data that are re quired for the Hospital IQR Program. h. Effects of the 2012 Electronic Reporting Pilot Under section XIV.J. of this final rule with comment period, we are finalizing our proposal to allow eligible hospi tals and CAHs that are partic ipating in the Medicare EHR Incentive Program to meet the CQM reporti ng requirement of the program for payment year 2012 by participating in the 2012 Electr onic Reporting Pilot. This alternative will facilitate the use of an electronic infrastruct ure that supports the use of EHRs by hospitals and CAHs to meet the requirements in various CMS programs and reduce reporting burden simultaneously. Through this pilot, we are encouraging eligible hospitals and CAHs to take steps toward the adoption of EH Rs that will allow for reporting of clinical quality data from EHRs to a CMS data repos itory. We expect th at the submission of quality data through EHRs will provide a foundation for establis hing the capacity of hospitals and CAHs to send, and for CMS, in th e future, to receive, quality measures via hospital EHRs for the Hospital IQR Program’s measures. Eligible hospitals and CAHs that choose to participate in this 2012 Electronic Reporting Pilot for the purpose of meeting the CQM reporting requirement of the Medicare EHR Incentive Program will be taking those first steps towa rd reporting clinical quality data in such a way.CMS-1525-FC 1527 i. Effect of Requirements for the Ambulator y Surgical Center (ASC) Quality Reporting Program In section XIV.K. of this final rule with comment period, we are finalizing our proposal to adopt requirements for ASCs to report quality data under the ASC Quality Reporting Program in order to receive the full ASC annual payment update factor for
CY 2014-2016. We are unable at this time to estimate the number of ASCs that may not receive the full ASC annual payment update factor in CY 2014, CY 2015, and CY 2016. 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 $34.5 million or less in any single year. Most ASCs and most CMHCs are considered small businesse s with total revenues of $10 million or less in any single year. For details, see the Sm all Business Administration’s “Table of Small Business Size Standards” at http://www. sba.gov/content/table-small-business-sizestandards. In addition, section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. Th is analysis must conf orm to the provisionsCMS-1525-FC 1528 of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located out side of a metropolitan st atistical area and has fewer than 100 beds. We estimate that this final rule with comment period may have a significant impact on approximate ly 704 small rural hospitals. The analysis above, together with the re mainder 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 $135 million. This final rule with comment period does not manda te any requirements for State, local, or tribal governments, nor will it affect private sector costs. D. Conclusion The changes we are finalizing will affect all classes of hospitals paid under the OPPS and will affect both CMHCs and ASCs. We estimate that most classes of hospitals paid under the OPPS will experience a modest in crease or a minimal decrease in payment for services furnished under the OPPS in CY 2012. Table 59 demonstrates the estimated distributional impact of the OPPS budget neutra lity requirements that will result in a 1.9 percent increase in payments for all serv ices paid under the OPPS in CY 2012, after considering all changes to APC reconfigurati on and recalibration, as well as the OPD fee schedule increase factor, wage index changes, including th e frontier State wage indexCMS-1525-FC 1529 adjustment, the addition of an adjustment for dedicated cancer hospitals, estimated payment for outliers, and changes to the pa ss-through payment estimate. However, some classes of providers that ar e paid under the OPPS will expe rience significant gains and others will experience modest losses in OPPS payments in CY 2012. Specifically, we estimate that the 11 dedicated cancer hospitals that met the classification criteria in section 1883(d)(1)(B )(v) of the Act, as a class, will re ceive an increase in payments under the OPPS of 13.7 percent for CY 2012. In cont rast, we estimate that CMHCs will see an overall decrease in payment of 30.8 percent as a result of the full transition in CY 2012 to payment rates for partial hospitalization se rvices at CMHCs based on cost report and claims data submitted by CMHCs. The updates to the ASC payment system for CY 2012 will affect each of the approximately 5,000 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 that are Medicare beneficiaries, the degree to which the payments for the procedures offered by the ASC are changed under the revised payment system, and the extent to which the ASC provide s a different set of procedures in the coming year. Table 61 demonstrates the estimated distributional impact among AS C surgical specialties of the MFP-adjusted CPI-U update of 1.6 percent for CY 2012. XXI. 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 substantialCMS-1525-FC 1530 direct costs on State and local governments , preempts State law, or otherwise has Federalism implications. We have examined the OPPS and ASC provisions included in this final rule with comment period in accordance with Execu tive Order 13132, Federalism, and have determined that they will not have a substant ial direct effect on State, local or tribal governments, preempt State law, or otherw ise have a Federalism implication. As reflected in Table 59 of this final rule with comment period, we estimate that OPPS payments to governmental hospitals (inclu ding State and local governmental hospitals) will increase by 1.6 percent under this final rule with comment period. While we do not know the number of ASCs or CMHCs with gove rnment ownership, we anticipate that it is small. We believe that the provisions related to payments to ASCs or CMHCs in CY 2012 will not affect payments to a ny ASCs or CMHCs owned by government entities. The analyses we have provided in section XX.A. of this final rule with comment period, in conjunction with the re mainder of this document, demonstrates that this final rule with comment period is consistent with the regulatory philosophy and principles identified in Executive Order 12866, the RF A, and section 1102(b) of the Act. This final rule with comment period will a ffect payments to a substantial number of small rural hospitals and a small number of rural ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some effects may be significant.List of Subjects
42 CFR Part 410 Health facilities, Health professions, La boratories, Medicare, Rural areas, X-rays.
42 CFR Part 411 Kidney diseases, Medicare, Physician referral, 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 489 Health facilities, Medicare, Reporting and recordkeeping requirements.
42 CFR Part 495 Computer technology, Electronic health r ecords, Electronic transactions, Health, Health care. Health information technology, Hea lth insurance, Health records, Hospitals, Laboratories, Medicaid, Medicare, Privacy, Reporting and recordkeeping requirements, Public health, Security. 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:CMS-1525-FC 1532 PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS 1. The authority citation for Part 410 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 2. Section 410.27 is revised to read as follows: § 410.27 Therapeutic outpatient hospital or CAH services and supplies incident to a physician’s or nonphysician prac titioner’s service: Conditions. (a) Medicare Part B pays for therapeu tic hospital or CAH services and supplies furnished incident to a physician’s or nonphysician practitioner’s service, which are defined as all services and s upplies furnished to hospital or CAH outpatients that are not diagnostic services and that aid the p hysician or nonphysician practitioner in the treatment of the patient, including drugs and biologicals that cannot be self-administered,
if— (1) They are furnished— (i) By or under arrangeme nts made by the participati ng hospital or CAH, except in the case of a SNF resident as prov ided in § 411.15(p) of this subchapter; (ii) As an integral although incide ntal part of a phys ician’s or nonphysician practitioner’s services; (iii) In the hospital or CAH or in a depa rtment of the hospital or CAH, as defined in § 413.65 of this subchapter; andCMS-1525-FC 1533 (iv) Under the direct supervision (or other level of superv ision as specified by CMS for the particular service) of a physic ian or a nonphysician practitioner as specified in paragraph (g) of this section, s ubject to the following requirements: (A) For services furnished in the hospital or CAH, or in an outpatient department of the hospital or CAH, both on and off- campus, as defined in § 413.65 of this subchapter, “direct supervision” means th at the physician or nonphysician practitioner must be immediately available to furnis h assistance and dir ection throughout the performance of the procedure. It does not mean that the physician or nonphysician practitioner must be presen t in the room when the procedure is performed; (B) Certain therapeutic services and supplies may be assigned either general supervision or personal supervision. When such assignment is made, general supervision means the definition specifie d at § 410.32(b)(3)(i), and personal supervision means the definition specified at § 410.32(b)(3)(iii); (C) Nonphysician practitione rs may provide the required supervision of services that they may personally furnish in acco rdance with State law and all additional requirements, including those sp ecified in §§ 410.71, 410.73, 410.74, 410.75, 410.76, and 410.77; (D) For pulmonary rehabilitation, card iac rehabilitation, a nd intensive cardiac rehabilitation services, direct supervision must be furnished by a doctor of medicine or a doctor of osteopathy, as specified in §§ 410.47 and 410.49, respectively; and (E) For nonsurgical extended duration therape utic services (extended duration services) , which are hospital or CAH outpatient therap eutic services that can last aCMS-1525-FC 1534 significant period of time, have a substantia l monitoring component that is typically performed by auxiliary personnel, have a low risk of requiring the physician's or appropriate nonphysician practitioner's immediate availability after th e initiation of the service, and are not primarily surgical in na ture, Medicare requires a minimum of direct supervision during th e initiation of the service wh ich may be followed by general supervision at the discretion of the supervising physician or the appropriate nonphysician practitioner. Initiation means the beginning portion of the nonsurgical extended duration therapeutic service which ends when the patien t is stable and the supervising physician or the appropriate nonphysician practi tioner determines that the remainder of the service can be delivered safely unde r general supervision. (2) In the case of part ial hospitalization services, al so meet the conditions of paragraph (e) of this section. (b) Drugs and biologicals are also subject to the limitations specified in § 410.129. (c) Rules on emergency services furnished to outpatients by nonparticipating hospitals are specified in subpart G of Part 424 of this chapter. (d) Rules on emergency services furnishe d to outpatients in a foreign country are specified in subpart H of Part 424 of this chapter. (e) Medicare Part B pays for partia l hospitalization services if they are— (1) Prescribed by a physic ian who certifies and recer tifies the need for the services in accordance with subpart B of part 424 of this chapter; andCMS-1525-FC 1535 (2) Furnished under a plan of treatment as required under subpart B of part 424 of this chapter. (f) Services furnished by an entity other than the hospital are subject to the limitations specified in § 410.42(a). (g) For purposes of this section, “no nphysician practitioner'” means a clinical psychologist, licensed clinical social worker, physician assi stant, nurse practitioner, clinical nurse specialist, or certified nurse-midwife.
PART 411—EXCLUSIONS FROM ME DICARE AND LIMITATIONS ON
MEDICARE PAYMENT 3. The authority citation for Part 41 1 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). 4. Section 411.362 is amended by— a. Under paragraph (a), adding the defin itions of “Baseline number of operating rooms, procedure rooms, and beds” and “mai n campus of the hospital” in alphabetical order. b. Revising paragraph (b)(2). c. Adding a new paragraph (c). The revision and additions read as follows: § 411.362 Additional requirements concernin g physician ownership and investment in hospitals. (a) * * *CMS-1525-FC 1536 Baseline number of operating rooms, procedure rooms, and beds means the number of operating rooms, procedure rooms, and beds for which the applicable hospital or high Medicaid facility is licensed as of March 23, 2010 (or, in the case of a hospital that did not have a provider agreement in eff ect as of such date, but does have a provider agreement in effect on December 31, 2010, the date of effect of such agreement). Main campus of the hospital means “campus” as defined at § 413.65(a)(2).
* * * * * (b) * * * (2) Prohibition on facility expansion . The hospital may not increase the number of operating rooms, procedure rooms, and beds beyond that for which the hospital is licensed on March 23, 2010 (or, in the case of a hospital that did not have a provider agreement in effect as of this date, but does have a provider agreement in effect on December 31, 2010, the effective date of such agreement), unless an exception is granted pursuant to paragraph (c) of this section.
* * * * * (c) Criteria for an individual hospital seeking an exception to the prohibition on facility expansion

. (1) General . An applicable hospital or high Medicaid facility may request an exception from the prohibition on facility e xpansion up to once every 2 years from the date of a CMS decision on the hospital’s most recent request. (2) Criteria for applicable hospital . An applicable hospital is a hospital that satisfies all of the following criteria:CMS-1525-FC 1537 (i) Population increase . Is located in a county that has a percentage increase in population that is at least 150 pe rcent of the percentage increa se in population of the State in which the hospital is located during the most recent 5-year period for which data are available as of the date that the hospital submits its request. To calculate State and county population growth, a hospital must us e Bureau of the Census estimates. (ii) Medicaid inpatient admissions . Has an annual percen t 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 fiscal year for which data are available as of the date that the hospital submits its request. A hospital mu st use filed hospital cost report discharge data to estimate its annual percent of total inpatient admissions under Medicaid. (iii) Nondiscrimination . Does not discriminate agai nst beneficiaries of Federal health care programs and does not permit phys icians practicing at the hospital to discriminate against such beneficiaries. (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 data are available as of the date that the hospital submits its request. (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 data ar e available as of the date that the hospital submits its request. A hospital must use filed hospital cost report data to determine its average bed occupancy rate.CMS-1525-FC 1538 (3) Criteria for high Medicaid facility . A high Medicaid facility is a hospital that satisfies all of the following criteria: (i) Sole hospital . Is not the sole hos pital in the county in which the hospital is located. (ii) Medicaid inpatient admissions . With respect to each of the 3 most recent fiscal years for which data are available as of the date the hospital submits its request, has an annual percent of total inpatient admissi ons under Medicaid that is estimated to be greater than such percent with respect to su ch admissions for any other hospital located in the county in which the hospital is located. A hospital must us e filed hospital cost report discharge data to estimate its annual per centage of total inpatient admissions under Medicaid and the annual per centages of total inpatient admissions under Medicaid for every other hospital located in the co unty in which the hospital is located. (iii) Nondiscrimination . Does not discriminate agai nst beneficiaries of Federal health care programs and does not permit phys icians practicing at the hospital to discriminate against such beneficiaries. (4) Procedure for submitting a request

. (i) A hospital must either mail an original and one copy of the written request to CMS or submit the request electronically to CMS. If a hospital submits the request electronically, the hospital must mail an original hard copy of the signed certification set forth in paragraph (c)(4)(iii) of this section to CMS. (ii) A request must include the following information:CMS-1525-FC 1539 (A) The name, address, National Provi der Identification number(s) (NPI), Tax Identification Number(s) (TIN), and CMS Cer tification Number(s) (CCN) of the hospital requesting an exception. (B) The county in which the hospital requesting an exception is located. (C) The name, title, address, and daytime telephone number of a contact person who will be available to discuss the reque st with CMS on behalf of the hospital. (D) A statement identifying the hospital as an applicable hospital or high Medicaid facility and a detailed explan ation with supporting documentation regarding whether and how the hospital satisfies each of the criteria for an applicable hospital or high Medicaid facility. The re quest must state that the ho spital does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discrimi nate against such beneficiaries. (E) Documentation supporting the hospita l’s calculations of its baseline number of operating rooms, procedure rooms, and beds; the hospital’s number of operating rooms, procedure rooms, and beds for which the hospital is licensed as of the date that the hospital submits a request for an exceptio n; and the additional number of operating rooms, procedure rooms, and beds by which the hospital requests to expand. (iii) A request must include the follo wing certification signe d by an authorized representative of the hospita l: “With knowledge of the penalties for false statements provided by 18 U.S.C. 1001, I certify that all of the information provided in the request and all of the documentation provided with the request is true and co rrect to the best ofCMS-1525-FC 1540 my knowledge and belief.” An authorized re presentative is the chief executive officer, chief financial officer, or other comparable officer of the hospital. (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 hos pital that it is requesting an exception. Individuals and entities in the hospital’s community may provide input with respect to the hospital’s request no later th an 30 days after CMS publishe s 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 ma iled or submitted electronically to CMS. (i) If CMS does not receive written comments from the community, a request will be deemed complete at the end of the 30-day period. (ii) If CMS receives written commen ts from the community, the hospital has 30 days after CMS notifies the hospital of the written comments to submit a rebuttal statement. A request will be deemed complete at the end of this 30-day period regardless of whether the hospital submits a rebuttal statement. (6) A permitted increase under this section— (i) May not result in th e number of operating rooms, procedure rooms, and beds for which the hospital is licensed exceeding 200 percent of the hospita l’s baseline number of operating rooms, procedure rooms, and beds; and (ii) May occur only in faciliti es on the hospital’s main campus. (7) Publication of final decisions . Not later than 60 days after receiving a complete request, CMS will publis h the final decision in the Federal Register

.CMS-1525-FC 1541 (8) Limitation on review . There shall be no administ rative or judicial review under section 1869, section 1878, or otherwis e of the process under this section (including the establishment of such process).
PART 416—AMBULATORY SURGICAL SERVICES 5. The authority citation for Part 41 6 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and1395hh). 6. Section 416.166 is amended by revising paragraph (b) to read as follows: § 416.166 Covered surgical procedures. * * * * * (b) General standards . Subject to the exclusions in paragraph (c) of this section, covered surgical procedures are surgical procedures specified by the Secretary and published in the Federal Register and/or via the Internet on the CMS Web site that are separately paid under the OPPS, that would not be expected to pose a significant safety risk to a Medicare beneficiary when perfor med in an ASC, and for which standard medical practice dictates that the beneficiary would not typica lly be expected to require active medical monitoring and care at midnight following the procedure.
* * * * * 7. Section 416.171 is amended by— a. Revising paragraph (b). b. Revising paragraph (d).CMS-1525-FC 1542 The revisions read as follows: §416.171 Determination of paymen t rates for ASC services. * * * * * (b) Exception. The national ASC payment rates for the following items and services are not determined in accordance with paragraph (a) of this section but are paid an amount derived from the payment rate for the equivalent item or service set under the payment system established in part 419 of this subchapter as updated annually in the Federal Register and/or via the Internet on the CMS We b site. If a payment rate is not available, the following items and services are designated as contractor-priced:
* * * * * (d) Limitation on payment rates for office -based surgical procedures and covered ancillary radiology services . Notwithstanding the provisions of paragraph (a) of this section, for any covered surgical proce dure under § 416.166 that CMS determines is commonly performed in physicians’ offices or for any covered ancillary radiology service, excluding those listed in paragraphs (d)(1) and (d)(2) of this section, the national unadjusted ASC payment rates for these procedur es and services will be the lesser of the amount determined under paragraph (a) of this section or the amount calculated at the nonfacility practice expense relative valu e units under § 414.22( b)(5)(i)(B) of this subchapter multiplied by the conversion f actor described in §414.20(a)(3) of this subchapter.CMS-1525-FC 1543 (1) The national unadjusted ASC paymen t rate for covered ancillary radiology services that involve certain nuclear medicine procedures w ill be the amount determined under paragraph (a) of this section. (2) The national unadjusted ASC paymen t rate for covered ancillary radiology services that use contrast agents will be the amount dete rmined under paragraph (a) of this section.
* * * * * 8. Section 416.173 is revi sed to read as follows: § 416.173 Publication of revised paymen t methodologies and payment rates. CMS publishes annually, through noti ce and comment rulemaking in the Federal Register and/or via the Internet on the CMS Web site, the payment methodologies and payment rates for ASC services and designa tes the covered surgical procedures and covered ancillary services for which CMS will make an ASC payment and other revisions as appropriate.
PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL
OUTPATIENT DEPARTMENT SERVICES 9. 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, 1395(t), and 1395hh). 10. Section 419.32 is amended by: a. Revising paragraph (b)(1)(iv)(A).CMS-1525-FC 1544 b. Removing the word “and” that appears at the end of paragraph (b)(1)(iv)(B)(1 ). c. Removing the period and adding “; a nd” in its place at the end of paragraph (b)(1)(iv)(B)(2 ). d. Adding a new paragraph (b)(1)(iv)(B)(3 ). The revision and addition read as follows: § 419.32 Calculation of prospective payment rates for hospital outpatient services. * * * * * (b) * * * (1) * * * (iv)(A) For calendar year 2003 and subs equent years, by the hospital inpatient market basket percentage increase applicable under section 1886(b)(3 )(B)(iii) of the Act, reduced by the factor(s) specified in para graph (b)(1)(iv)(B) of this section. (B) * * * (3 ) For calendar year 2012, a multifactor pr oductivity adjustment (as determined by CMS) and 0.1 percentage point.
* * * * * 11. Section 419.43 is amended by adding a new paragraph (i) to read as follows: § 419.43 Adjustments to national program payment and beneficiary copayment
amounts.
* * * * *CMS-1525-FC 1545 (i) Payment adjustment for certain cancer hospitals .—(1) General rule . CMS provides for a payment adjustment for covere d hospital outpatient department services furnished on or after January 1, 2012, by a hos pital described in se ction 1886(d)(1)(B)(v) of the Act. (2) Amount of payment adjustment . The amount of the payment adjustment under paragraph (i)(1) of this section is determined by the Secretary as follows: (i) If a hospital descri bed in section 1886(d)(1)(B)(v ) of the Act has a paymentto-cost ratio (PCR) before the cancer hospita l payment adjustment (as determined by the Secretary at cost report settlement) that is less than the weighted average PCR of other hospitals furnishing services under section 1833(t) of the Act (as determined by the Secretary at the time of the applicable CY Hospital Outpatient Prospective Payment System/Ambulatory Surgical Center final rule with comment period) (referred to as the Target PCR), for covered hospital outpatient department services, the aggregate payment amount provided at cost report se ttlement to such hospital is equal to the amount needed to make the hospital’s PCR at cost report se ttlement (as determined by the Secretary) equal to the target PCR (as determined by the Secretary). (ii) If a hospital descri bed in section 1886(d)(1)(B)(v ) of the Act has a paymentto-cost ratio (PCR) before the cancer hospita l payment adjustment (as determined by the Secretary at cost report settlement) that is greater than the weighted average PCR of other hospitals furnishing services under section 1833(t) of the Act (as determined by the Secretary at the time of the applicable CY Hospital Outpatient Prospective Payment System/Ambulatory Surgical Center final rule with comment period) (referred to as theCMS-1525-FC 1546 Target PCR), for covered hospital outpatient department services, the aggregate payment amount provided at cost report settlement to such hospital is equal to zero. (3) Budget neutrality . CMS establishes the payment adjustment under paragraph (i)(1) of this section in a budget neutral manner. 12. Section 419.70 is amended by— a. Revising the introductory text of paragraph (d)(2). b. Revising paragraph (d)(6). The revisions read as follows: § 419.70 Transitional adjustments to limit decline in payments.
* * * * * (d) * * * (2) Temporary treatment for small ru ral hospitals on or after January 1, 2006

. For covered hospital outpatient services furnished in a calendar year from January 1, 2006, through December 31, 2011, for which the prospective payment system amount is less than the pre-BBA amount, the amount of payment under this part is increased by 95 percent of that differe nce for services furnished during CY 2006, 90 percent of that differen ce for services furnished dur ing CY 2007, and 85 percent of that difference for services furnis hed during CYs 2008, 2009, 2010, and 2011 if the hospital—
* * * * * (6) Temporary treatment for sole community hospitals on or after January 1, 2010, and through December 31, 2011 . For covered hospital outpatientCMS-1525-FC 1547 services furnished on or after January 1, 2010, through December 31, 2011, for which the prospective payment system amount is less than the pre-BBA amount, the amount of payment under this part is in creased by 85 percent of that di fference if the hospital is a sole community hospital as defined in § 412.92 of this chapter or is an essential access community hospital as described under § 412.109 of this chapter.
* * * * *
PART 489--PROVIDER AGREEMEN TS AND SUPPLIER APPROVAL 13. The authority citation for Part 489 continues to read as follows: Authority: Secs. 1102, 1819, 1820(e), 1861, 1864(m), 1866, 1869, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m), 1395cc, 1395ff, and 1395hh). 14. Section 489.20 is amended by revising pa ragraph (w) to read as follows: § 489.20 Basic commitments. * * * * * (w)(1) In the case of a hosp ital as defined in § 489.24(b), to furnish written notice to all patients at the beginning of their pla nned or unplanned inpatient hospital stay or at the beginning of any planned or unplanned out patient visit for obser vation, surgery or any other procedure requirin g anesthesia, if a doctor of medici ne or a doctor of osteopathy is not present in the hospital 24 hours per day, 7 days per week, in order to assist the patients in making informed decisions rega rding their care, in accordance with § 482.13(b)(2) of this subchapter. For purposes of this paragraph, a planned hospital stay or outpatient visit begins with the provis ion of a package of information regardingCMS-1525-FC 1548 scheduled preadmission testing and registra tion for a planned hospital admission for inpatient care or outpatient serv ice. An unplanned hospital stay or outpatient visit begins at the earliest point at which the patient presents to the hospital. (2) In the case of a hospi tal that is a main provider and has one or more remote locations of a hospital or one or more sa tellites, as these terms are defined in § 413.65(a)(2), § 412.22(h), or § 412.25(e) of this chapter, as applicable, the determination is made separately for the main provider and each remote location or satellite whether notice to patients is require d. Notice is required at each location at which inpatient services are furnished at which a doctor of medicine or doctor of osteopathy is not present 24 hours per day, 7 days per week. (3) The written notice must state that the hospital does not have a doctor of medicine or a doctor of osteopathy present in the hospital 24 hours per day, 7 days per week, and must indicate how th e hospital will meet the medical needs of any patient who develops an emergency medical condition, as defined in § 489.24(b), at a time when there is no doctor of medicine or doctor of osteopathy present in the hospital. (4) Before admitting a patient or providing an outpatient service to outpatients for whom a notice is required, the hospital must receive a signed acknowledgment from the patient stating that the patient understands that a doctor of medicine or doctor of osteopathy may not be present during all hours serv ices are furnished to the patient. (5) Each dedicated emergency department, as that term is defined in § 489.24(b), in a hospital in which a doctor of medicine or doctor of osteopathy is not present 24 hours per day, 7 days per week must post a notice conspicuously in a place or places likely toCMS-1525-FC 1549 be noticed by all individuals entering the dedicated emergency department. The posted notice must state that the hospital does not ha ve a doctor of medicine or a doctor of osteopathy present in the hosp ital 24 hours per day, 7 days per week, and must indicate how the hospital will meet the medical needs of any patient with an emergency medical condition, as defined in § 489.24(b), at a time when there is no doctor of medicine or doctor of osteopathy pres ent in the hospital.
PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD
TECHNOLOGY INCENTIVE PROGRAM 15. The authority citation for Part 495 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 16. Section 495.8 is amended by— a. Revising paragraph (b)(2)(ii). b. Adding a new paragraph (b)(2)(vi). The revision and addition read as follows: § 495.8 Demonstration of meaningful use criteria. * * * * * (b) * * * (2) * * * (ii) Reporting clinical quality information . For § 495.6(f)(9) “R eporting hospital clinical quality measures to CMS or, in the case of Medicaid eligible hospitals, the States,” report the hospital quality measures selected by CMS to CMS (or in the case ofCMS-1525-FC 1550 Medicaid eligible hospitals, the States) in the form and manner sp ecified by CMS (or in the case of Medicaid eligible hospitals, the States).
* * * * * (vi) Exception for Medicare eligib le hospitals and CAHs for FY 2012-- Participation in the Medicare EHR Incentive Program Electronic Reporting Pilot . In order to satisfy the clinical quality measur e reporting objective in § 495.6(f)(9), aside from attestation, a Medicare eligible hosp ital or CAH may participate in the Medicare EHR Incentive Program Electronic Reporting Pilot.
* * * * *CMS-1525-FC (Catalog of Federal Domestic Assistan ce Program No. 93.773, Medicare—Hospital Insurance; Program No. 93.774, Medicare—Suppl ementary Medical Insurance Program; and Program No. 93.778 (M edical Assistance) Dated: October 26, 2011

______________________________ Donald M. Berwick, Administrator, Centers for Medicare & Medicaid Services

.

Dated: October 28, 2011

___________________________ Kathleen Sebelius, Secretary

.

BILLING CODE 4120-01-PCMS-1525-FC 1552 [FR Doc. 2011-28612 Filed 11/01/2011 at 4:15 pm; Publication Date: 11/30/2011]