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: Hospital Outpatient Prospective Payment; 

Ambulatory Surgical Center Payment; Hospital Value-Based Purchasing Program; 

Physician Self-Referral; and Patient Notification Requirements in Provider 

Agreements 

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

ACTION: Final rule with comment period. 

SUMMARY: This final rule with comment period revises the Medicare hospital 

outpatient prospective payment system (OPPS) for CY 2012 to implement applicable 

statutory requirements and changes arising from our continuing experience with this 

system. In this final rule with comment period, we describe the changes to the amounts 

and factors used to determine the payment rates for Medicare hospital outpatient services 

paid under the OPPS. 

 In addition, this final rule with comment period updates the revised Medicare 

ambulatory surgical center (ASC) payment system to implement applicable statutory 

requirements and changes arising from our continuing experience with this system. In 

this final rule with comment period, we set 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 the 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 participating in the Medicare 

Electronic Health Record (EHR) Incentive Program to meet the clinical quality measure 

reporting requirement of the EHR Incentive Program for payment year 2012 by 

participating in the 2012 Medicare EHR Incentive Program Electronic Reporting Pilot. 

 Finally, we are making changes to the rules governing the whole hospital and 

rural provider exceptions to the physician self-referral prohibition for expansion of 

facility capacity and changes to provider agreement regulations on patient notification 

requirements. 

DATES: Effective Date: This final rule with comment period is effective on 

January 1, 2012. 

 Comment Period: To be assured consideration, comments on the payment 

classifications assigned to HCPCS codes identified in Addenda B, AA, and BB of this 

final rule with comment period with the “NI” comment indicator and on other areas 

specified throughout this final rule with comment period, and comments on the 

suspension of the effective dates of the Hospital-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 be 
CMS-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 new class of new technology intraocular lenses 

must be received by 5 p.m. EST on March 2, 2012, at the following address: 

ASC/NTOL, Division of Outpatient 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 encourage you to) submit electronic 

comments on this regulation to http://www.regulations.gov. Follow the instructions 

under the “submit a comment” tab. 

2. By regular mail. You may mail written comments to the following address 

ONLY: 

Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

Attention: CMS-1525-FC, 

 P.O. Box 8013, 

 Baltimore, MD 21244-1850. 
CMS-1525-FC 4 

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

of the comment period. 

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

overnight mail to the following address ONLY: 

Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

Attention: CMS-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 Hubert H. Humphrey Building is not readily 

available to persons without Federal Government identification, commenters are 

encouraged to leave their comments in the CMS drop slots located in the main lobby of 
CMS-1525-FC 5 

the building. A stamp-in clock is available for persons wishing to retain a proof of filing 

by stamping in and retaining an extra copy of the comments being filed. 

 b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

 Baltimore, MD 21244-1850. 

 If you intend to deliver your comments to the Baltimore address, please call the 

telephone number (410) 786-7195 in advance to schedule your arrival with one of our 

staff members. 

 Comments mailed to the addresses indicated as appropriate for hand or courier 

delivery may be delayed and received after the comment period. 

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

the “SUPPLEMENTARY INFORMATION” section. 

FOR FURTHER INFORMATION CONTACT:

 Marjorie Baldo, (410) 786-4617, Hospital outpatient prospective payment issues. 

 Char Thompson, (410) 786-2300, Ambulatory surgical center issues. 

 Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-4533, Partial 

hospitalization and community mental 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, Patient 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 viewing by the public, including any personally 

identifiable or confidential business information that is included in a comment. We post 

all comments received before the close of the comment period on the following Web site 

as soon as possible after they have been received: http://www.regulations.gov. Follow 

the search instructions on that Web site to view public comments. 

Comments received timely will also be available for public inspection, generally 

beginning approximately 3 weeks after publication of the rule, at the headquarters of the 

Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 

Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 

p.m. EST. To schedule an appointment to view public comments, phone 

1-800-743-3951. 

Electronic Access

 This Federal Register document is also available from the Federal Register

online database through Federal Digital System (FDsys), a service of the U.S. 
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 the 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 administrative burden and reduce costs associated 

with publishing lengthy tables. Instead, these Addenda will be published and available 

only on the CMS Web site. The Addenda relating to the OPPS are available at: 

http://www.cms.gov/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 this final rule with comment period, we refer 

readers to section XVII. Readers who experience any problems accessing any of the 

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

Braver at (410) 786-0378. 

Alphabetical List of Acronyms Appearing in This Federal Register Document 

ACEP American College of Emergency Physicians 

AHA American Hospital Association 

AHIMA American Health Information Management Association 

AHRQ Agency for Healthcare Research and Quality 

AMA American Medical Association 
CMS-1525-FC 8 

AMP Average Manufacturer Price 

AOA American Osteopathic Association 

APC Ambulatory Payment Classification 

ARRA American Recovery and Reinvestment 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 [State Children's Health Insurance 

Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113 

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 

Act of 2000, Pub. L. 106-554 

BLS Bureau of Labor Statistics 

CAH Critical Access Hospital 

CAP Competitive Acquisition Program 

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 Center 
CMS-1525-FC 9 

CMS Centers for Medicare & Medicaid Services 

CPT Current Procedural Terminology (copyrighted 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 Condition 
CMS-1525-FC 10 

HAI Healthcare-Associated Infection 

HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems 

HCERA Health Care and Education Reconciliation 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 Portability 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 Extension Act under Division B, Title I of 

the Tax Relief Health Care Act of 2006, Pub. L. 109-432 
CMS-1525-FC 11 

MIPPA Medicare Improvements for Patients and Providers Act of 2008, 

Pub. L. 110-275 

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 

2003, Pub. L. 108-173 

MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309 

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-173 

MPFS Medicare Physician Fee Schedule 

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 Index 
CMS-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 payment 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 governing the Hospital Inpatient Value-Based 

Purchasing (VBP) Program. The provisions relating to the OPPS are included in sections 
CMS-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 with comment period. Addenda AA, BB, DD1, 

DD2, and EE, which relate to the ASC payment 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 relating to physician referrals 

to hospitals in which physicians have an ownership 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 Panel 
CMS-1525-FC 14 

2. Establishment of the APC Panel 

3. APC Panel Meetings and 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 Classification (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 Paid 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 Surgical 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 Patient Notification Requirements 
CMS-1525-FC 15 

16. Additional Changes to the Hospital Inpatient VBP Program 

17. Economic and Federalism Analyses 

F. Public Comments Received in Response 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 Records and Median Cost Calculations 

 d. Calculation of Single Procedure 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 Revascularization 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 Management Composite APCs (APCs 8002 and 

8003) 

 (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) 

 (3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 

(APC 8000) 

 (4) Mental Health Services Composite APC (APC 0034) 

 (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 

8008) 

 (6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418, 

0655, and 8009) 

 3. Changes to Packaged Services 

 a. Background 

 b. Packaging Issues 
CMS-1525-FC 17 

(1) CMS Presentation of Findings Regarding Expanded Packaging at the 

February 28-March 1, 2011 and August 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 the 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 EACHs under Section 1833(t)(13)(B) of the 

Act 

 F. OPPS Payments to Certain Cancer Hospitals Described by Section 

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

1. Background 

 2. Study of Cancer Hospital Costs 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 2012 
CMS-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 Rule 
CMS-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 (GI) 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 Neurotransmitter Electrodes (APCs 0040 and 0687) 

b. Magnetoencephalography (MEG) (APCs 0065, 0066, and 0067) 

c. Transcranial Magnetic Stimulation 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 Cast 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 Tomography (PET) Imaging (APC 0308)) 

e. Device Construction for Intensity Modulated Radiation Therapy (IMRT) (APC 

0305) 

f. Computed Tomography of Abdomen/Pelvic (APCs 0331 and 0334) 
CMS-1525-FC 21 

g. Complex Interstitial Radiation 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 

Devices 
CMS-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 Expiring Pass-Through Status in CY 2011 

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

Pass-Through Status in CY 2012 

 4. Provisions for Reducing Transitional 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, Biologicals, and Radiopharmaceuticals without 

Pass-Through Status 

 1. Background 

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

Radiopharmaceuticals 

 a. Background 
CMS-1525-FC 23 

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

Certain Drugs, Nonimplantable Biologicals, 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 Status 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 Hospital Outpatient Visits 

 A. Background 
CMS-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 Categories 
CMS-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 Designate Services That Are Paid under the 

OPPS 

 2. Payment Status Indicators to Designate Services That Are Paid under a 

Payment System Other Than the OPPS 

 3. Payment Status Indicators to Designate Services That Are Not Recognized 

under the OPPS But That May Be Recognized by Other Institutional Providers 

 4. Payment Status Indicators to Designate 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 Recommendations 
CMS-1525-FC 26 

 C. OIG Recommendations 

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

 A. Background 

1. Legislative Authority for the ASC Payment System 

 2. Prior Rulemaking 

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

Covered Surgical Procedures and Covered Ancillary Services 

 B. Treatment of New Codes 

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

Level II HCPCS Codes 

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

Implemented in April and July 2011 for Which We Solicited Public Comments in the 

CY 2012 OPPS/ASC Proposed Rule 

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

Codes for Which We Are Soliciting Public Comments in this CY 2012 OPPS/ASC Final 

Rule with Comment Period 

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

Ancillary Services 

 1. Covered Surgical Procedures 

 a. Additions to the List of ASC Covered Surgical Procedures 

 b. Covered Surgical Procedures Designated as Office-Based 

 (1) Background 
CMS-1525-FC 27 

 (2) Changes for CY 2012 to Covered Surgical Procedures Designated as 

Office-Based 

 c. ASC Covered Surgical Procedures Designated as Device-Intensive 

 (1) Background 

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

Device-Intensive for CY 2012 

 d. ASC Treatment of Surgical Procedures Removed from the OPPS Inpatient List 

for CY 2012 

 2. Covered Ancillary Services 

 D. ASC Payment for Covered Surgical 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 Deductible for Certain Preventive Services 

 e. Payment for the Cardiac Resynchronization 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 Process for Payment Adjustment 

 3. Requests to Establish New NTIOL Classes for CY 2012 

 4. Payment Adjustment 

 5. Announcement of CY 2012 Deadline 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 Conversion Factor and the ASC Payment Rates 

 1. Background 

 2. Calculation of the ASC Payment Rates 

 a. Updating the ASC Relative Payment Weights for CY 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. Overview 
CMS-1525-FC 29 

 2. Statutory History of Hospital Outpatient Quality Reporting (Hospital OQR) 

Program 

 3. Technical Specification Updates 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 Payment 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 Measure 
CMS-1525-FC 30 

 (2) Hospital Outpatient Department Volume 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 Consideration 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 Associated 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 Submission Requirements for Chart-Abstracted 

Measure Data Submitted Directly to CMS 
CMS-1525-FC 31 

 b. Eligibility to Voluntarily Sample and Data submission Exception for Low 

Patient Volume for CY 2013 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 Requirements 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 Validation 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 Criteria for Data Validation Selection for CY 2013 

 c. Encounter Selection 

 d. Validation Score Calculation 
CMS-1525-FC 32 

 4. Additional Data Validation Conditions under Consideration for CY 2014 and 

Subsequent Years 

 H. Hospital OQR Reconsideration and Appeals Procedures for CY 2013 and 

Subsequent Years 

 I. Electronic Health Records (EHRs) 

 J. 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for 

Hospitals and CAHs 

 1. Background 

 2. Electronic Reporting Pilot 

 3. CQM Reporting under the Electronic Reporting Pilot 

 K. ASC Quality 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 Patient, Wrong Procedure, Wrong Implant 

(NQF #0267) 

 (4) Hospital Transfer/Admission (NQF #0265) 

 (5) Prophylactic Intravenous (IV) Antibiotic Timing (NQF #0264) 

 (6) Ambulatory Patient with Appropriate Method of Surgical Hair Removal 

(NQF #0515) 

 (7) Selection of Prophylactic Antibiotic: 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 for 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 for the CY 2015 Payment Determination in the 

CY 2016 Payment Determination 

 b. HAI Measure: Influenza Vaccination Coverage among Healthcare Personnel 

(HCP) (NQF #0431) 

 6. ASC Measure Topics for Future Consideration 
CMS-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 Quality Reporting Program Data 

 8. Requirements for Reporting of ASC Quality Data for the CY 2014 Payment 

Determination 

 a. Data Collection and Submission Requirements 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 Expansion of Facility Capacity; and Changes to 

Provider Agreement Regulations on Patient 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 Exception to the Prohibition on Expansion of 

Facility Capacity 

 1. General Comments 

 2. Applicable Hospital 

 a. Percentage Increase in Population 

 b. Inpatient Admissions 
CMS-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 Agreement Regulations on Patient Notification 

Requirements 

XVI. Additional Hospital Value-Based Purchasing (Hospital VBP) Program Policies 

 A. Hospital VBP Program 

 1. Legislative Background 

 2. Overview of the Hospital Inpatient VBP Program Final Rule 

 3. Additional FY 2014 Hospital VBP Program Measures 
CMS-1525-FC 36 

 4. Minimum Number of Cases and Measures 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 Measures for Outcome Domain 

 5. Performance Periods and Baseline 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 Patient 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 Program 
CMS-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 Care 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 the Public Via the Internet 

 A. Information in Addenda Related 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 Requirements for Solicitation of Comments 

 B. Requirements in Regulation Text 

 1. ICRs Regarding Basic Commitments of Providers (§489.20) 

 2. ICRs Regarding Exceptions Process Related 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) Program 
CMS-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 Reconsideration 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 This Final Rule with Comment Period 

 (1) Limitations of Our Analysis 

 (2) Estimated Effects of This Final Rule with Comment Period on Hospitals 
CMS-1525-FC 39 

 (3) Estimated Effects of This Final 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 Medicare and Medicaid Programs 

 (7) Alternatives Considered 

 b. Effects of ASC Payment System Changes 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 Hospital Outpatient Quality Reporting (OQR) 

Program 

 e. Effects of Changes to Physician Self-Referral Regulations 

 f. Effects of Changes to Provider Agreement 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 Analysis 
CMS-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 services was based on hospital-specific costs. In an effort 

to ensure that Medicare and its beneficiaries pay appropriately for services and to 

encourage more efficient delivery of care, the Congress mandated replacement of the 

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

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

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

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

regulations for the OPPS are located at 42 CFR 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 OPPS: the Medicare, Medicaid, and SCHIP 

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

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

(Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted 
CMS-1525-FC 41 

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

Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-

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

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

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

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

(Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and 

Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 

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

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

 Under the OPPS, we pay for hospital outpatient services on a rate-per-service 

basis that varies according to the ambulatory payment classification (APC) group to 

which the service is assigned. We use the Healthcare Common Procedure Coding 

System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) 

to identify and group the services within each APC group. The OPPS includes payment 

for most hospital outpatient services, except those 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 mental health centers (CMHCs)) 

and hospital outpatient services that are furnished to inpatients who have exhausted their 

Part A benefits, or who are otherwise 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-related amount. The labor-related amount is 

adjusted for area wage differences using the hospital inpatient wage index value for the 

locality in which the hospital or CMHC is located. 

 All services and items within an APC group are comparable clinically and with 

respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with 

section 1833(t)(2) of the Act, subject to certain exceptions, items and services within an 

APC group cannot be considered comparable with respect to the use of resources if the 

highest median cost (or mean cost, if elected by the Secretary) for an item or service in 

the APC group is more than 2 times greater than the lowest median cost for an item or 

service within the same APC group (referred to as the “2 times rule”). In implementing 

this provision, we generally use the median cost of the item or service assigned to an 

APC group. 

 For new technology items and services, special payments under the OPPS may be 

made in one of two ways. Section 1833(t)(6) of the Act provides for temporary 

additional payments, which we refer to as “transitional pass-through payments,” for at 

least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy 

devices used for the treatment of cancer, and categories of other medical devices. For 

new technology services that are not eligible for transitional pass-through payments, and 

for which we lack sufficient data to appropriately assign them to a clinical APC group, 

we have established special APC groups based on costs, which we refer to as 
CMS-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 APC is temporary; that is, we retain a 

service within a New Technology APC until we acquire sufficient data to assign it to a 

clinically appropriate APC group. 

B. Excluded OPPS Services and Hospitals

 Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the 

hospital outpatient services that are paid under the OPPS. While most hospital outpatient 

services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes 

payment for ambulance, physical and occupational therapy, and speech-language 

pathology services, for which payment is made under a fee schedule. It also excludes 

screening mammography, diagnostic mammography, and effective January 1, 2011, an 

annual wellness visit providing personalized prevention plan services. The Secretary 

exercised the authority granted under the statute to also exclude from the OPPS those 

services that are paid under fee schedules or other payment systems. Such excluded 

services include, for example, the professional services of physicians and nonphysician 

practitioners paid under the Medicare Physician Fee Schedule (MPFS); laboratory 

services paid under the Clinical Laboratory Fee Schedule (CLFS); services for 

beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD 

composite rate; and services and procedures that require an inpatient stay that are paid 

under the hospital inpatient prospective payment system (IPPS). We set forth the 
CMS-1525-FC 44 

services that are excluded from payment under the OPPS in 42 CFR 419.22 of the 

regulations. 

 Under §419.20(b) of the regulations, we specify the types of hospitals and entities 

that are excluded from payment under the OPPS. These excluded entities include: 

Maryland hospitals, but only for services that are paid under a cost containment waiver in 

accordance with section 1814(b)(3) of the Act; critical access hospitals (CAHs); hospitals 

located outside of the 50 States, the District 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 first implemented for services furnished on 

or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review 

certain components of the OPPS, not less often than annually, and to revise the groups, 

relative payment weights, and other adjustments that take into account changes in 

medical practices, changes in technologies, and the addition of new services, new cost 

data, and other relevant information and factors. 

 Since initially implementing the OPPS, we have published final rules in the 

Federal Register annually to implement statutory requirements and changes arising from 

our continuing experience with this system. These rules can be viewed on the CMS Web 

site at: http://www.cms.gov/HospitalOutpatientPPS/. The CY 2011 OPPS/ASC final 

rule with comment period appears in the November 24, 2010 Federal Register
CMS-1525-FC 45 

(75 FR 71800). In that final rule with comment 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 January 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 assignment of HCPCS codes identified in 

Addendum B to that rule with the new interim (“NI”) comment indicator, and public 

comments received on the August 3, 2010 OPPS/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, with 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 requirements and changes arising 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 final 
CMS-1525-FC 46 

rule, fulfills these requirements. The APC Panel 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 provisions of the Federal Advisory Committee Act 

(FACA). Since its initial chartering, the Secretary has renewed 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 specifies, 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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp#TopOfPage.
CMS-1525-FC 47 

3. APC Panel Meetings and Organizational Structure 

 The APC Panel first met on February 27 through March 1, 2001. Since the initial 

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

August 10-12, 2011. Prior to each meeting, we publish a notice in the Federal Register

to announce the meeting and, when necessary, to solicit nominations for APC Panel 

membership and to announce new members. 

 The APC Panel has established an operational structure that, in part, currently 

includes the use of three subcommittees to facilitate its required 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 hospital outpatient visits paid 

under the OPPS (for example, APC configurations and APC payment weights). The 

Subcommittee for APC Groups and SI Assignments advises the Panel on the following 

issues: the appropriate SIs to be assigned to HCPCS codes, including but not limited to 

whether a HCPCS code or a category of codes should be packaged or separately paid; 

and the appropriate APCs to be assigned to HCPCS codes regarding services for which 

separate payment is made. 
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 the 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 recommendations made by the APC Panel at the 

February/March 2011 and August 2011 APC Panel meetings are included in the sections 

of this final rule with comment period that are specific to each recommendation. For 

discussions of earlier APC Panel meetings and recommendations, we refer readers to 

previously published hospital OPPS/ASC proposed and final rules, the CMS Web site 

mentioned earlier in this section, and the FACA database at: 

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

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 proposed changes to the Medicare hospital 

OPPS for CY 2012 to implement statutory requirements 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 addition, we proposed to make changes to the 

rules governing limitations on certain physician referrals to hospitals in which physicians 

have an ownership or investment interest, provider agreement regulations on patient 
CMS-1525-FC 49 

notification requirements, and the rules governing the Hospital Inpatient 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 proposed changes in the amounts and factors for 

calculating the full annual update increase 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 statewide average default CCRs. 

● The proposed application of hold harmless transitional outpatient payments 

(TOPs) for certain small rural hospitals, extended 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 Classification (APC) Group Policies 

 In section III. of the proposed 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 radiopharmaceuticals, including the proposed 

payment for drugs, biologicals, and radiopharmaceuticals 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 for 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 assign to APCs for payment under the OPPS. 

9. Policies on Supervision Standards for Outpatient Services in Hospitals and CAHs 

 In section X. of the proposed rule, we discussed proposed policy changes relating 

to the supervision of outpatient services 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 General (OIG), and by the APC Panel regarding the 

OPPS for CY 2012. 

12. Updates to the Ambulatory Surgical 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 quality data for the OPD fee schedule increase factor for 

CY 2013 and subsequent calendar years; set forth the requirements for data collection 

and submission; and discuss the reduction to the OPPS OPD fee schedule increase factor 

for hospitals that fail to meet the Hospital 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 for 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 eligible hospitals and 

CAHs participating in the Medicare EHR Incentive Program to meet the CQM reporting 
CMS-1525-FC 53 

requirement of the EHR Incentive Program for payment year 2012 by participating in the 

2012 Medicare EHR Incentive Program Electronic Reporting Pilot. 

15. Changes to Provisions Relating to Physician Self-Referral Prohibition 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 changes to the provider agreement 

regulations on patient notification requirements. 

16. Additional Changes Relating to the 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 Response 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 proposed 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 the scope of the proposed rule 
CMS-1525-FC 54 

and our responses are set forth in the various sections of this final rule with comment 

period under the appropriate headings. 

G. Public Comments Received on the CY 2011 OPPS/ASC Final Rule with Comment 

Period

 We received approximately 43 timely pieces of correspondence on the CY 2011 

OPPS/ASC final rule with comment 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 indicators 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 comment period and our responses to them are set forth in 

various sections of this final 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 review not less often 

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

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

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

each APC group. 
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 recalibrate the relative payment weights for each APC 

based on claims and cost report data for hospital outpatient department (HOPD) services, 

using the most recent available data to construct a database for calculating APC group 

weights. Therefore, for the purpose of recalibrating the proposed APC relative payment 

weights for CY 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 furnished 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 disputes 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 narrative 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 OPPS payment rates for this final rule with 

comment period, approximately 112 million claims were the type of bill potentially 
CMS-1525-FC 56 

appropriate for use in setting rates for OPPS services (but did not necessarily contain 

services payable under the OPPS). Of the 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 approximately 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 process we discuss later in this section). 

Approximately 888,000 claims were trimmed 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 development process is designed with the goal of 

using appropriate cost information in setting the APC relative weights. The bypass 

process is described in section II.A.1.b. of this final rule with comment period. This 

section discusses how we develop “pseudo” single procedure claims (as defined below), 

with the intention of using more appropriate data from the available claims. In some 

cases, the bypass process allows us to use some portion of the submitted claim for cost 

estimation purposes, while the remaining information on the claim continues to be 

unusable. Consistent with the goal of using appropriate information in our data 

development process, we only use claims (or portions of each claim) that are appropriate 

for ratesetting purposes. Ultimately, we were able to use for CY 2012 ratesetting some 
CMS-1525-FC 57 

portion of approximately 94 percent of the CY 2010 claims containing services payable 

under the OPPS. 

The final APC relative weights 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 via 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 rule with comment period, we select claims 

for services paid under the OPPS and match these claims to the most recent cost report 

filed by the individual hospitals represented in our claims data. We continue to believe 

that it is appropriate to use the most current full calendar year claims data and the most 

recently submitted cost reports to calculate the 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 should be derived from the costs of furnishing 

one unit of one procedure and because, in many circumstances, we are unable to ensure 

that packaged costs can be appropriately allocated across multiple procedures performed 

on the same date of service. 
CMS-1525-FC 58 

It is generally desirable to use the data from as many claims as possible to 

recalibrate the APC relative payment weights, including those claims for multiple 

procedures. As we have for several years, we proposed to continue to use date of service 

stratification and a list of codes to be bypassed to convert multiple procedure claims to 

“pseudo” single procedure claims. Through bypassing specified codes that we believe do 

not have significant packaged costs, we are able to use more data from multiple 

procedure claims. In many cases, this enabled us to create multiple “pseudo” single 

procedure claims from claims that were submitted as multiple procedure claims spanning 

multiple dates of service, or claims that contained numerous separately paid procedures 

reported on the same date on one claim. We refer to these newly created single 

procedure claims as “pseudo” single procedure claims. The history of our use of a bypass 

list to generate “pseudo” single procedure claims is well documented, most recently in 

the CY 2011 OPPS/ASC final rule with comment period (75 FR 71811 through 71822). 

In addition, for CY 2008, we increased packaging and created the first composite APCs. 

We have continued our packaging policies and the creation of composite APCs for 

CYs 2009, 2010, and 2011, and we proposed to continue them for CY 2012. Increased 

packaging and creation of composite APCs also 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 model to one additional clinical area, 

multiple imaging services (73 FR 68559 through 68569), which also increased the 

number of bills we were able to use to calculate APC median costs. We have continued 
CMS-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 comment 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 for the CY 2012 OPPS. This methodology enabled 

us to create, for the proposed rule, approximately 67 million “pseudo” single procedure 

claims, including multiple imaging composite “single 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 and “single session” procedure bills represented 

approximately 67 percent of all single procedure 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 bypass list, which is the list of codes to be 

bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we 

have calculated the percent of “natural” single bills that contained packaging for each 

HCPCS code and the amount of packaging on each “natural” single bill for each code. 

Each year, we generally retain the codes on the previous year’s bypass list and use the 

updated year’s data (for CY 2012, data available 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 rates 
CMS-1525-FC 60 

for CY 2011) to determine whether it would be appropriate to propose 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 under 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” (those HCPCS codes that are both on the bypass list and are 

members of the multiple imaging composite APCs). 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 empirical 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” single procedure claims for any given code 

is comparable to packaging for that code in the multiple procedure claims. The proposed 

criteria for the bypass list were: 
CMS-1525-FC 61 

● There are 100 or more “natural” single procedure claims for the code. This 

number of single procedure claims ensures that observed outcomes are sufficiently 

representative of packaging that might occur in the multiple claims. 

● Five percent or fewer of the “natural” single procedure claims for the code 

have packaged costs on that single procedure claim for the code. This criterion results in 

limiting the amount of packaging being redistributed to the separately payable procedures 

remaining on the claim after the bypass code is removed and ensures that the costs 

associated with the bypass code represent the cost of the bypassed service. 

● The median cost of packaging observed in the “natural” single procedure 

claims is equal to or less than $55. This criterion also limits the amount of error in 

redistributed costs. During the assessment of claims against the bypass criteria, we do 

not know the dollar value of the packaged cost that should be appropriately attributed to 

the other procedures on the claim. Therefore, ensuring that redistributed costs associated 

with a bypass code are small in amount and volume protects the validity of cost estimates 

for low cost services billed with the bypassed service. 

In response to comments to the CY 2010 OPPS/ASC proposed rule requesting 

that the packaged cost threshold be updated, we considered whether it would be 

appropriate to update the $50 packaged cost threshold for inflation when examining 

potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60328), the real value of this packaged cost threshold criterion 

has declined due to inflation, making the packaged cost threshold more restrictive over 

time when considering additions to the bypass list. Therefore, adjusting the threshold by 
CMS-1525-FC 62 

the market basket increase would prevent continuing 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 packaged cost threshold used in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60325). This calculation led us to a 

proposed packaged cost threshold for bypass 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 packaged cost threshold by the market basket 

increase. By applying the final CY 2011 market 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 considered 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 minimal associated packaging based on their 

clinical assessment of the complete 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 assignment of packaged costs to a companion 

code where services always appear together and where there would otherwise be few 

single procedure claims available for ratesetting. For example, we have previously 

discussed our reasoning for adding HCPCS code G0390 (Trauma response team 

associated with hospital critical care service) and the CPT codes for additional hours of 

drug administration to the bypass list (73 FR 68513 and 71 FR 68117 through 68118). 

 As a result of the multiple imaging composite APCs that we established in 

CY 2009, the program logic for creating “pseudo” single procedure claims from bypassed 

codes that are also members of multiple imaging composite APCs changed. When 

creating the set of “pseudo” single procedure claims, claims that contain “overlap bypass 

codes” (those HCPCS codes that are both on the bypass list and are members of the 

multiple imaging composite APCs) were identified first. These HCPCS codes were then 

processed to create multiple imaging composite “single session” bills, that is, claims 

containing HCPCS codes from only one imaging family, thus suppressing the initial use 

of these codes as bypass codes. However, these “overlap bypass codes” were retained on 

the bypass list because, at the end of the “pseudo” single processing logic, we reassessed 
CMS-1525-FC 64 

the claims without suppression of the “overlap bypass codes” under our longstanding 

“pseudo” single process to determine whether we could convert additional claims to 

“pseudo” single procedure claims. (We refer readers to section II.A.2.b. of the proposed 

rule and this final rule with comment period for further discussion of the treatment of 

“overlap bypass codes.”) This process also created multiple imaging composite “single 

session” bills that could be used for calculating composite APC median costs. “Overlap 

bypass codes” that are members of the proposed 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 included 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, therefore, 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 codes existed in CY 2010 and were covered 

OPD services in that period, and CY 2010 claims 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 Addendum 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 claims 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 number 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 clinical 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 ratesetting. 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 code. 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, distribute 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 payable service, if CPT code 77332 were on the 
CMS-1525-FC 66 

bypass list, the packaging would be associated with the visit, not with CPT code 

77332, because we use the line-item costs for codes on the bypass list without their 

attendant packaging to establish 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 packaging that rightfully should be associated 

with CPT code 77332 to other services. Therefore 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 number of procedure claims used for rate 

setting, including expanding the criteria 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 methodology 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 the public comments we received, we are adopting as final 

the proposed “pseudo” single claims process and the final CY 2012 bypass list of 460 

HCPCS codes, as displayed in Addendum N of this final rule with comment period 
CMS-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 bypass 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 payable 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 were “overlap bypass” codes. 

TABLE 1.—HCPCS CODES 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-specific overall ancillary and departmental CCRs 

to convert charges to estimated costs through application of a revenue code-to-cost center 

crosswalk. To calculate the APC median costs on which the proposed CY 2012 APC 

payment rates were based, we calculated hospital-specific overall ancillary CCRs and 

hospital-specific departmental CCRs for each hospital for which we had CY 2010 claims 
CMS-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 hierarchy of CCRs used to estimate costs from charges for each 

revenue code. That crosswalk is available for review and continuous comment on the 

CMS Web site at: 

http://www.cms.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage. 

To ensure the completeness of the revenue 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 proposed 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 (Electrocardiogram (EKG) and Electroencephalography (EEG)) as the 

primary cost center and to use standard cost 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 activity, and that the few hospitals that furnish 

MEG are likely to furnish it in the same department 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 the 
CMS-1525-FC 69 

application of the hospital-specific overall ancillary CCR. For hospitals that report 

charges under revenue code 860 or 861 but do not report costs on their cost report under 

cost center 3280 or 5400, we proposed to apply the hospital-specific 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 the 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 claims 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 electronic cost report database. In general, 

the most detailed level at which we calculated CCRs was the hospital-specific 

departmental level. For a discussion of the hospital-specific overall ancillary CCR 

calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 67983 through 67985). One longstanding exception to this general methodology 

for calculation of CCRs used for converting charges to costs on each claim is the 

calculation of median blood costs, as discussed in section II.A.2.d.(2) of the proposed 

rule and this final rule with comment period and which has been our standard policy 

since the CY 2005 OPPS. 

For the CCR calculation process, we used the same general approach that we used 

in developing the final APC rates for CY 2007 and thereafter, using the revised CCR 

calculation that excluded the costs of paramedical education programs and weighted the 

outpatient charges by the volume of outpatient services furnished by the hospital. We 
CMS-1525-FC 70 

refer readers to the CY 2007 OPPS/ASC final rule with comment period for more 

information (71 FR 67983 through 67985). We first limited the population of cost 

reports to only those for hospitals that filed outpatient claims in CY 2010 before 

determining whether the CCRs for such hospitals were valid. 

 We then calculated the CCRs for each cost center and the overall ancillary CCR 

for each hospital for which we had claims data. We did this using hospital-specific data 

from the Hospital Cost Report Information System (HCRIS). We used the most recent 

available cost report data, in most cases, cost reports with cost reporting periods 

beginning in CY 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 recent available cost report was submitted but 

not settled, we looked at the last settled cost report to determine the ratio of submitted to 

settled cost using the overall ancillary CCR, and we then adjusted the most recent 

available submitted, but not settled, cost report using that ratio. We then calculated both 

an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the 

overall ancillary CCR referenced 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 reflect 
CMS-1525-FC 71 

some aggregation bias, undervaluing high-cost items and overvaluing low-cost items 

when an estimate of average markup, embodied in a single CCR, is applied to items of 

widely varying costs in the same cost center. 

To explore this issue, in August 2006, we awarded a contract to RTI International 

(RTI) to study the effects of charge compression 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 services 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 discussed 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 final 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 relative weights and the IPPS MS-DRG (Medicare severity) 

cost-based relative weights. The RTI final 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_Charge_Ratios_200807_Final.pdf. For a complete 

discussion of the RTI recommendations, public comments, and our responses, we refer 

readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 

68527). 

We addressed the RTI finding that there was aggregation bias in both the IPPS 

and the OPPS cost estimation of expensive and inexpensive medical supplies in the 

FY 2009 IPPS final rule. Specifically, we finalized 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 Equipment” 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. Accordingly, 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 subscripted 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 Supplies 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 separate new cost center line and description which bears a 

logical relationship to the standard 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. For example, Line 55 of Worksheet A on Form 

CMS 2552-96 (the Medicare hospital cost report) is “Medical Supplies Charged to 
CMS-1525-FC 73 

Patients.” The additional cost center, which isolates the costs of “Implantable Medical 

Supplies Charged to Patients”, was created 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 (Intraocular 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 analysis regarding the use of cost 

data from the “Implantable Devices Charged to Patients” cost center, we believe that it is 

necessary to have a critical mass of cost reports filed with data in this cost center. The 

cost center for “Implantable Devices Charged to Patients” is effective 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 hospitals that had completed the “Implantable 

Devices Charged to Patients” cost center (out 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 Patients” 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 would reassess the availability of data for the 

“Implantable Devices Charged to Patients” cost center for the CY 2013 OPPS rulemaking 
CMS-1525-FC 74 

cycle. Because there is approximately a 3-year lag in the availability of cost report data 

for IPPS and OPPS ratesetting purposes in a given 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 changes included modifications to the cost 

reporting software and the addition of three new nonstandard cost centers. With regard to 

modifying the cost reporting preparation software 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 the next release of the cost 

report software. These changes have been made 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 Rehabilitation,” “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 cost 
CMS-1525-FC 75 

centers for “Cardiac Rehabilitation,” “Hyperbaric Oxygen Therapy,” and “Lithotripsy” 

for use on Worksheet A. These three new nonstandard 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, the nonstandard cost centers are: 3120 

(Cardiac Catheterization Laboratory); 3230 (CAT Scan); 3430 (Magnetic Resonance 

Imaging (MRI)). The revenue code to cost center 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 continuous comment (outside of comment on this final rule with 

comment period) on the CMS Web site at: 

http://www.cms.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage

Furthermore, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 

50080), we finalized our proposal to create new standard cost centers for “Computed 

Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac 

Catheterization,” and to require that hospitals report the costs and charges for these 

services under new cost centers on the revised Medicare cost report Form CMS 2552-10. 

As we discussed in the FY 2009 IPPS/LTCH PPS and CY 2009 OPPS/ASC proposed 

and final rules, RTI found that the costs and charges of CT scans, MRI, and cardiac 

catheterization differ significantly from the costs and charges of other services included 

in the standard associated cost center. RTI also concluded that both the IPPS and OPPS 

relative weights would better estimate the costs of those services if CMS were to add 

standard costs centers for CT scans, MRI, and cardiac catheterization in order for 
CMS-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 PPS final rule (75 FR 50075 through 50080) for 

a more detailed discussion on the reasons for the creation of standard cost centers for 

CT scans, MRI, and cardiac catheterization.) The new standard cost centers for MRI, 

CT scans, and cardiac catheterization are effective for cost report periods beginning on or 

after May 1, 2010, on the revised cost report Form CMS-2552-10. 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/itemdetail.asp?filterType=none&filterByDID=-

99&sortByDID=1&sortOrder=ascending&itemID=CMS021935&intNumPerPage=10 . 

Once at this Web site, users should double click on “Chapter 40.” 

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

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

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

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

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

accuracy of our cost estimation processes. 

Comment: Commenters requested that CMS reconsider its position to not use the 

data from the implantable device cost center 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 the 
CMS-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 contractor identified nearly 800 hospitals using the new cost 

center in the April 2011 HCRIS update and estimated 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 implantable device CCR to calculate the relative 

weights and improve the accuracy of the payment rates. Commenters also suggested that 

because the IPPS and OPPS use CCRs calculated at different levels, the analysis of 

robustness for the new cost center is less significant in the OPPS than in the IPPS, and 

should not be necessary before adopting the CCRs from the Implantable Device cost 

center. One commenter suggested that the only 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 representativeness of the hospitals 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 develop 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 for 
CMS-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 the latest upload of FY 2009 cost report 

data that we currently have available. We have determined 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” cost 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 cost center in the HCRIS data for the quarter 

ending June 30, 2011, that were used 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 between the OPPS and IPPS in the calculation 

of the CCRs and their use in establishing estimated costs. However, we believe that it is 

important to analyze the CCRs used for calculation of the median costs for procedures 

that use implantable devices and the impact 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 allows the opportunity for the public to provide 

comment on the impact of the adoption of those CCRs on payment for services that do 

not use implantable devices. In a budget neutral 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 HCRIS updates and the 
CMS-1525-FC 79 

commenters themselves indicate that hundreds of hospitals would report cost report data 

for the new implantable device cost center in the HCRIS data used for this final rule with 

comment period, although such data was not available for the proposed rule. This would 

create the possibility that changes to payments for services 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 public 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 payment 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 specialized cost center for high cost items means 

that the final rule relative weights would otherwise be very different from the proposed 

rule relative weights. In the proposed rule cost report data, 363 hospitals reported 

approximately $4.9 billion in costs in the implantable medical device cost center in 

Worksheet A. In the final rule cost report data, 1,689 hospitals reported approximately 

$20.7 billion in costs in the implantable medical 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 extent that the use of a CCR for implantable medical devices in 
CMS-1525-FC 80 

the final rule might create median costs for services that require high cost implantable 

medical devices that differ significantly from those we estimated 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 would 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 public to assess the full impact of the use of 

the new CCR that is specific to implantable 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 increase education efforts to encourage 

faster hospital adoption of the use of the implantable medical device cost center. One 

commenter suggested that more widespread use 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 Devices Charged to Patients” cost center, and 

we have worked to add more clarity to the cost report instructions. In addition, we also 

believe that the December 31, 2010 update of HCRIS reflected relatively few entries for 

this cost center because the corresponding cost center line was only available for use for 

cost reporting periods beginning 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 until 
CMS-1525-FC 81 

the March 31, 2011 HCRIS update. However, this update occurred after the 

December 31, 2010 HCRIS update we used when we prepared the proposed rule. 

Comment: Commenters suggested that CMS monitor the accuracy of the data 

reported in the implantable device cost center on the Medicare hospital cost report. 

Commenters urged CMS to impress upon the Medicare Administrative Contractors 

(MACs) the importance of establishing a mechanism to audit the implantable device cost 

center to ensure that the costs and charges are appropriately reported. In addition, one 

commenter suggested that the cost reporting software be modified 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 subject to greater audit scrutiny from the 

Medicare contractors. The new Medicare cost report form CMS–2552–10, on line 121 of 

Worksheet S–2, Part I, asks “Did this facility incur and report costs for implantable 

devices charged to a patient? Enter in column 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 properly report their costs 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 reflects 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, Part 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 possible that some hospitals do not provide 

services for which charges are reported in the revenue codes that correspond to the costs 

that are to be reported on line 55.30 (for example, psychiatric hospitals). 

Comment: One commenter believed that the standard cost centers for Computed 

Tomography and Magnetic Resonance Imaging would be artificially low due to hospital 

allocation of capital costs across the hospital rather than to particular 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 creation 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 centers, for the CY 2013 OPPS rulemaking 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 equipment, maintenance contract and dedicated staff 

necessary to furnish the service. Several commenters suggested that cost center 5400 

should be the primary cost center assignment and 3280 should be the secondary cost 

center assignment for revenue codes 0860 (Magnetoencephalography (MEG) - General 

Classification) and 0861 Magnoetoecnephalography (MEG). This would reverse the 

current cost center assignments for these revenue codes. Some commenters asked that 

CMS adopt the non-standard subscripted cost center assignment that one MAC had 

allowed for its hospitals that furnish MEG. 

Response: In the absence of recommendations for use of other existing cost 

center’s CCRs, we continue to believe that for revenue codes 0860 and 0861 nonstandard 

cost center 3280 “EKG and EEG” is an appropriate primary cost center mapping and cost 

center 5400 “Electroencephalography” is an appropriate secondary cost center mapping. 

We welcome recommendations on more suitable 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 new 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 discussed potential new standard and nonstandard cost 

centers for the Medicare hospital cost report in our 2008, 2009, 2010, 2011 hospital 

inpatient and outpatient final rules. All of the potential cost centers that we have 
CMS-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 estimate 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 International typically identified no fewer than 

200 institutions reporting a specific service category, such as cardiac catheterization or 

cardiac rehabilitation, in subscripted or other lines for the new nonstandard and standard 

cost centers. Historically, our rationale for adding an official nonstandard cost center to 

the cost report has been at the request of Medicare contractors experiencing 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 localization)); 38 units of CPT code 

95966 (Magnetoencephalography (MEG), recording and analysis; for spontaneous brain 

magnetic activity (e.g. epileptic cerebral cortex localization) for evoked magnetic fields, 

single modality (e.g. sensory, motor, language or visual cortex localization)); 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 visual 
CMS-1525-FC 85 

cortex localization (List separately in addition 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 creation 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 continue to believe that a specific cost 

center is not appropriate for MEG, given the longstanding low volume 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 could be requested for capital-expensive 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 nonstandard 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 discussed potential new standard and 

nonstandard cost centers for the Medicare hospital cost report in cases where doing so 

would provide more accurate information that would justify the resources and costs 

associated with doing so. For example, we have proposed and finalized nonstandard cost 

centers such as those for Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and 

Lithotripsy (74 FR 60344) as well as standard cost centers for Implantable Medical 
CMS-1525-FC 86 

Devices Charged to Patients, Cardiac Catheterization, Computed Tomography, and 

Magnetic Resonance Imaging through the annual rulemaking process. 

Comment: Several commenters requested that CMS modify the revenue 

code-to-cost center crosswalk to include data 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 information from the hospital cost reports, 

are available on the CMS Web site at 

http://www.cms.gov/CostReports/CostReportsFY/list.asp#TopOfPage, while our CMS 

Web site, http://www.cms.gov/HospitalOutpatientPPS, includes information about 

purchasing the ‘‘OPPS Limited Data Set’’. The HCRIS data can be used to extract the 

cost center information the commenters request 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 final 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 development of the final payment rates at: 

http://www.cms.gov/HospitalOutpatientPPS. The accounting of claims used in the 

development of this final rule with comment period is included on the CMS Web site 
CMS-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 addition, below in this section we discuss the file 

of claims that comprises the data set that is available for purchase under a CMS data use 

agreement. Our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS, includes 

information about purchasing the “OPPS Limited Data Set,” which now includes the 

additional variables previously available only in the OPPS Identifiable Data Set, 

including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is 

derived from the CY 2010 claims that were used to calculate the proposed and final 

payment rates for the CY 2012 OPPS. 

 We used the methodology described in sections II.A.2.a. through 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 calculating the OPPS payment rates for CY 2012 shown in 

Addenda A and B to the this rule with comment period (which are available via the 

Internet on the CMS Web site). We refer readers 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. One 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 the 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, hospital costs and charges changes each year 

resulting in changes to the CCRs, reassignments of HCPCS codes, changes to OPPS 

payment policy (for example, changes to packaging), and implementation of composite 

APCs. We cannot stabilize hospital-driven fundamental inputs to the calculation of 

OPPS payment rates. However, we have strived to resolve some of the other potential 

reasons for instability from year to year. Specifically, we continue to seek ways to use 

more claims data so that we have fewer APCs for which there are small numbers of 

single bills used to set the APC median costs. Moreover, we have tried to eliminate 

APCs with very small numbers of single bills where we could do so. We recognize that 

changes to payment policies, such as the packaging of payment for ancillary and 

supportive services and the implementation of composite APCs, may contribute to 

volatility in payment rates in the short term. However, we believe that larger payment 

packages and bundles should help to stabilize payments in the long term by enabling us 

to use more claims data and by establishing payments for larger groups of services. 

Further, in seeking to mitigate fluctuations in the OPPS, implementing such a system 

would make payments less reflective of the true service costs. Limiting decreases to 

payments across all APCs in a budget neutral payment system could unfairly reduce the 

payments for other services due to the effects of the scaling that is necessary to maintain 
CMS-1525-FC 89 

budget neutrality and would distort the relativity of payment 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 beneficiary 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 calculating the payments made for services 

furnished in hospital outpatient departments comports with the statutory requirements and 

results in payments that reflect the relative cost of these services within the statutory 

constraints of a budget neutral system. Indeed, 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 period, we used the CY 2010 hospital outpatient 

claims processed before July 1, 2011, to calculate 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 the population of claims paid under the OPPS, but 

all outpatient claims (including, for example, critical access hospital (CAH) claims and 
CMS-1525-FC 90 

hospital claims for clinical laboratory services for persons who are neither inpatients nor 

outpatients of the hospital). 

 We then excluded claims with condition codes 04, 20, 21, and 77 because these 

are claims that providers submitted to Medicare knowing that no payment would be 

made. For example, providers submit claims with a condition code 21 to elicit an official 

denial notice from Medicare and document that a service is not covered. We then 

excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, 

American Samoa, and the Northern Mariana Islands because hospitals in those 

geographic areas are not paid under the OPPS, and, therefore, we do not use claims for 

services furnished in these areas in ratesetting. 

 We divided the remaining claims into the three groups shown below. 

Groups 2 and 3 comprise the 112 million claims that contain hospital bill types paid 

under the OPPS. 

 1. Claims that were not bill types 12X (Hospital Inpatient (Medicare Part B 

only)), 13X (Hospital Outpatient), 14x (Hospital-- Laboratory Services Provided to 

Nonpatients), or 76X (Clinic--Community Mental Health Center). Other bill types are 

not paid under the OPPS; therefore, these claims were not used to set OPPS payment. 

 2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 

13X are hospital outpatient claims. Claims with bill type 14X are laboratory specimen 

claims, of which we use a subset for the limited number of services in these claims that 

are paid under the OPPS. 

 3. Claims that were bill type 76X (CMHC). 
CMS-1525-FC 91 

 To convert charges on the claims to estimated cost, we multiplied the charges on 

each claim by the appropriate hospital-specific CCR associated with the revenue code for 

the charge as discussed in section II.A.1.c. of this final rule with comment period. We 

then flagged and excluded CAH claims (which are not paid under the OPPS) and claims 

from hospitals with invalid CCRs. The latter included claims from hospitals without a 

CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously 

erroneous CCRs (greater than 90 or less than 0.0001); and those from hospitals with 

overall ancillary CCRs that were identified as outliers (that exceeded +/-3 standard 

deviations from the geometric mean after removing error CCRs). In addition, we 

trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs 

for each cost center as outliers if they exceeded +/- 3 standard deviations from the 

geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the 

revenue code-to-cost center crosswalk, to match a cost center to every possible revenue 

code appearing in the outpatient claims that is relevant to OPPS services, with the top tier 

being the most common cost center and the last tier being the default CCR. If a 

hospital’s cost center CCR was deleted by trimming, we set the CCR for that cost center 

to “missing” so that another cost center CCR in the revenue center hierarchy could apply. 

If no other cost center CCR could apply to the revenue code on the claim, we used the 

hospital’s overall ancillary CCR for the revenue code in question as the default CCR. For 

example, if a visit was reported under the clinic revenue code but the hospital did not 

have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the 

clinic revenue code. The revenue code-to-cost center crosswalk is available for 
CMS-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 hospitals in Maryland, Guam, the U.S. Virgin 

Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals 

for which CCRs were flagged as invalid. 

 We identified claims with condition code 41 as partial hospitalization services of 

hospitals and moved them to another file. We note that the separate file containing 

partial hospitalization claims is included in the files that are available for purchase as 

discussed above. 

 We then excluded claims without a HCPCS code. We moved to another file 

claims that contained nothing but influenza and pneumococcal pneumonia (PPV) 

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

claims are not used to set OPPS rates. 

 We next copied line-item costs for drugs, blood, and brachytherapy sources to a 

separate file (the lines stay on the claim, but are copied onto another file). No claims 

were deleted when we copied these lines onto another file. These line-items are used to 

calculate a per unit mean and median cost and a per day mean and median cost for drugs 

and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and 
CMS-1525-FC 93 

brachytherapy sources, as well as other information 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 redistribute some portion of total cost of packaged drugs and 

biologicals to the separately payable drugs and biologicals as acquisition and pharmacy 

overhead and handling costs. As discussed further 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 separately paid or packaged, and then for 

separately payable drugs and biologicals and for packaged drugs and biologicals, 

respectively, by taking the ratio of total claim cost for each group relative to total ASP 

dollars (per unit of each drug or biological HCPCS code’s July 2011 ASP amount 

multiplied by total units for each drug or biological in the CY 2010 claims data). These 

values are ASP+9 percent (for all drugs and biologicals with HCPCS codes, whether 

separately paid or packaged), ASP-2 percent (for drugs and biologicals that are separately 

paid), and ASP+192 percent (for drugs and biologicals 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 redistributing $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 code 
CMS-1525-FC 94 

series 025X (Pharmacy) and 026X (IV Therapy). This total excludes the cost of 

diagnostic and therapeutic radiopharmaceuticals because they are not reported under 

pharmacy revenue codes or under the pharmacy cost center on the hospital 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 Pharmaceuticals for Human Use, to derive a 

proportion of redistributed costs to total costs. We then updated our analysis for this 

CY 2012 OPPS/ASC final rule with comment period, holding the proportion of 

redistributed pharmacy overhead and handling cost constant, both for packaged coded 

drugs (35 percent) and for packaged uncoded drugs (10.7 percent), constant between the 

proposed rule and the final rule with comment period. This allowed us to keep the 

proportion of redistributed costs (and thus the ASP + X percent) stable between the 

proposed rule and the final rule with comment 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 biologicals with HCPCS codes and ASPs to 

$1.16 billion, approximately a 17-percent reduction. Redistributing $71.3 million from 

the cost of uncoded packaged drugs and biologicals reduces the $666 million cost of 

uncoded drugs and biologicals to $594.7 million, 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 the 
CMS-1525-FC 95 

cost of each packaged drug or biological 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 added 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 total 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 readers 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 were not paid during claim processing, 

presumably for a line-item rejection or denial. The number of edits for valid OPPS 

payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown 

significantly in the past few years, especially with the implementation of the full 

spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using 

valid claims that represent the cost of payable services to set payment rates, we removed 

line-items with an OPPS status indicator that were not paid during claims processing in 

the claim year, but have a status indicator of “S,” “T,” “V,” or “X” in the prospective 

year’s payment system. This logic preserves charges for services that would not have 

been paid in the claim year but for which some estimate of cost is needed for the 

prospective year, such as services newly proposed to come off the inpatient list for 

CY 2011 that were assigned status indicator “C” in the claim year. It also preserves 
CMS-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 CPT codes for the packaged services were not 

paid because the service is part of another service that was reported on the same claim or 

the code otherwise violates claims processing edits. 

 For CY 2012, we proposed to continue the policy we implemented for CY 2011 

to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for 

CY 2010) and nonpass-through drugs and biologicals (status indicator “K” for CY 2010) 

where the charges reported on the claim for the line were either denied or rejected during 

claims processing. Removing lines that were eligible for payment but were not paid 

ensures that we are using appropriate data. The trim avoids using cost data on lines that 

we believe were defective or invalid because those rejected or denied lines did not meet 

the Medicare requirements for payment. For example, edits may reject a line for a 

separately paid drug because the number of units billed exceeded the number of units that 

would be reasonable and, therefore, is likely a billing error (for example, a line reporting 

55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in 

the CY 2011 OPPS/ASC final rule with comment 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, therefore, should not be used for 

ratesetting. We believe that removing lines with valid status indicators that were edited 

and not paid during claims processing increases the accuracy of the 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 current policy of defining major procedures as 

any HCPCS code having a status indicator of “S,” “T,” “V,” or “X;” defining minor 

procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or 

“N,” and classifying “other” procedures as any code having a status indicator other than 

one that we have classified as major or minor. For CY 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 “STVX-packaged codes;” status 

indicator “Q2” to all “T-packaged codes;” and status indicator “Q3” to all codes that may 

be paid through a composite APC based on composite-specific criteria or paid separately 

through single code APCs when the criteria are not met. As discussed in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68709), we established status 

indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of 

codes. We 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 payment of codes with status indicator “Q1” or 

“Q2” are met in determining whether they are treated as major or minor codes. Codes 

with status indicator “Q1” or “Q2” are carried through the data either with status 
CMS-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 which they are assigned and are considered as 

“pseudo” single procedure claims for major codes. Codes assigned status indicator “Q3” 

are paid under individual APCs unless they occur in the combinations that qualify for 

payment as composite APCs and, therefore, they carry the status indicator of the 

individual APC to which they are assigned through the data process and are treated as 

major codes during both the split and “pseudo” single creation process. The calculation 

of the median costs for composite APCs from multiple procedure major claims is 

discussed in section II.A.2.e. of this final rule with comment period. 

 Specifically, we divided the remaining claims into the following five groups: 

 1. Single Procedure Major Claims: Claims with a single separately payable 

procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with 

status indicator “Q3”); claims with one unit of a status indicator “Q1” code 

(“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” 

on the same claim on the same date; or claims with one unit of a status indicator “Q2” 

code (“T-packaged”) where there was no code with a status indicator “T” on the same 

claim on the same date. 

 2. Multiple Procedure Major Claims: Claims with more than one separately 

payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes 

with status indicator “Q3”), or multiple units of one payable procedure. These claims 

include those codes with a status indicator “Q2” code (“T-packaged”) where there was no 

procedure with a status indicator “T” on the same claim on the same date of service but 
CMS-1525-FC 99 

where there was another separately paid procedure on the same claim with the same date 

of service (that is, another code with status indicator “S,” “V,” or “X”). We also include, 

in this set, claims that contained one unit of one code when the bilateral modifier was 

appended to the code and the code was conditionally or independently bilateral. In these 

cases, the claims represented more than one unit of the service described by the code, 

notwithstanding that only one unit was billed. 

 3. Single Procedure Minor Claims: Claims with a single HCPCS code that was 

assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N” and not status 

indicator “Q1” (“STVX-packaged”) or status indicator “Q2” (“T-packaged”) code. 

 4. Multiple Procedure Minor Claims: Claims with multiple HCPCS codes that 

are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N;” claims that 

contain more than one code with status indicator “Q1” (“STVX-packaged”) or more than 

one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” 

“V,” or “X” on the same date of service; or claims that contain more than one code with 

status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code 

with status indicator “Q2” but no code with status indicator “T” on the same date of 

service. 

 5. Non-OPPS Claims: Claims that contain no services payable under the OPPS 

(that is, all status indicators other than those listed for major or minor status). These 

claims were excluded from the files used for the OPPS. Non-OPPS claims have codes 

paid under other fee schedules, for example, durable medical equipment or clinical 

laboratory tests, and do not contain a code for a separately payable or packaged OPPS 
CMS-1525-FC 100 

service. Non-OPPS claims include claims for therapy services paid sometimes under the 

OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy 

services would be paid under the Medicare Physician Fee Schedule (MPFS). 

 The claims listed in numbers 1, 2, 3, and 4 above are included in the data file that 

can be purchased as described above. Claims that contain codes to which we have 

assigned status indicators “Q1” (“STVX-packaged”) and “Q2” (“T-packaged”) appear in 

the data for the single major file, the multiple major file, and the multiple minor file used 

for ratesetting. Claims that contain codes to which we have assigned status indicator 

“Q3” (composite APC members) appear in both the data of the single and multiple major 

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

calculation. 

 We did not receive any public comments on our proposed process of organizing 

claims by type. Therefore, for the reasons set forth in the proposed 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” single procedure claims for this final rule 

with comment period, we examined both the multiple procedure major claims and the 

multiple procedure minor claims. We first examined the multiple major procedure claims 

for dates of service to determine if we could break them into “pseudo” single procedure 

claims using the dates of service for all lines on the claim. If we could create claims with 

single major procedures by using dates of service, we created a single procedure claim 
CMS-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 comment period and available via the Internet on 

the CMS Web site) and discussed in section II.A.1.b. of this final rule with comment 

period to remove separately payable procedures which we determined contained limited 

or no packaged costs or that were otherwise suitable for inclusion on the bypass list from 

a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” 

that is, those HCPCS codes that are both on the bypass list and are members of the 

multiple imaging composite APCs, in this initial assessment for “pseudo” single 

procedure claims. The CY 2012 “overlap bypass codes” are listed in Addendum N to this 

final rule with comment period (which is available via the Internet on the CMS Web site). 

When one of the two separately payable procedures on a multiple procedure claim was on 

the bypass list, we split the claim into two “pseudo” single procedure claim records. The 

single procedure claim record that contained the bypass code did not retain packaged 

services. The single procedure claim record that contained the other separately payable 

procedure (but no bypass code) retained the packaged revenue code charges and the 

packaged HCPCS code charges. We also removed lines that contained multiple units of 

codes on the bypass list and treated them as “pseudo” single procedure claims by dividing 

the cost for the multiple units by the number of units on the line. Where one unit of a 

single, separately payable procedure code remained on the claim after removal of the 
CMS-1525-FC 102 

multiple units of the bypass code, we created a “pseudo” single procedure claim from that 

residual claim record, which retained the costs of packaged revenue codes and packaged 

HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure 

claims and could not be used. 

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 final rule with comment period, were met. Where the criteria 

for the imaging composite APCs were met, we created a “single session” claim for the 

applicable imaging composite service and determined whether we could use the claim in 

ratesetting. For HCPCS codes that are both conditionally packaged and are members of a 

multiple imaging composite APC, we first assessed whether the code would be packaged 

and, if so, the code ceased to be available for further assessment as part of the composite 

APC. Because the packaged code would not be a separately payable procedure, we 

considered it to be unavailable for use in setting the composite APC 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 than the bypass code to create a “pseudo” single 

procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” 

single procedure claim. This allowed us to use more claims data for ratesetting purposes. 
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 relative weight, set the units to one on that 

HCPCS code to reflect our policy of paying only one unit of a code with a status 

indicator of “Q1.” We then packaged all costs for the following into a single cost for the 

“Q1” HCPCS code that had the highest CY 2011 relative weight to create a “pseudo” 

single procedure claim for that code: additional units of the status indicator “Q1” 

HCPCS code with the highest CY 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 the selected procedure was assigned for further 

data processing and considered this claim as a major procedure claim. We used this 

claim in the calculation of the APC median cost for the status indicator “Q1” HCPCS 

code. 

Similarly, 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”) or multiple units of a single code with status indicator “Q2,” we selected 

the status indicator “Q2” HCPCS code that had the highest CY 2011 relative weight, set 

the units to one on that HCPCS code to reflect our policy of paying only one unit of a 
CMS-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 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”; and other packaged HCPCS codes and packaged revenue code 

costs. We changed the status indicator for the selected code from a data status indicator 

of “N” to the status indicator of the APC to which the selected code was assigned, and we 

considered this claim as a major procedure claim. 

 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 “Q1” (“STVX-packaged”), we selected the 

T-packaged status indicator “Q2” HCPCS code that had the highest relative weight for 

CY 2011 and set the units to one on that HCPCS code to reflect our policy of paying only 

one unit of a code with a status indicator of “Q2.” We then packaged all costs for the 

following into a single cost for the selected (“T packaged”) HCPCS code to create a 

“pseudo” single procedure claim for that code: additional units of the status indicator 

“Q2” HCPCS code with the highest CY 2011 relative weight; other codes with status 

indicator “Q2”; codes with status indicator “Q1” (“STVX-packaged”); and other 

packaged HCPCS codes and packaged revenue code costs. We favor status indicator 

“Q2” over “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2011 

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

weight, it would become the primary code for the simulated single bill process. We 
CMS-1525-FC 105 

changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code 

from a data status indicator of “N” to the status indicator of the APC to which the 

selected code was assigned and we considered this claim as a major procedure claim. 

 We then applied our process for creating “pseudo” single procedure claims to the 

conditionally packaged codes that do not meet the criteria for packaging, which enabled 

us to create single procedure claims from them, where they meet the criteria for single 

procedure claims. Conditionally packaged codes are identified using status indicators 

“Q1” and “Q2,” and are described in section 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 convert to single procedure claims even after 

applying all of the techniques for creation of “pseudo” single procedure claims to 

multiple procedure major claims and to multiple procedure minor claims. As has been 

our practice in recent years, we also excluded claims that contained codes that were 

viewed as independently or conditionally bilateral and that contained the bilateral 

modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the code 

represented the cost of two units of the procedure, notwithstanding that hospitals billed 

the code with a unit of one. 

Comment: Commenters supported the proposed process for creating pseudo 

single procedure claims. 

Response: We appreciate the commenters’ support and will continue to look for 

ways to refine the process to secure more claims data for use in calculating median costs. 
CMS-1525-FC 106 

After consideration of the public comments we received, as we proposed, we are 

continuing to apply the proposed methodology 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 via the Internet on the CMS Web site) and the 

costs of those lines for codes with status indicator “Q1” or “Q2” when they are not 

separately paid), and the costs of the services reported under packaged revenue codes in 

Table 2 below that appeared on the claim without a HCPCS code into the cost of the 

single major procedure remaining on the claim. 

As noted in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that 

CMS should review the final list of packaged revenue codes for consistency with OPPS 

policy and ensure that future versions of the I/OCE edit accordingly. As we have in the 

past, we will continue to compare 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 listed in Table 2 of the 
CMS-1525-FC 107 

CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the 

revenue code categories and subcategories to better articulate the meanings of the 

revenue codes without changing the proposed list of revenue codes. In the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized 

changes to the packaged revenue code list based on our examination of the updated 

NUBC codes and public comment to the CY 2010 proposed list of packaged revenue 

codes. For CY 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 ancillary and supportive services for which hospitals 

report charges without HCPCS codes. Therefore, for CY 2012, as we proposed, we are 

continuing to package the costs that we derive from the charges reported without HCPCS 

code under the revenue codes displayed in Table 2 below for purposes of calculating the 

median costs on which the CY 2012 OPPS are based. 

 We did not receive any public comments 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 finalizing 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 PACKAGED REVENUE CODES 
CMS-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 and Devices; Non-sterile Supply 

0272 Medical/Surgical Supplies and Devices; Sterile Supply 

0275 Medical/Surgical Supplies and Devices; Pacemaker 

0276 Medical/Surgical Supplies and Devices; Intraocular Lens 

0278 Medical/Surgical Supplies and Devices; Other Implants 

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

0280 Oncology; General Classification 

0289 Oncology; Other Oncology 

0343 Nuclear Medicine; Diagnostic Radiopharmaceuticals 

0344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 

0370 Anesthesia; General Classification 

0371 Anesthesia; Anesthesia Incident to Radiology 

0372 Anesthesia; Anesthesia Incident to Other DX Services 

0379 Anesthesia; Other Anesthesia 

0390 

Administration, Processing and Storage for Blood and Blood Components; 

General Classification 

0392 

Administration, Processing and Storage for Blood and Blood Components; 

Processing and Storage 

0399 

Administration, Processing and Storage for Blood and Blood Components; 

Other Blood Handling 
CMS-1525-FC 109 

Revenue 

Code Description 

0621 

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

Radiology 

0622 

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

DX Services 

0623 Medical Supplies – Extension of 027X, Surgical Dressings 

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

0630 Pharmacy – Extension of 025X; Reserved 

0631 Pharmacy – Extension of 025X; Single Source Drug 

0632 Pharmacy – Extension of 025X; Multiple Source Drug 

0633 Pharmacy – Extension of 025X; Restrictive Prescription 

0681 Trauma Response; Level I Trauma 

0682 Trauma Response; Level II Trauma 

0683 Trauma Response; Level III Trauma 

0684 Trauma Response; Level IV Trauma 

0689 Trauma Response; Other 

0700 Cast Room; General Classification 

0710 Recovery Room; General Classification 

0720 Labor Room/Delivery; General Classification 

0721 Labor Room/Delivery; Labor 

0732 EKG/ECG (Electrocardiogram); Telemetry 

0762 Specialty services; Observation Hours 

0801 Inpatient Renal Dialysis; Inpatient Hemodialysis 

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

0803 

Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal 

Dialysis (CAPD) 

0804 

Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis 

(CCPD) 

0809 Inpatient Renal Dialysis; Other Inpatient Dialysis 

0810 Acquisition of Body Components; General Classification 

0819 Inpatient Renal Dialysis; Other Donor 

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

0824 Hemodialysis-Outpatient or Home; Maintenance – 100% 

0825 Hemodialysis-Outpatient or Home; Support Services 
CMS-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 policy, 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 packaging flag number 3 to claims on which 

hospitals submitted token charges less than $1.01 for a service with status indicator “S” 

or “T” (a major separately payable service under the OPPS) for which the fiscal 

intermediary or MAC was required to allocate the sum of charges for services with a 

status indicator equaling “S” or “T” based on the relative weight of the APC to which 

each code was assigned. We do not believe that these charges, which were token charges 

as submitted by the hospital, are valid reflections of hospital resources. Therefore, we 

deleted these claims. We also deleted claims for which the charges equaled the revenue 

center payment (that is, the Medicare payment) on the assumption that, where the charge 

equaled the payment, to apply a CCR to the charge would not yield a valid estimate of 

relative provider cost. We are continuing 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 have 
CMS-1525-FC 111 

previously determined to be the labor-related portion) for geographic differences in labor 

input costs. We made this adjustment by determining the wage index that applied to the 

hospital that furnished the service and dividing the cost for the separately paid HCPCS 

code furnished by the hospital by that wage index. The claims accounting that we 

provide for the proposed and final rule contains the formula we use to standardize the 

total cost for the effects of the wage index. As has been our policy since the inception of 

the OPPS, we proposed to use the pre-reclassified wage indices for standardization 

because we believe that they better reflect the true costs of items and services in the area 

in which the hospital is located than the post-reclassification wage indices and, therefore, 

would result in the most accurate unadjusted 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 standard deviations from the geometric mean of 

units for each HCPCS code on the bypass list (because, as discussed above, we used 

claims that contain multiple units of the bypass codes). 

 After removing claims for hospitals with error CCRs, claims without HCPCS 

codes, claims for immunizations not covered under the OPPS, and claims for services not 

paid under the OPPS, approximately 109 million 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 discussed 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 the 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 considered comparable with respect to the use of 

resources if the highest median (or mean cost, if elected by the Secretary) for an item or 

service in the group is more than 2 times greater than the lowest 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 codes that have both greater than 99 single 

major claims and contribute at least 2 percent of the single major claims used to establish 

the APC 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 within the set of approximately 

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 

negligible impact on the APC median. Unlisted codes are not used in establishing the 

percent of claims contributing to the APC, nor are their costs used in the calculation of 

the APC median. Finally, we reviewed the median 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 different APCs where it was necessary to ensure clinical and 
CMS-1525-FC 113 

resource homogeneity within the APCs. Section 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 costs 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 were weighted to account for the inclusion 

of multiple units of the bypass codes in the creation of “pseudo” single procedure claims. 

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

rule with comment period, in some cases, APC median costs are calculated using 

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

with comment period addresses the calculation of single APC criteria-based median 

costs. Section II.A.2.e. of this final rule with 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 for CY 2012. Therefore, we are adopting it as final. 

After consideration of the public comments we received, 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 greater than 10 percent 
CMS-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 based 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 request (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 Subcommittee with a summary of cost and 

CCR data related to the Myocardial Positron Emission Tomography (PET) imaging APC, 

APC 0307, as well as the associated diagnostic 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 the associated diagnostic radiopharmaceutical. 

At the February 28-March 1, 2011 APC Panel 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 Meeting, CMS again provided the APC 

Panel Data Subcommittee with a list of all APCs fluctuating by greater 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 payment (with DRG Cap) for Cardiac 

Resynchronization Therapy-Defibrillator (CRT-D) composite. The APC Panel made a 

number of recommendations related to specific services. Recommendations (4-9) are 

discussed as part of the discussion of the 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 Procedure 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 rates for device-dependent APCs in previous 

years and a detailed discussion of how we developed the standard device-dependent APC 

ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device 

edits and device-to-procedure edits used in ratesetting for device-dependent APCs are 

available in the CY 2005 OPPS final rule with comment period (69 FR 65761 through 

65763) and the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 

through 68071). 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42190), for CY 2012, we 

proposed to use the standard methodology for calculating median costs for 

device-dependent APCs that was finalized in the CY 2011 OPPS/ASC 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 resynchronization therapy). This methodology utilizes 

claims data that generally represent the full cost of the required device. Specifically, we 

proposed to calculate the median costs for 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 (less 
CMS-1525-FC 117 

than $1.01) for devices; do not contain the “FB” modifier signifying that the device was 

furnished without cost to the provider, supplier, or practitioner, or where a full credit was 

received; and do not contain the “FC” modifier signifying that the hospital received 

partial credit for the device. The procedure-to-device edits require that when a particular 

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

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

set of device codes also contain an appropriate procedure code. We stated in the 

proposed rule that we continue to believe the standard methodology for calculating 

median costs for device-dependent APCs gives us the most appropriate median costs for 

device-dependent APCs in which the hospital 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 there are five proposed 

device-dependent APC title changes and one proposed deletion for CY 2012. As 

discussed in detail in section 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 Revascularization of the Lower Extremity”; the 

title of APC 0229 from “Transcatheter Placement of Intravascular Shunt and Stents” to 

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

0319 from “Endovascular Revascularization of the Lower Extremity” to “Level III 

Endovascular Revascularization of the Lower Extremity.” We also proposed to change 
CMS-1525-FC 118 

the title of APC 0040 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,” as discussed in section III.D.1. of the proposed rule. In 

addition, as discussed in section II.A.2.e.(6) of the proposed rule, we proposed to delete 

APC 0418 (Insertion of Left Ventricular Pacing Electrode) for CY 2012. As we 

discussed in detail in section III.D.6. of the proposed rule, we proposed to limit the 

payment for services that are assigned to APC 0108 to the proposed IPPS standardized 

payment amount for MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac 

Catheterization and without Medical Complications and Comorbidities), and we proposed 

to continue to apply the device edits and other standard features of the device-dependent 

APCs to APC 0108. Finally, we referred readers to Addendum A to the proposed rule for 

the proposed payment rates for device-dependent APCs for CY 2012. 

Comment: Several commenters supported CMS’ proposal to continue using the 

standard methodology for calculating median costs for device-dependent APCs as well as 

the continued use of device coding edits to ensure that hospitals are reporting charges for 

implanted devices. Some commenters recommended that CMS continue examining and 

refining the ratesetting methodology for procedures involving devices in order to 

encourage the continued development and proliferation of new technology, and that CMS 

further improve the accuracy of estimates for the costs of devices included in multiple 

procedure claims used for the purpose of setting relative weights. Some commenters 
CMS-1525-FC 119 

asked for continued focus on coding education, 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’ support of the continued use of the 

standard device-dependent APC ratesetting methodology and the procedure-to-device and 

device-to-procedure edits. As we have stated in the past (75 FR 71835 and 

74 FR 60367), we agree with the commenters that we should continue to encourage the 

development and proliferation of new technology 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-through payments devices. We 

refer readers to sections III.C. and IV.A., respectively, of this final rule with comment 

period for more information on these payment 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 and date splitting of claims as described further in section 

II.A. of this final rule with comment period, 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 accounted for in future years’ OPPS payment 

rates. We encourage stakeholders to carefully review HCPCS code descriptors, as well as 

any guidance CMS may have provided for specific HCPCS codes. In addition, we have 
CMS-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 HCPCS codes that are paid under the OPPS, 

providers may also submit inquiries to the AHA Central Office on HCPCS, which serves 

as a clearinghouse on the proper use of Level 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 Procedures) and APC 0386 (Level II Prosthetic 

Urological Procedures) should be categorized 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 APC 
CMS-1525-FC 121 

0259 (Level VII ENT Procedures), decreased by approximately 12 percent from that in 

the CY 2011 OPPS/ASC final rule with comment period. According to commenters, this 

payment rate is inconsistent with the average 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 commenters observed, based on their analysis of 

Medicare claims data, that while the overall median cost of APC 0259 decreased, the 

component parts of the APC (that is, the device, the procedure, and the other bundled 

supplies and services) either remained the same 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 cochlear implants. Under the standard 

device-dependent APC ratesetting methodology, 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 cost report data available for this final 

rule with comment is $28,892, approximately 6 percent less than the median cost of 
CMS-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 received, we are finalizing our 

proposed CY 2012 payment policies for device-dependent 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 the most recent cost report data, using only 

single procedure claims that pass the procedure-to-device and device-to-procedure edits, 

do not contain token charges for devices (less than $1.01), do not have an “FB” modifier 

signifying that the device was furnished without cost or with full credit, and do not 

contain an “FC” modifier signifying that the hospital received partial credit for the 

device. We continue to believe that the median costs calculated from the single claims 

that meet these criteria represent the most valid estimated relative costs of these services 

to hospitals when they incur the full cost of the devices required 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 and changing the titles of APC 0108 and 0655 

as we proposed. We refer readers 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 revising 
CMS-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 section III.D.4.a. of this final rule with 

comment period. We refer readers to Addendum 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, Valvuloplasty, and Level I 

Endovascular Revascularization of the Lower Extremity 

0084 S Level I Electrophysiologic Procedures 

0085 T Level II Electrophysiologic Procedures 

0086 T Level III Electrophysiologic Procedures 

0089 T 

Insertion/Replacement of Permanent Pacemaker and 

Electrodes 

0090 T Insertion/Replacement of Pacemaker Pulse Generator 

0104 T Transcatheter Placement of Intracoronary Stents 

0106 T 

Insertion/Replacement of Pacemaker Leads and/or 

Electrodes 

0107 T Insertion of Cardioverter-Defibrillator 

*0108 T 

Insertion/Replacement/Repair of AICD Leads, Generator, 

and Pacing Electrodes 

0115 T Cannula/Access Device Procedures 

0202 T Level VII Female Reproductive Procedures 

0227 T Implantation of Drug Infusion Device 
CMS-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 Revascularization of the Lower 

Extremity 

0384 T GI Procedures with Stents 

0385 S Level I Prosthetic Urological Procedures 

0386 S Level II Prosthetic Urological Procedures 

0425 T Level II Arthroplasty or Implantation with Prosthesis 

0427 T Level II Tube or Catheter Changes or Repositioning 

0622 T Level II Vascular Access Procedures 

0623 T Level III Vascular Access Procedures 

0648 T Level IV Breast Surgery 

0652 T Insertion of Intraperitoneal and Pleural Catheters 

0653 T Vascular Reconstruction/Fistula Repair with Device 

0654 T 

Insertion/Replacement of a Permanent Dual Chamber 

Pacemaker 

*0655 T 

Insertion/Replacement/Conversion of a Permanent Dual 

Chamber Pacemaker or Pacing Electrode 

0656 T 

Transcatheter Placement of Intracoronary Drug-Eluting 

Stents 

0674 T Prostate Cryoablation 

0680 S Insertion of Patient Activated Event Recorders 

*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 products through APCs rather than packaging payment for 
CMS-1525-FC 125 

them into payments for the procedures with which they are administered. Hospital 

payments for the costs of blood and blood products, as well as for the costs of collecting, 

processing, and storing blood and blood products, are made through the OPPS payments 

for specific blood product APCs. 

In the CY 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 actual or simulated CCRs from the most 

recently available hospital cost reports to convert hospital charges for blood and blood 

products to costs. This methodology has been our standard ratesetting methodology for 

blood and blood products since CY 2005. It was developed in response to data analysis 

indicating that there was a significant difference in CCRs for those hospitals with and 

without blood-specific cost centers, and past public comments indicating that the former 

OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a 

blood-specific cost center often resulted in an underestimation of the true hospital costs 

for blood and blood products. Specifically, in order to address the differences in CCRs 

and to better reflect hospitals’ costs, we proposed to continue to simulate blood CCRs for 

each hospital that does not report a blood cost center by calculating the ratio of the 

blood-specific CCRs to hospitals’ overall CCRs for those hospitals that do report costs 

and charges for blood cost centers. We would then apply this mean ratio to the overall 

CCRs of hospitals not reporting costs and charges for blood cost centers on their cost 

reports in order to simulate blood-specific CCRs for those hospitals. We calculated the 

median costs upon which the proposed CY 2012 payment rates for blood and blood 
CMS-1525-FC 126 

products are based using the actual blood-specific CCR for hospitals that reported costs 

and charges for a blood cost center and a hospital-specific simulated blood-specific CCR 

for hospitals that did not report costs and charges for a blood cost center. 

As we stated in the proposed rule (76 FR 42192), we continue to believe the 

hospital-specific, blood-specific CCR methodology best responds to the absence of a 

blood-specific CCR for a hospital than alternative methodologies, such as defaulting to 

the overall hospital CCR or applying an average blood-specific CCR across hospitals. 

Because this methodology takes into account the unique charging and cost accounting 

structure of each hospital, we believe that it yields more accurate estimated costs for 

these products. We believe that continuing with this methodology in CY 2012 would 

result in median costs for blood and blood products that appropriately reflect the relative 

estimated costs of these products for hospitals without blood cost centers and, therefore, 

for these blood products in general. 

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 products, 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 ensure 
CMS-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 the increasing costs of blood products, while 

another commenter noted that transfusion safety officers are being hired in most major 

hospitals to address improper transfusion and inappropriate use of blood. The 

commenters argued that, given the 2-year lag inherent in available claims data in the 

OPPS ratesetting process, the use of hospital claims data without adjustments likely will 

not reflect these rising costs 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 results in payments that appropriately reflect 

hospitals’ relative costs of providing blood and blood products as reported to us by 

hospitals, which would reflect hospitals’ changing 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 response to changes in hospitals’ costs from 

year to year in the most timely manner possible. A fundamental principle 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 absolute cost, that is important in 

setting payment rates. To deviate from our standard OPPS ratesetting methodology by 
CMS-1525-FC 128 

paying no less than the payment rates in effect for CY 2011 for individual blood products 

in CY 2012 would skew this relativity. We also note that the median costs per unit 

(calculated using the blood-specific CCR methodology) for this final rule with comment 

period increase for the majority of the most commonly provided blood and blood 

products (including the highest volume blood and blood product, 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 influence the median costs that are the basis for 

our payment rates, especially for low volume items and services. 

After consideration of the public comments we received, we are finalizing, 

without modification, our CY 2012 proposal to calculate median costs upon which the 

CY 2012 payments rates for blood and blood products are based using our blood-specific 

CCR methodology, which utilizes actual or simulated CCRs from the most recently 

available hospital cost reports to convert hospital charges for blood and blood products to 

costs (the methodology we have utilized since CY 2005). We believe that continuing this 

methodology in CY 2012 results in median costs for blood and blood products that 

appropriately reflect the relative estimated costs of these products for hospitals without 

blood cost centers and, therefore, for these products in general. 

We refer readers to Addendum B to this final rule with comment period (which is 

available via the Internet on the CMS Web site) for the final CY 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 the 
CMS-1525-FC 129 

CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS 

payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66807 through 66810). 

(3) Allergy Tests (APCs 0370 and 0381) 

 In the CY 2006 OPPS final rule with comment period (70 FR 68610), we 

discussed the confusion raised by a number of providers related to the reporting of units 

for single and multiple allergy tests described by CPT codes 95004 through 95078. 

According to the providers, while some of these codes instruct providers to specify the 

number of tests or use the singular 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 hospital billing that may be inconsistent 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 and 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 codes that instruct providers 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 making this distinction clarified billing for these 

services and more accurately placed them with like services sharing similar resource 

costs. We also provided billing guidance 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 allergy 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 all of the tests provided. Since 2006, we have analyzed our 

claims data to determine whether the reporting of these services has improved. 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42192), we proposed to 

continue to use our methodology of differentiating single allergy tests (“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 (Single Allergy Tests) reflect the CPT codes that describe 

single allergy tests in which CPT instructions direct providers to specify the number of 

tests performed. Alternatively, 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 billed even if multiple tests are performed. 

As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42192), our 

analysis of the CY 2010 claims data available for the proposed rule for the single allergy 

tests, specifically those services assigned 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 according to the standard 

single claims OPPS methodology was approximately $51, significantly higher than the 

CY 2011 OPPS/ASC final rule median cost of approximately $33 that was calculated 

according to the “per unit” methodology, and greater 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. Therefore, 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 median cost of approximately $97 based on 

283 claims. 

 We did not receive any public comments 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 “per unit” median cost for APC 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 set the APC payment rate for APC 0370. We 

are revising the title of APC 0370 from “Allergy Tests” to “Multiple Allergy Tests” so 

that the APC title more accurately describes all 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 under pressure, full body chamber, per 30 

minute interval) for hyperbaric oxygen (HBOT) provided in the hospital outpatient 

setting. In the CY 2005 final rule with 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 the 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 each 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 this methodology to estimate the median cost 

for HBOT. The median costs of HBOT using this methodology have been relatively 

stable for several years. 
CMS-1525-FC 133 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42192), we proposed to 

continue using the same methodology to estimate a “per unit” median cost for HCPCS 

code C1300 for CY 2012. This methodology resulted in a proposed APC median cost of 

approximately $107 using 370,519 claims with multiple 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 calculating 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 established ratesetting methodology 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 Services 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 modifier “–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 outpatient) with an emergent, life-threatening 

condition, and the patient dies before being admitted as an inpatient. HCPCS modifier 

“-CA” is defined as a procedure payable only 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 hospitals on the use of this modifier. For a 

complete description of the history of the policy and the development of the payment 
CMS-1525-FC 134 

methodology for these services, we refer readers to the CY 2007 OPPS 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 established ratesetting methodology for calculating the 

median cost of APC 0375 (Ancillary Outpatient Services When Patient Expires) and to 

continue to make one payment under APC 0375 for 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 using all claims reporting a status indicator 

“C” (inpatient procedures) appended with HCPCS 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 services provided in these unusual clinical 

situations. 

We stated that we believe that hospitals are reporting the HCPCS modifier “–CA” 

according to the policy initially established in CY 2003. We noted that the claims 

frequency for APC 0375 has been relatively stable over the past few years. We noted 

that the median cost for APC 0375 has decreased based on the CY 2010 OPPS claims 

data used for the development of the proposed 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 specific cases are grouped by the presence of the 

HCPCS modifier “-CA” appended to an inpatient only procedure and not according to the 
CMS-1525-FC 135 

standard APC criteria of clinical and resource homogeneity. Cost variation for APC 0375 

from year to year is anticipated and acceptable 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 approximately $5,711 for APC 0375 based on 155 claims. 

We did not receive any public comments regarding 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 established ratesetting 

methodology for calculating the median cost of APC 0375, which has a final CY 2012 

APC median cost of approximately $6,039. Table 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 MODIFIER) 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 $6,039
CMS-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 Revascularization section of the 2011 CPT code book to 

describe endovascular revascularization procedures of the lower extremity performed for 

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

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

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

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

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

outpatient claims data and most recent cost report 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 endovascular 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 believe 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 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 
CMS-1525-FC 137 

(75 FR 71842), we developed these criteria based on our clinicians’ understanding of 

services that were reported by CY 2009 CPT codes that, in various combinations, reflect 

the services provided that are described by the new CPT codes for CY 2011. 

After determining the simulated median costs for the procedures, we assigned 

each CPT code to appropriate APCs based on their clinical homogeneity and resource 

use. Of the 16 new codes, we assigned 9 CPT codes to APC 0083 (Coronary or NonCoronary Angioplasty and Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 

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

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

the CY 2011 OPPS/ASC final rule with comment period 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 identified with comment indicator “NI” in 

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

as a new interim APC assignment for 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 meeting, the APC Panel recommended that 

CMS provide data to allow the Panel to investigate and monitor the APC weights for the 

lower extremity revascularization procedures in light of CPT coding changes for 

CY 2011. In the CY 2012 OPPS/ASC proposed rule, we indicated that we were 
CMS-1525-FC 138 

accepting the APC Panel’s recommendation and will provide additional data to the Panel 

at an upcoming meeting. 

In the CY 2012 OPPS/ASC proposed rule (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 lower extremity. The predecessor endovascular revascularization 

CPT codes were in existence prior to CY 2011 and were assigned to APCs based on 

claims data and cost report data. Given that these data are available for the services 

described by the predecessor endovascular revascularization CPT codes, we proposed to 

continue for CY 2012 to use the existing hospital outpatient claims and cost report data 

from the previous endovascular revascularization CPT codes to simulate an estimated 

median cost for the new endovascular revascularization CPT codes in determining the 

appropriate APC assignments. As has been our practice since the implementation of the 

OPPS in 2000, we review our latest claims data for ratesetting 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 configured, showed that the range of the CPT median costs for 

the procedures with significant claims data was approximately between $3,252 (for CPT 

code 35476 (Transluminal balloon angioplasty, percutaneous; venous)) and $7,174 (for 

CPT code 37221 (Revascularization, endovascular, open or percutaneous, iliac artery, 

unilateral, initial vessel; with transluminal stent placement(s), includes angioplasty within 

the same vessel, when performed)), resulting in a 2 times rule violation. Because of its 
CMS-1525-FC 139 

median cost, we stated that we believe that CPT code 37221 would be more appropriately 

placed in APC 0229, which had an initial estimated median cost of approximately $8,606, 

based on the clinical and resource characteristics of other procedures 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 accurately reflect the cost and clinical 

features of the procedure. This proposed 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 claims data available for the proposed rule 

were used to calculate a median cost 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 were 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 procedures assigned to these APCs. Specifically, we proposed to 

revise the APC title for APC 0083 from “Coronary or Non-Coronary Angioplasty and 

Percutaneous Valvuloplasty” to “Level I Endovascular Revascularization of the 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.” 
CMS-1525-FC 140 

We solicited public comments on the proposed status indicators and APC 

assignments for the endovascular revascularization of the lower extremity CPT codes for 

CY 2012. Table 5 of the proposed rule listed the endovascular revascularization of the 

lower extremity CPT codes along with their proposed status indicator and APC 

assignments for CY 2012. As noted previously, 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 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). We respond to any public comments received on the 

CY 2011 OPPS/ASC final rule with comment period and the CY 2012 OPPS/ASC 

proposed rule below. 

At its August 10-12, 2011 meeting, the APC Panel supported CMS’ proposal to 

move HCPCS code 37221 (Revascularization, endovascular, open or percutaneous, iliac 

artery, unilateral, initial vessel; with transluminal stent placement(s), includes angioplasty 

within the same vessel, when performed) to APC 0229. 

Comment: Several commenters supported the CY 2012 proposal to rename APCs 

0083, 0229, and 0319 to better describe the procedures assigned to these APCs, and 

requested that CMS finalize these 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 title 
CMS-1525-FC 141 

of APC 0038 to “Coronary Angioplasty, Valvuloplasty, 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’ support of our proposal to revise the 

titles for APCs 0083, 0229, and 0319. We agree with the commenter that a title of 

“Coronary Angioplasty, Valvuloplasty, and Level I Endovascular 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, Valvuloplasty, and Level I 

Endovascular Revascularization of the 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 finalizing our proposal, without modification, to 

continue to assign status indicator “T” to each of these APCs. 

Comment: Many commenters supported our overall methodology for calculating 

simulated medians for the endovascular revascularization 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, during 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 the APC median cost of approximately $8,088 

for APC 0229 than to the APC 0083 median cost 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 meeting, we are finalizing our proposal, 

without modification, to assign CPT code 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, endovascular, open or percutaneous, iliac artery, 

each additional ipsilateral iliac vessel; with transluminal stent placement(s), includes 

angioplasty within the same vessel, when performed) in APC 0083. They stated that the 

service described by CPT code 37223 is more similar 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 0229, which is the APC to which CPT code 
CMS-1525-FC 143 

37221 is assigned. They pointed out that CPT codes 37206 (Transcatheter placement of 

an intravascular stent(s) (except coronary, carotid, and vertebral 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 vessel) are also add-on CPT codes, and that 

they are assigned to the same APC as the primary 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 endovascular 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 consideration. 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 result of both procedures being assigned status 

indicator “T.” 

Response: We are unable to simulate a median 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 describe 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 service described by CPT code 37223 

is clinically similar to procedures in APC 0083. We note that we will have CY 2011 

hospital claims available for CPT code 37223 and the other new endovascular 
CMS-1525-FC 144 

revascularization CPT codes for the first time for CY 2013 OPPS ratesetting, and that we 

will closely monitor our data to ensure that 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-codes 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-covered, with delivery system) 

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

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

● C2625 (Stent, non-coronary, temporary, with delivery system) 

These HCPCS C-codes were made effective 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, require 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 and consideration of the public comments 

received, we are finalizing our proposal, without 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), unilateral; with transluminal angioplasty) and 37235 (Revascularization, 

endovascular, open or percutaneous, tibial/peroneal artery, unilateral, each additional 

vessel; with transluminal stent placement(s) and atherectomy, includes angioplasty within 

the same vessel, when performed) 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 already assigned to APC 0229. 

Response: Analysis of our hospital outpatient 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 approximately 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 code 37224 is appropriately placed in APC 0083 

which has a final median cost is approximately $4,611. As is the case with CPT code 

37223, we do not have claims data to support 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 APC 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 Product, and Procedure Edits” at 

http://www.cms.gov/HospitalOutpatientPPS/. 

After consideration of the public comments received on the CY 2011 OPPS/ASC 

final rule with comment period and the CY 2012 OPPS/ASC proposed rule 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 determining the APC assignments for the 

CPT codes that describe endovascular revascularization of the lower extremity for the 

reasons set forth above. We also are finalizing our CY 2012 proposal, without 

modification, to revise the APC assignment 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 0083 
CMS-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 Panel deleted 19 non-congenital cardiac 

catheterization-related CPT codes and replaced 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 Editorial Panel deleted 19 non-congenital cardiac 

catheterization-related CPT codes from the 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/ASC final rule with comment period, along with the process 

by which we assigned the new CPT codes to APCs that we believe are comparable with 
CMS-1525-FC 148 

respect to clinical characteristics and resources required to furnish the cardiac 

catheterization services described 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 payable CPT codes for CY 2011. Specifically, 

to estimate the hospital costs associated with the 20 new non-congenital cardiac 

catheterization-related CPT codes based on their CY 2011 descriptors, we used claims 

and cost report data from CY 2009. Because of the substantive coding changes 

associated with the new non-congenital cardiac catheterization-related CPT codes for 

CY 2011, we used our CY 2009 single and “pseudo” single claims data to simulate the 

new CY 2011 CPT code definitions. We stated that many of the new CPT codes were 

previously reported using multiple CY 2009 CPT codes, and we provided a crosswalk of 

the new CY 2011 cardiac catheterization CPT codes mapped to the CY 2009 cardiac 

catheterization CPT codes in Table 11 of the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71849). Table 11 showed the criteria we applied to select a 

claim to be used in the calculation of the 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 these criteria based on our clinicians’ 

understanding of services that were reported by CY 2009 CPT codes that, in various 

combinations, reflect the services provided that are described in the new CPT codes. We 

used approximately 175,000 claims for the new non-congenital catheterization-related 

CPT codes, together with the single and “pseudo” single procedure claims for the 
CMS-1525-FC 149 

remaining congenital catheterization-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 Addendum 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 the 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 catheterization 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 cardiac catheterization CPT codes, we proposed 

for CY 2012 to continue to use the existing hospital outpatient claims and cost report data 

from the predecessor cardiac catheterization 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 since the implementation of the OPPS in 2000, we 

review our latest claims data for ratesetting and, if necessary, 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 the 
CMS-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 proposed 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 catheterization CPT codes. Table 6 of the 

proposed rule listed the new CY 2011 cardiac catheterization CPT codes 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 procedures. Therefore, consistent with our 

rationale set forth above, we are finalizing our CY 2012 proposal, without modification, 

to continue with the CY 2011 methodology in determining the APC assignments for the 

non-congenital cardiac catheterization 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 WILL 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 

APC 
CMS-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/atrial angio N NA N NA 

93566 Inject r ventr/atrial angio N NA N NA 

93567 Inject suprvlv aortography N NA N NA 

93568 Inject pulm art hrt cath N NA N NA 

(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 (eg, vagus nerve) neurostimulator electrode 

array and pulse generator) and indicated that it describes the services formerly included 

in the combinations of (1) CPT code 64573 (Incision for implantation of neurostimulator 

electrodes; cranial nerve) and CPT code 61885 (Insertion or replacement of cranial 

neurostimulator pulse generator or receiver, direct or inductive coupling; with connection 
CMS-1525-FC 152 

to a single electrode array); or (2) CPT 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 electrode arrays). As we discussed in the 

CY 2011 OPPS/ASC final rule with comment 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 public comment. In some, but not all, cases, 

we are able to use the existing data from established 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 neurostimulator 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 hospital costs of CPT code 64568 based on its 

CY 2011 descriptor, we used CY 2009 claims and 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 set a final payment rate for CY 2011 for the 
CMS-1525-FC 153 

new code. We created APC 0318 (Implantation 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 Electrodes, 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 maintain 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 CMS’ 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 from 
CMS-1525-FC 154 

455 single claims to set a payment rate for 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 creation of additional groups of covered OPD 

services that classify devices of brachytherapy consisting of a seed or seeds (or 

radioactive source) (“brachytherapy sources”) separately from other services or groups of 

services. The additional groups must reflect the number, isotope, and radioactive 

intensity of the brachytherapy sources furnished and include separate groups for 

palladium-103 and iodine-125 sources. 

 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 may not be used in determining any outlier 

payments under the OPPS for that period in which payment is based on charges adjusted 

to cost. Consistent with our practice under the OPPS to exclude items paid at cost from 

budget neutrality consideration, these items were 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 for brachytherapy sources based on a hospital’s 
CMS-1525-FC 155 

charges adjusted to cost through December 31, 2009. The CY 2011 OPPS/ASC final rule 

with comment period summarizes these amendments to the Act and our proposals to pay 

for brachytherapy sources at prospective payment rates based on their source specific 

median costs from CY 2007 through 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 section 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 methodology for brachytherapy sources, consistent 

with section 1833(t)(2)(C) of the Act (75 FR 71980). We also finalized our proposals to 

continue the policy we first implemented in the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60537 and 75 FR 71980) regarding payment for new 

brachytherapy sources for which we have no claims 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 regarding 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 proposals 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 (75 FR 71980 
CMS-1525-FC 156 

through 71981 and 75 FR 60537). Hospitals could receive outlier payments for 

brachytherapy sources if the costs of furnishing 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 hospitals to receive additional payments in CY 2010 and 

CY 2011 under certain circumstances through the 7.1 percent rural 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 median costs based on claims data to set 

the relative payment weights for hospital outpatient services. This payment methodology 

results in more consistent, predictable, and equitable payment amounts per source across 

hospitals by eliminating some of the extremely 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 hospitals with incentives for efficiency in the 

provision of brachytherapy services to Medicare beneficiaries. Moreover, this approach 

is consistent with our payment methodology for the vast majority of items and services 

paid under the OPPS. 
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 sources we finalized and first implemented in 

the CY 2010 OPPS/ASC final rule with comment 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 stranded or non-stranded prospective payment rate for such 

sources, respectively, on a per source basis (as opposed, for example, to a per mCi), 

which is based on the policy we established in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66785). The proposed payment methodology for NOS sources 

would provide payment to a hospital for new sources and, at the same time, encourage 

interested parties to quickly bring new sources to our attention so that specific coding and 

payment could be established. 

 We also proposed to continue the policy we first implemented in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new 

brachytherapy sources for which we have no claims data, based on the same reasons we 

discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; 

which was superseded for a period of time by section 142 of Pub. L. 110-275). That 

policy is intended to enable us to assign new HCPCS codes for new brachytherapy 

sources to their own APCs, with prospective payment rates set based on our consideration 
CMS-1525-FC 158 

of external data and other relevant information regarding the expected costs of the 

sources to hospitals. 

 Consistent with our policy regarding APC payments made on a prospective basis, 

as we did for CY 2011, 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 costs of furnishing 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 through 

71979, respectively), implementation of prospective payments for brachytherapy sources 

would provide opportunities for eligible hospitals to receive additional payments in 

CY 2012 under certain circumstances through the 7.1 percent rural adjustment, as 

described in section II.E. of the proposed rule. 

Therefore, we proposed to pay for brachytherapy 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 for brachytherapy sources, identified with 

status indicator “U.” For more detailed discussion 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 OPPS/ASC final rule with comment period 

(75 FR 71977 through 71981). 
CMS-1525-FC 159 

Comment: Some commenters requested that CMS discard its prospective 

payment methodology for brachytherapy sources based on source-specific median costs, 

and revert to payments based on brachytherapy charges adjusted to costs, for a variety of 

reasons. The commenters claimed that the claims data show a huge variation in costs per 

unit; that there continues to be, in the 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 proposed source payment rates, such as between 

C2635, high activity palladium, and C2640 and C2641, which represent forms of low 

activity palladium. The commenters also claimed that the charges adjusted to cost 

method would cost the Medicare program approximately $10.8 million less than the 

prospective payment methodology based on median cost per source. The commenters 

claimed that the number of hospitals providing brachytherapy treatment and the number 

of beneficiaries treated with brachytherapy 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 Rate (HDR) Iridium-192 

may treat multiple patients over a 90-day source life, making its true cost dependent on 

the number of patients treated, 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 hospital claims data for brachytherapy sources 

have produced reasonably consistent per-source cost estimates over the past several 

years, comparable to the patterns we have observed for many other OPPS services whose 

payments are set based upon relative payment weights from claims data. We believe that 

our per-source payment methodology specific to each source’s radioisotope, radioactive 

intensity, and stranded or non-stranded configuration, supplemented by payment based on 

the number of sources used in a specific clinical case, adequately accounts for the major 

expected sources of variability across treatments. As we also explained previously 

(72 FR 66782; 74 FR 60535; 75 FR 71979), a prospective payment system such as the 

OPPS relies on the concept of averaging, where the payment may be more or less than 

the estimated cost of providing a service for a particular patient, 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 requires separate payment groups, without 

packaging, the costs of these individual items could be expected to show greater variation 

than some other APCs under the OPPS because higher variability in costs for some 

component items and services is not balanced with lower variability for others and 

because relative weights are typically estimated using a smaller set of claims. 

Nevertheless, we believe that prospective payment for brachytherapy sources based on 

median costs from claims calculated according to the standard 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 their absolute costs, that is 

important, and we believe that brachytherapy sources are appropriately paid according to 

the standard OPPS payment approach. Furthermore, we are not concerned that some 

sources may have median costs and payment rates based on 50 or fewer providers, 

because it is not uncommon for OPPS prospective 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 year. 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 are required to pay separately 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 have no reason to believe that prospective 

payment rates based on claims from those providers 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 relationship is reversed for palladium-103 sources, as 

one commenter pointed out. As we have stated in the past (75 FR 71979), we have no 

information about the expected cost differential between high and low activity sources of 

various isotopes other than what is available in our claims and hospital cost report data. 
CMS-1525-FC 162 

For high activity palladium-103, only 12 hospitals 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 providers 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 cost distribution of the large 

number of providers reporting the low activity sources. These varied cost distributions 

clearly contribute to the observed relationship in median costs between the different types 

of sources. However, we see no reason why 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 which 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 indicated previously (75 FR 71980). We 

believe that consistent and predictable prospectively established payment rates under the 

OPPS for brachytherapy sources are appropriate because we do not believe that the 

hospital resource costs associated with specific brachytherapy sources would vary greatly 

across hospitals or clinical conditions under treatment, other than through differences in 
CMS-1525-FC 163 

the numbers of sources utilized 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/ASC 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 source would be dependent on the number of 

treatments furnished per source. The source cost must be amortized over the life of the 

source. Therefore, in establishing their charges for HDR iridium, we expect hospitals to 

project the number of treatments that would be provided over the life of the source and 

establish their charges for the source accordingly, as we have stated previously 

(72 FR 66783; 74 FR 60535; 75 FR 71980). For most of these OPPS services, our 

practice is to establish prospective payment 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 increase aggregate Medicare expenditures using 

the charges-adjusted-to-cost methodology compared to the proposed prospective payment 

methodology. Our past studies, such 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 brachytherapy 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 period (74 FR 60535 and 75 FR 71980), we have 
CMS-1525-FC 164 

traditionally found that charge inflation for brachytherapy sources appears to be higher 

than the market basket inflation update applicable to prospective payments under the 

OPPS. Therefore, we found that the estimated payments we calculated for brachytherapy 

charges adjusted to cost were greater than the estimated prospective payment rates 

because the hospital market basket 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 charge inflation. Moreover, the OPPS is a 

prospective payment system that ensures equitable prospective payment of services 

across providers, and efficient use of resources, including brachytherapy sources, which 

since CY 2010 are part of OPPS prospective payment. 

Concerning the comment that some providers 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 (75 FR 71980), there are many 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 continued. 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 services 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 HCPCS 
CMS-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 the sources to hospitals. 

Response: We appreciate the commenter’s support for this payment policy. 

After consideration of the public comments we received, we are finalizing our 

proposal to pay for brachytherapy 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 available via the Internet on the CMS Web site) for 

the final CY 2012 payment rates for brachytherapy 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-stranded prospective payment for 

such sources, respectively as discussed in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66786); and our proposal 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 information, in the absence of claims 

data. Once claims data are available, our standard 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 outlier 
CMS-1525-FC 166 

provision of section 1833(t)(5) of the Act, and also to subject brachytherapy source 

payment weights to scaling for 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 radioactive isotope, including a detailed rationale 

to support recommended new sources. Such recommendations should be directed to the 

Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare and Medicaid 

Services, 7500 Security Boulevard, Baltimore, MD 21244. We will continue to add new 

brachytherapy source codes and descriptors to our systems for payment on a quarterly 

basis. 
CMS-1525-FC 167 

e. Calculation of Composite APC Criteria-Based Median Costs 

 As discussed in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals 

to provide only necessary, high quality care and to provide that care as efficiently as 

possible. For CY 2008, we developed composite APCs to provide a single payment for 

groups of services that are typically performed together during a single clinical encounter 

and that result in the provision of a complete service. Combining payment for multiple 

independent services into a single OPPS payment in this way enables hospitals to manage 

their resources with maximum flexibility by monitoring and adjusting the volume and 

efficiency of services themselves. An additional advantage to the composite APC model 

is that we can use data from correctly coded multiple procedure claims to calculate 

payment rates for the specified combinations of services, rather than relying upon single 

procedure claims which may be low in volume and/or incorrectly coded. Under the 

OPPS, we currently have composite APC policies for extended assessment and 

management services, low dose rate (LDR) prostate brachytherapy, cardiac 

electrophysiologic evaluation and ablation services, mental health services, and multiple 

imaging services. We refer readers to the CY 2008 OPPS/ASC final rule with comment 

period for a full discussion of the development of the composite APC methodology 

(72 FR 66611 through 66614 and 66650 through 66652). 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42197), for CY 2012, we 

proposed to continue, with some modifications, our established composite APC policies 

for extended assessment and management, LDR prostate brachytherapy, cardiac 
CMS-1525-FC 168 

electrophysiologic evaluation and ablation, mental 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 therapy services, as discussed 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, without modification, our proposal to modify some aspects 

of our established composite APC policies for extended assessment and management, 

LDR prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, mental 

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 this final rule with 

comment period. We also are finalizing, with modification, our proposal to create a new 

composite APC for cardiac resynchronization therapy services, as discussed in section 

II.A.2.e.(6) of this final rule with comment period. 

(1) Extended Assessment and Management 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 include composite APC 8002 (Level I Extended 

Assessment and Management Composite) and composite APC 8003 (Level II Extended 

Assessment and Management Composite) in the OPPS for CY 2012. For CY 2008, we 

created these two composite APCs to provide payment to hospitals in certain 

circumstances when extended assessment and management of a patient occur (an 

extended visit). In most circumstances, observation services are supportive and ancillary 
CMS-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 and is an integral part of a 

patient’s extended encounter of care, payment is made for the entire care encounter 

through one of two composite APCs as appropriate. 

 As defined for the CY 2008 OPPS, composite 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 conjunction with observation services of substantial 

duration (72 FR 66648 through 66649). Composite APC 8003 describes an encounter for 

care provided to a patient that includes a high level (Level 4 or 5) Type A emergency 

department visit, a high level (Level 5) Type B emergency department visit, or critical 

care services in conjunction with observation services of substantial duration. HCPCS 

code G0378 (Observation services, per hour) is assigned status indicator “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), the Integrated Outpatient Code Editor 

(I/OCE) evaluates every claim received to determine if payment through a composite 

APC is appropriate. If payment through a composite APC is inappropriate, the I/OCE, in 

conjunction with the OPPS Pricer, determines the appropriate status indicator, APC, and 

payment for every code on a claim. The specific 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 selected for the calculation of the proposed 

CY 2012 median costs for these composite APCs. 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, documentation, 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 hospital 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, Change Request 6492, issued May 22, 2009 and 

implemented July 6, 2009). We did not propose 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 appropriate means of paying for these 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 median 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 which we have assigned status indicator “T” 

that is reported with a date of service 1 day earlier than the date of service associated with 

HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, 

we 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, HCPCS code G0379 (Direct referral of 

patient for hospital observation care) on the same 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 established patient (Level 5)) provided on the same 

date of service or one day before the 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 evaluation and management of a patient (Level 5)); 

CPT code 99291 (Critical care, evaluation and 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 on 
CMS-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 department visit, and critical care APCs (0604 

through 0617 and 0626 through 0630), we utilize 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 cost 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 assessment 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 possibility that total beneficiary copayments would 

exceed the inpatient deductible during extended observation encounters. We did not 
CMS-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 with copayments that exceeded the inpatient 

deductible, the modeled composites also had the effect of possibly increasing copayments 

by a small amount for the majority of beneficiaries 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, observation 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 management 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 methodology 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 proposed CY 2012 median costs. The proposed 

CY 2012 median cost resulting from this methodology for composite APC 8002 was 

approximately $395, which was calculated from 16,770 single and “pseudo” single bills 
CMS-1525-FC 174 

that met the required criteria. The proposed 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 provide 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 observation services in 

such cases are most likely related to post-procedural recovery, and thus no additional 

payment is warranted. The commenter argued, however, that when observation services 

are billed along with minor surgical procedures, the observation services should be paid 

separately. The commenter suggested that CMS utilize the MPFS definition of minor 

surgical procedures and reassign the codes currently assigned status indicator “T” to two 

newly created status indicators “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 minor surgical procedure with the suggested 

status indicator ”T2.” 

 Response: We appreciate the commenters’ support 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 services is included in the payment for the 

surgical procedure. We appreciate the commenter’s suggestions to define minor surgical 
CMS-1525-FC 175 

procedures and to develop new status indicators to allow for separate payment for 

observation services when billed with a minor surgical procedure and will take these 

suggestions into consideration for possible future rulemaking. At this time, we have not 

proposed to make any policy changes to allow 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 the extended assessment and management 

composite APC payment methodology and criteria that we finalized for CYs 2009 

through 2011. We applied the standard packaging and trimming rules to the claims and 

calculated the median costs for APCs 8002 and 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 resulting from this methodology for APC 8002 is 

approximately $393, which was calculated from 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 treatment for prostate cancer in which hollow 

needles or catheters are inserted into the prostate, followed by permanent implantation of 
CMS-1525-FC 176 

radioactive sources into the prostate through the needles/catheters. At least two CPT 

codes are used to report the composite treatment service because there are separate codes 

that describe placement of the needles/catheters and the application of the brachytherapy 

sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate 

for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 

(Interstitial radiation source application; complex). Generally, the component services 

represented by both codes are 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. As discussed 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 median 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 the most common clinical scenario, and to 

further our goal of providing payment under the OPPS for a larger bundle of component 

services provided in a single hospital encounter, beginning in CY 2008, we began 

providing a single payment for LDR prostate brachytherapy when the composite service, 

reported as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We 
CMS-1525-FC 177 

based the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) 

on the median cost derived from claims for the same date of service that contain both 

CPT codes 55875 and 77778 and that do not contain other separately paid codes that are 

not on the bypass list. In uncommon occurrences in which the services are billed 

individually, hospitals have continued to receive 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 history 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 rule (76 FR 42199), we proposed to 

continue paying for LDR prostate brachytherapy 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 separately paid procedure codes (other than 

those on the bypass list) to calculate the payment rate for composite APC 8001. 

Consistent with our CY 2008 through CY 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 Genitourinary Procedures) and 0651 (Complex 

Interstitial Radiation Source Application), 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 calculated using single and “pseudo” single procedure claims. 

We stated that we believe that this composite APC contributes to our goal of creating 
CMS-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 LDR prostate brachytherapy provide the most 

accurate median cost upon which to base 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 that contained both CPT codes 55875 and 77778 to 

calculate the median cost upon which the 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 approximately $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 composite APC 8001 of approximately $3,364, 

calculated from claims we believe to be correctly coded, would result in a reasonable and 

appropriate payment rate for this service in CY 2012. 

Comment: One commenter expressed concern 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 separately paid services that are not on the 

bypass list, which resulted in 556 CY 2012 proposed rule claims. The commenter noted 

that this is only 12 percent of all CY 2012 proposed rule claims containing CPT codes 
CMS-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 commenter’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 purposes. There are many services for which we 

have median costs based on hundreds of single 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, and the CY 2011 final median cost of 

approximately $3,195 all compare favorably and show stability in the median cost 

calculation for APC 8001. We do not believe the median cost would remain stable to 

such a degree if the claims used in ratesetting 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 discussed 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 support 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 the public comments we received, we are finalizing, 

without modification, our proposal to continue paying for LDR prostate brachytherapy 

services using the composite APC methodology implemented for CYs 2008, 2009, 2010, 

and 2011 described above in this section. The final CY 2012 median cost for composite 

APC 8001 is approximately $3,340, calculated from 595 single bills. 

(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000) 

Cardiac electrophysiologic evaluation and ablation services frequently are 

performed in varying combinations with one another during a single episode of care in 

the hospital outpatient setting. Therefore, correctly coded claims for these services often 

include multiple codes for component services that are reported with different CPT codes 

and that, prior to CY 2008, were always paid separately through different APCs 

(specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablate 

Heart Dysrhythm Focus), and APC 0087 (Cardiac Electrophysiologic 

Recording/Mapping)). As a result, there would never be many single bills for cardiac 

electrophysiologic evaluation and ablation services, and those that 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 persistent concerns regarding the limited and 
CMS-1525-FC 181 

reportedly unrepresentative single bills available for use in calculating the median costs 

for these services according to our standard OPPS methodology. 

Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic 

Evaluation and Ablation Composite) to pay for a composite service made up of at least 

one specified electrophysiologic evaluation service and one specified electrophysiologic 

ablation service. Calculating a composite APC for these services allowed us to utilize 

many more claims than were available to establish the individual APC median costs for 

these services, and we also saw this composite 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 payment rate for composite APC 8000 is based, 

we used multiple procedure claims that contained at least one CPT code from group A for 

evaluation services and at least one CPT code from group B for ablation services reported 

on the same date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 66656) identified the CPT codes that are assigned 

to groups A and B. For a full discussion of how we identified the group A and group B 

procedures and established the payment rate for the cardiac electrophysiologic evaluation 

and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66655 through 66659). Where a service in group A is furnished 

on a date of service that is different from the date of service for a code in group B for the 

same beneficiary, payments are made under the appropriate single procedure APCs and 

the composite APC does not apply. 
CMS-1525-FC 182 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42200), we proposed to 

continue to pay for cardiac electrophysiologic evaluation and ablation services using the 

composite APC methodology proposed and implemented for CY 2008 through CY 2011. 

Consistent with our CY 2008 through CY 2011 practice, we proposed not to use the 

claims that meet the composite payment criteria 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. Median 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 methodology 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 represents the hospital resources associated with 

performing the common combinations of these services that are clinically typical. 

Furthermore, this approach creates incentives 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 compared 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 calculated from a high volume of correctly coded 
CMS-1525-FC 183 

multiple procedure claims would result in an accurate and appropriate proposed payment 

for cardiac electrophysiologic evaluation and ablation services when at least one 

evaluation service is furnished during the same clinical encounter as at least one ablation 

service. 

Comment: One commenter supported CMS’ proposal to continue its current 

composite methodology for cardiac electrophysiologic evaluation and ablation services, 

stating that it is the most efficient and effective method to use claims data for most of the 

cardiac electrophysiologic services, and best represents 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 through CY 2011. For this final rule with 

comment period, we were able to use 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 APC 8000. Table 7 below list the groups of 

procedures upon which we based composite APC 8000 for CY 2012. 

TABLE 7.—GROUPS OF CARDIAC ELECTROPHYSIOLOGIC 

EVALUATION AND ABLATION PROCEDURES UPON WHICH COMPOSITE 

APC 8000 IS BASED 

Codes Used in Combinations: At Least 

One in Group A and One in Group B 

CY 2012 

CPT Code 

Single Code 

CY 2012 

APC 

CY 2012 SI 

(Composite) 

Group A

Comprehensive electrophysiologic 93619 0085 Q3 
CMS-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 right atrial pacing and 

recording, right ventricular pacing and 

recording, His bundle recording, including 

insertion and repositioning of multiple 

electrode catheters, without induction or 

attempted induction of arrhythmia 

Comprehensive electrophysiologic 

evaluation including insertion and 

repositioning of multiple electrode catheters 

with induction or attempted induction of 

arrhythmia; with right atrial pacing and 

recording, right ventricular pacing and 

recording, His bundle recording 93620 0085 Q3 

Group B

Intracardiac catheter ablation of 

atrioventricular node function, 

atrioventricular conduction for creation of 

complete heart block, with or without 

temporary pacemaker placement 93650 0085 Q3 

Intracardiac catheter ablation of 

arrhythmogenic focus; for treatment of 

supraventricular tachycardia by ablation of 

fast or slow atrioventricular pathways, 

accessory atrioventricular connections or 

other atrial foci, singly or in combination 93651 0086 Q3 

Intracardiac catheter ablation of 

arrhythmogenic focus; for treatment of 

ventricular tachycardia 93652 0086 Q3 

(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 longstanding policy of limiting the aggregate 
CMS-1525-FC 185 

payment for specified less resource-intensive mental health services furnished on the 

same date to the payment for a day of partial hospitalization, which we consider to be the 

most resource-intensive of all outpatient mental health 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 for a day of individual mental 

health services under the OPPS 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 furnished in a hospital. Specifically, we 

proposed one APC for partial hospitalization program days with three services furnished 

in a CMHC (APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs)) and 

one APC for days with four or more services 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 median 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 or 
CMS-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 limiting 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 all outpatient mental health treatment, for 

CY 2012, we proposed to continue to set the 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 payment. 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 partial hospitalization APC 0176. When the 

aggregate payment for specified mental health services provided by one hospital to a 

single beneficiary on one date of service based on the payment rates associated with the 

APCs for the individual services exceeds the maximum per diem partial hospitalization 

payment, we proposed that those specified mental 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 would continue to be paid one unit of APC 0034. The I/OCE 

currently determines whether to pay these specified mental health services individually or 

to make a single payment at the same rate as the APC 0176 per diem rate for partial 
CMS-1525-FC 187 

hospitalization for all of the specified mental health services furnished by the hospital on 

that single date of service, and we proposed for CY 2012 that it would continue to 

determine this. 

We did not receive any comments on this proposal. 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, and we do not believe 

that CMS should pay more for a day of individual mental health services under the OPPS 

than the partial hospitalization per diem payment. 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 hospitalization, 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 procedures were performed during a single session 

using the same imaging modality. Based on extensive data analysis, we determined that 

this practice neither reflected nor promoted the efficiencies hospitals can achieve when 

performing multiple imaging procedures during 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. We 
CMS-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 comment period (75 FR 71859 through 71860). 

While there are three imaging families, there are five multiple imaging composite 

APCs due to the statutory requirement at section 1833(t)(2)(G) of the Act that we 

differentiate payment for OPPS imaging services provided with and without contrast. 

While the ultrasound procedures included in the policy do not involve contrast, both 

CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five 

multiple imaging composite APCs established in CY 2009 are: 

● APC 8004 (Ultrasound Composite); 

● APC 8005 (CT and CTA without Contrast Composite); 

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

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

● APC 8008 (MRI and MRA with Contrast Composite). 

We define the single imaging session for the “with contrast” composite APCs as 

having at least one or more imaging procedures from the same family performed with 

contrast on the same date of service. For example, if the hospital performs an MRI 

without contrast during the same session as at least one other MRI with contrast, the 

hospital will receive payment for APC 8008, the “with contrast” composite APC. 
CMS-1525-FC 189 

Hospitals continue to use the same HCPCS codes to report imaging procedures, 

and the I/OCE determines when combinations 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 composite 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 future 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 partial year CY 2010 imaging composite cost 

and utilization data to comparable CY 2009 data in order to meet the APC Panel request 

that we provide analysis of the impact on beneficiaries 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 imaging 
CMS-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, APC 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 calculate the proposed median costs, we used the 

same methodology that we used to calculate 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 bypass 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 proposal in section II.A.1.b. of the CY 2012 proposed rule to add 

CPT code 71550 (Magnetic resonance (eg, proton) imaging, chest (eg, for evaluation of 

hilar and mediastinal lymphadenopathy); without contrast material(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 overlapping 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 same date of service, into the creation of 
CMS-1525-FC 191 

“pseudo” single procedure claims to ensure that claims were split in the “pseudo” single 

process into accurate reflections of either a composite “single 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 the session imaging costs. Our last step after 

processing all claims through the “pseudo” single 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” single 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 Editorial Board for combined abdominal and 

pelvis CT services (76 FR 42235). Specifically, 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 proposed to assign CPT codes 74177 (Computed 

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

tomography, abdomen and pelvis; without contrast material in one or both body regions, 

followed by contrast material(s) and further sections in one or both body regions) for the 

CY 2012 OPPS. As noted and listed in section III.D.2. of the proposed rule, we selected 
CMS-1525-FC 192 

claims of predecessor codes of new CPT codes 74176, 74177, and 74178 to calculate the 

costs of proposed new APCs 0331 and 0334, respectively (76 FR 42235). Therefore, we 

proposed not to use those claims listed in Table 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 calculate 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 proposed 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 payable through a 

composite APC. Their proposed composite 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 that 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 services performed together. The commenters indicated that 

hospitals providing emergent services are more likely than other hospitals to provide 
CMS-1525-FC 193 

multiple imaging services, some of which are provided in the same day but at different 

times. The commenters stated that when imaging 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 which it is necessary to perform CT scans of 

the chest, abdomen, and pelvis, and also a CT scan of the brain and/or soft tissues of the 

neck, must be split into two separate encounters 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. The 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 clinic 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 and 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 should be exempt from the multiple imaging 

composite payment methodology. As we indicated in the CY 2009 through CY 2011 

OPPS/ASC final rules with comment period (73 FR 68565; 74 FR 60399; 75 FR 71859), 

we believe that composite payment is appropriate even when procedures are provided on 

the same date of service but at different times because hospitals do not expend the same 
CMS-1525-FC 194 

facility resources each and every time a patient 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 different times during a single prolonged hospital 

outpatient encounter. The efficiencies that 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 efficiencies could not be 

gained for multiple imaging procedures performed on the same date of service but at 

different times, we expect that any higher costs 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, therefore, 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 provided 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 cases. 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 departments, clinics often operate independently 

from each other in different parts of the hospital with separate staffs providing different 

services. 

Comment: A few commenters, who expressed concern that providers may 

receive inadequate compensation and a resulting decrease in beneficiary access, stated 
CMS-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 appreciated the shared information, and 

recommended that CMS continue to monitor costs, 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 the 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 composite APCs should be considered until 

robust data on the current policy is available for public review and comment. One 

commenter expressed concern with CMS’ proposal 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 appropriate. Any expansion to the multiple imaging 

composite APCs would be subject to notice and comment rulemaking. We note that we 

did not propose to create two additional multiple 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 encourage efficiencies, they were concerned 

that the methodology employs arbitrary reductions absent data and may adversely affect 
CMS-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 the payment rates for the multiple 

imaging composite APCs are based are calculated using CY 2010 claims that qualified 

for composite payment, including those with only two imaging procedures and those with 

substantially higher numbers of imaging procedures. 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 commenter that the policy 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 than 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 beneficiary access. We note that the multiple imaging 

composite APC methodology is applied only when 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 received, we are adopting our 

CY 2012 proposal, without modification, to continue paying for all multiple imaging 

procedures within an imaging family performed on the same date of service using the 

multiple imaging composite payment methodology. The CY 2012 payment rates for the 

five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, 
CMS-1525-FC 197 

and APC 8008) are based on median costs calculated 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 single date of service). 

Using the same ratesetting methodology described 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 potential composite cases from our ratesetting 

claims data, or approximately half of all eligible 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 OPPS 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, limited 
CMS-1525-FC 198 

Family 2 - CT and CTA with 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/dye 
CMS-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 procedure is performed during the same session as a 

“with contrast” CT or CTA procedure, the I/OCE will assign APC 8006 rather than 

APC 8005. 

Family 3 - MRI and MRA with and without Contrast 

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 dye 
CMS-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/dye 
CMS-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 performed during the same session as a 

“with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than APC 

8007. 

TABLE 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, comp 
CMS-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 with and without Contrast 

70450 Ct head/brain w/o dye 

70480 Ct orbit/ear/fossa w/o dye 

70486 Ct maxillofacial w/o dye 

70490 Ct soft tissue neck w/o dye 

71250 Ct thorax w/o dye 

72125 Ct neck spine w/o dye 

72128 Ct chest spine w/o dye 

72131 Ct lumbar spine w/o dye 

72192 Ct pelvis w/o dye 

73200 Ct upper extremity w/o dye 

73700 Ct lower extremity w/o dye 

74150 Ct abdomen w/o dye 

Family 3 - MRI and MRA with and without Contrast 

70336 Magnetic image, jaw joint 

70544 Mr angiography head w/o dye 

70551 Mri brain w/o dye 

71550 Mri chest w/o dye 

72141 Mri neck spine w/o dye 

72146 Mri chest spine w/o dye 

72148 Mri lumbar spine w/o dye 

73218 Mri upper extremity w/o dye 

73221 Mri joint upr extrem w/o dye 

73718 Mri lower extremity w/o dye 

73721 Mri jnt of lwr extre w/o dye 

(6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418, 0655, and 

8009) 

 Cardiac resynchronization therapy (CRT) uses electronic devices to sequentially 

pace both sides of the heart to improve its output. CRT utilizes a pacing electrode 
CMS-1525-FC 203 

implanted in combination with either a pacemaker or an implantable cardioverter 

defibrillator (ICD). CRT performed by the implantation of an ICD along with a pacing 

electrode is referred to as “CRT–D.” 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 combinations of CPT codes for the insertion of 

pulse generators and the insertion of the leads associated with ICDs, along with the 

insertion of the pacing electrode. For the implantation of a pulse generator, hospitals may 

use CPT code 33240 (Insertion of single or dual chamber pacing cardioverterdefibrillator pulse generator), which is the only CPT code assigned to APC 0107 

(Insertion of Cardioverter-Defibrillator) for CY 2011, in combination with CPT code 

33225 (Insertion of pacing electrode, cardiac venous system, for left ventricular pacing, 

at time of insertion of pacing cardioverter-defibrillator or pacemaker pulse generator 

(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 CPT code 33249 (Insertion or repositioning of 

electrode lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion 

of pulse generator), which is the only CPT code assigned to APC 0108 

(Insertion/Replacement/Repair of Cardioverter-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 pacemaker with transvenous electrode(s); 
CMS-1525-FC 204 

ventricular), which are assigned to APC 0089 (Insertion/Replacement of Permanent 

Pacemaker and Electrodes) for CY 2011, in combination with CPT code 33225. 

Hospitals also may use CPT code 33208 (Insertion or replacement of permanent 

pacemaker with transvenous electrode(s); atrial and ventricular), for the implantation of a 

pacemaker with leads, which is assigned to APC 0655 

(Insertion/Replacement/Conversion of a Permanent 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, have recommended that CMS establish new 

composite APCs for CRT-D services, citing significant 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 the definition of CPT code 33225 specifies that 

the pacing electrode is inserted at the same time as an ICD or pacemaker, CMS would not 

have many valid single or pseudo single claims 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 implications of the creation of a new composite 

APC for CRT-D services and recommended that CMS reconsider creating a composite 

APC or a group of composite APCs for CRT-D and CRT-P services. While we did not 
CMS-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 recommendations and the comments we received, 

we evaluated the implications of creating four composite APCs for CRT services, which 

would include the ICD and pacemaker insertion procedures listed previously in this 

section (described by CPT codes 33240, 33249, 33206, 33207, and 33208) performed in 

combination with the insertion of a pacing 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 codes 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 calculate 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, those 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 

Data 
CMS-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 section 1833(t)(1)(B) of the Act, we 

proposed to create a new composite APC 8009 (Cardiac Resynchronization Therapy with 

Defibrillator Composite), listed as potential 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 shown above in Table 10, and would provide a 
CMS-1525-FC 207 

single payment for a procedure currently assigned to APC 0418 together with a procedure 

currently assigned to APC 0108 (Insertion/Replacement/Repair of CardioverterDefibrillator Leads) when performed on the same date of service. Specifically, we 

proposed to create composite APC 8009, which 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 accurate median costs for CPT 

code 33225 based on single procedure claims utilized in the standard OPPS ratesetting 

methodology, and to address the public commenters’ 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 methodology is specifically designed to provide 

payment for two or more procedures when they 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 believe 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 indicated that we believe the claims volume for 

CPT 33225 and CPT 33249 is sufficient to demonstrate that these services are commonly 

performed together. While the other combinations 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 CPT codes that describe the insertion of an 
CMS-1525-FC 208 

ICD and a pacemaker. As we have stated previously (74 FR 60392), because of the 

complex claims processing and ratesetting logic 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 rate established under the IPPS that would 

be provided to acute care hospitals for providing 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 for MS-DRG 227 (Cardiac Defibrillator Implant 

without Cardiac Catheterization without Major Complication or Comorbidity), as adopted 

in the FY 2012 IPPS/LTCH PPS final rule. We stated that we would establish the OPPS 

payment amount as the FY 2012 IPPS standardized 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 standardized payment rate for MS-DRG 227 to 

represent appropriate payment for a comparable package of services furnished to 

outpatients. We also stated that we believe that, because this MS-DRG includes 

defibrillator implantation for those inpatients 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 than 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 items and services than 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, therefore, 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 also explained that we believe that limiting 

payment for CRT-D services under the OPPS to the IPPS MS-DRG payment will ensure 
CMS-1525-FC 210 

appropriate and equitable payment to hospitals because patients 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 the hospital inpatient setting. Therefore, we 

expect it would be less costly to provide care 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 are similar in clinical characteristics and 

median cost. We proposed to revise the title of APC 0108 to read 

“Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes” for 

CY 2012. We also proposed to reassign CPT code 33224 (Insertion of pacing electrode, 

cardiac venous system, for left ventricular pacing, with attachment to previously placed 

pacemaker or pacing cardioverter-defibrillator pulse generator (including revision of 

pocket, removal, insertion, and/or replacement of generator)) from APC 0418 to APC 

0655, and to change the title of APC 0655 from “Insertion/Replacement/Conversion of a 

Permanent Dual Chamber Pacemaker” to “Insertion/Replacement/Conversion of a 

Permanent Dual Chamber Pacemaker or Pacing Electrode.” In the CY 2012 OPPS/ASC 

proposed rule (76 FR 42205), we stated that we believe that reassigning CPT code 33224 

to APC 0655 will promote stability in payment 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, therefore, will benefit from the stability in APC median costs and 
CMS-1525-FC 211 

payment rates that generally result as the volume 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 limit 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-DRG 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 defibrillator 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 approximately $27,361, it would result in a payment under 

the CY 2012 OPPS that would exceed our proposed standardized payment under the 

IPPS for MS-DRG 227 of $26,364.93. We stated that 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 inpatient 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 permanent pacemaker with transvenous 

electrode(s); atrial); 

● 33207 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); ventricular); 

● 33208 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); atrial and ventricular); 

● 33212 (Insertion or replacement of pacemaker pulse generator only; single 

chamber, atrial or ventricular); 

● 33213 (Insertion or replacement of pacemaker pulse generator only; dual 

chamber, atrial or ventricular); 

● 33214 (Upgrade of implanted pacemaker system, conversion of single chamber 

system to dual chamber system (includes removal of previously placed pulse generator, 

testing of existing lead, insertion of new lead, insertion of new pulse generator)); 

● 33216 (Insertion of a single transvenous electrode, permanent pacemaker or 

cardioverter-defibrillator); 

● 33217 (Insertion of 2 transvenous electrodes, permanent pacemaker or 

cardioverter-defibrillator); 

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

● 33233 (Removal of permanent pacemaker pulse generator); 

● 33234 (Removal of transvenous pacemaker electrode(s); single lead system, 

atrial or ventricular); 
CMS-1525-FC 213 

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

atrial or ventricular); 

● 33240 (Insertion of single or dual chamber pacing cardioverter-defibrillator 

pulse generator); or 

● 33249 (Insertion or repositioning of electrode lead(s) for single or dual 

chamber pacing cardioverter-defibrillator and insertion of pulse generator). 

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 Resynchronization Therapy - ICD Pulse Generator and 

Leads)), for which we proposed that payment would be capped at the IPPS payment rate 

for MS-DRG 227. In other words, we would calculate payment for APC 8009 based on 

the lesser of the APC 8009 median cost or the IPPS standardized payment for MSDRG 227. We also proposed to reassign CPT code 33225 to APC 0108 and to continue 

to assign CPT code 33249 to APC 0108 when they 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 processing 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 insertion. 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 within 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 Resynchronization Therapy with Defibrillator, 

Composite) and APC 0108 (Insertion/Replacement/Repair of Cardioverter-Defibrillator 

Leads) using only outpatient claims data. We are accepting this recommendation and 

will use only outpatient claims data to establish the payment rates for ICD and CRT-D 

implantation procedures, as discussed in greater 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 acknowledged 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. Many commenters noted that there could be 

legitimate explanations for the higher hospital outpatient cost estimates for CRT that 

would support higher hospital outpatient payments, such as the inclusion of less 

expensive ICD-only cases in the MS-DRG 227 payment bundle and geographic 

variations in cost for CRT-D devices provided to hospital inpatients and hospital 

outpatients. They asserted that MS-DRG 227 is an inappropriate comparator because it 

includes CRT-D implantation procedures, along with less expensive 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 composite APC 8009 would fail to cover the 

cost of CRT-D devices used in the procedures described by CPT codes 33225 and 33249 

based on CMS’ calculation of APC costs associated with devices presented in Table 24 of 

the CY 2012 OPPS/ASC proposed rule. 

The leading manufacturers of CRT devices argued that the payment cap is 

unnecessary, projecting that average actual payment differences (after accounting for 

wage index adjustments, indirect medical education (IME) payments, and 

disproportionate share hospital (DSH) payments) under the CRT-D composite APC (with 

no payment cap applied) and MS-DRG 227 would 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 implantable defibrillator implants has already 

been taking place over the past several years despite lower OPPS payment 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 that the cap as described in the proposed rule is not 

an accurate reflection of the equivalent IPPS payment for CRT-D services because the 

operating and capital standardized amounts paid to inpatient hospitals were not included, 

indicating that, according to the IPPS final rule, the total payment cap should be 

approximately $29,000. Other commenters added that IME and DSH payments also 

should be included in the cap calculation. The commenters urged CMS to take these 
CMS-1525-FC 216 

MS-DRG payment adjustments into consideration if an IPPS payment cap were applied 

to composite APC 8009 and APC 0108. 

Response: We appreciate the commenters’ suggestions presented in response to 

our 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 payment rate for MS-DRG 227. 

As described in the proposed rule, we continue to believe that we should 

recognize the inherent challenges 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 commenters’ 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 important to ensure that we do not create an 

inappropriate payment incentive to provide services in one setting of care as opposed to 

another, also as stated in the proposal. In light of these goals, and taking into 
CMS-1525-FC 217 

consideration the commenters’ observations that the hospital inpatient and outpatient 

payment bundles for CRT-D services are different, 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 proposed, 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 appropriate because the CRT-D procedure described 

by the combination of CPT codes 33225 and 33249 is clinically similar to the basic 

(nonresynchronization) ICD insertion procedure 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 the heart with subsequent connection 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 electrodes. 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 placement of these procedures in the same APC 

does not violate the 2 times rule. We also are finalizing our proposal to change the title 

of APC 0108 to “Insertion/Replacement/Repair 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 which 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 assigned to APC 0108, as well as single procedure 

claims that contain the composite CRT-D service, defined as the combination of CPT 

codes 33225 and 33249 with the same date of service. We were able to use 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 policy, 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 service payment, as well as any packaged 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 status indicator “Q3” 

(Codes that may be paid through a composite APC) 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 procedures 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 inherent ratesetting challenges associated with CPT code 33225 

and stabilize payment for this service. We also note that this policy is consistent with the 
CMS-1525-FC 219 

principles of a prospective payment system, specifically to place similar services that 

utilize technologies with varying costs in the same APC in order to promote efficiency 

and decisionmaking based on individual patient’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 the 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 indicated earlier, this methodology allows us to accept the APC 

Panel’s recommendation to calculate payment for these services using only hospital 

outpatient claims data. 

 Comment: A few commenters questioned 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 established under the IPPS, arguing that they believe 

this provision of the Act applies only to adjustments made within the OPPS, and does not 

give CMS authority to make equitable adjustments across payment systems. 

Many commenters pointed out that CMS has held strongly to the principle of 

setting OPPS payment rates based only on hospital outpatient claims and cost report data 

since the beginning of the OPPS, often refusing stakeholders’ requests to use external 

data or make cross-system payment comparisons as the basis for setting payment rates. 

The commenters stated that for CMS to cross payment systems and deviate from this 

longstanding policy would introduce a significant level of uncertainty and 

unpredictability. Other commenters stated that crossing payment systems for the first 

time under the OPPS represents a significant departure from the standard OPPS 
CMS-1525-FC 220 

ratesetting methodology, undermines the integrity 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 assume 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-device edits, to ensure that hospitals report the 

full costs of devices provided in hospital outpatient departments, while there are no 

similar mechanisms in place for devices provided 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 system 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 per drug payment rate when 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 believe 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 than 
CMS-1525-FC 221 

data obtained from hospital outpatient claims. It is not unprecedented for CMS to use 

data from one payment system in the calculations for another in specific 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 list 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 ASC 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 between 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 for 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, while the commenters’ suggested approach to 

achieve payment parity between the hospital outpatient setting and the physician office 
CMS-1525-FC 222 

setting for drugs and biologicals would usually result in higher hospital outpatient 

payment rates of ASP+ 6 percent, an approach that would achieve payment parity 

between the hospital outpatient setting and the hospital inpatient setting would result in 

payment for most drugs and biologicals being 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 applying 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 notice-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 the 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 based 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 explore methods to ensure our payment systems 

do not provide inappropriate payment incentives to provide services in one setting of care 

as opposed to another setting of care. 

Comment: Some commenters contested the statement in the CY 2012 OPPS/ASC 

proposed rule that hospital outpatients are generally less sick than hospital inpatients, 

arguing that not all patients with comorbidities are admitted as inpatients. Several 
CMS-1525-FC 223 

commenters stated that CMS has not provided evidence to support the claim that CRT-D 

services on an outpatient basis would include fewer items and services than on an 

inpatient basis. 

Response: As indicated previously, we are not implementing our proposal to cap 

payment for CRT-D services at the IPPS payment rate for MS-DRG 227. We continue to 

believe, however, that the Medicare beneficiaries 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 occupancy 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 statement 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 costs of providing a service to a hospital 

inpatient, in general, may exceed the costs for providing the same service on an 

outpatient basis. In general, payment for outpatient 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 are able to go home 
CMS-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 services under the IPPS 

includes similar services that would be paid under the OPPS through an APC, plus 

associated diagnostic testing, drugs, laboratory tests, and the cost of an extended recovery 

over several days. Inpatient care is typically associated with longer periods of recovery, 

which may be triggered by increased complications, 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, the 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 CMS applied its device-to-procedure edits. The 

commenters provided data analysis 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 CMS using 458 single bills from the data 

available for the CY 2012 proposed rule. The 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 expressed 
CMS-1525-FC 225 

general concern that the device-to-procedure edits were not being applied correctly to 

hospital outpatient claims. 

Response: We appreciate the commenters bringing to our attention potential 

problems with the claims used to calculate the proposed CY 2012 median cost for CPT 

code 33225. We are investigating the possibility that 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 have 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 cost 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 rule 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 device-dependent APC ratesetting methodology outlined in 

section II.A.2.d.(1) of this final rule with comment period. 

We do not agree with the commenters that we should maintain APC 0418 for CPT 

codes 33224 and 33225. Based on the hospital outpatient 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 approximately $18,855 using 28 single bills (out of 10,424 

total bills) for CPT code 33225. We continue to believe that CPT code 33224 
CMS-1525-FC 226 

appropriately aligns, both in terms of clinical characteristics and resource utilization, with 

other procedures assigned to APC 0655, which 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 includes pacemaker insertion procedures. 

Therefore, we are finalizing our proposal, without modification, to assign CPT code 

33224 to APC 0655. 

In addition, we agree with commenters that CPT code 33225 should not be 

assigned to APC 0108. We believe that CPT 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, based upon the median cost calculated for CPT 

code 33225 using data available for this final 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 assigned to APC 0655, we believe 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 position of the end of the electrode within 

the heart. In addition, CPT code 33225 is also similar to other procedures assigned to 

APC 0655, such as CPT code 33214 (Upgrade of implanted pacemaker system, 

conversion of single chamber system to dual chamber system (includes removal of 

previously placed pulse generator, testing of existing lead, insertion of new lead, insertion 

of new pulse generator), which describes the upgrade of a pacemaker which generally 
CMS-1525-FC 227 

includes new hardware and placement of a new 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 clinically appropriate CPT codes specified by the AMA in 

the CPT code book. 

Response: We appreciate the commenters’ support. We are implementing our 

CY 2012 proposal, without modification, to create 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 clinically appropriate CPT codes specified by the 

AMA in the CPT code book, as described previously in this section. 

In summary, after consideration 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 procedures 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 codes 
CMS-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 provide 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 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 assigned 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). We also are finalizing our proposals to reassign CPT code 33224 to APC 

0655 for CY 2012, to change the title of APC 0655 from 

“Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker” to 

“Insertion/Replacement/Conversion of a Permanent 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 incorrectly coded claims on which a pacing electrode 

insertion (the procedure described 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 payment 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 particular patient, but with the exception of outlier 

cases, the payment is adequate to ensure access to appropriate care. Packaging payment 

for multiple interrelated services into a single payment creates incentives for providers to 

furnish services in the most efficient way by enabling hospitals to manage their resources 

with maximum flexibility, thereby encouraging long-term cost containment. For 

example, where there are a variety of supplies that could be used to furnish a service, 

some of which are more expensive than others, packaging encourages hospitals to use the 

least expensive item that meets the patient’s needs, rather than to routinely use a more 

expensive item. Packaging also encourages hospitals to negotiate carefully with 

manufacturers and suppliers to reduce the purchase price of items and services or to 

explore alternative group purchasing arrangements, thereby encouraging the most 

economical health care. Similarly, packaging encourages hospitals to establish protocols 

that ensure that necessary services are furnished, while carefully scrutinizing the services 

ordered by practitioners to maximize the efficient use of hospital resources. Packaging 

payments into larger payment bundles promotes the stability of payment for services over 

time. Finally, packaging also may reduce the importance of refining service specific 

payment because there is more opportunity for hospitals to average payment across 

higher cost cases requiring many ancillary services and lower cost cases requiring fewer 
CMS-1525-FC 230 

ancillary services. For these reasons, packaging payment for services that are typically 

ancillary and supportive to a primary service has been a fundamental part of the OPPS 

since its implementation in August 2000. 

We 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 primary 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 uncommon cases when they do not meet their 

respective criteria for packaged payment. “STVX-packaged codes” and “T-packaged 

codes” are conditionally packaged. We refer readers to section 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 ancillary and supportive to a primary diagnostic or therapeutic 

modality. We use the term “independent service” to refer to the HCPCS codes that 

represent the primary therapeutic or diagnostic modality into which we package payment 

for the dependent service. In future years, as we consider the development of larger 

payment groups that more broadly reflect services provided in an encounter or episode 

of-care, it is possible that we might propose to bundle payment for a service that we now 

refer to as “independent.” 

Hospitals include HCPCS codes and charges for packaged services on their 

claims, and the estimated costs associated with those packaged services are then added to 

the costs of separately payable procedures on the same claims 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 appropriateness of the OPPS payment rates 

depends on the quality and completeness of the claims data that hospitals submit for the 

services they furnish to 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 for 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 typically ancillary and supportive. The seven categories are: 

(1) guidance services; (2) image processing services; (3) intraoperative services; 

(4) imaging supervision and interpretation services; (5) diagnostic radiopharmaceuticals; 
CMS-1525-FC 232 

(6) contrast media; and (7) observation services. We specifically chose these categories 

of HCPCS codes for packaging because we believe that the items and services described 

by the codes in these categories are typically ancillary and supportive to a primary 

diagnostic or therapeutic modality and, in those cases, are an integral part of the primary 

service they support. 

In addition, in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66650 through 66659), we finalized additional packaging for the CY 2008 OPPS, 

which included the establishment of new composite APCs for CY 2008, specifically 

APC 8000 (Cardiac Electrophysiologic Evaluation 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 final 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 statutory requirements to differentiate between 

imaging services provided with contrast and 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 and 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 more detail in section II.A.2.e. of this final 

rule with comment period. 
CMS-1525-FC 233 

We recognize that decisions about packaging and bundling payment involve a 

balance between ensuring that payment is adequate to enable the hospital to provide 

quality care and establishing incentives for efficiency through 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 Regarding Expanded Packaging at the 

February 28-March 1, 2011 and August 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 factors, including whether the service is normally 

provided separately or in conjunction with other services; how likely it is for the costs of 

the packaged code to be appropriately mapped 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 final rule with comment 

period, the APC Panel advises CMS on the clinical integrity of payment groups and their 

weights, and the APC Panel has had a Packaging Subcommittee that is now renamed the 

Subcommittee for APC Groups and Status Indicator (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 payable under the OPPS, but whose 

payments are bundled or packaged into APC payments. The APC Panel has considered 

packaging issues at several earlier meetings. For discussions of earlier APC Panel 
CMS-1525-FC 234 

meetings and recommendations, we refer readers to previously published hospital 

OPPS/ASC proposed and final rules on the CMS Web site at: 

http://www.cms.gov/HospitalOutpatientPPS/HORD/list.asp. 

(2) Packaging Recommendations of the APC 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, and made five recommendations related to 

packaging and to the function of the subcommittee. The Report of the 

February 28-March 1, 2011 meeting of the APC Panel may be found at the CMS Web 

site at: 

http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

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 packaging and that we discuss in this section is 

APC Panel Recommendation 4. Two other recommendations, Recommendations 12 and 

13, which evolved from the discussions of the APC Groups and Status Indicator 

Subcommittee, are related specifically to HCPCS codes, were discussed in section III.D. 

of the proposed rule, and are addressed in section III.D. of this final rule with comment 
CMS-1525-FC 235 

period. Recommendation 12 was that CMS reassign HCPCS code 65778 (Placement of 

amniotic membrane on the ocular surface for wound healing; self-retaining) and HCPCS 

code 65779 (Placement of amniotic membrane on the ocular surface for wound healing; 

single layer, sutured) to APC 0233 (Level III Anterior Segment Eye Procedures) and that 

CMS furnish data when data become available 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 indicator 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 status 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 ancillary and dependent upon an independent 

separately paid procedure. At the APC Panel’s February 2010 meeting, the manufacturer 

of the electromagnetic navigation bronchoscopy (ENB) technology, one of several 

technologies that can be used to perform the service described by HCPCS code 31627, 

asserted that use of the ENB technology during a bronchoscopy procedure enables access 

to distal lesions that are otherwise not accessible without use of the ENB technology. 

The manufacturer also stated that without separate payment for the ENB technology, 

hospitals would likely not adopt the technology and the population that would likely 
CMS-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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

We stated in the CY 2011 OPPS/ASC proposed 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 ancillary to a primary 

diagnostic or therapeutic modality. 

At its August 23-24, 2010 meeting, the APC 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 winter 2011 meeting for review. After 
CMS-1525-FC 237 

consideration of all of the information provided 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 separately 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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

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 technology 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 manufacturer stated that if CMS does not pay 

HCPCS code 31627 separately, hospitals will not furnish the procedure to hospital 

outpatients. 

In response to the request of the APC Panel at its August 2010 meeting, we 

presented the available data on HCPCS code 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 September 30, 2010, as processed through the 

CMS common working file by December 31, 2010. Specifically, using the limited set of 
CMS-1525-FC 238 

APC Panel data, CMS found that 119 hospitals 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 reported on 0 to 4 percent of the claims for 

bronchoscopy codes with which CPT guidance states that it is permissible to report 

HCPCS code 31627, with the exception of HCPCS code 31626 (Bronchoscopy, rigid or 

flexible, including fluoroscopic guidance, when 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 formulation 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 proposed rule data found that 149 hospitals 

reported 867 units of HCPCS code 31627, and that HCPCS code 31627 had a proposed 

rule median cost of approximately $344 per unit. 

 After considering the public presentation and the information presented by CMS 

staff, the APC Panel recommended that HCPCS code 31627 continue to be assigned a 

status indicator of “N.” The Panel further 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, therefore, proposed to package payment for the 

procedure into payment for the bronchoscopy to which we believe that it is ancillary and 
CMS-1525-FC 239 

supportive. As with all packaged items and 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 assigned. 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 ancillary to the primary 

bronchoscopy procedure with which it must be reported, as defined by CPT. HCPCS 

code 31627 describes a computer assisted image guided navigation service that is not 

furnished without a bronchoscopy. As defined by CPT, HCPCS code 31627 may only be 

furnished in addition to a bronchoscopy service and, therefore, we believe that it is 

ancillary and supportive to the bronchoscopy service with which it must be reported. We 

agreed to provide further claims information 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 further 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 package 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 supportive to the bronchoscopy with which it is 
CMS-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 (Bronchoscopy, 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, therefore, proposed to reassign HCPCS code 

31626 (which had a proposed CY 2012 APC median cost of approximately $2,708) from 

APC 0076 (which had a proposed CY 2012 APC median cost of approximately $751) to 

APC 0415 (Level II Endoscopy Lower Airway), which had a proposed CY 2012 APC 

median cost of approximately $2,007. We agreed with the APC Panel that it appears that 

the proposed APC median cost of HCPCS code 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 proposal 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 Status 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 APC Panel’s recommendation that Judith Kelly, 

R.H.I.T., R.H.I.A., C.C.S. continue to chair the APC Groups and Status Indicator 

Assignments Subcommittee for 2011. 

 We did not receive any public comments on this recommendation. We appreciate 

the services of Ms. Kelly as chair of the Subcommittee for CY 2011. 

 APC Panel Recommendation 7: That CMS furnish the results of its investigation 

of claims that contain the following unconditionally packaged codes without separately 

paid procedures: 

● HCPCS code G0177 (Training and educational services related to the care and 

treatment of patient's disabling mental health problems per session (45 minutes or more));

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

● HCPCS code 75940 (Percutaneous placement of IVC filter, radiological 

supervision and interpretation); and 

● HCPCS code 76937 (Ultrasound guidance 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 APC 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 claims 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 the 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 and Status Indicator (SI) Assignments, heard 
CMS-1525-FC 243 

several public presentations related to packaged services, discussed the deliberations of 

the subcommittee, and made three recommendations related to packaging and to the 

function of the subcommittee. The subcommittee 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 Report 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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

Below we present each of the three recommendations related to packaging and 

our responses to those recommendations. Recommendations that evolved from the 

discussions of the Subcommittee on APC Groups and Status Indicator Assignments that 

are specific to the APC assignment of HCPCS codes and removal of HCPCS codes from 

the inpatient only list are discussed in sections III and IX, respectively, of this final rule 

with comment period. 

APC Panel Recommendation 9: That CMS give HCPCS 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 for 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 chair 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., remain 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 indicator “N”), or conditionally (for which we 

continue to assign status indicators “Q 1,” “Q2,” or “Q3”), were displayed in 

Addendum B of the CY 2012 OPPS/ASC proposed rule (76 FR 42208). The supporting 

documents for the CY 2012 OPPS/ASC proposed 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 Addenda” or “2012 OPPS Final Rule with 

Comment Period Addenda” from the list of supporting files. Open the zipped file and 

select Addendum B, which is available as both an Excel file and a text file. 
CMS-1525-FC 245 

Comment: Commenters stated that CMS’ packaging policies would likely lead to 

less efficient use of resources, limited access to innovative treatment options, and greater 

instability in payments because the policies are based on several flawed assumptions. 

Commenters believed that, to the extent that hospitals control the array 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 advanced technologies, in an efficient manner to 

ensure the lowest cost for the patient’s diagnosis. 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, the hospital would receive 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 the cost of a technology, hospitals have 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 using 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 services that are ancillary to and 

dependent on the major procedure for which a payment rate is established is a 

fundamental concept of the OPPS, based in regulation in the definition 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 that packaging creates 

incentives for hospitals and their physician partners to work together to establish 

appropriate protocols that eliminate unnecessary services where they exist and 

institutionalize approaches to providing necessary services more efficiently. With respect 

to new services or new applications of existing technology, we believe 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 service or new technology. Where this review 

results in reductions in services that are only marginally beneficial or influences 

hospitals’ choices to not utilize certain technologies, we believe that these changes could 

improve, rather than harm, the quality of care for Medicare beneficiaries because every 

service furnished in a hospital carries some level of risk to the patient and the beneficiary 

would be spared the risk associated with the additional service or different technology. 

Moreover, we believe that hospitals 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 provide optimal care to their patients, we are 

aware that there are financial pressures on hospitals that might motivate some providers 
CMS-1525-FC 247 

to split services among different hospital encounters in such a way as to maximize 

payments. While we do not expect that hospitals would routinely change the way they 

furnish services or the way they bill for services in order to maximize payment, we 

recognize that it would be possible and we consider that possibility as we annually review 

hospital claims data. We will continue to examine 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 make underlying payment rates for 

packaged services, including utilization rates, estimated median costs, and numbers of 

hospitals furnishing various services, available 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 commenter 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 considerable amount of data for public analysis each 

year through the supporting data files that are posted on the CMS Web site in association 

with the display of the proposed and final rules. In addition, 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 later, supplemental line item cost data for 
CMS-1525-FC 248 

every HCPCS code under the OPPS, and a detailed narrative description of our data 

process for the annual OPPS/ASC proposed and final rules that the public can use to 

perform any desired analyses. Therefore, commenters are able to examine and analyze 

these data to develop specific information to assess the impact and effect of packaging for 

the services of interest to them. This information is available to support public requests 

for changes to payments under the OPPS, whether with regard to separate payment for a 

packaged service or other issues. We understand that the OPPS is a complex payment 

system and that it may be difficult to determine the quantitative amount of packaged cost 

included in the median cost for every independent service. However, commenters 

routinely provide us with meaningful analyses at a very detailed and service-specific 

level based on the claims data we make available. We routinely receive complex and 

detailed public comments, including extensive code-specific data analysis on packaged 

and separately paid codes, using the data from current and prior proposed 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 needs to set appropriate, stable payment rates in 

the future, but that this assumption is flawed. Commenters stated that CMS’ past 

experience with packaging payment for ancillary items indicates that 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 commenters asked that CMS require complete and 
CMS-1525-FC 249 

correct coding for packaged services so that all items and services that are not 

individually paid must be included on the claim to provide CMS with essential data for 

future OPPS updates. Commenters expressed concern about what they believed to be 

decreases in the number of hospitals reporting services as a result of packaging and 

bundling. They believed that the decline could be due to one or both of two reasons: 

Hospitals may no longer be providing these services; or hospitals could be providing 

these services but not reporting 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 included 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 outpatient services they furnish to Medicare 

beneficiaries and other patients as a result of our current packaging methodology. 

Medicare cost reporting standards specify that 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 reporting rules and generally accepted accounting principles, hospital 

chargemasters do not differentiate between the charges to Medicare patients and other 

patients. Therefore, we have no reason to believe that hospitals will stop reporting 

HCPCS codes and charges for packaged services they provide to Medicare beneficiaries. 

As we stated in the CY 2009 OPPS/ASC final rule with comment period (74 FR 68575), 

we strongly encourage hospitals to report a charge for each packaged service they 
CMS-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 service with an appropriate 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 being 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 challenging to specifically track the utilization 

patterns and resource cost of the packaged service itself. However, we have no reason to 

believe that hospitals have not considered the cost of the packaged service in reporting 

charges for the independent, separately paid service. We expect that hospitals, as other 

prudent businesses, have a quality review process that ensures that they accurately and 

completely report the services they furnish, with appropriate charges for those services to 

Medicare and all other payers. We encourage hospitals to report on their claim for 

payment all HCPCS codes that describe packaged services that were furnished, unless the 

CPT Editorial Panel or CMS provides other guidance. To the extent that hospitals 

include separate charges for packaged services on their claims, the estimated costs of 

those packaged services are then added to the costs of separately paid procedures on the 

same claims and used in establishing payment rates for the separately paid services. It is 

impossible to know with any certainty whether hospitals are failing to report HCPCS 

codes and charges for services for which the payment is packaged into payment for the 

independent service with which the packaged service is furnished. Moreover, if a 
CMS-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 package 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 reflects 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 supportive services were being furnished. 

If a hospital is no longer providing a service, there may be many reasons that a hospital 

chooses not to provide a particular 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 furnish 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 because these services are vital to the safe 

provision of radiation therapy and unconditionally packaging payment for them may 

discourage hospitals from providing them. 

Response: We recognize that radiation oncology guidance services, like most 

packaged services, are important to providing 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, and if hospitals can furnish them efficiently. 

We will continue to pay separately for innovative technologies if a device meets the 
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conditions for separate payment as a pass-through device or if a new procedure meets the 

criteria for payment as a new technology APC. 

 After considering the public comments 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 indicator “N”), or conditionally (for which we 

continue to assign status indicators “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 via the Internet on the CMS Web site). The 

supporting documents for this CY 2012 OPPS/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 OPPS Final rule with Comment Period 

Addenda” from the list of supporting files. Open the zipped file and select Addendum B, 

which is available as both an Excel file and a text file. 

 The continuation of our standard policy regarding packaging of drugs and 

biologicals, implantable biologicals, contrast agents and diagnostic radiopharmaceuticals 

is discussed in section V.B. of this final rule with comment period. We note that an 

implantable biological that is surgically inserted or implanted through a surgical incision 
CMS-1525-FC 253 

or a natural orifice is commonly referred to throughout this final rule with comment 

period as an “implantable biological.” 

The creation of a new composite APC for CY 2012 for payment of the insertion 

of cardiac resynchronization devices 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/ASC 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 relative payment weights for each APC for 

CY 2012 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 site). In years prior to CY 2007, we standardized all the 

relative payment weights to APC 0601 (Mid Level Clinic Visit) because mid-level clinic 

visits were among the most frequently performed services in the hospital outpatient 

setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the 

median cost for each APC by the median cost for APC 0601 to derive the relative 

payment weight for each APC. 

 Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the 

relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted 

APC 0601 as part of the reconfiguration of the clinic visit APCs. We selected APC 0606 

as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five 

levels). Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42209), for 
CMS-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. Following our standard methodology, but using the 

proposed CY 2012 median cost for APC 0606, for CY 2012, we assigned APC 0606 a 

relative payment weight of 1.00 and divided 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 requires that APC reclassification and 

recalibration changes, wage index changes, and other adjustments be made in a budget 

neutral manner. Budget neutrality ensures that the estimated aggregate weight under the 

OPPS for CY 2012 is neither greater than nor less than the estimated aggregate weight 

that would have been made without the changes. To comply with this requirement 

concerning the APC changes, we 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 applicable to a service 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 process 
CMS-1525-FC 255 

using the proposed CY 2012 unscaled weights rather than scaled weights. We then 

calculated the weight scaler by dividing the CY 2011 estimated 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 using CY 2010 claims data, holding all other 

components of the payment system constant to isolate changes in total weight. Based on 

this comparison, we adjusted the unscaled relative weights for purposes of budget 

neutrality. The proposed CY 2012 unscaled relative payment weights were adjusted by 

multiplying them by a proposed weight scaler of 1.4647 to ensure that the proposed 

CY 2012 relative weights are budget neutral. 

Section 1833(t)(14) of the Act provides the payment rates for certain “specified 

covered outpatient drugs.” That section states that “Additional expenditures resulting 

from this paragraph shall not be taken into account in establishing the conversion factor, 

weighting and other adjustment factors for 2004 and 2005 under paragraph (9) but shall 

be taken into account for subsequent years.” Therefore, the cost of those specified 

covered outpatient drugs (as discussed in section V.B.3. of the proposed rule and this 

final rule with comment period) was included 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 updating 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 relative payment weights listed 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 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 requires us to update the conversion factor 

used to determine payment rates under the OPPS on an annual basis by applying the OPD 

fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 

to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor 

is equal to the hospital inpatient market basket percentage increase applicable to hospital 

discharges under section 1886(b)(3)(B)(iii) of the Act. In the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51689), consistent with current law, based on IHS Global Insight, Inc.’s 

second quarter 2011 forecast of the FY 2012 market 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) requires that the OPD fee schedule increase 

factor under subparagraph (C)(iv) be reduced by the adjustments described in section 

1833(t)(3)(F) of the Act. Specifically, section 1833(t)(3)(F)(i) of the Act requires that the 

OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act 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 with the applicable fiscal year, year, cost reporting period, 
CMS-1525-FC 258 

or other annual period) (the “MFP adjustment”). We refer readers to the FY 2012 

IPPS/LTCH PPS final rule (76 FR 51690 through 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 recent estimate of the market 

basket and MFP adjustment), we would use such data, if appropriate, 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 increase 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 schedule increase factor. Consistent with the 

FY 2012 IPPS/LTCH PPS final rule, we applied 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 associated with both components of the calculation 

(the underlying OPD fee schedule increase factor and the productivity 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 reduction to the OPD fee schedule increase 

factor under subparagraph (C)(iv). Therefore, as we proposed, we are applying a 0.1 

percentage point reduction to the 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 subparagraph (C)(iv) being less than 

0.0 for a year, and may result in payment rates 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 applying an OPD fee schedule increase factor of 

1.9 percent for the CY 2012 OPPS (3.0 percent, which 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, for 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 section 1833(t)(3)(G)(ii) of the Act, as required by section 

1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by 

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 increase applicable under 
CMS-1525-FC 260 

section 1886(b)(3)(B)(iii) of the Act is further reduced by the adjustments necessary to 

satisfy the requirements in sections 1833(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 reasons discussed above, we are adjusting the 

OPD fee schedule increase factor and are 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 section 1833(t)(9)(B) of 

the Act, we further adjusted the conversion factor for CY 2012 to ensure that any 

revisions we make to the updates for a revised wage index and rural adjustment are made 

on a budget neutral basis. We calculated an overall budget neutrality factor of 1.0005 for 

wage index changes by comparing total estimated 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 change 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 adjustment policies discussed in section II.F. of 

this final rule with comment period, we calculated a CY 2012 budget neutrality 
CMS-1525-FC 261 

adjustment factor of 0.9978 by comparing the estimated total payments under section 

1833(t) of the Act, including the cancer hospital adjustment under section 1833(t)(18)(B) 

and 1833(t)(2)(E) of the Act, to hospitals described 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 increase 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 the conversion factor to make the hospital 

adjustment budget neutral. 

For this final rule with comment period, 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 factor is also adjusted by the difference between the 

0.15 percent estimate of pass-through spending for CY 2011 and the 0.22 percent 

estimate of CY 2012 pass-through spending, resulting in an adjustment for CY 2012 of 

0.07 percent. Finally, estimated payments for outliers remain at 1.0 percent of total 

OPPS payments for CY 2012. 

 The OPD fee schedule increase factor of 1.9 percent for CY 2012 (that is, the 

estimate of the hospital market basket increase of 3.0 percent less the 1.0 percentage 
CMS-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 approximately 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 result 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 adjustments which were necessary in order to 

comply with the requirements of the Affordable Care Act. 

As we stated in the proposed rule, hospitals that fail to meet the reporting 

requirements of the Hospital OQR Program would 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 would be used to calculate the OPPS payment 

rates made for their services as required by section 1833(t)(17) of the Act. For a 

complete discussion of the Hospital OQR 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 comment period. To calculate the CY 2012 reduced 

market basket conversion factor for those hospitals 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 reduced OPD fee schedule 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 the Act for failure to 

comply with the Hospital OQR requirements). This resulted in a reduced conversion 
CMS-1525-FC 263 

factor for CY 2012 of $68.616 for those hospitals that fail to meet the Hospital OQR 

requirements (a difference of -$1.40 in the conversion factor relative 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 payment rates for those items and services for 

which payment rates are calculated using median costs. We did not receive any public 

comments on this proposal. Therefore, for 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 that the hospital inpatient market basket 

percentage increase is reduced by the adjustments 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 Hospital 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 requires the Secretary to determine a wage 

adjustment factor to adjust, for geographic wage differences, the portion of the OPPS 

payment rate, which includes the copayment standardized amount, that is attributable to 
CMS-1525-FC 264 

labor and labor-related cost. This portion of the OPPS payment rate is called the OPPS 

labor-related share. This adjustment must be made in a budget neutral manner and 

budget neutrality is discussed in section II.B. of this final rule with comment period.

The OPPS labor-related share is 60 percent of the national OPPS payment. This 

labor-related share is based on a regression analysis that determined that, for all hospitals, 

approximately 60 percent of the costs of services paid under the OPPS were attributable 

to wage costs. We confirmed that this labor-related share for outpatient services is 

appropriate during our regression analysis for the payment adjustment for rural hospitals 

in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, 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 this final rule with comment period, for 

estimating national median APC costs, we standardize 60 percent of estimated claims 

costs for geographic area wage variation using the same FY 2012 pre-reclassified wage 

index that the IPPS uses to standardize costs. This standardization process removes the 

effects of differences in area wage levels from the determination of a national unadjusted 

OPPS payment rate and the copayment amount. 

 As published in the original OPPS April 7, 2000 final rule with comment period 

(65 FR 18545), the OPPS has consistently adopted the final fiscal year IPPS wage index 

as the calendar year wage index for adjusting the OPPS standard payment amounts for 
CMS-1525-FC 265 

labor market differences. Thus, the wage index that applies to a particular acute care 

short-stay hospital under the IPPS also applies to that hospital under the OPPS. As 

initially explained in the September 8, 1998 OPPS proposed rule, we believed that using 

the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and 

logical, given the inseparable, subordinate status of the HOPD within the hospital overall. 

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

annually. 

The Affordable Care Act contains provisions 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 final 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 this 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 continuing to adjust the FY 2012 IPPS wage 

index, as adopted on a calendar year basis for the OPPS, for all hospitals paid under the 
CMS-1525-FC 266 

OPPS, including non-IPPS hospitals (providers that are not paid under 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 specific inpatient hospital with which it is 

associated. Therefore, if the associated hospital is located in a frontier State, the wage 

index adjustment applicable for the hospital will also apply for the affiliated HOPD. We 

refer readers to the FY 2011 and FY 2012 IPPS/LTCH PPS final rules (75 FR 50160 and 

76 FR 51581, respectively) for a detailed discussion regarding this provision, including 

our methodology for identifying which areas meet the definition of frontier States as 

provided for in section 1886(d)(3)(E)(iii)(II)) of the Act. 

In addition to the changes required by the Affordable Care Act, we note that the 

FY 2012 IPPS wage indices continue to reflect a number of adjustments implemented 

over the past few years, including, but not limited to, reclassification of hospitals to 

different geographic areas, the rural floor provisions, an adjustment for occupational mix, 

and an adjustment to the wage index based on commuting patterns of employees (the 

out-migration adjustment). We refer readers to the FY 2012 IPPS/LTCH PPS final rule 

(76 FR 51581 through 51605) for a detailed discussion of all changes to the FY 2012 

IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS final rule with 
CMS-1525-FC 267 

comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed 

discussion of the history of these wage index adjustments as applied under the OPPS. 

Section 3137 of the Affordable Care Act extended, through FY 2010, section 508 

reclassifications as well as certain special exceptions. The most recent extension of the 

provision was included in section 102 of the Medicare and Medicaid Extender Act, which 

extends, through FY 2011, section 508 reclassifications as well as certain special 

exceptions. The latest extension of these provisions expired on September 30, 2011, and 

is no longer applicable effective with FY 2012. As we did for CY 2010, we revised wage 

index values for certain special exception 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 same time period as under the IPPS. In 

addition, because the OPPS pays on a calendar year basis, the effective date under the 

OPPS for all other nonsection 508 and non-special 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 paid under the OPPS to qualify for the 

out-migration adjustment if they are located in a section 505 out-migration county 

(section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 

2003 (MMA)). We note that, because non-IPPS hospitals cannot reclassify, they are 

eligible for the out-migration wage adjustment. Table 4J listed in the FY 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 that will receive the adjustment for FY 2012. 

We note that, beginning with FY 2012, under the IPPS, an eligible hospital that waives its 

Lugar status in order to receive the out-migration adjustment has effectively waived its 

deemed urban status and, thus, is rural for all purposes under the IPPS, including being 

considered rural for the disproportionate share hospital (DSH) payment adjustment, 

effective for the fiscal year in which the hospital receives the out-migration adjustment. 

We refer readers to the FY 2012 IPPS/LTCH PPS 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 including Table 4J as Addendum L to this final 

rule with comment period with the addition of non-IPPS hospitals that will receive the 

section 505 out-migration adjustment under the CY 2012 OPPS. Addendum L is 

referenced in section XVII. of this final rule 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 indices. However, section 1833(t)(2)(D) of 

the Act confers broad discretionary authority upon the Secretary in determining the wage 

adjustment factor used under the OPPS. Specifically, this provision provides that 

“subject to paragraph (19), the Secretary shall determine a wage adjustment factor to 

adjust the portion of payment and coinsurance attributable to labor-related costs for 

relative differences in labor and labor-related costs across geographic regions . . . .” In 
CMS-1525-FC 269 

other prospective payment systems, we do not adopt the adjustments applied to the IPPS 

wage index, such as the out-migration adjustment, reclassifications, and 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 reasonable and logical, given the 

inseparable, subordinate status of the outpatient department within the hospital overall. 

However, in recent years, we have become concerned that hospitals converting 

their status significantly inflate wage indices across a State. In the FY 2008 IPPS final 

rule (72 FR 47324 and 47325), we discussed 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 Massachusetts can expect an approximate 8.7percent 

increase in IPPS payments due to the conversion 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 than a 0.4 percent total 

payment reduction to all IPPS hospitals). 

In addition to the CAH conversion, we recently 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, through 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 allowing payment redistributions of this magnitude. 
CMS-1525-FC 270 

We believe the above discussions demonstrate 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 require the Secretary to 

use the IPPS wage adjustment factor to wage adjust OPPS payments and copayments, nor 

to apply to OPPS payment and copayment calculations 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 the rural floor, result in significant fluctuations in the wage 

index within a State. One option 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 small 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 apply within-State rural budget neutrality to the OPPS wage 

index as we did for both the IPPS and OPPS wage index beginning in FY 2009. In the 

proposed rule, we sought public comment on whether to: (1) adopt the IPPS wage index 

for the OPPS in its entirety including the rural floor, geographic reclassifications, and all 

other wage index adjustments (our current policy); (2) adopt the IPPS 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 rural floor wage 

index; (3) adopt the IPPS wage index for the OPPS in its entirety except apply rural floor 

budget neutrality within each State instead of nationally; or (4) adopt another decision 
CMS-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, and without including wage data associated 

with hospitals reclassified from urban to rural status under section 1886(d)(8)(E) of the 

Act. Such a policy would eliminate the incentive to reclassify from urban to rural status 

primarily to increase rural floors across a State, and would ensure that the rural floor is 

based upon hospitals located 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 commenters believed that hospital inpatient 

and outpatient departments are “inseparable” because 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 comprehensive wage index reform. These 

commenters believed that only comprehensive wage index reform can revise the wage 

index in such as way as “to minimize volatility of the wage index and remove incentives 

to game the system.” Commenters stated that an additional reason for maintaining the 

current policy was that different wage indices for inpatient and outpatient payments 
CMS-1525-FC 272 

would add a level of administrative complexity that is overly burdensome and 

unnecessary. 

Several commenters expressed a preference for wage index policy option 2 

included in the proposed rule (to adopt the IPPS 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 rural floor wage index). These 

commenters typically viewed this option to be the best in terms of addressing current 

inequities. However, some of the commenters 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 that 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 national level adjustment was in keeping with 

Congressional intent, especially given that Congress enacted 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 applied at the State versus national levels. 

Several commenters favored option 3 because they supported the application of 

statewide level budget neutrality for the rural floor policy. These commenters favored 

basing the wage index on Bureau of Labor Statistics (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, although supportive of systematic wage index 
CMS-1525-FC 273 

reform, stated that CMS “should not wait for 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 decision 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 policy 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 unnecessarily harm rural providers. Another 

commenter that supported systematic wage index reform advocated not making changes 

until reports from the Institute of Medicine 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 policy 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 various methods and wage index options that we 

might consider under the OPPS to address manipulation of wage index adjustment 

policies, and, in this specific case, the rural 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 increase the rural floor for the State, which 
CMS-1525-FC 274 

would increase IPPS and OPPS payments to that 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. Similarly, we are aware of requests 

from urban hospitals to convert to rural hospital status, which would inflate those States’ 

rural floors. While we recognize that conversions 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 that stated that maintaining the current 

policy for CY 2012 would be the best option, given the broader wage index reform 

currently under development and consideration. 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 significant wage index revisions. In 

response to commenters’ recommendations 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 through 51825), that displays the impact of 

the rural floor and imputed floor policies with national budget neutrality on OPPS 

hospitals and their payments by State. This table 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 using only data from hospitals that are 

geographically rural according to OMB and MSA designations, and without including 
CMS-1525-FC 275 

wage data associated with hospitals reclassified from urban to rural status under section 

1886(d)(8)(E) of the Act. One commenter opposed using data from geographically rural 

hospitals alone in setting the rural floor because reclassified hospitals are considered rural 

for all payment policies. Several commenters agreed that wage data associated with 

hospitals that are reclassified should be excluded from calculation of the rural floor. One 

commenter questioned why it is necessary to maintain the rural floor 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 status 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 final rule (76 FR 51788) should also apply 

under the OPPS. 

Response: The increase cited by the commenter is limited to IPPS payments. 

Budget neutrality (including that for the rural floor) is calculated prospectively each year 

under the OPPS. While we have historically adopted the IPPS wage index when 

developing the wage indices for calculating payments under the OPPS, the budget 

neutrality factors that applied to the standardized amount under IPPS as a result of the 

rural floor were not applied to the OPPS conversion factor, and thus would not have any 

effect on OPPS budget neutrality. 
CMS-1525-FC 276 

After consideration of the public comments we received, we are finalizing our 

policy to adopt the FY 2012 IPPS wage index for the CY 2012 OPPS in its entirety 

including the rural floor, geographic 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 hospitals 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 calculated from the hospital’s most recent cost 

report to determine outlier payments, payments for pass-through devices, and monthly 

interim transitional corridor payments under the OPPS during the PPS year. Medicare 

contractors cannot calculate a CCR for some hospitals because there is no cost report 

available. For these hospitals, CMS uses the statewide average default CCRs to 

determine the payments mentioned above until a hospital’s Medicare contractor is able to 

calculate the hospital’s actual CCR from its most recently submitted Medicare cost 

report. These hospitals include, but are not limited to, hospitals that are new, have not 

accepted assignment of an existing hospital’s provider agreement, and have not yet 
CMS-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 ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final 

rule with comment period (73 FR 68594 through 68599) in the context of our adoption of 

an outlier reconciliation policy for cost reports beginning on or after January 1, 2009. 

 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 listed 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 total costs to total charges for those cost centers relevant to 

outpatient services from each hospital’s most recently submitted cost report, weighted by 

Medicare Part B charges. We also adjusted ratios from submitted cost reports to reflect 

final settled status by applying the differential between settled to submitted overall CCRs 

for the cost centers relevant to outpatient services from the most recent pair of final 

settled and submitted cost reports. We then weighted each hospital’s CCR by the volume 

of separately paid line-items on hospital claims corresponding to the year of the majority 
CMS-1525-FC 278 

of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior 

OPPS rules for a more detailed discussion of our established methodology for calculating 

the statewide average default CCRs, including the hospitals used in our calculations and 

our trimming criteria. 

We did not receive any public comments on our CY 2012 proposal. We are 

finalizing our proposal to apply our standard methodology of calculating the statewide 

average default CCRs using the same hospital overall CCRs that we used to adjust 

charges to costs on claims data for setting the CY 2012 OPPS relative weights. We used 

this methodology to calculate the statewide 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. For Maryland, we used an overall weighted 

average CCR for all hospitals in the Nation as a substitute for Maryland CCRs. Few 

hospitals in Maryland are eligible to receive payment under the OPPS, which limits the 

data available to calculate an accurate and representative CCR. The weighted CCR is 

used for Maryland because it takes into account each hospital’s volume, rather than 

treating each hospital equally. We refer readers to the CY 2005 OPPS final rule with 

comment period (69 FR 65822) for further discussion and the rationale for our 

longstanding policy of using the national average CCR for Maryland. In general, 
CMS-1525-FC 279 

observed changes in the statewide 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 finalized statewide average default CCRs for OPPS 

services furnished on or after January 1, 2012. 

TABLE 11.–-CY 2012 STATEWIDE 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 0.308
CMS-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 0.351
CMS-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 0.362
CMS-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 (referred to as the pre-BBA amount). Section 

1833(t)(7) of the Act provides that the TOPs were temporary payments for most 

providers and intended to ease their transition from the prior reasonable cost-based 

payment system to the OPPS system. There are two 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 its pre-BBA amount in the applicable year. 

Section 1833(t)(7)(D)(i) of the Act originally provided for TOPs to rural hospitals with 
CMS-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 1833(t)(7)(D)(i) of the Act to extend these 

payments through December 31, 2005, for rural hospitals with 100 or fewer beds. 

Section 411 also extended the TOPs to sole community hospitals (SCHs) located in rural 

areas for services furnished during the period that began with the provider’s first cost 

reporting period beginning on or after January 1, 2004, and ending on 

December 31, 2005. Accordingly, the authority for making TOPs under section 

1833(t)(7)(D)(i) of the Act, as amended by section 411 of Pub. L. 108-173, for rural 

hospitals having 100 or fewer beds and SCHs located in rural areas expired on 

December 31, 2005. 

 Section 5105 of Pub. L. 109-171 (the Deficit Reduction Act of 2005) extended the 

TOPs for covered OPD services furnished on or after January 1, 2006, and before 

January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. Section 

5105 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 difference between the two amounts for CY 2006, by 

90 percent of the amount of that difference for CY 2007, and by 85 percent of the amount 

of that difference for CY 2008. 

 For CY 2006, we implemented section 5105 of Pub. L. 109-171 through 

Transmittal 877, issued on February 24, 2006. In the Transmittal, we did not specifically 
CMS-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 the Act. Accordingly, 

under the statute, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC final rule 

with comment period (71 FR 68010), we stated that EACHs were not eligible for TOPs 

under Pub. L. 109-171. However, we stated they were eligible for the adjustment for 

rural SCHs authorized under section 411 of Pub. L. 108-173. In the CY 2007 OPPS/ASC 

final rule with comment period (71 FR 68010 and 68228), we updated §419.70(d) of our 

regulations to reflect the requirements of Pub. L. 109-171. 

 In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated that, effective 

for services provided on or after January 1, 2009, rural hospitals having 100 or fewer 

beds that are not SCHs would no longer be eligible for TOPs, in accordance with section 

5105 of Pub. L. 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 

proposed rule, section 147 of Pub. L. 110-275 amended section 1833(t)(7)(D)(i) of the 

Act by extending the period of TOPs to rural hospitals with 100 beds or fewer for 1 year, 

for services provided before January 1, 2010. Section 147 of Pub. L. 110-275 also 

extended TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD 

services provided on or after January 1, 2009, and before January 1, 2010. In accordance 

with section 147 of Pub. L. 110-275, when the OPPS payment is less than the provider’s 

pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the 

difference between the two payment amounts for CY 2009. 

For CY 2009, we revised our regulations at §§ 419.70(d)(2) and (d)(4) and added 

a 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 technical changes to § 419.70(d)(2) to more precisely capture 

our existing policy and to correct an inaccurate cross-reference. We also made technical 

corrections to the cross-references in paragraphs (e), (g), and (i) of § 419.70. 

For CY 2010, we made a technical correction to the heading of § 419.70(d)(5) to 

correctly identify the policy as described in the subsequent regulation text. The 

paragraph heading now indicates that the adjustment applies to small SCHs, rather than to 

rural SCHs. 

 In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60425), we 

stated that, effective for services provided on or after January 1, 2010, rural hospitals and 

SCHs (including EACHs) having 100 or fewer beds would no longer be eligible for 

TOPs, in accordance with section 147 of Pub. L. 110-275. However, subsequent to 

issuance of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of 

the Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act by extending 

the period of TOPs to rural hospitals that are not SCHs with 100 beds or fewer for 1 year, 

for services provided before January 1, 2011. Section 3121(a) of the Affordable Care Act 

amended section 1833(t)(7)(D)(i)(III) of the Act and extended the period of TOPs to 

SCHs (including EACHs) for 1 year, for services provided before January 1, 2011, and 

section 3121(b) of the Affordable Care Act removed the 100-bed limitation applicable to 

such SCHs for covered OPD services furnished on and after January 1, 2010, and before 

January 1, 2011. In accordance with section 3121 of the Affordable Care Act, when the 

OPPS payment is less than the provider’s pre-BBA amount, the amount of payment is 

increased by 85 percent of the amount of the difference between the two payment 
CMS-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 Medicaid Extenders Act of 2010 (MMEA) 

(Pub. L. 111-309) extended for 1 year the hold harmless provision for a rural hospital 

with 100 or fewer beds that is not an SCH (as defined in section 1886(d)(5)(D)(iii) of the 

Act). Therefore, for such a hospital, for services furnished before January 1, 2012, when 

the PPS amount is less than the provider’s pre-BBA amount, the amount of payment is 

increased by 85 percent of the amount of the difference between the two payments. In 

addition, section 108 of the MMEA also extended for 1 year the hold harmless provision 

for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs) and 

removed the 100-bed limit applicable to such SCHs for covered OPD services furnished 

on or after January 1, 2010 and before January 1, 2012. Therefore, for such hospitals, 

for services furnished before January 1, 2012, when the PPS amount is less than the 

provider’s pre-BBA amount, the amount of payment is increased by 85 percent of the 

amount of the difference between the two payments. Effective for services provided on 

or after January 1, 2012, a rural hospital with 100 or fewer beds that is not an SCH and an 

SCH (including EACHs) will no longer be eligible 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 regulations at § 419.70(d) to conform the regulation text to the 

self-implementing provisions of section 108 of the MMEA described above. 
CMS-1525-FC 287 

We did not receive any public comments on our proposed policy to update the 

language in § 419.70(d) of the regulations. 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, biologicals, brachytherapy sources, and devices 

paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of 

the Act, as added by section 411 of Pub. L. 108-173. Section 411 gave the Secretary the 

authority to make an adjustment to OPPS payments for rural hospitals, effective 

January 1, 2006, if justified by a study of the difference in costs by APC between 

hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in 

costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment 

adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the 

OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and 

devices paid under the pass-through payment policy, in accordance with section 

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

In CY 2007, we became aware that we did not specifically address whether the 

adjustment applies to EACHs, which are considered to be SCHs under section 

1886(d)(5)(D)(iii)(III) of the Act. Thus, under the statute, EACHs are treated as SCHs. 

Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 
CMS-1525-FC 288 

68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) to clarify 

that EACHs are also eligible to receive the rural SCH adjustment, assuming these entities 

otherwise meet the rural adjustment criteria. Currently, three hospitals are classified as 

EACHs, and as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no 

longer become newly classified as an EACH. 

This adjustment for rural SCHs is budget neutral and applied before calculating 

outliers and copayment. As we stated in the CY 2006 OPPS final rule with comment 

period (70 FR 68560), we would not reestablish the adjustment amount on an annual 

basis, but we may review the adjustment in the future and, if appropriate, would revise 

the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including 

EACHs, again in CYs 2008 through 2011. Further, in the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to 

specify, in general terms, that items paid at charges adjusted to costs by application of a 

hospital-specific CCR are excluded from the 7.1 percent payment adjustment. 

 For the CY 2012 OPPS, we proposed to continue our policy of a budget neutral 

7.1 percent payment adjustment for rural SCHs, including EACHs, for all services and 

procedures paid under the OPPS, excluding separately payable drugs and biologicals, 

devices paid under the pass-through payment policy, and items paid at charges reduced to 

costs (76 FR 46232). In the CY 2012 OPPS/ASC proposed rule, we indicated that we 

intend to reassess the 7.1 percent adjustment in the near future by examining differences 

between urban hospitals’ costs and rural hospitals’ 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 finalizing 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 OPPS in CY 2012, excluding separately payable 

drugs and biologicals, devices paid under the pass-through payment policy, and items 

paid at charges reduced to costs because we continue to believe that the adjustment is 

appropriate for application in CY 2012. 

F. OPPS Payments to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) 

of the Act

1. Background 

Since the inception of the OPPS, which was authorized by the Balanced Budget 

Act of 1997 (BBA), Medicare has paid cancer hospitals identified in section 

1886(d)(1)(B)(v) of the Act (cancer hospitals) under the OPPS for covered outpatient 

hospital services. There are 11 cancer hospitals that meet the classification criteria in 

section 1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted from 

payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget 

Refinement Act of 1999, Congress created section 1833(t)(7) of the Act, “Transitional 

Adjustment to Limit Decline in Payment,” to serve as a permanent payment floor by 

limiting cancer hospitals’ potential losses under the OPPS. Through section 

1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference 

between payments for covered outpatient services under the OPPS and a “pre-BBA” 

amount. That is, cancer hospitals are permanently held harmless to their “pre-BBA” 
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 section 1833(t)(7)(F) of the 

Act. The “pre-BBA” payment amount is an amount equal to the product of the 

reasonable cost of the hospital for covered outpatient services for the portions of the 

hospital’s cost reporting period (or periods) occurring in the current year and the base 

payment-to-cost ratio (PCR) for the hospital. The “pre-BBA” amount, including the 

determination of the base PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on 

Worksheet E, Part B, of the Hospital and Hospital Health Care Complex Cost Report 

(Form CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 

1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations. Almost all of 

the 11 cancer hospitals receive TOPs each year. 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, outpatient costs incurred by cancer hospitals 

described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed the 

costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as 

determined appropriate by the Secretary. In addition, section 3138 of the Affordable 

Care Act requires the Secretary to take into consideration the cost of drugs and 

biologicals incurred by such hospitals when studying cancer hospital costliness. Further, 
CMS-1525-FC 291 

section 3138 of the Affordable Care Act provides that if the Secretary determines that 

cancer hospitals’ costs with respect to APC groups are determined to be greater than the 

costs of other hospitals furnishing services under section 1833(t) of the Act, the Secretary 

shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect 

these higher costs. Cancer hospitals described in section 1886(d)(1)(B)(v) of the Act 

remain eligible for TOPs (which are not budget neutral) and outlier payments (which are 

budget neutral). 

2. Study of Cancer Hospitals’ Costs Relative to Other Hospitals 

It has been our standard analytical approach 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 hospital 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 discussion 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 the costs faced by individual hospitals, whether 

urban or rural, are a function of many varying factors, including local labor supply and 

the complexity and volume of services provided (70 FR 42699). 

In constructing our analysis of cancer hospitals’ costs with respect to APC groups 

relative to other hospitals, we considered whether our standard analytical approach to use 

a combination of explanatory and payment regression models would lead to valid results 
CMS-1525-FC 292 

for this particular study, or whether we should develop a different or modified analytic 

approach. We note that the analyses presented 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 Act is specifically limited to identifying an 

adjustment for 11 cancer hospitals to the extent 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 size (11 out of approximately 4,000 hospitals paid 

under the OPPS), we were concerned that the standard explanatory and payment 

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 

hospitals must include the cost of drugs and biologicals. 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 calculate a proposed cancer hospital adjustment, 

we determined it still would be appropriate to construct our usual provider-level 

analytical dataset consisting of variables related to assessing costliness with respect to 
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APC groups, including average cost per unit for a hospital and the hospital’s average 

APC relative weight as an indicator of the hospital’s resource intensity, as measured by 

the APC relative weights. We used these variables to calculate univariate statistics that 

describe the costliness with respect to APC groups and related aspects of cancer hospitals 

and other hospitals paid under the OPPS. While descriptive statistics cannot control for 

the myriad factors that contribute to observed costs, we believed that stark differences in 

cost between cancer hospitals and other hospitals paid under the OPPS that would be 

observable by examining descriptive univariate statistics would provide some indication 

of relative costliness. We began our analysis of the cancer hospitals by creating an 

analytical dataset of hospitals billing under the OPPS for CY 2009 (a total of 3,933) that 

were included in our claims dataset for establishing the CY 2011 OPPS proposed APC 

relative weights. This analytical dataset included the 3,933 OPPS hospitals’ total 

estimated cost (including packaged cost), total 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 for each hospital (“hospital-level”). These 

files consist of hospital-level aggregate costs (including the cost of packaged items and 

services), total estimated discounted units under the modeled proposed CY 2011 OPPS, 

total estimated volume of number of occurrences of separately payable HCPCS codes 

under the modeled proposed CY 2011 OPPS, and total relative weight of separately 

payable services under the modeled proposed CY 2011 OPPS. After summarizing 

modeled payment to the hospital-level, we removed 48 hospitals in Puerto Rico from our 
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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 the calculation of 

hospital-weighted statistics. We then removed an additional 66 hospitals with a cost per 

unit of more than 3 standard deviations from 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 dataset with 11 cancer hospitals and 3,808 other 

hospitals. 

We included the following standard hospital-level variables that describe hospital 

costliness in our analysis file: outpatient cost per discounted unit under the modeled 

CY 2011 OPPS (substituting a cost per administration, rather than a cost per unit, for 

drugs and biologicals); each hospital’s proposed CY 2011 wage index as a measure of 

relative labor cost; the service-mix index, or volume-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 proposed 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 costliness of classes of hospitals 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 measured by the proposed CY 2011 OPPS relative 

weights, and standardizing the cost per discounted unit by the service mix index creates 
CMS-1525-FC 295 

an adjusted cost per unit estimate that reflects the remaining relative costliness of a 

hospital remaining after receiving the estimated payments that we proposed to make 

under the CY 2011 OPPS. In short, if a class of hospitals demonstrates 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 statistics for cancer hospitals appearing in Table 12 

below. We note that because drugs and biologicals are such a significant portion of the 

services that the cancer hospitals provide, and because section 3138 of the Affordable 

Care Act explicitly requires us to consider the cost of drugs and biologicals, we included 

the cost of these items in our total cost calculation for each hospital, 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 cancer 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 hospitals’ average cost 

per discounted unit remained high even after 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 discounted 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 inferential statistical models that we typically 

employ. 
CMS-1525-FC 296 

TABLE 12.—MEANS AND STANDARD DEVIATIONS FOR KEY VARIABLES 

BY CANCER AND NON-CANCER OPPS HOSPITALS 

Cancer Hospitals 

Non-Cancer 

Variable Hospitals 

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 per administration rather than per unit. 

3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals 

Having reviewed the cost data from the standard 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 hospital cost report 

data from Worksheet E, Part B (where TOPs are calculated on the Hospital and Hospital 

Health Care Complex Cost Report 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 based on cost report data. Analyses on 

our standard analytic database and descriptive statistics presented in Table 12 above did 

not consider TOPs in assessing costliness of cancer hospitals relative to other hospitals 

furnishing services under section 1833(t) of the Act. There were several reasons for this. 

One reason was that TOPs have no associated relative weight that could be included in an 
CMS-1525-FC 297 

assessment of APC-based payment. TOPs are 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 payment and cost data available on Worksheet 

E, Part B. These data include aggregate OPPS payments, including outlier payments and 

the cost of medical and other health services. These aggregate measures of cost and 

payment also include the cost and payment for drugs and biologicals and other 

adjustments that we typically include in our regression modeling, including wage index 

adjustment and rural adjustment, if applicable. While these cost report data cannot 

provide an estimate of cost per unit after controlling for other potential factors that could 

influence cost per unit, we used this aggregate cost and payment data to examine the 

cancer hospitals’ OPPS PCR and compare these 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 indicated 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 used 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 payments 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), whereas 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 findings that the cancer hospitals cost per 

discounted unit standardized for service mix remains much higher than the standardized 

cost per discounted unit of all 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 concerns outlined above with 

respect to the small number of hospitals, and because of the challenges associated with 

accurately including drug and biological costs in our standard regression models. We 

believed that an appropriate adjustment would 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 by 
CMS-1525-FC 299 

adjusting each cancer hospital’s OPPS APC payment by the percentage difference 

between the hospital’s individual PCR (without TOPs) and the weighted average PCR of 

the other hospitals furnishing services under the OPPS. This cancer hospital payment 

adjustment proposed for CY 2011 would have resulted 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 the 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 hospital 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 harmless 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 hospitals that would experience a payment reduction under 

the CY 2011 proposal, commenters also suggested that the associated budget neutral 

payment reduction of 0.7 percent was not appropriate or equitable to other OPPS 

hospitals. 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 would experience higher copayments due to the proposed 
CMS-1525-FC 300 

methodology. These commenters encouraged CMS to implement the adjustment in a 

way that does not increase beneficiary copayments. As indicated in the CY 2011 

OPPS/ASC final rule with comment period (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 reflecting 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 cancer 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 these 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 between the hospital’s individual 
CMS-1525-FC 301 

PCR and the weighted average PCR of other hospitals furnishing services under the 

OPPS in the CY 2012 dataset. This methodology resulted in estimated percentage 

payment adjustments for the 11 cancer hospitals that ranged between 10.1 percent and 

61.8 percent, with an estimated aggregate increase 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 year. The 340B drug program allows certain 

hospitals to purchase certain outpatient drugs at reduced prices. We understand from 

commenters that, currently, two cancer hospitals 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 year’s calculation. 

Comment: Many commenters urged CMS to consider TOPs when calculating the 

cancer hospital payment adjustment. The commenters stated that the proposed 

methodology to adjust each cancer hospital’s OPPS payment by the percentage difference 

between their individual PCR without TOPs and 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 substitution of TOPs for APC payments, in turn, 

results in savings to the Medicare program which, the commenters asserted, is in 
CMS-1525-FC 302 

violation of the statutory requirement that the policy be budget neutral. The commenters 

suggested that because the Congressional Budget 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 associated budget neutral payment reduction 

to other hospitals is not appropriate or equitable to other hospitals paid under the OPPS. 

The commenters indicated that it was not the intent of Congress for the provision to 

impact the non-cancer hospitals in a manner that 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 hospitals 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 beneficiary copayments, such as providing the adjustment amount 

in aggregate instead of on a per claim 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 outpatient services at the 
CMS-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 payments through the OPPS. These commenters 

asserted that, because concentration of outpatient services was not considered in 

establishing the benchmark, the proposed adjustment was not valid. 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 hospitals 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 expect 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 stability and predictability over the long term. 

Other commenters supported the proposal to annually recalculate 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 order 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 that costs are higher in cancer 

hospitals and that an adjustment is warranted. This commenter noted that the CMS 
CMS-1525-FC 304 

analysis did not control for the many factors that might explain differences in costliness 

or assess to what extent cost differences could be explained by differences in efficiency. 

This commenter also asserted that the exclusion of TOPs from the comparison of 

costliness distorts the analysis and makes the findings invalid. Another commenter 

suggested that CMS examine the costs of cancer patients generally for all hospitals and 

compare the costs of these 11 hospitals to all hospitals providing cancer care to ensure an 

adjustment does not reinforce high-cost characteristics of the 11 designated cancer 

hospitals. This commenter also indicated that additional payments to cancer hospitals 

should be guided by quality of care and, because the Affordable Care Act requires the 11 

cancer hospitals to begin submitting quality data in fiscal year 2014, suggested that the 

additional payments to cancer hospitals be delayed until these quality data are available 

to serve as a basis for the payment adjustment. 

Response: We analyzed the various issues raised by commenters, and in this final 

rule with comment period, we are adopting final policies that reflect a number of 

modifications to our proposed policies. We believe that a number of points raised by the 

commenters have merit and, consistent with our broad authority under the statute, we are 

adopting some (but not all) of their recommendations. 

As discussed above, section 3138 of the Affordable 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 Security Act to address higher costs incurred by cancer 

hospitals. Section 1833(t)(2)(E) of the Act, in turn, directs the Secretary to establish, “in 
CMS-1525-FC 305 

a budget neutral manner,” payment “adjustments as determined to be necessary to ensure 

equitable payments, such as adjustments 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 provision 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 hospital payment adjustment under sections 

1833(t)(18) and 1833(t)(2)(E) of the Act. Under the statute, however, 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, the 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 provision, 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, therefore, is the “amount payable 

under this title.” To the extent the PPS amount 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 establishing, 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 hospital payment adjustment changes the form 

of payments (from TOPs to cancer hospital adjustment payments). The cancer hospital 

payment adjustment presents a unique circumstance insofar as the cancer hospital 

adjustment can result in lower TOPs. Consistent 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 with the cancer hospital payment adjustment 

under sections 1833(t)(18) and 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 significantly 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 cancer hospital payment adjustment is 0.9978. In percentage 

terms, the budget neutrality reduction 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 associated with the cancer hospital payment 

adjustment is an estimated $71 million for CY 2012 based on updated cost report 

information. That is, the cancer hospital payment adjustment is estimated to increase 
CMS-1525-FC 307 

total payments by $71 million over the baseline (which accounts for TOPs) and this 

amount must be offset by reductions in other payments (resulting in the 0.2 percent 

reduction to the conversion factor). For this final rule with comment period, we are 

adopting the above-described approach of calculating budget neutrality, consistent with 

our broad authority under the statute, for the reasons stated above and because we believe 

it will increase equity to hospitals paid under 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 aggregate 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 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. 

Consistent with this broad authority, we agree 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 hospital, as opposed to an adjustment at the APC 

level, thereby avoiding the higher copayments for beneficiaries associated with providing 

the adjustment on a claims basis through increased APC payments. Therefore, in order to 

implement the cancer hospital payment adjustment in a way that does not increase 

beneficiary copayments as urged by commenters, and in light of the discretion afforded 

by the statute, we are providing the cancer hospital payment adjustment as an aggregate 

payment to each cancer hospital at cost report settlement instead of through enhanced 
CMS-1525-FC 308 

APC payments as proposed. As explained further below, the aggregate adjustment 

adopted in this final rule with comment period (like the proposed APC-level adjustment) 

is based on the comparison of each cancer hospital’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 suggested that CMS take into account the cancer 

hospitals’ significant Medicare outpatient concentration (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 account the portion of the cancer hospitals’ 

total Medicare payments that are OPPS payments compared to the non-cancer hospitals’ 

total Medicare payments that are OPPS payments. Section 3138 of the Affordable Care 

Act provides that if the Secretary determines under section 1833(t)(18)(A) of the Act that 

costs incurred by cancer hospitals exceed those costs of other hospitals furnishing 

services under section 1833(t), the Secretary shall provide for an appropriate adjustment 

to reflect the higher costs. We are not persuaded that Medicare outpatient concentration 

in and of itself has an impact on the costs incurred 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, application 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 with relatively large outlier payments will be 

provided less additional payment than intended under the proposed methodology because 

the payment adjustment would be applied only 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 provide 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 calculation of the PCRs used to determine the 

payment adjustment amount. 

In response to the commenters who suggested that annual recalculation of the 

PCRs for purposes of calculating the cancer hospital 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 340B drug program, we believe that annual 

recalculation of the cancer hospital payment adjustment will provide a timely assessment 
CMS-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 the proposed cancer hospital adjustment for 

CY 2011 for a variety of reasons, as explained in the CY 2011 OPPS/ASC 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 implement a cancer hospital adjustment for 

CY 2011. Moreover, the obligation to provide a cancer hospital payment adjustment is 

triggered only insofar as the Secretary determines 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 furnishing 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 example, a commenter suggested that the CMS 

analysis was inadequate to conclude that costs are higher in cancer hospitals and that an 

adjustment was warranted. Given the uncertainty 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 were not reduced for CY 2011 to offset the 

increased payments from the adjustment. 
CMS-1525-FC 311 

Regarding the commenter’s concerns related to the agency’s study conducted 

pursuant to section 1833(t)(18)(A) of the Act, as detailed above and in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 71883), we determined that we could 

not use our standard analytical 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 control for the many factors that might explain 

differences in costliness, as suggested by the commenter, we believe that this approach 

would lead to imprecise estimates of costliness 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 cancer care at other hospitals 

furnishing services under section 1833(t) of the Act, we believe such an approach is not 

appropriate because section 3138 of the Affordable Care Act does not specify that the 

comparison be made with regard to particular APC groups related to cancer services. 

In addition, with respect to the commenter who believed that the amount 

of additional payments to cancer hospitals should be guided by quality of care 

information and, therefore, be delayed until 2014 when the cancer hospitals begin to 

submit quality data to CMS, we note that section 1833(t)(18) of the Act did not include 

such a requirement nor did it include quality measures as a requirement for the additional 

payments to cancer hospitals. Therefore, we do not believe it is appropriate to delay 
CMS-1525-FC 312 

implementation of the cancer hospital payment 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 policies regarding the cancer hospital payment 

adjustment including modifications to our CY 2012 proposal with regard to the 

calculation of the budget neutrality adjustment associated with the cancer hospital 

payment adjustment. The budget neutral payment 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 total payments to cancer hospitals without 

the cancer adjustment, including TOPs. Therefore, 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 percent 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 report 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 final 
CMS-1525-FC 313 

rule with comment period, we are adopting a policy under which the amount of the 

payment adjustment will be made on an aggregate 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 hospital’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 target 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 payment 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 furnishing 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 proposed rule, the target PCR is set in 

advance and is calculated using the most recent 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 payment 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 dataset to the hospitals with CY 2010 claims 

data that we use to model the impact of the CY 2012 final APC relative weights (4,018 
CMS-1525-FC 314 

hospitals) because it is appropriate to use the same set of hospitals that we are using to 

calibrate the modeled CY 2012 OPPS. The cancer 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, therefore, their inclusion may bias the 

calculation of hospital-weighted statistics. We also removed 223 hospitals with cost 

report data that were not complete (missing aggregate OPPS payments (which include 

outliers), missing aggregate cost data, or missing both), so that all cost reports in the 

study would have both the payment and cost data necessary to calculate a PCR for each 

hospital, leading to a final analytic file of 3,748 hospitals with cost report data. We 

believe that the costs and PPS payments reported on Worksheet E, Part B, for the 

hospitals included in our CY 2012 modeling is sufficiently accurate for assessing 

hospital’s relative costliness because 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 approximately 91 percent of reasonable cost 

(weighted average PCR of 0.91). Individual cancer hospital’s OPPS PCRs range from 
CMS-1525-FC 315 

approximately 0.63 to approximately 0.78. Based 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. Under the policies in this final rule with 

comment period, the payment adjustments for cancer 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, including 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, including the cancer hospital 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 SETTLEMENT 
CMS-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 traditional multiple threshold, in order to better 

target outliers to those high cost and complex procedures where a very costly service 

could present a hospital with significant financial loss. If the cost of a service meets both 

of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier 

payment is calculated as 50 percent of the amount by which the cost of furnishing the 
CMS-1525-FC 317 

service exceeds 1.75 times the APC payment rate. Before CY 2009, this outlier payment 

had historically been considered a final payment by longstanding OPPS policy. We 

implemented a reconciliation process similar to the IPPS outlier reconciliation process for 

cost reports with cost reporting periods beginning on or after January 1, 2009 

(73 FR 68594 through 68599). 

It has been our policy for the past several years to report the actual amount of 

outlier payments as a percent of total spending in the claims being used to model the 

proposed OPPS. Our current estimate of total outlier payments as a percent of total 

CY 2010 OPPS payment, using available CY 2010 claims and the revised OPPS 

expenditure estimate for the 2011 Trustee’s Report, 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 total aggregated OPPS 

payments. 

As explained in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71887 through 71889), we set our projected target for aggregate outlier payments 

at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2011. 

The outlier thresholds were set so that estimated CY 2011 aggregate outlier payments 

would equal 1.0 percent of the total estimated aggregate payments under the OPPS. 

Using CY 2010 claims data and CY 2011 payment 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 comment 
CMS-1525-FC 318 

period. We note that we provide estimated CY 2012 outlier payments for hospitals and 

CMHCs with claims included in the claims data that we used to model impacts in the 

Hospital–Specific Impacts - Provider-Specific Data file on the CMS Web site at: 

http://www.cms.gov/HospitalOutpatientPPS/. 

2. Proposed Outlier Calculation 

In the CY 2012 OPPS/ASC proposed rule (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, specifically 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 threshold 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 policy that if a CMHC’s cost for partial 

hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 

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

for CMHCs), exceeds 3.40 times the payment for APC 0173, the outlier payment would 

be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 

0173 payment rate. For further discussion of CMHC outlier payments, we refer readers 

to section VIII.C. of this final rule with comment period. 

To ensure that the estimated CY 2012 aggregate outlier payments would equal 

1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the 

hospital outlier threshold be set so that outlier payments would be triggered when the cost 
CMS-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 plus a $2,100 fixed-dollar threshold. This 

proposed threshold reflected the methodology discussed below in this section, as well as 

the proposed APC recalibration for CY 2012. 

We calculated the proposed fixed-dollar threshold for the proposed rule using 

largely the same methodology 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 maintained by the Medicare contractors and 

used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS 

update lag by 2 years. For the proposed rule, we used CY 2010 claims to model the 

CY 2012 OPPS. In order to estimate the proposed 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 charge 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 these 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 outpatient cost centers to capture costs and charges 

for inpatient and outpatient services. 

As noted in the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 68011), we are concerned that we could systematically overestimate the OPPS 

hospital outlier threshold if we did not apply a CCR inflation adjustment factor. 

Therefore, in the CY 2012 OPPS/ASC proposed rule, we proposed to apply the same 

CCR inflation adjustment factor that we proposed to apply for the FY 2012 IPPS outlier 

calculation to the CCRs used to simulate the 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 that 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 2011 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 approximate CY 2012 charges). We simulated 

aggregated CY 2012 hospital outlier payments using these costs for several different 

fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that 

outlier payments would continue to be made at 50 percent of the amount by which the 

cost of furnishing the service would exceed 1.75 times the APC payment amount, until 
CMS-1525-FC 321 

the total outlier payments equaled 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 payment that equals 50 percent of the amount by 

which the cost of furnishing the service exceeds 1.75 times the APC payment amount 

when both the 1.75 multiple threshold and the proposed fixed-dollar threshold of $2,100 

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 calculated as 50 percent of the amount by which 

the cost exceeds 3.40 times the APC 0173 payment rate. 

 Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under 

section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required 

for the quality measures selected by the Secretary, in the form and manner required by 

the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to 

their OPD fee schedule increase factor, that is, the annual payment update factor. The 

application of a reduced OPD fee schedule increase factor results in reduced national 

unadjusted payment rates that will apply to certain outpatient items and services 

furnished by hospitals that are required to report outpatient quality data and that fail to 

meet the Hospital OQR requirements. For hospitals 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 the reduced payments for purposes of outlier 
CMS-1525-FC 322 

eligibility and payment calculation. 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 would reduce the number of cases eligible for outlier payments 

across the industry. Another commenter supported the proposed policy of estimating 

outlier payments to be 1.0 percent of the estimated aggregate total 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 significant financial loss. We maintain the target 

outlier percentage of 1.0 percent of estimated aggregate total payment under the OPPS 

and have a fixed-dollar threshold so that OPPS outlier payments are made only when the 

hospital would experience a significant loss for supplying a particular service. For 

CY 2012, based on updated data, we have established 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 calculation. For CY 2012, we are applying the overall 

CCRs from the July 2011 Outpatient Provider-Specific File with 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 charges (using the final 2-year charge inflation 
CMS-1525-FC 323 

factor of 1.0794). These are the same CCR adjustment 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 simulated aggregated CY 2012 hospital outlier 

payments using these costs for several different fixed-dollar thresholds, holding the 1.75 

multiple threshold constant and assuming that outlier payment would continue to be made 

at 50 percent of the amount by which the cost of furnishing the service would exceed 

1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent 

of aggregated estimated total CY 2011 OPPS payments. 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 estimated 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. For CMHCs, if a CMHC’s cost for partial 

hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times 

the payment for APC 0173, the outlier payment is calculated as 50 percent of the amount 

by which the cost exceeds 3.40 times the APC 0173 payment rate. We estimate that this 

threshold will allocate 0.12 percent of outlier payments to CMHCs for PHP outlier 

payments. 

4. Outlier Reconciliation 
CMS-1525-FC 324 

 In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 68599), we 

adopted as final policy a process to reconcile hospital or CMHC outlier payments at cost 

report settlement for services furnished during cost reporting periods beginning in 

CY 2009. OPPS outlier reconciliation more fully ensures accurate outlier payments for 

those facilities that have CCRs that fluctuate significantly relative to the CCRs of other 

facilities, and that receive a significant amount of outlier payments (73 FR 68598). As 

under the IPPS, we do not adjust the fixed-dollar threshold or the amount of total OPPS 

payments set aside for outlier payments for reconciliation activity because such action 

would be contrary to the prospective nature of the system. Our outlier threshold 

calculation assumes that overall ancillary CCRs accurately estimate hospital costs based 

on the information available to us at the time we set the prospective fixed-dollar outlier 

threshold. For these reasons, as we have previously discussed 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 fixed-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 existing regulations at 42 CFR Part 419, subparts 

C and D. As proposed, for this final rule with comment period, the payment rate for most 

services and procedures for which payment is made under the OPPS is the product of the 

conversion factor calculated in accordance with section II.B. of this final rule with 

comment period and the relative weight determined under section 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 referenced in section XVII. of this final rule 

with comment period and available via the Internet on the CMS Web site) and for most 

HCPCS codes to which separate payment under the OPPS has been assigned in 

Addendum B to this final rule with comment period (which is referenced in section XVII. 

of this final rule with comment period and 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 Act, which applies to hospitals as defined 

under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data 

required to be submitted on quality measures selected by the Secretary, in the form and 

manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage 

points to their OPD fee schedule increase factor, that is, the annual payment update 
CMS-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 required to report outpatient quality data and that fail to 

meet the Hospital Outpatient Quality Reporting (OQR) Program (formerly referred to as 

the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requirements. 

For further discussion of the payment reduction for hospitals that fail to meet the 

requirements of the Hospital OQR Program, we refer readers to section 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 that fulfills the Hospital OQR 

Program requirements and to a hospital that fails to meet the Hospital OQR Program 

requirements for a service that has any of the following status indicator assignments: 

“P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to 

this final rule with comment period), in a circumstance in which the multiple procedure 

discount does not apply, the procedure is not bilateral, and conditionally packaged 

services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, 

although blood and blood products with status indicator “R” and brachytherapy sources 

with status indicator “U” are not subject to wage adjustment, they are subject to reduced 

payments when a hospital fails to meet the Hospital OQR Program requirements. 

Individual providers interested in calculating the payment amount that they would 

receive for a specific service from the national unadjusted payment rates presented in 

Addenda A and B to this final rule with comment period (which are referenced in section 
CMS-1525-FC 327 

XVII. of this final rule with comment period 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 national unadjusted payment rate for hospitals 

that fail to meet the requirements of the Hospital OQR Program as the “reduced” national 

unadjusted payment rate. The reduced national unadjusted payment rate is calculated by 

multiplying the reporting ratio of 0.980 times the “full” national unadjusted payment rate. 

The national unadjusted payment rate used in the calculations below is either the full 

national unadjusted payment rate or the reduced national unadjusted payment rate, 

depending on whether the hospital met its Hospital OQR Program requirements in order 

to receive the full CY 2012 OPPS fee schedule increase factor of 1.90 percent. 

 Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted 

payment rate. Since the initial implementation of the OPPS, we have used 60 percent to 

represent our estimate of that portion of costs attributable, on average, to labor. We refer 

readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 

18497) for a detailed discussion of how we derived this percentage. We confirmed that 

this labor-related share for hospital outpatient services is appropriate during our 

regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS 

final rule with comment period (70 FR 68553). 

 The formula below is a mathematical representation of Step 1 and identifies the 

labor-related portion of a specific payment rate for a specific service.
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 section 508 of Pub. L. 108-173, as extended by 

sections 3137 and 10317 of the Affordable Care Act, expired on September 30, 2010. 

Section 102 of the Medicare and Medicaid Extenders Act of 2010 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 refer readers to section II.C. of this final 

rule with comment period.) As we proposed, we are continuing to apply a wage index 

floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care 

Act. 

 Step 3. Adjust the wage index of hospitals located in certain qualifying counties 

that have a relatively high percentage of hospital employees who reside in the county, but 

who work in a different county with a higher wage index, in accordance with section 505 
CMS-1525-FC 329 

of Pub. L. 108-173. Addendum L to this final rule with comment period (which is 

referenced in section XVII. of this final rule 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 IPPS 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 section 1886(d)(8) or section 

1886(d)(10) of the Act. 

 Step 4. Multiply the applicable wage index determined under Steps 2 and 3 by 

the amount determined under Step 1 that represents the labor-related portion of the 

national unadjusted payment rate. 

 The formula below is a mathematical representation of Step 4 and adjusts the 

labor-related portion of the national payment rate for the specific service by the wage 

index. 

Xa

 is the labor-related portion of the national unadjusted payment rate (wage adjusted). 

Xa = .60 * (national unadjusted payment rate) * applicable wage index. 

 Step 5. Calculate 40 percent (the nonlabor-related portion) of the national 

unadjusted payment rate and add that amount to the resulting product of Step 4. The 

result is the wage index adjusted payment rate for the relevant wage index area.

 The formula below is a mathematical representation of Step 5 and calculates the 

remaining portion of the national payment rate, the amount not attributable to labor, and 

the adjusted payment for the specific service. 
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 + Xa 

 Step 6. If a provider is a SCH, set forth in the regulations at §412.92, or an 

EACH, which is considered to be a SCH under section 1886(d)(5)(D)(iii)(III) of the Act, 

and located in a rural area, as defined in §412.64(b), or is treated as being located in a 

rural area under §412.103, multiply the wage index adjusted payment rate by 1.071 to 

calculate the total payment. 

The formula below is a mathematical representation of Step 6 and applies the 

rural adjustment for rural SCHs. 

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 1.071 

 We have provided examples below of the calculation of both the full and reduced 

national unadjusted payment rates that will apply to certain outpatient items and services 

performed by hospitals that meet and that fail to meet the Hospital OQR Program 

requirements, using the steps outlined above. For purposes of this example, we use a 

provider that is located in Brooklyn, New York that is assigned to CBSA 35644. This 

provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The 

CY 2012 full national unadjusted payment rate for APC 0019 is $307.74. The reduced 

national unadjusted payment rate for a hospital 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 payment 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 the effective copayment rate (determined on a 

national unadjusted basis) for that service in the year does not exceed a specified 

percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, 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 provides that, for a covered OPD service (or 

group of such services) furnished in a year, the national unadjusted copayment amount 
CMS-1525-FC 332 

cannot be less than 20 percent of the OPD fee schedule amount. However, section 

1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be 

collected to the amount of the inpatient deductible, which for CY 2012 is $1,156. 

 Section 4104 of the Affordable Care Act eliminated the Part B coinsurance for 

preventive services furnished on and after January 1, 2011 that meet certain requirements, 

including flexible sigmoidoscopies and screening colonscopies, and waived the Part B 

deductible for screening colonoscopies that become diagnostic during the procedure. Our 

discussion of the changes made by the Affordable Care Act with regard to copayments 

for preventive services furnished on and after January 1, 2011 may be found in section 

XII.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72013). 

2. 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 copayment methodology would result in a copayment 

amount that is less than 20 percent and cannot be rounded, under standard rounding 

principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66687) in which we discuss our rationale for applying these 

rounding principles.) The proposed national unadjusted copayment amounts for services 

payable under the OPPS that would be effective January 1, 2012, were shown in Addenda 
CMS-1525-FC 333 

A and B to the proposed rule (which were available via the Internet 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 for a service to which a reduced national 

unadjusted payment rate applies will equal the product of the reporting ratio and the 

national unadjusted copayment, or the product of the reporting ratio and the minimum 

unadjusted copayment, respectively, for the service. 

We did not receive any public comments regarding the proposed methodology for 

calculating copayments for CY 2012. Therefore, for the reasons set forth in the proposed 

rule (76 FR 42225), we are finalizing our CY 2012 copayment amounts without 

modification. We note that we received public comments on the copayments that would 

apply to beneficiaries who receive services from dedicated cancer hospitals under our 

proposal to provide an adjustment to payments to these hospitals. Those copaymentrelated public comments are discussed in section 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 given service provided by a hospital that met or failed to meet 

its Hospital OQR Program requirements should follow the formulas presented in the 

following steps. 

 Step 1. Calculate the beneficiary payment percentage for the APC by dividing the 

APC’s national unadjusted copayment by its payment rate. For example, using 
CMS-1525-FC 334 

APC 0019, $61.55 is 20 percent of the full national unadjusted payment rate of $307.74. 

For APCs with only a minimum unadjusted copayment in Addenda A and B of this final 

rule with comment period (which are available via the Internet on the CMS Web site), the 

beneficiary payment percentage is 20 percent. 

 The formula below is a mathematical representation of Step 1 and calculates 

national copayment as a percentage of national payment for a given service. 

B is the beneficiary payment percentage. 

B = National unadjusted copayment for APC/national unadjusted payment rate for APC 

 Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the 

provider in question, as indicated in Steps 2 through 4 under section II.H. of this final 

rule with comment period. Calculate the rural adjustment for eligible providers as 

indicated in Step 6 under section II.H. of this final rule with comment period. 

 Step 3. Multiply the percentage calculated in Step 1 by the payment rate 

calculated in Step 2. The result is the wage-adjusted copayment amount for the APC. 

The formula below is a mathematical representation of Step 3 and applies the 

beneficiary percentage to the adjusted payment rate for a service calculated under 

section II.H. of this final rule with comment period, with and without the rural 

adjustment, to calculate the adjusted beneficiary copayment for a given service. 

 Wage-adjusted copayment amount for the APC = Adjusted Medicare 

Payment * B 

 Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted 

Medicare Payment * 1.071) * B
CMS-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 site). We note that the national unadjusted 

payment rates and copayment rates shown in Addenda A and B to this final rule with 

comment period reflect the full CY 2012 OPD fee 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 Classification (APC) Group Policies 

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

CPT and Level II HCPCS codes are used to report procedures, services, items, 

and supplies under the hospital OPPS. Specifically, CMS recognizes the following codes 

on OPPS claims: 

● Category I CPT codes, which describe medical services and procedures; 

● Category III CPT codes, which describe new and emerging technologies, 

services, and procedures; and 

● Level II HCPCS codes, which are used primarily to identify products, supplies, 

temporary procedures, and services not described by CPT codes. 

CPT codes are established by the American Medical Association (AMA) and the 

Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are 

updated and changed throughout the year. CPT and HCPCS code changes that affect the 

OPPS are published both through the annual rulemaking cycle and through the OPPS 

quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to 

the public or recognizes the release of new CPT codes by the AMA and makes these 

codes effective (that is, the codes can be reported on Medicare claims) outside of the 

formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers 

hospitals access to codes that may more accurately describe items or services furnished 

and/or provides payment or more accurate payment for these items or services in a 

timelier manner than if CMS waited for the annual rulemaking process. We solicit 

comments on these new codes and finalize our proposals related to these codes through 
CMS-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 updating codes through our OPPS 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 quarterly update were not included in 

Addendum B of the proposed rule (which is available via the Internet on the CMS Web 

site), while those codes based upon the April 2011 OPPS quarterly update 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 period 
CMS-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 solicited public comments in the CY 2012 OPPS/ASC 

proposed rule or whether we are soliciting public comments in this CY 2012 OPPS/ASC 

final rule with comment period. In the CY 2012 OPPS/ASC proposed rule, 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 October 1, 2010. These new codes, with an 

effective date of October 1, 2010, or January 1, 2011, were flagged with comment 

indicator “NI” (New code, interim APC assignment; comments will be accepted on the 

interim APC assignment for the new code) in Addendum B to the CY 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 comment 
CMS-1525-FC 339 

I 

period. We are responding to public comments 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 sections II.A. and III.D. of this final rule with 

comment period. Table 15 lists the long descriptors 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 comment 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, surgical; with dilation 

of maxillary sinus ostium (eg, balloon dilation), 

transnasal or via canine fossa 

31296 Nasal/sinus endoscopy, surgical; with dilation 

of frontal sinus ostium (eg, balloon dilation) 

31297 Nasal/sinus endoscopy, surgical; 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, endovascular, open or 

percutaneous, iliac artery, unilateral, initial 

vessel; with transluminal stent placement(s), 

includes angioplasty within the same vessel, 

when performed 

37223 Revascularization, endovascular, 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, endovascular, open or 

percutaneous, tibial/peroneal artery, unilateral, 

each additional vessel; with transluminal stent 

placement(s), includes angioplasty within the 

same vessel, when performed 

37235 Revascularization, endovascular, open or 

percutaneous, tibial/peroneal artery, unilateral, 

each additional vessel; with transluminal stent 

placement(s) and atherectomy, includes 

angioplasty within the same vessel, when 

performed 

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 Codes and Category I CPT Vaccine Codes and 

Category III CPT Codes for Which We Solicited 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 the July 2011 OPPS quarterly update CR 

(Transmittal 2234, Change Request 7443, dated May 27, 2011), we recognized several 

new HCPCS codes for separate payment under the OPPS. Effective April 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 HCPCS codes were effective for the April 2011 
CMS-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 Category 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 codes. 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 (Injection, pegloticase, 1 mg) 

● HCPCS code C9282 (Injection, ceftaroline fosamil, 10 mg) 

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

● 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 bilateral; lumbar) 

We note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection, 

incobotulinumtoxin A, 1 unit) beginning April 1, 2010. HCPCS code C9278 was 

effective January 1, 2011, and deleted March 30, 2011, because it was replaced with 
CMS-1525-FC 343 

I 

HCPCS code Q2040. HCPCS code C9278 was assigned to pass-through status beginning 

January 1, 2011, when the code was implemented. Because HCPCS code Q2040 

describes the same drug as HCPCS code C9278, we are continuing its pass-through status 

and assigning the HCPCS Q-code to the same APC and status indicator as its predecessor 

HCPCS C-code, as shown in Table 16 below. Specifically, HCPCS code Q2040 is 

assigned to APC 9278 and status indicator “G.” 

In the CY 2012 OPPS/ASC proposed rule, we solicited public comments on the 

proposed status indicators and APC assignments 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 rule with comment period. We did not receive 

any public comments on the proposed APC assignments and status indicators for HCPCS 

codes C9280, C9281, C9282, C9729, and Q2040. However, for CY 2012, the HCPCS 

Workgroup replaced HCPCS C9280, C9281, C9282, and Q2040 with permanent HCPCS 

J-codes. Specifically, C9280 was replaced with J9179 (Injection, eribulin mesylate, 

0.1 mg), C9281 with J2507 (Injection, pegloticase, 1 mg), C9282 with J0712 (Injection, 

ceftaroline fosamil, 10 mg), and Q2040 with J0588 (Injection, incobotulinumtoxin A, 

1 unit). Consistent with our general policy 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 that 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 their pass-through status in CY 2012. Therefore, 

we are assigning HCPCS codes J2507, J0712, and J0588 to the same status indicators and 

APCs as their predecessor HCPCS codes, as shown in Table 16. 

However, we note that the replacement 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. Specifically, 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 comments on the new Level II HCPCS codes that 

were implemented in April 2011. We are adopting 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 CODES 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 deleted March 31, 2011, and replaced with HCPCS 

code Q2040 effective April 1, 2011. 

Through the July 2011 OPPS quarterly update CR, which included HCPCS codes 

that were made effective July 1, 2011, we allowed separate payment for 11 of the 17 new 

Level II HCPCS codes. Specifically, as displayed 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 (Injection, 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 square centimeter) 

● HCPCS code C9406 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 

5 millicuries) 

● HCPCS code C9730 (Bronchoscopic bronchial thermoplasty with imaging 

guidance (if performed), radiofrequency ablation of airway smooth muscle, 1 lobe) 

● HCPCS code C9731 (Bronchoscopic bronchial thermoplasty with imaging 

guidance (if performed), radiofrequency ablation 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, hydroxyprogesterone caproate, 1 mg) 

● HCPCS code Q2043 (Sipuleucel-t, minimum of 50 million autologous cd54+ 

cells activated with pap-gm-csf, including leukapheresis and all other preparatory 

procedures, per infusion) 

● HCPCS code Q2044 (Injection, belimumab, 10 mg) 

We note that two of the Level II HCPCS 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 status 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 effective January 1, 2011; however, the code is 
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“Not Payable by Medicare” because HCPCS code J7184 is replaced with HCPCS code 

Q2041 effective July 1, 2011. Therefore, HCPCS code J7184 was reassigned to status 

indicator “E” effective July 1, 2011. Because 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” effective 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 assigned to APC 1352 effective July 1, 2011. In 

addition, HCPCS code Q2043 replaced HCPCS code C9273 (Sipuleucel-t, minimum of 

50 million autologous cd54+ cells activated with pap-gm-csf, including leukapheresis and 

all other preparatory procedures, per infusion) beginning July 1, 2011. HCPCS code 

C9273 was assigned to pass-through 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 status and assigned HCPCS code Q2043 to status indicator 

“G” as well as assigned it to the same 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 (DMEPOS) 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. 
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In the CY 2012 OPPS/ASC proposed rule, we solicited public comments on the 

status indicators and APC assignments where applicable for the 17 HCPCS codes that 

were listed in Table 16 of that proposed rule (76 FR 42227 through 42228) and now 

appear in Table 17 of this final rule with 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 addition, we received some comments on the long 

descriptor for HCPCS code Q2043. A summary of the comments 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, acetaminophen, 10 mg), C9284 with J9228 

(Injection, ipilimumab, 1 mg), C9365 with Q4124 (Oasis Ultra Tri-Layer Matrix, per 

square centimeter), C9406 with A9584 (Iodine 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), Q2042 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, respectively, these drugs will continue 
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their pass-through status in CY 2012. Therefore, we are assigning HCPCS codes J0131, 

J9228, Q4124, A9584, J7183 and J0490 to the same status indicators and APCs as their 

predecessor HCPCS codes, as shown in Table 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 assignment as its predecessor HCPCS code, as 

shown in Table 17. 

As stated previously, we did not receive any other public comments on the new 

Level II HCPCS codes that were implemented 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 adopting as final, without 

modification, our proposal to assign the 17 Level II HCPCS codes listed in Table 12 to 

the APCs and status indicators 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 final status indicators, APC assignments, and 

payment rates for CY 2012. 
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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-Layer 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 container, regulator, 

flowmeter, humidifier, cannula or mask, and 

tubing, for cluster headaches 

Y NA 

K0742 K0742 

Portable oxygen contents, 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, portable, pad size 16 square 

inches or less 

A NA 

K0745 K0745 

Absorptive wound dressing for use with suction 

pump, home model, portable, pad size more 

than 16 square inches but less than or equal to 

48 square inches 

A NA 
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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, portable, 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, hydroxyprogesterone 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 Category III CPT codes that the AMA releases 

in January of each year for implementation in July through the OPPS quarterly update 

process. Under the OPPS, Category I vaccine codes and Category III CPT codes that are 

released on the AMA Web site in January are made effective in July of the same year 

through the July quarterly update CR, consistent with the AMA’s implementation date 

for the codes. 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 the proposed rule, we allow separate payment 

for the following Category III CPT codes: 
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● CPT code 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) 

● CPT code 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) 

● CPT code 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) 

● CPT code 0267T (Implantation or replacement of carotid sinus baroreflex 

activation device; lead only, unilateral (includes intra-operative interrogation, 

programming, and repositioning, when performed)) 

● CPT code 0268T (Implantation or replacement of carotid sinus baroreflex 

activation device; pulse generator only (includes intra-operative interrogation, 

programming, and repositioning, when performed)) 

● CPT code 0269T (Revision or removal of carotid sinus baroreflex activation 

device; total system (includes generator placement, unilateral or bilateral lead placement, 

intra-operative interrogation, programming, and repositioning, when performed)) 
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● CPT code 0270T (Revision or removal of carotid sinus baroreflex activation 

device; lead only, unilateral (includes intra-operative interrogation, programming, and 

repositioning, when performed)) 

● CPT code 0271T (Revision or removal of carotid sinus baroreflex activation 

device; pulse generator only (includes intra-operative interrogation, programming, and 

repositioning, when performed)) 

● CPT code 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)) 

● CPT code 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) 

● CPT 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) 
CMS-1525-FC 354 

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● CPT 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) (As published in the July 2011 OPPS 

quarterly update CR, CPT code 0275T replaced 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 activation device; total system (includes generator 

placement, unilateral or bilateral lead placement, intra-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 Editorial 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 C9729, we deleted HCPCS code C9729 on 

June 30, 2011. Through the July 2011 OPPS quarterly update CR, we also instructed 

hospitals to report the procedure previously described by HCPCS code C9729 with 
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Category III CPT code 0275T effective July 1, 2011. Because Category III CPT code 

0275T describes the same procedure designated by HCPCS code C9729, we assigned 

Category III CPT code 0275T to the same status indicator and APC assignment as its 

predecessor HCPCS code, as shown in Table 16 and Table 18. 

We received a comment on the APC assignment 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 indicators, final APC assignments where 

applicable, and final payment rates for CY 2012. 

TABLE 18.—CATEGORY III CPT CODES IMPLEMENTED 

IN JULY 2011 
CMS-1525-FC 356 

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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 unilateral 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 performed; 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 0687 
CMS-1525-FC 357 

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0268T 

Implantation or replacement of carotid sinus 

baroreflex activation device; pulse generator 

only (includes intra-operative interrogation, 

programming, and repositioning, when 

performed) 

S 0039 

0269T 

Revision or removal of carotid 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 carotid sinus baroreflex 

activation device; lead only, unilateral 

(includes intra-operative interrogation, 

programming, and repositioning, when 

performed) 

T 0687 

0271T 

Revision or removal of carotid sinus baroreflex 

activation device; pulse generator only 

(includes intra-operative 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 0218 
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In the CY 2012 OPPS/ASC proposed rule (76 FR 42227 through 42229), we 

solicited public comments on the CY 2012 proposed status indicators and the proposed 

APC assignments and payment rates, if applicable, for the Level II HCPCS codes and the 

Category III CPT codes that are newly recognized 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 finalize their status indicators 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 0208 
CMS-1525-FC 359 

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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 Level II HCPCS codes and the Category III CPT 

codes implemented through the July 2011 OPPS 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 incorporate these codes into Addendum B to this 

CY 2012 OPPS/ASC final rule with comment period, which is consistent with our annual 

OPPS update policy. The Level II HCPCS codes implemented or modified through the 

April 2011 OPPS update CR and displayed in Table 15 were included in Addendum B to 

the proposed rule (which is available via the Internet on the CMS Web site), where their 

proposed CY 2012 payment rates were also shown. 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 HCPCS codes and the Category III CPT codes that 

are newly recognized in April or July 2011 through the respective OPPS quarterly update 

CRs are found in Addendum B to this CY 2012 OPPS/ASC final rule with comment 

period (which is available via the 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 Comments 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 codes 
CMS-1525-FC 360 

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are released to the public via the CMS HCPCS (for Level II HCPCS codes) and AMA 

Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In 

the past, we also have released new Level II HCPCS codes that are effective 

October 1 through the October OPPS quarterly update CRs and incorporated these new 

codes in the final rule with comment period updating the OPPS for the following calendar 

year. All of these codes are flagged with comment indicator “NI” in Addendum B to the 

OPPS/ASC final rule with comment period to indicate that we are assigning them an 

interim payment status which is subject to public comment. Specifically, the status 

indicator and the APC assignment and payment rate, if applicable, for all such codes 

flagged with comment indicator “NI” are open to public comment in the final rule with 

comment period, and we respond to these comments in the OPPS/ASC final rule with 

comment period for the next calendar year’s OPPS/ASC update. 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 period (which is available via the Internet 

on the CMS Web site) the new Category I and 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 codes are flagged with comment indicator “NI” 

in Addendum B to this CY 2012 OPPS/ASC final rule with comment period to indicate 
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that we have assigned them an interim OPPS payment status for CY 2012. As proposed, 

in this final rule with comment period, their status indicators and their APC assignments 

and payment rates, if applicable, are open to public comment and will be finalized in the 

CY 2013 OPPS/ASC final rule with comment period. 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 comments 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 assignments of the Category I CPT vaccine codes, 

Category III CPT codes, and Level II HCPCS codes that are made effective on October 1 

or January 1 of subsequent years but are made available to the public by the completion 

of each year’s OPPS proposed rule. The commenter 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 commenter suggested that the lack of stakeholder 

input on the interim APC assignments may negatively impact Medicare beneficiaries. In 

particular, the commenter stated that interim 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 

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Response: The commenter is correct 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 later. 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, depending 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 and Level II HCPCS systems deadlines, we will 

continue to assign the new codes that are effective October 1and January 1 of subsequent 

year to interim APC assignments. 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 hospital outpatient facilities and Medicare 

beneficiaries. 

The OPPS is a prospective payment system that provides payment for groups of 

services that share clinical 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 a 
CMS-1525-FC 363 

I 

variety of sources, including but not limited to review of the clinical similarity of the 

service to existing procedures; 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 received, we are finalizing our 

proposed policy, without modification, 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 codes 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 fluctuations 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 would prevent hospitals from experiencing 

substantial payment reductions and would 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 order to prevent hospitals from experiencing 

substantial payment reductions as the commenter 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 cognizant 
CMS-1525-FC 364 

I 

of HCPCS coding changes, specifically with respect 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 increasingly created new codes 

that use a single HCPCS code to report combinations 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 exercise (includes monitoring), per hour, per session) to 

represent a comprehensive program of pulmonary therapy and the CPT Editorial Panel 

created CPT code 77338 (Multi-leaf collimator (MLC) device(s) for intensity modulated 

radiation therapy (IMRT), design and construction 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 charges for all of the 

predecessor services that are reported by the new code. To fail to carefully construct the 

charge for a new code that reports a combination 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 adverse 
CMS-1525-FC 365 

I 

impact on future payments under the OPPS for 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 department services. Section 1833(t)(2)(B) of the 

Act provides that the Secretary may establish groups of covered OPD services within this 

classification system, so that services classified within each group are comparable 

clinically and with respect to the use of resources. In accordance with these provisions, 

we developed a grouping classification system, referred to as Ambulatory Payment 

Classifications (APCs), as set forth in §419.31 of the regulations. We use Level I and 

Level II HCPCS codes to identify and group the services within each APC. The APCs 

are organized such that each group is homogeneous both clinically and in terms of 

resource use. Using this classification system, we have established distinct groups of 

similar services. We also have developed separate APC groups for certain medical 

devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices. 

 We have packaged into payment for each procedure or service within an APC 

group the costs associated with those items or services that are directly related to, and 

supportive of, performing the main independent procedures or furnishing the 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; 
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 (2) Use of a recovery room; 

 (3) Observation services; 

 (4) Anesthesia; 

 (5) Medical/surgical supplies; 

 (6) Pharmaceuticals (other than those for which separate payment may be 

allowed under the provisions discussed in section V. of the proposed rule and this final 

rule with comment period); 

 (7) Incidental services such as venipuncture; 

 (8) Guidance services, image processing services, intraoperative services, 

imaging, supervision and interpretation services, diagnostic radiopharmaceuticals, and 

contrast media. 

 Further discussion of packaged services is included in section II.A.3. of this final 

rule with comment period. 

In CY 2008, we implemented composite APCs to provide a single payment for 

groups of services that are typically performed together during a single clinical encounter 

and that result in the provision of a complete service (72 FR 66650 through 66652). 

Under CY 2011 OPPS policy, we provide composite APC payment for certain extended 

assessment and management services, low dose rate (LDR) prostate brachytherapy, 

cardiac electrophysiologic evaluation and ablation, mental health services, and multiple 

imaging services. Further discussion of composite APCs is included in section II.A.2.e. 

of this final rule with comment period. 
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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 Hospital Clinic Visits). The APC weights are 

scaled to APC 0606 because it is the middle level hospital clinic visit APC (the Level 3 

hospital clinic visit CPT code out of five levels), and because middle level hospital clinic 

visits are among the most frequently furnished services in the hospital outpatient setting. 

 Section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring 

basis occurring no less than annually, and revise the groups, the relative payment 

weights, and the wage and other adjustments to take into account changes in medical 

practice, changes in technology, the addition of new services, new cost data, and other 

relevant information and factors. Section 1833(t)(9)(A) of the Act also requires the 

Secretary to consult with an expert outside advisory panel composed of an appropriate 

selection of representatives of providers to review (and advise the Secretary concerning) 

the clinical integrity of the APC groups and the relative payment weights (the APC Panel 

recommendations for specific services for the 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 provides that, subject to certain exceptions, 

the items and services within an APC group cannot be considered comparable with 
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respect to the use of resources if the highest median cost (or 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 authorizes the Secretary to make exceptions to 

the 2 times rule in unusual cases, such as low-volume items and services (but the 

Secretary may not make such an exception in the case of a drug or biological that has 

been designated as an orphan drug under section 526 of the Federal Food, Drug, and 

Cosmetic Act). 

2. Application of the 2 Times Rule 

In accordance with section 1833(t)(2) of the Act and §419.31 of the regulations, 

we annually review the items and services within an APC group to determine, with 

respect to comparability of the use of resources, if the median cost of the highest cost 

item or service 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 only those HCPCS codes that are significant based on the number of claims. 

We note that, for purposes of identifying significant HCPCS codes for examination in the 

2 times rule, we consider codes that have more than 1,000 single major claims or codes 

that have both greater than 99 single major claims and contribute at least 2 percent of the 

single major claims used to establish the APC 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 
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is negligible within the set of approximately 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 negligible 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 meeting, 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-specific issues, the APC Panel recommendations, 

if any, and our proposals and final policies for 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 proposed 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 published 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 to 
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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 proposed 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 payment status from an OPPS 

perspective based on the policies 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” comment indicator the final CY 2012 changes 

compared to the codes' status as reflected in the October 2011 Addendum B update. 

3. Exceptions to the 2 Times Rule 

 As discussed earlier, we may make exceptions to the 2 times limit on the variation 

of costs within each APC group in unusual cases such as low volume items and services. 

Taking into account the APC changes that we proposed for CY 2012 based on the 

APC Panel recommendations that were discussed mainly in sections III.C. and III.D. of 
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the proposed rule, the other proposed changes to status indicators and APC assignments 

as identified in Addendum B to the proposed rule (which was available via the Internet 

on the CMS Web site), and the use of CY 2010 claims data to calculate 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 based 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 explicit consideration of 

resource use, clinical homogeneity, site of service, and the 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 for these and all other APCs that were used 
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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 dates 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 proposed 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, through 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 year to determine APCs that are exempted 

from the 2 times rule. Thus, after considering the public comments 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 proposed rule. We applied the criteria as 

described earlier to identify the APCs that are exceptions to the 2 times rule for CY 2012, 
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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 Anal/Rectal Procedures) 

● APC 0262 (Plain Film of Teeth) 

● APC 0317 (Level II Miscellaneous 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 there 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 Miscellaneous Radiology) 

● APC 0432 (Health and Behavior Services) 

 We have not included in this count those APCs where a 2 times violation is not a 

relevant concept, such as APC 0375 (Ancillary Outpatient Services when Patient 
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Expires), with an APC median cost set based on multiple procedure claims; therefore, we 

have identified only final APCs, including those with 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 appropriate 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 procedures with significant claims data in APC 

0058 is between $49 and $116. Currently, there are only two levels of APCs for services 

that describe strapping and cast application, 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 proposal 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 are 
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finalizing our proposal to exempt 12 original APCs (that appeared in Table 18 of the 

CY 2012 OPPS/ASC proposed rule with comment period and also appears in Table 19 

below) from the 2 times rule for CY 2012, with modification. Specifically, we removed 

five APCs that no longer violated the 2 times rule and increased the number of APC 

exceptions from 17 to 23 APCs, as described previously in this section. Our final list of 

23 APCs exempted from the 2 times rule is displayed in Table 19 below. 

TABLE 19.—FINAL APC EXCEPTIONS 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 Visits 
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Final 

CY 2012 

APC Final CY 2012 APC Title 

0660 Level II Otorhinolaryngologic 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 bands are assigned under the OPPS. Payment for 

each APC is made at the mid-point of the APC’s assigned cost band. For example, 

payment for New Technology APC 1507 (New Technology – Level VII ($500 - $600)) is 

made at $550. Currently, there are 82 New Technology APCs, ranging from the lowest 
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cost band assigned to APC 1491 (New Technology – Level IA ($0 - $10)) through the 

highest cost band assigned to APC 1574 (New Technology – Level XXXVII ($9,500 - 

$10,000). In CY 2004 (68 FR 63416), we last restructured the New Technology APCs to 

make the cost intervals more consistent across payment levels and refined the cost bands 

for these APCs to retain two parallel sets of New Technology APCs, one set with a status 

indicator of “S”' (Significant Procedures, Not Discounted when Multiple. Paid under 

OPPS; separate APC payment) and the other set with a status indicator of “T” 

(Significant Procedure, Multiple Reduction Applies. Paid under OPPS; separate APC 

payment). These current New Technology APC configurations allow us to price new 

technology services more appropriately and consistently. 

Every year we receive many requests for higher payment amounts under our New 

Technology APCs for specific procedures under the OPPS because they require the use 

of expensive equipment. We are taking this opportunity to reiterate our response in 

general to the issue of hospitals’ capital expenditures as they relate to the OPPS and 

Medicare. 

Under the OPPS, one of our goals is to make payments that are appropriate for the 

services that are necessary for the treatment of Medicare beneficiaries. The OPPS, like 

other Medicare payment systems, is budget neutral and increases are limited to the annual 

hospital inpatient market basket increase. We believe that our payment rates generally 

reflect the costs that are associated with providing care to Medicare beneficiaries in 

cost-efficient settings, and we believe that our rates are adequate to ensure access to 

services. 
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For many emerging technologies, there is a transitional period during which 

utilization may be low, often because providers are first learning about the techniques and 

their clinical utility. Quite often, parties request that Medicare make higher payment 

amounts under our New Technology APCs for new procedures in that transitional phase. 

These requests, and their accompanying estimates for expected total patient utilization, 

often reflect very low rates of patient use of expensive equipment, resulting in high per 

use costs for which requesters believe Medicare should make full payment. Medicare 

does not, and we believe should not, assume responsibility for more than its share of the 

costs of procedures based on Medicare beneficiary projected utilization and does not set 

its payment rates based on initial projections of low utilization for services that require 

expensive capital equipment. For the OPPS, we rely on hospitals to make informed 

business decisions regarding the acquisition of high cost capital equipment, taking into 

consideration their knowledge about their entire patient base (Medicare beneficiaries 

included) and an understanding of Medicare’s and other payers’ payment policies. 

We note that, in a budget neutral environment, payments may not fully cover 

hospitals’ costs in a particular circumstance, including those for the purchase and 

maintenance of capital equipment. We rely on hospitals to make their decisions 

regarding the acquisition of high cost equipment with the understanding that the 

Medicare program must be careful to establish its initial payment rates, including those 

made through New Technology APCs, for new services that lack hospital claims data 

based on realistic utilization projections for all such services delivered in cost-efficient 

hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs 
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associated with new procedures, we regularly examine the claims data and any available 

new information regarding the clinical aspects of new procedures to confirm that our 

OPPS payments remain appropriate for procedures as they transition into mainstream 

medical practice. 

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

As we explained in the November 30, 2001 final rule (66 FR 59902), we 

generally keep a procedure in the New Technology APC to which it is initially assigned 

until we have collected sufficient data to enable us to move the procedure to a clinically 

appropriate APC. However, in cases where we find that our original New Technology 

APC assignment was based on inaccurate or inadequate information (although it was the 

best information available at the time), or where the New Technology APCs are 

restructured, we may, based on more recent resource utilization information (including 

claims data) or the availability of refined New Technology APC cost bands, reassign the 

procedure or service to a different New Technology APC that most appropriately reflects 

its cost. 

Consistent with our current policy, in the CY 2012 OPPS/ASC proposed rule 

(76 FR 42233), we proposed for CY 2012 to retain services within New Technology APC 

groups until we gather sufficient claims data to enable us to assign the service to a 

clinically appropriate APC. The flexibility associated with this policy allows us to move 

a service from a New Technology APC in less than 2 years if sufficient claims data are 

available. It also allows us to retain a service in a New Technology APC for more than 

2 years if sufficient claims data upon which to base a decision for reassignment have not 
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been collected. Table 19 of the proposed rule 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 Technology APC for CY 2012. 

Currently, in CY 2011, there are three procedures described by a HCPCS G-code 

receiving payment through a New Technology APC. Specifically, HCPCS code G0417 

(Surgical pathology, gross and microscopic examination for prostate needle saturation 

biopsy sampling, 21-40 specimens) is assigned to New Technology APC 1506 (New 

Technology - Level VI ($400 - $500)); HCPCS code G0418 (Surgical pathology, gross 

and microscopic examination for prostate needle saturation biopsy sampling, 41-60 

specimens) is assigned to New Technology APC 1511 (New Technology - Level XI 

($900 - $1,000)); and HCPCS code G0419 (Surgical pathology, gross and microscopic 

examination for prostate needle saturation biopsy sampling, greater than 60 specimens) is 

assigned to New Technology APC 1513 (New Technology - Level XIII ($1,100-$1,200)). 

Analysis of our hospital outpatient data for claims submitted for CY 2010 

indicates that prostate saturation 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 hospital 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 believe that we should continue their New 
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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 continue the New Technology APC payments for 

HCPCS G-codes G0417, G0418, and G0419. Specifically, 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 from APC 1513 to APC 1508 (New Technology 

- Level VIII ($600 - $700)). We stated in the 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 and resource considerations. 

These procedures and their proposed APC assignments are displayed in Table 19 of the 

proposed rule. 

We did not receive any public comments on the APC reassignments for HCPCS 

codes G0417, G0418, and G0419. Therefore, for the reasons set forth above, we are 

finalizing our proposal, without modification, 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 are reassigning from a New Technology APC to a 

different New Technology APC for CY 2012. 
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TABLE 20.—REASSIGNMENT OF PROCEDURES 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 effective January 1, 2010: CPT codes 75571 

(Computed tomography, heart, without contrast material, with quantitative evaluation of 

coronary calcium), 75572 (Computed tomography, heart, with contrast material, for 

evaluation of cardiac structure and morphology (including 3D image postprocessing, 

assessment of cardiac function, and evaluation of venous structures, if performed)), 

75573 (Computed tomography, heart, with contrast material, for evaluation of cardiac 

structure and morphology in the setting of congenital heart disease (including 3D image 

postprocessing, assessment of LV cardiac function, RV structure and function and 

evaluation of venous structures, if performed)), and 75574 (Computed tomographic 

angiography, heart, coronary arteries and bypass grafts (when present), with contrast 

material, including 3D image postprocessing (including evaluation of cardiac structure 

and morphology, assessment of cardiac function, and evaluation of venous structures, if 
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performed). These Category I CPT codes replaced 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 Procedures), 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 final 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 final 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 previously 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 report CCT services and, if so, to use those 

claims in calculating the APC 0383 final median 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 equipment or clinical staff as CPT code 75571, 

while APC 0282 contains services that do have similar clinical and resource 

characteristics to CPT code 75571. 
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In addition, the commenter expressed concerns 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 relativity, and offered to work with CMS to develop 

a standard methodology to address these issues. The commenter also recommended that 

CMS promote the need to accurately and completely report all services provided. 

Response: We believe that the CY 2012 median costs we have calculated for 

CPT codes 75572, 75573, and 75574 and APC 0383 appropriately 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 and 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 clinical similarity. CPT 

code 75571 has a final median cost of approximately $31, and APC 0340 has a final 

median cost of approximately $46. In contrast, APC 0282 has a final median cost of 
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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. Therefore, 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 charges 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 specific 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 revised from year to year (for example, by redefining units 

of service), we expect that hospitals’ submitted 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 methodology (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 readers to the Provider Reimbursement 

Manual (Pub. 15-2, Part 2, Chapter 40 Hospital 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 final 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(Myocardial perfusion imaging, tomographic 

(SPECT) (including attenuation correction, qualitative or quantitative wall motion, 

ejection fraction by first pass or gated technique, additional quantification, when 

performed); single study, at rest or stress (exercise or pharmacologic)); 78452 

(Myocardial perfusion imaging, tomographic (SPECT) (including attenuation correction, 

qualitative or quantitative wall motion, ejection fraction by first pass or gated technique, 

additional quantification, when performed); multiple studies, at rest and/or stress 

(exercise or pharmacologic) and/or redistribution and/or rest reinjection); 78453 

(Myocardial perfusion imaging, planar (including qualitative or quantitative wall motion, 

ejection fraction by first pass or gated technique, additional quantification, when 

performed); single study, at rest or stress (exercise or pharmacologic)); and 78454 

(Myocardial perfusion imaging, planar (including qualitative or quantitative wall motion, 

ejection fraction by first pass or gated technique, additional quantification, when 

performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/or 
CMS-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 perfusion imaging (planar) single study, at 

rest of stress (exercise and/or pharmacologic), with or without quantification); 78461 

(Myocardial perfusion imaging (planar) single study, at rest or stress (exercise and/or 

pharmacologic), with or without quantification; multiple studies (planar), at rest and/or 

stress (exercise and/or pharmacologic), and redistribution and/or rest injection, with or 

without quantification); 78464 (Myocardial perfusion imaging (planar) single study, at 

rest or stress (exercise and/or pharmacologic), with or without quantification; 

tomographic (SPECT) single study (including attenuation correction when performed), at 

rest or stress (exercise and/or pharmacologic), with or without quantification); and 78465 

(Myocardial perfusion imaging (planar) single study, at rest or stress (exercise and/or 

pharmacologic), with or without quantification; tomographic (SPECT) multiple studies 

(including attenuation correction when performed), at rest or stress (exercise and/or 

pharmacologic), with or without quantification), which were also cardiac imaging 

services. Therefore, CY 2009 is the first year in which hospitals established charges for 

the new CPT codes for CY 2010 on which the CY 2012 proposed rule and final rule 

medians are based. 
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Comment: Several commenters expressed concern over the proposed 11 percent 

payment reduction to APC 0377. Commenters believed that there were irregularities in 

the hospital cost data that suggest inaccurate reporting of costs associated with 

procedures in APC 0377, rather than an actual decline in resource use. Commenters 

particularly pointed out that CPT code 78453 (Myocardial perfusion imaging, planar, 

single study) has a higher mean and median cost than CPT code 78454 (Myocardial 

perfusion imaging, planar, multiple studies), according to CMS data. The commenters 

stated that it is illogical to expect hospitals 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 proposed 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 additional refinement of the data, including 

eliminating hospital claims with 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 could utilize claims for ratesetting, 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. Commenters 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 an 
CMS-1525-FC 389 

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enhanced CMS validation process for all APCs, including accounting for all packaged 

costs and review of excluded/included claims. The commenters also recommended that 

CMS limit year-to-year changes in payment rates 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 introduction 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, including the relative weights, 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 APCs 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 median 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 that 
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our cost-finding methodology is based on reducing each hospital’s charge for its services 

to an estimated cost by applying 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 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. As we have 

previously, we note that, as part of our standard ratesetting process, we already engage in 

a standard review process for all APCs that experience significant 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 rule, and this CY 2012 final rule with 

comment period. Specifically we looked at the following data elements for all single and 

pseudo single procedure bills for the four CPT codes that are assigned to APC 0377 and 

that, therefore, are the data points on which the median cost for the APC is based: 

median CCR; median charge; median line item 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 $3,045.00
CMS-1525-FC 391 

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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 the median charge for services that are 

assigned to APC 0377 has increased from the 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 effective January 1, 2010). The CCRs that are 

applied to the codes remained the same from the CY 2011 final 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 data and the CY 2012 proposed 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 and further declined another 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 decline in the CCRs and the significant decline in 

the packaged cost. 

We acknowledge that some hospitals may charge at different markups over cost 

for different services. However, as long as the cost report is correctly completed and the 
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charges are mapped to the cost center in which the costs for the service are recorded, the 

CCRs will represent a valid reflection of the relationship between the costs and the 

charges. 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. 

We recognize that there is considerable variability in the charges that hospitals 

established for the four CPT codes that were new for CY 2010 and replaced deleted 

codes for reporting these services that had been assigned 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 would be carried through to the calculation of 

estimated costs for the service. Hospitals charges 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 service, and that they must charge 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 address wide variances in hospital cost accounting systems and 

billing patterns, and also has consistently been a reliable mechanism for promoting 

increased consistency without introducing additional regulations. 

We recognize that it appears peculiar that the estimated cost for CPT code 78453, 

which represents the cost of a single myocardial perfusion imaging (MPI) study, would 

be greater than the estimated cost for CPT code 78454, which represents the cost of 
CMS-1525-FC 393 

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multiple myocardial perfusion imaging studies done in a single session. However, our 

costs are based on the amount of the charge that the hospital established for the service 

and the hospital’s CCR from its Medicare cost report. 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. Moreover, because the 

median cost is the 50th percentile of the array of costs 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 estimate 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 addition, 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 commenters. To the extent that hospitals determine that 

their charges should be revised to better reflect the resources required to furnish the 

services currently assigned to APC 0377, the revised charges would be reflected in future 

years’ OPPS payment rates. 
CMS-1525-FC 394 

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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 stakeholders to review and comment on the data. 

Response: During the August 10-11, 2011 meeting of the APC Panel, we 

presented a list of all APCs whose median costs fluctuated by greater than 10 percent 

when comparing the CY 2011 final rule median costs to CY 2012 proposed rule median 

costs. While the proposed payment for APC 0377 represented a reduction 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 establish median cost for use in ratesetting, is 

available for purchase on the CMS Web site at: 

http://www.cms.gov/HospitalOutpatientPPS. Therefore, interested 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 commenters 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 50th percentile of the array of the estimated costs of 
CMS-1525-FC 395 

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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; implantable 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 resources 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 the observed costs in the claims data are 
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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 overall 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 commenters that the placement of CPT code 93299 in 

APC 0690 does not meet the APC recalibration 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 without contrast. Alternatively, hospitals 

report the HCPCS C-codes when performing echocardiography procedures with contrast, 

or without contrast followed by with contrast. In addition to the HCPCS C-codes, 

hospitals should also report the appropriate units of the HCPCS codes for the contrast 

agents used in the performance of the echocardiograms. 

 Currently, there are four APCs that describe echocardiography services 

● APC 0128 (Echocardiogram With Contrast)● 

APC 0697 (Level I Echocardiogram Without Contrast) 
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● APC 0269 (Level II Echocardiogram Without Contrast) 

● APC 0270 (Level III Echocardiogram Without Contrast) 

 For CY 2012, we proposed payment rates for these APCs of approximately $564, 

$219, $384, and $567, respectively. 

 Comment: Some commenters expressed concern with the proposed payment rate 

of approximately $384 for CPT code 93306 (Echocardiography, transthoracic real-time 

with image documentation (2D), includes M-mode recording, when performed, complete, 

with spectral Doppler echocardiography, and with color flow Doppler echocardiography), 

stating that the 5-percent decrease in the payment 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 documentation (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 spectral display (List separately in addition to 

codes for echocardiographic imaging); complete) and 93325 (Doppler echocardiography 

color flow velocity mapping), rather than using CPT code 93306 because they were still 

adjusting to billing with CPT code 93306. The commenters requested that CMS confirm 

that the calculation of the median cost for APC 0269, which is the APC that CMS 

proposed to continue to assign to CPT code 93306, is based on correct coding. 

 Response: CPT code 93306 was made effective 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 suggest that the fluctuations in cost data 
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for echocardiography APCs are due to incorrect hospital billing practices. For this CY 

2012 OPPS/ASC final rule with comment period, 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 reveals 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 APC 0269. Given the significant volume of claims 

and its CPT median cost of approximately $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 modification, to continue to assign CPT code 

93306 to APC 0269. As has been our practice since the implementation of the OPPS, we 

annually review all the items and services within an APC group to determine, with 

respect to comparability of the use of resources, for any 2 times rule violations. In 

making this determination, we review our claims data and determine whether we need to 

make changes to the current APC assignments for the following year. We will again 

reevaluate the status indicator and APC assignment for CPT code 93306 for the CY 2013 

OPPS rulemaking cycle. 

 Comment: Several commenters requested that CMS reassign CPT codes 76825 

(Echocardiography, fetal, cardiovascular system, real time with image documentation 

(2d), with or without m-mode recording) and 76826 (Echocardiography, fetal, 

cardiovascular system, real time with image documentation (2d), with or without m-mode 
CMS-1525-FC 399 

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recording; follow-up or repeat study) from 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 indicator "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 these 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 claims in CY 2008, 23 single claims in CY 2009, 

and 43 single claims in 2010), with a CPT median cost that has ranged between $85 and 

$92. Based on our claims data, we believe that CPT codes 76825 and 76826 are more 

appropriately placed in APC 0697 based on their clinical homogeneity and resource costs 
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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 assigned 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 finalizing 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 concern that the proposed payment 

rate of approximately $567 for the non-contrast echocardiogram procedures that are 

assigned to APC 0270 is higher than the proposed payment rate of approximately $564 

for the contrast echocardiograms procedures that are assigned to APC 0128. The 

commenters indicated that it is not appropriate for an APC with contrast enhanced 

echocardiogram procedures to have a lower median cost and lower payment rate than an 

APC with non-contrast enhanced echocardiogram procedures. The commenters 

requested that CMS develop a more consistent and stable payment methodology for 

echocardiograms that utilize contrast agents because the cost of the contrast agents is 

approximately $117 and requires significantly more 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 procedures, while another commenter requested 
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data analysis supporting the higher proposed payment rate for APC 0270. Several 

commenters urged CMS to pay separately for the administration and cost of the contrast 

agent. 

 Response: As stated above, we have four separate APCs to which 

echocardiography services are assigned. Procedures that utilize 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 proposed 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, compared to the median cost of 

approximately $557 for APC 0128. Our claims data show a higher median cost for one 

of the non-contrast echocardiography APCs, specifically, APC 0270, which has a median 

cost of approximately $581. We agree with the commenters that, in general, contrastbased echocardiography procedures would involve 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 the non-contrast echocardiography procedures 

assigned to APC 0270 are significantly higher than the contrast-based echocardiography 
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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 incorrectly reflect the relative resource costs of 

providing the services in APC 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 rule violation and the major procedures in 

the APC are similar based on resource costs, ranging from approximately $505 to 

approximately $732. 

 In addition, payment for the administration of contrast agents as well as the 

contrast agent products are included in payment for the associated imaging procedure, as 

discussed in section V.B.2.d. of this final rule with comment period. In limited 

circumstances, we pay separately for contrast agents that are approved for pass-through 

status under the OPPS, as discussed in section V.A. of this final rule with comment 

period. Payment for pass-through status is limited to a minimum of 2 years but no more 

than 3 years. 

 Furthermore, as we stated above, hospitals 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 instructions, and correct coding principles, for all 

charges for all services they furnish, whether payment for the services is made separately 

or is packaged. The appropriateness of the OPPS payment rates depend on the quality 
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and completeness of the claims data that hospitals submit for the services they furnish to 

Medicare beneficiaries. 

 After consideration of the public comments we received, we are finalizing, 

without modification, our CY 2012 proposal to continue to calculate our median costs for 

the non-contrast echocardiography procedures based on APCs 0697, 0269, and 0270, and 

to calculate our median costs for the contrast-echocardiography procedures based on 

APC 0128. We believe that continuing this methodology in CY 2012 results in payment 

rates for the contrast echocardiography and non-contrast echocardiography procedures 

that appropriately reflect the costs for these services. For a more detailed discussion and 

history of the OPPS payment for echocardiography services, we refer readers to the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66644 through 66646), the 

CY 2009 OPPS/ASC final rule with comment 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 final 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 

$557 
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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 

$581 
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2. Gastrointestinal Services 

a. Upper Gastrointestinal (GI) 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 Upper GI Procedures) and 

APC 0422 (Level II Upper GI Procedures, which we proposed to rename ”Level III 

Upper GI Procedures”). For APC 0141, we calculated 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 gastrointestinal (GI) procedure APCs, 

APC 0141, which has a CY 2011 national unadjusted 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 objecting to our CY 2011 proposal on the basis 

that the reconfiguration would reduce the median cost and, therefore, the payment for 

services to which APC 0422 was assigned and would not maintain the clinical 

homogeneity of these services. Instead commenters, including the applicable medical 

specialty societies, asked that we reconfigure 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 believed would provide payment rates that would more accurately 

reflect the median costs of the services in APCs 0141 and 0422. We finalized our 
CMS-1525-FC 406 

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proposed changes to APCs 0141 and 0422 for CY 2011 without establishing a third APC 

for upper GI procedures for the reasons discussed 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 the stakeholders in their comments on the 

CY 2011 OPPS/ASC final rule with comment period, 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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

For the reasons we discuss below, as stated in the proposed rule, we accepted the 

APC Panel recommendation to propose to establish three levels of upper GI procedure 

APCs and to propose to adopt the reconfiguration recommended by stakeholders because 

we believe that the proposed reconfiguration will provide payments 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 many CPT codes for upper GI procedures, and 
CMS-1525-FC 407 

I 

therefore, the APC median costs better reflect 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 configuration to the CY 2012 proposed rule data. 

Therefore, we stated in the proposed rule that we believed that we would need to propose 

to reassign HCPCS codes, regardless of whether 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 appropriate 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 reflective 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 proposed 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 reassignments for CY 2012 using the 

proposed three APC reconfiguration. We believe that this proposed reconfiguration 

classifies upper GI CPT codes in groups that demonstrate the best clinical and resource 

homogeneity. For APC 0141, we calculated 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. 
CMS-1525-FC 408 

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At its August 10-11, 2011 APC Panel meeting, the APC Panel recommended that 

CMS adopt the proposed APC reconfiguration for upper gastrointestinal (GI) procedures 

and the creation of a new APC 0419 (Level II Upper GI Procedures). The Panel further 

recommended that HCPCS code 43227 (Esophagoscopy, rigid or flexible; with control of 

bleeding (e.g., injection, bipolar cautery, unipolar cautery, laser, heater probe, stapler, 

plasma coagulator)) and HCPCS code 43830 (Gastrostomy, open; without construction of 

gastric tube (e.g., Stamm procedure) (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 frequency 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 recommendation 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. Therefore, 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 cohesive with regard to the resources used to 

provide the services and would provide for more equitable payment for these services. In 
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particular, commenters were pleased to with the proposed reassignment of CPT code 

43228 to APC 0422 because they believed that the assignment would enable facilities to 

cover the cost of the device and provide patients 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 appropriate to assign CPT code 43228 to APC 0422 for 

the reasons discussed in the proposed rule as summarized at the beginning 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 reconfiguration 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 fundamental principle of a prospective payment 

system like the OPPS is that prospective payment is set at a measure of central tendency 

that, on average, pays an amount that is appropriately reflective of the relative cost of the 

services in the group to which the payment rate applies. 

 Comment: Several commenters objected to the proposed assignment of CPT code 

43257 (Upper gastrointestinal endoscopy including esophagus, stomach, and either the 

duodenum and/or jejunum as appropriate; with delivery of thermal energy to the muscle 
CMS-1525-FC 410 

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of lower esophageal sphincter and/or gastric cardia, for treatment of gastroesophageal 

reflux disease) and CPT code C9724 (Endoscopic full thickness placation in the gastric 

cardia using endoscopic placation system (EPS); includes endoscopy) to APC 0422 and 

asked that CMS create an APC for transoral surgical endoscopy to which these codes 

would be assigned. The commenters believe that CPT codes 43257 and C9724 are 

clinically different from most other services in APC 0422 because these services provide 

surgical therapy and that the resources required to furnish them are much greater than the 

resources required to furnish the other services in APC 0422. Commenters requested the 

creation of the new level IV upper GI procedure APC that they believed would result in 

appropriate payment for these procedures and would also improve the accuracy of the 

payment for the procedures that will remain in APC 0422. Commenters stated that 

current claims data for CPT code 43257 underestimates 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 generation 1 Stretta catheter that was sold at a 

cost of $1,225, although since 2010 hospitals have been using a generation 2 catheter 

which has an average sales price of $2,450. Therefore, the commenters asserted that the 

use of CY 2010 claims data will not fully reflect the cost of the devices that will be used 

in CY 2012. Commenters suggested that CMS designate the new level IV APC that they 

requested as device dependent, establish procedure-to-device edits, and use only the 

claims that meet the device edits in setting 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 43257 
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and C9724 are clinically similar to the other services assigned to APC 0422 such as CPT 

codes 43228 (Esophagoscopy, rigid or flexible; with ablation of tumor(s), polyp(s), or 

other lesion(s), not amenable to removal by hot biopsy forceps, bipolar cautery or snare 

technique), and 43870 (Closure of gastrostomy, surgical), which are both therapeutic 

upper GI procedures. Moreover, the final median cost for CPT code 43257 of 

approximately $1,535 falls below the final median 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 based 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 payment 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 over 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 approximately $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 which the 2 times rule applies because it has 

a single bill frequency of less than 1,000 and also 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 refer readers to section III.B. of this final 

rule with comment period for additional information regarding the 2 times rule. 
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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 level 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 assigned to APC 0422 for CY 2012. We are not accepting the 

APC Panel’s recommendation that we reassign CPT code 43227 to APC 0422 because it 

is a very low volume service for which the median cost has not been stable over the past 

few years. We are accepting the APC Panel’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 

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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 . 1,484
CMS-1525-FC 414 

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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 1,272
CMS-1525-FC 415 

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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) 
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The AMA CPT Editorial Panel created CPT code 0242T (Gastrointestinal tract 

transit and pressure measurement, stomach through colon, wireless capsule, with 

interpretation and report) effective January 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 code 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 rule 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 assigned 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 insufficient 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 predominantly indicated to assess the esophagus, 

while CPT code 0242T is purportedly a unique test that provides transit, pressure, pH, 

and temperature measurement of the GI tract from the stomach to the colon. The 

commenters also stated that the resources, including clinical labor, for the procedures in 

APC 0361 differ from those of CPT code 0242T. The commenters claimed that the 

manometric tests assigned to APC 0361 measure neuromuscular activity in an 
CMS-1525-FC 417 

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anatomically specific, fixed manner, utilizing a reusable catheter, while CPT code 0242T 

utilizes a disposable capsule and a special meal to capture multiple pressure and transit 

measurements throughout the GI tract and cost $600 per procedure. Adding other 

procedure costs to the disposable costs yields 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, intraluminal (eg, capsule endoscopy), esophagus 

through ileum, with physician interpretation and report) to a New Technology APC until 

sufficient claims data were gathered for assignment 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 routinely make assignments of new 

CPT codes to clinical APCs before we have claims 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 initial 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 alimentary canal. Regarding 

resource costs, the final rule median cost of APC 0361 is approximately $288, with a 

median cost range of procedures in the APC from approximately $235 to approximately 
CMS-1525-FC 418 

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$680. We do not believe a New Technology APC is warranted for this procedure at this 

time. We believe that the clinical attributes and CY 2012 median costs of the services 

found in APC 0361 support the assignment of CPT 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 kidney 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. CPT code 52353 was made effective January 1, 

2001, and describes a cystourethroscopy with lithotripsy. Our understanding is that the 

lithotripsy described in CPT code 52353 is laser lithotripsy. 
CMS-1525-FC 419 

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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 the OPPS and a 1.3 percent decrease in the 

ASCs, thereby creating a significant financial advantage for shock wave lithotripsy over 

ureteroscopy with lithotripsy. The presenter further suggested that placing CPT code 

52353 in APC 0169 would be clinically appropriate because both procedures describe 

lithotripsy of stones in the ureter and kidney, and also because their historical median 

costs have tracked closely over time. After 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 APC 0169 would avoid potential 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 initially assigned to APC 0162 (Level III 
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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 Procedures) 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 appropriate procedure based on a patient's 

diagnosis and other relevant clinical factors. Further, based on our claims data, we do not 

believe that placing both procedures in the same APC would be appropriate. Our 

analysis of the final CY 2012 claims data reveal that shock wave lithotripsy (CPT code 

50590) is more commonly performed on Medicare 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 claims, for CPT code 52353. CPT code 

52353 represents 22 percent of the claims within 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 cost 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 higher than the final median cost of 

approximately $2,711 for CPT code 52353. 
CMS-1525-FC 421 

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Comment: One commenter suggested that the increase in the median cost for 

CPT code 50590 may be a result of the application 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 report 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 lithotripsy 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 reassignment in the APC is necessary. 

Therefore, after consideration of the public comments we received, we are 

finalizing our CY 2012 proposal, without modification, 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 

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For CY 2012, we proposed to continue to assign CPT code 50593 (Ablation, renal 

tumor(s), unilateral, percutaneous, cryotherapy) to APC 0423 (Level II Percutaneous 

Abdominal and Biliary Procedures), with a proposed payment rate of approximately 

$3,969. This CPT code was new in CY 2008; however, the same service was previously 

described by CPT code 0135T (Ablation renal 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 meeting, we reassigned CPT code 50593 (then CPT 

code 0135T) from APC 0163 ((Level IV Cystourethroscopy and other Genitourinary 

Procedures)) to APC 0423. We expect hospitals, when reporting CPT code 50593, to 

also report the device HCPCS code, C2618 (Probe, cryoablation), associated with the 

procedure. 

 Comment: One commenter disagreed with the 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, such as cryoablation probes. 

The commenter reported that the payment rate 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 commenter 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 HCPCS 
CMS-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 resource 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/ASC final rule with comment period 

(73 FR 68611), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60444), 

and the CY 2011 OPPS/ASC final rule with comment period (75 FR 71910), we revised 

the APC assignment for the percutaneous renal cryoablation procedure from APC 0163 to 

APC 0423 in CY 2007 based on the APC Panel’s recommendation 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 costs ranging from approximately $3,733 to 

approximately $4,493, which are well within the two-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 the 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 procedures for the percutaneous ablation of renal, 
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liver, or pulmonary tumors in the same payment 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 weights and payment rates are based on median 

hospital costs, not mean costs, for APC groups. The OPPS relies on the relativity of costs 

for procedures as reported by hospitals in establishing payment rates, and we do not 

believe it would be appropriate to utilize a different payment methodology based on 

mean cost for one APC, while the payment rates for the other clinical APCs would be 

based on median costs. Mean and median costs are two different statistical measures of 

central tendency and, based on common distributions, 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/ASC final rule with comment period 

(72 FR 66709), the CY 2009 OPPS/ASC final rule with comment period (73 FR 68611), 

the CY 2010 OPPS/ASC final rule with comment period (74 FR 60444), and the CY 

2011 OPPS/ASC final rule with comment period (75 FR 71910), we 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 procedures, there are no Level II HCPCS codes that 

describe all of the technologies that may be used in the procedures. Therefore, it would 
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not be possible for us to develop procedure-to-device edits for all of the CPT codes 

assigned to APC 0423. 

Finally, we remind hospitals that we expect all of the HCPCS codes to be reported 

that appropriately describe the items used to provide services, regardless of whether the 

HCPCS codes are packaged or paid separately. 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 this information on the claim and adjust their 

charges accordingly. Hospitals should report the number of cryoablation 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 codes for all devices used in procedures if 

there are appropriate HCPCS codes available. In this way, we can be confident that 

hospitals have included charges on their claims for 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 continue 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 Neurostimulator 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, 
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including replacement, when performed, of spinal neurostimulator electrode percutaneous 

array(s), including fluoroscopy, when performed) and 63664 (Revision, including 

replacement, when performed, of spinal neurostimulator electrode plate/paddle(s) placed 

via laminotomy or laminectomy, including fluoroscopy, when performed) from APC 

0687 (Revision/Removal of Neurostimulator Electrodes) to APC 0040 (Level I 

Implantation/Revision/Replacement of Neurostimulator 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 the proposed median cost of APC 0687 of 

approximately $1,492. We also proposed to change the title of APC 0040 from 

“Percutaneous Implantation of Neurostimulator Electrodes” to “Level I 

Implantation/Revision/Replacement of Neurostimulator Electrodes” and the title of APC 

0061 (Level II Implantation/Revision/Replacement of Neurostimulator Electrodes) from 

“Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator 

Electrodes” to “Level II Implantation/Revision/Replacement of Neurostimulator 

Electrodes.” CPT codes 63661 (Removal of spinal neurostimulator electrode 

percutaneous array(s), including fluoroscopy, when performed), 63662 (Removal of 

spinal neurostimulator electrode plate/paddle(s) placed via laminotomy or laminectomy, 

including fluoroscopy, when performed), 63663, and 63664 were all effective 

January 1, 2010. We proposed that CPT codes 63661 and 63662 would remain in 

APC 0687. 
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 In addition, for CY 2012, we proposed to assign CPT 64569 (Revision or 

replacement of cranial nerve (eg, vagus nerve) neurostimulator electrode array, including 

connection to existing pulse generator), 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 supported 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 purposes 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’ support 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 title changes to APC 0040 and APC 0061. 

We agree with the commenters that the proposed changes would ensure that all four 

codes are in APCs that are consistent with their median costs. Therefore, we are 

finalizing our proposals to reassign CPT codes 63663 and 63664 to APC 0040, to 
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continue to assign CPT codes 63661 and 63662 to APC 0687, and to change the titles of 

APC 0040 to “Level I Implantation/Revision/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 electrode replacement and revision procedures. As 

we discussed in the CY 2012 OPPS/ASC proposed 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 (implantable)) or HCPCS code C1897 (Lead, 

neurostimulator test kit (implantable)) in order 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 findings suggested that these CPT codes 

are being used by hospitals to describe mainly device revision procedures, although there 

were a significant number of cases with device replacement procedures in the claims 

data. We also note that we implemented claims processing logic to allow CPT codes 

63663 and 63664 to satisfy the device-to-procedure edits for HCPCS codes C1778 and 

C1897, effective January 1, 2012. We cannot implement 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 to 
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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 approximately $1,451. We do not agree that CPT 

code 64569 is inappropriately assigned to APC 0687. Our clinical analysis indicates that 

CPT code 64569 is similar to the other device 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 the cost of revising the VNS electrodes and 

generator or replacing them. We do not agree 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 the 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 the public comments we received, we are finalizing our 

proposal, without modification, to assign CPT codes 63663 and 63664 to APC 0040 and 
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to assign CPT codes 63661, 63662, and 64569 to APC 0687. We also are finalizing our 

proposal to change the title of APC 0040 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 and analysis; for spontaneous brain magnetic 

activity (eg, epileptic cerebral cortex localization)); 95966 (Magnetoencephalography 

(meg), recording and analysis; for evoked magnetic fields, single modality (eg, sensory, 

motor, language, or visual cortex localization)); and 95967 (Magnetoencephalography 

(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 frequency of 50 bills. We proposed to continue 

to assign CPT code 95965 to APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, 

and MEG), which had a proposed rule median cost of approximately $3,368. 

At its August 10-11, 2011 meeting, the APC Panel made two recommendations 

with regard to CPT code 95965. First, the APC Panel recommended that CMS 

implement appropriate edits requiring hospitals to use the new MEG revenue code, 086X, 

with CPT codes 95965, 95966, and 95967. We address this recommendation in the 
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context of a comment from the public to which we respond below. Second, the APC 

Panel recommended that CMS move CPT code 95965 from APC 0067 to APC 0066 

(Level II Stereotactic Radiosurgery, MRgFUS, and MEG), for consistency. We agree 

with this recommendation and have reassigned 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 median 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 electrocardiograms (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 commenters, CMS should create a new cost center 

on the Medicare hospital cost report to isolate the costs of MEG and calculate and apply a 

CCR from the dedicated MEG cost 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 CCRs 
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for cost centers 3280 (EKG and EEG) as primary and 5400 (Electroencephalography) as 

secondary, to reduce the charges for MEG to estimated relative costs. 

Comment: Commenters urged CMS to require 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 department, but that the department through 

which MEG services are furnished 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 their charges under the revenue code that will 

result in the charges being assigned to the same 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 the charges for MEG under the dedicated MEG revenue code 

series is necessary or appropriate. Medicare pays for a low 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 for particular CPT codes. Specifically, in the 

CY 2012 final rule claims data, a small number of hospitals reported one of the three 

CPT codes for MEG. We believe that it is not reasonable to implement national 
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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 single 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 that furnish the service have 

always been very low. 

For CY 2012, as stated previously, 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 approximately $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’ requests for a dedicated cost center on the 

Medicare cost report, we refer readers to section II.A.c. of this final rule with comment 

period. 

c. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0218) 

For CY 2011, the CPT Editorial Panel deleted CPT code 0160T (Therapeutic 

repetitive transcranial magnetic stimulation treatment planning) on December 31, 2010, 

and replaced it with CPT codes 90867 (Therapeutic repetitive transcranial magnetic 
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stimulation treatment; planning) effective January 1, 2011. Similarly, CPT code 0161T 

(Therapeutic repetitive transcranial magnetic stimulation treatment delivery and 

management, per session) was deleted on December 31, 2010, and was replaced with 

CPT code 90868 (Therapeutic repetitive transcranial magnetic 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 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 codes 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 OPPS/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 placement of CPT code 90868 in APC 0216. The 

commenter stated there are no clinically similar 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 (Electroconvulsive Therapy), which has a 
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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 new because they were previously described 

by two predecessor CPT codes, specifically Category III CPT codes 0160T and 0161T. 

CPT code 90867 was previously described 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 cost 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 based on 68 single claims (out of 69 total 
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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 outpatient claims for 

ratesetting, our claims data show a CPT median 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 predecessor CPT codes 0160T and 0161T, we believe 

that both CPT codes 90867 and 90868 are appropriately 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 hospitals to actively 

contribute on an ongoing basis to the ratesetting process and to influence future payment 

rates for services by submitting correctly coded and accurately priced claims for the 

services they provide. According to this methodology, it is generally 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 clinical perspective because the provision of electroconvulsive 

therapy generally requires more extensive monitoring 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 comment period, we are finalizing our CY 2012 proposal, with 

modification. That is, we are reassigning CPT codes 90867 and 90868 from APC 0216 
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to APC 0218, which has a final CY 2012 median cost of approximately $84. Given the 

information reflected in the CY 2012 final rule 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 believe our claims data show the costs of 

these procedures are similar to the costs of other procedures assigned to APC 0218. We 

also believe that these procedures are similar 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 CPT Editorial Panel revised the long 

descriptor for CPT code 65780 (Ocular surface reconstruction; amniotic membrane 

transplantation, multiple layers) to include the words “multiple layers” to further clarify 

the code descriptor. In addition, the AMA CPT Editorial Panel created two new CPT 

codes that describe the placement of amniotic membrane on the ocular surface without 

reconstruction; one describing the placement of a self-retaining (non-sutured/non-glued) 

device on the surface of the eye, and the other describing a single layer of amniotic 

membrane sutured to the surface of the eye. Specifically, the AMA CPT Editorial Panel 

created CPT codes 65778 (Placement of amniotic membrane on the ocular surface for 

wound healing; self-retaining) and 65779 (Placement of amniotic membrane on the 

ocular surface for wound healing; single layer, sutured), effective January 1, 2011. 
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As has been our practice since the implementation of the OPPS in 2000, we 

review all new procedures before assigning them to an APC. In determining the APC 

assignments for CPT codes 65778 and 65779, we took into consideration the clinical and 

resource characteristics involved with placement of amniotic membrane products on the 

eye for wound healing via a self-retaining device and a sutured, single-layer technique. 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72402), we assigned 

CPT code 65780 to APC 0244 (Corneal and Amniotic 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 Anterior 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 comment. We further stated that we would 

address any public comments on issues regarding 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 code 65780, which did not specify 

“multiple layers,” and, as such, these new codes should continue to be assigned to APC 
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0244. Further, the presenter stated that the costs of the new procedures described by CPT 

codes 65778 and 65779 are very similar to the procedure described by CPT code 65780. 

The APC Panel recommended that CMS reassign both CPT codes 65778 and 

65779 to APC 0233 (Level III Anterior Segment Eye Procedures), citing clinical 

similarity to procedures already in APC 0233. Based on clinical as well as resource 

similarity to the other procedures currently 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 conditionally 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 exclusively be provided in addition to and 

following another procedure or service. Our medical advisors indicated that the 

procedure described by CPT code 65778 is not significantly different than placing a 

bandage contact lens on the surface of the eye to cover a corneal epithelial defect. CPT 

code 65778 describes the simple placement of a special type of bandage (a self-retaining 

amniotic membrane device) on the surface of the eye, which would most commonly be 

used in the HOPD to cover the surface of the eye after a procedure that results in a 

corneal epithelial defect. 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, 
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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 that the procedure is packaged when it is billed on the same 

date with another procedure or service that is also assigned to status indicator “T.” 

Otherwise, separate payment would 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 assigning 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 conditionally packaging CPT code 65778 is 

inappropriate because it will result in no payment for the procedure despite the significant 

costs hospitals incur in furnishing the service, which includes the cost of the Prokera 
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device (the self-retaining amniotic membrane device) that is used with 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 that the service is a significant, separate 

procedure that should continue to be separately paid. 

 Response: We disagree that the procedure described by CPT code 65778 is a 

significant procedure. The procedure has been described by the manufacturer as “like 

inserting a contact lens.” The manufacturer’s Web site states the following about the 

Prokera self-retaining amniotic membrane device: “The ProKera® device configuration 

enables easy insertion in the office, hospital bedside or following surgical procedures to 

prevent adhesions while delivering the wound 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 immediately 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 quality 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 patient comfort, and that they will 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 care 
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under these circumstances. Based on the nature 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 the public comments we received and the APC Panel's 

August 2011 recommendation, we are finalizing 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 indicator “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 finalizing 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 approximately $1,164. Further, we are finalizing our 

proposal, without modification, to continue 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 implementation of the OPPS, we annually 

review all the items and services within an APC group to determine, with respect to 

comparability of the use of resources, for any 2 times rule violations. In making this 

determination, we review our claims data and determine whether we need to make 

changes to the current APC assignments for the following year. In CY 2012, we will 

again reevaluate the status indicator and APC assignments for CPT codes 65778, 65779, 
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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 category III CPT code 0253T (Insertion of 

anterior segment aqueous drainage device, without extraocular reservoir; internal 

approach, into the suprachoroidal 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 indicator “NI” in Addendum B of the CY 2011 

OPPS/ASC final rule with comment period (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 that 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. Specifically, the commenters stated that, because CPT code 0253T is a 
CMS-1525-FC 444 

I 

glaucoma treatment with an implantable 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 anterior segment aqueous drainage device, 

without extraocular reservoir; 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 reexamining the clinical and resource 

characteristics of CPT code 0253T, we agree with the commenters that CPT code 0253T 

is similar clinically and in terms of resource 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. Therefore, after consideration 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 report data related to CPT code 0253T as the 

data become available for future updates. 

c. Scanning Ophthalmic Diagnostic Imaging (APC 0230) 
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For CY 2011, the CPT Editorial Panel deleted CPT codes 0187T (Scanning 

computerized ophthalmic diagnostic imaging, anterior segment, with interpretation and 

report, unilateral) and 92135 (Scanning computerized ophthalmic diagnostic imaging, 

posterior segment, (eg, scanning laser) with interpretation and report, 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, anterior segment, with interpretation and 

report, unilateral or bilateral), and CPT code 92135 was replaced with CPT codes 92133 

(Scanning computerized ophthalmic diagnostic imaging, posterior segment, with 

interpretation and report, unilateral or bilateral; optic nerve) and 92134 (Scanning 

computerized ophthalmic diagnostic imaging, posterior 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 rate of approximately $42 and were flagged with comment 

indicator “NI” to indicate that these codes 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 codes 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. 
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Comment: One commenter on the CY 2011 OPPS/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 Tests & Treatments), which has a CY 2011 payment rate of 

approximately $67, to account for the long descriptor changes for the new codes. 

Specifically, the commenter indicated that the predecessor codes, specifically, CPT codes 

0187T and 92135 described a unilateral procedure; however, the new codes, specifically, 

CPT codes 92132, 92133, and 92134, describe a “unilateral 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, 2011. We assigned these new codes to the 

same APC and status indicator as their 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 deleted 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 codes, 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 show that the median cost for CPT code 

92135 is approximately $41 based on 191,170 single claims (out of 191,934 total claims), 
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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 approximately $48 for APC 0230. We also believe 

that the resources consumed in performing these 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 period, 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 Segment 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 final rule median cost for APC 0233 is 

approximately $1,164. 
CMS-1525-FC 448 

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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 laser 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 supply constraints of a part used in the 

manufacturing process. The commenter 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, which 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 applies, 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 device pass-through category for the single use 

intraocular laser endoscope, while noting that it had filed an OPPS pass-through 

application, and that it expected a separate decision on the pass-through application. 

Another alternative suggested 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 the 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 commenter, 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 for this type of service, and the particular 

APC assignment depends in part on the underlying 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 CPT code 66711 is more clinically 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 reassigning 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 

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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 bilateral; lumbar), and assigned it to APC 0208 

(Laminotomies and Laminectomies) effective 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, 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) effective July 1, 2011. We 

assigned CPT code 0275T to APC 0208 and 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 percutaneous laminotomy/laminectomy (HCPCS 

code C9729 is used in the CY 2012 proposed rule, 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 other 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 appropriate 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 the 
CMS-1525-FC 451 

I 

commenter, more resource intensive. The commenter 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 facilities 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 consumed when the procedure is performed on 

multiple levels of the spine. Therefore, 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 recommended that, for CY 2012, CMS either allow the 

use of modifiers when CPT code 0275T is used, 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 Panel will take up the issue of bilateral or 

multiple levels in the CPT code 0275T code descriptor for CY 2013. 

 Response: Concerning the request 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 property of the AMA, and CMS may not modify 

any CPT codes. We also will wait to see 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 effective July 1, 2011 (as was its predecessor 

code, HCPCS code C9729, which was available for one quarter, beginning 
CMS-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 for 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 received, 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, based 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 hip procedures in the reconfigured APC 

0042: CPT codes 29861 (Arthroscopy, hip, surgical; with removal of loose body or 

foreign body), 29914 (Arthroscopy, hip, surgical; with femoroplasty (ie, treatment of cam 

lesion)), 29915 (Arthroscopy, hip, surgical; with acetabuloplasty (ie, treatment of pincer 

lesion)), and 29916 (Arthroscopy, hip, surgical; with labral repair). The commenter also 

recommended that CMS separate the remaining CPT codes in APC 0042 into new APC 

0043 (proposed descriptor “Level III Upper 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 HCPCS 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 commenter. As we stated in the CY 2012 

OPPS/ASC proposed rule (76 FR 42231), in accordance with section 1833(t)(2) of the 

Act and § 419.31 of the regulations, we annually review the items and services within an 

APC group to determine, with respect to comparability of the use of resources, if the 

median cost of the highest cost item or service 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 only those HCPCS codes that are significant 

based on the number of claims. We note that, for purposes of identifying significant 

HCPCS codes for examination in the 2 times rule, we consider codes that have more than 

1,000 single major claims or codes that have both greater than 99 single major claims and 

contribute at least 2 percent of the single major claims used to establish the APC median 

cost to be significant (75 FR 71832). Based on this rule, we have no 2 times rule 

violations in APC 0042. Using our CY 2012 final rule claims data, the highest 

significant procedure in APC 0042 is CPT code 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 required for a violation. Furthermore, we 

do not agree with the commenter’s recommendation to establish an arthroscopy APC 

with the four hip arthroscopy procedures, specifically, CPT codes 29861, 29914, 29915, 
CMS-1525-FC 455 

I 

and 29916, as a viable alternative, because all 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 utilization. We will keep the current HCPCS code configuration 

of APC 0042 for CY 2012, and 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 for CY 2012) of the CY 2012 OPPS/ASC 

proposed rule, we proposed to continue with the existing group titles for APCs 0129, 

0138, and 0139 to read as follows: 

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

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

● APC 0139 (Level III Closed Treatment Fracture Finger/Toe/Trunk) 

 We note that Addendum A did not appear in the printed version of the Federal 

Register as part of the CY 2012 OPPS/ASC proposed rule. Rather, it was published and 

made available only via the Internet 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 there 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 the words “Finger/Toe/Trunk” from the group 

titles for APCs 0129, 0138, and 0139 more appropriately 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 that the title describes all procedures 

assigned to these APCs. Table 25 shows the 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 Treatment Fracture 

d. Level I and II Strapping and Cast Application (APCs 0058 and 0426) 

 In Addendum A (Proposed OPPS APCs for 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 Strapping and Cast Application) 

● APC 0426 (Level II Strapping and Cast Application) 

 We note that Addendum A did not appear in the printed version of the Federal 

Register as part of the CY 2012 OPPS/ASC proposed rule. Rather, it was published and 

made available only via the Internet on the CMS Web site at: http://www.cms. gov/. 
CMS-1525-FC 457 

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 Comment: One commenter stated there is only a single level APC for the 

strapping procedures; therefore, 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 which 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 continue to title APC 0058 to read “Level I 

Strapping and Cast Application” 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 continue to assign CPT codes 77520 (Proton 

treatment delivery; simple, without compensation) and 77522 (Proton treatment delivery; 

simple, with compensation) to APC 0664 (Level I Proton Beam Radiation Therapy), 

which had a proposed payment rate of approximately $992. We also proposed to continue 

to assign CPT codes 77523 (Proton treatment delivery; intermediate) and 77525 (Proton 

treatment delivery; complex) to APC 0667 (Level II Proton Beam Radiation Therapy), 

which had a proposed payment rate of approximately $1,298. 
CMS-1525-FC 458 

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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 the 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, with respect to comparability of the use of 

resources and clinical homogeneity. 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 according to the standard OPPS ratesetting 

methodology. Specifically, we used 12,263 single 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 claims 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 

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For CY 2012, we are setting the final payment 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 median costs upon which the final CY 2011 

payment rates were based ($1,020.72 and $1,335.24, respectively). As we have in the 

past (75 FR 71916), we note that our cost-finding methodology is based on reducing each 

hospital’s charge for its services to an estimated cost by applying the most discrete 

hospital-specific CCR available for the hospital that 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 continue 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 believe 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 

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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, MRgFUS, 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. Specifically, we proposed the following: to assign 

HCPCS code G0173 (Linear accelerator based stereotactic radiosurgery, complete course 

of therapy in one session) and HCPCS code G0339 (Image-guided robotic linear 

accelerator-based stereotactic radiosurgery, complete course of therapy in one session or 

first session of fractionated treatment) to APC 0067 (Level III Stereotactic 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 plugging, 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 II 
CMS-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, treatment 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 OPPS 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 indicator “B” to CPT codes 77372 and 77373. The 

commenter also recommended that CMS revise the code descriptors for HCPCS code 

G0173, G0251, G0339, and G0340 to distinguish between robotic and nonrobotic 

gantry-based SRS systems. Based on analysis 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 four HCPCS G-codes to ensure submission of correctly coded 

claims. Alternatively, the commenter requested that CMS provide guidance on the 

reporting of the existing SRS HCPCS G-codes if no change is made to the HCPCS code 

descriptors. 
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Response: As we have stated in the past (75 FR 71915), these HCPCS G-codes 

for SRS have been in effect for several years and, based on questions brought to our 

attention by hospitals, we have no reason to believe 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 for the services based on the current code 

descriptors. We continue to believe it would be confusing to hospitals if we were to 

revise the code descriptors for HCPCS 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 HCPCS G-code descriptors 

is not necessary for us to continue to provide appropriate payment for the services they 

describe. Further, we have provided instruction on the reporting of these SRS codes in 

Chapter 4, Section 200.3 of the Medicare Claims 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; HCPCS G-code G0251 to APC 0065, which has a 

final CY 2012 APC median cost of approximately $903; HCPCS G-code G0340 to APC 

0066, which has a final CY 2012 APC median cost of approximately $2,521; and CPT 
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code 77371 to APC 0127, which has a final CY 2012 APC median cost of approximately 

$7,461 because we continue to believe these placements are appropriate in light of the 

resource cost and clinical intensity of the services describe by these CPT codes. In 

addition, we are finalizing our proposals, without 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 CPT 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’ rationale for the proposal to reassign 

CPT code 78075 from APC 0408 to APC 0414, citing 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 provide rationale in all proposed rules when 

any CPT code placement change is proposed. 

Response: After revisiting this issue and analyzing the final CY 2012 median 

cost for CPT code 78075, we agree with commenters’ 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 cost 
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of APC 0408 of approximately $958. . We note that the proposed rule does not include 

service-specific discussions for each separately paid HCPCS code reassignment or for 

each APC. Rather, we discuss the general methodology used to calculate the median 

costs upon which the proposed payment rates 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 particular item or service. In most cases, a 

proposed reduction of a median cost for an APC or for a HCPCS code that is calculated 

from actual charges and cost data will not result in a service 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 the public comments we received, 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 Tomography (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 tomography (PET), perfusion; single study at 

rest or stress), and 78492 (Myocardial imaging, positron emission tomography (PET), 
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perfusion; multiple studies at rest and/or stress) to APC 0307 (Myocardial Position 

Emission Tomography (PET) Imaging), for which 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 continue 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 emission tomography (PET) imaging; skull 

base to mid-thigh), 78813 (Tumor imaging, positron emission tomography (PET) 

imaging; whole body), 78814 (Tumor imaging, positron emission tomography (PET) 

with concurrently acquired computed tomography (CT) for attenuation correction and 

anatomical localization imaging; limited area (eg, chest, head/neck)), 78815 (Tumor 

imaging, positron emission tomography (PET) with concurrently acquired computed 

tomography (CT) for attenuation correction and anatomical localization imaging; skull 

base to mid-thigh), and 78816 (Tumor imaging, positron emission tomography (PET) 

with concurrently acquired computed tomography (CT) for attenuation correction and 

anatomical localization imaging; whole body) to APC 0308 (Non-Myocardial Positron 

Emission Tomography (PET) imaging), for which we proposed a national unadjusted 

payment rate of $1,015. The CY 2011 national 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 from 
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one year to the next and the proposed reduction in the payment rate for CY 2012, 

particularly in view of the reduction in the payment rate from CY 2010 to CY 2011. The 

commenters urged CMS to validate the costs estimated from the CY 2010 hospital claims 

and cost report data for the limited number 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 stability of payment for myocardial PET services. 

Several commenters indicated that they believed that aberrant CCRs for a few 

hospitals that furnish myocardial PET services 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 calculated costs as compared to their peer 

institutions. The commenters believed that the 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 commenter 
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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, another commenter asked that CMS 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 performed at a relatively small number of hospitals and 

because hospitals do not always align the costs and charges for the service properly in 

their accounts and, therefore, the CCRs that result from the cost reports understate the 

cost of the services. Commenters also stated that they were concerned that hospitals had 

not charged appropriately for the services and the radiopharmaceutical that is needed to 

furnish the service. Some commenters objected to the absence of a strict definition of 

what costs should be included in each cost center 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 services results in the potential for hospitals to 

set charges at 4 to 5 times the cost for established 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 myocardial PET costs on their Medicare cost 

reports to improve the accuracy 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. 
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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 reconfigured APC 0308 is approximately $1,038. 

We were influenced in this decision 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 PET services that were assigned to APC 0307 

and therefore largely would control the median cost for APC 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 from the proposed rule median cost and a 

decrease of approximately 29 percent from 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, APC 0307 would have had a median cost of 

approximately $809, a 15-percent decrease from 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 final 
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rule data and the CY 2012 proposed rule and yet further between the CY 2012 proposed 

rule and the CY 2012 final rule data. We believe that there are multiple 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 costs; number of hospitals billing the service; 

and number of single bills. Our findings are contained in Table 26 below. 
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TABLE 26.—SELECT DATA 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 significant observations from these data for CPT code 78492, 

which is the myocardial PET imaging service that represents 98 percent 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 line 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 from the CT 2011 final rule data to the 

CY 2012 final rule data although the median line item charge increased only 5 percent 

over the same period, thus resulting in a significant 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 each 
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data set. Specifically, 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 furnished 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 volatility 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 the service is stable and once the volume of 

services being furnished each year is stable. We believe that the CCR changes are 

increasing the instability in the median costs for CY 2012 and that combining the two 

APCs is a reasonable response 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 after the cost center transitions are complete. 

In general, large volumes of services enhance stability of median costs, and we believe 

that by reassigning CPT codes 78459, 78491 and 78492 to APC 0308, we can lessen the 

volatility of payment changes for these services for CY 2012. There are many legitimate 
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reasons why costs for these services may go down (for example, hospitals are becoming 

more efficient as they provide greater volumes of these services without incurring 

additional substantial costs for equipment and 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, additional doses are no more costly during the life 

of the generator, among others). If we determine that the per unit costs for providing 

myocardial PET have genuinely decreased over time and stabilized, we believe that it is 

appropriate that our payment rates would reflect these diminishing costs. 

With regard to the comments that we should 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 whose CCRs were flagged as invalid. These 

included claims for hospitals without a CCR, for hospitals paid an all inclusive rate, for 

CAHs, for hospitals with obviously erroneous CCRs (greater than 90 or less than .0001), 

and for hospitals with CCRs that were identified as outliers (3 standard deviations from 

the geometric mean after removing error CCRs). This longstanding practice has resulted 

in enhancing the number of claims we use for ratesetting, while eliminating claims that 

cannot be reduced to cost or for which hospital CCRs are clearly erroneous. In the case 

of myocardial PET services, the commenter indicated that the claims that the commenter 

requested be deleted from the set of claims used for ratesetting comprise 34 percent of the 
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set of single bills and were submitted by hospitals 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 single 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 service. 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 refer 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 necessarily result in a median cost that would 

be a less accurate, if perhaps higher, 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. For 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 center 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 appropriate 
CMS-1525-FC 474 

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estimates of the cost of PET services when the CCR for the cost center 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 the Provider Reimbursement Manual. However, 

hospitals charges are a reflection of the monetary value that the hospital establishes for 

service it is furnishing and the only CMS restriction on hospital charges is that charges 

must be reasonably related to cost and that the same amount must be charged to all payers 

for the same service (we refer readers to the definition of “charges” for cost reporting 

purposes in 42 CFR 413.53(b)). We recognize 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 represent a valid reflection of the relationship 

between the costs and the charges in the aggregate for services 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. 
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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 result 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-mycardial PET (APC 0308) than for 

myocardial PET (APC 0307) because the proposed 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 estimation methodology which applied each hospital’s 

most current, hospital-specific and departmental-specific CCR to that hospital’s charge 

for services furnished in CY 2010. However, we are deleting APC 0307 for CY 2012 

and, therefore, all PET imaging services will 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 commenters 
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believed that this is evidence indicating that the data on which CMS is basing the 

payment rate are flawed. One commenter also stated that the CY 2012 proposed payment 

rate for APC 0307 is below the mean cost for 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 for a single scan indicates that the data are 

flawed. There are many reasons that the median 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 50th 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 relative costs, as we define them 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 frequently a wide range between the minimum cost 

and the maximum cost. For example, for CPT code 78492, the CY 2012 proposed rule 
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minimum cost on a single bill was approximately $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 greater than the median cost 

(approximately $954). We do not understand 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 there 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 that 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 cost 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 limited 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 and 
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for CMS to seek Panel comment and advice on issues for which CMS believes such 

comment and advice would be useful. The winter APC Panel meeting generally reviews 

concerns of the public with regard to the final rule for that year and provides an 

opportunity for the public and CMS to seek the Panel’s comment and advice on issues for 

the forthcoming year’s OPPS. The summer APC Panel meeting occurs during the 

comment period of the proposed rule and is generally limited to hearing the views of the 

public on the proposed rule for the upcoming year. No member of the public asked to 

make a presentation on the payment rate for APC 0307 at either the Panel’s winter or the 

summer meetings in 2011. Moreover, we had no clinical or resource-related question 

related to APC 0307 for which we believed that APC Panel input would be useful. 

Therefore, like many other topics applicable 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 the 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 cost 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 codes 
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for which median costs are calculated prohibit a detailed explanation 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 for 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 for APC 0308 is based on data from 

claims submitted during CY 2010 according 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. Specifically, we used 249,026 single 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 for all PET imaging services (including CPT 

codes 78459, 78491 and 78492 that were in APC 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 discrete 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 used to calculate the median cost for each 
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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 previously 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 myocardial 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 standard annual notice-and-comment rulemaking 

process. 

e. Device Construction for Intensity Modulated Radiation Therapy (IMRT) (APC 0305) 

CPT code 77338 (Multi-leaf collimator (MLC) device(s) for intensity modulated 

radiation therapy (IMRT), design and construction 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; complex (irregular blocks, special shields, 

compensators, wedges, molds or casts)). For CY 2012, the first year of claims data for 
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CPT code 77338, we proposed to assign CPT code 77338 to APC 0305 (Level II 

Therapeutic Radiation Treatment Preparation), with a proposed median cost of 

approximately $266 because we calculated a proposed 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 Preparation) based on a simulated median cost of 

approximately $792 that we calculated using CY 2009 claims data for CPT code 77334, 

the predecessor code to CPT code 77338. Using 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. Based on this simulated median cost for CPT 

code 77338, we assigned the code 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 for 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 2010, 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 times 
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rule violation. We refer readers to section III.B. of this final rule with comment period 

for discussion of the 2 times rule. Specifically, the proposed rule median cost for APC 

0310 of approximately $953 was more than twice 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 the criteria as a significant procedure in APC 0310. To 

resolve the 2 times rule violation, we proposed to move CPT code 77338 to APC 0305 

for CY 2012 OPPS. 

Comment: Commenters objected to our proposal to move CPT code 77338 from 

APC 0310 to APC 0305. They believed that even 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 and 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 commenter stated that 

its analysis revealed there is huge variability 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 through the CMS cost data, with CMS finding costs 

of less than $100 for 17.5 percent of hospitals and costs of more than $1,000 for 10 
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percent of hospitals. Another commenter indicated that its analysis 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 stated that it is clear 

that hospitals require guidance with 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 alternatively assign the 

procedure to an APC that would pay for construction 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 median 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 hospitals for CPT code 77338, converted to 

cost by application of the CCRs we calculated from the billing hospitals’ most recently 

submitted cost reports. CPT code 77338 has similar clinical characteristics to the 

services in APC 0305 (Level II Therapeutic 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 the 
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single bills used for ratesetting for CPT code 77338 was approximately $826. The 

median CCR that we used to reduce the hospital established charges 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 actual charges for CPT code 77338, 

to calculate the final rule median cost for 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 charge 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 designed to address wide variances in hospital 

cost accounting systems and billing patterns, and has also consistently been a reliable 

mechanism for promoting increased consistency without introducing additional 

regulations. We recognize that it is peculiar that 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 based on the amounts of the charges established by 

hospitals for the service and the hospitals’ CCRs, which are calculated from their 

Medicare cost reports. There are many reasons why this apparent anomaly could exist, 
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including clinical rationales such as the inclusion of labor-intensive physical blocks, 

shields, and molds in the service described by CPT code 77334, as well as accounting 

rationales such as the crosswalking of a single collimator setting to the charges for the 

construction of a physical block, also in the 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 service for which they are requesting a specified 

amount of payment. This self-selected hospital charge is converted to an estimated cost 

by the application of a CCR for the billing hospital which is calculated from the billing 

hospital’s own cost report. As described previously, 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 ratesetting out of 47,589 total lines). Therefore, we have no 

reason to believe that the median cost we have calculated from such a robust submission 

of charge data from a significant number of hospitals should not be used to establish the 

payment for the service reported by CPT code 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 defined by CPT code 77338, the revised charges would 

be reflected in future years’ OPPS payment rates. However, for CY 2012, based on the 

robust set of single procedure bills containing actual charges for CPT code 77338 by 965 

hospitals, we believe that it is appropriate to apply our longstanding cost-finding 
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methodology, as we proposed, to calculate the 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 are finalizing our assignment of CPT code 

77338, which has a final median cost of approximately $188 to APC 0305, which has a 

final median cost of $264 for CY 2012. 

f. Computed Tomography of Abdomen and Pelvis (APC 0331 and 0334) 

The AMA CPT Editorial Panel created three codes for computed tomography 

(CT) of abdominal and pelvis that were effective January 1, 2011, specifically, CPT code 

74176 (Computed tomography, abdomen and pelvis; without contrast material); CPT 

code 74177 (Computed tomography, abdomen and pelvis; with contrast material(s)); and 

CPT code 74178 (Computed tomography, abdomen and pelvis; without contrast material 

in one or both body regions, followed by contrast material(s) and further sections in one 

or both body regions). As with all new CPT 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). 
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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 APC 0283 (Computed Tomography with 

Contrast), which has a CY 2011 payment rate of approximately$300; and we assigned 

CPT code 74178 to APC 0333 (Computed Tomography Without Contrast Followed by 

with Contrast), which has a CY 2011 payment 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 furnished 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 forthcoming 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 include 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 comment period, an interim status 

indicator and/or APC assignment for all new CPT codes that are announced by the AMA 

CPT Editorial Board subsequent to the OPPS/ASC 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 identified the new codes for abdominal/pelvis CT for CY 2011 

in Addendum B of the CY 2011 OPPS/ASC final rule with comment period as having 

new interim APC assignments by showing a comment indicator of “NI,” and we provided 
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a public comment period. As we do with all 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 meeting, 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 effective 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 dates 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 payment 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 previously reported under two separate codes and 

that, therefore, payments would be more accurate and better reflective of the relative cost 

of the services under the OPPS if we were to establish payment rates for the codes for 
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CY 2012 using claim data that reflect the combined 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, the services that are being reported 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 services 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 codes in a manner similar to that used to create 

the composite APC medians would result in the 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 the 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 services 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 both 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 and 
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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 single 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 (Combined 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 median cost of approximately $417. We also 

proposed to create new APC 0334 (Combined Abdominal 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 contrast. 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 could 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 is 
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unique to these CPT codes. Therefore, we believe 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 continues 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 costs for proposed APCs 0331 and 0334 for 

CY 2012, we selected claims that contained 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 WERE 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; without contrast material, followed 

by contrast material(s) and further sections 

For purposes of selecting claims to be used to calculate simulated median costs, 

we selected only claims that contained one (and only one) unit of each of the predecessor 
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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 codes. 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 proposed rule and this final rule with comment 

period for discussion of the imaging composite APCs. 

TABLE 28.--COMBINATIONS OF PREDECESSOR CPT CODES USED TO 

SIMULATE MEDIAN COSTS FOR THE 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 contained one and only one unit of each code in 

each combination, we deleted claims that contained other separately paid HCPCS codes 
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if those codes did not appear on the bypass list (we refer readers to section II.A.1.b. of the 

proposed rule and this final rule with comment period, and to Addendum N, which was 

available via the Internet on the CMS Web site). We bypassed the costs for codes that 

appeared on the bypass list to create simulated single procedure claims for CPT codes 

74176, 74177, and 74178. Using the remaining simulated single procedure claims for the 

combined abdominal and pelvis CT services, we applied our standard trimming, 

packaging, and wage standardization methodology 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, packaging, and wage standardization methodology. 

We found that using the proposed 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 approximately $417. We found that using this 

proposed methodology, the simulated median cost for CPT code 74177 was 

approximately $570 and the simulated median cost for CPT code 74178 was 

approximately $638, and that the simulated 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 (CT 
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and CTA without Contrast), for which we proposed 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 proposed a median cost of approximately $744 for 

the CY 2012 OPPS. We proposed to assign 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 CPT 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 stated that we believe that it would be 

inconsistent with our proposed imaging composite 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 establish 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 which we would base the CY 2012 payment rates 

because we believe that to do so would result in relative payment weights for these new 

services that will more accurately reflect the resources required to furnish these services 
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as defined by CPT than would be true of continued assignment of the codes to the single 

service APCs to which we made interim assignments 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 APC Panel recommended that CMS adopt 

the proposal to create new APC 0331 (Combined Abdomen and Pelvis CT [computed 

tomography] without Contrast), for payment 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 contrast material(s)); and CPT code 74178 

(Computed tomography, abdomen and pelvis; without contrast material in one or both 

body regions, followed by contrast material(s) and further sections in one or both body 

regions). We respond to the Panel’s recommendation 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 into 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 which 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, commenters on the CY 2011 OPPS/ASC final rule 

with comment period also stated that the most appropriate approach to establishing 
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payment 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 

previously reported under two separate codes and that, therefore, payments would be 

more accurate and better reflective of the relative cost of the services under the OPPS if 

we were to establish payment rates for the codes for CY 2012 using claims data that 

reflect the combined cost of the two predecessor codes. 

 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. Therefore, 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 cost 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 the 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 for 
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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 containing 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 services 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 longstanding 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 the 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 reduced 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. 
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 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 entitled. We generally do not change payments 

that we implement as a result of the standard regulatory process during the year in which 

the payments are in effect unless required by legislation. We followed our longstanding 

policy when we made an interim assignment 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 hospital resources required to furnish these 

services. It is our longstanding practice to assign new CPT codes to interim APCs 

without having an opportunity to acquire comment from the public because the new 

codes are not announced to the public until after the opportunity for public comment has 

ended. This interim assignment remains in effect for the calendar 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 received, 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 data for the predecessor codes and the 

methodology we identify above and in the proposed rule, we calculated a simulated 

median cost of approximately $406 for APC 0331 and a simulated median cost of 
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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 imaging 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 contrast is not used and to assign CPT codes 74177 

and 74178 to APC 8006 when either of them is reported with CT codes that describe CT 

services for regions of the body other than abdomen 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 Radiation 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 Prostate Brachytherapy Composite) employs 

claims on which both CPT code 77778 and CPT code 55875 (Transperineal placement of 

needles or catheters into prostate for interstitial radioelement application, with or without 

cystoscopy) are found on the same date of service, as described in section 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. 
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 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 for APC 0651 are based on fewer than 100 

claims, and that the proposed CY 2012 payment 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 the proposed CY 2012 rate for APC 0651 are 

inadequate, and recommended that CMS continue to explore additional methodologies to 

increase the number of multiple procedure claims used for brachytherapy ratesetting. 

 Response: While we agree that 96 single claims associated with CPT code 77778 

is not optimal for APC 0651 ratesetting, we believe that a low volume of single claims 

for this code is not unexpected due to the clinical nature of the procedure. As we 

describe in section II.A.2.e.(2) of this final rule with comment period, 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 generally 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 hospital for brachytherapy source application, in 

which case CPT code 77778 would be reported alone in the hospital outpatient setting. 

While we agree with the commenter that it would be preferable if we had more single 
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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 could 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 data to establish the payment rate for APC 

0651 in particular. 

For CY 2012, the final median cost for 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 finalizing 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 application codes, one of which is unlisted 

CPT code 77799 (Unlisted procedure, clinical 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 random variations in yearly median costs. The commenter 

pointed to a decrease in single claims from the CY 2011 final rule to the CY 2012 
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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 percent. The commenter recommended that CMS 

continue to explore additional methodologies to increase the number of multiple 

procedure claims used for brachytherapy 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 ratesetting methodologies generally to maximize 

our use of claims data generally and continue 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 for services that are 

assigned to APC 0312 in the CY 2012 final rule 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 specifically, or in cases in which there is no 

existing code for the service, a new code were to be created to describe the services being 

furnished. 
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 After consideration of the public comments we received, we are finalizing a 

CY 2012 median cost for APC 0312 of approximately $378, based on 183 single claims. 

8. Respiratory Services 

a. Pulmonary Rehabilitation (APC 0102) 

Section 144(a)(1) of Pub. L. 110–275 (MIPPA) 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 established 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 comprehensive pulmonary rehabilitation benefit 

provided in section 1861(fff) of the Act. Moreover, at that time, there were no 

alphanumeric HCPCS codes that described the comprehensive pulmonary rehabilitation 

benefit in effect for CY 2008 (on which the CY 2010 OPPS was based) or CY 2009 (on 

which the CY 2011 OPPS was based). Therefore, for CY 2010, we created new HCPCS 

code G0424 (Pulmonary rehabilitation, including 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 created 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 pulmonary rehabilitation service for which 

MIPPA provided coverage, we did not assume that the charge reported on any one of the 
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previously existing HCPCS codes under which pulmonary treatments were reported 

would represent the full charge for the comprehensive pulmonary rehabilitation service. 

Instead, for the CY 2010 OPPS, which was based on claims for services in 

CY 2008, we calculated a median “per session” cost that we simulated from historical 

hospital claims data for pulmonary 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 provided 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 session” 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 procedures to improve respiratory function 

or increase strength or endurance of respiratory muscles, two or more individuals 

(includes monitoring), the group code that is without limitation on time duration, and one 

unit of HCPCS code G0237 (Therapeutic procedures to increase strength 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 muscles, one on one, face to face, per 15 minutes 

(includes monitoring), the individual, 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 of 
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approximately 1 hour in duration. This was consistent with public comments that 

suggested that pulmonary rehabilitation is often provided in group sessions in the HOPD, 

although patients commonly require additional one-on-one care in order to fully 

participate in the program. We note that our 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 with 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 services, for patients receiving pulmonary 

therapy services in the HOPD based upon CY 2008 claims. We concluded that the 

typical session of pulmonary rehabilitation 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 tests 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 oximetry)); 94664 (Demonstration 

and/or evaluation of patient utilization of an aerosol generator, nebulizer, metered dose 

inhaler or IPPB device); and 94667 (Manipulation chest wall, such as cupping, 

percussion and vibration to facilitate lung function; initial 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 identifying these “per session” claims, which we believe to 
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represent 1 hour of care, we summed the costs on them and calculated the median cost for 

the set of selected claims. In light of the cost and clinical similarities of pulmonary 

rehabilitation and the existing 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 the simulated median cost for 

HCPCS code G0424, constructed to include the costs of these services where furnished, 

was our best estimate of the expected hospital 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 simulated median that we expected hospitals would 

establish charges for pulmonary rehabilitation that would reflect 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 services 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 historical hospital claims data for similar pulmonary therapy 

services for the CY 2011 OPPS. The CY 2011 OPPS final rule median cost of 
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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 provided the pulmonary rehabilitation benefit 

beginning on January 1, 2010. Specifically, 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 found that higher volumes of single bills both in 

absolute numbers and as a percentage of total 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 HCPCS code G0424 and, therefore, for APC 102, 

would be based on the median cost for the service as derived from claims for services 

furnished in CY 2010 and the most current available 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 description of our longstanding standard process for calculating the 

median costs on which the OPPS payment rates are based. Using our standard median 

calculation process for HCPCS code G0424 resulted in a proposed median cost of 
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approximately $38 for HCPCS code G0424 and, therefore, 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 median cost we calculated for HCPCS code 

G0424 was a valid reflection of the relative 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 was derived from application of our standard 

median calculation process to hospital claims data for CY 2010. We believe that this 

difference arises because the median simulation methodology we used for CY 2010 and 

CY 2011 selected claims that contained multiple 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 service. Our simulation methodology assumed that 

hospitals would include the charges for these additional services in their CY 2010 

charges for HCPCS code G0424 because the services 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 percent of hospitals paid under the OPPS, reported HCPCS 

code G0424 and that the median line item median cost (exclusive of packaging) was 
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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 under 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 found that the median line item charge for 

HCPCS code G0424 in the CY 2012 proposed rule data was approximately $150 and that 

the median CCR was 0.29. We also found that the most frequently reported revenue code 

for HCPCS code G0424 was revenue code 410 (Respiratory therapy), approximately 

108,000 single bills, and with revenue code 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 total 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 the single bills supports the proposed median 

cost of approximately $38 per unit as a valid estimate of the relative cost of one unit of 

HCPCS code G0424. 

 In summary, our examination of the claims 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 correctly according to our longstanding standard 
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median cost calculation methodology. Therefore, we proposed to base the CY 2012 

OPPS payment rate for HCPCS code G0424 and APC 0102 on the median cost that we 

derive from applying our standard median 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 from the payment that resulted from the 

simulated median cost for pulmonary rehabilitation 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 furnish 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 obstructive pulmonary disease 

(COPD), accordingly. Commenters stated that CMS data support that hospitals are not 

reporting charges associated with the corollary 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 the use of a standard cost center to the use 

of a nonstandard cost center for determining the relative cost of pulmonary rehabilitation 

services because they believed that using a standard cost center does not adequately 
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capture the cost of the services. The commenters believed that continuing the CY 2011 

payment for CY 2012 is justified because there is strong historical 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 the 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 length of stay in inpatient hospital settings. The 

commenters stated that HCPCS 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 patients. However, they stated that this is not 

always the case and that HCPCS code G0424 is sometimes requires 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 using the simulated median methodology 

that was the basis for payments for HCPCS code G0424 for CY 2010 and 2011. 

 Response: After considering the comments and 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 billed 
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lines, for the calculation of the final median cost for HCPCS code G0424 for CY 2012. 

We disagree with commenters that these claims 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 centers that were used to reduce the charges to costs. We found 

that the median charge for one unit of HCPCS 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 service, 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. Therefore, 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 hospitals charged more for the comprehensive 

pulmonary rehabilitation service of HCPCS code G0424 than for HCPCS code G0239 

which is not a comprehensive service but which is a group service for which time is not 

limited. Hospital charges represent the hospital’s statement of the dollar value of the 

service they furnish and we conclude that hospitals place a higher 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 and $85, respectively, and which represent 15 

minutes of care to be similar to HCPCS code G0424 because each of them is for 
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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 code G0239 on the claim, with HCPCS code 

G0237 and/or HCPCS code G0238 being 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 reported 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 Respiratory 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 median 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 specific 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 report CMS 2552-96, to reduce the charges on the 

line to costs on 63 percent of the single bills. When we looked at the CCRs used to 

reduce charges to cost for HCPCS codes 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 the commenters’ request that we create a 
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nonstandard cost center for pulmonary rehabilitation because we believe that it is not 

necessary and would not result in more accurate estimated median costs for pulmonary 

rehabilitation. Stakeholders have 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 for pulmonary rehabilitation. We 

note also that a nonstandard cost center, which commenters’ requested, is not required to 

be used to report costs. However, a standard cost center, like cost center 4900, must be 

completed by a hospital if it has a cost account 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 data for the 446,456 single bills used to 

report the CY 2010 charges from which we calculated the median cost for HCPCS code 

G0424 leads us to believe that the calculation 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 payment that results from a median cost of 

approximately $37 would be insufficient to pay the labor cost for the service, we note 

that, given that HCPCS code G0424 is generally recognized to be a group service, 
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generally with a ratio of 1 staff to 4 patients, the payment for an hour of service would 

usually be 3 to 4 times the payment for one unit of HCPCS code G0424. 

We do not agree with the commenters that freezing the payment for HCPCS code 

G0424 at the rate that was based on the simulated 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 are furnishing. With regard to the comment 

that hospitals established their charges based 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 code G0424 is higher than the median charge 

for HCPCS code G0239, the group respiratory service as we would expect given that 

HCPCS code G0424 is a comprehensive service. The charges that hospitals 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 the 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 charges for CY 2010 will necessarily result in 

reduced access to care for Medicare patients. We note that the respiratory therapy 

services reported under HCPCS code G0239, which commenters stated is for an hour of 
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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, when the payment rate for HCPCS code G0239 

was $27.39, hospitals reported a total frequency of 146,616, which indicates no absence 

of access to care at a payment rate significantly less than the median cost for HCPCS 

code G0424 in CY 2012. 

 Comment: Commenters also stated that some CMS instructions to contractors 

were not issued until May 2010 and that some MACs did not permit billing of HCPCS 

code G0424 until October of 2010. Moreover, they stated that some MACs instructed 

hospitals to report HCPCS codes G0237 through G0239 for pulmonary rehabilitation for 

COPD patients contrary to CMS instructions. They added that, given these issues with 

implementation of billing and payment for HCPCS 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 similar 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 services, 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 articles on new codes and hosts Hospital Open Door Forum 

calls regularly to provide easy ways for hospitals to stay up to date on changes in 
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Medicare payment policy. The instructions to MACs are available 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 the issue with the MAC, the hospital should 

bring it to the attention of the CMS regional office 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 and 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 discussion of HCPCS code G0424 and 

an explanation of how the simulated median was created, including how CMS viewed 

HCPCS code G0424 to be similar to HCPCS codes G0237 through G0239 

(74 FR 60569). Moreover, CMS hosted regular 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 hospital OPPS. CMS expected that hospitals 

would use the detailed explanation of how we arrived at the simulated median that was 

articulated in the CY 2010 OPPS/ASC final rule with comment period that was posted on 

the CMS Web site as a basis for establishing 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 delay in the issuance of CR 6823, we believe 

that hospitals had access to all of the information that was necessary to report the new 
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codes and to establish appropriate charges for HCPCS code G0424 beginning with the 

January 1, 2010 effective date. 

Comment: Commenters asked that, for hospital cost reports filed January 1, 2012 

and later, CMS require that pulmonary rehabilitation to be reported in a nonstandard cost 

center rather than a standard cost center. They believed that the recommendations of RTI 

in its 2006 report, with regard to the creation of a new nonstandard cost center for cardiac 

rehabilitation, should also apply to pulmonary rehabilitation because the authorizing 

legislation is almost identical and because they 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 isolate the costs of respiratory 

services (which may include the cost of hospital staff other than respiratory therapists 

who furnish respiratory therapy): cost center 4900, Respiratory Therapy, on the CMS 

form 2552-96 and cost center 6600, Respiratory Therapy, on the CMS form 2552-10. 

However, we believe that respiratory therapists provide the majority of pulmonary 

rehabilitation and that the costs of respiratory therapists are largely reported on the cost 

report under the respiratory therapy cost center. Therefore, we believe that most of the 

costs of pulmonary rehabilitation are already 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 sufficiently often that it was 

used to reduce the charge for 279,803 of the 446,456 single bills, or 63 percent of the 
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I 

single bills, to cost. In view of the existence of the standard 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 for HCPCS code G0424. In contrast, unlike 

respiratory therapy, which has long had a dedicated cost center, the costs of the staff who 

furnish cardiac rehabilitation were not predominantly 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 does not justify the creation of a pulmonary 

rehabilitation cost center. 

Comment: One commenter asked that CMS reconsider the valuation of the cost 

of HCPCS code G0424 to appropriately account for the services delivered by physical 

therapists. The commenter asked that, alternatively, CMS create a separate HCPCS code 

that can be used to delineate those patients who require individualized physical therapy 

within the pulmonary rehabilitation program. The commenter stated that the need for the 

service that would be reported by the new code would be determined by conducting 

separate screening that has clear and distinct criteria that justify 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 particular type of professional who participates in 

providing the service. The charge a hospital establishes for HCPCS code G0424 is a 

charge for the comprehensive package of services that are encompassed in the pulmonary 

rehabilitation benefit and includes the charge for whatever portion of those services may 
CMS-1525-FC 520 

I 

be furnished by a physical therapist. We do not believe that it would be appropriate to 

create a new and separate code for the services furnished by a physical therapist as part of 

a comprehensive pulmonary rehabilitation service because those services are already 

included in the charge for HCPCS code G0424. Similarly no additional payment should 

be made for those services because payment for HCPCS code G0424 includes payment 

for the comprehensive package of services for which payment is claimed when a hospital 

reports HCPCS code G0424. 

 In summary, for CY 2010, we are establishing 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 billed 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 therapists 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 the 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 performed), radiofrequency ablation of airway 

smooth muscle, 1 lobe) and C9731 (Bronchoscopic bronchial thermoplasty with imaging 
CMS-1525-FC 521 

I 

guidance (if performed), radiofrequency ablation of airway smooth muscle, 2 or more 

lobes), also known as bronchial thermoplasty, and assigned them to APC 0415 (Level II 

Endoscopy lower airway), effective July 1, 2011. Bronchial thermoplasty is indicated for 

the treatment of severe persistent asthma, and the bronchial thermoplasty system consists 

of a radiofrequency (RF) controller 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 Technology APC. The APC 0415 median cost for the 

CY 2012 proposed rule is $2,094.64. AMA’s CPT Editorial Panel has recently created 

two new Category III CPT codes to be effective January 1, 2012, specifically, CPT codes 

0276T (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 

performed; with bronchial thermoplasty, 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 bronchial thermoplasty, but the Panel did not 

make any recommendations to CMS. We indicated at the August 2011 APC Panel 

meeting that we anticipate retiring HCPCS codes C9730 and C9731, and replacing them 

with CPT codes 0276T and 0277T, respectively, effective January 1, 2012. For 

CY 2012, we proposed maintaining assignment of bronchial thermoplasty services to 

APC 0415. 

Comment: One commenter stated that the bronchial thermoplasty codes, HCPCS 

codes C9730 and C9731, should not be assigned to APC 0415 for CY 2012 because the 
CMS-1525-FC 522 

I 

resources are not covered by the CY 2012 proposed 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 abdominal and biliary procedures). The commenter argued that 

APC 0423 includes CPT code 32998 (Ablation therapy for reduction or eradication of 

one or more pulmonary tumor(s) including pleura or chest wall when involved by tumor 

extension, percutaneous, radiofrequency, unilateral), a service that the commenter 

claimed is a better comparator for bronchial thermoplasty in terms of procedural costs as 

well as clinical similarity. The commenter stated that, clinically, the two procedures 

entail similar supplies and equipment and involve ablative techniques. However, the 

commenter stated that CPT code 32998 is performed percutaneously, while bronchial 

thermoplasty is performed through a bronchoscope. The commenter asserted that 

bronchial thermoplasty requires a disposable 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 assigned to APC 0423 because of greater 
CMS-1525-FC 523 

I 

resource similarity as reflected in the higher median cost. The second option 

recommended by the commenter is to revise existing APC 0415 into APCs “0415A” and 

“0415B” and place the two bronchial thermoplasty codes into an APC 0415B with CPT 

codes 31626 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 

performed; with placement of fiducial markers, single or multiple), 31631 

(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with 

placement of tracheal stent(s) (includes tracheal/bronchial dilation as required)), and 

31636 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 

performed; with placement of bronchial stent(s) (includes tracheal/bronchial dilation as 

required), initial bronchus). The commenter’s third, final and preferred recommendation 

was to assign bronchial thermoplasty codes to a New Technology APC.

Response: As stated above, effective January 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 effective that date. Regarding the commenter’s 

recommended option to assign bronchial thermoplasty codes to APC 0423, we do not 

believe that the bronchial thermoplasty 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. We 
CMS-1525-FC 524 

I 

proposed to assign bronchial thermoplasty to APC 0415 because it is similar clinically to 

the bronchoscopy procedures in APC 0415, particularly CPT code 31641 (Bronchoscopy, 

with destruction of tumor or relief of stenosis by any method other than excision (eg, 

laser therapy, cryotherapy)), and because the estimated resource costs are approximately 

similar to the upper end of the 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 actual hospital reported cost data become available for these 

procedures, we reevaluate their APC assignments and may reassign them to another APC, 

as appropriate. Regarding the option to assign the service to a New Technology APC, we 

believe that APC 0415 is an appropriate clinical APC for bronchial thermoplasty 

procedures. Therefore, we are maintaining assignment of the bronchial thermoplasty 

services to APC 0415. 

We are finalizing our proposal to maintain 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 air leaks of the lung. CPT code 0250T is an 

add-on code; therefore, hospitals must list the code in addition to the primary 

bronchoscopy procedure code. For 2011, we assigned CPT code 0250T to APC 0415 
CMS-1525-FC 525 

I 

(Level II Endoscopy lower airway), with a payment rate of $1,971.77. We believe CPT 

code 0250T is similar to other services in APC 0415 in its clinical characteristics. For 

2012, we proposed to maintain the assignment of CPT code 0250T to APC 0415, which 

had a proposed rule median cost of approximately $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 three specific surgical 

procedures: lobectomy, segmentectomy, or lung volume reduction surgery (LVRS). 

Comment: One commenter stated that APC 0415 does not adequately cover the 

resource costs of CPT code 0250T, and recommended 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 the cost for the bronchial valve that is 

necessary to perform the CPT code 0250T procedure is $2,750, and that a total device 

cost based on the number of valves (2.4 mean, 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) regulations governing the price of the device. 

The commenter estimated that the CY 2012 total procedural cost for CPT code 0250T is 

$7,268.91 (based on the mean number of valves) or $6,168.91 (based on the median). 

The commenter asserted that the highest 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 bronchoscopy APC classification is the correct 

clinical APC type for the CPT code 0250T procedure, 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 allow 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 15430 
CMS-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 Repair) to APC 0134 (Level II Skin Repair). 

We reassigned CPT codes 15004 and 15430 from APC 0135 to APC 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 replaced them with 8 new CPT codes in the 

Integumentary System section of the 2012 CPT code book to describe more accurately 

the services associated with skin replacement procedures. In particular, the CPT Editorial 

deleted 24 skin replacement and skin substitute-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 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. 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 new 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 existing CY 2011 CPT codes to the new CY 2012 

CPT codes that appropriately describes them. In assigning the new codes to their 

appropriate APCs, we took into consideration the size of the wound described in the code 
CMS-1525-FC 528 

I 

descriptor. Specifically, we assigned the new codes to their 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 included the words “first 25 sq cm or less” 

or “each additional 100 sq cm” were assigned to APC 0134; and 

● New codes whose long descriptors included the words “first 100 sq cm” were 

assigned to APC 0135 

Table 29 below lists the CY 2011 APC assignments 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 eight 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 only via the Internet on the CMS Web site at 

http://www.cms. gov/. 

TABLE 29.—CPT CODE CHANGES FOR 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 than or equal to 

100 sq cm; first 100 sq cm wound 

surface area, or 1% of body area of 

infants and children 

0135
CMS-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 than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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 than 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 0134
CMS-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 than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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 than 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 than or equal to 

100 sq cm; each additional 100 sq 

0134
CMS-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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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, genitalia, hands, feet, 

and/or multiple digits, 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 

0133
CMS-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, genitalia, hands, feet, 

and/or multiple digits, 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 than 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 than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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, 0134
CMS-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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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 than 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 than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

0134
CMS-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 than 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 than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than 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 than 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, genitalia, hands, feet, 

and/or multiple digits, total wound 

surface area greater than or equal to 

100 sq cm; each additional 100 sq 

0134
CMS-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 reassigned CPT code 15004 from APC 0135 

to APC 0134 to eliminate a 2 times rule violation in APC 0135. Based on our analysis, 

our claims data show a CPT median cost of approximately $278 for CPT code 15004 

based on 1,529 single claims (out of 5,116 total 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 cost of approximately $345 for APC 0135. 

Moreover, the range of the median costs for the procedures with significant claims data 

that are assigned to APC 0134 is between $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 approximately $278 for CPT code 15004 is in the range of 

median costs for the procedures with significant claims data in APC 0134 but not in the 

range of median costs for the procedures with significant claims data in APC 0135. 

Further, we believe that CPT code 15004 is similar to the procedures in APC 0134 based 

on clinical homogeneity and resource costs. We remind hospitals that we have more than 
CMS-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 consideration of the public comments that we received, we are 

finalizing our CY 2012 proposal, without modification, 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 thereof). The commenters stated that APC 0135 is 

the appropriate APC assignment for CPT code 15430 based on its clinical homogeneity 

and resource costs to other procedures assigned in APC 0135. One commenter indicated 

that the proposed CPT median cost of approximately $300 is closer to the proposed 

payment rate of approximately $361 for APC 0135 than to the proposed payment rate of 

approximately $228 for APC 0134. 
CMS-1525-FC 537 

I 

 Response: Although we proposed to reassign 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 APC 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 (Tissuemend, per square centimeter), the public 

should be provided adequate notice before the code is deleted with an explanation for its 

deletion. This same commenter requested that CMS temporarily reassign 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 assigned to status indicator “D” (Discontinued 

Codes) in Addendum B of the CY 2011 OPPS/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 redundancies across the HCPCS Level II national 

code set which reduces opportunities for duplicate 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 to 
CMS-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 for public comment in reaction to a published 

preliminary HCPCS coding decision. The application can be downloaded from this CMS 

Web site: 

https://www.cms.gov/MedHCPCSGenInfo/01a_Application_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 maxillary sinus ostium (eg, balloon dilation), transnasal or via 

canine fossa), 31296 (Nasal/sinus endoscopy, surgical; with dilation of frontal sinus 

ostium (eg, balloon dilation), and 31297 (Nasal/sinus endoscopy, surgical; with dilation 

of sphenoid sinus ostium (eg, balloon dilation) to APC 0075 (Level V Endoscopy Upper 

Airway). 

 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 OPPS/ASC final rule with comment period 

(75 FR 71800) relating to the interim APC assignments and/or status indicators of 

HCPCS codes identified with comment indicator “NI” in Addendum B to that final rule 

with comment period addressed the same issue. The commenters suggested that instead 

of assigning CPT codes 31295, 31296, and 31297 to APC 0075, CMS create a new 
CMS-1525-FC 539 

I 

device-dependent APC for these three CPT codes. Or, if CMS does not decide to create a 

new device-dependent APC, the commenters suggested that the three CPT codes should 

instead be assigned to one of four alternative APCs. The commenters believed that 

assigning these codes to APCs 0056 (Level II Foot Musculoskeletal Procedures), 0083 

(Level I Endovascular Revascularization of the Lower Extremity), or 0114 

(Thyroid/Lymphadenectomy Procedures) would be justified because the payment rates 

for these APCs more closely reflect the 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 characteristics 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, and 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 commenters asserted costs of approximately 

$4,000 for these procedures, which are currently assigned 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 all of the procedures assigned to APC 0075 is 

approximately $4,000. Therefore, even the non-claims data-based cost estimate for these 
CMS-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 procedures 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 available 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 extracellular 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 believed to have the most similar clinical 

characteristics and resource requirements. In the case of CPT code 0239T, we assigned 

bioimpedance spectroscopy to APC 0099 (Electrocardiogram/Cardiography). For 

CY 2012, we proposed to continue to assign CPT code 0239T, for which we had no 

claims data on which to calculate a median 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 jeopardize 
CMS-1525-FC 541 

I 

beneficiary access to the service. The commenter 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 arm. The commenter also stated that BIS is an aid for 

therapists to assess and monitor the measurement of extra cellular fluid volume 

differences between the arms during the treatment phase for early stage lymphedema. 

The commenter stated that BIS is not a diagnostic test but rather an aid to the physician in 

the clinical assessment of the patient because the results require interpretation by the 

physician and review of previous results for clinical relevance. 

The commenter asked that CMS reassign CPT code 0239T from APC 0099 to 

APC 0096 (Level II Noninvasive Physiologic Studies). The commenter stated that CPT 

code 239T is not similar to 93701 (Bioimpedance-derived physiologic cardiovascular 

analysis), which the commenter assumed was the CMS rationale for also placing 0239T 

into APC 0099. Instead the commenter indicated 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/brachial indices immediately 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 the records is similar to the work involved 
CMS-1525-FC 542 

I 

for CPT code 0239T and, therefore, CPT code 0239T should be assigned to APC 0096 

rather than to APC 0099. The commenter also stated that the resource time for CPT code 

0239T is similar to the resource time, using 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 decision 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 machine (approximately $27,000) and supplies 

(approximately $50 per unit). The commenter 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 information furnished by the commenter, we agree 
CMS-1525-FC 543 

I 

with the commenter that CPT code 0239T appears to be somewhat dissimilar in resource 

utilization to the services assigned to APC 0099. However, 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 believe 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 reported by CPT code 0239T. Similarly, we 

believe that there is neither clinical similarity nor similarity of hospital resources between 

the services reported by CPT code 0239T, which is used to diagnose lymphedema and 

CPT code 99214, which is an established patient outpatient visit. 

Although we do not believe that CPT code 0239T should be assigned to APC 

0096, we believe that CPT code 0239T is sufficiently more complex than the services 

that are assigned to APC 0099 that it would be more appropriately placed in APC 0097, 

based on its clinical homogeneity and resource similarity to other procedures in APC 

0097. For example, we believe that CPT code 0239T is more similar to CPT code 93922 

(Limited bilateral noninvasive physiologic studies of upper or lower extremity arteries, 

(eg, for lower extremity: ankle/brachial indices at distal posterior tibial and anterior 

tibial/dorsalis pedis arteries plus bidirectional, Doppler waveform recording and analysis 

at 1-2 levels, or ankle/brachial indices at distal posterior tibial and anterior tibial/dorsalis 

pedis arteries plus volume plethysmography at 1-2 levels, or ankle/brachial indices at 

distal posterior tibial and anterior tibial/dorsalis pedis arteries with transcutaneous oxygen 

tension measurements at 1-2 levels)), which is assigned to APC 0097, both clinically and 
CMS-1525-FC 544 

I 

in resource requirements, than to CPT code 93924. Therefore, we are reassigning CPT 

code 0239T from APC 0099 to APC 0097, which 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 the assignment of CPT code 86891 to 

APC 0345 because the commenter believed that the payment rate for APC 0345 

underpays providers. The commenter stated that 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 analyzed and a more appropriate 

payment level established based upon analysis 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 appropriately address the autologous 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 period is approximately $21 based on 124 single 

procedure claims out of 332 total claims. The calculated median cost of approximately 

$21 for CPT code 86891 is within the range of the median costs of the other procedures 
CMS-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 hospital 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 assigned to APC 0345, which is titled "Level I 

Transfusion Laboratory Procedures" and includes other transfusion 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, under the OPPS, a category of 

devices be eligible for transitional pass-through payments for at least 2, but not more than 

3, years. This pass-through payment eligibility period begins with the first date on which 

transitional pass-through payments may be made for any medical device that is described 

by the category. We may establish a new device category for pass-through payment in 

any quarter. Under our established policy, we base the pass-through status expiration 

date for a device category on the date on which pass-through payment is effective for the 

category. The date on which a pass-through category 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 finalize the dates for expiration of pass-through status for 

device categories as part of the OPPS annual update. 

 We also have an established policy to package the costs of the devices that are no 

longer eligible for pass-through payments into the costs of the procedures with which the 

devices are reported in the claims data used to set the payment rates (67 FR 66763). 

Brachytherapy sources, which are now separately paid in accordance with 

section 1833(t)(2)(H) of the Act, are an exception to this established policy. 

 There currently are three 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 categories 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 requirement that they be eligible for pass-through 

payments for at least 2, but not more than 3, years from the date on which pass-through 

payment for any medical device described by the category may first be made. 

b. CY 2012 Policy 

 As stated above, section 1833(t)(6)(B)(iii) of the Act requires that, under the 

OPPS, a category of devices be eligible for transitional pass-through payments for at least 

2, but not more than 3 years. Device pass-through 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 payment for device category C1749 of 

December 31, 2012. Therefore, under our proposal, beginning January 1, 2013, device 

category C1749 will no longer be eligible for pass-through payments. We will propose 
CMS-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 only one device category eligible for pass-through payment for 

CY 2012. These commenters opined that there has been a decrease in the number of 

categories eligible for pass-through payment over the past several years, and encouraged 

CMS to approve additional device categories for technologies that meet the criteria for 

pass-through payments. One commenter recommended 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 applications filed with 

CMS, along with CMS’ determinations and rationale for the resulting decisions. 

 Response: As indicated, we currently have three device categories eligible for 

pass-through payment, rather than one category as stated in the 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 eligible for payment 

will always vary, and we believe that the number of active device pass-through categories 

eligible for pass-through payment at any time is a function of the quality of applications 

under consideration, that is, whether they fully meet the device pass-through criteria, 

rather than a function of our criteria and approval process, 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 recommendation to publish a list of all pass-through 
CMS-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 the public comments we received, we are finalizing our 

proposal of an expiration date for pass-through payment for device category C1749 of 

December 31, 2012. Therefore, beginning January 1, 2013, device category C1749 will 

no longer be eligible for pass-through payments. We remind the public that as of January 

1, 2013, device category C1749 will still be active for the billing and reporting of devices 

and their charges along with the HCPCS codes of the procedures with which they are 

used. When billing for procedures utilizing devices that have active device codes, 

hospitals are required to report the codes for the 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 estimate the portion of each APC payment rate 

that could reasonably be attributed to the cost of the associated devices that are eligible 

for pass-through payments (66 FR 59904). We deduct from the pass-through payments 

for identified device categories eligible for pass-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 APC 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 APC payment rate that could reasonably be 

attributed to the cost of an associated device eligible for pass-through payment, using 
CMS-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 applicable device APC offset 

amounts for eligible pass-through device categories through the transmittals that 

implement the quarterly OPPS updates. 

We publish a list of all procedural APCs 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 application for a new device category for pass-through 

payment is not insignificant in relation to the APC payment amount for the service 

related to the category of devices, as specified in our regulations at §419.66(d). 

As of CY 2009, the costs of implantable biologicals without pass-through status 

are packaged into the payment for the procedures 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 finalized a new policy to specify that 

the pass-through evaluation process and pass-through payment methodology for 

implantable biologicals that are surgically inserted or implanted (through a surgical 

incision or a natural orifice; also referred to as “implantable biologicals”) and that are 

newly approved for pass-through status beginning on or after January 1, 2010, be the 

device pass-through process and payment methodology only. 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-through category, which could include a newly eligible 

implantable biological, beginning in CY 2010 using the same methodology we have 

historically used to calculate and set device APC offset amounts for device categories 

eligible for pass-through payment (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 biologicals. 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 application for a new device category for pass-through 

payment is not insignificant in relation to the APC payment amount for the service 

related to the category of devices. Further, for CY 2010, we no longer used the 

“policy-packaged” drug APC offset amounts for evaluating the cost significance of 

implantable biological pass-through applications under review and for setting the APC 

offset amounts that would apply to pass-through payment 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 that the pass-through evaluation process 

and pass-through payment methodology for implantable biologicals that are surgically 

inserted or implanted (through a surgical incision or a natural orifice) and that are newly 
CMS-1525-FC 552 

approved for pass-through status beginning on or after January 1, 2010, be the device 

pass-through process and payment methodology only. 

b. CY 2012 Policy 

In the CY 2012 OPPS/ASC proposed rule (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 biologicals that are surgically 

inserted or implanted (through a surgical incision or a natural orifice) and that are newly 

approved for pass-through status beginning on or after January 1, 2010, be the device 

pass-through process and payment methodology only. The rationale for this policy is 

provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 

through 60477). We also proposed to continue our established policies for calculating 

and setting the device APC offset amounts for each device category eligible for 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 amount from the pass-through payment for the 

device category. As stated earlier, these device APC offset amounts also would be used 

in order to evaluate whether the cost of a device in an application for a new device 

category for pass-through payment is not insignificant in relation to the APC payment 

amount for the service related to the category of devices (§419.66(d)). 
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 continue to calculate and set any device APC offset amount for 

a new device pass-through category that includes a newly eligible implantable biological 

beginning in CY 2012 using the same methodology we have historically used to calculate 

and set device APC offset amounts for device categories eligible for pass-through 

payment, and to include the costs of implantable biologicals in the calculation of the 

device APC offset amounts, as we first 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 that we determine are associated with the 

cost of devices so that this information is available for use by the public in developing 

potential CY 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 related to pass-through payment for devices: 

(1) treating implantable biologicals, that are surgically inserted or implanted (through a 

surgical incision or a natural orifice) and that are newly approved for pass-through status 

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 the device APC offset amounts to evaluate 

whether the cost of a device (defined to include implantable biologicals) in an application 
CMS-1525-FC 554 

for a new device category for pass-through payment is not insignificant in relation to the 

APC payment amount for the service related to the category of devices; and (4) reducing 

device pass-through payments based on device costs already 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. 

Comment: Several commenters recommended that all biological therapies, 

including implantable biologicals that are approved by the FDA under biological license 

applications (BLAs), be treated as drugs for pass-through payment status for CY 2012. 

The commenters claimed that Congress intended 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 provisions. Another commenter requested that CMS clarify its 

policy to state that the device pass-through criteria apply only to biologicals with an FDA 

approved indication or indications that are only surgically implanted. This commenter 

believed that the current regulation is unclear regarding 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 the regulations text at 42 CFR 419.64(a)(4) so 

that if refers to “a biological that is not always surgically implanted into the body.” 

 Response: As stated in the CY 2010 OPPS/ASC final rule with comment 

period and reiterated in the 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 approval 
CMS-1525-FC 555 

route, the intent of which is to ensure their safety and effectiveness 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 comment period, Congress did not specify in 

the statute that we must pay for implantable biologicals as biologicals rather than devices, 

if these products that function as medical devices also meet our criteria for payment as 

devices (74 FR 60476; 75 FR 71924). We continue to believe that implantable 

biologicals are devices for the purposes of OPPS payment, and therefore that it is 

appropriate for us to treat implantable biologicals 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), which states that a biological for pass-through 

status purposes must meet the following condition (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 pass-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 other indications in which the biological is not 

surgically implanted or inserted. 

After consideration of the public comments we received, we are finalizing our 

proposal, without modification, to continue the policy to specify that the pass-through 
CMS-1525-FC 556 

evaluation process and pass-through payment methodology for implantable biologicals 

that are surgically inserted or implanted (through a surgical incision or a natural orifice) 

and that are newly approved for pass-through status on or after January 1, 2010, be the 

device pass-through process and payment methodology only. We also are finalizing our 

other proposals, without modification, to continue the following policies regarding device 

offsets: (1) including implantable biologicals in calculating the device APC offset 

amounts; (2) using the device APC offset amounts to evaluate whether the cost of a 

device (defined to include implantable biologicals) in an application for a new device 

category for pass-through payment is not insignificant in relation to the APC payment 

amount for the service related to the category of devices; and (3) reducing device passthrough payments based on device costs already 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 several field actions on and recalls of medical 

devices as a result of implantable device failures. In many of these cases, the 

manufacturers have offered devices without cost to the hospital 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 the full costs of those 

devices, our standard ratesetting methodology for device-dependent APCs uses only 

claims that contain the correct device code for the procedure, do not contain token 
CMS-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” modifier 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 proposed, we are continuing to use our standard 

ratesetting methodology for device-dependent APCs for CY 2012. 

To ensure equitable payment when the hospital receives a device without cost or 

with full credit, in CY 2007, we implemented a policy to reduce the payment for 

specified device-dependent APCs by the estimated portion of the APC payment 

attributable to device costs (that is, the device offset) when the hospital receives a 

specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals 

are instructed to report no cost/full credit cases using the “FB” modifier on the line with 

the procedure code in which the no cost/full credit device is used. In cases in which the 

device is furnished without cost or with full credit, the hospital is instructed to report a 

token device charge of less than $1.01. In cases in which the device being inserted is an 

upgrade (either of the same type of device or to a different type of device) with a full 

credit for the device being replaced, the hospital is instructed to report as the device 

charge the difference between its usual charge for the device being implanted and its 

usual charge for the device for which it received full credit. In CY 2008, we expanded 

this payment adjustment policy to include cases in which hospitals receive partial credit 

of 50 percent or more of the cost of a specified device. Hospitals are instructed to append 

the “FC” modifier to the procedure code that reports the service provided to furnish the 
CMS-1525-FC 558 

device when they receive a partial credit of 50 percent or more 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 percent 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 copayment is based on the reduced payment 

amount when either the “FB” or the “FC” modifier is billed and the procedure and device 

codes appear on the lists of procedures and devices to which this policy applies. We refer 

readers to the CY 2008 OPPS/ASC final rule with comment period for more background 

information on the “FB” and “FC” payment adjustment policies (72 FR 66743 through 

66749). 

2. 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 existing policy of reducing OPPS payment for 

specified APCs by 100 percent of the device offset amount when a hospital furnishes a 

specified device without cost or with a full credit and by 50 percent of the device offset 

amount when the hospital receives partial credit in the amount of 50 percent or more of 

the cost for the specified device. Because the 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 we 
CMS-1525-FC 559 

continue to believe it is appropriate 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. (We refer readers to section II.A.2.d.(1) of this 

final rule with comment period for a description 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 beneficiary copayment is based, and we continue 

to believe it is equitable that the beneficiary 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 criteria established in the CY 2007 OPPS/ASC final rule with 

comment period for determining the APCs to which this policy applies (71 FR 68072 

through 68077). Specifically: (1) all procedures assigned to the selected APCs must 

involve implantable devices that would be reported if device insertion procedures were 

performed; (2) the required devices must be surgically inserted or implanted devices that 

remain in the patient’s body after the conclusion of the procedure (at least temporarily); 

and (3) the device offset amount must be significant, which, for purposes of this policy, is 

defined as exceeding 40 percent of the APC cost. We also proposed to continue to 

restrict the devices to which the APC payment adjustment would apply to a specific set of 

costly devices to ensure that the adjustment would not be triggered by the implantation of 

an inexpensive device whose cost would not constitute a significant proportion of the 

total payment rate for an APC. We stated in the CY 2012 OPPS/ASC proposed rule 

(76 FR 42244) that we continue to believe these criteria are appropriate because free 
CMS-1525-FC 560 

devices and device credits are likely to be associated with particular cases only when the 

device must be reported on the claim and is of a type that is implanted and remains in the 

body when the beneficiary leaves the hospital. We believe that the reduction in payment 

is appropriate only when the cost of the device is a significant part of the total cost of the 

APC into which the device cost is packaged, and that the 40-percent threshold is a 

reasonable definition of a significant cost. 

As indicated in the CY 2012 OPPS/ASC proposed rule (76 FR 42244 through 

42245), we examined the offset amounts calculated 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 credit device adjustment policy applied 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 criteria 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. However, as discussed in section II.A.2.e.(6) of 

the proposed rule, we proposed to delete APC 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 partial credit device adjustment policy would 

apply in CY 2012. 

Table 24 of the CY 2012 OPPS/ASC proposed 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 proposed 
CMS-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 offset percentage for the APC (the estimated percentage of 

the APC cost that is attributable to the device costs that are already packaged into the 

APC). We also 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 the 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 apply 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 the 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 suggested 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 patient access to critical devices. 

Response: We do not agree with the commenter that the CY 2012 proposed 

device offset percentage for APC 0425 is inaccurate. As we described in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 71926), the device cost is estimated 
CMS-1525-FC 562 

from the device HCPCS codes present on hospital claims and charges in the lines for four 

specific revenue codes: 275 (Medical/Surgical Supplies: Pacemaker); 276 

(Medical/Surgical Supplies: Intraocular lens); 278 (Medical/Surgical Supplies: Other 

implants); and 624 (Medical/Surgical Supplies: FDA investigational devices). The 

commenter did not provide the “real world cost data” upon which it based its assertion 

that the full offset amount for APC 0425 should be no greater than 40 percent. Therefore, 

we do not know why there would be a discrepancy between that estimate and our 

estimated device offset percentage of approximately 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 devices 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 clarification of CMS’ policy for instances 

when a device upgrade occurs and the original device is refunded at full cost and the 

upgraded device is charged at full cost. According 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” modifier 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 replaces 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 device 
CMS-1525-FC 563 

code) that reports the service provided to replace the device. The hospital must charge 

the difference between its usual charge for the device being implanted and its usual 

charge for the device for which it received credit. This charge should be billed in the 

covered charge field. As we stated in the 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 upgrades. We continue to believe that 

making the full APC payment would result in significant overpayment because, as 

described above, we use only those claims that 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 being 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 upgrade, rather than 

replacement with a comparable device, in warranty or recall cases where the surgical 

procedure to replace the device is only medically necessary because of the original 

defective device, for which the manufacturer bears responsibility. Moreover, we also are 

concerned that a new policy to apply a smaller APC payment percentage reduction in an 

upgrade case, if we were eventually able to estimate such a percentage from sufficient 

claims data, could also favor device upgrades, rather than replacement with a comparable 

device in those situations for which the upgrade is only being provided because the old 

model failed (and for which the manufacturer provides a full credit) but is no longer 
CMS-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 otherwise 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 receive 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 received, we are finalizing our 

CY 2012 proposals, without modification, to continue the established no cost/full credit 

and partial credit adjustment policies. 

Table 30 below lists the APCs to which 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 both no cost/full credit and partial credit 

circumstances. Table 31 below lists the devices to which no cost/full credit and partial 

credit device adjustment policy will apply 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 for 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 percent of the device offset when both a device 
CMS-1525-FC 565 

code listed in Table 31 is present on the claim 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 procedures and devices to which 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 ADJUSTMENT 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-inf 
CMS-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 comp 
CMS-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 payments” for certain drugs and biologicals (also referred to as 

biologics). As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act (BBRA) of 1999 (Pub. L. 106-113), this provision requires the Secretary 

to make additional payments to hospitals for current orphan drugs, as designated under 

section 526 of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current 

drugs and biologicals and brachytherapy sources used for the treatment of cancer; and 

current radiopharmaceutical drugs and biologicals. For those drugs and biologicals 

referred to as “current,” the transitional pass-through payment began on the first date the 

hospital OPPS was implemented. 

 Transitional pass-through payments also are provided for certain “new” drugs and 

biologicals that were not being paid for as an HOPD service as of December 31, 1996, 

and whose cost is “not insignificant” in relation to the OPPS payments for the procedures 

or services associated with the new drug or biological. For pass-through payment 

purposes, radiopharmaceuticals are included as “drugs.” Under the statute, transitional 

pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) 

of the Act can be made for a period of at least 2 years, but not more than 3 years, after the 

product’s first payment as a hospital outpatient service under Medicare Part B. Proposed 
CMS-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 biological, is the amount by which the amount 

determined under section 1842(o) of the Act for the drug or biological exceeds the 

portion of the otherwise applicable Medicare OPD fee schedule that the Secretary 

determines is associated with the drug or biological. If the drug or biological is covered 

under a competitive acquisition contract under section 1847B of the Act, the pass-through 

payment amount is determined by the Secretary to be equal to the average price for the 

drug or biological for all competitive acquisition areas and the year established under 

such section as calculated and adjusted by the Secretary. 

 As we noted in the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68633), the Part B drug CAP program 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 final rule with comment period, the 

postponement of the Part B drug CAP program remains 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 the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 71928), if the program is reinstituted 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 paid in the physician’s office 

setting for all drugs and biologicals with pass-through status. 

 This methodology for determining the pass-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 biological. Section 1847A 

of the Act establishes the average sales price (ASP) methodology, which is used for 

payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act 

furnished on or after January 1, 2005. The ASP methodology, as applied under the 

OPPS, uses several sources of data as a basis for payment, including the ASP, the 

wholesale acquisition cost (WAC), and the average wholesale price (AWP). In this final 

rule with comment period, the term “ASP methodology” and “ASP-based” are inclusive 

of all data sources and methodologies described therein. Additional information on the 

ASP methodology can be found on the CMS Web site at: 

http://www.cms.gov/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 schedule” amount was equivalent to the amount 

to be paid for pass-through drugs and biologicals under section 1842(o) of the Act (or 

section 1847B of the Act, if the drug or biological is covered under a competitive 

acquisition contract). We concluded for those years that the resulting difference between 
CMS-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 drugs and biologicals is 

explained on the CMS Web site at: 

http://www.cms.gov/HospitalOutpatientPPS/04_passthrough_payment.asp. 

2. Drugs and Biologicals with Expiring 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 biologicals 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 biologicals, our standard 

methodology for providing payment for drugs and biologicals with expiring pass-through 

status in an upcoming calendar year is to determine the product’s estimated per day cost 
CMS-1525-FC 573 

and compare it with the OPPS drug packaging threshold for that calendar year (which is 

$75), as discussed further in section 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 payment for the drug or biological into the 

payment for the associated procedure in the upcoming calendar year. If the estimated per 

day cost of the drug or biological is greater than the OPPS drug packaging threshold, we 

would provide separate payment at the applicable relative ASP-based payment amount 

(which is ASP+4 percent for CY 2012, as discussed 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 contrast agents, diagnostic 

radiopharmaceuticals, and implantable biologicals. 

 Comment: A number of commenters requested that CMS continue pass-through 

payments for a third year for certain drugs 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 period, and asserted that a third 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 CMS to adopt a 3-year pass-through period for 
CMS-1525-FC 574 

all eligible products. One commenter requested that CMS grant an additional year of 

pass-through payments for the product described 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 been subject to a 10-month long voluntary 

manufacturer’s recall during 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 their costs for future OPPS ratesetting. Our 

longstanding practice has been to provide pass-through payment for a period of 2 to 3 

years, with expiration of pass-through status proposed and finalized through the annual 

rulemaking process. Each year, when proposing to expire the pass-through status of 

certain drugs and biologicals, we examine our claims data for these products. We 

observe that hospitals typically have incorporated these products into their chargemasters 

based on the utilization and costs observed in our claims data. Under the existing 

pass-through policy, which has been generally supported by commenters, we begin passthrough payment on a quarterly basis that depends 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-through drugs and biologicals receive pass-through 

payment for a full 3 years, while also providing pass-through payment for no more than 3 
CMS-1525-FC 575 

years as the statute requires. Further, based on our review of available 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 packaging 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 product, it is paid separately on the basis of the product’s ASP 

(we refer readers to section V.B.3. of this final rule with comment period for more details 

regarding our payment policy for separately payable drugs). Because our policies for 

drugs with expiring pass-through status recognize products’ relative costliness and 

establish either separate or bundled payment as appropriate, based on such costliness, we 

disagree with commenters that certain relatively 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 product 
CMS-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 received, 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 drugs 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 BIOLOGICALS 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 iobenguane, 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/A 
CMS-1525-FC 577 

CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor CY 2012 

SI 

CY 2012 

APC 

centimeter 

J0598 Injection, C-1 esterase 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 Radiopharmaceuticals 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 December 31, 2011. These drugs and biologicals, 

which were approved for pass-through status 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” in 
CMS-1525-FC 578 

Addenda A and B, 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 sets the amount of pass-through payment for 

pass-through drugs and biologicals (the pass-through payment amount) as the difference 

between the amount authorized under section 1842(o) of the Act (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 otherwise applicable OPD fee schedule that the 

Secretary determines is associated with the drug or biological. Payment for drugs and 

biologicals with pass-through status under the OPPS is currently made at the physician’s 

office payment rate of ASP+6 percent. We believe it is consistent with the statute to 

continue to provide payment for drugs and biologicals with pass-through status at a rate 

of ASP+6 percent in CY 2012, the amount that 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 rate these drugs and biologicals 

would receive in the physician’s office setting in CY 2012. Therefore, the difference 

between ASP+6 percent and ASP+4 percent that we proposed 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 which 
CMS-1525-FC 579 

the drug or biological is utilized would be the CY 2012 pass-through payment amount for 

these policy-packaged products. 

 We note that we proposed to expire pass-through status for the remaining three 

implantable biologicals approved on or before January 1, 2010, under pass-through status 

as a drug or biological. Therefore, 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 are surgically inserted or implanted (through a surgical 

incision or a natural orifice) will be evaluated 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 described in section V.B.2.d. of this 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 pass-through status for CY 2012 

becomes covered under the Part B drug CAP, 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 annually review new permanent HCPCS 

codes and delete temporary HCPCS C-codes if an alternate permanent HCPCS code is 

available for purposes of OPPS billing and payment. We specifically review drugs with 

pass-through status for CY 2012 that will change 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-lyophilized (e.g. liquid), 500 

mg) describes the product reported under HCPCS code C9270 (Injection, immune 

globulin (Gammaplex), intravenous, non-lyophilized (e.g. liquid), 500 mg); HCPCS code 

J0894 (Injection, denosumab, 1 mg) describes the product reported under HCPCS code 

C9272 (Injection, denosumab, 1 mg); HCPCS code J0840 (Crotalidae Polyvalent 

Immune Fab (Ovine), 1 vial) describes the product reported under 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 code J0221 (Injection, alglucosidase alfa (Lumizyme), 1 mg) 

describes the product reported under HCPCS code C9277 (Injection, alglucosidase alfa 

(Lumizyme), 1 mg); HCPCS code J9179 (Injection, 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 (Injection, ipilimumab, 1 mg) describes the product 

reported under HCPCS code C9284 (Injection, ipilimumab, 1 mg). 

In CY 2012, as is consistent with our CY 2011 policy for diagnostic and 

therapeutic radiopharmaceuticals, we proposed to provide payment for both diagnostic 

and therapeutic radiopharmaceuticals that are granted pass-through status based on the 

ASP methodology. As stated above, for purposes of pass-through payment, we consider 

radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or 

therapeutic radiopharmaceutical receives pass-through status during CY 2012, we 

proposed to follow the standard ASP methodology to determine the pass-through 

payment rate that drugs receive under section 1842(o) of the Act, which is ASP+6 

percent. If ASP data are not available for a radiopharmaceutical, we proposed to provide 

pass-through payment at WAC+6 percent, the equivalent payment provided to passthrough drugs and biologicals without ASP information. If WAC information is also not 

available, we proposed to provide payment for the pass-through radiopharmaceutical at 

95 percent of its most recent AWP. 

 Comment: 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 payments as a “temporary solution,” 

and asserted that the global marketplace for Molybdenum and other medical isotopes 

could make historical payment data an inadequate 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 that historical payment data are an inadequate indicator of 

costs. We permit radiopharmaceutical manufacturers to voluntarily submit ASP data to 

us for therapeutic radiopharmaceuticals, and for diagnostic radiopharmaceuticals with 

pass-through status. These data are updated regularly, are as current 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 the most recently available cost and claims 

data, are adequately responsive to changes in global prices for Molybdenum and other 

medical isotopes. 

We do not believe, however, that requiring manufacturers to submit ASP data for 

all therapeutic radiopharmaceuticals currently paid under the OPPS is appropriate. As we 

stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 

60525), the challenges involved in reporting 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 reporting outweighs the 

expected benefits, and given the 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 cost and associated handling costs for a 
CMS-1525-FC 583 

radiopharmaceutical in the absence of ASP. If ASP information is unavailable for a 

therapeutic radiopharmaceutical, meaning that 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: 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 based on WAC if ASP information is not 

available, and payment at 95 percent of AWP if WAC information 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 statutorily mandated pass-through payment 

for pass-through drugs and biologicals for 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 determined by subtracting the otherwise 

applicable payment amount under the OPPS (determined to be ASP+4 percent for CY 

2012) from the amount determined under section 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 therapeutic 
CMS-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 methodology, as applied under the OPPS, uses 

several sources of data as a basis for payment, including the ASP, WAC if ASP is 

unavailable, and 95 percent of the radiopharmaceutical’s most recent AWP if ASP and 

WAC are unavailable. For purposes of pass-through payment, we consider 

radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or 

therapeutic radiopharmaceutical receives pass-through status during CY 2012, we 

proposed to follow the standard ASP methodology to determine its pass-through payment 

rate under the OPPS. We have routinely provided a single payment for drugs, 

biologicals, and radiopharmaceuticals under the OPPS to account for the acquisition and 

pharmacy overhead costs, including compounding costs. We continue to believe that a 

single payment is appropriate for diagnostic 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 both the radiopharmaceutical’s 

acquisition cost and any associated nuclear medicine handling and compounding costs. 

We refer readers to section V.B.3. of this final rule with comment period for further 

discussion of payment for therapeutic radiopharmaceuticals based on ASP information 

submitted by manufacturers and 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 are 
CMS-1525-FC 585 

granted pass-through status based on the ASP methodology. If a diagnostic or 

therapeutic radiopharmaceutical receives pass-through status during CY 2012, we will 

follow the standard ASP methodology to determine the pass-through payment rate that 

drugs receive under section 1842(o) of the Act, which is ASP+6 percent. If ASP data are 

not available for a radiopharmaceutical, we will provide pass-through payment at 

WAC+6 percent, the equivalent payment provided to pass-through drugs and biologicals 

without ASP information. If WAC information is also not available, we will provide 

payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP. 

As discussed in more detail in section V.B.2.d. of this final rule with comment 

period, over the last 4 years, we implemented a policy whereby payment for all 

nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable 

biologicals is packaged into payment for the associated procedure. In the CY 2012 

OPPS/ASC proposed rule (76 FR 42247 through 42248), we proposed to continue the 

packaging of these items, regardless of their per day cost. As stated earlier, pass-through 

payment is the difference between the amount authorized under section 1842(o) of the 

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 otherwise 

applicable OPD fee schedule that the Secretary determines is associated with the drug or 

biological. Because payment for a drug that is either a diagnostic radiopharmaceutical or 

a contrast agent (identified as a “policy-packaged” drug, first described in the CY 2009 
CMS-1525-FC 586 

OPPS/ASC final rule with comment period (73 FR 68639)) would otherwise be packaged 

if the product did not have pass-through status, we believe the otherwise applicable OPPS 

payment amount would be equal to the “policy-packaged” drug APC offset amount for 

the associated clinical APC in which the drug or biological is utilized. The calculation of 

the “policy-packaged” drug APC offset amounts is described in more detail in section 

IV.A.2. of this final rule with comment period. It follows that the copayment for the 

nonpass-through payment portion (the otherwise applicable fee schedule amount that we 

would also offset from payment for the drug or biological if a payment offset applies) of 

the total OPPS payment for those drugs and biologicals would, therefore, be accounted 

for in the copayment for the associated clinical APC in which the drug or biological is 

used. 

According to section 1833(t)(8)(E) of the Act, the amount of copayment 

associated with pass-through items is equal to the amount of copayment that would be 

applicable if the pass-through adjustment was not applied. Therefore, as we did in 

CY 2011, we proposed to continue to set the associated copayment amount for 

pass-through diagnostic radiopharmaceuticals and contrast agents that would otherwise 

be packaged if the item did not have pass-through status to zero for CY 2012. The 

separate OPPS payment to a hospital for the pass-through diagnostic radiopharmaceutical 

or contrast agent, after taking 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 copayment according to the statute. Therefore, we 

proposed to not publish a copayment amount for these items in Addenda A and B to the 
CMS-1525-FC 587 

proposed rule (which are referenced in section 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 the 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 commenters noted that this policy 

is consistent with statutory requirements and provides cost-saving benefits to 

beneficiaries. 

Response: We appreciate the commenters’ support 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,” the copayment for the nonpass-through payment 

portion of the total OPPS payment for this subset of drugs and biologicals is accounted 

for in the copayment for the associated clinical APC in which the drug or biological is 

used. According to section 1833 (t)(8)(E) of the Act, the amount of copayment 

associated with pass-through items is equal to the amount of copayment that would be 

applicable if the pass-through adjustment was not applied. Therefore, we believe that the 

copayment amount should be zero for drugs and biologicals that are “policy-packaged,” 

including diagnostic radiopharmaceuticals. 

 After consideration of the public comments we received, we are finalizing our 

proposal to continue to set the associated copayment amount for pass-through diagnostic 

radiopharmaceuticals and contrast agents that would otherwise be packaged if the item 

did not have pass-through status to zero for CY 2012. 
CMS-1525-FC 588 

The 33 drugs and biologicals that we proposed to continue on pass-through status 

for CY 2012 or that have been granted pass-through 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), intravenous, non-lyophilized (e.g. liquid), 500 

mg) was assigned a status indicator of “K,” meaning that this product was paid separately 

as a nonpass-through separately payable drug. Beginning on July 1, 2011, HCPCS code 

J1572 is assigned a status indicator of “G” and 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 and 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 status 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, ibuprofen, 100 mg G 9279 

C9285** C9285 Lidocaine 70 mg/tetracaine 70 mg, per patch G 9285 

C9286 C9286 Injection, belatacept, 1 mg G 9286 
CMS-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, alglucosidase 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 clostridium 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 globulin (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, velaglucerase 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 9268 
CMS-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 phosphate, 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-Layer 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 indicator 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 Transitional Pass-Through Payments for Diagnostic 

Radiopharmaceuticals and Contrast Agents to Offset Costs Packaged into APC Groups 

a. Background 

Prior to CY 2008, diagnostic radiopharmaceuticals and contrast agents were paid 

separately under the OPPS if their mean per day costs were greater than the applicable 

year’s drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of 
CMS-1525-FC 591 

packaging payment for all nonpass-through diagnostic radiopharmaceuticals and contrast 

agents as ancillary and supportive items and services into their associated nuclear 

medicine procedures. Therefore, beginning in CY 2008, nonpass-through diagnostic 

radiopharmaceuticals and contrast agents were not subject to the annual OPPS drug 

packaging threshold to determine their packaged or separately payable payment status, 

and instead all nonpass-through diagnostic radiopharmaceuticals and contrast agents were 

packaged as a matter of policy. For CY 2012, we proposed to continue to package 

payment for all nonpass-through diagnostic radiopharmaceuticals 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 described above, section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional pass-through payment amount for pass-through drugs and 

biologicals is the difference between the amount paid under section 1842(o) of the Act 

(or the Part B drug CAP rate) and the otherwise applicable OPD fee schedule amount. 

There is currently one radiopharmaceutical with pass-through status under the OPPS, 

HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 

5 millicuries). This product, which is presently referred to using HCPCS code A9584, 

was granted pass-through status using HCPCS code C9406 beginning July 1, 2011, and 

we proposed that it continue receiving pass-through status in CY 2012. We currently 

apply the established radiopharmaceutical payment offset policy to pass-through payment 

for this product. As described earlier in section V.A.3. of this final rule with comment 
CMS-1525-FC 592 

period, we proposed that new pass-through diagnostic radiopharmaceuticals would be 

paid at ASP+6 percent, while those without ASP information would be paid at WAC+6 

percent or, if WAC is not available, payment would be based on 95 percent of the 

product’s most recently published AWP. 

Because a payment offset is necessary in order to provide an appropriate 

transitional pass-through payment, we deduct from the pass-through payment for 

radiopharmaceuticals an amount reflecting the portion of the APC payment associated 

with predecessor radiopharmaceuticals in order to ensure no duplicate 

radiopharmaceutical payment is made. In CY 2009, we established a policy to estimate 

the portion of each APC payment rate that could reasonably be attributed to the cost of 

predecessor diagnostic radiopharmaceuticals when considering a new diagnostic 

radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). 

Specifically, we use the “policy-packaged” drug offset fraction for APCs containing 

nuclear medicine procedures, calculated as 1 minus (the cost from single procedure 

claims in the APC after removing the cost for “policy-packaged” drugs divided by the 

cost from single procedure claims in the APC). 

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 through 

60484), we finalized a policy to redefine “policy-packaged” drugs as only 

nonpass-through diagnostic radiopharmaceuticals and contrast agents, as a result of the 

policy discussed in sections V.A.4. and V.B.2.d. of the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60471 through 60477 and 60495 through 60499, 

respectively) that treats nonpass-through implantable biologicals that are surgically 
CMS-1525-FC 593 

inserted or implanted (through a surgical incision or a natural orifice) and implantable 

biologicals that are surgically inserted or implanted (through a surgical incision or a 

natural orifice) with newly approved pass-through status beginning in CY 2010 or later as 

devices, rather than drugs. To determine the actual APC offset amount for pass-through 

diagnostic radiopharmaceuticals that takes into consideration the otherwise applicable 

OPPS payment amount, we multiply the “policy-packaged” drug offset fraction by the 

APC payment amount for the nuclear medicine procedure with which the pass-through 

diagnostic radiopharmaceutical is used and, accordingly, reduce the separate OPPS 

payment for the pass-through diagnostic radiopharmaceutical by this amount. 

Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71934 through 71936), we finalized a policy to require 

hospitals to append modifier “FB” to specified nuclear medicine procedures when the 

diagnostic radiopharmaceutical is received at no cost/full credit. These instructions are 

contained within the I/OCE CMS specifications on the CMS Web site at 

http://www.cms.gov/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 medicine 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 procedures 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 radiopharmaceuticals. Finally, we also proposed to 
CMS-1525-FC 594 

continue to require hospitals to report a token charge of less than $1.01 in cases in which 

the diagnostic radiopharmaceutical is furnished without cost or with full credit. 

 Comment: Several commenters supported CMS for continuing to require that 

hospitals append modifier “FB” to specified nuclear medicine procedures when the 

diagnostic pharmaceutical is received 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. Further, 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 contrast-enhanced procedures are assigned in 

a calendar year, and hospitals would then be required to list the “FB” modifier with the 

appropriate APC for the contrast-enhanced procedure; payment, according to the 

commenter, could then be reduced by a policy-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 which the contrast agent is furnished without 

cost or with full credit. The commenter asserted that requiring 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 specified 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 inquiring how to properly bill for diagnostic 

radiopharmaceuticals obtained free of charge, typically in cases when the 

radiopharmaceutical had been provided to the hospital as a free sample. Although we 

have not received similar billing questions from 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 hospital, 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 modifier “FB” reporting policy, policy-packaged 

offset amount, and token charge 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 hospitals 
CMS-1525-FC 596 

with free samples. Furthermore, many radiopharmaceuticals 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 shelf 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 certain situations and 

may create “free” contrast agent for a patient that does not economically justify an “FB” 

adjustment by the hospital. These complexities may reduce the utility of the “FB” 

modifier for contrast agents. 

 Regardless of the differences and similarities between diagnostic 

radiopharmaceutical products, and notwithstanding 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 did not propose to extend the modifier “FB” policy to 

contrast agents. However, we are interested in receiving comments from hospitals, 

manufacturers and other interested parties regarding the possible application of modifier 

“FB” to contrast agents when the product is received at no cost/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. Although we are not accepting the commenter’s 

recommendation that CMS extend the modifier “FB” policy to contrast agents received at 

no cost/full credit to a hospital 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 received, we are finalizing our 

proposal, without modification, to continue requiring hospitals to append modifier “FB” 

to specified nuclear medicine procedures when the diagnostic radiopharmaceutical is 

received at no cost/full credit in CY 2012. In addition, we will continue to reduce the 

payment amount for procedures in the APCs listed in Table 34 in this final rule with 

comment period by the full “policy-packaged” offset amount appropriate for diagnostic 

radiopharmaceuticals. Finally, we also will continue to require hospitals to report a token 

charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is 

furnished without cost or with full credit. 

For CY 2011, we finalized a policy to apply the diagnostic radiopharmaceutical 

offset policy to payment for pass-through diagnostic 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 these 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 associated offset amounts, for the CY 2012 OPPS are available for 

purchase under a CMS data use agreement 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,” which now includes the additional variables 

previously available only in the OPPS Identifiable Data Set, including ICD-9-CMS 

diagnosis codes and revenue code payment amounts. We 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, including, but not limited to, 

packaged diagnostic radiopharmaceuticals. The offset amount is the portion of each APC 

payment rate that could reasonably be attributed to the cost of predecessor diagnostic 

radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for passthrough payment and has no bearing on APC assignment. 

After consideration of the public comments we received, we are finalizing our 

proposal to continue applying the diagnostic radiopharmaceutical offset policy to 

payment for pass-through diagnostic radiopharmaceuticals, as described in the CY 2012 

OPPS/ASC proposed rule (76 FR 42249 through 42250). 

Table 34 below displays the APCs to which nuclear medicine procedures will be 

assigned in CY 2012 and for which we expect that an APC offset could be applicable in 

the case of diagnostic radiopharmaceuticals 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 specifies that the transitional pass-through 

payment amount for pass-through drugs and biologicals is the difference between the 

amount paid under section 1842(o) of the Act (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 OPPS: HCPCS code C9275 (Injection, 

hexaminolevulinate hydrochloride, 100 mg, per study dose). HCPCS code C9275 was 

granted pass-through status beginning January 1, 2011, and was proposed to continue 

with pass-through status in CY 2012. As described in section V.A.3 of the proposed rule, 
CMS-1525-FC 600 

we proposed that new pass-through contrast agents would be paid at ASP+6 percent, 

while those without ASP information would be paid at WAC+6 percent or, if WAC is not 

available, payment would be based on 95 percent of the product’s most recently 

published AWP. 

We believe that a payment offset is necessary 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 portion of the APC payment associated with 

predecessor contrast agents, in order to ensure no duplicate contrast agent payment is 

made. 

In CY 2010, we established a policy to estimate the portion of each APC payment 

rate that could reasonably be attributed to the cost of predecessor contrast agents when 

considering new contrast agents for pass-through payment (74 FR 60482 through 60484). 

For CY 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-through diagnostic radiopharmaceuticals and 

contrast agents (74 FR 60495 through 60499). To determine the actual APC offset 
CMS-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, reduce 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 procedural 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 comments on our proposal to deduct, from the 

payment for pass-through contrast 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 agents 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 through 42251). We also are finalizing the 

proposed CY 2012 pass-through contrast agent offset policy to specify the procedural 

APCs to which offsets for pass through contrast agents would apply. In addition, as we 

proposed, for this final rule with comment period, 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, and 
CMS-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 billed 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 payment is not made for the contrast agent. 

As we proposed, for this final rule with comment period, we will continue to post 

annually on the CMS Web site at http://www.cms.gov/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 categories and drugs and 

biologicals, including contrast agents, and establishing any appropriate APC offset 

amounts. Specifically, the file will continue to provide the amounts and percentages of 

APC payment associated with packaged implantable devices, “policy-packaged” drugs, 

and “threshold-packaged” drugs and biologicals for every OPPS clinical APC. 

Procedural APCs for which we expect a contrast offset could be applicable in the 

case of a pass-through contrast agent have been identified as any procedural APC with a 

“policy-packaged” drug amount greater than $20 that is not a nuclear medicine APC 

identified in Table 34 above and these APCs are displayed in Table 35 below. The 

methodology used to determine a proposed threshold cost for application of a contrast 

agent offset policy is described in detail in the CY 2010 OPPS/ASC final rule with 

comment period (70 FR 60483 through 60484). For CY 2012, we proposed to continue 
CMS-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 proposed rule (76 FR 42251), a specific offset 

based on the procedural APC would be applied to payment for the contrast agent to 

ensure that duplicate payment is not made for the contrast agent. 

We did not receive any public comments regarding this proposal and, therefore, 

are adopting it for CY 2012 without modification. 

TABLE 35.--APCs TO WHICH A CONTRAST 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, Valvuloplasty, and Level I Endovascular 

Revascularization 

0093 Vascular Reconstruction/Fistula Repair without Device. 

0104 Transcathether Placement of Intracoronary Stents. 

0128 Echocardiogram with Contrast. 

0152 Level I Percutaneous Abdominal and Biliary Procedures. 

0229 Level II Endovascular Revascularization of the Lower Extremity 

0278 Diagnostic Urography. 

0279 Level II Angiography and Venography. 

0280 Level III Angiography and Venography. 

0283 Computed Tomography with Contrast. 

0284 

Magnetic Resonance Imaging and Magnetic Resonance Angiography 

with Contrast. 

0333 Computed Tomography without Contrast followed by Contrast. 

0334 Combined Abdomen and Pelvis CT with Contrast 

0337 

Magnetic Resonance Imaging and Magnetic Resonance Angiography 

without Contrast followed by Contrast. 

0375 Ancillary Outpatient Services When Patient Expires. 

0383 Cardiac Computed Tomographic Imaging. 
CMS-1525-FC 604 

CY 

2012 

APC 

CY 2012 APC Title 

0388 Discography. 

0442 Dosimetric Drug Administration. 

0653 Vascular Reconstruction/Fistula Repair with Device. 

0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents. 

0662 CT Angiography. 

0668 Level I Angiography and Venography. 

8006 CT and CTA with Contrast Composite. 

8008 MRI and MRA with Contrast Composite. 

B. OPPS Payment for Drugs, Biologicals, 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-through status in one of two ways: as a 

packaged payment included in the payment for the associated service or as a separate 

payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with 

comment period (65 FR 18450) that we generally package the cost of drugs and 

radiopharmaceuticals into the APC payment rate for the procedure or treatment with 

which the products are usually furnished. Hospitals do not receive separate payment for 

packaged items and supplies, and hospitals may not bill beneficiaries separately for any 

packaged items and supplies whose costs are recognized and paid within the national 

OPPS payment rate for the associated procedure or service. (Transmittal A-01-133, 

issued on November 20, 2001, explains in greater detail the rules regarding separate 

payment for packaged services.) 
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, packaging the costs of items and services into the 

payment for the primary procedure or service with which they are associated encourages 

hospital efficiencies and also enables hospitals to manage their resources with maximum 

flexibility. 

 Section 1833(t)(16)(B) of the Act set the threshold for establishing separate APCs 

for drugs and biologicals at $50 per administration for CYs 2005 and 2006. Therefore, 

for CYs 2005 and 2006, we paid separately for drugs, biologicals, and 

radiopharmaceuticals whose per day cost exceeded $50 and packaged 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 radiopharmaceuticals that were not new and did not have 

pass-through status was established at $55. For CYs 2008 and 2009, the packaging 

threshold for drugs, biologicals, and radiopharmaceuticals 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 packaging threshold for drugs, 

biologicals, and radiopharmaceuticals that were 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, the 
CMS-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 this 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 threshold for establishing separate 

APCs for payment of drugs and biologicals was set to $50 per administration during 

CYs 2005 and 2006. In CY 2007, we used the four quarter moving average Producer 

Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the 

$50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 

mandated threshold became effective) to the third quarter of CY 2007. We then rounded 

the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 

threshold amount of $55. Using the same methodology as that used in CY 2007 (which 

is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 68085 through 68086)), we set the packaging threshold for establishing separate 

APCs for drugs and biologicals at $60 for CYs 2008 and 2009. For CY 2010, we set the 

packaging threshold at $65; and for CY 2011, we set the packaging threshold at $70. 

Following the CY 2007 methodology, in the CY 2012 OPPS/ASC proposed rule, 

we used the most recently available four quarter moving average PPI levels to trend the 

$50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 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. In 
CMS-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 terminology reflects a change to the BLS naming 

convention for this series.) We refer below to this series generally as the PPI for 

Prescription Drugs. 

We chose this PPI as it reflects price changes associated with the average mix of 

all pharmaceuticals in the overall economy. In addition, we chose this price series 

because it is publicly available and regularly published, improving public access and 

transparency. Forecasts of the PPI for Prescription Drugs are developed by IHS Global 

Insight, Inc., a nationally recognized economic and financial forecasting firm. As actual 

inflation for past quarters replaced forecasted amounts, the PPI estimates for prior 

quarters have been revised (compared with those used in the CY 2007 OPPS/ASC final 

rule with comment period) and have been incorporated into our calculation. Based on the 

calculations described above, we proposed a packaging threshold 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 readers to the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68085 through 68086).) 

b. Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain 

Drugs, Nonimplantable Biologicals, and Therapeutic 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 radiopharmaceuticals (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 include 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 biologicals 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 costs for drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals to determine their proposed packaging status in 

CY 2012, we used the methodology that was described in detail in the CY 2006 OPPS 

proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final 

rule with comment period (70 FR 68636 through 70 FR 68638). For each drug and 

nonimplantable biological HCPCS code, we used an estimated payment rate of ASP+4 

percent (which is the payment rate we proposed for separately payable drugs and 

nonimplantable biologicals for CY 2012, as discussed in more detail in section V.B.3.b. 

of the proposed rule and this final rule with comment period) to calculate the CY 2012 

proposed rule per day costs. We used the manufacturer submitted ASP data from the 
CMS-1525-FC 609 

fourth quarter of CY 2010 (data 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 referenced in section XVII. of the proposed rule and 

available via the Internet) because these are the 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, effective April 1, 2011. For items that did not 

have an ASP-based payment rate, such as some therapeutic radiopharmaceuticals, we 

used their mean unit cost derived from the CY 2010 hospital claims data to determine 

their per day cost. We proposed to package items 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 crosswalked 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. Many 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 increments. Several commenters recommended 

that CMS consider either eliminating the drug packaging threshold and providing 
CMS-1525-FC 610 

separate payment for all drugs with HCPCS codes or freezing the packaging threshold at 

$70 for CY 2012. One commenter, in particular, suggested that CMS freeze the 

packaging threshold at $70 for at least 3 years. 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 concern that the packaging 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 threshold 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 eliminating 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 detail 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 OPPS/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 believe 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 are 
CMS-1525-FC 611 

fundamentally different payment systems with essential differences in their payment 

policies and structures. Specifically, the OPPS is a prospective payment system based on 

the concept of payment for groups of services that share clinical and resource 

characteristics. Payment is made under the OPPS according to prospectively established 

payment rates that are related to the relative costs of hospital resources for services. 

When physician’s services are furnished in an office setting, 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, the OPPS includes various drugs within a 

prospective payment system, where payment for certain drugs is packaged into the 

associated procedure payment for the APC group. 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 drugs because packaging is a fundamental 

component of a prospective payment system that accounts for the cost of certain items 

and services in larger payment bundles, recognizing that some clinical cases may be more 

costly and others less costly, but that, on average, OPPS payment is appropriate for the 

services provided. The growing utilization associated with packaged drugs and 

biologicals in our claims data suggests Medicare 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 appropriate to continue a 

modest drug packaging threshold for the CY 2012 OPPS for the reasons set forth below. 

As stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086), we 

believe that packaging certain items is a fundamental component of a prospective 

payment system, that packaging these items does not lead to beneficiary access issues and 

does not create a problematic site of service differential, that the packaging threshold is 

reasonable based on the initial establishment in law of a $50 threshold for the CY 2005 

OPPS, that updating the $50 threshold is consistent with industry and government 

practices, and that the PPI for Prescription Drugs is an appropriate mechanism to gauge 

Part B drug inflation. Therefore, because of our continued belief that packaging is a 

fundamental component of a prospective payment system that continues to provide 

important flexibility and efficiency in the delivery of high quality hospital outpatient 

services, we are not adopting the commenters’ recommendations to pay separately for all 

drugs, biologicals, and radiopharmaceuticals for CY 2012 or to eliminate or to freeze the 

packaging threshold at $70. 

We disagree with the commenters who suggested that CMS should limit increases 

in the outpatient drug packaging threshold amount to the market basket update for the 

year. As stated above, we continue to believe that updating the $50 threshold is 

consistent with industry and government practices and that the PPI for Prescription Drugs 

is an appropriate mechanism to gauge Part B drug inflation. As we stated in the CY 2007 

OPPS/ASC final rule with comment period (71 FR 68085), we believe that the PPI for 
CMS-1525-FC 613 

Prescription Drugs reflects price changes at the wholesale or manufacturer stage. 

Because OPPS payment rates for drugs and biologicals are generally based on the ASP 

data that are reported by their manufacturers, we believe that the PPI for Prescription 

Drugs is an appropriate price index to use to update the packaging threshold for CY 2007 

and beyond. 

In contrast, the market basket update contains numerous price proxies, including, 

but not limited to, proxies for wages and salaries, utilities, and nonlabor-related expenses, 

that are not related to price increases for prescription drugs. Therefore, we believe that 

the market basket as a whole is not an appropriate mechanism for determining the 

outpatient drug packaging threshold amount. Within the calculation of the market basket 

update, we use the PPI for Prescription Drugs specifically to measure the price growth for 

prescription drugs, but price changes for prescription drugs are only one component of 

price changes for the numerous items and services hospitals purchase. Additionally, we 

disagree with the commenters’ suggestion that we not round up 

the packaging threshold to the nearest $5 increment 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 packaging threshold does not inhibit our ability to 

pay accurately for drugs and biologicals. We have made several refinements to the 
CMS-1525-FC 614 

ASP+X drug payment methodology under the OPPS for nonpass-through drugs and 

biologicals over the past several years to improve its accuracy. During that time, we have 

continued to implement our established methodology for annually updating the drug 

packaging threshold. For CY 2010, we finalized an overhead adjustment methodology 

for determining payment for separately payable drugs without pass-through status while 

we have continued to consistently apply the methodology described 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 third 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, after consideration of the public comments we 

received, and consistent with our established methodology for establishing the packaging 
CMS-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 therapeutic 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/ASC final rule with 

comment period for the update year. Only HCPCS codes that are identified as separately 

payable in the final rule with comment period are subject to quarterly updates. For our 

calculation of per day costs of HCPCS codes for drugs and nonimplantable biologicals in 

this CY 2012 OPPS/ASC final rule with comment 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 hospital 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 biologicals 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 OPPS update, based on the most recent ASP 
CMS-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-based payment rate as proposed, 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 rule with comment period to determine their 

final per day cost. 

 Consequently, the packaging status of some HCPCS codes for drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals in this CY 2012 

OPPS/ASC final rule with comment period may be different from the same drug HCPCS 

code’s packaging status determined based on the data used for the proposed rule. Under 

such circumstances, we proposed to continue to follow the established policies initially 

adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those 

drugs whose median cost fluctuates relative to the proposed CY 2012 OPPS drug 

packaging threshold and the drug’s payment status (packaged or separately payable) in 

CY 2011. Specifically, consistent with our historical practice, we applied the following 

policies to these HCPCS codes for drugs, nonimplantable biologicals, and therapeutic 

radiopharmaceuticals whose relationship to the $75 drug packaging threshold changes 

based on the updated drug packaging threshold and on the final updated data: 

● HCPCS codes for drugs and nonimplantable biologicals that were paid 

separately in CY 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 rule with comment period, will continue to 

receive separate payment in CY 2012. 
CMS-1525-FC 617 

● HCPCS codes for drugs and nonimplantable biologicals that were packaged in 

CY 2011 and that are 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 rule with comment period, will remain packaged in CY 2012. 

● HCPCS codes for drugs and nonimplantable biologicals for which we proposed 

packaged payment in CY 2012 but then have per 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 cost 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 finalizing 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 final 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 separate 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 available 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, for 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 (Enfuvirtide injection), J1642 (Inj heparin sodium 

per 10 u), J1644 (Inj heparin sodium per 1000u), J1756 (Iron sucrose injection), J2700 

(Oxacillin sodium injeciton), J3030 (Sumatriptan succinate / 6 MG), J9070 

(Cyclophosphamide 100 MG inj), J9185 (Fludarabine phosphate inj), J9206 (Irinotecan 

injection), J9390 (Vinorelbine tartrate inj), and Q4103 (Oasis burn matrix) . Using 

updated ASPs and the CY 2010 hospital claims data 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 claims 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 per day cost for this product of approximately 
CMS-1525-FC 619 

$70 is less than the final $75 CY 2012 packaging 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 packaged drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals under our standard packaging methodology of 

packaging drugs with a per day cost less than $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 the 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 are 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 payment methodology is necessary to ensure 
CMS-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 the 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, including items used in anti-cancer regimens, is 

a fundamental component of a prospective payment system, and is an essential feature 

that distinguishes a prospective payment system 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 beneficiaries 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 consideration 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 addition, we are not providing any exceptions to 
CMS-1525-FC 621 

the standard drug packaging methodology for any class of drugs, including anti-cancer 

therapies, for CY 2012. However, we note that the 5-HT3 antiemetic product described 

by HCPCS code J2469 (palonosetron hydrocholride) 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 separate 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 purposes, multiple HCPCS codes reporting 

different dosages for the same covered Part B drugs or biologicals in order to reduce 

hospitals’ administrative burden by permitting them to report all HCPCS codes for drugs 

and biologicals. In general, prior to CY 2008, the OPPS recognized for payment only the 

HCPCS code that described the lowest dosage of a drug or biological. We extended this 

recognition to multiple HCPCS codes for several other drugs under the CY 2009 OPPS 

(73 FR 68665). During CYs 2008 and 2009, we applied a policy that assigned the status 

indicator of the previously recognized HCPCS code to the associated newly recognized 

code(s), reflecting the packaged or separately payable status of the new code(s). In the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we explained that 

once claims data were available for these previously unrecognized HCPCS codes, we 

would determine the packaging status and resulting status indicator for each HCPCS code 

according to the general, established HCPCS code-specific methodology for determining 

a code’s packaging status for a given update year. However, we also stated that we 
CMS-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 drug or biological did 

not create inappropriate payment incentives for hospitals to report certain HCPCS codes 

instead of others. 

 In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 

60491), we finalized a policy to make a single packaging determination for a drug, rather 

than an individual HCPCS code, when a drug has multiple HCPCS codes describing 

different dosages. We analyzed CY 2008 claims data for the HCPCS codes describing 

different dosages of the same drug or biological that were newly recognized in CY 2008 

and found that our claims data would result in several different packaging determinations 

for different codes describing the same drug or biological. Furthermore, we found that 

our claims data included few units and days for a number of newly recognized HCPCS 

codes, resulting in our concern that these data reflected claims from only a small number 

of hospitals, even though the drug or biological itself may be reported by many other 

hospitals under the most common HCPCS code. Based on these findings from our first 

available claims data for the newly recognized HCPCS codes, we believed that adopting 

our standard HCPCS code-specific packaging determinations for these codes could lead 

to payment incentives for hospitals to report certain HCPCS codes instead of others, 

particularly because we do not currently require hospitals to report all drug and biological 

HCPCS codes under the OPPS in consideration of our previous policy that generally 

recognized only the lowest dosage HCPCS code for a drug or biological for OPPS 

payment. 
CMS-1525-FC 623 

 For CY 2012, we continue to believe that adopting the standard HCPCS 

code-specific packaging determinations for these codes could lead to payment incentives 

for hospitals to report certain HCPCS codes for drugs instead of others. Making 

packaging determinations on a drug-specific basis eliminates these incentives and allows 

hospitals flexibility in choosing to report all HCPCS codes for different dosages of the 

same drug or only the lowest dosage HCPCS code. Therefore, in the CY 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 drug or biological but 

different dosages in CY 2012. 

For CY 2012, in order to propose a packaging determination that is consistent 

across all HCPCS codes that describe different dosages of the same drug or biological, 

we aggregated both our CY 2010 claims data and our pricing information at ASP+4 

percent across all of the HCPCS codes that describe each distinct drug or biological in 

order to determine the mean units per day of the drug or biological in terms of the 

HCPCS code with the lowest dosage descriptor. All HCPCS codes listed 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 amount across all dosage levels of a specific 

drug or biological by the estimated units per day for all HCPCS codes that describe each 

drug or biological from our claims data to determine the estimated per day cost of each 

drug or biological at less than or equal to $80 (whereupon all HCPCS codes for the same 
CMS-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 for 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 describe each distinct drug or biological in 

order to determine the mean units per day of the drug or biological in terms of the 

HCPCS code with the lowest dosage descriptor for those drugs listed 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 equal to $75 (whereupon all HCPCS codes for the same drug or 

biological would be packaged) or greater than $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 proposed a CY 2012 status indicator of “N,” 

HCPCS J1642 (Injection, heparin sodium, (heparin 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 separately 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 packaging status of each drug and biological 

HCPCS code to which the aforementioned methodology applies. The products affected 

are displayed in Table 36 below. 

TABLE 36.--HCPCS CODES TO WHICH THE CY 2012 

DRUG-SPECIFIC PACKAGING DETERMINATION 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 globulin, intramuscular over 10 cc K 

J1642 

Injection, heparin sodium, (heparin 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 sulfate, up to 500 mg N 

J2270 Injection, morphine sulfate, up to 10 mg N 

J2271 Injection, morphine sulfate, 100mg N 

J2788 

Injection, rho d immune globulin, human, minidose, 50 

micrograms (250 i.u.) K 

J2790 

Injection, rho d immune globulin, human, full dose, 300 

micrograms (1500 i.u.) K 

J2920 

Injection, methylprednisolone sodium succinate, up to 40 

mg N 
CMS-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, ovine, preservative free, per 

1000 usp units N 

J7050 Infusion, normal saline solution , 250 cc N 

J7040 Infusion, normal saline solution, sterile (500 ml=1 unit) N 

J7030 Infusion, normal saline solution , 1000 cc N 

J7515 Cyclosporine, oral, 25 mg N 

J7502 Cyclosporine, oral, 100 mg N 

J8520 Capecitabine, oral, 150 mg K 

J8521 Capecitabine, oral, 500 mg K 

J9250 Methotrexate sodium, 5 mg N 

J9260 Methotrexate sodium, 50 mg N 

Q0164 

Prochlorperazine maleate, 5 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0165 

Prochlorperazine maleate, 10 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0167 

Dronabinol, 2.5 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete therapeutic substitute 

for an IV anti-emetic at the time of chemotherapy 

treatment, not to exceed a 48-hour dosage regimen N 

Q0168 

Dronabinol, 5 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an 

IV anti-emetic at the time of chemotherapy treatment, not 

to exceed a 48-hour dosage regimen N 
CMS-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-emetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0170 

Promethazine hydrochloride, 25 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV antiemetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0171 

Chlorpromazine hydrochloride, 10 mg, oral, FDA 

approved prescription antiemetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0172 

Chlorpromazine hydrochloride, 25 mg, oral, FDA 

approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0175 

Perphenazine, 4 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete therapeutic substitute 

for an IV anti-emetic at the time of chemotherapy 

treatment, not to exceed a 48-hour dosage regimen N 

Q0176 

Perphenazine, 8 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete therapeutic substitute 

for an IV anti-emetic at the time of chemotherapy 

treatment, not to exceed a 48-hour dosage regimen N 

Q0177 

Hydroxyzine pamoate, 25 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 
CMS-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 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 

d. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast Agents, and 

Implantable Biologicals (“Policy-Packaged” Drugs and Devices) 

Prior to CY 2008, the methodology of calculating a product’s estimated per day 

cost and comparing it to the annual OPPS drug packaging threshold was used to 

determine the packaging status of drugs, biologicals, and radiopharmaceuticals under the 

OPPS (except for 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 costs. In addition, in CY 2009, we adopted a policy that 

packaged the payment for nonpass-through implantable biologicals into payment for the 

associated surgical procedure on the claim (73 FR 68633 through 68636). We refer to 

diagnostic radiopharmaceuticals and contrast agents collectively as “policy-packaged” 

drugs and implantable biologicals 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 costs 
CMS-1525-FC 629 

that are directly related and integral to performing a procedure or furnishing a service on 

an outpatient basis including, but not limited to, implantable prosthetics, implantable 

durable medical equipment, and medical and surgical supplies. Packaging costs into a 

single aggregate payment for a service, encounter, or episode-of-care is a fundamental 

principle that distinguishes a prospective payment system from a fee schedule. In 

general, packaging the costs of items and services into the payment for the primary 

procedure or service with which they are associated encourages hospital efficiencies and 

also enables hospitals to manage their resources with maximum flexibility. 

Prior to CY 2008, we noted that the proportion of drugs, biologicals, and 

radiopharmaceuticals that were separately paid under the OPPS had increased in recent 

years, a pattern that we also observed for procedural services under the OPPS. Our final 

CY 2008 policy that packaged payment for all nonpass-through diagnostic 

radiopharmaceuticals and contrast agents, regardless of their per day costs, contributed 

significantly to expanding the size of the OPPS payment bundles and is consistent with 

the principles of a prospective payment system. 

As discussed in more detail in the CY 2009 OPPS/ASC final rule with comment 

period (73 FR 68645 through 68649), we presented several reasons supporting our initial 

policy to package payment of diagnostic radiopharmaceuticals and contrast agents into 

their associated procedures on a claim. Specifically, we stated that we believed 

packaging was appropriate because: (1) the statutorily required OPPS drug packaging 

threshold has expired; (2) we believe that diagnostic radiopharmaceuticals and contrast 

agents function effectively as supplies that enable the provision of an independent 
CMS-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 prospectively based on a measure of average 

hospital acquisition cost. 

For these reasons, we believe it is appropriate to continue to treat diagnostic 

radiopharmaceuticals and contrast 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, collectively referred to as “policy-packaged” drugs, regardless of 

their per day costs, for CY 2012. We also proposed to continue to package the payment 

for diagnostic radiopharmaceuticals into the payment for the associated nuclear medicine 

procedure and to package the payment for contrast agents into the payment of the 

associated echocardiography imaging procedure, regardless of whether the agent met the 

OPPS drug packaging threshold. We refer readers to the CY 2010 OPPS/ASC final rule 

with comment period for a detailed discussion of nuclear medicine and echocardiography 

services (74 FR 35269 through 35277). 

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 radiopharmaceuticals and contrast agents with per day 

costs over the proposed OPPS drug packaging threshold are defined 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 contrast agents, and implement packaging and payment 
CMS-1525-FC 631 

policies that do not reflect their status as SCODs. Several comments disagreed with 

CMS’ labeling of radiopharmaceuticals as supplies and stated instead that they should be 

treated as other SCODs. The commenters recommended that diagnostic 

radiopharmaceuticals should be subject to the same per day cost drug packaging 

threshold that applies to other drugs, in order to determine whether their payment would 

be packaged or made separately. 

 Response: As discussed in the CY 2008 OPPS/ASC final rule with comment 

period (72 FR 66766), the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68645), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60497), 

and the CY 2011 final rule with comment period (75 FR 71949), we continue to believe 

that diagnostic radiopharmaceuticals and contrast agents are different from other drugs 

and biologicals for several reasons. We note that the statutorily 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 ancillary and supportive to an 

independent service, rather than themselves serving as the therapeutic modality. We 

packaged their payment in CYs 2008, 2009, 2010, and 2011 as ancillary and supportive 

services in order to provide incentives for greater 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 interchangeable in every case, and we recognized 

that, in some cases, hospitals may utilize higher cost products and, in some cases, lower 

cost products, taking into consideration the clinical needs of the patient and efficiency 
CMS-1525-FC 632 

incentives. While we recognize this variability from case to case, on average under a 

prospective payment system, we expect payment 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 drug packaging threshold. We note that we 

treat diagnostic radiopharmaceuticals and contrast 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 all nonpass-through implantable biologicals into 

payment for the associated surgical procedure because we consider these products to 

always be ancillary and supportive to independent services, similar to implantable 

nonbiological devices that are always packaged. Therefore, we currently package 

payment for nonpass-through implantable biologicals, also known as devices that are 

surgically inserted or implanted (through a surgical incision or a natural orifice) into the 

body. As we stated in the CY 2012 OPPS/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 implantable biologicals into the payment for their associated 

procedures, we are continuing to provide payment for these items in CY 2012 based on a 

proxy for average acquisition cost, as we did in CY 2009. We continue to believe that 
CMS-1525-FC 633 

the line-item estimated cost for a diagnostic radiopharmaceutical, contrast agent, or 

nonpass-through implantable biological in our claims data is a reasonable approximation 

of average acquisition and preparation and handling costs for diagnostic 

radiopharmaceuticals, contrast 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 hospitals have adapted to the CY 2006 coding 

changes for radiopharmaceuticals and responded to our instructions to include charges for 

radiopharmaceutical handling in their charges for the radiopharmaceutical products. 

Further, because the standard OPPS packaging methodology packages the total estimated 

cost of each radiopharmaceutical, contrast agent, 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 radiopharmaceuticals, contrast agents, or 

nonpass-through implantable biologicals, rather than the median cost. In addition, as we 

noted in the CY 2009 OPPS/ASC final rule with comment period (72 FR 68646), these 

drugs, biologicals, or radiopharmaceuticals for which we have not established a separate 

APC and therefore, for which payment would be packaged rather than separately 

provided under the OPPS, are considered to not be SCODs. Similarly, drugs and 

biologicals with per day costs of less than $75 in CY 2012 that are packaged and for 

which a separate APC has not been established also are not SCODs. This reading is 

consistent with our final payment policy whereby we package payment for diagnostic 
CMS-1525-FC 634 

radiopharmaceuticals, contrast agents, and nonpass-through implantable biologicals and 

provide payment for these products through payment for their associated procedures. 

 Comment: Several commenters disagreed with the proposal to distinguish 

between diagnostic and therapeutic radiopharmaceuticals for payment purposes under the 

OPPS. The commenters noted that CMS’ identification of HCPCS code A9544 (Iodine I131 tositumomab, diagnostic, per study dose) as a diagnostic radiopharmaceutical is 

inappropriate because this radiopharmaceutical functions as a dosimetric 

radiopharmaceutical and not as a diagnostic radiopharmaceutical. A few commenters 

explained that this particular radiopharmaceutical product is used as part of a therapeutic 

regimen and, therefore, should be considered therapeutic for OPPS payment purposes. 

Response: As discussed above and in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68645), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60498), 

and the CY 2011 OPPS/ASC final rule with comment period (75 FR 71949), we 

classified each radiopharmaceutical into one of the two groups according to whether its 

long descriptor contained the term “diagnostic” or “therapeutic”. HCPCS code A9544 

contains the term “diagnostic” in its long code descriptor. Therefore, according to our 

established methodology, we continue to classify it as diagnostic for the purposes of 

CY 2012 OPPS payment. While we understand that 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 diagnostic in nature. As we first stated 
CMS-1525-FC 635 

in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66641), we continue 

to believe that the product described by HCPCS code A9544 is a diagnostic 

radiopharmaceutical. While it is not used to necessarily diagnose a general disease state, 

it is used to determine whether future therapeutic 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 the diagnostic test, a service which 

provides information, is used to guide therapy does not make it a therapeutic service, one 

which intended to improve a patient’s clinical 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 radiopharmaceuticals are provided to patients 

who already have an established diagnosis. We continue to consider HCPCS code A9544 

to be diagnostic because this item is provided for the purpose of conducting a diagnostic 

imaging procedure and is used to identify the proposed dose of the therapeutic agent to be 

provided at a later time. 

Comment: Some commenters recommended using the ASP methodology to make 

payment for nonpass-through diagnostic radiopharmaceuticals, noting that it would be 

inconsistent for CMS to treat diagnostic 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 payment status expires, package the costs 

included in historical hospital claims data, rather than use the ASP methodology to pay 
CMS-1525-FC 636 

for the product and treat the drug as a supply. A few commenters suggested that 

diagnostic radiopharmaceuticals could be paid separately as therapeutic 

radiopharmaceuticals are paid, which would allow 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 separately for diagnostic radiopharmaceuticals, 

could reduce Medicare program expenditures 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 statutorily 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 diagnostic radiopharmaceuticals should be paid under the 

ASP methodology, that nonpass-through diagnostic radiopharmaceuticals should be paid 

as pass-through drugs and biologicals, or that nonpass-through diagnostic 

radiopharmaceuticals should be paid similarly to therapeutic radiopharmaceuticals. We 

continue to believe that nonpass-through diagnostic radiopharmaceuticals and contrast 

agents function effectively as supplies that enable the provision 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 biologicals, 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 acquisition cost. We continue to believe 

that the line-item estimated cost for a diagnostic radiopharmaceutical, contrast agent, or 

nonpass-through implantable biological in our claims data is a reasonable approximation 

of average acquisition and preparation and handling costs for diagnostic 

radiopharmaceuticals, contrast agents and nonpass-through implantable biologicals, 

respectively. 

Further, as we have stated above, we believe 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 system from a fee schedule. Our policy of 

packaging payment for diagnostic radiopharmaceuticals, 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 biologicals, when each of these 

items is ancillary and supportive to an independent service, is contrary to this principle of 

a prospective payment system. Moreover, we note that SCODs, the payment 

methodology for which the commenters suggest that CMS adopt for diagnostic 

radiopharmaceuticals and contrast 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 will 
CMS-1525-FC 638 

receive payment equal to 104 percent of ASP (ASP +4). We do not agree that payment 

for diagnostic radiopharmaceuticals and contrast agents, were it equal to the SCOD 

reimbursement amount calculated using 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 for these products under the ASP+X methodology. 

Finally, we do not agree with the commenter’s assertion that separate payment for 

diagnostic radiopharmaceuticals would result in more accurate payment for these 

products. When CMS discussed possible ASP-based payment for diagnostic 

radiopharmaceuticals in the proposed and final rules for OPPS in CY 2006 (70 FR 68653 

through 68657), numerous public commenters advised CMS that radiopharmaceuticals 

are formulated, distributed, compounded, and administered in unique distribution 

channels that preclude the determination of ASP relevant to a radiopharmaceutical 

HCPCS code. Further, commenters advised CMS that the 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 intervening period between the CY 2006 final rule 

with comment period and the present, diagnostic radiopharmaceutical use has become 

more widespread, and their formulation more complex. Moreover, we believe that the 

phenomena described by commenters (including 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’ calculations of accurate ASP, and thus accurate 

payment, for these products. Therefore, we do not believe that diagnostic 
CMS-1525-FC 639 

radiopharmaceuticals should be paid separately under the OPPS such that manufacturers 

voluntarily can submit ASP data and then default to mean unit cost when ASP data are 

unavailable. We believe they are appropriately packaged into a single aggregate payment 

for the accompanying service provided. 

Comment: A few commenters recommended that CMS provide separate payment 

for all diagnostic radiopharmaceuticals with a median per day cost greater than $200. 

The commenters believed that this recommendation is most consistent with the APC 

Panel’s recommendation to CMS at the Panel’s September 2007 meeting (described 

below). One commenter recommended that if CMS does not adopt the recommended 

$200 packaging threshold for diagnostic radiopharmaceuticals, that CMS adopt alternate 

packaging criteria providing separate payment 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 radiopharmaceuticals 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 separately for radiopharmaceuticals with a 

median per day cost in excess of $200. Instead, as proposed, for CY 2008, we finalized 

the packaging of payment for all diagnostic radiopharmaceuticals. Consistent with the 
CMS-1525-FC 640 

CY 2012 OPPS/ASC proposed rule, for this final rule with comment period, we continue 

to believe that diagnostic radiopharmaceuticals are ancillary and supportive 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 for packaging diagnostic radiopharmaceuticals 

because, regardless of their per day cost, they are always supportive of an independent 

procedure that is the basis for administration of the diagnostic radiopharmaceutical. We 

also do not believe that it is appropriate to consider alternate packaging criteria for 

nonpass-through diagnostic radiopharmaceuticals. We continue to believe that, 

regardless of their per-day cost, these items are always supportive of an independent 

procedure that is the basis for administration of the diagnostic radiopharmaceutical. 

Therefore, our policy of packaging costs for 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 average costs associated with a covered 

procedure, already takes into account both higher and lower input costs 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 costs exceed certain thresholds. This system 
CMS-1525-FC 641 

of outliers already provides hospitals (or, in the case of partial hospitalization services, 

community mental health centers) with additional reimbursement to offset costs that are 

high relative to the prospective payment amount, regardless 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 calculate all of the proposed and final APC 

assignments and rates, including costs associated 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,” which now includes the additional variables 

previously available only in the OPPS Identifiable Data Set, including ICD-9-CMS 

diagnosis codes and revenue code payment amounts. We 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, including, but not limited to, 

packaged diagnostic radiopharmaceuticals. 

In CY 2009, we adopted a final policy to package payment for all 

nonpass-through implantable biologicals that are surgically inserted or implanted 

(through a surgical incision or a natural orifice) like our longstanding policy that 
CMS-1525-FC 642 

packaged payment for all implantable nonbiological devices without pass-through status. 

We finalized a policy in CY 2010 to package payment for nonpass-through implantable 

biologicals that are surgically inserted or implanted (through 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 are 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 for CY 2012 are biologicals that, according to 

their FDA-approved indications, are only surgically 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, per 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 period (75 FR 71948 through 71950), we believe 

that the three biologicals specified above with expiring pass-through status for CY 2012 

differ from other biologicals paid under the OPPS in that they specifically function as 

surgically implanted devices. As a result of our proposed packaged payment 

methodology for nonpass-through implantable biologicals, we proposed to package 

payment for HCPCS codes C9361, C9362, and C9364 and assign them status indicator 

“N” for CY 2012. In addition, any new biologicals without pass-through status that are 

surgically inserted or implanted (through a surgical incision or a natural orifice) would be 
CMS-1525-FC 643 

packaged in CY 2012. Moreover, for nonpass-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 regarding our proposed packaging of nonpassthrough implantable biologicals that are surgically inserted or implanted (through a 

surgical incision or a natural orifice) into the body. 

 After consideration of the public comments we received, we are finalizing our 

CY 2012 proposals, without modification, to continue to package 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, regardless of their per day costs. Given the inherent function 

of contrast agents and diagnostic radiopharmaceuticals as ancillary and supportive to the 

performance of an independent procedure and the similar functions of implantable 

biologicals and nonbiological devices as integral to and supportive of the separately paid 

surgical procedures in which either may be used, we continue to view the packaging of 

payment for contrast agents, diagnostic radiopharmaceuticals, and implantable 

biologicals as a logical expansion of packaging payment for drugs and biologicals. In 

addition, as we initially established in the 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 that include the term “diagnostic” along with 
CMS-1525-FC 644 

a radiopharmaceutical in their long code descriptors, and therapeutic 

radiopharmaceuticals as those Level II HCPCS codes that include the term “therapeutic” 

along with a radiopharmaceutical in their long code 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 that is surgically 

inserted or implanted through a surgical incision or natural orifice would be packaged in 

CY 2012. For three biologicals with expiring pass-through status and which differ from 

other biologicals paid under the OPPS in that they specifically function as surgically 

implanted devices, we are finalizing our proposal to package 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 package payment for contrast agents into 

the payment of the associated echocardiography 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 more information on how we set CY 2012 

payment rates for nuclear medicine procedures in which diagnostic radiopharmaceuticals 

are used and echocardiography services provided with and without contrast agents, we 

refer readers to the CY 2010 OPPS/ASC final rule with comment period for a detailed 
CMS-1525-FC 645 

discussion of nuclear medicine and echocardiography services (74 FR 35269 through 

35277). 
CMS-1525-FC 646 

3. Payment for Drugs and Biologicals without Pass-Through Status That Are Not 

Packaged 

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

Payable and Packaged Drugs and Biologicals 

Section 1833(t)(14) of the Act defines certain separately payable 

radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these 

items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” 

(SCOD) is a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for 

which a separate APC has been established and that either is a radiopharmaceutical agent 

or is a drug or biological for which payment was made on a pass-through basis on or 

before December 31, 2002. 

 Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are 

designated as exceptions and are not included in the definition of “specified covered 

outpatient drugs”.. These exceptions are-- 

● A drug or biological for which payment is first made on or after 

January 1, 2003, under the transitional pass-through payment provision in 

section 1833(t)(6) of the Act. 

● A drug or biological for which a temporary HCPCS code has not been 

assigned. 

● During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). 

 Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in 

CY 2006 and subsequent years be equal to the average acquisition cost for the drug for 
CMS-1525-FC 647 

that year as determined by the Secretary, subject to any adjustment for overhead costs 

and taking into account the hospital acquisition cost survey data collected by the 

Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic 

surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost 

data are not available, the law requires that payment be equal to payment rates 

established under the methodology described in section 1842(o), section 1847A, or 

section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Most 

physician Part B drugs are paid at ASP+6 percent pursuant to 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 Act authorizes the Secretary to adjust 

the weights for ambulatory procedure classifications 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 regarding pharmacy overhead costs in HOPDs and 

summarized the findings of that study: 

● Handling costs for drugs, biologicals, and radiopharmaceuticals administered 

in the HOPD are not insignificant; 
CMS-1525-FC 648 

● Little information is available about the magnitude of pharmacy overhead 

costs; 

● Hospitals set charges for drugs, biologicals, and radiopharmaceuticals at levels 

that reflect their respective handling costs; and 

● Hospitals vary considerably in their likelihood of providing services that utilize 

drugs, biologicals, or radiopharmaceuticals with different handling costs. 

 As a result of these findings, MedPAC developed seven drug categories for 

pharmacy and nuclear medicine handling costs 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, budget neutral payments to cover the costs 

hospitals incur for handling separately 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 charges 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 overhead category that would apply to all hospital 

outpatient uses of the drug. Therefore, our CY 2006 OPPS proposed rule included a 
CMS-1525-FC 649 

proposal to establish three distinct Level II HCPCS C-codes and three corresponding 

APCs for drug handling categories to differentiate overhead costs for drugs and 

biologicals (70 FR 42730). We also proposed: (1) to combine several overhead 

categories recommended by MedPAC; (2) to establish three drug handling categories, as 

we believed that larger groups would minimize the number of drugs that may fit into 

more than one category and would lessen any undesirable payment policy incentives to 

utilize particular forms of drugs or specific preparation methods; (3) to collect hospital 

charges for these HCPCS C-codes for 2 years; and (4) to ultimately base payment for the 

corresponding drug handling APCs on CY 2006 claims data available for the CY 2008 

OPPS. 

In the CY 2006 OPPS final rule with comment period (70 FR 68659 through 

68665), we discussed the public comments we received on our proposal regarding 

pharmacy overhead. The overwhelming majority of commenters did not support our 

proposal regarding pharmacy overhead and urged us not to finalize this policy, as it 

would be administratively burdensome for hospitals to establish charges for HCPCS 

codes for pharmacy overhead and to report them. Therefore, we did not finalize this 

proposal for CY 2006. Instead, we established payment for separately payable drugs and 

biologicals at ASP+6 percent, which we calculated by comparing the estimated aggregate 

cost of separately payable drugs and biologicals in our claims data to the estimated 

aggregate ASP dollars for separately payable drugs and biologicals, using the ASP as a 

proxy for average acquisition cost (70 FR 68642). Hereinafter, we refer to this 

methodology as our standard drug payment methodology. We concluded that payment 
CMS-1525-FC 650 

for drugs and biologicals and pharmacy overhead at a combined ASP+6 percent rate 

would serve as an acceptable proxy for the combined acquisition and overhead costs of 

each of these products. 

 In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we 

finalized our proposed policy to provide a single payment of ASP+6 percent for the 

hospital’s acquisition cost for the drug or biological and all associated pharmacy 

overhead and handling costs. The ASP+6 percent rate that we finalized was higher than 

the equivalent average ASP-based amount calculated from claims of ASP+4 percent 

according to our standard drug payment methodology, but we adopted payment at ASP+6 

percent for stability while we continued to examine the issue of the costs of pharmacy 

overhead in the HOPD and awaited the accumulation of CY 2006 data as discussed in the 

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 drug and biological acquisition and pharmacy 

overhead costs while continuing our efforts to improve the available data. We also 

proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged 

and separately payable drugs and biologicals from the charge for the drug or biological 

and report the pharmacy overhead charge on an uncoded revenue code line on the claim. 

We believed that this would provide us with an avenue for collecting pharmacy handling 

cost data specific to drugs in order to package the overhead costs of these items into the 

associated procedures, most likely drug administration services. Similar to the public 
CMS-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 meeting, the APC Panel recommended that 

hospitals not be required to separately report charges for pharmacy overhead and 

handling and that payment for overhead be included as part of drug payment. The APC 

Panel also recommended that CMS continue to evaluate alternative methods to 

standardize the capture of pharmacy overhead costs in a manner that is simple to 

implement at the organizational level (72 FR 66761). 

 Because of concerns expressed by the APC Panel and public commenters, we did 

not finalize the proposal to instruct hospitals to separately report pharmacy overhead 

charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment 

period (72 FR 66763), we finalized a policy of providing payment for separately payable 

drugs and biologicals and their pharmacy overhead at ASP+5 percent as a transition from 

their CY 2007 payment of ASP+6 percent to payment based on the equivalent average 

ASP-based payment rate calculated from hospital claims according to our standard drug 

payment methodology, which was ASP+3 percent for the CY 2008 OPPS/ASC final rule 

with comment period. Hospitals continued to include charges for pharmacy overhead 

costs in the line-item charges for the associated drugs reported on claims. 

 For CY 2009, we proposed to pay separately payable drugs and biologicals at 

ASP+4 percent, including both SCODs and other drugs without CY 2009 OPPS 

pass-through status, based on our standard drug payment methodology. We also 

continued to explore mechanisms to improve the available data. We proposed to split the 
CMS-1525-FC 652 

“Drugs Charged to Patients” cost center into two cost centers: one for drugs with high 

pharmacy overhead costs and one for drugs with low pharmacy overhead costs 

(73 FR 41492). We noted that we expected that CCRs from the proposed new cost 

centers would be available in 2 to 3 years to refine OPPS drug cost estimates by 

accounting for differential hospital markup practices for drugs with high and low 

overhead costs. After consideration of the public comments received and the APC Panel 

recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide payment for 

separately payable nonpass-through drugs and biologicals based on costs calculated from 

hospital claims at a 1-year transitional rate of ASP+4 percent, in the context of an 

equivalent average ASP-based payment rate of ASP+2 percent calculated according to 

our standard drug payment methodology from the final rule claims data and cost report 

data. We did not finalize our proposal to split the single standard “Drugs Charged to 

Patients” cost center into two cost centers largely due to concerns raised by hospitals 

about the associated administrative burden. Instead, we indicated in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68659) that we would continue to 

explore other potential approaches to improve our drug cost estimation methodology, 

thereby increasing payment accuracy for separately payable drugs and biologicals. 

 In response to 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 the 
CMS-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 packaged drugs at ASP+6 percent, as separate 

pharmacy overhead payments for separately payable drugs. They indicated that this 

approach would preserve the aggregate drug cost observed in the claims data, while 

significantly increasing payment accuracy for individual drugs and procedures by 

redistributing drug cost from packaged drugs. Their suggested approach would provide a 

separate overhead payment for each separately payable drug or biological at one of three 

different levels, depending on the pharmacy stakeholders’ assessment of the complexity 

of pharmacy handling associated with each specific drug or biological (73 FR 68651 

through 68652). Each separately payable drug or biological HCPCS code would be 

assigned to one of the three overhead categories, and the separate pharmacy overhead 

payment applicable to the category would be made when each of the separately payable 

drugs or biologicals was paid. 

In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we acknowledged the 

limitations of our data and our availability to find a method to improve that data in a way 

that did not impose unacceptable administrative burdens on providers. Accepting that 

charge compression was a reasonable but unverifiable supposition, we proposed to 

redistribute between one-third and one-half of the estimated overhead cost associated 

with coded packaged drugs and biologicals with an ASP. This proposed redistribution 

resulted in our proposal to pay for the acquisition and pharmacy overhead costs of 

separately payable drugs and biologicals that did not have pass-through payment status at 
CMS-1525-FC 654 

ASP+4 percent. We calculated estimated overhead cost for coded packaged drugs and 

biologicals by determining the difference between the aggregate claims cost for coded 

packaged drugs and biologicals with an ASP and the ASP dollars (ASP multiplied by the 

drug’s or biological’s units in the claims data) for those same coded drugs and 

biologicals. This difference was our estimated overhead cost for coded packaged drugs 

and biologicals. 

In 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, specifically approximately $150 million of those 

costs, should be attributed to separately payable 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 reduce the costs of coded 

drugs and biologicals that are packaged into payment for procedural APCs to offset the 

$150 million adjustment to payment for separately payable drugs and biologicals. In 

addition, we proposed that any redistribution of pharmacy overhead cost that may arise 

from the CY 2010 final rule with comment period data would occur only from some 

drugs and biologicals to other drugs and biologicals, thereby maintaining the estimated 

total cost of drugs and biologicals that we calculate based on the charges and costs 

reported by hospitals on claims and cost reports. As a result of this approach, no 

redistribution of cost would occur from other services to drugs and biologicals or vice 

versa. 
CMS-1525-FC 655 

Using our CY 2010 proposed rule data, and applying our longstanding 

methodology for calculating the total cost of separately payable drugs and biologicals in 

our claims compared to the ASP dollars for 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 overhead costs, was equivalent to ASP-2 

percent. Therefore, under the standard 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, their equivalent average ASP-based payment 

rate. We also determined that the estimated aggregate cost of coded packaged drugs and 

biologicals with an ASP (status indicator “N”), including acquisition and pharmacy 

overhead costs, was equivalent to ASP+247 percent. 

While we had no way of assessing whether this current distribution of overhead 

cost to coded packaged drugs and biologicals with an ASP was appropriate, we 

acknowledged in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60499 

through 60518) that the established method of converting billed charges to costs had the 

potential to “compress” the calculated costs to some degree. Further, we recognized that 

the attribution of pharmacy overhead costs to packaged or separately payable drugs and 

biologicals through our standard drug payment methodology of a combined payment for 

acquisition and pharmacy overhead costs depends, in part, on the treatment of all drugs 

and biologicals each year under our annual drug packaging threshold. Changes to the 

packaging threshold may result in changes to payment for the overhead cost of drugs and 
CMS-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 with coded packaged drugs and biologicals (the 

difference between aggregate cost for those drugs and biologicals on the claims and ASP 

dollars for the same drugs and biologicals), should, at least for CY 2010, be attributed to 

separately payable drugs and biologicals based on our standard methodology. 

We acknowledged that the observed combined payment for acquisition and 

pharmacy overhead costs of ASP-2 percent for separately payable drugs and biologicals 

may be too low and ASP+247 percent for coded packaged drugs and biologicals with 

reported ASP data in the CY 2010 claims data may be too high (74 FR 35327 and 

35328). In addition, we stated that we believed that the pharmacy stakeholders’ 

recommendation to set packaged drug and biological 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 percent 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 storage 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 explained that layered on these indirect costs 

are direct costs of staff, supplies, and equipment that are directly attributable only to the 
CMS-1525-FC 657 

storage, handling, preparation, and distribution of drugs and biologicals and which do 

vary, sometimes considerably, depending upon the drug being furnished. 

Therefore, we stated that a middle ground would represent the most accurate 

redistribution of pharmacy overhead cost. Our assumption was that approximately 

one-third to one-half of the total pharmacy overhead cost currently associated with coded 

packaged drugs and biologicals in the CY 2008 claims data offered a more appropriate 

allocation of drug and biological cost to separately payable drugs and biologicals 

(74 FR 35328). One third of the $395 million of pharmacy overhead cost associated with 

packaged drugs and biologicals was $132 million, whereas one-half was $198 million. 

Within the one-third to one-half parameters, we proposed that reallocating 

$150 million in drug and biological cost observed in the claims data from coded 

packaged drugs and biologicals with an ASP to separately payable drugs and biologicals 

for CY 2010 would more appropriately distribute pharmacy overhead cost among 

packaged and separately payable drugs and biologicals. Based on this redistribution, we 

proposed a CY 2010 payment rate for separately payable drugs and biologicals of ASP+4 

percent. Redistributing $150 million represented 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 redistribution of pharmacy overhead cost that may 

arise from CY 2010 final rule data would occur only from some drugs and biologicals to 

other drugs and biologicals, thereby maintaining the estimated total cost of drugs and 

biologicals in our claims data (no redistribution of cost would occur from other services 
CMS-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 separately payable drugs and biologicals as 

hospitals that do not participate 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 payable drugs and biologicals would be taken into 

account 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 (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 readers to the CY 2010 OPPS/ASC final rule with 

comment period for a complete discussion 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 biological cost to separately payable drugs and biologicals as 

a conservative estimate of the pharmacy overhead cost of uncoded packaged drugs and 

biologicals that should be appropriately associated with the cost of separately payable 

drugs and biologicals (74 FR 60517). We believed that our proposal to reallocate $150 
CMS-1525-FC 659 

million of costs from coded packaged drugs and biologicals, or one-third of the pharmacy 

overhead costs of these products, based upon the claims data available for the CY 2010 

final rule, to separately payable drugs and biologicals was appropriate (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 percent of the total cost of uncoded packaged 

drug and biological cost in order to represent 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 comparable to that of coded packaged drugs 

and biologicals with an ASP. We stated that we could not know the amount of overhead 

associated with these drugs without making significant assumptions about the amount of 

pharmacy overhead cost associated with the 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 percent (that would have 

resulted from no pharmacy overhead cost redistribution from packaged to separately 

payable drugs and biologicals), to ASP+7 percent (that would have resulted from 

redistribution of pharmacy overhead cost based on expansive assumptions about the 

nature of uncoded packaged drug and biological cost). We finalized a policy of 
CMS-1525-FC 660 

redistributing pharmacy overhead cost 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 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 determined 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 multiplied 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 acquisition and pharmacy overhead costs, was 

ASP-1 percent, which also would be the ASP-based payment rate under the standard 

methodology that we established in CY 2006 (75 FR 46275). Additionally, we 

determined that the total estimated aggregate 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 estimated cost for both packaged drugs and 

biologicals with a HCPCS code and separately 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 our 
CMS-1525-FC 661 

standard methodology may understate the cost of separately payable drugs and 

biologicals and related pharmacy overhead for those drugs and biologicals, we 

redistributed $150 million from the pharmacy overhead cost of coded packaged drugs and 

biologicals with an ASP and redistributed $50 million from the cost of uncoded packaged 

drugs and biologicals, for a total redistribution of $200 million from costs for coded and 

uncoded packaged drugs to separately payable drugs and biologicals, with the result that 

we pay separately paid drugs and biologicals at ASP+5 percent for CY 2011. The 

redistribution amount of $150 million in overhead cost from coded packaged drugs and 

biologicals with an ASP and $50 million in costs from uncoded packaged drugs and 

biologicals without an ASP were within the parameters established in the CY 2010 

OPPS/ASC final rule. In addition, as in prior years, we described some of our work to 

improve our analyses during the preceding year, 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 described above, continues to be 

applicable to determining payments for SCODs for CY 2012. This provision requires 

that payment for SCODs be equal to the average acquisition cost for the drug for that year 

as determined by the Secretary, subject to any adjustment for overhead costs and taking 

into account the hospital acquisition cost survey data collected by the 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, section 1833(t)(14)(A)(iii)(II) of the 

Act requires that payment be equal to payment rates established under the methodology 
CMS-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 Secretary as necessary. In accordance with 

sections 1842(o) and 1847A of the Act, payments 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 three categories: physician-administered drugs 

(drugs furnished incident to a physician's service), drugs delivered through DME (drugs 

furnished under the durable medical equipment benefit), and drugs specifically covered 

by a statutory provision (certain oral anti-cancer and immunosuppressive 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 services 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 statute 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. Prior 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 biologicals 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 methodology to include an adjustment for 
CMS-1525-FC 663 

pharmacy overhead. As explained previously, we have acknowledged, and continue to 

believe, that the established method of converting billed charges 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 separately payable drugs and biologicals 

through our standard drug payment methodology of a combined payment for acquisition 

and pharmacy overhead costs depends, in part, on the treatment of all drugs and 

biologicals each year under our annual drug packaging threshold. 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 total 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 multiplied 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 acquisition and pharmacy overhead costs, is 

ASP-2 percent, which also would be the ASP-based payment rate under the standard 

methodology that we established in CY 2006 (75 FR 46275). Additionally, we 

determined that the total estimated aggregate 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 equivalent to ASP+188 percent. 

Finally, we determined that the total estimated cost for both packaged drugs and 
CMS-1525-FC 664 

biologicals with a HCPCS code and separately 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 percent. 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 biologicals and for separately payable coded 

drugs and biologicals before application 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 standard methodology for establishing payment 

in CY 2012. Many commenters stated that they 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 methodology. Commenters further asserted that payment for 

SCODs that is based on the standard methodology of ASP -2 would be far below many 

hospitals’ acquisition costs for separately payable 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 data, with regard to the percentage of 

ASP in comparison to the cost for packaged coded drugs and biologicals and for 
CMS-1525-FC 665 

separately payable coded drugs and biologicals 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 and related pharmacy overhead for those drugs 

and biologicals. Specifically, we recognize that payment at ASP-2 percent for such costs 

may not be sufficient. We also acknowledge that ASP +188 percent may overstate the 

combined acquisition and pharmacy overhead cost 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 appropriate to account for inflation that has 

occurred since the overhead redistribution 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 pharmaceuticals in the overall economy. 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 Statistics (BLS) series code WPUSI07003), provided 

through CMS’ Office of the Actuary (OACT), is a price series that reflects price changes 

associated with the average mix of all pharmaceuticals in the overall economy. We refer 

to this series generally as the PPI for Prescription Drugs. We believe that this price series 
CMS-1525-FC 667 

is appropriate to use to update the overhead redistribution amount because the PPI for 

Prescription Drugs is publicly available and regularly published and because we have 

successfully utilized the PPI for Prescription Drugs for the past 5 years to update the drug 

packaging threshold as described in section V.B.2.a. of this final rule with comment 

period. 

In order to apply the inflation allowance to the overhead redistribution amount for 

CY 2012, we used the most recent forecast of yearly index levels for the PPI for 

Prescription Drugs to calculate an updated overhead redistribution amount. After 

adjusting the $200 million overhead redistribution amount for inflation using the PPI for 

Prescription Drugs, we determined that $161 million 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 biologicals. The proposed redistribution amount 

of $161 million in overhead cost from coded packaged drugs and biologicals is within the 

redistribution parameters established in the 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 redistribution 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 overhead, in the proposed rule, we also 

continued to believe that the methodology to redistribute a portion of drug overhead cost 

from packaged coded and uncoded drugs and biologicals to separately payable drugs and 
CMS-1525-FC 668 

biologicals while keeping the total cost of drugs and biologicals in the claims data 

constant continued to be appropriate 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 packaged drugs and biologicals to separately 

payable drugs and biologicals. 

In the CY 2010 OPPS/ASC final rule with comment period, we reallocated $150 

million in overhead cost from coded packaged drugs and biologicals with an ASP to 

separately payable drugs and biologicals with an ASP, or one-third of the pharmacy 

overhead cost of these products based upon the 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 redistribute to separately payable drugs and 

biologicals. Therefore, we made 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 biologicals 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 comment 
CMS-1525-FC 669 

period. A redistribution amount of $161 million in overhead cost from coded packaged 

drugs and biologicals with an ASP or approximately 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 overhead 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 proposal 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 ASP, 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 redistribution of pharmacy overhead cost 

would occur only among drugs and biologicals 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 adjustment 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 2012 
CMS-1525-FC 670 

payment rate for separately payable drugs and 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 separately 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, because we are concerned about the possibility 

of underpaying for separately payable drugs and biologicals, we believe that a pharmacy 

overhead adjustment using a redistribution methodology for determining the amount of 

payment for drugs and biologicals, as we did for CY 2011, is appropriate for CY 2012. 

We acknowledge that the observed ASP-2 percent may reflect some amount of charge 

compression and variability attributable to the choice of a packaging threshold. We 

displayed the effect of this proposed adjustment payment methodology in Table 32 of the 

proposed rule (76 FR 42262). 

Comment: The majority of commenters urged 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 ASP+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 acquisition cost for the drug for a year, as determined 
CMS-1525-FC 671 

by the GAO or CMS surveys of hospital acquisition cost, and that the most recent survey 

available is “outdated” because it was performed in CY 2004 by the GAO, the 

commenters urged CMS to pay for separately payable 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 under the statute. Many 

of these commenters suggested that CMS discontinue the use of the standard 

methodology and the overhead redistribution 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 that 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 and 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 defined by the Secretary based on the volume 

of covered OPD services or other relevant characteristics)), as determined by the 

Secretary taking into account the hospital 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 account 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 believe that the ASP information we collect is an adequate 

proxy for hospital acquisition cost. Further, the commenters have not disputed the 
CMS-1525-FC 672 

accuracy of the total drug and biological cost estimated in our claims data, only the 

estimated cost of separately payable drugs and biologicals. We continue to believe that 

average sales prices for separately paid drugs and biologicals represent a generally 

appropriate source of hospital average acquisition cost for drugs 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 required 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 Medicaid Best Price calculations. Given that purchase price 

generally equals sales price for any transaction, we believe that the ASP is an accurate 

proxy for hospitals’ average acquisition cost for 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 drug and biological costs observed in hospital 

claims data and pricing information observed in ASP data, as adjusted with a 

redistribution for pharmacy overhead. 

Comment: One commenter stated that the statute requires that CMS make 

payment for SCODs at ASP+6 percent, citing that 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 reduced by CCRs to derive proxies for hospital 
CMS-1525-FC 673 

costs is a methodology dependent on assumptions about the relationship between charges 

and costs and, therefore, does not typify actual hospital costs for drugs and biologicals. 

These cost data, the commenter argued, therefore 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 acquisition cost of drugs. With respect to 

establishing the total estimated cost of drugs and biologicals, including both pharmacy 

overhead and acquisition cost of drugs and biologicals, we use hospital charges and cost 

report data. We believe that our claims data 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 data, 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 from claims and cost report data is the only 

source of the total cost of drugs and biologicals, that includes both pharmacy overhead 

and acquisition cost. 

Comment: MedPAC remained concerned about our policy of setting payment 

rates for drugs and biologicals as a percentage of ASP because, as MedPAC stated, 
CMS-1525-FC 674 

pharmacy overhead, as a percentage of total costs, varies widely across individual drugs. 

MedPAC previously had recommended that CMS collect data on hospitals’ pharmacy 

overhead costs separately from drug acquisition costs 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 pharmacy 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 costs 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 should collect data on hospitals’ pharmacy 

overhead costs separately from drug acquisition costs and that these data could be used to 

create separate payment to hospitals for pharmacy overhead and drug acquisition costs, as 

we discussed in detail above, we proposed to create HCPCS codes for pharmacy 

overhead services so that hospitals could charge for these services and provide us a basis 

for making separate payments for pharmacy overhead. However, hospitals strongly 

objected and provided convincing arguments that to do so would impose an enormous 

burden on them and on other payers that would not provide an offsetting benefit. We 

believe that hospitals would find any option requiring them to identify the cost associated 

with the overhead component of a drug or biological 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 and biologicals, charge compression leads to 

misallocation of pharmacy overhead costs associated with high and low cost drugs and 
CMS-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 calculating the equivalent average ASP-based 

payment amount for separately payable drugs. They argued that this would provide a 

more accurate ASP-based payment amount for separately payable drugs. As an 

alternative, the commenters recommended that CMS eliminate the drug packaging 

threshold and provide separate payment for all Part B drugs under the OPPS at an 

ASP+X percent amount calculated from the cost for all drugs with HCPCS codes. 

Several commenters objected to the inclusion of data from hospitals that receive 

Federal discounts on drug prices under the 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 substantially 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 significant proportion of 

hospital drug costs on CY 2010 OPPS claims. The commenters stated that including 

340B hospital claims data when comparing aggregate hospital costs based on claims data 

to ASP rates contributed to an artificially low equivalent average ASP-based payment 

rate because ASP data specifically exclude drug sales under the 340B program. 

In addition, MedPAC encouraged CMS to exclude data from 340B hospitals from 

the ratesetting. MedPAC stated that analysis indicates that exclusion of the 340B 

hospitals would increase CMS’ estimates of the cost of separately paid drugs by about 
CMS-1525-FC 676 

3.5 percent above the estimate obtained when the 340B hospital claims data are included 

in the ratesetting calculations 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 address the issue of charge compression by 

redistributing some portion of the estimated 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 conservative estimate of overhead cost in the 

uncoded packaged drug cost ($54 million). Further, we have made several proposals in 

the past to more precisely identify pharmacy overhead costs and to address charge 

compression in the pharmacy revenue center, which 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 distinct Level II HCPCS 

C-codes and three corresponding APCs for drug handling categories to differentiate 

overhead costs for drugs and biologicals (70 FR 42730). 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 separately payable drugs and biologicals from the 

charge for the drug or biological and report the pharmacy overhead charge on an uncoded 

revenue code line on the claim. We believed that this would provide us with an avenue 

for collecting pharmacy handling cost data specific to drugs in order to package the 

overhead costs of these items into the associated procedures, most likely drug 
CMS-1525-FC 677 

administration services. However, we did not finalize these proposals due to strong 

objection from hospitals. For CY 2009, we proposed to split the “Drugs Charged to 

Patients” cost center into two cost centers: one for drugs with high pharmacy overhead 

costs and one for drugs with low pharmacy overhead costs (73 FR 41492). We noted that 

we expected that CCRs from the proposed new cost centers would be available in 2 to 3 

years to refine OPPS drug cost estimates by accounting for differential hospital markup 

practices for drugs with high and low overhead costs. 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 hospitals and staff. By proposing to continue 

our CY 2010 overhead adjustment methodology, we were once again attempting to 

address the issue of charge compression without requiring any changes to current hospital 

reporting practices. 

It has been our policy since CY 2006 to only use separately payable drugs and 

biologicals in the calculation 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 items 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 period. To include the costs of coded packaged 

drugs and biologicals in both our APC ratesetting process (for associated procedures 

present on the same claim) and in our ratesetting process to establish an equivalent 

average ASP-based payment amount for separately payable drugs and biologicals would 

give these data disproportionate emphasis in the OPPS by skewing our analyses, as the 
CMS-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 establishing 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 overhead costs, are packaged into the payment 

for the procedures in which they are administered, the OPPS provides payment for both 

the drugs and the associated pharmacy overhead costs through the applicable procedural 

APC payments. 

Furthermore, we disagree with the commenters who recommended that we should 

pay separately for all drugs and biologicals with HCPCS codes. We continue to believe 

that packaging is a fundamental component of a prospective payment system that 

contributes to important flexibility and efficiency in the delivery 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 hospitals have been particularly sensitive to any 

increased administrative burden, and we are aware that the burden of separate reporting 

for a multitude of very low cost packaged drugs is significant. 

With respect to the comment that we should not include data from hospitals that 

receive discounts on outpatient drug prices under 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/ASC final rule with comment period (74 FR 60517) and the 
CMS-1525-FC 679 

CY 2011 OPPS/ASC final rule with comment period (75 FR 71963), we continue to 

believe that excluding data from hospitals that participate in the 340B program from our 

ASP+X calculation, and paying those hospitals at that derived payment amount, would 

inappropriately redistribute payment to drugs and biologicals from payment for other 

services under the OPPS. The ASP-equivalent cost of drugs under the OPPS that would 

be calculated only from claims data for hospitals that do not participate in the 340B 

program, would likely be higher than the cost of all drugs from our aggregate claims from 

all hospitals. To set drug payment rates for all hospitals based on a subset of hospital cost 

data, determined only from claims data from hospitals 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 all hospitals, although all hospitals, 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 costs of all hospitals relative to the drug costs 

of all hospitals, thereby distorting 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 differential 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 drug and biological payment policy 

that is based on average acquisition cost and pays all hospitals 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 referenced 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 generally 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 attributable to the tendency of the relationship 

between ASP and total costs of separately payable 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 created 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 below, 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 methodologically-derived ASP+X percent is the 

inclusion of a whole year’s data for the final rule while keeping the drug overhead 

redistribution amount constant, and not the use of later ASP data, as the commenter 

suggested. Had we finalized our proposed redistribution methodology without 

modification in CY 2012, this would have again 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 that CMS require hospitals to bill 

all drugs with HCPCS codes under revenue code 0636 in order to improve its data on 

packaged drugs. The commenter also recommended that CMS require hospitals to report 

J3490 (Unclassified drugs) for drugs without a HCPCS code. One commenter asserted 

that requiring that hospitals take these additional steps for packaged drugs could occur 

with minimal additional administrative burden to hospitals since hospitals are now 

required to report national drug codes (NDCs) to State Medicaid programs. Other 

commenters asked that CMS require mandatory reporting of all drugs using either 

specific HCPCS codes or J3490, and that CMS should leave the choice of the revenue 

code that must be reported on the line to the discretion of the hospital. 

Response: We did not propose to require hospitals to report all drugs and 

biologicals using HCPCS codes and report drugs and biologicals that do not have specific 

HCPCS codes using HCPCS code J3490 for the 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 services that have HCPCS codes using those 

HCPCS codes, regardless of whether payment for 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 more complete data from hospitals identifying 
CMS-1525-FC 682 

the specific drugs that were provided during an episode of care will improve payment 

accuracy for separately payable drugs in the future. Therefore, we continue to encourage 

hospitals to change their reporting practices if they are not already reporting HCPCS 

codes for all drugs and biologicals furnished, where specific HCPCS codes are available 

for those drugs and biologicals. 

Comment: Several commenters characterized 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 drugs and biologicals. However, several 

commenters expressed concern that, under 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 for separately payable drugs and biologicals. 

Several commenters supported the payment of ASP+6 percent for separately paid 

drugs and biologicals and the redistribution methodology on a whole, but did not support 

the proposed redistribution amount of $215 million 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 payable drugs and biologicals. A few of these commenters 

stated that a larger portion of the overhead costs should be reallocated from uncoded 
CMS-1525-FC 683 

packaged drugs and biologicals to separately payable drugs and biologicals, noting that 

coded and uncoded drugs and biologicals have 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 drugs 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 insufficient to pay adequately for the costs of 

separately paid drugs and biologicals. To the contrary, the utilization of drugs and 

biologicals continues to increase. In addition, we note that payment for pharmacy 

overhead is not only paid through payment for specifically identified drugs and 

biologicals, but pharmacy overhead payment also 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 furnished 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 payment for the procedure, because the APC 

payment for any procedure includes the cost of packaged drugs and the overhead cost 

associated with those packaged 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 adjustment methodology, and other commenters 

argued that we should redistribute 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 forth 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 should redistribute a higher portion of drug 

cost from coded packaged drugs and biologicals, nor can we assume that uncoded 

packaged drugs and biologicals have the same or higher pharmacy overhead costs as 

coded packaged drugs and biologicals. Therefore, 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 biologicals, 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 methodology is our assessment of the amount of drug cost in 

the claims data above aggregate ASP available as “overhead” for redistribution. 

Knowing the specific HCPCS codes for packaged drugs and their associated ASP allows 

us to assess the difference between the aggregate ASP and claims cost for packaged drugs 

and to assess the intensity of pharmacy overhead associated with these drugs. The 
CMS-1525-FC 685 

inability to know which drugs are captured by uncoded drug charges on a claim is 

challenging because we cannot know the hospitals’ charges for the drug, which include 

overhead costs, or what the overhead complexity may be. Therefore, we cannot be 

certain that the amount of uncoded pharmacy overhead 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 HCPCS codes. Second, we continue to believe 

that the information supplied to us by commenters urging us to redistribute a greater (or 

equivalent) fraction of costs for uncoded packaged drugs and biologicals is insufficient to 

enable us to isolate the portion of the uncoded packaged drug and biological cost that is 

pharmacy overhead cost. In order to isolate 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 hospitals, either through more reporting of 

packaged drugs on claims or through more granular 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/ASC proposed rule, we have also evaluated claims data 

in an effort to assess how much uncoded packaged drugs resemble coded packaged drugs 

(75 FR 46278). We found that most uncoded packaged drug costs appear with surgical 

services and that most coded packaged drug costs appear with medical services. In light 

of this information, we are not confident that the drugs captured by uncoded drug costs 

are the same drugs captured by the coded packaged drug cost. Therefore, we do not 

agree that we can assume that they are the same drugs, with comparable overhead and 

handling costs. Without being able to calculate an ASP for these drugs and without being 
CMS-1525-FC 686 

able to gauge the magnitude of the overhead complexity 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 for 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 complexity categories of delivery; 

this report can be viewed on the MedPAC Web site at: 

http://www.medpac.gov/publications%5Ccongressional_reports%5CJune05_ch6.pdf. As 

we have stated elsewhere, we remain committed to using hospital data as reported to us 

by hospitals to set OPPS payment rates. Therefore, we continue to believe that it would 

be inappropriate to assume that the costs reported under uncoded pharmacy revenue code 

lines are for the same drugs and biologicals with 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 should not make broad assumptions that the same 

overall charge markup exists for both coded and uncoded packaged drugs or that we 

should redistribute a similar or greater amount 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 adjustment 
CMS-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 below. As we stated in our CY 2010 proposed rule, we 

remain concerned that the ASP value derived 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 understate the cost of separately payable drugs 

and biologicals and related pharmacy overhead for 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 value of ASP+247 for packaged drugs and 

biologicals as evidence of this distortion. We further stated that we believe that, 

according industry stakeholders and MedPAC, approximately $150 million of handling 

and pharmacy overhead cost for coded packaged drugs, and approximately $50 million of 

costs attributed to pharmacy overhead cost for uncoded packaged drugs were appropriate 

to redistribute to separately payable drugs in CY 2010. We believed, and continue to 

believe, that between approximately one-third and one-half of the overhead cost 

associated with coded packaged drugs could be attributable to charge compression due to 

our cost estimation methodology and our choice of a packaging threshold. In addition, 

redistributing $50 million of the total cost associated with uncoded packaged drugs and 

biologicals to separately payable 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 biologicals 
CMS-1525-FC 688 

included a pharmacy overhead amount comparable to those of coded packaged drugs and 

biologicals with an ASP. Using 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 (ASP +0), and a relatively high ASP value for 

packaged drugs and biologicals (ASP+283). Thus, in the CY 2011 OPPS final rule with 

comment period (75 FR71953 through 71967), we again finalized our proposed 

redistribution methodology, and redistributed $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 the one-third to one-half of the 

estimated pharmacy overhead cost in coded packaged drugs and biologicals. The 

CY 2010 policy for redistributing $150 million from coded packaged drugs and 

biologicals to separately payable 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 between approximately one-third and one-half of the overhead 

cost in coded packaged drugs could be attributable to charge compression due to our cost 

estimation methodology and our choice of a packaging threshold. 

The proposed CY 2012 policy of redistributing $53 million of the total cost of 

uncoded packaged drugs and biologicals to separately payable drugs and biologicals, or 

approximately 11 percent in overhead cost from uncoded packaged drugs and biologicals, 

falls into the parameter of not less than 8 percent of cost associated with these items, as 

discussed in the CY 2010 OPPS/ASC final rule with comment period. Further, as we 
CMS-1525-FC 689 

indicated in the CY 2010 OPPS/ASC final rule with comment period, the proportion of 

uncoded packaged drug cost that is redistributed 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 comment period (74 FR 60511), we 

remain unwilling to make sweeping assumptions 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 percent (or $54 million for redistribution in 

the proposed rule) from the cost of uncoded packaged drugs and biologicals to separately 

payable drugs and biologicals is an appropriate amount in light of our uncertainty about 

the relationship between ASP and pharmacy overhead costs for the uncoded drugs and 

biologicals. We also do not believe our redistribution 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 for separately paid drugs. 

We believe that the consensus among commenters 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 discussed below), has a rational basis and is not 

arbitrary. 
CMS-1525-FC 690 

Although we proposed to continue our established policy to redistribute 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 finalizing this aspect of the proposed policy, we 

believe the intra-rulemaking fluctuation that 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 decrease in the ASP+X amount between the proposed and final 

rules. Although in CY 2010 the magnitude was 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 final rule with comment period, it did result 

in a 1 percent decline in CY 2011 between the proposed rule and the final rule with 

comment period. We believe that this possible decrease in the ASP+X percent between 

the CY 2012 proposed rule and this final rule with comment period prompted several 

commenters, especially those commenters representing hospitals and hospital 

associations, to characterize the proposed overhead redistribution methodology as 

unstable. 

In our consideration of commenters’ concerns regarding this observed intrarulemaking variability (that is, the fluctuation in the derived ASP+X value between the 

OPPS proposed rule and the final rule), in preparation for this CY 2012 final rule with 
CMS-1525-FC 691 

comment period, we revisited this issue and analyzed cost and claims data in an effort to 

determine the cause of the fluctuation. 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 example, 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 percent 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 proposed 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 inclusion of an entire year’s worth of cost data (amounting to 

approximately $5.4 billion) in the calculation, the ASP+X percent based on the proposed 

$215 million redistribution of packaged drug overhead cost again dropped 1 percent from 

ASP+4 in the CY 2012 proposed rule to ASP+3 if the proposed methodology was used, 

without modification, for the final calculation. We then analyzed our ASP+X 

calculations in 2011, and found the same effect, namely 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 ASP+X value in the final rule than was 
CMS-1525-FC 692 

proposed. Although the change in CY 2010 was less than one-half percent and thus 

prompted no change in the final ASP+X percent due to rounding, the inclusion of a 

whole year of costs caused a 1 percent decline 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 only, 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 worth 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 redistribution 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 project that for most years this shrinking in the redistributed 

cost to total drug cost ratio that derives the ASP+X percent will cause a decrease in the 
CMS-1525-FC 693 

ASP+X percent of at least 1 percent between 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 redistribution of $161 million in overhead cost from 

coded packaged drugs and $54 million in overhead 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 redistribution amount changes the ratio of redistributed 

cost to total drug cost changes and prompts a 1 percent decrease in the ASP+X percent. 

 Comment: In general, commenters urged CMS to increase the stability and 

decrease the volatility of its payment policies wherever possible. The commenters stated 

that instability in the OPPS rates creates 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 year to the next becomes more important to 

hospitals. Regarding payment for SCODs and the ASP+X methodology in particular, 

commenters also cited instability 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 adequate and accurate payment and enhance the 

predictability of Medicare payment for these 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. Observing 
CMS-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 enhance the stability of the ASP+X percent for 

those years. In CY 2010, we concluded that charge compression was likely distorting the 

equivalent average ASP+X percent calculated 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 separately 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 inflation that has occurred since 

the overhead redistribution amount of $200 million was applied in CY 2011. Therefore, 

we proposed to apply an inflation allowance equal to the PPI for Prescription Drugs to 

the redistribution amount. The CY 2011 redistribution 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 cost 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 cost data in preparation for the CY 2012 final 

rule, holding the redistribution amount of $215 million constant but updating the analysis 
CMS-1525-FC 695 

using a full year of costs, we observed a decline 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 methodologically-derived ASP+X percent with a fixed 

redistribution amount, prompted us to reexamine this issue in order 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 redistribution data pertaining 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 fluctuation 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 final 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 overhead 
CMS-1525-FC 696 

and handling costs from packaged to separately 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 using the CY 2011 redistribution amounts for coded 

and uncoded drugs indexed by the PPI for Prescription Drugs constituted 35 percent and 

10.7 percent, respectively, of the drug handling and overhead costs for these categories. 

If we had redistributed the same amounts ($161 million of coded drug costs and $54 

million of uncoded drug costs) for the final 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 proportion 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 comment 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 the 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 payment 
CMS-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 maintains the mathematical relationship between redistributed 

packaged drug pharmacy overhead and handling cost and total drug overhead and 

handling cost, so that when a whole year of cost 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. Therefore, we believe that this approach is a small 

but important refinement in the redistribution methodology used to calculate the ASP+X 

amount and will lead to greater intra-rulemaking stability for SCOD payment rates. 

It is important to note that this methodology redistributes a fixed proportion of the 

calculated overhead attributable to coded and uncoded packaged drugs so that the percent 

of overhead will not change between 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 fraction of its total cost attributed to pharmacy 

overhead and handling, and the “mix” of products (each with an individual pharmacy 

overhead cost) prescribed by physicians and billed to Medicare varies 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 costs to total drug costs, when compared 

with the ratio from the proposed rule, which used less than a whole year of data. Table 

39 below displays our findings with regard to the percentage of ASP in comparison to the 
CMS-1525-FC 698 

cost for packaged coded drugs and biologicals 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 above and considering the data limitations 

we have previously discussed, we are finalizing 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 amount 
CMS-1525-FC 699 

finalized in CY 2011 for inflation 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 costs from uncoded packaged drugs and 

biologicals, and noted that these updated amounts 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 rule, for this CY 2012 OPPS final rule with 

comment period, we are instead holding constant 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 redistribution amount is higher 

in this final rule with comment period than it was in the proposed rule, the proportion of 

redistributed overhead cost for coded and uncoded packaged drugs remains constant 

between the proposed and final rule. Therefore, 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 within the redistribution parameters established in the CY 2010 
CMS-1525-FC 700 

OPPS/ASC final rule with comment 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 continues 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 processed 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 finalizing 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 payment for drugs and biologicals under the CY 2012 

OPPS. We believe excluding data from hospitals that participate in the 340B program 

from our ASP+X calculation, but paying those hospitals at that derived payment amount, 

would effectively redistribute payment to drugs or biologicals from payment for other 

services under the OPPS. Furthermore, we do not believe it would be appropriate to 

exclude claims from this subset of hospitals in the context of a proposed CY 2012 drug 

and biological payment policy that pays all hospitals the same rate for separately payable 

drugs and biologicals (74 FR 60517). In addition, 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 participate in the 340B program for CY 2012 because 
CMS-1525-FC 701 

commenters have generally opposed differential payment for 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 account 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’ longstanding policy under the OPPS to refrain 

from instructing hospitals on the appropriate revenue code to use to charge for specific 

services, we continue to encourage hospitals to bill all drugs and biologicals with HCPCS 

codes, regardless of whether they are separately payable or packaged, and to ensure that 

drug costs are completely reported, using appropriate revenue codes. We also note that 

we make packaging determinations for drugs 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 separate payment for the items and services. 

We also note that we continue to pursue 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 data, we have previously proposed multiple 

mechanisms to improve the cost data available to us, but have not implemented those 

proposals due to hospital concerns about the administrative burden. We continue to be 

interested in developing mechanisms that improve the cost data available to us while 
CMS-1525-FC 702 

minimizing, to the extent possible, the administrative burden on hospitals. For the past 

3 years, we have proposed an internal adjustment to redistribute an amount from 

packaged coded and uncoded drugs and biologicals to separately payable drugs and 

biologicals because the results of our standard drug payment methodology are unlikely to 

accurately reflect the full cost of acquisition 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 could 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 reporting 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 cost as determined by the Secretary and 

subject to any adjustment for overhead costs. For CYs 2006 and 2007, we used mean 
CMS-1525-FC 703 

unit cost data from hospital claims to determine each radiopharmaceutical’s packaging 

status and implemented a temporary policy to pay for separately payable 

radiopharmaceuticals based on the hospital’s charge for each radiopharmaceutical 

adjusted to cost using the hospital’s overall CCR. The methodology of providing 

separate radiopharmaceutical payment based 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 provide prospective payment for therapeutic 

radiopharmaceuticals (defined as those Level II HCPCS codes 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, 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(a) of the Medicare, Medicaid, and SCHIP Extension 

Act of 2007 (Pub. L. 110–173), to further extend 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 pay 
CMS-1525-FC 704 

hospitals for therapeutic radiopharmaceuticals at charges adjusted 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 allowed manufacturers to submit the ASP data in a 

patient-specific dose or patient-ready form in order to properly calculate the ASP amount 

for a given HCPCS code. This resulted in payment for nonpass-through separately paid 

therapeutic radiopharmaceuticals at ASP+4 percent 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 therapeutic radiopharmaceuticals under the ASP 

methodology adopted for separately payable drugs and biologicals, 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 radiopharmaceuticals continues to be appropriate for 

nonpass-through separately payable therapeutic radiopharmaceuticals in CY 2012. 

Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42263), we proposed to 
CMS-1525-FC 705 

continue to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals 

under the ASP+X payment level established using the proposed pharmacy overhead 

adjustment based on a redistribution methodology to set payment for separately payable 

drugs and biologicals (proposed at ASP+4 percent, 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 discussion of how a “patient ready” dose is 

defined, we refer readers to the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60520 through 60521). We also 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, according to our usual process for updating the 

payment rates for separately payable drugs and biologicals, on a quarterly basis if 

updated ASP information is available. 

The proposed CY 2012 payment rates for nonpass-through separately payable 

therapeutic radiopharmaceuticals were included in Addenda A and B to the proposed rule 

(which is referenced in section XVII. of the proposed rule and available via the Internet). 

Comment: A large number of commenters from consumers and disease-focused 

advocacy groups submitted comments regarding CMS’ payment for BEXXAR® 

(Tositumomab and Iodine I 131 Tositumomab). 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® available. Commenters also stated that 
CMS-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 BEXXAR®. A few commenters 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 BEXXAR® 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 evidence to support the commenters’ assertion 

that OPPS payment for BEXXAR® is unusually low. 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 amount that Medicare has proposed to pay 

for CY 2012 is $33,982. We note that we pay for 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 prospective payments such as chemotherapy administration codes. 
CMS-1525-FC 707 

In analyzing the elements of the treatment regimen described by commenters, 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) radiopharmaceutical is inappropriate. Although we 

acknowledge that certain components of BEXXAR® 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 characterized 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 research are mistaken; the Medicare 

program generally, and the OPPS in particular, does not provide stipends to cancer 

researchers, nor does it directly 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 department. Further, CMS has not made its 

proposed payment for BEXXAR® to save the 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 manufacturers and costs reported to CMS by 

hospitals. Year-to-year fluctuations in payment for individual items and treatments are 
CMS-1525-FC 708 

often the result of fluctuations in the submitted cost 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 commenters’ concern regarding the high cost of 

radioimmunotherapy services. We note that the national unadjusted 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 commenters’ concerns about the growth in 

health costs, CMS does not have the authority to directly negotiate with drug 

manufacturers on behalf of Medicare 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 radioimmunotherapy regimen and billed as part 

of HCPCS code G3001 (Administration and 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 National Drug Code (NDC), it should be 

recognized as a drug and, therefore, be paid 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 regimen (the CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68658), the CY 2008 OPPS final rule with comment period 
CMS-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 period (68 FR 63443)). We do not make 

separate payment for supplies used in services provided under the OPPS. Payments for 

necessary supplies are packaged into payments 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 currently described by HCPCS code G3001, which 

includes tositumomab as a supply. Therefore, 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 supported CMS’ proposal to continue to 

pay for separately payable therapeutic radiopharmaceuticals under the ASP+X payment 

level established using the proposed pharmacy overhead adjustment based on a 

redistribution methodology to set payment for 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 payment 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 adjusted to cost when ASP data are unavailable 

for nonpass-through separately payable therapeutic radiopharmaceuticals. Some 

commenters also recommended that CMS provide cost-based payment to hospitals when 

ASP is not available. A few commenters further noted that CMS should require all 

manufacturers of therapeutic radiopharmaceuticals to submit ASP data for all therapeutic 

radiopharmaceuticals currently paid under the OPPS. 

Response: We appreciate the commenters’ support. We continue to believe that 

providing payment for nonpass-through separately 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 collected 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 matter 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 average 
CMS-1525-FC 711 

hospital acquisition and associated handling costs of nonpass-through separately payable 

therapeutic radiopharmaceuticals. As we stated 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 using 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 believe that WAC or AWP is not an appropriate 

proxy to provide OPPS payment for average therapeutic radiopharmaceutical acquisition 

cost and associated handling costs when manufacturers are not required to submit ASP 

data. 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 comment period, we continue to believe that 

payment on a claim-specific basis is not consistent with the payment of items and 

services in a prospective payment system under the OPPS and may also lead to extremely 

high or low payments to hospitals for radiopharmaceuticals, even when those products 

would be expected to have relatively predictable and consistent acquisition and handling 

costs across individual clinical cases and hospitals. For CY 2012, Medicare will pay for 

only a few outpatient services at reasonable cost. These include, but are not limited to, 

corneal tissue acquisition and influenza vaccines. 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 prospective payment rate for them may result 
CMS-1525-FC 712 

in payment that is so deficient that hospitals would not be able to provide the services and 

the general public could be denied the benefits. In particular, it is not 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 radiopharmaceuticals are not hugely unpredictable. 

Therefore, we do not believe that therapeutic radiopharmaceuticals should be paid in the 

same manner as the few outpatient services paid at reasonable cost. We continue to 

believe that when ASP data are unavailable for therapeutic radiopharmaceuticals, 

payment based upon mean unit cost is an appropriate proxy for hospitals’ acquisition and 

handling data. 

We disagree with the commenters who suggested that CMS require all 

manufacturers of therapeutic radiopharmaceuticals to submit ASP data for all therapeutic 

radiopharmaceuticals currently paid under the OPPS. We continue to believe that 

requiring ASP data for all therapeutic radiopharmaceuticals currently paid under the 

OPPS would potentially be burdensome for manufacturers. Moreover, as we stated in the 

CY 2011 OPPS/ASC final rule with comment 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 significant in many cases, given the variety 

of manufacturing processes and the frequent need for patient specific pre-processing. 

Therefore, due to the fact that the added administrative burden of direct reporting 

outweighs the expected benefits, and given the relative accuracy of hospital claims data 

regarding such drugs, payment based on mean unit cost from historical hospital claims 
CMS-1525-FC 713 

data offers the best proxy for average hospital acquisition cost and associated handling 

costs for a radiopharmaceutical in many situations. We continue to believe that we 

should allow, but not require, manufacturers to submit ASP information for therapeutic 

radiopharmaceuticals. If ASP information 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 while it supported paying separately 

payable therapeutic radiopharmaceuticals under the ASP+X payment methodology 

established in the CY 2012 proposed rule, it believed that payment for 

radiopharmaceuticals should be made at a higher level than other drugs 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 payment 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 acquisition and pharmacy overhead and handling 

costs for separately payable therapeutic radiopharmaceuticals, regardless of the amount 
CMS-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 period (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 applicable HCPCS code descriptor, should include the price for 

all component materials of the radiopharmaceutical as well as any additional processing, 

including radiolabeling, that is reflected in the price the manufacturer charges for the 

radiopharmaceutical, so long as the fees paid for such additional processing meet the 

“bona fide service fee” test under the regulations implementing section 1847A of the Act. 

We explicitly noted that because radiopharmaceuticals 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 prices used to calculate the manufacturer’s 

ASP 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 payment 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 additional 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 payment for more intensive handling costs is 

necessary. 
CMS-1525-FC 715 

After consideration of the public comments we received, we are finalizing our 

proposal, without modification, to continue to pay all nonpass-through, separately 

payable therapeutic radiopharmaceuticals under the ASP+X payment level established 

using the pharmacy overhead adjustment based on a redistribution methodology to set 

payment for separately payable drugs and biologicals (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 separately 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 payable 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 rates 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 section 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-through separately payable drugs and biologicals under 

the OPPS and continued paying an updated furnishing fee. That is, for CY 2011, we 

provided payment for blood clotting factors under the OPPS at ASP+5 percent, plus an 

additional payment for the furnishing fee. We note that when blood clotting factors are 
CMS-1525-FC 716 

provided in physicians’ offices under Medicare Part B and in other Medicare settings, a 

furnishing fee is also applied to the payment. 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 other nonpass-through separately payable drugs 

and biologicals, and to continue our policy for payment of the furnishing fee using an 

updated amount. Our rationale for this proposed 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 comment period (72 FR 66765). The proposed 

furnishing fee update was based on the percentage increase in the Consumer Price Index 

(CPI) for medical care for the 12-month period ending with June of the previous year. 

Because the Bureau of Labor Statistics releases the applicable CPI data after the MPFS 

and OPPS/ASC proposed rules are published, we are not able to include the actual 

updated furnishing fee in the proposed rules. Therefore, in accordance with our policy, 

as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), 

we would announce the actual figure for the percent change in the applicable CPI and the 

updated furnishing fee calculated based on that figure through applicable program 

instructions and posting on the CMS Web site at: 

http://www.cms.gov/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 that 
CMS-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 clotting factors and all 

drugs and biologicals, is inappropriate. 

Response: We appreciate the commenters’ support. We continue to believe that 

applying the furnishing fee for blood clotting 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 pay 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 packaged, which includes blood clotting factors. In 

addition, because we recognize that there is additional work involved in acquiring the 

product, that is neither acquisition cost nor pharmacy overhead, we believe that it 

continues to be appropriate to pay a furnishing 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 received, 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 the 
CMS-1525-FC 718 

OPPS and to continue paying an updated furnishing fee. We will announce the actual 

figure for the percent change in the applicable 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, Biologicals, and Radiopharmaceuticals with 

HCPCS Codes, but without OPPS Hospital Claims Data 

 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 

(Pub. L. 108-173) does not address the OPPS payment in CY 2005 and after for drugs, 

biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but that do not 

have a reference AWP or approval for payment as pass-through drugs or biologicals. 

Because there is no statutory provision that dictated payment for such drugs, biologicals, 

and radiopharmaceuticals in CY 2005, and because we had no hospital claims data to use 

in establishing a payment rate for them, we investigated several payment options for 

CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment 

period (69 FR 65797 through 65799). 

 For CYs 2005 to 2007, we implemented a policy to provide separate payment for 

new drugs, biologicals, and radiopharmaceuticals with HCPCS codes (specifically those 

new drug, biological, and radiopharmaceutical HCPCS codes in each of those calendar 

years that did not crosswalk to predecessor HCPCS codes) but which did not have 

pass-through status, at a rate that was equivalent to the payment they received in the 

physician’s office setting, established in accordance with the ASP methodology for drugs 

and biologicals, and based on charges adjusted to cost for radiopharmaceuticals. For 
CMS-1525-FC 719 

CYs 2008 and 2009, we finalized a policy to provide payment for new drugs (excluding 

contrast agents and diagnostic radiopharmaceuticals) and biologicals (excluding 

implantable biologicals for CY 2009) with HCPCS codes, but which did not have 

pass-through status and were without OPPS hospital claims data, at ASP+5 percent and 

ASP+4 percent, respectively, consistent with the final OPPS payment methodology for 

other separately payable drugs and biologicals. New therapeutic radiopharmaceuticals 

were paid at charges adjusted to cost based on the statutory requirement for CY 2008 and 

CY 2009 and payment for new diagnostic radiopharmaceuticals was packaged in both 

years. 

 For CY 2010, we continued to provide payment for new drugs (excluding contrast 

agents) and nonimplantable biologicals with HCPCS codes that do not have pass-through 

status and are without OPPS hospital claims data at ASP+4 percent, consistent with the 

CY 2010 payment methodology for other separately payable nonpass-through drugs and 

nonimplantable biologicals. We also finalized a policy to extend the CY 2009 payment 

methodology to new therapeutic radiopharmaceutical HCPCS codes, consistent with our 

final policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60581 

through 60526), providing separate payment for therapeutic radiopharmaceuticals that do 

not crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and are 

without OPPS hospital claims data at ASP+4 percent. This policy was continued in the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 71970 through 71973), 

paying for new drugs, nonimplantable biologicals, and radiopharmaceuticals that do not 
CMS-1525-FC 720 

crosswalk to CY 2010 HCPCS codes, do not have pass-through status, 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 for new drugs (excluding contrast agents and 

diagnostic radiopharmaceuticals), nonimplantable biologicals, and therapeutic 

radiopharmaceuticals that have HCPCS codes that do not crosswalk to CY 2011 HCPCS 

codes, do not have pass-through status, and are 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, consistent with the proposed CY 2012 payment 

methodology for other separately payable nonpass-through drugs, nonimplantable 

biologicals, and therapeutic radiopharmaceuticals. We believed this proposed policy 

would ensure that new nonpass-through drugs, nonimplantable biologicals and 

therapeutic radiopharmaceuticals would be treated like other drugs, nonimplantable 

biologicals, and therapeutic radiopharmaceuticals under the OPPS, unless they are 

granted pass-through status. Only pass-through drugs, nonimplantable biologicals, or 

therapeutic radiopharmaceuticals would receive a different payment for CY 2012, which 

would be generally equivalent to the payment 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 (those new CY 2012 diagnostic 
CMS-1525-FC 721 

radiopharmaceuticals, contrast agents, and implantable biological HCPCS codes that do 

not crosswalk to predecessor HCPCS codes). This is consistent with the proposed policy 

packaging all existing nonpass-through diagnostic radiopharmaceuticals, 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 policy we implemented beginning in CY 2005 of 

using the WAC for the product to establish the initial payment rate for new 

nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS 

claims data. However, we noted that if the WAC is also unavailable, we would make 

payment at 95 percent of the product’s most recent AWP. We also proposed to assign 

status indicator “K” (for separately paid nonpass-through drugs and nonimplantable 

biologicals, including therapeutic radiopharmaceuticals) to HCPCS codes for new drugs 

and nonimplantable biologicals without OPPS claims data and for which we have not 

granted pass-through status. With respect to new, nonpass-through drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals for which we do not 

have ASP data, we proposed that once their ASP data become available in later quarterly 

submissions, their payment rates under the OPPS would be adjusted so that the rates 

would be based on the ASP methodology and set to the finalized ASP-based amount 

(proposed for CY 2012 at ASP+4 percent) for items that have not been granted 

pass-through status. This proposed policy, which is consistent with prior years’ policies 

for these items, would ensure that new nonpass-through drugs, nonimplantable 
CMS-1525-FC 722 

biologicals, and therapeutic radiopharmaceuticals would be treated like other drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals under the OPPS, unless 

they are granted pass-through status. Only pass-through drugs, nonimplantable 

biologicals, or therapeutic radiopharmaceuticals would receive a different payment for 

CY 2012, which would be generally equivalent to the payment these drugs and 

biologicals would receive in the physician’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 radiopharmaceuticals with HCPCS codes, but which do not 

have pass-through status and are without claims data, on the WACs for these products if 

ASP data for these therapeutic radiopharmaceuticals are not available. If the WACs are 

also unavailable, we proposed to make payment for new therapeutic 

radiopharmaceuticals at 95 percent of the products’ most recent AWP because we would 

not have mean costs from hospital claims data upon which to base payment. As we 

proposed with new drugs and biologicals, we proposed to continue our policy of 

assigning status indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals 

without OPPS claims data for which we have not granted pass-through status. 

Consistent with other ASP-based payment, we proposed to announce any changes 

to the payment amounts for new drugs and biologicals in this CY 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 submissions (or more recent WACs or AWPs) indicate that 

changes to the payment rates for these drugs and biologicals are necessary. The payment 
CMS-1525-FC 723 

rates for new therapeutic radiopharmaceuticals would 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, these agents are included in Addendum 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 via the Internet on the 

CMS Web site) where they are assigned comment indicator “NI.” This comment 

indicator reflects that their interim final OPPS treatment is open to public comment in 

this CY 2012 OPPS/ASC final rule with comment period. 

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 which there are no other HCPCS codes that 

describe different doses of the same drug, but which have pricing information available 

for the ASP methodology. We note that there are currently no therapeutic 

radiopharmaceuticals in this category. In order to determine the packaging status of these 

products for CY 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 separately under the OPPS, by an 

estimated average number of units of each product that would typically be furnished to a 

patient during one day in the hospital outpatient setting. This rationale was first adopted 

in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68666 and 68667). 
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 packaging threshold 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 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 payment 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 physician’s office setting, in the absence of ASP data we 

proposed to use the WAC for the product to establish the initial payment rate. However, 

we noted that if the WAC is also unavailable, we would make payment at 95 percent of 

the most recent AWP available. 

The proposed estimated units per day and status indicators for these items are 

displayed in Table 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 HCPCS to report HCPCS code J1826 (Injection, 

interferon beta-1A-1A, 30 mcg). The commenter 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 should 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 for 
CMS-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 effective January 1, 2011, and assigned 

a status indicator of “E” under 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 recognize it. Therefore, we advise hospitals to 

contact their health insurers for further reporting 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 are updated quarterly and posted on the CMS 

OPPS website, specifically at 

https://www.cms.gov/HospitalOutpatientPPS/AU/list.asp#TopOfPage. Because 

payments for OPPS drugs are updated on a quarterly basis, hospitals are advised to refer 

to either Addendum A, which is in APC order, or Addendum B, which is in HCPCS code 

order, for the latest payment information for items and services paid under the OPPS. 

Comment: One commenter remarked that the “list of acceptable analgesics for 

long bone fractures” does not include products such as Motrin and ibuprofen. The 

commenter recommended that CMS add these 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 hospital 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 policies that pertain to a list of 

analgesics. Therefore, we believe that this comment 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 medically necessary drugs and therefore 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 most cases drugs necessary for the treatment 

of pain, including NSAIDS such as ibuprofen, do not receive separate payment under 

OPPS, their costs, as with costs associated with other supplies necessary during the visit, 

may be packaged into emergency department or clinic visit codes. 

Although we did not receive any specific public comments regarding our 

proposed payment for nonpass-through drugs, biologicals, and radiopharmaceuticals with 

HCPCS codes, but without OPPS hospital claims data, many commenters supported our 

proposal to pay for separately payable drugs at ASP+4 percent in CY 2012, and other 

commenters recommended that we pay no less than ASP+6 percent for separately 

payable drugs in CY 2012. However, these comments 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/ASC proposed rule objected to packaging 

payment for diagnostic radiopharmaceuticals and contrast agents in general, but these 

comments were not directed to new diagnostic 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 agents and diagnostic radiopharmaceuticals), 

nonimplantable biologicals, and therapeutic radiopharmaceuticals with HCPCS codes 

that do not crosswalk to CY 2011 HCPCS codes, but which do not have pass-through 

status and for which we do not have OPPS hospital 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 drugs, 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 biologicals with HCPCS codes 

but for which we do not have OPPS claims data 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 claims 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 based on the ASP methodology 

and set to the finalized ASP amount of ASP+4 percent. This 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 which we do not have claims data, on the WACs for these 

products if ASP data for these therapeutic radiopharmaceuticals are not available. If the 

WACs are also unavailable, we proposed to make payment for a new therapeutic 

radiopharmaceutical at 95 percent of the product’s most recent AWP because we would 

not have mean costs from hospital claims data 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 therapeutic radiopharmaceuticals without OPPS 

claims data for which we have not granted pass-through status. 

We did not receive any public comments 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 therapeutic radiopharmaceuticals with HCPCS codes 

but without pass-through status and for which we do not have claims 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 assigning status indicator 

“K” to HCPCS codes for new therapeutic radiopharmaceuticals without claims data in 

CY 2012 that do not have pass-through status. 

Consistent with other ASP-based payments, for CY 2012, we proposed to 

announce any changes to the payment amounts for new drugs and biologicals in the 

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 submissions (or more recent WACs 

or AWPs) indicate that changes to the payment rates for these drugs and biologicals are 

necessary. The payment rates for new therapeutic radiopharmaceuticals 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 comment on this CY 2012 OPPS/ASC final rule 

with comment period. 
CMS-1525-FC 730 

We did not receive any public comments on our proposal to announce, via the 

CMS Web site, any changes to the OPPS payment amounts for new drugs and biologicals 

on a quarterly basis. Therefore, for the reasons described in the CY 2012 proposed rule, 

we are finalizing our proposal and will update payment rates for new drugs, biologicals, 

and therapeutic radiopharmaceuticals, as necessary, 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 which 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 methodology. In the CY 2012 OPPS/ASC proposed 

rule (76 FR 42265), we noted that there are currently 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 biologicals paid separately under the OPPS, by an estimated 

average number of units of each product that would typically be furnished to a patient 

during one day in the hospital outpatient setting. 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 threshold 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 exception of diagnostic 
CMS-1525-FC 731 

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 

payment 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 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 initial 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 the resulting packaging status of these drugs 

and biologicals. However, upon receiving updated CY 2011 claims data for HCPCS 

codes J0364 (Injection, apomorphine hydrochloride, 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 determined 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, with 
CMS-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 changed from $80 in the proposed rule to $75 in 

this final rule with comment period. As a result of this change, which occurred because 

of our use of the most recent forecast of the quarterly PPI index levels in our update of 

the CY 2012 packaging threshold for the final 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 and biologicals (other than diagnostic 

radiopharmaceuticals, contrast agents and implantable biologicals) with estimated per day 

costs over $75 for CY 2012. For those drugs 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 AWP if WAC is not available. The final 

estimated units per day and status indicators 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 1222 
CMS-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 concentrate, 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 information for the ASP methodology for the CY 2012 

OPPS/ASC proposed rule. In CY 2009, for similar 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 change the status indicator for drugs and 

biologicals previously assigned a payable status indicator to status indicator “E” (Not 

paid by Medicare when submitted on outpatient claims (any outpatient bill type)) 

whenever we lacked claims data and pricing information and were unable to determine 

the per day cost. In addition, we noted that we would provide separate payment for these 

drugs and biologicals if pricing information reflecting recent sales becomes available 

mid-year in CY 2010 for the ASP methodology. If pricing information became available, 

we would assign the products status indicator “K” and pay for them separately for the 

remainder of CY 2010. In the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71973), for CY 2011, we continued our CY 2010 policy to assign status indicator 
CMS-1525-FC 734 

“E” to drugs and biologicals that lacked CY 2009 claims data and pricing information for 

the ASP methodology. We also continued our policy 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 that 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 the ASP methodology that are assigned status 

indicator “E” on this basis at the time of the 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 products status indicator “K” and pay for them separately for 

the remainder of CY 2012. We did not receive 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 Addendum 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 via 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 J2265 
CMS-1525-FC 735 

(Injection, minocycline hydrochloride, 1 mg), Q4123 (Alloskin RT), Q4125 (Arthroflex), 

Q4126 (Memoderm), Q4127 (Talymed), Q4128 (Flexhd or alopatch hd), and Q4129 

(Unite biomatrix) as lacking CY 2010 claims data and any other pricing information for 

the ASP methodology. Therefore, in addition 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 status indicator “E” to 

HCPCS codes J2265, Q4123, Q4125, Q4126, Q4127, Q4128, and Q4129. We are 

finalizing our CY 2012 proposal, without modification, 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 separately for the remainder of CY 2012. 

All drugs and biologicals without CY 2010 hospital claims data and data based on 

the ASP methodology that are assigned status indicator “E” on this basis at the time of 

this final rule with comment period for CY 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 E 
CMS-1525-FC 736 

CY 2012 

HCPCS Code CY 2012 Long Descriptor CY 2012 SI 

Q4128 Flexhd or alopatch hd E 

Q4129 Unite biomatrix E 
CMS-1525-FC 737 

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

Radiopharmaceuticals, and Devices 

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional 

pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of 

devices for a given year to an “applicable percentage” (currently 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 year (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 the calendar year that the total amount of 

pass-through payments in that year would exceed the applicable percentage, 

section 1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction in the 

amount of each of the transitional pass-through payments made in that year to ensure that 

the limit is not exceeded. We make an estimate of pass-through spending to determine 

not only whether payments exceed the applicable percentage, but also to determine the 

appropriate pro rata reduction to the conversion factor for the projected level of 

pass-through spending in the following year in order to ensure that total estimated 

pass-through spending for the prospective payment year is budget neutral, as required by 

section 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. The first group of items consists of device 

categories that were recently made eligible for pass-through payment and that will 

continue to be eligible for pass-through payment in CY 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. The second group contains items 

that we know are newly eligible, or project may be newly eligible, for device 

pass-through payment in the remaining quarters of CY 2011 or beginning in CY 2012. 

Beginning in CY 2010, the pass-through evaluation process and pass-through payment 

for implantable biologicals newly approved for pass-through payment beginning on or 

after January 1, 2010, that are surgically inserted or implanted (through a surgical 

incision or a natural orifice; 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-through spending for implantable biologicals 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 sum of the CY 2012 

pass-through estimates for these two groups of device categories would equal the total 

CY 2012 pass-through spending estimate for device categories with pass-through status. 

For devices eligible for pass-through payment, section 1833(t)(6)(D)(ii) of the Act 

establishes the pass-through payment amount as the amount by which the hospital’s 
CMS-1525-FC 739 

charges for the device, adjusted to cost, exceeds the portion of the otherwise applicable 

OPPS fee schedule payment that the Secretary determines 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 payment for an identified device category 

eligible for pass-through payment an amount that reflects the portion of the APC payment 

amount that we determine is associated with the cost of the device, defined as the device 

APC offset amount, when we believe that the predecessor device costs for the device 

category newly approved for pass-through payment are already packaged into the 

existing APC structure. For each device category that becomes newly eligible for device 

pass-through payment, including implantable biologicals from CY 2010 forward, we 

estimate pass-through spending to be the difference 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 the 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 establishes the pass-through payment amount as the amount 

by which the amount authorized under section 1842(o) of the Act (or, if the drug or 

biological is covered under a competitive acquisition contract under section 1847B of the 

Act, an amount determined by the Secretary equal to the average price for the drug or 

biological for all competitive acquisition areas and year established under such section as 

calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable 
CMS-1525-FC 740 

fee schedule amount that the Secretary determines 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 otherwise 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 nonimplantable 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 discussed below. Furthermore, payment for 

certain drugs, specifically diagnostic radiopharmaceuticals, contrast agents, and 

implantable biologicals without pass-through status, will always be packaged into 

payment for the associated procedures because these products will never be separately 

paid. However, all pass-through diagnostic radiopharmaceuticals and contrast agents 

with pass-through status approved prior to CY 2012 would be paid at ASP+6 percent or 

the Part B drug CAP rate, if applicable, like other pass-through drugs and biologicals. 

Therefore, our estimate of pass-through payment 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 biologicals 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 determine if the cost of certain “policypackaged” drugs, including diagnostic radiopharmaceuticals and contrast agents, are 

already packaged into the existing APC structure. If we determine that a 

“policy-packaged” drug approved for pass-through payment resembles predecessor 

diagnostic radiopharmaceuticals or contrast agents already included in the costs of the 

APCs that would be associated with the drug receiving pass-through payment, in the 

proposed rule, we proposed to offset the amount 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 radiopharmaceutical 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 radiopharmaceutical 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 readers to the Medicare Learning Network (MLN) Matters 

Special Edition article SE0833 for more information, available via the CMS Web site at: 

http://www.cms.gov/MLNMattersArticles/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 years, for the proposed rule and 
CMS-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 devices, the first group of drugs and 

nonimplantable biologicals requiring a pass-through payment estimate consists of those 

products that were recently made eligible for pass-through payment 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 the first group of devices for pass-through 

payment estimation purposes, there was one device category eligible for pass-through 

payment for CY 2012, C1749 (Endoscope, retrograde 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 estimate 
CMS-1525-FC 743 

purposes, there currently are three device categories eligible for pass-through payment in 

CY 2012: C1749 that became effective October 1, 2010; C1830 (Powered bone marrow 

biopsy needle) that became effective October 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 expenditures related to these 3 categories 

will be approximately $47 million. 

In estimating our proposed CY 2012 pass-through spending for device categories 

in the second group, which also includes any estimate for implantable biologicals that are 

eligible for pass-through payment, we include: device categories 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 categories (including 

categories that describe implantable biologicals) that we estimate could be approved for 

pass-through status subsequent to the development of the proposed rule and before 

January 1, 2012; and contingent projections for new device categories (including 

categories that describe implantable 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 approving 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-through spending for device categories for 
CMS-1525-FC 744 

CY 2012 (spending for the first group of device 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 spending estimate for those categories in 

$47 million. There also are possible new device categories for pass-through payment 

based on current applications and future applications. 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. Employing our established methodology that the 

estimate of pass-through device spending in CY 2012 incorporates CY 2012 estimates of 

pass-through spending for known device categories 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 approved during subsequent quarters 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 categories for CY 2011 to be $57 million. 

To estimate CY 2012 proposed pass-through spending for drugs 

andnonimplantable biologicals in the first group, specifically those drugs (including 

radiopharmaceuticals and contrast agents) and nonimplantable biologicals recently made 
CMS-1525-FC 745 

eligible for pass-through payment and continuing on pass-through status for CY 2012, we 

proposed to utilize the most recent Medicare physician’s office data regarding their 

utilization, information provided in the respective pass-through applications, historical 

hospital claims data, pharmaceutical industry information, and clinical information 

regarding those drugs or nonimplantable biologicals, to project the CY 2012 OPPS 

utilization of the products. 

For the known drugs and nonimplantable biologicals (excluding diagnostic 

radiopharmaceuticals and contrast agents) that would be continuing on pass-through 

status in CY 2012, we estimated the proposed 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 drugs and nonimplantable biologicals that 

would be separately paid at ASP+4 percent, 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 (or WAC+6 percent, or 95 percent of AWP, 

if ASP or WAC information is not available) and the “policy-packaged” drug APC offset 

amount, if we have determined that the diagnostic radiopharmaceutical or contrast agent 

approved for pass-through payment resembles predecessor diagnostic 

radiopharmaceuticals or contrast agents already included in the costs of the APCs that 

would be associated with the drug receiving pass-through payment. For the CY 2012 
CMS-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 comments 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 that 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 group (that is, drugs and nonimplantable biologicals that we 

knew at the time of development of the proposed rule would be newly eligible for 

pass-through payment in CY 2012, additional drugs and nonimplantable biologicals that 

we estimate could be approved for pass-through status subsequent to the development of 

this proposed rule and before January 1, 2012, and projections for new drugs and 

nonimplantable biologicals that could be initially eligible for pass-through payment in the 

second through fourth quarters of CY 2012), we proposed to use utilization estimates 

from pass-through applicants, pharmaceutical industry data, clinical information, recent 

trends in the per unit ASPs of hospital outpatient drugs, and projected annual changes in 

service volume and intensity as our basis for making the 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-through payments for this second group of 
CMS-1525-FC 747 

drugs, we calculated a proposed spending estimate for this second group of drugs and 

nonimplantable biologicals to be approximately $13.8 million. 

We did not receive any public comments on our proposed policy and, therefore, 

are finalizing our proposed methodology for estimating CY 2012 pass-through payments 

for this second group of drugs. For this final 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 proposed rule and this final rule with 

comment period, radiopharmaceuticals are considered drugs for pass-through purposes. 

Therefore, we included radiopharmaceuticals 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 biologicals (spending for the first group of drugs 

and nonimplantable biologicals ($5.7 million) plus spending for the second group of 

drugs and nonimplantable biologicals ($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 with comment period, radiopharmaceuticals are 

considered drugs for pass-through purposes. Therefore, we included 

radiopharmaceuticals in our final CY 2012 pass-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 methodology described above in this section, 

for this final rule with comment period, we estimate that total pass-through spending for 

the device categories and the drugs and nonimplantable biologicals that are continuing to 

receive pass-through payment in CY 2012 and those device categories, drugs, and 

nonimplantable biologicals that first become 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 projected 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 Hospital Outpatient Visits 

A. Background

 Currently, hospitals report HCPCS visit codes to describe three types of OPPS 

services: clinic visits; emergency department visits; and critical care services. For OPPS 

purposes, we recognize clinic visit codes as those codes defined in the CPT code book to 

report evaluation and management (E/M) services 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 services 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 HCPCS codes that apply to Type B emergency 

departments. For OPPS purposes, we recognize critical care codes as those CPT codes 

used by hospitals to report critical care services that involve the “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 physician and/or hospital staff engaged in active 

face-to-face critical care of a critically ill or critically injured patient. Under the OPPS, 

we also recognize HCPCS code G0390 (Trauma response team associated with hospital 

critical care service) for the reporting of a trauma response in association with critical 

care services. 

 As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42268), we are 

continuing to recognize these CPT and HCPCS codes describing clinic visits, Type A and 
CMS-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 the evaluation and management of a 

patient 

(Level 1) 
CMS-1525-FC 751 

99282 

Emergency department visit for the evaluation and management of a 

patient 

(Level 2) 

99283 

Emergency department visit for the evaluation and management of a 

patient 

(Level 3) 

99284 

Emergency department visit for the evaluation and management of a 

patient 

(Level 4) 

99285 

Emergency department visit for the evaluation and management of a 

patient 

(Level 5) 

G0380 Type B emergency department visit (Level 1) 

G0381 Type B emergency department visit (Level 2) 

G0382 Type B emergency department visit (Level 3) 

G0383 Type B emergency department visit (Level 4) 

G0384 Type B emergency department visit (Level 5) 

Critical Care Services HCPCS Codes 

99291 

Critical care, evaluation and management of the critically ill or 

critically injured patient; first 30-74 minutes 

99292 

Critical care, evaluation and management of the critically ill or 

critically injured patient; each additional 30 minutes 

G0390 Trauma response associated with hospital critical care service 

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 changes in patterns of 

utilization or cost, it bring those issues before 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 adopting 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 meeting, the APC Panel recommended that the work of 

the Visits and Observation Subcommittee 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 different CPT codes for clinic visits based 

on whether the patient being treated is a new patient 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 patient has been registered as an inpatient 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 prior 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 within the 3 years prior to a visit would be 

considered to be a new patient for that visit. 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 proposed rule (76 FR 42269) that we 

continue to believe that defining new or established patient 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 burden 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 to 
CMS-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 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 clinic 

visit APCs (0604 through 0608), we proposed to continue to utilize our methodology that 

excludes those claims for visits that are eligible for payment through the extended 

assessment and management composite APC 8002 (Level I Extended Assessment and 

Management Composite). We stated in the proposed 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 that CMS remove the distinction 

between new and established patient 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. According to commenters, facilities must expend the same level of 

resources to evaluate, manage, and treat the patient’s current condition, regardless of 

whether the patient was registered as an inpatient or an outpatient in the hospital within 

the past 3 years. In addition, some commenters stated that there are significant 

operational issues involved 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 visit, but argued that any 

differences in costs that are evident in claims data for new patient visits versus 

established patient visits would be the result of hospitals’ erroneous reporting of these 
CMS-1525-FC 754 

codes, rather than any real difference in the level of resources expended treating a new 

versus an established patient. The commenters suggested that CMS recognize only the 

established patient visit codes and calculate payment rates for those codes by blending 

median costs for both the new and established 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 patient 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 continue 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 codes 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 using over 5.1 million single claims from 
CMS-1525-FC 755 

CY 2010, is approximately $75. We believe this difference in median costs warrants 

continued assignment of these CPT codes 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 that the differences in costs for new versus 

established patient visits are flawed or the result of hospitals’ erroneous reporting of these 

codes. We expect hospitals to report all HCPCS codes in accordance with correct coding 

principles, CPT code descriptions, and relevant CMS guidance, which, in this case, 

specifies that the meanings of “new” and “established” patients as included in the clinic 

visit CPT code descriptors pertain 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’ request that the distinction 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 that care of a patient who was not treated at 
CMS-1525-FC 756 

the hospital for several years prior to a visit could require significantly greater hospital 

resources than care for a patient who was recently treated at the hospital. 

Comment: One commenter recommended that CMS reassign HCPCS code 

G0379 (Direct admission of patient for hospital 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 similarity in both median cost 

and clinical characteristics to CPT code 99285 (Emergency Department Visit Level 5). 

The commenter stated that CMS should create 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 (Emergency Department Visit Level 4), 

99285 (Emergency Department Visit Level 5), 99291 (Critical Care First Hour), and 

G0384 (Level 5 Hospital Type B ED Visit) because of the clinical similarity with the 

higher evaluation and management level codes. According to the commenter, the median 

costs for CPT codes 99205 (Office/Outpatient Visit New Level 5) and 99215 

(Office/Outpatient Visit Established Level 5) are significantly lower than the median cost 

for HCPCS code G0379 and, therefore, would 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 code 
CMS-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 assessment of patient directly admitted to 

observation with a diagnosis other than congestive 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 describe services previously 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 received, we are finalizing our 

CY 2012 proposal, without modification, to continue to define new or established patient 

status for the purpose of reporting the clinic visit CPT codes, on the basis of whether or 

not the patient has been registered as an inpatient or outpatient 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 costs 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 for payment through the extended 
CMS-1525-FC 758 

assessment and management composite APC 8002 (Level I Extended Assessment and 

Management Composite). We continue to believe 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 the OPPS—Type A emergency departments and 

Type B emergency departments. As described in greater detail below, by providing 

payment for two types of emergency departments, we recognize, for OPPS payment 

purposes, both the CPT definition of an emergency department, which requires the 

facility to be available 24 hours a day, and the requirements for emergency departments 

specified in the provisions of the Emergency Medical Treatment and Labor Act 

(EMTALA) (Pub. L. 99-272), which do not stipulate 24-hour availability 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 emergency department to distinguish it from a 

Type B emergency department. A Type A emergency department must be available to 

provide services 24 hours a day, 7 days a week, and meet one or both of the following 

requirements related to the EMTALA definition of a dedicated emergency department 

specified at 42 CFR 489.24(b), specifically: (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, advertising, 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 visit 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 Emergency 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 department 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 departments incur EMTALA obligations with 

respect to an individual 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 clinics or Type A emergency departments, in the 

CY 2007 OPPS/ASC final rule with comment period (71 FR 68132), we finalized a set of 

five HCPCS G-codes for use by hospitals to report visits to all entities that meet the 

definition of a dedicated emergency department 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 period 
CMS-1525-FC 760 

(71 FR 68132), we explained that these new HCPCS G-codes would serve as a vehicle to 

capture median cost and resource differences among visits provided by Type A 

emergency departments, Type B emergency departments, and clinics. We stated that the 

reporting of specific HCPCS G-codes for emergency department visits provided in 

Type B emergency departments would permit us to specifically collect 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 that 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 than 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 hospital resource costs for the same level of 

visits in a Type A or Type B emergency department. Therefore, for CY 2009, we 

adopted the August 2008 APC Panel recommendation to assign Levels 1 through 4 

Type B emergency department visits to their 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/ASC final rule with comment period 

(74 FR 60548 through 60551), analyses of CY 2008 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 consistent with the distributions 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 associated with Level 5 Type B emergency 

department visits compared to the HCPCS code-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 emergency 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 based on their median costs through five levels 

of APCs: APC 0626 (Level 1 Type B Emergency 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 estimated 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 median 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 through 0630), we proposed to utilize our 

methodology that excludes those claims for visits that are eligible for payment through 

the extended assessment and management composite APC 8002. We stated that we 

continue to believe that this approach will result 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 comments 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 Emergency Visits), APC 0628 (Level 3 Type B 
CMS-1525-FC 763 

Emergency Visits), APC 0629 (Level 4 Type B Emergency Visits), and APC 0630 (Level 

5 Type B Emergency Visits). We are 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 configuration pays appropriately for each level of Type B 

emergency department visits based on estimated resource costs from the most recent 

claims data. 

 We also note that, as discussed 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 emergency department visit and critical care APCs (0609 through 0617 and 

0626 through 0630), we utilized our methodology that excludes those claims for visits 

that are eligible for payment through the extended assessment and management 

composite APC 8002 (Level I Extended Assessment and Management Composite). We 

continue to believe that this approach will result in the most accurate cost estimates for 

APCs 0604 through 0608 for CY 2012. 

 Table 43 below displays the final median costs for each level of Type B 

emergency department visit APCs under the CY 2012 configuration, compared to the 

final CY 2012 median costs for each level of clinic 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 DEPARTMENT VISIT APCs, AND TYPE A 

EMERGENCY DEPARTMENT VISIT APCs 
CMS-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 AMA CPT Editorial Panel defined critical 

care CPT codes 99291 (Critical care, evaluation and management of the critically ill or 

critically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and 

management of the critically ill or critically injured patient; each additional 30 minutes 

(List separately in addition to code for primary service)) to include a wide range of 

ancillary services such as electrocardiograms, chest X-rays and pulse oximetry. As we 

have stated in manual instruction, we expect hospitals to report in accordance with CPT 

guidance unless we instruct otherwise. For critical care in particular, we instructed 

hospitals that any services that the CPT Editorial Panel indicates are included in the 

reporting of CPT code 99291 (including those services that would otherwise be reported 

by and paid to hospitals using any of the CPT codes specified by the CPT Editorial Panel) 

should not be billed separately. Instead, hospitals were instructed to report charges for 

any services provided as part of the critical care services. In establishing payment rates 

for critical care services, and other services, CMS packages the costs of certain items and 

services separately reported by HCPCS codes into payment for critical care services and 
CMS-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 hospital reporting purposes, critical care codes do 

not include the specified ancillary services. Beginning in CY 2011, hospitals that report 

in accordance with the CPT guidelines should report all of the ancillary services and their 

associated charges separately when they are provided in conjunction with critical care. 

Because the CY 2011 payment rate for critical care services is based on hospital claims 

data from CY 2009, during which time hospitals would have reported charges for any 

ancillary services provided as part of the critical care services, we stated in the CY 2011 

OPPS/ASC final rule with comment period that we believe it is inappropriate to pay 

separately in CY 2011 for the ancillary services that hospitals may now report in addition 

to critical care services (75 FR 71988). Therefore, for CY 2011, we continued to 

recognize the existing CPT codes for critical care services and established a payment rate 

based on historical data, into which the cost of the ancillary services 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 status 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 Through a Composite APC) to the ancillary 

services to indicate that payment for them is packaged into a single payment for specific 
CMS-1525-FC 766 

combinations of services and made through a separate APC payment or packaged in all 

other circumstances, in accordance with the OPPS payment status indicated for status 

indicator “Q3” in Addendum D1 to the CY 2011 OPPS/ASC final rule with comment 

period. The ancillary services that were included in the definition of critical care prior to 

CY 2011 and that will be conditionally packaged into the payment for critical care 

services when provided on the same date of service as critical care services for CY 2011 

were listed in Addendum M to that final rule with comment period. We noted in the 

CY 2011 OPPS/ASC final rule with comment period 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 for critical care services were based 

upon CY 2010 claims data, which reflect the CPT billing guidance that was in effect prior 

to CY 2011, in the CY 2012 OPPS/ASC 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 ancillary 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 the 
CMS-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 implemented to allow the identification of ancillary 

services provided to critical care patients during the same date of service as critical care 

services, but outside the critical care period, so that those services 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 methodology that includes review of multiple 

cost report revenue centers and that CMS consult with the hospital industry on the 

appropriate methodology used to calculate the 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 encounter, are included in the critical care period and, therefore, 

do not support the commenters’ recommendation that a modifier be implemented to allow 

the identification of ancillary services provided to critical care patients 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 performed 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 CPT’s definition of critical care prior to 

CY 2011, when they are reported on the same date of service as critical care services. 
CMS-1525-FC 768 

In regard to the commenter who suggested that CMS include review of multiple 

cost report revenue centers when calculating the costs of the packaged ancillary services, 

we note that the methodology the commenters recommended is consistent with the 

methodology we already have in place. As discussed in section II.A.1.c. of this final rule 

with comment period, we calculate hospital-specific overall ancillary CCRs and 

hospital-specific departmental CCRs for each hospital for which we have claims data. 

We apply the hospital-specific CCR to the hospital’s charges at the most detailed level 

possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of 

CCRs used to estimate costs from charges for each revenue code. Therefore, we base our 

cost estimation of each packaged ancillary service on the most specific cost center to 

which the revenue code reported with that service maps. We then package the cost that 

we estimate as a result of that process into the median cost calculation for critical care. 

After consideration of the public comments we received, we are finalizing our 

CY 2012 proposal, without modification, 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 ancillary 

services is intrinsically packaged. We also will 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. 

3. Visit Reporting Guidelines 

 Since April 7, 2000, we have instructed hospitals to report facility resources for 

clinic and emergency department hospital outpatient visits using the CPT E/M codes and 
CMS-1525-FC 769 

to develop internal hospital guidelines for reporting the appropriate visit level. Because a 

national set of hospital- specific codes and guidelines do not currently exist, we have 

advised hospitals that each hospital’s internal guidelines that determine the levels of 

clinic and emergency department visits to be reported should follow the intent of the CPT 

code descriptors, in that the guidelines should be designed to reasonably relate the 

intensity of hospital resources to the different levels of effort represented by the codes. 

As noted in detail in the CY 2008 OPPS/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 hospital 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 indicated that hospitals were billing consistently 

over time and in a manner that distinguished between visit levels, resulting in relatively 

normal distributions nationally for the OPPS, as well as for specific classes of hospitals. 

The results of these analyses were generally consistent with our understanding of the 

clinical and resource characteristics of different 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 point in the maturation of the OPPS, or if the 

current system where hospitals create and apply 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 creating national guidelines, this 
CMS-1525-FC 770 

complex undertaking for these important and common hospital services was proving 

more challenging than we initially anticipated 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 hospitals had worked diligently and carefully to 

develop and implement their own internal guidelines that reflected the scope and types of 

services they provided throughout the hospital 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 could apply to the reporting of visits in all 

hospitals and specialty clinics. In addition, the stable distribution of clinic and 

emergency department visits reported under the OPPS over the past several years 

indicated that hospitals, both nationally in the aggregate and grouped by specific hospital 

classes, were generally billing in an appropriate and consistent manner as we would 

expect in a system that accurately distinguished among different levels of service based 

on the associated hospital resources. 

Therefore, we did not propose to implement national visit guidelines 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 period, we again examined the distribution 

of clinic and Type A emergency department 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 that we continue to observe a normal and 

relatively stable distribution of clinic and emergency department visit levels in hospital 
CMS-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 visits, 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 aggregate, hospitals’ charges for these higher level emergency 

department visits seem to be trending upward 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 observed any shift in reporting “new” versus 

“established” patient visits after instituting the new definition of established patient in 

CY 2009, noting that CMS has 2 years of claims data since the definition change. 

According to commenters, if hospitals changed their reporting based on the new 

definition, the data should reflect a shift toward the higher level visits, because more 

patients would have been “established” patients under the new definition. The 

commenters stated that if CMS has not noticed this shift in the proportion of new and 

established patient visits beginning with CY 2009 claims, it suggested that hospitals may 

not have begun applying the revised definition and a shift in level 4 and 5 visits may have 

occurred more in response to the increasing trend of comorbid conditions in emergency 

department visits than from hospitals’ response to CMS’ visit guidelines. The 
CMS-1525-FC 772 

commenters suggested that CMS evaluate secondary diagnoses on Level 4 and Level 5 

Type A emergency department visit claims. 

Another commenter stated that this trend is consistent with its observations and 

listed the following as possible reasons for the higher Medicare acuity: some patients 

with low acuity problems are seeking care elsewhere because of long emergency 

department wait times and higher copayments; increasing options for faster, less 

expensive care for lower acuity problems (retail 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 for the above reasons 

and then presenting to the emergency department in a relatively sicker condition. 

Response: We appreciate the commenters’ discussion of possible contributing 

factors to the shift toward increasing numbers 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 over 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 information about claims volume for particular 

HCPCS codes for a given calendar year, including new and established patient visits, is 

publicly available in the median cost file made 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 appropriate and consistent 

manner that distinguishes among different levels of visits based on their required hospital 

resources. 
CMS-1525-FC 773 

Comment: Some commenters supported CMS’ proposal to continue to recognize 

hospital-specific visit guidelines rather than implement national guidelines because 

hospitals have grown accustomed to using their 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 guidelines in place by different payers. The 

commenters recommended that, in the absence of national guidelines for hospital visit 

reporting, CMS support a request to the American Medical Association CPT Editorial 

Panel to create unique CPT codes for hospital reporting of emergency department and 

clinic visits based on internally developed guidelines. In addition, some commenters 

expressed their appreciation for CMS’ encouragement of its contractors to use a 

hospital’s own guidelines when auditing and 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 desirable to many hospitals to have national 

guidelines. However, we also understand that it would be disruptive and administratively 

burdensome to other hospitals that have successfully adopted internal guidelines to 

implement any new set of national guidelines 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 visit 
CMS-1525-FC 774 

reporting at varying levels of disaggregation below the national level to ensure that 

hospitals continue to bill appropriately 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 questions related to the creation of internal 

guidelines to contact their servicing fiscal intermediary or MAC. Also, as originally 

noted in detail in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66648 

through 66649), we continue to expect that hospitals will not purposely change their visit 

guidelines or otherwise upcode clinic and emergency department visits for purposes of 

extended assessment and management composite APC payment. 

We continue to encourage fiscal intermediaries 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 the past (75 FR 71990), 

if the AMA were to create facility-specific CPT codes for reporting visits provided in 

HOPDs [based on internally developed guidelines], we would consider such codes for 

OPPS use. 

After consideration of the public comments we received, we are continuing to 

encourage hospitals to use their own internal guidelines to determine the appropriate 

reporting of different levels of clinic and emergency department visits. We note that it 

remains our goal to ensure that OPPS national or hospital-specific visit guidelines 

continue to facilitate consistent and accurate reporting of hospital outpatient visits in a 
CMS-1525-FC 775 

manner that is resource-based and supportive of appropriate OPPS payments for the 

efficient and effective provision of visits in hospital outpatient settings. 
CMS-1525-FC 776 

VIII. Payment for Partial Hospitalization Services 

A. Background

 Partial hospitalization is an intensive outpatient program of psychiatric services 

provided to patients as an alternative to inpatient psychiatric care for individuals who 

have an acute mental illness. Sections 1861(ff)(1) and (ff)(2) of the Act specify the items 

and services that are defined as partial hospitalization services and some conditions under 

which Medicare payment for the items and services 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 center (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 amended the description of a PHP in our 

regulations to specify that the program must be a distinct and organized intensive 

ambulatory treatment program offering less than 24-hour daily care “other than in an 

individual’s home or in an inpatient or residential setting.” In addition, in accordance 

with section 1301(a) of HCERA 2010, we revised the definition of a CMHC in the 

regulations to conform to the revised definition now set forth at section 1861(ff)(3)(B) of 

the Act. We discussed our finalized policies for these two provisions of HCERA 2010 

under section X.C. of the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71990). 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 this provision specify, at 42 CFR 419.21, that 
CMS-1525-FC 777 

payments under the OPPS will be made for partial hospitalization services furnished by 

CMHCs as well as those services furnished 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 services (and any groups of such services 

described in subparagraph (B)) based on median (or, at the election of the Secretary, 

mean) hospital costs” using data on claims from 1996 and data from the most recent 

available cost reports. In pertinent part, subparagraph (B) provides that the Secretary 

may establish groups of covered OPD services, within a classification system developed 

by the Secretary for covered OPD services, so that services classified within each group 

are comparable clinically and with respect to the use of resources. In accordance with 

these provisions, CMS developed the APCs. Section 1833(t)(9)(A) of the Act requires 

the Secretary to “review not less often than annually and revise the groups, the relative 

payment weights, and the wage and other adjustments described in paragraph (2) to take 

into account changes in medical practice, changes in technology, the addition of new 

services, new cost data, and other relevant information and factors.” Because a day of 

care is the unit that defines the structure and scheduling of partial hospitalization services, 

we established a per diem payment methodology for the PHP APCs, effective for services 

furnished on or after August 1, 2000 (65 FR 18452 through 18455). Under this 

methodology, the median per diem costs are used to calculate the relative payment 

weights for PHP APCs. 

 From CY 2003 through CY 2006, the median per diem cost for CMHCs 

fluctuated significantly from year to year, while the median per diem cost for 
CMS-1525-FC 778 

hospital-based PHPs remained relatively constant. We were concerned that CMHCs may 

have increased and decreased their charges in response to Medicare payment policies. 

Therefore, we began efforts to strengthen the PHP benefit through extensive data analysis 

and policy and payment changes in the CY 2008 update (72 FR 66670 through 66676). 

We made two refinements to the methodology for computing the PHP median: the first 

remapped 10 revenue codes that are common among hospital-based PHP claims to the 

most appropriate cost centers; and the second refined our methodology for computing the 

PHP median per diem costs by computing a separate 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 comment period (72 FR 66671 through 66676). 

In CY 2009, we implemented several regulatory, policy, and payment changes, 

including a two-tiered payment approach for PHP services under which we paid one 

amount for days with 3 services (APC 0172 (Level I Partial Hospitalization)) and a 

higher amount for days with 4 or more services (APC 0173 (Level II Partial 

Hospitalization)). We refer readers to section X.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, for CY 2009, we finalized our policy to deny 

payment for any PHP claims for days when fewer than 3 units of therapeutic services are 

provided. 

Furthermore, for CY 2009, we revised the regulations at 42 CFR 410.43 to codify 

existing basic PHP patient eligibility criteria and to add a reference to current physician 

certification requirements at 42 CFR 424.24 to conform our regulations to our 
CMS-1525-FC 779 

longstanding policy (73 FR 68694 through 68695). These changes have helped to 

strengthen the PHP benefit. We also revised the partial hospitalization benefit to include 

several coding updates. We refer readers to section X.C.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 the two-tiered payment approach for PHP services and 

used only hospital-based PHP data in computing the per diem payment rates. We used 

only hospital-based PHP data because we were concerned about further reducing both 

PHP APC per diem payment rates without knowing the impact of the policy and payment 

changes we made in CY 2009. Because of the 2-year lag between data collection and 

rulemaking, the changes we made in CY 2009 were reflected for the first time in the 

claims data that we used to determine payment rates for the CY 2011 rulemaking. 

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 two for hospital-based PHPs (for Level I and Level II 

services). We proposed that CMHC APC rates would be based only on CMHC data and 

hospital-based PHP APC rates would be based only on hospital-based PHP data (75 FR 

46300). As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) and 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 hospital-based PHP providers, in part because 
CMS-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 costs. We were concerned that 

paying hospital-based PHP programs at a lower rate than their cost structure reflects 

could lead to closures and possible access problems for hospital-based programs for 

Medicare beneficiaries. Creating the four payment rates (two for CMHCs and two for 

hospital-based PHPs) supported continued access to the PHP benefit, while also 

providing appropriate payment based on the unique cost structures of CMHCs and 

hospital-based PHPs. In addition, separation of cost data by provider type was supported 

by several hospital-based PHP commenters who responded to the CY 2011 OPPS/ASC 

proposed rule (75 FR 71992). 

For CY 2011, we instituted a 2-year transition period for 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 allowing providers time to adjust their business 

operations and protect access to care for beneficiaries. We also stated that we would 

review and analyze the data during the CY 2012 rulemaking cycle and may, based on 
CMS-1525-FC 781 

these analyses, further refine the payment mechanism. We refer readers to section X.B. 

of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994) 

for a full discussion of these four payment rates. 

 After publication of the CY 2011 OPPS/ASC final rule with comment period, a 

CMHC and one of its patients filed an application for a preliminary injunction, 

challenging the OPPS 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 for 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 derived solely from hospitals. As discussed 

above, section 1833(t)(2)(C) of the Act requires CMS to “establish relative payment 

weights for covered OPD services (and any groups of such services . . .) . . . based on . . . 

hospital costs.” Numerous courts have held that “based on” does not mean “based 

exclusively on.” Thus, on July 25, 2011, the district court dismissed the plaintiffs’ 

complaint and dismissed the plaintiffs’ application for preliminary injunction. The Court 

found that “the Secretary has exercised her statutory authority and 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 data derived solely from CMHCs and the 

relative payment weights for hospital-based PHP services based exclusively on hospital 

cost data. The statute is reasonably interpreted to allow the 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 hospital-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 covered OPD services (and any groups of such 

services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, 

subparagraph (B) provides that “the Secretary may establish groups of covered OPD 

services . . . so that services classified within each group are comparable clinically and 

with respect to the use of resources.” In accordance with subparagraph (B), 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, PHP services are grouped into 

APCs. 

 Based on section 1833(t)(2)(C) of the Act, we believe that the word “establish” 

can be interpreted as applying to APCs at the inception of the OPPS in 2000 or whenever 

a new APC is added to the OPPS. In creating the original APC for PHP services (APC 

0033), we did “establish” the initial relative payment weight for PHP services, provided 

in hospital-based and CMHC-based settings, 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 services based exclusively on hospital costs. 

For CY 2009, we adopted a two-tiered APC methodology (in lieu of the original APC 

0033) under which CMS paid one rate for days with 3 services (APC 0172) and a 

different payment rate for days with 4 or more services (APC 0173). These two new 

APCs were established using only hospital data. For CY 2011, we added two new APCs 

(APCs 0175 and 0176) for PHP services provided by hospitals and based the relative 

payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were 

designated for PHP services provided by CMHCs and were based on a mixture of 

hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have 

consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, 

the relative payment weights for the two APCs for 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 the Act make plain that the data source for 

the relative payment weights is subject to change from one period to another. Section 

1833(t)(2)(C) of the Act provides that, in establishing the relative payment weights, “the 
CMS-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 used 1996 data (plus 1997 data) in determining 

only the original relative payment weights for 2000; in the ensuing calendar year updates, 

we continually used more recent cost report data. 

 Moreover, section 1833(t)(9)(A) of the Act requires the Secretary to “review not 

less often than annually and revise the groups, the relative payment weights, and the 

wage and other adjustments described in paragraph (2) to take into account changes in 

medical practice, changes in technology, the addition of new services, new cost data, and 

other relevant information and factors.” For purposes of the CY 2012 update, we 

exercised our authority under section 1833(t)(9)(A) of the Act to change the data source 

for the relative payment weights for PHP services 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 rule (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 proposed median per diem costs were computed 

separately for CMHCs and hospital-based PHPs, 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 PHPs, BY CATEGORY, BASED ON CY 

2010 CLAIMS DATA 

Category CMHC PHPs Hospital-Based PHPs 
CMS-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 and 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 the 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 median per diem costs for days with 4 or 

more services (Level II) were approximately $114 for CMHCs and approximately $190 

for hospital-based PHPs. The difference 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 approximately $108 for CY 2011 (using CY 2009 

data) for Level I services (days with 3 services) and from approximately $172 for 

CY 2009 to approximately $116 for CY 2011 for Level II services (days with 4 or more 

services) using only CMHC data. For the CY 2012 proposed rule, our analysis of claims 
CMS-1525-FC 786 

data (using CY 2010 claims data) showed that CMHCs’ approximate median per diem 

costs continued to decrease to approximately $98 for CY 2012 for Level I services (days 

with 3 services), and to approximately $114 for 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 Department’s Center for Program Integrity 

and the Office of Inspector General, and by the U.S. Department of Justice, collectively 

(76 FR 42275). In the CY 2012 OPPS/ASC proposed 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 claims data), hospital-based PHPs’ median per 

diem costs were approximately $203 for Level 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 (using CY 2010 claims data), these numbers decreased to 

approximately $162 for Level I services (days 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 attributed this decrease in costs for 

CY 2012 to one provider whose costs inflated the CY 2011 hospital-based cost data and 

increased the CY 2011 hospital-based PHP median for Level II services by 

approximately $30. We included this provider in the CY 2011 ratesetting because this 

provider had paid claims in CY 2009. Subsequently, this provider did not bill for PHP 
CMS-1525-FC 787 

services during CY 2010 and, therefore, was 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 per diem payment rates for Level I and Level 

II services using only hospital-based PHP data. Basing payment rates specific to each 

type of provider’s own data would continue to support access to the PHP benefit, 

including a more intensive level of care, while also providing appropriate payment 

commensurate with the cost structures of CMHC PHPs and hospital-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 providers and CMHCs expressed concern 

regarding the proposed rate reductions. Several 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 benefit in both provider settings. In response 
CMS-1525-FC 788 

to hospital-based PHP providers’ concerns regarding the proposed rate reductions, we 

believe that the CY 2012 medians reflect hospital-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 services (73 FR 68689) 

and the CY 2010 median per diem costs (using 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 approximately $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 approximately $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 hospital-based cost data and increased the 

CY 2011 hospital-based PHP median 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 hospital-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 median 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 protect access to care and 

with the hope that the cost structures for both provider types would eventually become 
CMS-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 for 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 exactly clear about why the 

CMHC costs continue to decrease, we can reasonably 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 mitigate 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 opportunities for providers to adjust their business 

operations, including mitigating the 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 calculate the CMHC PHP APC per diem payment 
CMS-1525-FC 790 

rates for Level I and Level II services using only CMHC data and to calculate the 

hospital-based PHP APC per diem payment rates 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 and $113.83 for Level II services and for 

hospital-based PHPs, $160.74 for Level I services 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 care for the benefit. 

Comment: Almost all commenters expressed some concern that the proposed rate 

reductions would result in adverse outcomes, including program closures and subsequent 

access to care issues, exacerbating an existing problem of inadequate inpatient and 

outpatient hospital capacities in many communities caring for individuals with mental 

illness. The commenters reasoned that if closures were to result, this would have 

substantial and serious consequences for hospitals and for Medicare beneficiaries 

requiring PHP services. Several commenters stated that the reduction in CMHC rates 

will lead to closures, where critical access points for Medicare beneficiaries would no 

longer be available. The commenters 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. Because 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 would 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 population may also enter prison 
CMS-1525-FC 791 

systems, or wind up dead if they do not receive their medication. Some commenters 

asserted that CMS has essentially contradicted its principles, by acknowledging a 

patient’s disability; but on the other hand, reducing the rate of reimbursement for their 

care. The commenters stated that this has the effect of denying access to treatment, 

which runs counter to ensuring essential care. 

Response: The proposed median per diem costs for CY 2012 reflect each PHP 

provider type’s (hospital-based and CMHC) costs, 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 hospital-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 substantially lower than the median per diem costs for 

hospital-based PHPs. We also noted that hospital-based PHPs 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 own data, that is, CMHC rates are based on 

CMHC cost data and hospital-based PHP providers 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 closure. The closure of PHPs may be due to 

any number of reasons, such as poor business management or marketing decisions, 

competition, over-saturation of certain geographic areas, Federal and State fraud and 

abuse efforts, among others. However, it does not directly follow that closure could be 

due to reduced reimbursement rates alone, especially when these rates reflect actual costs 

of PHP providers. CMS remains steadfast in its concern over access to care for all 
CMS-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 health services in addition to PHP. Many 

beneficiaries in need of mental health treatment 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. Other 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 will become an issue, and we do not believe 

we have acted in a manner that is contradictory 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 commenters believed that, by adding a payment 

reduction on top of these requirements, CMHCs 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 of 
CMS-1525-FC 793 

participation addressing basic health and safety issues in CMHCs. By law, CMS must 

update the OPPS payment rates on an annual basis using the most current cost data. 

Comment: Some commenters recommended 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 suggested 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 Association of Psychiatric 

Health Systems, the American Association 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 discuss 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 participate 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 and take that input into consideration 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 interpretation of the statute 

by eliminating the requirement in section 1833(t)(2)(C) of the Act. 

Response: As discussed above in this section, we believe the statute is reasonably 

interpreted to allow the relative payment weights for the OPPS rates for PHP services 

provided by CMHCs to be based solely on CMHC 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 the Secretary to “establish relative payment 

weights for covered OPD services (and any groups of such services described in 

subparagraph (B)) based on . . . hospital costs.” In pertinent part, subparagraph (B) 

provides that “the Secretary may establish groups of covered OPD services . . . so that 

services classified within each group are comparable clinically and with respect to the use 

of resources.” In accordance with subparagraph (B), 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 creating the original APC for PHP services (APC 

0033), we did “establish” the initial relative payment weight for PHP services, provided 

in hospital-based and CMHC-based settings, 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, we 
CMS-1525-FC 795 

subsequently established new APCs for PHP services based exclusively on hospital costs. 

For CY 2009, we adopted a two-tiered APC methodology (in lieu of the original APC 

0033) under which CMS paid one rate for days with 3 services (APC 0172) and a 

different payment rate for days with 4 or more services (APC 0173). These two new 

APCs were established using only hospital data. For CY 2011, we added two new APCs 

(APCs 0175 and 0176) for PHP services provided by hospitals and based the relative 

payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were 

designated for PHP services provided by CMHCs and were based on a mixture of 

hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have 

consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, 

the relative payment weights for the two APCs for 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 the Act make plain that the data source for 

the relative payment weights is subject to change from one period to another. Section 

1833(t)(2)(C) of the Act provides that, in establishing the relative payment weights, “the 

Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from the most recent 

available cost reports.” However, we used 1996 data (plus 1997 data) in determining 
CMS-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 relative payment weights, and the 

wage and other adjustments described in paragraph (2) to take into account changes in 

medical practice, changes in technology, the addition of new services, new cost data, and 

other relevant information and factors.” For purposes of the CY 2012 update, we 

exercised our authority under section 1833(t)(9)(A) of the Act to change the data source 

for the relative payment weights for PHP services by CMHCs based on “new cost data, 

and other relevant information and factors.” 

Comment: Several commenters questioned how one provider’s cost data could 

impact the rates so dramatically and how can CMS reasonably attribute some of the rate 

fluctuation to targeted fraud and abuse efforts on the part of CMS and other agencies. 

Commenters stated that fraud and abuse efforts did not decrease the operating cost of 

providers, but instead resulted in eliminating fraudulent providers from the program. 

Commenters also posed the question of whether 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 medians 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 medians, depending on its cost data. For 

example, if a provider that has high cost data and a high volume of claims will saturate 
CMS-1525-FC 797 

the overall cost data, resulting in high medians. 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 concerns that the technical data on 

which CMS relies during the ratesetting process are fundamentally flawed, in that the 

data do not reflect the full scope of CMHC costs. 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 remain 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 which providers certify and attest that the 

information contained in them is accurate. As a Medicare participating provider, it is the 

responsibility of the provider to complete and submit an accurate Medicare cost report. 

Because all providers must certify and attest to the accuracy of the report, we trust that 

the data are, in fact, accurate. We calculate 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 always 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 Chapter 18 of the Provider Reimbursement Manual, 

Part II, located on the CMS Web site at: 

https://www.cms.gov/Manuals/PBM/itemdetail.asp?filterType=none&filterByDID=-

99&sortByDID=1&sortOrder=ascending&itemID=CMS021935&intNumPerPage=10. 

 CMS regional office and central office employees, including those in the Division 

of Cost Reporting, are also available resources who can answer questions. Furthermore, 

CMS offers cost reporting software 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 services of accountants who profess to know 

Medicare cost reporting 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 consideration of the public comments we received, we are 

finalizing our CY 2012 proposal, without modification, 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 PHP 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 MEDIAN 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, given the difference in PHP charges between hospitals and 

CMHCs, we did not believe it was appropriate to make outlier payments to CMHCs 

using the outlier percentage target amount and threshold established for hospitals. Prior 

to that time, there was a significant difference in the amount of outlier payments made to 

hospitals and CMHCs for PHP services. In addition, further analysis indicated that using 

the same OPPS outlier threshold for both hospitals and CMHCs did not limit outlier 

payments to high-cost cases and resulted in excessive outlier payments to CMHCs. 

Therefore, beginning in CY 2004, we established a separate outlier threshold for 
CMS-1525-FC 800 

CMHCs. The separate outlier threshold for CMHCs has resulted in more commensurate 

outlier payments. 

 The separate outlier threshold for CMHCs resulted in $1.8 million in outlier 

payments to CMHCs in CY 2004 and $0.5 million in outlier payments to CMHCs in 

CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier 

payments. We believe this difference in outlier payments indicates that the separate 

outlier threshold for CMHCs has been successful in keeping outlier payments to CMHCs 

in line with the percentage of OPPS payments made to CMHCs. 

 In the CY 2012 OPPS/ASC proposed rule (76 FR 42275), we proposed to 

continue our policy of identifying 1.0 percent of the aggregate total payments under the 

OPPS for outlier payments for CY 2012. We proposed that a portion of that 1.0 percent, 

an amount equal to 0.14 percent of outlier payments (or 0.0014 percent of total OPPS 

payments), would be allocated to CMHCs for PHP outlier payments. In section II.G. of 

the proposed rule, for hospital outpatient outlier payments policy, we proposed to set a 

dollar threshold in addition to an APC multiplier threshold. Because the PHP APCs are 

the only APCs for which CMHCs may receive payment under the OPPS, we would not 

expect to redirect outlier payments by imposing a dollar threshold. Therefore, we did not 

propose to set a dollar threshold for CMHC outlier payments. We proposed to set the 

outlier threshold for CMHCs for CY 2012 at 3.40 times the APC payment amount and 

the CY 2012 outlier payment percentage applicable to costs in excess of the threshold at 

50 percent. Specifically, we proposed to establish that if a CMHC's cost for partial 

hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times 
CMS-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 separate outlier threshold for 

CMHCs. As discussed in section II.G. of this final rule with comment period, using more 

recent data for this final rule with comment period, we set the target for hospital 

outpatient outlier payments at 1.00 percent of total estimated OPPS payments. We 

allocated a portion of 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 the 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 gives 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, Medicare paid reasonable costs for services 

provided in the HOPD. The claims submitted were subject to medical review by the 

fiscal intermediaries to determine the appropriateness of providing certain 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 comment 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 specifies those services for which the hospital 

will be paid only when provided in the inpatient 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 November 30, 2001 final rule with 

comment period (66 FR 59884), we may use any 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 assigned to an APC group for payment under the 
CMS-1525-FC 803 

OPPS when provided in the hospital outpatient setting. Those criteria include the 

following: 

● Most outpatient departments are equipped 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 that 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 reviewing 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 procedure is being performed in numerous 

hospitals on an outpatient basis; or 

● A determination is made that the procedure can be appropriately and safely 

performed in an ASC, and is on the list of approved ASC procedures or has been 

proposed by us for addition to the ASC list. 

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 comment period (which is 

referenced in section XVII. of this final rule 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 described 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 significant amount of the time on an outpatient 

basis. Using this methodology, we identified two procedures that met the criteria for 

potential removal from the inpatient list for CY 2012. We then clinically reviewed these 

two potential procedures for possible removal from the inpatient list and found them to be 

appropriate candidates for removal from 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 nasomaxillary complex fracture (Lefort II type); 

with wiring and/or local fixation) and 54411 (Removal and replacement of all 

components of a multi-component inflatable penile prosthesis through an infected field at 

the same operative session, including irrigation 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 input 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, with 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 the 
CMS-1525-FC 805 

appropriateness of removing the following procedures identified in a comment letter 

addressed to the APC Panel: CPT codes 61154 (Burr hole(s) with evacuation and/or 

drainage of hematoma, extradural or subdural); 61156 (Burr hole(s); with aspiration of 

hematoma or cyst, intracerebral); and 61210 (Burr hole(s); for implanting ventricular 

catheter, reservoir, eeg electrode(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 recommendation regarding CPT codes 61154 and 61156. 

Additionally, during the February 28-March 1, 2011 meeting of the APC Panel, an 

APC Panel member requested removal of the following CPT codes from the CY 2012 

inpatient list: 22551 (Arthrodesis, anterior interbody, including 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, osteophytectomy and decompression of spinal cord and/or nerve 

roots; cervical below C2, each additional interspace (List separately in addition to code 

for separate procedure)); 22554 (Arthrodesis, anterior interbody technique, including 

minimal discectomy to prepare interspace (other than for decompression); cervical below 

C2); 22585 (Arthrodesis, anterior interbody 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)); 61107 (Twist drill 

hole(s) for subdural, intracerebral, or ventricular puncture; for implanting ventricular 
CMS-1525-FC 806 

catheter, pressure recording device, or other intracerebral monitoring device); and 63267 

(Laminectomy for excision or evacuation of intraspinal lesion other than neoplasm, 

extradural; lumbar). 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 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 because we agree with the APC Panel 

that the procedures may be appropriately provided 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 upon further clinical review subsequent to 

the February 28-March 1, 2011 APC Panel meeting, we did not believe that these 

procedures may be appropriately provided as hospital outpatient procedures for some 

Medicare beneficiaries, based upon the evaluation criteria mentioned above, due to the 

clinical intensity of the services 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 outpatient hospital setting. We noted that 

despite its low overall volume, CPT code 54411 is performed a significant percentage of 

the time in the outpatient hospital setting; however, we do not believe that the outpatient 

procedures being performed are truly reflective of the intensity of services requisite when 
CMS-1525-FC 807 

performing the procedure as described by the CPT code’s long descriptor. 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 APC 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 fundoplasty, when performed) from the inpatientonly list and, if removed, to which APC it should be assigned. 

Comment: Commenters supported the CMS proposal to accept the APC 

recommendation to remove CPT procedures 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 the specialty society’s experience and 

additionally requested that CMS remove CPT code 54417 (Removal and replacement of a 

non-inflatable (semi-rigid) or inflatable (self-contained) penile prosthesis through an 

infected field at the same operative session) from the 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 prior to admission) to indicate procedure 

payable only in the inpatient setting when performed emergently on an outpatient who is 

transferred to another acute care facility prior to admission. 

Response: We appreciate this comment. However, the issues discussed within 

this comment are outside the scope of the provisions 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 their own experience, specialty society 

recommendation, or designation of a procedure as safe in the outpatient setting under one 

of the many clinical guidelines available, such as Milliman Care Guidelines.

Response: We reevaluated data on the 42 additional CPT codes requested by the 

commenters using more recent utilization data 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 postoperatively as outpatients: 

0184T (Excision of rectal tumor, transanal endoscopic microsurgical approach (ie, 

TEMS), including muscularis propria (ie, full thickness)); 20930 (Allograft for spine 

surgery; morselized); 20931 (Allograft for spine surgery only; structural (List separately 
CMS-1525-FC 809 

in addition to code for primary procedure)); 43281 (Laparoscopy, surgical, repair of 

paraesophageal hernia, includes fundoplasty, when performed; without implantation of 

mesh); 43770 (Laparoscopy, surgical, gastric restrictive procedure; placement of 

adjustable gastric restrictive device (eg, gastric band and subcutaneous port 

components)); 22551 (Arthrodesis, anterior interbody, including disc space preparation, 

discectomy, osteophytectomy and decompression of spinal cord and/or nerve roots; 

cervical below C2); and 22554 (Arthrodesis, anterior interbody technique, including 

minimal discectomy to prepare interspace (other than for decompression); cervical below 

C2). We also note that although commenters requested that CPT code 

37221(Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, 

initial vessel; with transluminal stent placement(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 assigned a status indicator 

of “T.” In regard to the other 36 CPT codes 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 suggested that regulations should not 

supersede the physician’s level of knowledge and assessment of the patient’s condition, 

and that the physician can appropriately determine whether a procedure can be performed 

in a hospital outpatient setting. Other commenters stated that physician’s payment should 

be aligned with the hospital payment; if the hospital is not paid, the physician payment 
CMS-1525-FC 810 

should not be allowed. The commenters further stated that physicians have little 

incentive to ensure that inpatient only procedures 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 educate physicians have not been effective. 

Many commenters suggested that the inpatient only list be eliminated in its entirety. The 

commenters indicated that hospitals already meet minimum safety standards through 

Joint Commission accreditation and the Medicare hospital conditions of participation. 

Commenters suggested that, if the inpatient only list cannot be eliminated in its entirety, 

an appeals process be developed. Commenters believed that an appeal process would 

give the hospital the opportunity to submit documentation on the physician’s intent, the 

patient’s clinical condition, and 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 coverage determinations (LCDs) 

that define when selected procedures should be performed as inpatient 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 list is a valuable tool for ensuring that the 

OPPS only pays for services that can safely be performed in the hospital outpatient 

setting, and we will not eliminate the inpatient only list at this time. We believe that 

there are many surgical procedures that are never safely performed for a Medicare 

beneficiary in the hospital outpatient setting. Therefore, it would be inappropriate for us 
CMS-1525-FC 811 

to assign them separately payable status indicators and establish payment rates in the 

OPPS. We recognize that hospitals already meet minimum 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 appropriate environment for providing care, they do not 

determine whether a particular service can be safely 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 performed inappropriately, 

payment for physicians’ services is outside the scope of the payment policies governed 

by the OPPS and the provisions of this OPPS/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 hospital 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. Therefore, we do not believe that it is appropriate to pay the 

hospital for the ancillary services furnished when the patient receives an inpatient only 

service in the hospital outpatient setting. Further, we expect hospitals to use this 

knowledge and to educate physicians with regard to the appropriate setting for the 

procedures they furnish. We recognize that there are cases in which the patient expires 
CMS-1525-FC 812 

before he or she can be admitted and has received an inpatient only service without being 

admitted. In these cases, we have a longstanding policy of making payment for the 

ancillary services provided to Medicare beneficiaries under APC 0375. 

As we have stated in the past, we also 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 beneficiaries are responsible for copayments for a complex 

surgery and any individual services 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 hospital inpatient setting and the hospital outpatient 

setting, and Medicare beneficiaries may incur higher out-of-pocket costs in the hospital 

outpatient setting for complex surgical procedures. We do not plan to adopt a specific 

appeals process for claims related to inpatient only procedures performed in the HOPD. 

Stakeholders can request changes to the inpatient only list through annual rulemaking, 

but they are responsible for knowing what procedures are currently on the list. We do not 

believe that a dedicated appeals process for cases involving inpatient only procedures 

performed in the outpatient setting is warranted and such a process could potentially 

undermine the disincentive for performing inpatient only procedures in an outpatient 

setting. We remain committed to reviewing the inpatient only list 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 the notice-and-comment 

rulemaking process. 
CMS-1525-FC 813 

After consideration of the public comments received, for CY 2012, we are 

modifying our proposal to accept the APC Panel’s recommendations to remove the 

procedures described by CPT codes 22551and 22554 from the CY 2012 inpatient only 

list because after additional discussion during the August 10-12, 2011 APC Panel 

meeting and further clinical review subsequent to the August 10-12, 2011 APC Panel 

meeting, we agree with the APC Panel that the 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 Panel 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 Panel meeting, we do not believe that these 

procedures may be appropriately provided as hospital outpatient procedures for some 

Medicare beneficiaries, based upon the evaluation criteria mentioned above, due to the 

clinical intensity of services provided. 

We are finalizing our proposal, with modifications, 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 inpatient only list for CY 2012 

and their CPT codes, long descriptors, APC assignments, and status indictors are 

displayed in Table 46 below. 
CMS-1525-FC 814 

TABLE 46.—PROCEDURES REMOVED FROM THE INPATIENT ONLY 

LIST AND THEIR APC ASSIGNMENTS 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, for 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 spinal 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 T 
CMS-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 (eg, gastric band and 

subcutaneous port components) 

0131 T 

54650 Orchiopexy, abdominal approach, for intraabdominal testis (eg, Fowler-Stephens) 0154 T 
CMS-1525-FC 816 

TABLE 47.—ADDITIONAL PROCEDURES REQUESTED BY COMMENTERS 

TO BE REMOVED FROM THE INPATIENT ONLY LIST FOR CY 2012 

HCPCS 

Code Long Descriptor 

CY 2012 

Status 

Indicator 

0075T 

Transcatheter placement of extracranial vertebral or intrathoracic 

carotid artery stent(s), including 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 removal, cranial, 6 or more pins 

placed, for thin skull osteology (eg, pediatric patients, 

hydrocephalus, osteogenesis imperfecta) 

C 

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, 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, sagittal 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 interbody 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 C 
CMS-1525-FC 817 

HCPCS 

Code Long Descriptor 

CY 2012 

Status 

Indicator 

22862 Revision including replacement of total disc arthroplasty 

(artificial disc) anterior approach, lumbar C 

22840 

Posterior non-segmental instrumentation (eg, Harrington rod 

technique, pedicle fixation across one interspace, atlantoaxial 

transarticular screw fixation, sublaminar wiring at C1, facet 

screw fixation) (list separately in addition to code for primary 

procedure) 

C 

23472 Arthroplasty, glenohumeral joint; total shoulder (glenoid and 

proximal humeral replacement (eg, total shoulder)) C 

27702 Arthroplasty, ankle; with implant (total ankle) C 

32662 Thoracoscopy, surgical; with excision of mediastinal cyst, tumor, 

or mass 

C 

35141 

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, 

common femoral artery (profunda femoris, superficial femoral) 

C 

35221 Repair blood vessel, direct; intra-abdominal C 

35372 Thromboendarterectomy, including patch graft, if performed; 

deep (profunda) femoral C 

35721 Exploration (not followed by surgical repair), with or without 

lysis of artery; femoral artery C 

35800 Exploration for postoperative hemorrhage, thrombosis or 

infection; neck C 

37182 

Insertion of transvenous intrahepatic portosystemic shunt(s) (tips) 

(includes venous access, hepatic and portal vein catheterization, 

portography with hemodynamic evaluation, intrahepatic tract 

formation/ dilatation, stent placement and all associated ima 

C 

37221 

Revascularization, endovascular, open or percutaneous, iliac 

artery, unilateral, initial vessel; 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 staging (separate procedure); 

pelvic and para-aortic C 
CMS-1525-FC 818 

HCPCS 

Code Long Descriptor 

CY 2012 

Status 

Indicator 

43281 Laparoscopy, surgical, repair of paraesophageal hernia, includes 

fundoplasty, when performed; without implantation of mesh T 

43770 

Laparoscopy, surgical, gastric restrictive procedure; placement of 

adjustable gastric band restrictive device (eg, gastric band and 

subcutaneous port components) 

T 

43774 

Laparoscopy, surgical, gastric restrictive procedure; removal of 

adjustable gastric band restrictive 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; complicated (reconstruction in-depth) 

(separate procedure) C 

44345 Revision of colostomy; complicated (reconstruction in-depth) 

(separate procedure) C 

44346 Revision of colostomy; with repair of paracolostomy hernia 

(separate procedure) C 

44602 Suture of small intestine (enterorrhaphy) for perforated ulcer, 

diverticulum, wound, injury or rupture; single perforation C 

49010 Exploration, retroperitoneal 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 occlusion or embolization (eg, for tumor 

destruction, to achieve hemostasis, to occlude a vascular 

malformation), percutaneous, any method; central nervous 

system (intracranial, spinal cord) 

C 
CMS-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 intervertebral disc, reexploration, single 

interspace; each additional lumbar interspace (list separately in 

addition to code for primary procedure) 

C 

63710 Dural graft, spinal C 
CMS-1525-FC 820 

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

A. Background

In the CY 2000 OPPS final rule with comment period, CMS established the 

hospital OPPS and indicated that direct supervision is the standard for all hospital 

outpatient therapeutic services covered and paid by Medicare in hospitals and in 

provider-based departments (PBDs) of hospitals (65 FR 18524 through 18526). 

Currently, as discussed in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72008), this standard requires the supervisory practitioner to be immediately 

available to furnish assistance and direction throughout the performance of a hospital 

outpatient therapeutic service or procedure. In the CY 2000 OPPS final rule with 

comment period, we established in the regulation 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 provide 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 supervision that CMS defined for the physician office 
CMS-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 the definitions or applications in the OPPS may differ 

slightly from those in the physician office setting. This is the case in defining direct 

supervision, where the MPFS requires presence “in the office suite,” and the OPPS 

currently does not require presence within any specific physical 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 extended duration therapeutic services (extended 

duration services) for which we require direct supervision during an initiation period, 

followed by a minimum standard of general supervision for the duration of the service 

(75 FR 72012). Under the OPPS, general supervision means that the service is furnished 

under the overall direction and control of the physician or appropriate nonphysician 

practitioner (NPP), but his or her physical presence is not required during the 

performance of the service. Direct supervision means that the physician or appropriate 

NPP is immediately available to furnish assistance and direction throughout the 

performance of a therapeutic service or procedure; however, he or she does not have to be 

present in the room where the service or procedure is being performed. 

In the CY 2000 OPPS final rule with comment period (65 FR 18524 through 

18526), we adopted physician supervision policies as a condition of payment under the 
CMS-1525-FC 822 

OPPS to ensure that Medicare pays for high quality hospital outpatient services that are 

furnished in a safe and effective manner and consistent with Medicare requirements. The 

agency has long divided hospital outpatient services into the two categories of 

“diagnostic” services and “therapeutic” 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 and supplies (including the use of hospital facilities) that are 

incident to the services of physicians in the treatment of patients (Section 3112.4 of the 

Medicare Part A Intermediary Manual (May 1985)). In recognition of this historic 

classification of services, we established a direct supervision standard for outpatient 

therapeutic services under our regulation at § 410.27, which establishes the conditions for 

payment for outpatient hospital services provided “incident to” physicians’ services. In 

the text of § 410.27, we also established standards requiring that these services be 

furnished either by or under arrangements made by the participating 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 services as either diagnostic or therapeutic 

in our manual guidance that establishes the conditions of payment for hospital outpatient 

services under the OPPS (Sections 20.4 and 20.5, Chapter 6 of the Medicare Benefit 

Policy Manual (Pub. 100-02)). In the requirements for therapeutic services, in addition to 
CMS-1525-FC 823 

the direct supervision standard, we applied the requirements of § 410.27(a)(1)(i) and 

(a)(1)(iii) regarding under arrangement and provider-based site of service to all outpatient 

therapeutic services that are paid under the OPPS (Section 20.5, Chapter 6 of the 

Medicare Benefit Policy Manual (Pub. 100-02)). 

In the CY 2000 OPPS final rule with comment period, we amended our regulation 

at § 410.27 to specify that direct supervision is required for outpatient 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 specified further in the 

regulation that direct supervision means the physician must be present on the premises of 

the location and immediately available to furnish assistance and direction throughout the 

performance of the service or procedure. The requirement to be “immediately available” 

was included in the regulation, 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 procedure 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 amendment 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 the 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 supervision standard is met when outpatient 
CMS-1525-FC 824 

therapeutic services are provided 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 outpatient hospital diagnostic services 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 having 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 comment period (74 FR 60588 through 60591, and 

60680), we revised §410.28(e) to extend the supervision 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 for 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 statutory 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 Medicare Benefit Policy Manual. 

In the years following establishment of the initial OPPS regulations, we began to 

receive inquiries from providers about the supervision requirements. Many of these 
CMS-1525-FC 825 

inquiries led us to believe that some hospitals may have misunderstood our statement to 

the effect that we assume physician supervision requirements are met for services 

furnished on the hospital premises, and that some hospitals were providing either general 

supervision or no supervision for therapeutic services furnished incident to physicians’ 

services in the outpatient setting and for which we had established a requirement of direct 

supervision. Therefore, in the CY 2009 OPPS/ASC proposed rule and final rule with 

comment period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, 

respectively), we clarified 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 direct 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 under the MPFS. We received very few public 

comments regarding this clarification 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 outpatient diagnostic services furnished in locations other 

than PBDs (that is, in the hospital and under arrangement in nonhospital facilities). 

Accordingly, we expanded and refined the regulatory language regarding direct 
CMS-1525-FC 826 

supervision of diagnostic services in those locations to refer to presence of the 

supervisory practitioner in the hospital or PBD (for services furnished in those locations) 

or in the office suite (for services furnished under arrangement in nonhospital space). For 

therapeutic services, we increased hospitals’ flexibility regarding the direct supervision 

requirement by allowing all NPPs whose services 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 physicians’ services”) to 

supervise hospital outpatient therapeutic services 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 rehabilitation (ICR) services, we required that 

direct supervision of those services furnished 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 statute specifies that these services are 

physician-supervised (section 144(a) of the 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 regulations at § 410.27 to remove the physical 

boundary requirements for direct supervision of hospital outpatient therapeutic services, 

and instead allow the supervisory practitioner to be “immediately available,” meaning 

physically present, interruptible, and able to furnish assistance and direction throughout 
CMS-1525-FC 827 

the performance of the procedure, but without reference to any particular physical 

boundary. 

In the CY 2010 OPPS/ASC final rule with comment period, we finalized a 

technical correction to the regulation at § 410.27 to clarify that the direct supervision 

requirement under that section applies to services furnished in CAHs as well as other 

types of hospitals. Specifically, we added 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 outpatient 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 comment period (75 FR 72000), we viewed this as a technical 

correction because the Act applies the same regulations to hospitals and CAHs when 

appropriate (CAHs are included if “the context 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 therapeutic services, CAHs and the hospital 

community at large suggested that CAHs should be exempt from this requirement 

because the requirement is at odds with longstanding and prevailing practices of many 

CAHs. For example, commenters noted that, due to a low volume of services, a 

practitioner retained on the campus of a small rural hospital or CAH to meet supervision 

requirements may not have other concurrent responsibilities or patient care, which could 

lead to inefficiencies. In their correspondence and discussion in public forums, CAHs 

and small rural hospitals explicitly raised concerns about services that extend after 
CMS-1525-FC 828 

regular operating hours, especially observation services. They asserted that direct 

supervision is not clinically necessary for some outpatient services that have a significant 

monitoring component that is typically performed by nursing or other auxiliary staff, 

including IV hydration, blood transfusions, and 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 the duration of the therapeutic service. 

We provided guidance regarding the flexibility that we believe exists within our 

requirement for direct supervision for an emergency 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/HospitalOutpatientPPS/05_OPPSGuidance.asp#TopOfPage. 

However, these hospitals continued to express that they have difficulty in meeting the 

standard. Small rural hospitals and CAHs indicated that, regulations notwithstanding, 

many of them did not have appropriate staff arrangements to provide the required 

supervision of some services, particularly services being provided after hours or 

consisting of a significant monitoring component that last for an extended period of time. 

In addition, the broader hospital 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 requests, 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/HospitalOutpatientPPS/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 and safety and consistent with the Medicare 

statute. Specifically, for these services we redefined direct supervision to remove all 

requirements that the supervisory practitioner remain present within a particular physical 

boundary, although we continued to require immediate availability. 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 supervision is required for these services during an initiation period, 

but once the supervising physician or NPP has determined that the patient is stable, the 

service can continue under general supervision. 

In addition, in response to concerns expressed by the industry about appropriate 

levels of supervision for certain outpatient therapeutic services furnished in various 

settings (for example, chemotherapy administration, and post-operative recovery 

services), we stated our intent to create through the CY 2012 rulemaking cycle an 

independent advisory review process for consideration of stakeholder requests that CMS 
CMS-1525-FC 830 

assign supervision levels other than direct supervision for 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 level 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 nonenforcement policy for direct supervision 

of outpatient therapeutic services provided in CAHs for a second year through CY 2011 

(which is available at the CMS Website at: 

http://www.cms.gov/HospitalOutpatientPPS/Downloads/CMS_1504FC_OPPS_2011_FR

_Physician_Supervision_Nonenf_Notice.pdf). In addition, we expanded the 

nonenforcement notice to include small and rural hospitals that have 100 or fewer beds, 

as defined by Transitional Outpatient Payments (TOPs) criteria, because we believe that 

these hospitals experience resource constraints 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 both on that idea and on other aspects of the 

review process, such as evaluation criteria and 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 members 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 through 42285), we discussed these comments 

and further developed our proposals for the 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 diagnostic services, following our revisions to 

the regulation at §410.28(e) in the CY 2010 OPPS/ASC final rule with comment period 

described above, we have received very few comments from stakeholders regarding our 

revised policy. Therefore, we did not propose any changes to those requirements in the 

CY 2012 proposed rule. 
CMS-1525-FC 832 

B. Issues Regarding the Supervision of Hospital 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 technical 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 structure 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 supervision 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 several (2 to 4) representatives 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 assignments do not affect CAHs. CAHs are 

not paid under the OPPS, and we do not believe that they are “appropriate representative 

providers” for the Panel’s deliberations on APC groups and weights 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 hospitals received appropriate representation. 

Many commenters requested that CMS add 4 representatives of CAHs and an additional 

4 representatives of small rural 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 supervision requirement. The 

commenters also recommended that small rural hospitals paid under the OPPS be 

permitted to participate in the Panel’s deliberations about APC groupings and weights. 

One commenter requested an equal number of rural and urban provider representatives on 

the Panel. Another commenter urged CMS to ensure adherence to the FACA rules. 

Response: We agree with commenters that the APC Panel is an appropriate entity 

to serve as the review body, provided CAHs and small rural hospitals are given 

appropriate representation on the Panel. Therefore, we are finalizing the APC Panel as 

the entity that will advise and make independent 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 a 
CMS-1525-FC 834 

Federal advisory recommendation. In addition 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. Through 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 Secretary of the Department of Health and Human Services and the 

CMS Administrator on the appropriate supervision level for individual 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 indicated significant differences between 

CAHs and non-CAH small rural hospitals in resources, quality 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). However, 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 Panel 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 representatives of small rural PPS hospitals. We are 
CMS-1525-FC 835 

defining “small rural PPS hospital” in the same manner as we defined “small rural 

hospital” for the notice of nonenforcement of direct supervision of therapeutic services in 

CAHs and small rural hospitals, that is, hospitals with 100 or fewer beds and either 

geographically located in a rural area or paid under the hospital OPPS with a rural wage 

index (75 FR 72007; 

https://www.cms.gov/HospitalOutpatientPPS/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 under section 1833(t)(7) of the Act. All PPS 

hospital representatives on the Panel, including 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 expertise. Two commenters suggested that recommendations and 

decisions about supervision levels be made only by clinicians, and that nonclinicians not 

be permitted to participate in the review process. One commenter 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 their knowledge of payment and reimbursement 

systems rather than clinical judgment and expertise. The commenter believed that the 

Panel’s recommendations should be based solely on clinical judgment, and pointed out 

that several current Panel members do not have clinical expertise. The commenter 

expressed concern that these individuals’ recommendations would be based upon 
CMS-1525-FC 836 

payment implications rather than clinical criteria. One commenter recommended that 

CMS involve its specialty society in its reviews. 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 societies. 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 administration from the list of extended duration 

services pending an independent assessment, CMS noted a safety standard that was 

published by the American Society of Clinical Oncology and the Oncology Nursing 

Society. The commenter requested information as to how CMS might consider such 

specialty association guidelines in future decision-making. 

 Response: As we stated in the proposed rule (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 informed, representative decision-making on 

supervision which we believe includes both clinical and other types of expertise. In 

evaluating the supervision levels that are required 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 supervision 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 period 
CMS-1525-FC 837 

that is not defined by a CPT code but rather by phases assigned by a specialty society. 

As we discuss below, one commenter requested that CMS synchronize the supervision 

requirement for the recovery period with the phases into which the American Society of 

Anesthesiology (ASA) divides the 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 inappropriately based on payment implications rather 

than clinical or other criteria that may be set forth. Clinicians must adhere to the 

supervision rules in order to receive payment for their services, and furnishing 

supervision uses resources that might otherwise be devoted to increasing payment by 

furnishing additional services. Thus, we believe there is some potential among clinicians 

and nonclinicians to give inappropriate 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 associations 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 groups 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 associations, 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 services, especially registered nurses (RNs), 

physical therapists, and respiratory therapists. One commenter indicated that the Panel 

should seek input from providers who compete with physicians in the marketplace, and 

not restrict opportunities to inform the Panel to medical doctors only. Several 

commenters expressed concern about 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 Panel to consider allowing pharmacists to 

supervise hospital outpatient therapeutic services 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 RNs by physicians will not necessarily prevent 

medical errors, and also stated that physicians have been implicated in the increase in 

wrong-patient and wrong-site surgical errors. 

Response: We note again that, in accordance with the FACA rules, CMS will 

follow a balance plan for the Panel membership. For purposes of supervision 

deliberations, we believe that the clinicians on the Panel should largely represent the 

types of practitioners who furnish hospital outpatient 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 hospital 
CMS-1525-FC 839 

outpatient therapeutic services because they 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 practitioners that furnish a broader 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 the number of nurse practitioners, physician 

assistants or other supervisory 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 deliberations, we note that, as we proposed, the 

Panel’s scope of review will be limited to addressing the level of supervision that should 

be furnished for a given hospital outpatient therapeutic service, and will not include the 

type of practitioner that should be permitted to furnish the supervision. The Panel will 

recommend the appropriate supervision 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 decisions 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 also 
CMS-1525-FC 840 

applicable to those services when furnished in the hospital outpatient setting. We 

proposed that CMS’ decisions, which 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 July or January following the most recent APC 

Panel meeting, or only in January of the 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 allow 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 rule with comment period had requested 

(75 FR 42280). It also would give CMS the ability to respond more rapidly to any issues 

that may arise in access to care or patterns of care. Subjecting CMS’ decisions to noticeand-comment rulemaking would provide a more structured, formal review of decisions, 

but changes could only be made once a year due to the annual OPPS/ASC rulemaking 

cycle. 

Comment: Most commenters opposed the agency issuing its decisions through a 

subregulatory process. The commenters requested that, to ensure the greatest 
CMS-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 review 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 notices of nonenforcement, additional rulemaking, 

and other administrative powers. Several commenters requested 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 comment, due to practical considerations 

involved in rulemaking, it is very likely that 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 nimble 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 processes rather than rulemaking to issue 

changes in certain administrative specifications at the level 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 individual diagnostic services under 

the MPFS, which are also applicable to those 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 decisions based on Panel recommendations at the 

subregulatory level. We will post our preliminary decisions on the OPPS Web site for 

public review and comment. Given 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 from stakeholders for APC and 

status indicator changes for services 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 the 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 give 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 justification for the change in supervision level that is 

sought, supported to the extent possible with clinical evidence. We also proposed that we 

would consider these justifications in deciding which services to forward to the APC 

Panel for evaluation.

We proposed to charge the Panel with recommending 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 which 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 there is a significant likelihood that the 

supervisory practitioner would need to reassess the patient and modify treatment during 

or immediately following the therapeutic intervention, 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; and 
CMS-1525-FC 844 

● Expectation of rapid clinical changes during the therapeutic service or 

procedure. 

 We noted that these criteria include, but extend well beyond, 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 privileges, the knowledge, 

skills, ability, and privileges to perform the service or procedure. Specially trained 

ancillary staff and technicians are the primary operators of some specialized diagnostic or 

therapeutic equipment, and while in such cases CMS does not expect the supervisory 

practitioner to operate this equipment instead of a technician, CMS does expect the 

practitioner that supervises provision 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 throughout the performance of a procedure and, 

as appropriate to the supervisory practitioner and 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 decisions unilaterally without consulting the patient’s treating 

physician or NPP. The supervisory practitioner should have the training and knowledge 

to clinically redirect the service or provide additional orders. 
CMS-1525-FC 845 

We proposed that, in the event there has been a previous consideration and 

decision on the supervision standard for a service, we would consider the request and, as 

warranted, forward the request to the APC Panel 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 practice 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 APC 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 anticipated extending through CY 2012 the notice of 

nonenforcement of the requirement for direct supervision 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). This extension would 

allow these facilities time to meet the appropriate supervision standard and allow us to 

complete supervision policy decisions on many key services during 2012. 

Comment: Commenters largely supported the proposed four clinical criteria. 

One commenter requested that CMS expand these criteria to allow exceptions based on 

changes in technology. 

Response: We believe that a change in technology or practice patterns that affects 

a procedure’s level of safety is an appropriate additional criterion. Therefore, 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 CMS 
CMS-1525-FC 846 

will use to determine whether there is a need for reconsideration of a particular service as 

discussed below. 

Comment: Several commenters continued to request that CMS establish a default 

supervision standard of general supervision for all hospital outpatient therapeutic 

services, and assign direct supervision only as recommended by the review entity. The 

commenters reiterated public comments on prior rules, stating that the review entity and 

CMS should not consider services for assignment of personal supervision because many 

services that might qualify for personal supervision are already personally performed by a 

physician or NPP. They again noted that certain services are not furnished personally by 

these practitioners and instead are furnished personally by auxiliary personnel such as 

technicians or RNs. However, the commenters maintained that hospitals currently 

furnish adequate supervision of those services by higher level practitioners. Further, they 

requested that any evaluation for personal supervision be based on clinical evidence and 

evidence of a current deficiency in the quality of care. In contrast, one commenter 

suggested that, to shorten the list of services that need consideration, CMS assign 

personal supervision to all services that require the practitioner to personally furnish the 

service and limit the Panel’s scope to consideration of any remaining services. One 

commenter requested that the Panel be permitted to advise the agency on “alternative” 

forms of supervision such as satellite offices and telemedicine. 

Response: In the CY 2012 OPPS/ASC proposed rule and the CY 2011 

OPPS/ASC final rule with comment period (76 FR 42281 and 75 FR 72006, 

respectively), we expressed our belief that direct supervision is the most appropriate level 
CMS-1525-FC 847 

of supervision for most hospital outpatient therapeutic services due to the “incident to” 

nature of most hospital outpatient therapeutic services. We discussed how our 

requirements for physician (or NPP) orders and 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 continue 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 services 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 authority to accept a recommendation by the review 

entity of general supervision for a given service. However, we continue to believe that 

direct supervision is the most appropriate level of supervision for the majority of hospital 

outpatient therapeutic services and, as such, it is the default supervision standard. 

In the course of evaluating a stakeholder request for review of the supervision 

level required for a given service, the APC Panel may recommend that personal 

supervision is the most appropriate level of supervision for that service. It may also be 

appropriate for the Panel to recommend personal supervision for certain services to 

ensure that auxiliary personnel or personnel in training (such as medical students) are 

adequately supervised. As we indicated in last year’s final rule with comment period, our 
CMS-1525-FC 848 

supervision policy is designed to preserve both the quality and safety of the hospital 

outpatient services that are paid for by Medicare. Accordingly, we believe that the APC 

Panel should have authority to recommend personal 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 shall recommend general, direct 

or personal supervision for a service. 

For situations where the supervisory practitioner is not available in person, but 

only by “telemedicine” or in a location such as a “satellite office,” the Panel shall apply 

the definitions of direct, general and personal supervision in accordance with the 

regulations. For example, if a supervisory practitioner is only available via telemedicine, 

meaning telephone or Internet, and is not able to be immediately physically present, the 

supervisory practitioner would be furnishing general supervision. If a supervisory 

practitioner is present in a satellite office such as an off-campus PBD and is able to be 

immediately physically present but is not present 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 comment period (75 FR 72008), with regard to 

recognizing availability by phone or modes other than in-person, we believe that the 

requirement for physical presence distinguishes direct supervision from general 

supervision because the regulations define general supervision as “the procedure is 

furnished under the physician’s overall direction 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 the 
CMS-1525-FC 849 

underlying definitions of direct, general or personal supervision, or for it to consider 

recommending yet another type of supervision 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 consideration any known impacts of the level of supervision on the 

quality of care. As we have previously noted (75 FR 72005), while literature or clinical 

opinions may exist on the risk of adverse outcomes and susceptibility to medical error 

associated with the provision of specific hospital outpatient procedures when a physician 

is not present, we do not know of any analyses that have directly examined levels of 

supervision and patient outcomes in the hospital outpatient setting. This may be an area 

for future study. 

Comment: With respect to a starting agenda, several commenters continued to 

request that the Panel begin by evaluating all therapeutic services with a work RVU < 1.0 

under the MPFS, which includes many extended duration services. Many commenters 

requested that the Panel review surgical procedures and the surgical recovery period, 

chemotherapy administration, and blood transfusions. A few commenters also requested 

that the Panel evaluate therapies that accompany chemotherapy administration such as 

hydration and anti-emetics. One commenter asked how stakeholders could request 

evaluation of services that are not defined by CPT codes, notably the surgical recovery 

period. The commenter requested that CMS allow general supervision after “phase 1” of 

the recovery period as designated by the American Anesthesiology Association (ASA), 
CMS-1525-FC 850 

and asked that CMS synchronize its supervision requirements for the recovery period 

with the phases established by the ASA. Another 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 appropriate 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 above, 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 given Panel meeting. We 

did not receive any public comments regarding criteria for prioritizing requests and 

services to be reviewed at each meeting. Therefore, we will prioritize requests based on 

service volume, total expenditures for the service, and frequency of requests. As 

proposed, we will also give priority to services 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 have not previously been evaluated by the Panel. As we 

proposed, requests must include justification 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 these justifications into consideration. 
CMS-1525-FC 851 

We did not receive any public comments on our proposal that the agency would 

retain the independent discretion to request that the Panel evaluate supervision levels for 

one or more services. Therefore, we are finalizing that provision. 

Comment: Several commenters requested that CMS explicitly include the place 

of service as an evaluation criterion, especially when the service is furnished in a CAH or 

rural facility. However, several other commenters recommended that supervision 

requirements should be applied based on service type and safety requirements, 

irrespective of location. 

Response: We continue to believe that the overall patient experience for a given 

encounter may differ significantly by facility depending on physician practice patterns, 

the facility’s patient and payer mix, Medicare payment structure for the facility, 

applicable regulations, quality of care, available resources and practitioners, and many 

other factors. In recent years, researchers have noted an undesirable amount of variation 

in the care that is furnished to Medicare patients in both metropolitan and 

nonmetropolitan areas of the country (MedPAC Report to the Congress: Regional 

Variation in Medicare Service Use, 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 (Joynt K, Harris Y, et al.: Quality of Care 

and Patient Outcomes in Critical Access Rural 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, there 
CMS-1525-FC 852 

has not been consensus on whether or not CMS should set supervision levels for 

individual services that are 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 discussed above, published safety standards appear 

to recommend direct supervision of chemotherapy administration. 

We continue to believe that in making its recommendations, the Panel should 

consider the context in which care is furnished and that CMS should seek balanced input 

from various groups on these issues, and this belief 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 evaluation criterion, thereby instructing 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 set supervision requirements no higher than the 

supervision requirements for a given service under the MPFS. Several commenters 

recommended that CMS require the same supervision levels in the hospital outpatient 

setting and ASCs, or among the hospital outpatient 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 services. Various factors contribute to the 

appropriate level of supervision that is needed in different 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 CMS allow reconsideration requests. 

One commenter requested that CMS expand its proposed criteria to include unique 

circumstances generally, rather than limiting the criteria for conducting another 

evaluation to changes in technology or practice patterns. 

Response: As we indicated in the proposed rule, conducting evaluations of 

services that the Panel has previously considered without new evidence supporting a 

change in the supervision level could 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 reconsideration of a service if new 

information indicates recent changes in technology or practice patterns that affect a 

procedure’s safety. Such a request 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 warranted, the Panel shall review the service again 

using the same process that it uses to evaluate new requests, and shall make another 

recommendation to CMS that could be the same or a different level of supervision. 

Comment: Most commenters supported extending through CY 2012 the notice of 

nonenforcement of the requirement for direct 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 supervision policy decisions on many 

key services until sometime in CY 2012, we are extending the notice 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 standard, 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/HospitalOutpatientPPS/01_overview.asp. 

We noted in the proposed rule that we have not yet defined the terms “personal 

supervision” or “general supervision” for 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 supervision” 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 comments on this proposal. Therefore, in 

§ 410.27(a)(1)(iv)(B), we are finalizing our proposed definitions of “personal 

supervision” for hospital outpatient therapeutic services to mean the definition specified 
CMS-1525-FC 855 

at § 410.32(b)(3)(iii), and “general supervision” for hospital outpatient therapeutic 

services to mean the definition 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 that 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 “directly” and inserting “the 

required” to provide that “nonphysician practitioners may provide the required 

supervision of services that they may personally furnish in accordance with State law and 

all additional requirements, including 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 physician or NPP with training or experience in 

emergency care must be on call and immediately available only by telephone or radio 

contact, and available on site within 30 minutes. The commenter suggested that hospitals 

are only required to adhere to the CoPs in order to submit a claim; therefore, they are not 

required to follow the more strict direct supervision 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 detailed discussion of this issue. We 

continue to believe that the supervision rules are a condition of payment for CAH 

services, irrespective of their CoP staffing standard. In the CY 2011 final rule, we also 
CMS-1525-FC 856 

discussed our position that the CoP is a general condition of the CAH’s participation in 

the Medicare program, while the supervision standards apply to particular individual 

services furnished by the CAH. The CoP 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 proposed rule (76 FR 

42277 through 42285) is the applicability of the payment conditions for hospital 

outpatient therapeutic services in § 410.27 to services described in paragraphs or 

subparagraphs of section 1861(s) of the Act other than section 1861(s)(2)(B) of the Act, 

which describes outpatient hospital services incident 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 services and supplies furnished incident to 

a physician service to outpatients,” to outpatient therapeutic 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 ambulatory surgical center services 

(described under section 1832(a)(2)(F)(i) of the Act) under arrangement in locations that 

are not provider-based. Some inquirers have suggested that the language in § 410.27 is 

not applicable to services described by benefit categories in section 1861(s) of the Act 
CMS-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 described 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 regulation 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 outpatients 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 furnished 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 this position as clearly in the regulations, 

and while the regulation text of § 410.27 only explicitly refers to “incident to” services, 

we noted that our policy is longstanding and, in fact, predates the OPPS. In longstanding 

manual guidance, we have expressed our view that direct supervision is required for 

hospital outpatient therapeutic services, and suggested 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 services 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 services of physicians and practitioners in the 
CMS-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 personnel under the direct supervision of a 

physician or appropriate NPP. 

Thus, we have long maintained that all hospital outpatient therapeutic services 

are, according to our policy, furnished “incident to” a physician’s service even when 

described by benefit categories other than the specific “incident to” provision in section 

1861(s)(2)(B) of the Act. Because hospital outpatient therapeutic services are furnished 

“incident to” a physician’s professional service, we believe the conditions for payment, 

including the direct supervision standard, should apply to all hospital outpatient 

therapeutic services. As discussed above, 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. Therapeutic services and supplies described by benefit 

categories other than the hospital 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 outpatients and paid under the OPPS or to CAHs under section 

1834(g) of the Act. 

We stated our belief that this clarification could most readily be accomplished by 

more specifically defining the services and supplies described in the regulation text to 

which the requirements at § 410.27 apply. Accordingly, we proposed to revise the 
CMS-1525-FC 859 

description of the services and supplies addressed in § 410.27(a) by adding the term 

“therapeutic” so that paragraph (a) would read, “Medicare Part B pays for therapeutic 

hospital or CAH services and supplies furnished incident to a physician’s or nonphysician 

practitioner’s service” to outpatients. We proposed 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 furnished to hospital outpatients that are not 

diagnostic services and that aid the physician or practitioner in the treatment of the 

patient.” We also proposed to add the term “therapeutic” 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 practitioner’s service: Conditions.” 

 Comment: Several commenters requested that CMS clarify that certain services 

which are not paid under the OPPS are excluded from the requirements of § 410.27 and 

thus from our proposed clarification, especially physical therapy (PT), speech language 

pathology (SLP) and occupational therapy (OT); diabetes self management training 

(DSMT); medical nutrition therapy; end-stage renal disease (ESRD) services; and 

services paid under the MPFS or the Clinical Laboratory Fee Schedule (CLFS). 

Response: The requirements of § 410.27 must be met for payment of the facility 

component of hospital outpatient therapeutic 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 the MPFS for outpatient PT/SLP/OT services, 
CMS-1525-FC 860 

under the proposed clarification, the supervision and other requirements of § 410.27 

would apply to CAHs but not to hospitals that are paid for those services under the 

MPFS. They expressed concern that CAHs will be disproportionately affected by CMS’ 

clarification regarding the applicability of the requirements of § 410.27 to outpatient 

therapeutic services furnished in CAHs. 

Response: CAHs have long been paid at reasonable cost rather than under the 

MPFS for PT/SLP/OT services, and, as discussed 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 clarification. We are finalizing our proposed 

amendment to our regulations to clarify our policy as follows. Hospital outpatient 

therapeutic services and supplies, including those services described by benefit categories 

other than the hospital outpatient “incident to” category under section 1861(s)(2)(B) of 

the Act, are subject to the conditions of payment in § 410.27 when they are paid under 

the OPPS or paid to CAHs under 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 apply. Accordingly, we are finalizing our 

proposed revision of the description of the services and supplies addressed in § 410.27(a) 

by adding the term “therapeutic” so that paragraph (a) reads, “Medicare Part B pays for 

therapeutic hospital or CAH services and supplies furnished incident to a physician’s or 

nonphysician practitioner’s service” to outpatients. We are defining these services, 

similar to the way they are defined in Section 20.5, Chapter 6, of the Medicare Benefit 

Policy Manual, to mean “all services and supplies furnished to hospital outpatients that 
CMS-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 adding the term “therapeutic” to the title of 

§ 410.27 so that it reads, “Therapeutic outpatient 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 CAHs are not specifically named in the 

definition of nonsurgical extended duration therapeutic services at § 410.27(a)(1)(v). We 

proposed to make a technical correction to insert the words “or CAH” after “hospital” in 

this paragraph. This is the same technical correction that we made throughout § 410.27 

in the CY 2010 OPPS/ASC final rule with comment period, discussed above. We did not 

receive any public comments on this proposal. Therefore, we are inserting the words “or 

CAH” after “hospital” in revised § 410.27(a)(1)(iv)(E) to clarify 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-references 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 reference § 410.29 (Limitations on drugs and biologicals). We 

proposed to correct § 410.27(b) so that it cross-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 this 
CMS-1525-FC 862 

update, we proposed to revise 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 to add a new paragraph (d) to read, “Rules on emergency 

services furnished to outpatients in a foreign 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 paragraphs (e) through (g), respectively. 

 We did not receive any public comments on this proposal. Therefore, we are 

finalizing our proposal to correct § 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 addition, we are updating § 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 this update, as we proposed, we are 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 are adding a new paragraph (d) to read, “Rules 

on emergency services furnished to outpatients in a foreign country are specified in 

subpart H of Part 424 of this chapter”. Accordingly, as we proposed, we are 

redesignating the existing paragraphs (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 consideration of the public 

comments we received, we are finalizing 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 appropriate level of supervision for individual hospital outpatient 

therapeutic services. We will amend the Panel Charter to add the appropriate statutory 

authority and to allow representatives 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 rural PPS hospitals. “Small rural PPS hospital” means the 

definition of small rural hospital that is used by the Congress for purposes of TOPs, and 

that is used in CMS’ notice of nonenforcement of direct supervision of outpatient 

therapeutic services in CAHs and small rural hospitals. With respect to supervision 

policy, the scope of the Panel’s activity is limited to recommending to CMS the 

appropriate level of supervision (general, direct, or personal) for individual hospital 

outpatient therapeutic services. 

We will issue agency decisions based on Panel recommendations through a 

subregulatory process. We will post our preliminary decisions on the OPPS Web site for 

a 30-day period of public review and comment. After consideration of any public 

comments that we receive, we will issue our final 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) that 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 a 
CMS-1525-FC 864 

supervision level to CMS, the Panel will assess whether there is a significant likelihood 

that the supervisory practitioner would need to reassess the patient and modify treatment 

during or immediately following the therapeutic intervention, or provide guidance or 

advice to the individual who provides the service. In answering 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 therapeutic service or procedure. 

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

• The clinical context in which the service is delivered. 

As we have discussed above, these criteria include, but extend well beyond, the 

likelihood of the need to manage medical emergencies during or after the provision of the 

service. The supervisory responsibility is more 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 based 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 supervision level that is sought, supported to the 
CMS-1525-FC 865 

extent possible with clinical evidence. In prioritizing services 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 service, the requestor should submit new evidence to support a 

change in policy. For example, the public could request another review of a previously 

reviewed service if new information indicates recent changes in technology or practice 

patterns that affect a procedure’s safety. Such a request 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 warranted, the agency will ask the 

APC Panel to review the service again using the same process that it uses to evaluate new 

requests. The Panel will then make another recommendation to CMS that could be the 

same or a different level of supervision 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 nonenforcement of the requirement for 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 extension is to allow these 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 that CMS assign either personal or 

general supervision to services, we are defining these terms 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 hospital 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 outpatients 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 addition, we are updating § 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 this update, we are 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 are adding a new paragraph (d) to read, “Rules on emergency 
CMS-1525-FC 867 

services furnished to outpatients in a foreign 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 that CAHs are subject to the requirements of § 410.27 in 

the same manner as other 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 particular OPPS policies apply to the code. The 

CY 2012 status indicator assignments for APCs and HCPCS codes are shown in 

Addendum A and Addendum B, respectively, on the CMS Web site at: 

http://www.cms.gov/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 the CY 2012 proposed rule, the Addenda will no 

longer appear in the printed version of the OPPS/ASC rules that are found in the Federal 

Register. Instead, these Addenda will be published and available only via the Internet on 

the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS. 

As we proposed in the CY 2012 OPPS/ASC 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 their 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 Designate 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 Paid 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 Paid 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 OPPS. We continue to believe 

that the proposed definitions of the OPPS status indicators continue to be appropriate, and 

therefore, we are finalizing, without modification, our CY 2012 proposal. The final 
CMS-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 status 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 Diagnostic 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 comments 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 providers. We continue to believe that the 

proposed definitions of the OPPS status indicators continue to be appropriate, and 

therefore, we are finalizing, 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 rule (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 Status 
CMS-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 the 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 status indicators and their definitions 

listed in the table above are also displayed 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 payment 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 the 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 above 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/ASC proposed rule (76 FR 42287 through 

42288), for the CY 2012 OPPS, we are using the same two comment indicators that are in 

effect for the CY 2011 OPPS. 

● “CH”—Active HCPCS codes in current and next calendar year; status indicator 

and/or APC assignment have changed or active HCPCS code that will be discontinued at 

the end of the current calendar year. 

● “NI”—New code for the next calendar year or existing code with substantial 

revision to its code descriptor in the next calendar year as compared to current calendar 

year, interim APC assignment; comments will be accepted on the interim APC 

assignment for the new code. 

We proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42287) to use the 

“CH” comment indicator in this CY 2012 OPPS/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 assignment as of December 31, 2011. We believe 

that using the “CH” indicator in this CY 2012 OPPS/ASC final rule with comment period 

will facilitate the public’s review of the changes that we are making for CY 2012. The 

use of the comment indicator “CH” in association with a composite APC indicates that 

the configuration of the composite APC is changed 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 regarding 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 indicator “NI,” the CY 2012 revision 

to the code descriptor (compared to the CY 2011 descriptor) must be significant such that 

the new code descriptor describes a new service or procedure for which the OPPS 

treatment may change. We use comment indicator “NI” to indicate that these HCPCS 

codes are open to comment on this CY 2012 OPPS/ASC final rule with comment period. 

Like all codes labeled with comment indicator “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 final rule with comment period. 

Only HCPCS codes with comment indicator “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 final rule with comment period 

are not open to public comment, unless we specifically request additional comments 

elsewhere in this final rule with comment period. The CY 2012 treatment of HCPCS 

codes that appear in this CY 2012 OPPS/ASC final rule with comment period to which 
CMS-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 comments 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 finalizing, without modification, our 

CY 2012 proposal and are continuing to use 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 section 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 later than March and June of each year that 

contain its Medicare payment policy recommendations. This section describes recent 

recommendations relevant to the OPPS 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 Medicare hospital OPPS: 

 Recommendation 3: “The Congress should increase payment rates for the acute 

care hospital inpatient and outpatient prospective payment systems in 2012 by 1 percent. 

The Congress should also require the Secretary of Health and Human Services to make 

adjustments to inpatient payment rates in future years to fully recover all overpayments 

due to documentation and coding improvements.” (page 60) 

 MedPAC further stated that: “For outpatient hospital services, the Commission is 

concerned that significant payment disparities among Medicare’s ambulatory care 

settings (hospital outpatient departments, ambulatory surgical centers, and physician 

offices) for similar services are fostering undesirable financial incentives. Physician 

practices and ambulatory surgical centers are being reorganized as hospital outpatient 

entities in part to receive higher reimbursements. The Commission believes that 

Medicare should seek to pay similar amounts for similar services, taking into account 
CMS-1525-FC 879 

differences in quality of care and in the relative risks of the patient populations. The 

Commission is concerned by the trend to reorganize 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 statutory 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 final 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/documents/Mar11_EntireReport.pdf. 

On June 15, 2011, MedPAC released a report to Congress entitled “Medicare and 

the Health Care Delivery System.” The report did not contain recommendations with 

regard to payment under the OPPS or the ASC 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 section of this final rule with comment period. 

● Adjustment to payments for dedicated cancer hospitals (section 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 resynchronization therapy (section II.A.2.e.(6) of 

this final rule with comment period) 

● Hospital outpatient quality reporting measures (section X.G. of this final rule 

with comment period) 

● Ambulatory surgical center quality reporting measures (section X.K. of this 

final rule with comment period) 

● Hospital inpatient value based purchasing (section XVI. of this final rule with 

comment period) 

B. APC Panel Recommendations

 Recommendations made by the APC Panel meeting held on February 28 and 

March 1, 2011 and August 10-12, 2011 are discussed in the sections of this final rule with 

comment period that correspond to topics addressed by the APC Panel. The reports and 

recommendations from the APC Panel’s February 28 and March 1, 2011 and 
CMS-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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

C. OIG Recommendations

The mission of the Office of the Inspector General (OIG), as mandated by 

Pub. L. 95–452, as amended, is to protect the integrity of the U.S. Department of Health 

and Human Services (HHS) programs, as well as the health and welfare of beneficiaries 

served by those programs. This statutory mission is carried out through a nationwide 

network of audits, investigations, and inspections. 

On October 22, 2010, the OIG published a memorandum report entitled “Payment 

for Drugs under the Hospital Outpatient 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 the OIG regarding the payment for 

drugs under the OPPS, and we have taken the findings 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 Surgical Center (ASC) Payment System 

A. Background

1. Legislative Authority for the ASC Payment System 

 Section 1832(a)(2)(F)(i) of the Act provides that benefits under Medicare Part B 

include payment for facility services furnished 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 requirements for ASCs, and the regulations at 

Subpart C explain the specific conditions 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 reviewing the appropriateness of the payment 

amount provided under section 1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) 

that belong to a class of new technology intraocular lenses (NTIOLs). That process was 

the subject of a final rule entitled “Adjustment in Payment Amounts for New Technology 

Intraocular Lenses Furnished by Ambulatory Surgical Centers,” published on 

June 16, 1999, in the Federal Register (64 FR 32198). 

 Section 626(b) of the Medicare Prescription 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 Secretary to implement a revised ASC payment 

system to be effective not later than January 1, 2008. Section 626(c) of the MMA 
CMS-1525-FC 883 

amended section 1833(a)(1) of the Act by adding new subparagraph (G), which requires 

that, beginning with implementation of the revised ASC payment system, payment for 

surgical procedures furnished in ASCs shall be 80 percent of the lesser of the actual 

charge for the services or the amount determined by the Secretary under the revised 

payment system. 

 Section 109(b) of the Medicare Improvements and Extension Act of 2006 of the 

Tax Relief and Health Care Act of 2006 (MIEA-TRHCA), Pub. L. 109-432, amended 

section 1833(i) of the Act by redesignating clause (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 payment system “in a manner so as to provide 

for a reduction in any annual update for failure to report on quality measures in 

accordance with paragraph (7).” 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 paragraph (7) will incur a 2.0 percentage point reduction to 

any annual increase provided under the revised 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 hospital 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 under section 1861(ddd)(3)(A) of the Act as 

described in section 1861(ww)(2) of the Act (excluding electrocardiograms) that are 

recommended by the United States Preventive Services Task Force (USPSTF) with a 

grade of A or B for any indication or population and that are appropriate for the 

individual. Section 4104(c) of the Affordable Care Act amended section 1833(b)(1) of 

the Act to waive the Part B deductible for colorectal cancer screening tests that become 

diagnostic. These provisions apply 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 and subsequent years, any annual update under 

the ASC payment system be reduced by a productivity adjustment, which is equal to the 

10-year moving average of changes in annual economy-wide private nonfarm business 

multi-factor productivity (as projected by the Secretary for the 10-year period ending 

with the applicable fiscal year, year, cost reporting period, or other annual period). 

Application of this productivity 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. 

 For a detailed discussion of the legislative 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 identifying 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 association with those covered surgical procedures 

beginning in CY 2008. We also established a policy for treating new and revised 

Healthcare Common Procedure Coding System (HCPCS) and Current Procedural 

Terminology (CPT) codes under the ASC payment system. 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 ASC covered surgical procedures on the OPPS 

relative payment weight multiplied by the ASC 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 predominantly performed in the office setting and 

covered ancillary radiology services (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 and 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 provide 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 and 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 and 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 listed for some CPT codes in Addendum B to 

the CY 2010 MPFS final rule with comment period (74 FR 62017), which were incorrect 

due to methodological errors and were subsequently 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 resulting 
CMS-1525-FC 887 

from corrections to the PE RVUs identified 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 ASC 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 correction 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 and lists of covered surgical procedures 

and covered ancillary services. We corrected some of the ASC rates 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 changes 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, affected office-based and ancillary radiology payment under the 

ASC payment system. Following legislative changes to the MPFS for CY 2011 

associated with passage of section 101 of the Medicare and Medicaid Extenders Act of 

2010 that occurred after publication 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 Lists of Codes and Payment Rates for ASC 

Covered Surgical Procedures and Covered Ancillary Services 

The August 2, 2007 final rule established our policies for determining which 

procedures are ASC covered surgical procedures and covered ancillary services. Under 

§ 416.2 and § 416.166 of the regulations, subject to certain exclusions, covered surgical 

procedures are surgical procedures that are separately paid under the OPPS, that would 

not be expected to pose a significant risk to beneficiary safety when performed in an 

ASC, and that would not be expected to require active medical monitoring and care at 

midnight following the procedure (“overnight stay”). We adopted this standard for 

defining which surgical procedures are covered surgical procedures under the ASC 

payment system as an indicator of the complexity of the procedure and its 

appropriateness for Medicare payment in ASCs. We use this standard only for purposes 

of evaluating procedures to determine whether or not they are appropriate for Medicare 

beneficiaries in ASCs. We define surgical procedures as those described by Category I 

CPT codes in the surgical range from 10000 through 69999, as well as those Category III 

CPT codes and Level II HCPCS codes that crosswalk 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 provided 
CMS-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-priced, including, but not limited to, procurement of corneal 

tissue; certain drugs and biologicals for which separate payment is allowed under the 

OPPS; and certain radiology services for which separate payment is allowed under the 

OPPS. These covered ancillary services are specified in § 416.164(b) and, as stated 

previously, are eligible for separate ASC payment (72 FR 42495). Payment for ancillary 

items and services that are not paid separately under the ASC payment system is 

packaged into the ASC payment for the covered surgical procedure. 

We update the lists of, and payment rates for, covered surgical procedures and 

covered ancillary services in conjunction with the annual proposed and final rulemaking 

process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In 

addition, as discussed in detail in section XIII.B. of the proposed rule and this final rule 

with comment period, because we base ASC payment policies for covered surgical 

procedures, drugs, biologicals, and certain other covered ancillary services on the OPPS 

payment policies, we also provide quarterly updates for ASC services throughout the year 

(January, April, July, and October). The updates are to implement newly created Level II 

HCPCS and Category III CPT codes for ASC payment and to update the payment rates 

for separately paid drugs and biologicals based on the most recently submitted ASP data. 

New Category I CPT codes, except vaccine codes, are released only once a year and, 

therefore, are implemented through the January quarterly update. New Category I CPT 
CMS-1525-FC 890 

vaccine codes are released twice a year and thus are implemented through the January 

and July quarterly updates. 

In our annual updates to the ASC list of, and payment rates for, covered surgical 

procedures and covered ancillary services, we undertake a review of excluded surgical 

procedures (including all procedures newly proposed for removal from the OPPS 

inpatient list), new procedures, and procedures for which there is revised coding, to 

identify any that we believe meet the criteria for designation as ASC covered surgical 

procedures or covered ancillary services. Updating the lists of covered surgical 

procedures and covered ancillary services, as well as their payment rates, in association 

with the annual OPPS rulemaking cycle is particularly important because the OPPS 

relative payment weights and, in some cases, payment rates, are used as the basis for the 

payment of covered surgical procedures and covered ancillary services under the revised 

ASC payment system. This joint update process ensures that the ASC updates occur in a 

regular, predictable, and timely manner. 

Comment: Several commenters provided a number of general suggestions related 

to the ASC list of covered surgical procedures. The commenters contended that CMS 

should not restrict which procedures 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 performed in hospitals and physician 

offices, CMS should articulate a clinical rationale 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 office setting should be included as one of the 
CMS-1525-FC 891 

criteria for inclusion on the ASC list of covered surgical procedures. Some commenters 

urged CMS to eliminate unlisted codes from the exclusionary criteria at § 416.166(c), and 

other commenters requested that ASCs be allowed to use unlisted codes to bill for 

procedures that are from anatomic sites that could not possibly pose a potential risk to 

beneficiary safety. The commenters reported that unlisted codes enable surgeons to 

utilize innovative techniques or new technologies and are paid under the OPPS and by 

commercial insurers. 

Response: We appreciate the commenters’ suggestions related to our decisions 

about which procedures are excluded from the ASC list of covered surgical procedures. 

However, as we explained in the August 2, 2007 final rule (72 FR 42479), we do not 

believe that all procedures that are appropriate for performance in HOPDs are appropriate 

in ASCs. HOPDs are able to provide much higher acuity care than ASCs. ASCs have 

neither patient safety standards consistent with 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 hospitals are required to maintain. Therefore, there are some 

procedures that we believe may be appropriately 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’ request 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 hospitals and physician offices. Our decisions to 
CMS-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 decisions. 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 meaningful comments on our decisions to exclude 

procedures from the list of covered surgical procedures. 

We believe that we should not use the frequency that a procedure is performed in 

the office setting as one of our criteria for additions 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 monitoring and care at midnight following 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 commenters’ 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 for procedures from certain anatomic sites 

would be expected to pose a risk to beneficiary 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 comment period (75 FR 72026 and 72027), because 
CMS-1525-FC 893 

we cannot evaluate any such procedure, we continue to believe that we must exclude 

unlisted codes as a group from the list of covered surgical procedures. 

After consideration of the public comments we received, we are continuing our 

established policies without modification for determining which procedures are ASC 

covered surgical procedures and covered ancillary services. 

B. Treatment of New Codes

1. Process for Recognizing New Category I and Category III CPT Codes and Level II 

HCPCS Codes 

CPT and Level II HCPCS codes are used to report procedures, services, items, 

and supplies under the ASC payment system. Specifically, we recognize the following 

codes on ASC claims: (1) Category I CPT codes, which describe medical services and 

procedures; (2) Category III CPT codes, which describe new and emerging technologies, 

services, and procedures; and (3) Level II HCPCS codes, which are used primarily to 

identify products, supplies, temporary procedures, and services not described by 

CPT codes. CPT codes are established by the American Medical Association (AMA) and 

the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes 

are updated and changed throughout the year. CPT and HCPCS code changes that affect 

ASCs are addressed both through the ASC quarterly update Change Requests (CRs) and 

through the annual rulemaking cycle. 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 are recognized on Medicare claims) outside of the formal 

rulemaking process via ASC quarterly update CRs. This quarterly process offers ASCs 
CMS-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 rulemaking process. We solicit comments on the 

new codes recognized for ASC payment and finalize our proposals related to these codes 

through our annual rulemaking process. 

We finalized a policy in the August 2, 2007 final rule to evaluate each year all 

new Category I and Category III CPT codes and Level II HCPCS codes that describe 

surgical procedures, and to make preliminary determinations in the annual OPPS/ASC 

final rule with comment period regarding whether or not they meet the criteria for 

payment in the ASC setting as covered surgical procedures and, if so, whether they are 

office-based procedures (72 FR 42533 through 42535). In addition, we identify new 

codes as ASC covered ancillary services based upon the final payment policies of the 

revised ASC payment system. 

In Table 41 of the CY 2012 OPPS/ASC 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 those comments in this CY 2012 OPPS/ASC 

final rule with comment period) or whether 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 comment period). We note that we sought 
CMS-1525-FC 895 

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 October 1, 2010. These new codes, with an effective 

date of October 1, 2010, or January 1, 2011, were flagged with comment indicator “N1” 

in Addenda AA and BB to the CY2011 OPPS/ASC final rule with comment period to 

indicate that we were assigning them an interim payment status and payment rate, if 

applicable, which were subject to public comment following publication of the CY 2011 

OPPS/ASC final rule with comment period. We stated that we would respond to public 

comments and finalize our proposed ASC treatment 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 Solicited Public Comments in the CY 2012 

OPPS/ASC Proposed Rule 

In the April and July CRs, we made effective for April 1 or July 1, 2011, a total of 

13 new Level II HCPCS codes and 6 new Category 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 covered 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 services. Specifically, as displayed in Table 42 of the CY 2012 

OPPS/ASC proposed rule (76 FR 42292), these included HCPCS codes C9280 (Injection, 

eribulin mesylate, 1 mg), C9281 (Injection, pegloticase, 1 mg), C9282 (Injection, 

ceftaroline fosamil, 10 mg), and Q2040 (Injection, incobotulinumtoxin A, 1 unit). We 

note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection, 

incobotulinumtoxin A, 1 unit) beginning 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 biological Level II HCPCS codes to the list 

of covered ancillary services. Specifically, 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, ipilimumab, 1 mg), 

C9285 (Lidocaine 70 mg/tetracaine 70mg, per 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 willebrand factor complex (human), Wilate, 

1 i.u. vwf:rco), Q2042 (Injection, hydroxyprogesterone caproate, 1 mg), Q2043 

(Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, 

including leukapheresis and all other preparatory procedures, per infusion), and Q2044 
CMS-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 surgical procedure on the ASC list; payment based on OPPS rate) 

to these 13 new Level II HCPCS codes to indicate 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 payment 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 became 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 that all ASC addenda were only available 

via the Internet on the CMS Web site. Because HCPCS codes that became effective for 

July (listed in Table 43 of the CY 2012 OPPS/ASC proposed rule) were not available to 

us in time for incorporation into the Addenda to the OPPS/ASC proposed rule, our policy 

is to include these HCPCS codes and their proposed payment indicators and payment 

rates in the preamble to the proposed rule but not in the Addenda to the proposed rule. 

These codes and their final payment indicators and rates are included in the appropriate 

Addendum to this CY 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 the 
CMS-1525-FC 898 

CY 2012 OPPS/ASC proposed rule were not included in Addendum BB to that proposed 

rule. The final list of covered ancillary services and the associated 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 comments regarding our proposals. We are 

continuing our established policy for recognizing new mid-year HCPCS codes. We also 

are adopting as final for CY 2012 the ASC payment 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 displayed 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 listed alongside the temporary CY 2011 HCPCS C-codes in 

Tables 48 and 49 below. 

TABLE 48.—NEW LEVEL II HCPCS CODES 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, 2011 
CMS-1525-FC 899 

TABLE 49.—NEW LEVEL II HCPCS CODES 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 million 

autologous cd54+ cells activated with papgm-csf, including leukapheresis and all 

other preparatory procedures, per infusion 

K2 

J0490 Q2044 Injection, belimumab, 10 mg K2 

*Level II HCPCS codes J7184 and C9273 were deleted June 30, 2011 and were replaced 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. Because new Category III CPT and Level II 

HCPCS codes that became effective for July were not available to us in time for 
CMS-1525-FC 900 

incorporation into the Addenda to the OPPS/ASC proposed rule, our policy is to include 

the codes, their proposed payment indicators, and proposed payment rates in the 

preamble to the proposed rule but not in the Addenda to the proposed rule. These codes 

and their final payment indicators and rates 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 procedure added in CY 2008 or later; payment 

based on OPPS relative payment weight) to all 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 Medicare beneficiaries or would not require an overnight stay if 

performed in ASCs. We solicited public comment on these proposed payment indicators 

and the payment rates for the new Category III CPT codes that were newly recognized as 

ASC covered surgical procedures in July 2011 through the quarterly update CR, as listed 

in Table 44 of the CY 2012 OPPS/ASC proposed rule (76 FR 42292 and 42293). We 

proposed to finalize their payment indicators and their payment rates in this CY 2012 

OPPS/ASC final rule with comment period. 

We did not receive any public comments regarding this proposal. We are 

continuing our established policy for recognizing new mid-year CPT codes for CY 2012. 

We also are adopting as final for CY 2012 the 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 carotid 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 carotid sinus baroreflex activation 

device; lead only, unilateral (includes intra-operative 

interrogation, programming, and repositioning, when 

performed) 

G2 

0271T 

Revision or removal of carotid sinus baroreflex activation 

device; pulse generator only (includes intra-operative 

interrogation, programming, and repositioning, when 

performed) 

G2 
CMS-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 HCPCS codes that are effective January 1 in 

the final rule with comment period updating the ASC payment system for the following 

calendar year. These codes are released to the public via the CMS HCPCS (for Level II 

HCPCS codes) and AMA Web sites (for CPT codes), and also through the January ASC 

quarterly update CRs. In the past, we also have released new Level II HCPCS codes that 

are effective October 1 through the October ASC quarterly update CRs and incorporated 

these new codes in the final rule with comment period updating the ASC payment system 

for the following calendar year. All of these codes are flagged with comment indicator 

‘‘NI’’ in Addenda AA and BB to the OPPS/ASC final rule with comment period to 

indicate that we are assigning them an interim payment status which is subject to public 

comment. The payment indicator and payment rate, if applicable, for all such codes 

flagged with comment indicator ‘‘NI’’ are open to public comment in the OPPS/ASC 

final rule with comment period, and we respond to these comments in the final rule with 

comment period for the next calendar year’s OPPS/ASC update. In the CY 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 comment period the new Category I and III CPT 

codes effective January 1, 2012 that would be incorporated in the January 2012 ASC 
CMS-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/ASC 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 codes that currently are paid under the 

OPPS, but not included on the ASC list of covered surgical procedures, to determine if 

changes in technology and/or medical practice changed the clinical appropriateness of 

these procedures for the ASC setting. Upon review, we did not identify any procedures 

that are currently excluded from the ASC list of procedures that met the definition of a 
CMS-1525-FC 904 

covered surgical procedure based on our expectation that they would not pose a 

significant safety risk to Medicare beneficiaries or would require an overnight stay if 

performed in ASCs. Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42293) 

we did not propose additions to the list of ASC covered surgical procedures for CY 2012. 

Comment: Commenters requested that CMS add the procedures described by the 

232 CPT codes displayed in Table 51 below to the list of ASC covered surgical 

procedures as well as several CPT unlisted codes. The commenters argued that these 

procedures are less complex and/or as safe 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, including axillary lymph nodes, with or 

without pectoralis minor muscle, but excluding pectoralis major muscle 

20100 Exploration of penetrating wound (separate procedure); neck 

20101 Exploration of penetrating wound (separate procedure); chest 

20102 

Exploration of penetrating wound (separate procedure); 

abdomen/flank/back 

20660 

Application of cranial tongs, caliper, or stereotactic frame, including 

removal (separate procedure) 

21049 

Excision of benign tumor or cyst of maxilla; requiring extra-oral 

osteotomy and partial maxillectomy (eg, locally aggressive or 

destructive lesion(s)) 

21089 Unlisted maxillofacial prosthetic procedure 

21141 

Reconstruction midface, lefort i; single piece, segment movement in 

any direction (eg, for long face syndrome), without bone graft 

21142 Reconstruction midface, lefort i; two pieces, segment movement in any 
CMS-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; single piece, segment movement in 

any direction, requiring bone grafts (includes obtaining autografts) 

21146 

Reconstruction midface, lefort i; two pieces, segment movement in any 

direction, requiring bone grafts (includes 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 bilateral alveolar cleft or multiple 

osteotomies) 

21151 

Reconstruction midface, lefort ii; any direction, requiring bone grafts 

(includes obtaining autografts) 

21172 

Reconstruction superior-lateral orbital rim and lower forehead, 

advancement or alteration, with or without grafts (includes obtaining 

autografts) 

21188 

Reconstruction midface, osteotomies (other 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 and/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 condyle with bone and cartilage 

autografts (includes obtaining grafts) (eg, for hemifacial microsomia) 

21256 

Reconstruction of orbit with osteotomies (extracranial) and with bone 

grafts (includes obtaining autografts) (eg, micro-ophthalmia) 

21343 Open treatment of depressed frontal sinus fracture 

21346 

Open treatment of nasomaxillary complex fracture (lefort ii type); with 

wiring and/or local fixation 
CMS-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 blowout fracture; transantral approach 

(caldwell-luc type operation) 

21386 Open treatment of orbital floor blowout fracture; periorbital approach 

21387 Open treatment of orbital floor blowout fracture; combined approach 

21395 

Open treatment of orbital floor blowout fracture; periorbital approach 

with bone graft (includes obtaining graft) 

21408 

Open treatment of fracture of orbit, except blowout; with bone grafting 

(includes obtaining graft) 

21422 Open treatment of palatal or maxillary 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 internal fixation, interdental fixation, 

and/or wiring of dentures or splints 

22100 

Partial excision of posterior vertebral component (eg, spinous process, 

lamina or facet) for intrinsic bony lesion, single vertebral segment; 

cervical 

22222 

Osteotomy of spine, including discectomy, anterior approach, single 

vertebral segment; thoracic 

22612 

Arthrodesis, posterior or posterolateral technique, single level; lumbar 

(with or without lateral transverse technique) 

22614 

Arthrodesis, posterior or posterolateral technique, single level; each 

additional vertebral segment (list separately in addition to code for 

primary procedure) 

22851 

Application of intervertebral biomechanical device(s) (eg, synthetic 

cage(s), methylmethacrylate) to vertebral defect or interspace (list 

separately in addition to code for primary procedure) 

23470 Arthroplasty, glenohumeral joint; hemiarthroplasty 
CMS-1525-FC 907 

CY 2012 

CPT/HCPCS 

Code CY 2012 CPT/HCPCS Long Descriptor 

23929 Unlisted procedure, shoulder 

27006 

Tenotomy, abductors and/or extensor(s) of hip, open (separate 

procedure) 

27027 

Decompression fasciotomy(ies), pelvic (buttock) compartment(s) (eg, 

gluteus medius-minimus, gluteus maximus, iliopsoas, and/or tensor 

fascia lata muscle), unilateral 

27035 

Denervation, hip joint, intrapelvic or extrapelvic intra-articular 

branches of sciatic, femoral, or obturator nerves 

27524 

Open treatment of patellar fracture, with internal fixation and/or partial 

or complete patellectomy and soft tissue repair 

28805 Amputation, foot; transmetatarsal 

31292 

Nasal/sinus endoscopy, surgical; with medial or inferior orbital wall 

decompression 

31600 Tracheostomy, planned (separate procedure); 

31610 Tracheostomy, fenestration procedure 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 without water seal (eg, for abscess, 

hemothorax, empyema) (separate procedure) 

32560 Chemical pleurodesis (eg, for recurrent or persistent pneumothorax) 

32601 

Thoracoscopy, diagnostic (separate procedure); lungs, pericardial sac, 

mediastinal or pleural space, without biopsy 

32602 

Thoracoscopy, diagnostic (separate procedure); lungs and pleural 

space, with biopsy 

32606 

Thoracoscopy, diagnostic (separate procedure); 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 incision 
CMS-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, pseudoaneurysm, or excision (partial or 

total) and graft insertion, with or without patch graft; for aneurysm and 

associated occlusive disease, axillary-brachial artery, by arm incision 

35180 Repair, congenital arteriovenous fistula; head and neck 

35184 Repair, congenital arteriovenous fistula; extremities 

35190 Repair, acquired or traumatic arteriovenous 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 patch graft, if performed; axillarybrachial 

35458 

Transluminal balloon angioplasty, open; brachiocephalic trunk or 

branches, each vessel 

35471 Transluminal balloon angioplasty, percutaneous; renal or visceral artery

35472 Transluminal balloon angioplasty, percutaneous; aortic 

35494 

Transluminal peripheral atherectomy, 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 arteriovenous fistula during lower extremity bypass 

surgery (non-hemodialysis) (list separately in addition to code for 

primary procedure) 

35860 Exploration for postoperative hemorrhage, 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 synthetic arterial bypass graft in 

groin, open; with autogenous vein patch graft 

35903 Excision of infected graft; extremity 

36838 

Distal revascularization and interval ligation (dril), upper extremity 

hemodialysis access (steal syndrome) 

37183 

Revision of transvenous intrahepatic portosystemic shunt(s) (tips) 

(includes venous access, hepatic and portal vein catheterization, 

portography with hemodynamic evaluation, intrahepatic tract 

recanulization/ dilatation, stent placement and all associated 

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 intravascular stent(s) (except coronary, 

carotid, and vertebral vessel), percutaneous; initial vessel 

37206 

Transcatheter placement of an intravascular stent(s) (except coronary, 

carotid, and vertebral vessel), percutaneous; each additional vessel (List 

separately in addition to code for primary procedure) 

37207 

Transcatheter placement of an intravascular stent(s) (non-coronary 

vessel other than iliac and lower extremity arteries), open; initial vessel 

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) 

37209 

Exchange of a previously placed intravascular catheter during 

thrombolytic therapy 

37224 

Revascularization, endovascular, open or percutaneous, 

femoral/popliteal artery(s), unilateral; with transluminal angioplasty 

37225 Revascularization, endovascular, open or percutaneous, 
CMS-1525-FC 910 

CY 2012 

CPT/HCPCS 

Code CY 2012 CPT/HCPCS Long Descriptor 

femoral/popliteal artery(s), unilateral; with atherectomy, includes 

angioplasty within the same vessel, when performed 

37226 

Revascularization, endovascular, open or percutaneous, 

femoral/popliteal artery(s), unilateral; with transluminal stent 

placement(s), includes angioplasty within the same vessel, when 

performed 

37227 

Revascularization, endovascular, open or percutaneous, 

femoral/popliteal artery(s), unilateral; with transluminal stent 

placement(s) and atherectomy, includes angioplasty within the same 

vessel, when performed 

37228 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, initial vessel; with transluminal angioplasty 

37229 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, initial vessel; with atherectomy, includes angioplasty 

within the same vessel, when performed 

37230 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, initial vessel; with transluminal stent placement(s), 

includes angioplasty within the same vessel, when performed 

37231 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, initial vessel; with transluminal stent placement(s) 

and atherectomy, includes angioplasty within the same vessel, when 

performed 

37232 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, each additional vessel; with transluminal angioplasty 

(List separately in addition to code for primary procedure) 

37233 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, each additional vessel; with atherectomy, includes 

angioplasty within the same vessel, when performed (List separately in 

addition to code for primary procedure) 

37234 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, each additional vessel; with transluminal stent 

placement(s), includes angioplasty within the same vessel, when 

performed (List separately in addition to code for primary procedure) 

37235 

Revascularization, endovascular, open or percutaneous, tibial/peroneal 

artery, unilateral, each additional vessel; with transluminal stent 
CMS-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, intravascular (umbrella device) 

38120 Laparoscopy, surgical, splenectomy 

38240 

Bone marrow or blood-derived peripheral stem cell transplantation; 

allogenic 

38720 Cervical lymphadenectomy (complete) 

39400 Mediastinoscopy, with biopsy(ies), when performed 

42842 

Radical resection of tonsil, tonsillar pillars, and/or retromolar trigone; 

without closure 

42844 

Radical resection of tonsil, tonsillar pillars, and/or retromolar trigone; 

closure with local flap (eg, tongue, buccal) 

43280 

Laparoscopy, surgical, esophagogastric fundoplasty (eg, nissen, toupet 

procedures) 

43420 Closure of esophagostomy or fistula; cervical approach 

43510 

Gastrotomy; with esophageal dilation and insertion of permanent 

intraluminal tube (eg, celestin or mousseaux-barbin) 

43659 Unlisted laparoscopy procedure, stomach 

43830 

Gastrostomy, open; without construction of gastric tube (eg, stamm 

procedure) (separate procedure) 

44180 

Laparoscopy, surgical, enterolysis (freeing of intestinal adhesion) 

(separate procedure) 

44186 Laparoscopy, surgical; jejunostomy (eg, for decompression or feeding) 

44206 

Laparoscopy, surgical; colectomy, partial, with end colostomy and 

closure of distal segment (hartmann type procedure) 

44207 

Laparoscopy, surgical; colectomy, partial, with anastomosis, with 

coloproctostomy (low pelvic anastomosis) 

44208 

Laparoscopy, surgical; colectomy, partial, with anastomosis, with 

coloproctostomy (low pelvic anastomosis) with colostomy 
CMS-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 appendiceal abscess; percutaneous 

44950 Appendectomy; 

44955 

Appendectomy; when done for indicated purpose at time of other major 

procedure (not as separate procedure) (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 supervision 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 retroperitoneal 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, surgical; partial nephrectomy 

50544 Laparoscopy, surgical; pyeloplasty 
CMS-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 suspension, with or without endoscopic 

control (eg, stamey, raz, modified pereyra) 

51860 Cystorrhaphy, suture of bladder wound, injury or rupture; simple 

52649 

Laser enucleation of the prostate with morcellation, including control 

of postoperative bleeding, complete (vasectomy, meatotomy, 

cystourethroscopy, urethral calibration and/or dilation, internal 

urethrotomy and transurethral resection 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, postsurgical obstruction, scarring) 

54332 

One stage proximal penile or penoscrotal hypospadias repair requiring 

extensive dissection to correct chordee and urethroplasty by use of skin 

graft tube and/or island flap 

54336 

One stage perineal hypospadias repair requiring extensive 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 through an infected field at the same 

operative session, including irrigation and debridement of infected 

tissue 

54417 

Removal and replacement of non-inflatable (semi-rigid) or inflatable 

(self-contained) penile prosthesis through an infected field at the same 

operative session, including irrigation and debridement of infected 

tissue 

54535 Orchiectomy, radical, for tumor; with abdominal exploration 

54650 

Orchiopexy, abdominal approach, for intra-abdominal testis (eg, 

fowler-stephens) 

57106 Vaginectomy, partial removal 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-peritoneal 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 vaginal prolapse if performed); open 

abdominal approach (do not report 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 vaginal 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 vesicovaginal fistula; transvesical and vaginal approach 

57423 

Paravaginal defect repair (including repair 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, for uterus 250 g or less; 

58262 

Vaginal hysterectomy, for uterus 250 g or less; with removal of tube(s), 

and/or ovary(s) 

58263 

Vaginal hysterectomy, for uterus 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 vaginal hysterectomy, for uterus greater 
CMS-1525-FC 915 

CY 2012 

CPT/HCPCS 

Code CY 2012 CPT/HCPCS Long Descriptor 

than 250 g; 

58554 

Laparoscopy, surgical, with vaginal hysterectomy, for uterus greater 

than 250 g; with removal of tube(s) and/or ovary(s) 

58570 Laparoscopy, surgical, with total hysterectomy, for uterus 250 g or less;

58571 

Laparoscopy, surgical, with total hysterectomy, 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, transvaginal or transrectal approach, 

percutaneous (eg, ovarian, pericolic) 

58925 Ovarian cystectomy, unilateral or bilateral 

59074 

Fetal fluid drainage (eg, vesicocentesis, 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 remaining thyroid tissue following 

previous removal of a portion of thyroid 

60271 Thyroidectomy, including substernal thyroid; cervical approach 

60500 Parathyroidectomy or exploration of parathyroid(s); 

60512 

Parathyroid autotransplantation (list separately in addition to code for 

primary procedure) 

61623 

Endovascular temporary balloon arterial 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 required for balloon occlusion and to 

exclude vascualr injury post occlusion 

61626 

Transcatheter permanent occlusion or embolization (eg, for tumor 

destruction, to achieve hemostasis, to occlude a vascular 

malformation), percutaneous, any method; non-central nervous system, 

head or neck (extracranial, brachiocephalic branch) 

61720 Creation of lesion by stereotactic method, including burr hole(s) and 
CMS-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 repositioning 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), one 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 or 
CMS-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, foraminotomy 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, foraminotomy 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, foraminotomy and/or excision of 

herniated intervertebral disc, including open and endoscopicallyassisted approaches; each additional 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, foraminotomy and/or excision of 

herniated intervertebral disc, reexploration, single interspace; cervical 

63042 

Laminotomy (hemilaminectomy), with decompression of nerve root(s), 

including partial facetectomy, foraminotomy and/or excision of 

herniated intervertebral disc, reexploration, single interspace; lumbar 

63045 

Laminectomy, facetectomy and foraminotomy (unilateral or bilateral 

with decompression of spinal cord, cauda equina and/or nerve root(s), 

(eg, spinal or lateral recess stenosis)), single vertebral segment; cervical

63046 

Laminectomy, facetectomy and foraminotomy (unilateral or bilateral 

with decompression of spinal cord, cauda equina and/or nerve root(s), 

(eg, spinal or lateral recess stenosis)), single vertebral segment; thoracic

63047 

Laminectomy, facetectomy and foraminotomy (unilateral or bilateral 

with decompression of spinal cord, cauda equina and/or nerve root(s), 

(eg, spinal or lateral recess stenosis)), single vertebral segment; lumbar 

63048 

Laminectomy, facetectomy and foraminotomy (unilateral or bilateral 

with decompression of spinal cord, cauda 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 procedure) (Use 63048 with 63045-63047) 
CMS-1525-FC 918 

CY 2012 

CPT/HCPCS 

Code CY 2012 CPT/HCPCS Long Descriptor 

63055 

Transpedicular approach with decompression of spinal cord, equina 

and/or nerve root(s) (eg, herniated intervertebral disc), single segment; 

thoracic 

63056 

Transpedicular approach with decompression of spinal cord, equina 

and/or nerve root(s) (eg, herniated intervertebral disc), single segment; 

lumbar (including transfacet, or lateral extraforaminal approach) (eg, 

far lateral herniated intervertebral disc) 

63057 

Transpedicular approach with decompression of spinal cord, equina 

and/or nerve root(s) (eg, herniated intervertebral disc), single segment; 

each additional segment, thoracic or lumbar (list separately in addition 

to code for primary procedure) 

63075 

Discectomy, anterior, with decompression of spinal cord and/ or nerve 

root(s), including osteophytectomy; cervical, single interspace 

63076 

Discectomy, anterior, with decompression 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 process distraction device (including 

necessary removal of bone or ligament for insertion and imaging 

guidance), lumbar; single level 

0172T 

Insertion of posterior spinous process distraction device (including 

necessary removal of bone or ligament for insertion and imaging 

guidance), lumbar; each additional level (list separately in addition to 

code for primary procedure) 

G0365 

Vessel mapping of vessels for hemodialysis access (services for 

preoperative vessel mapping prior to creation of hemodialysis access 

using an autogenous hemodialysis conduit, including arterial inflow 

and venous outflow) 

G0413 

Percutaneous skeletal fixation of posterior pelvic bone fracture and/or 

dislocation, for fracture patterns which disrupt the pelvic ring, 

unilateral or bilateral, (includes ilium, 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 recommended by the commenters are appropriate for 

provision to Medicare beneficiaries in ASCs. Although the commenters asserted that the 

procedures they were requesting for addition to the list are less complex than and as safe 

as procedures already on the list, our review did not support those assertions. We 

exclude from ASC payment any procedure for which standard medical practice dictates 

that the beneficiary who undergoes the procedure would typically be expected to require 

active medical monitoring and care at midnight following the procedure (overnight stay) 

as well as all surgical procedures that our medical advisors determine may be expected to 

pose a significant safety risk to Medicare beneficiaries when performed in an ASC. The 

criteria used under the revised ASC payment system to identify procedures that would be 

expected to pose a significant safety risk when performed in an ASC include, but are not 

limited to, those procedures that: generally result in extensive blood loss; require major 

or prolonged invasion of body cavities; directly involve major blood vessels; are 

emergent or life threatening in nature; commonly require systemic thrombolytic 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 threat to beneficiary safety or require active 

medical monitoring at midnight following the procedure. Specifically, we found that 

prevailing medical practice called for inpatient hospital stays for beneficiaries undergoing 

many of the procedures and that some of the procedures directly involve major blood 

vessels and/or may result in extensive blood loss. However, we do agree with 

commenters that the procedures described by CPT codes 37201, 37202, 37207, 37208, 

59074, and HCPCS code G0365 meet the criteria 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 descriptors, 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 

G2 
CMS-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, including arterial inflow and 

venous outflow) 

G2 

b. Covered Surgical Procedures Designated as Office-Based 

(1) Background 

In the August 2, 2007 ASC final rule, we finalized our policy to designate as 

“office-based” those procedures that are added to the ASC list of covered surgical 

procedures in CY 2008 or later years that we determine are performed predominantly 

(more than 50 percent of the time) in physicians’ offices based on consideration of the 

most recent available volume and utilization data for each individual procedure code 

and/or, if appropriate, the clinical characteristics, utilization, and volume of related codes. 

In that rule, we also finalized our policy to exempt all procedures on the CY 2007 ASC 

list from application of the office-based classification (72 FR 42512). The procedures 

that were added to the ASC list of covered surgical procedures beginning in CY 2008 that 

we determined were office-based were identified in Addendum AA to that rule by 
CMS-1525-FC 922 

payment indicator “P2” (Office-based surgical procedure added to ASC list in CY 2008 

or later with MPFS nonfacility PE RVUs; payment based on OPPS relative payment 

weight); “P3” (Office-based surgical procedures added to ASC list in CY 2008 or later 

with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE RVUs); or 

“R2” (Office-based surgical procedure added to ASC list in CY 2008 or later without 

MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), 

depending on whether we estimated it would be paid according to the standard ASC 

payment methodology based on its OPPS relative payment weight or at the MPFS 

nonfacility PE RVU-based amount. 

 Consistent with our final policy to annually review and update the list of surgical 

procedures eligible for payment in ASCs, each year we identify surgical procedures as 

either temporarily office-based, permanently office-based, or non-office-based, after 

taking into account updated volume and utilization data. 

(2) Changes for CY 2012 to Covered Surgical Procedures Designated 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 the surgical procedures for 

which ASC payment is made and to identify new procedures that may be appropriate for 

ASC payment, including their potential designation as office-based. We reviewed CY 

2010 volume and utilization data and the clinical characteristics for all surgical 

procedures that are assigned payment indicator “G2” in CY 2011, as well as for those 

procedures assigned one of the temporary office-based payment indicators, specifically 
CMS-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 identification of 10 

surgical procedures that we believe meet the criteria for designation as office-based. We 

stated that the data indicated that the procedures are performed more than 50 percent of 

the time in physicians’ offices, and that our medical advisors believed the services are of 

a level of complexity consistent with other procedures performed routinely in physicians’ 

offices. The 10 CPT codes we proposed to permanently designate as office-based are 

listed in Table 45 of the CY 2012 OPPS/ASC proposed rule (76 FR 42294), and are listed 

in Table 53 below. 

Comment: Some commenters expressed 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 recommended 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 ensure that the data used to apply this policy are reliable. 

Response: We have responded to this comment in the past and we continue to 

believe that our policy of identifying low complexity procedures that are usually provided 

in physicians’ offices and limiting their payment in ASCs to the physician’s office 

payment amount is necessary and valid. We believe this is the most appropriate approach 
CMS-1525-FC 924 

to preventing the creation of payment incentives for services to move from physicians’ 

offices to ASCs for the many newly covered low complexity procedures on the ASC list. 

We refer readers to our response to this comment in final rules with comment period 

from prior years: 74 FR 60605 through 60606 and 75 FR 72034 through 72035. 

 After consideration of the public comments we received, we are finalizing our 

CY 2012 proposal to designate the procedures 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 R2 
CMS-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 R2 
CMS-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 the time this final rule with comment period is being 

finalized for publication, current law authorizes a negative update to the MPFS payment rates for 
CMS-1525-FC 927 

CY 2012. Therefore, this final rule with comment period reflects a negative update to the MPFS 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. 

We also reviewed CY 2010 volume and utilization data and other information for 

the 23 procedures finalized for temporary office-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 placement of pharmacological agent (does not include 

supply of medication)); CPT code 0226T (Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); diagnostic, including collection of 

specimen(s) by brushing or washing when performed); CPT code 0227T (Anoscopy, high 

resolution (HRA) (with magnification and chemical agent enhancement); with 

biopsy(ies)); CPT code 0232T (Injection(s), platelet rich plasma, any tissue, including 

image guidance, harvesting and preparation when performed); CPT code C9800 (Dermal 

injection procedure(s) for facial lipodystrophy syndrome (LDS) and provision of 

Radiesse or Sculptra dermal filler, including all items and supplies); CPT code 37761 

(Ligation of perforator vein(s), subfascial, open, including ultrasound guidance, when 

performed, 1 leg); and CPT code 67229 (Treatment of extensive or progressive 

retinopathy, one or more sessions; preterm infant (less than 37 weeks gestation at birth), 

performed from birth up to 1 year of age (eg, retinopathy of prematurity), 

photocoagulation or cryotherapy). Consequently, we proposed in the CY 2012 
CMS-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 remaining 15 procedures that have temporary 

office-based designations for CY 2011 for which 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 vascular 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 tissue 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 tissue 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 CPT codes are sufficient to indicate that 

these procedures are not performed predominantly in physicians’ offices and, therefore, 

should not be assigned an office-based payment indicator in CY 2012. 

The CY 2012 payment indicator designations that we proposed for the 

23 procedures that were temporarily designated as office-based in CY 2011 were 

displayed in Table 46 of the CY 2012 OPPS/ASC proposed rule (76 FR 42295). The 

procedures for which the proposed office-based designations for CY 2012 are temporary 
CMS-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 that addressed our proposal to continue 

to designate the eight 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 designate the eight procedures listed in Table 46 of the 

CY 2012 OPPS/ASC proposed rule and restated 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 any 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 temporarily office-based in CY 2011. Therefore, we 

are finalizing our proposal to not provide 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 INDICATORS FOR ASC COVERED 

SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY OFFICEBASED IN THE CY 2011 OPPS/ASC FINAL 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* G2 
CMS-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 tissue 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 tissue of pelvis and hip 

area, subcutaneous; less than 3 cm P3* G2 

27327 Excision, tumor, soft tissue of thigh or knee 

area, subcutaneous; less than 3 cm P3* G2 

27618 Excision, tumor, soft tissue of leg or ankle 

area, subcutaneous; less than 3 cm P3* G2 

28039 Excision, tumor, soft tissue of foot or toe, 

subcutaneous; 1.5 cm or greater P3* G2 

28041 

Excision, tumor, soft tissue of foot or toe, 

subfascial (eg, intramuscular); 1.5 cm or 

greater 

R2* G2 

28043 Excision, tumor, soft tissue of foot or toe, 

subcutaneous; less than 1.5 cm P3* G2 

28045 

Excision, tumor, soft tissue of foot or toe, 

subfascial (eg, intramuscular); 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 vein(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 rich 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 all 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 authorizes a negative update to the MPFS payment rates 

for CY 2012. Therefore, this final rule with comment period reflects a negative update to the MPFS 
CMS-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 Procedures Designated as Device-Intensive 

(1) Background 

As discussed in the August 2, 2007 final rule (72 FR 42503 through 42508), we 

adopted a modified payment methodology for calculating the ASC payment rates for 

covered surgical procedures that are assigned to the subset of OPPS device-dependent 

APCs with a device offset percentage greater than 50 percent of the APC cost under the 

OPPS, in order to ensure that payment for the procedure is adequate to provide packaged 

payment for the high-cost implantable devices used in those procedures. We assigned 

payment indicators “H8” (Device-intensive procedure on ASC list in CY 2007; paid at 

adjusted rate) and “J8” (Device-intensive procedure added to ASC list in CY 2008 or 

later; paid at adjusted rate) to identify the procedures that were eligible for ASC payment 

calculated according to the modified methodology, depending on whether the procedure 

was included on the ASC list of covered surgical 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 transition to the ASC payment rates under 

the standard methodology is complete and, therefore, identification of device-intensive 

procedures that are subject to transitional payment methodology is no longer necessary, 

we proposed to delete payment indicator “H8” (Device-intensive procedure on ASC list 
CMS-1525-FC 934 

in CY 2007; paid at adjusted rate). We proposed that the device-intensive procedures for 

which the device-intensive payment methodology would apply in CY 2012 or later would 

be assigned payment indicator “J8” (Device-intensive 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 that are eligible for payment according to the 

device-intensive procedure payment methodology 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 that we proposed to designate as deviceintensive and that would be subject to the device-intensive procedure payment 

methodology for CY 2012 were listed in Table 47 of the CY 2012 OPPS/ASC proposed 

rule (76 FR 42296 through 42297). The CPT code, 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 rule. 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 expressed the same general concerns made in prior 

rulemakings – that is concerns regarding the sufficiency of ASC payment for devicerelated services and recommended modifications to the ASC 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 of whether they are designated as deviceintensive under the established methodology. In a related suggestion, the commenters 

urged CMS to lower the threshold used to determine device-intensive procedures stating 

that the designation of a device-intensive procedure based on whether the device portion 

of the cost is greater than 50 percent of the APC median cost excludes too many 

procedures from a reasonable modification to the standard ASC payment methodology. 

Commenters suggested that APCs with a device offset percentage greater than 23 percent 

of the APC median cost under the OPPS may 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 occurs on a national market, and the price is 

the same regardless of the location of the ASC. Commenters also suggested that 

application of device-intensive status should supersede the office-based designation. 

Commenters believed that CMS has misapplied its policy in a limited number of cases by 
CMS-1525-FC 936 

designating a device-intensive procedure as office-based and setting the payment for the 

procedure at the physician 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 packaged 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 assigned 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 costs are less likely to be as predictable across 

sites-of-service. Accordingly, we believe that it is possible for ASCs to achieve 

efficiencies relative to HOPDs when providing those procedures, and that the application 

of the ASC conversion factor to the entire ASC payment weight is appropriate. We refer 

readers to our response to this comment in 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 different services, such as applying the wage 

index only to the service portion of the ASC payment for device-intensive procedures, as 

the commenters requested. Consistent with the OPPS, we apply the ASC geographic 

wage adjustment to the entire ASC payment rate for device-intensive procedures. We 

refer readers to our response to this comment in 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 evaluate 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 reviewing the results of its evaluation, as well 

as any recommendations it may provide, regarding 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 this 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 payment rates. We have reviewed all 

procedures that are on the ASC list of covered 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 osseointegrated devices. However, the commenter 

indicated that the proposed payment 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 osseointegrated 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 according 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 the public comments we received, 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 short descriptor, the final CY 2012 ASC 

payment indicator, the final CY 2012 OPPS 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 effective 
CMS-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 until 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-dependent 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 relevant tables in the OPPS/ASC final rule with 

comment period. Therefore, we have also removed CPT codes 64560 (percutaneous 

implantation of neurostimulator electrodes; 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 Addendum AA to this final rule 

with comment period (which is available via the Internet on the CMS Web site). The 

OPPS device-dependent APCs are discussed further 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 2012 

DeviceDependent 

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 2012 

DeviceDependent 

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 2012 

DeviceDependent 

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 2012 

DeviceDependent 

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 2012 

DeviceDependent 

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 2012 

DeviceDependent 

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 

Implant 

neuroelectrodes 

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 2012 

DeviceDependent 

APC 

Offset 

Percentage

generator Generator 

64553 

Implant 

neuroelectrodes J8 0040 

Level I 

Implantation/Revision/Re

placement of 

Neurostimulator 

Electrodes 

55% 

64555 

Implant 

neuroelectrodes J8 0040 

Level I 

Implantation/Revision/Re

placement of 

Neurostimulator 

Electrodes 

55% 

64561 

Implant 

neuroelectrodes 

J8 0040 

Level I 

Implantation/Revision/Re

placement of 

Neurostimulator 

Electrodes 

55% 

64565 

Implant 

neuroelectrodes 

J8 0040 

Level I 

Implantation/Revision/Re

placement of 

Neurostimulator 

Electrodes 

55% 

64568 

Implant 

neuroelectrodes 

J8 0318 

Implantation of Cranial 

Neurostimulator Pulse 

Generator and Electrode 

86% 

64575 

Implant 

neuroelectrodes 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 2012 

DeviceDependent 

APC 

Offset 

Percentage

64580 

Implant 

neuroelectrodes J8 0061 

Level II 

Implantation/Revision/Re

placement of 

Neurostimulator 

Electrodes 

64% 

64581 

Implant 

neuroelectrodes 

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 2012 

DeviceDependent 

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 possible 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 the 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 should 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 recommendations regarding the procedures we 

proposed to remove from the OPPS inpatient list for CY 2012 may be found in section 
CMS-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 procedures for CY 2012, that were proposed for 

removal from the CY 2012 OPPS inpatient list. 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 THAT 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 and/or local fixation 

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 

54650 Orchiopexy, abdominal approach, 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 update 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 changes 
CMS-1525-FC 949 

to ASC payment indicators for some covered ancillary items and services because of 

changes that are being proposed under the OPPS for CY 2012. For example, a covered 

ancillary service that was separately paid under the revised ASC payment system in 

CY 2011 may be proposed for packaged status under the CY 2012 OPPS and, therefore, 

also under the ASC payment system for CY 2012. Comment indicator “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 ancillary services for which we proposed a change in the ASC 

payment indicator to reflect a proposed change in the OPPS treatment of the service for 

CY 2012. 

Except for the Level II HCPCS codes listed in Table 43 of the CY 2012 

OPPS/ASC proposed rule (76 FR 42292), all ASC 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 comments on our proposal. Therefore, we are 

finalizing, without modification, our proposal to update the ASC list of covered ancillary 

services to reflect the payment status for the services under the OPPS. All CY 2012 ASC 

covered ancillary services and their final payment indicators are included in Addendum 

BB to this final rule with comment period (which is available via the Internet on the CMS 

Web site). 
CMS-1525-FC 950 

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

1. Payment for Covered Surgical Procedures 

a. Background 

Our ASC payment policies for covered surgical procedures under the revised 

ASC payment system are fully described in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66828 through 66831). Under our established policy for the 

revised ASC payment system, the ASC standard ratesetting methodology of multiplying 

the ASC relative payment weight for the procedure by the ASC conversion factor for that 

same year is used to calculate the national unadjusted payment rates for procedures with 

payment 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 according to the ASC standard ratesetting 

methodology. The rate calculation established for device-intensive procedures (payment 

indicator “J8”) is structured so that the packaged device payment amount is the same as 

under the OPPS, and only the service portion of the rate is subject to the ASC standard 

ratesetting methodology. In the CY 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 the 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 procedures formerly subject to the transitional 
CMS-1525-FC 951 

payment methodology (payment indicators “A2” and “H8”) using the standard rate 

setting methodology, incorporating the device-intensive methodology, as appropriate. 

Payment rates for office-based procedures (payment indicators “P2,” “P3,” and 

“R2”) are the lower of the MPFS nonfacility PE RVU-based amount (we refer readers to 

the CY 2012 MPFS final rule with comment period) 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, calculated according to the ASC standard 

ratesetting methodology, to the MPFS nonfacility PE RVU-based amount to determine 

which was lower and, therefore, would be the CY 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 rule (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 subsequent 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 “H8”) using the proposed CY 2012 ASC rate 

calculated according to the ASC standard ratesetting methodology, incorporating the 
CMS-1525-FC 952 

device-intensive procedure methodology, as appropriate. We proposed to continue to use 

the amount calculated under the ASC standard ratesetting methodology for procedures 

assigned payment indicator “G2.” We proposed 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 office-based procedures (payment indicators 

“P2,” “P3,” and “R2”) and device-intensive procedures that were 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 the proposed CY 2012 ASC payment amount 

calculated according to the standard ratesetting methodology. 

 We did not receive any comments on our proposal to calculate CY 2012 payment 

rates for ASC-covered surgical procedures according to our established methodologies. 

Therefore, we are finalizing our CY 2012 proposal, without modification, 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 Cost/Full Credit and Partial Credit Devices 

Our ASC policy with regard to payment for costly devices implanted in ASCs at 

no cost/full credit or partial credit as set forth in § 416.179 is consistent 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 includes 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 those ASC covered surgical procedures that are 

assigned to APCs under the OPPS to which this policy applies. We refer readers to the 

CY 2009 OPPS/ASC final rule with comment period for a full discussion of the ASC 

payment adjustment policy for no cost/full credit and partial credit devices (73 FR 68742 

through 68745). 

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 devices 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 through 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 manufacturer, the ASC would append 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 covered surgical procedure being furnished by the 

ASC. 

We also proposed to reduce the payment for implantation procedures listed in 

Table 49 of the CY 2012 OPPS/ASC proposed rule (76 FR 42299 through 42301) by 

one-half of the device offset amount that would be applied if a device was provided at no 

cost or with full credit, if the credit to the ASC is 50 percent or more of the cost of the 

new device. The ASC would append the HCPCS “FC” modifier to the HCPCS code for 

a surgical procedure listed in Table 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 manufacturer acknowledgment of credit for the 

device, and subsequently contacting the contractor regarding a claim adjustment once the 

credit determination is made; or (2) holding the claim for the device implantation 
CMS-1525-FC 955 

procedure until a determination is made by the manufacturer on the partial credit and 

submitting the claim with the “FC” modifier appended to the implantation procedure 

HCPCS code if the partial credit is 50 percent or more of the cost of the replacement 

device. Beneficiary coinsurance would continue to be based on the reduced payment 

amount. 

We did not receive any comments on our CY 2012 proposal to continue the no 

cost/full credit and partial credit device adjustment 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 amount for no cost/full credit cases. ASCs 

must append the modifier “FB” to the HCPCS procedure code when the device furnished 

without cost or with full credit 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 the 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 until after the CY 2012 OPPS/ASC proposed rule 
CMS-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 CPT codes to Table 57 because they are ASC 

covered surgical procedures that are assigned to APCs under 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 annually and remove them from all relevant 

tables in the OPPS/ASC final rule with comment period. Therefore, we have also 

removed CPT codes 64560 (Percutaneous implantation of neurostimulator electrodes; 

autonomic nerve) and 64577 (Incision for implantation of neurostimulator electrodes; 

autonomic nerve) because these CPT codes have been deleted for CY 2012. We also 

have added two device HCPCS codes to Table 58, C1777 (Lead, cardioverterdefibrillator, endocardial single coil (implantable)) and C1895 (Lead, cardioverterdefibrillator, endocardial dual coil (implantable)) because these devices are now 

associated with CPT code 33249 (Insertion or replacement of permanent pacing 

cardioverter-defibrillator system with transvenous 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 DEVICE 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 of 

CardioverterDefibrillator Pulse 

Generator 

89% 45% 

33231 Insrt pulse gen 

w/mult leads J8 0107 

Insertion of 

CardioverterDefibrillator 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 of 

CardioverterDefibrillator Pulse 

Generator 

89% 45% 

33263 

Remv&replc 

cvd gen dual 

lead 

J8 0107 

Insertion of 

CardioverterDefibrillator Pulse 

Generator 

89% 45% 

33264 

Remv&replc 

cvd gen mult 

lead 

J8 0107 

Insertion of 

CardioverterDefibrillator 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 THE “FB” OR “FC” MODIFIER 

MUST BE REPORTED WITH THE PROCEDURE CODE IN CY 2012 WHEN 

FURNISHED AT NO COST OR WITH FULL OR PARTIAL CREDIT 

CY 2012 

Device HCPCS 

Code CY 2012 Short Descriptor 

C1721 AICD, dual chamber 

C1722 AICD, single chamber 

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 Deductible 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 Act waives the coinsurance and the Part B deductible for 

those preventive services under section 1861(ddd)(3)(A) of the Act as described in 

section 1861(ww)(2) of the Act (excluding electrocardiograms) that are recommended by 
CMS-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 appropriate for the individual. Section 1833(b) 

of the Act also waives the Part B deductible for colorectal cancer screening tests that 

become diagnostic. In the CY 2011 OPPS/ASC final rule with comment period, we 

finalized our policies with respect to these provisions and identified the ASC covered 

surgical and ancillary services that are preventive services that are recommended by the 

USPSTF with a grade of A or B for which the coinsurance and the deductible are waived. 

For a complete discussion of our policies and identified services, we refer readers to the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 72047 through 72049). We 

did not propose any changes to our policies or the list of services in the CY 2012 

OPPS/ASC proposed rule. We identify these services 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 Resynchronization Therapy Composite 

Cardiac resynchronization therapy (CRT) uses electronic devices to sequentially 

pace both sides of the heart to improve its output. CRT utilizes a pacing electrode 

implanted in combination with either a pacemaker or an implantable cardioverter 

defibrillator (ICD). CRT performed by the implantation of an ICD along with a pacing 

electrode is referred to as “CRT–D.” 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 ventricular pacing, at time of insertion of pacing 
CMS-1525-FC 967 

cardioverter-defibrillator or pacemaker pulse generator (including upgrade to dual 

chamber system)) and CPT code 33249 (Insertion or repositioning of electrode lead(s) for 

single or dual chamber pacing cardioverter-defibrillator and insertion 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 comparable Medicare severity diagnosis-related 

group (MS-DRG) payment rate established under the IPPS that would 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 Complication 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 incentive 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 hospital outpatient setting. Because CPT codes 33225 

and 33249 are on the proposed list of device-intensive procedures for CY 2012, we 
CMS-1525-FC 968 

proposed to apply the usual device-intensive methodology based on the OPPS payment 

rate applicable to APC 8009 (which is the lesser of the APC 8009 median cost that we 

will calculate for the CY 2012 OPPS/ASC final 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 performed on the same date of service and, 

therefore, receive the appropriate 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 reported 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 OPPS/ASC final rule with comment period or 

the FY 2012 IPPS standardized payment 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, using the device-intensive methodology, based 

on the OPPS payment rate applicable to composite APC 8009 when procedures described 
CMS-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 payment cap for CRT-D services and ICD 

implantation procedures performed in a hospital outpatient department based upon the 

payment rate for IPPS MS-DRG 227 as proposed. 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. However, 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 assigning 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 assigned 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 same date of service in an ASC. 

Because CPT codes 33225 and 33249 are on the list of device-intensive procedures 

finalized for CY 2012, APC payment for CRT-D services will be established using the 
CMS-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 CPT code 33225, ASC payment for the service 

described by CPT code 33249 will to be based on APC 0108 using the device-intensive 

methodology. When not performed on the same day as the service described by CPT 

code 33249, ASC payment for the service described by CPT code 33225 will be based on 

APC 0655 using the device-intensive methodology. 

2. Payment for Covered Ancillary Services 

a. Background 

Our final payment policies under the revised ASC payment system for covered 

ancillary services vary according to the particular type of service and its payment policy 

under the OPPS. Our overall policy provides separate ASC payment for certain ancillary 

items and services integrally related to the provision of ASC covered surgical procedures 

that are paid separately under the OPPS and provides packaged ASC payment for other 

ancillary items and services that are packaged 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 ancillary services also to be paid, ancillary items and services 

must be provided integral to the performance of ASC covered surgical procedures for 

which the ASC bills Medicare. 

Our ASC payment policies provide separate payment for drugs and biologicals 

that are separately paid under the OPPS at the OPPS rates, while we generally pay for 
CMS-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 according to the ASC 

standard ratesetting methodology (72 FR 42497). However, as finalized in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72050), payment indicators for all 

nuclear medicine procedures (defined as CPT codes in the range of 78000 through 

78999) that are designated as radiology services that are paid separately when provided 

integral to a surgical procedure on the ASC list are set to “Z2” so that payment is made 

based on the ASC standard ratesetting methodology rather than the MPFS nonfacility PE 

RVU amount, regardless of which is lower. This modification to the ASC payment 

methodology for ancillary services was finalized in response to a comment on the 

CY 2011 OPPS/ASC proposed rule that suggested it is inappropriate to use the MPFSbased payment methodology for nuclear medicine procedures because the associated 

diagnostic radiopharmaceutical, although packaged under the ASC payment system, is 

separately paid under the MFPS. We set the payment indicator to “Z2” for nuclear 

medicine procedures in the ASC setting so that payment for these procedures would be 

based on the OPPS relative payment weight rather than the MPFS nonfacility PE 

RVU-based amount to ensure that the ASC will be compensated for the cost associated 

with the diagnostic radiopharmaceuticals. 

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 adopted under the OPPS or, if OPPS rates were 
CMS-1525-FC 972 

unavailable, at contractor-priced 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 June 30, 2008, brachytherapy sources be paid 

under the OPPS at charges adjusted to cost. Therefore, consistent with our final overall 

ASC payment policy, we paid ASCs at contractor-priced rates for brachytherapy sources 

provided in ASCs during that period of time. Beginning 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 OPPS/ASC final rule with comment period (72 FR 67165 

through 67188). Immediately prior to the publication of the 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, Medicaid, and SCHIP Extension Act of 2007, 

Pub. L. 110-173) to extend the requirement that brachytherapy sources be paid under the 

OPPS at charges adjusted to cost through December 31, 2009. Therefore, consistent with 

final ASC payment policy, ASCs continued to be paid at contractor-priced rates for 

brachytherapy sources provided integral to ASC covered surgical procedures during that 

period of time. Since December 31, 2009, ASCs have been paid for brachytherapy 

sources provided integral to ASC covered surgical procedures at prospective rates 

adopted under the OPPS. 

 Other separately paid covered ancillary services in ASCs, specifically corneal 

tissue acquisition and device categories with OPPS pass-through status, do not have 

prospectively established ASC payment rates according to the final policies of the revised 
CMS-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 transplantation. Devices that are eligible for pass-through 

payment under the OPPS are separately paid under the ASC payment system. Currently, 

the three devices that are eligible for pass-through payment in the OPPS are described by 

HCPCS code C1749 (Endoscope, retrograde imaging/illumination colonoscope device 

(Implantable), HCPCS code C1830 (Powered bone marrow biopsy needle), and HCPCS 

code C1840 (Lens, intraocular (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 separately payable drugs and biologicals and 

brachytherapy sources were discussed in section II.A. and section V.B. of that proposed 

rule, respectively, and we proposed to set the CY 2012 ASC payment rates for those 

services equal to the proposed CY 2012 OPPS rates. 

Consistent with established ASC payment policy (72 FR 42497), the proposed 

CY 2012 payment for separately payable covered 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 proposed rule) and the proposed CY 2012 ASC 
CMS-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 proposed payment rates for radiology services 

are based on the MPFS nonfacility PE RVU-based amount or the ASC standard 

ratesetting methodology, or whether payment for a radiology service is packaged into the 

payment for the covered surgical procedure (payment indicator “N1”). Radiology 

services that we proposed to pay based on the ASC standard ratesetting methodology are 

assigned payment indicator “Z2” (Radiology service paid separately when provided 

integral to a surgical procedure on ASC list; payment based on OPPS relative payment 

weight) and those for which the proposed payment is based on the MPFS nonfacility PE 

RVU-based amount are assigned payment indicator “Z3” (Radiology service paid 

separately when provided integral to a surgical procedure on ASC list; payment based on 

MPFS nonfacility PE RVUs). 

As finalized in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72050), payment indicators for all nuclear medicine procedures (defined as CPT 

codes in the range of 78000 through 78999) that are designated as radiology services that 

are paid separately when provided integral to a surgical procedure on the ASC list are set 

to “Z2” so that payment is made based on the OPPS relative payment weights rather than 

the MPFS nonfacility PE RVU-based amount, regardless of which is lower. In the 

CY 2012 OPPS/ASC proposed rule (76 FR 42303), we proposed to continue this 
CMS-1525-FC 975 

modification to the payment methodology and, therefore, 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 use 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 reflect this proposal. 

Most covered ancillary services and their proposed payment indicators were listed 

in Addendum BB to the CY 2012 OPPS/ASC proposed 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 case for brachytherapy sources and separately 

payable drugs and biologicals, instead of the lower of the amount calculated according to 

the standard methodology of the ASC payment system or the MPFS nonfacility 

PE RVU-based amount. The commenter expressed concern that the payment rates for 

certain separately payable covered radiology services that are based on the established 

methodology are far below the amounts necessary to cover the costs involved in 

providing the service. 

Response: We do not agree with the commenter that we should alter our 

established policy to pay for separately payable covered radiology services at the lower 
CMS-1525-FC 976 

of the MPFS nonfacility PE RVU-based amounts 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 for 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 radiology 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 (Transperineal placement of needles or 

catheters into prostate for interstitial radioelement application, with or without 

cystoscopy) and 77778 (Interstitial radiation source application; complex). The 

composite APCs were developed for procedures like LDR prostate brachytherapy in 

which two procedures are frequently performed in a single hospital visit. The 

commenters asserted that basing ASC payments for the services on the composite APC 

methodology in which one payment is made for the combination of the two services 

would result in a more accurate payment than is currently being made to ASCs because 

ASC payment is based on the median costs from single-service claims that CMS has 

acknowledged are mostly incorrectly coded claims. 

Response: Although we have tried to align 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 will take the commenter’s request into 
CMS-1525-FC 977 

consideration in future rulemaking, recognizing the lead time that is necessary for the 

creation of the associated G-code that would be used to identify when the procedures in 

the LDR prostate brachytherapy composite are performed on the same date of service in 

an ASC. 

Comment: One commenter indicated that ASCs are experiencing problems with 

obtaining payment from several of the ASC contractors for the pass-through device 

identified by HCPCS code C1749 (Endoscope, retrograde imaging/illumination 

colonoscope device (Implantable)) and requests that CMS provide further guidance in the 

final rule with comment period as to the ASC pricing level for the pass-through device. 

Response: Devices that are eligible for pass-through payment under the OPPS are 

separately paid under the ASC payment system and are paid at contractor-priced rates. 

CMS will remind contractors that payment for 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 the public comments we received, 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 contrast agents so that payment for these procedures will be 

based on the OPPS relative payment weight and, therefore, will include the cost for the 

contrast agent. We also are finalizing proposed changes to § 416.171(d). However, we 
CMS-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 their final CY 2012 payment indicators are listed 

in Addendum BB (which is available via the Internet on the CMS Web site) to this final 

rule with comment period. 

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria 

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68176), we 

finalized our current process for reviewing applications to establish new classes of new 

technology intraocular lenses (NTIOLs) and for recognizing new candidate intraocular 

lenses (IOLs) inserted during or subsequent to cataract extraction as belonging to an 

NTIOL class that is qualified for a payment adjustment. Specifically, we established the 

following process: 

● We announce annually in the proposed rule updating the ASC and OPPS 

payment rates for the following calendar year, a list of all requests to establish new 

NTIOL classes accepted for review during the calendar year in which the proposal is 

published. In accordance with section 141(b)(3) of Pub. L. 103-432 and our regulations 

at § 416.185(b), the deadline for receipt of public comments is 30 days following 

publication of the list of requests in the proposed rule. 

● In the final rule updating the ASC and OPPS payment rates for the following 

calendar year, we— 
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 consideration 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 benefits 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 predominant, class-defining 

characteristic associated with the improved clinical outcome with designated members of 

an active or expired NTIOL class; and 

● Criterion 3 (42 CFR 416.195(a)(4)): Evidence demonstrates that use of the 

IOL results in measurable, clinically meaningful, improved outcomes in comparison with 

use of currently available IOLs. The statute requires us to consider the following 

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 Process for Payment Adjustment 

For a request to be considered complete, we require submission of the information 

that is found in the guidance document entitled “Application Process and Information 

Requirements for Requests for a New Class of New Technology Intraocular Lens 

(NTIOL)” posted on the CMS Web site at: 

http://www.cms.gov/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 final rule updating the ASC and OPPS payment rates for the 

next calendar year. 

We also summarize briefly in the final rule the evidence that we reviewed, the 

public comments we received timely, and the basis for our determinations in 

consideration of applications for establishment of a new NTIOL class. When a new 

NTIOL class is created, we identify the predominant characteristic of NTIOLs in that 

class that sets them apart from other IOLs (including those previously approved as 
CMS-1525-FC 981 

members of other expired or active NTIOL classes) and that is associated with an 

improved clinical outcome. The date of implementation of a payment adjustment in the 

case of approval of an IOL as a member of a new NTIOL class would be set 

prospectively as of 30 days after publication of the ASC payment update final rule, 

consistent with the statutory requirement. 

3. Requests to Establish New NTIOL Classes for CY 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. Below we summarize the evidence that we 

reviewed, the public comments we received timely, and the basis for our determinations 

in consideration of the applications for establishment of a new NTIOL class. For each 

application, we invited public comments on certain specific questions as well as all of the 

NTIOL evaluation criteria. We thank the public for their comments 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 optic, 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 for recognition as NTIOLs and to concurrently 

establish a new class of NTIOLs for “blue-light-filtering IOLs that improve driving safety 

under glare conditions,” with these IOLs as members of the class. These IOLs will be 
CMS-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 cycle (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 IOLs 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 glare that impairs the ability of the eye to 

differentiate objects from the background. Alcon 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 describe 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 NTIOLs, 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 the 
CMS-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 relevance in comparison with currently available 

IOLs must have been approved by the FDA for use in labeling and advertising. The 

approved labels for the Alcon IOLs all state the following: “Alcon’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. Specifically, in the proposed rule (76 FR 42303 through 

42309), we stated that we were interested in public comments regarding the assertion that 

the specific blue-light-filtering properties associated with the candidate IOLs improve 

driving safety via the reduction of glare disability. 

Second, according to 42 CFR 416.195(a)(3), we also require that the candidate 

IOL not be described by an active or expired 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 characteristics a class-defining 

characteristic associated with members of an active or expired class. Only if that shared 

characteristic were the predominant characteristic of the lens would it be precluded from 

approval as a new class of NTIOL. However, if the lens featured other characteristics, 

one or more of which predominated, that were clearly tied with improved clinical 

outcomes, the lens would not be disqualified 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 created in 2000 and expired in 2005; and the 

Reduced Spherical Aberration class, which 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 example, IOLs recognized as members of the 

reduced spherical aberration class are characterized by their aspheric design that results in 

reduced spherical aberration. Based on the information in the table entitled CMS 
CMS-1525-FC 985 

Approved NTIOLs, a candidate IOL’s predominant characteristic 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 characteristic is predominant for Alcon’s model 

SN60WF, asphericity (resulting in reduced spherical aberration) or blue-light-filtering. If 

the predominant characteristic is asphericity, then the model SN60WF IOL would be 

disqualified under § 416.195(a)(3). This determination is particularly relevant given that 

the clinical benefit attributed to both of these lens characteristics is improved driving 

under glare conditions. In the proposed rule (76 FR 42303 through 42309), we solicited 

public comments on whether blue-light-filtering 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 benefits 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 also require that an applicant submit 

evidence demonstrating that use of the IOL results 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 postoperative 
CMS-1525-FC 986 

vision; or (6) other comparable clinical advantages. We note that in the CY 2007 

OPPS/ASC final rule with comment 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 for 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 every candidate NTIOL class. Therefore, we 

believe that “currently available lenses” for purposes of reviewing NTIOL requests 

should depend upon the class-defining characteristic and the associated purported 

improved clinical outcome of the candidate NTIOL. For example, for some candidate 

NTIOLs the most appropriate comparison IOL 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 the currently available IOLs against which the candidate 

NTIOLs should be compared in order to establish a new class. According to publicly 

available data from Market Scope, LLC, IOLs with aspheric optics accounted for over 86 

percent of the IOLs implanted in the United 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 spherical 
CMS-1525-FC 987 

aberration was the class defining characteristic for IOLs recognized as members of the 

expired reduced spherical aberration NTIOL class. The primary clinical outcome 

associated with reduced spherical aberration (for purposes of establishing 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 conditions during driving primarily occur at night due to 

headlights from oncoming cars. The primary improved clinical outcome from reduced 

spherical aberration IOLs (an expired NTIOL class) was safer night driving. We believed 

that Alcon was also claiming that its blue-light-filtering IOLs resulted in safer night 

driving. Therefore, we proposed that the most relevant type of currently 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 IOL versus an aspheric nonblue-light-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 currently available IOLs. The first of these 

two submitted articles is: Hammond B, et al., “Contralateral comparison of blue-filtering 

intraocular lenses: glare disability, heterochromic contrast, and photostress recovery,” 

Clinical Ophthalmology. 2010;4:1465-1473 (Hammond 2010). This article compared 
CMS-1525-FC 988 

visual performance (as measured by glare disability, heterochromic contrast threshold, 

and photostress recovery time) in eyes with blue-light-filtering 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., “Reduced effect of glare disability on driving 

performance in patients with blue-light-filtering intraocular lenses,” J Cataract Refract 

Surg., 2011;37:38-44. This study compared the effects 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 acrylic 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 characteristic of the candidate lenses, we also were 

interested in what other information the public could contribute related to the asserted 

benefits of the blue-light-filtering IOL. Specifically, in the proposed rule (76 FR 42304 

through 42309), we sought public comment and relevant data on the following: 

● Are there other peer-reviewed studies or other information that would support 

or disprove the claims of clinical benefit made by Alcon? 

● How would you interpret the results of the Hammond 2010 study, given that 

the blue-light-filtering group included patients with spherical 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 optics of some of the study subjects in the 

blue light-filtering group? 
CMS-1525-FC 989 

● Is the sample size used in both studies sufficient to conclude that a 

blue-light-filtering IOL would reduce glare disability and improve 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 the new class would be based? 

● Are the submitted data enough to prove that the blue-light-filtering optic is 

responsible for reduction in glare disability as asserted by applicant? 

● Did these studies use an appropriate comparator IOL? 

 Furthermore, in accordance with our established NTIOL review process, in the 

proposed rule, we also sought public comments on all of the review criteria for 

establishing a new NTIOL class that would be based on the ability of the AcrySof 

Natural IOLs to filter blue light and subsequently help beneficiaries avoid hazards that 

can be caused by glare while driving. We stated that we would give all comments full 

consideration regarding Alcon’s candidate IOLs. 

 Comment: Regarding criterion 1, the requestor asserted that the AcrySof 

Natural IOLs contain a blue-light-filtering chromophore that reduces glare disability that 

impairs the ability of individuals to differentiate objects from the background. The 

blue-light-filtering chromophore is a characteristic of the AcrySof Natural IOLs that is 

listed in the FDA-approved labeling. Whether 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 the clinical relevance of the blue-lightfiltering chromophore in comparison with currently available IOLs depends upon 
CMS-1525-FC 990 

whether, as required by criterion 3, evidence demonstrates that use of the IOL (and in 

particular the blue-light-filtering chromophore) 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 clinical 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 that 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 comparison with currently available IOLs in the 

FDA-approved labeling. Therefore, there can be either claims of specific clinical benefits 

in the FDA-approved labeling or lens characteristics in the FDA-approved labeling with 

evidence of established clinical relevance in comparison with 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, which 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 refinements to the regulations such that a claim 

of specific clinical benefit of the IOL in comparison with currently available IOLs would 

be required in the FDA-approved labeling. 
CMS-1525-FC 991 

 Comment: Regarding criterion 2, the applicant 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 (which Alcon describes as its 

pivotal study) which states the following: “In a real-world task 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 from the headlights of an oncoming car during 

nighttime driving. 

 Prior to its clarifying comments, we originally 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 when the sun is at a low angle and not at 

nighttime when headlights cause glare. This 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; that is, the blue-light-filtering IOLs do not share the 

predominant, class-defining characteristic associated with the improved clinical outcome 

with designated members of an active or expired NTIOL class. One of the four candidate 

blue-light-filtering IOLs, the AcrySof Natural IQ Aspheric IOL model SN60WF, is a 

member of the expired reduced spherical aberration NTIOL class (75 FR 72052). 
CMS-1525-FC 992 

 The requestor and other commenters argued that because asphericity does not 

contribute to visual performance during daytime driving conditions due to pupillary 

constriction during daytime driving conditions, blue-light-filtering is the predominant 

characteristic of the AcrySof Natural IQ Aspheric IOL model SN60WF for the associated 

outcome of improved driving safety under daytime 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 aberration in the AcrySof Natural IQ Aspheric IOL 

model SN60WF from any other lens characteristic with regard to clinical benefit. 

Therefore, this commenter stated that, because the AcrySof Natural IQ Aspheric IOL 

model SN60WF is a member of a recently expired 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 predominant for Alcon’s model SN60WF, asphericity 

(resulting in reduced spherical aberration) or blue-light-filtering. If the predominant 

characteristic is asphericity, the model SN60WF IOL would be ineligible under 

§ 416.195(a)(3). Although we briefly discussed 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 factors that influence a 

determination of predominance regarding different IOL characteristics. We believe that 

when the clinical outcomes associated with different lens characteristics are related, 

comparative clinical data are required to demonstrate that one characteristic is 
CMS-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 characteristic as it relates to the clinical 

outcome associated with the lens characteristic that is the subject of NTIOL review. 

 We agree with the requestor and other commenters that, with respect to the 

purported outcome of improved driving safety under daytime driving conditions with 

glare simulating low-angle sun, the predominant 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-light-filtering IOLs, the determination of the 

predominant characteristic for the model SN60WF would be more complicated. 

However, because the purported clinical benefit of the blue-light-filtering IOLs is limited 

to improved driving safety under daytime driving conditions with glare simulating lowangle sun, under these conditions the blue-light-filtering characteristic is predominant. 

Also, the description of the requestor’s proposed 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 regarding whether the blue-light-filtering 

characteristic has established clinical relevance 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 IOLs should be compared. The 
CMS-1525-FC 994 

requestor and several other commenters believed that an appropriate comparator IOL for 

the blue-light-filtering IOL is a spherical monofocal IOL for the following reasons: 

● Because market share was not mentioned as a factor in considering which 

lenses are appropriate comparators for other NTIOL requests, it should not be a factor in 

the blue-light-filtering request; 

● Because the requestor has not claimed that the blue-light-filtering 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 CMS 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 considering low market share IOLs to be currently 

available IOLs; 

● Because an aspheric colorless Acrysof 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 aspheric comparator IOL by applying a new 

definition of “currently available IOLs” after 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-filtering IOLs is improved 

daytime driving under simulated low angle sun conditions and not improved night driving 

under glare from car headlights. Therefore, we agree that it is not necessary that the 
CMS-1525-FC 995 

blue-light-filtering IOLs be compared to an aspheric IOL because under daytime low 

angle sun glare conditions pupillary constriction 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 available IOLs.” Our flexible approach means that 

the appropriate comparator can vary depending upon the candidate IOL and the 

associated claimed clinical outcome and can also 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 benefit. 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. However, the particular optics of the IOLs in 

this hypothetical case would likely not necessarily matter. If the claim was that the 

candidate IOL corrected some type of higher order optical aberration that resulted in 

improved night driving, such an IOL would have to be compared to an aspheric IOL to 

determine whether it improved night driving 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 and the CMS Rulings for presbyopia correcting 

IOLs and astigmatism correcting IOLs. Therefore, our flexible approach to currently 

available comparator IOLs means that manufacturers should account for contemporary 

practices among U.S. cataract surgeons when designing studies and resist the temptation 
CMS-1525-FC 996 

to select a comparator IOL that would most likely yield a statistically 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 Hammond et al. and Gray et al. that are cited 

above. Therefore, although we will discuss 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 supports the requestor’s hypothesis that blue blocking IOLs 

improve driving performance while driving 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 application, 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 the requestor are summarized below: 
CMS-1525-FC 997 

● Figure 3 in the Hammond study mislabels 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 hides 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 described 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. Thus, the retinal image contrast cannot be 

increased by a color filter; therefore, disability glare cannot be decreased 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 light filter, and Hammond et al. stated the 

following: “Increased MP density will also not reduce glare disability when the 

wavelength conditions between the target and surround are the same. If MP absorbs light 

from both the target and the surround in equal 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 (that 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 why 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 most glare sources are broad spectrum and 

most targets have a color such that the target absorbs certain wavelengths 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 would be preferentially filtered out by blue 

blocking IOLs. 

 Rebuttal by requestor: There is no extant literature suggesting that the glare and 

target sources should have the same spectral characteristics, and shorter 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 other commenters also stressed 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 situations because people do not ordinarily stare 

directly into brilliant, uncomfortable light sources for many seconds, and any colored or 
CMS-1525-FC 999 

neutral density filter that reduces light exposure 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 the 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-filtering IOLs reduce the effects of glare. 

Overall, there appears to be some significant unanswered questions as to how well the 

Hammond study supports the requestor’s hypothesis in the real world situation 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 turn to the study that the requestor has 

characterized as the “pivotal” study for its application, which was performed by Gray et 

al., and is described above. The Gray study is the primary evidence for the purported 
CMS-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 commenters stated that the Gray study 

is sufficient evidentiary support for the blue blocker NTIOL application. The requestor 

and several other commenters stated that 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 showed an improvement in stopping time of 

0.11 seconds, and has been demonstrated to have prevented automobile accidents. Some 

commenters suggested that there 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 application, 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 rebuttals 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 pseudophakic 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 critical patient safety information. 

● The Gray driving simulator was a computer 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 Gray study did not conform to guidelines for 

driving simulators outlined in ANSI Z80.12-2007, Annex G. In particular, the 

commenters stated that the simulation should have 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 medication that may have affected vision or 

motor abilities; the study did not mention exclusion 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 represents the target population. 

 Rebuttal by requestor: Selection bias was addressed by enrolling subjects who 

were matched for age, time after cataract surgery, and visual acuity. 
CMS-1525-FC 1002 

● Commenters further stated that differences in judging distance to oncoming 

vehicles could be attributable to motion processing differences between the two groups, 

which is impaired in older drivers. 

● The driving simulator used in the Gray study is not a valid representation of 

on-road driving performance in older drivers 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-world 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 accurately represents realistic driving by Medicare beneficiaries 

in low angle sun conditions and whether such a small study accurately represents the 

population of Medicare beneficiaries. 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 blue-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 beneficiaries. We believe that a significant 

question remains as to whether the Gray study results are sufficient to support the 

conclusion of a significant real world improved outcome for blue-light-filtering IOLs in 

Medicare beneficiaries. We discuss these issues below. 
CMS-1525-FC 1003 

 Comment: Commenters asserted that “studies 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 the commenters’ assertion by stating that none 

of the studies cited by the commenters involved driving simulation or other real-world 

situations, and that because of historical limitations in studying glare, the 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 review 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 drivers, 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; Owsley, Ball, et al., 1998; Owsley, et al., 2001). 

This failure to find an association between glare and road safety may be attributed to 

methodological difficulties in defining “glare” 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 seemingly paradoxical relationship between disability glare and 

motor vehicle collisions. They found that disability glare reduced crash risk in older 

drivers with good vision, which could not be attributed to changes 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 established 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 Gray sufficiently establishes the clinical 

relevance of blue-light-filtering 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 older adults, as summarized above by Owsley 

and McGwin, the lone study by Gray is currently 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 the daytime. Glare from low angle sun is 

encountered when driving east shortly after sunrise and when driving west shortly before 

sunset. We believe that there is a significant question as to whether the results of the 

experiment performed by Gray (assuming for the purpose of this response that the results 

are valid within Gray’s experimental context) represent a real-world improved clinical 

outcome or clinical benefit in the context of real-world daytime driving during times of 
CMS-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 commenter pointed out, there are currently several 

daytime glare countermeasures that are both 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 during daytime driving. These include (but are 

not necessarily limited to) the automobile’s sun visor, tinted windshield glass, polarized 

sunglasses, and antireflective (AR) coatings on glasses. Such daytime glare 

countermeasures are included in the following 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 the windshield washer fluid reservoir full; 

● When possible, take an alternate route lined with trees or tall buildings instead 

of one with extreme glare; 

● Turn on headlights to reduce the possible poor visibility of oncoming drivers; 

● Most importantly, wear sunglasses at all times. Even more important is to 

wear sunglasses with polarized lenses to reduce 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 general public. Given all of these common countermeasures 
CMS-1525-FC 1006 

for managing glare from the sun during driving, we do not know, despite the Gray study, 

exactly what additional benefit blue-light-filtering 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 blue-light-filtering IOLs underneath polarized sunglasses that 

already typically absorb a broad spectrum of light including blue light and also reduce 

glare through the polarized property of the lenses in the sunglasses. We believe that it 

would be important to account for these common daytime glare countermeasures that are 

in widespread use when assessing the real-world benefit of blue-light-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, because nighttime conditions are the greatest 

challenge to Medicare beneficiaries, causing 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 important issue as it relates to the purported clinical benefit of 

blue blocking IOLs to Medicare beneficiaries. 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 states 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 specifies the following outcomes: (1) reduced risk of 
CMS-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 low angle sun conditions is a 

“comparable clinical advantage” and, therefore, an outcome that would satisfy the 

statutory and regulatory requirements. 

 The most analogous clinical outcome associated with an expired NTIOL class is 

the improved night driving associated with the expired reduced spherical aberration 

NTIOL class. However, there are significant differences between daytime driving with 

glare from low angle sun and nighttime driving with glare from headlights. The 

nighttime driving benefit of reduced spherical aberration IOLs was a clinical benefit to 

Medicare beneficiaries because (other than abstaining from driving at night) there is very 

little that drivers can do at nighttime to mitigate the effect of glare from headlights. 

Therefore, even a modest night driving benefit from a reduced spherical aberration IOL 

can have an overall significant impact on Medicare beneficiaries’ night driving because 

of the lack of other countermeasures that can assist with night driving. However, with 

daytime driving during low angle sun, an IOL that possibly mitigates the effects of glare 

under these conditions appears less significant 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 nighttime, this is a significant inconvenience 

because to do so means not driving at night. However, for glare from the sun, as 
CMS-1525-FC 1008 

mentioned above, there are many countermeasures for glare caused by low-angle sun, 

which is only a problem for certain drivers (those driving east in the morning and west in 

the evening) during a relatively short period of time each day. For these drivers, 

avoidance can be a practical alternative to driving into the bright sun. As mentioned 

above, the Vision Council of America recommends that drivers take a shady route if 

available. However, even if an alternate 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 short 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 Medicare 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 schedule and, therefore, may find it difficult due 

to job obligations to shift their commuting schedules even slightly, the overwhelming 

majority of Medicare beneficiaries tend to be retirees who generally do not face such 

rigid transportation schedule restrictions. In their 2007 study, Gray and Regan 

acknowledge this point as follows: “Our present study is restricted 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 rush hour traffic. Driving in lower density traffic would 

likely lower the probability of a traffic accident thereby promoting driving safety, which 

seems to be one goal of this NTIOL application and other recent developments in IOL 

technology. 

 Therefore, given the significant differences between nighttime driving and 

daytime driving, we do not believe that improved driving performance limited only to 

daytime under conditions of glare from low angle sun in this context is a “comparable 

clinical advantage” when compared to those outcomes listed above and in the statute and 

the outcomes associated with the three expired NTIOL classes, including improved night 

driving under conditions of glare from headlights. For this reason (and others discussed 

elsewhere in this preamble), the request does not satisfy 42 CFR 416.195(a)(4) because 

the purported outcome is not a comparable clinical advantage for Medicare 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) aspects of night vision; (3) sleep 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 continues to be, a vigorous 

debate in the literature regarding some of these issues. We do not have enough 

information to evaluate these issues, which we consider important but somewhat 

collateral to the issues under review for this NTIOL application. The decision on the 
CMS-1525-FC 1010 

blue-light-filtering NTIOL request 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, the evidence is insufficient to conclude that 

the blue-light-filtering characteristic of the Acrysof blue-light-filtering IOLs has 

established clinical relevance in comparison to currently available IOLs. We also 

conclude that the evidence does not demonstrate that the use of the Acrysof blue-lightfiltering IOLs results in measurable, clinically meaningful, improved outcomes in 

comparison with use of currently available IOLs. Therefore, Alcon’s request for NTIOL 

status for its Acrysof blue-light-filtering IOLs is denied. 

b. Requestor/Manufacturer: Bausch & Lomb, Inc. (B&L) 

 Lens Model Numbers: Xact Foldable Hydrophobic Acrylic Ultraviolet 

Light-Absorbing Posterior Chamber Intraocular 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 IOL optic when the IOL is in an aqueous 

environment. According to B&L, “glistenings have been associated with decreased 
CMS-1525-FC 1011 

contrast sensitivity, increased glare, decreased 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 risks 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 FDA. 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 decreased contrast sensitivity, increased glare, 

decreased visual acuity, and impaired fundus visualization associated with glistenings, 

and may likewise decrease the need for explantations associated with those conditions. 

B&L also concludes that use of a glistening-free IOL results in measurable, clinically 

meaningful, improved outcomes in comparison with 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 applications discussed in the CY 2012 

OPPS/ASC proposed rule, we base our determination of the B&L application on 

consideration of the three major 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 relevance in comparison with currently available 

IOLs must have been approved by the FDA for 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 were 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 conducted outside of the United States. In this study, 172 eyes of 

142 patients were examined at least once between 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-approved 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 IOLs, and the incidence of glistenings severe 
CMS-1525-FC 1013 

enough to cause measurable visual symptoms in recently pseudophakic Medicare 

beneficiaries. In addition, we were interested in public comments regarding the assertion 

by B&L that the glistening-free property associated with the Xact IOLs would eliminate 

the decreased contrast sensitivity, increased glare, decreased visual acuity, and impaired 

fundus visualization associated with glistenings, and may likewise 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 predominant, class-defining 

characteristic associated with improved clinical 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 proposed class-defining 

characteristic and associated clinical benefits of the Xact IOLs, specifically the 

glistening-free property, cannot be similar to the class-defining characteristics and 

associated benefits of the three expired NTIOL classes. In the proposed rule (76 FR 

42303 through 42309), we welcomed public comments 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 also require that an applicant submit 

evidence demonstrating that use of the IOL results 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 
CMS-1525-FC 1014 

in lenses over time. We also believe that “currently available lenses” for purposes of 

reviewing NTIOL requests should depend upon the class-defining characteristic and the 

associated purported improved clinical outcome of the candidate NTIOL class. For 

purposes of reviewing B&L’s request to establish a new NTIOL class for CY 2012, we 

believe that the full spectrum of currently available IOL materials should be represented 

in the comparator IOLs, but that the particular design of the optic (for example, aspheric 

versus spherical) is less critical to evaluating the benefits of glistening-free IOLs as 

glistenings are related more to the IOL optic material than to the optical surface 

characteristics of the IOL. In the proposed 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 glistenings 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 material types. However, there are several 

significant questions with respect to glistenings, and we solicited public comment on 

these questions as follows: 

● Is there a particular IOL 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 the patient’s perspective) 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 severity 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 the 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 severity, and whether subclinical glistenings could 

be present to some degree in a glistening−free IOL. Another commenter argued that 

because the Xact IOL label does not identify any approved claim of clinical benefit or 
CMS-1525-FC 1016 

any lens characteristic with established clinical 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 listed in the FDA-approved labeling with the 

evidence of established clinical relevance in comparison with currently available IOLs 

provided outside of the FDA-approved labeling, such as in peer-reviewed journals. The 

Xact IOL FDA-approved labeling states that for patient follow-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 commenter who remarked that the term 

glistening−free is imprecise, and asked whether it means the complete absence of any 

glistenings whatsoever, regardless of severity, and whether subclinical 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 the requester and other commenters that the 

proposed glistening−free Xact IOLs are not described by an expired NTIOL class. 

Comment: The requestor reiterated its belief that glistenings cause compromised 

visual performance in patients, and that “[t]he growing concern 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 over 70 studies related to glistenings, most 

published after 2000, a staggering figure that itself demonstrates that glistenings are 

widely viewed by clinicians as problematic.” Therefore, according to the requestor, a 
CMS-1525-FC 1017 

glistening−free IOL offers the clinical benefit of avoiding visual problems associated 

with glistenings. The requestor offers the following 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 between eyes with and without glistenings; 

● A study by Christiansen et al. that showed decreased visual acuity with a glare 

source versus without a glare source in patients 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 1997 and 2011 of IOL explantation due to 

glistenings from the FDA medical device adverse event database. 

Other commenters asserted that the currently available peer-reviewed literature 

does not yield any clinical studies supporting 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 benefit of glistening-free IOLs. The 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 glistenings 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 between eyes with and without glistenings. 

However, that study showed no difference in visual 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 Christiansen et al. study was as follows: 

“Glistenings occurred frequently in AcrySof IOLs, with most cases mild. A larger study 

of this lens is needed to determine whether severe presentations affect visual function and 

to understand how glistenings change over time.” As noted by some commenters, further 

studies have been performed on the AcrySof 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 that “[a]lthough it was difficult 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 typical. More importantly, considering that the 

Werner et al. case report is relatively recent, the authors state that “[t]here is still 

controversy about whether glistenings affect the visual function of the patient and 
CMS-1525-FC 1019 

whether they progress over time[,]” and they cite seven articles in support of this 

statement. 

 The lack of a consensus in the literature 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 have established clinical 

relevance, not merely theoretical clinical relevance. If glistenings are not proven through 

proper scientific studies to affect visual function, the clinical relevance of the glisteningfree lens characteristic is not established. Regarding this point, the requestor stated in its 

comment letter that “[t]he effects of glistenings on a patient’s vision are not easily 

captured using existing tests.” Assuming that this 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 IOLs (emphasis added). If clinical visual 

function testing cannot measure the effect of glistenings, then it is impossible to 

determine the extent to which glistenings affects patients’ vision. The fourth piece of 

evidence offered by the requestor regarding the clinical 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 since 1997, is too small to establish clinical 

relevance. In essence, the requestor corrected a perceived problem (glistenings) with the 
CMS-1525-FC 1020 

Xact IOLs by changing the IOL storage solution that eliminated the glistenings, although 

the glistenings had no effect on visual function 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 comparison to currently 

available IOLs, these IOLs do not satisfy 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 “aseptically 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 package for delivery to the operating field. 

According to Hoya, the iSert System has the following benefits, in that 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 reusable forceps or injectors 

used for other foldable IOLs; 

● Provides a clinical advantage compared to existing IOLs by allowing the IOL 

to be placed in the eye without contacting external ocular tissues or reusable injection 

instruments; and 

● Improves overall safety of cataract/IOL surgery by reducing the number of 

reusable instruments that must be properly 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 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, the FDA letter of approval, 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 major criteria that are discussed above. We 

reviewed Hoya's request to recognize its iSert System as an NTIOL and concurrently 

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 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 relevance in comparison with currently available 
CMS-1525-FC 1022 

IOLs must have been approved by the FDA for use in labeling and advertising. The 

FDA-approved labeling for the iSert System states the following under the heading 

“DEVICE DESCRIPTION”: 

 “The Hoya iSertTM Model PY-60R Intraocular Lens (IOL) is an ultraviolet 

absorbing posterior chamber intraocular lens designed 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 loaded 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 iSertTM Model PY-60R Intraocular Lens is indicated for primary 

implantation in the capsular bag of the eye for the visual correction of aphakia in adult 

patients in whom a cataractous lens has been removed.” 

 The FDA-approved labeling for the iSert System does not otherwise reference 

claims of specific clinical benefits and/or lens characteristics with established clinical 

relevance in comparison with currently available IOLs. Section 416.195(a)(2) requires 

that “[c]laims of specific clinical benefits and/or lens characteristics with established 

clinical relevance in comparison with currently available IOLs are approved by the FDA 

for use in labeling and advertising.” 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 different from the typical device description and indications 

for a standard spherical monofocal IOL is the statement that the “PY-60R is loaded in a 
CMS-1525-FC 1023 

disposable injector consists [sic] of Case, Tip, Body, Slider, Rod, Plunger, and Screw.” 

However, this statement merely describes the IOL as loaded in a disposable injector. It 

does not appear to describe a benefit or characteristic of the IOL itself. Therefore, it 

would appear that the Hoya iSertSystem PY-60R IOL would not satisfy the requirements 

of 42 CFR 416.195(a)(2). However, in the proposed rule, we solicited public comments 

on this matter and stated that we would give all comments full consideration regarding 

Hoya’s candidate IOL. 

Comment: With regard to whether the Hoya iSertSystem PY-60R IOL describes 

a benefit or characteristic of the IOL itself such 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 iSertSystem is not 

eligible for NTIOL status, and Hoya’s request 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 recognition as an NTIOL and to concurrently 
CMS-1525-FC 1024 

establish a new class of NTIOLs that result in a “reduction of postoperative residual 

refractive error.” According to Lenstec, the Softec HD PS IOL achieves a “reduction of 

postoperative residual refractive error” by its availability in 0.25 diopter (D) increments 

with a tolerance of ±0.11 D, while all other current 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 accuracy of the Softec HD PS is due to the chosen IOL power 

likely being closer to the calculated (desired) 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 expects 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 refractive 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 application on consideration of the three major 

evaluation criteria that are discussed above. We reviewed Lenstec's request to recognize 
CMS-1525-FC 1025 

its Softec HD PS IOL as an NTIOL and concurrently 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 established 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 relevance in comparison with currently available 

IOLs must have been approved by the FDA for use in labeling and advertising. The 

submitted FDA-approved labeling for the Softec 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 relevance in comparison with currently available 

IOLs. We were interested in public comments on whether an IOL being offered in 

quarter diopter increments can be considered a “lens characteristic with established 

clinical relevance in comparison 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 characteristic 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 classes. Lenstec states the following in its 

application: 

 “The Softec HD IOL, the parent to the 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 included in the just-closed ‘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 previously 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 characteristic that defines the 

expired Reduced Spherical Aberration NTIOL class. 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 D 
CMS-1525-FC 1027 

increments allows more IOL power choices for the surgeon, it does not appear to affect 

the functionality of the IOL. In the proposed 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 also require that an applicant submit 

evidence demonstrating that use of the IOL results 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 also believe that “currently available lenses” for purposes of 

reviewing NTIOL requests should depend upon the class-defining characteristic and the 

associated purported improved clinical outcome 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. Lenstec 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 literature on IOL optics related to the Softec HD 

PS. Lenstec relies primarily on one study that is the subject of an article that is currently 
CMS-1525-FC 1028 

in press and another unpublished study to support its hypothesis that the Softec HD PS 

IOL results in less postoperative refractive error than other IOLs. The first study 

submitted by Lenstec was the study that it conducted under an IDE for FDA approval of 

the Softec HD PS IOL. This study is being published 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 aberration free, bi-aspheric 

intraocular lens. Cont Lens Anterior Eye. 2011 May 24 (electronic publication in advance 

of print release), and is available on the Internet at 

http://www.sciencedirect.com/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 investigators to control for all of the variables 

that impact post-cataract surgery refractive outcome and/or isolate the effect of the 

availability of the Softec HD PS IOL in quarter diopter increments. Lenstec compared 

the postoperative refractive errors of these study subjects to the 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 this comparison that implantation of the 

Softec HD PS IOL, which is available in quarter diopter increments, results in superior 

refractive outcomes as compared to other IOLs. 

The second study is a retrospective study 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 increments and labeled with a manufacturing 

tolerance of ±0.11D (the labeled group) and 51 were implanted with IOLs available in 
CMS-1525-FC 1029 

0.50 D increments without a labeled manufacturing tolerance (the unlabeled group). 

Postoperative outcomes were assessed, and prediction error was calculated and compared 

between groups. Mean error 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 statistically 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 that within ±0.25 D 

prediction error was achieved in 63 percent of the patients in the labeled group compared 

to 43 percent in the unlabeled group (p=0.03), and for within ±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 regarding the Lenstec NTIOL request and the 

evidence submitted by Lenstec, and in particular we requested public comment on the 

following: 

● What is the clinical significance (from the patient’s perspective) of a small 

amount of residual spherical refractive error after cataract surgery? 

● What is the likelihood that a Medicare beneficiary receiving a monofocal IOL 

will require some form of postoperative refractive correction (that is, post-cataract 

surgery glasses), which is a Medicare benefit? 

● If the overwhelming majority of Medicare beneficiaries receiving a monofocal 

IOL will require some form of postoperative refractive correction (that is, post-cataract 

surgery glasses), does that lessen the clinical significance of reduced postoperative 

residual refractive error? 

● Are the studies described above properly designed to test Lenstec’s hypothesis? 
CMS-1525-FC 1030 

● Do the studies described above adequately prove Lenstec’s hypothesis? 

Comment: Several commenters stated that availability in 0.25 D increments with 

a tolerance of +/- 0.11 D is a lens characteristic that satisfies criterion 1. One commenter 

argued that lens power increments are not a characteristic within the meaning of the 

NTIOL regulations, and, even if they are, they 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 relevance of this characteristic is discussed 

further below. 

Comment: Several commenters believed that, 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 resulting in reduced spherical 

aberration. One commenter stated that because Lenstec has not presented evidence to 

distinguish the contribution of the 0.25 D increments 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 disqualified 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 associated 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 the 
CMS-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 characteristic 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 benefit of reduced spherical aberration is 

improved night driving. We believe that these outcomes are sufficiently unrelated such 

that comparative clinical data are not required to demonstrate the predominance of the 

0.25 D increments as it relates to greater refractive precision. 

Comment: Many commenters supported NTIOL designation for the HD PS IOL. 

The commenters are primarily ophthalmologists 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 the studies described above are sufficient to 

demonstrate a clinical benefit for the HD PS IOL. Some of these commenters reported 

the results of case series from their practices that, according to them, support greater 

refractive precision of the HD PS IOL versus another lens. One commenter summarized 

data to support the position that the HD PS remains in a more stable position in the eye 

postoperatively. Several commenters stated that whether or not a patient must wear 

distance correction postoperatively has no bearing 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 underlying 
CMS-1525-FC 1032 

studies must be well-controlled such that the improved outcome can be appropriately 

attributed to the candidate IOL characteristic. 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 currently available IOLs. The commenter cited 

studies by Aristodemou et al. and Norrby et al. using IOLs available 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 the ISO 11979-2 tolerances. In addition, the 

commenter remarked that Brown et al. has several study design flaws and other 

deficiencies, including refractive predictability not being a planned outcome of the study, 

no comparator lens in the study resulting in bias, and inappropriate comparison studies. 

Also, this commenter stated that the number of subjects required 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 submitted by the requestor (summarized above), 

and stated that the results are not significantly different from those of published studies of 

refractive outcomes for IOLs available in 0.5 D increments. 

Response: We agree with this commenter and 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 other 
CMS-1525-FC 1033 

issues that historically have affected the ultimate postoperative outcome, that is, how well 

the patient sees after surgery, have been solved. There is a certain intuitive appeal to the 

hypothesis proffered by the requestor that smaller dioptric increments and, therefore, a 

greater number of available individual lens powers requires less rounding or 

approximation of the implant power and therefore a postoperative 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, systemic 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 large, prospective randomized clinical trial in order to try to 

prove the underlying hypothesis. An appropriate control/comparator 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 short of this evidentiary requirement. In 

addition, greater refractive precision alone is not enough, as one would have to prove a 

superior outcome of significance to the average Medicare beneficiary, such as true 

spectacle independence for distance vision. Most patients would not notice (even if it 

were the case) that their postoperative refractive 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 state currently lies with the preoperative 

measurement techniques, and that when the accuracy of these techniques improve, IOLs 

with 0.25 D increments may be of benefit to patients. 

Response: We generally agree with this commenter, 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, prospective, 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 presented does not demonstrate that the use of 

the HD PS IOL results in measurable, clinically meaningful, improved outcomes in 

comparison with use of currently available IOLs 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 only evaluator of clinical benefit for candidate IOLs and 
CMS-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 comment letters from ophthalmologists included a 

statement similar to the following: “I would 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 ophthalmologists. In fact, 

one of this year’s candidate IOLs is the current U.S. market leader. NTIOL status does 

not affect U.S. market availability or Medicare coverage of an IOL. Instead, the NTIOL 

payment adjustment is reserved for new technology IOLs with sound evidence of 

measurable, clinically meaningful, improved 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 applications as new IOL technology is developed. 

However, we strongly encourage applicants 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 superiority and associated data that may be useful for marketing 

purposes are not necessarily sufficient for NTIOL status, which requires sound scientific 

proof of measurable, clinically meaningful, 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 the payment adjustment amount for CY 2012. 

5. Announcement of CY 2012 Deadline for Submitting Requests for CMS Review of 

Appropriateness of ASC Payment for Insertion 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 effective January 1, 2013, requests for review of 

applications for a new class of new technology 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 Services, 7500 Security 

Boulevard, Baltimore, MD 21244-1850. To be considered, requests for NTIOL reviews 

must include the information requested on the CMS Web site at: 

http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf. 

F. ASC Payment and Comment Indicators

1. Background 

In addition to the payment indicators that we introduced in the August 2, 2007 

final rule, we also created final comment indicators for the ASC payment system in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66855). We created 

Addendum DD1 to define ASC payment indicators that we use in Addenda AA and BB 

to provide payment information regarding covered surgical procedures and covered 

ancillary services, respectively, under the revised ASC payment system. The ASC 

payment indicators in Addendum DD1 are intended to capture policy relevant 

characteristics of HCPCS codes that may receive packaged or separate payment in ASCs, 

such as whether they were on the ASC list of covered services prior to CY 2008; payment 

designation, such as device-intensive or office-based, and the corresponding ASC 

payment methodology; and their classification as separately payable ancillary services 

including radiology services, brachytherapy sources, OPPS pass-through devices, corneal 

tissue acquisition services, drugs or biologicals, or NTIOLs. 

We also created Addendum DD2 that lists the ASC comment indicators. The 

ASC comment indicators used in Addenda AA and BB to the proposed rules and final 
CMS-1525-FC 1038 

rules with comment period serve to identify, for the revised ASC payment system, the 

status of a specific HCPCS code and its payment indicator with respect to the timeframe 

when comments will be accepted. The comment indicator “NI” is used in the OPPS/ASC 

final rule with comment period to indicate new HCPCS codes for the next calendar year 

for which the interim payment indicator assigned is subject to comment. The comment 

indicator “NI” is also assigned to existing codes with substantial revisions to their 

descriptors such that we consider them to be describing new services, as discussed in the 

CY 2010 OPPS/ASC final rule with comment period (74 FR 60622). In this CY 2012 

OPPS/ASC final rule with comment period, we respond to public comments and finalize 

the ASC treatment of all codes that are labeled with comment indicator “NI” in Addenda 

AA and BB to the CY 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 Internet on the CMS Web site) to 

indicate that the payment indicator assignment has changed for an active HCPCS code; 

an active HCPCS code is newly recognized as payable in ASCs; or an active HCPCS 

code is discontinued at the end of the current calendar year. The “CH” comment 

indicators that are published in the final rule with comment period are provided to alert 

readers that a change has been made from one calendar year to the next, but do not 

indicate that the change is subject to comment. The full definitions of the proposed 
CMS-1525-FC 1039 

payment indicators and comment indicators were provided in Addenda 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 payment under the standard methodology for the 

revised ASC payment system. Payment indicators “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 procedures that were included on the list of ASC covered surgical 

procedures in CY 2007 and were, therefore, subject to transitional payment prior to 

CY 2011. 

Because the 4-year transitional payment period has ended and it is no longer 

necessary to identify device-intensive procedures 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 calculation 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 distinction 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 Reporting 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 comment period. Additionally, CMS proposed to create a new 

ASC payment indicator “M5” (Quality measurement 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 definitions 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 section XVII. of the proposed rule and available 
CMS-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 via 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. Subparagraphs (C) and (D) of section 1805(b)(1) 

of the Act require MedPAC to submit reports to Congress not later than March 15 and 

June 15 of each year that present its Medicare payment policy reviews and 

recommendations and its examination of issues affecting the Medicare program, 

respectively. The March 2011 MedPAC “Report 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 implement a 0.5 percent increase in 

payment rates for ambulatory surgical center services in calendar year 2012 concurrent 

with requiring ambulatory surgical centers 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 requires that, if the Secretary has not updated the 

ASC payment amounts in a calendar year, the payment amounts shall be increased by the 
CMS-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 period ending with the midpoint of the year 

involved. The statute set the update at zero for CY 2008 and CY 2009. We indicated 

that we planned to implement the annual updates through an adjustment to the conversion 

factor under the ASC payment system beginning in CY 2010 when the statutory 

requirement for a zero update no longer applied. 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 (codified at § 416.171(a)(2)). 

As we indicated in the CY 2010 OPPS/ASC 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 report, “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 ASC 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 recommendation of the GAO. Furthermore, we explained 
CMS-1525-FC 1043 

that we have never required ASCs to routinely submit cost data and expressed our 

concern that requiring this could be administratively burdensome for ASCs. 

In 2009, MedPAC made a similar recommendation 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 solicited 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 issues 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 regarding the feasibility of requiring ASCs 

to submit cost data to the Secretary. Some commenters believed that requiring ASCs to 

submit such data would not be an insurmountable 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 Medicare payments and evaluate the ASC update. 

Other commenters, however, opposed the requirement that ASCs submit cost data to 

CMS because they believed such a requirement would be unnecessary and 

administratively burdensome. Commenters generally supported a requirement that ASCs 

report quality data. We refer readers to the CY 2010 OPPS/ASC final rule with comment 
CMS-1525-FC 1044 

period for a full discussion of the comments we received on the feasibility 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 submit 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 (Pub. L. 109-432) gives the Secretary the 

authority to implement ASC quality measure reporting and to reduce the payment update 

for ASCs that fail to report those required 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 recommended 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 estimated that the CPI-U is 2.3 percent and 
CMS-1525-FC 1045 

the MFP adjustment is 1.4 percent. Therefore, we proposed a 0.9 percent update for 

CY 2012. 

Comment: Commenters urged CMS to require ASCs to routinely report cost data 

to allow for future validation of the relative appropriateness of ASC payment weights and 

rates. MedPAC commented that 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 pointed out that businesses such as ASCs 

typically keep records of their costs for filing 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 streamlined 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 ASCs to submit cost data to the 

Secretary for CY 2012 because, as noted previously in this section and in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72058), we continue to believe that 

our established methodology results in appropriate payment rates for ASCs. Therefore, 

we are finalizing our proposal not to require cost reporting in this final rule with 
CMS-1525-FC 1046 

comment period. We will keep the commenters’ perspectives about collecting cost 

information from ASCs in mind as we further consider the adequacy of the Medicare 

ASC payment rates. We also appreciate the commenters’ perspectives regarding ASC 

quality reporting and refer readers to section XIV.K. of this final rule with comment 

period for more detailed discussion 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 rates 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 the Act that the revised payment system be 

implemented so that it would be budget neutral, the initial ASC conversion factor 

(CY 2008) was calculated so that estimated total Medicare payments under the revised 

ASC payment system in the first year would be budget neutral to estimated total 

Medicare payments under the prior (CY 2007) ASC payment system (the ASC 

conversion factor is multiplied by the relative payment weights calculated for many ASC 

services in order to establish payment rates). That is, application of the ASC conversion 

factor was designed to result in aggregate Medicare expenditures under the revised ASC 

payment system in CY 2008 equal to aggregate Medicare expenditures that would have 

occurred in CY 2008 in the absence of the revised system, taking into consideration the 

cap on ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the Act 

(72 FR 42522). 
CMS-1525-FC 1047 

 We note that we consider the term “expenditures” in the context of the budget 

neutrality requirement under section 1833(i)(2)(D)(ii) of the Act to mean expenditures 

from the Medicare Part B Trust Fund. We do not consider expenditures to include 

beneficiary coinsurance and copayments. This distinction was important for the CY 2008 

ASC budget neutrality model that considered payments across hospital outpatient, ASC, 

and MPFS payment systems. However, because coinsurance is almost always 20 percent 

for ASC services, this interpretation of expenditures has minimal impact for subsequent 

budget neutrality adjustments calculated within the revised ASC payment system. 

 In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 through 

66858), we set out a step-by-step illustration of the final budget neutrality adjustment 

calculation based on the methodology finalized in the August 2, 2007 final rule 

(72 FR 42521 through 42531) and as applied to updated data available for the CY 2008 

OPPS/ASC final rule with comment period. The application of that methodology to the 

data available for the CY 2008 OPPS/ASC final rule with comment period resulted in a 

budget neutrality adjustment of 0.65. 

 For CY 2008, we adopted the OPPS relative payment weights as the ASC relative 

payment weights for most services and, consistent with the final policy, we calculated the 

CY 2008 ASC payment rates by multiplying the ASC relative payment weights by the 

final CY 2008 ASC conversion factor of $41.401. For covered office-based surgical 

procedures and covered ancillary radiology services (excluding covered ancillary 

radiology services involving certain nuclear medicine procedures or involving the use of 

contrast agents, as discussed in section XIII.D.2.b. of this final rule with comment period) 
CMS-1525-FC 1048 

the established policy is to set the relative payment weights so that the national 

unadjusted ASC payment rate does not exceed the MPFS unadjusted nonfacility PE 

RVU-based amount. Further, as discussed in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66841 through 66843), we also adopted alternative ratesetting 

methodologies for specific types of services (for example, device-intensive procedures). 

As discussed in the August 2, 2007 final rule (72 FR 42518) and as codified at 

§ 416.172(c) of the regulations, the revised ASC payment system accounts for geographic 

wage variation when calculating individual ASC payments by applying the pre-floor and 

pre-reclassified hospital wage indices to the labor-related share, which is 50 percent of 

the ASC payment amount. Beginning in CY 2008, CMS accounted for geographic wage 

variation in labor cost when calculating individual ASC payments by applying the 

pre-floor and pre-reclassified hospital wage index values that CMS calculates for 

payment, using updated Core Based Statistical Areas (CBSAs) issued by OMB in 

June 2003. The reclassification provision provided at section 1886(d)(10) of the Act is 

specific to hospitals. We believe that using the most recently available raw pre-floor and 

pre-reclassified hospital wage indices results in the most appropriate adjustment to the 

labor portion of ASC costs. In addition, use of the unadjusted hospital wage data avoids 

further reductions in certain rural statewide wage index values that result from 

reclassification. We continue to believe that the unadjusted hospital wage indices, which 

are updated yearly and are used by many other Medicare payment systems, appropriately 

account for geographic variation in labor costs for ASCs. 
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 methodology to ASCs located in CBSA 25980 

Hinesville-Fort Stewart, GA, and CBSA 22 Rural Massachusetts. In CY 2011, we 

identified another area, specifically, CBSA 11340 Anderson, SC for which there is no 

IPPS hospital whose wage index data would be used to set the wage index for that area. 

Generally, we would use the methodology described above; however, in this situation, all 

of the areas contiguous to CBSA 11340 Anderson, SC are rural. Therefore, in the 

CY 2011 OPPS/ASC final rule with comment (75 FR 72058 through 72059), we 

finalized our proposal to set the ASC wage index by calculating the average of all wage 

indices for urban areas in the State when all contiguous areas to a CBSA are rural and 

there is no IPPS hospital whose wage index data could be used to set the wage index for 

that area. In other situations, where there are no IPPS hospitals located in a relevant labor 

market area, we will continue our current policy of calculating an urban or rural area’s 

wage index by calculating the average of the wage indices for CBSAs (or metropolitan 

divisions where applicable) that are contiguous to the area with no wage index. 

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 payment under the OPPS (75 FR 72059 contains an 
CMS-1525-FC 1050 

explanation of such comment). At a minimum, commenters recommended that CMS 

apply the out-migration adjustment to ASCs in qualifying counties. 

Response: We have responded to this comment in the past, and believe our prior 

rationale for using unadjusted wage indices is still a sound one. We refer readers to our 

response to this comment in last year’s final 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 the public comments we received, we are continuing our 

established policy to account for geographic wage variation in labor cost when 

calculating individual ASC payment by applying the pre-floor and pre-reclassified 

hospital wage index values that CMS calculated 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 through 72059) to set the ASC wage index by 

calculating the average of all wage indices for urban areas in the state when there is no 

IPPS hospital 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 weights each year using the national OPPS 

relative payment weights (and MPFS nonfacility PE RVU-based amounts, as applicable) 

for that same calendar year and uniformly scale the ASC relative payment weights for 

each update year to make them budget neutral (72 FR 42531 through 42532). Consistent 
CMS-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 payment weights for ASCs according to the 

following method. Holding ASC utilization and 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 ratesetting 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 relative payment weights for CY 2012. The proposed CY 2012 

ASC scaler was 0.9373 (76 FR 42312) and scaling would apply to the ASC relative 

payment weights of the covered surgical procedures and covered ancillary radiology 

services for which the ASC payment rates are based on OPPS relative payment weights. 

 Scaling would not apply in the case of ASC payment for separately payable 

covered ancillary services that have a predetermined national payment amount (that is, 

their national ASC payment amounts are not based on OPPS relative payment weights), 

such as drugs and biologicals that are separately paid or services that are contractorpriced or paid at reasonable cost in ASCs. Any service with a predetermined national 

payment amount would be included in the ASC budget neutrality comparison, but scaling 

of the ASC relative payment weights would not apply to those services. The ASC 

payment weights for those services without predetermined national payment amounts 

(that is, those services with national payment amounts that would be based on OPPS 
CMS-1525-FC 1052 

relative payment weights) would be scaled to eliminate any difference in the total 

payment weight between the current year and the update year. 

For any given year’s ratesetting, we typically use the most recent full calendar 

year of claims data to model budget neutrality adjustments. At the time of the CY 2012 

proposed rule, we had available 98 percent of CY 2010 ASC claims data. For this final 

rule with comment period, we have approximately 99 percent of all ASC claims data for 

CY 2010. 

To create an analytic file to support calculation of the 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 unique ASCs within the CY 2010 claims data. 

We used the supplier zip code reported on the claim to associate State, county, and CBSA 

with each ASC. This file, available to the public as a supporting data file for the 

proposed rule, is posted on the CMS Web site at: 

http://www.cms.gov/ASCPayment/ASCRN/itemdetail.asp?filterType=none&filterByDID

=-

99&sortByDID=3&sortOrder=descending&itemID=CMS1249114&intNumPerPage=10. 

Comment: Many commenters again expressed 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 the August 2, 2007 final rule. The commenters 
CMS-1525-FC 1053 

expressed many concerns, including that scaling 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 and 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 large payment differentials between the ASC 

and OPPS payments for the same services without evidence of growing differences in 

capital and operating costs between the two settings, and depriving ASCs of real 

increases in the relative costs of procedures. The commenters believed that the OPPS 

relative payment weights represent real growth in the costs of services provided in 

HOPDs and the annual change in relative weights should move in the same direction in 

both the ASC and HOPD setting. The commenters argued that the difference in 

payments between the ASC and HOPD services at the aggregate and procedure level 

should be driven only by changes in the conversion factor. 

The commenters also pointed out that, while 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 decrease payments for certain procedures, the 

trend in the OPPS relative weights suggests that 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 revised 
CMS-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 commenters that annual rescaling would cause 

divergence of the relative 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 the 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 services are not attributable 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 standard 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 differences in capital and operating costs over 
CMS-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 effects of changes in relative weights. The 

ASC payment system adopts the OPPS relative weights as the mechanism for 

apportioning total payments, after application of the update 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 weights do not represent an estimate of absolute 

cost of any given procedure; rather, they reflect 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 OPPS payment weights as used in the ASC payment system. 

Differences in the relativity between the ASC relative payment weights and the OPPS 

relative payment weights are not driven by the application of the uniform scaling factor. 

The ASC weight scaling methodology is entirely consistent with the OPPS weight scaling 

methodology and the weights serve the same purpose in both systems, to apportion total 

budget neutral payment allowed under the update. 

We do not agree with commenters’ assertion that we should eliminate the scaling 

methodology because the scaling factor will rarely 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), aggregate 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 increase in the costs of hospital outpatient 
CMS-1525-FC 1056 

emergency department or clinical visits due, for instance, to an increase 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 hospital 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 weights 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 changes in relative weights 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 process 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 years does not mean the same trend will continue, 

nor does it mean that the principle of preventing the ASC payment weights from being 

affected by fluctuations in the OPPS payment weights is inherently flawed. 

As we stated in the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68754), with respect to the use of “as needed” in the text of § 416.171(e)(2) that 

commenters have interpreted to mean that CMS has the authority to suspend scaling the 

relative payment weights if it determines there 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 relative payment weights as needed to ensure budget neutrality. 

Therefore, we do not agree with the commenters’ assertion that we are under no legal 
CMS-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 weights is an integral and separate process for 

maintaining budget neutrality under the ASC prospective payment system. Scaling is the 

budget neutrality adjustment that ensures that changes in the relative 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 scaling 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 period, we used our proposed methodology 

described above to calculate the scaler adjustment 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 calculated using the CY 2011 ASC 
CMS-1525-FC 1058 

relative payment weights and the CY 2012 relative 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 claims 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 received, we are finalizing our 

CY 2012 ASC relative payment weight scaling 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 the pre-floor and pre-reclassified hospital 

wage indices that are used for ASC payment 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 introducing the proposed CY 2012 
CMS-1525-FC 1059 

pre-floor and pre-reclassified hospital wage indices. Specifically, holding CY 2010 ASC 

utilization and service-mix and the proposed CY 2012 national payment rates after 

application of the weight scaler constant, we calculated the total adjusted payment using 

the CY 2011 pre-floor and pre-reclassified hospital wage indices 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 calculated with the CY 2011 

pre-floor and pre-reclassified hospital wage indices to the total adjusted payment 

calculated with the proposed CY 2012 pre-floor and pre-reclassified hospital wage 

indices and applied the resulting ratio of 1.0003 (the proposed 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 requires 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.” Because 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 CPI-U for CY 2010 and subsequent calendar 

years. Therefore, the annual update to the ASC payment system is the CPI-U (referred to 

as the CPI-U update factor). 
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 requires that “any annual update under [the ASC 

payment] system for the year, after application of clause (iv), shall be reduced by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II)” of the Act (which we 

refer to as the MFP adjustment) effective with the calendar year beginning 

January 1, 2011. Clause (iv) authorizes the Secretary to provide for a reduction in any 

annual update for failure to report on quality measures. Clause (v) states that application 

of the MFP adjustment to the ASC payment system may result in the update to the ASC 

payment system being less than zero for a year and may result in payment rates under the 

ASC payment system for a year being less than such payment rates for the preceding 

year. In the CY 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 reduction 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 “percentage increase” in the CPI-U, which we interpret cannot be a 

negative number. Thus, in the instance where the percentage change in the CPI-U for a 

year is negative, 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 reduce the CPI-U update factor (which would be held to zero 

if the CPI-U percentage change 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 CPI-U percentage increase would result in an 

MFP-adjusted CPI-U update factor that is less than zero, the annual update to the ASC 

payment rates would be negative and payments would decrease relative to the prior year. 

Illustrative examples of how the MFP adjustment would be applied to the ASC payment 

system update are found in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72062 through 72064). 

In the CY 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 proposed rule. We proposed to reduce the 
CMS-1525-FC 1062 

CPI-U of 2.3 percent by the MFP adjustment specific to this CPI-U of 1.4 percentage 

points, resulting in an MFP-adjusted CPI-U update factor of 0.9 percent. Therefore, we 

proposed to apply a 0.9 percent MFP-adjusted update to the CY 2011 ASC conversion 

factor. 

For CY 2012, we also proposed to adjust 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 discussed above, which resulted in a proposed 

CY 2012 ASC conversion factor of $42.329 (76 FR 42313). 

Comment: As in prior years, many commenters 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 hospital 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 designed to capture household spending. The 

commenters stated that, in the most recent 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 very 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 from independent researchers and economists, 

who indicate that the CPI-U consistently underestimates the rate of inflation according to 

the commenters. In addition, because commenters view the CPI-U as a highly volatile 

index, the commenters suggested that CMS adjust for prior year forecast errors. 
CMS-1525-FC 1063 

Commenters stated that adopting the hospital 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 divergence when the productivity adjustment is 

applied to both settings in the future. The commenters asserted that CMS has the 

authority to use an alternative update mechanism, and believed 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 CMS is required to apply the MFP adjustment 

to the ASC annual update. Commenters stated that, as an output price index, the CPI-U 

index already accounts for productivity thus ASCs, in essence, are receiving a 

productivity adjustment that is twice that applied to the HOPD update. Because CMS has 

discretion regarding the index used to update ASCs, but is required in statute to adjust the 

ASC update by the MFP, commenters urged CMS to use the hospital market basket, 

which is an input price index that does not already account for productivity, to update 

ASC payment rates and thereby allow the appropriate application of the required 

productivity adjustment. With regard to the MFP adjustment itself, commenters 

requested that, because the MFP is a volatile measure that is subject to substantial yearto-year fluctuations, the MFP measurement 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 submit cost and quality data, concurrent with 

a 0.5 percent increase in ASC payment rates for CY 2012, arguing that ASC cost data are 
CMS-1525-FC 1064 

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. 

Response: While commenters argue that the items included in the CPI-U index 

may not adequately measure inflation for the goods and services provided by ASCs and 

that use of the hospital market basket would minimize the divergence in the payment 

rates between the OPPS and ASC payment system, we believe that the hospital market 

basket does not align with the cost structures of ASCs. A much wider range of services, 

such as room and board and emergency services, are provided by hospitals but are not 

costs associated with providing services in ASCs. 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, suggestions by MedPAC to find a way to obtain 

cost data from ASCs, in a manner that will minimize the burden on ASCs and CMS, so 

that we can examine whether an alternative input price index would be an appropriate 

proxy for ASC costs or whether an ASC-specific market basket should be developed. 

We recognize that the CPI-U is an output price index that accounts for 

productivity. However, the agency is required 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 the 
CMS-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 regarding the difference in the CPI-U 

forecast and the actual inflation using historical data, we do not believe it is appropriate 

to provide an adjustment to the ASC annual update to correct previous 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 the public comments we received, we are applying our 

established methodology for determining the 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, resulting in an MFP-adjusted CPI-U update 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 index 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 surgical 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” indicates that the surgical procedure will be 

subject to the multiple procedure payment reduction policy. As discussed in the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66829 through 66830), most covered 

surgical procedures are subject to a 50-percent reduction in the ASC payment for the 

lower-paying procedure when more than one procedure is performed in a single operative 

session. Display of the comment indicator “CH” in the column titled “Comment 

Indicator” indicates a change in payment policy for the item or service, including 

identifying discontinued HCPCS codes, designating items or services newly payable 

under the ASC payment system, and identifying items or services with changes in the 

ASC payment indicator for CY 2012. Display of the comment indicator “NI” in the 

column titled “Comment Indicator” indicates that the code is new (or substantially 

revised) and that the payment indicator assignment is an interim assignment that is open 

to comment on the final rule with comment period. 

The values displayed in the column titled “CY 2012 Payment Weight” are the 

relative payment weights for each of the listed services for CY 2012. The payment 

weights for all covered surgical procedures and covered ancillary services whose ASC 
CMS-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 portion of the device-intensive 

procedures, services that are paid at the MPFS nonfacility PE RVU-based amount, 

separately payable covered ancillary services that have a predetermined national payment 

amount, such as drugs and biologicals 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 and services with predetermined national 

payment amounts, such as separately payable 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 payment rates listed in Addendum BB for 

separately payable drugs and biologicals are based on ASP data used for payment in 

physicians’ offices in October 2011. 

We did not receive any public comments regarding the continuation of our policy 

to provide CY 2012 ASC payment information as detailed in Addenda AA and BB. 

Therefore, Addenda AA and BB to this final rule with comment period (which are 
CMS-1525-FC 1068 

available via the Internet on the CMS Web site) display the updated ASC payment rates 

for CY 2012 for covered surgical procedures and covered ancillary services, respectively, 

and provide additional information related to the CY 2012 rates. 
CMS-1525-FC 1069 

XIV. Hospital Outpatient Quality Reporting 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 quality, more efficient health care for Medicare 

beneficiaries. The quality data reporting program for hospital outpatient care, known as 

the Hospital Outpatient Quality Reporting (Hospital OQR) Program, formerly known as 

the Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been 

generally modeled after the quality data reporting program for hospital inpatient services 

known as the Hospital Inpatient Quality Reporting (Hospital IQR) Program (formerly 

known as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) 

Program). Both of these quality reporting programs for hospital services, as well as the 

program for physicians and other eligible professionals, known as the Physician Quality 

Reporting System (PQRS) (formerly known as the Physician Quality Reporting Initiative 

(PQRI)), have financial incentives for the reporting of quality data to CMS. CMS also 

has implemented quality reporting programs for home health agencies and skilled nursing 

facilities that are based on conditions of participation, 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 Program and other quality reporting 

programs, we have focused on measures that have high impact and support CMS and 
CMS-1525-FC 1070 

HHS priorities for improved quality and efficiency of care for Medicare beneficiaries. 

Our goal is ultimately to align the clinical quality 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 reduced. In developing this and other quality 

reporting programs, as well as the Hospital Inpatient Value-Based Purchasing (Hospital 

Inpatient VBP) Program, we applied the following principles for the development and 

use of measures: 

● Pay-for-reporting, public reporting, and value-based purchasing programs 

should rely on a mix of standards, 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 quickly as possible to the use of primarily 

outcome and patient experience of care measures. 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, measures should be aligned across public reporting and payment 

systems under Medicare and Medicaid. The measure sets should evolve so that they 

include a focused set of measures appropriate to the specific provider category that 

reflects the level of care and the most important areas of service and measures for that 

provider category. 
CMS-1525-FC 1071 

● The collection of information burden on providers should be minimized to the 

extent possible. To this end, we continuously seek to align our measures with the 

adoption of meaningful use standards for health information technology (HIT), so that 

data can be submitted and calculated via certified EHR technology with minimal burden. 

● To the extent practicable and feasible, and recognizing differences in statutory 

authorities, measures used by CMS should be endorsed by a national, multi-stakeholder 

organization. Measures should be aligned with best practices 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 Hospital 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 National Quality Strategy which transforms 

national priorities into the focal point for measurement, reporting, and financial 

incentives. Commenters added that all HOPD Program measures should be thoroughly 

tested for accuracy, validity and applicability to hospital-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 Alliance (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 National Quality Strategy to prioritize our 

measure selection, and implement quality reporting initiatives. We are required by 

statute to select measures for the Hospital OQR Program that 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. The NQF, MAP, 

and HQA are organizations composed of a diverse representation of consumer, purchaser, 

provider, academic, clinical, and 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 development process that incorporates broad 

stakeholder input. Details regarding the process we have used in connection with some 

measures are available on our Web site at: 

http://www.cms.gov/MMS/19_MeasuresManagementSystemBlueprint.asp#TopOfPage. 

Also, we will continue our multi-year approach 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 the process measures that are 

linked to outcomes. One commenter specifically urged CMS not to dismiss process 

measures when there is evidence that supports 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 organization that accredits and certifies health care 

organizations and programs in the U.S.) accountability measure criteria as a guide to 
CMS-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 outcomes; the measure accurately captures the 

evidence-based care delivered; and implementation 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 are 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 assessment of measures, and consider these 

criteria, among others, in selecting measures for the Hospital OQR Program because we 

agree that accountability is crucial in quality 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 measures and their implementation generally 

does not provide sufficient time for hospitals to implement process changes to capture 

quality data. The commenter stated that insufficient preparation would hinder hospital 

performance improvement and accurate reporting of quality data. 

 Response: We thank the commenter for this input. We agree that when measures 

require the capture or collection of new chart-abstracted measure information not 

previously captured, hospitals need a sufficient 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 for the Hospital OQR Program may require the 

capture or collection of new data elements for chart-abstracted measures. 

 Comment: A commenter strongly urged CMS to include an update on the NQF 

status of each quality measure in every proposed and final rule, to foster an open and 

transparent environment, given the significant statutory and contractual 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 modifications of the measures as 

necessary to minimize the burden on the small hospitals. 

Response: We believe that the current Hospital OQR Program measures are 

relevant to rural hospitals because they address topics that are broadly applicable to 

hospital outpatient departments, including rural hospital outpatient departments. We 

agree that it is important to seek to minimize the collection burden associated with 

measurement, and that some types of providers may be more greatly impacted by 

collection burden than others. In maintaining 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 CMS clarify the patient population to 

which the Hospital OQR Program measure applies, 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 the measure regardless of payer, while the 

claims-based measures are calculated using only Medicare Fee-for-Service claims. The 

structural measures apply to the hospital outpatient department. 

2. Statutory History of the Hospital Outpatient Quality Reporting (Hospital OQR) 

Program 

 We refer readers to the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72064) for a detailed discussion of the statutory history of the Hospital OQR 

Program. 

3. Technical Specification Updates and Data Publication 

a. Maintenance of Technical Specifications for Quality Measures 

 Technical specifications for each Hospital OQR measure are listed in the Hospital 

OQR Specifications Manual, which is posted on the CMS QualityNet Web site at 

http://www.QualityNet.org. We maintain the technical specifications for the measures by 

updating this Hospital OQR Specifications Manual and including detailed instructions 

and calculation algorithms. In some cases where the specifications are available 

elsewhere, we may include links to Web sites hosting technical specifications. These 

resources are for hospitals to use when collecting and submitting data on required 

measures. 
CMS-1525-FC 1076 

 In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 

68767), we established a subregulatory process for making updates to the technical 

specifications that we use to calculate Hospital OQR measures. This process is used 

when changes to the measure specifications are necessary due to changes in scientific 

evidence, treatment guidelines, or consensus among affected parties. Changes due to 

these reasons may not coincide with the timing of our regulatory actions, but nevertheless 

should be made so that the Hospital OQR measures are calculated based on the most upto-date scientific and consensus standards. We indicated that notification of technical 

changes to the measure specifications is made via the QualityNet Web site, 

http://www.QualityNet.org, and in the Hospital OQR Specifications Manual. The 

notification of changes to the measure technical specifications occurs 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. This release schedule provides at least 3 months of advance 

notice for substantial changes such as changes to ICD-9, CPT, NUBC, and HCPCS 

codes, and at least 6 months of advance notice for changes to data elements that would 

require significant systems changes. 

Comment: A commenter requested that for future new measure proposals, CMS 

also post the associated measure specification publicly at least 6 months prior to inclusion 

in a proposed rule. 
CMS-1525-FC 1077 

Response: We provide specifications or links to specifications as part of the 

proposal. We also seek to incorporate measure specifications as quickly as possible into 

the Hospital OQR Specifications Manual in order to provide enough lead time (generally 

six months) prior to the beginning of data collection for the measure under the Hospital 

OQR Program. 

b. Publication of Hospital OQR Program Data 

 Section 1833(t)(17)(E) of the Act requires that the Secretary establish procedures 

to make data collected under Hospital OQR available to the public. It also states that 

such procedures must ensure that a hospital has the opportunity to review the data that are 

to be made public with respect to the hospital prior to such data being made public. To 

meet these requirements, data that a hospital has submitted for the Hospital OQR 

Program are typically displayed on CMS Web 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 assists beneficiaries by providing information on 

hospital quality of care. This information motivates beneficiaries to work with their 

doctors and hospitals to discuss the quality of care hospitals provide to patients, providing 

additional incentives to hospitals to improve the quality of care that they furnish. 

 Under our current policy, we publish quality data by the corresponding hospital 

CCN, and indicate instances where data from two or more hospitals are combined to form 

the publicly reported measures on the Hospital Compare Web site. This approach is 

consistent with the approach taken under the Hospital IQR Program. Consistent with our 
CMS-1525-FC 1078 

current policy, we make Hospital OQR data publicly available whether or not the data 

have been validated for payment purposes. 

In general, we strive to display hospital quality measures on the Hospital 

Compare Web site as soon as possible after they have been adopted and have been 

reported to CMS. However, if there are unresolved display issues or pending design 

considerations, we may make the data available on other, non-interactive, CMS Web sites 

such as http://www.cms.hhs.gov/HospitalQualityInits/. Publicly reporting the 

information in this manner, though not on the interactive Hospital Compare Web site, 

allows us to meet the requirement under section 1833(t)(17)(E) of the Act for establishing 

procedures to make quality data submitted available to the public following a preview 

period. When we display hospital quality information on non-interactive CMS Web sites, 

affected parties will be notified via CMS listservs, CMS e-mail blasts, national provider 

calls, and QualityNet announcements regarding the release of preview reports followed 

by the posting of data on a Web site other than Hospital Compare. 

We also require hospitals to complete and submit a registration form 

(“participation form”) in order to participate in the Hospital OQR Program. With 

submission of this participation form, participating hospitals agree that they will allow 

CMS to publicly report the quality measure data submitted under the Hospital OQR 

Program, including measures that we calculate using Medicare claims. 

Comment: A commenter urged CMS to continue using both the stakeholder and 

focus groups to develop and evaluate terminology for presenting measurement data to the 

public to avoid misleading and alarming the public unnecessarily. 
CMS-1525-FC 1079 

Response: We appreciate this feedback. Prior to presenting new measurement 

topics or new types of measures on the Hospital Compare Web site ̧ we strive to 

incorporate stakeholder feedback into the display, and to test the display with consumers 

in order to ensure that the concepts are easily understood by consumers and that the 

display and accompanying text will not lead to misinterpretation or inappropriate 

comparisons. 

Comment: Two commenters believed that the imaging measures displayed on the 

Hospital Compare Web site have caused confusion regarding how they should be 

interpreted. 

Response: Currently, we are displaying the imaging efficiency measures as rates 

or ratios as well as observed averages and rates by percentile among all those facilities 

that meet the minimum case count (a minimum case count is needed for statistical 

validity purposes. We plan to evaluate whether 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 with 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 outpatient 
CMS-1525-FC 1080 

quality measures to provide more timely and accurate information for the public. For 

future display of e-measures, a commenter urged CMS to indicate the method of data 

collection (that is, electronic versus chart-abstracted) on Hospital Compare so that 

consumers are aware of the different collection methods used. 

Response: We use the Hospital Compare Web site as the primary vehicle for 

displaying hospital quality data reported for the Hospital OQR Program. As we stated in 

the CY 2011 OPPS/ASC final rule with comment 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, the 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 the 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 for professionals” link, 

which is accessible to the public. We will consider alternatives to make this information 

more transparent to the public. 
CMS-1525-FC 1081 

B. Revision to Measures Previously Adopted 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 payment 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 payment 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 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* 
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 Preoperative Risk Assessment for Non Cardiac Low 

Risk Surgery* 

OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus 

Computed Tomography (CT)* 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache* 

OP-16: Troponin Results for Emergency Department acute myocardial infarction 

(AMI) patients or chest pain patients (with Probable Cardiac Chest Pain) Received 

Within 60 minutes of Arrival** 

OP-17: Tracking Clinical Results between Visits** 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED 

Patients** 

OP-19: Transition Record with Specified Elements Received by Discharged 

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 Interpretation Within 45 minutes 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, discussed below, on some of these previously 

finalized measures. 

● OP-3 Median time to transfer to another 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 measure review for relevancy, potential 

topped-out status, program alignment, and harmonization. We have not observed any 
CMS-1525-FC 1083 

evidence indicating that the measure should be retired at this time. This measure is 

important because it measures the promptness of care intervention for life threatening 

coronary events, which is associated with better outcomes for patients experiencing such 

events.

● OP-4: Aspirin at Arrival and OP-5: Median Time to ECG 

Comment: A commenter disagreed with the inclusion code for "Chest Pain Not 

Elsewhere Classified (NEC)" for the identification 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 applies 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 assess the use of aspirin and ECG in patients 

suspected of having cardiac chest pain, we believe 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 – Use of Contrast Material 

● OP-14: Simultaneous Use of Brain Computed Tomography (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 not 
CMS-1525-FC 1084 

HQA-approved. A few commenters 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 proposed 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 requirement 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 measures results in patient harm. 

● OP-13: Cardiac imaging for preoperative risk assessment for non-cardiac low risk 

surgery 

● OP-14: Simultaneous use of brain computed tomography (CT) and sinus computed 

tomography (CT) 

● OP-15: Use of brain computed tomography (CT) in the ED for atraumatic headache 

Comment: A commenter recommended that for initial implementation of new 

imaging measures, CMS should keep the “within range” rates broad so that hospital 

performance would not be unfairly presented. 
CMS-1525-FC 1085 

 Response: Generally, the hospital outpatient imaging efficiency measures that we 

have implemented do not provide for any targets or ranges. However, the OP-9: 

Mammography Follow-Up rates measure uses ranges because the literature supports 

specified ranges. For the other imaging efficiency measures, we provide rates or ratios 

as well as observed averages and rates by percentile among all those facilities that meet 

the minimum case count (a minimum case count 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 context to support the clinical decisions for the imaging studies. 

The commenter gave the example of measure OP-13. The commenter believed that 

exclusions should be added that would recognize 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 routinely 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 technical experts determined that additional 
CMS-1525-FC 1086 

clinical information beyond what is present on claims is not necessary to identify 

exclusions. However, we will further consider 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 computed tomography (CT) and sinus computed 

tomography (CT) 

Comment: A commenter believed that prior to measure implementation, CMS 

should include explicit exclusion criteria for patients with signs of serious infection. 

 Response: We appreciate the commenter’s concerns. During the development of 

this imaging efficiency measure, we completed extensive literature reviews and analyzed 

appropriate medical guidelines to determine the appropriateness of imaging studies for 

various medical conditions and exclusions. Currently, we exclude claims with primary or 

secondary diagnosis codes related to trauma, tumor, orbital cellulitis, or intracranial 

abscess from the measure as long as these 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 order 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 benefit in this measure 
CMS-1525-FC 1087 

because the sample size for patients having both 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 requiring rescanning with 

additional radiation. 

 Response: While we recognize that OP-14 and 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 counts can be problematic for 

facilities that do not perform a sufficient volume of CT imaging studies. For this reason, 

we will establish a minimum case count requirement for these measures for public 

reporting purposes. Regarding the comment on the impact of imaging technology on 

imaging efficiency measure results, currently, we do not collect any information 

regarding what level of CT technology is employed by a facility. Therefore, it is not 

currently possible to adjust the CT measures in this manner. 

● OP-15: Use of brain computed tomography (CT) in the ED for atraumatic headache 

Comment: A commenter noted that certain conditions 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 suggestions and will take them into 

consideration in our measure maintenance process. 

 Comment: A few commenters opposed measure OP-15 because it is not 

NQF-endorsed. Commenters stated that the measure is a utilization measure rather than 

an efficiency measure. The commenters added that there was no scientific basis to 
CMS-1525-FC 1088 

suggest this measure addresses patient safety. Commenters urged CMS to reconsider the 

adoption of measure OP-15, considering potential tort liability in the ED if imaging does 

not occur, and the potential positive impact on quality of life for patients. 

 Response: The objective of imaging efficiency measures, including OP-15, is to 

promote efficient and high quality patient care in the hospital outpatient setting that 

neither underutilizes nor over utilizes healthcare resources. Unnecessary or duplicative 

studies are inefficient and detrimental to the 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 claims data indicated that approximately 200,000 

Medicare beneficiaries had a visit to the ED with a primary diagnosis of headache with 

about half of them receiving a brain CT during the ED visit. We encourage use of this 

important diagnostic tool when clinically indicated. 

 Earlier this year, we conducted a dry run of the measure and received many 

suggestions for refinements to the measure in order to better address 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 during this public comment period and during the 

maintenance process for this measure. We intend to incorporate refinements arising out 

of this process, such as the formulation and incorporation of addition exclusion 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 myocardial 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 with chest pain. The focus of this measure 

is on the timeliness of the receipt of the Troponin results and not on its use or 

interpretation by HOPDs. However, we believe that use of the Troponin 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 decisions and treatment delivery, which in turn 

results in better outcomes for patients. 

● OP-17: Tracking clinical results between visits 

Comment: A commenter suggested the inclusion of a “N/A” option for hospital 

outpatient departments, in the event that lab 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 HITECH 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 designed to assess the ability of HOPDs to track 

results of clinical tests between the patient visits. This would be true of the facility even 
CMS-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 patient’s condition over time. 

● OP-19: Transition record with specified elements received by discharged patient 

 Comment: A few commenters supported providing 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 performed 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 and the recommendations from the 

commenters. This measure covers outpatient 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 the facility during the ED visit. If the 

principal diagnosis has not been determined prior to discharge, the specifications state 

that the chief complaint can be used to comply with the measure. 

We do not believe it is necessary to delay 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 believe it will incur much burden to report the 

data. Additionally, certified EHR technology already has the functionality to generate 
CMS-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 care of non-ED physicians. 

 Response: Currently, observation patients discharged from the ED would be 

captured. However, not all observation patients 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 population can be better defined for the hospital 

outpatient department as a whole with our technical expert panel during the maintenance 

of this measure. 

Comment: A commenter requested the exclusion of the discontinued medications 

from the specified elements for this measure. 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 measure are included in the Specifications Manual. 

 Response: There is only one data element (Transition Record received) in this 

measure and this data element contains several 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 medications that patient should take after ED 

discharge, with quantity prescribed and/or dispensed (OR intended duration) and 
CMS-1525-FC 1092 

instructions for each medication. The medications discontinued as a result of the ED visit 

should be listed to ensure that the patient does not continue taking them after discharge. 

This would mean a change to the list of home medications. Thus, documentation of 

discontinued medication is an essential part of the instructions given to a patient upon 

discharge. Therefore, the transition record should contain a summary of the care, 

including discontinued medication instruction provided during the ED encounter. 

● OP-21: ED- Median time to pain management for long bone fracture 

 Comment: Two commenters believed that this 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: We acknowledge the importance of listing all possible analgesics in 

the treatment of long bone fractures in the list 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 analgesic administered. The list of analgesic 

medications in the Specification 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 patients not being treated 

would be appropriately captured. 
CMS-1525-FC 1093 

 Response: The commenter is correct, this measure assesses whether patients with 

long bone fracture who received analgesics did so in a timely manner. During measure 

development, our technical expert panel 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 addressed 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 interpretation 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 interpretation of head CT scan results for acute 

ischemic stroke or hemorrhage stroke patients is important in both inpatient and 

outpatient settings. This measure is appropriate to measure the quality of care in the 

outpatient setting, given that the goals of this measure are to encourage 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 expect 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 the 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 measure 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 resuscitation 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 excluding cases with diagnosis codes for either Respiratory 

Arrest (799.1) or Cardiac Arrest (427.5) would be feasible 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 imaging 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 and 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 that they can be read within 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 equally good or better than CT in diagnosing 

stroke. Therefore, the commenter recommended changing the title of the measure to read 

Brain CT or MRI scan results from acute ischemic stroke or hemorrhagic stroke who 

received brain CT or MRI scan interpretation within 45 minutes of arrival. 

Response: We appreciate the feedback and will 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 commenters’ statements that structural 

measures are not tied to quality. Structural measures assess 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-Left 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 (NQF # 0499) as part of an NQF project 

entitled “National Voluntary Consensus Standards for Emergency Care.” This measure 

assesses the percentage of patients who leave the Emergency Department (ED) without 

being evaluated by qualified medical personnel, which is an indication of ED 

overcrowding, and lack of timely access to care. In the CY 2012 OPPS/ASC proposed 
CMS-1525-FC 1096 

rule (76 FR 42315), we proposed that beginning with the CY 2013 payment 

determination, hospitals would submit aggregate numerator and denominator counts once 

a year using a Web-based form available through the QualityNet Web site for this 

measure. We stated that this proposed process would be different from that which is used 

to collect other chart-abstracted measures because it would not require hospitals to submit 

patient-level information for this measure, and would not require quarterly submission of 

data. We believe this proposed process will 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, the aggregate counts for the numerator (the 

total number of patients who left without being evaluated by a physician/advance practice 

nurse/physician’s assistant) and the denominator (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 through December 31, 2011. We invited public 

comment on this proposed approach to data collection for OP-22 for the CY 2013 

Hospital OQR Program and subsequent payment 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 measure 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 the denominator for measure OP-22 for burden 
CMS-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 that 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 contended that the measure is not a quality 

of care measure and is hard to validate since 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 their support of aggregate reporting for 

this measure and their suggestions for monitoring 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 measure 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, and 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 proposed. Other commenters believed that the 

long lapse of time between 2011 and 2013 would 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 until the data can be submitted electronically. 
CMS-1525-FC 1098 

Response: We believe that most HOPDs are 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 response to the public comments we received 

regarding the burden for retroactive retrieval of aggregate data, we will finalize the time 

window for the initial reporting 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 clarification regarding whether the 

proposed revisions to the measure are endorsed by the NQF. A commenter requested the 

definitions of “being seen,” “left without being seen,” as well as clarifications for the 

inclusion or exclusion of patients who have been triaged but not evaluated by a 

physician/advance practice nurse/physician’s assistant, for data collection purposes. 

 Response: The revisions do not change 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 received, we are finalizing our proposal 

that for the CY 2013 payment determination, with respect to OP-22-Left Without Being 

Seen, HOPDs will be required to report only aggregate counts for the numerator (the total 
CMS-1525-FC 1099 

number of patients who left without being evaluated by a physician/advance practice 

nurse/physician’s assistant) and the denominator (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 data between July 1, 2012 and August 15, 2012 

with respect to the period January 1, 2012 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 Updating Quality Measures under the Hospital OQR 

Program 

In general, when selecting measures for the Hospital OQR Program, we take into 

account several considerations and goals. These include: (a) expanding 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 quality programs to align incentives and 

promote coordinated efforts to improve quality; (e) seeking to use measures based on 

alternative sources of data that do not require chart abstraction or that utilize data already 

being reported by many hospitals, such as data that hospitals report to clinical data 

registries, or all-payer claims data bases; and (f) weighing the relevance and utility of the 
CMS-1525-FC 1100 

measures compared to the burden on hospitals 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 greatest 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 guidelines. We used and continue to use these criteria to 

guide our decisions regarding what measures to add to the Hospital OQR Program 

measure set. 

In the CY 2009 OPPS/ASC final rule with comment period, we adopted four 

claims–based quality measures that do not require 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 abstraction 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 opportunities for quality improvement. Many hospitals 

submit data to and participate in existing registries. In addition, registries often capture 

outcome information and provide ongoing quality 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 with 
CMS-1525-FC 1101 

the permission of the hospital, thereby enabling 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 measures required under the Hospital OQR Program, and would 

be publicly reported like other Hospital OQR Program quality measures, encouraging 

improvements in the quality of care. In the CY 2010 OPPS/ASC final rule with comment 

period (74 FR 60633), we responded to public 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 Coordinator for Health Information Technology 

(ONC) (45 CFR 170.102) which has adopted the 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 patient demographic and clinical health information, such as medical 

history and problem lists; and (B) has the capacity -- (i) to provide clinical decision 

support; (ii) to support physician order entry; (iii) to capture and query information 

relevant to health care quality; and (iv) to exchange electronic health information with, 

and integrate such information from other sources.” 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: “Certified EHR Technology” means (1) A 

complete EHR that meets the requirements included in the definition of a Qualified EHR 
CMS-1525-FC 1102 

and 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; 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 CMS, and the adoption of standards for the 

capturing, formatting, and transmission of data elements that make up the measures. 

However, once these activities are accomplished, 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 hospitals. In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60633 through 60634), we responded to public comments 

on such an approach. 

Continuing to reduce our reliance on the chart-abstraction mechanism would 

allow us and hospital outpatient departments to devote available resources towards 

maximizing the potential of registries and EHRs for quality measurement reporting. Both 

mechanisms hold the promise of more sophisticated and timely reporting of clinical 

quality measures. Clinical data registries allow the collection of more detailed data, 

including outcomes. Registries can also provide feedback and quality improvement 
CMS-1525-FC 1103 

information based on reported data. Finally, clinical data registries can also receive data 

from EHRs, and therefore, serve as an alternative 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 requirements, and implementing quality improvement 

efforts. We will also have more time to develop, align, and implement the infrastructure 

necessary to collect data on the measures and 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 these future payment determinations. 

 We have previously expanded the Hospital OQR Program measure set 

dramatically by adopting measures over several 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 and patient experience of care measures. 

Commenters encouraged measure alignment across payers using NQF-endorsed 

measures. To alleviate burden from chart-abstraction, commenters provided the 

following suggestions for CMS: 

● Identify measures suitable for registry-based reporting in the near future. 

Commenters described many advantages in using registries such as less resources are 

needed to report data, and timely 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-abstracted measures in the Hospital OQR 

Program. 

 Response: We appreciate the valuable input from commenters. As discussed in 

previous rules, we are supportive of registry-based measurement which holds promise for 

reducing burden. During our measure maintenance process, we review the improvement 

potential for a measure, the measure’s continued 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. Additionally, 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 articulate the specific patient inclusion criteria for the measure; 

and (2) select codes that are appropriate for claims-based measures in HOPD settings. 

 Response: We note that we provide measure specifications or links to measure 

specifications, including patient inclusion criteria and the appropriate codes for 

claims-based measures for the proposed measures, 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 Payment Determination: Surgical Site 

Infection (NQF #0299) 

Healthcare Associated Infections (HAIs) is a topic area widely acknowledged by 

HHS, the Institute of Medicine (IOM), the National Priorities Partnership, and others as a 

high priority requiring measurement and improvement. HAIs are among the leading 

causes of death in the United States. CDC estimates that as many as 2 million infections 
CMS-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 year from HAIs than from auto accidents and 

homicides combined. HAIs not only put the patient at risk, but also increase the days of 

hospitalization required for patients and add considerable health care costs. HAIs are 

largely preventable through interventions such as better 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 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 the National Healthcare Safety 

Network (NHSN) as part of State-mandated reporting and surveillance requirements for 

hospitals in some States. Additionally, data 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 types of healthcare facilities in the United 

States, including acute care hospitals, long term acute care hospitals, psychiatric 

hospitals, rehabilitation hospitals, outpatient dialysis centers, 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 prevalence of multidrug-resistant organisms 

within their organizations, and other adverse 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 facilities 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 performed in hospital outpatient 

department settings and ASCs. Therefore, we have determined that this measure is 

“appropriate for the measurement of the quality 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 surgical 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 infection 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). The 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 

section 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 feasible 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 determination (75 FR 50211) and its adoption into 
CMS-1525-FC 1108 

the Hospital OQR Program would further our goal of aligning measures across programs 

where feasible. 

We proposed that submission of data for 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 protocols 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 into the Hospital OQR Program for the CY 2014 

payment determination. 

Comment: Some commenters stated it is inappropriate to include the surgical site 

infection measure in the Hospital OQR Program based on the measure’s NQF 

endorsement status as an inpatient 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. However, the commenters stated that, in the 

outpatient settings, patients are discharged within hours of surgery and potential 

outpatient surgery related infections may not occurred until after discharge. Commenters 

cited the examples of colon surgery and abdominal hysterectomy, specified for reporting 

in the Hospital IQR Program, which are seldom performed in hospital outpatient settings. 

Response: We agree that currently, the procedures included in the proposed 

surgical site infection measure do not represent a large number of procedures that are 

performed in hospital outpatient departments or in ASCs. Based on the public comments 

we received, we are not finalizing the surgical site infection measure for HOPDs for the 
CMS-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 will 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 currently, 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 hospitals 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 reporting 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 payment 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 strategy for surgical site infection data. 
CMS-1525-FC 1110 

Comment: Some commenters applauded the addition of the surgical site infection 

measure in recognition of the significant negative impact of HAIs on hospital patients. 

Commenters recommended that CMS adopt one to two of the NQF-endorsed 

CDC/NHSN outpatient surgical procedures initially and they encouraged the inclusion of 

more HAI measures in the Hospital OQR Program 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 include 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 reporting programs for ASCs, LTCHs and Inpatient 

Rehabilitation Facilities. A commenter noted that CDC is still conducting pilot testing of 

vendor capability to electronically transfer data. 

Response: In preparation for the upcoming influx of data, CDC is adding 

capacity, both personnel and technical infrastructure, to support the additional use of 
CMS-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 HOPDs could have high surgical site 

infection rates because they have adopted more comprehensive and sophisticated 

surveillance systems. 

Response: Surveillance efforts may initially 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 measurement of surgical site infections is 

dependent upon standardized data collection protocols for such things 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 measure, all facilities will be 

submitting the same type of data using a standardized collection protocol, and therefore 

more comprehensive and sophisticated surveillance systems would not necessarily equate 

to a greater number of surgical site infections. In many ways those facilities with 

comprehensive and sophisticated surveillance systems may be at an advantage, relative to 

those without sophisticated surveillance systems, in the identification of surgical site 

infections earlier on. 

 Comment: A commenter noted that CDC is currently collaborating with surgical 

associations to develop and harmonize a more robust surgical site infection measure that 
CMS-1525-FC 1112 

would be consistent with the approaches and expertise of both organizations. Therefore, 

the commenter urged postponing the surgical 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 surgical site infection 

measure. When a measure that is better suited for the HOPD setting is fully developed, 

we will re-propose the measure. As previously indicated, CMS is not finalizing the 

surgical site infection measure for HOPDs at this time. 

 After consideration of the public comments we received, 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 diabetes care measures because we were 

in the process of refining the chart-abstracted numerator definitions for these measures 

(75 FR 72091). We also stated that we intended 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 adopt these five diabetes care measures 

for the CY 2014 payment determination as chart-abstracted measures. These five 

measures are: (1) Hemoglobin A1c Management (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: Eye 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 solicited 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 sixth new chart-abstracted measure, Cardiac 

Rehabilitation Patient Referral from an Outpatient 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 their support of these 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 Hospital OQR Program for the CY 2014 payment 

determination does not appear to be consistent with CMS’ goal to reduce burden for 

providers. One commenter suggested that CMS provide per case abstraction time burden 
CMS-1525-FC 1114 

in the proposal. Commenters strongly recommended that no new chart-abstracted 

measures should be introduced while providers are in transition to ICD-10. Many 

commenters were very concerned about the burden from the proposed addition of chartabstracted measures, in terms of staff training, coordination of data submission, data 

quality checks, and staff resources. Commenters recommended delaying the 

implementation of the proposed chart-abstracted measures to the CY 2015 payment 

determination as the target date. Other commenters suggested that we delay the 

implementation for these chart-abstracted measures until NQF finishes retooling and 

testing the related specifications, and EHR technology can facilitate electronic data 

transmission. 

 Response: We are aware of the burden that HOPDs 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 consideration of the public comments we 

received regarding this burden and the need to further specify these diabetes care 

measures for the hospital outpatient setting, we have decided 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 supported 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 be 
CMS-1525-FC 1115 

overwhelming without a clear definition of the target patient population. Commenters 

asserted that CMS needs to provide more precise specifications to identify the appropriate 

patient population inclusions and exclusions for these measures. The commenters 

explained that many patients that visited hospital 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 have diabetes clinics 

should be held accountable for outpatients’ diabetes lab work ordered by primary care 

physicians practice outside the hospital outpatient setting. Some commenters opposed 

the diabetes care measure set and believed they would be better suited for the PQRS 

Program where patients are being 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 management services in hospital outpatient 

department clinics. These diabetes measures 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 outpatient setting, we have 

decided not to finalize these 5 diabetes care measures at this time. 
CMS-1525-FC 1116 

Comment: A few commenters provided suggestions to modify the diabetes care 

measure specifications to: (1) limit the denominator population to capture only primary 

care provider-based clinics that are under the OPPS system; (2) incorporate electronic lab 

data; (3) evaluate the appropriateness 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 clinics responsible for the diabetes care measures; 

and (5) include at least a minimum 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 hospital outpatient setting. 

 After consideration of the public comment regarding burden and the need to 

further specify these measures for the hospital 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 these measures at a 

future date. 

Cardiac Rehabilitation Measure: Patient Referral from an Outpatient Setting 

(NQF #0643) 

Cardiac rehabilitation improves the quality of life, reduces modifiable 

cardiovascular risk factors, enhances adherence to preventable medications, and lowers 

morbidity and mortality.2

 Despite these benefits, cardiac rehabilitation is significantly 

underused by patients with heart disease and there is significant geographical variation in 

referral rates and lower use in women, non-whites, older patients and patients on 

 

2

 Wenger, N.K.: Current status of cardiac rehabilitation. J. Am Coll Cardiol 2008; 51:1619-1631. 
CMS-1525-FC 1117 

Medicaid.3

 A recent study of Medicare beneficiaries, using 70,040 matched pairs of 

patients hospitalized for coronary conditions or revascularization procedures, found that 

mortality rates were 21 percent to 34 percent lower in cardiac rehabilitation users 

compared to nonusers.4

 Evidence from registries which include a cardiac rehabilitation 

performance measure indicated that only about 18 percent of eligible patients were 

referred to cardiac rehabilitation.5

 Under our regulations, 42 CFR 410.49, cardiac 

rehabilitation is covered for patients who have had one or more of the following: an acute 

myocardial infarction within the preceding 12 months, current 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 cardiac rehabilitation referral performance 

measures as part of the call for care coordination performance measures. These measures 

are: (1) Cardiac Rehabilitation: Patient Referral From an Inpatient Setting (NQF #0642). 

The percentage of patients admitted to the hospital with a qualifying cardiovascular 

disease (CVD) event who are referred 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 cardiac 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 transplantation who have not already participated in an early outpatient 

cardiac rehabilitation/secondary prevention program for the qualifying event and who are 

referred to an early outpatient cardiac rehabilitation/secondary prevention program unless 

there is a documented medical or patient oriented 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 specifications are located in Appendix A (Pages 

A4 and A5) of the 2010 NQF consensus report entitled “ Preferred 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_Reporting_Care_Coordination.aspx. 

This proposed measure targets patients who have experienced a qualifying 

cardiovascular event. These patients are commonly seen in hospital outpatient 

departments and, for this reason, we believe that the proposed measure is appropriate for 

the measurement of the quality of care (including 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 therefore 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 Cardiac 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 public comment on this proposed measure. 

 Comment: Many commenters were very supportive of the cardiac rehabilitation 

referral measure which they believed would encourage hospitals to take responsibility for 

patient care beyond the cardiovascular interventions. Commenters stated that facilities 

with electronic patient management systems would generate more physician referrals to 

cardiac rehabilitation. A commenter recommended that the measure should be included 

in the Hospital IQR Program as well so that the continuity of care for cardiovascular 

events can be better enhanced. A commenter alerted CMS that some registries already 

integrate both the inpatient and outpatient cardiac 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 this measure for various reasons. 

A commenter did not see the reason for hospitals to report this measure because 

presumably, the cardiologist in the cardiac clinic would be reporting this measure. 

Furthermore, the commenter stated the calculation of the percentage of patients evaluated 
CMS-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 believed that only highly integrated care system 

with well-structured coordination 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 report 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 evaluated in an outpatient setting who, 

in the previous 12 months, experienced a qualifying cardiovascular event (which is 

defined in the NQF-endorsed measure specifications). Hospital outpatient departments 

are not required under the measure specifications to track whether these patients were 

actually following the qualifying cardiovascular 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 measure specification for this measure 

available at the link above includes the definition of a referral as “an official 

communication between the healthcare provider and the patient to recommend and carry 

out a referral order to an early outpatient cardiac rehabilitation program.” This includes 

the provision of all necessary information to the patient that would allow the patient to 
CMS-1525-FC 1121 

enroll in an early outpatient cardiac rehabilitation program. This also includes written or 

electronic communication between the healthcare provider or healthcare system and the 

cardiac rehabilitation program that includes the 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 facility, 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 cardiac 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 cardiac 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 processes such as this 

are an indicator of high quality of care delivered 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 delay the implementation of this 

measure given its beneficial impact on patient care. We thank the commenter for the 
CMS-1525-FC 1122 

input for e-measure specification and we will take this into consideration in our 

e-measure development. 

After consideration of the public comments we received, we are finalizing the 

chart-abstracted Cardiac Rehabilitation Measure: 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 general, structural measures assess the characteristics and 

capacity of the provider to deliver quality health care. 

(1) Safe Surgery Checklist Use Measure 

This proposed structural measure assesses whether a hospital outpatient 

department utilizes a Safe Surgery checklist that assesses whether effective 

communication and safe practices are performed during three distinct perioperative 

periods: (1) the period prior to the administration of anesthesia; (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 has been credited with dramatic decreases in 

preventable harm, complications and post-surgical mortality6

. 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 concluding 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 and the use of safe surgical practices 

during surgical procedures will significantly reduce preventable surgical deaths and 

complications. 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.8

 A safe surgery checklist would also reduce the potential for human error, 

which we believe would increase the safety of the surgical environment. 

 The safe surgery checklists of which we are aware typically include safe surgery 

practices corresponding to three critical perioperative periods: 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 the operating room. Some examples of safe 

surgery practices that can be performed during 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.aspx
CMS-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 Health Organization Surgical 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/safesurgery/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 Surgeons’ 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 outpatient department would indicate whether or 

not it uses a safe surgery checklist for its surgical procedures that includes safe surgery 

practices during each of the three critical perioperative periods discussed above. The 
CMS-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 with any individual outpatient procedures. 

The proposed Safe Surgery Checklist structural 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 through 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 endorsed by the Council on Surgical and Perioperative Safety, 

which is comprised of the American Association of Nurse Anesthetists, American 

College of Surgeons, American Association of Surgical Physician Assistants, American 

Society of Anesthesiologists, American Society of PeriAnesthesia Nurses, AORN, and 

Association of Surgical Technologists. 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). “Association 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 Checklist use reflects consensus among affected 

parties. We also note that TJC included safe surgery checklist practices 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 proposed 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 collection of structural measures 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 structural measure to the CY 2014 Hospital 

OQR Program measure set. 

Comment: Many commenters supported the measure and were pleased that CMS 

cited the WHO’s Surgical Safety Checklist as a reference. A commenter recommended 

incorporating the WHO’s Surgical Safety Checklist as an Appendix in the Specifications 

Manual. A few commenters commended CMS’ efforts to align the Safe Surgery 

Checklist measure in both hospital outpatient departments and ASCs to ensure quality of 

care across settings. Some commenters suggested that CMS adopt the measure in the 

hospital inpatient setting. 

 

11 Birkmeyer, JD (2010) “Strategies for Improving Surgical Quality – Checklists and Beyond.” NEJM. 

363: 1963-1965. 
CMS-1525-FC 1127 

Some commenters appreciated the flexibility provided under the measure that 

would allow facilities to develop a safe surgery checklist based on their own needs and 

populations served. A commenter 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 example, intra-operative record, anesthesia record, 

etc.) as appropriate. 

 Response: We appreciate the support for the measure designed to assess the 

adoption of a best practice for surgical care to reduce preventable 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 implementation 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 result in a documentation task which does not 

result in the improved delivery of care 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 implemented appropriately to achieve improved 
CMS-1525-FC 1128 

delivery rather than just create 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, wrong site surgery, wrong procedure or wrong 

patient surgery, and the retention of foreign objects in the body. During our measure 

maintenance process, we will review the improvement 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 this measure should only apply to 

surgeries performed in an operating room setting because many hospital outpatient 

departments perform procedures (for example, prostate biopsy, PEG replacement, 

endoscopy, etc.) in procedure units where safe surgery checklist is not used routinely in 

procedure units. 

 Response: This measure applies to any facility where a surgery or other invasive 

procedures occurs rather than to specific surgical procedures performed in a HOPD or 

individual surgical patients. Therefore exclusions 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-endorsed. Additionally, one commenter noted that 

the introduction of this measure would create an undue burden on hospitals because 

Medicare National Coverage Determinations 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 CMS to seek NQF endorsement. Another 
CMS-1525-FC 1129 

commenter was skeptical that the proposed Safe 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 the 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 elements that HOPDs could include in their checklist to 

avoid preventable medical errors. We believe 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-surgical 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 significant consensus among affected parties. 

As stated in the CY 2012 OPPS/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 Anesthesiologists, TJC, the National Association 

for Healthcare Quality and the Association of PeriOperative Registered Nurses (AORN). 

Furthermore, consensus for this measure was 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 checklist is one of the safe surgery principles 
CMS-1525-FC 1130 

endorsed by the Council on Surgical and Perioperative Safety. Some State agencies, 

State hospital associations, accrediting organizations, and the Veterans Health 

Administration also have endorsed the use of a safe surgery checklist 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 required to adopt only NQF-endorsed measures 

for the Hospital OQR Program. We will take the comment regarding seeking 

endorsement of this measure 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-based tool should be provided, such 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 agree that this collection method places 

minimal burden on HOPDs. The Web-based tool 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 requirements 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 procedures, is related to 

better patient outcomes, including decreased surgical errors and mortality.12, 13, 14This 

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 patients for the particular procedure. For this 

reason, the National Quality Forum has previously endorsed measures of total all-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). Additionally, many consumer-oriented Web sites 

that display health care quality information required to be reported under State law 

(California, New York, Texas, Washington, Florida, Illinois, Michigan, 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 

 

12Livingston, E.H.; Cao, J “Procedure Volume as a Predictor of Surgical Outcomes”. JAMA. 

2010;304(1):95-97.

13 David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Dellinger, 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 Following Surgery for Colon Cancer” JAMA. 2000; 284 (23): 3028-3035. 14 Maltezou, H.C., Drancourt, M.: Nosocomial influenza in children. Journal of Hospital Infection 2003; 

55:83-91. 
CMS-1525-FC 1132 

Mortality), in order to provide more context to consumers choosing a health care 

provider. The current NQF-endorsed measures of procedure volume (noted above) relate 

to surgeries performed only in inpatient settings, and would not be applicable to the types 

of procedures approved to be performed in HOPDs and ASCs. 

The table below, which shows the proportion of procedures during CY 2010 

performed in hospital outpatient departments stratified by broad categories, reveals that 

most hospital outpatient procedures (99 percent) fall into one of 8 categories: 

Cardiovascular, Eye, Gastrointestinal, Genitourinary, 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 with better quality, and surgical procedures 

are performed in hospital outpatient departments, we believe that surgical volume is 

appropriate for measuring the quality of these eight categories 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 all-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 volume data. Like the other 

structural measures in the Hospital OQR Program, data on this proposed measure would 

be collected via an online Web-based tool that 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 the type of broad procedure categories as 

proposed. The commenters asserted that the measure as proposed without associated 

information on outcomes or patient-reported assessment of care may have the potential to 

mislead patients and Medicare about the care that providers delivered. Another 

commenter requested that CMS provide data that indicate a correlation between all-payer 
CMS-1525-FC 1134 

data and Medicare-specific data related to outpatient procedure volumes. A commenter 

requested a snapshot of how the surgical procedures volume data would be displayed on 

the Hospital Compare Web site. 

Some commenters opposed the inclusion of the hospital outpatient volume for 

selected outpatient surgical procedures measure because of concerns regarding the 

categories and because of concerns regarding CPT codes. Some commenters stated that 

the proposed procedures are broad based categories. 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 surgical 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’ input 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 surgical procedure volume in order to assist 

patients in making informed healthcare decisions. Based on the public comment received 

suggesting that the eight broad categories will not be meaningful to consumers, we will 

further identify groupings of key procedure types 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 less burdensome alternatives to 

implement this measure as follows: (1) implement 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 number 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 participate 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 these suggestions. This information 

will be submitted in aggregate counts once annually 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 services 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 specifications for the measure that will be in an 

upcoming release of the Hospital OQR Specifications Manual. 

Comment: A commenter stated that it is imperative that the volume of procedures 

be compared to the number of physicians performing 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 different from a hospital reporting 1,000 procedures 

with 500 physicians. 

Response: . We do not have information about the volume of physicians 

performing the procedures within 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 reporting this information, for future rules. 

Comment: Some commenters did not support this 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-specific Web sites, and registries. In addition, some 

commenters believed that data collection for this measure would create tremendous 

burden if the population include all patients and not just Medicare patients. 

A commenter contended that the proposed measure is only a crude measurement 

tool to monitor surgical volume. A few commenters noted that there is a lack of evidence 

linking volume of surgical procedure performed in HOPDs or ASCs to quality, 

notwithstanding the non-HOPD- or ASC-specific 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-reviewed 
CMS-1525-FC 1137 

literature and because this type of information 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 counts that they would submit once annually. In 

the Specifications Manual, we will include further reporting instructions if hospitals do 

not perform certain procedures. 

We disagree with the concern expressed regarding the inpatient focus of the 

literature we cited. We believe that this literature is also relevant to HOPDs. We note 

that the number of Medicare-certified HOPDs has increased dramatically over the years. 

In addition, an increasing number of procedures 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 context 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, there are risks associated with all surgical 

procedures, and we believe that the more often a surgery is performed in a HOPD, the 
CMS-1525-FC 1138 

greater the incentive for the HOPD to implement standardized practices that can 

minimize these risks. At this time, a greater 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 facilities 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 define key procedure types within each of the 

8 broad categories in the Hospital OQR Specifications 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 within each of the 8 broad categories for hospitals to report. 

 In summary, in addition to the 23 measures 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 measures 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-Abstracted Measure, and 2 Structural Measures 

OP-1: Median Time to Fibrinolysis 
CMS-1525-FC 1139 

CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously 

Adopted and the Addition of 1 Chart-Abstracted Measure, and 2 Structural Measures 

OP-2: Fibrinolytic Therapy Received Within 30 Minutes 

OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 

OP-4: Aspirin at Arrival 

OP-5: Median Time to ECG 

OP-6: Timing of Antibiotic Prophylaxis 

OP-7: Prophylactic Antibiotic Selection for Surgical Patients 

OP-8: MRI Lumbar Spine for Low Back Pain 

OP-9: Mammography Follow-up Rates 

OP-10: Abdomen CT – Use of Contrast Material 

OP-11: Thorax CT – Use of Contrast Material 

OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically 

Directly into their Qualified/Certified EHR System as Discrete Searchable Data* 

OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk 

Surgery * 

OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed 

Tomography (CT)* 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache* 

OP-16: Troponin Results for Emergency Department acute myocardial infarction (AMI) 

patients or chest pain patients (with Probable Cardiac Chest Pain) Received Within 60 

minutes of Arrival ** 

OP-17: Tracking Clinical Results between Visits** 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients** 

OP-19: Transition Record with Specified Elements Received by Discharged Patients** 

OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional** 

OP-21: ED- Median Time to Pain Management for Long Bone Fracture ** 

OP-22: ED Patient Left Without Being Seen** 

OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who 

Received Head CT Scan Interpretation Within 45 minutes of Arrival ** 

OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting *** 

OP-25: Safe Surgery Checklist Use*** 

OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures*** 

Procedure Category Corresponding HCPCS Codes

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, 
CMS-1525-FC 1140 

CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously 

Adopted and the Addition of 1 Chart-Abstracted 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 for 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. Accordingly, 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 objecting to the retention of CY 2014 Hospital 

OQR Measures for the CY 2015 payment determination. Therefore, we are finalizing the 

retention of the 26 measures finalized for 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 payment determination, we proposed to adopt an 

additional HAI measure entitled Influenza 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 patients at high risk for complications of influenza. The 

involvement of HCP in influenza transmission has been a long-standing concern.15,16,17

 

15 Maltezou, H.C., Drancourt, M.: Nosocomial influenza 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 measure against influenza, and can prevent 

many illnesses, deaths, and losses in productivity.18 HCP are considered 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. Results 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 randomized trial. The Journal of the American Medical 

Association 1999; 281:908-913. 

19 Salgado, C.D., Giannetta, E.T., Hayden, F.G., Farr, B.M.: Preventing influenza 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.: Influenza 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.: Effectiveness 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 allocation for healthcare workers during vaccine shortages. Infection 

Control and Hospital Epidemiology 2005; 26:882-890 

23 American College of Physicians (ACP), ACP policy on influenza vaccination of health care workers. 

http://www.acponline.org/running_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/PracticeGuidance/Topics/Influenza/APIC_Position_Paper_I

nfluenza_11_7_08final_revised.pdfhttp://www.apic.org/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/pressrel/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., Strikas, R.A.: Influenza vaccination 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 healthcare settings who have the potential 

for exposure to patients and/or to infectious materials, including body substances, 

contaminated medical supplies and equipment, contaminated environmental surfaces, or 

contaminated air.30 HCP may include (but are not limited to) physicians, nurses, nursing 

assistants, therapists, technicians, emergency medical service personnel, dental personnel, 

pharmacists, laboratory personnel, autopsy personnel, students and trainees, contractual 

staff not employed by the healthcare 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 infectious agents that can be 

transmitted to and from HCP and patients. Settings in which HCP may work include, but 

are not limited to, acute care hospitals, long-term care facilities, skilled nursing facilities, 

rehabilitation centers, physicians’ offices, urgent care centers, outpatient clinics, home 

health agencies, and emergency medical services. 

Currently, four States have “offer” laws for influenza vaccination of HCP, 

meaning that vaccine must be offered to HCP by healthcare facilities; and three States 

 

28http://www.cdc.gov/mmwr/preview/mmwrhtml/rr55e209a1.htm Influenza Vaccination of Health-Care 

Personnel 

Recommendations of the Healthcare Infection Control 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 Health-Care Personnel—United 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

30Adapted from: Pearson ML., Bridges CB., Harper SA., : Influenza vaccination of health-care personnel: 

Recommendations of the Healthcare Infection Control Practices Advisory Committee (HICPAC) and the 

Advisory Committee on Immunization Practices (ACIP). Morbidity and Mortality Weekly Report 

(MMWR) 2006; 55:1-16. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/rr5502a1.htm
CMS-1525-FC 1144 

(Alabama, California, and New Hampshire) have “ensure” laws for influenza vaccination 

of HCP, meaning that vaccination of non-immune HCP is mandatory in the absence of a 

specified exemption or refusal; and, additionally, numerous hospitals and other healthcare 

facilities have established policies requiring mandatory influenza vaccination of their 

HCP.31

Currently, no State requires that hospitals report this measure to NHSN. 

However, approximately 13 hospitals (including long term acute care and rehabilitation), 

outpatient hemodialysis centers, long term care facilities, and ambulatory surgical centers 

are currently reporting HCP immunization data to the NHSN. In September 2009, CDC 

released the Healthcare Personnel Safety (HPS) Component of the NHSN, which 

complements Patient Safety and Biovigilance components available in NHSN. The HPS 

Component replaced CDC’s National Surveillance System for Health Care Workers 

(NaSH) and is comprised of two modules: the Blood/Body Fluid Exposure Module and 

the Influenza Vaccination and Management and Exposure Module.32 Currently, 

participation in either module is voluntary. The current Influenza Vaccination and 

Management and Exposure Module may soon offer 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 advanced analysis capabilities 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 facilities’ 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.htmlhttp://www.cdc.gov/nhsn/hps.html. 
CMS-1525-FC 1145 

Component can assist participating facilities in developing surveillance and analysis 

capabilities to permit the timely recognition 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 influenza vaccination on patient outcomes, 

we believe this measure is appropriate for measuring the quality of care in hospital 

outpatient departments. Healthcare Personnel (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 outpatient setting. Therefore, this measure 

meets the requirement for measure selection under section 1833(t)(17)(C)(i) of the Act. 

We proposed to adopt the Influenza Vaccination Coverage among Healthcare Personnel 

measure that is collected by the CDC via the NHSN. The NHSN proposed reporting 

mechanism for this proposed HAI measure is discussed in greater detail in 

sections XIV.C.2.a. of the proposed rule and this final rule with comment period. We 
CMS-1525-FC 1146 

proposed that hospital outpatient departments use the NHSN infrastructure and protocol 

to report the measure for Hospital OQR purposes. 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 the reporting of the Influenza 

vaccination coverage among healthcare personnel 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 overcome the data collection 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 setting. 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 implementation 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 results of field testing, in its efforts to 

streamline data collection. The revised measure proposal reduces denominator data 
CMS-1525-FC 1147 

collection to employee healthcare personnel, defined as staff on facility payroll, and two 

categories of non-employee healthcare personnel: (1) licensed independent practitioners, 

that is, physicians, advance practice nurses, and physician assistants, and (2) student 

trainees and adult volunteers. CDC has indicated 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 determination 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 the 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 infection, illness, antibiotic use, medical visits, 

and lost work days.33 34 Influenza vaccination also reduces influenza virus shedding and 

reduces transmission of influenza to others through prevention of infection. In addition, 

studies show that healthcare personnel continue to work while ill, including when ill with 

influenza35. Therefore, preventing influenza illness in healthcare personnel is important 

to reduce patient exposures to influenza-infected persons in the healthcare setting. 

 

33 Bridges CB, Thompson WW, Meltzer MI, et al. Effectiveness 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. Effectiveness 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’Riordan MA, Steinhoff MC. Effectiveness of influenza 

vaccine in health care professionals. A randomized trial. JAMA 1999;281:908–13. 
CMS-1525-FC 1148 

Although no studies have been done in the outpatient setting to assess reductions 

in illness among patients due to healthcare personnel vaccination, studies have been done 

in hospitals and nursing homes demonstrating the risk of healthcare-acquired influenza in 

these settings. One study in a hospital and three studies in long-term care facilities have 

demonstrated reductions in patient illness and mortality with healthcare personnel 

influenza vaccination. The evidence that influenza 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 understanding 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 measure 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 display 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 Program, it will strive to standardize the reportable quality 

measure at State and federal levels. Standardizing 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 vaccination type or brand most appropriate for 

them. 

Response: The measure does not specify which vaccination types or brand the 

healthcare personnel should receive. As stated previously, we are not finalizing this 

measure for the Hospital OQR Program at this time. 

 After consideration of the public comments we received, 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 measure 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 Therapy Received Within 30 Minutes 
CMS-1525-FC 1150 

CY 2015 Hospital OQR Program Measure Set 

OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 

OP-4: Aspirin at Arrival 

OP-5: Median Time to ECG 

OP-6: Timing of Antibiotic Prophylaxis 

OP-7: Prophylactic Antibiotic Selection for Surgical Patients 

OP-8: MRI Lumbar Spine for Low Back Pain 

OP-9: Mammography Follow-up Rates 

OP-10: Abdomen CT – Use of Contrast Material 

OP-11: Thorax CT – Use of Contrast Material 

OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically 

Directly into their Qualified/Certified EHR System as Discrete Searchable Data* 

OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk 

Surgery * 

OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed 

Tomography (CT)* 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache* 

OP-16: Troponin Results for Emergency Department acute myocardial infarction (AMI) 

patients or chest pain patients (with Probable Cardiac Chest Pain) Received Within 60 

minutes of Arrival ** 

OP-17: Tracking Clinical Results between Visits** 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients** 

OP-19: Transition Record with Specified Elements Received by Discharged Patients** 

OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional** 

Op-21: ED- Median Time to Pain Management for Long Bone Fracture ** 

OP-22: ED Patient Left Without Being Seen** 

OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who 

Received Head CT Scan Interpretation Within 45 minutes of Arrival ** 

OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting *** 

OP-25: Safe Surgery Checklist Use*** 

OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures*** 

Procedure Category Corresponding HCPCS Codes

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, 

C9724, C9725, 0170T 

Eye 65000 through 68999, 0186, 0124T, 0099T, 0017T, 
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 Consideration 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’ rulemakings, we have provided lists of measures that are under 

consideration for future adoption into the Hospital OQR measure set. Below is a list of 

potential measurement areas that we set out in the CY 2012 OPPS/ASC proposed rule 

that we are considering for future Hospital OQR payment determinations (beginning with 

CY 2015) for which we solicited public comment. In particular, we sought comment on 
CMS-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 comparable 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 Determinations 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 Administered 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: Angiotensin-Converting Enzyme (ACE) Inhibitor or Angiotensin 

Receptor Blocker (ARB) Therapy for Left Ventricular Systolic Dysfunction (LVSD) 

Heart Failure: Left Ventricular Ejection Fraction Assessment 
CMS-1525-FC 1153 

Measures and Measurement Topics Under Consideration for Future 

Hospital OQR Program Payment Determinations Beginning with CY 2015 

Heart Failure: Combination Medical Therapy for Left Ventricular Systolic 

Dysfunction 

Heart Failure: Beta-Blocker Therapy for Left Ventricular Systolic Dysfunction 

Heart Failure: Counseling regarding Implantable Cardioverter-Defibrillator (ICD) 

Implantation for Patients with Left Ventricular Systolic Dysfunction on Combination 

Medical Therapy 

Heart Failure: Patients with Left Ventricular 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 Appointment 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 Providers 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 Accident, or Coma following anesthesia 

Visual Loss 

Medication Error 

Unplanned ICU admission 

Patient intraoperative awareness 
CMS-1525-FC 1154 

Measures and Measurement Topics Under Consideration for Future 

Hospital OQR Program Payment Determinations Beginning with CY 2015 

Unrecognized difficult airway 

Reintubation 

Dental Trauma 

Perioperative aspiration 

Vascular access complication, including vascular injury or pneumothorax 

Pneumothorax following attempted vascular access or regional anesthesia 

Infection following epidural or spinal anesthesia 

Epidural hematoma following spinal or epidural anesthesia 

High Spinal 

Postdural puncture headache 

Major systemic local anesthetic toxicity 

Peripheral neurologic deficit following regional anesthesia 

Infection following peripheral nerve block 

Additional Measurement Topics 

NQF Serious Reportable Events in Healthcare 

Medication Reconciliation 

Chemotherapy 

Post-discharge follow up 

Post-discharge ED visit within 72 hours 

Breast cancer detection rate 

 

We invited public comment on these measures and other topics that we might 

consider proposing to adopt beginning with the Hospital OQR Program CY 2015 

payment determination. We also sought suggestions and rationales to support the 

adoption of measures and topics for the Hospital 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 commenter did not support the Needle Biopsy to 

Establish Diagnosis of Cancer Precedes Surgical 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 heart failure measures on the list. 

Two commenters noted the Overuse of echocardiography, Left ventricular ejection 

fraction assessment, and the Patients with left ventricular systolic dysfunction on 

combination medical therapy have inherent fundamental incompatibilities, given that the 

first measure would likely prohibit the use of echocardiography while the latter two 

measures would presumably encourage the use of echocardiography. The commenters 

were specifically concerned that the first measure may have unintended consequences of 

deterring physicians from ordering 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 consider 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 Medication reconciliation measure is 

inappropriate for ED setting since emergency room patients may not have the ability to 

accurately report current medications taken and the data collection process may cause a 

delay in patient care. A commenter was concerned 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 supported the listed Breast cancer detection rate 

measure for future consideration. 

 Response: We thank the commenters for these suggestions and support, and will 

take them into consideration during our future measure 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 hospitals that fail to report 

data required to be submitted on the measures selected by the Secretary, in the form and 

manner, and at a time, required by the Secretary under section 1833(t)(17) of the Act, 

incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, 

the annual payment update factor. Section 1833(t)(17)(A)(ii) of the Act specifies that any 

reduction applies only to the payment year involved and will not be taken into account in 

computing the applicable OPD fee schedule increase factor for a subsequent payment 

year. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 through 

68772), we discussed how the payment reduction for failure to meet the administrative, 

data collection, and data submission requirements of the Hospital OQR Program affected 

the CY 2009 payment update applicable to OPPS payments for HOPD services furnished 

by the hospitals defined under section 1886(d)(1)(B) of the Act to which the program 

applies. The application of a reduced OPD fee schedule increase factor results in reduced 

national unadjusted payment rates that apply to certain outpatient items and services 

provided by hospitals that are required to report outpatient quality data and that fail to 

meet the Hospital OQR Program requirements. All other hospitals paid under the OPPS 

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 conversion factor and the scaled relative weight for the 

APC to which the service is assigned. The OPPS conversion factor, which is updated 

annually by the OPD fee schedule increase factor, is used to calculate the OPPS payment 

rate for services with the following status indicators (listed in Addendum B to this final 

rule with comment period, which is available via the Internet on the CMS Web site): 

“P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” “U,” or “X.” In the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 68770), we adopted a policy that payment for all 

services assigned these status indicators would be subject to the reduction of the national 

unadjusted payment rates for applicable hospitals, with the exception of services assigned 

to New Technology APCs with assigned status indicator “S” or “T,” and brachytherapy 

sources with assigned status indicator “U,” which were paid at charges adjusted to cost in 

CY 2009. We excluded services assigned to New Technology APCs from the list of 

services subject to the reduced national unadjusted payment rates because the OPD fee 

schedule increase factor is not used to update the payment rates for these APCs. 

In addition, section 1833(t)(16)(C) of the Act, as amended by section 142 of the 

Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) 

(Pub. L. 110-275), specifically required that brachytherapy sources be paid during 

CY 2009 on the basis of charges adjusted to cost, rather than under the standard OPPS 

methodology. Therefore, the reduced conversion factor also was not applicable to 

CY 2009 payment for brachytherapy sources because payment would not be based on the 

OPPS conversion factor and, consequently, the payment rates for these services were not 
CMS-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 for brachytherapy services furnished on and 

after January 1, 2010. 

The OPD fee schedule increase factor is an input into the OPPS conversion factor, 

which is used to calculate OPPS payment rates. To implement the requirement to reduce 

the OPD fee schedule increase factor for hospitals that fail to meet reporting 

requirements, we calculate two conversion factors: a full market basket conversion factor 

(that is, the full conversion factor), and a reduced market basket conversion factor (that 

is, the reduced conversion factor). We then calculate a reduction ratio by dividing the 

reduced conversion factor by the full conversion factor. We refer to this reduction ratio 

as the “reporting ratio” to indicate that it applies to payment for hospitals that fail to meet 

their reporting requirements. Applying this reporting ratio to the OPPS payment amounts 

results in reduced national unadjusted payment rates that are mathematically equivalent 

to the reduced national unadjusted payment rates that would result if we multiplied the 

scaled OPPS relative weights by the reduced conversion factor. To determine the 

reduced national unadjusted payment rates that applied to hospitals that failed to meet 

their quality reporting requirements for the CY 2010 OPPS, we multiply the final full 
CMS-1525-FC 1160 

national unadjusted payment rate in Addendum B to the CY 2010 OPPS/ASC final rule 

with comment period by the CY 2010 OPPS final reporting ratio of 0.980 (74 FR 60642). 

 In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 through 

68772), we established a policy that the Medicare beneficiary’s minimum unadjusted 

copayment and national unadjusted copayment for a service to which a reduced national 

unadjusted payment rate applies would each equal the product of the reporting ratio and 

the national unadjusted copayment or the minimum unadjusted copayment, as applicable, 

for the service. Under this policy, we apply the reporting ratio to both the minimum 

unadjusted copayment and national unadjusted copayment for those hospitals that receive 

the payment reduction for failure to meet the Hospital OQR Program reporting 

requirements. This application of the reporting ratio to the national unadjusted and 

minimum unadjusted copayments is calculated according to §419.41 of our regulations, 

prior to any adjustment for a hospital’s failure to meet the quality reporting standards 

according to §419.43(h). Beneficiaries and secondary payers thereby share in the 

reduction of payments to these hospitals. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68772), we 

established the policy that all other applicable adjustments to the OPPS national 

unadjusted payment rates apply in those cases when the OPD fee schedule increase factor 

is reduced for hospitals that fail to meet the requirements of the Hospital OQR Program. 

For example, the following standard adjustments apply to the reduced national unadjusted 

payment rates: the wage index adjustment; the multiple procedure adjustment; the 

interrupted procedure adjustment; the rural sole community hospital adjustment; and the 
CMS-1525-FC 1161 

adjustment for devices furnished with full or partial credit or without cost. We believe 

that these adjustments continue to be equally applicable to payments for hospitals that do 

not meet the Hospital OQR Program requirements. Similarly, outlier payments will 

continue to be made when the criteria are met. For hospitals that fail to meet the quality 

data reporting requirements, the hospitals' costs are compared to the reduced payments 

for purposes of outlier eligibility and payment calculation. This policy conforms to 

current practice under the IPPS. We continued this policy in the CY 2010 OPPS/ASC 

final rule with comment period (74 FR 60642), 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 readers to section II.G. of this final rule with 

comment period. 

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2012 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42327 through 42328), we 

proposed to continue our established policy of applying the reduction of the OPD fee 

schedule increase factor through the use of a reporting ratio for those hospitals that fail to 

meet the Hospital OQR Program requirements for the full CY 2012 annual payment 

update factor. For the CY 2012 OPPS, the proposed reporting ratio was 0.980, calculated 

by dividing the proposed reduced conversion factor of $68.052 by the proposed full 

conversion factor of $69.420. The final CY 2012 OPPS reporting ratio is 0.980, 

calculated by dividing the reduced conversion factor of $68.616 by the full conversion 

factor of $70.016. We proposed to continue to apply the reporting ratio to all services 

calculated using the OPPS conversion factor. For the CY 2012 OPPS, we proposed to 
CMS-1525-FC 1162 

apply the reporting ratio, when applicable, to all HCPCS codes to which we have 

assigned status indicators “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” “U,” and “X” 

(other than new technology APCs to which we have assigned status indicators “S” and 

“T”). We proposed to continue to exclude services paid under New Technology APCs. 

We proposed to continue to apply the reporting ratio to the national unadjusted payment 

rates and the minimum unadjusted and national unadjusted copayment rates of all 

applicable services for those hospitals that fail to meet the Hospital OQR Program 

reporting requirements. We also proposed to continue to apply all other applicable 

standard adjustments to the OPPS national unadjusted payment rates for hospitals that fail 

to meet the requirements of the Hospital OQR Program. Similarly, we proposed to 

continue to calculate OPPS outlier eligibility and outlier payment based on the reduced 

payment rates for those hospitals that fail to meet the reporting requirements. 

We invited public comments on these proposals. We did not receive any public 

comments on our CY 2012 proposal to apply the HOP QDRP reduction in the manner 

described in the paragraph above and, therefore, are finalizing our proposal, without 

modification. 

Therefore, for the CY 2012 OPPS, we are applying a reporting ratio of 0.980 to 

the national unadjusted payments, minimum unadjusted copayments, and national 

unadjusted copayments for all applicable services for those hospitals failing to meet the 

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 standard 
CMS-1525-FC 1163 

adjustments to the OPPS national unadjusted payment rates for hospitals that fail to meet 

the requirements of the HOP QDRP will continue to apply. We continue to calculate 

OPPS outlier eligibility and outlier payment based on the reduced rates for those 

hospitals that fail to meet the reporting requirements. 

F. Extraordinary Circumstances Extension or Waiver for CY 2012 and Subsequent Years

 In our experience, there have been times when hospitals have been unable to 

submit required quality data due to extraordinary circumstances that are not within their 

control. It is our goal to not penalize hospitals for such circumstances and we do not 

want to unduly increase their burden during these times. Therefore, in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60046 through 600647), we adopted a 

process for hospitals to request and for CMS to grant extensions or waivers with respect 

to the reporting of required quality data when there are extraordinary circumstances 

beyond the control of the hospital. In the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72103), we retained these procedures with some modifications. For 

CY 2012 and subsequent years, we proposed to retain these procedures with one 

modification. In the CY 2012 OPPS/ASC proposed rule (76 FR 42328), we proposed to 

extend these procedures to the submission of medical record documentation for purposes 

of complying with our validation requirement for the Hospital OQR Program. 

 Under this process, in the event of extraordinary circumstances, such as a natural 

disaster, not within the control of the hospital, for the hospital to receive consideration for 

an extension or waiver of the requirement to submit quality data or medical record 

documentation for one or more quarters, a hospital would submit to CMS a request form 
CMS-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 personnel contact information, including name, 

email address, telephone number, and mailing address (must include a physical address, a 

post office box address is not acceptable); 

● Hospital’s reason for requesting an extension or waiver; 

● Evidence of the impact of the extraordinary circumstances, including but not 

limited to photographs, newspaper and other media articles; and 

● A date when the hospital would again be able to submit Hospital OQR data 

and/or medical record documentation, and a justification for the proposed date. 

 The request form would be signed by the hospital’s CEO. A request form would 

be required to be submitted within 45 days of the date that the extraordinary circumstance 

occurred. 

 Following receipt of such a request, CMS would— 

 (1) Provide a written acknowledgement using the contact information provided in 

the request, to the CEO and any additional designated hospital personnel, notifying them 

that the hospital’s request has been received; 

 (2) Provide a formal response to the CEO and any additional designated hospital 

personnel using the contact information provided in the request notifying them of our 

decision; and 
CMS-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 grant waivers or extensions to hospitals that 

have not requested them when we determine that an extraordinary circumstance, such as 

an act of nature (for example, hurricane) affects an entire region or locale. If we make 

the determination to grant a waiver or extension to hospitals in a region or locale, we 

would communicate this decision to hospitals and vendors through routine 

communication channels, including but not limited to e-mails and notices on the 

QualityNet Web site. 

 In the proposed rule we invited public comment on this proposal to retain our 

existing process for granting extraordinary circumstances extensions or waivers, and to 

extend this process to the submission of medical 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 record 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 circumstances extensions or waivers to the submission 

of medical record documentation. 
CMS-1525-FC 1166 

 After consideration of the public comments we received, we are finalizing our 

proposal without modification; to continue the existing process for granting extraordinary 

circumstances extensions or waivers, to extend 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 Hospital 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 validation requirements (if applicable). 

Hospitals that do not meet Hospital OQR Program requirements, as well as hospitals not 

participating in the Program and hospitals that withdraw from the Program, will not 

receive the full OPPS payment rate update. Instead, in accordance with section 

1833(t)(17)(A) of the Act, those hospitals will receive a reduction of 2.0 percentage 

points to their OPD fee schedule increase factor for the applicable payment year. We 

established 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 would require the hospital to: 

● Identify a QualityNet security administrator who follows the registration 

process located on the QualityNet Web site (http://www.QualityNet.org) and submits 

the information to the appropriate CMS-designated 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 experience, 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, such 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 contact 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 requirements, 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 be 
CMS-1525-FC 1168 

beneficial to have more than one QualityNet security administrator for back-up 

purposes. 

● Register with QualityNet, regardless of the method used for data submission. 

● Complete and submit an online participation form if this form (or a paper 

Notice of Participation form) has not been previously completed, if a hospital has 

previously withdrawn, or if the hospital acquires a new CCN. For Hospital OQR 

Program purposes, hospitals that share the same CCN would be required to complete a 

single online participation form. At this time, the participation form for the Hospital 

OQR Program is separate from the participation form required for the Hospital IQR 

Program and completing a form for each program 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 hospital that has a Medicare 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 merged, must submit a completed participation 
CMS-1525-FC 1169 

form no later than 180 days from the date identified as its Medicare acceptance date on 

the CMS Certification and Survey Provider Enhanced Reporting (CASPER) system. 

Hospitals typically receive a package notifying them of their new CCN after they receive 

their Medicare acceptance date. The Medicare acceptance date is the earliest date that a 

hospital can receive Medicare payment for the services that it furnishes. Completing the 

participation form would include supplying 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 monitor more effectively hospital compliance 

with the requirement to complete a participation form because a hospital’s Medicare 

acceptance date is readily available to CMS through its data systems. In addition, 

providing an extended time period to register for the program would allow newly 

functioning hospitals sufficient time to get their operations fully functional before having 

to collect and submit quality data. 

We are aware that Medicare acceptance dates may be back-dated; we had 

experience with reported occurrences as such over the past year. In that event, we would 

consider a hospital’s request to allow additional 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 hospital 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 not 
CMS-1525-FC 1170 

currently participating in Hospital OQR and wishes to participate in the Hospital OQR 

Program must submit a participation form by March 31 of the year prior to the affected 

annual payment update. We proposed a deadline 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 year’s services. This requirement would apply 

to all hospitals whether or not the hospital billed for payment under the OPPS. 

For the CY 2013 and subsequent years payment 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 prior to the affected annual payment update. A 

hospital that withdraws during this time period for any annual 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 new 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 invited public comment on these proposed Hospital OQR 

Program administrative requirements for the 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 successfully 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 the public comments we received, we are finalizing our 

proposals for Hospital OQR Program administrative requirements without modification. 

2. Form, Manner, and Timing of Data Submission 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 the full OPD fee schedule increase factor for any 

payment determination, hospitals must comply with our submission requirements for 

chart-abstracted data, population and sampling data, claims-based measure data, and 

structural quality measure data, including all-patient volume data: 

a. CY 2013 and CY 2014 Data Submission Requirements 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 data 
CMS-1525-FC 1172 

directly to CMS, we proposed for CY 2013 and CY 2014 that participating hospitals 

submit chart-abstracted data for each applicable quarter by the deadline posted on the 

QualityNet Web site; there must be no lapse in data submission. For the CY 2013 

Hospital OQR Program, we proposed that the applicable quarters would be as follows: 

3rd quarter CY 2011, 4th quarter CY 2011, 1st quarter CY 2012, and 2nd quarter CY 2012. 

Hospitals that did not participate 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 before January 1, 2012, would begin data 

submission with respect to 1st quarter CY 2012 encounters using the CY 2013 measure 

set that was finalized in this final rule with comment period. For those hospitals with 

Medicare acceptance dates on or after January 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 measures would be as follows: 3rd quarter CY 2012, 4th

quarter CY 2012, 1st quarter CY 2013, and 2nd quarter CY 2013. With respect to our 

proposed additional measures for CY 2014 (5 Diabetes measures and 1 Cardiac 

Rehabilitation measure), the applicable quarters would be 1st quarter CY 2013 and 2nd

quarter CY 2013. Hospitals that did not participate in the CY 2013 Hospital OQR 

Program, but would like to participate in the CY 2014 Hospital OQR Program, and that 

have a Medicare acceptance date on the CASPER system before January 1, 2013, would 

begin data submission with respect to 1st quarter CY 2013 encounters using the CY 2014 

measure set that we are finalizing in this final rule with comment period. For those 
CMS-1525-FC 1173 

hospitals with Medicare acceptance dates on or after January 1, 2013, data submission 

must begin with the first full quarter following the submission of a completed online 

participation form. 

 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. Thus, for example, the proposed submission 

deadline for data for services furnished 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 Abstraction and Reporting Tool for Outpatient 

Department (CART-OPD) measures or the tool of a third-party vendor that meets the 

measure specification requirements for data transmission to QualityNet. 

 We proposed that hospitals must collect Hospital OQR data from outpatient 

hospital encounters to which the required measures apply. In previous rulemakings, we 

have used various terms for describing the unit of care for outpatient hospital reporting, 

including encounter, episode, episode of care, and discharge. We note that for outpatient 

hospital services, the term 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 direct personal contact between a patient and a physician, or 
CMS-1525-FC 1174 

other person who is authorized by State licensure law and, if applicable, by hospital or 

CAH staff bylaws, to order or furnish hospital services for diagnosis or treatment of the 

patient.” For Medicare outpatient services, the terms episode and episode of care also are 

used. When discussing inpatient services, the Medicare Benefit Policy Manual 

specifically refers to discharges; the term encounter 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 connection with the Hospital OQR 

Program. 

 We will make every effort to ensure that data elements common to both inpatient 

and outpatient settings are defined consistently 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 “timely” when data are successfully accepted into 

the OPPS Clinical Warehouse on or before the reporting deadline. A “complete” 

submission would be determined based on whether the data satisfy the sampling criteria 

that are published and maintained in the Hospital 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 hospitals review OPPS Clinical Warehouse 

feedback reports and the Hospital OQR Provider Participation Reports that are accessible 

through their QualityNet accounts. These reports 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 occurred. We also note that irrespective of 

whether a hospital submits data to the OPPS Clinical Warehouse 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 measures would be due in August 2012, whereas, in the CY 2012 

OPPS/ASC proposed rule, the proposed timing 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 Department acute myocardial infarction (AMI) 

patients or chest pain patients (with Probable 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 the 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 final 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 final rule with comment period finalized our 

proposal to modify the collection mechanism for OP-22: Left Without Being Seen. With 

respect to the CY 2013 payment determination, hospitals must submit data on this 

measure between July 1, 2012 and August 15, 2012 with respect 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 definitions are vital to data accuracy. 

 Response: We thank this commenter for their appreciation of the discussion 

related to harmonization 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 the public comments we received, we are finalizing our 

proposals, without modification, regarding CY 2013 and CY 2014 data submission 

requirements for chart-abstracted measure data for OP-16, OP-18 through OP-21, and 

OP-23 submitted directly to CMS. Specifically, for the CY 2013 Hospital OQR Program, 

the applicable quarters will be as follows: 3rd quarter CY 2011, 4th quarter CY 2011, 

1st quarter CY 2012, and 2nd quarter CY 2012. Submission deadlines 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 sample those encounters and submit data only 

for these sampled encounters, rather than submitting data on all of the eligible 

encounters. This sampling scheme, which includes 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 sampling scheme to at least 3 months from at 

least 4 months to be consistent with the Hospital OQR Specifications Manual release 
CMS-1525-FC 1178 

schedule. If a hospital chooses to sample for a particular quarter, the hospital must meet 

the sampling requirements for the required chart-abstracted measures that quarter. 

 In addition, to reduce the burden on hospitals that treat a low number of patients 

but otherwise meet the submission requirements 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 required to submit patient level data because they 

have five or fewer encounters (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 comments on our proposal for 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 Requirements 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 required, though hospitals could submit, on a 

voluntary basis, the aggregate numbers of outpatient encounters which are eligible for 

submission under the Hospital OQR Program and sample size counts. These aggregated 

numbers of outpatient encounters represent the number of outpatient encounters in the 

universe of all possible cases eligible for data reporting under the Hospital OQR 
CMS-1525-FC 1179 

Program. For the CY 2012 payment update, we proposed, but did not adopt, a policy to 

require submission of this population 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 payment determination, hospitals must submit 

on a quarterly basis, aggregate population and 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 submit on a quarterly basis an aggregate 

population and sample size count with respect to each measure regardless of whether any 

patients met the inclusion criteria for the measure population. For example, if a hospital 

did not treat any patients who met the inclusion 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 encounter count thresholds based on reported population sizes, 

and minimum sample size thresholds based on reported population sizes. We found that 

less than 10 percent of hospitals 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 this 
CMS-1525-FC 1180 

analysis, we believe that hospitals have had sufficient time to become familiar with 

Hospital OQR data reporting and have developed 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 size 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 available 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 appropriate revisions before the data submission 

deadline. 

 We stated that we plan to use the aggregate population and sample size data to 

assess data submission completeness to the OPPS Clinical Warehouse and adherence to 

sampling requirements for Medicare and non-Medicare patients. 

 Comment: One commenter was concerned that only 80 percent of hospitals are 

able to submit outpatient quality data meeting 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 commenter believed that the 20 percent of 

hospitals not meeting the case count or sampling minimum requirements are ones that 

have systematic issues such as “complex outpatient services,” high volume or services, 

and/or have some clinics that have patients who should have data reported to CMS under 
CMS-1525-FC 1181 

the Hospital OQR Program, while some other clinics owned by the hospital do not that 

make it difficult for them to accurately determine what minimum number of cases or 

cases sampled are to be submitted to meet program requirements. 

 Response: The percent of hospitals that show 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 percent of hospitals are voluntarily reporting 

aggregate population and sampling data. However, due to data accuracy concerns that 

may exist for this small set of reporting hospitals, we have decided to not finalize this 

requirement for the CY 2013 payment determination. 

 After consideration of the public comments we received, 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 accepting 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 measures 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 claims-based measures for the CY 2013 and 

CY 2014 payment determinations; therefore, we are finalizing these proposals without 

modification. 

e. Structural 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 CY 2013 

payment determination, we proposed that hospitals would be required to submit data on 

the structural measures, including OP-17: Tracking Clinical Results between Visits, 

between July 1, 2012 and August 15, 2012 with 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 Selected Outpatient Surgical Procedures. 

We proposed that for the CY 2014 payment determination, 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 Clinical Results between Visits, due to 

statements in the CY 2011 OPPS/ASC final rule with comment period that data 

collection for this measure would start January 1, 2012, whereas, in the CY 2012 
CMS-1525-FC 1183 

OPPS/ASC proposed rule, CMS proposed 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 would 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 Clinical Results between Visits, hospitals would be required 

to submit data between July 1, 2012 and August 15, 2012 with respect to the time period 

of January 1, 2011 to December 31, 2011 (76 FR 42331). 

 After consideration of the public comment we received on our proposal regarding 

structural measure data requirements for the CY 2013 and CY 2014 payment 

determinations; we are finalizing our proposals, with modification. With respect to 

structural measures for the CY 2013 payment determination, hospitals will 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 HAI 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 infection. 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 requirements. 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 required 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 Proposed 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 31st to August 1st August 1, 2013 

Q2 (Apr 1 to Jun 30, 2013) April 30th to November 1st November 1, 2013 
CMS-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 belief that data collection on NHSN 

measures by outpatient hospitals should be deferred. Commenters cited issues related to 

NHSN capacity, lack of experience with NHSN measures, and applicability to outpatient 

procedures of the NHSN Surgical Site Infection measure. 

 Response: We thank the commenters for their input. As discussed above, we are 

not finalizing the collection of any NHSN measures at this time. Thus, we are not 

finalizing our proposals regarding data submission 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 would 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 payment determination, hospitals would be 
CMS-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 proposals 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 the public comments we received, 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, based on the comments we received, we are 

modifying the time frames so that data collection will be prospective, and will begin for 

the time period from January 1, 2012 to June 30, 2012. 

3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data 

Submitted Directly to CMS: Data Validation 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 determination. To reduce hospital burden and to 

facilitate our efforts to reallocate resources in the event that we finalize the targeting 
CMS-1525-FC 1187 

proposal discussed below, for the CY 2013 payment determination, we proposed to 

reduce the number of randomly selected hospitals 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 believe 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 will be eligible each year for 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 and must have submitted at least 10 encounters 

to the OPPS Clinical Warehouse during the 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 encouraged continued reductions in the number of hospitals 

selected for validation as hospital 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 seemingly without justification. One commenter 

strongly opposed this proposal and believed that this reduced CMS’ burden at the 

expense of validity of data publicly 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 commenters for their views on the number of 

hospitals that should be selected for validation. 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 approximately 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 validated (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 have 
CMS-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 another 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 provide 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 and 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 validation of NHSN measure data are warranted. We intend 

to learn from our experiences with validating 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 the public comments we received, we are finalizing our 

proposals for validation without modification. 

b. Use of Targeting Criteria for Data 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 considering, in addition to selecting a random 
CMS-1525-FC 1190 

sample of hospitals for validation purposes, selecting targeted hospitals based on criteria 

designed to measure whether the data these hospitals have reported raises a concern 

regarding data accuracy. Because hospitals had gained little experience with validation 

under the Hospital OQR at that time, we noted that we were considering this approach for 

possible use beginning with the CY 2013 payment determination. Examples of targeting 

criteria suggested for inclusion: 

● Abnormal data patterns identified such as consistently high Hospital OQR 

measure denominator exclusion rates resulting in unexpectedly low denominator counts; 

● Whether a hospital had previously failed validation; 

● Whether a hospital had not been previously selected for validation for 2 or 

more consecutive years; 

● Whether a hospital had low submitted 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 addition to random sampling for validation, 

we should use targeted validation and, if so, what criteria for targeting 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 reporting 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 intended 
CMS-1525-FC 1191 

to propose to implement validation targeting criteria for CY 2013 and subsequent years in 

the CY 2012 OPPS/ASC proposed rule. 

(2) Targeting Criteria for Data Validation Selection for CY 2013 

In the CY 2012 OPPS/ASC proposed rule (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” for 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 within 3 standard deviations of 

the mean; very few values lie past the 3 standard 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 submitted 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, placing 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 selected randomly from this pool of hospitals.

 

36 Ruan, Da, Chen, Guoguing, Kerre, Etienne E., and 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 the use of extreme outliers as a 

criterion for selecting hospitals for validation. Some commenters supported using data 

quality concerns for targeting hospitals for validation selection. 

 Response: We thank these commenters for their support of our extreme outlier 

proposal and the use of data quality concerns 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 also examined data submitted under the Hospital 

OQR Program and found the 5 standard deviation threshold suitable for detecting 

extreme values for targeting hospitals based upon data quality concerns. 

 After consideration of the public comments we received, 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 year) from the total number of 

encounters that the hospital successfully submitted to the OPPS Clinical Warehouse. If a 

selected hospital has submitted less than 12 encounters in one or more quarters, only 

those encounters available would be validated. For each selected encounter, a designated 

CMS contractor would request that the hospital submit the 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 this 
CMS-1525-FC 1193 

approach is suitable for the Hospital OQR Program because it will: (1) produce a more 

reliable estimate of whether a hospital’s submitted data have been abstracted accurately; 

(2) provide more statistically reliable estimates of the quality of care delivered in each 

measured hospital as well as at a national level; and (3) reduce overall burden, for 

example, in submitting validation documentation, because hospitals most likely will not 

be selected to undergo validation each year, and a smaller number 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 topic. 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 completing 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 sample size requirements to reduce burden on 

hospitals. 

 Response: We interpret the commenter as referring to the Hospital IQR Program 

sampling requirements for validation which stratify 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 by 
CMS-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 possible 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 validating a larger number of 

cases from a sample of hospitals has advantages 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 selection 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 the public comments we received, 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 the validation calculation approach finalized 

for the CY 2012 payment determination with validation being done for each selected 

hospital. Specifically, we proposed to conduct a measures level validation by calculating 
CMS-1525-FC 1195 

each measure within a submitted record using the independently abstracted data and then 

comparing this to the measure reported by the hospital; a percent agreement would then 

be calculated. We would also compare the measure category for quality measures with 

continuous units of measurement, such as time, so that for these measures, both the 

category and the measure would need to match. 

 To receive the full OPPS OPD fee schedule increase factor for CY 2013, we 

proposed that hospitals must attain at least 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 validation score. If the calculated upper limit 

is above the required 75 percent reliability threshold, we would consider a hospital’s data 

to be “validated” for payment purposes. Because we are more interested in whether the 

measure has been accurately reported, we would continue to focus on whether the 

measure data reported by the hospital matches the data documented in the medical record 

as determined by our reabstraction. We proposed to calculate the validation score using 

the same methodology we finalized for the CY 2012 payment determination 

(75 FR 72105). We also proposed to use the same medical record documentation 

submission procedures that we also finalized for the CY 2012 payment determination 

(75 FR 72104) with one modification. 

 We proposed to shorten the time period 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 for chart submission in the context of QIO 
CMS-1525-FC 1196 

review. We proposed this deadline of 30 days also to reduce the time for data validation 

completion to increase timeliness of providing hospitals with feedback on their 

abstraction accuracy. 

 Comment: Many commenters opposed the proposal to reduce the time for 

hospitals to submit medical record documentation for validation. Some of these 

commenters cited burden as an issue. Some 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 Contractor (RAC) purposes. One commenter 

believed that this proposal would be a burden on medical and quality staff if a hospital 

had been selected for both outpatient and inpatient hospital quality reporting. 

 Response: We thank these commenters for expressing their concerns regarding 

this proposal. Based on these comments, we have decided to not finalize 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 the hospital does not respond to 

the initial request within 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 proposal 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 the public comments we received, 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 return 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 upon our validation approach of targeting 

hospitals to address data quality concerns and to ensure that 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 hospitals for validation: 

● Whether a hospital that was open under its current CCN and had not been 

selected for validation in the previous 3 years. This is consistent with validation targeting 
CMS-1525-FC 1198 

criteria we recently proposed to implement 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 public comment on these proposals, and noted 

that we were specifically interested in receiving 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 idea 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’ support. Regarding the suggestion 

that the time allowance for targeting a hospital for validation due to non-selection be 

increased from three years to four, if the time was increased to four years, the maximum 

number of years that a hospital could avoid 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 numbers of “unable to 

determine” data elements. The commenter stated that without a quality strategy for 

outpatient care, it is difficult to evaluate a low number of encounters relative to 

population or significant numbers of “unable to determine.” Another commenter 

suggested that statistical testing 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 size and significant numbers of “unable to determine” data 

elements in formulating these factors as targeting criteria for validation. We will take 

these views under consideration as we develop 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 Reconsideration and Appeals Procedures for CY 2013 and Subsequent 

Years

 When the Hospital IQR Program was initially implemented, it did not include a 

reconsideration process for hospitals. Subsequently, we received many requests for 

reconsideration of those payment decisions and, as a result, established a process by 

which participating hospitals would submit requests for reconsideration. We anticipated 

similar concerns with the Hospital OQR Program and, therefore, in the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66875), we stated our intent to 

implement for the Hospital OQR Program a reconsideration process modeled after the 
CMS-1525-FC 1200 

reconsideration process we implemented for the Hospital IQR Program. In the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68779), we adopted a reconsideration 

process that applied to the CY 2010 payment decisions. In the CY 2010 OPPS/ASC final 

rule with comment period (74 FR 60654 through 60655), we continued this process for 

the CY 2011 payment update. 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 reconsideration. This must identify the 

hospital’s specific reason(s) for believing it met the affected year’s Hospital OQR 

Program requirements and should receive the full OPD fee schedule increase factor. 

○ 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 applicable Notice of Participation form or 

completed online registration form, and measure data that the hospital submitted via 

QualityNet. 

● Paper copies of all the medical record documentation that it submitted for the 

initial validation (if applicable). 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 the address where hospitals are to send this 

documentation on the QualityNet Web site. 

● To the extent that the hospital is requesting reconsideration on the basis that 

CMS has determined it did not meet an affected year’s validation requirement, the 

hospital must provide a written justification for each appealed data element classified 

during the validation process as a mismatch. Only data elements that affect a hospital’s 

validation score would be eligible to be reconsidered. We would review the data 
CMS-1525-FC 1202 

elements that were labeled as mismatched as well as the written justifications provided by 

the hospital, and make a decision on the reconsideration request. 

 We note that, consistent with our policy for CY 2012 reconsiderations, 

reconsideration request forms would not need 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 and 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 information provided in the reconsideration request, 

notifying the hospital of the outcome of the reconsideration process. 

 We intend to complete any reconsideration reviews and communicate the results 

of these determinations within 90 days following the deadline for submitting requests for 

reconsideration. 

 We also proposed to apply the same policies that we finalized for the CY 2012 

payment determination regarding the scope of our review when a hospital requests 

reconsideration because it failed our validation requirement. These policies are as 

follows: 

● If a hospital requests reconsideration on the basis that it disagrees with a 

determination that one or more data elements were classified as mismatches, we 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 invalid record selection (that is, the CMS 

contractor determined that one or more medical records submitted by the hospital did not 

match what was requested, thus resulting in a zero validation score for the encounter(s)), 

our review would initially be limited to determining whether the medical documentation 

submitted in response to the designated CMS contractor’s request was the correct 

documentation. If we determine that the hospital did submit the correct medical 

documentation, we would abstract the data elements and compute a new validation score 

for the encounter. If we conclude that the hospital did not submit the correct medical 

record documentation, we would not further consider the hospital’s request. 

● If a hospital requests reconsideration on the basis that it disagrees with a 

determination that it did not submit the requested medical record documentation to the 

CMS contractor within the proposed 30 calendar 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 whether the hospital 

received the initial medical record request and reminder notice. If we determine that the 

CMS contractor timely received paper copies of the requested medical record 

documentation, we would abstract data elements from the medical record documentation 

submitted by the hospital and compute a validation score for the hospital. If we 

determine that the hospital received two letters requesting medical documentation but 
CMS-1525-FC 1204 

did not submit the requested documentation within the 30 calendar day period, we would 

not further consider the hospital’s request. 

 If a hospital is dissatisfied with the 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 determinations our program reconsideration and appeals 

procedures currently in place. 

 Response: We thank these commenters for 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 having 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 reviews and communicate decisions results to 

hospitals in 90 day days or less after the submission deadline timeframe. As 

reconsideration requests can involve extensive research and information review, among 

other time consuming processes, often the full 90 day time-frame is necessary to 

complete the process in a thorough manner. In some more complex cases, the 90 days 
CMS-1525-FC 1205 

may not be enough. Note that, when the reconsideration process can be completed in a 

shorter time-frame, we can and have communicated the results in less than 90 days. We 

intend where possible to complete any reconsideration requests and to communicate the 

results of our decision within 90 days. 

 After consideration of the public comments we received, 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 referred to in previous rulemaking documents as 

electronic medical records) that will allow for reporting of clinical quality data from 

EHRs to a CMS data repository (70 FR 47420 through 47421). We sought to prepare for 

future EHR submission of quality measures by sponsoring the creation of electronic 

specifications for quality measures under consideration for the Hospital IQR Program. 

Through the EHR Incentive Programs, we expect that the submission of quality data 

through EHRs will provide a foundation for establishing the capacity of hospitals to send, 

and for CMS, in the future, to receive, quality measures via hospital EHRs for Hospital 

IQR and OQR Program measures. We expect the Hospital IQR and Hospital OQR 

Programs to transition to the use of certified EHR technology, for measures that 

otherwise require information from the clinical record. This would allow us to collect 

data for measures without the need for manual chart abstraction. 

 In the FY 2012 IPPS/LTCH PPS proposed rule (75 FR 25894), we identified FY 

2015 as a potential transition date to move to EHR-based submission and phase out 
CMS-1525-FC 1206 

manual chart abstraction. We also anticipate such a transition for hospital outpatient 

measures, although likely somewhat after the transition 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 Hospital IQR Program, rather than the Hospital 

OQR Program. Our goals are to align the hospital quality reporting programs, to seek to 

avoid redundant and duplicative reporting of quality measures for hospitals, and to rely 

largely on EHR submission for measures based on clinical record data. 

 Comment: A commenter recommended that prior to CY 2015, CMS offer a 

voluntary test period of at least 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 also concerned about the potential inaccurate 

calculations generated from certified EHRs and urged CMS not to publicly report the 

Stage 1 clinical quality measure (CQM) data reported 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 Electronic Reporting Pilot 

(2012 Electronic Reporting Pilot) (discussed below) that we proposed is voluntary and 

last for one year. This Pilot would provide eligible hospitals and CAHs the opportunity 

to report clinical quality measures using certified EHR technology. We thank the 

commenter for the feedback on certified EHR technology and we will communicate that 

to the ONC for further evaluation. We also note that at present, CQMs reported through 

attestation under the EHR Incentive Program are not publicly reported and we do not plan 
CMS-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 stakeholders 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 their vendors about these issues. 

 Comment: A commenter requested clarification regarding the validation of 

quality measures submitted through certified EHR technology after manual chartabstraction is phased out. 

 Response: For reporting clinical 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 the 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 retooling 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 EHR 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 applicable to measures without contradicting documentation in “free 

text” and “scanned document” areas 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-specifications that align with medial record 

documentations. We are collaborating with the NQF, measure stewards, and the ONC to 

develop the accurate, easy to understand, and medical-record compatible electronic 

specifications while maintaining the integrity of the measures as endorsed. 

 Comment: Some commenters discussed their CQM reporting experience for 

Stage 1 meaningful use. Commenters indicated that extra efforts were required to 

manipulate the certified EHR products to generate accurate quality data. For this reason, 

some commenters had misgivings about the testing of the e-measure specifications. In 

addition, commenters were concerned whether corrections or updates, such as new 

medications to treat patients with stroke, were communicated and adopted timely by 

vendors. Some commenters did not believe EHR vendors have the capacity to keep up 

with the constant changes in electronic measures and related specifications. Moving 

forward, some commenters requested that CMS establish a transparent process to manage 

specification updates to quality measures, as well as a mechanism through which vendors 

and providers can provide feedback on problematic measures. The commenters noted 

that the existing CQMs require a level of clinical documentation and the use of coded 

data fields that are far more extensive than other Stage 1 Meaningful Use objectives. 
CMS-1525-FC 1209 

 Response: We thank the commenters for the 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 transparent process to manage updates and will 

take them into consideration 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 vendors and hospitals to accurately capture the 

necessary data in the required formats to generate, 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 program to test measures in the field. 

Currently, we are working with the various stakeholders to define this process. 

 Comment: A commenter requested clarification 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 requirement 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 separate 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 eligible hospitals and CAHs would report 

clinical quality measures for the 2012 payment year and subsequent years for the 

Medicare EHR Incentive Program. Specifically, 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 technology by attestation, as for 

the 2011 payment year. Alternatively, for the 2012 payment year, 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 these proposals for reporting CQMs through 

attestation and the 2012 Electronic 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 Incentive Program for payment year 2012 by 
CMS-1525-FC 1211 

participating in an Electronic Reporting Pilot. We proposed that participation in this 

Electronic Reporting Pilot would be voluntary and that eligible 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 proposed Electronic Reporting Pilot in view 

of our desire to adequately pilot electronic submission of CQMs 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 Programs, and the EHR Incentive Program. We 

strongly encouraged eligible hospitals and CAHs to participate in the proposed Electronic 

Reporting Pilot as it provides opportunities to test the interoperability and functionality of 

the certified EHR technology that they have implemented. We believe that the 

participation of eligible hospitals and CAHs in the proposed Electronic Reporting Pilot 

would help advance EHR-based reporting in the Hospital IQR and Hospital OQR 

Programs. 

Eligible hospitals and CAHs would need to be registered in order to participate in 

the proposed Electronic Reporting Pilot. Eligible hospitals and CAHs wishing to 

participate in the proposed Electronic Reporting Pilot for the CQMs would register by 

indicating their desire and intent to participate in the proposed Electronic Reporting Pilot 

as part of the attestation process for the Medicare EHR Incentive Program. We proposed 

that eligible hospitals 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 Incentive Program. Such eligible 
CMS-1525-FC 1212 

hospitals and CAHs would therefore not need to attest to the results of clinical quality 

measures calculated by certified EHR technology. As described below, for the purpose 

of the proposed Electronic Reporting Pilot, CMS would calculate the results of the 

clinical quality measures for eligible hospitals and CAHs based on patient level data 

submitted for Medicare patients. The proposed Electronic Reporting Pilot would require 

eligible hospitals and CAHs to submit information on the same 15 CQMs that were listed 

in Table 10 of the final rule for the Medicare and Medicaid EHR Incentive Programs 

(75 FR 44418 through 44420) and such information would be obtained from the certified 

EHR technology used by the eligible hospital or CAH. 

We proposed that electronic submission of the 15 CQMs through this proposed 

Electronic Reporting Pilot would be sufficient to meet the core objective for reporting 

CQMs for the Medicare EHR Incentive Program 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 Incentive Program, an eligible hospital or 

CAH that chooses to participate in the proposed Electronic Reporting Pilot would still be 

required to meet and attest to the other core and menu set objectives and their associated 

measures using the attestation module for the program on the CMS Web site. 

We stated that after the eligible hospital or CAH had attested and CMS had 

received electronic submission of the CQMs from an eligible hospital or CAH 

participating in the proposed Electronic Reporting 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 determination would be made within 2 months 
CMS-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 requirement 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 clarification on the purpose of this Pilot, 

which appears to duplicate other quality measurement programs. 

 Response: The specific purpose of the 2012 Electronic Reporting Pilot is to 

provide a method for eligible hospitals and CAHs to electronically report the clinical 

quality measures for the EHR Incentive Program. We recognize that there may be some 

overlap between the 2012 Electronic Reporting Pilot and other quality reporting 

programs but we expect electronic reporting will be aligned and harmonized across 

Medicare quality reporting programs over time. 

Comment: Some commenters strongly supported the proposed 2012 Electronic 

Reporting Pilot, which they perceived as a great opportunity for hospitals to test 

interoperability and functionality of their certified EHR technology while allowing CMS 

to evaluate the compatibility of electronic measure specifications and chart-abstracted 

data. Commenters recommended that CMS should be flexible with the implementation 

timelines for the pilot to ensure the viability and successful functionality of this new 

reporting method. 

Response: We appreciate the commenters’ support of the proposed 2012 

Electronic Reporting Pilot. If the proposed timelines for the Electronic Reporting Pilot 
CMS-1525-FC 1214 

are not feasible for an eligible hospital or CAH, attestation would continue to be an 

acceptable method for reporting the clinical quality measures for the 2012 payment year. 

 Comment: Some commenters believed that the 2012 Electronic Reporting Pilot 

would be instrumental in shaping and facilitating 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 participation in the 2012 Electronic Reporting Pilot. 

 Response: We thank the commenters for their support. As we stated in the 

proposed rule, the 2012 Electronic Reporting Pilot would be an alternative to reporting 

CQMs by attestation for the 2012 payment year. Eligible hospitals and CAHs may 

choose to report CQMs by attestation and voluntarily participate in the 2012 Electronic 

Reporting Pilot simultaneously. We will provide more education and outreach to 

stakeholders on the reporting process for the 2012 Electronic 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 allow all hospitals to participate in the 2012 

Electronic Reporting Pilot regardless of whether they participated in the EHR Incentive 

Program. A commenter recommended providing an additional incentive for 2012 

Electronic Reporting Pilot participants to increase participation. 

 Response: We plan to engage a variety of hospitals and vendors in the testing of 

the submission of patient level reports for the clinical quality measures required in the 

pilot. The submitter will not be required to register in the registration and attestation 
CMS-1525-FC 1215 

module before submitting the test files. More information about the testing period will be 

available in 2012. Although we appreciate 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 participation in the 2012 Electronic Reporting Pilot. 

Comment: One commenter requested delaying the 2012 Electronic Reporting 

Pilot until 2013. 

Response: Based on the amount of support from 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 payment 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 measure information from their certified EHR 

technology would participate in the 2012 Electronic Reporting Pilot. Participation in the 

pilot is not required to be a meaningful user 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 reporting method for the 2011 payment year in the 

HITECH EHR Incentive Program final rule (75 FR 44430 through 44431). 

 Comment: A commenter requested a detailed analysis of the incapability of the 

PQRI 2009 Registry XML Specification content exchange standard in conveying 

aggregate hospital quality measures data from EHRs. The commenter also suggested 
CMS-1525-FC 1216 

CMS consult with hospitals and vendors on the need to move to electronic reporting from 

the current attestation model, given relative costs and benefits. 

 Response: We suggest that the commenter should contact the Office of the 

National Coordinator for Health Information Technology (ONC) with any questions or 

concerns about the PQRI 2009 Registry XML Specification content exchange standard. 

ONC’s Web site address is http://healthit.hhs.gov. We appreciate the suggestion to 

consult with hospitals and vendors about the need to move from the current attestation 

model to electronic reporting and will take it into consideration for future planning. 

After consideration of the public comments we received, we are finalizing as 

proposed the voluntary 2012 Electronic Reporting Pilot for eligible hospitals and CAHs 

participating in the Medicare EHR Incentive Program for the 2012 payment year. 

Eligible hospitals and CAHs also may choose to attest to the results of CQMs calculated 

by certified EHR technology as for the 2011 payment year. We also are revising our 

regulations at §495.8(b)(2) as proposed. Successful 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 44418 
CMS-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 and CAHs participating in the proposed 

Electronic Reporting Pilot would: (1) submit CQM data on Medicare patients only; 

(2) submit Medicare patient-level data from which CMS may calculate CQM results 

using a uniform calculation process, rather than aggregate results 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 and Medicaid EHR Incentive Programs; and (4) use electronic 

specifications for transmission as specified by CMS, which we expected would be 

Quality Data Reporting Architecture (QRDA) Level 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 submission is based would be obtained from 

certified EHR technology. However, the functionality of reporting these CQMs to CMS 

would not rely on the certification process. We proposed that eligible hospitals and 

CAHs participating in the proposed Electronic Reporting Pilot would report CQMs based 

on a pilot measurement period of one full Federal fiscal year (October 1, 2011 through 
CMS-1525-FC 1218 

September 30, 2012), regardless of whether the eligible hospital or CAH is in its first 

year of participation in the Medicare and Medicaid EHR Incentive Programs. The period 

for submitting information on CQMs under the 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 CQM reporting format would be as specified 

by CMS, which we expected would be QRDA Category I. We proposed to offer a test 

period beginning July 1, 2012, which would allow eligible hospitals, CAHs, or their 

designee to submit CQM reports to CMS with the requirements that would be used in the 

proposed 2012 Electronic Reporting Pilot. 

 Comment: Some commenters stated that if QRDA Category I is going to be 

implemented, vendors will need time to develop, test, and deploy this functionality. 

Commenters urged CMS to provide 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 before and during the submission period 

as well as additional education and outreach to the industry in advance to assist 

2012 Electronic Reporting Pilot participants with transmitting electronic quality measure 

data. We thank the commenters for the suggestions 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 collection of patient-level data. Another 

commenter was concerned about the significant resource and system burden from the 

submission of patient-level data. Furthermore, the structure and content of the patient-
CMS-1525-FC 1219 

level data elements were not clear to the 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 concerned 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 commenter believed is well-tested for submission 

of aggregate quality measure data. The commenter 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 the 

submission of patient-level data because eligible hospitals are already submitting patientlevel data to CMS under the Hospital IQR Program. Also, we anticipate that the certified 

EHR technology vendors will work with the requirements necessitated by the Pilot to 

serve the best interest of hospitals. We will strive to ensure that hospitals participating in 

the Pilot are provided with the resources needed to understand the structure and content 

of the patient-level data elements. One 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 intend 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 Electronic 
CMS-1525-FC 1220 

Reporting Pilot participants and non-participants to level the playing field, based on 

concerns that requiring one full year of data would delay the receipt of incentive 

payments for eligible hospitals and CAHs that are in their first payment year. The 

commenter strongly believed that the proposed one-year measurement period is a 

disincentive for provider participation in the pilot, as eligible hospitals and CAHs would 

have to complete one whole year of data collection before receiving their EHR incentive 

payment. 

 Response: We understand the commenter’s concerns. 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 begin Stage 1 in FY 2012 would have a 90-day 

reporting period if they choose to report CQMs by attestation. We encourage 

participation in the 2012 Electronic Reporting Pilot 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 data. Commenters also requested CMS to 

provide explanation why aggregate data submission is not piloted. 

Response: We still collect numerator, denominator, and exclusion data from 

eligible hospitals and CAHs who choose to report CQMs by attestation. The reason we 

collect patient-level data in the 2012 Electronic Reporting Pilot is to align with the data 
CMS-1525-FC 1221 

reported to the Hospital IQR Program, as part of our efforts to reduce burdens on the 

hospitals that participate in that program. 

Comment: A few commenters assumed that CMS intends to test the use of the 

HL7 Standard QRDA Category I, which has 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 with ONC to remove the PQRI 2009 Registry 

content exchange standards from the certification 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 place, we do not believe it is necessary 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 CFR 164.512(a) permits disclosures of 

protected health information that are required by law, including regulation. Eligible 

hospitals and CAHs that choose to participate in the 2012 Electronic Reporting Pilot 

would be required to submit patient-level data. 

Comment: A commenter recommended the collection of all-payer data, instead of 

just Medicare data, in order to advance the utilization of all-payer database. 

Response: We thank the commenter for the suggestion. The pilot is designed to 

collect Medicare patient data. We will analyze the Medicare patient data we receive in 
CMS-1525-FC 1222 

this 2012 Electronic Reporting Pilot and evaluate the feasibility of collecting all-payer 

data in the future. 

Comment: A commenter was concerned about the significant resource and 

system burden from the submission of patient-level data using QRDA. The commenter 

questioned CMS’ ability to receive and analyze the huge amount of patient-level data and 

was concerned that the huge QRDA Category I files may slow down CMS’ data 

processing. Some commenters recommended that CMS and other measure vendors work 

with HL7 to create, ballot, and test a generic standard (perhaps QRDA Category II) 

conformable to NQF’s Quality Data Model 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 Reporting Pilot, but it may not be the eventual 

transmission format used for all EHR CQM reporting. We will use the 2012 Electronic 

Reporting Pilot experience to evaluate the level of complexity, effort, and burden created 

by this transmission format. This analysis will be considered in future program designs. 

 Comment: A commenter was concerned about the potential security risks of 

patient data and urged CMS to build a security protection mechanism modeled after the 

Quality Improvement Organization (QIO) warehouse system. Some commenters 

recommended that CMS should require providers to submit their patient-level data to a 

QIO Clinical Data Warehouse, which would then transmit quality data to CMS. 
CMS-1525-FC 1223 

 Response: We have security standards in place to receive patient-level data in the 

Hospital IQR and OQR Programs. We will continue 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 objective of meaningful use 

addresses security validation. 

 Comment: A commenter suggested that the 2012 Electronic Reporting Pilot also 

test electronic measures and not just transmission of quality data to CMS. The 

commenter also encouraged CMS to solicit feedback from participants and nonparticipants of the 2012 Electronic Reporting Pilot. 

Response: The 2012 Electronic Reporting Pilot will test file submission while 

certified EHR technology is certified for its ability to electronically calculate CQM 

specifications required by CMS. We welcome feedback from participants and nonparticipants in the 2012 Electronic Reporting Pilot. 

After consideration of the public comments we received, we are finalizing our 

proposals for reporting CQM data under the 2012 Electronic Reporting Pilot. Among 

other requirements, eligible hospitals and 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 CMS may calculate CQM results using a uniform 

calculation process, rather than aggregate results 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 and 
CMS-1525-FC 1224 

Medicaid EHR Incentive Programs; and (4) use QRDA Category I format data 

transmission. 

K. ASC Quality Reporting Program

1. Background 

Section 109(b) of the MIEA TRHCA amended 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 Secretary 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 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 paragraph (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 reduction for one year cannot be taken into account in 

computing any annual increase factor for a subsequent year. 

Section 1833(i)(7)(B) of the Act provides that, “[e]xcept as the Secretary may 

otherwise provide,” the hospital 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 hospitals under the Hospital 

OQR Program and any reference to a hospital, outpatient setting, or outpatient hospital 

services is deemed a reference to an ASC, the 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 time, that the Secretary specifies. 

Section 1833(t)(17)(C)(i) of the Act requires the Secretary to develop measures 

appropriate for the measurement of the quality of care (including medication errors) 

furnished by hospitals in outpatient settings, that these measures 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. Section 

1833(t)(17)(C)(ii) of the Act allows the Secretary to select measures 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 include providing hospitals with the opportunity 

to review their data before these data are released 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 period (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 comment period (73 FR 68780), the CY 2010 
CMS-1525-FC 1226 

OPPS/ASC final rule with comment period (74 FR 60656), and the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 72109), we did not implement a quality data 

reporting program for ASCs. We determined that it would be more appropriate to allow 

ASCs to acquire some experience with the revised ASC payment system, which was 

implemented for CY 2008, before implementing new requirements, such as public 

reporting of quality measures. However, in these 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 data 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 Administration Variance (MAV); 

(9) Medication Reconciliation; and (10) VTE Measures: 

Outcome/Assessment/Prophylaxis (75 FR 46383). 

In addition to preparing to propose implementation of an ASC Quality Reporting 

Program, HHS developed a plan to implement 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 submitted a Report to Congress, as required by section 

3006(f)(4) of the Affordable Care Act, entitled “Medicare Ambulatory Surgical Center 

Value-Based Purchasing Implementation Plan” that contains this plan. This report is 
CMS-1525-FC 1227 

found on our Web site at: 

http://www.cms.gov/ASCPayment/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 collection 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 data reporting and that if there are payment 

penalties, how would they be calculated. Several commenters stated their belief that the 

payment penalty for non-reporting or not meeting reporting requirements be lowered for 

at least the initial payment penalty year, recommending a 0.4 percentage point reduction 

for CY 2014, rather than a 2 percentage point reduction. Some of these commenters 

noted that a 0.4 percentage point 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 that the Secretary may provide 

that any ASC that does not submit quality measures to the Secretary as specified will 

incur a 2.0 percentage point reduction to any annual increase provided 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 payment penalties will be calculated. We note 
CMS-1525-FC 1228 

that although the payment reduction 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 points. (Beginning with FY 2015, the payment 

reduction will be one-quarter of the applicable percentage increase (determined without 

regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act).) 

 Comment: Many commenters appreciated CMS’ 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 reporting program warrants at least 6 months of 

advance notice to providers, who would have to make substantive changes to data 

elements and operation systems. Commenters cited the example of ASCs’ inexperience 

in reporting data using Quality Data Codes (QDCs) as well as reporting to NHSN as 

efforts that would require tremendous time, 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 on 
CMS-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 the 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 extent that we finalize some or all of the 

measures for future payment determinations, we would not be precluded 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 rulemaking 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 for multiple payment determinations for the 

Hospital IQR and Hospital OQR Programs. We believe this proposed process will assist 

ASCs in planning, meeting future reporting requirements, and implementing quality 
CMS-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 and any new legislative requirements. 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 ASCs to gain understanding of measure 

specifications, data collection and data submission methodologies while CMS develops 

needed infrastructure to collect quality data on ASCs. 

 Response: We thank the commenters for the support of the multi-year proposals 

for ASC quality measures. 

 After consideration of the public comments we received, we are finalizing our 

proposal to adopt quality measures for 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 that section 1833(t)(17)(C) of the Act shall 

apply with respect to ASC services in a similar manner in which they apply to hospitals 

for the Hospital OQR Program, except as the Secretary may otherwise provide. The 

requirements at section 1833(t)(17)(C)(i) of the 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 affected 
CMS-1525-FC 1231 

parties and, to the extent feasible and practicable, shall include measures set forth by one 

or more national consensus 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 improved 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 the HITECH Act so that the burden for 

reporting will be reduced. In general, we prefer to adopt measures that have been 

endorsed by the NQF because it is a national multi-stakeholder organization with a welldocumented and rigorous approach to consensus 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 measure development process, through broad 

acceptance and use of the measure(s), and through public comment. 

In developing this and other quality reporting programs, as well as the Hospital 

VBP Program, we applied the following principles for the development and use of 

measures. In the proposed rule, we invited public comment on these 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 standards, 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 quickly as possible to the use of primarily 

outcome and patient experience measures. To the extent practicable and appropriate, 

outcome and patient experience measures should be adjusted for risk or other appropriate 

patient population or provider/supplier characteristics. 

● To the extent possible and recognizing differences in payment system maturity 

and statutory authorities, measures should be aligned across public reporting and payment 

systems under Medicare and Medicaid. The measure sets should evolve so that they 

include a focused core set of measures appropriate to the specific provider/supplier 

category that reflects the level of care and the most important areas of service and 

measures for that provider/supplier. 

● The collection of information should 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 certified EHR technology with minimal burden. 

● To the extent practicable and feasible, and within the scope of our statutory 

authorities for various quality reporting and value-based purchasing programs, measures 

used by CMS should be endorsed by a national, multi-stakeholder organization. 

Measures should be aligned with best practices 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. Similar standards and guidelines can be applied 

between hospital outpatient departments and ASCs with respect to surgical care 

improvement, given that many of the same surgical procedures are provided in both 

settings. Measure harmonization assures that comparable care in different settings can be 

evaluated in similar ways, which further assures that quality measurement can focus more 

on the needs of a patient with a particular condition rather than on the specific program or 

policy attributes of the setting in which the care is provided. In general, our goal is to 

adopt harmonized measures that assess the quality of care given across settings and 

providers/suppliers and to use the same measure specifications based on clinical evidence 

and guidelines for the care being assessed regardless of provider/supplier type or setting. 

This harmonization goal is also supported by a commenter to the CY 2011 OPPS/ASC 

proposed rule, who recommended CMS align ASC 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 Ambulatory Surgical Center Value-Based 

Purchasing Implementation Plan” and with those 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 initial measure set that we proposed for the 

CY 2014 payment determination addresses outcome measures and infection control 

process measures. Six of the eight initial measures that we proposed for the CY 2014 
CMS-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-endorsed, is currently in use in the PQRS, 

and is similar to a measure that is being used in the Hospital OQR Program, and therefore 

aligns across settings in which outpatient surgery is performed. 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 patients 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 this measure to the CDC under the Hospital 

IQR Program in 2012, and we also proposed that hospital outpatient departments begin 

reporting this measure to the CDC under the Hospital OQR Program in 2013. Thus, this 

measure would be aligned across quality reporting programs for facilities performing 

surgery. 

 Comment: Several commenters supported all the proposed NQF-endorsed 

measures for ASCs and also believed that all ASC quality reporting measures should be 

NQF-endorsed, regardless of the measures’ endorsement by other national 

multi-stakeholder organizations. Some commenters 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 Secretary must develop measures that reflect 

consensus among affected parties and, to the extent feasible and practicable, must include 
CMS-1525-FC 1235 

measures set forth by a national consensus building entity. Whenever possible, we strive 

to adopt NQF-endorsed measures because these measures will meet these requirements, 

as discussed above. However, we believe that the requirement that measures reflect 

consensus among affected parties can be achieved in other ways, including through the 

measure development process, through broad acceptance and use of the measure, 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 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 

section 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, the Secretary has further authority to adopt measures that do not reflect 

consensus among affected parties and are not endorsed by a national consensus building 

entity. We wish to clarify that these measures 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 distinct factors should be considered 

in the selection of measures for ASCs: (1) the 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 case mix or low volume); (2) Hospital OQR 

Program measure specifications may not be relevant for all ASCs; (3) the reporting 
CMS-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 factors 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 diversity 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 the 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 gain 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/providers that perform surgeries, such as 

HOPDs. However, we acknowledge that not all procedures that are performed in HOPDs 

are performed in ASCs, and hence that some Hospital OQR measures may not be as 

relevant for ASCs or may need to be tailored to the types of procedures approved to be 

performed in ASCs. We also understand that most ASCs are small businesses for which 

data collection burden or EHR adoption may pose 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 structural 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 consider 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 accrediting bodies that focus 

on ASC quality and safety. The ASC QC initiated a process of standardizing ASC 

quality measure development through evaluation of existing nationally 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 processes 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, including patients, providers and payers.” 

The ASC QC developed and pilot-tested five facility-level measures (Patient 

Burn; Patient Fall in the ASC; Wrong Site, Wrong Side, Wrong Patient, Wrong 
CMS-1525-FC 1238 

Procedure, Wrong Implant; Hospital Transfer/Admission, and Prophylactic 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 Timing and Ambulatory Surgery Patients with 

Appropriate Method of Hair Removal measures are infection control process measures, 

and the rest are outcome measures. All six of these measures were listed as under 

consideration in the CY 2011 OPPS/ASC proposed 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, diverse, physician-led group that identifies, 

develops, and promotes implementation of evidence-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 add a QDC to any claim involving a proposed 

claims-based quality measure. We stated that CMS is in the process of developing QDCs 
CMS-1525-FC 1239 

for each proposed claims-based quality measure and the QDC would be a CPT Category 

II code or a HCPCS Level II G-code if an appropriate 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 ASC QC measures specifications can be 

found at 

http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pd

f. 37 For the seventh measure, the specifications can be found on the PQRS Web site at: 

http://www.cms.gov/pqrs/downloads/2011_PhysQualRptg_MeasuresGroups_Specificatio

nsManual_033111.pdf?agree=yes&next=Accept. 

Comment: Commenters generally supported most of the proposed measures for 

CY 2014 and requested harmonization of the measures with the Hospital OQR Program 

as appropriate, so that comparative quality data is available to consumers. A commenter 

requested that CMS provide measure benchmarks for ASCs to assess how they stack up 

against their peers. 

 

37 ASC Quality Measures: Implementation Guide Version 1.4, ASC Quality Collaboration, December 2010. 
CMS-1525-FC 1240 

Response: We thank the commenters for the support of our intent to align and 

harmonize measures across Hospital OQR and ASC Quality Reporting Programs to keep 

consumers better informed when making outpatient 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/ContentServer?c=Page&pagename=QnetPublic%2FPage

%2FQnetTier2&cid=1228768205297. We also provide such benchmarks for the 

Hospital OQR measures at: 

http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage

%2FQnetTier2&cid=1228768205213. However, such information is provided for 

informational purposes and quality improvement 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 potential burden on ASCs when we 

contemplated measures for ASCs. We determined 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 with 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 year 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 collection 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 are less burdensome, given that ASCs already 

submit a CMS-1500 form for each Medicare beneficiary served. A few commenters were 

concerned about the potential burden caused by the use 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 information 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 determined 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 Part B claim forms. Based on the public 

comments we received, we are deferring the start date of required submissions of QDCs 

for the ASC Quality Reporting Program to October 1, 2012. 

The QDCs are a means of data collection for quality measures that 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 included: 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) attributed 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 consideration for development by registry 

developers. 

Response: We thank the commenter for the suggestion. 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: Implementation Guide Version 1.4 states that every 

patient receiving care in an ASC setting has the potential to experience 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 increased risk of burns associated with newer electrosurgical 

devices due to their application of higher electrical current for longer time intervals. 

Other common sources of burns in a surgical setting include chemical and thermal 

sources, and radiation, scalds, and fires. Clinical practice guidelines for reducing the risk 

of burns have been established by the American 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/ASCQualityCollaborationImplementationGuide.pd

f. The ASC QC in their ASC Quality Measure 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, fire, chemical, electrical 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 further refine means to ensure prevention. 

Read together, section 1833(i)(7)(B) of the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

extent feasible and practicable, that include measures set forth by one or more national 

consensus building entities. We believe that this measure is appropriate to measure 

quality in ASCs since they serve surgical patients who may face the risk of burns during 

ambulatory surgical procedures. Furthermore, we believe 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 determination 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 use 
CMS-1525-FC 1245 

information submitted on claims to calculate these 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 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 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 since 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 specification is an appropriate application of the 

NQF-endorsed measure. Therefore, the measure is applicable to all Medicare Part B 

ASC admissions It addresses “[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, and electrosurgical unit or laser).” Although 
CMS-1525-FC 1246 

patient burns may be rare in GI ASCs, we believe 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 the public comments we received, we are finalizing this 

measure for the CY 2014 payment determination with data collection to begin on 

October 1, 2012 (as discussed in section XIV.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 prevented through assessment of risk, care planning, 

and patient monitoring. Healthcare settings are being called 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 anxiolytics, 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 specifications for this NQF-endorsed measure 

developed by the ASC QC can be found at: 
CMS-1525-FC 1247 

http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pd

f. 

 The ASC QC in its ASC Quality Measure Implementation Guide version 1.4 

defines a “fall” as “a sudden, uncontrolled, unintentional, downward displacement of the 

body to the ground or other object, excluding falls resulting from violent blows or other 

purposeful actions”, which is consistent with the definition set forth by the National 

Center for Patient Safety. 

Read together, section 1833(i)(7)(B) of the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

extent feasible and practicable, that include measures set forth by one or more national 

consensus building entities. We believe that this measure is appropriate to measure 

quality in ASCs because it was specifically developed to measure quality of surgical care 

furnished by ASCs, as measured by patient falls. Furthermore, we believe 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 

NQF-endorsed. 

In the proposed rule, we invited public comment on our proposal to adopt this 

measure for the CY 2014 payment determination using the claims-based QDC data 

collection mechanism for ASC services furnished for Medicare fee-for-service 

beneficiaries from January 1, 2012 through December 31, 2012 (76 FR 42339). While 
CMS-1525-FC 1248 

the NQF-endorsed specification for this measure 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 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 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 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 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 support 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 determination with data collection to begin on 

October 1, 2012. 
CMS-1525-FC 1249 

(3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant 

(NQF #0267) 

 Surgeries and procedures performed on the wrong site/side, and wrong patient can 

result in significant impact on patients, including complications, serious disability or 

death. While the prevalence of such serious errors may be rare, such events are 

considered serious reportable events, and are 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/ASCQualityCollaborationImplementationGuide.pd

f.

Read together, section 1833(i)(7)(B) of the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

 

38

http://www.qualityforum.org/Publications/2007/03/Serious_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_information/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 percentage 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 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 determination 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 these 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 

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 on 
CMS-1525-FC 1251 

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 commented on this measure supported the 

proposed measure. However, some commenters indicated that this measure may not 

apply to GI ASCs since the risk of performing wrong site, wrong side, wrong patient, 

wrong procedure, and wrong implant in ASC endoscopic procedures is rare (for example, 

confusion over an upper GI endoscopy and colonoscopy, 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 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 determination 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 other 
CMS-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-endorsed measure assesses the rate of ASC 

admissions requiring a hospital transfer or hospital admission upon discharge from the 

ASC. The ASC QC defines “hospital transfer/admission” as “any transfer/admission 

from an ASC directly to an acute care hospital, including hospital emergency room.” 

 The specifications for this NQF-endorsed measure developed by the ASC QC 

measure can be found at: 

http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pd

f. The ASC QC believes that this “measure would allow ASCs to assess their guidelines 

for procedures performed in the facility and patient selection if transfers/admissions are 

determined to be at a level higher than expected. 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 section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

extent feasible and practicable, that include measures set forth by one or more national 

consensus building entities. 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 interventions. Furthermore, we believe that this 

measure meets the consensus requirement and the requirement that it be set forth by a 
CMS-1525-FC 1253 

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 determination 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 these 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 who 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 commented 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 a 
CMS-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 their support. We also thank the 

commenter for the suggestion, and will consider it in future measure development and 

refinement. 

 After consideration of the public comments we received, we are finalizing this 

measure for the CY 2014 payment determination with data collection to begin on 

October 1, 2012 (as discussed in section XIV.K.1. of this final rule with comment 

period). 

(5) Prophylactic Intravenous (IV) Antibiotic Timing (NQF #0264) 

 Timely preoperative administration of intravenous 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 IQR 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 prophylaxis on time. The 

specifications for this NQF-endorsed measure 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 prophylaxis 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 Giamacellou, H.: Effect of time interval on tissue 

concentrations of cephalosporins after tourniquet inflation. 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/ASCQualityCollaborationImplementationGuide.pd

f. 

The ASC QC measure implementation guide defines “antibiotic administered on 

time” as “[a]ntibiotic infusion ... initiated within one hour prior to the time of the initial 

surgical incision or the beginning of the procedure (e.g., introduction of endoscope, 

insertion of needle, inflation of tourniquet) or two hours prior if vancomycin or 

fluoroquinolones are administered.” The measure also defines “prophylactic antibiotic” 

as “an antibiotic prescribed with the intent of reducing the probability of an infection 

related to an invasive procedure. For purposes of this measure, the following antibiotics 

are considered prophylaxis for surgical site infections: Ampicillin/sulbactam, 

Aztreonam, Cefazolin, Cefmetazole, Cefotetan, Cefoxitin, Cefuroxime, Ciprofloxacin, 

Clindamycin, Ertapenem, Erythromycin, Gatifloxacin, Gentamicin, Levofloxacin, 

Metronidazole, Moxifloxacin, Neomycin and 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 the two hours time frame. The ASC QC Guide 

states that “[i]n cases involving more than one antibiotic, all antibiotics must be given 

within the appropriate time frame in order for 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 section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 
CMS-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 administration. Furthermore, we believe 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 determination 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 ASC admissions with a preoperative order for a 

prophylactic IV antibiotic for prevention of surgical site infection, 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. 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 who are part of the broader population to which 

the measure applies. As stated in the CY 2012 OPPS/ASC proposed rule, if the measure 
CMS-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 endoscopic centers. A few commenters considered 

the proposed data collection to begin 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 section XIV.K.1. of this 

final rule with comment period, we are delaying 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 CMS 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 and HCPCS codes, ASCs would need to add 

the appropriate QDCs for measure numerators and denominators on Medicare Part B 

claim forms. We intend to provide education and outreach on data submission for the 
CMS-1525-FC 1258 

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: One commenter noted that CMS incorrectly stated that the 

NQF-endorsed specification for this measure includes all ASC admissions. The 

commenter stated that the NQF specification limits the denominator to all ASC 

admissions with a pre-operative order for a prophylactic IV antibiotic for the prevention 

of surgical site infection. 

 The commenter recommended giving the public the opportunity to comment on 

the QDC descriptors that CMS develops in the future. Specifically, the commenter 

requested the following corrections: (1) the required 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 administration; and (3) circumstances where no 

prophylactic was ordered. 

 Response: The commenter is correct, the denominator for the NQF-endorsed 

measure is all ASC admissions with a pre-operative 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 state 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 the initiation of IV 

antibiotics relative to the initial surgical incision or the beginning of the procedure. We 

will ensure these aspects of the measure are 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 measure is implemented to include additional ASC 

procedures. 

 Response: We thank the commenter for the suggestion. As discussed in section 

XIV.K.3.b. below, for the ASC Quality Reporting Program, we are not finalizing the 

surgical site infection measure in this rulemaking. 

 After consideration of the public comments we received, we are finalizing this 

measure for the CY 2014 payment determination 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 QC43 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 clipping, depilatory use or no hair removal at 

 

43 ASC QC Quality measures: Implementation Guide version 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 Operating Room Nurses published similar 

guidelines for appropriate hair removal.46 While a similar measure is being considered 

for retirement from the Hospital IQR Program because it displays a high degree of 

performance with little variability 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 setting. In the CY 2012 OPPS/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 surgical site hair removal. 

The specifications for this NQF-endorsed measure developed by the ASC QC can be 

found at: 

http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pd

f. Read together, sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of the Act require the 

Secretary, except as the Secretary may otherwise provide, to develop measures 

appropriate for the measurement of the quality of care (including medication errors) 

furnished by ASCs, that reflect consensus among affected parties and, to the extent 

feasible and practicable, that include measures set forth by one or more national 

 

44 Seropian, R., Reynolds, B.M.: Wound infections after 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 practices for skin preparation 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 believe 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 determination 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 submitted on claims to calculate these measures 

necessitates 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 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 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 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 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 infections across a broad spectrum of surgical 

procedures. Furthermore, the scrotal surgery exclusion does not appear to be present in 

the ASC specifications. Two commenters found it confusing that CMS has currently 

suspended 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 probability of infection. 

 Comment: One commenter indicated that CMS incorrectly stated that the 

NQF-endorsed specification for this measure 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 descriptors 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 surgical site hair removal, not all ASC 

admissions. Additionally, the commenter believed that a set of three QDCs would be 

needed to describe: (1) appropriate hair removal; (2) inappropriate hair removal; and 

(3) circumstances where no hair was 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 Second Generation Cephalosporin 

(NQF #0268) 

 Surgical outcomes are affected by the selection of appropriate antibiotics. Current 

guidelines indicate that first or second generation 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. This 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: Specialty Clinician 

Performance Measures,” and it assesses the percentage of surgical patients aged 18 years 

and older undergoing procedures with the indications for a first OR second generation 

cephalosporin prophylactic antibiotic, who had an order for cefazolin or cefuroxime for 

antimicrobial prophylaxis. While we recognize that this measure is not specifically 

endorsed for the ASC setting, we believe that this 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 this 
CMS-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_PhysQualRptg_MeasuresGroups_Specificatio

nsManual_033111.pdf?agree=yes&next=Accept. 

 Read together, section 1833(i)(7)(B) of the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

extent feasible and practicable, that include measures set forth by one or more national 

consensus building entities. 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, including consensus achieved during the measure 

development process; consensus shown through 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 consortium of physicians dedicated to improving 

patient safety by developing evidence based performance measures, promoting the 

implementation of effective and relevant clinical performance improvement activities , 

and advancing the science of clinical performance measurement and improvement. The 
CMS-1525-FC 1265 

AMA-PCPI develops many measures for the PQRS program. The AMA-PCPI 

development process for this measure is a consensus-based process that involves 

stakeholder input, including surgeons 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 feasible or practicable to adopt an NQF-endorsed measure of 

prophylactic antibiotic selection specifically for ASCs 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 entity, or by the NQF specifically. Further, 

section 1833(i)(7)(B) of the Act states that section 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, the Secretary has further authority to adopt 

measures that are not NQF-endorsed or measures 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 measures across settings, as it is also used in the 

PQRS, and a similar measure (NQF #0528) has 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 determination using the claims-based QDC data 

collection mechanism for ASC services furnished for Medicare patients from 
CMS-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 indications 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. 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 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 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: 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 measure 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 ASCs. A commenter stated that data collection for this 

measure is very burdensome. One commenter requested clarification on what procedure 

codes would allow for the best comparison since very few codes in the current 

denominator set are relevant to the ASC setting (according to the commenter, ASCs only 

accounted for 0.16 percent of total 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 procedure or only if the adverse event has 

occurred. A commenter stated that this measure 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 endorsement 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 procedures most commonly performed in ASCs. 

Therefore, we are not finalizing this measure for the CY 2014 payment determination at 

this time. 

 After consideration of the public comments we received, we are not finalizing the 

selection of prophylactic antibiotic: first OR second generation 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 acquired 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 hospitalization required for patients and add 

considerable health care costs. HAIs are largely preventable for surgical patients through 

application of perioperative best practices such as those listed in the CDC’s Surgical Site 

Infection prevention guidelines. Therefore, many health care consumers and 

organizations are calling for public disclosure 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 the NHSN as part of State-mandated reporting 

and surveillance requirements for hospitals in some States. Additionally, 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 been 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 sections XIV.C.2.a. of the proposed rule and 

this final rule with comment period. The 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 events 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 1833(i)(7)(B) of the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

extent feasible and practicable, that include measures set forth by one or more national 

consensus building entities. Increasingly, surgical procedures are being performed in 

hospital outpatient department settings and ASCs. We believe this measure is 

appropriate for measuring quality of care in ASCs because it applies to outcomes for 

surgical patients undergoing procedures that are performed in ASCs. 

 Furthermore, we believe that this measure meets the consensus requirement and 

the requirement that it be set forth by a national 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 measures 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 proposed rule and this final rule 

with comment period. In the proposed rule, we invited public comment on this proposed 

measure and the reporting mechanism. 

Comment: Some commenters requested clarification 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 believed that it would be challenging to survey 

outpatients, including ASC patients, to determine 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 readmission to the facility of the original 

operative procedures” and concluded this measure 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 predominant procedures performed in ASCs, the 

commenter recommended that CDC re-specify 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 as 
CMS-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 recommended that CMS require ASCs to conduct 

follow-up phone calls with patients, caregivers or physicians within 30 days of 

procedures to identify patients who have developed surgical site infections. Commenters 

also recommended that CMS require that ASCs include this information in medical 

records as part of the data submission to NHSN, preferably via electronic submission. 

 Several commenters supported the surgical site infection measure but the 

disparate codes used by hospital outpatient departments and ASCs and the ICD codes 

used in the NHSN module would create potential 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 antibiotic timing, and ASC-7: 

Prophylactic antibiotic selection for surgical patients) can be eliminated from the 
CMS-1525-FC 1272 

Hospital OQR Program. The commenter suggested harmonization of this measure across 

different HOPD surgical and ASC settings. 

Response: We appreciate this supportive comment. 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 performed in outpatient surgical settings like 

ASCs are not addressed in the current surgical site infection measure adopted for the 

Hospital IQR Program, and that a follow-up and collection protocol that is better suited to 

outpatient surgical settings for such a measure 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 measure should facilitate comparisons 

across ASCs and hospital outpatient surgery setting by making the data more 

patient-centered for easy comprehension. 

 Response: We appreciate the input from the 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 currently participating in NHSN reported 
CMS-1525-FC 1273 

registration and data submission 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 finalizing the surgical site infection 

measure for the CY 2014 payment determination. 

 After consideration of the public comments we received, 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 claims-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 section 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 Patient, 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 payment 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 determination, if they are finalized in the 

CY 2012 OPPS/ASC final rule with comment period, for the CY 2015 payment 

determination. In the proposed rule, we invited public comments on this proposal. 

 Comment: One commenter supported the proposed 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 payment determination to the next. For the 
CMS-1525-FC 1275 

CY 2014 payment determination, as discussed above, 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 whether ASCs are using a safe surgery checklist 

that covers effective communication and helps ensure that safe practices are being 

performed at three critical perioperative periods: prior to administration of anesthesia, 

prior to incision, and prior to the patient leaving 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 were 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: 1928-37 
CMS-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 surgery practices that can be performed during 

each of these three perioperative periods 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 reduce the potential for human error, which 

would increase the safety of the surgical environment. 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.aspx
CMS-1525-FC 1277 

checklist can be found at: 

http://www.who.int/patientsafety/safesurgery/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 Surgeons’ 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 whether it uses a checklist in 

connection with any individual procedures. 

Read together, section 1833(i)(7)(B) of the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

extent feasible and practicable, that include measures set forth by one or more national 

consensus building entities. 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 affected parties can be reflected through means 

other than NQF endorsement, including consensus achieved during the measure 

development process; consensus shown through broad acceptance and use of measures; 

and consensus through public comment. 
CMS-1525-FC 1278 

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 Federation of Societies of 

Anesthesiologists, the use of a safe surgery checklist is one of the safe surgery principles 

endorsed by the Council on Surgical and Perioperative Safety51, which is comprised of 

the American Association of Nurse Anesthetists, the American College of Surgeons, the 

American Association of Surgical Physician Assistants, the American Society of 

Anesthesiologists, the American Society of PeriAnesthesia Nurses, AORN, and the 

Association of Surgical Technologists. Two State agencies (Oregon, South Carolina), the 

Veterans Health Administration52, 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 Checklist Use reflects consensus among affected 

parties. We also note that TJC has included safe surgery checklist practices among those 

to be used to achieve NPSGs adopted for 2011 for surgeries performed in ambulatory 

settings and hospitals55. 

 

51 http://www.cspsteam.org/safesurgerychecklist/safesurgerychecklist.html 52 Neily, J; Mills, PD, Young-Xu, Y. (2010). “Association 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 Surgical Quality – Checklists and Beyond.” NEJM. 

363: 1963-1965. 

55 http://www.jointcommission.org/standards_information/npsgs.aspx 
CMS-1525-FC 1279 

The Safe Surgery Checklist Use structural 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 practice. Therefore, it is not feasible or 

practicable to adopt an NQF-endorsed measure 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 entity, or by the NQF specifically. Further, 

section 1833(i)(7)(B) of the Act states that section 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, the Secretary has further authority to adopt 

non-endorsed measures. We note that the proposed 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 proposed 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 safe surgery checklist that 

covered each of the three critical perioperative 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 also 
CMS-1525-FC 1280 

used to collect structural measures and other information for other programs, specifically 

for the Hospital IQR and Hospital OQR Programs. 

In the proposed rule, we invited public comments on our proposal to add this new 

structural measure to the ASC quality measurement 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 ensure 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 revise 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 same 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 recommended 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 using an online tool. Commenters 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 assess 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 assess whether a safe surgery checklist is used 

for each Medicare Part B patient. Therefore, a claims-based measure would not be 

appropriate to measure whether an ASC is using a safe surgery checklist because we are 

not measuring its use on an individual claims-based level. 

 We note that the Web based reporting tool is a minimally burdensome method of 

collecting this facility level information, and is currently in use for similar types of 

measures for both the Hospital IQR and Hospital 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 changing 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 this 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 measure. Some commenters noted that it is not 

NQF-endorsed. Some commenters objected to the collection of patient- or 

procedure-detailed level data. Commenters were also concerned about the 

implementation of this measure simultaneously with ICD-10 conversion would further 

tax facilities’ resources. A commenter stated 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 required in the Conditions for Coverage could also 

meet the criteria for this measure. A few commenters 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 believe this measure meets the statutory 

requirements, even if it is not NQF-endorsed. There is no NQF-endorsed measure for 

safe surgery checklist use despite the broad acceptance and widespread endorsement of 

this practice. Therefore, it is not feasible or practicable to adopt an NQF-endorsed 

measure of safe surgery checklist use because there is no such NQF-endorsed measure. 

As stated in previous rulemaking, we believe that consensus among affected parties can 

be reflected through means other than NQF endorsement, including consensus achieved 
CMS-1525-FC 1283 

during measure development processes, consensus shown through broad acceptance and 

use of measure; and consensus through public comment. The use of a safe surgery 

checklist has been adopted by the World Federation of Societies of Anesthesiologists, 

and is one of the safe surgery principles endorsed by the Council on Surgical and 

Perioperative Safety which is comprised of multiple medical professional organizations. 

We disagree with the commenters who suggested that a safe surgery checklist 

would not apply to GI procedures. 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 surgery 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 this structural measure to CMS for this 

quality reporting program and subsequent public reporting is duplicative 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 information 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 the 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 would report their yes/no response regarding 

use of a safe surgery checklist between July 1, 2013 and August 15, 2013 for the time 
CMS-1525-FC 1284 

period from January 1, 2012 through December 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 this 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 procedures, is related to 

better patient outcomes, including decreased 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 patients for the particular procedure. For this 

reason, the National Quality Forum has endorsed measures of total all-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). Additionally, many consumer-oriented Web sites reporting 

health care quality information sponsored by States (California, New York, Texas, 

Washington, Florida, Illinois, Michigan, Oregon) and private organizations (Leapfrog 

Group, U.S. News & World Report) are reporting procedure volume, in addition to 

 

56 Livingston, E.H.; Cao, J “Procedure Volume as a Predictor of Surgical Outcomes”. JAMA. 

2010;304(1):95-97.

57 David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Dellinger, 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 Following 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, Patient Safety Indicators, and Mortality), because it provides 

beneficial performance information to consumers choosing a health care provider,. The 

currently NQF-endorsed measures of procedure volume (noted above) relate to surgeries 

only performed in inpatient settings, and would 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 beneficiaries. When stratified by specialty category, CMS 

identified six procedure categories that historically constitute 98.5 percent of the total 

volume of procedures performed 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 all patient volume data on these six broad 

categories of surgical procedures as a structural measure to be used for the ASC Quality 

Reporting Program CY 2015 payment determination. 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 provider/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 section 1833(t)(17)(C)(i) of the Act require the 

Secretary, except as the Secretary may otherwise provide, to develop measures 

appropriate for the measurement of the quality of care (including medication errors) 
CMS-1525-FC 1286 

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. 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 categories of surgical procedures 

performed in ASCs. We have previously established 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 structural measure reflects consensus among 

affected parties as being associated with quality of surgical care because of recent 

evidence published in well-respected and widely circulated peer-reviewed clinical 

literature, and because of its widespread reporting among States and private stakeholders 

on Web sites featuring quality information. Because the current volume measures are 

endorsed for inpatient procedures, many of which are not performed in outpatient settings 

such as ASCs, it is not feasible or practicable to use NQF-endorsed measures of volume 

for ASCs. Further, section 1833(i)(7)(B) of the Act states that section 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, the Secretary has 

further authority to adopt non-endorsed measures. 

For the CY 2015 payment determination, we proposed that ASCs would report 

these data with respect to these six 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 
CMS-1525-FC 1287 

other words, under this proposal, an ASC would report its CY 2012 all-patient volume 

data for these six categories of procedures during the 45-day window of July 1 to 

August 15, 2013. In the CY 2012 OPPS/ASC proposed rule (76 FR 42346), we included 

a table which listed the HCPCS codes for which hospitals would be required to report allpatient volume data. Like the structural measures in the Hospital OQR Program, data on 

this proposed measure would be collected via 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 other information for other programs (Hospital 

IQR and Hospital OQR). In the proposed rule, we invited public comment on this 

proposal. 

 Comment: A commenter questioned why cardiovascular and respiratory codes 

are included for the same measure proposed in the Hospital OQR Program and not in the 

ASC Quality Reporting Program. The commenter recommended harmonizing the same 

categories for both programs for consistency. 

 Response: The procedures approved for HOPDs and for ASCs are not the same 

in type or frequency. For HOPDs, an analysis of prior years’ data indicated that 

procedures performed in the eight broad categories that we proposed (eye, 

cardiovascular, gastrointestinal, genitourinary, musculoskeletal, nervous, respiratory, and 

skin systems) accounted for 99 percent of the procedures performed in HOPDs. When 

we assessed the frequency of procedures performed by ASCs using prior year’s claims, 

we found that the six procedure categories of gastrointestinal, eye, nervous system, 

musculoskeletal, skin and genitourinary constitute 98.5 percent of the total volume of 
CMS-1525-FC 1288 

procedures performed in ASCs. Therefore, unlike HOPDs, cardiovascular and 

respiratory system procedures were not included 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 the 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 procedures in the Cardiovascular 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 urged harmonization with the same measure 

adopted in the Hospital OQR Program. Another commenter noted that the provision of 

data on high volume procedures across hospital outpatient setting and ASC setting would 

facilitate comparisons and subsequent informed 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 information to the consumer. Commenters 

recommended clarification on the most common ASC specialty-specific procedures 
CMS-1525-FC 1289 

performed, prior to creation of a clearly specified measure. Commenters also urged CMS 

to solicit input from the ASC community to determine how to make publication of 

volume data meaningful prior to implementation. A commenter stated this measure is 

unwarranted as volume data is already available 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 information. 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 proposed 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 healthcare decisions. We are aware of Web sites 

reporting volume for some procedures performed 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 standardized platform for consumers to be able to 

compare volume information based on procedure types commonly performed in ASCs 

within the 6 broad categories. 
CMS-1525-FC 1290 

 However, we agree with commenters that 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 commonly performed in ASCs within the 

6 broad categories so that they are more meaningful 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 release of the ASC Specifications Manual. We 

agree with the commenter that obtaining stakeholder input as well as consumer testing 

prior to public reporting of the volume information will be beneficial, and will strive to 

do so, as we have done previously for information made available to the public from 

other quality reporting programs. 

 Comment: A commenter believed the proposed 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 method of collecting facility level 

structural measures, and is currently in use for structural measures for both the Hospital 

IQR and Hospital OQR Programs. While the time period for the measure for CY 2015 

would be calendar year 2012, the information would not be submitted by ASCs until 
CMS-1525-FC 1291 

mid-2013. Therefore, we do not believe further delay in the collection and submission of 

the measure is necessary. 

 After consideration of the 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 finalizing our proposal for the CY 2015 payment 

determination that ASCs would report data with 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 regarding 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 determination, 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 procedures, for a total of 7 measures. 

The measures for ASCs for the CY 2015 payment determination are listed below: 

ASC Program Measurement Set 

 for the CY 2015 Payment Determination 

ASC-1: Patient Burn 

ASC-2: Patient Fall 
CMS-1525-FC 1292 

ASC Program Measurement Set 

 for the CY 2015 Payment Determination 

ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant 

ASC-4: Hospital Transfer/Admission 

ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing 

ASC-6: Safe Surgery Checklist Use* 

ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures* 

Procedure Category Corresponding HCPCS Codes 

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, 

C9724, C9725, 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 payment 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 determination, if they are finalized in an 

OPPS/ASC final rule with comment period, for the CY 2016 payment determination. In 

the proposed rule, we invited public 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 for the CY 2015 payment determination for the 

CY 2016 payment determination. Thus, we are 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 Healthcare Personnel (HCP) 

(NQF #0431) 

The Influenza Vaccination among Healthcare 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 measure for the Hospital OQR Program for the CY 2015 payment 

determination. We refer readers to the discussion in sections XIV.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 section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as the Secretary may otherwise provide, to develop 

measures appropriate for the measurement of the quality of care (including medication 

errors) furnished by ASCs, that reflect consensus among affected parties and, to the 

extent feasible and practicable, that include measures set forth by one or more national 
CMS-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 that it be set forth by a national consensus 

building entity because it is endorsed by the NQF. 

We proposed that ASCs use the NHSN infrastructure and protocol to report the 

measure for ASC Quality Reporting Program purposes. Collection of data via the NHSN 

for this measure would begin with immunizations 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 measure, but were concerned that 

ASCs will require many resources to initiate this reporting process since they are not 

accustomed to reporting to NHSN. A commenter 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 recommended that CMS postpone 

data collection for immunizations 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 potential 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 facility 
CMS-1525-FC 1295 

payroll, and two categories of non-employee healthcare personnel: (1) licensed 

independent practitioners, that is, physicians, advance practice nurses, and physician 

assistants; and (2) student trainees and adult volunteers. 

 Based on the public comments we received, we are changing the proposed initial 

reporting period for HCP influenza vaccination 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 submission 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 duplicative 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 measurement and reporting of HCP vaccination rates, as is the case 

for other measureable healthcare processes and outcomes, may exist at the State and 

federal levels. Standardizing 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. 
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 healthcare personnel to receive a 

specific type or brand of influenza 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 modification. Because NQF’s final review and 

an endorsement decision are pending with respect to the CDC’s revised measure proposal 

and at the request of commenters, as discussed 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 March 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 payment 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 Patient, Wrong Procedure, Wrong Implant 

ASC-4: Hospital Transfer/Admission 

ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing 

ASC-6: Safe Surgery Checklist Use 

ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures 
CMS-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 Coverage among Healthcare Personnel * 

*New measure for CY 2016 payment determination. 

6. ASC Measure Topics for Future Consideration 

Below is a list of future measurement areas that we are considering for future 

ASC Quality Reporting Program payment determinations 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 inclusion of Patient Experience of Care 

Measures in the ASC Quality Reporting Program 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, in particular, sought comment on the inclusion of 

procedure-specific measures for cataract surgery, colonoscopy and endoscopy, and for 
CMS-1525-FC 1298 

measures of Anesthesia Related Complications 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 Providers 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 Accident, 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 vascular access or regional anesthesia 

Infection following epidural or spinal anesthesia 

Epidural hematoma following spinal or epidural anesthesia 

High Spinal 

Postdural puncture headache 

Major systemic local anesthetic toxicity 
CMS-1525-FC 1299 

Measures and Measurement Topics under Consideration for Future Payment 

Determinations 

Peripheral neurologic deficit following regional anesthesia 

Infection following peripheral 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 during Entire Recovery Period 

Post-discharge follow up 

Post-discharge ED visit 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 address the short patient experience with staff 

performance at ASCs. 

 Response: We thank the commenter for the input and we will take it into 

consideration in future measure selection efforts for this program. 

● Anesthesia related complications measures 

 Comment: A commenter supported the anesthesia related complications 

measures listed, including, Use of Reversal Agents, Type of Anesthesia and Credentials 
CMS-1525-FC 1300 

of the Professional Administering Anesthesia When a Complication is Reported, 

Presence of Physician During Entire Recovery 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 more 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 safety, 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 Updates 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 specifications 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 payment determinations, with the exception of 

the two structural measures, can be found at: 

http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pd

f; 

http://www.cms.gov/pqrs/downloads/2011_PhysQualRptg_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 are included in the discussion. 

 We proposed to maintain the technical specifications for the measures adopted for 

the ASC Quality Reporting Program by updating this Specifications Manual, including 

updating the detailed instructions and the calculation of algorithms as appropriate. In 
CMS-1525-FC 1302 

some cases where the specifications are available elsewhere, we may include links to 

Web sites hosting technical specifications. We currently use this same process for 

Hospital OQR Program measures, as discussed in sections XIV.A.3.a. of the proposed 

rule and this final rule with comment period. We proposed to follow the same technical 

specification maintenance process for the ASC Quality Reporting Program measures as 

for the Hospital OQR Program measures and 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 subregulatory process for updates to the technical specifications 

that we use to calculate Hospital OQR Program measures. This process is used when 

changes to the measure specifications are necessary 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 adopting 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 feasible and practicable, measures must be set 

forth by a consensus building entity. We note 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 measure specifications so that measures are 
CMS-1525-FC 1303 

calculated based on the most up-to-date scientific standards and ̧ in some instances ̧ 

consensus standards. 

 For the Hospital OQR Program, we indicated that notification of changes to the 

measure specifications is available on the QualityNet Web site, 

http://www.QualityNet.org, and in the Hospital OQR Specifications 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 for substantial changes, such as changes to ICD-9, CPT, 

NUBC, and HCPCS codes, and at least 6 months notice for substantive changes to data 

elements that would require significant systems changes. We proposed to follow the 

same subregulatory process for the ASC Quality 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 proposes that at least 6 months of advance 

notice will be provided to participants for substantive changes to data elements that 

would require significant system changes and at least three 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 strive to provide as much advance notice as 
CMS-1525-FC 1304 

possible when substantive changes to technical 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 comment we received, we are finalizing the 

policy of providing technical specifications and links to technical specifications in a 

Specifications Manual to be posted 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 would 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 manuals 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 maintenance of the technical specifications for 

the measures adopted by updating the Specifications Manual, and updating the detailed 

instructions and the calculation of algorithms as appropriate. We also are finalizing our 

policy to follow the same subregulatory process 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 substantial changes such 
CMS-1525-FC 1305 

as changes to ICD-9, CPT, NUBC, 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 Quality Reporting Program Data 

 Section 1833(t)(17)(E) of the Act requires that the Secretary establish procedures 

to make data collected under the Hospital OQR Program available to the public. It also 

states that such procedures must ensure that a hospital has the opportunity to review the 

data that are to be made public with respect to the hospital prior to such data being made 

public. 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 Reporting Program available on a CMS Web site 

after providing an ASC an opportunity to preview the data to be made public. We 

proposed that these data would be displayed 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 quality of care that they furnish. We intend 

to propose more detail on the publication of data 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 information should be displayed in a 

manner that allows easy comparisons for quality and cost between HOPDs and ASCs. 

Commenters expressed concerns regarding potential inappropriate data displayed on 

Hospital Compare. These commenters suggested that, in publicly displaying ASC data, 

CMS should: (1) provide contact information 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 only GI procedures are done, those 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 measure participation, data completeness, QDC submission 

errors, and performance details at CCN level, prior to publication of the data. Some 

commenters recommended that an appeals process 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 public. Prior to making the data available 

to the public, we also are required to provide facilities with the opportunity to review 
CMS-1525-FC 1307 

their data. We intend to propose a reconsideration and appeals process in future 

rulemaking. 

 Comment: A few commenters urged CMS to strive for user friendly data on the 

CMS Web site for the ASC Quality Reporting Program. 

 Response: We thank the commenters for their suggestion; we intend to make the 

display as consumer friendly as possible. 

After consideration of the public comments we received, 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 providing an ASC an opportunity to preview 

the data to be made public. As we proposed, 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 administrative 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 completeness requirements, and reconsideration 
CMS-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 the use of claims-based quality data codes is 

a new approach to quality data reporting, data validation procedures must 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 commenter 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 reconsideration 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 comments we received on the CY 2012 OPPS/ASC 

proposed rule. 

 We agree that it is preferable to issue 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 the CY 2013 OPPS/ASC proposed rule. We intend to take this 

approach because the FY 2013 IPPS/LTCH PPS proposed rule is scheduled to finalize 

earlier and prior to data collection beginning with October 2012 services. We disagree 

with the comment that the use of claims-based quality codes is a new approach to quality 
CMS-1525-FC 1309 

data reporting; this mechanism is used to collect such information under the PQRS. 

However, regarding the necessity to include data validation procedures in a final ASC 

Quality Reporting Program, we will consider these comments for future rulemaking. We 

note that claims-based and structural measures historically have not been validated 

through independent medical record review in our hospital and physician quality 

reporting programs due to the lack of relevant 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 period 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 avert account deactivation. 

 Response: We thank the commenter for raising this issue. While we did not 

make any proposals specifically addressing the 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 finalizing our proposals regarding 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 necessary to access information that is posted 

to the Web site, such as specifications manuals and educational 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 Requirements 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 full CY 2014 ASC annual payment update, ASCs 

would be required to submit complete data on individual quality measures through a 

claims-based reporting mechanism by submitting 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 the 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 regarding 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 number 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 proposed rule. In the CY 2012 OPPS/ASC 

proposed rule, we requested public comment on these proposals and were specifically 
CMS-1525-FC 1311 

interested in receiving public comment on what constitutes complete data in regard to our 

proposed ASC claims-based measures utilizing QDCs and methods to assess 

completeness. 

 Comment: Some commenters supported 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 their support. We agree that this 

method is reasonable and will reduce burden. 

 Comment: Many commenters expressed their 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 that data collection 

be delayed, beginning with October 1, 2012 services, 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 collection 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 determination measures, as discussed in 

sectionXIV.K.3.a. of this final 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 suggested, that due to ASCs not being familiar 

with reporting, successful reporting on a limited number of claims, for example, 

50 percent should be permitted, a level similar to that in the PQRS. 

 Response: We thank these commenters for 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 program, a low threshold should be used and that a level such as 

the 50 percent used in the PQRS would be reasonable. 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 consider 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 consider the need for exemptions based on case-mix. One 

commenter believed that some smaller facilities 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 their views regarding criteria for 

reporting exemptions under the ASC Quality Reporting Program. We will consider these 

comments as we develop our proposals in future 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 rule 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 loads is reasonable and we will consider this 

comment with all others when developing our proposals. 

 Comment: One commenter believed that, since the full complement of measures 

are not applicable to all ASCs, G-codes that ASCs can submit once during a performance 

period that indicates the measure is not applicable to the ASC should be developed, 

thereby exempting the ASC from data submission for the measure. One commenter 

believed that it is unclear how a facility should 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 report on all measures, but only those measures 

that applied. 

 Response: We thank the commenters for their views regarding methods to report 

when an ASC does not have cases for a quality measure. We understand that a measure 

may not be applicable to the services furnished 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 and denominators on Medicare Part B claim 

forms to submit quality data. We intend to provide education and outreach on data 
CMS-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 proposals to assess the completeness of 

reporting by comparing the number of claims meeting measure specifications that contain 

the appropriate QDCs with the number of claims that would meet measure specifications, 

but did not have the appropriate QDCs on the submitted claims. We will be using public 

comments we received that addressed this issue in the development 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 received, 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 measures 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 QDCs with the number of claims that would 
CMS-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 data 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 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 finalized 

measures. 

b. Data Submission Deadlines for the Surgical 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 reporting procedures with NHSN procedures 

currently used by healthcare providers 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 in 
CMS-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 public comments on these proposals. We did 

not receive any comments specifically on the proposed timeframes. However, as 

discussed above, we are not finalizing 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 Rural Provider Exceptions to the Physician 

Self-Referral Prohibition: Exception for Expansion of Facility Capacity; and 

Changes to Provider Agreement Regulations 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 with which the physician (or an immediate 

family member) has a financial relationship (ownership or compensation), unless an 

exception applies; and (2) prohibits the entity from filing claims 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 create regulatory exceptions that pose no risk of program or 

patient abuse. 

 Section 1877(d) of the Act sets forth additional 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 providers. In order for an entity to qualify for 

the exception, the DHS must be furnished in a rural area (as defined 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 rural area. Section 1877(d)(3) of the Act provides an exception, 

known as the “whole hospital” exception, for ownership or investment interests in a 
CMS-1525-FC 1318 

hospital located outside of Puerto Rico, provided that the referring physician is 

authorized to perform services at the hospital and the ownership or investment interest is 

in the hospital itself (and not merely 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 owner 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 hospital. 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 period (75 FR 71800). In 42 CFR 411.362, we 

implemented most of the requirements of section 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 this 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 notification 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 provider 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 establish and implement an exception process to the 

prohibition on expansion of facility capacity. 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 regulations 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 process 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 same 
CMS-1525-FC 1320 

2-year frequency limit on high Medicaid facilities (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 individuals 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 “application,” we use the term “request.” 

 Because section 1877(i)(3)(D) of the Act provides that any increase in the number 

of operating rooms, procedure rooms, and beds 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 campus 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 section XV.C.4. of the proposed rule and this 

final rule with comment period, we discuss our proposal for publishing 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 Act, 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 exception 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 Affordable 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 request 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 data 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 supportive of CMS’ overall approach to 

the exception process. One commenter contended that the proposed rule honors the 

purpose and intent of the Affordable Care Act’s elimination of the whole hospital 
CMS-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 hospitals or the inpatient Medicaid admissions 

criterion for high Medicaid facilities. CMS currently considers 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. Therefore, 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 HCRIS 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 standardized 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 Service Areas” and the 24-kilometer radius around a hospital 

in determining whether a hospital has a legitimate need to increase its number of 
CMS-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 considered in the exception process. 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 statutory directives, and, therefore, we decline to adopt it. 

2. Applicable Hospital 

 Below we separately discuss each of the statutory criteria that a hospital must 

satisfy to qualify as an “applicable hospital.” In the CY 2012 OPPS/ASC proposed rule 

(76 FR 42350), we proposed the processes by which 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, the average bed capacity per State, the 

national average bed capacity, and the average bed occupancy per State on the CMS Web 

site at: http://www.cms.gov/physicianselfreferral/85_physician_owned_hospitals.asp. 

We stated that hospitals could access these 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 the 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 accurate 
CMS-1525-FC 1324 

determinations as to whether a hospital satisfies the relevant criteria. We received the 

following comment regarding the requirement that hospitals must use data maintained 

within HCRIS to demonstrate satisfaction of the eligibility criteria. 

Comment: One commenter recommended that CMS permit applicable hospitals 

to use State agency-maintained data to demonstrate that they meet the eligibility criteria 

concerning inpatient Medicaid admissions, bed capacity, and bed occupancy. The 

commenter asserted that State agency-maintained 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 within HCRIS. We believe this will result in 

the use of uniform and consistent data, which will minimize inconsistent application of 

the eligibility criteria. 

a. Percentage Increase in Population 

 Section 1877(i)(3)(E)(i) of the Act provides that an applicable hospital must be 

located in a county in which the percentage increase in the population 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 Census as a county equivalent area, such as an 
CMS-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” refers 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 estimates that are current as of the date that a hospital submits its 

request for an exception. We proposed that a hospital should 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 recent 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 submits 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 review a request based on the population 

estimates available as of the date that a hospital submits its request even if the Bureau of 

the Census updates its estimates after the hospital submits its request and prior to our 
CMS-1525-FC 1326 

decision. We received the following comment regarding the population growth criterion 

for applicable hospitals. 

 Comment: Two commenters supported the proposal 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 commenters’ 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 total 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 calculate inpatient admissions using filed 

hospital cost report discharge data. We proposed that, in calculating the hospital’s annual 

percent of total Medicaid inpatient admissions, the hospital should divide the number of 

discharges for the year that are paid for under 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 could be used to provide an accurate estimate of the annual 

percent of total inpatient Medicaid admissions for the applicable hospital and for all 

hospitals in the same county. 
CMS-1525-FC 1327 

 We did not receive any public comments on our proposal. Therefore, we are 

finalizing our proposal, without modification, to require hospitals 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 admissions 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 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 should consider in evaluating a request for an exception. 

 We proposed at new § 411.362(c)(2)(ii) that the hospital would estimate its 

annual percentage of total inpatient admissions under Medicaid. The hospital would 

reference its own filed cost reports 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 percentages of inpatient admissions under Medicaid 

for each county. 
CMS-1525-FC 1328 

 Comment: One commenter contended that CMS exceeded its statutory authority 

in proposing that applicable hospitals must satisfy the eligibility criteria concerning 

inpatient Medicaid admissions, bed capacity, and 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 requirement 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 was 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 hospital and would unreasonably delay a hospital’s 

ability to qualify as an “applicable hospital.” The commenter recommended that CMS 

allow applicable hospitals to satisfy the inpatient admission, bed capacity, and bed 

occupancy criteria using data from any 1 of the last 3 most recent fiscal years prior to a 
CMS-1525-FC 1329 

facility capacity expansion request, which would allow hospitals to apply for an 

exception to the capacity restriction 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-growth markets with rapidly changing populations, 

and, therefore, would be incapable of identifying 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 counties with rapidly changing populations. 

 Response: We are not persuaded to adopt the first commenter’s proposal. We 

believe that allowing hospitals to use data from any 1 of the last 3 most recent years may 

result in inconsistent application of the eligibility criteria and the approval of an 

expansion request based on anomalous data. However, we have reconsidered our 

proposal to require hospitals to satisfy eligibility 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. Under this modification, a hospital’s eligibility 

for an exception to the prohibition against facility 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 criteria, together with the requirement to satisfy a 5-year 

population growth criterion, is sufficient to identify those hospitals with a legitimate need 

to expand capacity without risking the approval of exception requests based on aberrant 

data. In addition, we believe that requiring applicable hospitals to perform calculations 
CMS-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 demonstrating how the data can be weighted. Without 

further detail, we are unable to adopt the commenter’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 compliance 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 hospital may access these data on the CMS Web site 

at: http://www.cms.gov/physicianselfreferral/85_physician_owned_hospitals.asp. If the 

hospital filed its own cost report for the respective year and satisfies the criteria to qualify 

as an applicable hospital, the hospital may submit a request starting on February 1, 2012. 

 Comment: In the proposed rule (76 FR 42351 and 42352), CMS proposed that 

estimates of inpatient Medicaid admissions would be based on filed hospital cost report 

discharge data. In completing the hospital cost report, hospitals report the number of 

discharges for whom Medicaid is the primary payer. One commenter recommended that, 

to estimate the annual percent of total inpatient 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 commenter. The statute does not require 

Medicaid data to be considered as a whole. In addition, hospitals do not submit discharge 
CMS-1525-FC 1331 

data in the manner recommended by the commenter, and therefore such data are not 

readily available for use in the exception process. 

 After consideration of the public comments we received, we are finalizing at 

§ 411.362(c)(2)(ii) the Medicaid inpatient admission criterion for applicable hospitals. 

As noted above, the final regulatory language has been modified 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 beneficiaries of Federal health care programs and does not permit 

physicians practicing at the hospital 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 the State average bed capacity must be less 

than the national average bed capacity for each of the 3 most recent fiscal years for which 
CMS-1525-FC 1332 

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 need by the 

hospital to increase its number of operating rooms, procedure rooms, and beds 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. of this final rule with comment 

period, we are modifying the proposed regulatory 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 use filed hospital cost reporting data to 

determine State and national average bed capacities. 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 based on the data available as of the date a 

hospital submits its request. We discuss below the significant points raised by 

commenters to our proposal. 

 Comment: One commenter recommended that 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 obligated to follow the statutory directive. 

Therefore, we are not adopting the commenter’s recommendation to consider bed 

capacity at the county level. 
CMS-1525-FC 1333 

 Comment: One commenter asserted that the proposed 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 support for the proposed eligibility 

criteria for applicable hospitals. We believe that our modified exception process closely 

mirrors the statute and will provide sufficient flexibility to allow hospitals in areas with a 

low bed capacity and high bed occupancy to be granted an exception. 

 After consideration of the public comments we received, 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 provides that an applicable hospital means a 

hospital that has an average bed occupancy rate that is greater than the average bed 

occupancy rate in the State in which the hospital is located. The statute does not specify 

the time period over which the hospital’s average 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 greater than the State average bed occupancy 

rate for each of the 3 most recent fiscal years 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 need by the hospital to increase the number of 
CMS-1525-FC 1334 

its operating rooms, procedure rooms, and beds 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 with comment period, we have modified this 

proposal and are requiring applicable hospitals to satisfy the bed occupancy criterion 

during only the most recent fiscal year for which data are available. 

 We proposed at new § 411.362(c)(2)(v) that the hospital use filed hospital cost 

reporting data to calculate its own average bed occupancy rate. We stated that we plan to 

issue guidance explaining how the hospital can calculate its bed occupancy rate. The 

guidance would also explain how we will determine 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 finalizing at § 411.362(c)(2)(v) the requirement that an 

applicable hospital must have an average bed 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 that a hospital must 

satisfy to qualify as a “high Medicaid facility.” In the CY 2012 OPPS/ASC proposed 
CMS-1525-FC 1335 

rule (76 FR 42351), we proposed the processes by which a hospital can determine 

whether it satisfies each criterion. The proposed data requirements 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 high 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 proposed 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 expressed 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 county. We are obligated to follow this statutory 

directive. Also, we do not believe that the requirement reduces access to quality care. 

Therefore, we are not making 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) without 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 the 3 most recent years for which data are 

available, has an annual percent of total inpatient admissions under Medicaid that is 
CMS-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 the hospital is located. We proposed to 

incorporate this requirement at new § 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 under Medicaid for each of the 3 most recent 

fiscal years for which data are available. We also proposed that the hospital estimate the 

annual percentage of such admissions for all other hospitals located in the county in 

which the hospital is located for each of 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 that the hospital submits its request. 

We proposed to require the applicant hospital to use filed hospital cost reporting 

discharge data as a proxy for inpatient admissions under Medicaid. 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 other hospitals located in the county in which 

the hospital is located on the CMS Web site at: 

http://www.cms.gov/physicianselfreferral/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 would be based on filed hospital cost report 

discharge data. In completing the hospital cost report, hospitals report the number of 
CMS-1525-FC 1337 

discharges for whom Medicaid is the primary payer. One commenter recommended that, 

to estimate the annual percent of total inpatient 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 commenter. The statute does not require 

Medicaid data to be considered as a whole. In addition, hospitals do not submit discharge 

data in the manner recommended by the commenter, 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 statement refers to the inpatient Medicaid 

admissions criteria for high Medicaid facilities. We are unsure of the exact position 

taken by the commenter as the commenter did 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 further describes the process for hospitals to estimate inpatient 

admissions under Medicaid. 

 After consideration of the public comment 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 beneficiaries of Federal health care programs and does not 

permit physicians practicing at the hospital to discriminate against such beneficiaries. 
CMS-1525-FC 1338 

We proposed to incorporate this requirement 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 include: (i) the name and address, National 

Provider Identification number(s) (NPI), Tax Identification Number(s) (TIN), and CMS 

Certification Number(s) (CCN) of the hospital; (ii) the county 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 high 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 against 
CMS-1525-FC 1339 

beneficiaries of Federal health care programs and does not permit physicians practicing at 

the hospital to discriminate against such beneficiaries. 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 calculation 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 authorized 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 submit its request electronically. If a hospital 

submits its request electronically, the hospital must also submit an original, 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 application process, as necessary, in response 
CMS-1525-FC 1340 

to difficulties in meeting its requirements. The commenter asserted the proposed 

exception process requires complex calculations 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 whether the hospital is seeking an exception as 

an applicable hospital or high Medicaid facility, 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 addition, 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 consider changes after we 

have more experience with the process. 

 After consideration of the public comments we received, we are finalizing the 

proposed procedure for submitting a request under new § 411.362(c)(4) without 

modification. 
CMS-1525-FC 1341 

5. Community Input 

 Section 1877(i)(3)(A)(ii) of the Act provides 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 request 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 input 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 requesting an exception. The notice should be 

accessible to the public and should remain posted 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 requesting 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/downloads/MailingLists_FactSheet.pdf. In addition, 

we proposed that we will publish a notice of the hospital’s request in the Federal 

Register. We proposed at new § 411.362(c)(5) to allow individuals and entities in the 
CMS-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 criteria 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 during 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 comments. We stated that we would consider 

the request complete at the end of the 30-day period provided for the hospital’s rebuttal, 

regardless of whether the hospital submits additional information or documentation. We 

also stated that we reserve the right to perform our own calculations based on a review of 

the material submitted and of information generally available to CMS. 

 We address below the comments received in response to our proposal. 

 Comment: Two commenters asserted that the 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 Medicaid recipients in high growth areas. 

 Response: We are not adopting the commenter’s suggested deadline. There are 

many factors external to CMS that affect publication dates in the Federal Register. 

However, we will make every effort to expedite our process for sending a notice of an 

exception request to the Office of the 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 that 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 period, 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 concern that the proposed methods for 

notifying other area hospitals and the public of an exception request are not adequate. 
CMS-1525-FC 1344 

The commenter stated that hospitals, employers, 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 application for an exception has been made. In 

addition to the proposed methods of notifications 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 the hospital is located in a rural area. 

Response: We disagree with the commenter’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 applicable hospital or high Medicaid 

facility be allowed an opportunity to provide input on the hospital’s request for an 

exception to the prohibition against facility expansion. In the proposed rule, we proposed 

to add new § 411.362(c)(5) to specify that a hospital is required to disclose on any public 

Web site for the hospital that it is requesting 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 CMS 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 for individuals and entities in the community 

to provide input. Moreover, we are not persuaded that the additional notice advocated by 

the commenter would be beneficial. We believe that written notice would be overly 

burdensome for hospitals requesting an exception and may not effectively provide notice 

to all interested individuals and entities in the hospital’s community. For example, if a 
CMS-1525-FC 1345 

nonrural hospital is located near the perimeter of its MSA, there 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 radius in some rural areas would include any interested 

hospitals. In summary, we do not believe that the commenter’s suggested methods of 

providing written notice to hospitals will inform 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 which the hospital is located. The commenter 

proposed that the notice should provide (1) the location where copies of the expansion 

request are available, (2) the timeframe for submitting comments, and (3) the name of the 

designated representative who is appointed to receive the comments. 

Response: As stated in the preceding response, we do not believe additional 

notice is necessary. We also are concerned that the commenter’s proposal would be 

costly and burdensome for the hospital requesting an exception. 

 After consideration of the 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 provides that a hospital granted an exception 

from the Secretary may increase the number of operating rooms, procedure rooms, and 
CMS-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 proposed to incorporate this 

definition, with the clarification that it also applies to high Medicaid facilities, at new 

§ 411.362(a) of the regulations. 

Section 1877(i)(3)(C)(i) of the Act provides that if a hospital previously has been 

granted an exception by the Secretary, the hospital may increase the number of its 

operating rooms, procedure rooms, and licensed beds above the number of such rooms 

and beds for which the hospital is licensed after application of the most recent increase 

under such an exception. 

a. Amount of Permitted Increase 

 Section 1877(i)(3)(C)(ii) of the Act provides 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 result in the number of 

operating rooms, procedure rooms, and beds for which the applicable hospital is licensed 

exceeding 200 percent of the baseline number of operating rooms, procedure rooms, and 

beds of the applicable hospital. 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 sections 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 Medicaid facility may request an exception. 

We invited public comment on whether the proposed 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 where a sufficient need 

for access to high Medicaid facilities is demonstrated. We note that, although the statute 

provides that an applicable hospital may request an exception up to once every 2 years, 

we proposed to apply the same provision to high Medicaid facilities. We believe that 

providing a high Medicaid facility 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 proposal regarding the amount of 

permitted increase. 

Response: We appreciate the commenters’ support. Upon further review, 

however, we have concluded that the language of our proposed § 411.362(c)(6)(i) is 

inconsistent with the limitation set forth in section 1877(i)(3)(C)(ii) of the Act. Proposed 

§ 411.362(c)(6)(i) provides that “[a] permitted increase under this section may not exceed 

200 percent of the hospital’s baseline number of operating rooms, 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, procedure 
CMS-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 closely 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 operating rooms, procedure rooms, and beds. 

Comment: One commenter supported the proposal to apply the same limit on 

total growth to both applicable hospitals and high Medicaid facilities. The commenter 

asserted that applying parallel requirements to both applicable hospitals and high 

Medicaid facilities would result in an efficient and consistent process. 

 Response: We agree with the commenter regarding 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 for 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 regulations. We proposed to define the term “main campus” as 

the term “campus” is defined at § 413.65(a)(2). Using our rulemaking authority under 
CMS-1525-FC 1349 

sections 1871 and 1877(i)(3)(A)(i) of the Act, we proposed that, with respect to high 

Medicaid facilities, the limitation on expansion of hospital capacity, as set forth at section 

1877(i)(1)(B) of the Act, similarly 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 hospitals and high Medicaid 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 expansion 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 decisions, 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 final 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 the 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 affected 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 approved 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 commenter’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 application 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 exception as an applicable hospital. We are 

obligated to grant exceptions only to those hospitals that meet the statutory criteria. 

 After consideration of the public comment 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 process, 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 whether a hospital qualifies for an exception is 

not reviewable. 

We did not receive any public comments regarding the limitation of review. 

Therefore, we are finalizing 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 incorporate 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 finalizing our proposed new § 411.362(c)(1) without modification. 

D. Changes Related to Provider Agreement Regulations on Patient Notification 

Requirements

Section 1866 of the Act states that a provider 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 applicable 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 rulemaking 
CMS-1525-FC 1352 

authority under sections 1102 and 1871 of the Act) to impose certain additional 

requirements on physician-owned hospitals as part 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 beginning of their inpatient hospital stay or 

outpatient service if a doctor of medicine or osteopathy is not present in the hospital 

24 hours a day, 7 days a week; and (2) describe 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 hospital 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 who receive services in these 

institutions. The notice requirements are intended to permit individuals 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 these patient safety requirements to hospital 

inpatients and outpatients. We continue to believe that both hospital inpatients and 

outpatients should receive these disclosures prior to admission. However, after hospitals 
CMS-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 safety requirements related to patient notification of physician 

presence, and in the proposed rule, we proposed 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 like that of hospital inpatients. Under this 

proposal, we proposed to require disclosures only for those outpatients receiving 

observation services, surgery, or any other procedure requiring anesthesia. We proposed 

that signage would be required for hospital outpatients in the emergency department, as 

we recognize the merit of finding a less cumbersome manner to provide the required 

notice in this setting. Other 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 believe the safety of these particular hospital 

outpatients would not be compromised in any 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 observation services, surgery, or services 
CMS-1525-FC 1354 

involving anesthesia, must receive such written notice. We stated 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 emergency 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 planned or unplanned stay or visit begins. We 

proposed to add a provision to state that an unplanned stay or visit begins at the earliest 

point at which the patient presents to the hospital. The current regulation describes when 

a stay or visit begins by referring to the time when a package of information is provided 

regarding scheduled preadmission testing and registration for a planned hospital 

admission or outpatient service. However, 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 (existing paragraph 

(w)(2) would be redesignated as discussed below) that would require a hospital that is a 

main provider that has one or more remote locations of the hospital or satellites, to make 

the determination of whether notice is required separately at each location providing 

inpatient services. We proposed to use the terms “main provider,” “remote location of a 

hospital,” and “satellite” as these terms are defined at § 413.65(a)(2), § 412.22(h), or 
CMS-1525-FC 1355 

§ 412.25(e), as applicable. We proposed that notice would be required 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 proposed 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 existing paragraph (w)(2), which requires the 

hospital to receive a signed acknowledgment from 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 furnished to the patient, as paragraph (w)(4) and to 

revise the redesignated paragraph. We proposed to add a provision to state that, before 

providing an outpatient service to an outpatient for whom a notice is required, the 

hospital must receive the signed acknowledgment. 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 medicine 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 individuals 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 meet 
CMS-1525-FC 1356 

the needs of any patient with an emergency medical condition, as that term is defined in 

§ 489.24(b), at a time when no doctor of medicine or osteopathy is present within the 

hospital. In the event that there is a decision 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 supported the proposal to limit the types of 

outpatient situations in which notice of physician availability is required. Several of 

these commenters added that, from the beginning, 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 any notice to patients concerning the 

onsite availability of a doctor of medicine or osteopathy. One commenter indicated the 

requirement would impose costs and potentially alarm patients 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 reduce costs to hospitals and critical 

access hospitals because it would require significantly fewer notices than are required 

under the current regulation, which requires notice to all outpatients in affected hospitals 

and CAHs. In the years since the current regulation first took effect, we have not 
CMS-1525-FC 1357 

received any feedback of patients being unduly alarmed as a result of receiving notice. 

While there may be some individual circumstances in which 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 elimination of the notice requirement implicit in the 

commenters’ statements would not be appropriate. As we stated when this provision was 

first adopted, we believe consumers have certain 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 decisions 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 doctor of medicine or osteopathy on site. 

Therefore, it is important to ensure that patients receive notice when a doctor of medicine 

or osteopathy is not always on site, and how the hospital or CAH handles patient 

emergencies when a doctor of medicine or osteopathy is not present. 

Comment: One commenter described the proposal as requiring all 

physician-owned hospitals and CAHs to furnish outpatients receiving observation 

services, surgery or any other 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 provision 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 certain 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 treatment. The commenter noted that CMS 

stated in the proposal that the safety of “these particular outpatients” [that is, those who 

would not receive notice under the 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, including those that are physician-owned. 

However, we believe the commenter is referring to the fact that there is an additional 

regulation at §411.362(b)(5)(i) that applies only 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 osteopathy on site 24 hours a day, 7 

days a week, to provide notice to all inpatients and all outpatients. 

Section 411.362(b)(5)(i) was adopted in order to implement provisions of section 6001(a) 

of the Affordable Care Act. That provision pertains specifically to physician-owned 

hospitals and governs the notice to be provided 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 includes the presence of residents. 
CMS-1525-FC 1359 

Response: Residents who are doctors of medicine or osteopathy would be 

included when determining whether a hospital 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 outpatient who is not receiving observation 

services, surgery, or other procedure requiring anesthesia, and who experiences a change 

in medical condition which requires immediate 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 surgery 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 emergency department as an inpatient, the 

individualized written disclosure and acknowledgment 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 patient’s condition and need to initiate treatment immediately 

may result in some necessary delay in completion of the disclosure and acknowledgment 

requirements. 

 After consideration of the public comments we received, we are finalizing the 

proposed revisions to § 489.20(w), without modification, relating to patient notification 
CMS-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 only those outpatients who receive observation 

services, surgery, or services involving anesthesia 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) requires a hospital that is a main provider, that has one or 

more remote locations of the hospital or satellites, to make the determination of whether 

notice is required separately at each location providing inpatient services. New 

paragraph (w)(3) includes provisions (moved from existing paragraph (w)(1)) governing 

the content of the written notice. Paragraph (w)(4) requires the hospital to receive a 

signed acknowledgement from 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 furnished to the patient (previously language in existing paragraph 

(w)(2); and states that, before providing an outpatient service to an outpatient for whom a 

notice is required, the hospital must receive the signed acknowledgement. New 

paragraph (w)(5) requires that every hospital that has a dedicated emergency department 

in which a doctor of medicine 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 individuals 

entering the dedicated emergency room and sets forth the required statements for the 

notice. 
CMS-1525-FC 1361 

XVI. Additional Hospital Value-Based 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 establish a hospital inpatient value-based 

purchasing program under which value-based incentive payments are made in a fiscal 

year to hospitals meeting performance standards established for a performance period for 

such fiscal year. Both the performance standards and the performance period for a fiscal 

year are to be established by the Secretary. 

Section 1886(o)(1)(B) of the Act directs the Secretary to begin making 

value-based incentive payments under the Hospital Inpatient Value-Based Purchasing 

Program (Hospital VBP Program) to hospitals for discharges occurring on or after 

October 1, 2012. These incentive payments 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 section 1886(d)(1)(B) of the 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 section 1886(b)(3)(B)(viii)(I) of the Act (the 

Hospital IQR Program) for such fiscal year; (2) a hospital for which, during the 
CMS-1525-FC 1362 

performance period for the fiscal year, the 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 determined by the Secretary) of measures for the 

performance period for the fiscal year involved, 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 Inpatient VBP Program Final Rule 

We previously issued the Hospital Inpatient 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 2007 report we submitted to Congress, entitled 

“Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing 

Program.” This report is available on our Web site 

(https://www.cms.gov/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUB

MITTED2007.pdf) and takes into account input from stakeholders and other interested 

parties. 

As described more fully in the Hospital 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, categorized 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 of 
CMS-1525-FC 1363 

care domain. We adopted a 3-quarter performance 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 assessing 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 (for the FY 2013 Hospital VBP Program, the 

weights will be clinical process of care = 70 percent, 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 details of the FY 2013 Hospital VBP Program 

(76 FR 26490 through 26547). 

For FY 2014, we adopted 13 outcome measures comprised of 3 mortality 

measures, 2 AHRQ composite measures, and 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 2012 
CMS-1525-FC 1364 

IPPS/LTCH Final Rule, we also adopted a new Medicare Spending Per Beneficiary 

Measure for the FY 2014 Hospital Inpatient VBP 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 Program 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 beneficiary measure is not statutorily compliant because it has not 

been properly specified and data on the measure 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 measure to be included in the Hospital 

VBP Program, the statute requires that the measure be specified 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 inclusion in the Hospital VBP Program. Citing their 

interpretation of the requirements 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 could necessitate delaying their introduction 

into the program until after FY 2014. Commenters also argued that the proposed 

performance periods for the HAC and AHRQ measures 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 and, therefore, we interpreted the requirements 

under section 1886(o) of the Act in a way that enabled us to move swiftly. We also took 

into account comments submitted in response 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 prior 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 Medicare 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 from commenters that hospitals would 

benefit from seeing publicly posted performance data on measures before we include 

those measures in the Hospital VBP Program and make them part of the basis for 
CMS-1525-FC 1366 

value-based incentive payments, and note that 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 that we previously 

articulated. In light of these comments, we intend to publicly release further details 

related to the specifications for this measure and, in doing so, we will ensure that 

interested parties have an opportunity to comment on them. We also note that in light of 

comments received, we are working expeditiously to appropriately post Medicare 

spending per beneficiary measure data on Hospital Compare. 

In addition, we appreciate the commenters’ concern that the proposed 7-month 

performance period for the HAC and AHRQ measures 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 period 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 prior 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 process of posting hospital data 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 Medicare 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 prior to these dates. Because 

there will not be enough time to both publicly post the measure data 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 measures will not be included in the FY 2014 

Hospital VBP Program. We note that our decision to suspend the effective dates of the 

HAC, AHRQ and Medicare spending 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 suspend the effective dates of the HAC, AHRQ 

and Medicare spending per beneficiary measures is a logical outgrowth of the comments 

we received in response to the CY 2012 OPPS/ASC proposed rule, a reasoned response 

to the concerns raised by the public in those 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 rest 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 implement 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 requirements that would, in conjunction with the requirements we 

have previously adopted, incorporate these questioned measures into the FY 2014 

program. And, because we do not interpret section 1886(o) of the Act to authorize the 

Secretary to include “placeholder” measures in the Hospital 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 have good cause to waive notice and an 

opportunity to comment under the Administrative Procedure Act with 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 relating to the HAC, AHRQ and Medicare 

spending per beneficiary measures at this time. 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 the 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 Hospital VBP Program is set forth in 

section 1886(o) of the Act, which we believe represents the culmination of substantial 

research and stakeholder outreach 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 purchasing 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 scoring methodology for the Hospital VBP Program 

provides strong incentives to hospitals to provide high quality care and to improve their 

performance over time. 

Comment: Some commenters suggested technical changes to the HF-1 

(Discharge Instructions) quality measure to improve providers’ compliance. Commenters 

argued that the measure should capture discharge “orders,” and not the discharge 

“summary,” to avoid unintentionally penalizing hospitals when doctors change 
CMS-1525-FC 1370 

medication orders after the summary is created. Commenters urged 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 difficulties hospitals face in developing 

streamlined, effective discharge processes, we believe hospitals should be able to align 

discharge orders and summaries without further modifications to this measure. 

 Comment: Some commenters reiterated their opposition to the use of HAC 

measures in the Hospital VBP Program, arguing 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 suspending the effective date of these 

measures for the Hospital VBP Program. We will take these comments into 

consideration as we develop our future policies. 

Comment: Some commenters called on CMS to thoroughly test and monitor 

measures for continued validity. 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 that 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 of 
CMS-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 appropriate 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 instance. 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 the 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 the eight HAC measures for which we are 

suspending the effective date because we believe the HAC measures capture critical 

patient safety data that are strong indicators of the quality of hospital care. We do not 

believe we should create exceptions for other measures at this time. We also note that we 

are not finalizing our proposed HAC scoring methodology at this time for the reasons 

discussed above. 

Comment: Some commenters argued that the Hospital VBP Program 

inappropriately captures mortality data twice in the outcome domain, through both the 
CMS-1525-FC 1372 

30-day mortality measures and the AHRQ composite measures. Commenters argued that 

such double-counting will harm tertiary care hospitals 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 patient safety and quality data in the outcome 

domain. We note that the two sets of mortality 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 measures also do not count patients receiving 

comfort care only or enrolled in hospice care. 

As noted above, we are suspending the effective 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 expressed support for the use of the Medicare 

spending per beneficiary measure, arguing that CMS has met the statutory requirements 

for public display and suggesting that hospitals 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 efficiency 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 spending per beneficiary is the only measure 

that Congress specifically included in the Affordable Care Act, mandating its inclusion in 

the Hospital VBP Program. 

Response: We agree that measurement of efficiency is an important goal for the 

Medicare program, and we thank the commenters for their support. However, for the 

reasons explained above, we are suspending the effective date of the 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 their views regarding the Medicare 

spending per beneficiary measure, including the Medicare payments to be included, 

adjustments to be made, length of the episode, period of performance, and measure 

endorsement. Some commenters also argued that the Medicare spending per beneficiary 

measure's performance standards do not sufficiently consider the significant variation in 

health care costs per beneficiary throughout the country. Other commenters suggested 

that CMS develop condition-specific spending per beneficiary measures in order to 

appropriately capture each hospital's service mix. Several commenters stated that the 

measure should be adjusted for socioeconomic status and hospital case mix. 

Response: We appreciate these comments and refer commenters to the FY 2012 

IPPS/LTCH PPS final rule where we finalized the Medicare spending 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 the effective date of this measure in the 

Hospital VBP Program for FY 2014. Therefore, we will take these comments into 

consideration as we develop future proposals 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 retain 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 information 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 Hospital VBP Program because it assesses a 

practice that reduces Catheter Associated Urinary Tract Infection (CAUTI), and improves 

patient safety, which is highlighted as one of the Institute of Medicine’s six quality aims 

along with effectiveness, patient-centeredness, 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 the 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/initiatives/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 hospitals. Therefore, 

we believe it would be a meaningful measure 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 maintenance. We will continue to monitor 

these measures to ensure that they reliably measure hospital quality, for example, 

ensuring that, among other things, these measures are not “topped-out,” and their 

measurement criteria remain endorsed by NQF and/or are otherwise 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 support 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 alternative measures as replacements for 

the SCIP clinical process measures in the Hospital VBP Program, such as surgical 
CMS-1525-FC 1376 

outcomes measures. Commenters argued the alternative measures are risk-adjusted and 

better capture high quality surgeries than the current SCIP measures. Other commenters 

suggested that CMS consider adopting additional 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 Experience 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 Therapy 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 

Incision 
CMS-1525-FC 1377 

Clinical Process of Care, Patient Experience of Care and Outcome Measures for the 

FY 2014 Hospital VBP Program 

SCIP-Inf-2 Prophylactic Antibiotic Selection for Surgical Patients 

SCIP-Inf-3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery 

End Time 

SCIP-Inf-4 Cardiac Surgery Patients with 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 Blocker Prior to Arrival 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 (HF) 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 Doctors, 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 hospital for the performance period for the fiscal 

year. Section 1886(o)(1)(C)(ii)(IV) 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 apply to the hospital for the performance period 

for the fiscal year. In the Hospital Inpatient VBP Program Final Rule, we adopted 

13 outcome measures for the FY 2014 Hospital 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 measures necessary for the outcome domain to be included 

in the Total Performance Score. 

Under section 1886(o)(1)(C)(iii) of the Act, in determining the minimum number 

of reported measures and cases under sections 1886(o)(1)(C)(ii)(III) and (IV), the 

Secretary must conduct an independent analysis of what minimum numbers would be 

appropriate. As described in the Hospital Inpatient VBP Final Rule (76 FR 26528 

through 26529), to fulfill this requirement, we commissioned Brandeis University to 

perform an independent analysis that examined technical issues concerning the minimum 

number of cases per measure and the minimum number of measures per hospital for 

clinical process of care measures needed to derive reliable domain scores. Based on that 
CMS-1525-FC 1379 

analysis, we finalized our policy to exclude any clinical process of care measures for 

which a hospital reported fewer than 10 cases, 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 performance period (76 FR 26529 through 26531). 

To determine the minimum numbers of measures and cases that should be 

required for the outcome domain, we again commissioned Brandeis University to 

perform an independent analysis. This analysis 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 domain, different minimum numbers of cases and 

measures were tested to determine the combination 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 minimum number of cases a hospital would need 

to report for each individual outcome measure. 

b. Minimum Number of Cases for Mortality 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 score on an AHRQ composite measure, a hospital would need to 
CMS-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, Mathematica 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 hospital 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 based on the presence or absence of HAC 

occurrences, regardless of the number of Medicare cases a hospital treats, as long as the 

hospital submits at least one Medicare claim 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 seven of the eight HAC measures. 

c. Minimum Numbers of Measures for Outcome Domain 

Brandeis researchers also analyzed the reliability of the outcome domain scores 

for hospitals depending upon the total number of outcome measures on which they 

reported. The analysis showed that the data provide a meaningful and sufficiently 

reliable indication of outcomes for hospitals in the outcome domain as long as the 
CMS-1525-FC 1381 

hospitals submit the minimum number of cases (discussed above) on each of 11 outcome 

measures for FY 2014. Specifically, the analysis found that using at least 11 outcome 

measures per hospital provided sufficiently comparable 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, together 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 evaluated how the outcome 

domain score would be affected if a hospital reported all eight finalized HAC measures. 

However, one of these HAC measures, Foreign Object Retained After Surgery, will not 

apply to a very small subset of hospitals that do not perform surgeries. 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 believed that this proposal was consistent with 

the conclusions reached by Brandeis. In addition, from an inclusiveness standpoint, we 
CMS-1525-FC 1382 

believed that a 10 measure minimum would maximize 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 barrier 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 experience of care measures. This is because, as 

stated above, an analysis of the existing data shows that virtually all hospitals 

participating in the FY 2014 Hospital VBP Program 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 proposed 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 requirement that hospitals must report on all 

four domains (if finalized) to receive a Total 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 measures required for the various Hospital VBP 
CMS-1525-FC 1383 

Program domains, arguing that they could not provide informed 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, including 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 the 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 too low. Commenters argued that these 

proposals will result in inaccurate performance measurement, especially for low-volume 

hospitals. Some commenters suggested that CMS apply the AHRQ composite measures’ 

minimum number of cases to each component indicator. 

Response: We thank commenters for their 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 Inpatient VBP Program Final Rule 

(76 FR 26528), we believe the most important factor in setting minimum case and 

measure thresholds for the Hospital VBP Program is to determine a combination of 
CMS-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 standards where we believe them to be necessary 

to accommodate different types of measures and to be as inclusive as possible. We 

believe that our proposals appropriately reflect the different 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 should be allowed to participate 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 needed to report a minimum of 10 cases in order 

to receive a reliable score on the mortality measures. We note that this minimum number 

of cases is also consistent with the minimum number of cases required 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 the outcome domain and in the calculation of 

the Total Performance Score, while enabling hospital inclusion and providing consistency 

with the case minimums in the clinical process of care domain. 

Comment: Some commenters noted 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 required for a hospital to be eligible for the 

domain. 
CMS-1525-FC 1385 

Response: We thank the commenters for this observation, and agree 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 outcome domain, we need to re-evaluate the 

minimum number of measures necessary for the domain. 

In conjunction with Brandeis, we reexamined 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 indicated that a large 

number of these hospitals (2,548) would receive 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 because smaller hospitals typically do not treat 

a sufficient number of AMI cases to reach the minimum threshold of ten cases needed to 

generate useful AMI mortality values. If the AMI mortality measure were excluded from 

the minimum measure threshold, approximately 3,000 hospitals would receive outcome 

domain scores in the FY 2014 Hospital Inpatient VBP Program, which is approximately 

the same number of hospitals able to participate 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 mortality measures to qualify for participation will 

allow many more hospitals to be included 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 sufficient data on all three mortality measures, 

while almost all hospitals will report sufficient data on at least two of the mortality 

measures. This approach allows us to include 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 supported the proposal to require hospitals to 

report on all four proposed domains in order to receive a Total Performance Score. 

Response: We thank commenters for their support. 

As stated above, we are not finalizing 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, after considering the comments, we are 

finalizing our proposal that a hospital must report a minimum of 10cases to receive a 

score on a mortality measure, and we note that this minimum is consistent with our 

previously finalized policy regarding the minimum number of cases that a hospital must 

report in order to receive a score on a clinical process of care measure. As we stated in 

the proposed rule, this policy is consistent with the analyses performed by Brandeis and 

Mathematica (76 FR 42357). 
CMS-1525-FC 1387 

Accordingly, we are finalizing that the minimum number of measures that a 

hospital must report in order to receive a score 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 sufficient data on all three. 

Concurrently, we are finalizing our proposal 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 Baseline Periods for FY 2014 Measures 

Section 1886(o)(4) of the Act requires the Secretary to establish a performance 

period for the Hospital VBP Program for a fiscal year that begins and ends prior to the 

beginning of such fiscal year. 

a. Clinical Process of Care Domain and Patient Experience of Care 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 implementing the FY 2013 Hospital VBP Program in a 
CMS-1525-FC 1388 

timely fashion, we adopted a 3-quarter performance period for the clinical process of care 

and patient experience of care domains for the FY 2013 Hospital VBP Program. We 

have stated our intent to move to a 12-month 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 payment 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 immediately 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 proposed 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 for the proposed clinical process 

and patient experience performance periods for FY 2014. 

Response: We thank commenters for their support. 

After consideration of the public comments we received, 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 Performance 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 for the three mortality outcome measures 

currently specified under the Hospital IQR 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 VBP Program Final Rule, we stated 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 included 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 measures in the CY 2012 OPPS/ASC proposed 

rule. 

We noted that in order for the HAC and AHRQ measures to be scored for the 

FY 2014 Hospital VBP Program, the performance period for these measures would need 

to end by the fourth quarter of FY 2012 to allow us sufficient time to collect and process 

the necessary claims data. We stated that this time period needs to be longer for HAC 
CMS-1525-FC 1390 

and AHRQ measures than for clinical process and patient experience measures, which are 

based on chart-abstracted data and surveys rather than claims. Claims data require at 

least three months following a given calendar quarter to process and necessitate two 

additional months to complete measure calculation, including risk adjustment, 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 the 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 performance period would provide sufficiently 

robust values on these critical measures. 

We also stated that because we believe that a comparable period should be 

selected for the baseline data, we proposed 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 performance and baseline period 

proposals, arguing that the various performance period dates specified for the measures 

within each domain is confusing 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 performance period that applies to all of the 

Hospital VBP measures for a particular payment 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 account 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 period. We believe that all providers will work 

to track achievement and improvement across all 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, 2012 
CMS-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 section 1886(o)(3)(B) of the Act, and must 

be established and announced not later than 60 days before the beginning of the 

performance period for the fiscal year involved, as required by section 1886(o)(3)(C) of 

the Act. Achievement and improvement standards are discussed more fully in the 

Hospital Inpatient VBP Program Final Rule (76 FR 26511 through 26513). In addition, 

when establishing the performance standards, section 1886(o)(3)(D) of the Act requires 

the Secretary to consider appropriate factors, such as: (1) practical experience with the 

measures, including whether a significant proportion of hospitals failed to meet the 

performance standard during previous performance periods; (2) historical 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 Final 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 period. We also finalized the improvement 

performance standard (improvement threshold) 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 (Displayed 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 mortality measure performance standards. 
CMS-1525-FC 1394 

Comment: Some commenters argued 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’ assertion. 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 topped-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 coefficient of variation would indicate that the 

distribution of individual hospital scores is clustered tightly around the mean value, 

which would suggest that the measure is not useful to draw distinctions 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 Patient 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 the clinical process of care and patient 

experience of care measures for the FY 2014 Hospital VBP Program. To set 

achievement and improvement performance standards for these proposed measures for 
CMS-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 approach 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 (50th

percentile) during the proposed baseline period of April 1, 2010 through 

December 31, 2010. We also proposed to set the improvement performance standard 

(improvement threshold) for each of the proposed 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 proposed to set each benchmark for each 

measure as the mean of the top decile performance of applicable hospitals during the 

proposed baseline period. We invited 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 (0th percentile) for the eight HCAHPS 

dimensions included in the FY 2013 Hospital 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 are not under the control of the hospital that 

may affect patient reports of hospital experiences. The goal of adjusting for patient-mix 

is to estimate how different hospitals would 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 patients’ HCAHPS ratings that also vary 

meaningfully across hospitals (O’Malley et al., 2005). The 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 discharge and survey completion), service line 

by linear age interactions, and primary language other than English. 

Initially the model also included admission through an emergency room, but 

because admission through an emergency room is no longer available on the UB–92 

Form, this adjustor is no longer available for the patient-mix model. We are exploring 

other options to obtain that information in the future. 

We have found that evaluations of care increase with self-rated health and age (at 

least through age 74), and decrease with educational attainment. Maternity service has 
CMS-1525-FC 1397 

generally more positive evaluations than medical and surgical services. Response order 

percentile (relative lag time) findings show that late responders tend to provide less 

positive evaluations than earlier responders. 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 widely accepted measure of a person’s overall 

health status. In general, “how would you rate your health” is the most widely used 

single self-reported health item and is used in many national health surveys. Education 

also captures important aspects 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 hospitals are not included 

in the adjustment. Controlling for geographic region (a hospital-level factor) as part of a 

patient-mix adjustment model could mask important differences in quality across the 

country. 

Comment: A few commenters were concerned 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 understand these differences to ensure that 

HCAHPS is a reliable measure. 

Response: We recognize that HCAHPS results differ by bed size and other 

hospital characteristics. However, we do not interpret these differing results to mean that 
CMS-1525-FC 1398 

the survey should be risk-adjusted for these factors. HCAHPS results also differ among 

hospitals with the same characteristics, which 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 beyond the control of a 

hospital, not for hospital characteristics that are endogenous, or within their control. 

We also believe that the HCAHPS survey 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 received, we are finalizing the 

FY 2014 clinical process of care and patient experience of care performance standards as 

proposed. We set out final achievement performance standards for the finalized FY 2014 

clinical process of care and patient experience of care measures 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 1.0000 
CMS-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 0.9989 

SCIP-Card2 Surgery Patients on a 

Beta Blocker Prior to 0.9565 1.0000 
CMS-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 Period 

SCIP-VTE1 Surgery Patients with 

Recommended Venous 

Thromboembolism 

Prophylaxis Ordered 0.9462 1.0000 

SCIP-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 standard (achievement threshold) for each 

AHRQ composite measure at the median of hospital performance (50th percentile) during 

the proposed baseline period of March 3, 2010 to September 30, 2010. We proposed to 

set the benchmark for each AHRQ composite measure at the mean of the top decile of 

hospital performance during the proposed baseline period of March 3, 2010 to September 

30, 2010. We also proposed to set the improvement performance standard (improvement 

threshold) for each of the proposed measures at each specific hospital’s performance on 

the applicable measure during the proposed baseline period of March 3, 2010 to 

September 30, 2010. 
CMS-1525-FC 1402 

We did not receive any comments on the 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 discharges from October 1, 2008 through 

June 30, 2010 (that is, they did not have any reportable HAC occurrences). In addition, 

based on the administrative data from October 1, 2008 through June 30, 2010, at least one 

half of all hospitals achieved a measure rate of 100 percent on six of the eight HAC 

measures (Foreign Object Retained After Surgery; Air Embolism; Blood Incompatibility; 

Pressure Ulcer Stages III and IV; Catheter-Associated UTI; Manifestations of Poor 

Glycemic Control). Accordingly, the achievement threshold for these measures would be 

zero if we proposed to set performance standards for each individual measure using the 

same methodology that we finalized with respect to the mortality measures. 

We believe that the HAC measures are extremely important in promoting patient 

safety, improving quality of care, and reducing costs. According to a 2010 HHS Office 

of the Inspector General report, entitled “Adverse 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 hospitalized Medicare beneficiaries experienced adverse events 

during their hospital stays. We believe that all the finalized HAC measures assess the 
CMS-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 for Medicare beneficiaries. Outcome measures, 

including HAC outcome measures, are widely regarded by the provider community as 

strongly indicative of the quality of medical care and as integral to reporting and 

improving quality and patient safety. Therefore, 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 topped-out policy would not apply to the HAC 

measures. We also proposed to treat the eight individual HAC measures as a single 

aggregate HAC score for purposes of performance scoring, and believe that this approach 

will enable us to calculate meaningful distinction among hospitals and variation in 

hospital performance on these measures. In addition, this aggregation of the scores for 

the HAC measures ensures that the HAC measures 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 performance standards based on hospital combined 

performance on seven or eight HAC measures, as applicable, during the proposed 

performance or baseline period. Because certain hospitals will report on only seven of 

the eight HAC measures, we proposed separate 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 those hospitals that report on all eight of the 

HAC measures at the median of hospital performance (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 proposed to set the achievement performance 

standard (achievement threshold) for the HAC aggregate score for those hospitals that 

report on seven of the HAC measures at the median of hospital performance (50th 

percentile) on only those seven measures for those 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 proposed to set the benchmark for 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 reporting 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 improvement 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 hospitals 
CMS-1525-FC 1405 

report on seven or eight HAC measures. Please see below 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 eight individual HAC measures. We recognized 

that all hospitals report on seven of these individual measures, and nearly all (about 95 

percent) of hospitals report all eight. However, a small number of hospitals do not report 

on the Foreign Object Removal after Surgery HAC measure. We believe that any 

numerical differences between the HAC performance 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 seven of the eight HAC measures. 

We invited public comment on the proposed methodology for setting performance 

standards for the aggregate HAC score for HAC measures finalized for the FY 2014 

Hospital VBP Program. 

Comment: Some commenters asked 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 transition from ICD-9 to 

ICD-10 for purposes of performance scoring and will provide more details in future 

rulemaking. 

Comment: Some commenters expressed concerns 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 consequences 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 aggregating the HAC measures may mislead consumers 

and suggested that CMS remove all HACs related to HAIs from the aggregated HAC 

score. Some commenters suggested that 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 commenters argued that HACs represent such rare 

events that the proposed separate performance standards for hospitals depending on 

whether they report 7 or 8 HACs could exacerbate scoring reliability problems. 

Response: As explained above, we are not finalizing any proposals related to the 

HAC measures at this time. We thank commenters 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-understood 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 confidence in the scoring methodology (76 FR 26514). 

In addition, we believe that, for simplicity and consistency of the Hospital VBP Program, 

it is important to score hospitals under the same general methodology for subsequent 

fiscal years, with appropriate 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 these measures in the FY 2014 Hospital VBP 

Program, with the changes discussed below for HAC measures. We invited public 

comment on this proposal. 

Comment: Some commenters sought clarification on the outcome domain 

calculation, specifically asking if CMS intends to weight measures 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 equally) 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 percentage 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 erroneously 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 and 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 finalized 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 performance and baseline period 

proposals, arguing that the various dates specified are confusing and impose hardships on 

hospitals' quality management staff. Commenters 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 details on those postings in future rulemaking. 

After consideration of the public comments we received, we are finalizing our 

general scoring methodology for the clinical process 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, insofar 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 using an aggregated HAC rate based on the 

unweighted average of the rates of the individual 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 seven HAC measures would apply to all 
CMS-1525-FC 1410 

hospitals, however, because all 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 perform 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 aggregate 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 aggregate score will be calculated if a hospital 

submits at least one Medicare claim during the performance period. For example, if a 

hospital submits one or more Medicare claims 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 aggregate HAC rate would then be used to assign 

points in accordance with the proposed performance standards discussed above to 

calculate an individual hospital’s aggregate 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 aggregate HAC score would be combined with the 

hospital’s score on other outcome measures to derive an outcome 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 HAC 
CMS-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 object to the proposed aggregated scoring 

methodology. Commenters argued that CMS must finalize a HAC scoring methodology 

that is statistically reliable in order to provide reliable comparisons between hospitals on 

these measures. 

Response: We thank commenters for their support. However, for the reasons 

discussed above, we are not finalizing our proposed scoring methodology with respect to 

the HAC measures at this time. We will consider 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/LTCH 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 are made. This claims review ensures that HAC data 

included on the claims are accurately reported both for the Hospital IQR Program and the 

Hospital VBP Program. In addition, we are considering proposing to adopt additional 
CMS-1525-FC 1412 

targeting to assess the accuracy of HAC data reported on claims. Specifically, we are 

considering targeting a subset of hospitals that report zero or an aberrantly low 

percentage of HACs on Medicare fee-for-service 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 claims 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/HospitalQualityInits/06_HACPost.asp#TopOfPage. This 

analysis revealed a range in hospital-reporting of the eight HACs from a low of 0.0001 

percent (that is, 1 discharge out of every 100,000 applicable discharges) of hospital 

inpatient discharges (23 discharges) reporting a blood incompatibility, to a high of 0.0564 

percent (that is, 56.4 discharges out of every 100,000 applicable discharges) reporting 

Falls and Trauma. According to this analysis, however, these HAC rates appear to be 

underreported occurrences when compared to similar HAI measures. 

For example, the Catheter Associated Urinary Tract Infection (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 CAUTI rate of 0.317 out of every 1,000 eligible 

discharges. While we recognize that definitional differences in the measures might 

contribute to this rate difference, we also believe that underreporting 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 of 
CMS-1525-FC 1413 

Medicare beneficiaries for acute care hospital stays, as discussed in a separate Federal 

report about healthcare quality (AHRQ 2008 National Healthcare Quality Report). We 

note that this analysis is exploratory in nature, and we cannot definitively conclude any 

systematic underreporting by any particular hospitals. Nonetheless, we believe that this 

analysis provides sufficient information for CMS to consider development of a HAC 

validation process to assess potential underreporting by hospitals and ensure accurate 

reporting among all hospitals reporting HACs on Medicare claims. 

Our goal is to improve quality and patient 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 believe that validating a random 

subset of hospitals that report 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 validation process. We also noted that we intend to take 

appropriate action if we discover systematic underreporting of HAC and other adverse 

event information, including, where appropriate, reporting such instances to the HHS 

Office of the Inspector General for its review. 

Comment: Some commenters supported the proposals to validate HAC data as 

long as it does not cause undue burden to hospitals. 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 better 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 undue burden on hospitals. We will consider 

commenters’ suggestion that we target hospitals with aberrantly high HAC rates in the 

future. We welcome commenters’ suggestion that we could identify HACs through other 

data sources and would appreciate input on such sources and 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 policies 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 Total Performance Score, 

and weights the patient experience of care domain at 30 percent. However, the addition 

of the outcome domain and the proposed addition of an efficiency domain necessitate the 

adoption of a different domain 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 hospital is important in determining the hospital’s 

overall quality of care for purposes of the Hospital 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 care 
CMS-1525-FC 1415 

domain at 30 percent for the FY 2014 Hospital 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 towards 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 analysis showing that many of the clinical 

process of care measures are nearly topped-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 percent. 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 scoring hospitals on outcome measures will 

improve treatment outcomes and patient safety, 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 IPPS/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 and the overall quality of care provided to 

Medicare beneficiaries in the inpatient hospital setting. Accordingly, in the CY 2012 

OPPS/ASC proposed rule (76 FR 42363), we proposed to weight the efficiency domain at 
CMS-1525-FC 1416 

20 percent of the Total Performance Score for the FY 2014 Hospital VBP Program in 

order to encourage the delivery of high quality, coordinated, and 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 constitute 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 proposed 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 alternative 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. Some commenters suggested we reconsider the 

distribution of the clinical process of care domain weighting. 

Response: We disagree with commenters’ argument that the patient experience 

domain is weighted too high at 30 percent. While hospitals have less direct control over 
CMS-1525-FC 1417 

the patient experience domain than, for example, the clinical process domain, we do not 

believe that the Hospital VBP Program should diminish the importance of the patient’s 

experience of care. We believe that hospitals 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 experience and our emphasis on outcomes, as 

discussed below. 

Comment: Commenters disagreed with the proposed outcome domain weighting. 

Some commenters suggested that CMS weight it less than proposed, while others 

suggested that CMS give more weight to the outcome measures. Some commenters 

suggested that CMS redistribute the weight of the outcome 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 measures 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 measures are critical to patient safety. We believe that the three 

mortality measures serve as very good predictors 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 methodology 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 weight 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 importance 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 weighting 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 concern about the proposed weighting 

for the efficiency domain, arguing that 20 percent 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 that 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 zero. Other commenters expressed general 

concern about weighting 50 percent of the program (patient experience and efficiency 

domains) on measures that are somewhat less under a hospital's control than clinical 

process and outcome measures. 

Response: In light of our decision to suspend the effective date of the Medicare 

spending per beneficiary measure in the Hospital VBP Program, there is no efficiency 
CMS-1525-FC 1419 

domain to weight. We will take these comments 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 strong incentives for hospitals to redesign 

care processes for the delivery of coordinated, efficient health care services to Medicare 

beneficiaries are a priority. We intend to revisit the domain weighting 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 outcomes and efficiency, as well as reduced 

emphasis on clinical processes, is consistent with the National Quality Strategy to 

promote higher quality health care. Other commenters expressed support for giving the 

proposed outcome domain a higher weight than the clinical process domain. 

Response: We thank commenters for their support. After consideration of the 

public comments we received, we are not finalizing our FY 2014 domain weighting as 

proposed. Instead, we will finalize the FY 2014 domain weighting as follows: clinical 

process of care = 45 percent; patient 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 individual hospital performance in the Hospital VBP 

Program, including: (1) performance of the hospital 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 condition-specific score (that is, the performance 

score with respect to each condition 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 hospital 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 proposed rule (76 FR 42363 through 42365), we 

proposed that hospitals will have an opportunity to review and correct chart-abstracted 

data and patient experience data through the processes discussed below. We intend to 
CMS-1525-FC 1421 

make additional proposals regarding the review and correction of outcome measures, 

efficiency measures, and domain, 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 Care Measures and Measure Rates 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42363 through 42364), we 

proposed that the process utilized to give hospitals an opportunity to review and correct 

data submitted on the Hospital IQR Program chart-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 process, hospitals would continue to have 

the opportunity to review and correct data they submit on all Hospital IQR Program 

chart-abstracted measures, whether or not the 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 being submitted for the Hospital IQR Program, 

which in turn would allow hospitals to correct data and measure rates used to calculate 

the Hospital VBP Program Total Performance Score 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 made 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 Maryland 
CMS-1525-FC 1422 

hospitals, we intend to make proposals regarding 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 following the last discharge 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 IPPS/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 data 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 reports that are updated nightly 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 Measure 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 the number of successfully accepted cases in 

the measure population evaluated by the performance measure. The percentage of total is 

calculated by using the numerator divided by the denominator multiplied by 100. The 
CMS-1525-FC 1423 

sum of the numerators and the denominators 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 time 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 for 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 placed on hospitals that 

participate in the Hospital IQR Program if they 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 opportunity 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 has been given the opportunity to review and 

correct this data. We proposed to use this data to calculate 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 correction. We invited public comment on this 

proposal. 
CMS-1525-FC 1424 

Comment: Many commenters expressed support 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 CMS provide details on review and 

corrections for claims-based measures, particularly 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 rulemaking. 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 chart-abstracted measures as proposed. 

3. Review and Correction Process for Hospital 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 review and correction of HCAHPS data. Under 

this proposed process, hospitals would have the opportunity to review 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/Final%20Draft%20Description%20of%20HCAHPS%

20Mode%20and%20PMA%20with%20bottom%20box%20modedoc%20April%2030,%

202008.pdf) on dimensions that we will use to score hospitals under the Hospital VBP 

Program to determine whether they believe 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 proposing to release any patient level data to the public. This 

proposed review process would only grant each 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 quarter 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 quarter to submit HCAHPS data for that quarter to the QIO 
CMS-1525-FC 1426 

Clinical Warehouse and a 1-week period to review 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-week data submission deadline. 

 The proposed 1-week review and correction 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 review and correction period would allow 

hospitals to identify any issues with the data they had submitted in the 13-week 

submission period. Hospitals will have the opportunity to review frequency distributions 

of all of their submitted data items, which include hospital summary information, patient 

administrative data, and patient survey responses, and resubmit their HCAHPS data files 

to correct identified issues during the 1-week review and correction period. We define 

the term “review and correct” to mean that hospitals can correct their existing data 

records, but not add new data records. Accordingly, hospitals would not be allowed to 

add new patient-level records or remove existing patient-level records during the review 

and correction period. Following the conclusion 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 Program. 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 HCAHPS adjustment process may be found at: 

http://www.hcahpsonline.org/files/Final%20Draft%20Description%20of%20HCAHPS%

20Mode%20and%20PMA%20with%20bottom%20box%20modedoc%20April%2030,%

202008.pdf.) Hospitals would have approximately 1 week to examine their HCAHPS 

dimension scores for the applicable Hospital VBP Program performance period. A 

participating hospital would have the opportunity 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, recalculating 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 process in future rulemaking. 
CMS-1525-FC 1428 

 In summary, for the chart-abstracted and patient experience of care measures, we 

proposed that existing procedures for submission, review, and correction 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 hospitals 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 Scores for the Hospital VBP Program. We 

intend to make proposals related to making this information publicly available, and to 

make additional proposals regarding the review and correction of outcome measures, 

efficiency measures, and domain, condition, and Total Performance Scores in future 

rulemaking. We invited public comment on these proposals. 

Comment: Some commenters expressed support for the proposed two-phase 

review and corrections process, agreeing that it provides an appropriate 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 the data submission process and ensure 

adequate time for data cleaning and processing, score calculation and report preparation, 

we have never allowed HCAHPS data to be submitted into the data warehouse after the 
CMS-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 allow new records to be submitted or accepted 

in the data warehouse after the end of the data 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 will occur one week earlier than previously 

in order to allow time for the Phase One Review 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 opportunity to resubmit surveys to correct any 

issues regarding the patient records. During 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 after the relevant data submission deadlines and long after the 

HCAHPS Hospital VBP scores have been calculated. 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 Phase 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 least 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 survey 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 survey, 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 the period sooner, or ending it sooner. 

During the proposed one-week Review and Correction period for Phase One, 

hospitals or their survey vendors will have access 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 received, we are finalizing as 

proposed our two-phase review and corrections process for HCAHPS data. 
CMS-1525-FC 1431 

XVII. Files Available to the 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 proposed 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 Internet on the CMS Web site. Our existing regulations at 

§§ 416.166(b), 416.171(b), and 416.173 provide for the publication of covered 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 system available via the Internet on the CMS 

Web site. 

We did not receive any public comments 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 change. In this final rule with comment 
CMS-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 Related 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. Specifically, Addendum A includes a list of all 

APCs that are payable under the OPPS, including 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 unadjusted 
CMS-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 also 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 indicators that are used in Addendum B. 

 Addendum E lists the HCPCS codes that are only payable to hospitals as inpatient 

procedures and that are not payable under the OPPS for CY 2012. 

 Addendum L contains the out-migration 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 comment 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 single 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 payment 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 rule 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 refer readers to section II.A.1.b. of this final 

rule with comment period for a full discussion 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 descriptor; (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 the preamble of the applicable proposed or final rule. We are 

issuing it as an addendum to this final rule with comment period because 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 covered ancillary services for which ASCs may 

receive separate payment. Addendum AA lists, for CY 2012, the ASC covered surgical 

procedures, whether the procedure is subject to multiple procedure discounting, the 

payment indicator for each procedure, the comment indicator if applicable, and the 

payment weight and rate for each procedure. 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 indicators that are used in Addenda AA and 

BB. Addendum DD2 defines the comment indicators that are used in Addenda AA and 

BB. 

Addendum EE lists the surgical procedures to be excluded from Medicare 

payment if furnished in ASCs. The excluded procedures listed in Addendum EE are 

surgical procedures that are assigned to the OPPS inpatient list, are not covered by 

Medicare, are reported using a CPT unlisted code, or have been determined to pose a 

significant safety risk to a Medicare beneficiary when performed in an ASC or for which 

standard medical practice dictates that the beneficiary typically requires 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 Requirements for Solicitation of Comments

 Under the Paperwork Reduction Act of 1995, we are required to provide 60-day 

notice in the Federal Register and to solicit public comment before a collection of 

information requirement is submitted to the Office of Management and Budget (OMB) 

for review and approval. In order to fairly evaluate whether an information collection 
CMS-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 collection and its usefulness in carrying out the 

proper functions of our agency. 

● The accuracy of our estimate of the information collection burden. 

● The quality, utility, and clarity of the information to be collected. 

● Recommendations to minimize the information collection burden on the 

affected public, including automated collection techniques. 

 In the CY 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 Commitments of Providers (§ 489.20) 

Section 489.20(w) contains a physician presence disclosure requirement that 

requires disclosure when a doctor of medicine or a doctor of osteopathy is not onsite 

24 hours per day, 7 days per week. The burden associated with the physician presence 

disclosure requirement is the time and effort necessary for each hospital and CAH to 

develop a standard notice to furnish to its patient, obtain the required patients’ signatures, 

and maintain a copy in the patient’s medical record. 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) would require that, for hospitals and 

CAHs that are not physician owned, the existing physician presence disclosure 

requirement regarding outpatient services would apply only to outpatients receiving 

observation services, surgery, and procedures 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 doctor or medicine or a doctor of osteopathy 

onsite at all times. We estimated that it will take each hospital 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 the 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 subject to the disclosure requirement will make 

1,966 disclosures per year. The estimated annual burden associated 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 reflected 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 correction noted. 
CMS-1525-FC 1438 

2. ICRs Regarding Exceptions Process Related 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 rule with comment period, we proposed to 

add a new § 411.362(c) to establish and implement the process by which an applicable 

hospital or high Medicaid facility may apply 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 proposed § 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, procedure 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 for 3 of the most recent fiscal years for which 

data are available. In addition, the hospital 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 final 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 hospitals to satisfy the respective 

criteria for the most recent fiscal year for which data are available. Therefore, we have 

revised our proposed estimates. We estimate that it will take each hospital 6 hours and 
CMS-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 and provide rebuttal statements in response to 

community input comments, which is included in the final regulation, 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 difficult 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 estimate associated with the requirement. 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 discussed 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, the Hospital OQR Program has been generally 
CMS-1525-FC 1440 

modeled after the quality data reporting program for the Hospital IQR Program. We refer 

readers to the CY 2011 OPPS/ASC final rule with comment period (75 FR 72064 through 

72110 and 72111 through 72114) 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 Program Measures for the CY 2012, CY 2013, and 

CY 2014 Payment Determinations 

 In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766), we 

retained the 7 chart-abstracted measures we used in CY 2009 and adopted 4 new 

claims-based imaging measures for the CY 2010 payment determination, bringing the 

total number of quality measures for which hospitals must submit data to 11 measures. In 

the CY 2010 OPPS/ASC final rule with comment period (74 FR 60637), we required 

hospitals to continue to submit data on the same 11 measures for the CY 2011 payment 

determination. The burden associated with the aforementioned data submission 

requirements is currently approved under OCN: 0938-1109 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 payment 
CMS-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 measures. In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72112 through 72113), we discussed the burden associated 

with these information collection requirements. 

 For the CY 2013 payment determination, we required that hospitals continue to 

submit data for all of the quality measures that we adopted for the CY 2012 payment 

determination. We also adopted 1 structural HIT measure assessing the ability to track 

clinical results between visits, 6 new chart-abstracted measures on the topics of HOPD 

care transitions and ED efficiency, as well as 1 chart-abstracted ED-AMI measure that we 

proposed for the CY 2012 payment determination but which we decided to finalize for 

the CY 2013 payment determination. These actions bring the total number of quality 

measures for the CY 2013 payment determination for which hospitals must submit data 

to 23 measures. 

 In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 

72094), for the CY 2014 payment determination, we retained the CY 2013 payment 

determination measures, but did not adopt any additional measures. In the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72112 through 72113), we discussed 

the burden associated with these information collection requirements. 
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 Set 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 Computed Tomography (CT) and Sinus 

Computed Tomography (CT) 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache 

OP-16: Troponin Results for Emergency Department acute myocardial infarction 

(AMI) patients or chest pain patients (with Probable Cardiac Chest Pain) Received 

Within 60 minutes of Arrival 

OP-17: Tracking Clinical Results between Visits 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients 

OP-19: Transition Record with Specified Elements Received by Discharged 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 
CMS-1525-FC 1443 

Hospital OQR Program Measurement Set 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 Interpretation Within 45 minutes of Arrival 

b. Additional Hospital OQR Program 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 determination. In this final rule with comment 

period, we are adding, for the CY 2014 payment determination, 1 chart-abstracted 

measure and 2 structural measures (including hospital outpatient volume data for selected 

outpatient surgical procedures). Thus, for 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 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* 
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 Computed Tomography (CT) and Sinus Computed 

Tomography (CT)* 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache* 

OP-16: Troponin Results for Emergency Department acute myocardial infarction (AMI) 

patients or chest pain patients (with Probable Cardiac Chest Pain) Received Within 60 

minutes of Arrival ** 

OP-17: Tracking Clinical Results between Visits** 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients** 

OP-19: Transition Record with Specified Elements Received by Discharged Patients** 

OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional** 

Op-21: ED- Median Time to Pain Management for Long Bone Fracture ** 

OP-22: ED Patient Left Without Being Seen** 

OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who 

Received Head CT Scan Interpretation Within 45 minutes of Arrival ** 

OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting*** 

OP-25: Safety Surgery Checklist*** 

OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures*** 

Procedure Category Corresponding HCPCS Codes

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, 

C9724, C9725, 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 
CMS-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 submission 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 determinations. 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 the Hospital OQR Program if they not already 

done so or have withdrawn from participation. By submitting this document, hospitals 

agree that they will allow CMS to publicly report the measures for which they have 

submitted data under the Hospital OQR Program. 

 For the CY 2014 payment determination, the burden associated with these 

requirements (including those previously 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 measures (including those measures for which data 
CMS-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 per year. For hospitals to collect and 

submit the information on the chart-abstracted measures we estimate it will take 

35 minutes per sampled case. Based upon the data submitted for the CY 2011 payment 

determination and our estimates for the additional 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 associated 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, excluding 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 submit the required data, making the estimated 

annual burden associated with these measures 1,600 hours (3,200 hospitals x 0.167 hours 

per measure x 3 structural measures per hospital). 

 For the collection of all-patient volume for selected outpatient surgical 

procedures, because hospitals must determine their populations for data reporting 

purposes and most hospitals are voluntarily reporting population and sampling data for 

Hospital OQR Program purposes, we believe the only additional burden associated with 

this proposed requirement would be the reporting of the data using the Web-based tool. 

We estimate that each participating hospital will spend 10 minutes per year to collect and 

submit the data, making the estimated annual burden associated with this measure 
CMS-1525-FC 1447 

533 hours (3,200 hospitals x 0.167 hours per measure x 1 all-patient volume measure per 

hospital). 

Comment: One commenter believed that the estimates within the proposed rule 

are reasonable for the chart-abstraction of cases, but that they underestimate the true 

burden by overlooking the time burden for startup and biannual maintenance education of 

the measure specifications, educational research for cases that do not fit within the 

specifications manual, education regarding electronic tool usage, coordination of data 

submission and data quality checks by management and/or information technology 

personnel, and recruitment of abstraction personnel by management. The commenter 

believed that the effect of these additional, required activities will double or triple the 

burden estimated within the original proposal 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 estimates related to the abstraction of cases. 

We will consider whether future estimates will require consideration of the factors listed. 

c. Hospital OQR Program Measures for CY 2015 

 In this final rule with comment period, for the CY 2015 payment determination, 

we are retaining the requirement that hospitals 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 determination, the burden associated with these 

requirements is the time and effort associated with completing the notice of participation 

form, collecting and submitting the data on the proposed measures, and collecting and 

submitting all-patient volume data for selected outpatient surgical procedures. For the 

chart-abstracted measures, we estimate that there will be approximately 3,200 

respondents per year. For hospitals to collect and submit the information on the chartabstracted measures where data is submitted directly to CMS, we estimate it will take 35 

minutes per sampled case. Based upon the data submitted for the CY 2011 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 data is 1,136,000 hours (1,947,429 cases per year x 

0.583 hours per case). For the structural measures, we estimate that each participating 

hospital will spend 10 minutes per year to collect and submit the data, making the 

estimated annual burden associated with these measures 1,603 hours (3,200 hospitals x 

0.167 hours per hospital x 3 structural measures per hospital). 

 For the collection of all-patient volume data for selected outpatient surgical 

procedures, because hospitals must determine their populations for data reporting 

purposes and most hospitals are voluntarily reporting population and sampling data for 

Hospital OQR purposes, we believe the only additional burden associated with this 

requirement will be the reporting of the data using the Web-based tool. We estimate that 

each participating hospital will spend 10 minutes per year to collect and submit the data, 
CMS-1525-FC 1449 

making the estimated annual burden associated with this measure 533 hours (3,200 

hospitals x 0.167 hours per hospital). 

 We invited public comment on the burden 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 that we adopted in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72103 through 72106) for CY 2012, with some 

revisions. While these requirements are subject 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 participating in the Hospital OQR Program would be eligible 

each year for validation selection. 

 In the CY 2011 OPPS/ASC proposed rule and final rule with comment period 

(75 FR 46381 and 72106, respectively), we discussed additional data validation 

conditions under consideration for CY 2013 and subsequent years. In this final rule with 
CMS-1525-FC 1450 

comment period, we are finalizing a policy under which we will select for validation up 

to 50 additional hospitals based 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 submitted to the OPPS Clinical Warehouse during 

the applicable time period. However, if a selected hospital submitted less than 12 cases 

in one or more quarters, only those cases available would be validated. 

 The burden associated with the CY 2013 requirement is the time and effort 

necessary to submit validation data to a CMS contractor. We estimate that it would take 

each of the sampled hospitals approximately 12 hours to comply with these data 

submission requirements. To comply with the requirements, we estimate each hospital 

must submit up to 48 cases for the affected year for review. All selected hospitals must 

comply with these requirements 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 for CY 2013 is approximately 6,000 hours. 

We are maintaining the deadline of 45 days for hospitals to submit requested 

medical record documentation to a CMS contractor to support our validation process. 

 We invited public comment on the burden associated with these information 

collection requirements. We received comments regarding increased burden related to 

reducing the deadline for hospitals to submit requested medical record documentation 

from 45 to 30 days. We discuss these comments and state in section XIV.G.3.d. of this 

final rule with comment period that we have decided to not finalize our proposal to 
CMS-1525-FC 1451 

reduce the time for hospitals to submit medical record documentation, and that we are 

instead retaining our policy of 45 days after request. 

4. Hospital OQR Program Reconsideration and Appeals Procedures 

 In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), we 

adopted a mandatory reconsideration process that applied to the CY 2010 payment 

decisions. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60654 

through 60655), we continued this process for the CY 2011 payment update. In the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 72106 through 72108), we 

continued this process for the CY 2012 payment update with some modifications. We 

eliminated the requirement that the reconsideration request form be signed by the hospital 

CEO to facilitate electronic submission of the form and reduce hospital burden. We are 

continuing this process for the CY 2013 and future years’ payment determinations. 

While there is burden associated with filing a reconsideration request, 5 CFR 1320.4 of 

the Paperwork Reduction Act of 1995 regulations excludes collection activities during 

the conduct of administrative actions such as redeterminations, reconsiderations, and/or 

appeals. 

We did not receive any comments on these information collection requirements. 

5. ASC Quality Reporting Program 

 In this final rule with comment period, 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 collect quality measure data for the five 

claims-based measures by using Quality Data Codes (QDCs) placed on submitted claims 
CMS-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 participate 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 Assurance, Inc. and Health Services Advisory 

Group.: Ambulatory Surgery Center Environmental Scan (July 2008) (Contract 

No. GS-10F-0096T)). Thus, we estimate the burden to report QDCs on this number of 

claims per year for the first four claims-based measures to be nominal due to the small 

number of cases (less than 1 case per month per ASC). 

 The remaining claims-based measure is prophylatic IV antibiotic 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 percent 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 Purchasing Implementation Plan, available at 

the Web site: https://www.cms.gov/ASCPayment/downloads/C_ASC_RTC%202011.pdf
CMS-1525-FC 1453 

as the source for the number of ASCs and number 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 and 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 submit the required data, making the estimated 

annual burden associated with this measure 864 hours (5,175 ASCs x 1 measure x 0.167 

hours per ASC). 

 For the ASC Facility Volume Data on Selected ASC Surgical Procedures 

structural measure, we estimate that each participating ASC will spend 10 minutes per 

year to collect and submit the required data, making the estimated annual burden 

associated with this measure, 864 hours (5,175 ASCs x 1 measure 0.167 hours per ASC). 

 Comments received regarding burden related 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 eligible 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 hospitals and CAHs may continue to attest 

CQMs in 2012, they may also choose to participate in the 2012 Electronic Reporting 
CMS-1525-FC 1454 

Pilot for Hospitals and CAHs which we are finalizing in this final rule with comment 

period. Eligible hospitals and 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 eligible 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 clinical quality measures is part of the core 

set. We estimate that it would take an eligible hospital or CAH 0.5 hour to submit the 

required CQM information under the 2012 Electronic Reporting Pilot. Therefore, the 

estimated total burden should all 4,922 Medicare eligible hospitals and CAHs (3,620 

acute care hospitals and 1,302 CAHs) participate in the 2012 Electronic Reporting Pilot is 

2,461 hours. 

 We believe that an eligible hospital or CAH might assign a Computer and 

Information Systems Manager to submit the CQM information on their behalf. We 

estimate the cost burden for an eligible hospital 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 Electronic Reporting Pilot and that would submit the 
CMS-1525-FC 1455 

CQM information via the 2012 Electronic Reporting Pilot. We also invited public 

comments on the type of personnel or staff that would mostly likely submit on behalf of 

eligible hospitals and CAHs. 

We did not receive any comments on these information collection requirements. 

7. Additional Topics 

 In addition to soliciting public comments as part of the OMB approval process for 

the proposed information collection requirements associated with the Hospital OQR 

Program, in the proposed rule we sought public 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 other possible measures under consideration 

for adoption into the Hospital OQR Program. We also sought public comments on 

collecting chart-abstracted data for one measure 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 beginning 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 these potential information collection 

requirements. 
CMS-1525-FC 1456 

Comments and responses for the proposed policies and burden associated with 

these proposed information collection requirements 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 acknowledge or respond to them individually. 

We will consider all comments we receive by the date and time specified in the DATES

section of this final rule with comment period, and, when we proceed with a subsequent 

document(s), we will respond to those comments in the preamble to that document. 
CMS-1525-FC 1457 

XX. Economic Analyses 

A. Regulatory Impact Analysis

1. Introduction 

We have examined the impacts of this final rule with comment period as required 

by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), 

Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 

section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates 

Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 

on Federalism (August 4, 1999), and the Contract with America Advancement Act of 

1996 (Pub. L. 104-121) (5 U.S.C. 804(2)). 

 Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits 

of available regulatory alternatives and, if regulation is necessary, to select regulatory 

approaches that maximize net benefits (including potential economic, environmental, 

public health and safety effects, distributive impacts, and equity). Executive Order 13563 

emphasizes the importance of quantifying both costs and benefits, of reducing costs, of 

harmonizing rules, and of promoting flexibility. This rule has been designated as an 

“economically” significant rule under section 3(f)(1) of Executive Order 12866 and a 

major rule under the Contract with America Advancement Act of 1996 

(Pub. L. 104-121). Accordingly, the rule has been reviewed by the Office of 

Management and Budget. We have prepared a regulatory impact analysis that, to the best 

of our ability, presents the costs and benefits of this final rule with comment period. In 
CMS-1525-FC 1458 

the proposed rule (76 FR 42371), we solicited 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 payment rates and the ambulatory surgical center (ASC) 

prospective payment rates for CY 2012. The final rule with comment period is necessary 

to adopt changes to payment policies and payment rates for outpatient services furnished 

by hospitals and CMHCs for CY 2012. We are required under section 1833(t)(3)(C)(ii) 

of the Act to update annually the OPPS conversion factor used to determine the APC 

payment rates. We also are required under section 1833(t)(9)(A) of the Act to review, 

not less often than annually, and revise the groups, the relative payment weights, and the 

wage and other adjustments described in section 1833(t)(2) of the Act. In addition, we 

must review the clinical integrity of payment 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 comment period is necessary to enable CMS to 

adopt changes to payment policies and payment rates for covered surgical procedures and 

covered ancillary services that are performed in an ASC for CY 2012. Because the ASC 

payment rates are based on the OPPS relative weights for the majority of the procedures 

performed in ASCs, the ASC payment rates are updated annually to reflect annual 

changes to the OPPS relative weights. In addition, because the services provided in 

ASCs are identified by HCPCS codes which are reviewed and revised either quarterly or 
CMS-1525-FC 1459 

annually, depending on the HCPCS codes, it is necessary to update the ASC payment 

rates annually to reflect these changes to HCPCS codes. In addition, we are required 

under section 1833(i)(1) of the Act to review and update the list of surgical procedures 

that can be performed in an ASC not less frequently than every 2 years. 

 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 points to their OPD fee schedule increase factor. In section 

XIV. of this final rule with comment period, we are adopting additional policies affecting 

the Hospital OQR Program for CY 2013, CY 2014, and CY 2015 that hospitals will have 

to meet in order to receive the full OPD fee schedule increase factor. In the proposed 

rule, we solicited public comments on these proposed additional policies. Any public 

comments that we received are addressed in section 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 section XV. of this final rule with comment 

period, we are adopting a process for a hospital to request an exception to the prohibition 

on expansion of facility capacity under the whole hospital and rural provider exceptions 

to the physician self-referral prohibition. We also adopt amendments to the patient safety 

requirements in the provider agreement regulations. 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 directs the Secretary to begin making 

value-based incentive payments under the Hospital VBP Program to hospitals for 

discharges occurring on or after October 1, 2012. In section XVI. this final rule with 

comment period, we are adding one chart-abstracted 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 this final rule with comment period. 

 Section 109(b) of the MIEA-TRHCA states that the Secretary may implement a 

quality reporting system for ASCs in a manner so as to provide for a reduction of 

2.0 percentage points in any annual update with respect to the year involved, for failure to 

report on quality measures. In section XIV.K. of this final rule with comment period, we 

are establishing an ASC Quality Reporting Program with the collection of five quality 

measures beginning in CY 2012. In the proposed 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 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 OPPS for 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 measured by the $100 million threshold, we have 
CMS-1525-FC 1461 

prepared a regulatory impact analysis that, to the best of our ability, 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 ASC 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 payment 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 display the redistributional impact of the CY 2012 changes on 

ASC payment, grouped by specialty area and then grouped by procedures with the 

greatest ASC expenditures, respectively. 

4. Detailed Economic Analyses 

a. Effects of OPPS Changes in This Final Rule with Comment Period 

 We are updating the OPPS payment rates and revising several OPPS payment 

policies for CY 2012. We are required under 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 than 
CMS-1525-FC 1462 

annually, and revise the groups, the relative payment weights, and the wage and other 

adjustments described in section 1833(t)(2) of the Act. In addition, we must review the 

clinical integrity of payment groups and weights 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 hospital 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 HCERA, authorizing a wage index of 1.00 for 

certain frontier States. We also are revising the relative APC payment weights using 

claims data for services furnished on and after January 1, 2010, through and including 

December 31, 2010, and updated cost report information. 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 with comment period that we are removing from 

pass-through payment status for CY 2012. 

 We estimate that the update change to the conversion factor and other adjustments 

(but not including the effects of outlier payments, the pass-through estimates, and the 

application of the frontier State wage adjustment for CY 2012) will increase total OPPS 

payments by 1.9 percent in CY 2012. The changes to the APC weights, the changes to 

the wage indices, the continuation of a payment adjustment for rural SCHs, including 

EACHs, and the payment adjustment for cancer hospitals will not increase OPPS 

payments because these changes to the OPPS are budget neutral. However, these updates 

will change the distribution of payments within the budget neutral system as shown in 
CMS-1525-FC 1463 

Table 59 below and described in more detail in this section. We also estimate that the 

total change in payments between CY 2011 and CY 2012, considering all payments, 

including changes in estimated total outlier payments, pass-through payments, and the 

application of the frontier State wage adjustment outside of budget neutrality, in addition 

to the application of the OPD fee schedule increase factor after all adjustments required 

by sections 1833(t)(3)(F) 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 projected 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 comment 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 and then select “CMS-1525-FC” from the list of 

regulations and notices. The hospital-specific file layout and the hospital-specific file are 

listed with the other supporting documentation for this final rule with comment period. 

We show hospital-specific data only for hospitals whose claims were 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 discussion of the hospitals whose claims we do not 

use for ratesetting and impact purposes. 
CMS-1525-FC 1464 

 We estimate the effects of the individual policy changes by estimating payments 

per service, while holding all other payment policies constant. We use the best data 

available, but do not attempt to predict behavioral responses to our policy changes. In 

addition, we do not make adjustments for future changes in variables such as service 

volume, service-mix, or number of encounters. In the proposed rule, as we have done in 

previous proposed rules, we solicited public comment and information about the 

anticipated effects of our proposed changes on providers and our methodology for 

estimating them. Any public comments that we received are addressed in the applicable 

sections of this final rule with comment period that discuss the specific policies. 

(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 facilities, has always included cancer and children’s hospitals, 

which are held harmless to their pre-BBA amount. We also include CMHCs in the first 

line that includes all providers because we include CMHCs in our weight scalar estimate. 

As discussed in section II.F. of this final rule with comment period, 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 CMHCs, 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 CMHCs in Table 59 because CMHCs are paid 

only for partial hospitalization services and CMHCs are a different provider type from 

hospitals. In CY 2011, we are paying CMHCs under APC 0172 (Level I Partial 

Hospitalization (3 services) for CMHCs) and APC 0173 (Level II Partial Hospitalization 

(4 or more services) for CMHCs), and we are paying hospitals for partial hospitalization 

services under APC 0175 (Level I Partial Hospitalization (3 services) for hospital-based 

PHPs) and APC 0176 (Level II Partial Hospitalization (4 or more services) for 

hospital-based PHPs). For CY 2012, we are continuing this APC payment structure and 

basing payment fully on the median costs calculated 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 payments made under the OPPS is determined 

largely by the increase to the conversion factor set under the methodology in the statute. 

The distributional impacts presented 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 paragraph (17) and subparagraph (F) of this paragraph, the OPD 

fee schedule increase factor is equal to the market basket percentage increase applicable 

under section 1886(b)(3)(B)(iii) of the Act. 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 reduces that 3.0 percent by the productivity adjustment 
CMS-1525-FC 1466 

described in section 1886(b)(3)(B)(xi)(II) of the Act, which 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 increase 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 readers 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 10324 of the Affordable Care Act, as amended 

by HCERA, further authorized additional expenditures outside budget neutrality for 

hospitals in certain frontier States that have a wage index of 1.00. The amounts 

attributable to this frontier State wage index adjustment are incorporated in the CY 2012 

estimates in Table 59. Additionally, in response to public comments on the proposed 

rule, we are providing the payment impact of the rural floor and the imputed floor with 

budget neutrality at the State level in Table 60, as discussed in section II.C. of this final 

rule with comment period. 

 Table 59 shows the estimated redistribution of hospital and CMHC payments 

among providers as a result of the following factors: APC reconfiguration and 

recalibration; wage indices and the rural adjustment; the combined impact of the APC 

recalibration, wage and rural adjustment effects, and the OPD fee schedule increase 

factor update to the conversion factor; the effect of the budget neutral adjustment to 

payments made to the 11 dedicated cancer hospitals that meet the classification criteria in 

section 1886(d)(1)(B)(v) of the Act; the frontier State wage index adjustment; and 
CMS-1525-FC 1467 

estimated redistribution considering all payments 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 schedule increase factor, that is, the IPPS market basket 

percentage increase less the productivity adjustment required by section 1833(t)(3)(F)(i) 

of the Act and less the adjustment required 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 projected pass-through payment for CY 2012) are 

applied uniformly across services, observed redistributions of payments in the impact 

table for hospitals largely depend on the mix of services furnished by a hospital (for 

example, how the APCs for the hospital's most frequently furnished services would 

change), and the impact of the wage index changes on the hospital. However, total 

payments made under this system and the extent to which this final rule with comment 

period will redistribute money during implementation also will depend on changes in 

volume, practice patterns, and the mix of services billed between CY 2011 and CY 2012 

by various groups of hospitals, which CMS cannot forecast. 

 Overall, we estimate that the OPPS rates for CY 2012 will have a positive effect 

for providers paid under the OPPS, resulting in a 1.9 percent estimated increase in 

Medicare payments. Removing payments to cancer and children’s hospitals because their 
CMS-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 payments to all other hospitals. 

 To illustrate the impact of the CY 2012 changes, our analysis begins with a 

baseline simulation model that uses the final CY 2011 relative weights, the FY 2011 final 

IPPS wage indices that include reclassifications, and the final CY 2011 conversion factor. 

Column 2 in Table 59 shows the independent effect of the changes 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 the service-mix and volume in the CY 2010 

claims used for this final rule with comment period) and calculating the percent 

difference in the relative weight. Column 2 also reflects the effect of the changes 

resulting from the APC reclassification and recalibration changes and any changes in 

multiple procedure discount patterns or conditional packaging that occur as a result of the 

changes in the relative magnitude of payment weights. 

 Column 3 reflects the independent effects of the updated wage indices, including 

the application of budget neutrality for the rural floor policy on a nationwide basis. This 

column excludes the effects of the frontier State wage index adjustment, which is not 

budget neutral and is included in Column 6. We did not model a budget neutrality 

adjustment for the rural adjustment for SCHs because we are not making any changes to 
CMS-1525-FC 1469 

the policy for CY 2012. We modeled the independent effect of updating the wage indices 

by varying only the wage indices, holding APC 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 adjustment 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 hospital’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 PCR (before the cancer hospital payment 

adjustment) is above the target PCR, a cancer 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 with regard to the payment adjustment for 

dedicated cancer hospitals. We refer readers 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 payments to cancer hospitals of 34.5 percent. 

After accounting for TOPs, the estimated aggregate increase in OPPS payments for CY 
CMS-1525-FC 1470 

2012 is approximately 11.3 percent, after all CY 2012 payment updates have been 

included. 

 Column 5 demonstrates the combined “budget neutral” impact of APC 

recalibration (that is, Column 2), the wage index update (that is, Column 3), as well as the 

impact of updating the conversion factor with the OPD fee schedule increase factor, the 

3.0 percent hospital market basket 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 reduction required by sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) 

of the Act, which resulted in an OPD fee schedule increase factor of 1.9 percent. We 

modeled the independent effect of the budget 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 included 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 factor of 1.9 percent 

reflected in Column 5, combined with the non-budget neutral frontier 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 all 
CMS-1525-FC 1471 

estimated payments in CY 2011. Column 7 shows 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 outlier 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 hospitals 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 pass-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 model because they had both CY 2010 claims 

data and recent cost report data. We estimate that the cumulative effect of all changes for 

CY 2012 will increase payments to all providers by 1.9 percent for CY 2012. We 

modeled the independent effect of all changes in Column 7 using the final relative 

weights for CY 2011 and the relative 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 and 
CMS-1525-FC 1472 

a 3.89 percent charge inflation factor, we currently estimate that outlier payments for 

CY 2011, using a multiple threshold of 1.75 and 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 Column 7. We used the same set of claims 

and a charge inflation factor of 7.94 percent (1.0794) and the CCRs in the July 2011 

OPSF, with an adjustment of 0.9903, to reflect relative changes in cost and charge 

inflation between CY 2010 and CY 2012, to model 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 number of facilities (4,161), 

including designated cancer and 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 entities that are not paid under the OPPS. 

The latter entities include CAHs, all-inclusive hospitals, and hospitals located in Guam, 

the U.S. Virgin Islands, Northern Mariana Islands, American Samoa, and the State of 

Maryland. This process is discussed in greater detail in section II.A. of this final rule 

with comment period. At this time, we are unable to calculate a disproportionate share 

(DSH) variable for hospitals not participating in the IPPS. Hospitals for which we do not 

have a DSH variable are grouped separately and generally include freestanding 
CMS-1525-FC 1473 

psychiatric hospitals, rehabilitation 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 hospitals to their “pre-BBA amount” as 

specified under the terms of the statute, and therefore, we removed them from our impact 

analyses. We show the isolated impact on 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 effects of the reconfiguration, recalibration, and 

other policies (such as setting payment for separately payable 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 urban hospitals by 0.2 percent. We estimate 

that both large and other urban hospitals will experience an increase 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 urban 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 set at the payment rate for APC 0176 (Level II 

Partial Hospitalization (4 or more services) for hospital-based PHPs). Urban hospitals 
CMS-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 percent as a result of the APC 

recalibration. We estimate that rural hospitals that report fewer than 5,000 lines for 

OPPS services will experience a decrease of 0.7 percent, while rural hospitals that report 

5,000 or more lines for OPPS services will experience 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 decrease 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 ownership suggests that voluntary, proprietary, 

and governmental hospitals will experience increases of 0.1 to 0.2 percent as a result of 

the APC recalibration. Finally, we estimate that 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 decrease of 6.3 percent. Hospitals for which DSH 

is not available furnish a large number of psychiatric 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 the frontier State wage index adjustment, 

which is not budget neutral. The frontier State wage index adjustment is reflected in the 

combined impact shown in Columns 6 and 7. We are continuing the rural payment 

adjustment of 7.1 percent to rural SCHs for CY 2012, as described in section II.E.2. of 

this final rule with comment period. We estimate 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 estimate that urban hospitals will experience no 

change from CY 2011 to CY 2012, although large 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 West 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 increase of 4.2 percent as a result of the 

implementation of the rural floor. We refer readers to section II.C. of this final rule with 

comment period for more information and Table 60 for estimated impact of the rural 

floor and the imputed floor with budget neutrality at the State level. Overall, we estimate 

that rural hospitals will experience a decrease of 0.3 percent as a result of changes to the 

wage index for CY 2012. We estimate that hospitals in rural Middle Atlantic, West 
CMS-1525-FC 1476 

North Central, and Pacific States will experience increases 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 result of the budget neutral payment adjustment 

for the dedicated cancer hospitals. 

Column 5: All Budget Neutrality Changes 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 mitigate 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 update is applied to the budget neutrality 

adjustments, urban hospitals that bill fewer than 11,000 lines and hospitals that do not 

report DSH or for which DSH information is not available will experience decreases. In 

particular, urban hospitals that report fewer than 5,000 lines will experience a cumulative 

decrease, after application of the OPD fee schedule increase factor and the budget 

neutrality adjustments, of 3.4 percent, largely as a result of the decrease in payment for 
CMS-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 payment rate of APC 0176 (Level II Partial 

Hospitalization (4 or more services) for hospital-based PHPs), which experienced a 

decline based on updated cost report 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 percent, respectively. Hospitals in urban New 

England will experience an increase of 5.7 percent, largely as a result of the change in 

wage index shown under column 3 and discussed above. We estimate that rural hospitals 

will experience a 1.5 percent increase as a result of the OPD fee schedule 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 budget 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 ownership suggests that proprietary hospitals will 

experience an estimated increase of 1.7 percent, 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 the Frontier State Wage Index Adjustment

 This column shows the impact of all budget neutrality adjustments, application of 

the 1.9 percent OPD fee schedule increase factor, and the non-budget neutral impact of 

applying the frontier State wage adjustment (that is, the frontier State wage index change 

in addition to all changes reflected in Column 4). In general, we estimate that all 

facilities and all hospitals will experience a combined increase of 2.0. Hospitals in the 

rural Mountain region will experience an increase of 2.8 percent, most of which is 

attributable to the frontier State wage adjustment. Similarly, hospitals in the rural West 

North Central region will experience an increase 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 frontier 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, payment reductions for hospitals 

that failed to meet the Hospital OQR Program reporting requirements, and the difference 

in pass-through estimates that are not included in the combined percentages shown in 

Column 5. This column includes estimated payment for a few hospitals receiving 

reduced payment because they did not meet their Hospital OQR Program reporting 

requirements; however, we estimate that the 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 experience 
CMS-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 percent OPD fee schedule increase factor, less 0.07 

percent for the change in the pass-through 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 frontier State wage index adjustment. When we 

exclude cancer and children’s hospitals (which are held harmless to their pre-BBA 

amount) and CMHCs, the estimated increase is 1.9 percent after rounding. 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 decline 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 that report between 5,000 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 of 
CMS-1525-FC 1480 

0.6 percent and that rural hospitals that bill 5,000 or more lines 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 percent for major teaching 

hospitals and nonteaching hospitals. Minor teaching hospitals will experience 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 experience an increase of 1.7 percent, and 

governmental hospitals will experience an increase of 1.6 percent. 

(3) Estimated Effects of This Final 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 for services under the OPPS: APC 0172 

(Level I Partial Hospitalization (3 services) for CMHCs); APC 0173 (Level II Partial 

Hospitalization (4 or more services) for CMHCs); APC 0175 (Level I Partial 

Hospitalization (3 services) for hospital-based PHPs); and APC 0176 (Level II Partial 

Hospitalization (4 or more services) for hospital-based PHPs). We implemented these 

four APCs for CY 2011. We adopted payment rates for each APC based on the cost data 

derived from claims and cost reports for the provider type to which the APC is specific 

and provided a transition to CMHC rates based solely on CMHC data for the two CMHC 

PHP per diem rates. For CY 2012, we are continuing the four APC provider-specific 

structure we adopted for CY 2011 and are finalizing our proposal to base payment fully 
CMS-1525-FC 1481 

on the cost data for the type of provider furnishing the service. We modeled the impact 

of this APC policy assuming that CMHCs will continue to provide the same number of 

days of PHP care, with each day having either 3 services or 4 or more services, as seen in 

the CY 2010 claims data used for this CY 2012 OPPS/ASC final rule with comment 

period. We excluded days with 1 or 2 services because our policy only pays a per diem 

rate for partial hospitalization when 3 or more qualifying services are provided to the 

beneficiary. Because the relative payment 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 that 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 impact of adopting the CY 2012 wage index 

values will result in a decrease 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 increase 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 results in no change to 

the cumulative 30.8 percent decrease. Column 7 shows that adding the 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 changes 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 policy. Combining this OPD fee schedule increase factor with 

changes in APC policy for CY 2012, the CY 2012 wage index updates, and with changes 

in outlier and pass-through payments, we estimate that the combined impact on hospitals 

within the OPPS system will be a 1.9 percent 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 PROSPECTIVE 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 1.9 
CMS-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 Lines 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 5.5 
CMS-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/DSH 
CMS-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 aggregate 

increase in OPPS payments to cancer hospitals of $71 million when TOPs are included.. 

Column (5) shows the impact of all budget neutrality adjustments 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 received on the proposed rule, we are 

providing the payment impact of the rural floor and imputed floor with budget neutrality 
CMS-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 the 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 receives or contributes to fund the rural floor 

and the imputed floor with national budget neutrality. This column compares the 

post-reclassification CY 2012 wage index of providers before the rural floor and the 

imputed floor adjustment and the post-reclassification CY 2012 wage index of providers 

with the rural floor and the imputed floor adjustment. 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 -0.7 
CMS-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 -1.0 
CMS-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 Rule 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 for services for which the OPPS payments 

will fall. For example, for a service assigned 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 decline 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 payment 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 discussion on the calculation of the national 

unadjusted copayments and minimum unadjusted copayments, we refer readers to section 
CMS-1525-FC 1489 

II.I. of this final rule with comment period. In all cases, the statute limits beneficiary 

liability for copayment for a procedure to the hospital inpatient deductible for the 

applicable year. The CY 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 copayment liability using CY 2010 claims. We 

estimate, using the claims of the 4,161 hospitals and CMHCs on which our modeling is 

based, that total beneficiary liability for 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 amounts established under the OPPS affect the 

payments made to ASCs as discussed in section XIII. of this final rule with comment 

period. No types of providers other than hospitals, CMHCs and ASCs are affected by the 

changes in this final rule with comment period. 

(6) Effects on the Medicare and Medicaid Programs 

 The effect on the Medicare program is expected to be $600 million in additional 

program payments for OPPS services furnished in CY 2012. The effect on the Medicaid 

program is expected to be limited to increased copayments that Medicaid may make on 

behalf of Medicaid recipients who are also Medicare beneficiaries. We refer readers to 

our discussion of the impact on beneficiaries 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 final rule with comment period. 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 payable drugs and biologicals. 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 applied 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 proposed redistribution 

amount of $215 million in order to keep the 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 and 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 pharmacy overhead cost currently attributed to 
CMS-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 approximately $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 biologicals 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 redistribution of pharmacy overhead cost that may arise 

from CY 2012 final rule claims data will occur 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 biologicals that do not have pass-through status for CY 2012. 

The first alternative we considered was to compare the estimated aggregate cost of 

separately payable drugs and biologicals in our claims data to the estimated aggregate 

ASP dollars for separately payable drugs and biologicals, using the ASP as a proxy for 

average acquisition cost, to calculate the estimated percent of ASP that would serve as 

the best proxy for the combined acquisition and pharmacy overhead costs of separately 
CMS-1525-FC 1492 

payable drugs and biologicals (70 FR 68642), but without redistribution of estimated 

pharmacy overhead costs. Under this methodology 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 section 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 choose this alternative because we believe that 

this analysis indicates that hospital charging practices reflected in our standard drug 

payment methodology have the potential to “compress” the calculated costs of separately 

payable drugs and biologicals to some degree when there is no redistribution of estimated 

pharmacy overhead costs. Further, we recognize that the attribution of pharmacy 

overhead costs to packaged or separately payable drugs and biologicals through our 

standard drug payment methodology of a combined payment for acquisition and 

pharmacy overhead costs depends, in part, on the treatment of all drugs and biologicals 

each year under our annual drug packaging threshold. Changes to the packaging 

threshold may result in changes to payment for the overhead cost of drugs and biologicals 

that do not reflect actual changes in hospital pharmacy overhead cost for those products. 

 The second alternative we considered and the one we proposed for CY 2012 is to 

continue our pharmacy overhead redistribution 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 handling 
CMS-1525-FC 1493 

redistribution amount of $200 million using the PPI for Pharmaceuticals for Human Use, 

resulting in a proposed CY 2012 redistribution amount of $215 million and payments of 

ASP+4 percent. In the final rule, redistributing $215 million in overhead between 

packaged drugs and biologicals to separately payable drugs and pharmaceuticals would 

have resulted in a combined payment of ASP+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 section V.B.3.b of this final rule with comment 

period, we determined that this decline of the methodologically derived ASP+X percent 

is due to increasing the interim claims data used in the proposed rule calculations to a 

whole year’s data for the final rule while keeping the drug overhead redistribution 

amount constant. Further, after additional analysis, we believe that this decline in the 

ASP+X amount for the final rule due to the inclusion 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. Therefore, 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 considered, and the one that we selected for CY 2012, is 

to continue the overhead redistribution methodology that we finalized in the CY 2010 
CMS-1525-FC 1494 

OPPS/ASC final rule with comment period, 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 overhead 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 the 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 percent of total drug and biological costs; and 

$161 million for coded packaged drugs and biologicals, or 35 percent of total costs) we 

will update the redistribution amounts to keep 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 coded 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 redistribution amount of $240.3 million. This option 

keeps the percentage of coded packaged and 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 of 
CMS-1525-FC 1495 

pharmacy overhead costs associated with drugs 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 the cost of drugs and biologicals, incurred by 

cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to 

ambulatory classification groups exceed the costs incurred by other hospitals furnishing 

services under this subsection (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 appropriate 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 traditional provider-level database of costs, modeled 

payments, units, service mix, wage index and other provider information that we 

typically use to establish class adjustments under the OPPS. We observed that cancer 

hospitals were more costly with respect to APC groups than other hospitals paid under 

the OPPS, having a standardized cost per 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 standard analytic database and determined 

that cancer hospitals are more costly with respect to APC groups than other hospitals 
CMS-1525-FC 1496 

within the OPPS system, we are finalizing our proposal, with modification after 

consideration of the public comments we received, to provide a payment adjustment for 

cancer hospitals for CY 2012 based on a comparison of costliness relative to payments 

using cost report data. Specifically, the cancer hospital payment adjustment amounts will 

be provided on an aggregate basis at cost report settlement and will be equal to the 

amount of additional payment needed for a resulting 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”. The 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 total payments to cancer hospitals, including 

TOPs, are estimated to increase by 11.3 percent in CY 2012. 

We considered three alternatives for the proposed OPPS payment adjustment for 

certain cancer hospitals. The first alternative 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 percent 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 establish an adjustment for a large class of 

rural hospitals. In contrast, section 3138 of the Affordable Care Act is specifically 
CMS-1525-FC 1497 

limited to identifying an adjustment for 11 cancer hospitals to the extent that their costs 

with respect to APC groups exceeded the costs 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 the OPPS), we were concerned that the 

standard explanatory and payment 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 hospitals must include the cost of drugs and 

biologicals. 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 cancer 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 provide a 34.6 percent 

payment increase for each cancer hospital. Because this alternative did not seem 

equitable to other hospitals furnishing services under OPPS as it would result in a PCR 

for most cancer hospitals that is higher than the weighted average PCR of other hospitals 
CMS-1525-FC 1498 

furnishing services under OPPS and a much larger 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 amount at cost report settlement that is equal to the amount 

of additional payment needed for a resulting 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 target PCR (before the cancer hospital payment 

adjustment), the aggregate payment amount provided at cost report settlement is equal to 

zero. For purposes of calculating the aggregate adjustment amounts to be provided in CY 

2012, we chose to rely on this straightforward assessment of payments and costs from the 

cost report data because of the concerns outlined above with respect to the small number 

of hospitals, and because of the challenges associated with accurately 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 establish the APC Panel as the independent 

advisory body that will recommend to CMS the appropriate supervision level for 

individual hospital outpatient therapeutic services. 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 the 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 include 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 this 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 requirements. Because currently there is little 

representation of small rural PPS hospitals on the Panel, we believe that additional 

representation of these providers is appropriate. 

We also considered an alternative with respect to how CMS will issue final 

decisions on required supervision levels. We considered subjecting our decisions to 

notice and comment rulemaking because most public 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. Public commenters who responded to the proposed 

rule and to the CY 2011 OPPS/ASC final rule with comment period requested that CMS 

provide such flexibility. In addition, there is precedent for setting outpatient supervision 
CMS-1525-FC 1500 

levels using a subregulatory process. Our final policy is similar to the process that the 

agency uses to set the supervision 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 exemplary history of providing valuable 

advice to CMS with regard to the payment and clinical issues associated with the APC 

groupings of hospital outpatient therapeutic services under the OPPS. We believe that 

extension of the function of the Panel to providing advice on supervision of individual 

hospital outpatient therapeutic services will result in both full consideration of the views 

of all types of hospitals and the best advice 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 payment rates for covered ASC services to 

implement the revised payment system so that it would be designed to result in budget 

neutrality as required by section 626 of Pub. L. 108-173; established that the OPPS 

relative payment weights would be the basis for payment and that we would update the 

system annually as part of the OPPS rulemaking cycle; and provided that the revised 

ASC payment rates would be phased in over 4 years. During the 4-year transition to full 

implementation of the ASC payment rates, payments for surgical procedures performed 
CMS-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 rate 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 standard ratesetting methodology for the same 

procedure. In CY 2009, we paid ASCs using 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 surgical procedures and 50 percent of the CY 2009 ASC 

rate calculated according to the ASC standard ratesetting methodology for the same 

procedure. For CY 2010, we transitioned the blend to a 25/75 blend of the CY 2007 ASC 

rate and the CY 2010 ASC payment rate calculated 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 multiplying 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 ASC 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 weights on payment rates during this second year 

of full implementation of the ASC payment rates calculated according to the ASC 
CMS-1525-FC 1502 

standard ratesetting methodology are varied and are reflected in the estimated payments 

displayed in Tables 61 and 62 below. 

Beginning in CY 2011, section 3401 of the Affordable Care Act requires that the 

annual update to the ASC payment system, which is the consumer price index for all 

urban consumers (CPI-U), be reduced by the productivity adjustment. The Affordable 

Care Act defines the productivity adjustment to be equal to the 10-year moving average 

of changes in annual economy-wide private nonfarm business multifactor productivity 

(MFP) (as projected by the Secretary for the 10-year period ending with the applicable 

fiscal year, year, cost reporting period, or other annual period). We calculated the 

CY 2012 ASC conversion factor by adjusting 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 applying the CY 2012 MFP-adjusted CPI-U 

update factor of 1.6 percent (2.7 percent CPI-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 effects of the changes for CY 2012 on Medicare 

payment to ASCs. A key limitation of our analysis is our inability to predict changes in 

ASC service-mix between CY 2010 and CY 2012 with 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 changes may have differential effects across 

surgical specialty groups as ASCs continue to adjust to the payment rates based on the 

policies of the revised ASC payment system. We are unable to accurately project such 
CMS-1525-FC 1503 

changes at a disaggregated level. Clearly, individual ASCs will experience changes in 

payment that differ from the aggregated estimated impacts presented below. 

(2) Estimated Effects of 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 lesions to hernia repair to cataract extraction; others focus 

on a single specialty and perform only a limited range of surgical procedures, such as 

eye, digestive system, or orthopedic procedures. The combined effect on an individual 

ASC of the update to the CY 2012 payments will depend on a number of factors, 

including, but not limited to, the mix of services the ASC provides, the volume of 

specific services provided by the ASC, the percentage of its patients who are Medicare 

beneficiaries, and the extent to which an ASC provides different services in the coming 

year. The following discussion presents tables that display estimates of the impact of the 

CY 2012 update to the revised ASC payment system on Medicare payments to ASCs, 

assuming the same mix of services as reflected in our CY 2010 claims data. Table 61 

depicts the estimated aggregate percent change in payment by surgical specialty or 

ancillary items and services group by comparing 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 specialty or ancillary items and services group. 

We have aggregated the surgical HCPCS codes by specialty group, grouped all HCPCS 
CMS-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 procedures are grouped or the ancillary items and 

services group which includes all HCPCS codes for covered ancillary items and services. 

To group surgical procedures by surgical specialty, we used the CPT code range 

definitions and Level II HCPCS codes and Category III CPT codes as appropriate, to 

account for all surgical procedures to which the Medicare program payments are 

attributed. 

● Column 2—Estimated CY 2011 ASC Payments were calculated using 

CY 2010 ASC utilization (the most recent full year of ASC utilization) and CY 2011 

ASC payment rates. The surgical specialty and ancillary items and services groups are 

displayed in descending order based on estimated CY 2011 ASC payments. 

● Column 3—Estimated CY 2012 Percent Change is the aggregate percentage 

increase or decrease in Medicare program payment to ASCs for each surgical specialty or 

ancillary items and services group that will be attributable 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 adnexa 
CMS-1525-FC 1505 

procedures, a 4 percent increase in aggregate payment amounts for digestive system 

procedures, and a 0 percent change in aggregate payment amounts for nervous system 

procedures. 

 Generally, for the surgical specialty groups that account for less ASC utilization 

and spending, we estimate that the payment effects of the CY 2012 update are variable. 

For instance, we estimate that, in the aggregate, payment for genitourinary system 

procedures and hematologic and lymphatic systems procedures will increase by 5 

percent, whereas auditory system procedures will decrease by 2 percent under the 

CY 2012 rates. 

An estimated increase in aggregate payment for the specialty group does not mean 

that all procedures in the group will experience increased payment rates. For example, 

the estimated increase for CY 2012 for genitourinary system procedures is likely due to 

an increase in the ASC payment weight for some 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 separate estimate of Medicare ASC payments for 

the group of separately payable covered ancillary items and services. The payment 

estimates for the covered surgical procedures include the costs of packaged ancillary 

items and services. Payment for New Technology Intraocular Lenses (NTIOLs) is 

captured under this category. Because the NTIOL class for reduced spherical aberration 

expired on February 26, 2011, and a new NTIOL class was not approved during CY 2011 

or CY 2012 rulemaking, we redistributed the estimated payment dedicated to separately 
CMS-1525-FC 1506 

paid NTIOLs in CY 2011 while the NTIOL class was active to other 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 AGGREGATE 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 procedures receiving the greatest estimated 

CY 2011 aggregate Medicare payments to ASCs. 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 payments 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 Medicare payment to ASCs in CY 2011, 

specifically eye and ocular adnexa, digestive system, and nervous system surgical groups. 

Consistent with the estimated payment effects 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 removal procedure reported with CPT code 66984 

(Cataract surg w/iol 1 stage). We estimate that 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 included in Table 62 are slightly 

more significant. We estimate that the payment rate for CPT code 67904 (Repair eyelid 
CMS-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 indicate 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 procedures listed in 

Table 62 will be neutral or will increase by 2 to 4 percent except CPT code 29826 

(Shoulder arthroscopy/surgery), which is estimated 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 estimated to decrease by 5 percent. 

Musculoskeletal procedures in general are expected to account for a greater percentage of 
CMS-1525-FC 1509 

CY 2012 Medicare ASC spending as we estimate that payment for procedures in that 

surgical specialty group will increase under 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 deleting 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 determined Medicare payments would support their 

continued operation. We note that, historically, the ASC payment rates for many of the 

most frequently performed procedures in ASCs 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 were performed least often in ASCs. We 

believed that the revised ASC payment system would encourage greater efficiency in 

ASCs and would promote significant increases in the breadth of surgical procedures 

performed in ASCs because it distributes payments across the entire spectrum of covered 

surgical procedures based on a coherent system of relative weights that are related to the 

clinical and facility resource requirements of those procedures. 

The CY 2010 claims data that we used to develop the CY 2012 ASC payment 

system relative payment weights and rates reflect the third year of utilization under the 
CMS-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 increases in spending for the hematologic and 

lymphatic systems compared to the previous ASC payment system. 

(3) Estimated Effects of This Final Rule with Comment Period on Beneficiaries 

 We estimate that the CY 2012 update to the ASC payment system will be 

generally positive for beneficiaries with respect to the new procedures that we are adding 

to the ASC list of covered surgical procedures and for those that we are designating as 

office-based for CY 2012. First, other than certain preventive services where coinsurance 

and the Part B deductible is waived to comply with sections 1833(a)(1) and (b) of the 

Act, the ASC coinsurance rate for all procedures is 20 percent. This contrasts with 

procedures performed in HOPDs, where the beneficiary is responsible for copayments 

that range from 20 percent to 40 percent of the procedure payment. Second, in almost all 

cases, the ASC payment rates under the 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. (The only exceptions would be if the ASC 

coinsurance amount exceeds the inpatient deductible. The statute requires that 

copayment amounts under the OPPS not exceed the inpatient deductible.) Furthermore, 

the additions to the ASC list of covered surgical procedures will provide beneficiaries 

access to more surgical procedures in ASCs. Beneficiary coinsurance for services 
CMS-1525-FC 1512 

migrating from physicians' offices to ASCs may decrease or increase under the revised 

ASC payment system, depending on the particular service and the relative payment 

amounts for that service in the physician's office compared to the ASC. However, for 

those additional procedures that we are designating as office-based in CY 2012, the 

beneficiary coinsurance amount would be no greater than the beneficiary coinsurance in 

the physician's office because the coinsurance in both settings is 20 percent. 

(4) Alternatives Considered 

 Alternatives to the changes we are making and the reasons that we have chosen 

specific options are discussed throughout this final rule with comment period. Some of 

the major ASC issues discussed in this final 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 consideration of the most recent available volume and 

utilization data for each individual procedure HCPCS code and, if appropriate, the 

clinical characteristics, utilization, and volume of related HCPCS codes. We establish 

payment for procedures designated as office-based at the lesser of the MPFS nonfacility 

practice expense payment amount or the ASC rate developed according to the standard 

methodology of the 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 OPPS/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 designations 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 was 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 revised ASC payment system. We did not select 

this alternative because our analysis of the data 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 temporarily as office-based, are considered to 

be predominantly performed in physicians’ offices. Consistent with our final policy 

adopted in the August 2, 2007 final rule (72 FR 42509 through 42513), we were 

concerned that making payments at the standard ASC payment rate for the 10 procedures 

we proposed to designate as permanently office-based and the 8 procedures we proposed 
CMS-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 appropriate setting for surgical care. Further, consistent 

with our policy, we believe that when adequate data become available to make permanent 

determinations about procedures with temporary office-based designations, maintaining 

the temporary designation is no longer appropriate. 

 The second alternative we considered and the one we are selecting for CY 2012 is 

to designate 10 additional procedures as permanently 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 alternative 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 applicable, is an appropriate step 

to ensure that Medicare payment policy does not create financial incentives for such 

procedures to shift unnecessarily from physicians’ offices to ASCs, consistent with our 

final policy adopted in the August 2, 2007 final rule. 

c. Accounting Statements and Tables 

 As required by OMB Circular A-4 (available at 

http://www.whitehouse.gov/omb/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 President’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. Lastly, 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 Government to outpatient hospitals and 

other providers who received payment under 

the hospital OPPS 

Total $600 million 

TABLE 64.--ACCOUNTING STATEMENT: CLASSIFICATION OF 

ESTIMATED TRANSFERS FROM CY 2011 TO CY 2012 AS A RESULT OF THE 

FINAL CY 2012 UPDATE TO THE REVISED ASC PAYMENT SYSTEM 

Category Transfers 

Annualized Monetized Transfers $45 million 

From Whom to Whom 

Federal Government to Medicare Providers 

and Suppliers 

Total $45 million 
CMS-1525-FC 1516 

d. Effects of Requirements for the Hospital Outpatient Quality Reporting (OQR) 

Program 

 In section XVI. of the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68758 through 68781), section XVI. of the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60629 through 60655), and section XVI. of the CY 2011 

OPPS/ASC final rule with comment period (75 FR72064 through 72110), we discussed 

our requirements for subsection (d) hospitals to report quality data under the Hospital 

OQR Program in order to receive the full OPD fee schedule increase factor for CY 2010, 

CY 2011, and CY 2012-2014, respectively. In section XIV. of this final rule with 

comment period, we are finalizing our proposal to adopt additional 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 factor for CY 2011. Most of these 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 OPPS/ASC final rule with comment period 

(74 FR 60647 through 60650), for the CY 2011 payment update, as part of the validation 

process, we required hospitals to submit paper copies of requested medical records to a 

designated contractor within the required timeframe. Failure to submit requested 
CMS-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 failure to attain a validation score threshold 

would not. 

 In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with comment period, 

we finalized our proposal to validate data submitted by 800 hospitals of the 

approximately 3,200 participating hospitals for purposes of the CY 2012 Hospital OQR 

Program payment determination. We stated our belief that this approach was suitable for 

the CY 2012 Hospital OQR Program because it would: produce a more reliable estimate 

of whether a hospital’s submitted data have been abstracted accurately; provide more 

statistically reliable estimates of the quality of care delivered in each selected hospital as 

well as at the national level; and reduce overall hospital burden because most hospitals 

would not be selected to undergo validation each year. We adopted a threshold of 

75 percent as the threshold for the validation score because we believed this level was 

reasonable for hospitals to achieve while still ensuring accuracy of the data. 

Additionally, this level is consistent with what we adopted in the Hospital Inpatient 

Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality 

Data for Annual Payment Update (RHQDAPU) program)) (75 FR 50225 through 50229). 

As a result, we believed that the effect of our validation process for CY 2012 would be 

minimal in terms of the number of hospitals that would not meet all program 

requirements. 

 In this final rule with comment period, we are finalizing our proposal to validate 

data submitted by up to 500 of the approximately 3,200 participating hospitals for 
CMS-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 conduct 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 estimate the number of hospitals that may not 

receive the full OPD fee schedule increase factor in CY 2013. We also are unable to 

estimate the number of hospitals that would 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 payment determinations, and finalized for the 

CY 2013 payment determination, respectively, 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 requirement for medical record documentation for 
CMS-1525-FC 1519 

7,300 total cases for CY 2011, a maximum of 12 cases per quarter for 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 are 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 requirement. 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 after the end of each 

quarter. 

e. Effects of Changes to Physician 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 physician ownership or investment in hospitals. The amended 

whole hospital and rural provider 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 
CMS-1525-FC 1520 

Secretary shall establish and implement an exception process to the prohibition on 

expansion of facility capacity. 

Most physician-owned hospitals are unable 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 ownership or investment in publicly traded securities in a 

corporation where there is stockholder equity exceeding $75 million at the end of the 

corporation’s most recent fiscal year or on average 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 prohibition on expansion of facility capacity. New 

§ 411.362(c)(2) outlines the requirements for an applicable hospital 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 the Bureau of the Census, in addition to 

referencing data from the hospital’s individual cost reports and making certain estimates 

on the basis of its cost report data. We believe the impact of these requirements on 

affected hospitals will be minimal. 
CMS-1525-FC 1521 

Our new regulations require each hospital requesting an exception to provide 

documentation supporting its calculations to demonstrate that it satisfies the relevant 

criteria. Our new regulations further require each hospital to provide 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 licensed as of the date that the hospital submits 

a request for an exception. Each hospital also is required to provide a detailed 

explanation regarding whether and how it satisfies each of the relevant criteria. We 

believe physician-owned hospitals will be minimally affected by these requirements. 

Our regulations require each hospital requesting 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 beneficiaries of Federal health care programs. In 

addition, under our new regulations, if CMS were to receive input from the community 

related to a particular hospital’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 finalizing 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 would be impracticable. Further, we are not 

aware of any existing data or projections that may produce an estimate with reasonable 
CMS-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 the potential increase in operation rooms, 

procedure rooms, or beds pursuant to exceptions potentially approved. We also have no 

data or projections that may help estimate 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 hospitals seeking an 

exception to the prohibition on expansion of facility capacity are consistent with the 

physician self-referral statute and regulations and the current practices of most hospitals. 

Thus, our requirements will present a negligible impact on physician-owned hospitals. 

Physician-owned hospitals will bear costs associated with requesting an exception to the 

prohibition on facility expansion. In part, because hospitals are currently undertaking the 

costs of producing a cost report, we believe that the cost of referencing the required data 

and making the required estimates will be negligible. In addition, we believe the costs of 

providing supporting documentation, certifying nondiscrimination 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 operating rooms, procedure rooms, and beds may augment the 

volume or nature of services offered by physician-owned hospitals. An expansion in the 

number of hospital beds may also permit additional inpatient admissions and overnight 
CMS-1525-FC 1523 

stays. Increased operating rooms, procedure rooms, and beds may result in improved 

access to health care facilities and services. We believe that our regulatory changes are 

necessary to conform our regulations 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 beneficiary 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 Agreement Regulations on Patient Notification 

Requirements 

In section XV.D. of this final rule with 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 indicate how the hospital will meet the medical 

needs of any patient who develops an emergency 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 provider agreement regulations to reduce the 

categories of outpatients who must be notified if hospital does not have a doctor of 

medicine or doctor of osteopathy on site 24 hours a day/7 days a week. We are finalizing 

our proposal that only those outpatients who receive observation services, surgery, or 
CMS-1525-FC 1524 

services involving anesthesia must receive written notice. We are not making any 

changes to our patient safety requirements 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 doctor 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 doctor of osteopathy is not present. 

We believe our changes to the provider agreement regulations will result in only a 

minor change in the number of hospitals that are subject to the disclosure 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 osteopathy 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 disclosures given by hospitals to patients. We 

believe the cost of implementing these provisions borne by hospitals will be limited to a 

one-time cost associated with completing minor 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 staff. Therefore, we do not believe that these 

changes will have any significant 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 physicians, 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 finalizing 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 economic impact on the hospital. 

 Overall, we believe that beneficiaries will be positively impacted by these 

provisions. Specifically, disclosure 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 impede patient access to health care facilities 

and services. In fact, we believe that our policies will help minimize anti-competitive 

behavior that can affect the decision as to where a beneficiary 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 directs the Secretary to begin making 

value-based incentive payments under the Hospital VBP Program to hospitals for 

discharges occurring on or after October 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 percent, as required by section 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 Hospital VBP Program. Specifically, we are 
CMS-1525-FC 1526 

finalizing our proposal to add one chart-abstracted 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 Hospital 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 required 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 hospitals and CAHs that are participating in the Medicare EHR 

Incentive Program to meet the CQM reporting requirement of the program for payment 

year 2012 by participating in the 2012 Electronic Reporting Pilot. This alternative will 

facilitate the use of an electronic infrastructure that supports the use of EHRs by hospitals 

and CAHs to meet the requirements in various CMS programs and reduce reporting 

burden simultaneously. Through this pilot, we are encouraging eligible hospitals and 

CAHs to take steps toward the adoption of EHRs that will allow for reporting of clinical 

quality data from EHRs to a CMS data repository. We expect that the submission of 

quality data through EHRs will provide a foundation for establishing the capacity of 

hospitals and CAHs to send, and for CMS, in the 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 toward reporting clinical quality data in such a way. 
CMS-1525-FC 1527 

i. Effect of Requirements for the Ambulatory 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 significant impact on a substantial number of small entities. For 

purposes of the RFA, we estimate that most hospitals, ASCs and CMHCs are small 

entities as that term is used in the RFA. For purposes of the RFA, most hospitals are 

considered small businesses according to the Small Business Administration’s size 

standards with total revenues of $34.5 million or less in any single year. Most ASCs and 

most CMHCs are considered small businesses with total revenues of $10 million or less 

in any single year. For details, see the Small Business Administration’s “Table of Small 

Business Size Standards” at http://www.sba.gov/content/table-small-business-sizestandards. 

In addition, section 1102(b) of the 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. This analysis must conform to the provisions 
CMS-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 outside of a metropolitan statistical area and has 

fewer than 100 beds. We estimate that this final rule with comment period may have a 

significant impact on approximately 704 small rural hospitals. 

The analysis above, together with the remainder of this preamble, provides a 

regulatory flexibility analysis and a regulatory impact analysis. 

C. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 

requires that agencies assess anticipated costs and benefits before issuing any rule whose 

mandates require spending in any 1 year of $100 million in 1995 dollars, updated 

annually for inflation. That threshold level is currently approximately $135 million. This 

final rule with comment period does not mandate 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 increase 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 neutrality requirements that will result in a 

1.9 percent increase in payments for all services paid under the OPPS in CY 2012, after 

considering all changes to APC reconfiguration and recalibration, as well as the OPD fee 

schedule increase factor, wage index changes, including the frontier State wage index 
CMS-1525-FC 1529 

adjustment, the addition of an adjustment for dedicated cancer hospitals, estimated 

payment for outliers, and changes to the pass-through payment estimate. However, some 

classes of providers that are paid under the OPPS will experience 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 receive an increase in payments under 

the OPPS of 13.7 percent for CY 2012. In contrast, 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 services 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 for participation in the Medicare program. 

The effect on an individual ASC will depend on its mix of patients, the proportion of the 

ASC’s patients 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 provides a different set of procedures in the coming year. Table 

61 demonstrates the estimated distributional impact among ASC surgical specialties of 

the MFP-adjusted CPI-U update of 1.6 percent for CY 2012. 

XXI. Federalism Analysis 

Executive Order 13132 establishes certain requirements that an agency must meet 

when it promulgates a proposed rule (and subsequent final rule) that imposes substantial 
CMS-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 Executive Order 13132, Federalism, and have 

determined that they will not have a substantial direct effect on State, local or tribal 

governments, preempt State law, or otherwise have a Federalism implication. As 

reflected in Table 59 of this final rule with comment period, we estimate that OPPS 

payments to governmental hospitals (including State and local governmental hospitals) 

will increase by 1.6 percent under this final rule with comment period. While we do not 

know the number of ASCs or CMHCs with government ownership, we anticipate that it 

is small. We believe that the provisions related to payments to ASCs or CMHCs in 

CY 2012 will not affect payments to any 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 remainder 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 RFA, and section 1102(b) of the Act. 

This final rule with comment period will affect payments to a substantial number 

of small rural hospitals and a small number of rural ASCs, as well as other classes of 

hospitals, CMHCs, and ASCs, and some effects may be significant. 
List of Subjects 

42 CFR Part 410

 Health facilities, Health professions, Laboratories, 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 and recordkeeping requirements. 

42 CFR Part 489 

 Health facilities, Medicare, Reporting and recordkeeping requirements. 

42 CFR Part 495 

 Computer technology, Electronic health records, Electronic transactions, Health, 

Health care. Health information technology, Health insurance, Health records, Hospitals, 

Laboratories, Medicaid, Medicare, Privacy, Reporting and recordkeeping requirements, 

Public health, Security. 

 For reasons stated in the preamble of this document, the Centers for Medicare & 

Medicaid Services is 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 practitioner’s service: Conditions.

 (a) Medicare Part B pays for therapeutic hospital or CAH services and supplies 

furnished incident to a physician’s or nonphysician practitioner’s service, which are 

defined as all services and supplies furnished to hospital or CAH outpatients that are not 

diagnostic services and that aid the physician or nonphysician practitioner in the 

treatment of the patient, including drugs and biologicals that cannot be self-administered, 

if— 

 (1) They are furnished— 

 (i) By or under arrangements made by the participating hospital or CAH, except 

in the case of a SNF resident as provided in § 411.15(p) of this subchapter; 

 (ii) As an integral although incidental part of a physician’s or nonphysician 

practitioner’s services; 

 (iii) In the hospital or CAH or in a department of the hospital or CAH, as defined 

in § 413.65 of this subchapter; and 
CMS-1525-FC 1533 

 (iv) Under the direct supervision (or other level of supervision as specified by 

CMS for the particular service) of a physician or a nonphysician practitioner as specified 

in paragraph (g) of this section, subject 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 that the physician or nonphysician practitioner 

must be immediately available to furnish assistance and direction throughout the 

performance of the procedure. It does not mean that the physician or nonphysician 

practitioner must be present 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 specified at § 410.32(b)(3)(i), and personal supervision means the 

definition specified at § 410.32(b)(3)(iii); 

 (C) Nonphysician practitioners may provide the required supervision of services 

that they may personally furnish in accordance with State law and all additional 

requirements, including those specified in §§ 410.71, 410.73, 410.74, 410.75, 410.76, and 

410.77; 

 (D) For pulmonary rehabilitation, cardiac rehabilitation, and 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 therapeutic services (extended duration 

services), which are hospital or CAH outpatient therapeutic services that can last a 
CMS-1525-FC 1534 

significant period of time, have a substantial 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 the initiation of the 

service, and are not primarily surgical in nature, Medicare requires a minimum of direct 

supervision during the initiation of the service which 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 patient is stable and the supervising physician or 

the appropriate nonphysician practitioner determines that the remainder of the service can 

be delivered safely under general supervision. 

 (2) In the case of partial hospitalization services, also 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 furnished to outpatients in a foreign country are 

specified in subpart H of Part 424 of this chapter. 

 (e) Medicare Part B pays for partial hospitalization services if they are— 

 (1) Prescribed by a physician who certifies and recertifies the need for the 

services in accordance with subpart B of part 424 of this chapter; and 
CMS-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, “nonphysician practitioner'” means a clinical 

psychologist, licensed clinical social worker, physician assistant, nurse practitioner, 

clinical nurse specialist, or certified nurse-midwife. 

PART 411—EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON 

MEDICARE PAYMENT

3. The authority citation for Part 411 continues to read as follows: 

Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 of the Social 

Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh and 1395nn). 

4. Section 411.362 is amended by— 

a. Under paragraph (a), adding the definitions of “Baseline number of operating 

rooms, procedure rooms, and beds” and “main 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 concerning 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 effect 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 expansion 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 percent of the percentage increase 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 use Bureau of the Census estimates. 

 (ii) Medicaid inpatient admissions. Has an annual percent of total 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 during the most recent fiscal year for which data are available as of the date that 

the hospital submits its request. A hospital must use filed hospital cost report discharge 

data to estimate its annual percent of total inpatient admissions under Medicaid. 

 (iii) Nondiscrimination. Does not discriminate against beneficiaries of Federal 

health care programs and does not permit physicians 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 than the national average bed capacity 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 State 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 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 hospital 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 admissions under Medicaid that is estimated to be 

greater than such percent with respect to such admissions for any other hospital located in 

the county in which the hospital is located. A hospital must use filed hospital cost report 

discharge data to estimate its annual percentage of total inpatient admissions under 

Medicaid and the annual percentages of total inpatient admissions under Medicaid for 

every other hospital located in the county in which the hospital is located. 

 (iii) Nondiscrimination. Does not discriminate against beneficiaries of Federal 

health care programs and does not permit physicians 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 Provider Identification number(s) (NPI), Tax 

Identification Number(s) (TIN), and CMS Certification 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 request with CMS on behalf of the hospital. 

 (D) A statement identifying the hospital as an applicable hospital or high 

Medicaid facility and a detailed explanation with supporting documentation regarding 

whether and how the hospital satisfies each of the criteria for an applicable hospital or 

high Medicaid facility. The request must state that the hospital does not discriminate 

against beneficiaries of Federal health care programs and does not permit physicians 

practicing at the hospital to discriminate against such beneficiaries. 

 (E) Documentation supporting the hospital’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 exception; and the additional number of operating 

rooms, procedure rooms, and beds by which the hospital requests to expand. 

 (iii) A request must include the following certification signed by an authorized 

representative of the hospital: “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 correct to the best of 
CMS-1525-FC 1540 

my knowledge and belief.” An authorized representative 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 the hospital receives a CMS decision, the hospital must 

disclose on any public Web site for the hospital 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 than 30 days after CMS publishes notice of the hospital’s 

request in the Federal Register. Such input must take the form of written comments. 

The written comments must be either mailed or submitted 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 comments 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 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 operating rooms, procedure rooms, and beds; and 

 (ii) May occur only in facilities on the hospital’s main campus. 

 (7) Publication of final decisions. Not later than 60 days after receiving a 

complete request, CMS will publish the final decision in the Federal Register. 
CMS-1525-FC 1541 

 (8) Limitation on review. There shall be no administrative or judicial review 

under section 1869, section 1878, or otherwise of the process under this section 

(including the establishment of such process). 

PART 416—AMBULATORY SURGICAL SERVICES 

5. The authority citation for Part 416 continues to read as follows: 

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

and1395hh). 

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 performed in an ASC, and for which standard 

medical practice dictates that the beneficiary would not typically 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 payment 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 Web 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 procedure 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 procedures 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 value units under § 414.22(b)(5)(i)(B) of this 

subchapter multiplied by the conversion factor described in §414.20(a)(3) of this 

subchapter. 
CMS-1525-FC 1543 

 (1) The national unadjusted ASC payment rate for covered ancillary radiology 

services that involve certain nuclear medicine procedures will be the amount determined 

under paragraph (a) of this section. 

 (2) The national unadjusted ASC payment rate for covered ancillary radiology 

services that use contrast agents will be the amount determined under paragraph (a) of 

this section. 

* * * * * 

 8. Section 416.173 is revised to read as follows: 

§ 416.173 Publication of revised payment methodologies and payment rates.

 CMS publishes annually, through notice 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 designates 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 Social 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 “; and” 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 subsequent 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 paragraph (b)(1)(iv)(B) of this section. 

 (B) * * * 

 (3) For calendar year 2012, a multifactor productivity 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 covered hospital outpatient department services 

furnished on or after January 1, 2012, by a hospital described in section 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 described in section 1886(d)(1)(B)(v) of the Act has a paymentto-cost ratio (PCR) before the cancer hospital 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 settlement to such hospital is equal to the amount needed 

to make the hospital’s PCR at cost report settlement (as determined by the Secretary) 

equal to the target PCR (as determined by the Secretary). 

 (ii) If a hospital described in section 1886(d)(1)(B)(v) of the Act has a paymentto-cost ratio (PCR) before the cancer hospital 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 the 
CMS-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 rural hospitals on or after January 1, 2006. 

For covered hospital outpatient services furnished in a calendar year from 

January 1, 2006, through December 31, 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 difference for services furnished during CY 2006, 

90 percent of that difference for services furnished during CY 2007, and 85 percent of 

that difference for services furnished during CYs 2008, 2009, 2010, 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 outpatient 
CMS-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 increased by 85 percent of that difference 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 AGREEMENTS 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 paragraph (w) to read as follows: 

§ 489.20 Basic commitments. 

* * * * * 

(w)(1) In the case of a hospital as defined in § 489.24(b), to furnish written notice 

to all patients at the beginning of their planned or unplanned inpatient hospital stay or at 

the beginning of any planned or unplanned outpatient visit for observation, surgery or any 

other procedure requiring anesthesia, if a doctor of medicine 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 regarding 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 provision of a package of information regarding 
CMS-1525-FC 1548 

scheduled preadmission testing and registration for a planned hospital admission for 

inpatient care or outpatient service. 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 hospital that is a main provider and has one or more remote 

locations of a hospital or one or more satellites, 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 required. 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 the 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 services 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 to 
CMS-1525-FC 1549 

be noticed by all individuals entering the dedicated emergency department. The posted 

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 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 present 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) “Reporting 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 of 
CMS-1525-FC 1550 

Medicaid eligible hospitals, the States) in the form and manner specified by CMS (or in 

the case of Medicaid eligible hospitals, the States). 

* * * * * 

 (vi) Exception for Medicare eligible hospitals and CAHs for FY 2012--

Participation in the Medicare EHR Incentive Program Electronic Reporting Pilot. In 

order to satisfy the clinical quality measure reporting objective in § 495.6(f)(9), aside 

from attestation, a Medicare eligible hospital or CAH may participate in the Medicare 

EHR Incentive Program Electronic Reporting Pilot. 

* * * * *
CMS-1525-FC 

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital 

Insurance; Program No. 93.774, Medicare—Supplementary Medical Insurance Program; 

and Program No. 93.778 (Medical Assistance) 

Dated: October 26, 2011

______________________________ 

 Donald M. Berwick, 

 Administrator,

 Centers for Medicare & Medicaid 

 Services. 

Dated: October 28, 2011

 ___________________________ 

 Kathleen Sebelius,

 Secretary. 

BILLING CODE 4120-01-P 
CMS-1525-FC 1552 

[FR Doc. 2011-28612 Filed 11/01/2011 at 4:15 pm; Publication Date: 11/30/2011]