Vol. 78 Friday, 

No. 139 July 19, 2013 

Part III 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 405, 410, 412, et al. 

Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment 

and Ambulatory Surgical Center Payment Systems and Quality Reporting 

Programs; Hospital Value-Based Purchasing Program; Organ Procurement 

Organizations; Quality Improvement Organizations; Electronic Health 

Records (EHR) Incentive Program; Provider Reimbursement Determinations 

and Appeals; Proposed Rule 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43534 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 405, 410, 412, 416, 419, 

475, 476, 486, and 495 

[CMS–1601–P] 

RIN 0938–AR54 

Medicare and Medicaid Programs: 

Hospital Outpatient Prospective 

Payment and Ambulatory Surgical 

Center Payment Systems and Quality 

Reporting Programs; Hospital ValueBased Purchasing Program; Organ 

Procurement Organizations; Quality 

Improvement Organizations; Electronic 

Health Records (EHR) Incentive 

Program; Provider Reimbursement 

Determinations and Appeals 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

revise the Medicare hospital outpatient 

prospective payment system (OPPS) and 

the Medicare ambulatory surgical center 

(ASC) payment system for CY 2014 to 

implement applicable statutory 

requirements and changes arising from 

our continuing experience with these 

systems. In this proposed rule, we 

describe the proposed changes to the 

amounts and factors used to determine 

the payment rates for Medicare services 

paid under the OPPS and those paid 

under the ASC payment system. In 

addition, this proposed rule would 

update and refine the requirements for 

the Hospital Outpatient Quality 

Reporting (OQR) Program, the ASC 

Quality Reporting (ASCQR) Program, 

and the Hospital Value-Based 

Purchasing (VBP) Program. 

We are proposing changes to the 

conditions for coverage (CfCs) for organ 

procurement organizations (OPOs); 

revisions to the Quality Improvement 

Organization (QIO) regulations; changes 

to the Medicare fee-for-service 

Electronic Health Record (EHR) 

Incentive Program; and changes relating 

to provider reimbursement 

determinations and appeals. 

DATES: Comment Period: To be assured 

consideration, comments on all sections 

of this proposed rule must be received 

at one of the addresses provided in the 

ADDRESSES section no later than 5 p.m. 

EST on September 6, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–1601–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (no duplicates, please): 

1. Electronically. You may (and we 

encourage you to) submit electronic 

comments on this regulation to http:// 

www.regulations.gov. Follow the 

instructions under the ‘‘submit a 

comment’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1601–P, P.O. Box 8013, Baltimore, 

MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments via express 

or overnight mail to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1601–P, Mail Stop C4–26–05, 

7500 Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal Government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call the telephone number (410) 

786–7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, we refer readers to the 

beginning of the SUPPLEMENTARY

INFORMATION section. 

FOR FURTHER INFORMATION, CONTACT: 

Marjorie Baldo, (401) 786–4617, for 

issues related to new CPT and Level 

II HCPCS codes, exceptions to the 2 

times rule, and stereotactic 

radiosurgery services. 

Anita Bhatia, (410) 786–7236, for issues 

related to the Ambulatory Surgical 

Center Quality Reporting (ASCQR) 

Program—Program Administration 

and Reconsideration Issues. 

Chuck Braver, (410) 786–9379, for 

issues related to the Advisory Panel 

on Hospital Outpatient Payment (HOP 

Panel). 

Erick Chuang, (410) 786–1816, for issues 

related to OPPS APC weights, mean 

calculation, copayments, wage index, 

outlier payments, cost-to-charge ratios 

(CCRs), and rural hospital payments. 

Diane Corning, (410) 786–8486, for 

issues related to the Conditions for 

Coverage for Organ Procurement 

Organizations (OPOs). 

Dexter Dickey, (410) 786–6856, or 

Dorothy Myrick, (410) 786–9671, for 

issues related to partial 

hospitalization and community 

mental health center (CMHC) issues. 

Roxanne Dupert-Frank, (410) 786–4827, 

for issues related to the Hospital 

Value-Based Purchasing (VBP) 

Program. 

Dan Duvall, (410) 786–4592, for issues 

related to comprehensive APCs. 

Shaheen Halim (410) 786–0641, for 

issues related to the Hospital 

Outpatient Quality Reporting Program 

(OQR)—Measures Issues and 

Publication of Hospital OQR Program 

Data, and Ambulatory Surgical Center 

Quality Reporting (ASCQR) 

Program—Measures Issues and 

Publication of ASCQR Program Data. 

James Hart, (410) 786–9520, for issues 

related to the Medicare fee-for-service 

Electronic Health Record (EHR) 

Incentive Program. 

Jeneen Iwugo, (410) 786–1028, for issues 

related to the revisions of the Quality 

Improvement Organization (QIO) 

Regulations. 

Twi Jackson, (410) 786–1159, for issues 

related to blood products, devicedependent APCs, extended 

assessment and management 

composite APCs, hospital outpatient 

visits, inpatient-only procedures, and 

no cost/full credit and partial credit 

devices. 

Marina Kushnirova, (410) 786–2682, for 

issues related to OPPS status 

indicators and comment indicators. 

Barry Levi, (410) 786–4529, for issues 

related to OPPS pass-through devices, 

brachytherapy sources, intraoperative 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43535 

radiation therapy (IORT), 

brachytherapy composite APC, 

multiple imaging composite APCs, 

and cardiac electrophysiologic 

evaluation and ablation composite 

APC. 

Ann Marshall, (410) 786–3059, for 

issues related to packaged items/ 

services, hospital outpatient 

supervision, proton beam therapy, 

therapy caps in CAHs, incident to 

physician or nonphysician 

practitioner services, and providerbased issues. 

Danielle Moskos, (410) 786–8866, or 

Michael Zleit, (410) 786–2050, for 

issues related to Provider 

Reimbursement Determination 

Appeals. 

James Poyer, (410) 786–2261, for issues 

related to the Hospital Outpatient 

Quality Reporting—Program 

Administration, Validation, and 

Reconsideration Issues. 

Char Thompson, (410) 786–2300, for 

issues related to OPPS drugs, 

radiopharmaceuticals, biologicals, 

blood clotting factors, new technology 

intraocular lenses (NTIOLs), and 

ambulatory surgical center (ASC) 

payments. 

Marjorie Baldo, (410) 786–4617, for all 

other issues related to hospital 

outpatient and ambulatory surgical 

center payments not previously 

identified. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection, 

generally beginning approximately 3 

weeks after publication of the rule, at 

the headquarters of the Centers for 

Medicare & Medicaid Services, 7500 

Security Boulevard, Baltimore, MD 

21244, on Monday through Friday of 

each week from 8:30 a.m. to 4:00 p.m. 

EST. To schedule an appointment to 

view public comments, phone 1–800– 

743–3951. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the U.S. 

Government Printing Office. This 

database can be accessed via the 

internet at http://www.gpo.gov/fdsys/. 

Addenda Available Only Through the 

Internet on the CMS Web Site 

In the past, a majority of the Addenda 

referred to in our OPPS/ASC proposed 

and final rules were published in the 

Federal Register as part of the annual 

rulemakings. However, beginning with 

the CY 2012 OPPS/ASC proposed rule, 

all of the Addenda no longer appear in 

the Federal Register as part of the 

annual OPPS/ASC proposed and final 

rules to decrease administrative burden 

and reduce costs associated with 

publishing lengthy tables. Instead, these 

Addenda will be published and 

available only on the CMS Web site. The 

Addenda relating to the OPPS are 

available at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/ 

index.html. The Addenda relating to the 

ASC payment system are available at: 

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

Medicare-Fee-for-Service-Payment/ 

ASCPayment/index.html. 

Alphabetical List of Acronyms 

Appearing in This Federal Register 

Document 

AHA American Hospital Association 

AMA American Medical Association 

APC Ambulatory Payment Classification 

ASC Ambulatory surgical center 

ASCQR Ambulatory Surgical Center 

Quality Reporting 

ASP Average sales price 

AWP Average wholesale price 

BBA Balanced Budget Act of 1997, Public 

Law 105–33 

BBRA Medicare, Medicaid, and SCHIP 

[State Children’s Health Insurance 

Program] Balanced Budget Refinement Act 

of 1999, Public Law 106–113 

BIPA Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection Act 

of 2000, Public Law 106–554 

BLS Bureau of Labor Statistics 

CAH Critical access hospital 

CAP Competitive Acquisition Program 

CASPER Certification and Survey Provider 

Enhanced Reporting 

CAUTI Catheter associated urinary tract 

infection 

CBSA Core-Based Statistical Area 

CCI Correct Coding Initiative 

CCN CMS Certification Number 

CCR Cost-to-charge ratio 

CDC Centers for Disease Control and 

Prevention 

CEO Chief executive officer 

CERT Comprehensive Error Rate Testing 

CfC [Medicare] Condition for coverage 

CFR Code of Federal Regulations 

CLFS Clinical Laboratory Fee Schedule 

CMHC Community mental health center 

CMS Centers for Medicare & Medicaid 

Services 

CoP [Medicare] Condition of participation 

CPI–U Consumer Price Index for All Urban 

Consumers 

CPT Current Procedural Terminology 

(copyrighted by the American Medical 

Association) 

CQM Clinical quality measure 

CR Change request 

CSAC Consensus Standards Approval 

Committee 

CY Calendar year 

DFO Designated Federal Official 

DRA Deficit Reduction Act of 2005, Public 

Law 109–171 

DRG Diagnosis-Related Group 

DSH Disproportionate share hospital 

EACH Essential access community hospital 

eCQM Electronically specified clinical 

quality measure 

ECT Electroconvulsive therapy 

ED Emergency department 

E/M Evaluation and management 

EHR Electronic health record 

ESRD End-stage renal disease 

FACA Federal Advisory Committee Act, 

Public Law 92–463 

FDA Food and Drug Administration 

FFS [Medicare] Fee-for-service 

FY Fiscal year 

FFY Federal fiscal year 

GAO Government Accountability Office 

HAI Healthcare-associated infection 

HCERA Health Care and Education 

Reconciliation Act of 2010, Public Law 

111–152 

HCPCS Healthcare Common Procedure 

Coding System 

HCRIS Hospital Cost Report Information 

System 

HEU Highly enriched uranium 

HIPAA Health Insurance Portability and 

Accountability Act of 1996, Public Law 

104–191 

HITECH Health Information Technology for 

Economic and Clinical Health [Act] (found 

in the American Recovery and 

Reinvestment Act of 2009, Pub. L. 111–5) 

HOP Hospital Outpatient Payment [Panel] 

HOPD Hospital outpatient department 

ICD–9–CM International Classification of 

Diseases, Ninth Revision, Clinical 

Modification 

ICD Implantable cardioverter defibrillator 

ICU Intensive care unit 

IHS Indian Health Service 

IMRT Intensity Modulated Radiation 

Therapy 

I/OCE Integrated Outpatient Code Editor 

IOL Intraocular lens 

IOM Institute of Medicine 

IORT Intraoperative radiation treatment 

IPPS [Hospital] Inpatient Prospective 

Payment System 

IQR [Hospital] Inpatient Quality Reporting 

LDR Low dose rate 

LOS Length of Stay 

LTCH Long-term care hospital 

MAC Medicare Administrative Contractor 

MAP Measure Application Partnership 

MedPAC Medicare Payment Advisory 

Commission 

MEI Medicare Economic Index 

MFP Multifactor productivity 

MGCRB Medicare Geographic Classification 

Review Board 

MIEA–TRHCA Medicare Improvements and 

Extension Act under Division B, Title I of 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43536 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

the Tax Relief Health Care Act of 2006, 

Public Law 109–432 

MIPPA Medicare Improvements for Patients 

and Providers Act of 2008, Public Law 

110–275 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Public Law 108–173 

MMEA Medicare and Medicaid Extenders 

Act of 2010, Public Law 111–309 

MMSEA Medicare, Medicaid, and SCHIP 

Extension Act of 2007, Public Law 110–173 

MPFS Medicare Physician Fee Schedule 

MRA Magnetic resonance angiography 

MRI Magnetic resonance imaging 

MSA Metropolitan Statistical Area 

NCCI National Correct Coding Initiative 

NHSN National Healthcare Safety Network 

NQF National Quality Forum 

NTIOL New technology intraocular lens 

NUBC National Uniform Billing Committee 

OACT [CMS] Office of the Actuary 

OBRA Omnibus Budget Reconciliation Act 

of 1996, Public Law 99–509 

OIG [HHS] Office of the Inspector General 

OMB Office of Management and Budget 

OPD [Hospital] Outpatient Department 

OPPS [Hospital] Outpatient Prospective 

Payment System 

OPSF Outpatient Provider-Specific File 

OQR [Hospital] Outpatient Quality 

Reporting 

OT Occupational therapy 

PBD Provider-Based Department 

PCR Payment-to-cost ratio 

PE Practice expense 

PEPPER Program for Evaluating Payment 

Patterns Electronic Report 

PHP Partial hospitalization program 

PHS Public Health Service [Act], Public 

Law 96–88 

PPI Producer Price Index 

PPS Prospective payment system 

PQRS Physician Quality Reporting System 

PT Physical therapy 

QDC Quality data code 

QIO Quality Improvement Organization 

RFA Regulatory Flexibility Act 

RTI Research Triangle Institute, 

International 

RVU Relative value unit 

SCH Sole community hospital 

SCOD Specified covered outpatient drugs 

SI Status indicator 

SIR Standardized infection ratio 

SLP Speech-language pathology 

SNF Skilled Nursing Facility 

SRS Stereotactic Radiosurgery 

TEP Technical Expert Panel 

TMS Transcranial Magnetic Stimulation 

Therapy 

TOPs Transitional Outpatient Payments 

UR Utilization review 

USPSTF United States Preventive Services 

Task Force 

UTI Urinary tract infection 

VBP Value-based purchasing 

WAC Wholesale acquisition cost 

Table of Contents 

I. Summary and Background 

A. Executive Summary of This Proposed 

Rule 

1. Purpose 

2. Summary of the Major Provisions 

3. Summary of Costs and Benefits 

B. Legislative and Regulatory Authority for 

the Hospital OPPS 

C. Excluded OPPS Services and Hospitals 

D. Prior Rulemaking 

E. Advisory Panel on Hospital Outpatient 

Payment (the HOP Panel or the Panel), 

Formerly Named the Advisory Panel on 

Ambulatory Payment Classification 

Groups (APC Panel) 

1. Authority of the Panel 

2. Establishment of the Panel 

3. Panel Meetings and Organizational 

Structure 

F. Public Comments Received in Response 

to the CY 2013 OPPS/ASC Final Rule 

With Comment Period 

II. Proposed Updates Affecting OPPS 

Payments 

A. Proposed Recalibration of APC Relative 

Payment Weights 

1. Database Construction 

a. Database Source and Methodology 

b. Proposed Use of Single and Multiple 

Procedure Claims 

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

2. Proposed Data Development Process and 

Calculation of Costs Used for Ratesetting 

a. Claims Preparation 

b. Splitting Claims and Creation of 

‘‘Pseudo’’ Single Procedure Claims 

(1) Splitting Claims 

(2) Creation of ‘‘Pseudo’’ Single Procedure 

Claims 

c. Completion of Claim Records and 

Geometric Mean Cost Calculations 

(1) General Process 

(2) Recommendations of the Advisory 

Panel on Hospital Outpatient Payment 

Regarding Data Development 

d. Proposed Calculation of Single 

Procedure APC Criteria-Based Costs 

(1) Device-Dependent APCs 

(2) Blood and Blood Products 

e. Proposed Establishment of 

Comprehensive APCs 

(1) Definitions and General Principles 

(2) Comprehensive APCs for DeviceDependent Services 

f. Proposed Calculation of Composite APC 

Criteria-Based Costs 

(1) Extended Assessment and Management 

Composite APCs (APCs 8002 and 8003) 

(2) Low Dose Rate (LDR) Prostate 

Brachytherapy Composite APC (APC 

8001) 

(3) Cardiac Electrophysiologic Evaluation 

and Ablation Composite APC (APC 8000) 

(4) Mental Health Services Composite APC 

(APC 0034) 

(5) Multiple Imaging Composite APCs 

(APCs 8004, 8005, 8006, 8007, and 8008) 

3. Proposed Changes to Packaged Services 

a. Background 

b. Basis for Proposed New Packaging 

Policies for CY 2014 

c. Proposed New Packaging Policies for CY 

2014 

(1) Drugs, Biologicals, and 

Radiopharmaceuticals That Function as 

Supplies When Used in a Diagnostic Test 

or Procedure 

(2) Drugs and Biologicals That Function as 

Supplies or Devices When Used in a 

Surgical Procedure 

(3) Clinical Diagnostic Laboratory Tests 

(4) Procedures Described by Add-On Codes 

(5) Ancillary Services (Status Indicator 

‘‘X’’) 

(6) Diagnostic Tests on the Bypass List 

(7) Device Removal Procedures 

d. Impact of the New Packaging Proposals 

e. Clarification Regarding Supplies That 

Are Packaged in the OPPS 

f. Proposed Revision and Clarification of 

the Regulations at 42 CFR 419.2(b) and 

42 CFR 419.22 

g. Comment Solicitation on Increased 

Packaging for Imaging Services 

h. Summary of CY 2014 Packaging 

Proposals 

4. Proposed Calculation of OPPS Scaled 

Payment Weights 

B. Proposed Conversion Factor Update 

C. Proposed Wage Index Changes 

D. Proposed Statewide Average Default 

CCRs 

E. Proposed Adjustment for Rural SCHs 

and EACHs Under Section 1833(t)(13)(B) 

of the Act 

F. Proposed OPPS Payment to Certain 

Cancer Hospitals Described by Section 

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

1. Background 

2. Proposed Payment Adjustment for 

Certain Cancer Hospitals for CY 2014 

G. Proposed Hospital Outpatient Outlier 

Payments 

1. Background 

2. Proposed Outlier Calculation 

H. Proposed Calculation of an Adjusted 

Medicare Payment From the National 

Unadjusted Medicare Payment 

I. Proposed Beneficiary Copayments 

1. Background 

2. Proposed OPPS Copayment Policy 

3. Proposed Calculation of an Adjusted 

Copayment Amount for an APC Group 

III. Proposed OPPS Ambulatory Payment 

Classification (APC) Group Policies 

A. Proposed OPPS Treatment of New CPT 

and Level II HCPCS Codes 

1. Proposed Treatment of New CY 2013 

Level II HCPCS and CPT Codes Effective 

April 1, 2013 and July 1, 2013 for Which 

We Are Soliciting Public Comments in 

This CY 2014 OPPS/ASC Proposed Rule 

2. Proposed Process for New Level II 

HCPCS Codes That Will Be Effective 

October 1, 2013 and New CPT and Level 

II HCPCS Codes That Will Be Effective 

January 1, 2014 for Which We Will 

Solicit Public Comments in the CY 2014 

OPPS/ASC Final Rule With Comment 

Period 

B. Proposed OPPS Changes—Variations 

Within APCs 

1. Background 

2. Application of the 2 Times Rule 

3. Proposed Exceptions to the 2 Times Rule 

C. Proposed OPPS APC-Specific Policies 

1. Intraoperative Radiation Therapy (IORT) 

Related Services (APCs 0028 and 0065) 

2. Proton Beam Radiation Therapy (APCs 

0664 and 0667) 

3. Stereotactic Radiosurgery (SRS) 

Treatment Delivery Services (APCs 0066 

and 0067) 

IV. Proposed OPPS Payment for Devices 

A. Proposed Pass-Through Payments for 

Devices 

1. Expiration of Transitional Pass-Through 

Payments for Certain Devices 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43537 

a. Background 

b. Proposed CY 2014 Policy 

2. Proposed Provisions for Reducing 

Transitional Pass-Through Payments To 

Offset Costs Packaged Into APC Groups 

a. Background 

b. Proposed CY 2014 Policy 

3. Proposed Changes to Device PassThrough Criteria: Integral and 

Subordinate Criterion 

B. Proposed Adjustment to OPPS Payment 

for No Cost/Full Credit and Partial Credit 

Devices 

1. Background 

2. Proposed Policy for CY 2014 

V. Proposed OPPS Payment Changes for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

A. Proposed OPPS Transitional PassThrough Payment for Additional Costs of 

Drugs, Biologicals, and 

Radiopharmaceuticals 

1. Background 

2. Proposed Drugs and Biologicals With 

Expiring Pass-Through Status in CY 2013 

3. Proposed Drugs, Biologicals, and 

Radiopharmaceuticals With New or 

Continuing Pass-Through Status in CY 

2014 

4. Proposed Provisions for Reducing 

Transitional Pass-Through Payments for 

Diagnostic Radiopharmaceuticals; 

Contrast Agents; Drugs, Biologicals, and 

Radiopharmaceuticals That Function as 

Supplies When Used in a Diagnostic Test 

or Procedure; and Drugs and Biologicals 

That Function as Supplies or Devices 

When Used in a Surgical Procedure 

a. Background 

b. Proposed Payment Offset Policy for 

Diagnostic Radiopharmaceuticals 

c. Proposed Payment Offset Policy for 

Contrast Agents 

d. Proposed Payment Offset Policy for 

Products Packaged According to the 

Proposed Policy To Package Drugs, 

Biologicals, and Radiopharmaceuticals 

That Function as Supplies When Used in 

a Diagnostic Test or Procedure and Drugs 

and Biologicals That Function as 

Supplies or Devices When Used in a 

Surgical Procedure 

B. Proposed OPPS Payment for Drugs, 

Biologicals, and Radiopharmaceuticals 

Without Pass-Through Status 

1. Background 

2. Proposed Criteria for Packaging Payment 

for Drugs, Biologicals, and 

Radiopharmaceuticals 

a. Background 

b. Proposed Cost Threshold for Packaging 

of Payment for HCPCS Codes That 

Describe Certain Drugs, Certain 

Biologicals, and Therapeutic 

Radiopharmaceuticals (‘‘ThresholdPackaged Drugs’’) 

c. Proposed Packaging Determination for 

HCPCS Codes That Describe the Same 

Drug or Biological But Different Dosages 

3. Proposed Payment for Drugs and 

Biologicals Without Pass-Through Status 

That Are Not Packaged 

a. Proposed Payment for Specified Covered 

Outpatient Drugs (SCODs) and Other 

Separately Payable and Packaged Drugs 

and Biologicals 

b. Proposed CY 2014 Payment Policy 

4. Proposed Payment Policy for 

Therapeutic Radiopharmaceuticals 

5. Proposed Payment for Blood Clotting 

Factors 

6. Proposed Payment for Nonpass-Through 

Drugs, Biologicals, and 

Radiopharmaceuticals With HCPCS 

Codes, but Without OPPS Hospital 

Claims Data 

C. Nuclear Medicine Procedure to 

Radiolabeled Product Edits 

VI. Proposed Estimate of OPPS Transitional 

Pass-Through Spending for Drugs, 

Biologicals, Radiopharmaceuticals, and 

Devices 

A. Background 

B. Proposed Estimate of Pass-Through 

Spending 

VII. Proposed OPPS Payment for Hospital 

Outpatient Visits 

A. Background 

B. Proposed Payment for Hospital 

Outpatient Clinic and Emergency 

Department Visits 

C. Proposed Payment for Critical Care 

Services 

VIII. Proposed Payment for Partial 

Hospitalization Services 

A. Background 

B. Proposed PHP APC Update for CY 2014 

C. Discussion of Possible Future Initiatives 

and Request for Public Comments 

D. Proposed Separate Threshold for Outlier 

Payments to CMHCs 

IX. Proposed Procedures That Would Be Paid 

Only as Inpatient Procedures 

A. Background 

B. Proposed Changes to the Inpatient List 

X. Proposed Nonrecurring Policy Changes 

A. Supervision of Outpatient Therapeutic 

Services 

1. Enforcement Instruction for the 

Supervision of Outpatient Therapeutic 

Services in CAHs and Certain Small 

Rural Hospitals 

2. Supervision Requirements for 

Observation Services 

B. Application of Therapy Caps in CAHs 

C. Requirements for Payment of Outpatient 

Therapeutic (‘‘Incident to’’) Hospital or 

CAH Services 

1. Overview 

2. Background 

3. Technical Correction 

D. Collecting Data on Services Furnished 

in Off-Campus Provider-Based 

Departments 

XI. Proposed CY 2014 OPPS Payment Status 

and Comment Indicators 

A. Proposed CY 2014 OPPS Payment 

Status Indicator Definitions 

B. Proposed CY 2014 Comment Indicator 

Definitions 

XII. Proposed Updates to the Ambulatory 

Surgical Center (ASC) Payment System 

A. Background 

1. Legislative History, Statutory Authority, 

and Prior Rulemaking for the ASC 

Payment System 

2. Policies Governing Changes to the Lists 

of Codes and Payment Rates for ASC 

Covered Surgical Procedures and 

Covered Ancillary Services 

B. Proposed Treatment of New Codes 

1. Proposed Process for Recognizing New 

Category I and Category III CPT Codes 

and Level II HCPCS Codes 

2. Proposed Treatment of New Level II 

HCPCS Codes and Category III CPT 

Codes Implemented in April 2013 and 

July 2013 for Which We Are Soliciting 

Public Comments in This CY 2014 

OPPS/ASC Proposed Rule 

3. Proposed Process for New Level II 

HCPCS Codes and Category I and 

Category III CPT Codes for Which We 

Will Solicit Public Comments in the CY 

2014 OPPS/ASC Final Rule With 

Comment Period 

C. Proposed Update to the Lists of ASC 

Covered Surgical Procedures and 

Covered Ancillary Services 

1. Covered Surgical Procedures 

a. Additions to the List of ASC Covered 

Surgical Procedures 

b. Proposed Covered Surgical Procedures 

Designated as Office-Based 

(1) Background 

(2) Proposed Changes for CY 2014 to 

Covered Surgical Procedures Designated 

as Office-Based 

c. ASC Covered Surgical Procedures 

Proposed To Be Designated as DeviceIntensive 

(1) Background 

(2) Proposed Changes to List of Covered 

ASC Surgical Procedures Designated as 

Device-Intensive for CY 2014 

d. Proposed Adjustment to ASC Payments 

for No Cost/Full Credit and Partial Credit 

Devices 

e. Proposed ASC Treatment of Surgical 

Procedures Removed From the OPPS 

Inpatient List for CY 2014 

2. Covered Ancillary Services 

D. Proposed ASC Payment for Covered 

Surgical Procedures and Covered 

Ancillary Services 

1. Proposed Payment for Covered Surgical 

Procedures 

a. Background 

b. Proposed Update to ASC Covered 

Surgical Procedure Payment Rates for CY 

2014 

c. Waiver of Coinsurance and Deductible 

for Certain Preventive Services 

d. Proposed Payment for Cardiac 

Resynchronization Therapy Services 

e. Proposed Payment for Low Dose Rate 

(LDR) Prostate Brachytherapy Composite 

2. Proposed Payment for Covered Ancillary 

Services 

a. Background 

b. Proposed Payment for Covered Ancillary 

Services for CY 2014 

E. New Technology Intraocular Lenses 

(NTIOLs) 

1. NTIOL Application Cycle 

2. Requests To Establish New NTIOL 

Classes for CY 2014 

3. Payment Adjustment 

F. Proposed ASC Payment and Comment 

Indicators 

1. Background 

2. Proposed ASC Payment and Comment 

Indicators 

G. Calculation of the Proposed ASC 

Conversion Factor and the Proposed ASC 

Payment Rates 

1. Background 


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2. Proposed Calculation of the ASC 

Payment Rates 

a. Updating the ASC Relative Payment 

Weights for CY 2014 and Future Years 

b. Updating the ASC Conversion Factor 

3. Display of Proposed CY 2014 ASC 

Payment Rates 

XIII. Hospital Outpatient Quality Reporting 

Program Updates 

A. Background 

1. Overview 

2. Statutory History of the Hospital 

Outpatient Quality Reporting (Hospital 

OQR) Program 

3. Measure Updates and Data Publication 

a. Process for Updating Quality Measures 

b. Publication of Hospital OQR Program 

Data 

B. Process for Retention of Hospital OQR 

Program Measures Adopted in Previous 

Payment Determinations 

C. Removal or Suspension of Quality 

Measures From the Hospital OQR 

Program Measure Set 

1. Considerations in Removing Quality 

Measures From the Hospital OQR 

Program 

2. Proposed Removal of Two ChartAbstracted Measure From the Hospital 

OQR Program 

a. Proposed Removal of OP–19: Transition 

Record With Specified Elements 

Received by Discharged ED Patients 

b. Proposed Removal of OP–24: Cardiac 

Rehabilitation Measure: Patient Referral 

From an Outpatient Setting 

D. Quality Measures Previously Adopted 

for the CY 2014 and CY 2015 Payment 

Determinations and Subsequent Years 

E. Possible Quality Measures for the CY 

2016 Payment Determination and 

Subsequent Years 

1. Influenza Vaccination Coverage Among 

Healthcare Personnel (NQF #0431) 

2. Complications Within 30 Days 

Following Cataract Surgery Requiring 

Additional Surgical Procedures (NQF 

#0564) 

3. Endoscopy/Poly Surveillance: 

Appropriate Follow-Up Interval for 

Normal Colonoscopy in Average Risk 

Patients (NQF #0658) 

4. Endoscopy/Poly Surveillance: 

Colonoscopy Interval for Patients With a 

History of Adenomatous Polyps— 

Avoidance of Inappropriate Use (NQF 

#0659) 

5. Cataracts—Improvement in Patient’s 

Visual Function Within 90 Days 

Following Cataract Surgery (NQF #1536) 

F. Possible Hospital OQR Program Measure 

Topics for Future Consideration 

G. Proposed Payment Reduction for 

Hospitals That Fail To Meet the Hospital 

OQR Program Requirements for the CY 

2014 Payment Update 

1. Background 

2. Proposed Reporting Ratio Application 

and Associated Adjustment Policy for 

CY 2014 

H. Proposed Requirements for Reporting of 

Hospital OQR Data for the CY 2015 

Payment Determination and Subsequent 

Years 

1. Administrative Requirements for the CY 

2015 Payment Determination and 

Subsequent Years 

2. Form, Manner, and Timing of Data 

Submitted for the Hospital OQR Program 

a. Background 

b. Effects of Proposed Changes on Data 

Submission for CY 2015 and CY 2016 

Payment Determinations and Subsequent 

Years 

c. General Requirements 

d. Proposed Chart-Abstracted Measure 

Requirements for CY 2015 and CY 2016 

Payment Determinations and Subsequent 

Years 

e. Proposed Claims-Based Measure Data 

Requirements for the CY 2015 Payment 

Determinations and Subsequent Years 

f. Proposed Data Submission Requirements 

for Measure Data Submitted via WebBased Tool for the CY 2016 Payment 

Determination and Subsequent Years 

g. Proposed Data Submission Requirements 

for a Measure Reported via NHSN for the 

CY 2016 Payment Determination and 

Subsequent Years 

h. Population and Sampling Data 

Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

3. Hospital OQR Program Validation 

Requirements for Chart-Abstracted 

Measure Data Submitted Directly to CMS 

for the CY 2015 Payment Determination 

and Subsequent Years 

a. Selection of Hospitals for Data 

Validation of Chart-Abstracted Measures 

for the CY 2015 Payment Determination 

and Subsequent Years 

b. Targeting Criteria for Data Validation 

Selection for CY 2015 Payment 

Determination and for Subsequent Years 

c. Methodology for Encounter Selection for 

the CY 2015 Payment Determination and 

Subsequent Years 

d. Medical Record Documentation 

Requests for Validation and Validation 

Score Calculation for the CY 2015 

Payment Determination and Subsequent 

Years 

I. Proposed Hospital OQR Reconsideration 

and Appeals Procedures for the CY 2015 

Payment Determination and Subsequent 

Years 

J. Extraordinary Circumstances Extension 

or Waiver for the CY 2014 Payment 

Determination and Subsequent Years 

XIV. Hospital Value-Based Purchasing (VBP) 

Program Updates 

A. Background 

B. Proposal for Additional CMS Appeals 

Review Process 

1. Statutory Basis 

2. Independent CMS Review Proposal 

C. Proposed Performance and Baseline 

Periods for Certain Outcome Measures 

for the FY 2016 Hospital VBP Program 

XV. Proposed Requirements for the 

Ambulatory Surgical Centers Quality 

Reporting (ASCQR) Program 

A. Background 

1. Overview 

2. Statutory History of the ASC Quality 

Reporting (ASCQR) Program 

3. Regulatory History of the ASCQR 

Program 

B. ASCQR Program Quality Measures 

1. Considerations in the Selection of 

ASCQR Program Quality Measures 

2. ASCQR Program Quality Measures 

Adopted in Previous Rulemaking 

3. Proposed Additional ASCQR Program 

Quality Measures for the CY 2016 

Payment Determination and Subsequent 

Years 

a. Complications Within 30 Days 

Following Cataract Surgery Requiring 

Additional Surgical Procedures 

b. Endoscopy/Poly Surveillance: 

Appropriate Follow-Up for Normal 

Colonoscopy in Average Risk Patients 

(NQR #0658) 

c. Endoscopy/Poly Surveillance: 

Colonoscopy Interval for Patients With a 

History of Adenomatous Polyps— 

Avoidance of Inappropriate Use (NQF 

#0659) 

d. Cataracts: Improvement in Patient’s 

Visual Function Within 90 Days 

Following Cataract Surgery (NQF #1536) 

4. ASCQR Program Measure Topics for 

Future Consideration 

5. Technical Specification Updates and 

Data Publication 

C. Payment Reduction for ASCs That Fail 

To Meet the ASCQR Program 

Requirements 

1. Statutory Background 

2. Reduction to the ASC Payment Rates for 

ASCs That Fail To Meet the ASCQR 

Program Requirements for the CY 2015 

Payment Determination and Subsequent 

Years 

D. Administrative Requirements 

1. Proposed Requirements Regarding 

QualityNet Account and Security 

Administrator 

a. Background for the CY 2014 and CY 

2015 Payment Determinations 

b. Proposed Requirements for the CY 2016 

Payment Determination and Subsequent 

Years 

2. Proposed Requirements Regarding 

Participation Status 

a. Background for the CY 2014 Payment 

Determination and Subsequent Years 

b. Proposed Requirements for the CY 2016 

Payment Determination and Subsequent 

Years 

3. Requirements Regarding Data Processing 

and Collection Periods for Claims-Based 

Measures for the CY 2014 Payment 

Determination and Subsequent Years 

4. Proposed Minimum Threshold, 

Minimum Case Volume, and Data 

Completeness for Claims-Based 

Measures Using QDCs 

a. Background for the CY 2014 Payment 

Determination and Subsequent Years 

b. Proposed Requirements for the CY 2016 

Payment Determination and Subsequent 

Years 

5. Proposed Requirements for Data 

Submitted Via a CMS Online Data 

Submission Tool 

a. Background for the CY 2015 Payment 

Determination and Subsequent Years 

b. Proposed Requirements for the CY 2016 

Payment Determination and Subsequent 

Years for Measures Currently Finalized 

c. Proposed Requirements for the CY 2016 

Payment Determination and Subsequent 

Years for Proposed New Measures With 

Data Submission Via a CMS Web-Based 

Tool 

6. Proposed Data Submission Requirements 

for a Measure Reported Via the National 


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Healthcare Safety Network (NHSN) for 

the CY 2016 Payment Determination 

a. Background for the CY 2016 Payment 

Determination 

b. Proposed Requirements for the CY 2016 

Payment Determination 

7. ASCQR Program Validation of ClaimsBased and CMS Web-Based Measures 

8. Extraordinary Circumstances Extensions 

or Waivers for the CY 2014 Payment 

Determination and Subsequent Years 

a. Background 

b. Proposal for CMS Granting of 

Extraordinary Circumstance Waiver or 

Extension for CY 2014 

9. ASCQR Program Reconsideration 

Procedures for the CY 2014 Payment 

Determination and Subsequent Years 

XVI. Proposed Changes to the Conditions for 

Coverage (CfCs) for Organ Procurement 

Organizations (OPOs) 

A. Background 

B. Proposed Policy Changes 

XVII. Proposed Revisions to the Quality 

Improvement Organization (QIO) 

Regulations 

A. Legislative History 

B. Basis for Proposals 

C. Proposed Changes to the Nomenclature 

and Regulations Under 42 CFR Parts 475 

and 476 

1. Proposed Nomenclature Changes 

2. Proposals To Add and Revise Definitions 

3. Proposals Relating to Scope and 

Applicability of Subpart C of Part 475 

4. Proposals Relating to Eligibility 

Requirements for QIOs (§§ 475.101 

Through 475.106) 

a. Eligibility To Be Awarded a QIO 

Contract (§ 475.101) 

b. Eligibility Requirements for QIOs To 

Perform Case Reviews (§ 475.102) 

c. Eligibility Requirements for QIOs To 

Conduct Quality Improvement Initiatives 

(§ 475.103) 

d. Prohibitions on Eligibility as a QIO 

(§ 475.105) 

5. Proposals Relating to QIO Contract 

Awards (§ 475.107) 

XVIII. Medicare Fee-for-Service Electronic 

Health Record (EHR) Incentive Program 

A. Incentive Payments for Eligible 

Professionals (EPs) Reassigning Benefits 

to Method II CAHs 

1. Background for Definition of EPs and 

EHR Incentive Payments to EPs 

2. Special Circumstances of EPs 

Reassigning Benefits to Method II CAHs 

B. Cost Reporting Periods for Interim and 

Final EHR Incentive Payments to 

Hospitals 

1. Background 

2. Special Circumstances 

XIX. Medicare Program: Provider 

Reimbursement Determinations and 

Appeals 

A. Matters Not Subject to Administrative or 

Judicial Review (§ 405.1801) 

1. Background 

2. Proposed Technical Conforming Change 

B. Clarification of Reopening of Predicated 

Facts in Intermediary Determinations of 

Provider Reimbursement (§ 405.1885) 

XX. Files Available to the Public via the 

Internet 

XXI. Collection of Information Requirements 

A. Legislative Requirements for 

Solicitation of Comments 

B. Requirements in Regulation Text 

1. Proposed Changes to the Outcome 

Measure Requirement for OPOs 

2. Proposed Changes to the Medicare Feefor-Service EHR Incentive Program 

C. Associated Information Collections Not 

Specified in Regulatory Text 

1. Hospital OQR Program 

a. Hospital OQR Program Requirements for 

the CY 2015, CY 2016, and Subsequent 

Years Payment Determinations 

b. Hospital OQR Program Validation 

Requirements for the CY 2015 and 

Subsequent Years Payment 

Determinations 

c. Hospital OQR Program Reconsideration 

and Appeals Procedures 

2. ASCQR Program Requirements 

a. Claims-Based Measures for the CY 2014 

Payment Determination 

b. Claims-Based and Web-Based Measures 

for the CY 2015 and CY 2016 Payment 

Determination 

c. Program Administrative Requirements 

and QualityNet Accounts; Extraordinary 

Circumstance and Extension Requests; 

Reconsideration Requests 

3. Hospital VBP Program Requirements 

XXII. Response to Comments 

XXIII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impacts for the Proposed OPPS 

and ASC Payment Provisions 

4. Detailed Economic Analyses 

a. Estimated Effects of Proposed OPPS 

Changes in This Proposed Rule 

(1) Limitations of Our Analysis 

(2) Estimated Effects of Proposed OPPS 

Changes on Hospitals 

(3) Estimated Effects of Proposed OPPS 

Changes on CMHCs 

(4) Estimated Effect of Proposed OPPS 

Changes on Beneficiaries 

(5) Estimated Effects of Proposed OPPS 

Changes on Other Providers 

(6) Estimated Effects of Proposed OPPS 

Changes on the Medicare and Medicaid 

Programs 

(7) Alternative OPPS Policies Considered 

b. Estimated Effects of ASC Payment 

System Proposed Policies 

(1) Limitations of Our Analysis 

(2) Estimated Effects of ASC Payment 

System Proposed Policies on ASCs 

(3) Estimated Effects of ASC Payment 

System Proposed Policies on 

Beneficiaries 

(4) Alternative ASC Payment Policies 

Considered 

c. Accounting Statements and Tables 

d. Effects of Proposed Requirements for the 

Hospital OQR Program 

e. Effects of Proposals for the ASCQR 

Program 

f. Effects of Proposed Changes to the CfCs 

for OPOs Relating to the Outcome 

Measure Requirement for Recertification 

g. Effects of Proposed Revisions of the QIO 

Regulations 

h. Effects of Proposed Changes to the 

Medicare Fee-for-Service EHR Incentive 

Program 

B. Regulatory Flexibility Act (RFA) 

Analysis 

C. Unfunded Mandates Reform Act 

Analysis 

D. Conclusion 

XXIV. Federalism Analysis 

Regulation Text 

I. Summary and Background 

A. Executive Summary of This Proposed 

Rule 

1. Purpose 

In this proposed rule, we are 

proposing to update the payment 

policies and payment rates for services 

furnished to Medicare beneficiaries in 

hospital outpatient departments and 

Ambulatory Surgical Centers (ASCs) 

beginning January 1, 2014. Section 

1833(t) of the Social Security Act (the 

Act) requires us to annually review and 

update the relative payment weights 

and the conversion factor for services 

payable under the Outpatient 

Prospective Payment System (OPPS). 

Under section 1833(i) of the Act, we 

annually review and update the ASC 

payment rates. We describe these and 

various other statutory authorities in the 

relevant sections of this proposed rule. 

In addition, we are proposing to update 

and refine the requirements for the 

Hospital Outpatient Quality Reporting 

(OQR) Program, the ASC Quality 

Reporting (ASCQR) Program, and the 

Hospital Value-Based Purchasing (VBP) 

Program. 

We are proposing changes to the 

conditions for coverage (CfCs) for organ 

procurement organizations (OPOs); 

revisions to the Quality Improvement 

Organization (QIO) regulations; changes 

to the Medicare fee-for-service 

Electronic Health Record (EHR) 

Incentive Program; and changes relating 

to provider reimbursement 

determinations and appeals. 

2. Summary of the Major Provisions 

• OPPS Update: For CY 2013, we are 

proposing to increase the payment rates 

under the OPPS by an Outpatient 

Department (OPD) fee schedule increase 

factor of 1.8 percent. This proposed 

increase is based on the proposed 

hospital inpatient market basket 

percentage increase of 2.5 percent for 

inpatient services paid under the 

hospital inpatient prospective payment 

system (IPPS), minus the proposed 

multifactor productivity (MFP) 

adjustment of 0.4 percentage points, and 

minus a 0.3 percentage point adjustment 

required by the Affordable Care Act. 

Under this proposed rule, we estimate 

that proposed total payments for CY 

2014, including beneficiary costsharing, to the almost 4,000 facilities 

paid under the OPPS (including general 


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acute care hospitals, children’s 

hospitals, cancer hospitals, and 

community mental health centers 

(CMHCs)), will be approximately $50.4 

billion, an increase of approximately 

$4.4 billion compared to CY 2013 

payments, or $600 million excluding 

our estimated changes in enrollment, 

utilization, and case-mix 

We are proposing to continue to 

implement the statutory 2.0 percentage 

point reduction in payments for 

hospitals failing to meet the hospital 

outpatient quality reporting 

requirements, by applying a reporting 

factor of 0.980 to the OPPS payments 

and copayments for all applicable 

services. 

• Rural Adjustment: We are 

proposing to continue the adjustment of 

7.1 percent to the OPPS payments to 

certain rural sole community hospitals 

(SCHs), including essential access 

community hospitals (EACHs). This 

adjustment will apply to all services 

paid under the OPPS, excluding 

separately payable drugs and 

biologicals, devices paid under the passthrough payment policy, and items paid 

at charges reduced to cost. 

• Cancer Hospital Payment 

Adjustment: For CY 2014, we are 

proposing to continue our policy to 

provide additional payments to cancer 

hospitals so that the hospital’s paymentto-cost ratio (PCR) with the payment 

adjustment is equal to the weighted 

average PCR for the other OPPS 

hospitals using the most recent 

submitted or settled cost report data. 

Based on those data, a target PCR of 0.90 

will be used to determine the proposed 

CY 2014 cancer hospital payment 

adjustment to be paid at cost report 

settlement. That is, the proposed 

payment amount associated with the 

cancer hospital payment adjustment 

will be the additional payment needed 

to result in a PCR equal to 0.90 for each 

cancer hospital. 

• Payment of Drugs, Biologicals, and 

Radiopharmaceuticals: For CY 2014, 

proposed payment for the acquisition 

and pharmacy overhead costs of 

separately payable drugs and biologicals 

that do not have pass-through status 

would be set at the statutory default of 

average sales price (ASP) plus 6 percent. 

• Packaging Proposals: The OPPS 

packages payment for multiple 

interrelated items and services into a 

single payment to create incentives for 

hospitals to furnish services in the most 

efficient way by enabling hospitals to 

manage their resources with maximum 

flexibility, thereby encouraging longterm cost containment. For 2014, we are 

proposing to unconditionally package or 

conditionally package the following 

items and services and to add them to 

the list of OPPS packaged items and 

services in 42 CFR 419.2(b): 

(1) Drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies in a diagnostic test or 

procedure; 

(2) Drugs and biologicals that function 

as supplies or devices in a surgical 

procedure; 

(3) Laboratory tests; 

(4) Procedures described by add-on 

codes; 

(5) Ancillary services (status indicator 

‘‘X’’); 

(6) Diagnostic tests on the bypass list; 

and 

(7) Device removal procedures. 

We refer readers to section II.A.3. of 

this proposed rule for a complete 

description of our 2014 packaging 

proposals. 

• Establishing Comprehensive APCs: 

In order to improve the accuracy and 

transparency of our payment for certain 

device-dependent services, for CY 2014, 

we are proposing to create 29 

comprehensive APCs to prospectively 

pay for the most costly devicedependent services. We are proposing to 

define a comprehensive APC as a 

classification for the provision of a 

primary service and all adjunct services 

provided to support the delivery of the 

primary service. The comprehensive 

APC would treat all individually 

reported codes as representing 

components of the comprehensive 

service, resulting in a single prospective 

payment based on the cost of all 

individually reported codes that 

represent the delivery of a primary 

service as well as all adjunct services 

provided to support that delivery. We 

are proposing to make a single payment 

for the comprehensive service based on 

all charges on the claim, excluding only 

charges for services that cannot be 

covered by Medicare Part B or that are 

not payable under the OPPS. 

• Payment of Hospital Outpatient 

Visits: For CY 2014 we are proposing to 

replace the current five levels of visit 

codes for each clinic, Type A ED, and 

Type B ED visits with three new 

alphanumeric Level II HCPCS codes 

representing a single level of payment 

for the three types of visits, respectively. 

We are proposing to assign the new 

alphanumeric Level II HCPCS to newly 

created APCs with CY 2014 OPPS 

payment rates based on the total mean 

costs of Level 1 through Level 5 visit 

codes obtained from CY 2012 OPPS 

claims data for each visit type. 

• Proposed OPPS Nonrecurring 

Policy Changes: We note in this 

proposed rule that we expect to allow 

the enforcement instruction for the 

supervision of outpatient therapeutic 

services furnished in CAHs and small 

rural hospitals to expire at the end of CY 

2013. In addition, we are proposing to 

amend the conditions of payment for 

‘‘incident to’’ hospital or CAH 

outpatient services (sometimes referred 

to as hospital or CAH ‘‘therapeutic’’ 

services) to require that individuals 

furnishing these services be in 

compliance with State law. We are 

soliciting public comments regarding a 

potential new claims or other data 

element that would indicate that the 

services were furnished in an offcampus provider-based department. 

Finally, we refer readers to the CY 2014 

Medicare Physician Fee Schedule 

(MPFS) proposed rule (CMS–1600–P) to 

review Medicare’s proposal to apply the 

therapy caps and related provisions 

under section 1833(g) of the Act to 

physical therapy (PT), speech-language 

pathology (SLP) and occupational 

therapy (OT) (‘‘therapy’’) services that 

are furnished by a CAH, effective 

January 1, 2014. 

• Ambulatory Surgical Center 

Payment Update: For CY 2014, we are 

proposing to increase payment rates 

under the ASC payment system by 0.9 

percent. This proposed increase is based 

on a projected CPI–U update of 1.4 

percent minus a multifactor 

productivity adjustment required by the 

Affordable Care Act that is projected to 

be 0.5 percent. Based on this proposed 

update, we estimate that total payments 

to ASCs (including beneficiary costsharing and estimated changes in 

enrollment, utilization, and case-mix), 

for CY 2014 would be approximately 

$3.980 billion, an increase of 

approximately $133 million compared 

to estimated CY 2013 payments. 

• Hospital Outpatient Quality 

Reporting (OQR) Program: For the 

Hospital OQR Program, we are 

proposing five quality measures for the 

CY 2016 and subsequent years payment 

determinations: four where aggregate 

data (numerators, denominators, and 

exclusions) are collected and data 

submitted via an online Web-based tool 

located on a CMS Web page and one 

HAI measure submitted through the 

CDC’s NHSN. We also are proposing to 

remove two measures and are proposing 

to codify administrative procedures. 

• Ambulatory Surgical Center Quality 

Reporting (ASCQR) Program: For the 

ASCQR Program, we are proposing four 

quality measures for the CY 2016 and 

subsequent years payment 

determinations where data collection 

would begin in CY 2014. We are 

proposing to collect aggregate data 

(numerators, denominators, and 

exclusions) on all ASC patients for these 


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four proposed chart-abstracted measures 

via an online Web-based tool located on 

a CMS Web page. We also are 

proposing, for the CY 2016 payment 

determination and subsequent years’ 

payment determinations, requirements 

for facility participation, data collection, 

and submission for claims-based, CMS 

Web-based, and NHSN measures. 

• Proposed Revisions to the Quality 

Improvement Organizations 

Regulations. We are proposing to update 

the regulations at 42 CFR parts 475 and 

476 based on the recently enacted Trade 

Adjustment Assistance Extension Act of 

2011 (TAAEA) (Pub. L. 112–40, Section 

261) where by Congress authorized 

numerous changes to the original 

legislation and included additional 

flexibility for the Secretary in the 

administration of the QIO program. 

Currently, 42 CFR Part 475 includes 

definitions and standards governing 

eligibility and the award of contracts to 

QIOs. In this proposed rule, we set forth 

proposals for the partial deletion and 

revision of the regulations under 42 CFR 

Parts 475 and 476, which relate to the 

QIO program, including the following: 

(1) Replace nomenclature in Part 475 

and 476 that has been amended by the 

TAAEA; (2) revise the existing 

definition for the term ‘‘physician’’; (3) 

add new definitions as necessary to 

support the new substantive provisions 

in Subpart C; and (4) replace some of 

the substantive provisions in Subpart C 

in their entirety to fully exercise the 

Secretary’s authority for the program 

and update the contracting requirements 

to align with contemporary quality 

improvement. 

• Proposed Changes to the Medicare 

Fee-for-Service Electronic Record (EHR) 

Incentive Program. We are proposing to 

the regulations to provide a special 

method for making hospital-based 

determinations for 2013 only in the 

cases of those eligible professionals 

(EPs) who reassign their benefits to 

Method II CAHs. We have been unable 

to make EHR payments to these EPs for 

their CAH II claims, or to take those 

claims into consideration in making 

hospital-based determinations because 

of systems limitations. Adopting our 

proposed method for 2013 will allow us 

to begin making payments based on 

CAH II one year earlier than we would 

be able to do under current regulations. 

We also are proposing a minor 

clarification to the regulations 

concerning the cost reporting period to 

be used in determining final EHR 

payments for hospitals. 

3. Summary of Costs and Benefits 

In sections XXIII. and XXIV. of this 

proposed rule, we set forth a detailed 

analysis of the regulatory and federalism 

impacts that the proposed changes 

would have on affected entities and 

beneficiaries. Key estimated impacts are 

described below. 

a. Impacts of the OPPS Update 

(1) Impacts of All Proposed OPPS 

Changes 

Table 39 in section XXIII. of this 

proposed rule displays the 

distributional impact all the proposed 

OPPS changes on various groups of 

hospitals and CMHCs for CY 2014 

compared to all estimated OPPS 

payments in CY 2013. We estimate that 

the proposed policies in this proposed 

rule would result in a 1.8 percent 

overall increase in OPPS payments to 

providers. We estimate that the 

proposed increase in OPPS 

expenditures, including beneficiary 

cost-sharing, would be approximately 

$600 million, not taking into account 

potential changes in enrollment, 

utilization, and case-mix. Taking into 

account estimated spending changes 

that are attributable to these factors, we 

estimate an increase of approximately 

$4.372 billion in OPPS expenditures, 

including beneficiary cost-sharing, for 

CY 2014 compared to CY 2013 OPPS 

expenditures. We estimate that 

proposed total OPPS payments, 

including beneficiary cost-sharing, 

would be $50.4 billion for CY 2014. 

We estimated the isolated impact of 

our proposed OPPS policies on CMHCs 

because CMHCs are only paid for partial 

hospitalization services under the 

OPPS. Continuing the provider-specific 

structure that we adopted for CY 2011 

and basing payment fully on the type of 

provider furnishing the service, we 

estimate a 3.8 percent decrease in CY 

2014 payments to CMHCs relative to 

their CY 2013 payments. 

(2) Impacts of the Proposed Updated 

Wage Indices 

We estimate no significant impacts 

related to our proposal to update the 

wage indices and apply the frontier 

State wage index. Proposed adjustments 

to the wage indices other than the 

frontier State wage adjustment would 

not significantly affect most hospitals. 

(3) Impacts of the Proposed Rural 

Adjustment and the Cancer Hospital 

Payment Adjustment 

There are no significant impacts of 

our proposed CY 2014 payment policies 

for hospitals that are eligible for the 

rural adjustment or for the cancer 

hospital payment adjustment. We are 

not proposing to make any change in 

policies for determining the rural and 

cancer hospital payment adjustments, 

and the proposed adjustment amounts 

do not significantly impact the budget 

neutrality adjustments for these 

proposed policies. 

(4) Impacts of the Proposed OPD Fee 

Schedule Increase Factor 

We estimate that, for many hospitals, 

the application of the proposed OPD fee 

schedule increase factor of 1.8 percent 

to the conversion factor for CY 2014 

would mitigate the small negative 

impacts of the budget neutrality 

adjustments. While most classes of 

hospitals would receive an increase that 

is in line with the proposed 1.8 percent 

overall increase after the update is 

applied to the budget neutrality 

adjustments, some hospitals would 

receive smaller but still generally 

positive overall increases. 

b. Impacts of the Proposed ASC 

Payment Update 

For impact purposes, the surgical 

procedures on the ASC list of covered 

procedures are aggregated into surgical 

specialty groups using CPT and HCPCS 

code range definitions. The proposed 

percentage change in estimated total 

payments by specialty groups under the 

CY 2014 payment rates compared to 

estimated CY 2013 payment rates ranges 

between ¥12 percent for ancillary items 

and services and 17 percent for hemic 

and lymphatic system procedures. 

c. Impacts of the Hospital OQR Program 

We do not expect our proposed CY 

2014 policies to significantly affect the 

number of hospitals that do not receive 

a full annual payment update. 

d. Impacts of the ASCQR Program 

We do not expect our proposed CY 

2014 proposed policies to significantly 

affect the number of ASCs that do not 

receive a full annual payment update 

beginning in CY 2015. 

e. Impacts for the Proposed QIO 

Program Changes 

We estimate the effects of the 

proposed QIO Program changes to be 

consistent with the Congressional 

Budget Office’s 2011 Cost Estimate of 

the Trade Bill (H.R. 2832) which 

included a reduction in spending of 

$330 million over the 2012–2021 

period. According to the CBO Estimate 

the Act and subsequently the proposed 

regulatory changes ‘‘would modify the 

provisions under which CMS contracts 

with independent entities called 

[‘‘]Quality Improvement Organizations 

[(QIOs)’’] in Medicare. QIOs, generally 

staffed by health care professionals, 

review medical care, help beneficiaries 

with complaints about the quality of 


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care, and implement care 

improvements. H.R. 2832 would make 

several changes to the composition and 

operation of QIOs, and would 

harmonize QIO contracts with 

requirements of the Federal Acquisition 

Regulation. Among those changes are a 

modification to expand the geographic 

scope of QIO contracts and a 

lengthening of the contract period. CBO 

estimates that those provisions would 

reduce spending by $330 million over 

the 2012–2021 period.’’ 

B. Legislative and Regulatory Authority 

for the Hospital OPPS 

When Title XVIII of the Social 

Security Act was enacted, Medicare 

payment for hospital outpatient services 

was based on hospital-specific costs. In 

an effort to ensure that Medicare and its 

beneficiaries pay appropriately for 

services and to encourage more efficient 

delivery of care, the Congress mandated 

replacement of the reasonable costbased payment methodology with a 

prospective payment system (PPS). The 

Balanced Budget Act of 1997 (BBA) 

(Pub. L. 105–33) added section 1833(t) 

to the Act authorizing implementation 

of a PPS for hospital outpatient services. 

The OPPS was first implemented for 

services furnished on or after August 1, 

2000. Implementing regulations for the 

OPPS are located at 42 CFR Parts 410 

and 419. 

The Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 

1999 (BBRA) (Pub. L. 106–113) made 

major changes in the hospital OPPS. 

The following Acts made additional 

changes to the OPPS: The Medicare, 

Medicaid, and SCHIP Benefits 

Improvement and Protection Act of 

2000 (BIPA) (Pub. L. 106–554); the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173); the 

Deficit Reduction Act of 2005 (DRA) 

(Pub. L. 109–171), enacted on February 

8, 2006; the Medicare Improvements 

and Extension Act under Division B of 

Title I of the Tax Relief and Health Care 

Act of 2006 (MIEA–TRHCA) (Pub. L. 

109–432), enacted on December 20, 

2006; the Medicare, Medicaid, and 

SCHIP Extension Act of 2007 (MMSEA) 

(Pub. L. 110–173), enacted on December 

29, 2007; the Medicare Improvements 

for Patients and Providers Act of 2008 

(MIPPA) (Pub. L. 110–275), enacted on 

July 15, 2008; the Patient Protection and 

Affordable Care Act (Pub. L. 111–148), 

enacted on March 23, 2010, as amended 

by the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152), enacted on March 30, 2010 (These 

two public laws are collectively known 

as the Affordable Care Act); the 

Medicare and Medicaid Extenders Act 

of 2010 (MMEA, Pub. L. 111–309); the 

Temporary Payroll Tax Cut 

Continuation Act of 2011 (TPTCCA, 

Pub. L. 112–78), enacted on December 

23, 2011; and most recently the Middle 

Class Tax Relief and Job Creation Act of 

2012 (MCTRJCA, Pub. L. 112–96), 

enacted on February 22, 2012; and most 

recently the American Taxpayer Relief 

Act of 2012 (Pub. L. 112–240), enacted 

January 2, 2013. 

Under the OPPS, we pay for hospital 

outpatient services on a rate-per-service 

basis that varies according to the APC 

group to which the service is assigned. 

We use the Healthcare Common 

Procedure Coding System (HCPCS) 

(which includes certain Current 

Procedural Terminology (CPT) codes) to 

identify and group the services within 

each APC. The OPPS includes payment 

for most hospital outpatient services, 

except those identified in section I.C. of 

this proposed rule. Section 1833(t)(1)(B) 

of the Act provides for payment under 

the OPPS for hospital outpatient 

services designated by the Secretary 

(which includes partial hospitalization 

services furnished by CMHCs), and 

certain inpatient hospital services that 

are paid under Part B. 

The OPPS rate is an unadjusted 

national payment amount that includes 

the Medicare payment and the 

beneficiary copayment. This rate is 

divided into a labor-related amount and 

a nonlabor-related amount. The laborrelated amount is adjusted for area wage 

differences using the hospital inpatient 

wage index value for the locality in 

which the hospital or CMHC is located. 

All services and items within an APC 

group are comparable clinically and 

with respect to resource use (section 

1833(t)(2)(B) of the Act). In accordance 

with section 1833(t)(2) of the Act, 

subject to certain exceptions, items and 

services within an APC group cannot be 

considered comparable with respect to 

the use of resources if the highest 

median cost (or mean cost, if elected by 

the Secretary) for an item or service in 

the APC group is more than 2 times 

greater than the lowest median cost (or 

mean cost, if elected by the Secretary) 

for an item or service within the same 

APC group (referred to as the ‘‘2 times 

rule’’). In implementing this provision, 

we generally use the cost of the item or 

service assigned to an APC group. 

For new technology items and 

services, special payments under the 

OPPS may be made in one of two ways. 

Section 1833(t)(6) of the Act provides 

for temporary additional payments, 

which we refer to as ‘‘transitional passthrough payments,’’ for at least 2 but not 

more than 3 years for certain drugs, 

biological agents, brachytherapy devices 

used for the treatment of cancer, and 

categories of other medical devices. For 

new technology services that are not 

eligible for transitional pass-through 

payments, and for which we lack 

sufficient clinical information and cost 

data to appropriately assign them to a 

clinical APC group, we have established 

special APC groups based on costs, 

which we refer to as New Technology 

APCs. These New Technology APCs are 

designated by cost bands which allow 

us to provide appropriate and consistent 

payment for designated new procedures 

that are not yet reflected in our claims 

data. Similar to pass-through payments, 

an assignment to a New Technology 

APC is temporary; that is, we retain a 

service within a New Technology APC 

until we acquire sufficient data to assign 

it to a clinically appropriate APC group. 

C. Excluded OPPS Services and 

Hospitals 

Section 1833(t)(1)(B)(i) of the Act 

authorizes the Secretary to designate the 

hospital outpatient services that are 

paid under the OPPS. While most 

hospital outpatient services are payable 

under the OPPS, section 

1833(t)(1)(B)(iv) of the Act excludes 

payment for ambulance, physical and 

occupational therapy, and speechlanguage pathology services, for which 

payment is made under a fee schedule. 

It also excludes screening 

mammography, diagnostic 

mammography, and effective January 1, 

2011, an annual wellness visit providing 

personalized prevention plan services. 

The Secretary originally exercised the 

authority granted under the statute to 

also exclude from the OPPS those 

services that are paid under fee 

schedules or other payment systems. 

Such excluded services include, for 

example, the professional services of 

physicians and nonphysician 

practitioners paid under the MPFS; 

laboratory services paid at the Clinical 

Laboratory Fee Schedule (CLFS) rates; 

services for beneficiaries with end-stage 

renal disease (ESRD) that are paid under 

the ESRD prospective payment system; 

and services and procedures that require 

an inpatient stay that are paid under the 

hospital IPPS. We set forth the services 

that are excluded from payment under 

the OPPS in regulations at 42 CFR 

419.22. This proposed rule includes 

proposals to modify 42 CFR 419.22 and 

include in the OPPS some of these 

currently excluded services. 

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 


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only for services that are paid under a 

cost containment waiver in accordance 

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

CAHs; hospitals located outside of the 

50 States, the District of Columbia, and 

Puerto Rico; and Indian Health Service 

(IHS) hospitals. 

D. Prior Rulemaking 

On April 7, 2000, we published in the 

Federal Register a final rule with 

comment period (65 FR 18434) to 

implement a prospective payment 

system for hospital outpatient services. 

The hospital OPPS was first 

implemented for services furnished on 

or after August 1, 2000. Section 

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

Secretary to review certain components 

of the OPPS, not less often than 

annually, and to revise the groups, 

relative payment weights, and other 

adjustments that take into account 

changes in medical practices, changes in 

technologies, and the addition of new 

services, new cost data, and other 

relevant information and factors. 

Since initially implementing the 

OPPS, we have published final rules in 

the Federal Register annually to 

implement statutory requirements and 

changes arising from our continuing 

experience with this system. These rules 

can be viewed on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. 

E. Advisory Panel on Hospital 

Outpatient Payment (the HOP Panel or 

the Panel), Formerly Named the 

Advisory Panel on Ambulatory Payment 

Classification Groups (APC Panel) 

1. Authority of the Panel 

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

amended by section 201(h) of Public 

Law 106–113, and redesignated by 

section 202(a)(2) of Public Law 106–113, 

requires that we consult with an 

external advisory panel of experts to 

annually review the clinical integrity of 

the payment groups and their weights 

under the OPPS. In CY 2000, based on 

section 1833(t)(9)(A) of the Act and 

section 222 of the Public Health Service 

(PHS) Act, the Secretary established the 

Advisory Panel on Ambulatory Payment 

Classification Groups (APC Panel) to 

fulfill this requirement. In CY 2011, 

based on section 222 of the PHS Act 

which gives discretionary authority to 

the Secretary to convene advisory 

councils and committees, the Secretary 

expanded the panel’s scope to include 

the supervision of hospital outpatient 

therapeutic services in addition to the 

APC groups and weights. To reflect this 

new role of the panel, the Secretary 

changed the panel’s name to the 

Advisory Panel on Hospital Outpatient 

Payment (the HOP Panel, or the Panel). 

The Panel is not restricted to using data 

compiled by CMS, and in conducting its 

review it may use data collected or 

developed by organizations outside the 

Department. 

2. Establishment of the Panel 

On November 21, 2000, the Secretary 

signed the initial charter establishing 

the HOP Panel, at that time named the 

APC Panel. This expert panel, which 

may be composed of up to 19 

appropriate representatives of providers 

(currently employed full-time, not as 

consultants, in their respective areas of 

expertise), reviews clinical data and 

advises CMS about the clinical integrity 

of the APC groups and their payment 

weights. Since CY 2012, the Panel also 

is charged with advising the Secretary 

on the appropriate level of supervision 

for individual hospital outpatient 

therapeutic services. The Panel is 

technical in nature, and it is governed 

by the provisions of the Federal 

Advisory Committee Act (FACA). The 

current charter specifies, among other 

requirements, that: the Panel continues 

to be technical in nature; is governed by 

the provisions of the FACA; may 

convene up to three meetings per year; 

has a Designated Federal Official (DFO); 

and is chaired by a Federal Official 

designated by the Secretary. The current 

charter was amended on November 15, 

2011 and the Panel was renamed to 

reflect expanding the Panel’s authority 

to include supervision of hospital 

outpatient therapeutic services and 

therefore to add CAHs to its 

membership. 

The current Panel membership and 

other information pertaining to the 

Panel, including its charter, Federal 

Register notices, membership, meeting 

dates, agenda topics, and meeting 

reports, can be viewed on the CMS Web 

site at: http://www.cms.gov/FACA/05_

AdvisoryPanelonAmbulatoryPayment

ClassificationGroups.asp#TopOfPage. 

3. Panel Meetings and Organizational 

Structure 

The Panel has held multiple meetings, 

with the last meeting taking place on 

March 11, 2013. Prior to each meeting, 

we publish a notice in the Federal 

Register to announce the meeting and, 

when necessary, to solicit nominations 

for Panel membership and to announce 

new members. 

The Panel has established an 

operational structure that, in part, 

currently includes the use of three 

subcommittees to facilitate its required 

review process. The three current 

subcommittees are the Data 

Subcommittee, the Visits and 

Observation Subcommittee, and the 

Subcommittee for APC Groups and 

Status Indicator (SI) Assignments. 

The Data Subcommittee is responsible 

for studying the data issues confronting 

the Panel and for recommending 

options for resolving them. The Visits 

and Observation Subcommittee reviews 

and makes recommendations to the 

Panel on all technical issues pertaining 

to observation services and hospital 

outpatient visits paid under the OPPS 

(for example, APC configurations and 

APC relative payment weights). The 

Subcommittee for APC Groups and SI 

Assignments advises the Panel on the 

following issues: the appropriate SIs to 

be assigned to HCPCS codes, including 

but not limited to whether a HCPCS 

code or a category of codes should be 

packaged or separately paid; and the 

appropriate APC placement of HCPCS 

codes regarding services for which 

separate payment is made. 

Each of these subcommittees was 

established by a majority vote from the 

full Panel during a scheduled Panel 

meeting, and the Panel recommended 

that the subcommittees continue at the 

August 2013 Panel meeting. We 

accepted this recommendation. 

Discussions of the other 

recommendations made by the Panel at 

the March 2013 Panel meeting are 

included in the sections of this final 

rule that are specific to each 

recommendation. For discussions of 

earlier Panel meetings and 

recommendations, we refer readers to 

previously published OPPS/ASC 

proposed and final rules, the CMS Web 

site mentioned earlier in this section, 

and the FACA database at: http:// 

fido.gov/facadatabase/public.asp. 

F. Public Comments Received on the CY 

2013 OPPS/ASC Final Rule With 

Comment Period 

We received approximately 27 timely 

pieces of correspondence on the CY 

2013 OPPS/ASC final rule with 

comment period that appeared in the 

Federal Register on November 15, 2012 

(77 FR 68210), some of which contained 

comments on the interim APC 

assignments and/or status indicators of 

HCPCS codes identified with comment 

indicator ‘‘NI’’ in Addenda B, AA, and 

BB to that final rule. Summaries of these 

public comments on topics that were 

open to comment and our responses to 

them will be set forth in various 

sections of the final rule with comment 

period under the appropriate subjectmatter headings. 


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II. Proposed Updates Affecting OPPS 

Payments 

A. Proposed Recalibration of APC 

Relative Payment Weights 

1. Database Construction 

a. Database Source and Methodology 

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

requires that the Secretary review not 

less often than annually and revise the 

relative payment weights for APCs. In 

the April 7, 2000 OPPS final rule with 

comment period (65 FR 18482), we 

explained in detail how we calculated 

the relative payment weights that were 

implemented on August 1, 2000 for each 

APC group. 

For the CY 2014 OPPS, we are 

proposing to recalibrate the APC relative 

payment weights for services furnished 

on or after January 1, 2014, and before 

January 1, 2015 (CY 2014), using the 

same basic methodology that we 

described in the CY 2013 OPPS/ASC 

final rule with comment period. That is, 

we are proposing to recalibrate the 

relative payment weights for each APC 

based on claims and cost report data for 

hospital outpatient department (HOPD) 

services, using the most recent available 

data to construct a database for 

calculating APC group weights. 

Therefore, for the purpose of 

recalibrating the proposed APC relative 

payment weights for CY 2014, we used 

approximately 146 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, 2012, 

and before January 1, 2013. For exact 

counts of claims used, we refer readers 

to the claims accounting narrative under 

supporting documentation for this 

proposed rule on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. 

Of the approximately 146 million 

final action claims for services provided 

in hospital outpatient settings used to 

calculate the CY 2014 OPPS payment 

rates for this proposed rule, 

approximately 117 million claims were 

the type of bill potentially appropriate 

for use in setting rates for OPPS services 

(but did not necessarily contain services 

payable under the OPPS). Of the 

approximately 117 million claims, 

approximately 5 million claims were 

not for services paid under the OPPS or 

were excluded as not appropriate for 

use (for example, erroneous cost-tocharge ratios (CCRs) or no HCPCS codes 

reported on the claim). From the 

remaining approximately 112 million 

claims, we created approximately 82 

million single records, of which 

approximately 34 million were 

‘‘pseudo’’ single or ‘‘single session’’ 

claims (created from approximately 19 

million multiple procedure claims using 

the process we discuss later in this 

section). Approximately 1 million 

claims were trimmed out on cost or 

units in excess of +/¥ 3 standard 

deviations from the geometric mean, 

yielding approximately 82 million 

single bills for ratesetting. As described 

in section II.A.2. of this proposed rule, 

our data development process is 

designed with the goal of using 

appropriate cost information in setting 

the APC relative payment weights. The 

bypass process is described in section 

II.A.1.b. of this proposed rule. This 

section discusses how we develop 

‘‘pseudo’’ single procedure claims (as 

defined below), with the intention of 

using more appropriate data from the 

available claims. In some cases, the 

bypass process allows us to use some 

portion of the submitted claim for cost 

estimation purposes, while the 

remaining information on the claim 

continues to be unusable. Consistent 

with the goal of using appropriate 

information in our data development 

process, we only use claims (or portions 

of each claim) that are appropriate for 

ratesetting purposes. 

The proposed APC relative weights 

and payments for CY 2014 in Addenda 

A and B to this proposed rule (which 

are available via the Internet on the 

CMS Web site) were calculated using 

claims from CY 2012 that were 

processed through December 31, 2012. 

While prior to CY 2013 we historically 

based the payments on median hospital 

costs for services in the APC groups, 

beginning with the CY 2013 OPPS, we 

established the cost-based relative 

payment weights for the OPPS using 

geometric mean costs, as discussed in 

the CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68259 through 

68271). For the CY 2014 OPPS, we are 

proposing to use this same 

methodology, basing payments on 

geometric mean costs. Under this 

methodology, we select claims for 

services paid under the OPPS and 

match these claims to the most recent 

cost report filed by the individual 

hospitals represented in our claims data. 

We continue to believe that it is 

appropriate to use the most current full 

calendar year claims data and the most 

recently submitted cost reports to 

calculate the relative costs 

underpinning the APC relative payment 

weights and the CY 2014 payment rates. 

b. Proposed Use of Single and Multiple 

Procedure Claims 

For CY 2014, in general, we are 

proposing to continue to use single 

procedure claims to set the costs on 

which the APC relative payment 

weights are based. We generally use 

single procedure claims to set the 

estimated costs for APCs because we 

believe that the OPPS relative weights 

on which payment rates are based 

should be derived from the costs of 

furnishing one unit of one procedure 

and because, in many circumstances, we 

are unable to ensure that packaged costs 

can be appropriately allocated across 

multiple procedures performed on the 

same date of service. 

It is generally desirable to use the data 

from as many claims as possible to 

recalibrate the APC relative payment 

weights, including those claims for 

multiple procedures. As we have for 

several years, we are proposing to 

continue to use date of service 

stratification and a list of codes to be 

bypassed to convert multiple procedure 

claims to ‘‘pseudo’’ single procedure 

claims. Through bypassing specified 

codes that we believe do not have 

significant packaged costs, we are able 

to use more data from multiple 

procedure claims. In many cases, this 

enables 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 2013 OPPS/ASC final 

rule with comment period (77 FR 68227 

through 68229). In addition, for CY 2008 

(72 FR 66614 through 66664), we 

increased packaging and created the 

first composite APCs, and continued 

those policies through CY 2013. 

Increased packaging and creation of 

composite APCs also increased the 

number of bills that we were able to use 

for ratesetting by enabling us to use 

claims that contained multiple major 

procedures that previously would not 

have been usable. Further, for CY 2009, 

we expanded the composite APC model 

to one additional clinical area, multiple 

imaging services (73 FR 68559 through 

68569), which also increased the 

number of bills we were able to use in 

developing the OPPS relative weights 

on which payments are based. We have 

continued the composite APCs for 


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multiple imaging services through CY 

2013, and are proposing to continue this 

policy for CY 2014. We also are 

proposing to further expand our 

packaging policies for CY 2014. We refer 

readers to section II.A.2.f. of this 

proposed rule for a discussion of the use 

of claims in modeling the costs for 

composite APCs and to section II.A.3. of 

this proposed rule for a discussion of 

our proposed packaging policies for CY 

2014. 

We are proposing to continue to apply 

these processes to enable us to use as 

much claims data as possible for 

ratesetting for the CY 2014 OPPS. This 

methodology enabled us to create, for 

this proposed rule, approximately 34 

million ‘‘pseudo’’ single procedure 

claims, including multiple imaging 

composite ‘‘single session’’ bills (we 

refer readers to section II.A.2.f.(5) of this 

proposed rule for further discussion), to 

add to the approximately 48 million 

‘‘natural’’ single procedure claims. 

For CY 2014, we are proposing to 

bypass 179 HCPCS codes that are 

identified in Addendum N to this 

proposed rule (which is available via 

the Internet on the CMS Web site). Since 

the inception of the bypass list, which 

is the list of codes to be bypassed to 

convert multiple procedure claims to 

‘‘pseudo’’ single procedure claims, we 

have calculated the percent of ‘‘natural’’ 

single bills that contained packaging for 

each HCPCS code and the amount of 

packaging on each ‘‘natural’’ single bill 

for each code. Each year, we generally 

retain the codes on the previous year’s 

bypass list and use the updated year’s 

data (for CY 2014, data available for the 

March 11, 2013 meeting of the Advisory 

Panel on Hospital Outpatient Payment 

(the Panel) from CY 2012 claims 

processed through September 30, 2012, 

and CY 2011 claims data processed 

through June 30, 2012, used to model 

the payment rates for CY 2013) to 

determine whether it would be 

appropriate to add additional codes to 

the previous year’s bypass list. For CY 

2014, we are proposing to continue to 

bypass all of the HCPCS codes on the 

CY 2013 OPPS bypass list, with the 

exception of HCPCS codes that we are 

proposing to delete for CY 2014, which 

are listed in Table 1 of this proposed 

rule. We also are proposing to remove 

HCPCS codes that are not separately 

paid under the OPPS because the 

purpose of the bypass list is to obtain 

more data for those codes relevant to 

ratesetting. Some of the codes we are 

proposing to remove from the CY 2014 

bypass list are affected by the CY 2014 

packaging proposal, discussed in 

section II.A.3. of this proposed rule. In 

addition, we are proposing to add to the 

bypass list for CY 2014 HCPCS codes 

not on the CY 2013 bypass list that, 

using either the CY 2013 final rule data 

(CY 2011 claims) or the March 11, 2013 

Panel data (first 9 months of CY 2012 

claims), met the empirical criteria for 

the bypass list that are summarized 

below. Finally, to remain consistent 

with the CY 2014 proposal to continue 

to develop OPPS relative payment 

weights based on geometric mean costs, 

we also are proposing that the packaged 

cost criterion continue to be based on 

the geometric mean cost. The entire list 

proposed for CY 2014 (including the 

codes that remain on the bypass list 

from prior years) is open to public 

comment. Because we must make some 

assumptions about packaging in the 

multiple procedure claims in order to 

assess a HCPCS code for addition to the 

bypass list, we assumed that the 

representation of packaging on 

‘‘natural’’ single procedure claims for 

any given code is comparable to 

packaging for that code in the multiple 

procedure claims. The proposed criteria 

for the bypass list are: 

• There are 100 or more ‘‘natural’’ 

single procedure claims for the code. 

This number of single procedure claims 

ensures that observed outcomes are 

sufficiently representative of packaging 

that might occur in the multiple claims. 

• Five percent or fewer of the 

‘‘natural’’ single procedure claims for 

the code have packaged costs on that 

single procedure claim for the code. 

This criterion results in limiting the 

amount of packaging being redistributed 

to the separately payable procedures 

remaining on the claim after the bypass 

code is removed and ensures that the 

costs associated with the bypass code 

represent the cost of the bypassed 

service. 

• The geometric mean cost of 

packaging observed in the ‘‘natural’’ 

single procedure claims is equal to or 

less than $55. This criterion also limits 

the amount of error in redistributed 

costs. During the assessment of claims 

against the bypass criteria, we do not 

know the dollar value of the packaged 

cost that should be appropriately 

attributed to the other procedures on the 

claim. Therefore, ensuring that 

redistributed costs associated with a 

bypass code are small in amount and 

volume protects the validity of cost 

estimates for low cost services billed 

with the bypassed service. 

We note that, as we did for CY 2013, 

we are proposing to continue to 

establish the CY 2014 OPPS relative 

payment weights based on geometric 

mean costs. To remain consistent in the 

metric used for identifying cost patterns, 

we are proposing to use the geometric 

mean cost of packaging to identify 

potential codes to add to the bypass list. 

In response to public comments on 

the CY 2010 OPPS/ASC proposed rule 

requesting that the packaged cost 

threshold be updated, we considered 

whether it would be appropriate to 

update the $50 packaged cost threshold 

for inflation when examining potential 

bypass list additions. As discussed in 

the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60328), the real 

value of this packaged cost threshold 

criterion has declined due to inflation, 

making the packaged cost threshold 

more restrictive over time when 

considering additions to the bypass list. 

Therefore, adjusting the threshold by 

the market basket increase would 

prevent continuing decline in the 

threshold’s real value. Based on the 

same rationale described for the CY 

2013 OPPS/ASC final rule with 

comment period (77 FR 68221), we are 

proposing for CY 2014 to continue to 

update the packaged cost threshold by 

the market basket increase. By applying 

the final CY 2013 market basket increase 

of 1.8 percent to the prior nonrounded 

dollar threshold of $53.76 (77 FR 

68221), we determined that the 

threshold would remain for CY 2014 at 

$55 ($54.73 rounded to $55, the nearest 

$5 increment). Therefore, we are 

proposing to set the geometric mean 

packaged cost threshold on the CY 2012 

claims at $55 for a code to be considered 

for addition to the CY 2014 OPPS 

bypass list. 

• The code is not a code for an 

unlisted service. Unlisted codes do not 

describe a specific service, and thus 

their costs would not be appropriate for 

bypass list purposes. 

In addition, we are proposing to 

continue to include on the bypass list 

HCPCS codes that CMS medical 

advisors believe have minimal 

associated packaging based on their 

clinical assessment of the complete CY 

2014 OPPS proposal. Some of these 

codes were identified by CMS medical 

advisors and some were identified in 

prior years by commenters with 

specialized knowledge of the packaging 

associated with specific services. We 

also are proposing to continue to 

include certain HCPCS codes on the 

bypass list in order to purposefully 

direct the assignment of packaged costs 

to a companion code where services 

always appear together and where there 

would otherwise be few single 

procedure claims available for 

ratesetting. For example, we have 

previously discussed our reasoning for 

adding HCPCS code G0390 (Trauma 

response team associated with hospital 


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critical care service) to the bypass list 

(73 FR 68513). 

As a result of the multiple imaging 

composite APCs that we established in 

CY 2009, the program logic for creating 

‘‘pseudo’’ single procedure claims from 

bypassed codes that are also members of 

multiple imaging composite APCs 

changed. When creating the set of 

‘‘pseudo’’ single procedure claims, 

claims that contain ‘‘overlap bypass 

codes’’ (those HCPCS codes that are 

both on the bypass list and are members 

of the multiple imaging composite 

APCs) were identified first. These 

HCPCS codes were then processed to 

create multiple imaging composite 

‘‘single session’’ bills, that is, claims 

containing HCPCS codes from only one 

imaging family, thus suppressing the 

initial use of these codes as bypass 

codes. However, these ‘‘overlap bypass 

codes’’ were retained on the bypass list 

because, at the end of the ‘‘pseudo’’ 

single processing logic, we reassessed 

the claims without suppression of the 

‘‘overlap bypass codes’’ under our 

longstanding ‘‘pseudo’’ single process to 

determine whether we could convert 

additional claims to ‘‘pseudo’’ single 

procedure claims. (We refer readers to 

section II.A.2.b. of this proposed rule for 

further discussion of the treatment of 

‘‘overlap bypass codes.’’) This process 

also created multiple imaging composite 

‘‘single session’’ bills that could be used 

for calculating composite APC costs. 

‘‘Overlap bypass codes’’ that are 

members of the proposed multiple 

imaging composite APCs are identified 

by asterisks (*) in Addendum N to this 

proposed rule (which is available via 

the Internet on the CMS Web site). 

Addendum N to this proposed rule 

includes the proposed list of bypass 

codes for CY 2014. The list of bypass 

codes contains codes that were reported 

on claims for services in CY 2012 and, 

therefore, includes codes that were in 

effect in 2012 and used for billing but 

were deleted for CY 2013. We retained 

these deleted bypass codes on the 

proposed CY 2014 bypass list because 

these codes existed in CY 2012 and 

were covered OPD services in that 

period, and CY 2012 claims data are 

used to calculate CY 2014 payment 

rates. Keeping these deleted bypass 

codes on the bypass list potentially 

allows us to create more ‘‘pseudo’’ 

single procedure claims for ratesetting 

purposes. ‘‘Overlap bypass codes’’ that 

were members of the proposed multiple 

imaging composite APCs are identified 

by asterisks (*) in the third column of 

Addendum N to this proposed rule. 

HCPCS codes that we are proposing to 

add for CY 2014 are identified by 

asterisks (*) in the fourth column of 

Addendum N. 

Table 1 below contains the list of 

codes that we are proposing to remove 

from the CY 2014 bypass list because 

these codes were either deleted from the 

HCPCS before CY 2012 (and therefore 

were not covered OPD services in CY 

2012) or were not separately payable 

codes under the proposed CY 2014 

OPPS because these codes are not used 

for ratesetting through the bypass 

process. The list of codes proposed for 

removal from the bypass list includes 

those that would be affected by the CY 

2014 OPPS proposed packaging policy 

described in section II.A.3. of this 

proposed rule. 

TABLE 1—HCPCS CODES PROPOSED

TO BE REMOVED FROM THE CY 

2014 BYPASS LIST

HCPCS 

Code HCPCS Short descriptor 

17003 ..... Destruct premalg les 2–14. 

31231 ..... Nasal endoscopy dx. 

31505 ..... Diagnostic laryngoscopy. 

31579 ..... Diagnostic laryngoscopy. 

51741 ..... Electro-uroflowmetry first. 

51798 ..... Us urine capacity measure. 

54240 ..... Penis study. 

56820 ..... Exam of vulva w/scope. 

57452 ..... Exam of cervix w/scope. 

57454 ..... Bx/curett of cervix w/scope. 

69210 ..... Remove impacted ear wax. 

70030 ..... X-ray eye for foreign body. 

70100 ..... X-ray exam of jaw <4 views. 

70110 ..... X-ray exam of jaw 4/> views. 

70120 ..... X-ray exam of mastoids. 

70130 ..... X-ray exam of mastoids. 

70140 ..... X-ray exam of facial bones. 

70150 ..... X-ray exam of facial bones. 

70160 ..... X-ray exam of nasal bones. 

70200 ..... X-ray exam of eye sockets. 

70210 ..... X-ray exam of sinuses. 

70220 ..... X-ray exam of sinuses. 

70240 ..... X-ray exam pituitary saddle. 

70250 ..... X-ray exam of skull. 

70260 ..... X-ray exam of skull. 

70320 ..... Full mouth x-ray of teeth. 

70328 ..... X-ray exam of jaw joint. 

70330 ..... X-ray exam of jaw joints. 

70355 ..... Panoramic x-ray of jaws. 

70360 ..... X-ray exam of neck. 

70370 ..... Throat x-ray & fluoroscopy. 

70371 ..... Speech evaluation complex. 

71021 ..... Chest x-ray frnt lat lordotc. 

71022 ..... Chest x-ray frnt lat oblique. 

71023 ..... Chest x-ray and fluoroscopy. 

71030 ..... Chest x-ray 4/> views. 

71034 ..... Chest x-ray&fluoro 4/> views. 

71035 ..... Chest x-ray special views. 

71100 ..... X-ray exam ribs uni 2 views. 

71101 ..... X-ray exam unilat ribs/chest. 

71110 ..... X-ray exam ribs bil 3 views. 

71111 ..... X-ray exam ribs/chest 4/> vws. 

71120 ..... X-ray exam breastbone 2/>vws. 

71130 ..... X-ray strenoclavic jt 3/>vws. 

72010 ..... X-ray exam spine ap&lat. 

72020 ..... X-ray exam of spine 1 view. 

72040 ..... X-ray exam neck spine 3/<vws. 

72050 ..... X-ray exam neck spine 4/5vws. 

TABLE 1—HCPCS CODES PROPOSED

TO BE REMOVED FROM THE CY 

2014 BYPASS LIST—Continued 

HCPCS 

Code HCPCS Short descriptor 

72052 ..... X-ray exam neck spine 6/>vws. 

72069 ..... X-ray exam trunk spine stand. 

72070 ..... X-ray exam thorac spine 2vws. 

72072 ..... X-ray exam thorac spine 3vws. 

72074 ..... X-ray exam thorac spine 4/>vw. 

72080 ..... X-ray exam trunk spine 2 vws. 

72090 ..... X-ray exam scloiosis erect. 

72100 ..... X-ray exam l-s spine 2⁄3 vws. 

72110 ..... X-ray exam l-2 spine 4/>vws. 

72114 ..... X-ray exam l-s spine bending. 

72120 ..... X-ray bend only l-s spine. 

72170 ..... X-ray exam of pelvis. 

72190 ..... X-ray exam of pelvis. 

72202 ..... X-ray exam si joints 3/> vws. 

72220 ..... X-ray exam sacrum tailbone. 

73000 ..... X-ray exam of collar bone. 

73010 ..... X-ray exam of shoulder blade. 

73020 ..... X-ray exam of shoulder. 

73030 ..... X-ray exam of shoulder. 

73050 ..... X-ray exam of shoulders. 

73060 ..... X-ray exam of humerus. 

73070 ..... X-ray exam of elbow. 

73080 ..... X-ray exam of elbow. 

73090 ..... X-ray exam of forearm. 

73100 ..... X-ray exam of wrist. 

73110 ..... X-ray exam of wrist. 

73120 ..... X-ray exam of hand. 

73130 ..... X-ray exam of hand. 

73140 ..... X-ray exam of finger(s). 

73510 ..... X-ray exam of hip. 

73520 ..... X-ray exam of hips. 

73540 ..... X-ray exam of pelvis & hips. 

73550 ..... X-ray exam of thigh. 

73560 ..... X-ray exam of knee 1 or 2. 

73562 ..... X-ray exam of knee 3. 

73564 ..... X-ray exam knee 4 or more. 

73565 ..... X-ray exam of knees. 

73590 ..... X-ray exam of lower leg. 

73600 ..... X-ray exam of ankle. 

73610 ..... X-ray exam of ankle. 

73620 ..... X-ray exam of foot. 

73630 ..... X-ray exam of foot. 

73650 ..... X-ray exam of heel. 

73660 ..... X-ray exam of toe(s). 

74000 ..... X-ray exam of abdomen. 

74010 ..... X-ray exam of abdomen. 

74020 ..... X-ray exam of abdomen. 

74022 ..... X-ray exam series abdomen. 

74210 ..... Contrst x-ray exam of throat. 

74220 ..... Contrast x-ray esophagus. 

74230 ..... Cine/vid x-ray throat/esoph. 

74246 ..... Contrst x-ray uppr gi tract. 

74247 ..... Contrst x-ray uppr gi tract. 

74249 ..... Contrst x-ray uppr gi tract. 

76100 ..... X-ray exam of body section. 

76510 ..... Ophth us b & quant a. 

76511 ..... Ophth us quant a only. 

76512 ..... Ophth us b w/non-quant a. 

76513 ..... Echo exam of eye water bath. 

76514 ..... Echo exam of eye thickness. 

76516 ..... Echo exam of eye. 

76519 ..... Echo exam of eye. 

76536 ..... Us exam of head and neck. 

76645 ..... Us exam breast(s). 

76801 ..... Ob us < 14 wks single fetus. 

76805 ..... Ob us >/= 14 wks sngl fetus. 

76811 ..... Ob us detailed sngl fetus. 

76816 ..... Ob us follow-up per fetus. 

76817 ..... Transvaginal us obstetric. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43547 

TABLE 1—HCPCS CODES PROPOSED

TO BE REMOVED FROM THE CY 

2014 BYPASS LIST—Continued 

HCPCS 

Code HCPCS Short descriptor 

76830 ..... Transvaginal us non-ob. 

76881 ..... Us xtr non-vasc complete. 

76882 ..... Us xtr non-vasc lmtd. 

76970 ..... Ultrasound exam follow-up. 

77072 ..... X-rays for bone age. 

77073 ..... X-rays bone length studies. 

77074 ..... X-rays bone survey limited. 

77075 ..... X-rays bone survey complete. 

77076 ..... X-rays bone survey infant. 

77077 ..... Joint survey single view. 

77082 ..... Dxa bone density vert fx. 

77084 ..... Magnetic image bone marrow. 

77300 ..... Radiation therapy dose plan. 

77301 ..... Radiotherapy dose plan imrt. 

77305 ..... Teletx isodose plan simple. 

77310 ..... Teletx isodose plan intermed. 

77315 ..... Teletx isodose plan complex. 

77327 ..... Brachytx isodose calc interm. 

77331 ..... Special radiation dosimetry. 

77336 ..... Radiation physics consult. 

77338 ..... Design mlc device for imrt. 

77370 ..... Radiation physics consult. 

80500 ..... Lab pathology consultation. 

80502 ..... Lab pathology consultation. 

85097 ..... Bone marrow interpretation. 

86510 ..... Histoplasmosis skin test. 

86850 ..... RBC antibody screen. 

86870 ..... RBC antibody identification. 

86880 ..... Coombs test direct. 

86885 ..... Coombs test indirect qual. 

86886 ..... Coombs test indirect titer. 

86890 ..... Autologous blood process. 

86900 ..... Blood typing abo. 

86901 ..... Blood typing rh (d). 

86904 ..... Blood typing patient serum. 

86905 ..... Blood typing rbc antigens. 

86906 ..... Blood typing rh phenotype. 

86930 ..... Frozen blood prep. 

86970 ..... Rbc pretx incubatj w/chemicl. 

86977 ..... Rbc serum pretx incubj/inhib. 

88104 ..... Cytopath fl nongyn smears. 

88106 ..... Cytopath fl nongyn filter. 

88108 ..... Cytopath concentrate tech. 

88112 ..... Cytopath cell enhance tech. 

88120 ..... Cytp urne 3–5 probes ea spec. 

88160 ..... Cytopath smear other source. 

88161 ..... Cytopath smear other source. 

88162 ..... Cytopath smear other source. 

88172 ..... Cytp dx eval fna 1st ea site. 

88173 ..... Cytopath eval fna report. 

88182 ..... Cell marker study. 

88184 ..... Flowcytometry/tc 1 marker. 

88185 ..... Flowcytometry/tc add-on. 

88189 ..... Flowcytometry/read 16 & >. 

88300 ..... Surgical path gross. 

88302 ..... Tissue exam by pathologist. 

88304 ..... Tissue exam by pathologist. 

88305 ..... Tissue exam by pathologist. 

88307 ..... Tissue exam by pathologist. 

88311 ..... Decalcify tissue. 

88312 ..... Special stains group 1. 

88313 ..... Special stains group 2. 

88314 ..... Histochemical stains add-on. 

88321 ..... Microslide consultation. 

88323 ..... Microslide consultation. 

88325 ..... Comprehensive review of data. 

88329 ..... Path consult introp. 

88331 ..... Path consult intraop 1 bloc. 

88342 ..... Immunohistochemistry. 

TABLE 1—HCPCS CODES PROPOSED

TO BE REMOVED FROM THE CY 

2014 BYPASS LIST—Continued 

HCPCS 

Code HCPCS Short descriptor 

88346 ..... Immunofluorescent study. 

88347 ..... Immunofluorescent study. 

88348 ..... Electron microscopy. 

88358 ..... Analysis tumor. 

88360 ..... Tumor immunohistochem/manual. 

88361 ..... Tumor immunohistochem/comput. 

88365 ..... Insitu hybridization (fish). 

88368 ..... Insitu hybridization manual. 

88385 ..... Eval molecul probes 51–250. 

88386 ..... Eval molecul probes 251–500. 

89049 ..... Chct for mal hyperthermia. 

89220 ..... Sputum specimen collection. 

89230 ..... Collect sweat for test. 

89240 ..... Pathology lab procedure. 

90472 ..... Immunization admin each add. 

90474 ..... Immune admin oral/nasal addl. 

92020 ..... Special eye evaluation. 

92025 ..... Corneal topography. 

92060 ..... Special eye evaluation. 

92081 ..... Visual field examination(s). 

92082 ..... Visual field examination(s). 

92083 ..... Visual field examination(s). 

92133 ..... Cmptr ophth img optic nerve. 

92134 ..... Cptr ophth dx img post segmt. 

92136 ..... Ophthalmic biometry. 

92225 ..... Special eye exam initial. 

92226 ..... Special eye exam subsequent. 

92230 ..... Eye exam with photos. 

92240 ..... Icg angiography. 

92250 ..... Eye exam with photos. 

92275 ..... Electroretinography. 

92285 ..... Eye photography. 

92286 ..... Internal eye photography. 

92520 ..... Laryngeal function studies. 

92541 ..... Spontaneous nystagmus test. 

92542 ..... Positional nystagmus test. 

92546 ..... Sinusoidal rotational test. 

92548 ..... Posturography. 

92550 ..... Tympanometry & reflex thresh. 

92552 ..... Pure tone audiometry air. 

92553 ..... Audiometry air & bone. 

92555 ..... Speech threshold audiometry. 

92556 ..... Speech audiometry complete. 

92557 ..... Comprehensive hearing test. 

92567 ..... Tympanometry. 

92570 ..... Acoustic immitance testing. 

92582 ..... Conditioning play audiometry. 

92585 ..... Auditor evoke potent compre. 

92603 ..... Cochlear implt f/up exam 7/>. 

92604 ..... Reprogram cochlear implt 7/>. 

92626 ..... Eval aud rehab status. 

93005 ..... Electrocardiogram tracing. 

93017 ..... Cardiovascular stress test. 

93225 ..... Ecg monit/reprt up to 48 hrs. 

93226 ..... Ecg monit/reprt up to 48 hrs. 

93229 ..... Remote 30 day ecg tech supp. 

93270 ..... Remote 30 day ecg rev/report. 

93271 ..... Ecg/monitoring and analysis. 

93278 ..... ECG/signal-averaged. 

93290 ..... Icm device eval. 

93306 ..... Tte w/doppler complete. 

93701 ..... Bioimpedance cv analysis. 

93786 ..... Ambulatory BP recording. 

93788 ..... Ambulatory BP analysis. 

93880 ..... Extracranial bilat study. 

93882 ..... Extracranial uni/ltd study. 

93886 ..... Intracranial complete study. 

93888 ..... Intracranial limited study. 

93922 ..... Upr/l xtremity art 2 levels. 

TABLE 1—HCPCS CODES PROPOSED

TO BE REMOVED FROM THE CY 

2014 BYPASS LIST—Continued 

HCPCS 

Code HCPCS Short descriptor 

93923 ..... Upr/lxtr art stdy 3+ lvls. 

93924 ..... Lwr xtr vasc stdy bilat. 

93925 ..... Lower extremity study. 

93926 ..... Lower extremity study. 

93930 ..... Upper extremity study. 

93931 ..... Upper extremity study. 

93965 ..... Extremity study. 

93970 ..... Extremity study. 

93971 ..... Extremity study. 

93975 ..... Vascular study. 

93976 ..... Vascular study. 

93978 ..... Vascular study. 

93979 ..... Vascular study. 

93990 ..... Doppler flow testing. 

94015 ..... Patient recorded spirometry. 

94690 ..... Exhaled air analysis. 

95250 ..... Glucose monitoring cont. 

95800 ..... Slp stdy unattended. 

95803 ..... Actigraphy testing. 

95805 ..... Multiple sleep latency test. 

95806 ..... Sleep study unatt&resp efft. 

95807 ..... Sleep study attended. 

95808 ..... Polysom any age 1–3> param. 

95810 ..... Polysom 6/> yrs 4/> param. 

95812 ..... Eeg 41–60 minutes. 

95813 ..... Eeg over 1 hour. 

95816 ..... Eeg awake and drowsy. 

95819 ..... Eeg awake and asleep. 

95822 ..... Eeg coma or sleep only. 

95869 ..... Muscle test thor paraspinal. 

95872 ..... Muscle test one fiber. 

95900 ..... Motor nerve conduction test. 

95921 ..... Autonomic nrv parasym inervj. 

95925 ..... Somatosensory testing. 

95926 ..... Somatosensory testing. 

95930 ..... Visual evoked potential test. 

95950 ..... Ambulatory eeg monitoring. 

95953 ..... EEG monitoring/computer. 

96000 ..... Motion analysis video/3d. 

96361 ..... Hydrate iv infusion add-on. 

96366 ..... Ther/proph/diag iv inf addon. 

96367 ..... Tx/proph/dg addl seq iv inf. 

96370 ..... Sc ther infusion addl hr. 

96371 ..... Sc ther infusion reset pump. 

96375 ..... Tx/pro/dx inj new drug addon. 

96411 ..... Chemo iv push addl drug. 

96415 ..... Chemo iv infusion addl hr. 

96417 ..... Chemo iv infus each addl seq. 

96423 ..... Chemo ia infuse each addl hr. 

G0365 .... Vessel mapping hemo access. 

G0399 .... Home sleep test/type 3 Porta. 

G0416 .... Sat biopsy 10–20. 

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

For CY 2014, we are proposing to 

continue to use the hospital-specific 

overall ancillary and departmental costto-charge ratios (CCRs) to convert 

charges to estimated costs through 

application of a revenue code-to-cost 

center crosswalk. To calculate the APC 

costs on which the proposed CY 2014 

APC payment rates are based, we 

calculated hospital-specific overall 

ancillary CCRs and hospital-specific 

departmental CCRs for each hospital for 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43548 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

which we had CY 2012 claims data from 

the most recent available hospital cost 

reports, in most cases, cost reports 

beginning in CY 2011. For the CY 2014 

OPPS proposed rates, we used the set of 

claims processed during CY 2012. We 

applied the hospital-specific CCR to the 

hospital’s charges at the most detailed 

level possible, based on a revenue codeto-cost center crosswalk that contains a 

hierarchy of CCRs used to estimate costs 

from charges for each revenue code. 

That crosswalk is available for review 

and continuous comment on the CMS 

Web site at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/ 

index.html. 

To ensure the completeness of the 

revenue code-to-cost center crosswalk, 

we reviewed changes to the list of 

revenue codes for CY 2012 (the year of 

claims data we used to calculate the 

proposed CY 2014 OPPS payment rates) 

and found that the National Uniform 

Billing Committee (NUBC) did not add 

any new revenue codes to the NUBC 

2012 Data Specifications Manual. 

In accordance with our longstanding 

policy, we calculated CCRs for the 

standard and nonstandard cost centers 

accepted by the electronic cost report 

database. In general, the most detailed 

level at which we calculated CCRs was 

the hospital-specific departmental level. 

For a discussion of the hospital-specific 

overall ancillary CCR calculation, we 

refer readers to the CY 2007 OPPS/ASC 

final rule with comment period (71 FR 

67983 through 67985). One 

longstanding exception to this general 

methodology for calculation of CCRs 

used for converting charges to costs on 

each claim, as detailed in the CY 2007 

OPPS/ASC final rule with comment 

period, is the calculation of blood costs, 

as discussed in section II.A.2.d.(2) of 

this proposed rule and which has been 

our standard policy since the CY 2005 

OPPS. 

For the CCR calculation process, we 

used the same general approach that we 

used in developing the final APC rates 

for CY 2007 and thereafter, using the 

revised CCR calculation that excluded 

the costs of paramedical education 

programs and weighted the outpatient 

charges by the volume of outpatient 

services furnished by the hospital. We 

refer readers to the CY 2007 OPPS/ASC 

final rule with comment period for more 

information (71 FR 67983 through 

67985). We first limited the population 

of cost reports to only those hospitals 

that filed outpatient claims in CY 2012 

before determining whether the CCRs 

for such hospitals were valid. 

We then calculated the CCRs for each 

cost center and the overall ancillary 

CCR for each hospital for which we had 

claims data. We did this using hospitalspecific data from the Hospital Cost 

Report Information System (HCRIS). We 

used the most recent available cost 

report data, in most cases, cost reports 

with cost reporting periods beginning in 

CY 2011. For this proposed rule, we 

used the most recently submitted cost 

reports to calculate the CCRs to be used 

to calculate costs for the proposed CY 

2014 OPPS payment rates. If the most 

recently available cost report was 

submitted but not settled, we looked at 

the last settled cost report to determine 

the ratio of submitted to settled cost 

using the overall ancillary CCR, and we 

then adjusted the most recent available 

submitted, but not settled, cost report 

using that ratio. We then calculated both 

an overall ancillary CCR and cost 

center-specific CCRs for each hospital. 

We used the overall ancillary CCR 

referenced above for all purposes that 

require use of an overall ancillary CCR. 

We are proposing to continue this 

longstanding methodology for the 

calculation of costs for CY 2014. 

Since the implementation of the 

OPPS, some commenters have raised 

concerns about potential bias in the 

OPPS cost-based weights due to ‘‘charge 

compression,’’ which is the practice of 

applying a lower charge markup to 

higher cost services and a higher charge 

markup to lower cost services. As a 

result, the cost-based weights may 

reflect some aggregation bias, 

undervaluing high-cost items and 

overvaluing low-cost items when an 

estimate of average markup, embodied 

in a single CCR, is applied to items of 

widely varying costs in the same cost 

center. This issue was evaluated in a 

report by Research Triangle Institute, 

International (RTI). The RTI final report 

can be found on RTI’s Web site at: 

http://www.rti.org/reports/cms/HHSM500-2005–0029I/PDF/ 

Refining_Cost_to_Charge_Ratios_

200807_Final.pdf. For a complete 

discussion of the RTI recommendations, 

public comments, and our responses, 

we refer readers to the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68519 through 68527). 

We addressed the RTI finding that 

there was aggregation bias in both the 

IPPS and the OPPS cost estimation of 

expensive and inexpensive medical 

supplies in the FY 2009 IPPS final rule 

(73 FR 48458 through 45467). 

Specifically, we created one cost center 

for ‘‘Medical Supplies Charged to 

Patients’’ and one cost center for 

‘‘Implantable Devices Charged to 

Patients,’’ essentially splitting the then 

current cost center for ‘‘Medical 

Supplies Charged to Patients’’ into one 

cost center for low-cost medical 

supplies and another cost center for 

high-cost implantable devices in order 

to mitigate some of the effects of charge 

compression. In determining the items 

that should be reported in these 

respective cost centers, we adopted 

commenters’ recommendations that 

hospitals should use revenue codes 

established by the AHA’s NUBC to 

determine the items that should be 

reported in the ‘‘Medical Supplies 

Charged to Patients’’ and the 

‘‘Implantable Devices Charged to 

Patients’’ cost centers. For a complete 

discussion of the rationale for the 

creation of the new cost center for 

‘‘Implantable Devices Charged to 

Patients,’’ public comments, and our 

responses, we refer readers to the FY 

2009 IPPS final rule. 

The cost center for ‘‘Implantable 

Devices Charged to Patients’’ has been 

available for use for cost reporting 

periods beginning on or after May 1, 

2009. In the CY 2013 OPPS/ASC final 

rule with comment period, we 

determined that a significant volume of 

hospitals were utilizing the 

‘‘Implantable Devices Charged to 

Patients’’ cost center. Because a 

sufficient amount of data from which to 

generate a meaningful analysis was 

available, we established in the CY 2013 

OPPS/ASC final rule with comment 

period a policy to create a distinct CCR 

using the ‘‘Implantable Devices Charged 

to Patients’’ cost center (77 FR 68225). 

For the CY 2014 OPPS, we are 

proposing to continue to use data from 

the ‘‘Implantable Devices Charged to 

Patients’’ cost center to create a distinct 

CCR for use in calculating the OPPS 

relative payment weights. 

In the FY 2011 IPPS/LTCH PPS final 

rule (75 FR 50075 through 50080), we 

finalized our proposal to create new 

standard cost centers for ‘‘Computed 

Tomography (CT),’’ ‘‘Magnetic 

Resonance Imaging (MRI),’’ and 

‘‘Cardiac Catheterization,’’ and to 

require that hospitals report the costs 

and charges for these services under 

new cost centers on the revised 

Medicare cost report Form CMS 2552– 

10. As we discussed in the FY 2009 

IPPS and CY 2009 OPPS/ASC proposed 

and final rules, RTI also found that the 

costs and charges of CT scans, MRIs, 

and cardiac catheterization differ 

significantly from the costs and charges 

of other services included in the 

standard associated cost center. RTI 

concluded that both the IPPS and the 

OPPS relative payment weights would 

better estimate the costs of those 

services if CMS were to add standard 

costs centers for CT scans, MRIs, and 

cardiac catheterization in order for 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43549 

hospitals to report separately the costs 

and charges for those services and in 

order for CMS to calculate unique CCRs 

to estimate the cost from charges on 

claims data. We refer readers to the FY 

2011 IPPS/LTCH PPS final rule (75 FR 

50075 through 50080) for a more 

detailed discussion on the reasons for 

the creation of standard cost centers for 

CT scans, MRIs, and cardiac 

catheterization. The new standard cost 

centers for CT scans, MRIs, and cardiac 

catheterization were effective for cost 

report periods beginning on or after May 

1, 2010, on the revised cost report Form 

CMS–2552–10. 

Using the December 2012 HCRIS 

update which we use to estimate costs 

in the CY 2014 OPPS ratesetting 

process, we were able to calculate a 

valid implantable device CCR for 2,936 

hospitals, a valid MRI CCR for 1,853 

hospitals, a valid CT scan CCR for 1,956 

hospitals, and a valid Cardiac 

Catheterization CCR for 1,367 hospitals. 

We believe that there is a sufficient 

amount of data in the Form CMS 2552– 

10 cost reports from which to generate 

a meaningful analysis of CCRs. 

Therefore, we are providing various data 

analyses below in Tables 2 and 3 

demonstrating the changes as a result of 

including the new CCRs calculated from 

the new standard cost centers into the 

CY 2014 OPPS ratesetting process. 

TABLE 2—MEDIAN CCRS CALCULATED USING DIFFERENT COST REPORT DISTRIBUTIONS

Calculated CCR 

‘‘New’’ 

standard 

cost center 

Using Form 

2552–96 

CCRs only 

Using Form 

2552–96 and 

Form 2552–10 

CCRs 

Cardiology .................................................................................................................................... ........................ 0.2915 0.5112 

Cardiac Catheterization ............................................................................................................... * 0.1685 0.1590 

Radiology—Diagnostic ................................................................................................................. ........................ 0.2025 0.2279 

Magnetic Resonance Imaging (MRI) ........................................................................................... * 0.1074 0.0959 

CT Scan ....................................................................................................................................... * 0.0568 0.0502 

Medical Supplies Charged to Patient .......................................................................................... ........................ 0.3389 0.3315 

Implantable Devices Charged to Patient ..................................................................................... * 0.4371 0.4190 

TABLE 3—PERCENTAGE CHANGE IN ESTIMATED COST FOR THOSE APCS SIGNIFICANTLY AFFECTED BY USE OF THE NEW

STANDARD COST CENTER CCRS IN THE CMS FORM 2552–10 COST REPORTS

APC APC Descriptor 

Percentage 

change in 

estimated 

cost 

(percent) 

0282 ....... Miscellaneous Computed Axial Tomography ..................................................................................................................... ¥38.1 

0332 ....... Computed Tomography without Contrast ........................................................................................................................... ¥34.0 

8005 ....... CT and CTA without Contrast Composite .......................................................................................................................... ¥33.9 

0331 ....... Combined Abdomen and Pelvis CT without Contrast ........................................................................................................ ¥32.9 

8006 ....... CT and CTA with Contrast Composite ............................................................................................................................... ¥29.0 

0334 ....... Combined Abdomen and Pelvis CT with Contrast ............................................................................................................. ¥28.8 

0662 ....... CT Angiography .................................................................................................................................................................. ¥27.0 

0283 ....... Computed Tomography with Contrast ................................................................................................................................ ¥27.0 

0333 ....... Computed Tomography without Contrast followed by Contrast ......................................................................................... ¥26.3 

0383 ....... Cardiac Computed Tomographic Imaging .......................................................................................................................... ¥24.8 

0336 ....... Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast ................................................. ¥19.3 

8008 ....... MRI and MRA with Contrast Composite ............................................................................................................................. ¥18.9 

8007 ....... MRI and MRA without Contrast Composite ........................................................................................................................ ¥18.5 

0337 ....... Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast ............... ¥18.2 

0284 ....... Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast ...................................................... ¥14.9 

0080 ....... Diagnostic Cardiac Catheterization .................................................................................................................................... ¥8.7 

0276 ....... Level I Digestive Radiology ................................................................................................................................................ 15.2 

0378 ....... Level II Pulmonary Imaging ................................................................................................................................................ 15.2 

0396 ....... Bone Imaging ...................................................................................................................................................................... 15.5 

0390 ....... Level I Endocrine Imaging .................................................................................................................................................. 15.8 

0395 ....... GI Tract Imaging ................................................................................................................................................................. 16.2 

0402 ....... Level II Nervous System Imaging ....................................................................................................................................... 16.2 

0398 ....... Level I Cardiac Imaging ...................................................................................................................................................... 16.3 

0262 ....... Plain Film of Teeth .............................................................................................................................................................. 16.9 

0377 ....... Level II Cardiac Imaging ..................................................................................................................................................... 17.0 

0267 ....... Level III Diagnostic and Screening Ultrasound .................................................................................................................. 17.2 

0406 ....... Level I Tumor/Infection Imaging ......................................................................................................................................... 17.4 

0403 ....... Level I Nervous System Imaging ........................................................................................................................................ 18.9 

0266 ....... Level II Diagnostic and Screening Ultrasound ................................................................................................................... 25.1 

0265 ....... Level I Diagnostic and Screening Ultrasound .................................................................................................................... 29.9 

8004 ....... Ultrasound Composite ........................................................................................................................................................ 30.2 

We note that the estimated changes in 

geometric mean estimated APC cost of 

using data from the new standard cost 

centers cited above appear consistent 

with the expected results based on RTI’s 

analysis of cost report and claims data 

in the July 2008 final report (pages 5 

and 6), which state ‘‘in hospitals that 

aggregate data for CT scanning, MRI, or 


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nuclear medicine services with the 

standard line for Diagnostic Radiology, 

costs for these services all appear 

substantially overstated, while the costs 

for plain films, ultrasound and other 

imaging procedures are correspondingly 

understated.’’ We also note that there 

are limited additional impacts in the 

implantable device related APCs due to 

using the new cost report form CMS 

2552–10 because the standard cost 

center for implantable medical devices 

was previously incorporated into cost 

report form CMS 2552–96. 

As we have discussed in prior 

rulemaking (77 FR 68223 through 

68225), once we determined that cost 

report data were available for analysis, 

we would propose, if appropriate to use 

the distinct CCRs described above in the 

calculation of the OPPS relative 

payment weights. We believe that the 

analytic findings described above 

support the original decision to develop 

distinct standard cost centers for 

implantable devices, MRIs, CT scans, 

and cardiac catheterization, and we see 

no reason to further delay proposing to 

implement the CCRs of each of these 

cost centers. Therefore, beginning in CY 

2014, we are proposing to calculate the 

OPPS relative payment weights using 

distinct CCRs for cardiac 

catheterization, CT scan, and MRI and 

to continue using a distinct CCR for 

implantable medical devices. Section 

XXIII. of this proposed rule includes the 

impacts of calculating the proposed CY 

2014 OPPS relative payment weights 

using these new standard cost centers. 

2. Proposed Data Development Process 

and Calculation of Costs Used for 

Ratesetting 

In this section of this proposed rule, 

we discuss the use of claims to calculate 

the proposed OPPS payment rates for 

CY 2014. The Hospital OPPS page on 

the CMS Web site on which this 

proposed rule is posted (http:// 

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

HospitalOutpatientPPS/index.html) 

provides an accounting of claims used 

in the development of the proposed 

payment rates. That accounting 

provides additional detail regarding the 

number of claims derived at each stage 

of the process. In addition, below in this 

section we discuss the file of claims that 

comprises the data set that is available 

for purchase under a CMS data use 

agreement. The CMS Web site, http:// 

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

HospitalOutpatientPPS/index.html, 

includes information about purchasing 

the ‘‘OPPS Limited Data Set,’’ which 

now includes the additional variables 

previously available only in the OPPS 

Identifiable Data Set, including ICD–9– 

CM diagnosis codes and revenue code 

payment amounts. This file is derived 

from the CY 2012 claims that were used 

to calculate the proposed payment rates 

for the CY 2014 OPPS. 

In the history of the OPPS, we have 

traditionally established the scaled 

relative weights on which payments are 

based using APC median costs, which is 

a process described in the CY 2012 

OPPS/ASC final rule with comment 

period (76 FR 74188). However, as 

discussed in more detail in section 

II.A.2.f. of the CY 2013 OPPS/ASC final 

rule with comment period (77 FR 68259 

through 68271), we finalized the use of 

geometric mean costs to calculate the 

relative weights on which the CY 2013 

OPPS payment rates were based. While 

this policy changed the cost metric on 

which the relative payments are based, 

the data process in general remained the 

same, under the methodologies that we 

used to obtain appropriate claims data 

and accurate cost information in 

determining estimated service cost. For 

CY 2014, we are proposing to continue 

to use geometric mean costs to calculate 

the relative weights on which the 

proposed CY 2014 OPPS payments rates 

are based. 

We used the methodology described 

in sections II.A.2.a. through II.A.2.f. of 

this proposed rule to calculate the costs 

we used to establish the proposed 

relative weights used in calculating the 

proposed OPPS payment rates for CY 

2014 shown in Addenda A and B to this 

proposed rule (which are available via 

the Internet on the CMS Web site). We 

refer readers to section II.A.4. of this 

proposed rule for a discussion of the 

conversion of APC costs to scaled 

payment weights. 

a. Claims Preparation 

For this proposed rule, we used the 

CY 2012 hospital outpatient claims 

processed through December 31, 2012, 

to calculate the geometric mean costs of 

APCs that underpin the proposed 

relative payment weights for CY 2014. 

To begin the calculation of the proposed 

relative payment weights for CY 2014, 

we pulled all claims for outpatient 

services furnished in CY 2012 from the 

national claims history file. This is not 

the population of claims paid under the 

OPPS, but all outpatient claims 

(including, for example, critical access 

hospital (CAH) claims and hospital 

claims for clinical laboratory tests for 

persons who are neither inpatients nor 

outpatients of the hospital). 

We then excluded claims with 

condition codes 04, 20, 21, and 77 

because these are claims that providers 

submitted to 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 116 million claims 

that contain hospital bill types paid 

under the OPPS. 

1. Claims that were not bill types 12X 

(Hospital Inpatient (Medicare Part B 

only)), 13X (Hospital Outpatient), 14X 

(Hospital—Laboratory Services 

Provided to Nonpatients), or 76X 

(Clinic—Community Mental Health 

Center). Other bill types are not paid 

under the OPPS; therefore, these claims 

were not used to set OPPS payment. 

2. Claims that were bill types 12X, 

13X or 14X. Claims with bill types 12X 

and 13X are hospital outpatient claims. 

Claims with bill type 14X are laboratory 

specimen claims, of which we use a 

subset for the limited number of 

services in these claims that are paid 

under the OPPS. 

3. Claims that were bill type 76X 

(CMHC). 

To convert charges on the claims to 

estimated cost, we multiplied the 

charges on each claim by the 

appropriate hospital-specific CCR 

associated with the revenue code for the 

charge as discussed in section II.A.1.c. 

of this proposed rule. We then flagged 

and excluded CAH claims (which are 

not paid under the OPPS) and claims 

from hospitals with invalid CCRs. The 

latter included claims from hospitals 

without a CCR; those from hospitals 

paid an all-inclusive rate; those from 

hospitals with obviously erroneous 

CCRs (greater than 90 or less than 

0.0001); and those from hospitals with 

overall ancillary CCRs that were 

identified as outliers (that exceeded 

+/¥3 standard deviations from the 

geometric mean after removing error 

CCRs). In addition, we trimmed the 

CCRs at the cost center (that is, 

departmental) level by removing the 

CCRs for each cost center as outliers if 

they exceeded +/¥ 3 standard 

deviations from the geometric mean. We 

used a four-tiered hierarchy of cost 

center CCRs, which is the revenue codeto-cost center crosswalk, to match a cost 

center to every possible revenue code 

appearing in the outpatient claims that 


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is relevant to OPPS services, with the 

top tier being the most common cost 

center and the last tier being the default 

CCR. If a hospital’s cost center CCR was 

deleted by trimming, we set the CCR for 

that cost center to ‘‘missing’’ so that 

another cost center CCR in the revenue 

center hierarchy could apply. If no other 

cost center CCR could apply to the 

revenue code on the claim, we used the 

hospital’s overall ancillary CCR for the 

revenue code in question as the default 

CCR. For example, if a visit was 

reported under the clinic revenue code 

but the hospital did not have a clinic 

cost center, we mapped the hospitalspecific overall ancillary CCR to the 

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

inspection on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. 

Revenue codes that we do not use in 

establishing relative costs or to model 

impacts are identified with an ‘‘N’’ in 

the revenue code-to-cost center 

crosswalk. 

We applied the CCRs as described 

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

or 14X, excluding all claims from CAHs 

and hospitals in Maryland, Guam, the 

U.S. Virgin Islands, American Samoa, 

and the Northern Mariana Islands and 

claims from all hospitals for which 

CCRs were flagged as invalid. 

We identified claims with condition 

code 41 as partial hospitalization 

services of hospitals and moved them to 

another file. We note that the separate 

file containing partial hospitalization 

claims is included in the files that are 

available for purchase as discussed 

above. 

We then excluded claims without a 

HCPCS code. We moved to another file 

claims that contained only influenza 

and pneumococcal pneumonia (PPV) 

vaccines. Influenza and PPV vaccines 

are paid at reasonable cost; therefore, 

these claims are not used to set OPPS 

rates. 

We next copied line-item costs for 

drugs, blood, and brachytherapy sources 

to a separate file (the lines stay on the 

claim, but are copied onto another file). 

No claims were deleted when we copied 

these lines onto another file. These lineitems are used to calculate a per unit 

arithmetic and geometric mean and 

median cost and a per day arithmetic 

and geometric mean and median cost for 

drugs and nonimplantable biologicals, 

therapeutic radiopharmaceutical agents, 

and brachytherapy sources, as well as 

other information used to set payment 

rates, such as a unit-to-day ratio for 

drugs. 

Prior to CY 2013, our payment policy 

for nonpass-through separately paid 

drugs and biologicals was based on a 

redistribution methodology that 

accounted for pharmacy overhead by 

allocating cost from packaged drugs to 

separately paid drugs. This 

methodology typically would have 

required us to reduce the cost associated 

with packaged coded and uncoded 

drugs in order to allocate that cost. 

However, for CY 2013, we paid for 

separately payable drugs and biologicals 

under the OPPS at ASP+6 percent, 

based upon the statutory default 

described in section 

1833(t)(14)(A)(iii)(II) of the Act. Under 

that policy, we did not redistribute the 

pharmacy overhead costs from packaged 

drugs to separately paid drugs. For the 

CY 2014 OPPS, we are proposing to 

continue the CY 2013 payment policy 

for separately payable drugs and 

biologicals. We refer readers to section 

V.B.3. of this proposed rule for a 

complete discussion of our CY 2014 

proposed payment policy for separately 

paid drugs and biologicals. 

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,’’ or ‘‘V,’’ 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 removed from the 

inpatient list for CY 2013 that were 

assigned status indicator ‘‘C’’ in the 

claim year. It also preserves charges for 

packaged services so that the costs can 

be included in the cost of the services 

with which they are reported, even if 

the CPT codes for the packaged services 

were not paid because the service is part 

of another service that was reported on 

the same claim or the code otherwise 

violates claims processing edits. 

For CY 2014, we are proposing to 

continue the policy we implemented for 

CY 2013 to exclude line-item data for 

pass-through drugs and biologicals 

(status indicator ‘‘G’’ for CY 2012) and 

nonpass-through drugs and biologicals 

(status indicator ‘‘K’’ for CY 2012) 

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 2013 

OPPS/ASC final rule with comment 

period (77 FR 68226) of line-items with 

a status indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or 

‘‘X,’’ we believe that unpaid line-items 

represent services that are invalidly 

reported and, therefore, should not be 

used for ratesetting. We believe that 

removing lines with valid status 

indicators that were edited and not paid 

during claims processing increases the 

accuracy of the data used for ratesetting 

purposes. 

For the CY 2014 OPPS, as part of the 

proposal to package clinical diagnostic 

laboratory tests, we also are proposing 

to apply the line item trim to these 

services if they did not receive payment 

in the claims year. Removing these lines 

ensures that, in establishing the CY 

2014 OPPS relative payments weights, 

we appropriately allocate the costs 

associated with packaging these 

services. For a more detailed discussion 

of the proposal to package clinical 

diagnostic laboratory tests, we refer 

readers to section II.A.3.b.(3) of this 

proposed rule. 

b. Splitting Claims and Creation of 

‘‘Pseudo’’ Single Procedure Claims 

(1) Splitting Claims 

For the CY 2014 OPPS, we then split 

the remaining claims into five groups: 

single majors; multiple majors; single 

minors; multiple minors; and other 

claims. (Specific definitions of these 

groups are presented below.) We note 

that, under the proposed CY 2014 OPPS 

packaging policy, we are proposing to 

delete status indicator ‘‘X’’ and revise 

the title and description of status 

indicator ‘‘Q1’’ to reflect that deletion, 

as discussed in sections II.A.3. and XI. 

of this proposed rule. For CY 2014, we 

are proposing to define major 

procedures as any HCPCS code having 

a status indicator of ‘‘S,’’ ‘‘T,’’ or ‘‘V’’; 

to define minor procedures as any code 


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having a status indicator of ‘‘F,’’ ‘‘G,’’ 

‘‘H,’’ ‘‘K,’’ ‘‘L,’’ ‘‘R,’’ ‘‘U,’’ or ‘‘N’’; and 

to classify ‘‘other’’ procedures as any 

code having a status indicator other 

than one that we have classified as 

major or minor. For CY 2014, we are 

proposing to continue to assign status 

indicator ‘‘R’’ to blood and blood 

products; status indicator ‘‘U’’ to 

brachytherapy sources; status indicator 

‘‘Q1’’ to all ‘‘STV-packaged codes’’; 

status indicator ‘‘Q2’’ to all ‘‘T-packaged 

codes’’; and status indicator ‘‘Q3’’ to all 

codes that may be paid through a 

composite APC based on compositespecific criteria or paid separately 

through single code APCs when the 

criteria are not met. 

As discussed in the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68709), we established status 

indicators ‘‘Q1,’’ ‘‘Q2,’’ and ‘‘Q3’’ to 

facilitate identification of the different 

categories of codes. We are proposing to 

treat these codes in the same manner for 

data purposes for CY 2014 as we have 

treated them since CY 2008. 

Specifically, we are continuing to 

evaluate whether the criteria for 

separate payment of codes with status 

indicator ‘‘Q1’’ or ‘‘Q2’’ are met in 

determining whether they are treated as 

major or minor codes. Codes with status 

indicator ‘‘Q1’’ or ‘‘Q2’’ are carried 

through the data either with status 

indicator ‘‘N’’ as packaged or, if they 

meet the criteria for separate payment, 

they are given the status indicator of the 

APC to which they are assigned and are 

considered as ‘‘pseudo’’ single 

procedure claims for major codes. Codes 

assigned status indicator ‘‘Q3’’ are paid 

under individual APCs unless they 

occur in the combinations that qualify 

for payment as composite APCs and, 

therefore, they carry the status indicator 

of the individual APC to which they are 

assigned through the data process and 

are treated as major codes during both 

the split and ‘‘pseudo’’ single creation 

process. The calculation of the 

geometric mean costs for composite 

APCs from multiple procedure major 

claims is discussed in section II.A.2.f. of 

this proposed rule. 

Specifically, we are proposing to 

divide the remaining claims into the 

following five groups: 

1. Single Procedure Major Claims: 

Claims with a single separately payable 

procedure (that is, status indicator ‘‘S,’’ 

‘‘T,’’ or ‘‘V’’ which includes codes with 

status indicator ‘‘Q3’’); claims with one 

unit of a status indicator ‘‘Q1’’ code 

(‘‘STV-packaged’’) where there was no 

code with status indicator ‘‘S,’’ ‘‘T,’’ or 

‘‘V’’ on the same claim on the same 

date; or claims with one unit of a status 

indicator ‘‘Q2’’ code (‘‘T-packaged’’) 

where there was no code with a status 

indicator ‘‘T’’ on the 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,’’ or ‘‘V,’’ which 

includes codes with status indicator 

‘‘Q3’’), or multiple units of one payable 

procedure. These claims include those 

codes with a status indicator ‘‘Q2’’ code 

(‘‘T-packaged’’) where there was no 

procedure with a status indicator ‘‘T’’ 

on the same claim on the same date of 

service but where there was another 

separately paid procedure on the same 

claim with the same date of service (that 

is, another code with status indicator 

‘‘S ’’ or ‘‘V’’). We also include in this set 

claims that contained one unit of one 

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’’ (‘‘STVpackaged’’) or status indicator ‘‘Q2’’ (‘‘Tpackaged’’) code. 

4. Multiple Procedure Minor Claims: 

Claims with multiple HCPCS codes that 

are assigned status indicator ‘‘F,’’ ‘‘G,’’ 

‘‘H,’’ ‘‘K,’’ ‘‘L,’’ ‘‘R,’’ ‘‘U,’’ or ‘‘N’’; claims 

that contain more than one code with 

status indicator ‘‘Q1’’ (‘‘STV-packaged’’) 

or more than one unit of a code with 

status indicator ‘‘Q1’’ but no codes with 

status indicator ‘‘S,’’ ‘‘T,’’ or ‘‘V’’ on the 

same date of service; or claims that 

contain more than one code with status 

indicator ‘‘Q2’’ (T-packaged), or ‘‘Q2’’ 

and ‘‘Q1,’’ or more than one unit of a 

code with status indicator ‘‘Q2’’ but no 

code with status indicator ‘‘T’’ on the 

same date of service. 

5. Non-OPPS Claims: Claims that 

contain no services payable under the 

OPPS (that is, all status indicators other 

than those listed for major or minor 

status). These claims were excluded 

from the files used for the OPPS. NonOPPS claims have codes paid under 

other fee schedules, for example, 

durable medical equipment, and do not 

contain a code for a separately payable 

or packaged OPPS service. Non-OPPS 

claims include claims for therapy 

services paid sometimes under the 

OPPS but billed, in these non-OPPS 

cases, with revenue codes indicating 

that the therapy services would be paid 

under the Medicare Physician Fee 

Schedule (MPFS). 

The claims listed in numbers 1, 2, 3, 

and 4 above are included in the data file 

that can be purchased as described 

above. Claims that contain codes to 

which we have assigned status 

indicators ‘‘Q1’’ (‘‘STV-packaged’’) and 

‘‘Q2’’ (‘‘T-packaged’’) appear in the data 

for the single major file, the multiple 

major file, and the multiple minor file 

used for ratesetting. Claims that contain 

codes to which we have assigned status 

indicator ‘‘Q3’’ (composite APC 

members) appear in both the data of the 

single and multiple major files used in 

this proposed rule, depending on the 

specific composite calculation. 

(2) Creation of ‘‘Pseudo’’ Single 

Procedure Claims 

To develop ‘‘pseudo’’ single 

procedure claims for this proposed rule, 

we examined both the multiple 

procedure major claims and the 

multiple procedure minor claims. We 

first examined the multiple major 

procedure claims for dates of service to 

determine if we could break them into 

‘‘pseudo’’ single procedure claims using 

the dates of service for all lines on the 

claim. If we could create claims with 

single major procedures by using dates 

of service, we created a single procedure 

claim record for each separately payable 

procedure on a different date of service 

(that is, a ‘‘pseudo’’ single procedure 

claim). 

We also are proposing to use the 

bypass codes listed in Addendum N to 

this proposed rule (which is available 

via the Internet on our Web site) and 

discussed in section II.A.1.b. of this 

proposed rule to remove separately 

payable procedures which we 

determined contained limited or no 

packaged costs or that were otherwise 

suitable for inclusion on the bypass list 

from a multiple procedure bill. As 

discussed above, we ignore the ‘‘overlap 

bypass codes,’’ that is, those HCPCS 

codes that are both on the bypass list 

and are members of the multiple 

imaging composite APCs, in this initial 

assessment for ‘‘pseudo’’ single 

procedure claims. The proposed CY 

2014 ‘‘overlap bypass codes’’ are listed 

in Addendum N to this proposed rule 

(which is available via the Internet on 

the CMS Web site). When one of the two 

separately payable procedures on a 

multiple procedure claim was on the 

bypass list, we split the claim into two 

‘‘pseudo’’ single procedure claim 

records. The single procedure claim 

record that contained the bypass code 

did not retain packaged services. The 

single procedure claim record that 

contained the other separately payable 

procedure (but no bypass code) retained 

the packaged revenue code charges and 


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the packaged HCPCS code charges. We 

also removed lines that contained 

multiple units of codes on the bypass 

list and treated them as ‘‘pseudo’’ single 

procedure claims by dividing the cost 

for the multiple units by the number of 

units on the line. If one unit of a single, 

separately payable procedure code 

remained on the claim after removal of 

the multiple units of the bypass code, 

we created a ‘‘pseudo’’ single procedure 

claim from that residual claim record, 

which retained the costs of packaged 

revenue codes and packaged HCPCS 

codes. This enabled us to use claims 

that would otherwise be multiple 

procedure claims and could not be used. 

We then assessed the claims to 

determine if the proposed criteria for 

the multiple imaging composite APCs, 

discussed in section II.A.2.f.(5) of this 

proposed rule, were met. If the criteria 

for the imaging composite APCs were 

met, we created a ‘‘single session’’ claim 

for the applicable imaging composite 

service and determined whether we 

could use the claim in ratesetting. For 

HCPCS codes that are both 

conditionally packaged and are 

members of a multiple imaging 

composite APC, we first assessed 

whether the code would be packaged 

and, if so, the code ceased to be 

available for further assessment as part 

of the composite APC. Because the 

packaged code would not be a 

separately payable procedure, we 

considered it to be unavailable for use 

in setting the composite APC costs on 

which the proposed CY 2014 OPPS 

payments are based. Having identified 

‘‘single session’’ claims for the imaging 

composite APCs, we reassessed the 

claim to determine if, after removal of 

all lines for bypass codes, including the 

‘‘overlap bypass codes,’’ a single unit of 

a single separately payable code 

remained on the claim. If so, we 

attributed the packaged costs on the 

claim to the single unit of the single 

remaining separately payable code other 

than the bypass code to create a 

‘‘pseudo’’ single procedure claim. We 

also identified line-items of overlap 

bypass codes as a ‘‘pseudo’’ single 

procedure claim. This allowed us to use 

more claims data for ratesetting 

purposes. 

We also are proposing to examine the 

multiple procedure minor claims to 

determine whether we could create 

‘‘pseudo’’ single procedure claims. 

Specifically, where the claim contained 

multiple codes with status indicator 

‘‘Q1’’ (‘‘STV-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 2013 relative payment 

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 2013 relative 

payment weight to create a ‘‘pseudo’’ 

single procedure claim for that code: 

additional units of the status indicator 

‘‘Q1’’ HCPCS code with the highest CY 

2013 relative payment weight; other 

codes with status indicator ‘‘Q1’’; and 

all other packaged HCPCS codes and 

packaged revenue code costs. We 

changed the status indicator for the 

selected code from the data status 

indicator of ‘‘N’’ to the status indicator 

of the APC to which the selected 

procedure was assigned for further data 

processing and considered this claim as 

a major procedure claim. We used this 

claim in the calculation of the APC 

geometric mean cost for the status 

indicator ‘‘Q1’’ HCPCS code. 

Similarly, if a multiple procedure 

minor claim contained multiple codes 

with status indicator ‘‘Q2’’ (‘‘Tpackaged’’) or multiple units of a single 

code with status indicator ‘‘Q2,’’ we 

selected the status indicator ‘‘Q2’’ 

HCPCS code that had the highest CY 

2013 relative payment weight and set 

the units to one on that HCPCS code to 

reflect our policy of paying only one 

unit of a code 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 

2013 relative payment weight to create 

a ‘‘pseudo’’ single procedure claim for 

that code: additional units of the status 

indicator ‘‘Q2’’ HCPCS code with the 

highest CY 2013 relative payment 

weight; other codes with status 

indicator ‘‘Q2’’; and other packaged 

HCPCS codes and packaged revenue 

code costs. We changed the status 

indicator for the selected code from a 

data 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. 

If a multiple procedure minor claim 

contained multiple codes with status 

indicator ‘‘Q2’’ (‘‘T-packaged’’) and 

status indicator ‘‘Q1’’ (‘‘STVpackaged’’), we selected the T-packaged 

status indicator ‘‘Q2’’ HCPCS code that 

had the highest relative payment weight 

for CY 2013 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 2013 relative payment 

weight; other codes with status 

indicator ‘‘Q2’’; codes with status 

indicator ‘‘Q1’’ (‘‘STV-packaged’’); and 

other packaged HCPCS codes and 

packaged revenue code costs. We 

selected status indicator ‘‘Q2’’ HCPCS 

codes instead of ‘‘Q1’’ HCPCS codes 

because ‘‘Q2’’ HCPCS codes have higher 

CY 2013 relative payment weights. If a 

status indicator ‘‘Q1’’ HCPCS code had 

a higher CY 2013 relative payment 

weight, it became the primary code for 

the simulated single bill process. We 

changed the status indicator for the 

selected status indicator ‘‘Q2’’ (‘‘Tpackaged’’) code from a data status 

indicator of ‘‘N’’ to the status indicator 

of the APC to which the selected code 

was assigned and we considered this 

claim as a major procedure claim. 

We then applied our proposed 

process for creating ‘‘pseudo’’ single 

procedure claims to the conditionally 

packaged codes that do not meet the 

criteria for packaging, which enabled us 

to create single procedure claims from 

them, if they met the criteria for single 

procedure claims. Conditionally 

packaged codes are identified using 

status indicators ‘‘Q1’’ and ‘‘Q2,’’ and 

are described in section XI.A. of this 

proposed rule. 

Lastly, we excluded those claims that 

we were not able to convert to single 

procedure claims even after applying all 

of the techniques for creation of 

‘‘pseudo’’ single procedure claims to 

multiple procedure major claims and to 

multiple procedure minor claims. As 

has been our practice in recent years, we 

also excluded claims that contained 

codes that were viewed as 

independently or conditionally bilateral 

and that contained the bilateral modifier 

(Modifier 50 (Bilateral procedure)) 

because the line-item cost for the code 

represented the cost of two units of the 

procedure, notwithstanding that 

hospitals billed the code with a unit of 

one. 

We are proposing to continue to apply 

the methodology described above for the 

purpose of creating ‘‘pseudo’’ single 

procedure claims for the CY 2014 OPPS. 

c. Completion of Claim Records and 

Geometric Mean Cost Calculations 

(1) General Process 

We then packaged the costs of 

packaged HCPCS codes (codes with 

status indicator ‘‘N’’ listed in 

Addendum B to this proposed rule 

(which is available via the Internet on 

the CMS Web site) and the costs of those 


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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 4 below that 

appeared on the claim without a HCPCS 

code into the cost of the single major 

procedure remaining on the claim. For 

a more complete discussion of our 

proposed CY 2014 OPPS packaging 

policy, we refer readers to section II.A.3. 

of this proposed rule. 

As noted in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66606), for the CY 2008 OPPS, we 

adopted an APC Panel recommendation 

that CMS should review the final list of 

packaged revenue codes for consistency 

with OPPS policy and ensure that future 

versions of the I/OCE edit accordingly. 

As we have in the past, we are 

proposing to continue to compare the 

final list of packaged revenue codes that 

we adopt for CY 2014 to the revenue 

codes that the I/OCE will package for 

CY 2014 to ensure consistency. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68531), we 

replaced the NUBC standard 

abbreviations for the revenue codes 

listed in Table 2 of the CY 2009 OPPS/ 

ASC proposed rule with the most 

current NUBC descriptions of the 

revenue code categories and 

subcategories to better articulate the 

meanings of the revenue codes without 

changing the list of revenue codes. In 

the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60362 through 

60363), we finalized changes to the 

packaged revenue code list based on our 

examination of the updated NUBC 

codes and public comment on the CY 

2010 proposed list of packaged revenue 

codes. 

For CY 2014, as we did for CY 2013, 

we reviewed the changes to revenue 

codes that were effective during CY 

2012 for purposes of determining the 

charges reported with revenue codes but 

without HCPCS codes that we would 

propose to package for CY 2014. We 

believe that the charges reported under 

the revenue codes listed in Table 4 

below continue to reflect ancillary and 

supportive services for which hospitals 

report charges without HCPCS codes. 

Therefore, for CY 2014, we are 

proposing to continue to package the 

costs that we derive from the charges 

reported without HCPCS codes under 

the revenue codes displayed in Table 4 

below for purposes of calculating the 

geometric mean costs on which the 

proposed CY 2014 OPPS/ASC payment 

rates are based. 

TABLE 4—PROPOSED CY 2014 PACKAGED REVENUE CODES

Revenue 

code Description 

0250 ....... Pharmacy; General Classification. 

0251 ....... Pharmacy; Generic Drugs. 

0252 ....... Pharmacy; Non-Generic Drugs. 

0254 ....... Pharmacy; Drugs Incident to Other Diagnostic Services. 

0255 ....... Pharmacy; Drugs Incident to Radiology. 

0257 ....... Pharmacy; Non-Prescription. 

0258 ....... Pharmacy; IV Solutions. 

0259 ....... Pharmacy; Other Pharmacy. 

0260 ....... IV Therapy; General Classification. 

0261 ....... IV Therapy; Infusion Pump. 

0262 ....... IV Therapy; IV Therapy/Pharmacy Svcs. 

0263 ....... IV Therapy; IV Therapy/Drug/Supply Delivery. 

0264 ....... IV Therapy; IV Therapy/Supplies. 

0269 ....... IV Therapy; Other IV Therapy. 

0270 ....... Medical/Surgical Supplies and Devices; General Classification. 

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

0272 ....... Medical/Surgical Supplies and Devices; Sterile Supply. 

0275 ....... Medical/Surgical Supplies and Devices; Pacemaker. 

0276 ....... Medical/Surgical Supplies and Devices; Intraocular Lens. 

0278 ....... Medical/Surgical Supplies and Devices; Other Implants. 

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

0280 ....... Oncology; General Classification. 

0289 ....... Oncology; Other Oncology. 

0343 ....... Nuclear Medicine; Diagnostic Radiopharmaceuticals. 

0344 ....... Nuclear Medicine; Therapeutic Radiopharmaceuticals. 

0370 ....... Anesthesia; General Classification. 

0371 ....... Anesthesia; Anesthesia Incident to Radiology. 

0372 ....... Anesthesia; Anesthesia Incident to Other DX Services. 

0379 ....... Anesthesia; Other Anesthesia. 

0390 ....... Administration, Processing and Storage for Blood and Blood Components; General Classification. 

0392 ....... Administration, Processing and Storage for Blood and Blood Components; Processing and Storage. 

0399 ....... Administration, Processing and Storage for Blood and Blood Components; Other Blood Handling. 

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. 


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TABLE 4—PROPOSED CY 2014 PACKAGED REVENUE CODES—Continued 

Revenue 

code Description 

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 ....... Acquisition of Body Components; Other Donor. 

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

0824 ....... Hemodialysis-Outpatient or Home; Maintenance—100%. 

0825 ....... Hemodialysis-Outpatient or Home; Support Services. 

0829 ....... Hemodialysis-Outpatient or Home; Other OP Hemodialysis. 

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

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

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

In accordance with our longstanding 

policy, we are proposing to continue to 

exclude: (1) Claims that had zero costs 

after summing all costs on the claim; 

and (2) claims containing packaging flag 

number 3. Effective for services 

furnished on or after July 1, 2004, the 

I/OCE assigned packaging flag number 3 

to claims on which hospitals submitted 

token charges less than $1.01 for a 

service with status indicator ‘‘S’’ or ‘‘T’’ 

(a major separately payable service 

under the OPPS) for which the fiscal 

intermediary or Medicare administrative 

contractor (MAC) was required to 

allocate the sum of charges for services 

with a status indicator equaling ‘‘S’’ or 

‘‘T’’ based on the relative payment 

weight of the APC to which each code 

was assigned. We do not believe that 

these charges, which were token charges 

as submitted by the hospital, are valid 

reflections of hospital resources. 

Therefore, we deleted these claims. We 

also deleted claims for which the 

charges equaled the revenue center 

payment (that is, the Medicare payment) 

on the assumption that, where the 

charge equaled the payment, to apply a 

CCR to the charge would not yield a 

valid estimate of relative provider cost. 

We are proposing to continue these 

processes for the CY 2014 OPPS. 

For the remaining claims, we are 

proposing to then standardize 60 

percent of the costs of the claim (which 

we have previously determined to be 

the labor-related portion) for geographic 

differences in labor input costs. We 

made this adjustment by determining 

the wage index that applied to the 

hospital that furnished the service and 

dividing the cost for the separately paid 

HCPCS code furnished by the hospital 

by that wage index. The claims 

accounting that we provide for the 

proposed and final rule contains the 

formula we use to standardize the total 

cost for the effects of the wage index. As 

has been our policy since the inception 

of the OPPS, we are proposing to use the 

pre-reclassified wage indices for 

standardization because we believe that 

they better reflect the true costs of items 

and services in the area in which the 

hospital is located than the postreclassification wage indices and, 

therefore, would result in the most 

accurate unadjusted geometric mean 

costs. 

In accordance with our longstanding 

practice, we also are proposing to 

exclude single and ‘‘pseudo’’ single 

procedure claims for which the total 

cost on the claim was outside 3 standard 

deviations from the geometric mean of 

units for each HCPCS code on the 

bypass list (because, as discussed above, 

we used claims that contain multiple 

units of the bypass codes). 

After removing claims for hospitals 

with error CCRs, claims without HCPCS 

codes, claims for immunizations not 

covered under the OPPS, and claims for 

services not paid under the OPPS, 

approximately 112 million claims were 

left. Using these approximately 112 

million claims, we created 

approximately 82 million single and 

‘‘pseudo’’ single procedure claims, of 

which we used slightly more than 82 

million single bills (after trimming out 

approximately 1 million claims as 

discussed in section II.A.1.a. of this 

proposed rule) in the CY 2014 geometric 

mean cost development and ratesetting. 

As discussed above, the OPPS has 

historically developed the relative 

weights on which APC payments are 

based using APC median costs. For the 

CY 2013 OPPS, we calculated the APC 

relative payment weights using 

geometric mean costs, and are proposing 

to do the same for CY 2014. Therefore, 

the following discussion of the 2 times 

rule violation and the development of 

the relative payment weight refers to 

geometric means. For more detail about 

the CY 2014 OPPS/ASC policy to 

calculate relative payment weights 

based on geometric means, we refer 

readers to section II.A.2.f. of this 

proposed rule. 

We are proposing to use these claims 

to calculate the CY 2014 geometric 

mean costs for each separately payable 

HCPCS code and each APC. The 

comparison of HCPCS code-specific and 

APC geometric mean costs determines 

the applicability of the 2 times rule. 

Section 1833(t)(2) of the Act provides 

that, subject to certain exceptions, the 

items and services within an APC group 

shall not be treated as comparable with 

respect to the use of resources if the 

highest median cost (or mean cost, if 

elected by the Secretary) for an item or 

service within the group is more than 2 

times greater than the lowest median 

cost (or mean cost, if so elected) for an 

item or service within the same group 

(the 2 times rule). While we have 

historically applied the 2 times rule 

based on median costs, in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68270), as part of the CY 

2013 policy to develop the OPPS 

relative payment weights based on 

geometric mean costs, we also applied 


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the 2 times rule based on geometric 

mean costs. For the CY 2014 OPPS, we 

are proposing to continue to develop the 

APC relative payment weights based on 

geometric mean costs. 

We note that, for purposes of 

identifying significant HCPCS codes for 

examination in the 2 times rule, we 

consider codes that have more than 

1,000 single major claims or codes that 

have both greater than 99 single major 

claims and contribute at least 2 percent 

of the single major claims used to 

establish the APC geometric mean cost 

to be significant. This longstanding 

definition of when a HCPCS code is 

significant for purposes of the 2 times 

rule was selected because we believe 

that a subset of 1,000 claims is 

negligible within the set of 

approximately 82 million single 

procedure or single session claims we 

use for establishing geometric mean 

costs. Similarly, a HCPCS code for 

which there are fewer than 99 single 

bills and which comprises less than 2 

percent of the single major claims 

within an APC will have a negligible 

impact on the APC geometric mean. We 

note that this method of identifying 

significant HCPCS codes within an APC 

for purposes of the 2 times rule was 

used in prior years under the medianbased cost methodology. Under our 

proposed CY 2014 policy to continue to 

base the relative payment weights on 

geometric mean costs, we believe that 

this same consideration for identifying 

significant HCPCS codes should apply 

because the principles are consistent 

with their use in the median-based cost 

methodology. Unlisted codes are not 

used in establishing the percent of 

claims contributing to the APC, nor are 

their costs used in the calculation of the 

APC geometric mean. Finally, we 

reviewed the geometric mean costs for 

the services for which we are proposing 

to pay separately under this proposed 

rule, and we reassigned HCPCS codes to 

different APCs where it was necessary 

to ensure clinical and resource 

homogeneity within the APCs. The APC 

geometric means were recalculated after 

we reassigned the affected HCPCS 

codes. Both the HCPCS code-specific 

geometric means and the APC geometric 

means were weighted to account for the 

inclusion of multiple units of the bypass 

codes in the creation of ‘‘pseudo’’ single 

procedure claims. 

As we discuss in sections II.A.2.d. 

and II.A.2.f. and in section VIII.B. of this 

proposed rule, in some cases, APC 

geometric mean costs are calculated 

using variations of the process outlined 

above. Specifically, section II.A.2.d. of 

this proposed rule addresses the 

proposed calculation of single APC 

criteria-based geometric mean costs. 

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

discusses the proposed calculation of 

composite APC criteria-based geometric 

mean costs. Section VIII.B. of this 

proposed rule addresses the 

methodology for calculating the 

proposed geometric mean costs for 

partial hospitalization services. 

(2) Recommendations of the Advisory 

Panel on Hospital Outpatient Payment 

Regarding Data Development 

At the March 11, 2013 meeting of the 

Advisory Panel on Hospital Outpatient 

Payment (the Panel), we provided the 

Data Subcommittee with a list of all 

APCs fluctuating by greater than 10 

percent when comparing the CY 2013 

OPPS/ASC final rule costs based on CY 

2011 claims processed through June 30, 

2012, to those based on CY 2012 OPPS/ 

ASC final rule data (CY 2011 claims 

processed through June 30, 2011). The 

Data Subcommittee reviewed the 

fluctuations in the APC costs and their 

respective weights. 

At the March 2013 Panel meeting, the 

Panel made a number of 

recommendations related to the data 

process. The Panel’s recommendations 

and our responses follow. 

Recommendation: The Panel 

recommends that the work of the Data 

Subcommittee continue. 

CMS Response: We are accepting this 

recommendation. 

Recommendation: The panel 

recommended that CMS provide data on 

the impact of the CY 2013 method of 

using geometric mean costs rather than 

median costs to establish relative APC 

weights. 

CMS Response: We are accepting this 

recommendation and will provide the 

data at a future meeting. 

d. Proposed Calculation of Single 

Procedure APC Criteria-Based Costs 

(1) Device-Dependent APCs 

Historically, device-dependent APCs 

are populated by HCPCS codes that 

usually, but not always, require that a 

device be implanted or used to perform 

the procedure. The standard 

methodology for calculating devicedependent APC costs utilizes claims 

data that generally reflect the full cost 

of the required device by using only the 

subset of single procedure claims that 

pass the procedure-to-device and 

device-to-procedure edits; do not 

contain token charges (less than $1.01) 

for devices; do not contain the ‘‘FB’’ 

modifier signifying that the device was 

furnished without cost to the provider, 

or where a full credit was received; and 

do not contain the ‘‘FC’’ modifier 

signifying that the hospital received 

partial credit for the device. 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-toprocedure edits used in ratesetting for 

device-dependent APCs are available in 

the CY 2005 OPPS final rule with 

comment period (69 FR 65761 through 

65763) and the CY 2007 OPPS/ASC 

final rule with comment period (71 FR 

68070 through 68071). 

For CY 2014, we are proposing in 

section II.A.2.e. of this proposed rule to 

define 29 device-dependent APCs as 

single complete services and to assign 

them to comprehensive APCs that 

would provide all-inclusive payments 

for those services. As we explain in that 

section, we are proposing this as a 

further step to improve the accuracy and 

transparency of our payments for these 

services where the cost of the device is 

large compared to the other costs that 

contribute to the cost of the service. 

Table 5 below provides a list of the 39 

APCs currently recognized as devicedependent APCs and identifies those 29 

APCs that we are proposing to include 

in the comprehensive APCs proposal. 

We are proposing to treat the remaining 

10 device-dependent APCs by applying 

our standard APC ratesetting 

methodology to calculate their CY 2014 

payment rates. We initially adopted a 

specific device-dependent APC 

ratesetting methodology because 

commenters had previously expressed 

concerns that the costs associated with 

certain high-cost devices were not 

always being accurately reported and 

included in the calculation of relative 

payment weights for the associated 

procedures. In this proposed rule, we do 

not believe that it is necessary to 

continue to apply the more specific 

device-dependent APC ratesetting 

methodology to ensure accurate 

ratesetting for the 10 APCs that are not 

included in the comprehensive APCs 

proposal because hospitals now have 

had several years of experience 

reporting procedures involving 

implantable devices and have grown 

accustomed to ensuring that they code 

and report charges so that their claims 

fully and appropriately reflect the costs 

of those devices. Therefore, we believe 

that it is possible to calculate the 

payment rates for these APCs using our 

standard APC ratesetting methodology. 


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Beginning in CY 2014, we also are 

proposing to no longer implement 

procedure-to-device edits and device-toprocedure edits for any APCs. Under 

this proposal, hospitals would still be 

expected to adhere to the guidelines of 

correct coding and append the correct 

device code to the claim when 

applicable. However, claims would no 

longer be returned to providers when 

specific procedure and device code 

pairings do not appear on a claim. We 

believe that this is appropriate because 

of the experience hospitals now have 

had in coding and reporting these 

claims fully and because, for the more 

costly devices, the proposed 

comprehensive APCs would reliably 

reflect the cost of the device if it is 

included anywhere on the claim. 

Therefore, we do not believe that the 

burden on hospitals of adhering to the 

procedure-to-device edits and device-toprocedure edits, and the burden on the 

Medicare program of maintaining those 

edits, continue to be warranted. As with 

all other items and services recognized 

under the OPPS, we expect hospitals to 

code and report their costs 

appropriately, regardless of whether 

there are claims processing edits in 

place. 

TABLE 5—APCS CURRENTLY RECOGNIZED AS DEVICE–DEPENDENT APCS

APC APC Title 

0039* .................... Level I Implantation of Neurostimulator Generator. 

0040* .................... Level I Implantation/Revision/Replacement of Neurostimulator Electrodes. 

0061* .................... Level II Implantation/Revision/Replacement of Neurostimulator Electrodes. 

0082* .................... Coronary or Non-Coronary Atherectomy. 

0083* .................... Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization. 

0084 ..................... Level I Electrophysiologic Procedures. 

0085* .................... Level II Electrophysiologic Procedures. 

0086 ..................... Level III Electrophysiologic Procedures. 

0089* .................... Insertion/Replacement of Permanent Pacemaker and Electrodes. 

0090* .................... Level I Insertion/Replacement of Permanent Pacemaker. 

0104* .................... Transcatheter Placement of Intracoronary Stents. 

0106* .................... Insertion/Replacement of Pacemaker Leads and/or Electrodes. 

0107* .................... Level I Implantation of Cardioverter-Defibrillators (ICDs). 

0108* .................... Level II Implantation of Cardioverter-Defibrillators (ICDs). 

0115 ..................... Cannula/Access Device Procedures. 

0202* .................... Level VII Female Reproductive Procedures. 

0227* .................... Implantation of Drug Infusion Device. 

0229* .................... Level II Endovascular Revascularization of the Lower Extremity. 

0259* .................... Level VII ENT Procedures. 

0293* .................... Level VI Anterior Segment Eye Procedures. 

0315* .................... Level II Implantation of Neurostimulator Generator. 

0318* .................... Implantation of Neurostimulator Pulse Generator and Electrode. 

0319* .................... Level III Endovascular Revascularization of the Lower Extremity. 

0384 ..................... GI Procedures with Stents. 

0385* .................... Level I Prosthetic Urological Procedures. 

0386* .................... Level II Prosthetic Urological Procedures. 

0425* .................... Level II Arthroplasty or Implantation with Prosthesis. 

0427 ..................... Level II Tube or Catheter Changes or Repositioning. 

0622 ..................... Level II Vascular Access Procedures. 

0623 ..................... Level III Vascular Access Procedures. 

0648* .................... Level IV Breast Surgery. 

0652 ..................... Insertion of Intraperitoneal and Pleural Catheters. 

0653 ..................... Vascular Reconstruction/Fistula Repair with Device. 

0654* .................... Level II Insertion/Replacement of Permanent Pacemaker. 

0655* .................... Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing. 

0656* .................... Transcatheter Placement of Intracoronary Drug-Eluting Stents. 

0674* .................... Prostate Cryoablation. 

0680* .................... Insertion of Patient Activated Event Recorders. 

0687 ..................... Revision/Removal of Neurostimulator Electrodes. 

*Denotes proposed comprehensive APC. 

(2) Blood and Blood Products 

Since the implementation of the OPPS 

in August 2000, we have made separate 

payments for blood and blood products 

through APCs rather than packaging 

payment for them into payments for the 

procedures with which they are 

administered. Hospital payments for the 

costs of blood and blood products, as 

well as for the costs of collecting, 

processing, and storing blood and blood 

products, are made through the OPPS 

payments for specific blood product 

APCs. 

For CY 2014, we are proposing to 

continue to establish payment rates for 

blood and blood products using our 

blood-specific CCR methodology, which 

utilizes actual or simulated CCRs from 

the most recently available hospital cost 

reports to convert hospital charges for 

blood and blood products to costs. This 

methodology has been our standard 

ratesetting methodology for blood and 

blood products since CY 2005. It was 

developed in response to data analysis 

indicating that there was a significant 

difference in CCRs for those hospitals 

with and without blood-specific cost 

centers, and past public comments 

indicating that the former OPPS policy 

of defaulting to the overall hospital CCR 

for hospitals not reporting a bloodspecific cost center often resulted in an 

underestimation of the true hospital 

costs for blood and blood products. 

Specifically, in order to address the 

differences in CCRs and to better reflect 

hospitals’ costs, we are proposing to 

continue to simulate blood CCRs for 

each hospital that does not report a 

blood cost center by calculating the ratio 


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of the blood-specific CCRs to hospitals’ 

overall CCRs for those hospitals that do 

report costs and charges for blood cost 

centers. We would then apply this mean 

ratio to the overall CCRs of hospitals not 

reporting costs and charges for blood 

cost centers on their cost reports in 

order to simulate blood-specific CCRs 

for those hospitals. We calculated the 

costs upon which the proposed CY 2014 

payment rates for blood and blood 

products are based using the actual 

blood-specific CCR for hospitals that 

reported costs and charges for a blood 

cost center and a hospital-specific 

simulated blood-specific CCR for 

hospitals that did not report costs and 

charges for a blood cost center. 

We continue to believe the hospitalspecific, blood-specific CCR 

methodology best responds to the 

absence of a blood-specific CCR for a 

hospital than alternative methodologies, 

such as defaulting to the overall hospital 

CCR or applying an average bloodspecific CCR across hospitals. Because 

this methodology takes into account the 

unique charging and cost accounting 

structure of each hospital, we believe 

that it yields more accurate estimated 

costs for these products. We continue to 

believe that this methodology in CY 

2014 would result in costs for blood and 

blood products that appropriately reflect 

the relative estimated costs of these 

products for hospitals without blood 

cost centers and, therefore, for these 

blood products in general. 

We note that, as discussed in section 

II.A.2.e. of this proposed rule, we are 

proposing comprehensive APCs that 

would provide all-inclusive payments 

for certain device-dependent 

procedures. Under this proposal, we 

would include the costs of blood and 

blood products when calculating the 

overall costs of these comprehensive 

APCs. We note that we would continue 

to apply the blood-specific CCR 

methodology described in this section 

when calculating the costs of the blood 

and blood products that appear on 

claims with services assigned to the 

comprehensive APCs. Because the costs 

of blood and blood products would be 

reflected in the overall costs of the 

comprehensive APCs (and, as a result, 

in the payment rates of the 

comprehensive APCs), we would not 

make separate payments for blood and 

blood products when they appear on the 

same claims as services assigned to the 

comprehensive APCs. 

We refer readers to Addendum B to 

this proposed rule (which is available 

via the Internet on the CMS Web site) 

for the proposed CY 2014 payment rates 

for blood and blood products (which are 

identified with status indicator ‘‘R’’). 

For a more detailed discussion of the 

blood-specific CCR methodology, we 

refer readers to the CY 2005 OPPS 

proposed rule (69 FR 50524 through 

50525). For a full history of OPPS 

payment for blood and blood products, 

we refer readers to the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66807 through 66810). 

e. Proposed Establishment of 

Comprehensive APCs 

(1) Definition and General Principles 

During the initial development of a 

proposal for an outpatient prospective 

payment system in 1998 (63 FR 47552 

through 48036), we considered 

developing the payment system based 

on a comprehensive outpatient bundle, 

as opposed to on a HCPCS component 

level. In 2000, we implemented an 

OPPS based generally on making 

payments at the HCPCS level (65 FR 

18434 through 18820). Since then, 

however, we have been steadily moving 

the OPPS towards a more 

comprehensive approach that increases 

flexibility and opportunity for 

efficiencies in a prospective system. 

For CY 2014, we are proposing to 

create 29 comprehensive APCs to 

replace 29 existing device-dependent 

APCs. We are proposing to define a 

comprehensive APC as a classification 

for the provision of a primary service 

and all adjunctive services provided to 

support the delivery of the primary 

service. Because a comprehensive APC 

would treat all individually reported 

codes as representing components of the 

comprehensive service, our proposal is 

to make a single prospective payment 

based on the cost of all individually 

reported codes that represent the 

provision of a primary service and all 

adjunctive services provided to support 

that delivery of the primary service. 

Specifically, we are proposing to create 

comprehensive APCs for the 29 most 

costly device-dependent services, where 

the cost of the device is large compared 

to the other costs that contribute to the 

cost of delivering the primary service. 

We believe that, under the authority 

of sections 1833(t)(1) and (t)(2) of the 

Act, the Secretary has the discretion to 

establish comprehensive APCs as part of 

developing the OPPS classification 

system, and that this proposal furthers 

our ongoing efforts to move the OPPS 

towards a more comprehensive payment 

system in support of our objectives to 

increase flexibility and efficiencies. 

The OPPS data we have accumulated 

over the past decade have enabled us to 

continue to address several 

longstanding goals, including: 

Continuing to improve the validity of 

our payments to most accurately reflect 

costs; improving transparency and 

reducing complexity and administrative 

burden whenever possible; and 

increasing flexibility for hospitals to 

develop increased efficiencies in the 

delivery of quality care. 

We believe this proposal to establish 

comprehensive APCs will improve our 

ability to accurately set payment rates. 

In the normal process of setting 

payment rates, costs in certain cost 

centers (‘‘uncoded costs’’) are added to 

the costs of services reported with 

specific HCPCS codes only when they 

can be reliably assigned to a single 

service. Under the proposal, the entire 

claim would be associated with a single 

comprehensive service so all costs 

reported on the claim may be reliably 

assigned to that service. This increases 

the accuracy of the payment for the 

comprehensive service and also 

increases the stability of the payment 

from year to year. As an example, room 

and board revenue center charges are 

not included in OPPS rate setting 

calculations because room and board is 

typically not separately charged for 

outpatient services. In the case of these 

29 device-dependent procedures, the 

patient typically stays overnight to 

recover from the procedure. Thus, for 

these 29 comprehensive services, the 

cost of the room, nutrition (board) and 

nursing care that is required to sustain 

the patient while the comprehensive 

device-dependent service is delivered 

will be associated with the service even 

if the hospital reports the costs in room 

and board revenue codes that are not 

usually used to report outpatient 

procedure costs. 

We also believe our proposal will 

enhance beneficiary understanding and 

transparency. Typically beneficiaries 

understand the primary procedure to be 

the OPPS service they receive, and do 

not generally consider that the other 

HCPCS codes are separate services. For 

example, beneficiaries think of a single 

service such as ‘‘getting my gall bladder 

removed’’ or ‘‘getting a pacemaker.’’ We 

believe that defining certain services 

within the OPPS in terms of a single 

comprehensive service delivered to the 

beneficiary improves transparency for 

the beneficiary, for physicians, and for 

hospitals by creating a common 

reference point with a similar meaning 

for all three groups and using the 

comprehensive service concept that 

already identifies these same services 

when they are performed in an inpatient 

environment. 

Finally, we believe that larger bundles 

that contain a wider mix of related 

services in the prospectively paid 

bundles increase the opportunities for 


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providers to tailor services to the 

specific needs of individual 

beneficiaries, thereby increasing the 

opportunities for efficiencies and 

improving the delivery of medical care. 

(2) Comprehensive APCs for DeviceDependent Services 

(a) Identification of High-Cost DeviceDependent Procedures 

In order to identify those services for 

which comprehensive packaging would 

have the greatest impact on cost 

validity, payment accuracy, beneficiary 

transparency, and hospital efficiency, 

we ranked all APCs by CY 2012 costs 

and then identified 29 devicedependent APCs where we believe that 

the device-dependent APC is 

characterized by a costly primary 

service with relatively small cost 

contributions from adjunctive services. 

(b) Proposal To Create Comprehensive 

APCs for Certain Device-Dependent 

Procedures 

For CY 2014, we are proposing to 

create 29 comprehensive APCs to 

prospectively pay for device-dependent 

services associated with 136 HCPCS 

codes. We are proposing to base the 

single all-inclusive comprehensive APC 

payment on all charges on the claim, 

excluding only charges that cannot be 

covered by Medicare Part B or that are 

not payable under the OPPS. This 

comprehensive APC payment would 

include, for example, payment for the 

following types of services. 

• Inclusion of Otherwise Packaged 

Services and Supplies 

As part of the comprehensive APC, 

we are proposing to package all services 

that are packaged in CY 2013, and all 

services proposed for unconditional or 

conditional packaging for CY 2014. 

• Inclusion of Adjunctive Services 

We have previously noted in section 

II.A.3.a. of this proposed rule that it has 

been a goal of the OPPS to package 

services that are typically integral, 

ancillary, supportive, dependent, or 

adjunctive to a primary service. We are 

proposing to package into the 

comprehensive APCs all these integral, 

ancillary, supportive, dependent, and 

adjunctive services, hereinafter 

collectively referred to as ‘‘adjunctive 

services,’’ provided during the delivery 

of the comprehensive service. This 

includes the diagnostic procedures, 

laboratory tests and other diagnostic 

tests, and treatments that assist in the 

delivery of the primary procedure; visits 

and evaluations performed in 

association with the procedure; 

uncoded services and supplies used 

during the service; outpatient 

department services delivered by 

therapists as part of the comprehensive 

service; durable medical equipment as 

well as prosthetic and orthotic items 

and supplies when provided as part of 

the outpatient service; and any other 

components reported by HCPCS codes 

that are provided during the 

comprehensive service, except for 

mammography services and ambulance 

services, which are never payable as 

OPD services in accordance with section 

1833(t)(1)(B)(iv) of the Act. 

• Inclusion of Devices, Durable Medical 

Equipment, Prosthetics, Orthotics and 

Supplies (DMEPOS) 

As part of the comprehensive service 

packaging proposal described above, we 

are proposing to package all devices; 

implantable durable medical equipment 

(DME); implantable prosthetics; DME, 

prosthetics, and orthotics when used as 

supplies in the delivery of the 

comprehensive service; and supplies 

used in support of these items when 

these items or supplies are provided as 

part of the delivery of a comprehensive 

service. We have a longstanding policy 

of providing payment under the OPPS 

for implantable DME, implantable 

prosthetics, and medical and surgical 

supplies, as provided at sections 

1833(t)(1)(B)(i) and(iii) of the Act and 42 

CFR 419.2(b)(4), (b)(10), and (b)(11). 

Under this proposal, DME, prosthetics, 

and orthotics, when used as supplies in 

the delivery of the comprehensive 

service, would be covered OPD services 

as provided under section 

1833(t)(1)(B)(i) of the Act and 42 CFR 

419.2(b)(4). Under this proposal, we 

believe that when such items and 

services are provided as adjunctive 

components in the delivery of a 

comprehensive service, such items are 

appropriate for coverage under the 

OPPS as covered OPD services, and for 

payment under the OPPS. We note that, 

at other times, such items when not 

provided as adjunctive components in 

the delivery of a comprehensive service 

would not constitute covered OPD 

services, and such items would be 

appropriately provided by suppliers and 

paid for under the DMEPOS benefit. 

More specifically, we do not believe that 

this proposed policy limits a hospital’s 

ability to function as a DMEPOS 

supplier and bill DMEPOS items to the 

DME–MAC when those items are 

unrelated to the outpatient procedure 

and provided outside of the delivery of 

the comprehensive service. 

In summary, we are proposing to 

consider all DMEPOS items to be 

covered OPD services and to be 

adjunctive to the primary service when 

they are delivered during the 

comprehensive service, as described 

above, and, therefore, are proposing to 

package such items into the applicable 

comprehensive service. This proposal 

includes any items described by codes 

that are otherwise covered and paid 

separately in accordance with the 

payment rules for DMEPOS items and 

services, and applies to those items 

when they are provided as part of the 

delivery of the comprehensive service. 

Under this proposal, when such items 

are provided during the delivery of a 

comprehensive service, we are 

proposing that they are covered OPD 

services as provided under sections 

1833(t)(1)(B)(i) and (iii) of the Act and 

42 CFR 419.2(b)(4), (b)(10), and (b)(11), 

and payable under the OPPS, as 

described above. 

• Inclusion of OPD Services Reported 

by Therapy Codes 

Generally, section 1833(t)(1)(B)(4) of 

the Act excludes therapy services from 

the OPPS. We have previously noted 

that therapy services are those provided 

by therapists under a plan of care, and 

are paid under section 1834(k) of the 

Act subject to an annual therapy cap, 

when applied. However, certain other 

activities similar to therapy services are 

considered and paid as outpatient 

services. Although some adjunctive 

services may be provided by therapists 

and reported with therapy codes, we do 

not believe they always constitute 

therapy services. In the case of 

adjunctive components of a 

comprehensive service that are 

described by codes that would, under 

other circumstances, be indicative of 

therapy services, we note that there are 

a number of factors that would more 

appropriately identify them as OPD 

services. They are not independent 

services but are delivered as an integral 

part of the OPD service on the order of 

the physician who is providing the 

service; they are not typically provided 

under an established plan of care but on 

a direct physician order; they may be 

performed by nontherapists; and they 

frequently do not contribute to a 

rehabilitative process. For example, we 

note that therapists might be asked to 

provide a detailed documentation of 

patient weaknesses to be used by the 

physician to help identify or quantify a 

possible procedure-associated stroke or 

help with the mobilization of the patient 

after surgery in order to prevent blood 

clots. We note that these nontherapy 

services furnished by a therapist are 

limited to the immediate perioperative 

period, consistent with their inclusion 

as part of the larger service to deliver 

the device, and are distinct from 


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subsequent therapy services furnished 

under a therapy plan of care which 

serve to establish rehabilitative needs 

and begin the process of rehabilitation. 

For that reason, when provided 

within this very limited context of a 

comprehensive service such as the 

implantation of an expensive device, we 

are proposing that services reported by 

therapy HCPCS codes, including costs 

associated with revenue codes 042X, 

043X and 044X, would be considered to 

be adjunctive OPD services in support 

of the primary service when those 

services occur within the peri-operative 

period; that is, during the delivery of 

this comprehensive service that is 

bracketed by the OPD registration to 

initiate the service and the OPD 

discharge at the conclusion of the 

service. They do not constitute therapy 

services provided under a plan of care, 

are not subject to a therapy cap, if 

applied, and are not paid separately as 

therapy services. 

• Inclusion of Additional Hospital 

Room and Board Revenue Centers in the 

Calculation of Covered Costs 

We believe that the cost of the bed 

and room occupied by the patient, the 

cost of nursing services, and the cost of 

any necessary fluid and nutrition 

(board) are considered covered costs 

when incurred during the provision of 

an OPD service, that is, during the 

provision of the comprehensive service. 

Because we are able to assign all costs 

on the claim to the comprehensive 

service, we believe we have an 

opportunity to better capture costs by 

including these costs in our calculations 

even when they appear in certain 

revenue centers not usually used to 

report OPPS costs. Specifically, we are 

including costs reported with room, 

board, and nursing revenue codes 012X, 

013x, 015X, 0160, 0169, 0200 through 

0204, 0206 through 0209, 0210 through 

0212, 0214, 0219, 0230 through 0234, 

0239, 0240 through 0243, and 0249, as 

we believe these revenue centers are 

sometimes associated with the costs of 

room, nutrition, and nursing care 

provided during these comprehensive 

services. 

• Inclusion of Hospital-Administered 

Drugs 

We also are proposing to package all 

drugs provided to the beneficiary as part 

of the delivery of the comprehensive 

service except for those drugs separately 

paid through a transitional pass through 

payment. Intravenous drugs, for 

example, are OPPS services that are 

considered adjunctive to the primary 

procedure because the correct 

administration of the drug either 

promotes a beneficial outcome, such as 

the use of intravenous pain medications, 

or prevents possible complications, 

such as the use of intravenous blood 

pressure medications to temporarily 

replace oral blood pressure medications 

and reduce the risk of a sudden rise in 

blood pressure when a normal daily 

medication is stopped. We note that, in 

defining these packaged drugs, we are 

applying both our existing definitions of 

self-administered drugs (SADs) and our 

existing definition of drugs as supplies 

to the situation where the OPD service 

is a comprehensive service. 

We are proposing that all medications 

provided by the hospital for delivery 

during a comprehensive service 

pursuant to a physician order, 

regardless of the route of administration, 

would be considered to be adjunctive 

supplies and therefore packaged as part 

of the comprehensive APC. We believe 

that the physician order demonstrates 

that the delivery of the medication by 

the hospital is necessary to avoid 

possible complications during the 

delivery of the comprehensive service, 

to ensure patient safety, and to ensure 

that the comprehensive service delivery 

is not compromised, and therefore the 

medication should be considered an 

adjunctive supply. 

Therefore, we are proposing to 

consider all medications to be supplies 

that are adjunctive to the primary 

service if the medicines are ordered by 

the physician and supplied and 

delivered by the hospital for 

administration during the 

comprehensive service. 

(c) Methodology 

We calculated the proposed relative 

payment weights for these devicedependent comprehensive APCs by 

using relative costs derived from our 

standard process as described earlier in 

section II.A. of this proposed rule. 

Specifically, after converting charges to 

costs on the claims, we identified all 

claims containing one of the 136 

HCPCS-defined procedures specified as 

constituting a comprehensive service. 

These claims were, by definition, 

classified as single major procedure 

claims. Any claims that contained more 

than one of these procedures were 

identified but were included in 

calculating the cost of the procedure 

that had the greatest cost when 

traditional HCPCS level accounting was 

applied. All other costs were summed to 

calculate the total cost of the 

comprehensive service, and statistics for 

those services were calculated in the 

usual manner. Claims with extreme 

costs were excluded in accordance with 

our usual process. 

(d) Payments 

We used the proposed relative 

payment weights of these devicedependent comprehensive services to 

calculate proposed payments following 

our standard methodology. The 

proposed payments for the HCPCS 

codes assigned to these proposed 

comprehensive APCs are included in 

Addendum B of this proposed rule 

(which is available via the Internet on 

the CMS Web site). We are proposing to 

assign a new status indicator, ‘‘J1’’ (OPD 

services paid through a comprehensive 

APC), to these device-dependent 

procedures. The claims processing 

system would be configured to make a 

single payment for the devicedependent comprehensive service 

whenever a HCPCS for one of these 

primary procedures appears on the 

claim. From a processing system 

perspective, all other adjunctive 

services except mammography, 

ambulance, and pass-through services 

would be conditionally packaged when 

a comprehensive service is identified on 

a claim. From our data, we have 

determined that multiple primary 

HCPCS codes occur together in 24 

percent of these device-dependent 

claims but only rarely represent 

unrelated services. Having determined 

that having multiple unrelated devicedependent services is an uncommon 

event, we are proposing to pay only the 

largest comprehensive payment 

associated with a claim. However, the 

costs of all of these more extensive or 

additional services are included in the 

calculations of the relative payment 

weights for the comprehensive service, 

so the prospective payment includes 

payment for these occurrences. 

(e) Impact of Proposed Comprehensive 

APCs for Device-Dependent Procedures 

• Impact on Medicare Payments 

Because these proposed devicedependent comprehensive APCs are 

entirely derived from existing services 

currently reported in Medicare claims, 

the proposed policy is effectively budget 

neutral in its impact on Medicare 

payments. We note that room, board, 

and nursing services have been covered 

costs in the delivery of outpatient 

services that require the patient to 

receive nursing services, occupy a bed 

for outpatient care, and maintain a 

controlled metabolic intake during a 

prolonged outpatient stay. Although we 

are including new revenue center costs 

for room and board when reported on 

these claims, we are including them to 

increase the accuracy of reporting not 

because they represent a new cost. 


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• Impact on APCs 

Impact on Composite APCs. There is 

currently one device-dependent 

composite service in the OPPS, Cardiac 

Resynchronization Therapy, assigned to 

APC 0108. Because a comprehensive 

APC would treat all individually 

reported codes as representing 

components of the comprehensive 

service, all of the elements of the 

composite service are included in the 

proposed new comprehensive service. 

Therefore, Cardiac Resynchronization 

Therapy would no longer be identified 

as a composite service but would be 

identified as a comprehensive service. 

All services currently assigned to APC 

0108, including Cardiac 

Resynchronization Therapy, would be 

assigned to the proposed new 

comprehensive APC, with the proposed 

payment for CY 2014 identified in 

Addendum B of this proposed rule 

(which is available via the Internet on 

the CMS Web site). 

Impact on Claims Used to Calculate 

Other APCs. Some costs reported on 

claims for device-dependent procedures 

may no longer be available to contribute 

to the calculations for other services 

through the pseudo-single process, 

described in section II.A. of this 

proposed rule. However, the loss of 

usable cost data for these services would 

be small because most of these services 

currently cannot be isolated as the 

‘‘single services’’ that can be used in the 

cost calculation process. The exceptions 

are services such as EKGs and chest xrays that occur in very high frequency 

across all types of encounters, and 

laboratory services and drugs, neither of 

which are calculated based on average 

cost. Finally, it is important to note that 

any loss is a small impact when 

compared against the 400,000 new 

claims that could now be used because 

of the establishment of the proposed 

comprehensive APC. 

Impact on Device-Dependent APCs. 

The impact on current devicedependent APCs is described above in 

section II.A.2.d.(1) of this proposed rule. 

Comprehensive APC costs exceed the 

device-dependent procedure costs by an 

average of 11 percent, less than $1,000 

per claim. The direct cost contribution 

of other OPPS services accounts for 

most of this increase, with laboratory 

tests contributing approximately $18 per 

claim (a 0.1 percent increase) and other 

non-OPPS payments contributing an 

additional $18 per claim. There is 

significant variation across 

comprehensive APCs, however, not only 

because the distribution of supporting 

services varies but also because the 

larger bundle allows a more complete 

incorporation of uncoded costs. Finally, 

the use of comprehensive APCs would 

allow the number of claims used to 

estimate costs for these services to 

almost triple from 233,000 to 649,000, 

increasing the accuracy of our cost 

estimates. 

• Impact on Beneficiary Payments 

Under the proposed comprehensive 

service APCs, instead of paying 

copayments for a number of separate 

services that are generally, individually 

subject to the copayment liability cap at 

section 1833(t)(8)(C)(i) of the Act, 

beneficiaries could expect to pay only a 

single copayment that is subject to the 

cap. This would likely reduce 

beneficiary overall liability for most of 

these claims. 

(f) Summary of Proposal To Create 

Comprehensive APCs for High-Cost 

Device-Dependent Procedures 

For CY 2014, we are proposing to 

create 29 comprehensive APCs to 

prospectively pay for device-dependent 

services associated with 136 HCPCS 

codes. We are proposing to treat all 

individually reported codes as 

representing components of the 

comprehensive service, making a single 

payment for the comprehensive service 

based on all charges on the claim, 

excluding only charges for services that 

cannot be covered by Medicare Part B or 

that are not payable under the OPPS. 

This would create a single all-inclusive 

payment for the claim that is subject to 

a single beneficiary copayment, up to 

the cap set at the level of the inpatient 

hospital deductible, as provided at 

section 1833(t)(8)(C)(i) of the Act. 

As part of the proposed 

comprehensive APC, we are proposing 

to— 

• Continue to package all services 

that were packaged in CY 2013. 

• Unconditionally package all 

services elsewhere proposed for 

unconditional or conditional packaging 

for CY 2014. 

• Package all adjunctive services 

provided during the delivery of the 

comprehensive service. 

• Package room, board, and nursing 

costs necessary to deliver the outpatient 

service, regardless of whether or not the 

stay extends beyond a single calendar 

day. 

• Package all hospital-administered 

drugs pursuant to a physician order, 

excluding pass-through drugs that are 

required to be separately paid by statute. 

• Pay separately for mammography 

services and ambulance services as nonOPPS services, regardless of whether 

they are reported as part of a 

comprehensive service. 

We are inviting public comment on 

this proposal. 

f. Proposed Calculation of Composite 

APC Criteria-Based Costs 

As discussed in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66613), we believe it is important 

that the OPPS enhance incentives for 

hospitals to provide necessary, high 

quality care and as efficiently as 

possible. For CY 2008, we developed 

composite APCs to provide a single 

payment for groups of services that are 

typically performed together during a 

single clinical encounter and that result 

in the provision of a complete service. 

Combining payment for multiple, 

independent services into a single OPPS 

payment in this way enables hospitals 

to manage their resources with 

maximum flexibility by monitoring and 

adjusting the volume and efficiency of 

services themselves. An additional 

advantage to the composite APC model 

is that we can use data from correctly 

coded multiple procedure claims to 

calculate payment rates for the specified 

combinations of services, rather than 

relying upon single procedure claims 

which may be low in volume and/or 

incorrectly coded. Under the OPPS, we 

currently have composite policies for 

extended assessment and management 

services, low dose rate (LDR) prostate 

brachytherapy, cardiac 

electrophysiologic evaluation and 

ablation services, mental health 

services, multiple imaging services, and 

cardiac resynchronization therapy 

services. We refer readers to the CY 

2008 OPPS/ASC final rule with 

comment period for a full discussion of 

the development of the composite APC 

methodology (72 FR 66611 through 

66614 and 66650 through 66652) and 

the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74163) for more 

recent background. 

For CY 2014, we are proposing to 

continue our composite policies for 

extended assessment and management 

services, LDR prostate brachytherapy, 

cardiac electrophysiologic evaluation 

and ablation services, mental health 

services, and multiple imaging services, 

as discussed below. We are proposing to 

discontinue and supersede the cardiac 

resynchronization therapy composite 

APC by our proposed comprehensive 

APC 0108, as discussed in section 

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


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(1) Extended Assessment and 

Management Composite APCs (APCs 

8002 and 8003) 

(a) Background 

Beginning in CY 2008, we included 

composite APC 8002 (Level I Extended 

Assessment and Management 

Composite) and composite APC 8003 

(Level II Extended Assessment and 

Management Composite) in the OPPS to 

provide payment to hospitals in certain 

circumstances when extended 

assessment and management of a patient 

occur (an extended visit). In most of 

these circumstances, observation 

services are supportive and ancillary to 

the other services provided to a patient. 

From CY 2008 through CY 2013, in the 

circumstances when observation care is 

provided in conjunction with a high 

level visit, critical care, or direct referral 

and is an integral part of a patient’s 

extended encounter of care, payment is 

made for the entire care encounter 

through one of the two composite APCs 

as appropriate. We refer readers to the 

CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74163 through 

74165) for a full discussion of this 

longstanding policy for CY 2013 and 

prior years. 

For CY 2014, we are proposing to 

modify our longstanding policy to 

provide payment to hospitals in certain 

circumstances when extended 

assessment and management of a patient 

occur. Primarily, we are proposing to 

allow any visit furnished by a hospital 

in conjunction with observation services 

of substantial duration to qualify for 

payment through the Extended 

Assessment and Management (EAM) 

Composite APC. Also, rather than 

recognizing two levels of EAM 

Composite APCs, we are proposing to 

create a new composite APC entitled, 

‘‘Extended Assessment and 

Management (EAM) Composite,’’ (APC 

8009) to provide payment for all 

qualifying extended assessment and 

management encounters. These 

proposals are discussed in greater detail 

below. 

(b) Proposed Payment for Extended 

Assessment and Management Services 

As discussed in section VII. of this 

proposed rule, we are proposing to no 

longer recognize five distinct visit levels 

for clinic visits and emergency 

department visits based on the existing 

HCPCS E/M codes, and instead 

recognize three new alphanumeric 

HCPCS codes for each visit type. 

Currently, the payment criteria for the 

EAM composite APCs 8002 and 8003 

include a high level visit represented by 

HCPCS code 99205, 99215, 99284, 

99285, or G0304; critical care 

represented by CPT code 99281; or 

direct referral represented by HCPCS 

code G0379 provided in conjunction 

with observation care represented by 

HCPCS code G0378. In light of the 

proposal to no longer differentiate visit 

payment levels, and the fact that the 

current high level visit codes (HCPCS 

codes 99205, 99215, 99284, 99285 and 

G0304) would no longer be recognized 

under the OPPS, it would no longer be 

feasible to continue with our current 

payment criteria for the EAM composite 

APCs 8002 and 8003 for CY 2014. 

Therefore, to ensure that we continue to 

provide payment to hospitals in certain 

circumstances when extended 

assessment and management of a patient 

occur, for CY 2014, we are proposing to 

provide payment for the entire care 

encounter through proposed new EAM 

Composite APC 8009 when observation 

care is provided in conjunction with a 

visit, critical care, or direct referral and 

is an integral part of a patient’s 

extended encounter of care. 

Specifically, for CY 2014, we are 

proposing to provide EAM composite 

APC payment, through a newly created 

composite APC in circumstances when 

a clinic or ED visit, identified by one of 

the three new alphanumeric HCPCS 

codes proposed in section VII. of this 

proposed rule, is accompanied by 

observation care of substantial duration 

on a claim. We would no longer 

recognize APC 8002 or APC 8003. The 

specific criteria we are proposing to be 

met for the proposed new EAM 

composite APC to be paid is provided 

below in the description of the claims 

that we are proposing to select for the 

calculation of the proposed CY 2016 

mean costs for this composite APC. 

We are proposing to calculate the 

mean costs for the proposed new EAM 

composite APC (APC 8009) for CY 2014 

using CY 2012 single and ‘‘pseudo’’ 

single procedure claims that meet each 

of the following criteria: 

• The claim does 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 assured that they would not 

contain a code for a service with status 

indicator ‘‘T’’ on the same date of 

service.); 

• The claim contains 8 or more units 

of HCPCS code G0378 (Observation 

services, per hour); and 

• The claim contains one of the 

following codes: HCPCS code G0379 

(Direct referral of patient for hospital 

observation care) on the same date of 

service as G0378; or CPT code 99201 

(Office or other outpatient visit for the 

evaluation and management of a new 

patient (Level 1)); CPT code 99202 

(Office or other outpatient visit for the 

evaluation and management of a new 

patient (Level 2)); CPT code 99203 

(Office or other outpatient visit for the 

evaluation and management of a new 

patient (Level 3)); CPT code 99204 

(Office or other outpatient visit for the 

evaluation and management of a new 

patient (Level 4)); CPT code 99205 

(Office or other outpatient visit for the 

evaluation and management of a new 

patient (Level 5)); CPT code 99211 

(Office or other outpatient visit for the 

evaluation and management of an 

established patient (Level 1)); CPT code 

99212 (Office or other outpatient visit 

for the evaluation and management of 

an established patient (Level 2)); CPT 

code 99213 (Office or other outpatient 

visit for the evaluation and management 

of an established patient (Level 3)); CPT 

code 99214 (Office or other outpatient 

visit for the evaluation and management 

of an established patient (Level 4)); CPT 

code 99215 (Office or other outpatient 

visit for the evaluation and management 

of an established patient (Level 5)); CPT 

code 99281 (Emergency department 

visit for the evaluation and management 

of a patient (Level 1)); CPT code 99282 

(Emergency department visit for the 

evaluation and management of a patient 

(Level 2)); CPT code 99283 (Emergency 

department visit for the evaluation and 

management of a patient (Level 3)); 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)); or HCPCS code G0380 (Type 

B emergency department visit (Level 1)); 

HCPCS code G0381 (Type B emergency 

department visit (Level 2)); HCPCS code 

G0382 (Type B emergency department 

visit (Level 3)); HCPCS code G0383 

(Type B emergency department visit 

(Level 4)); HCPCS code G0384 (Type B 

emergency department visit (Level 5)); 

or CPT code 99291 (Critical care, 

evaluation and management of the 

critically ill or critically injured patient; 

first 30–74 minutes) provided on the 

same date of service or 1 day before the 

date of service for HCPCS code G0378. 

The proposed CY 2014 cost resulting 

from this methodology for the proposed 

new EAM composite APC (APC 8009) is 

approximately $1,357, which was 

calculated from 318,265 single and 

‘‘pseudo’’ single claims that met the 

required criteria. 

When hospital claims data for the CY 

2014 proposed clinic and ED visit codes 

becomes available, we are proposing to 


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calculate the mean costs for the 

proposed new EAM composite APC 

(APC 8009) for CY 2016 using CY 2014 

single and ‘‘pseudo’’ single procedure 

claims that meet each of the following 

criteria: 

• The claims do not contain a HCPCS 

code to which we have assigned status 

indicator ‘‘T’’ that is reported with a 

date of service 1 day earlier than the 

date of service associated with HCPCS 

code G0378. (By selecting these claims 

from single and ‘‘pseudo’’ single claims, 

we ensure that they would not contain 

a code for a service with status indicator 

‘‘T’’ on the same date of service.); 

• The claims contain 8 or more units 

of HCPCS code G0378 (Observation 

services, per hour); and 

• The claims contain one of the 

following codes: HCPCS code G0379 

(Direct referral of patient for hospital 

observation care) on the same date of 

service as G0378; or CPT code 99291 

(Critical care, evaluation and 

management of the critically ill or 

critically injured patient; first 30–74 

minutes); or newly proposed 

alphanumeric Level II HCPCS code 

GXXXA (Type A ED visit); newly 

proposed alphanumeric Level II HCPCS 

code GXXXB (Type B ED visit); or 

newly proposed alphanumeric Level II 

HCPCS code GXXXC (Clinic visit) 

provided on the same date of service or 

1 day before the date of service for 

HCPCS code G0378. 

(2) Low Dose Rate (LDR) Prostate 

Brachytherapy Composite APC (APC 

8001) 

LDR prostate brachytherapy is a 

treatment for prostate cancer in which 

hollow needles or catheters are inserted 

into the prostate, followed by 

permanent implantation of radioactive 

sources into the prostate through the 

needles/catheters. At least two CPT 

codes are used to report the composite 

treatment service because there are 

separate codes that describe placement 

of the needles/catheters and the 

application of the brachytherapy 

sources: CPT code 55875 (Transperineal 

placement of needles or catheters into 

prostate for interstitial radioelement 

application, with or without cystoscopy) 

and CPT code 77778 (Interstitial 

radiation source application; complex), 

which are generally present together on 

claims for the same date of service in 

the same operative session. In order to 

base payment on claims for the most 

common clinical scenario, and to 

further our goal of providing payment 

under the OPPS for a larger bundle of 

component services provided in a single 

hospital encounter, beginning in CY 

2008, we began providing a single 

payment for LDR prostate brachytherapy 

when the composite service, reported as 

CPT codes 55875 and 77778, is 

furnished in a single hospital encounter. 

We based the payment for composite 

APC 8001 (LDR Prostate Brachytherapy 

Composite) on the cost derived from 

claims for the same date of service that 

contain both CPT codes 55875 and 

77778 and that do not contain other 

separately paid codes that are not on the 

bypass list. We refer readers to the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66652 through 

66655) for a full history of OPPS 

payment for LDR prostate brachytherapy 

and a detailed description of how we 

developed the LDR prostate 

brachytherapy composite APC. 

For CY 2014, we are proposing to 

continue to pay for LDR prostate 

brachytherapy services using the 

composite APC methodology proposed 

and implemented for CY 2008 through 

CY 2013. That is, we are proposing to 

use CY 2012 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 2013 practice, we are 

proposing not to use the claims that 

meet these criteria in the calculation of 

the costs for APC 0163 (Level IV 

Cystourethroscopy and Other 

Genitourinary Procedures) and APC 

0651 (Complex Interstitial Radiation 

Source Application), the APCs to which 

CPT codes 55875 and 77778 are 

assigned, respectively. We are proposing 

to continue to calculate the costs for 

APCs 0163 and 0651 using single and 

‘‘pseudo’’ single procedure claims. We 

believe that this composite APC 

contributes to our goal of creating 

hospital incentives for efficiency and 

cost containment, while providing 

hospitals with the most flexibility to 

manage their resources. We also 

continue to believe that data from 

claims reporting both services required 

for LDR prostate brachytherapy provide 

the most accurate cost upon which to 

base the composite APC payment rate. 

Using a partial year of CY 2012 claims 

data available for this CY 2014 OPPS/ 

ASC proposed rule, we were able to use 

1,487 claims that contained both CPT 

codes 55875 and 77778 to calculate the 

cost upon which the proposed CY 2014 

payment for composite APC 8001 is 

based. The proposed cost for composite 

APC 8001 for CY 2014 is approximately 

$4,340. 

(3) Cardiac Electrophysiologic 

Evaluation and Ablation Composite 

APC (APC 8000) 

Effective January 1, 2008, we 

established APC 8000 (Cardiac 

Electrophysiologic Evaluation and 

Ablation Composite) to pay for a 

composite service made up of at least 

one specified electrophysiologic 

evaluation service and one specified 

electrophysiologic ablation service. 

Correctly coded claims for these 

services often include multiple codes 

for component services that are reported 

with different CPT codes and that, prior 

to CY 2008, were always paid separately 

through different APCs (specifically, 

APC 0085 (Level II Electrophysiologic 

Evaluation), APC 0086 (Ablate Heart 

Dysrhythm Focus), and APC 0087 

(Cardiac Electrophysiologic Recording/ 

Mapping)). Calculating a composite APC 

for these services allowed us to utilize 

many more claims than were available 

to establish the individual APC costs for 

these services, and advanced our stated 

goal of promoting hospital efficiency 

through larger payment bundles. In 

order to calculate the cost upon which 

the payment rate for composite APC 

8000 is based, we used multiple 

procedure claims that contained at least 

one CPT code from Group A for 

evaluation services and at least one CPT 

code from Group B for ablation services 

reported on the same date of service on 

an individual claim. Table 9 in the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66656) 

identified the CPT codes that are 

assigned to Groups A and B. For a full 

discussion of how we identified the 

Group A and Group B procedures and 

established the payment rate for the 

cardiac electrophysiologic evaluation 

and ablation composite APC, we refer 

readers to the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66655 

through 66659). Where a service in 

Group A is furnished on a date of 

service that is different from the date of 

service for a CPT code in Group B for 

the same beneficiary, payments are 

made under the appropriate single 

procedure APCs and the composite APC 

does not apply. 

Subsequent to the publication of the 

CY 2013 OPPS/ASC proposed rule, the 

AMA’s CPT Editorial Panel created five 

new CPT codes describing cardiac 

electrophysiologic evaluation and 

ablation services, effective January 1, 

2013. These five new codes are: 

• CPT code 93653 (Comprehensive 

electrophysiologic evaluation including 

insertion and repositioning of multiple 

electrode catheters with induction or 

attempted induction of an arrhythmia 


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with right atrial pacing and recording, 

right ventricular pacing and recording, 

His recording with intracardiac catheter 

ablation of arrhythmogenic focus; with 

treatment of supraventricular 

tachycardia by ablation of fast or slow 

atrioventricular pathway, accessory 

atrioventricular connection, cavotricuspid isthmus or other single atrial 

focus or source of atrial re-entry); 

• CPT code 93654 (Comprehensive 

electrophysiologic evaluation including 

insertion and repositioning of multiple 

electrode catheters with induction or 

attempted induction of an arrhythmia 

with right atrial pacing and recording, 

right ventricular pacing and recording, 

His recording with intracardiac catheter 

ablation of arrhythmogenic focus; with 

treatment of ventricular tachycardia or 

focus of ventricular ectopy including 

intracardiac electrophysiologic 3D 

mapping, when performed, and left 

ventricular pacing and recording, when 

performed); 

• CPT code 93655 (Intracardiac 

catheter ablation of a discrete 

mechanism of arrhythmia which is 

distinct from the primary ablated 

mechanism, including repeat diagnostic 

maneuvers, to treat a spontaneous or 

induced arrhythmia (List separately in 

addition to code for primary 

procedure)); 

• CPT code 93656 (Comprehensive 

electrophysiologic evaluation including 

transseptal catheterizations, insertion 

and repositioning of multiple electrode 

catheters with induction or attempted 

induction of an arrhythmia with atrial 

recording and pacing, when possible, 

right ventricular pacing and recording, 

His bundle recording with intracardiac 

catheter ablation of arrhythmogenic 

focus, with treatment of atrial 

fibrillation by ablation by pulmonary 

vein isolation); and 

• CPT code 93657 (Additional linear 

or focal intracardiac catheter ablation of 

the left or right atrium for treatment of 

atrial fibrillation remaining after 

completion of pulmonary vein isolation 

(List separately in addition to code for 

primary procedure)). 

The CPT Editorial Panel also deleted 

two electrophysiologic ablation codes, 

CPT code 93651 (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) and 

CPT code 93652 (Intracardiac catheter 

ablation of arrhythmogenic focus; for 

treatment of ventricular tachycardia), 

effective January 1, 2013. 

As we described in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68425), new CPT codes 

93653, 93654, and 93656 are primary 

electrophysiologic services that 

encompass evaluation as well as 

ablation, while new CPT codes 93655 

and 93657 are add-on codes. Because 

CPT codes 93653, 93654, and 93656 

already encompass both evaluation and 

ablation services, we assigned them to 

composite APC 8000 with no further 

requirement to have another 

electrophysiologic service from either 

Group A or Group B furnished on the 

same date of service, and we assigned 

them interim status indicator ‘‘Q3’’ 

(Codes that may be paid through a 

composite APC) in Addendum B to the 

CY 2013 OPPS/ASC final rule with 

comment period. To facilitate 

implementing this policy, we assigned 

CPT codes 93653, 93654, and 93656 to 

a new Group C, which is paid at the 

composite APC 8000 payment rate. (We 

noted that we will use single and 

‘‘pseudo’’ single claims for CPT codes 

93653, 93654, and 93656 when they 

become available for calculating the 

costs upon which the payment rate for 

APC 8000 will be based in future 

ratesetting.) Because CPT codes 93655 

and 93657 are dependent services that 

may only be performed as ancillary 

services to the primary CPT codes 

93653, 93654, and 93656, we believed 

that packaging CPT codes 93655 and 

93657 with the primary procedures is 

appropriate, and we assigned them 

interim status indicator ‘‘N.’’ Because 

the CPT Editorial Panel deleted CPT 

codes 93651 and 93652, effective 

January 1, 2013, we deleted them from 

the Group B code list, leaving only CPT 

code 93650 (Intracardiac catheter 

ablation of atrioventricular node 

function, atrioventricular conduction for 

creation of complete heart block, with or 

without temporary pacemaker 

placement) in Group B. 

As is our usual practice for new CPT 

codes that were not available at the time 

of the proposed rule, our treatment of 

new CPT codes 93653, 93654, 93655, 

93656, and 93657 was open to public 

comment for a period of 60 days 

following the publication of the CY 

2013 OPPS/ASC final rule with 

comment period. 

For CY 2014, we are proposing to 

continue to pay for cardiac 

electrophysiologic evaluation and 

ablation services using the composite 

APC methodology proposed and 

implemented for CY 2008 through CY 

2013. We also are proposing to continue 

the new Group C methodology we first 

established for CY 2013, described 

above, in response to the CPT Editorial 

Panel’s creation of primary CPT codes 

93653, 93654, and 93656. We continue 

to believe that the cost for cardiac 

electrophysiologic evaluation and 

ablation services calculated from a high 

volume of correctly coded multiple 

procedure claims would result in an 

accurate and appropriate proposed 

payment for these services when at least 

one evaluation service is furnished 

during the same clinical encounter as at 

least one ablation service. Consistent 

with our practice since CY 2008, we are 

proposing not to use the claims that met 

the composite payment criteria in the 

calculation of the costs for APC 0085, to 

which the CPT codes in both Groups A 

and B for composite APC 8000 are 

otherwise assigned. We are proposing 

that the costs for APC 0085 would 

continue to be calculated using single 

procedure claims. For CY 2014, using a 

partial year of CY 2012 claims data 

available for this CY 2014 OPPS/ASC 

proposed rule, we were able to use 

15,817 claims containing a combination 

of Group A and Group B CPT codes 

(Group C was not effective until January 

1, 2013) to calculate a proposed cost of 

approximately $13,402 for composite 

APC 8000. 

Table 6 below lists the proposed 

groups of procedures upon which we 

would base composite APC 8000 for CY 

2014. 


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TABLE 6—PROPOSED GROUPS OF CARDIAC ELECTROPHYSIOLOGIC EVALUATION AND ABLATION PROCEDURES UPON

WHICH COMPOSITE APC 8000 IS BASED

Codes Used in Combinations: At least one in Group A and one in Group B, 

or at least one in Group C 

CY 2014 

CPT Code 

Proposed 

single code 

CY 2014 

APC 

Proposed 

CY 2014 SI 

(composite) 

Group A 

Comprehensive electrophysiologic evaluation with right atrial pacing and recording, right ventricular 

pacing and recording, His bundle recording, including insertion and repositioning of multiple electrode catheters, without induction or attempted induction of arrhythmia ............................................ 93619 0085 Q3 

Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of arrhythmia; with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording ................................................ 93620 0085 Q3 

Group B 

Intracardiac catheter ablation of atrioventricular node function, atrioventricular conduction for creation 

of complete heart block, with or without temporary pacemaker placement ........................................ 93650 0085 Q3 

Group C 

Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and 

recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation 

of arrhythmogenic focus; with treatment of supraventricular tachycardia by ablation of fast or slow 

atrioventricular pathway, accessory atrioventricular connection, cavo-tricuspid isthmus or other single atrial focus or source of atrial re-entry ........................................................................................... 93653 8000 Q3 

Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and 

recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation 

of arrhythmogenic focus; with treatment of ventricular tachycardia or focus of ventricular ectopy including intracardiac electrophysiologic 3D mapping, when performed, and left ventricular pacing 

and recording, when performed ........................................................................................................... 93654 8000 Q3 

Comprehensive electrophysiologic evaluation including transseptal catheterizations, insertion and 

repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia 

with atrial recording and pacing, when possible, right ventricular pacing and recording, His bundle 

recording with intracardiac catheter ablation of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation ..................................................................................... 93656 8000 Q3 

(4) Mental Health Services Composite 

APC (APC 0034) 

For CY 2104, we are proposing to 

continue our longstanding policy of 

limiting the aggregate payment for 

specified less resource-intensive mental 

health services furnished on the same 

date to the payment for a day of partial 

hospitalization services provided by a 

hospital, which we consider to be the 

most resource-intensive of all outpatient 

mental health treatments. We refer 

readers to the April 7, 2000 OPPS final 

rule with comment period (65 FR 18452 

to 18455) for the initial discussion of 

this longstanding policy and the CY 

2012 OPPS/ASC final rule with 

comment period (76 FR 74168) for more 

recent background. 

We are proposing that when the 

aggregate payment for specified mental 

health services provided by one hospital 

to a single beneficiary on one date of 

service based on the payment rates 

associated with the APCs for the 

individual services exceeds the 

maximum per diem payment rate for 

partial hospitalization services provided 

by a hospital, those specified mental 

health services would be assigned to 

APC 0034 (Mental Health Services 

Composite). Specifically, we are 

proposing to continue to set the 

payment rate for APC 0034 at the same 

payment rate that we are proposing to 

establish for APC 0176 (Level II Partial 

Hospitalization (4 or more services) for 

hospital-based PHPs), which is the 

maximum partial hospitalization per 

diem payment rate for a hospital and 

proposing that the hospital would 

continue to be paid one unit of APC 

0034. Under this policy, the I/OCE 

would continue to determine whether to 

pay for these specified mental health 

services individually or to make a single 

payment at the same payment rate 

established for APC 0176 for all of the 

specified mental health services 

furnished by the hospital on that single 

date of service. We continue to believe 

that the costs associated with 

administering a partial hospitalization 

program represent the most resourceintensive of all outpatient mental health 

treatments. Therefore, we do not believe 

that we should pay more for mental 

health services under the OPPS than the 

highest partial hospitalization per diem 

payment rate for hospitals. 

(5) Multiple Imaging Composite APCs 

(APCs 8004, 8005, 8006, 8007, and 

8008) 

Effective January 1, 2009, we provide 

a single payment each time a hospital 

bills more than one imaging procedure 

within an imaging family on the same 

date of service, in order to reflect and 

promote the efficiencies hospitals can 

achieve when performing multiple 

imaging procedures during a single 

session (73 FR 41448 through 41450). 

We utilize three imaging families based 

on imaging modality for purposes of this 

methodology: (1) Ultrasound; (2) 

computed tomography (CT) and 

computed tomographic angiography 

(CTA); and (3) magnetic resonance 

imaging (MRI) and magnetic resonance 

angiography (MRA). The HCPCS codes 

subject to the multiple imaging 

composite policy and their respective 

families are listed in Table 6 of the CY 

2013 OPPS/ASC final rule with 

comment period (77 FR 68253 through 

68257). 


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While there are three imaging 

families, there are five multiple imaging 

composite APCs due to the statutory 

requirement under section 1833(t)(2)(G) 

of the Act that we differentiate payment 

for OPPS imaging services provided 

with and without contrast. While the 

ultrasound procedures included in the 

policy do not involve contrast, both CT/ 

CTA and MRI/MRA scans can be 

provided either with or without 

contrast. The five multiple imaging 

composite APCs established in CY 2009 

are: 

• APC 8004 (Ultrasound Composite); 

• APC 8005 (CT and CTA without 

Contrast Composite); 

• APC 8006 (CT and CTA with 

Contrast Composite); 

• APC 8007 (MRI and MRA without 

Contrast Composite); and 

• APC 8008 (MRI and MRA with 

Contrast Composite). 

We define the single imaging session 

for the ‘‘with contrast’’ composite APCs 

as having at least one or more imaging 

procedures from the same family 

performed with contrast on the same 

date of service. For example, if the 

hospital performs an MRI without 

contrast during the same session as at 

least one other MRI with contrast, the 

hospital will receive payment for APC 

8008, the ‘‘with contrast’’ composite 

APC. 

We make a single payment for those 

imaging procedures that qualify for 

composite APC payment, as well as any 

packaged services furnished on the 

same date of service. The standard 

(noncomposite) APC assignments 

continue to apply for single imaging 

procedures and multiple imaging 

procedures performed across families. 

For a full discussion of the development 

of the multiple imaging composite APC 

methodology, we refer readers to the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68559 through 

68569). 

For CY 2014, we are proposing to 

continue to pay for all multiple imaging 

procedures within an imaging family 

performed on the same date of service 

using the multiple imaging composite 

APC payment methodology. We 

continue to believe that this policy 

would reflect and promote the 

efficiencies hospitals can achieve when 

performing multiple imaging procedures 

during a single session. The proposed 

CY 2014 payment rates for the five 

multiple imaging composite APCs (APC 

8004, APC 8005, APC 8006, APC 8007, 

and APC 8008) are based on costs 

calculated from a partial year of CY 

2012 claims available for this CY 2014 

OPPS/ASC proposed rule that qualified 

for composite payment under the 

current policy (that is, those claims with 

more than one procedure within the 

same family on a single date of service). 

To calculate the proposed costs, we 

used the same methodology that we 

used to calculate the final CY 2012 and 

CY 2013 costs for these composite 

APCs, as described in the CY 2012 

OPPS/ASC final rule with comment 

period (76 FR 74169). The imaging 

HCPCS codes referred to as ‘‘overlap 

bypass codes’’ that we removed from the 

bypass list for purposes of calculating 

the proposed multiple imaging 

composite APC costs, pursuant to our 

established methodology (76 FR 74169), 

are identified by asterisks in Addendum 

N to this proposed rule (which is 

available via the Internet on the CMS 

Web site) and are discussed in more 

detail in section II.A.1.b. of this 

proposed rule. 

We were able to identify 

approximately 0.8 million ‘‘single 

session’’’ claims out of an estimated 1.5 

million potential composite cases from 

our ratesetting claims data, more than 

half of all eligible claims, to calculate 

the proposed CY 2014 costs for the 

multiple imaging composite APCs. 

Table 7 below lists the proposed 

HCPCS codes that would be subject to 

the multiple imaging composite policy 

and their respective families and 

approximate composite APC costs for 

CY 2014. We note that the proposed 

costs calculated for many imaging APCs, 

including the multiple imaging 

composite APCs, have changed 

significantly from the costs calculated 

for the CY 2013 OPPS/ASC final rule 

with comment period for these APCs as 

a result of the proposed adoption of the 

new MRI and CT cost centers, as 

discussed in section II.A.1.c. of this 

proposed rule. 

TABLE 7—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS

Proposed CY 2014 APC 8004 

(ultrasound composite) 

Proposed CY 2014 approximate APC cost = $322 

Family 1—Ultrasound 

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. 

Proposed CY 2014 APC 8005 

(CT and CTA without contrast composite) * 

Proposed CY 2014 approximate APC cost = $304 

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. 


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TABLE 7—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS—Continued 

73200 .................................................................. Ct upper extremity w/o dye. 

73700 .................................................................. Ct lower extremity w/o dye. 

74150 .................................................................. Ct abdomen w/o dye. 

74261 .................................................................. Ct colonography, w/o dye. 

74176 .................................................................. Ct angio abd & pelvis. 

Proposed CY 2014 APC 8007 

(CT and CTA with Contrast composite) 

Proposed CY 2014 approximate APC cost = $522 

70487 .................................................................. Ct maxillofacial w/dye. 

70460 .................................................................. Ct head/brain w/dye. 

70470 .................................................................. Ct head/brain w/o & w/dye. 

70481 .................................................................. Ct orbit/ear/fossa w/dye. 

70482 .................................................................. Ct orbit/ear/fossa w/o&w/dye. 

70488 .................................................................. Ct maxillofacial w/o & w/dye. 

70491 .................................................................. Ct soft tissue neck w/dye. 

70492 .................................................................. Ct sft tsue nck w/o & w/dye. 

70496 .................................................................. Ct angiography, head. 

70498 .................................................................. Ct angiography, neck. 

71260 .................................................................. Ct thorax w/dye. 

71270 .................................................................. Ct thorax w/o & w/dye. 

71275 .................................................................. Ct angiography, chest. 

72126 .................................................................. Ct neck spine w/dye. 

72127 .................................................................. Ct neck spine w/o & w/dye. 

72129 .................................................................. Ct chest spine w/dye. 

72130 .................................................................. Ct chest spine w/o & w/dye. 

72132 .................................................................. Ct lumbar spine w/dye. 

72133 .................................................................. Ct lumbar spine w/o & w/dye. 

72191 .................................................................. Ct angiograph pelv w/o&w/dye. 

72193 .................................................................. Ct pelvis w/dye. 

72194 .................................................................. Ct pelvis w/o & w/dye. 

73201 .................................................................. Ct upper extremity w/dye. 

73202 .................................................................. Ct uppr extremity w/o&w/dye. 

73206 .................................................................. Ct angio upr extrm w/o&w/dye. 

73701 .................................................................. Ct lower extremity w/dye. 

73702 .................................................................. Ct lwr extremity w/o&w/dye. 

73706 .................................................................. Ct angio lwr extr w/o&w/dye. 

74160 .................................................................. Ct abdomen w/dye. 

74170 .................................................................. Ct abdomen w/o & w/dye. 

74175 .................................................................. Ct angio abdom w/o & w/dye. 

74262 .................................................................. Ct colonography, w/dye. 

75635 .................................................................. Ct angio abdominal arteries. 

74177 .................................................................. Ct angio abd&pelv w/contrast. 

74178 .................................................................. Ct angio abd & pelv 1+ regns. 

* If a ‘‘without contrast’’ CT or CTA procedure is performed during the same session as a ‘‘with contrast’’ CT or CTA procedure, the I/OCE will 

assign APC 8006 rather than APC 8005. 

Proposed CY 2014 APC 8007 

(MRI and MRA without Contrast composite) * 

Proposed CY 2014 approximate APC cost = $612 

Family 3—MRI and MRA with and without Contrast 

70336 .................................................................. Magnetic image, jaw joint. 

70540 .................................................................. Mri orbit/face/neck w/o dye. 

70544 .................................................................. Mr angiography head w/o dye. 

70547 .................................................................. Mr angiography neck w/o dye. 

70551 .................................................................. Mri brain w/o dye. 

70554 .................................................................. Fmri brain by tech. 

71550 .................................................................. Mri chest w/o dye. 

72141 .................................................................. Mri neck spine w/o dye. 

72146 .................................................................. Mri chest spine w/o dye. 

72148 .................................................................. Mri lumbar spine w/o dye. 

72195 .................................................................. Mri pelvis w/o dye. 

73218 .................................................................. Mri upper extremity w/o dye. 

73221 .................................................................. Mri joint upr extrem w/o dye. 

73718 .................................................................. Mri lower extremity w/o dye. 

73721 .................................................................. Mri jnt of lwr extre w/o dye. 

74181 .................................................................. Mri abdomen w/o dye. 

75557 .................................................................. Cardiac mri for morph. 

75559 .................................................................. Cardiac mri w/stress img. 

C8901 ................................................................. MRA w/o cont, abd. 

C8904 ................................................................. MRI w/o cont, breast, uni. 

C8907 ................................................................. MRI w/o cont, breast, bi. 

C8910 ................................................................. MRA w/o cont, chest. 


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TABLE 7—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS—Continued 

C8913 ................................................................. MRA w/o cont, lwr ext. 

C8919 ................................................................. MRA w/o cont, pelvis. 

C8932 ................................................................. MRA, w/o dye, spinal canal. 

C8935 ................................................................. MRA, w/o dye, upper extr. 

Proposed CY 2014 APC 8008 

(MRI and MRA with contrast composite) 

Proposed CY 2014 approximate APC cost = $908 

70549 .................................................................. Mr angiograph neck w/o&w/dye. 

70542 .................................................................. Mri orbit/face/neck w/dye. 

70543 .................................................................. Mri orbt/fac/nck w/o & w/dye. 

70545 .................................................................. Mr angiography head w/dye. 

70546 .................................................................. Mr angiograph head w/o&w/dye. 

70547 .................................................................. Mr angiography neck w/o dye. 

70548 .................................................................. Mr angiography neck w/dye. 

70552 .................................................................. Mri brain w/dye. 

70553 .................................................................. Mri brain w/o & w/dye. 

71551 .................................................................. Mri chest w/dye. 

71552 .................................................................. Mri chest w/o & w/dye. 

72142 .................................................................. Mri neck spine w/dye. 

72147 .................................................................. Mri chest spine w/dye. 

72149 .................................................................. Mri lumbar spine w/dye. 

72156 .................................................................. Mri neck spine w/o & w/dye. 

72157 .................................................................. Mri chest spine w/o & w/dye. 

72158 .................................................................. Mri lumbar spine w/o & w/dye. 

72196 .................................................................. Mri pelvis w/dye. 

72197 .................................................................. Mri pelvis w/o & w/dye. 

73219 .................................................................. Mri upper extremity w/dye. 

73220 .................................................................. Mri uppr extremity w/o&w/dye. 

73222 .................................................................. Mri joint upr extrem w/dye. 

73223 .................................................................. Mri joint upr extr w/o&w/dye. 

73719 .................................................................. Mri lower extremity w/dye. 

73720 .................................................................. Mri lwr extremity w/o&w/dye. 

73722 .................................................................. Mri joint of lwr extr w/dye. 

73723 .................................................................. Mri joint lwr extr w/o&w/dye. 

74182 .................................................................. Mri abdomen w/dye. 

74183 .................................................................. Mri abdomen w/o & w/dye. 

75561 .................................................................. Cardiac mri for morph w/dye. 

75563 .................................................................. Card mri w/stress img & dye. 

C8900 ................................................................. MRA w/cont, abd. 

C8902 ................................................................. MRA w/o fol w/cont, abd. 

C8903 ................................................................. MRI w/cont, breast, uni. 

C8905 ................................................................. MRI w/o fol w/cont, brst, un. 

C8906 ................................................................. MRI w/cont, breast, bi. 

C8908 ................................................................. MRI w/o fol w/cont, breast,. 

C8909 ................................................................. MRA w/cont, chest. 

C8911 ................................................................. MRA w/o fol w/cont, chest. 

C8912 ................................................................. MRA w/cont, lwr ext. 

C8914 ................................................................. MRA w/o fol w/cont, lwr ext. 

C8918 ................................................................. MRA w/cont, pelvis. 

C8920 ................................................................. MRA w/o fol w/cont, pelvis. 

C8931 ................................................................. MRA, w/dye, spinal canal. 

C8933 ................................................................. MRA, w/o&w/dye, spinal canal. 

C8934 ................................................................. MRA, w/dye, upper extremity. 

C8936 ................................................................. MRA, w/o&w/dye, upper extr. 

* If a ‘‘without contrast’’ MRI or MRA procedure is performed during the same session as a ‘‘with contrast’’ MRI or MRA procedure, the I/OCE 

will assign APC 8008 rather than APC 8007. 

3. Proposed Changes to Packaged Items 

and Services 

a. Background 

Like other prospective payment 

systems, the OPPS relies on the concept 

of averaging, where the payment may be 

more or less than the estimated cost of 

providing a specific service or bundle of 

specific services for a particular patient. 

However, with the exception of outlier 

cases, overall payment is adequate to 

ensure access to appropriate care. The 

OPPS packages payment for multiple 

interrelated items and services into a 

single payment to create incentives for 

hospitals to furnish services in the most 

efficient way by enabling hospitals to 

manage their resources with maximum 

flexibility, thereby encouraging longterm cost containment. Our packaging 

policies support our strategic goal of 

using larger payment bundles to 

maximize hospitals’ incentives to 

provide care in the most efficient 

matter. In addition, the OPPS packages 

payment for multiple interrelated items 

and services into a single payment, 

regardless of whether dedicated CPT or 

HCPCS codes describe the services or 

the cost of the individual items and 

services. For example, where there are 

a variety of devices, drugs, items, 

supplies, etc. that could be used to 

furnish a service, some of which are 

more expensive than others, packaging 

encourages hospitals to use the most 

cost-efficient item that meets the 

patient’s needs, rather than to routinely 


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use a more expensive item, which often 

results if separate payment is provided 

for the items. This encourages hospitals 

that are spending more per case than the 

payment they received to review their 

service patterns to ensure that they 

furnish services as efficiently as 

possible. Similarly, we believe that 

separate payment for items and services 

heightens the hospital’s focus on the 

payment for individual services, rather 

than the efficient delivery of those 

services. 

Packaging also encourages hospitals 

to effectively negotiate with 

manufacturers and suppliers to reduce 

the purchase price of items and services 

or to explore alternative group 

purchasing arrangements, thereby 

encouraging the most economical health 

care delivery. Similarly, packaging 

encourages hospitals to establish 

protocols that ensure that necessary 

services are furnished, while 

scrutinizing the services ordered by 

practitioners to maximize the efficient 

use of hospital resources. Packaging 

payments into larger payment bundles 

promotes the predictability and 

accuracy of payment for services over 

time. Finally, packaging may reduce the 

importance of refining service-specific 

payment because packaged payments 

include costs associated with higher 

cost cases requiring many ancillary 

items and services and lower cost cases 

requiring fewer ancillary items and 

services. Because packaging encourages 

efficiency and is an essential component 

of a prospective payment system, 

packaging payment for items and 

services that are typically integral, 

ancillary, supportive, dependent, or 

adjunctive to a primary service has been 

a fundamental part of the OPPS since its 

implementation in August 2000. Most, 

but not necessarily all, items and 

services currently packaged in the OPPS 

are listed in 42 CFR 419.2(b). For an 

extensive discussion of the history and 

background of the OPPS packaging 

policy, we refer readers to the CY 2008 

OPPS/ASC proposed rule (72 FR 42628) 

and the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66580). 

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 ‘‘primary service’’ to refer 

to the HCPCS codes that represent the 

primary therapeutic or diagnostic 

modality into which we package 

payment for the dependent service. 

Over the last decade, we have refined 

our understanding and implementation 

of the OPPS and have packaged 

numerous services that we originally 

paid as primary services, and as we 

consider the development of larger 

payment groups that more broadly 

reflect services provided in an 

encounter or episode of care, we may 

propose to expand these packaging 

policies as they apply to services that 

we may currently pay as primary 

services. 

We assign status indicator ‘‘N’’ to 

those HCPCS codes of dependent 

services that we believe are always 

integral to the performance of the 

primary modality. Therefore, we always 

package their costs into the costs of the 

separately paid primary services with 

which they are billed. Services assigned 

to status indicator ‘‘N’’ are 

unconditionally packaged. The 

following description of the conditional 

packaging status indicators reflects our 

proposal to discontinue the use of status 

indicator ‘‘X,’’ which we discuss below. 

We assign status indicator ‘‘Q1’’ (STVPackaged Codes), ‘‘Q2’’ (T-Packaged 

Codes), or ‘‘Q3’’ (Codes that may be paid 

through a composite APC) to each 

conditionally packaged HCPCS code. 

An STV-packaged code describes a 

HCPCS code whose payment is 

packaged with one or more separately 

paid primary services with the status 

indicator of ‘‘S,’’ ‘‘T,’’ or ‘‘V’’ furnished 

in the hospital outpatient encounter. A 

T-packaged code describes a code 

whose payment is only packaged with 

one or more separately paid surgical 

procedures with the status indicator of 

‘‘T’’ that are provided during the 

hospital outpatient encounter. STVpackaged codes and T-packaged codes 

are paid separately in those uncommon 

cases when they do not meet their 

respective criteria for packaged 

payment. STV-packaged codes and Tpackaged codes are conditionally 

packaged. We refer readers to the 

discussion of proposed CY 2014 OPPS 

payment status and comment indicators 

in section XI. of this proposed rule and 

Addendum D1, which is available via 

the Internet on the CMS Web site, for a 

complete listing of status indicators and 

the meaning of each status indicator. 

Hospitals include HCPCS codes and 

charges for packaged services on their 

claims, and the estimated costs 

associated with those packaged services 

are then added to the costs of separately 

payable procedures on the same claims 

to establish prospective payment rates. 

We encourage hospitals to report all 

HCPCS codes that describe packaged 

services provided, unless the CPT 

Editorial Panel or CMS provides other 

specific guidance. The appropriateness 

of the OPPS payment rates depends on 

the quality and completeness of the 

claims data that hospitals submit for the 

services they furnish to Medicare 

beneficiaries. 

In addition to the packaged items and 

services listed in 42 CFR 419.2(b), in the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66610 through 

66659), we adopted the packaging of 

payment for items and services in seven 

categories with the primary diagnostic 

or therapeutic modality to which we 

believe these items and services are 

typically ancillary and supportive. The 

seven categories are: (1) Guidance 

services; (2) image processing services; 

(3) intraoperative services; (4) imaging 

supervision and interpretation services; 

(5) diagnostic radiopharmaceuticals; (6) 

contrast media; and (7) observation 

services. We specifically chose these 

categories of HCPCS codes for packaging 

because we believe that the items and 

services described by the codes in these 

categories are typically ancillary and 

supportive to a primary diagnostic or 

therapeutic modality and, in those 

cases, are an integral part of the primary 

service they support. In addition, in the 

CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68634), we 

packaged products described as 

implantable biologicals. As discussed 

below, we are proposing to add each of 

these categories of packaged items and 

services that were packaged beginning 

in CYs 2008 and 2009, along with newly 

proposed packaged items and services 

for CY 2014 as described below to the 

OPPS packaging regulation at § 419.2(b). 

Packaging under the OPPS also includes 

composite APCs, which are described in 

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

b. Basis for Proposed New Packaging 

Policies for CY 2014 

As discussed above, the OPPS is a 

prospective payment system. It is not 

intended to be a fee schedule, in which 

separate payment is made for each 

coded line item. However, the OPPS is 

currently a prospective payment system 

that packages some items and services 

but not others. Payment for some items 

and services in the OPPS is according to 

the principles of a prospective payment 

system, while the payment for other 

items and services is more like that of 

a fee schedule. Our overarching goal is 

to make OPPS payments for all services 

paid under the OPPS more consistent 

with those of a prospective payment 

system and less like those of a per 

service fee schedule, which pays 

separately for each coded item. As a part 

of this effort, we have continued to 

examine the payment for items and 

services provided in the OPPS to 

determine which OPPS services can be 

packaged to achieve the objective of 


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advancing the OPPS as a prospective 

payment system. 

Therefore, as we did in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66610 through 66659), we 

have examined the items and services 

currently provided under the OPPS, 

reviewing categories of integral, 

ancillary, supportive, dependent, or 

adjunctive items and services for which 

we believe payment would be 

appropriately packaged into payment of 

the primary service they support. 

Specifically, we examined the HCPCS 

code definitions (including CPT code 

descriptors) to see whether there were 

categories of codes for which packaging 

would be appropriate according to 

existing OPPS packaging policies or a 

logical expansion of those existing 

OPPS packaging policies. In general, we 

are proposing to package the costs of 

selected HCPCS codes into payment for 

services reported with other HCPCS 

codes where we believe that one code 

reported an item or service that was 

integral, ancillary, supportive, 

dependent, or adjunctive to the 

provision of care that was reported by 

another HCPCS code. Below we discuss 

categories and classes of items and 

services that we are proposing to 

package beginning in CY 2014. In 

several cases, we are proposing that 

services be conditionally packaged so 

that if they are provided without other 

services, there will be a separate 

payment for the service. The proposed 

policies detailed below are not 

exhaustive, and we expect to continue 

to review the OPPS and consider 

additional packaging policies in the 

future. 

c. Proposed New Packaging Policies for 

CY 2014 

(1) Drugs, Biologicals, and 

Radiopharmaceuticals That Function as 

Supplies When Used in a Diagnostic 

Test or Procedure 

In the OPPS, we currently 

unconditionally package the following 

six categories of drugs, biologicals, and 

radiopharmaceuticals (unless temporary 

pass-through status applies): (1) Those 

with per day costs at or below the 

packaging threshold (discussed further 

in section V.B.2. of this proposed rule); 

(2) diagnostic radiopharmaceuticals; (3) 

contrast agents; (4) anesthesia drugs; (5) 

drugs used as supplies according to 

§ 419.2(b)(4)); and (6) implantable 

biologicals. For CY 2014, we reviewed 

all of the drugs, biologicals, and 

radiopharmaceuticals administered in 

the hospital outpatient setting to 

identify categories or classes of drugs, 

biologicals, and radiopharmaceuticals 

that either should be packaged 

according to existing packaging policies 

or should be packaged as a logical 

expansion of existing OPPS packaging 

policies for drugs, biologicals, and 

radiopharmaceuticals. 

Currently, two of the categories of 

drugs, biologicals, and 

radiopharmaceuticals that are packaged 

in the OPPS (contrast agents and 

diagnostic radiopharmaceuticals) have a 

common characteristic—they both 

describe products that function as 

supplies that are used in a diagnostic 

test or procedure. Although in the past 

we identified these specific categories of 

drugs, biologicals, and 

radiopharmaceuticals as packaged after 

the expiration of pass-through status, we 

recognize that they actually represent 

subcategories of a broader category of 

drugs, biologicals, and 

radiopharmaceuticals that should be 

packaged in the OPPS according to 

OPPS packaging principles: drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies when used in 

a diagnostic test or procedure. In 

particular, we are referring to drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies as a part of a 

larger, more encompassing service or 

procedure, namely, the diagnostic test 

or procedure in which the drug, 

biological, or radiopharmaceutical is 

employed. Because diagnostic 

radiopharmaceuticals and contrast 

agents represent specific examples of a 

broader category of drugs, biologicals, or 

radiopharmaceuticals that may function 

as a supply that is integral and 

supportive to a diagnostic test or 

procedure, we are proposing to 

unconditionally package drugs, 

biologicals, and radiopharmaceuticals 

that function as a supply when used in 

a diagnostic test or procedure, except 

when the drug, biological, or 

radiopharmaceutical has pass-through 

status. 

A diagnostic test or procedure is 

defined as any kind of test or procedure 

performed to aid in the diagnosis, 

detection, monitoring, or evaluation of a 

disease or condition. A diagnostic test 

or procedure also includes tests or 

procedures performed to determine 

which treatment option is optimal. A 

diagnostic test or procedure can have 

multiple purposes, but at least one 

purpose must be diagnostic. We are 

proposing to revise the regulations at 

§ 419.2(b) to specify that any drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies when used in 

diagnostic tests or procedures will be 

packaged as supplies in the OPPS, 

except when pass-through status 

applies. This proposed broader category 

of packaged drugs, biologicals, and 

radiopharmaceuticals includes the 

currently packaged categories of 

contrast agents and diagnostic 

radiopharmaceuticals when used in a 

diagnostic test or procedure. We have 

identified specific drugs that function as 

supplies when used in a diagnostic test 

or procedure that fall under this 

proposed packaging policy, and discuss 

these drugs below. 

(a) Stress Agents 

Our review of OPPS drugs identified 

pharmacologic stress agents (‘‘stress 

agents’’) as a class of drugs that is 

described by the proposed packaged 

category of drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure. Stress agents are a class of 

drugs that are used in diagnostic tests to 

evaluate certain aspects of cardiac 

function. In many cases, these agents are 

used in patients who are unable to 

perform an exercise stress test, which 

typically precedes additional diagnostic 

testing. The primary diagnostic test in 

which these agents are used is 

myocardial perfusion imaging (MPI), 

which is the highest cost nuclear 

medicine procedure in the OPPS, with 

OPPS payments exceeding $800 million 

in CY 2012. Approximately 96 percent 

of MPI is billed with CPT code 78452. 

Stress agents include the following 

drugs described by these HCPCS codes: 

HCPCS codes J0152 (Injection, 

adenosine for diagnostic use, 30 mg); 

J1245 (Injection, dipyridamole, per 10 

mg); J1250 (Injection, dobutamine 

hydrochloride, per 250 mg); and J2785 

(Injection, regadenoson, 0.1 mg). For CY 

2013, HCPCS codes J1245 and J1250 are 

packaged in the OPPS, and J0152 and 

J2785 are separately paid. OPPS 

payments for the two separately payable 

stress agents totaled approximately $111 

million in CY 2012. 

Beginning in CY 2014, we are 

proposing to package all stress agents 

that function as supplies into the 

diagnostic tests or procedures in which 

they are employed, consistent with the 

policy proposed above. The primary 

service in which stress agents are 

employed is MPI. MPI with stress 

encompasses the imaging service, the 

stress test, and either exercise to induce 

stress or the administration of a 

pharmacologic stress agent. The various 

combinations of items and services that 

constitute MPI with stress are depicted 

in the table below, which includes the 

CY 2013 separate payment rates versus 

the proposed CY 2014 packaged 

payment rate for MPI. 


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TABLE 8—CY 2013 SEPARATE PAYMENT VERSUS CY 2014 PROPOSED PACKAGED PAYMENT FOR MPI 

Service or supply 

CY 2013 Separate payment 

for MPI 

components 

CY 2013 Separate payment 

for MPI 

components 

CY 2013 Separate payment 

for MPI 

components 

CY 2013 Separate payment 

for MPI 

components 

CY 2014 

Proposed 

packaged 

payment for 

MPI 

78452 ....................................................................................... $672 $672 $672 $672 $1,235 

93017 ....................................................................................... $178 $178 $178 $178 P× 

Exercise or Stress Agent ¥ ...................................................... Exercise–$0 J1245–P J2785–$215 * J0152–$219 P 

Radiopharmaceutical ............................................................... P P P P P 

Total .................................................................................. $850 $850 $1,065 $1,069 $1,235 

P = Packaged. 

× The stress test described by CPT code 93017 is proposed to be conditionally packaged as a result of the proposal described below to conditionally package ancillary services. 

¥April 2013 ASP Drug Pricing File. 

* 70 kg patient. 

The proposed CY 2014 payment rate 

for MPI with the stress test, stress agent, 

and diagnostic radiopharmaceutical 

packaged into MPI is 14 percent higher 

than the sum of the CY 2013 payments 

for separately paid MPI, a separately 

paid stress test, and either of the two 

separately paid stress agents. 

(b) Hexaminolevulinate Hydrochloride 

(Cysview®)—HCPCS Code C9275 

Cysview is a drug for which passthrough status expired on December 31, 

2012. Beginning in CY 2013, Cysview 

was unconditionally packaged in the 

OPPS as a contrast agent (77 FR 68364). 

The indications and usage of Cysview as 

listed in the FDA-approved label are as 

follows: ‘‘Cysview is an optical imaging 

agent indicated for use in the 

cystoscopic detection of non-muscle 

invasive papillary cancer of the bladder 

among patients suspected or known to 

have lesion(s) on the basis of a prior 

cystoscopy. Cysview is used with the 

Karl Storz D-Light C Photodynamic 

Diagnostic (PDD) system to perform 

cystoscopy with the blue light setting 

(Mode 2) as an adjunct to the white light 

setting (Mode 1).’’ 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 42672), we 

described contrast agents as follows: 

‘‘Contrast agents are generally 

considered to be those substances 

introduced into or around a structure 

that, because of the differential 

absorption of x-rays, alteration of 

magnetic fields, or other effects of the 

contrast medium in comparison with 

surrounding tissues, permit 

visualization of the structure through an 

imaging modality. The use of certain 

contrast agents is generally associated 

with specific imaging modalities, 

including x-ray, computed tomography 

(CT), ultrasound, and magnetic 

resonance imaging (MRI), for purposes 

of diagnostic testing or treatment.’’ 

Upon reexamining this description of 

contrast agents and considering our 

prior application of this description to 

specific compounds, we believe that 

contrast agents should include those 

compounds that are used with the 

imaging modalities x-ray, computed 

tomography (CT), ultrasound, magnetic 

resonance imaging (MRI), and other 

related modalities that could represent 

advancements of these modalities. 

Based on the indications and usage 

described above for Cysview, we do not 

believe that Cysview is best described as 

a contrast agent. Rather, we believe 

Cysview is more appropriately 

described as a drug used in a procedure 

to diagnose bladder cancer. 

As discussed above, we are proposing 

a new policy to package all drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies when used in 

a diagnostic test or procedure. Cysview 

is a drug that functions as a supply 

when used in a diagnostic test or 

procedure for the purpose of the 

‘‘detection of non-muscle invasive 

papillary cancer of the bladder.’’ 

Therefore, as a drug that functions as a 

supply when used in a diagnostic test or 

procedure, we are proposing to package 

Cysview for CY 2014 under the OPPS. 

Cysview is currently assigned to status 

indicator ‘‘N’’ for CY 2013, and under 

this proposal, the status indicator 

assignment of ‘‘N’’ would continue for 

CY 2014. 

(2) Drugs and Biologicals That Function 

as Supplies or Devices When Used in a 

Surgical Procedure 

Since the inception of the OPPS we 

have packaged medical devices, medical 

and surgical supplies, and surgical 

dressings into the related procedure 

under § 419.2(b)(4). Medical and 

surgical supplies are a broad category of 

items used in the hospital outpatient 

setting. Supplies is a large category of 

items that typically are either for single 

patient use or have a shorter life span 

in use than equipment. Supplies 

include not only minor, inexpensive, or 

commodity-type items but also include 

a wide range of products used in the 

hospital outpatient setting, including 

certain implantable medical devices. We 

consider implantable medical devices to 

be integral to, dependent on, and 

supportive to a surgical implantation 

procedure. For further discussion, we 

refer readers to the CY 2000 OPPS final 

rule (65 FR 18443 through 18444). 

Packaged supplies can include certain 

drugs, biologicals, and 

radiopharmaceuticals. Packaged 

supplies in the OPPS also include 

implantable biologicals, which are 

packaged because they function as 

implantable devices which, as noted 

above, are considered to be a type of 

supply in the OPPS. We refer readers to 

the CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68634) for a 

more detailed discussion. We believe 

that the existing packaging policy for 

implantable biologicals represents an 

example of a broader category of drugs 

and biologicals that should be packaged 

in the OPPS according to longstanding 

regulations and existing policies: drugs 

and biologicals that function as supplies 

or devices in a surgical procedure. 

Therefore, beginning in the CY 2014 

OPPS, we are proposing to 

unconditionally package all drugs and 

biologicals that function as supplies or 

devices in a surgical procedure, 

following the current policy that is 

applied to implantable biologicals. 

A class of products that we treat as 

biologicals in the OPPS that is described 

by the proposed packaging category of 

drugs and biologicals that function as 

supplies or devices in a surgical 

procedure is skin substitutes. The term 

‘‘skin substitutes’’ refers to a category of 

products that are most commonly used 

in outpatient settings for the treatment 


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43572 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

of diabetic foot ulcers and venous leg 

ulcers. Although the term ‘‘skin 

substitute’’ has been adopted to refer to 

this category of products in certain 

contexts, these products do not actually 

function like human skin that is grafted 

onto a wound; they are not a substitute 

for a skin graft. Instead, these products 

are various types of wound dressings 

that, through various mechanisms of 

action, stimulate the host to regenerate 

lost tissue and replace the wound with 

functional skin. We refer readers to the 

‘‘Skin Substitutes for Treating Chronic 

Wounds Technology Assessment Report 

at ES–2’’ which is available on the 

AHRQ Web site at: http:// 

www.ahrq.gov/research/findings/ta/ 

skinsubs/HCPR0610_skinsubstfinal.pdf. Currently, available skin 

substitutes are regulated by the FDA as 

either medical devices (and classified as 

wound dressings) or as human cell, 

tissue, and cellular and tissue-based 

products (HCT/Ps) under section 361 of 

the Public Health Service Act. The 

different skin substitutes are applied to 

a wound during a surgical procedure 

described by CPT codes in the range 

15271 through 15278. To be properly 

performed, every surgical procedure in 

this CPT code range requires the use of 

at least one skin substitute product. 

These surgical procedures include 

preparation of the wound and 

application of the skin substitute 

product through suturing or various 

other techniques. Currently skin 

substitutes are separately paid in the 

OPPS as if they are biologicals 

according to the ASP methodology and 

are subject to the drug and biological 

packaging threshold. 

Because a skin substitute must be 

used to perform any of the procedures 

described by a CPT code in the range 

15271 through 15278, and conversely 

because it is the surgical procedure of 

treating the wound and applying a 

covering to the wound that is the 

independent service, skin substitute 

products serve as a necessary supply for 

these surgical repair procedures. In 

addition, many skin substitutes are 

classified by the FDA as wound 

dressings, which make them the same or 

similar to surgical dressings that are 

packaged under § 419.2(b)(4). Finally, 

implantable biological products are very 

similar to (and in some instances the 

same as) skin substitute products, 

except that the clinical applications for 

implantable biologicals are typically an 

internal surgery versus the application 

to a wound for a skin substitute. Some 

products had or have dual uses as both 

skin substitutes and implantable 

biologicals, which underscores the 

similarity of these sometimes 

overlapping classes of products. 

Implantable biologicals and skin 

substitutes both function as supplies or 

devices that are used in surgical 

procedures and, therefore, should be 

packaged with the surgical procedure in 

which the products are used. Since CY 

2009, we have packaged implantable 

biologicals and we are proposing to 

package skin substitutes with their 

associated surgeries beginning in CY 

2014. We see no reason to distinguish 

skin substitutes from implantable 

biologicals for OPPS packaging 

purposes based on the clinical 

application of individual products. 

Therefore, we are proposing to 

unconditionally package skin 

substitutes into their associated surgical 

procedures. Packaging payment for 

these skin substitutes into the APC 

payment for the related surgical 

procedures also would result in a total 

prospective payment that is more 

reflective of the average resource costs 

of the procedures because prices for 

these products vary significantly from 

product to product. Packaging these 

products also would promote more 

efficient resource use by hospitals and 

would be more consistent with the 

treatment of similar products under the 

OPPS. We are proposing to revise the 

regulations at § 419.2(b)(4) to include 

skin substitutes as an example of a 

packaged surgical supply. Pass-through 

status would still be available to new 

skin substitutes that meet the passthrough criteria. The skin substitute 

products that would be unconditionally 

packaged under this proposal and 

assigned to status indicator ‘‘N’’ for CY 

2014 are listed in Addendum P of this 

CY 2014 OPPS/ASC proposed rule. The 

proposed payment for CPT codes 15271 

through 15278, including the cost of the 

packaged skin substitutes, for CY 2014 

are listed in Addendum B of this 

proposed rule. These addenda are 

available on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. 

(3) Clinical Diagnostic Laboratory Tests 

Since the beginning of the OPPS, 

clinical diagnostic laboratory tests 

(laboratory tests) provided in the 

hospital outpatient setting have been 

separately paid to hospitals at Clinical 

Laboratory Fee Schedule (CLFS) rates 

(65 FR 18442). Section 1833(t)(1)(B)(i) of 

the Act authorizes the Secretary to 

designate the hospital outpatient 

services that are paid under the OPPS. 

Under this authority, the Secretary 

excluded from the OPPS those services 

that are paid under fee schedules or 

other payment systems. As stated in the 

April 17, 2000 OPPS final rule with 

comment period: ‘‘Rather than duplicate 

existing payment systems that are 

effectively achieving consistency of 

payments across different service 

delivery sites, we proposed to exclude 

from the outpatient PPS those services 

furnished in a hospital outpatient 

setting that were already subject to an 

existing fee schedule or other 

prospectively determined payment rate’’ 

(65 FR 18442). Because payment rates 

for laboratory tests were based on the 

CLFS, laboratory tests are among the 

services excluded from the OPPS. We 

codified this policy at 42 CFR 419.22(l). 

As discussed above, it is our intent to 

make the OPPS a more complete 

prospective payment system, and less of 

a fee schedule-type payment system that 

makes separate payment for each 

separately coded item. We have 

examined the services performed in the 

hospital outpatient setting to determine 

those services that we believe should be 

packaged in order to make the OPPS a 

more complete and robust prospective 

payment system. We were guided by our 

longstanding OPPS packaging principle 

of packaging the payment of items or 

services when they are provided along 

with primary services they support. 

Based on this approach, we believe that 

laboratory tests (other than molecular 

pathology tests, as discussed below) that 

are integral, ancillary, supportive, 

dependent, or adjunctive to the primary 

services provided in the hospital 

outpatient setting are services that 

should be packaged. Laboratory tests 

and their results support clinical 

decisionmaking for a broad spectrum of 

primary services provided in the 

hospital outpatient setting, including 

surgery and diagnostic evaluations. 

Therefore, except as discussed below for 

molecular pathology tests, we are 

proposing to package laboratory tests 

when they are integral, ancillary, 

supportive, dependent, or adjunctive to 

a primary service or services provided 

in the hospital outpatient setting. We 

are proposing that laboratory tests 

would be integral, ancillary, supportive, 

dependent, or adjunctive to a primary 

service or services provided in the 

hospital outpatient setting when they 

are provided on the same date of service 

as the primary service and when they 

are ordered by the same practitioner 

who ordered the primary service. We 

would consider a laboratory test to be 

unrelated to a primary service and, thus, 

not part of this packaging policy when 

the laboratory test is the only service 

provided on that date of service or when 

the laboratory test is provided on the 


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same date of service as the primary 

service but is ordered for a different 

purpose than the primary service by a 

practitioner different than the 

practitioner who ordered the primary 

service provided in the hospital 

outpatient setting. The laboratory tests 

not included in the packaging proposal 

would continue to be paid separately at 

CLFS rates when billed on a 14X bill 

type. 

We are proposing an exception for 

molecular pathology tests described by 

CPT codes in the ranges of 81200 

through 81383, 81400 through 81408, 

and 81479 from this proposed packaging 

policy. We are not proposing that these 

services be packaged because we believe 

that these relatively new tests have a 

different pattern of clinical use, which 

may make them generally less tied to a 

primary service in the hospital 

outpatient setting than the more 

common and routine laboratory tests 

that we are proposing to package. As we 

gain more experience with these 

molecular pathology tests, we will 

consider if packaging in the OPPS 

would be appropriate for these types of 

tests. 

In addition to the laboratory 

packaging policy proposals described 

above, we considered proposing an 

alternative laboratory packaging policy 

that would package those laboratory 

tests meeting the proposed policies 

above, but also include a dollar 

threshold policy similar to the approach 

we use for separately paid drugs and 

biologicals in the OPPS so that only 

laboratory tests (meeting the proposed 

standards above) with CLFS payment 

rates below a certain dollar threshold 

amount would be packaged. Under this 

alternative policy, tests meeting the 

proposed standards above, but for 

which the CLFS payment rates are 

above the threshold amount, would 

continue to be separately paid. We 

decided not to propose this alternative 

policy because, as discussed above in 

the background section, our packaging 

policies generally do not consider the 

cost of the individual items and services 

that are packaged, meaning that we 

package both inexpensive and 

expensive items according to OPPS 

packaging principles. 

We recognize that the Medicare Part 

B deductible and coinsurance generally 

do not apply for laboratory tests paid to 

hospitals at CLFS rates, but that the 

deductible and coinsurance would 

apply to laboratory tests packaged into 

other services in the OPPS. The purpose 

of the laboratory packaging proposal is 

not to shift program costs onto 

beneficiaries, but to encourage greater 

efficiency by hospitals and the most 

economical delivery of medically 

necessary laboratory tests. We estimate 

that the combination of packaging 

laboratory tests into a wide array of 

primary services provided in the 

hospital outpatient setting combined 

with our long-standing methodology to 

adjust the copayment percentages to 20 

percent as provided in section 

1833(t)(3)(B)(ii) of the Act and as 

discussed in section II.I. of this 

proposed rule, and the limitation on the 

copayment amount for a procedure to 

the inpatient hospital deductible as set 

forth at section 1833(t)(8)(C)(i) of the 

Act would fully offset the financial 

impact on Medicare beneficiaries 

receiving laboratory tests that would be 

subject to the proposed packaging 

policy. Further, we believe that creating 

these larger bundles will result in a 

more efficient use of laboratory services 

when they are adjunctive to an 

outpatient service. In addition, to the 

extent that the coinsurance and 

deductible do not apply under the 

CLFS, they would continue not to apply 

for tests that are ordered, provided, and 

billed independently from a primary 

service as discussed above, or for 

molecular pathology tests. We are 

inviting public comments on the effect 

of packaging laboratory tests on 

beneficiary coinsurance. 

The laboratory test codes that we are 

proposing to be packaged and assigned 

status indicator ‘‘N’’ for CY 2014 are 

listed in Addendum P of this proposed 

rule (which is available via the Internet 

on the CMS Web site. We are proposing 

to revise the regulation text at § 419.2(b) 

and § 419.22(l) to reflect this laboratory 

test packaging proposal. 

(4) Procedures Described By Add-On 

Codes 

Add-on codes describe procedures 

that are always performed in addition to 

a primary procedure. Add-on codes can 

be either CPT codes or Level II HCPCS 

codes. For example, the procedure 

described by CPT code 11001 is 

‘‘Debridement of extensive eczematous 

or infected skin; each additional 10% of 

the body surface, or part thereof (list 

separately in addition to code for 

primary procedure).’’ This code is used 

for additional debridement beyond that 

described by the primary procedure 

code. Currently, add-on codes are 

treated like other codes in the OPPS. 

Add-on codes typically received 

separate payment based on an APC 

assignment, and are typically assigned 

status indicator ‘‘T.’’ 

Procedures described by add-on codes 

represent an extension or continuation 

of a primary procedure, which means 

that they are typically supportive, 

dependent, or adjunctive to a primary 

surgical procedure. The parent code 

defines the purpose of the patient 

encounter and the add-on code typically 

describes additional incremental work, 

when the extent of the procedure 

encompasses a range rather than a single 

defined endpoint applicable to all 

patients. For example, add-on CPT code 

11001 is used for each additional 10 

percent of debridement. Therefore, 

according to longstanding OPPS 

packaging principles described above 

and the dependent nature and 

adjunctive characteristics of procedures 

described by add-on codes, we believe 

that such procedures should be 

packaged with the primary procedure. 

For CY 2014, we are proposing to 

unconditionally package all procedures 

described by add-on codes in the OPPS. 

There is an additional benefit to 

packaging add-on codes—more accurate 

OPPS payment for procedures described 

by add-on codes. Currently, calculating 

mean costs for procedures described by 

add-on codes is problematic in the 

OPPS because we cannot determine 

which costs on a claim are attributable 

to the primary procedure and which 

costs are attributable to the add-on 

procedure. Furthermore, because we use 

single claims and ‘‘pseudo’’ single 

procedure claims for ratesetting, we 

generally must rely on incorrectly coded 

claims containing only the add-on code 

to calculate payment rates for add-on 

procedures. Claims containing only an 

add-on code are incorrectly coded 

because they should be reported with 

(or ‘‘added-on’’) a primary procedure. 

Packaging the line item costs associated 

with an add-on code into the cost of the 

primary procedure will help address 

this ratesetting concern because the 

costs of the add-on code would be 

packaged into the primary procedure, 

and we would no longer have to 

calculate costs for add-on codes based 

on miscoded claims. In addition, 

packaging add-on codes would increase 

the number of single bills available for 

ratesetting for the primary procedures. 

We are revising the regulations at 

§ 419.2(b) to include the packaging of 

add-on codes. The specific add-on codes 

that we are proposing to be 

unconditionally packaged and assigned 

status indicator ‘‘N’’ for CY 2014 are 

listed in Addendum P of this proposed 

rule, which is available via the Internet 

on the CMS Web site. 

(5) Ancillary Services (Status Indicator 

‘‘X’’) 

Under the OPPS, we currently pay 

separately for certain ancillary services 

that are assigned to status indicator ‘‘X,’’ 

defined as ‘‘ancillary services.’’ Some 


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other services that are ancillary to other 

services are currently packaged in the 

OPPS. Those ancillary services assigned 

status indicator ‘‘X’’ in the OPPS and 

paid separately are, by definition, 

ancillary relative to primary services 

provided in the OPPS and include many 

minor diagnostic tests that are typically 

performed with a primary service, 

although there are instances where such 

services are not always performed with 

a primary service and may be performed 

alone. 

As mentioned above, our intent is that 

the OPPS be more of a prospective 

payment system through expanding 

packaging. Given that the longstanding 

OPPS policy is to package items and 

services that are integral, ancillary, 

supportive, dependent, or adjunctive to 

a primary service, we believe that these 

ancillary services, which are assigned 

status indicator ‘‘X,’’ should be 

packaged when they are performed with 

another service, but should continue to 

be separately paid when performed 

alone. This packaging approach is most 

consistent with a prospective payment 

system and the regulations at § 419.2(b) 

that packages ancillary services into 

primary services while preserving 

separate payment for those instances in 

which one of these services is provided 

alone (not with a separate primary 

service) to a hospital outpatient. 

In summary, we are proposing to 

conditionally package all ancillary 

services that were previously assigned a 

status indicator of ‘‘X’’ and assign these 

services to status indicator ‘‘Q1’’ 

(packaged when provided with a service 

assigned a status indicator of ‘‘S,’’ ‘‘T,’’ 

or ‘‘V’’). Status indicator ‘‘X’’ would be 

discontinued. To encourage maximum 

flexibility to beneficiaries across 

different sites of service, we are not 

proposing to conditionally package 

preventive services assigned to status 

indicator ‘‘X’’ and instead are proposing 

to change the status indicator for 

preventive services from the currently 

assigned status indicator ‘‘X’’ to status 

indicator ‘‘S.’’ The specific codes for 

procedures assigned to status indicator 

‘‘X’’ that are proposed to be 

conditionally packaged and assigned to 

status indicator ‘‘Q1’’ for CY 2014 are 

listed in Addendum P of this proposed 

rule, which is available via the Internet 

on the CMS Web site. 

(6) Diagnostic Tests on the Bypass List 

For the CY 2013 OPPS, we 

implemented a bypass list to convert 

lines from multiple procedure claims 

into ‘‘pseudo’’ single procedure claims. 

We are proposing to continue 

developing ‘‘pseudo’’ single procedure 

claims using a bypass list for the CY 

2014 OPPS, as discussed in section 

II.A.1.b. of this proposed rule. The 

bypass list of separately paid services is 

used to convert claims with multiple 

separately payable procedures, which 

are generally not used for ratesetting 

purposes, into claims with a single 

separately paid procedure that can be 

used for ratesetting. Services on the 

bypass list have limited associated 

packaged costs so they can be bypassed 

when assigning packaged costs on a 

claim to a separately paid procedure on 

the same claim. 

As noted above, beginning in CY 

2008, we packaged several diagnostic 

items and services including guidance 

services, image processing services, 

intraoperative services, imaging 

supervision and interpretation services, 

diagnostic radiopharmaceuticals, and 

contrast agents. In this proposed rule, 

we also are proposing to conditionally 

package several diagnostic items and 

services, including drugs, biologicals, 

and radiopharmaceuticals that function 

as supplies when used in a diagnostic 

test or procedure, ancillary services 

(many of which are diagnostic tests), 

and laboratory tests. We believe that the 

diagnostic tests on the bypass list share 

many of the characteristics with these 

other conditionally or unconditionally 

packaged or proposed packaged 

categories of items and services in that 

they are diagnostic and are integral, 

ancillary, supportive, dependent, or 

adjunctive to a primary service. 

Examples include a barium swallow test 

(CPT code 74220) and a visual field 

examination (CPT code 92081). Given 

the nature of these services, we are 

proposing to conditionally package 

these procedures. We recognize that 

some of these services are sometimes 

provided without other services and, 

therefore, they will continue to be 

separately paid in those circumstances. 

We are proposing that these codes be 

assigned status indicator ‘‘Q1’’ 

beginning in the CY 2014 OPPS. Some 

of these diagnostic tests on the bypass 

list are currently assigned to status 

indicator ‘‘X’’ and, therefore, would be 

conditionally packaged under the 

proposed policy to conditionally 

package ancillary services currently 

assigned status indicator ‘‘X.’’ The only 

diagnostic codes on the bypass list 

affected by this proposal are currently 

assigned to status indicator ‘‘S.’’ The 

specific codes for the diagnostic tests on 

the bypass list that we are proposing to 

be conditionally packaged and assigned 

to status indicator ‘‘Q1’’ for CY 2014 are 

listed in Addendum P of this proposed 

rule, which is available via the Internet 

on the CMS Web site. Similar to our 

conditional packaging proposal for 

services previously assigned to status 

indicator ‘‘X,’’ we are not proposing to 

conditionally package preventive 

services that are diagnostic tests on the 

bypass list. 

(7) Device Removal Procedures 

Implantable devices frequently 

require removal or replacement due to 

wear, failure, recall, and infection, 

among others. Since the beginning of 

the OPPS, implantable devices have 

been packaged (either as supplies, 

implantable prosthetics, or implantable 

DME) into their associated procedures. 

Device removal is sometimes described 

by a code that may include repair or 

replacement. In other cases, device 

removal is described by a separate code 

that only describes removal of a device. 

Device removal procedures are 

frequently performed with procedures 

to repair or replace devices, although it 

is possible that device removal may 

occur without repair or replacement if 

the clinical indication for the device 

that was removed no longer exists. 

When a separately coded device 

removal procedure is performed with a 

separately coded device repair or 

replacement procedure, the device 

removal procedure actually represents a 

part of an overall procedure that is 

removal with repair or replacement of 

the device. 

Given that a separately coded device 

removal that accompanies a device 

repair or replacement procedure 

represents a service that is integral and 

supportive to a primary service, we are 

proposing to conditionally package 

device removal codes when they are 

billed with other surgical procedures 

involving repair or replacement. We 

believe that this conditional packaging 

policy is appropriate under 

longstanding OPPS packaging principles 

because these device removal 

procedures are an integral and 

supportive step in a more 

comprehensive overall procedure. 

Furthermore, conditionally packaging 

these device removal procedures with 

the replacement or revision codes 

would be consistent with our packaging 

policies for other dependent services. 

The specific codes for the device 

removal procedures that we are 

proposing to be conditionally packaged 

and assigned to status indicator ‘‘Q2’’ 

for CY 2014 are listed in Addendum P 

of this proposed rule, which is available 

via the Internet on the CMS Web site. 

d. Impact of the New Packaging 

Proposals 

We have examined the proposed 

aggregate impact of making these 

proposed changes to packaging for CY 


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2014. Because the OPPS is a budget 

neutral payment system in which the 

amount of the relative payment weight 

in the system is annually adjusted for 

changes in expenditures created by 

changes in APC weights and codes (but 

is not currently adjusted based on 

estimated growth in service volume), 

the effects of the packaging changes that 

we are proposing would result in 

changes to scaled weights and, 

therefore, to the payment rates for all 

separately paid procedures. These 

proposed changes would result from 

shifts in mean costs as a result of 

increased packaging, changes in 

multiple procedure discounting 

patterns, and a higher weight scaler that 

is applied to all unscaled APC weights. 

Further, to properly budget neutralize 

the money that would previously have 

been paid through other payment 

systems, we have included those 

payments when performing OPPS 

budget neutrality calculations. We refer 

readers to section II.A.4. of this 

proposed rule for an explanation of the 

weight scaler for OPPS budget 

neutrality. In a budget neutral system, 

the monies previously paid for services 

that are now proposed to be packaged 

are not lost, but are redistributed to all 

other services. A higher weight scaler 

would increase payment rates relative to 

observed mean costs for independent 

services by redistributing the lost weight 

of packaged items that historically have 

been paid separately and the lost weight 

when the mean costs of independent 

services do not completely reflect the 

full incremental cost of the packaged 

services. The impact of this proposed 

change on proposed CY 2014 OPPS 

payments is discussed in section 

XXIII.A. of this proposed rule, and the 

impact on various classifications of 

hospitals is shown in Column 5 in Table 

39 in that section. 

We estimate that our CY 2014 

packaging proposal would redistribute 

approximately 4 percent of the 

estimated CY 2013 base year 

expenditures under the OPPS. If the 

relative payment weight for a particular 

APC decreases as a result of the 

proposed packaging approach, the 

increased weight scaler may or may not 

result in a relative payment weight that 

is equal to or greater than the relative 

weight that would occur without the 

proposed packaging approach. In 

general, the packaging policies that we 

are proposing would have more effect 

on payment for some services than on 

payment for others because the 

dependent items and services that we 

are proposing for packaging are 

furnished more often with some 

independent services than with others. 

However, because of the amount of 

relative payment weight that would be 

redistributed by this proposal, there 

would be some impact on payments for 

all OPPS services whose rates are set 

based on relative payment weights, and 

the impact on any given hospital would 

vary based on the mix of services 

furnished by the hospital. 

e. Clarification Regarding Supplies That 

Are Packaged in the OPPS 

Under the regulations at § 419.2(b)(4), 

medical and surgical supplies and 

equipment are packaged in the OPPS. 

Supplies is a large category of items that 

typically are either for single patient use 

or have a shorter life span in use than 

equipment. Packaged supplies can 

include certain drugs, biologicals, and 

radiopharmaceuticals. The only 

supplies that are sometimes paid 

separately in the OPPS are prosthetic 

supplies under § 419.22(j), and if paid 

separately, they are paid according to 

the DMEPOS fee schedule. All other 

supplies are unconditionally packaged 

in the OPPS. 

In our annual review of the OPPS for 

CY 2014, we discovered many supplies 

that should be packaged in the OPPS 

according to § 419.2(b)(4), but that are 

currently assigned to status indicator 

‘‘A’’ and are separately paid in the 

hospital outpatient setting according to 

the DMEPOS fee schedule. For CY 2014, 

we are proposing to revise the status 

indicator for all supplies described by 

Level II HCPCS A-codes (except for 

prosthetic supplies) from status 

indicator ‘‘A’’ to ‘‘N,’’ so that these 

supplies would be unconditionally 

packaged as required by § 419.2(b)(4). 

The specific Level II HCPCS A-codes 

whose status indicator will be revised 

from ‘‘A’’ to ‘‘N’’ are listed in 

Addendum P of this CY 2014 OPPS/ 

ASC proposed rule, which is available 

via the Internet on the CMS Web site. 

f. Proposed Revision and Clarification of 

the Regulations at 42 CFR 419.2(b) and 

42 CFR 419.22 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68272), 

after consideration of public comments 

we received on the proposed rule, we 

clarified the regulatory language at 

§ 419.2(b) to make explicit that the 

OPPS payments for the included costs 

of the nonexclusive list of items and 

services covered under the OPPS 

referred to in this paragraph are 

packaged into the payments for the 

related procedures or services with 

which such items and services are 

provided. In this proposed rule, we are 

proposing to further revise this 

regulation to add the packaging 

categories that were adopted in CYs 

2008 and 2009 in addition to the new 

proposed policies described above. We 

also are proposing to make some further 

minor revisions and editorial 

clarifications to the existing language of 

§ 419.2(b) to make it more clearly reflect 

current packaging policy. Finally, we 

are proposing to revise the list of 

services excluded from the OPPS at 

§ 419.22. 

g. Comment Solicitation on Increased 

Packaging for Imaging Services 

We currently package several kinds of 

imaging services in the OPPS, including 

image guidance services, image 

processing services, intraoperative 

imaging, and imaging supervision and 

interpretation services. In addition, 

some imaging services are included in 

this year’s proposal to conditionally 

package ancillary services and 

diagnostic tests on the bypass list. In 

addition to these imaging services that 

are either packaged or proposed to be 

packaged, we are contemplating a 

proposal for CY 2015 that would 

conditionally package all imaging 

services with any associated surgical 

procedures. Imaging services not 

provided with a surgical procedure 

would continue to either be separately 

paid according to a standard clinical 

APC or a composite APC. We are 

requesting public comments on this 

potential CY 2015 proposal. 

h. Summary of CY 2014 Packaging 

Proposals 

Beginning in CY 2014, we are 

proposing to unconditionally package or 

conditionally package the following 

items and services and to add them to 

the list of OPPS packaged items and 

services in § 419.2(b): 

(1) Drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure; 

(2) Drugs and biologicals that function 

as supplies or devices when used in a 

surgical procedure; 

(3) Clinical diagnostic laboratory tests; 

(4) Procedures described by add-on 

codes; 

(5) Ancillary services (status indicator 

‘‘X’’); 

(6) Diagnostic tests on the bypass list; 

and 

(7) Device removal procedures. 

We believe that each of the above 

proposed unconditionally or 

conditionally packaged categories of 

items or services is appropriate 

according to existing packaging policies 

or expansions of existing packaging 

policies. However, we recognize that 


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decisions about packaging payment 

involve a balance between ensuring that 

payment is adequate to enable the 

hospital to provide quality care while 

establishing incentives for efficiency 

through larger units of payment. 

Therefore, we are inviting public 

comments regarding our packaging 

proposals for the CY 2014 OPPS. 

The HCPCS codes that we are 

proposing to be packaged either 

unconditionally (for which we are 

proposing to assign status indicator 

‘‘N’’), or conditionally (for which we are 

proposing to assign status indicator 

‘‘Q1’’ or ‘‘Q2’’), for CY 2014 are 

displayed in both Addendum P and 

Addendum B of this proposed rule. The 

supporting documents for this proposed 

rule, including but not limited to the 

Addenda, are available at the CMS Web 

site at: http://www.cms.hhs.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/ 

index.html. 

4. Proposed Calculation of OPPS Scaled 

Payment Weights 

For CY 2014, we are proposing to 

calculate the relative payment weights 

for each APC for CY 2014 shown in 

Addenda A and B to this proposed rule 

(which are available via the Internet on 

the CMS Web site) using the APC costs 

discussed in sections II.A.1. and II.A.2. 

of this proposed rule. In years prior to 

CY 2007, we standardized all the 

relative payment weights to APC 0601 

(Mid-Level Clinic Visit) because midlevel clinic visits were among the most 

frequently performed services in the 

hospital outpatient setting. We assigned 

APC 0601 a relative payment weight of 

1.00 and divided the median cost for 

each APC by the median cost for APC 

0601 to derive the relative payment 

weight for each APC. 

Beginning with the CY 2007 OPPS (71 

FR 67990), we standardized all of the 

relative payment weights for APC 0606 

(Level 3 Clinic Visits) because we 

deleted APC 0601 as part of the 

reconfiguration of the clinic visit APCs. 

We selected APC 0606 as the base 

because APC 0606 was the mid-level 

clinic visit APC (that is, Level 3 of five 

levels). 

For the CY 2013 OPPS (77 FR 68283), 

we established a policy of using 

geometric mean-based APC costs to 

calculate relative payment weights. For 

the CY 2014 OPPS, we are proposing to 

continue basing the relative payment 

weights on which OPPS payments will 

be made by using geometric mean costs. 

As we discuss in section VII. of this 

proposed rule, we are proposing to 

reconfigure the CY 2014 visit APCs so 

that they would include a single level 

for each visit type. However, in an effort 

to maintain consistency in calculating 

unscaled weights that represent the cost 

of some of the most frequently provided 

services, we are proposing to use the 

cost of the clinic visit APC in 

calculating unscaled weights, which for 

CY 2014 is proposed APC 0634. While 

we have previously used APC 0606 as 

the base from which to develop the 

OPPS budget neutral weight scaler, 

under our proposal to reconfigure the 

visit APCs, we would have a single APC 

for each visit type. The proposal to 

reconfigure the visit APCs is discussed 

in more detail in section VII. of this 

proposed rule. Following our general 

methodology for establishing relative 

payment weights derived from APC 

costs, but using the proposed CY 2014 

geometric mean cost for APC 0634, for 

CY 2014, we are proposing to assign 

APC 0634 a relative payment weight of 

1.00 and to divide the geometric mean 

cost of each APC by the proposed 

geometric mean cost for APC 0634 to 

derive the proposed unscaled relative 

payment weight for each APC. The 

choice of the APC on which to base the 

proposed relative payment weights 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 

2014 is neither greater than nor less 

than the estimated aggregate weight that 

would have been made without the 

changes. To comply with this 

requirement concerning the APC 

changes, we are proposing to compare 

the estimated aggregate weight using the 

CY 2013 scaled relative payment 

weights to the estimated aggregate 

weight using the proposed CY 2014 

unscaled relative payment weights. 

For CY 2013, we multiplied the CY 

2013 scaled APC relative payment 

weight applicable to a service paid 

under the OPPS by the volume of that 

service from CY 2012 claims to calculate 

the total relative payment weight for 

each service. We then added together 

the total relative payment weight for 

each of these services in order to 

calculate an estimated aggregate weight 

for the year. For CY 2014, we are 

proposing the same process using the 

proposed CY 2014 unscaled relative 

payment weights rather than scaled 

relative payment weights. We are 

proposing to calculate the weight scaler 

by dividing the CY 2013 estimated 

aggregate weight by the proposed CY 

2014 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. We note that, as 

a result of the CY 2014 proposed OPPS 

packaging policy for laboratory tests 

described in section II.A.3.b.(3) of this 

proposed rule, we would need to 

incorporate the estimated relative 

payment weights from those services. 

Therefore, the CY 2013 estimated OPPS 

aggregate weight would include 

payments for outpatient laboratory tests 

paid at the CLFS rates. 

For a detailed discussion of the 

weight scaler calculation, we refer 

readers to the OPPS claims accounting 

document available on the CMS Web 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. 

We are proposing to include 

estimated payments to CMHCs in our 

comparison of the estimated unscaled 

relative payment weights in CY 2014 to 

the estimated total relative payment 

weights in CY 2013 using CY 2012 

claims data, holding all other 

components of the payment system 

constant to isolate changes in total 

weight. Based on this comparison, we 

adjusted the proposed CY 2014 

unscaled relative payment weights for 

purposes of budget neutrality. The 

proposed CY 2014 unscaled relative 

payment weights were adjusted by 

multiplying them by a proposed weight 

scaler of 1.2143 to ensure that the 

proposed CY 2014 relative payment 

weights are budget neutral. 

Section 1833(t)(14) of the Act 

provides the payment rates for certain 

SCODs. Section 1833(t)(14)(H) of the 

Act states that ‘‘Additional expenditures 

resulting from this paragraph shall not 

be taken into account in establishing the 

conversion factor, weighting, and other 

adjustment factors for 2004 and 2005 

under paragraph (9), but shall be taken 

into account for subsequent years.’’ 

Therefore, the cost of those SCODs (as 

discussed in section V.B.3. of this 

proposed rule) is included in the 

proposed budget neutrality calculations 

for the CY 2014 OPPS. 

The proposed CY 2014 unscaled 

relative payment weights listed in 

Addenda A and B to this proposed rule 

(which are available via the Internet on 

the CMS Web site) incorporate the 

proposed recalibration adjustments 

discussed in sections II.A.1. and II.A.2. 

of this proposed rule. 


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B. Proposed Conversion Factor Update 

Section 1833(t)(3)(C)(ii) of the Act 

requires the Secretary to update the 

conversion factor used to determine the 

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 

2014 IPPS/LTCH PPS proposed rule (78 

FR 27572), consistent with current law, 

based on IHS Global Insight, Inc.’s first 

quarter 2013 forecast of the FY 2014 

market basket increase, the proposed FY 

2014 IPPS market basket update is 2.5 

percent. However, sections 1833(t)(3)(F) 

and 1833(t)(3)(G)(iii) of the Act, as 

added by section 3401(i) of the Patient 

Protection and Affordable Care Act of 

2010 (Pub. L. 111–148) and as amended 

by section 10319(g) of that law and 

further amended by section 1105(e) of 

the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152), provide adjustments to the OPD 

fee schedule increase factor for CY 2014. 

Specifically, section 1833(t)(3)(F)(i) of 

the Act requires that, for 2012 and 

subsequent years, the OPD fee schedule 

increase factor under subparagraph 

(C)(iv) be reduced by the productivity 

adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. Section 

1886(b)(3)(B)(xi)(II) of the Act defines 

the productivity adjustment as equal to 

the 10-year moving average of changes 

in annual economy-wide, private 

nonfarm business multifactor 

productivity (MFP) (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, year, 

cost reporting period, or other annual 

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

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51689 through 51692), we finalized 

our methodology for calculating and 

applying the MFP adjustment. In the FY 

2014 IPPS/LTCH PPS proposed rule (78 

FR 27572), we discussed the calculation 

of the proposed MFP adjustment for FY 

2014, which is 0.4 percentage point. 

We are proposing that if more recent 

data become subsequently available 

after the publication of this proposed 

rule (for example, a more recent 

estimate of the market basket increase 

and the MFP adjustment), we would use 

such data, if appropriate, to determine 

the CY 2014 market basket update and 

the MFP adjustment, components in 

calculating the OPD fee schedule 

increase factor under sections 

1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the 

Act, in the CY 2014 OPPS/ASC final 

rule with comment period. 

In addition, section 1833(t)(3)(F)(ii) of 

the Act requires that for each of years 

2010 through 2019, the OPD fee 

schedule increase factor under section 

1833(t)(3)(C)(iv) of the Act be reduced 

by the adjustment described in section 

1833(t)(3)(G) of the Act. For CY 2014, 

section 1833(t)(3)(G)(iii) of the Act 

provides a 0.3 percentage point 

reduction to the OPD fee schedule 

increase factor under section 

1833(t)(3)(C)(iv) of the Act. Therefore, in 

accordance with sections 

1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iii) of 

the Act, we are proposing to apply a 0.3 

percentage point reduction to the OPD 

fee schedule increase factor for CY 2014. 

We note that section 1833(t)(3)(F) of 

the Act provides that application of this 

subparagraph may result in the OPD fee 

schedule increase factor under section 

1833(t)(3)(C)(iv) of the Act being less 

than 0.0 for a year, and may result in 

payment rates under the OPPS for a year 

being less than such payment rates for 

the preceding year. As described in 

further detail below, we are proposing 

to apply an OPD fee schedule increase 

factor of 1.8 percent for the CY 2014 

OPPS (which is 2.5 percent, the 

proposed estimate of the hospital 

inpatient market basket percentage 

increase, less the proposed 0.4 

percentage point MFP adjustment, and 

less the 0.3 percentage point additional 

adjustment). 

We note that hospitals that fail to 

meet the Hospital OQR Program 

reporting requirements are subject to an 

additional reduction of 2.0 percentage 

points from the OPD fee schedule 

increase factor adjustment to the 

conversion factor that would be used to 

calculate the OPPS payment rates for 

their services, as required by section 

1833(t)(17) of the Act. As a result, those 

hospitals failing to meet the Hospital 

OQR Program reporting requirements 

would receive an OPD fee schedule 

increase factor of ¥0.2 percent (which 

is 2.5 percent, the proposed estimate of 

the hospital inpatient market basket 

percentage increase, less the proposed 

0.4 percentage point MFP adjustment, 

less the 0.3 percentage point additional 

adjustment, and less 2.0 percentage 

points for the Hospital OQR Program 

reduction). For further discussion of the 

Hospital OQR Program, we refer readers 

to section XIII. of this proposed rule. 

In this proposed rule, we are 

proposing to amend 42 CFR 

419.32(b)(1)(iv)(B) by adding a new 

paragraph (5) to reflect the requirement 

in section 1833(t)(3)(F)(i) of the Act that, 

for CY 2014, we reduce the OPD fee 

schedule increase factor by the MFP 

adjustment as determined by CMS, and 

to reflect the requirement in section 

1833(t)(3)(G)(iii) of the Act, as required 

by section 1833(t)(3)(F)(ii) of the Act, 

that we reduce the OPD fee schedule 

increase factor by an additional 0.3 

percentage point for CY 2014. 

To set the OPPS conversion factor for 

CY 2014, we are proposing to increase 

the CY 2013 conversion factor of 

$71.313 by 1.8 percent. In accordance 

with section 1833(t)(9)(B) of the Act, we 

are proposing to further adjust the 

conversion factor for CY 2014 to ensure 

that any revisions made to the updates 

for a revised wage index and rural 

adjustment are made on a budget 

neutral basis. We are proposing to 

calculate an overall proposed budget 

neutrality factor of 1.004 for wage index 

changes by comparing proposed total 

estimated payments from our simulation 

model using the proposed FY 2014 IPPS 

wage indices to those payments using 

the current (FY 2013) IPPS wage 

indices, as adopted on a calendar year 

basis for the OPPS. 

For CY 2014, we are not proposing to 

make a change to our rural adjustment 

policy, as discussed in section II.E. of 

this proposed rule. Therefore, the 

proposed budget neutrality factor for the 

rural adjustment is 1.0000. 

For CY 2014, we are proposing to 

continue previously established policies 

for implementing the cancer hospital 

payment adjustment described in 

section 1833(t)(18) of the Act, as 

discussed in section II.F. of this 

proposed rule. We are proposing to 

calculate a CY 2014 budget neutrality 

adjustment factor for the cancer hospital 

payment adjustment by comparing the 

estimated total CY 2014 payments under 

section 1833(t) of the Act, including the 

proposed CY 2014 cancer hospital 

payment adjustment, to the estimated 

CY 2014 total payments using the CY 

2013 final cancer hospital payment 

adjustment as required under section 

1833(t)(18)(B) of the Act. The difference 

in the CY 2014 estimated payments as 

a result of applying the proposed CY 

2014 cancer hospital payment 

adjustment relative to the CY 2013 final 

cancer hospital payment adjustment has 

a limited impact on the budget 

neutrality calculation. Therefore, we are 

proposing to apply a proposed budget 

neutrality adjustment factor of 1.0001 to 

the conversion factor to ensure that the 

cancer hospital payment adjustment is 

budget neutral. 

For this proposed rule, we estimate 

that pass-through spending for both 

drugs and biologicals and devices for 

CY 2014 would equal approximately 

$12 million, which represents 0.02 


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percent of total projected CY 2014 OPPS 

spending. Therefore, the proposed 

conversion factor also would be 

adjusted by the difference between the 

0.15 percent estimate of pass-through 

spending for CY 2013 and the 0.02 

percent estimate of CY 2014 passthrough spending, resulting in a 

proposed adjustment for CY 2014 of 

0.13 percent. Finally, estimated 

payments for outliers would remain at 

1.0 percent of total OPPS payments for 

CY 2014. 

The proposed OPD fee schedule 

increase factor of 1.8 percent for CY 

2014 (that is, the estimate of the hospital 

inpatient market basket percentage 

increase of 2.5 percent less the proposed 

0.4 percentage point MFP adjustment 

and less the 0.3 percentage point 

required under section 1833(t)(3)(F) of 

the Act), the required proposed wage 

index budget neutrality adjustment of 

approximately 1.0004, the proposed 

cancer hospital payment adjustment of 

1.0001, and the proposed adjustment of 

0.13 percent of projected OPPS 

spending for the difference in the passthrough spending result in a proposed 

conversion factor for CY 2014 of 

$72.728. 

Hospitals that fail to meet the 

reporting requirements of the Hospital 

OQR Program would continue to be 

subject to a further reduction of 2.0 

percentage points to the OPD fee 

schedule increase factor adjustment to 

the conversion factor that would be 

used to calculate the OPPS payment 

rates made for their services as required 

by section 1833(t)(17) of the Act. For a 

complete discussion of the Hospital 

OQR Program requirements and the 

payment reduction for hospitals that fail 

to meet those requirements, we refer 

readers to section XIII.G. of this 

proposed rule. To calculate the 

proposed CY 2014 reduced market 

basket conversion factor for those 

hospitals that fail to meet the 

requirements of the Hospital OQR 

Program for the full CY 2014 payment 

update, we are proposing to make all 

other adjustments discussed above, but 

using a proposed reduced OPD fee 

schedule update factor of ¥0.2 percent 

(that is, the proposed OPD fee schedule 

increase factor of 1.8 percent further 

reduced by 2.0 percentage points as 

required by section 1833(t)(17)(A)(i) of 

the Act for failure to comply with the 

Hospital OQR requirements). This 

results in a proposed reduced 

conversion factor for CY 2014 of 

$71.273 for those hospitals that fail to 

meet the Hospital OQR requirements (a 

difference of ¥$1.455 in the conversion 

factor relative to those hospitals that 

met the Hospital OQR requirements). 

In summary, for CY 2014, we are 

proposing to use a conversion factor of 

$72.728 in the calculation of the 

national unadjusted payment rates for 

those items and services for which 

payment rates are calculated using 

geometric mean costs. We are proposing 

to amend § 419.32(b)(1)(iv)(B) by adding 

a new paragraph (5) to reflect the 

reductions to the OPD fee schedule 

increase factor that are required for CY 

2014 in order to satisfy the statutory 

requirements of sections 1833(t)(3)(F) 

and (t)(3)(G)(iii) of the Act. We also are 

proposing to use a reduced conversion 

factor of $71.273 in the calculation of 

payments for hospitals that fail to 

comply with the Hospital OQR Program 

requirements to reflect the reduction to 

the OPD fee schedule increase factor 

that is required by section 1833(t)(17) of 

the Act. 

C. Proposed Wage Index Changes 

Section 1833(t)(2)(D) of the Act 

requires the Secretary to ‘‘determine a 

wage adjustment factor to adjust the 

portion of payment and coinsurance 

attributable to labor-related costs for 

relative differences in labor and laborrelated costs across geographic regions 

in a budget neutral manner’’ (codified at 

42 CFR 419.43(a)). This portion of the 

OPPS payment rate is called the OPPS 

labor-related share. Budget neutrality is 

discussed in section II.B. of this 

proposed rule. 

The OPPS labor-related share is 60 

percent of the national OPPS payment. 

This labor-related share is based on a 

regression analysis that determined that, 

for all hospitals, approximately 60 

percent of the costs of services paid 

under the OPPS were attributable to 

wage costs. We confirmed that this 

labor-related share for outpatient 

services is appropriate during our 

regression analysis for the payment 

adjustment for rural hospitals in the CY 

2006 OPPS final rule with comment 

period (70 FR 68553). Therefore, we are 

not proposing to revise this policy for 

the CY 2014 OPPS. We refer readers to 

section II.H. of this proposed rule for a 

description and example of how the 

wage index for a particular hospital is 

used to determine the payment for the 

hospital. As discussed in section 

II.A.2.c. of this proposed rule, for 

estimating APC costs, we standardize 60 

percent of estimated claims costs for 

geographic area wage variation using the 

same proposed FY 2014 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. 

Under 42 CFR 419.41(c)(1) and 

419.43(c) (published in the original 

OPPS April 7, 2000 final rule with 

comment period (65 FR 18495 and 

18545)), the OPPS adopted the final 

fiscal year IPPS wage index as the 

calendar year wage index for adjusting 

the OPPS standard payment amounts for 

labor market differences. Thus, the wage 

index that applies to a particular acute 

care short-stay hospital under the IPPS 

also applies to that hospital under the 

OPPS. As initially explained in the 

September 8, 1998 OPPS proposed rule 

(63 FR 47576), we believed that using 

the IPPS wage index as the source of an 

adjustment factor for the OPPS is 

reasonable and logical, given the 

inseparable, subordinate status of the 

HOPD within the hospital overall. In 

accordance with section 1886(d)(3)(E) of 

the Act, the IPPS wage index is updated 

annually. 

The Affordable Care Act contained 

provisions affecting the wage index. 

These provisions were discussed in the 

CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74191). As 

discussed in that final rule with 

comment period, section 10324 of the 

Affordable Care Act added section 

1886(d)(3)(E)(iii)(II) to the Act, which 

defines ‘‘frontier State,’’ and amended 

section 1833(t) of the Act to add new 

paragraph (19), which requires a 

‘‘frontier State’’ wage index floor of 1.00 

in certain cases, and states that the 

frontier State floor shall not be applied 

in a budget neutral manner. We codified 

these requirements in § 419.43(c)(2) and 

(c)(3) of our regulations. For the CY 

2014 OPPS, we will implement this 

provision in the same manner as we did 

since CY 2011. That is, frontier State 

hospitals would receive a wage index of 

1.00 if the otherwise applicable wage 

index (including reclassification, rural 

and imputed floor, and rural floor 

budget neutrality) is less than 1.00. 

Similar to our current policy for HOPDs 

that are affiliated with multicampus 

hospital systems, the HOPD would 

receive a wage index based on the 

geographic location of the specific 

inpatient hospital with which it is 

associated. Therefore, if the associated 

hospital is located in a frontier State, the 

wage index adjustment applicable for 

the hospital would also apply for the 

affiliated HOPD. We refer readers to the 

FY 2011, FY 2012, and FY 2013 IPPS/ 

LTCH PPS final rules (75 FR 50160 

through 50161, 76 FR 51793, 51795, and 

51825, and 77 FR 53369 through 53370, 

respectively) and the FY 2014 IPPS/ 

LTCH PPS proposed rule (78 FR 27556 

through 27557) for discussions 


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regarding this provision, including our 

methodology for identifying which areas 

meet the definition of frontier States as 

provided for in section 

1886(d)(3)(E)(iii)(II) of the Act. 

In addition to the changes required by 

the Affordable Care Act, we note that 

the proposed FY 2014 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 and imputed 

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 

2014 IPPS/LTCH PPS proposed rule (78 

FR 27552 through 27561) for a detailed 

discussion of all proposed changes to 

the FY 2014 IPPS wage indices. In 

addition, we refer readers to the CY 

2005 OPPS final rule with comment 

period (69 FR 65842 through 65844) and 

subsequent OPPS rules for a detailed 

discussion of the history of these wage 

index adjustments as applied under the 

OPPS. 

For purposes of the OPPS, we are 

proposing to continue our policy for CY 

2014 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) (Pub. 

L. 108–173)). We note that, because nonIPPS hospitals cannot reclassify, they 

are eligible for the out-migration wage 

adjustment. Table 4J listed in the FY 

2014 IPPS/LTCH PPS proposed rule 

(available via the Internet on the CMS 

Web site at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ 

index.html) identifies counties eligible 

for the out-migration adjustment and 

hospitals that would receive the 

adjustment for FY 2014. We also note 

that, beginning with FY 2012, under the 

IPPS, an eligible hospital that waives its 

Lugar status in order to receive the outmigration adjustment has effectively 

waived its deemed urban status and, 

thus, is rural for all purposes under the 

IPPS, including being considered rural 

for the disproportionate share hospital 

(DSH) payment adjustment, effective for 

the fiscal year in which the hospital 

receives the out-migration adjustment. 

We refer readers to the FY 2013 IPPS/ 

LTCH PPS final rule (77 FR 53371) for 

a more detailed discussion on the Lugar 

redesignation waiver for the outmigration adjustment. As we have done 

in prior years, we are including Table 4J 

from the FY 2014 IPPS/LTCH PPS 

proposed rule as Addendum L to this 

proposed rule with the addition of nonIPPS hospitals that would receive the 

section 505 out-migration adjustment 

under the CY 2014 OPPS. Addendum L 

is available via the Internet on the CMS 

Web site. 

As discussed in the FY 2014 IPPS/ 

LTCH PPS proposed rule (78 FR 27552 

through 27553), the Office of 

Management and Budget (OMB) issued 

revisions to the current geographic area 

designations on February 28, 2013, that 

included a number of significant 

changes such as new CBSAs, urban 

counties that become rural, rural 

counties that become urban, and 

splitting existing CBSAs (OMB Bulletin 

13–01. This bulletin can be found at: 

http://www.whitehouse.gov/sites/ 

default/files/omb/bulletins/2013/b13- 

01.pdf. All of these designations have 

corresponding effects on the wage index 

system and its adjustments. In order to 

allow for sufficient time to assess the 

new revisions and their ramifications, 

we intend to propose changes to the 

IPPS wage index based on the newest 

CBSA designations in the FY 2015 IPPS/ 

LTCH PPS proposed rule. Similarly, in 

the OPPS, which uses the IPPS wage 

index, we intend to propose changes 

based on the new OMB revisions in the 

CY 2015 OPPS/ASC proposed rule, 

consistent with any proposals in the FY 

2015 IPPS/LTCH PPS proposed rule. 

As stated earlier in this section, we 

continue to believe that using the IPPS 

wage index as the source of an 

adjustment factor for the OPPS is 

reasonable and logical, given the 

inseparable, subordinate status of the 

HOPD within the hospital overall. 

Therefore, we are not proposing to 

change our current regulations which 

require that we use the FY 2014 IPPS 

wage indices for calculating OPPS 

payments in CY 2014. With the 

exception of the proposed out-migration 

wage adjustment table (Addendum L to 

this proposed rule, which is available 

via the Internet on the CMS Web site), 

which includes non-IPPS hospitals paid 

under the OPPS, we are not reprinting 

the proposed FY 2014 IPPS wage 

indices referenced in this discussion of 

the wage index. We refer readers to the 

CMS Web site for the OPPS at: http:// 

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

HospitalOutpatientPPS/index.html. At 

this link, readers will find a link to the 

proposed FY 2014 IPPS wage index 

tables. 

D. Proposed Statewide Average Default 

CCRs 

In addition to using CCRs to estimate 

costs from charges on claims for 

ratesetting, CMS uses overall hospitalspecific CCRs calculated from the 

hospital’s most recent cost report to 

determine outlier payments, payments 

for pass-through devices, and monthly 

interim transitional corridor payments 

under the OPPS during the PPS year. 

Medicare contractors cannot calculate a 

CCR for some hospitals because there is 

no cost report available. For these 

hospitals, CMS uses the statewide 

average default CCRs to determine the 

payments mentioned above until a 

hospital’s Medicare contractor is able to 

calculate the hospital’s actual CCR from 

its most recently submitted Medicare 

cost report. These hospitals include, but 

are not limited to, hospitals that are 

new, have not accepted assignment of 

an existing hospital’s provider 

agreement, and have not yet submitted 

a cost report. CMS also uses the 

statewide average default CCRs to 

determine payments for hospitals that 

appear to have a biased CCR (that is, the 

CCR falls outside the predetermined 

ceiling threshold for a valid CCR) or for 

hospitals in which the most recent cost 

report reflects an all-inclusive rate 

status (Medicare Claims Processing 

Manual (Pub. 100–04), Chapter 4, 

Section 10.11). In this proposed rule, we 

are proposing to update the default 

ratios for CY 2014 using the most recent 

cost report data. We discuss our policy 

for using default CCRs, including setting 

the ceiling threshold for a valid CCR, in 

the CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68594 through 

68599) in the context of our adoption of 

an outlier reconciliation policy for cost 

reports beginning on or after January 1, 

2009. 

For CY 2014, we are proposing to 

continue to use our standard 

methodology of calculating the 

statewide average default CCRs using 

the same hospital overall CCRs that we 

use to adjust charges to costs on claims 

data for setting the proposed CY 2014 

OPPS relative payment weights. Table 9 

below lists the proposed CY 2014 

default urban and rural CCRs by State 

and compares them to last year’s default 

CCRs. These proposed CCRs represent 

the ratio of total costs to total charges for 

those cost centers relevant to outpatient 

services from each hospital’s most 

recently submitted cost report, weighted 

by Medicare Part B charges. We also are 

proposing to adjust ratios from 

submitted cost reports to reflect the final 

settled status by applying the 

differential between settled to submitted 

overall CCRs for the cost centers 

relevant to outpatient services from the 

most recent pair of final settled and 

submitted cost reports. We then are 


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proposing to weight each hospital’s CCR 

by the volume of separately paid lineitems on hospital claims corresponding 

to the year of the majority of cost reports 

used to calculate the overall CCRs. We 

refer readers to the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66680 through 66682) and prior OPPS 

rules for a more detailed discussion of 

our established methodology for 

calculating the statewide average default 

CCRs, including the hospitals used in 

our calculations and our trimming 

criteria. 

For Maryland, we used an overall 

weighted average CCR for all hospitals 

in the Nation as a substitute for 

Maryland CCRs. Few hospitals in 

Maryland are eligible to receive 

payment under the OPPS, which limits 

the data available to calculate an 

accurate and representative CCR. The 

weighted CCR is used for Maryland 

because it takes into account each 

hospital’s volume, rather than treating 

each hospital equally. We refer readers 

to the CY 2005 OPPS final rule with 

comment period (69 FR 65822) for 

further discussion and the rationale for 

our longstanding policy of using the 

national average CCR for Maryland. In 

general, observed changes in the 

statewide average default CCRs between 

CY 2013 and CY 2014 are modest and 

the few significant changes are 

associated with areas that have a small 

number of hospitals. 

Table 9 below lists the proposed 

statewide average default CCRs for 

OPPS services furnished on or after 

January 1, 2014. 

TABLE 9—PROPOSED CY 2014 STATEWIDE AVERAGE CCRS

State Urban/rural 

Proposed 

CY 2014 

default CCR 

Previous 

default CCR 

(CY 2013 

OPPS 

final rule) 

ALASKA ........................................................................ RURAL .......................................................................... 0.472 0.489 

ALASKA ........................................................................ URBAN ......................................................................... 0.296 0.307 

ALABAMA ..................................................................... RURAL .......................................................................... 0.223 0.209 

ALABAMA ..................................................................... URBAN ......................................................................... 0.198 0.193 

ARKANSAS .................................................................. RURAL .......................................................................... 0.227 0.219 

ARKANSAS .................................................................. URBAN ......................................................................... 0.230 0.234 

ARIZONA ...................................................................... RURAL .......................................................................... 0.223 0.238 

ARIZONA ...................................................................... URBAN ......................................................................... 0.188 0.190 

CALIFORNIA ................................................................ RURAL .......................................................................... 0.210 0.192 

CALIFORNIA ................................................................ URBAN ......................................................................... 0.210 0.202 

COLORADO ................................................................. RURAL .......................................................................... 0.396 0.331 

COLORADO ................................................................. URBAN ......................................................................... 0.222 0.226 

CONNECTICUT ............................................................ RURAL .......................................................................... 0.359 0.364 

CONNECTICUT ............................................................ URBAN ......................................................................... 0.285 0.287 

DISTRICT OF COLUMBIA ........................................... URBAN ......................................................................... 0.282 0.302 

DELAWARE .................................................................. RURAL .......................................................................... 0.278 0.282 

DELAWARE .................................................................. URBAN ......................................................................... 0.331 0.353 

FLORIDA ...................................................................... RURAL .......................................................................... 0.172 0.182 

FLORIDA ...................................................................... URBAN ......................................................................... 0.166 0.167 

GEORGIA ..................................................................... RURAL .......................................................................... 0.271 0.237 

GEORGIA ..................................................................... URBAN ......................................................................... 0.209 0.214 

HAWAII ......................................................................... RURAL .......................................................................... 0.350 0.323 

HAWAII ......................................................................... URBAN ......................................................................... 0.311 0.306 

IOWA ............................................................................ RURAL .......................................................................... 0.312 0.296 

IOWA ............................................................................ URBAN ......................................................................... 0.284 0.269 

IDAHO .......................................................................... RURAL .......................................................................... 0.333 0.417 

IDAHO .......................................................................... URBAN ......................................................................... 0.491 0.357 

ILLINOIS ....................................................................... RURAL .......................................................................... 0.258 0.240 

ILLINOIS ....................................................................... URBAN ......................................................................... 0.235 0.230 

INDIANA ....................................................................... RURAL .......................................................................... 0.358 0.285 

INDIANA ....................................................................... URBAN ......................................................................... 0.288 0.256 

KANSAS ....................................................................... RURAL .......................................................................... 0.298 0.290 

KANSAS ....................................................................... URBAN ......................................................................... 0.245 0.210 

KENTUCKY .................................................................. RURAL .......................................................................... 0.226 0.217 

KENTUCKY .................................................................. URBAN ......................................................................... 0.232 0.241 

LOUISIANA ................................................................... RURAL .......................................................................... 0.258 0.242 

LOUISIANA ................................................................... URBAN ......................................................................... 0.229 0.225 

MASSACHUSETTS ...................................................... RURAL .......................................................................... 0.436 0.427 

MASSACHUSETTS ...................................................... URBAN ......................................................................... 0.330 0.323 

MAINE .......................................................................... RURAL .......................................................................... 0.443 0.445 

MAINE .......................................................................... URBAN ......................................................................... 0.455 0.449 

MARYLAND .................................................................. RURAL .......................................................................... 0.286 0.275 

MARYLAND .................................................................. URBAN ......................................................................... 0.251 0.246 

MICHIGAN .................................................................... RURAL .......................................................................... 0.353 0.303 

MICHIGAN .................................................................... URBAN ......................................................................... 0.316 0.303 

MINNESOTA ................................................................ RURAL .......................................................................... 0.462 0.469 

MINNESOTA ................................................................ URBAN ......................................................................... 0.339 0.321 

MISSOURI .................................................................... RURAL .......................................................................... 0.282 0.241 

MISSOURI .................................................................... URBAN ......................................................................... 0.287 0.262 

MISSISSIPPI ................................................................ RURAL .......................................................................... 0.228 0.226 

MISSISSIPPI ................................................................ URBAN ......................................................................... 0.187 0.182 

MONTANA .................................................................... RURAL .......................................................................... 0.486 0.431 


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TABLE 9—PROPOSED CY 2014 STATEWIDE AVERAGE CCRS—Continued 

State Urban/rural 

Proposed 

CY 2014 

default CCR 

Previous 

default CCR 

(CY 2013 

OPPS 

final rule) 

MONTANA .................................................................... URBAN ......................................................................... 0.407 0.384 

NORTH CAROLINA ..................................................... RURAL .......................................................................... 0.251 0.253 

NORTH CAROLINA ..................................................... URBAN ......................................................................... 0.255 0.254 

NORTH DAKOTA ......................................................... RURAL .......................................................................... 0.667 0.322 

NORTH DAKOTA ......................................................... URBAN ......................................................................... 0.376 0.414 

NEBRASKA .................................................................. RURAL .......................................................................... 0.333 0.318 

NEBRASKA .................................................................. URBAN ......................................................................... 0.251 0.254 

NEW HAMPSHIRE ....................................................... RURAL .......................................................................... 0.325 0.317 

NEW HAMPSHIRE ....................................................... URBAN ......................................................................... 0.300 0.292 

NEW JERSEY .............................................................. URBAN ......................................................................... 0.212 0.207 

NEW MEXICO .............................................................. RURAL .......................................................................... 0.294 0.256 

NEW MEXICO .............................................................. URBAN ......................................................................... 0.307 0.279 

NEVADA ....................................................................... RURAL .......................................................................... 0.234 0.234 

NEVADA ....................................................................... URBAN ......................................................................... 0.159 0.162 

NEW YORK .................................................................. RURAL .......................................................................... 0.347 0.420 

NEW YORK .................................................................. URBAN ......................................................................... 0.347 0.369 

OHIO ............................................................................. RURAL .......................................................................... 0.337 0.321 

OHIO ............................................................................. URBAN ......................................................................... 0.237 0.237 

OKLAHOMA ................................................................. RURAL .......................................................................... 0.253 0.239 

OKLAHOMA ................................................................. URBAN ......................................................................... 0.210 0.212 

OREGON ...................................................................... RURAL .......................................................................... 0.332 0.314 

OREGON ...................................................................... URBAN ......................................................................... 0.352 0.335 

PENNSYLVANIA .......................................................... RURAL .......................................................................... 0.270 0.267 

PENNSYLVANIA .......................................................... URBAN ......................................................................... 0.199 0.200 

PUERTO RICO ............................................................. URBAN ......................................................................... 0.600 0.504 

RHODE ISLAND ........................................................... URBAN ......................................................................... 0.310 0.264 

SOUTH CAROLINA ...................................................... RURAL .......................................................................... 0.196 0.211 

SOUTH CAROLINA ...................................................... URBAN ......................................................................... 0.210 0.214 

SOUTH DAKOTA ......................................................... RURAL .......................................................................... 0.309 0.307 

SOUTH DAKOTA ......................................................... URBAN ......................................................................... 0.208 0.218 

TENNESSEE ................................................................ RURAL .......................................................................... 0.212 0.209 

TENNESSEE ................................................................ URBAN ......................................................................... 0.200 0.195 

TEXAS .......................................................................... RURAL .......................................................................... 0.233 0.235 

TEXAS .......................................................................... URBAN ......................................................................... 0.203 0.206 

UTAH ............................................................................ RURAL .......................................................................... 0.343 0.374 

UTAH ............................................................................ URBAN ......................................................................... 0.338 0.359 

VIRGINIA ...................................................................... RURAL .......................................................................... 0.223 0.227 

VIRGINIA ...................................................................... URBAN ......................................................................... 0.243 0.237 

VERMONT .................................................................... RURAL .......................................................................... 0.429 0.408 

VERMONT .................................................................... URBAN ......................................................................... 0.395 0.384 

WASHINGTON ............................................................. RURAL .......................................................................... 0.315 0.366 

WASHINGTON ............................................................. URBAN ......................................................................... 0.322 0.301 

WISCONSIN ................................................................. RURAL .......................................................................... 0.347 0.345 

WISCONSIN ................................................................. URBAN ......................................................................... 0.308 0.307 

WEST VIRGINIA .......................................................... RURAL .......................................................................... 0.294 0.277 

WEST VIRGINIA .......................................................... URBAN ......................................................................... 0.327 0.338 

WYOMING .................................................................... RURAL .......................................................................... 0.444 0.379 

WYOMING .................................................................... URBAN ......................................................................... 0.279 0.301 

ALASKA ........................................................................ RURAL .......................................................................... 0.472 0.489 

ALASKA ........................................................................ URBAN ......................................................................... 0.296 0.307 

E. Proposed Adjustment for Rural SCHs 

and EACHs Under Section 

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

In the CY 2006 OPPS final rule with 

comment period (70 FR 68556), we 

finalized a payment increase for rural 

SCHs of 7.1 percent for all services and 

procedures paid under the OPPS, 

excluding drugs, biologicals, 

brachytherapy sources, and devices paid 

under the pass-through payment policy 

in accordance with section 

1833(t)(13)(B) of the Act, as added by 

section 411 of the Medicare Prescription 

Drug, Improvement, and Modernization 

Act of 2003 (MMA) (Pub. L. 108–173). 

Section 1833(t)(13) of the Act provided 

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/ 


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ASC final rule with comment period (71 

FR 68010 and 68227), for purposes of 

receiving this rural adjustment, we 

revised § 419.43(g) of the regulations to 

clarify that EACHs also are eligible to 

receive the rural SCH adjustment, 

assuming these entities otherwise meet 

the rural adjustment criteria. Currently, 

three hospitals are classified as EACHs, 

and as of CY 1998, under section 

4201(c) of Public Law 105–33, a hospital 

can no longer become newly classified 

as an EACH. 

This adjustment for rural SCHs is 

budget neutral and applied before 

calculating outlier payments and 

copayments. We stated in the CY 2006 

OPPS final rule with comment period 

(70 FR 68560) that 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 2013. 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 2014 OPPS, we are 

proposing to continue our policy of a 

7.1 percent payment adjustment that is 

done in a budget neutral manner for 

rural SCHs, including EACHs, for all 

services and procedures paid under the 

OPPS, excluding separately payable 

drugs and biologicals, devices paid 

under the pass-through payment policy, 

and items paid at charges reduced to 

costs. 

F. Proposed OPPS Payment 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) (Pub. L. 105– 

33), Medicare has paid cancer hospitals 

identified in section 1886(d)(1)(B)(v) of 

the Act 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 that are 

exempted from payment under the IPPS. 

With the Medicare, Medicaid and 

SCHIP Balanced Budget Refinement Act 

of 1999 (Pub. L. 106–113), Congress 

established section 1833(t)(7) of the Act, 

‘‘Transitional Adjustment to Limit 

Decline in Payment,’’ to hold harmless 

cancer hospitals and children’s 

hospitals based on their pre-BBA 

amount under the OPPS. As required 

under section 1833(t)(7)(D)(ii) of the 

Act, a cancer hospital receives the full 

amount of the difference between 

payments for covered outpatient 

services under the OPPS and a ‘‘preBBA amount.’’ That is, cancer hospitals 

are permanently held harmless to their 

‘‘pre-BBA amount,’’ and they receive 

transitional outpatient payments (TOPS) 

or hold harmless payments to ensure 

that they do not receive a payment that 

is lower under the OPPS than the 

payment they would have received 

before implementation of the OPPS, as 

set forth in section 1833(t)(7)(F) of the 

Act. The ‘‘pre-BBA 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-tocost ratio (PCR) for the hospital defined 

in section 1833(t)(7)(F)(ii) of the Act. 

The ‘‘pre-BBA amount,’’ including the 

determination of the base PCR, are 

defined at 42 CFR 419.70(f). TOPs are 

calculated on Worksheet E, Part B, of 

the Hospital and Hospital Health Care 

Complex Cost Report (Form CMS–2552– 

96 or Form CMS–2552–10, as 

applicable) each year. Section 

1833(t)(7)(I) of the Act exempts TOPs 

from budget neutrality calculations. 

Section 3138 of the Affordable Care 

Act of 2010 amended section 1833(t) of 

the Act by adding a new paragraph (18), 

which instructs the Secretary to conduct 

a study to determine if, under the OPPS, 

outpatient costs incurred by cancer 

hospitals described in section 

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

to APC groups exceed the costs incurred 

by other hospitals furnishing services 

under section 1833(t) of the Act, as 

determined appropriate by the 

Secretary. In addition, section 

1833(t)(18)(A) of the Act requires the 

Secretary to take into consideration the 

cost of drugs and biologicals incurred by 

such hospitals when studying cancer 

hospital costliness. Further, section 

1833(t)(18)(B) of the Act provides that if 

the Secretary determines that costs by 

these cancer hospitals with respect to 

APC groups are determined to be greater 

than the costs of other hospitals 

furnishing services under section 

1833(t) of the Act, the Secretary shall 

provide an appropriate adjustment 

under section 1833(t)(2)(E) of the Act to 

reflect these higher costs. After 

conducting the study required by 

section 1833(t)(18)(A) of the Act, we 

determined in 2011 that outpatient costs 

incurred by the 11 specified cancer 

hospitals were greater than the costs 

incurred by other OPPS hospitals. For a 

complete discussion regarding the 

cancer hospital cost study, we refer 

readers to the CY 2012 OPPS/ASC final 

rule with comment period (76 FR 74200 

through 74201). 

Based on our findings that costs 

incurred by cancer hospitals were 

greater than the costs incurred by other 

OPPS hospitals, we finalized a policy to 

provide a payment adjustment to the 11 

specified cancer hospitals that reflects 

the higher outpatient costs as discussed 

in the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74202 

through 74206). Specifically, we 

adopted a policy to provide additional 

payments to each of the 11 cancer 

hospitals so that each cancer hospital’s 

final PCR for services provided in a 

given calendar year is equal to the 

weighted average PCR (which we refer 

to as the ‘‘target PCR’’) for other 

hospitals paid under the OPPS. The 

target PCR is set in advance of the 

calendar year and is calculated using 

the most recent submitted or settled cost 

report data that are available at the time 

of final rulemaking for the calendar 

year. The amount of the payment 

adjustment is made on an aggregate 

basis at cost report settlement. We note 

that the changes made by section 

1833(t)(18) of the Act do not affect the 

existing statutory provisions that 

provide for TOPs for cancer hospitals. 

The TOPs are assessed as usual after all 

payments, including the cancer hospital 

payment adjustment, have been made 

for a cost reporting period. For CYs 2012 

and 2013, the target PCR for purposes of 

the cancer hospital payment adjustment 

was 0.91. 

2. Proposed Payment Adjustment for 

Certain Cancer Hospitals for CY 2014 

For CY 2014, we are proposing to 

continue our policy to provide 

additional payments to cancer hospitals 

so that each cancer hospital’s final PCR 

is equal to the weighted average PCR (or 

‘‘target PCR’’) for the other OPPS 

hospitals using the most recent 

submitted or settled cost report data that 

are available at the time of the 

development of this proposed rule. To 

calculate the proposed CY 2014 target 

PCR, we used the same extract of cost 

report data from HCRIS, as discussed in 

section II.A. of this proposed rule, used 

to estimate costs for the CY 2014 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 


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with CY 2012 claims data that we used 

to model the impact of the proposed CY 

2014 APC relative weights (3,951 

hospitals) because it is appropriate to 

use the same set of hospitals that we are 

using to calibrate the modeled CY 2014 

OPPS. The cost report data for the 

hospitals in this dataset were from cost 

report periods with fiscal year ends 

ranging from 2011 to 2012. We then 

removed the cost report data of the 45 

hospitals located in Puerto Rico from 

our dataset because we do not believe 

that their cost structure reflects the costs 

of most hospitals paid under the OPPS 

and, therefore, their inclusion may bias 

the calculation of hospital-weighted 

statistics. We also removed the cost 

report data of 118 hospitals because the 

cost report data were not complete 

(missing aggregate OPPS payments, 

missing aggregate cost data, or missing 

both), so that all cost reports in the 

study would have both the payment and 

cost data necessary to calculate a PCR 

for each hospital, leading to a proposed 

analytic file of 3,788 hospitals with cost 

report data. 

Using this smaller dataset of cost 

report data, we estimated that, on 

average, the OPPS payments to other 

hospitals furnishing services under the 

OPPS are approximately 90 percent of 

reasonable cost (a weighted average PCR 

of 0.90). Based on these data, we are 

proposing a target PCR of 0.90 to 

determine the CY 2014 cancer hospital 

payment adjustment to be paid at cost 

report settlement. Therefore, we are 

proposing that the payment amount 

associated with the cancer hospital 

payment adjustment to be determined at 

cost report settlement would be the 

additional payment needed to result in 

a proposed target PCR equal to 0.90 for 

each cancer hospital. 

Table 10 below indicates the 

estimated percentage increase in OPPS 

payments to each cancer hospital for CY 

2014 due to the cancer hospital payment 

adjustment policy. The actual amount of 

the CY 2014 cancer hospital payment 

adjustment for each cancer hospital will 

be determined at cost report settlement 

and will depend on each hospital’s CY 

2014 payments and costs. 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 10—ESTIMATED CY 2014 HOSPITAL–SPECIFIC PAYMENT ADJUSTMENT FOR CANCER HOSPITALS TO BE PROVIDED

AT COST REPORT SETTLEMENT

Provider No. Hospital name 

Estimated 

percentage 

increase in 

OPPS 

payments 

for CY 2014 

(percent) 

050146 ........................... City of Hope Helford Clinical Research Hospital .................................................................................... 15.0 

050660 ........................... USC Kenneth Norris Jr. Cancer Hospital ............................................................................................... 28.9 

100079 ........................... University of Miami Hospital & Clinic ...................................................................................................... 16.7 

100271 ........................... H. Lee Moffitt Cancer Center & Research Institute ................................................................................ 23.7 

220162 ........................... Dana-Farber Cancer Institute ................................................................................................................. 48.2 

330154 ........................... Memorial Hospital for Cancer and Allied Diseases ................................................................................ 41.4 

330354 ........................... Roswell Park Cancer Institute ................................................................................................................. 35.2 

360242 ........................... James Cancer Hospital & Solove Research Institute ............................................................................. 35.6 

390196 ........................... Hospital of the Fox Chase Cancer Center ............................................................................................. 16.7 

450076 ........................... University of Texas M. D. Anderson Cancer Center .............................................................................. 58.9 

500138 ........................... Seattle Cancer Care Alliance .................................................................................................................. 55.1 

G. Proposed Hospital Outpatient Outlier 

Payments 

1. Background 

Currently, the OPPS provides outlier 

payments on a service-by-service basis. 

In CY 2012, the outlier threshold was 

determined to be met when the cost of 

furnishing a service or procedure by a 

hospital exceeds 1.75 times the APC 

payment amount and exceeds the APC 

payment rate plus a $2,025 fixed-dollar 

threshold. We introduced a fixed-dollar 

threshold in CY 2005, in addition to the 

traditional multiple threshold, in order 

to better target outlier payments to those 

high-cost and complex procedures 

where a very costly service could 

present a hospital with significant 

financial loss. If the cost of a service 

meets both of these conditions, the 

multiple threshold and the fixed-dollar 

threshold, the outlier payment is 

calculated as 50 percent of the amount 

by which the cost of furnishing the 

service exceeds 1.75 times the APC 

payment rate. Before CY 2009, this 

outlier payment had historically been 

considered a final payment by 

longstanding OPPS policy. However, we 

implemented a reconciliation process 

similar to the IPPS outlier reconciliation 

process for cost reports with cost 

reporting periods beginning on or after 

January 1, 2009, in our CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68594 through 68599). 

It has been our policy for the past 

several years to report the actual amount 

of outlier payments as a percent of total 

spending in the claims being used to 

model the proposed OPPS. Our current 

estimate of total outlier payments as a 

percent of total CY 2012 OPPS payment, 

using available CY 2012 claims and the 

revised OPPS expenditure estimate for 

the 2013 Trustee’s Report, is 

approximately 1.1 percent of the total 

aggregated OPPS payments. Therefore, 

for CY 2012, we estimate that we paid 

0.1 percent above the CY 2012 outlier 

target of 1.0 percent of total aggregated 

OPPS payments. 

As explained in the CY 2013 OPPS/ 

ASC final rule with comment period (77 

FR 68295 through 68297), we set our 

projected target for aggregate outlier 

payments at 1.0 percent of the estimated 

aggregate total payments under the 

OPPS for CY 2013. The outlier 

thresholds were set so that estimated CY 

2013 aggregate outlier payments would 

equal 1.0 percent of the total estimated 

aggregate payments under the OPPS. 

Using CY 2012 claims data and CY 2013 

payment rates, we currently estimate 

that the aggregate outlier payments for 

CY 2013 will be approximately 1.2 

percent of the total CY 2013 OPPS 

payments. The difference between 1.2 

percent and 1.0 percent is reflected in 

the regulatory impact analysis in section 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
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XXIII. of this proposed rule. We note 

that we provide estimated CY 2014 

outlier payments for hospitals and 

CMHCs with claims included in the 

claims data that we used to model 

impacts in the Hospital–Specific 

Impacts—Provider-Specific Data file on 

the CMS Web site at: http:// 

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

HospitalOutpatientPPS/index.html. 

2. Proposed Outlier Calculation 

For CY 2014, we are proposing to 

continue our policy of estimating outlier 

payments to be 1.0 percent of the 

estimated aggregate total payments 

under the OPPS for outlier payments. 

We are proposing that a portion of that 

1.0 percent, an amount equal to 0.18 

percent of outlier payments (or 0.0018 

percent of total OPPS payments) would 

be allocated to CMHCs for PHP outlier 

payments. This is the amount of 

estimated outlier payments that would 

result from the proposed CMHC outlier 

threshold as a proportion of total 

estimated OPPS outlier payments. As 

discussed in section VIII.D. of this 

proposed rule, for CMHCs, we are 

proposing to continue our longstanding 

policy that if a CMHC’s cost for partial 

hospitalization services, paid under 

either APC 0172 (Level I Partial 

Hospitalization (3 services) for CMHCs) 

or APC 0173 (Level II Partial 

Hospitalization (4 or more services) for 

CMHCs), exceeds 3.40 times the 

payment rate for APC 0173, the outlier 

payment would be calculated as 50 

percent of the amount by which the cost 

exceeds 3.40 times the APC 0173 

payment rate. For further discussion of 

CMHC outlier payments, we refer 

readers to section VIII.D. of this 

proposed rule. 

To ensure that the estimated CY 2014 

aggregate outlier payments would equal 

1.0 percent of estimated aggregate total 

payments under the OPPS, we are 

proposing that the hospital outlier 

threshold be set so that outlier payments 

would be triggered when the cost of 

furnishing a service or procedure by a 

hospital exceeds 1.75 times the APC 

payment amount and exceeds the APC 

payment rate plus a $2,775 fixed-dollar 

threshold. 

We calculated the proposed fixeddollar threshold using largely the 

standard methodology, most recently 

used for CY 2013 (77 FR 68295 through 

68297). For purposes of estimating 

outlier payments for this proposed rule, 

we used the hospital-specific overall 

ancillary CCRs available in the April 

2013 update to the Outpatient ProviderSpecific 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. 

In order to estimate the CY 2014 

hospital outlier payments for this 

proposed rule, we inflated the charges 

on the CY 2012 claims using the same 

inflation factor of 1.0993 that we used 

to estimate the IPPS fixed-dollar outlier 

threshold for the FY 2014 IPPS/LTCH 

PPS proposed rule (78 FR 27767). We 

used an inflation factor of 1.0485 to 

estimate CY 2013 charges from the CY 

2012 charges reported on CY 2012 

claims. The methodology for 

determining this charge inflation factor 

is discussed in the FY 2014 IPPS/LTCH 

PPS proposed rule (78 FR 27767). As we 

stated in the CY 2005 OPPS final rule 

with comment period (69 FR 65845), we 

believe that the use of these charge 

inflation factors are appropriate for the 

OPPS because, with the exception of the 

inpatient routine service cost centers, 

hospitals use the same ancillary and 

outpatient cost centers to capture costs 

and charges for inpatient and outpatient 

services. 

As noted in the CY 2007 OPPS/ASC 

final rule with comment period (71 FR 

68011), we are concerned that we could 

systematically overestimate the OPPS 

hospital outlier threshold if we did not 

apply a CCR inflation adjustment factor. 

Therefore, for this CY 2014 OPPS/ASC 

proposed rule, we are proposing to 

apply the same CCR inflation 

adjustment factor that we are proposing 

to apply for the FY 2014 IPPS outlier 

calculation to the CCRs used to simulate 

the proposed CY 2014 OPPS outlier 

payments to determine the fixed-dollar 

threshold. Specifically, for CY 2014, we 

are proposing to apply an adjustment 

factor of 0.9732 to the CCRs that were 

in the April 2013 OPSF to trend them 

forward from CY 2013 to CY 2014. The 

methodology for calculating this 

proposed adjustment was discussed in 

the FY 2014 IPPS/LTCH PPS proposed 

rule (78 FR 27766 through 27768). 

Therefore, to model hospital outlier 

payments for this proposed rule, we 

applied the overall CCRs from the April 

2013 OPSF file after adjustment (using 

the proposed CCR inflation adjustment 

factor of 0.9732 to approximate CY 2014 

CCRs) to charges on CY 2012 claims that 

were adjusted (using the proposed 

charge inflation factor of 1.0993 to 

approximate CY 2014 charges). We 

simulated aggregated CY 2014 hospital 

outlier payments using these costs for 

several different fixed-dollar thresholds, 

holding the 1.75 multiple threshold 

constant and assuming that outlier 

payments would continue to be made at 

50 percent of the amount by which the 

cost of furnishing the service would 

exceed 1.75 times the APC payment 

amount, until the total outlier payments 

equaled 1.0 percent of aggregated 

estimated total CY 2014 OPPS 

payments. We estimated that a proposed 

fixed-dollar threshold of $2,775, 

combined with the proposed multiple 

threshold of 1.75 times the APC 

payment rate, would allocate 1.0 

percent of aggregated total OPPS 

payments to outlier payments. We are 

proposing to continue to make an 

outlier payment that equals 50 percent 

of the amount by which the cost of 

furnishing the service exceeds 1.75 

times the APC payment amount when 

both the 1.75 multiple threshold and the 

proposed fixed-dollar threshold of 

$2,775 are met. For CMHCs, we are 

proposing that, if a CMHC’s cost for 

partial hospitalization services, paid 

under either APC 0172 or APC 0173, 

exceeds 3.40 times the payment rate for 

APC 0173, the outlier payment would 

be calculated as 50 percent of the 

amount by which the cost exceeds 3.40 

times the APC 0173 payment rate. 

Section 1833(t)(17)(A) of the Act, 

which applies to hospitals as defined 

under section 1886(d)(1)(B) of the Act, 

requires that hospitals that fail to report 

data required for the quality measures 

selected by the Secretary, in the form 

and manner required by the Secretary 

under 1833(t)(17)(B) of the Act, incur a 

2.0 percentage point reduction to their 

OPD fee schedule increase factor, that 

is, the annual payment update factor. 

The application of a reduced OPD fee 

schedule increase factor results in 

reduced national unadjusted payment 

rates that will apply to certain 

outpatient items and services furnished 

by hospitals that are required to report 

outpatient quality data and that fail to 

meet the Hospital OQR Program 

requirements. For hospitals that fail to 

meet the Hospital OQR Program 

requirements, we are proposing to 

continue the policy that we 

implemented in CY 2010 that the 

hospitals’ costs will be compared to the 

reduced payments for purposes of 

outlier eligibility and payment 

calculation. For more information on 

the Hospital OQR Program, we refer 

readers to section XIII. of this proposed 

rule. 

H. Proposed Calculation of an Adjusted 

Medicare Payment From the National 

Unadjusted Medicare Payment 

The basic methodology for 

determining prospective payment rates 

for HOPD services under the OPPS is set 

forth in existing regulations at 42 CFR 

Part 419, Subparts C and D. For this CY 


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2014 OPPS/ASC proposed rule, the 

payment rate for most services and 

procedures for which payment is made 

under the OPPS is the product of the 

conversion factor calculated in 

accordance with section II.B. of this 

proposed rule and the relative payment 

weight determined under section II.A. of 

this proposed rule. Therefore, the 

proposed national unadjusted payment 

rate for most APCs contained in 

Addendum A to this proposed rule 

(which is available via the Internet on 

the CMS Web site and for most HCPCS 

codes to which separate payment under 

the OPPS has been assigned in 

Addendum B to this proposed rule 

(which is available via the Internet on 

the CMS Web site) was calculated by 

multiplying the proposed CY 2014 

scaled weight for the APC by the 

proposed CY 2014 conversion factor. 

We note that section 1833(t)(17) of the 

Act, which applies to hospitals as 

defined under section 1886(d)(1)(B) of 

the Act, requires that hospitals that fail 

to submit data required to be submitted 

on quality measures selected by the 

Secretary, in the form and manner and 

at a time specified by the Secretary, 

incur a reduction of 2.0 percentage 

points to their OPD fee schedule 

increase factor, that is, the annual 

payment update factor. The application 

of a reduced OPD fee schedule increase 

factor results in reduced national 

unadjusted payment rates that apply to 

certain outpatient items and services 

provided by hospitals that are required 

to report outpatient quality data and 

that fail to meet the Hospital OQR 

Program (formerly referred to as the 

Hospital Outpatient Quality Data 

Reporting Program (HOP QDRP)) 

requirements. For further discussion of 

the payment reduction for hospitals that 

fail to meet the requirements of the 

Hospital OQR Program, we refer readers 

to section XIII. of this proposed rule. 

We demonstrate in the steps below 

how to determine the APC payments 

that will be made in a calendar year 

under the OPPS to a hospital that fulfills 

the Hospital OQR Program requirements 

and to a hospital that fails to meet the 

Hospital OQR Program requirements for 

a service that has any of the following 

status indicator assignments: ‘‘J1,’’ ‘‘P,’’ 

‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘U,’’ 

or ‘‘V’’ (as defined in Addendum D1 to 

this proposed rule), in a circumstance in 

which the multiple procedure discount 

does not apply, the procedure is not 

bilateral, and conditionally packaged 

services (status indicator of ‘‘Q1’’ and 

‘‘Q2’’) qualify for separate payment. We 

note that, although blood and blood 

products with status indicator ‘‘R’’ and 

brachytherapy sources with status 

indicator ‘‘U’’ are not subject to wage 

adjustment, they are subject to reduced 

payments when a hospital fails to meet 

the Hospital OQR Program 

requirements. We note that we are also 

proposing to create status indicator ‘‘J1’’ 

to reflect the proposed comprehensive 

APCs discussed in section II.A.2.e. of 

this proposed rule. 

Individual providers interested in 

calculating the payment amount that 

they would receive for a specific service 

from the national unadjusted payment 

rates presented in Addenda A and B to 

this proposed rule (which are available 

via the Internet on the CMS Web site) 

should follow the formulas presented in 

the following steps. For purposes of the 

payment calculations below, we refer to 

the proposed national unadjusted 

payment rate for hospitals that meet the 

requirements of the Hospital OQR 

Program as the ‘‘full’’ national 

unadjusted payment rate. We refer to 

the national unadjusted payment rate 

for hospitals that fail to meet the 

requirements of the Hospital OQR 

Program as the ‘‘reduced’’ national 

unadjusted payment rate. The reduced 

national unadjusted payment rate is 

calculated by multiplying the proposed 

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 

proposed CY 2014 OPPS fee schedule 

increase factor of 1.8 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. During our regression 

analysis for the payment adjustment for 

rural hospitals in the CY 2006 OPPS 

final rule with comment period (70 FR 

68553), we confirmed that this laborrelated share for hospital outpatient 

services is appropriate. 

The formula below is a mathematical 

representation of Step 1 and identifies 

the labor-related portion of a specific 

payment rate for a specific service. 

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 

2014 under the IPPS, reclassifications 

through the MGCRB, section 

1886(d)(8)(B) ‘‘Lugar’’ hospitals, 

reclassifications under section 

1886(d)(8)(E) of the Act, as defined in 

§ 412.103 of the regulations, and 

hospitals designated as urban under 

section 601(g) of Public Law 98–21. (For 

further discussion of the proposed 

changes to the FY 2014 IPPS wage 

indices, as applied to the CY 2014 

OPPS, we refer readers to section II.C. 

of this proposed rule.) We are proposing 

to continue to apply a wage index floor 

of 1.00 to frontier States, in accordance 

with section 10324 of the Affordable 

Care Act of 2010. 

Step 3. Adjust the wage index of 

hospitals located in certain qualifying 

counties that have a relatively high 

percentage of hospital employees who 

reside in the county, but who work in 

a different county with a higher wage 

index, in accordance with section 505 of 

Public Law 108–173. Addendum L to 

this proposed rule (which is available 

via the Internet on the CMS Web site) 

contains the qualifying counties and the 

associated proposed wage index 

increase developed for the FY 2014 IPPS 

and listed as Table 4J in the FY 2014 

IPPS/LTCH PPS proposed rule and 

available via the Internet on the CMS 

Web site at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ 

index.html. This step is to be followed 

only if the hospital is not reclassified or 

redesignated under section 1886(d)(8) or 

section 1886(d)(10) of the Act. 

Step 4. Multiply the applicable wage 

index determined under Steps 2 and 3 

by the amount determined under Step 1 

that represents the labor-related portion 

of the national unadjusted payment rate. 

The formula below is a mathematical 

representation of Step 4 and adjusts the 

labor-related portion of the national 

unadjusted 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 


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payment rate for the relevant wage 

index area. 

The formula below is a mathematical 

representation of Step 5 and calculates 

the remaining portion of the national 

payment rate, the amount not 

attributable to labor, and the adjusted 

payment for the specific service. 

Y is the nonlabor-related portion of 

the national unadjusted payment rate. 

Y = .40 * (national unadjusted payment rate) 

Adjusted Medicare Payment = Y + Xa

Step 6. If a provider is an SCH, set 

forth in the regulations at § 412.92, or an 

EACH, which is considered to be an 

SCH under section 1886(d)(5)(D)(iii)(III) 

of the Act, and located in a rural area, 

as defined in § 412.64(b), or is treated as 

being located in a rural area under 

§ 412.103, multiply the wage index 

adjusted payment rate by 1.071 to 

calculate the total payment. 

The formula below is a mathematical 

representation of Step 6 and applies the 

proposed rural adjustment for rural 

SCHs. 

Adjusted Medicare Payment (SCH or 

EACH) = Adjusted Medicare 

Payment * 1.071 

We have provided examples below of 

the calculation of both the proposed full 

and reduced national unadjusted 

payment rates that would 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 used a provider that is 

located in Brooklyn, New York that is 

assigned to CBSA 35644. This provider 

bills one service that is assigned to APC 

0019 (Level I Excision/Biopsy). The 

proposed CY 2014 full national 

unadjusted payment rate for APC 0019 

is approximately $345.75. The proposed 

reduced national unadjusted payment 

rate for APC 0019 for a hospital that 

fails to meet the Hospital OQR Program 

requirements is approximately $338.84. 

This proposed reduced rate is calculated 

by multiplying the reporting ratio of 

0.980 by the full unadjusted payment 

rate for APC 0019. The proposed FY 

2014 wage index for a provider located 

in CBSA 35644 in New York is 1.3158. 

The proposed labor-related portion of 

the full national unadjusted payment is 

approximately $272.96 (.60 * $345.75 * 

1.3158). The labor-related portion of the 

proposed reduced national unadjusted 

payment is approximately $267.51 (.60 

* $338.84 * 1.3158). The proposed 

nonlabor-related portion of the full 

national unadjusted payment is 

approximately $138.30 (.40 * $345.75). 

The nonlabor-related portion of the 

proposed reduced national unadjusted 

payment is approximately $135.54 (.40 

* $338.84). The sum of the labor-related 

and nonlabor-related portions of the 

proposed full national adjusted payment 

is approximately $411.26 ($272.96 + 

$138.30). The sum of the reduced 

national adjusted payment is 

approximately $403.05 ($267.51 + 

$135.54). 

I. Proposed Beneficiary Copayments 

1. Background 

Section 1833(t)(3)(B) of the Act 

requires the Secretary to set rules for 

determining the unadjusted copayment 

amounts to be paid by beneficiaries for 

covered OPD services. Section 

1833(t)(8)(C)(ii) of the Act specifies that 

the Secretary must reduce the national 

unadjusted copayment amount for a 

covered OPD service (or group of such 

services) furnished in a year in a 

manner so that the effective copayment 

rate (determined on a national 

unadjusted basis) for that service in the 

year does not exceed a specified 

percentage. As specified in section 

1833(t)(8)(C)(ii)(V) of the Act, the 

effective copayment rate for a covered 

OPD service paid under the OPPS in CY 

2006, and in calendar years thereafter, 

shall not exceed 40 percent of the APC 

payment rate. 

Section 1833(t)(3)(B)(ii) of the Act 

provides that, for a covered OPD service 

(or group of such services) furnished in 

a year, the national unadjusted 

copayment amount cannot be less than 

20 percent of the OPD fee schedule 

amount. However, section 

1833(t)(8)(C)(i) of the Act limits the 

amount of beneficiary copayment that 

may be collected for a procedure 

performed in a year to the amount of the 

inpatient hospital deductible for that 

year. 

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 

colonoscopies, and waived the Part B 

deductible for screening colonoscopies 

that become diagnostic during the 

procedure. Our discussion of the 

changes made by the Affordable Care 

Act with regard to copayments for 

preventive services furnished on and 

after January 1, 2011, may be found in 

section XII.B. of the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

72013). 

2. Proposed OPPS Copayment Policy 

For CY 2014, we are proposing to 

determine copayment amounts for new 

and revised APCs using the same 

methodology that we implemented 

beginning in CY 2004. (We refer readers 

to the November 7, 2003 OPPS final rule 

with comment period (68 FR 63458).) In 

addition, we are proposing to use the 

same standard rounding principles that 

we have historically used in instances 

where the application of our standard 

copayment methodology would result in 

a copayment amount that is less than 20 

percent and cannot be rounded, under 

standard rounding principles, to 20 

percent. (We refer readers to the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66687) in which 

we discuss our rationale for applying 

these rounding principles.) The 

proposed national unadjusted 

copayment amounts for services payable 

under the OPPS that would be effective 

January 1, 2014, are shown in Addenda 

A and B to this proposed rule (which 

are available via the Internet on the 

CMS Web site). As discussed in section 

XIII.G. of this proposed rule, for CY 

2014, the proposed Medicare 

beneficiary’s minimum unadjusted 

copayment and national unadjusted 

copayment for a service to which a 

reduced national unadjusted payment 

rate applies will equal the product of 

the reporting ratio and the national 

unadjusted copayment, or the product 

of the reporting ratio and the minimum 

unadjusted copayment, respectively, for 

the service. 

We note that APC copayments may 

increase or decrease each year based on 

changes in the calculated APC payment 

rates due to updated cost report and 

claims data, and any changes to the 

OPPS cost modeling process. However, 

as described in the CY 2004 OPPS/ASC 

final rule with comment period, the 

development of the copayment 

methodology generally moves 

beneficiary copayments closer to 20 

percent of OPPS APC payments (68 FR 

63458 through 63459). 

3. Proposed Calculation of an Adjusted 

Copayment Amount for an APC Group 

Individuals interested in calculating 

the national copayment liability for a 

Medicare beneficiary for a given service 

provided by a hospital that met or failed 

to meet its Hospital OQR Program 

requirements should follow the 

formulas presented in the following 

steps. 

Step 1. Calculate the beneficiary 

payment percentage for the APC by 

dividing the APC’s national unadjusted 

copayment by its payment rate. For 

example, using APC 0019, 

approximately $69.15 is 20 percent of 

the proposed full national unadjusted 

payment rate of approximately $345.75. 


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For APCs with only a minimum 

unadjusted copayment in Addenda A 

and B to this proposed rule (which are 

available via the Internet on the CMS 

Web site), the beneficiary payment 

percentage is 20 percent. 

The formula below is a mathematical 

representation of Step 1 and calculates 

the national copayment as a percentage 

of national payment for a given service. 

B is the beneficiary payment 

percentage. 

B = National unadjusted copayment for APC/ 

national unadjusted payment rate for 

APC 

Step 2. Calculate the appropriate 

wage-adjusted payment rate for the APC 

for the provider in question, as 

indicated in Steps 2 through 4 under 

section II.H. of this proposed rule. 

Calculate the rural adjustment for 

eligible providers as indicated in Step 6 

under section II.H. of this proposed rule. 

Step 3. Multiply the percentage 

calculated in Step 1 by the payment rate 

calculated in Step 2. The result is the 

wage-adjusted copayment amount for 

the APC. 

The formula below is a mathematical 

representation of Step 3 and applies the 

beneficiary payment percentage to the 

adjusted payment rate for a service 

calculated under section II.H. of this 

proposed rule, with and without the 

rural adjustment, to calculate the 

adjusted beneficiary copayment for a 

given service. 

Wage-adjusted copayment amount for 

the APC = Adjusted Medicare 

Payment * B 

Wage-adjusted copayment amount for 

the APC (SCH or EACH) = 

(Adjusted Medicare Payment * 

1.071) * B 

Step 4. For a hospital that failed to 

meet its Hospital OQR Program 

requirements, multiply the copayment 

calculated in Step 3 by the proposed 

reporting ratio of 0.980. 

The proposed unadjusted copayments 

for services payable under the OPPS 

that would be effective January 1, 2014, 

are shown in Addenda A and B to this 

proposed rule (which are available via 

the Internet on the CMS Web site). We 

note that the proposed national 

unadjusted payment rates and 

copayment rates shown in Addenda A 

and B to this proposed rule reflect the 

proposed full CY 2014 OPD fee 

schedule increase factor discussed in 

section II.B. of this proposed rule. 

In addition, as noted above, section 

1833(t)(8)(C)(i) of the Act limits the 

amount of beneficiary copayment that 

may be collected for a procedure 

performed in a year to the amount of the 

inpatient hospital deductible for that 

year. 

III. Proposed OPPS Ambulatory 

Payment Classification (APC) Group 

Policies 

A. Proposed OPPS Treatment of New 

CPT and Level II HCPCS Codes 

CPT and Level II HCPCS codes are 

used to report procedures, services, 

items, and supplies under the hospital 

OPPS. Specifically, CMS recognizes the 

following codes on OPPS claims: 

• Category I CPT codes, which 

describe surgical procedures and 

medical services; 

• 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 (the 

AMA) and 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 through 

OPPS quarterly update CRs. This 

quarterly update process offers hospitals 

access to codes that may more 

accurately describe items or services 

furnished and/or provides payment or 

more accurate payment for these items 

or services in a timelier manner than if 

CMS waited for the annual rulemaking 

process. We solicit public comments on 

these new codes and finalize our 

proposals related to these codes through 

our annual rulemaking process. In Table 

11 below, we summarize our proposed 

process for updating codes through our 

OPPS quarterly update CRs, seeking 

public comments, and finalizing their 

treatment under the hospital OPPS. We 

note that because the payment rates 

associated with codes effective July 1 

are not available to us in time for 

incorporation into the Addenda of this 

proposed rule, the Level II HCPCS codes 

and the Category III CPT codes 

implemented through the July 2013 

OPPS quarterly update CR could not be 

included in Addendum B to this 

proposed rule (which is available via 

the Internet on the CMS Web site), 

while those codes based upon the April 

2013 OPPS quarterly update CR are 

included in Addendum B. Nevertheless, 

we are requesting public comments on 

the codes included in the July 2013 

OPPS quarterly update CR and 

including these codes in the preamble of 

this proposed rule (we refer readers to 

Tables 13 and 14 for the July 2013 CPT 

and Level II HCPCS codes). 

TABLE 11—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES

OPPS Quarterly update 

CR Type of code Effective date Comments sought When finalized 

April l, 2013 ....................... Level II HCPCS Codes ..... April 1, 2013 ...................... CY 2014 OPPS/ASC proposed rule.CY 2014 OPPS/ASC final 

rule with comment period. 

July 1, 2013 ....................... Level II HCPCS Codes ..... July 1, 2013 ...................... CY 2014 OPPS/ASC proposed rule.CY 2014 OPPS/ASC final 

rule with comment period. 

Category I (certain vaccine 

codes) and III CPT 

codes.

July 1, 2013 ...................... CY 2014 OPPS/ASC proposed rule.CY 2014 OPPS/ASC final 

rule with comment period. 

October 1, 2013 ................ Level II HCPCS Codes ..... October 1, 2013 ................ CY 2014 OPPS/ASC final 

rule with comment period.

CY 2015 OPPS/ASC final 

rule with comment period. 

January 1, 2014 ................ Level II HCPCS Codes ..... January 1, 2014 ................ CY 2014 OPPS/ASC final 

rule with comment period.

CY 2015 OPPS/ASC final 

rule with comment period. 


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TABLE 11—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES—Continued 

OPPS Quarterly update 

CR Type of code Effective date Comments sought When finalized 

Category I and III CPT 

Codes.

January 1, 2014 ................ CY 2014 OPPS/ASC final 

rule with comment period.

CY 2015 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 are soliciting public 

comments in this CY 2014 OPPS/ASC 

proposed rule or whether we will be 

soliciting public comments in the CY 

2014 OPPS/ASC final rule with 

comment period. We note that we 

sought public comments in the CY 2013 

OPPS/ASC final rule with comment 

period on the new CPT and Level II 

HCPCS codes that were effective 

January 1, 2013. We also sought public 

comments in the CY 2013 OPPS/ASC 

final rule with comment period on the 

new Level II HCPCS codes that were 

effective October 1, 2012. These new 

codes, with an effective date of October 

1, 2012, or January 1, 2013, 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 2013 

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 2013 OPPS/ASC final rule with 

comment period. We will respond to 

public comments and finalize our 

interim OPPS treatment of these codes 

in the CY 2014 OPPS/ASC final rule 

with comment period. 

1. Proposed Treatment of New CY 2013 

Level II HCPCS and CPT Codes Effective 

April 1, 2013 and July 1, 2013 for Which 

We Are Soliciting Public Comments in 

This CY 2014 OPPS/ASC Proposed Rule 

Through the April 2013 OPPS 

quarterly update CR (Transmittal 2664, 

Change Request 8228, dated March 1, 

2013), and the July 2013 OPPS quarterly 

update CR (Transmittal 2718, Change 

Request 8338, dated June 7, 2013), we 

recognized several new HCPCS codes 

for separate payment under the OPPS. 

Effective April 1 and July 1 of CY 2013, 

we made effective 18 new Level II 

HCPCS codes and 6 Category III CPT 

codes. Specifically, 8 new Level II 

HCPCS codes were effective for the 

April 2013 quarterly update and another 

10 new Level II HCPCS codes were 

effective for the July 2013 quarterly 

update for a total of 18. In addition, six 

new Category III CPT codes were 

effective for the July 2013 quarterly 

update. Of the 24 new HCPCS codes, we 

recognized for separate payment under 

the OPPS 14 new codes from the April 

and July 2013 OPPS quarterly updates. 

Through the April 2013 OPPS 

quarterly update CR, we allowed 

separate payment for five new Level II 

HCPCS codes. Specifically, as displayed 

in Table 12 below, we provided separate 

payment for HCPCS codes C9130, 

C9297, C9298, C9734, and C9735. 

HCPCS codes Q0507, Q0508, and Q0509 

were assigned to OPPS status indicator 

‘‘A’’ to indicate that they are paid 

through another Medicare payment 

system other than the OPPS. Although 

HCPCS codes Q0507, Q0508, and Q0509 

were effective April 1, 2013, they were 

previously described by HCPCS code 

Q0505, which was deleted on March 31, 

2013. 

TABLE 12—NEW LEVEL II HCPCS CODES IMPLEMENTED IN APRIL 2013 

CY 2013 

HCPCS code CY 2013 Long descriptor 

Proposed 

CY 2014 

status 

indicator 

Proposed 

CY 2014 

APC 

C9130* .............. Injection, immune globulin (Bivigam), 500 mg ................................................................................... G 9130 

C9297* .............. Injection, omacetaxine mepesuccinate, 0.01 mg ............................................................................... G 9297 

C9298* .............. Injection, ocriplasmin, 0.125 mg ......................................................................................................... G 9298 

C9734 # ............. Focused ultrasound ablation/therapeutic intervention, other than uterine leiomyomata, with or 

without magnetic resonance (MR) guidance.

S 0065 

C9735 ............... Anoscopy; with directed submucosal injection(s), any substance ..................................................... T 0150 

Q0507 ............... Miscellaneous supply or accessory for use with an external ventricular assist device ..................... A N/A 

Q0508 ............... Miscellaneous supply or accessory for use with an implanted ventricular assist device .................. A N/A 

Q0509 ............... Miscellaneous supply or accessory for use with any implanted ventricular assist device for which 

payment was not made under Medicare Part A.

A N/A 

* The proposed payment rate for HCPCS codes C9130, C9297, and C9298 are based on ASP+6 percent. 

# HCPCS code C9734 has been revised to delete the words ‘‘or without’’ from the long descriptor effective July 1, 2013. 

In this CY 2014 OPPS/ASC proposed 

rule, we are soliciting public comments 

on the proposed status indicators and 

APC assignments, where applicable, for 

the Level II HCPCS codes listed in Table 

12 of this proposed rule. The proposed 

payment rates for these codes, where 

applicable, can be found in Addendum 

B to this proposed rule (which is 

available via the Internet on the CMS 

Web site). 

Through the July 2013 OPPS quarterly 

update CR, we allowed separate 

payment under the OPPS for 5 of the 10 

new Level II HCPCS codes effective July 

1, 2013. Specifically, as displayed in 

Table 13 below, we allowed separate 

payment for HCPCS codes C9131, 

C9736, G0460, Q2050, and Q2051. We 

note that two of the Level II HCPCS Qcodes that were made effective July 1, 

2013, were previously described by 

HCPCS J-codes that were separately 

payable under the hospital OPPS. First, 

the HCPCS Workgroup replaced HCPCS 

code J9002 (Injection, doxorubicin 

hydrochloride, liposomal, Doxil, 10mg) 

with new HCPCS code Q2050, effective 

July 1, 2013, to appropriately identify 

and pay for both the brand and generic 


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forms of doxorubicin hydrochloride 

liposome. Consequently, the status 

indicator for HCPCS code J9002 was 

changed to ‘‘E’’ (Not Payable by 

Medicare), effective July 1, 2013. 

Because HCPCS code Q2050 describes 

the same product as HCPCS code J9002, 

we continued its separate payment 

status and assigned HCPCS code Q2050 

to status indicator ‘‘K’’ (Nonpassthrough drugs and nonimplantable 

biological, including therapeutic 

radiopharmaceuticals; paid under 

OPPS; separate APC payment). We also 

continued to assign HCPCS code Q2050 

to the same APC as HCPCS code J9002, 

specifically APC 7046 (Doxil injection), 

effective July 1, 2013. 

Secondly, the HCPCS Workgroup 

replaced HCPCS codes J3487 (Injection, 

zoledronic acid (Zometa), 1 mg) and 

J3488 (Injection, zoledronic acid 

(Reclast), 1 mg) with one new HCPCS 

code, specifically Q2051, effective July 

1, 2013, to appropriately identify and 

pay for both the brand and generic 

forms of zoledronic acid. Consequently, 

the status indicators for both HCPCS 

code J3487 and J3488 were changed to 

‘‘E,’’ effective July 1, 2013, to indicate 

that these codes are not separately 

payable by Medicare. Because HCPCS 

code Q2051 describes the same product 

as HCPCS codes J3487 and J3488, we 

assigned HCPCS code Q2051 to separate 

payment status indicator ‘‘K,’’ effective 

July 1, 2013. Because HCPCS codes 

J3487 and J3488, which were assigned 

to two separate APCs, were replaced 

with only one code, we assigned HCPCS 

code Q2051 to a new APC to maintain 

data consistency for future rulemaking. 

Specifically, HCPCS code Q2051 is 

assigned to APC 1356 (Zoldedronic acid 

1mg), effective July 1, 2013. 

Of the 10 Level II HCPCS codes that 

were made effective July 1, 2013, we did 

not recognize for separate payment 

under the hospital OPPS five HCPCS 

codes. Specifically, HCPCS codes 

K0008, K0013, and K0900 are assigned 

to status indicator ‘‘Y’’ (Nonimplantable durable medical 

equipment; not paid under OPPS); 

HCPCS code Q2033 is assigned to status 

indicator ‘‘L’’ (Not paid under OPPS; 

paid at reasonable cost); and HCPCS 

code Q0090 is assigned to status 

indicator ‘‘E’’ (Not payable/Non-covered 

by Medicare; not paid under OPPS). 

Table 13 below includes a complete 

list of the Level II HCPCS codes that 

were made effective July 1, 2013. As 

stated above, the codes effective July 1, 

2013, do not appear in Addendum B of 

this proposed rule, and, as a result, their 

proposed payment rates along with their 

proposed status indicators and proposed 

APC assignments, where applicable, for 

CY 2014 are provided in Table 13. 

TABLE 13—NEW LEVEL II HCPCS CODES IMPLEMENTED IN JULY 2013 

CY 2013 

HCPCS 

code 

CY 2013 Long descriptor 

Proposed 

CY 2014 

status 

indicator 

Proposed 

CY 2014 

APC 

Proposed 

CY 2014 

payment 

rate 

C9131* ..... Injection, ado-trastuzumab emtansine, 1 mg ...................................................................... G 9131 $29.40 

C9736 ...... Laparoscopy, surgical, radiofrequency ablation of uterine fibroid(s), including 

intraoperative guidance and monitoring, when performed.

T 0131 3,765.67 

G0460 ...... Autologous platelet rich plasma for chronic wounds/ulcers, including phlebotomy, centrifugation, and all other preparatory procedures, administration and dressings, per 

treatment.

T 0013 83.85 

K0008 ...... Custom Manual Wheelchair Base ....................................................................................... Y N/A N/A 

K0013 ...... Custom Motorized/Power Wheelchair Base ........................................................................ Y N/A N/A 

K0900 ...... Customized Durable Medical Equipment, Other Than Wheelchair ..................................... Y N/A N/A 

Q0090 ...... Levonorgestrel-Releasing Intrauterine Contraceptive System (SKYLA), 13.5 mg .............. E N/A N/A 

Q2033 ...... Influenza Vaccine, Recombinant Hemagglutinin Antigens, For Intramuscular Use 

(Flublok).

L N/A N/A 

Q2050** ... Injection, Doxorubicin Hydrochloride, Liposomal, Not Otherwise Specified, 10mg ............ K 7046 545.44 

Q2051*** .. Injection, Zoledronic Acid, Not Otherwise Specified, 1mg .................................................. K 1356 196.42 

*The proposed payment rate for HCPCS code C9131 is based on ASP+6 percent. 

**HCPCS code Q2050 replaced HCPCS code J9002, effective July 1, 2013. The status indicator for HCPCS code J9002 was changed to ‘‘E’’ 

(Not Payable by Medicare), effective July 1, 2013. The proposed payment rate for HCPCS code Q2050 is based on ASP+6 percent. 

***HCPCS code Q2051 replaced HCPCS codes J3487 and J3488 effective July 1, 2013. The status indicator for HCPCS codes J3487 and

J3488 was changed to ‘‘E’’ (Not Payable by Medicare), effective July 1, 2013. The proposed payment rate for HCPCS code Q2051 is based on 

ASP+6 percent. 

For CY 2014, we are proposing to 

continue our established policy of 

recognizing Category I CPT vaccine 

codes for which FDA approval is 

imminent and Category III CPT codes 

that the AMA releases in January of 

each year for implementation in July 

through the OPPS quarterly update 

process. Under the OPPS, Category I 

CPT vaccine codes and Category III CPT 

codes that are released on the AMA Web 

site in January are made effective in July 

of the same year through the July OPPS 

quarterly update CR, consistent with the 

AMA’s implementation date for the 

codes. For the July 2013 quarterly 

update, there were no new Category I 

CPT vaccine codes. However, we note 

that Level II HCPCS code Q2033, which 

is listed in Table 13, describes a flu 

vaccine that was effective July 1, 2013, 

and is separately payable by Medicare at 

reasonable cost. 

Through the July 2013 OPPS quarterly 

update CR (Transmittal 2718, Change 

Request 8338, dated June 7, 2013), we 

allowed separate payment for four of the 

six new Category III CPT codes effective 

July 1, 2013. Specifically, as displayed 

in Table 14 below, we allowed separate 

payment for Category III CPT codes 

0330T, 0331T, 0332T, and 0334T. We 

did not recognize for separate payment 

Category III CPT code 0329T because 

the device associated with this 

procedure has not received FDA 

approval. In addition, we did not 

recognize for separate payment Category 

III CPT code 0333T because this 

procedure is not covered by Medicare. 

As listed in Table 14, both CPT codes 

0329T and 0333T are assigned to status 

indicator ‘‘E’’ (Not payable/Non-covered 

by Medicare; not paid under OPPS). 

Table 14 below lists the Category III 

CPT codes that were implemented in 

July 2013, along with their proposed 

status indicators, proposed APC 

assignments, and proposed payment 

rates, where applicable, for CY 2014. 


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TABLE 14—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2013 

CY 2013 

CPT code CY 2013 Long descriptor 

Proposed 

CY 2014 

status 

indicator 

Proposed 

CY 2014 

APC 

Proposed 

CY 2014 

payment 

rate 

0329T ..... Monitoring of intraocular pressure for 24 hours or longer, unilateral or bilateral, with interpretation and report.E N/A N/A 

0330T ..... Tear film imaging, unilateral or bilateral, with interpretation and report ............................... S 0230 $51.83 

0331T ..... Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment;.S 0398 397.32 

0332T ..... Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment; with tomographic SPECT.S 0398 397.32 

0333T ..... Visual evoked potential, screening of visual acuity, automated ........................................... E N/A N/A 

0334T ..... Sacroiliac joint stabilization for arthrodesis, percutaneous or minimally invasive (indirect 

visualization), includes obtaining and applying autograft or allograft (structural or 

morselized), when performed, includes image guidance when performed (eg, CT or 

fluoroscopic).

T 0208 4,171.56 

We are soliciting public comments on 

the CY 2014 proposed status indicators 

and the proposed APC assignments and 

payment rates for the Level II HCPCS 

codes and the Category III CPT codes 

that were effective April 1, 2013, and 

July 1, 2013. These codes are listed in 

Tables 12, 13, and 14 of this proposed 

rule. We are proposing to finalize their 

status indicators and their APC 

assignments and payment rates, if 

applicable, in the CY 2014 OPPS/ASC 

final rule with comment period. 

Because the new Category III CPT and 

Level II HCPCS codes that become 

effective for July are not available to us 

in time for incorporation into the 

Addenda to the OPPS/ASC proposed 

rule, our policy is to include the codes, 

their proposed status indicators, 

proposed APCs (where applicable), and 

proposed payment rates (where 

applicable) in the preamble of the 

proposed rule but not in the Addenda 

to the proposed rule. These codes are 

listed in Tables 13 and 14, respectively, 

of this proposed rule. We are proposing 

to incorporate these codes into 

Addendum B to the CY 2014 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 2013 OPPS quarterly update 

CR and displayed in Table 12 are 

included in Addendum B to this 

proposed rule (which is available via 

the Internet on the CMS Web site), 

where their proposed CY 2014 payment 

rates are also shown. 

2. Proposed Process for New Level II 

HCPCS Codes That Will Be Effective 

October 1, 2013 and New CPT and Level 

II HCPCS Codes That Will Be Effective 

January 1, 2014 for Which We Will Be 

Soliciting Public Comments in the CY 

2014 OPPS/ASC Final Rule With 

Comment Period 

As has been our practice in the past, 

we incorporate those new Category I 

and III CPT codes and new Level II 

HCPCS codes that are effective January 

1 in the final rule with comment period 

updating the OPPS for the following 

calendar year. These codes are released 

to the public through the CMS HCPCS 

Workgroup (for Level II HCPCS codes) 

and the AMA’s Web sites (for CPT 

codes), and also through the January 

OPPS quarterly update CRs. In the past, 

we also have released new Level II 

HCPCS codes that are effective October 

1 through the October OPPS quarterly 

update CRs and incorporated these new 

codes in the final rule with comment 

period updating the OPPS for the 

following calendar year. For CY 2014, 

these codes will be flagged with 

comment indicator ‘‘NI’’ in Addendum 

B to the OPPS/ASC final rule with 

comment period to indicate that we are 

assigning them an interim payment 

status which is subject to public 

comment. In addition, the CPT and 

Level II HCPCS codes that will be 

effective January 1, 2014, will be flagged 

with comment indicator ‘‘NI’’ in 

Addendum B to the OPPS/ASC final 

rule with comment period. Specifically, 

the interim status indicator and the APC 

assignment and payment rate, if 

applicable, for all such codes flagged 

with comment indicator ‘‘NI’’ are open 

to public comment in the final rule with 

comment period, and we respond to 

these comments in the OPPS/ASC final 

rule with comment period for the next 

calendar year’s OPPS/ASC update. We 

are proposing to continue this process 

for CY 2014. Specifically, for CY 2014, 

we are proposing to include in 

Addendum B to the CY 2014 OPPS/ASC 

final rule with comment period the 

following new HCPCS codes: 

• New Level II HCPCS codes effective 

October 1, 2013 that would be 

incorporated in the October 2013 OPPS 

quarterly update CR; 

• New Category I and III CPT codes 

effective January 1, 2014 that would be 

incorporated in the January 2014 OPPS 

quarterly update CR; and 

• New Level II HCPCS codes effective 

January 1, 2014 that would be 

incorporated in the January 2014 OPPS 

quarterly update CR. 

As stated above, the October 1, 2013 

and January 1, 2014 codes would be 

flagged with comment indicator ‘‘NI’’ in 

Addendum B to the CY 2014 OPPS/ASC 

final rule with comment period to 

indicate that we have assigned them an 

interim OPPS payment status for CY 

2014. We are proposing that their status 

indicators and their APC assignments 

and payment rates, if applicable, would 

be open to public comment and would 

be finalized in the CY 2015 OPPS/ASC 

final rule with comment period. 

B. Proposed OPPS Changes—Variations 

Within APCs 

1. Background 

Section 1833(t)(2)(A) of the Act 

requires the Secretary to develop a 

classification system for covered 

hospital outpatient department services. 

Section 1833(t)(2)(B) of the Act provides 

that the Secretary may establish groups 

of covered OPD services within this 

classification system, so that services 

classified within each group are 

comparable clinically and with respect 

to the use of resources. In accordance 

with these provisions, we developed a 

grouping classification system, referred 

to as Ambulatory Payment 

Classifications (APCs), as set forth in 


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§ 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. In general, 

according to the regulations at 

§ 419.2(b), packaged items and services 

include, but are not limited to: 

(1) Use of an operating suite, 

procedure room, or treatment room; 

(2) Use of recovery room; 

(3) Use of an observation bed; 

(4) Anesthesia, certain drugs, 

biologicals, and other pharmaceuticals; 

medical and surgical supplies and 

equipment; surgical dressings; and 

devices used for external reduction of 

fractures and dislocations; 

(5) Supplies and equipment for 

administering and monitoring 

anesthesia or sedation; 

(6) Intraocular lenses (IOLs); 

(7) Incidental services such as 

venipuncture; 

(8) Capital-related costs; 

(9) Implantable items used in 

connection with diagnostic X-ray tests, 

diagnostic laboratory tests, and other 

diagnostic tests; 

(10) Durable medical equipment that 

is implantable; 

(11) Implantable prosthetic devices 

(other than dental) which replace all or 

part of an internal body organ 

(including colostomy bags and supplies 

directly related to colostomy care), 

including replacement of these devices; 

(12) Costs incurred to procure donor 

tissue other than corneal tissue. 

Significant revisions to the 

regulations at § 419.2(b) are being 

proposed. Further discussion of our 

packaging proposals is included in 

section II.A.3. of this proposed rule. 

In CY 2008, we implemented 

composite APCs to provide a single 

payment for groups of services that are 

typically performed together during a 

single clinical encounter and that result 

in the provision of a complete service 

(72 FR 66650 through 66652). Under the 

CY 2013 OPPS (77 FR 68243 through 

68258), we provided composite APC 

payments for 10 categories of services: 

(1) Mental Health Services (APC 

0034); 

(2) Cardiac Electrophysiologic 

Evaluation and Ablation (APC 8000); 

(3) Low Dose Rate (LDR) Prostate 

Brachytherapy (APC 8001); 

(4) Level I Extended Assessment & 

Management Composite (APC 8002); 

(5) Level II Extended Assessment & 

Management Composite (APC 8003); 

(6) Ultrasound (APC 8004); 

(7) CT and CTA without Contrast 

(APC 8005); 

(8) CT and CTA with Contrast (APC 

8006); 

(9) MRI and MRA without Contrast 

Composite (APC 8007); and 

(10) MRI and MRA with Contrast 

Composite (APC 8008) 

Further discussion of composite APCs 

is included in section II.A.2.f. of this 

proposed rule. 

Under the OPPS, we generally pay for 

hospital outpatient services on a rateper-service basis, where the service may 

be reported with one or more HCPCS 

codes. Payment varies according to the 

APC group to which the independent 

service or combination of services is 

assigned. Each APC relative payment 

weight represents the hospital cost of 

the services included in that APC, 

relative to the hospital cost of the 

services included in new proposed APC 

0634 (Hospital Clinic Visits). The APC 

relative payment weights are scaled to 

new proposed APC 0634 because it is 

the hospital clinic visit APC and 

because clinic visits are among the most 

frequently furnished services in the 

hospital outpatient setting. We refer 

readers to section VII. (Proposed OPPS 

Payment for Hospital Outpatient Visits) 

of this proposed rule for further 

discussion of the establishment of new 

proposed APC 0634. 

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 

HOP Panel recommendations for 

specific services for the CY 2014 OPPS 

and our responses to them are discussed 

in the relevant specific sections 

throughout this proposed rule). 

Finally, section 1833(t)(2) of the Act 

provides that, subject to certain 

exceptions, the items and services 

within an APC group cannot be 

considered comparable with respect to 

the use of resources if the highest cost 

for an item or service in the group is 

more than 2 times greater than the 

lowest cost for an item or service within 

the same group (referred to as the ‘‘2 

times rule’’). The statute authorizes the 

Secretary to make exceptions to the 2 

times rule in unusual cases, such as 

low-volume items and services (but the 

Secretary may not make such an 

exception in the case of a drug or 

biological that has been designated as an 

orphan drug under section 526 of the 

Federal Food, Drug, and Cosmetic Act). 

2. Application of the 2 Times Rule 

In accordance with section 1833(t)(2) 

of the Act and § 419.31 of the 

regulations, we annually review the 

items and services within an APC group 

to determine, with respect to 

comparability of the use of resources, if 

the cost of the highest cost item or 

service within an APC group is more 

than 2 times greater than the cost of the 

lowest cost item or service within that 

same group. In making this 

determination, we consider only those 

HCPCS codes that are significant based 

on the number of claims. We note that, 

for purposes of identifying significant 

HCPCS codes for examination in the 2 

times rule, we consider codes that have 

more than 1,000 single major claims or 

codes that have both greater than 99 

single major claims and contribute at 

least 2 percent of the single major 

claims used to establish the APC cost to 

be significant (75 FR 71832). This 

longstanding definition of when a 

HCPCS code is significant for purposes 

of the 2 times rule was selected because 

we believe that a subset of 1,000 claims 

is negligible within the set of 

approximately 100 million single 

procedure or single session claims we 

use for establishing costs. Similarly, a 

HCPCS code for which there are fewer 

than 99 single bills and which 

comprises less than 2 percent of the 

single major claims within an APC will 

have a negligible impact on the APC 

cost. In this proposed rule, we are 

proposing to make exceptions to this 

limit on the variation of costs within 

each APC group in unusual cases, such 

as low-volume items and services, for 

CY 2014. 

We have identified APCs with 2 times 

rule violations for which we are 

proposing changes to their HCPCS 


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codes’ APC assignments in Addendum 

B to this proposed rule. We note that 

Addendum B does not appear in the 

printed version of the Federal Register 

as part of the CY 2014 OPPS/ASC 

proposed rule. Rather, it is published 

and made available via the Internet on 

the CMS Web site at: http:// 

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

HospitalOutpatientPPS/index.html. In 

these cases, to eliminate a 2 times rule 

violation or to improve clinical and 

resource homogeneity, we are proposing 

to reassign the codes to APCs that 

contain services that are similar with 

regard to both their clinical and 

resource characteristics. In many cases, 

the proposed HCPCS code 

reassignments and associated APC 

reconfigurations for CY 2014 included 

in this proposed rule are related to 

changes in costs of services that were 

observed in the CY 2012 claims data 

newly available for CY 2014 ratesetting. 

We also are proposing changes to the 

status indicators for some codes that are 

not specifically and separately 

discussed in this proposed rule. In these 

cases, we are proposing to change the 

status indicators for some codes because 

we believe that another status indicator 

would more accurately describe their 

payment status from an OPPS 

perspective based on the policies that 

we are proposing for CY 2014. In 

addition, we are proposing to rename 

existing APCs or create new clinical 

APCs to complement proposed HCPCS 

code reassignments. Addendum B of 

this CY 2014 OPPS/ASC proposed rule 

identifies with a comment indicator 

‘‘CH’’ those HCPCS codes for which we 

are proposing a change to the APC 

assignment or status indicator, or both, 

that were initially assigned in the April 

2013 Addendum B Update (available via 

the Internet on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html). 

3. Proposed Exceptions to the 2 Times 

Rule 

As discussed earlier, we may make 

exceptions to the 2 times limit on the 

variation of costs within each APC 

group in unusual cases such as lowvolume items and services. Taking into 

account the APC changes that we are 

proposing for CY 2014, we reviewed all 

the APCs to determine which APCs 

would not satisfy the 2 times rule. Then 

we used the following criteria to decide 

whether to propose exceptions to the 2 

times rule for affected APCs: 

• Resource homogeneity; 

• Clinical homogeneity; 

• Hospital outpatient setting 

utilization; 

• Frequency of service (volume); and 

• Opportunity for upcoding and code 

fragments. 

For a detailed discussion of these 

criteria, we refer readers to the April 7, 

2000 OPPS final rule with comment 

period (65 FR 18457 and 18458). 

We note that, for cases in which a 

recommendation by the HOP Panel 

appears to result in or allow a violation 

of the 2 times rule, we generally accept 

the Panel’s recommendation because 

those recommendations are based on 

explicit consideration of resource use, 

clinical homogeneity, site of service, 

and the quality of the claims data used 

to determine the APC payment rates. 

Table 15 of this proposed rule lists 10 

APCs that we are proposing to exempt 

from the 2 times rule for CY 2014 based 

on the criteria cited above and based on 

claims data processed from January 1, 

2012, through December 31, 2012. For 

the final rule with comment period, we 

plan to use claims data for dates of 

service between January 1, 2012, and 

December 31, 2012, that were processed 

on or before June 30, 2013, and updated 

CCRs, if available. Based on the CY 2012 

claims data, we found 10 APCs with 2 

times rule violations. We applied the 

criteria as described earlier to identify 

the APCs that we are proposing as 

exceptions to the 2 times rule for CY 

2014, and identified 10 APCs that meet 

the criteria for exception to the 2 times 

rule for this proposed rule. We have not 

included in this count those APCs 

where a 2 times rule violation is not a 

relevant concept, such as APC 0375 

(Ancillary Outpatient Services when 

Patient Expires), with an APC cost set 

based on multiple procedure claims. 

Therefore, we have identified only 

APCs, including those with criteriabased costs, those APCs listed under 

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

with 2 times rule violations. These 

proposed APC exceptions are listed in 

Table 15 below. 

TABLE 15—PROPOSED APC EXCEPTIONS TO THE 2 TIMES RULE FOR CY 2014 

APC Description 

0057 ....... Bunion Procedures. 

0060 ....... Manipulation Therapy. 

0075 ....... Level V Endoscopy Upper Airway. 

0105 ....... Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices. 

0148 ....... Level I Anal/Rectal Procedures. 

0272 ....... Fluoroscopy. 

0278 ....... Diagnostic Urography. 

0330 ....... Dental Procedures. 

0402 ....... Level II Nervous System Imaging. 

0690 ....... Level I Electronic Analysis of Devices. 

The proposed costs for hospital 

outpatient services for these and all 

other APCs that were used in the 

development of this proposed rule can 

be found on the CMS Web site at: http:// 

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

HospitalOutpatientPPS/index.html. 

C. Proposed OPPS APC-Specific Policies 

1. Intraoperative Radiation Therapy 

(IORT) Related Services (APCs 0028 and 

0065) 

HCPCS code C9726 (Placement and 

removal (if performed) of applicator into 

breast for radiation therapy) was created 

effective January 1, 2006 to describe the 

service of placing and removing (if 

performed) an applicator into the breast 

for radiation therapy. The service was 

brought to our attention by means of a 

New Technology APC application, and 

we created HCPCS code C9726 because 

there were no HCPCS codes that 

described this service. HCPCS code 

C9726 is assigned to APC 0028, which 

has a CY 2013 payment rate of 

$1,862.77. Based on our CY 2014 

proposed rule claims data, APC 0028 

has a geometric mean cost of 

approximately $2,147, and HCPCS code 

C9726 has a geometric mean cost of 


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approximately $2,165 based upon 8 

single claims. 

The AMA’s CPT Editorial Panel 

created two new Category I CPT codes 

for intraoperative radiation therapy 

(IORT) treatment delivery, effective 

January 1, 2012: CPT codes 77424 

(Intraoperative radiation treatment 

delivery, x-ray, single treatment session) 

and 77425 (Intraoperative radiation 

treatment delivery, electrons, single 

treatment session). For CY 2013, we 

finalized a policy to assign these CPT 

codes to APC 0065 (IORT, MRgFUS, and 

MEG), with a CY 2013 payment rate of 

$978.25 because we believed these IORT 

service codes were similar to services 

assigned to APC 0065 in terms of 

clinical characteristics, and the range of 

estimated costs for IORT services (77 FR 

68345). 

CPT codes 77424 and 77425 describe 

the placement and removal (if 

performed) of an applicator into the 

breast for radiation therapy, as well as 

the delivery of radiation therapy when 

performed intraoperatively, and HCPCS 

code C9726 is no longer required to 

report the placement and removal of the 

applicator. Therefore, we are proposing 

to delete HCPCS code C9726, effective 

January 1, 2014. Under this proposal, 

hospitals would report the costs of the 

service to place and remove (if 

performed) an applicator into the breast 

for radiation therapy, as well as the 

delivery of radiation therapy when 

performed intraoperatively, with CPT 

codes 77424 and 77425, which we are 

proposing to maintain assignment to 

APC 0065. We are inviting public 

comments on this proposal. 

2. Proton Beam Radiation Therapy 

(APCs 0664 and 0667) 

APC 0664 (Level I Proton Beam 

Radiation Therapy) includes two 

procedures, CPT code 77520 (Proton 

treatment delivery; simple, without 

compensation) with an estimated cost of 

approximately $417 (based on 217 

single claims of 218 total claims 

submitted for CY 2012), and CPT code 

77522 (Proton treatment delivery; 

simple, with compensation) with an 

estimated cost of approximately $883 

(based on 10,629 single claims of 11,260 

total claims submitted for CY 2012). 

APC 0667 (Level II Proton Beam 

Radiation Therapy) also includes two 

procedures: CPT code 77523 (Proton 

treatment delivery, intermediate), with 

an estimated cost of approximately $687 

(based on 6,707 single claims of 7,104 

total claims submitted for CY 2012); and 

CPT code 77525 (Proton treatment 

delivery, complex), with an estimated 

cost of approximately $1,044 (based on 

438 single claims of 547 total claims 

submitted for CY 2012). Based on these 

CY 2012 claims data, the estimated cost 

of APC 0664 is approximately $870, and 

the estimated cost of APC 0667 is 

approximately $705. 

The payment rates for proton beam 

radiation therapy services are set 

annually based on claims data according 

to the standard OPPS ratesetting 

methodology. Based on our updated 

data for CY 2014, we noted a violation 

of the 2 times rule in APC 0664. As we 

discuss in section III.B. of this proposed 

rule, a 2 times violation occurs when 

the cost of the highest cost item or 

service within an APC group is more 

than 2 times greater than the cost of the 

lowest cost item or service within that 

same group. In making this 

determination, we consider only codes 

that have more than 1,000 single major 

claims or codes that have both greater 

than 99 single major claims and 

contribute at least 2 percent of the single 

major claims used to establish the APC 

cost to be significant. If neither of these 

claims thresholds are met, there is not 

a 2 times violation even if the highest 

cost item or service is more than 2 times 

greater than the cost of the lowest cost 

item or service in the APC. In prior 

years, even though the cost of CPT code 

77522 was more than 2 times the cost 

of CPT code 77520, there was no 2 times 

violation in APC 0664 because the 

claims volume for CPT code 77520 did 

not meet either of the claims volume 

tests discussed above (72 FR 66719; 75 

FR 71901; and 77 FR 68341). However, 

for CY 2014, the claims volume for CPT 

code 77520 increased such that there is 

a 2 times violation within APC 0664, 

with the single claims for CPT code 

77520 greater than 99 and contributing 

2 percent of the single claims used to 

establish the cost of APC 0664. 

To resolve the 2 times violation, we 

are proposing to reassign CPT codes 

77520 and 77522 from APC 0664 to APC 

0667, and to revise the title of APC 0667 

to ‘‘Proton Beam Radiation Therapy,’’ 

which would now include all proton 

beam radiation therapy services. We 

also are proposing to delete APC 0664. 

The estimated cost of the new APC 0667 

is approximately $998, which would be 

the payment rate for each of the four 

proton beam radiation therapy services. 

We are inviting public comments on 

this proposal. 

3. Stereotactic Radiosurgery (SRS) 

Services (APCs 0066 and 0067) 

Since 2001, we have distinguished the 

various methods of delivery of 

stereotactic radiosurgery (SRS) with 

HCPCS G-codes. SRS includes two 

different source types, specifically, 

Cobalt-60 and linear accelerator (linac). 

Among the linac-based SRS devices, the 

HCPCS G-codes distinguish between 

robotic and nonrobotic (66 FR 59865). In 

2007 new CPT codes were established 

for SRS, and at that time, we recognized 

one of the three new CPT codes for SRS 

for separate payment under the OPPS, 

but we did not replace all of the HCPCS 

G-codes for SRS with the new CPT 

codes because we believed that the 

distinctions reflected in the HCPCS Gcodes should be maintained for APC 

assignment purposes. Specifically, in 

2007 we replaced HCPCS code G0243 

(Multi-source photon stereotactic 

radiosurgery, delivery including 

collimator changes and custom 

plugging, complete course of treatment, 

all lesions) with CPT code 77371 

because this CPT code corresponded 

directly to procedures for HCPCS code 

G0243. We refer readers to the CY 2007 

OPPS final rule (71 FR 68023 through 

68026) for a detailed discussion of the 

history of the SRS codes. 

Since 2007, HCPCS G-codes G0173, 

G0251, G0339, G0340, and CPT code 

77371 have been the codes used in the 

OPPS to describe SRS treatment 

delivery procedures. However, SRS 

techniques and equipment have evolved 

and advanced over time. In light of 

these considerations, we have 

reexamined the HCPCS G-codes and 

CPT codes for SRS with the intent of 

identifying the codes that would best 

capture the significant differences 

between the various procedures while 

eliminating unnecessary complexity, 

redundancy, and outdated distinctions 

that no longer represent meaningful 

distinctions, given current technology 

and clinical practice. Based on our 

review of the current SRS technology, it 

is our understanding that most current 

linac-based SRS technology 

incorporates some type of robotic 

feature. Therefore, we believe that it is 

no longer necessary to continue to 

distinguish robotic versus nonrobotic 

linac-based SRS through the HCPCS Gcodes. For CY 2014, we are proposing to 

replace the existing four SRS HCPCS Gcodes G0173, G0251, G0339, and G0340, 

with the SRS CPT codes 77372 and 

77373. We believe that utilizing all of 

the CPT codes for SRS (77371, 77372, 

and 77373) will more accurately capture 

the most significant distinctions 

between the various SRS procedures 

that are currently used today, namely: 

(1) Cobalt-60 versus linac; and (2) single 

session cranial treatment versus 

fractionated treatments. 

Table 16 below shows the complete 

list of HCPCS G-codes and CPT codes 

for SRS, along with their long 

descriptors. The table also shows the 

proposed CPT codes and their 


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associated status indicators and APC 

assignments for the current HCPCS Gcodes for SRS that we are proposing to 

replace. We are proposing to assign CPT 

code 77373 as the only code assigned to 

APC 0066, which we are proposing to 

rename ‘‘Level I Stereotactic 

Radiosurgery.’’ We are proposing to 

assign both of the single session cranial 

treatment codes (CPT codes 77371 and 

77372) as the only two codes assigned 

to APC 0067, which we are proposing to 

rename ‘‘Level II Stereotactic 

Radiosurgery.’’ We believe that the high 

degree of clinical similarity of CPT 

codes 77371 and 77372 supports the 

proposed grouping of these procedures 

together in the proposed renamed APC 

0067 (Level II Stereotactic 

Radiosurgery). The CY 2014 APC 

proposed payment rates for the CPT 

codes for SRS can be found in 

Addendum B to this proposed rule 

(which is available via the Internet on 

the CMS Web site). We are proposing to 

finalize their status indicators and their 

APC assignments and payment rates in 

the CY 2014 OPPS/ASC final rule with 

comment period. 

In addition, although the SRS HCPCS 

G-codes will no longer be separately 

payable under the OPPS, the codes will 

remain active in the MPFS for CY 2014. 

Consequently, we are proposing to 

reassign the HCPCS G-codes for SRS to 

OPPS status indicator ‘‘B’’ (Alternative 

code may be available under the OPPS) 

for CY 2014. 

TABLE 16—PROPOSED SEPARATELY PAYABLE STEREOTACTIC RADIOSURGERY (SRS) SERVICES FOR CY 2014 

CY 2013 

CPT code Long descriptor CY 2014 CPT code Long descriptor CY 2014 SI 

CY 2014 

APC 

77371 ..... Radiation treatment delivery, stereotactic 

radiosurgery (SRS), complete course of 

treatment of cranial lesion(s) consisting of 

1 session; multi-source Cobalt 60 based.

77371 Radiation treatment delivery, stereotactic 

radiosurgery (SRS), complete course of 

treatment of cranial lesion(s) consisting of 

1 session; multi-source Cobalt 60 based.

S 0067 

G0173 .... Linear accelerator based stereotactic 

radiosurgery, complete course of therapy 

in one session.

77372 Radiation treatment delivery, stereotactic 

radiosurgery (SRS), complete course of 

treatment of cranial lesion(s) consisting of 

1 session; linear accelerator based.

S 0067 

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.

77373 Stereotactic body radiation therapy, treatment delivery, per fraction to 1 or more lesions, including image guidance, entire 

course not to exceed 5 fractions.

S 0066 

G0339 * .. Image-guided robotic linear acceleratorbased stereotactic radiosurgery, complete 

course of therapy in one session or first 

session of fractionated treatment. 

G0340 .... Image-guided robotic linear acceleratorbased 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. 

*Although not reflected in the above table (in order to avoid confusion), single session cranial cases currently billed with HCPCS code G0339 

would be billed with CPT code 77372 beginning in CY 2014. Any other reporting of HCPCS code G0339 (other than single session cranial 

cases) would be reported beginning in CY 2014 with CPT code 77373. 

IV. Proposed OPPS Payment for Devices 

A. Proposed Pass-Through Payments for 

Devices 

1. Expiration of Transitional PassThrough Payments for Certain Devices 

a. Background 

Section 1833(t)(6)(B)(iii) of the Act 

requires that, under the OPPS, a 

category of devices be eligible for 

transitional pass-through payments for 

at least 2, but not more than 3 years. 

This pass-through payment eligibility 

period begins with the first date on 

which transitional pass-through 

payments may be made for any medical 

device that is described by the category. 

We may establish a new device category 

for pass-through payment in any 

quarter. Under our established policy, 

we base the pass-through status 

expiration date for a device category on 

the date on which pass-through 

payment is effective for the category, 

which is the first date on which passthrough payment may be made for any 

medical device that is described by such 

category. We propose and finalize the 

dates for expiration of pass-through 

status for device categories as part of the 

OPPS annual update. 

We also have an established policy to 

package the costs of the devices that are 

no longer eligible for pass-through 

payments into the costs of the 

procedures with which the devices are 

reported in the claims data used to set 

the payment rates (67 FR 66763). 

Brachytherapy sources, which are now 

separately paid in accordance with 

section 1833(t)(2)(H) of the Act, are an 

exception to this established policy. 

There currently are three device 

categories eligible for pass-through 

payment. These device categories are 

described by HCPCS codes C1830 

(Powered bone marrow biopsy needle) 

and C1840 (Lens, intraocular 

(telescopic)), which we made effective 

for pass-through payment as of October 

1, 2011; and HCPCS code C1886 

(Catheter, extravascular tissue ablation, 

any modality (insertable)), which we 

made effective for pass-through 

payment as of January 1, 2012. 

Recognizing that these three device 

categories were eligible for at least 2, but 

not more than 3, years of pass-through 

status, in the CY 2013 OPPS/ASC final 

rule with comment period, we finalized 

the expiration of pass-through payment 

for all three of these HCPCS codes, 

which will expire after December 31, 

2013 (77 FR 68352). Therefore, in 

accordance with our established policy, 

after December 31, 2013, we will 


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package the respective costs of the 

HCPCS codes C1830, C1840, and C1886 

devices into the costs of the procedures 

with which the devices are reported in 

the hospital claims data used in OPPS 

ratesetting. 

b. Proposed CY 2014 Policy 

As previously stated, we 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). In the case of device category 

C1840, we are proposing that the device 

costs be packaged only when billed with 

CPT code 0308T (Insertion of ocular 

telescope prosthesis including removal 

of crystalline lens), which became 

effective on July 1, 2012. We announced 

the policy that device category C1840 

must be billed with CPT code 0308T, 

effective July 1, 2012, in Transmittal 

2483, dated June 8, 2012. CPT code 

0308T is currently assigned to APC 0234 

(Level IV Anterior Segment Eye 

Procedures), which has a proposed 

geometric mean cost of approximately 

$1,794. When the CPT code C1840 

device costs are packaged into the cost 

of CPT code 0308T (and the equivalent 

procedure described by HCPCS code 

C9732 for the first half of 2012), the 

proposed mean cost of the procedure is 

approximately $15,249. Based on this 

mean cost for CPT code 0308T, we are 

proposing to create new APC 0351 

(Level VII Anterior Segment Eye 

Procedures), and to assign CPT code 

0308T to this APC, which has a 

proposed mean cost of approximately 

$15,249. The mean cost for CY 2014 that 

will be reported in the final rule for this 

new APC will depend on the mean cost 

of CPT code 0308T (including the cost 

of HCPCS code C1840) as calculated 

using claims data available for the final 

rule. 

With the expiration of these three 

device categories at the end of CY 2013, 

there are no currently active categories 

for which we would propose expiration 

of pass-through status in CY 2014. If we 

create new device categories for passthrough payment status during the 

remainder of CY 2013 or during CY 

2014, 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. 

2. Proposed Provisions for Reducing 

Transitional Pass-Through Payments To 

Offset Costs Packaged Into APC Groups 

a. Background 

Section 1833(t)(6)(D)(ii) of the Act sets 

the amount of additional pass-through 

payment for an eligible device as the 

amount by which the hospital’s charges 

for a device, adjusted to cost (the cost 

of the device) exceeds the portion of the 

otherwise applicable Medicare 

outpatient department fee schedule 

amount (the APC payment amount) 

associated with the device. We have an 

established policy to estimate the 

portion of each APC payment rate that 

could reasonably be attributed to the 

cost of the associated devices that are 

eligible for pass-through payments (66 

FR 59904) for purposes of estimating the 

portion of the otherwise applicable APC 

payment amount associated with passthrough devices. For eligible device 

categories, we deduct an amount that 

reflects the portion of the APC payment 

amount that we determine is associated 

with the cost of the device, defined as 

the device APC offset amount, from the 

charges adjusted to cost for the device, 

as provided by section 1833(t)(6)(D)(ii) 

of the Act, to determine the eligible 

device’s pass-through payment amount. 

We have consistently used an 

established methodology to estimate the 

portion of each APC payment rate that 

could reasonably be attributed to the 

cost of an associated device eligible for 

pass-through payment, using claims 

data from the period used for the most 

recent recalibration of the APC rates (72 

FR 66751 through 66752). We establish 

and update the applicable device APC 

offset amounts for eligible pass-through 

device categories through the 

transmittals that implement the 

quarterly OPPS updates. 

Currently, we have published a list of 

all procedural APCs with the CY 2013 

portions (both percentages and dollar 

amounts) of the APC payment amounts 

that we determine are associated with 

the cost of devices on the CMS Web site 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. The 

dollar amounts are used as the device 

APC offset amounts. In addition, in 

accordance with our established 

practice, the device APC offset amounts 

in a related APC are used in order to 

evaluate whether the cost of a device in 

an application for a new device category 

for pass-through payment is not 

insignificant in relation to the APC 

payment amount for the service related 

to the category of devices, as specified 

in our regulations at § 419.66(d). 

Beginning in CY 2010, we include 

packaged costs related to implantable 

biologicals in the device offset 

calculations in accordance with our 

policy that the pass-through evaluation 

process and payment methodology for 

implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) and that are newly approved for 

pass-through status beginning on or 

after January 1, 2010, be the device passthrough process and payment 

methodology only (74 FR 60476). 

b. Proposed CY 2014 Policy 

We are proposing to continue, for CY 

2014, our established methodology to 

estimate the portion of each APC 

payment rate that could reasonably be 

attributed to (that is, reflect) the cost of 

an associated device eligible for passthrough payment, using claims data 

from the period used for the most recent 

recalibration of the APC payment rates. 

We are proposing to continue our 

policy, for CY 2014, that the passthrough evaluation process and passthrough payment methodology for 

implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) and that are newly approved for 

pass-through status beginning on or 

after January 1, 2010, be the device passthrough process and payment 

methodology only. The rationale for this 

policy is provided in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60471 through 60477). We 

also are proposing to continue our 

established policies for calculating and 

setting the device APC offset amounts 

for each device category eligible for 

pass-through payment. In addition, we 

are proposing to continue to review 

each new device category on a case-bycase basis to determine whether device 

costs associated with the new category 

are already packaged into the existing 

APC structure. If device costs packaged 

into the existing APC structure are 

associated with the new category, we 

are proposing to deduct the device APC 

offset amount from the pass-through 

payment for the device category. As 

stated earlier, these device APC offset 

amounts also would be used in order to 

evaluate whether the cost of a device in 

an application for a new device category 

for pass-through payment is not 

insignificant in relation to the APC 

payment amount for the service related 

to the category of devices (§ 419.66(d)). 

For CY 2014, we also are proposing to 

continue our policy established in CY 

2010 to include implantable biologicals 

in our calculation of the device APC 

offset amounts. In addition, we are 


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proposing to continue to calculate and 

set any device APC offset amount for 

any new device pass-through category 

that includes a newly eligible 

implantable biological beginning in CY 

2014 using the same methodology we 

have historically used to calculate and 

set device APC offset amounts for 

device categories eligible for passthrough payment, and to include the 

costs of implantable biologicals in the 

calculation of the device APC offset 

amounts. 

In addition, we are proposing to 

update the list of all procedural APCs 

with the final CY 2014 portions of the 

APC payment amounts that we 

determine are associated with the cost 

of devices on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html so 

that this information is available for use 

by the public in developing potential 

CY 2014 device pass-through payment 

applications and by CMS in reviewing 

those applications. 

3. Proposed Changes to Device PassThrough Criteria: Integral and 

Subordinate Criterion 

We established a number of specific 

criteria that new medical devices must 

meet to be considered eligible for passthrough payments under section 

1833(t)(6) of the Act (42 CFR 419.66; 65 

FR 18480 and 65 FR 47672 through 

47674). In this proposed rule, we are 

proposing to change one of these criteria 

for device pass-through payment, 

described at § 419.66(b)(3), which 

requires that a device ‘‘is an integral and 

subordinate part of the service 

furnished, is used for one patient only, 

comes in contact with human tissue, 

and is surgically implanted or inserted 

whether or not it remains with the 

patient when the patient is released 

from the hospital’’ (65 FR 47674). 

Regarding the existing regulation at 

§ 419.66(b)(3), applicants for device 

pass-through status have continued to 

ask what is meant by the phrase 

‘‘integral and subordinate part of the 

service furnished,’’ and more 

specifically, what the terms ‘‘integral’’ 

and ‘‘subordinate’’ mean. These terms 

have not been specifically defined or 

described in prior regulatory language, 

preamble, or guidance. In an effort to 

reduce further confusion and ensure all 

applicants understand the intent of the 

existing regulation, we are proposing to 

provide guidance on the meaning of the 

term ‘‘integral’’ and delete the term 

‘‘subordinate’’ from the existing 

regulation in this proposed rule. We 

have interpreted the term ‘‘integral’’ to 

mean that the device is necessary to 

furnish or deliver the primary procedure 

with which it is used. For example, a 

pacemaker is integral to the procedure 

of implantation of a pacemaker. We 

have interpreted the accompanying term 

‘‘subordinate’’ in conjunction with the 

term ‘‘integral,’’ in that a ‘‘subordinate’’ 

device is dependent upon the overall 

procedure of implanting the device, and 

we have not interpreted the term 

separately, or applied the term 

‘‘subordinate’’ as a separate criterion. 

Because of confusion among passthrough status applicants regarding the 

use of both terms ‘‘integral’’ and 

‘‘subordinate,’’ and because we do not 

believe it is necessary that the 

regulation specifically state that a 

device must be subordinate to the 

procedure, in addition to the 

requirement that a device be integral to 

the procedure, and have not treated 

‘‘subordinate’’ as a separate criterion, as 

previously explained, we are proposing 

to delete the term ‘‘subordinate’’ from 

this criterion’s regulatory text under 

existing § 419.66(b)(3). The proposed 

revised § 419.66(b)(3) regulatory 

language reads: ‘‘The device is an 

integral part of the service furnished, is 

used for one patient only, comes in 

contact with human tissue, and is 

surgically implanted or inserted, 

whether or not it remains with the 

patient when the patient is released 

from the hospital.’’ 

B. Proposed Adjustment to OPPS 

Payment for No Cost/Full Credit and 

Partial Credit Devices 

1. Background 

To ensure equitable payment when 

the hospital receives a device without 

cost or with full credit, in CY 2007, we 

implemented a policy to reduce the 

payment for specified device-dependent 

APCs by the estimated portion of the 

APC payment attributable to device 

costs (that is, the device offset) when the 

hospital receives a specified device at 

no cost or with full credit (71 FR 68071 

through 68077). Hospitals are instructed 

to report no cost/full credit cases using 

the ‘‘FB’’ modifier on the line with the 

procedure code in which the no cost/ 

full credit device is used. In cases in 

which the device is furnished without 

cost or with full credit, the hospital is 

instructed to report a token device 

charge of less than $1.01. In cases in 

which the device being inserted is an 

upgrade (either of the same type of 

device or to a different type of device) 

with a full credit for the device being 

replaced, the hospital is instructed to 

report as the device charge the 

difference between its usual charge for 

the device being implanted and its usual 

charge for the device for which it 

received full credit. In CY 2008, we 

expanded this payment adjustment 

policy to include cases in which 

hospitals receive partial credit of 50 

percent or more of the cost of a specified 

device. Hospitals are instructed to 

append the ‘‘FC’’ modifier to the 

procedure code that reports the service 

provided to furnish the device when 

they receive a partial credit of 50 

percent or more of the cost of the new 

device. We refer readers to the CY 2008 

OPPS/ASC final rule with comment 

period for more background information 

on the ‘‘FB’’ and ‘‘FC’’ payment 

adjustment policies (72 FR 66743 

through 66749). 

2. Proposed Policy for CY 2014 

Beginning in CY 2014, we are 

proposing to modify our existing policy 

of reducing OPPS payment for specified 

APCs when a hospital furnishes a 

specified device without cost or with a 

full or partial credit. For CY 2013 and 

prior years, our policy has been to 

reduce OPPS payment by 100 percent of 

the device offset amount when a 

hospital furnishes a specified device 

without cost or with a full credit and by 

50 percent of the device offset amount 

when the hospital receives partial credit 

in the amount of 50 percent or more of 

the cost for the specified device. For CY 

2014, we are proposing to reduce OPPS 

payment, for the applicable APCs listed 

below in Table 17, by the full or partial 

credit a provider receives for a replaced 

device. Specifically, under this 

proposed policy for CY 2014, hospitals 

would be required to report the amount 

of the credit in the amount portion for 

value code ‘‘FD’’ (Credit Received from 

the Manufacturer for a Replaced 

Medical Device) when the hospital 

receives a credit for a replaced device 

listed in Table 18 that is 50 percent or 

greater than the cost of the device. 

Under this proposal, hospitals would no 

longer be required to append the ‘‘FB’’ 

or ‘‘FC’’ modifier when receiving a 

device at no cost or with a full or partial 

credit. 

For CY 2014, we are proposing to 

continue using the three criteria 

established in the CY 2007 OPPS/ASC 

final rule with comment period for 

determining the APCs to which our 

modified CY 2014 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 


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temporarily); and (3) the device offset 

amount must be significant, which, for 

purposes of this policy, is defined as 

exceeding 40 percent of the APC cost. 

We also are proposing to continue to 

restrict the devices to which the APC 

payment adjustment would apply to a 

specific set of costly devices to ensure 

that the adjustment would not be 

triggered by the implantation of an 

inexpensive device whose cost would 

not constitute a significant proportion of 

the total payment rate for an APC. We 

continue to believe these criteria are 

appropriate because no cost devices and 

device credits are likely to be associated 

with particular cases only when the 

device must be reported on the claim 

and is of a type that is implanted and 

remains in the body when the 

beneficiary leaves the hospital. We 

believe that the reduction in payment is 

appropriate only when the cost of the 

device is a significant part of the total 

cost of the APC into which the device 

cost is packaged, and that the 40-percent 

threshold is a reasonable definition of a 

significant cost. 

We examined the offset amounts 

calculated from the CY 2014 proposed 

rule data and the clinical characteristics 

of the proposed CY 2014 APCs to 

determine which APCs would meet the 

criteria for CY 2014. Based on the CY 

2012 claims data available for this 

proposed rule, we are not proposing any 

changes to the APCs and devices to 

which this proposed modified policy 

would apply. 

Table 17 below lists the proposed 

APCs to which the proposed modified 

payment adjustment policy for no cost/ 

full credit and partial credit devices 

would apply in CY 2014. 

Table 18 below lists the proposed 

devices to which the proposed modified 

payment adjustment policy for no cost/ 

full credit and partial credit devices 

would apply in CY 2014. We are 

proposing to update the lists of APCs 

and devices to which the proposed 

modified no cost/full credit and partial 

credit device adjustment policy would 

apply for CY 2014, consistent with the 

three criteria discussed earlier in this 

section, based on the final CY 2012 

claims data available for the CY 2014 

OPPS/ASC final rule with comment 

period. 

TABLE 17—PROPOSED APCS TO WHICH THE PROPOSED MODIFIED NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE

PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 2014 

Proposed 

CY 2014 

APC 

Proposed CY 2014 APC title 

0039 ....... Level I Implantation of Neurostimulator Generator. 

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

0061 ....... Level II Implantation/Revision/Replacement of Neurostimulator Electrodes. 

0082 ....... Coronary or Non-Coronary Atherectomy. 

0083 ....... Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization. 

0085 ....... Level II Electrophysiologic Procedures. 

0086 ....... Level III Electrophysiologic Procedures. 

0089 ....... Insertion/Replacement of Permanent Pacemaker and Electrodes. 

0090 ....... Level I Insertion/Replacement of Permanent Pacemaker. 

0104 ....... Transcatheter Placement of Intracoronary Stents. 

0106 ....... Insertion/Replacement of Pacemaker Leads and/or Electrodes. 

0107 ....... Level I Implantation of Cardioverter-Defibrillators (ICDs). 

0108 ....... Level II Implantation of Cardioverter-Defibrillators (ICDs). 

0227 ....... Implantation of Drug Infusion Device. 

0229 ....... Level II Endovascular Revascularization of the Lower Extremity. 

0259 ....... Level VII ENT Procedures. 

0293 ....... Level VI Anterior Segment Eye Procedures. 

0315 ....... Level II Implantation of Neurostimulator Generator. 

0318 ....... Implantation of Neurostimulator Pulse Generator and Electrode. 

0319 ....... Level III Endovascular Revascularization of the Lower Extremity. 

0385 ....... Level I Prosthetic Urological Procedures. 

0386 ....... Level II Prosthetic Urological Procedures. 

0425 ....... Level II Arthroplasty or Implantation with Prosthesis. 

0648 ....... Level IV Breast Surgery. 

0654 ....... Level II Insertion/Replacement of Permanent Pacemaker. 

0655 ....... Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing. 

0656 ....... Transcatheter Placement of Intracoronary Drug-Eluting Stents. 

0674 ....... Prostate Cryoablation. 

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

TABLE 18—PROPOSED DEVICES TO

WHICH THE PROPOSED MODIFIED

NO COST/FULL CREDIT AND PARTIAL

CREDIT DEVICE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 

2014 

CY 2014 

Device 

HCPCS 

code 

CY 2014 Short descriptor 

C1721 .... AICD, dual chamber. 

C1722 .... AICD, single chamber. 

TABLE 18—PROPOSED DEVICES TO

WHICH THE PROPOSED MODIFIED

NO COST/FULL CREDIT AND PARTIAL

CREDIT DEVICE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 

2014—Continued 

CY 2014 

Device 

HCPCS 

code 

CY 2014 Short descriptor 

C1728 .... Cath, brachytx seed adm. 

C1764 .... Event recorder, cardiac. 

TABLE 18—PROPOSED DEVICES TO

WHICH THE PROPOSED MODIFIED

NO COST/FULL CREDIT AND PARTIAL

CREDIT DEVICE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 

2014—Continued 

CY 2014 

Device 

HCPCS 

code 

CY 2014 Short descriptor 

C1767 .... Generator, neurostim, imp. 

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


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43598 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

TABLE 18—PROPOSED DEVICES TO

WHICH THE PROPOSED MODIFIED

NO COST/FULL CREDIT AND PARTIAL

CREDIT DEVICE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 

2014—Continued 

CY 2014 

Device 

HCPCS 

code 

CY 2014 Short descriptor 

C1772 .... Infusion pump, programmable. 

C1776 .... Joint device (implantable). 

C1777 .... Lead, AICD, endo single coil. 

C1778 .... Lead, neurostimulator. 

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

C1785 .... Pmkr, dual, rate-resp. 

C1786 .... Pmkr, single, rate-resp. 

C1789 .... Prosthesis, breast, imp. 

C1813 .... Prosthesis, penile, inflatab. 

C1815 .... Pros, urinary sph, imp. 

C1820 .... Generator, neuro rechg bat sys. 

C1881 .... Dialysis access system. 

C1882 .... AICD, other than sing/dual. 

C1891 .... Infusion pump, non-prog, perm. 

C1895 .... Lead, AICD, endo dual coil. 

C1896 .... Lead, AICD, non sing/dual. 

C1897 .... Lead, neurostim, test kit. 

C1898 .... Lead, pmkr, other than trans. 

C1899 .... Lead, pmkr/AICD combination. 

C1900 .... Lead coronary venous. 

C2619 .... Pmkr, dual, non rate-resp. 

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

C2621 .... Pmkr, other than sing/dual. 

C2622 .... Prosthesis, penile, non-inf. 

C2626 .... Infusion pump, non-prog, temp. 

C2631 .... Rep dev, urinary, w/o sling. 

V. Proposed OPPS Payment Changes for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

A. Proposed OPPS Transitional PassThrough Payment for Additional Costs 

of Drugs, Biologicals, and 

Radiopharmaceuticals 

1. Background 

Section 1833(t)(6) of the Act provides 

for temporary additional payments or 

‘‘transitional pass-through payments’’ 

for certain drugs and biologicals (also 

referred to as biologics). As enacted by 

the Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 

1999 (BBRA) (Pub. L. 106–113), this 

provision requires the Secretary to make 

additional payments to hospitals for: 

current orphan drugs, as designated 

under section 526 of the Federal Food, 

Drug, and Cosmetic Act (Pub. L. 107– 

186); current drugs and biologicals and 

brachytherapy sources used in cancer 

therapy; and current 

radiopharmaceutical drugs and 

biologicals. ‘‘Current’’ refers to drugs or 

biologicals that are outpatient hospital 

services under Part B for which 

payment was made on the first date the 

hospital OPPS was implemented. 

Transitional pass-through payments 

are also 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.’’ As required by 

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 payment was first made 

for the product as a hospital outpatient 

service under Medicare Part B. Proposed 

CY 2014 pass-through drugs and 

biologicals and their designated APCs 

are assigned status indicator ‘‘G’’ in 

Addenda A and B to this proposed rule, 

which are available via the Internet on 

the CMS Web site. 

Section 1833(t)(6)(D)(i) of the Act 

specifies that the pass-through payment 

amount, in the case of a drug or 

biological, is the amount by which the 

amount determined under section 

1842(o) of the Act for the drug or 

biological exceeds the portion of the 

otherwise applicable Medicare OPD fee 

schedule that the Secretary determines 

is associated with the drug or biological. 

If the drug or biological is covered 

under a competitive acquisition contract 

under section 1847B of the Act, the 

pass-through payment amount is 

determined by the Secretary to be equal 

to the average price for the drug or 

biological for all competitive acquisition 

areas and the year established under 

such section as calculated and adjusted 

by the Secretary. However, we note that 

the Part B drug CAP program has been 

postponed since CY 2009, and such a 

program has not been reinstated for CY 

2014. 

This methodology for determining the 

pass-through payment amount is set 

forth in regulations at 42 CFR 419.64. 

These regulations specify that the passthrough payment equals the amount 

determined under section 1842(o) of the 

Act minus the portion of the APC 

payment that CMS determines is 

associated with the drug or biological. 

Section 1847A of the Act establishes the 

average sales price (ASP) methodology, 

which is used for payment for drugs and 

biologicals described in section 

1842(o)(1)(C) of the Act furnished on or 

after January 1, 2005. The ASP 

methodology, as applied under the 

OPPS, uses several sources of data as a 

basis for payment, including the ASP, 

the wholesale acquisition cost (WAC), 

and the average wholesale price (AWP). 

In this proposed rule, the term ‘‘ASP 

methodology’’ and ‘‘ASP-based’’ are 

inclusive of all data sources and 

methodologies described therein. 

Additional information on the ASP 

methodology can be found on the CMS 

Web site at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-Service-PartB-Drugs/McrPartBDrugAvgSalesPrice/ 

index.html. 

The pass-through application and 

review process for drugs and biologicals 

is explained on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/ 

passthrough_payment.html. 

2. Proposed Drugs and Biologicals With 

Expiring Pass-Through Status in CY 

2013 

We are proposing that the passthrough status of 15 drugs and 

biologicals would expire on December 

31, 2013, as listed in Table 19 below. 

All of these drugs and biologicals will 

have received OPPS pass-through 

payment for at least 2 years and no more 

than 3 years by December 31, 2013. 

These drugs and biologicals were 

approved for pass-through status on or 

before January 1, 2012. 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, 

anesthesia drugs, and our new proposed 

groups of policy packaged products 

described in section II.A.3. of this 

proposed rule, namely drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies when used in 

a diagnostic test or procedure and drugs 

and biologicals that function as supplies 

or devices when used in a surgical 

procedure, our standard methodology 

for providing payment for drugs and 

biologicals with expiring pass-through 

status in an upcoming calendar year is 

to determine the product’s estimated per 

day cost and compare it with the OPPS 

drug packaging threshold for that 

calendar year (which is proposed at $90 

for CY 2014), as discussed further in 

section V.B.2. of this proposed rule. If 

the estimated per day cost for the drug 

or biological is less than or equal to the 

applicable OPPS drug packaging 

threshold, we would package payment 

for the drug or biological into the 

payment for the associated procedure in 

the upcoming calendar year. If the 

estimated per day cost of the drug or 

biological is greater than the OPPS drug 

packaging threshold, we would provide 

separate payment at the applicable 

relative ASP-based payment amount 

(which is proposed at ASP+6 percent for 


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CY 2014, as discussed further in section 

V.B.3. of this proposed rule). 

TABLE 19—PROPOSED DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH STATUS WILL EXPIRE DECEMBER 31, 2013 

Proposed 

CY 2014 

HCPCS 

code 

Proposed CY 2014 long descriptor 

Proposed 

CY 2014 

SI 

Proposed 

CY 2014 

APC 

A9584 ..... Iodine I–123 ioflupane, diagnostic, per study dose, up to 5 millicuries ........................................................... N N/A 

C9285 .... Lidocaine 70 mg/tetracaine 70 mg, per patch .................................................................................................. N 9285 

J0131 ..... Injection, acetaminophen, 10 mg ...................................................................................................................... N 9283 

J0485 ..... Injection, belatacept, 1 mg ................................................................................................................................ K 9286 

J0490 ..... Injection, belimumab, 10 mg ............................................................................................................................. K 1353 

J0638 ..... Injection, canakinumab, 1mg ............................................................................................................................ K 1311 

J0712 ..... Injection, ceftaroline fosamil, 10 mg ................................................................................................................. N 9282 

J1572 ..... Injection, immune globulin, (flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g., liquid), 500 

mg.

K 0947 

J2507 ..... Injection, pegloticase, 1 mg .............................................................................................................................. K 9281 

J7180 ..... Injection, factor xiii (antihemophilic factor, human), 1 i.u ................................................................................. K 1416 

J9042 ..... Injection, brentuximab vedotin, 1 mg ................................................................................................................ K 9287 

J9179 ..... Injection, eribulin mesylate, 0.1 mg .................................................................................................................. K 1426 

J9228 ..... Injection, ipilimumab, 10 mg ............................................................................................................................. K 9284 

Q4124 .... Oasis Ultra Tri-Layer matrix, per square centimeter ........................................................................................ N 9365 

Q4131 .... EpiFix, per square centimeter ........................................................................................................................... N 9366 

3. Proposed Drugs, Biologicals, and 

Radiopharmaceuticals With New or 

Continuing Pass-Through Status in CY 

2014 

We are proposing to continue passthrough status in CY 2014 for 18 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, 2013. These drugs and 

biologicals, which were approved for 

pass-through status between April 1, 

2012 and July 1, 2013, are listed in 

Table 20 below. The APCs and HCPCS 

codes for these drugs and biologicals 

approved for pass-through status 

through April 1, 2013 are assigned 

status indicator ‘‘G’’ in Addenda A and 

B of this proposed rule. Addenda A and 

B of this proposed rule are available via 

the Internet on the CMS Web site. 

Section 1833(t)(6)(D)(i) of the Act sets 

the amount of pass-through payment for 

pass-through drugs and biologicals (the 

pass-through payment amount) as the 

difference between the amount 

authorized under section 1842(o) of the 

Act and the portion of the otherwise 

applicable OPD fee schedule that the 

Secretary determines is associated with 

the drug or biological. Payment for 

drugs and biologicals with pass-through 

status under the OPPS is currently made 

at the physician’s office payment rate of 

ASP+6 percent. We believe it is 

consistent with the statute to propose to 

continue to provide payment for drugs 

and biologicals with pass-through status 

at a rate of ASP+6 percent in CY 2014, 

the amount that drugs and biologicals 

receive under section 1842(o) of the Act. 

Therefore, for CY 2014, we are 

proposing to pay for pass-through drugs 

and biologicals at ASP+6 percent, 

equivalent to the rate these drugs and 

biologicals would receive in the 

physician’s office setting in CY 2014. 

We are proposing that a $0.00 passthrough payment amount would be paid 

for most pass-through drugs and 

biologicals under the CY 2014 OPPS 

because the difference between the 

amount authorized under section 

1842(o) of the Act, which is ASP+6 

percent, and the portion of the 

otherwise applicable OPD fee schedule 

that the Secretary determines is 

appropriate, proposed at ASP+6 

percent, is $0. 

In the case of pass-through for policy 

packaged drugs (which include contrast 

agents, diagnostic radiopharmaceuticals, 

anesthesia drugs, and our new proposed 

groups of policy packaged products 

described in section II.A.3. of this 

proposed rule, namely drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies when used in 

a diagnostic test or procedure and drugs 

and biologicals that function as supplies 

or devices when used in a surgical 

procedure), we are proposing that their 

pass-through payment amount would be 

equal to ASP+6 percent for CY 2014 

because, if not on pass-through status, 

payment for these products would be 

packaged into the associated procedure. 

In addition, we are proposing to 

continue to update pass-through 

payment rates on a quarterly basis on 

the CMS Web site during CY 2014 if 

later quarter ASP submissions (or more 

recent WAC or AWP information, as 

applicable) indicate that adjustments to 

the payment rates for these pass-through 

drugs or biologicals are necessary. For a 

full description of this policy, we refer 

readers to the CY 2006 OPPS/ASC final 

rule with comment period (70 FR 42722 

and 42723). 

In CY 2014, as is consistent with our 

CY 2013 policy for diagnostic and 

therapeutic radiopharmaceuticals, we 

are proposing to provide payment for 

both diagnostic and therapeutic 

radiopharmaceuticals that are granted 

pass-through status based on the ASP 

methodology. As stated above, for 

purposes of pass-through payment, we 

consider radiopharmaceuticals to be 

drugs under the OPPS. Therefore, if a 

diagnostic or therapeutic 

radiopharmaceutical receives passthrough status during CY 2014, we are 

proposing to follow the standard ASP 

methodology to determine the passthrough payment rate that drugs receive 

under section 1842(o) of the Act, which 

is ASP+6 percent. If ASP data are not 

available for a radiopharmaceutical, we 

are proposing to provide pass-through 

payment at WAC+6 percent, the 

equivalent payment provided to passthrough drugs and biologicals without 

ASP information. If WAC information is 

also not available, we are proposing to 

provide payment for the pass-through 

radiopharmaceutical at 95 percent of its 

most recent AWP. 

As discussed in more detail in section 

II.A.3. of this proposed rule, over the 

last 6 years, we implemented a policy 

whereby payment for all nonpassthrough diagnostic 

radiopharmaceuticals, contrast agents, 

and anesthesia drugs is packaged into 

payment for the associated procedure. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43600 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

We are proposing to continue the 

packaging of these items and also are 

proposing new groups of policy 

packaged products described in section 

II.A.3. of this proposed rule, namely 

drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure, 

regardless of their per day cost, in CY 

2014. As stated earlier, pass-through 

payment is the difference between the 

amount authorized under section 

1842(o) of the Act and the portion of the 

otherwise applicable OPD fee schedule 

that the Secretary determines is 

associated with the drug or biological. 

Because payment for a drug that is 

policy packaged 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 

proposed calculation of the policy 

packaged drug APC offset amounts is 

described in more detail in section 

IV.A.2. of this proposed rule. It follows 

that the copayment for the nonpassthrough 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 2013, we are proposing 

to continue to set the associated 

copayment amount to zero for CY 2014 

for pass-through diagnostic 

radiopharmaceuticals, contrast agents, 

and anesthesia drugs that would 

otherwise be packaged if the item did 

not have pass-through status. We also 

are proposing to set the associated 

copayment amount to zero for the 

additional categories of policy-packaged 

products proposed for CY 2014 

described in section II.A.3. of this 

proposed rule. 

The separate OPPS payment to a 

hospital for the pass-through diagnostic 

radiopharmaceutical, contrast agent, 

anesthesia drug, and the additional 

categories of policy-packaged products 

proposed for CY 2014 is not subject to 

a copayment according to the statute. 

Therefore, we are proposing to not 

publish a copayment amount for these 

items in Addenda A and B to this 

proposed rule (which are available via 

the Internet on the CMS Web site). 

For CY 2013, we estimated the OPPS 

pass-through payment for drugs and 

biologicals to be $22 million. Our 

proposed OPPS pass-through payment 

estimate for drugs and biologicals in CY 

2014 is $1 million, which is discussed 

in section VI.B. of this proposed rule. 

The 18 drugs and biologicals that we are 

proposing to continue on pass-through 

status for CY 2014 or have been granted 

pass-through status as of July 2013 are 

displayed in Table 20 below. 

TABLE 20—PROPOSED DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2014 

Proposed 

CY 2014 

HCPCS 

code 

CY 2014 Long descriptor 

Proposed 

CY 2014 

SI 

Proposed 

CY 2014 

APC 

C9130 .... Injection, immune globulin (Bivigam), 500 mg .................................................................................................. G 9130 

C9131* ... Injection, ado-trastuzumab emtansine, 1 mg .................................................................................................... G 9131 

C9290 .... Injection, bupivicaine liposome, 1 mg ............................................................................................................... G 9290 

C9292 .... Injection, pertuzumab, 10 mg ........................................................................................................................... G 9292 

C9293 .... Injection, glucarpidase, 10 units ....................................................................................................................... G 9293 

C9294 .... Injection, taliglucerase alfa, 10 units ................................................................................................................. G 9294 

C9295 .... Injection, carfilzomib, 1 mg ............................................................................................................................... G 9295 

C9296 .... Injection, ziv-aflibercept, 1 mg .......................................................................................................................... G 9296 

C9297 .... Injection, omacetaxine mepesuccinate, 0.01 mg .............................................................................................. G 9297 

C9298 .... Injection, ocriplasmin, 0.125 mg ....................................................................................................................... G 9298 

J0178 ..... Injection, aflibercept, 1 mg vial ......................................................................................................................... G 1420 

J0716 ..... Injection, centruroides (scorpion) immune f(ab)2, up to 120 milligrams .......................................................... G 1431 

J7315 ..... Mitomycin, ophthalmic, 0.2 mg ......................................................................................................................... G 1448 

J9019 ..... Injection, asparaginase (erwinaze), 1,000 iu .................................................................................................... G 9289 

Q4122* ... Dermacell, per square centimeter ..................................................................................................................... G 1419 

Q4127 .... Talymed, per square centimeter ....................................................................................................................... G 1449 

Q4132 .... Grafix core, per square centimeter ................................................................................................................... G 9368 

Q4133 .... Grafix prime, per square centimeter ................................................................................................................. G 9369 

* Because the payment rates associated with these codes effective July 1, 2013 are not available to us in time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2013 OPPS quarterly update CR could not be included in Addendum B to this proposed rule. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
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4. Proposed Provisions for Reducing 

Transitional Pass-Through Payments for 

Diagnostic Radiopharmaceuticals; 

Contrast Agents; Drugs, Biologicals, and 

Radiopharmaceuticals That Function as 

Supplies When Used in a Diagnostic 

Test or Procedure; and Drugs and 

Biologicals That Function as Supplies or 

Devices When Used in a Surgical 

Procedure to Offset Costs Packaged Into 

APC Groups 

a. Background 

Prior to CY 2008, diagnostic 

radiopharmaceuticals and contrast 

agents were paid separately under the 

OPPS if their mean per day costs were 

greater than the applicable year’s drug 

packaging threshold. In CY 2008 (72 FR 

66768), we began a policy of packaging 

payment for all nonpass-through 

diagnostic radiopharmaceuticals and 

contrast agents as ancillary and 

supportive items and services into their 

associated nuclear medicine procedures. 

Therefore, beginning in CY 2008, 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents were not subject to the annual 

OPPS drug packaging threshold to 

determine their packaged or separately 

payable payment status, and instead all 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents were packaged as a matter of 

policy. For CY 2014, we are proposing 

to continue to package payment for all 

nonpass-through diagnostic 

radiopharmaceuticals, contrast agents, 

and anesthesia drugs and to begin 

packaging all nonpass-through drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies when used in 

a diagnostic test or procedure and drugs 

and biologicals that function as supplies 

or devices when used in a surgical 

procedure, as discussed in section 

II.A.3. of this proposed rule. 

b. Proposed Payment Offset Policy for 

Diagnostic Radiopharmaceuticals 

As previously noted, 

radiopharmaceuticals are considered to 

be drugs for OPPS pass-through 

payment purposes. As described above, 

section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional passthrough payment amount for passthrough drugs and biologicals is the 

difference between the amount paid 

under section 1842(o) of the Act and the 

otherwise applicable OPD fee schedule 

amount. There is currently one 

radiopharmaceutical with pass-through 

status under the OPPS, HCPCS code 

A9584 (Iodine I–123 ioflupane, 

diagnostic, per study dose, up to 5 

millicuries). This product, which is 

presently referred to using HCPCS code 

A9584, was granted pass-through status 

using HCPCS code C9406 beginning July 

1, 2011, and we are proposing that its 

pass-through status would expire on 

December 31, 2013. We currently apply 

the established radiopharmaceutical 

payment offset policy to pass-through 

payment for this product. As described 

earlier in section V.A.3. of this proposed 

rule, we are proposing that new passthrough diagnostic 

radiopharmaceuticals would be paid at 

ASP+6 percent, while those new passthrough diagnostic 

radiopharmaceuticals 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 diagnostic radiopharmaceuticals an 

amount reflecting the portion of the 

APC payment associated with 

predecessor radiopharmaceuticals in 

order to ensure no duplicate 

radiopharmaceutical payment is made. 

In CY 2009, we established a policy to 

estimate the portion of each APC 

payment rate that could reasonably be 

attributed to the cost of predecessor 

diagnostic radiopharmaceuticals when 

considering a new diagnostic 

radiopharmaceutical for pass-through 

payment (73 FR 68638 through 68641). 

Specifically, we use the policy packaged 

drug offset fraction for APCs containing 

nuclear medicine procedures, calculated 

as 1 minus the following: the cost from 

single procedure claims in the APC after 

removing the cost for policy packaged 

drugs divided by the cost from single 

procedure claims in the APC. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60480 

through 60484), we finalized a policy to 

redefine policy packaged drugs as only 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents, as a result of the policy 

discussed in sections V.A.4. and 

V.B.2.d. of the CY 2010 OPPS/ASC final 

rule with comment period (74 FR 60471 

through 60477 and 60495 through 

60499, respectively) that treats nonpassthrough implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) and implantable biologicals that 

are surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) with newly approved passthrough status beginning in CY 2010 or 

later as devices, rather than drugs. To 

determine the actual APC offset amount 

for pass-through diagnostic 

radiopharmaceuticals that takes into 

consideration the otherwise applicable 

OPPS payment amount, we multiply the 

policy packaged drug offset fraction by 

the APC payment amount for the 

nuclear medicine procedure with which 

the pass-through diagnostic 

radiopharmaceutical is used and, 

accordingly, reduce the separate OPPS 

payment for the pass-through diagnostic 

radiopharmaceutical by this amount. 

Beginning in CY 2011 and as 

discussed in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71934 through 71936), we finalized a 

policy to require hospitals to append 

modifier ‘‘FB’’ to specified nuclear 

medicine procedures and to report a 

token charge of less than $1.01 in cases 

in which the diagnostic 

radiopharmaceutical is received without 

cost or with full credit. Beginning in CY 

2014, we are proposing to no longer 

require hospitals to append modifier 

‘‘FB’’ to specified nuclear medicine 

procedures or to report a token charge 

of less than $1.01 in cases in which the 

diagnostic radiopharmaceutical is 

received at no cost/full credit. Under 

this proposed policy, the OPPS payment 

amount for nuclear medicine 

procedures would not be reduced when 

a diagnostic radiopharmaceutical is 

received at no cost or full credit. Based 

on claims data, it appears that hospitals 

rarely receive diagnostic 

radiopharmaceuticals at no cost or full 

credit and, therefore, we do not believe 

that the burden on hospitals of adhering 

to the nuclear medicine ‘‘FB’’ modifier 

policy continues to be warranted. 

For CY 2013, we finalized a policy to 

apply the diagnostic 

radiopharmaceutical offset policy to 

payment for pass-through diagnostic 

radiopharmaceuticals, as described 

above. For CY 2014, we are proposing 

to continue to apply the diagnostic 

radiopharmaceutical offset policy to 

payment for pass-through diagnostic 

radiopharmaceuticals. 

Table 21 below displays the proposed 

APCs to which nuclear medicine 

procedures would be assigned in CY 

2014 and for which we expect that an 

APC offset could be applicable in the 

case of diagnostic radiopharmaceuticals 

with pass-through status. 


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TABLE 21—PROPOSED APCS TO

WHICH NUCLEAR MEDICINE PROCEDURES WOULD BE ASSIGNED FOR

CY 2014 

Proposed 

CY 2014 

APC 

Proposed CY 2014 APC title 

0308 ....... Positron Emission Tomography 

(PET) Imaging. 

0377 ....... Level II Cardiac Imaging. 

0378 ....... Level II Pulmonary Imaging. 

0389 ....... Level I Non-imaging Nuclear 

Medicine. 

0390 ....... Level I Endocrine Imaging. 

0391 ....... Level II Endocrine Imaging. 

0392 ....... Level II Non-imaging Nuclear 

Medicine. 

0393 ....... Hematologic Processing & Studies. 

0394 ....... Hepatobiliary Imaging. 

0395 ....... GI Tract Imaging. 

0396 ....... Bone Imaging. 

0397 ....... Vascular Imaging. 

0398 ....... Level I Cardiac Imaging. 

0400 ....... Hematopoietic Imaging. 

0401 ....... Level I Pulmonary Imaging. 

0402 ....... Level II Nervous System Imaging. 

0403 ....... Level I Nervous System Imaging. 

0404 ....... Renal and Genitourinary Studies. 

0406 ....... Level I Tumor/Infection Imaging. 

0408 ....... Level III Tumor/Infection Imaging. 

0414 ....... Level II Tumor/Infection Imaging. 

c. Proposed Payment Offset Policy for 

Contrast Agents 

Section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional passthrough payment amount for passthrough drugs and biologicals is the 

difference between the amount paid 

under section 1842(o) of the Act and the 

otherwise applicable OPD fee schedule 

amount. There currently are no contrast 

agents with pass-through status under 

the OPPS. As described in section 

V.A.3. of this proposed rule, we are 

proposing that new pass-through 

contrast agents would be paid at ASP+6 

percent, while those new pass-through 

contrast agents without ASP 

information would be paid at WAC+6 

percent or, if WAC is not available, 

payment would be based on 95 percent 

of the product’s most recently published 

AWP. 

Although there are currently no 

contrast agents with pass-through status, 

we believe that a payment offset is 

necessary in the event that a new 

contrast agent is approved for passthrough status during CY 2014 in order 

to provide an appropriate transitional 

pass-through payment for new contrast 

agents because all of these items are 

packaged when they do not have passthrough status. In accordance with our 

standard offset methodology, we are 

proposing for CY 2014 to deduct from 

the payment for new pass-through 

contrast agents that are approved for 

pass-through status as a drug or 

biological during CY 2014, 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 2014, as we did in CY 2013, we 

are proposing to continue to apply this 

same policy to contrast agents. 

Specifically, we are proposing to utilize 

the policy packaged drug offset fraction 

for procedural APCs, calculated as 1 

minus the following: the cost from 

single procedure claims in the APC after 

removing the cost for policy packaged 

drugs divided by the cost from single 

procedure claims in the APC. To 

determine the actual APC offset amount 

for pass-through contrast agents that 

takes into consideration the otherwise 

applicable OPPS payment amount, we 

are proposing to multiply the policy 

packaged drug offset fraction by the 

APC payment amount for the procedure 

with which the pass-through contrast 

agent is used and, accordingly, reduce 

the separate OPPS payment for the passthrough contrast agent by this amount. 

We are proposing to continue to apply 

this methodology for CY 2014 to 

recognize that when a contrast agent 

with pass-through status is billed with 

any procedural APC listed in Table 22 

of this proposed rule, a specific offset 

based on the procedural APC would be 

applied to the payment for the contrast 

agent to ensure that duplicate payment 

is not made for the contrast agent. 

Proposed procedural APCs for which 

we expect a contrast offset could be 

applicable in the case of a pass-through 

contrast agent have been identified as 

any procedural APC with a policy 

packaged drug amount greater than $20 

that is not a nuclear medicine APC 

identified in Table 21 above, and these 

APCs are displayed in Table 22 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 (74 FR 60483 through 60484). 

For CY 2014, we are proposing to 

continue to recognize that when a 

contrast agent with pass-through status 

is billed with any procedural APC listed 

in Table 22, a specific offset based on 

the procedural APC would be applied to 

the payment for the contrast agent to 

ensure that duplicate payment is not 

made for the contrast agent. 

TABLE 22—PROPOSED APCS TO WHICH A CONTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2014 

Proposed 

CY 2014 

APC 

Proposed CY 2014 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. 

0152 ....... Level I Percutaneous Abdominal and Biliary Procedures. 

0177 ....... Level I Echocardiogram With Contrast. 

0178 ....... Level II Echocardiogram With Contrast. 

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. 


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TABLE 22—PROPOSED APCS TO WHICH A CONTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2014—Continued 

Proposed 

CY 2014 

APC 

Proposed CY 2014 APC title 

0375 ....... Ancillary Outpatient Services When Patient Expires. 

0383 ....... Cardiac Computed Tomographic Imaging. 

0388 ....... Discography. 

0442 ....... Dosimetric Drug Administration. 

0653 ....... Vascular Reconstruction/Fistula Repair with Device. 

0656 ....... Transcatheter Placement of Intracoronary Drug-Eluting Stents. 

0662 ....... CT Angiography. 

0668 ....... Level I Angiography and Venography. 

8006 ....... CT and CTA with Contrast Composite. 

8008 ....... MRI and MRA with Contrast Composite. 

d. Proposed Payment Offset Policy for 

Products Packaged According to the 

Proposed Policy to Package Drugs, 

Biologicals, and Radiopharmaceuticals 

That Function as Supplies When Used 

in a Diagnostic Test or Procedure and 

Drugs and Biologicals That Function as 

Supplies or Devices When Used in a 

Surgical Procedure 

Section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional passthrough payment amount for passthrough drugs and biologicals is the 

difference between the amount paid 

under section 1842(o) of the Act and the 

otherwise applicable OPD fee schedule 

amount. As discussed in section II.A.3. 

of this proposed rule, as a part of our 

proposed policy to package drugs, 

biologicals, and radiopharmaceuticals 

that function as supplies when used in 

a diagnostic test or procedure and drugs 

and biologicals that function as supplies 

or devices when used in a surgical 

procedure, we are specifically proposing 

that skin substitutes and stress agents 

used in myocardial perfusion imaging 

(MPI) be policy packaged in CY 2014, in 

addition to diagnostic 

radiopharmaceuticals, contrast agents, 

and anesthesia drugs. We believe that a 

payment offset, similar to the offset 

currently in place for pass-through 

devices, diagnostic 

radiopharmaceuticals, and contrast 

agents, is necessary in order to provide 

an appropriate transitional pass-through 

payment for drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure 

because all of these are packaged, or 

proposed to be packaged, when they do 

not have pass-through status. In 

accordance with our standard offset 

methodology, we are proposing for CY 

2014 to deduct from the payment for 

pass-through drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure an 

amount that reflects the portion of the 

APC payment associated with 

predecessor products in order to ensure 

no duplicate 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). 

For CY 2014, we are proposing to apply 

this same policy to drugs, biologicals, 

and radiopharmaceuticals that function 

as supplies when used in a diagnostic 

test or procedure and drugs and 

biologicals that function as supplies or 

devices when used in a surgical 

procedure. Specifically, in the case of 

pass-through skin substitutes, we are 

proposing to utilize the policy packaged 

drug offset fraction for skin substitute 

procedural APCs, calculated as 1 minus 

the following: the cost from single 

procedure claims in the APC after 

removing the cost for policy packaged 

drugs divided by the cost from single 

procedure claims in the APC. Because 

policy packaged radiopharmaceuticals 

also would be included in the drug 

offset fraction for the APC to which MPI 

procedures are assigned, in the case of 

pass-through stress agents, we are 

proposing to utilize the policy packaged 

drug offset fraction for the procedural 

APC, calculated as 1 minus the 

following: the cost from single 

procedure claims in the APC after 

removing the cost for policy packaged 

drugs excluding policy packaged 

diagnostic radiopharmaceuticals 

divided by the cost from single 

procedure claims in the APC. To 

determine the actual APC offset amount 

for pass-through skin substitutes and 

pass-through stress agents that takes 

into consideration the otherwise 

applicable OPPS payment amount, we 

are proposing to multiply the policypackaged drug offset fraction by the 

APC payment amount for the procedure 

with which the pass-through skin 

substitute or pass-through stress agent is 

used and, accordingly, reduce the 

separate OPPS payment for the passthrough skin substitute or pass-through 

stress agent by this amount. 

Table 23 below displays the proposed 

APCs to which skin substitute 

procedures would be assigned in CY 

2014 and for which we expect that an 

APC offset could be applicable in the 

case of skin substitutes with passthrough status. 

Table 24 below displays the proposed 

APC to which MPI procedures would be 

assigned in CY 2014 and for which we 

expect that an APC offset could be 

applicable in the case of a stress agent 

with pass-through status. 

We are proposing to continue to post 

annually on the CMS Web site at 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html a 

file that contains the APC offset 

amounts that will be used for that year 

for purposes of both evaluating cost 

significance for candidate pass-through 

device categories and drugs and 

biologicals 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. 


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TABLE 23—PROPOSED APCS TO

WHICH SKIN SUBSTITUTE PROCEDURES WOULD BE ASSIGNED FOR

CY 2014 

Proposed 

CY 2014 

APC 

Proposed CY 2014 APC title 

0135 ....... Level III Skin Repair. 

0136 ....... Level IV Skin Repair. 

TABLE 24—PROPOSED APCS TO

WHICH MPI PROCEDURES WOULD

BE ASSIGNED FOR CY 2014 

Proposed 

CY 2014 

APC 

Proposed CY 2014 APC title 

0100 ....... Cardiac Stress Tests. 

0377 ....... Level II Cardiac Imaging. 

B. Proposed OPPS Payment for Drugs, 

Biologicals, and Radiopharmaceuticals 

Without Pass-Through Status 

1. Background 

Under the CY 2013 OPPS, we 

currently pay for drugs, biologicals, and 

radiopharmaceuticals that do not have 

pass-through status in one of two ways: 

As a packaged payment included in the 

payment for the associated service, or as 

a separate payment (individual APCs). 

We explained in the April 7, 2000 OPPS 

final rule with comment period (65 FR 

18450) that we generally package the 

cost of drugs and radiopharmaceuticals 

into the APC payment rate for the 

procedure or treatment with which the 

products are usually furnished. 

Hospitals do not receive separate 

payment for packaged items and 

supplies, and hospitals may not bill 

beneficiaries separately for any 

packaged items and supplies whose 

costs are recognized and paid within the 

national OPPS payment rate for the 

associated procedure or service. 

(Transmittal A–01–133, issued on 

November 20, 2001, explains in greater 

detail the rules regarding separate 

payment for packaged services.) 

Packaging costs into a single aggregate 

payment for a service, procedure, or 

episode-of-care is a fundamental 

principle that distinguishes a 

prospective payment system from a fee 

schedule. In general, packaging the costs 

of items and services into the payment 

for the primary procedure or service 

with which they are associated 

encourages hospital efficiencies and 

also enables hospitals to manage their 

resources with maximum flexibility. 

2. Proposed Criteria for Packaging 

Payment for Drugs, Biologicals, and 

Radiopharmaceuticals 

a. Background 

As indicated in section V.B.1. of this 

proposed rule, in accordance with 

section 1833(t)(16)(B) of the Act, the 

threshold for establishing separate APCs 

for payment of drugs and biologicals 

was set to $50 per administration during 

CYs 2005 and 2006. In CY 2007, we 

used the four quarter moving average 

Producer Price Index (PPI) levels for 

Pharmaceutical Preparations 

(Prescription) to trend the $50 threshold 

forward from the third quarter of CY 

2005 (when the Pub. L. 108–173 

mandated threshold became effective) to 

the third quarter of CY 2007. We then 

rounded the resulting dollar amount to 

the nearest $5 increment in order to 

determine the CY 2007 threshold 

amount of $55. Using the same 

methodology as that used in CY 2007 

(which is discussed in more detail in 

the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68085 through 

68086)), we set the packaging threshold 

for establishing separate APCs for drugs 

and biologicals at $60 for CYs 2008 and 

2009. For CY 2010, we set the packaging 

threshold at $65; for CY 2011, we set the 

packaging threshold at $70; for CY 2012, 

we set the packaging threshold at $75; 

and for CY 2013, we set the packaging 

threshold at $80. 

Following the CY 2007 methodology, 

for this CY 2014 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 2014 and 

rounded the resulting dollar amount 

($87.70) to the nearest $5 increment, 

which yielded a figure of $90. In 

performing this calculation, we used the 

most recent forecast of the quarterly 

index levels for the PPI for 

Pharmaceuticals for Human Use 

(Prescription) (Bureau of Labor Statistics 

(BLS) series code WPUSI07003) from 

CMS’ Office of the Actuary (OACT). (We 

note that we are not proposing a change 

to the PPI that is used to calculate the 

threshold for CY 2014; 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 the PPI for Prescription 

Drugs as it reflects price changes 

associated with the average mix of all 

pharmaceuticals in the overall economy. 

In addition, we chose this price series 

because it is publicly available and 

regularly published, improving public 

access and transparency. Forecasts of 

the PPI for Prescription Drugs are 

developed by IHS Global Insight, Inc., a 

nationally recognized economic and 

financial forecasting firm. As actual 

inflation for past quarters replaced 

forecasted amounts, the PPI estimates 

for prior quarters have been revised 

(compared with those used in the CY 

2007 OPPS/ASC final rule with 

comment period) and have been 

incorporated into our calculation. Based 

on the calculations described above, we 

are proposing a packaging threshold for 

CY 2014 of $90. (For a more detailed 

discussion of the OPPS drug packaging 

threshold and the use of the PPI for 

Prescription Drugs, we refer readers to 

the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68085 through 

68086).) 

b. Proposed Cost Threshold for 

Packaging of Payment for HCPCS Codes 

That Describe Certain Drugs, Certain 

Biologicals, and Therapeutic 

Radiopharmaceuticals (‘‘ThresholdPackaged Drugs’’) 

To determine the proposed CY 2014 

packaging status for all nonpass-through 

drugs and biologicals that are not policy 

packaged for this proposed rule, we 

calculated, on a HCPCS code-specific 

basis, the per day cost of all drugs, 

biologicals, and therapeutic 

radiopharmaceuticals (collectively 

called ‘‘threshold-packaged’’ drugs) that 

had a HCPCS code in CY 2012 and were 

paid (via packaged or separate payment) 

under the OPPS. We used data from CY 

2012 claims processed before January 1, 

2013 for this calculation. However, we 

did not perform this calculation for 

those drugs and biologicals with 

multiple HCPCS codes that include 

different dosages, as described in 

section V.B.2.c. of this proposed rule, or 

for diagnostic radiopharmaceuticals, 

contrast agents, anesthesia drugs, and 

implantable biologicals that we are 

proposing to continue to package in CY 

2014, or for the new categories of 

policy-packaged products proposed for 

CY 2014, as discussed in section II.A.3. 

of this proposed rule. 

In order to calculate the per day costs 

for drugs, biologicals, and therapeutic 

radiopharmaceuticals to determine their 

proposed packaging status in CY 2014, 

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 biological HCPCS code, 

we used an estimated payment rate of 

ASP+6 percent (which is the payment 

rate we are proposing for separately 


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payable drugs and biologicals for CY 

2014, as discussed in more detail in 

section V.B.3.b. of this proposed rule) to 

calculate the CY 2014 proposed rule per 

day costs. We used the manufacturer 

submitted ASP data from the fourth 

quarter of CY 2012 (data that were used 

for payment purposes in the physician’s 

office setting, effective April 1, 2013) to 

determine the proposed rule per day 

cost. 

As is our standard methodology, for 

CY 2014, we are proposing to use 

payment rates based on the ASP data 

from the fourth quarter of CY 2012 for 

budget neutrality estimates, packaging 

determinations, impact analyses, and 

completion of Addenda A and B to this 

proposed rule (which are available via 

the Internet on the CMS Web site) 

because these are the most recent data 

available for use at the time of 

development of this proposed rule. 

These data also were the basis for drug 

payments in the physician’s office 

setting, effective April 1, 2013. 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 

2012 hospital claims data to determine 

their per day cost. 

We are proposing to package items 

with a per day cost less than or equal 

to $90, and identify items with a per day 

cost greater than $90 as separately 

payable. Consistent with our past 

practice, we crosswalked historical 

OPPS claims data from the CY 2012 

HCPCS codes that were reported to the 

CY 2013 HCPCS codes that we display 

in Addendum B of this proposed rule 

(which is available via the Internet on 

the CMS Web site) for payment in CY 

2014. 

Our policy during previous cycles of 

the OPPS has been to use updated ASP 

and claims data to make final 

determinations of the packaging status 

of HCPCS codes for drugs, biologicals, 

and therapeutic radiopharmaceuticals 

for the OPPS/ASC final rule with 

comment period. We note that it is also 

our policy to make an annual packaging 

determination for a HCPCS code only 

when we develop the OPPS/ASC final 

rule with comment period for the 

update year. Only HCPCS codes that are 

identified as separately payable in the 

final rule with comment period will be 

subject to quarterly updates. For our 

calculation of per day costs of HCPCS 

codes for drugs and biologicals in the 

CY 2014 OPPS/ASC final rule with 

comment period, we are proposing to 

use ASP data from the first quarter of 

CY 2013, 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, 2013, along with 

updated hospital claims data from CY 

2012. We note that we also are 

proposing to use these data for budget 

neutrality estimates and impact analyses 

for the CY 2014 OPPS/ASC final rule 

with comment period. 

Payment rates for HCPCS codes for 

separately payable drugs and biologicals 

included in Addenda A and B to the 

final rule with comment period will be 

based on ASP data from the second 

quarter of CY 2013. These data will be 

the basis for calculating payment rates 

for drugs and biologicals in the 

physician’s office setting using the ASP 

methodology, effective October 1, 2013. 

These physician’s office payment rates 

would then be updated in the January 

2014 OPPS update, based on the most 

recent ASP data to be used for 

physician’s office and OPPS payment as 

of January 1, 2014. For items that do not 

currently have an ASP-based payment 

rate, we are proposing to recalculate 

their mean unit cost from all of the CY 

2012 claims data and updated cost 

report information available for the CY 

2014 final rule with comment period to 

determine their final per day cost. 

Consequently, the packaging status of 

some HCPCS codes for drugs, 

biologicals, and therapeutic 

radiopharmaceuticals in this CY 2014 

OPPS/ASC proposed rule may be 

different from the same drug HCPCS 

code’s packaging status determined 

based on the data used for the CY 2014 

OPPS/ASC final rule with comment 

period. Under such circumstances, we 

are proposing to continue to follow the 

established policies initially adopted for 

the CY 2005 OPPS (69 FR 65780) in 

order to more equitably pay for those 

drugs whose cost fluctuates relative to 

the proposed CY 2014 OPPS drug 

packaging threshold and the drug’s 

payment status (packaged or separately 

payable) in CY 2013. Specifically, for 

CY 2014, consistent with our historical 

practice, we are proposing to apply the 

following policies to these HCPCS codes 

for drugs, biologicals, and therapeutic 

radiopharmaceuticals whose 

relationship to the drug packaging 

threshold changes based on the updated 

drug packaging threshold and on the 

final updated data: 

• HCPCS codes for drugs and 

biologicals that were paid separately in 

CY 2013 and that are proposed for 

separate payment in CY 2014, and that 

then have per day costs equal to or less 

than the CY 2014 final rule drug 

packaging threshold, based on the 

updated ASPs and hospital claims data 

used for the CY 2014 final rule, would 

continue to receive separate payment in 

CY 2014. 

• HCPCS codes for drugs and 

biologicals that were packaged in CY 

2013 and that are proposed for separate 

payment in CY 2014, and that then have 

per day costs equal to or less than the 

CY 2014 final rule drug packaging 

threshold, based on the updated ASPs 

and hospital claims data used for the CY 

2014 final rule, would remain packaged 

in CY 2014. 

• HCPCS codes for drugs and 

biologicals for which we are proposing 

packaged payment in CY 2014 but then 

have per day costs greater than the CY 

2014 final rule drug packaging 

threshold, based on the updated ASPs 

and hospital claims data used for the CY 

2014 final rule, would receive separate 

payment in CY 2014. 

c. Proposed Packaging Determination for 

HCPCS Codes That Describe the Same 

Drug or Biological But Different Dosages 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66776), we 

began recognizing, for OPPS payment 

purposes, multiple HCPCS codes 

reporting different dosages for the same 

covered Part B drugs or biologicals in 

order to reduce hospitals’ administrative 

burden by permitting them to report all 

HCPCS codes for drugs and biologicals. 

In general, prior to CY 2008, the OPPS 

recognized for payment only the HCPCS 

code that described the lowest dosage of 

a drug or biological. We extended this 

recognition to multiple HCPCS codes for 

several other drugs under the CY 2009 

OPPS (73 FR 68665). During CYs 2008 

and 2009, we applied a policy that 

assigned the status indicator of the 

previously recognized HCPCS code to 

the associated newly recognized code(s), 

reflecting the packaged or separately 

payable status of the new code(s). In the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66775), we 

explained that once claims data were 

available for these previously 

unrecognized HCPCS codes, we would 

determine the packaging status and 

resulting status indicator for each 

HCPCS code according to the general, 

established HCPCS code-specific 

methodology for determining a code’s 

packaging status for a given update year. 

However, we also stated that we 

planned to closely follow our claims 

data to ensure that our annual packaging 

determinations for the different HCPCS 

codes describing the same drug or 

biological did not create inappropriate 

payment incentives for hospitals to 

report certain HCPCS codes instead of 

others. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60490 


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through 60491), we finalized a policy to 

make a single packaging determination 

for a drug, rather than an individual 

HCPCS code, when a drug has multiple 

HCPCS codes describing different 

dosages. We analyzed CY 2008 claims 

data for the HCPCS codes describing 

different dosages of the same drug or 

biological that were newly recognized in 

CY 2008 and found that our claims data 

would result in several different 

packaging determinations for different 

codes describing the same drug or 

biological. Furthermore, we found that 

our claims data included few units and 

days for a number of newly recognized 

HCPCS codes, resulting in our concern 

that these data reflected claims from 

only a small number of hospitals, even 

though the drug or biological itself may 

be reported by many other hospitals 

under the most common HCPCS code. 

Based on these findings from our first 

available claims data for the newly 

recognized HCPCS codes, we believed 

that adopting our standard HCPCS codespecific packaging determinations for 

these codes could lead to payment 

incentives for hospitals to report certain 

HCPCS codes instead of others, 

particularly because we do not currently 

require hospitals to report all drug and 

biological HCPCS codes under the OPPS 

in consideration of our previous policy 

that generally recognized only the 

lowest dosage HCPCS code for a drug or 

biological for OPPS payment. 

For CY 2014, we continue to believe 

that adopting the standard HCPCS codespecific packaging determinations for 

these codes could lead to payment 

incentives for hospitals to report certain 

HCPCS codes for drugs instead of 

others. Making packaging 

determinations on a drug-specific basis 

eliminates these incentives and allows 

hospitals flexibility in choosing to 

report all HCPCS codes for different 

dosages of the same drug or only the 

lowest dosage HCPCS code. Therefore, 

we are proposing to continue our policy 

to make packaging determinations on a 

drug-specific basis, rather than a HCPCS 

code-specific basis, for those HCPCS 

codes that describe the same drug or 

biological but different dosages in CY 

2014. 

For CY 2014, 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 2012 claims data and our pricing 

information at ASP+6 percent across all 

of the HCPCS codes that describe each 

distinct drug or biological in order to 

determine the mean units per day of the 

drug or biological in terms of the HCPCS 

code with the lowest dosage descriptor. 

We then multiplied the weighted 

average ASP+6 percent per unit 

payment amount across all dosage levels 

of a specific drug or biological by the 

estimated units per day for all HCPCS 

codes that describe each drug or 

biological from our claims data to 

determine the estimated per day cost of 

each drug or biological at less than or 

equal to $90 (so that all HCPCS codes 

for the same drug or biological would be 

packaged) or greater than $90 (so that all 

HCPCS codes for the same drug or 

biological would be separately payable). 

The following drugs did not have 

pricing information available for the 

ASP methodology for this CY 2014 

OPPS/ASC proposed rule and, as is our 

current policy for determining the 

packaging status of other drugs, we used 

the mean unit cost available from the 

fourth quarter CY 2012 claims data to 

make the packaging determinations for 

these drugs: HCPCS codes J3471 

(Injection, hyaluronidase, ovine, 

preservative free, per 1 usp unit (up to 

999 usp units)); J3472 (Injection, 

hyaluronidase, ovine, preservative free, 

per 1000 usp units); Q0171 

(Chlorpromazine hydrochloride, 10 mg, 

oral, FDA approved prescription 

antiemetic, for use as a complete 

therapeutic substitute for an IV 

antiemetic at the time of chemotherapy 

treatment, not to exceed a 48-hour 

dosage regimen); Q0172 

(Chlorpromazine hydrochloride, 25 mg, 

oral, FDA approved prescription antiemetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of chemotherapy 

treatment, not to exceed a 48-hour 

dosage regimen); Q0175 (Perphenazine, 

4 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of chemotherapy 

treatment, not to exceed a 48-hour 

dosage regimen); Q0176 (Perphenazine, 

8 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of chemotherapy 

treatment, not to exceed a 48-hour 

dosage regimen); Q0177 (Hydroxyzine 

pamoate, 25 mg, oral, FDA approved 

prescription anti-emetic, for use as a 

complete therapeutic substitute for an 

IV anti-emetic at the time of 

chemotherapy treatment, not to exceed 

a 48-hour dosage regimen); and Q0178 

(Hydroxyzine pamoate, 50 mg, oral, 

FDA approved prescription anti-emetic, 

for use as a complete therapeutic 

substitute for an IV anti-emetic at the 

time of chemotherapy treatment, not to 

exceed a 48-hour dosage regimen). The 

proposed packaging status of each drug 

and biological HCPCS code to which 

this methodology would apply is 

displayed in Table 25 below. 

TABLE 25—PROPOSED HCPCS CODES TO WHICH THE CY 2014 DRUG–SPECIFIC PACKAGING DETERMINATION

METHODOLOGY WOULD APPLY

Proposed 

CY 2014 

HCPCS 

code 

Proposed CY 2014 long descriptor 

Proposed 

CY 2014 

SI 

C9257 ..... Injection, bevacizumab, 0.25 mg ............................................................................................................................................ K 

J9035 ...... Injection, bevacizumab, 10 mg ............................................................................................................................................... K 

J1020 ...... Injection, methylprednisolone acetate, 20 mg ........................................................................................................................ N 

J1030 ...... Injection, methylprednisolone acetate, 40 mg ........................................................................................................................ N 

J1040 ...... Injection, methylprednisolone acetate, 80 mg ........................................................................................................................ N 

J1070 ...... Injection, testosterone cypionate, up to 100 mg .................................................................................................................... N 

J1080 ...... Injection, testosterone cypionate, 1 cc, 200 mg .................................................................................................................... N 

J1440 ...... Injection, filgrastim (g-csf), 300 mcg ...................................................................................................................................... K 

J1441 ...... Injection, filgrastim (g-csf), 480 mcg ...................................................................................................................................... K 

J1460 ...... Injection, gamma globulin, intramuscular, 1 cc ...................................................................................................................... N 

J1560 ...... Injection, gamma globulin, intramuscular over 10 cc ............................................................................................................. N 

J1642 ...... Injection, heparin sodium, (heparin lock flush), per 10 units ................................................................................................. N 

J1644 ...... Injection, heparin sodium, per 1000 units .............................................................................................................................. N 

J1850 ...... Injection, kanamycin sulfate, up to 75 mg ............................................................................................................................. N 

J1840 ...... Injection, kanamycin sulfate, up to 500 mg ........................................................................................................................... N 


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TABLE 25—PROPOSED HCPCS CODES TO WHICH THE CY 2014 DRUG–SPECIFIC PACKAGING DETERMINATION

METHODOLOGY WOULD APPLY—Continued 

Proposed 

CY 2014 

HCPCS 

code 

Proposed CY 2014 long descriptor 

Proposed 

CY 2014 

SI 

J2270 ...... Injection, morphine sulfate, up to 10 mg ................................................................................................................................ N 

J2271 ...... Injection, morphine sulfate, 100 mg ....................................................................................................................................... N 

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

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

J2920 ...... Injection, methylprednisolone sodium succinate, up to 40 mg .............................................................................................. N 

J2930 ...... Injection, methylprednisolone sodium succinate, up to 125 mg ............................................................................................ N 

J3120 ...... Injection, testosterone enanthate, up to 100 mg ................................................................................................................... N 

J3130 ...... Injection, testosterone enanthate, up to 200 mg ................................................................................................................... N 

J3471 ...... Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units) ....................................................... N 

J3472 ...... Injection, hyaluronidase, ovine, preservative free, per 1000 usp units .................................................................................. N 

J7050 ...... Infusion, normal saline solution , 250 cc ................................................................................................................................ N 

J7040 ...... Infusion, normal saline solution, sterile (500 ml = 1 unit) ...................................................................................................... N 

J7030 ...... Infusion, normal saline solution , 1000 cc .............................................................................................................................. N 

J7515 ...... Cyclosporine, oral, 25 mg ...................................................................................................................................................... N 

J7502 ...... Cyclosporine, oral, 100 mg .................................................................................................................................................... N 

J8520 ...... Capecitabine, oral, 150 mg .................................................................................................................................................... K 

J8521 ...... Capecitabine, oral, 500 mg .................................................................................................................................................... K 

J9250 ...... Methotrexate sodium, 5 mg .................................................................................................................................................... N 

J9260 ...... Methotrexate sodium, 50 mg .................................................................................................................................................. N 

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

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

Q0167 ..... Dronabinol, 2.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV 

anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0168 ..... Dronabinol, 5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV

anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0169 ..... Promethazine hydrochloride, 12.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0170 ..... Promethazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0171 ..... Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic 

substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0172 ..... Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0175 ..... Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV 

anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0176 ..... Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV 

anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0177 ..... Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute

for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0178 ..... Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute

for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

3. Proposed Payment for Drugs and 

Biologicals Without Pass-Through 

Status That Are Not Packaged 

a. Proposed Payment for Specified 

Covered Outpatient Drugs (SCODs) and 

Other Separately Payable and Packaged 

Drugs and Biologicals 

Section 1833(t)(14) of the Act defines 

certain separately payable 

radiopharmaceuticals, drugs, and 

biologicals and mandates specific 

payments for these items. Under section 

1833(t)(14)(B)(i) of the Act, a ‘‘specified 

covered outpatient drug’’ (known as a 

SCOD) is defined as 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 SCODs. 

These exceptions are— 

• A drug or biological for which 

payment is first made on or after 

January 1, 2003, under the transitional 

pass-through payment provision in 

section 1833(t)(6) of the Act. 

• A drug or biological for which a 

temporary HCPCS code has not been 

assigned. 

• During CYs 2004 and 2005, an 

orphan drug (as designated by the 

Secretary). 

Section 1833(t)(14)(A)(iii) of the Act 

requires that payment for SCODs in CY 

2006 and subsequent years be equal to 

the average acquisition cost for the drug 

for that year as determined by the 

Secretary, subject to any adjustment for 

overhead costs and taking into account 

the hospital acquisition cost survey data 

collected by the Government 

Accountability Office (GAO) in CYs 

2004 and 2005, and later periodic 

surveys conducted by the Secretary as 

set forth in the statute. If hospital 

acquisition cost data are not available, 

the law requires that payment be equal 

to payment rates established under the 

methodology described in section 

1842(o), section 1847A, or section 

1847B of the Act, as calculated and 

adjusted by the Secretary as necessary. 


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Most physician Part B drugs are paid at 

ASP+6 percent pursuant to section 

1842(o) and section 1847A of the Act. 

Section 1833(t)(14)(E)(ii) of the Act 

provides for an adjustment in OPPS 

payment rates for SCODs to take into 

account overhead and related expenses, 

such as pharmacy services and handling 

costs. Section 1833(t)(14)(E)(i) of the Act 

required MedPAC to study pharmacy 

overhead and related expenses and to 

make recommendations to the Secretary 

regarding whether, and if so how, a 

payment adjustment should be made to 

compensate hospitals for overhead and 

related expenses. Section 

1833(t)(14)(E)(ii) of the Act authorizes 

the Secretary to adjust the weights for 

ambulatory procedure classifications for 

SCODs to take into account the findings 

of the MedPAC study. 

It has been our longstanding policy to 

apply the same treatment to all 

separately payable drugs and 

biologicals, which include SCODs, and 

drugs and biologicals that are not 

SCODs. Therefore, we apply the 

payment methodology in section 

1833(t)(14)(A)(iii) of the Act to SCODs, 

as required by statute, but we also apply 

it to separately payable drugs and 

biologicals that are not SCODs, which is 

a policy determination rather than a 

statutory requirement. In this CY 2014 

OPPS/ASC proposed rule, we are 

proposing to apply section 

1833(t)(14)(A)(iii)(II) of the Act to all 

separately payable drugs and 

biologicals, including SCODs. Although 

we do not distinguish SCODs in this 

discussion, we note that we are required 

to apply section 1833(t)(14)(A)(iii)(II) of 

the Act to SCODs, but we also are 

applying this provision to other 

separately payable drugs and 

biologicals, consistent with our history 

of using the same payment methodology 

for all separately payable drugs and 

biologicals. 

Since CY 2006, we have attempted to 

establish a drug payment methodology 

that reflects hospitals’ acquisition costs 

for drugs and biologicals while taking 

into account relevant pharmacy 

overhead and related handling 

expenses. We have attempted to collect 

more data on hospital overhead charges 

for drugs and biologicals by making 

several proposals that would require 

hospitals to change the way they report 

the cost and charges for drugs. None of 

these proposals were adopted due to 

significant stakeholder concern, 

including that hospitals stated that it 

would be administratively burdensome 

to report hospital overhead charges. We 

established a payment policy for 

separately payable drugs and 

biologicals, authorized by section 

1833(t)(14)(A)(iii)(I) of the Act, based on 

an ASP+X amount that is calculated by 

comparing the estimated aggregate cost 

of separately payable drugs and 

biologicals in our claims data to the 

estimated aggregate ASP dollars for 

separately payable drugs and 

biologicals, using the ASP as a proxy for 

average acquisition cost (70 FR 68642). 

We referred to this methodology as our 

standard drug payment methodology. 

In CY 2010, taking into consideration 

comments made by the pharmacy 

stakeholders and acknowledging the 

limitations of the reported data due to 

charge compression and hospitals’ 

reporting practices, we added an 

‘‘overhead adjustment’’ (an internal 

adjustment of the data) by redistributing 

cost from coded and uncoded packaged 

drugs and biologicals to separately 

payable drugs in order to provide more 

appropriate payments for drugs and 

biologicals in the HOPD. We continued 

this overhead adjustment methodology 

through CY 2012, and further refined 

our overhead adjustment methodology 

by finalizing a policy to update the 

redistribution amount for inflation and 

to keep the redistribution ratio constant 

between the proposed rule and the final 

rule. For a detailed discussion of our 

OPPS drug payment policies from CY 

2006 to CY 2012, we refer readers to the 

CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68383 through 

68385). 

We noted in the CY 2013 OPPS/ASC 

final rule with comment period (77 FR 

68386) that application of the standard 

drug payment methodology, with the 

overhead adjustment, has always 

yielded a finalized payment rate in the 

range of ASP+4 percent to ASP+6 

percent for nonpass-through separately 

payable drugs. We stated that the 

historic ASP+4 to ASP+6 percentage 

range is an appropriate payment rate for 

separately payable drugs and biologicals 

administered within the HOPD, 

including acquisition and pharmacy 

overhead and related expenses. 

However, because of continuing 

uncertainty about the full cost of 

pharmacy overhead and acquisition 

cost, based in large part on the 

limitations of the submitted hospital 

charge and claims data for drugs, we 

indicated our concern that the 

continued use of the standard drug 

payment methodology (including the 

overhead adjustment) still may not 

appropriately account for average 

acquisition and pharmacy overhead cost 

and, therefore, may result in payment 

rates that are not as predictable, 

accurate, or appropriate as they could 

be. 

In that final rule with comment 

period, we discussed that section 

1833(t)(14)(A)(iii)(II) of the Act requires 

an alternative methodology for 

determining payment rates for SCODs 

wherein, if hospital acquisition cost 

data are not available, payment shall be 

equal (subject to any adjustment for 

overhead costs) to payment rates 

established under the methodology 

described in section 1842(o), section 

1847A, or section 1847B of the Act, as 

calculated and adjusted by the Secretary 

as necessary. In the CY 2013 OPPS/ASC 

final rule with comment period (77 FR 

68386), we noted that section 

1833(t)(14)(A)(iii)(II) of the Act 

authorizes the Secretary to calculate and 

adjust, as necessary, the average price 

for a drug in the year established under 

section 1842(o), 1847A, or 1847B of the 

Act, as the case may be, in determining 

payment for SCODs. Pursuant to 

sections 1842(o) and 1847A of the Act, 

Part B drugs are paid at ASP+6 percent 

when furnished in physicians’ offices. 

We indicated that we believe that 

establishing the payment rates based on 

the statutory default of ASP+6 percent 

is appropriate as it yields increased 

predictability in payment for separately 

payable drugs and biologicals under the 

OPPS. We also noted that ASP+6 

percent is an appropriate payment 

amount because it is consistent with 

payment amounts yielded by our drug 

payment methodologies over the past 7 

years. Therefore, considering 

stakeholder and provider feedback, 

continued limitations of the hospital 

claims and cost data on drugs and 

biologicals, and Panel 

recommendations, in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68389), we finalized our 

proposal for CY 2013 to pay for 

separately payable drugs and biologicals 

at ASP+6 percent based on section 

1833(t)(14)(A)(iii)(II) of the Act, referred 

to as the statutory default. We also 

finalized our proposal that the ASP+6 

percent payment amount for separately 

payable drugs and biologicals requires 

no further adjustment, and represents 

the combined acquisition and pharmacy 

overhead payment for drugs and 

biologicals and that payments for 

separately payable drugs and biologicals 

are included in the budget neutrality 

adjustments, under the requirements in 

section 1833(t)(9)(B) of the Act, and that 

the budget neutral weight scaler is not 

applied in determining payments for 

these separately paid drugs and 

biological for CY 2013 (77 FR 68389). 

b. Proposed CY 2014 Payment Policy 

For CY 2014, we are proposing to 

continue our CY 2013 policy and pay 


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for separately payable drugs and 

biologicals at ASP+6 percent based on 

section 1833(t)(14)(A)(iii)(II) of the Act, 

referred to as the statutory default. We 

are proposing that the ASP+6 percent 

payment amount for separately payable 

drugs and biologicals requires no further 

adjustment, and represents the 

combined acquisition and pharmacy 

overhead payment for drugs and 

biologicals. We also are proposing that 

payments for separately payable drugs 

and biologicals are included in the 

budget neutrality adjustments, under 

the requirements in section 1833(t)(9)(B) 

of the Act, and that the budget neutral 

weight scaler is not applied in 

determining payments for these 

separately paid drugs and biologicals. 

4. Proposed Payment Policy for 

Therapeutic Radiopharmaceuticals 

Beginning in CY 2010 and continuing 

for CY 2013, we established a policy to 

pay for separately paid therapeutic 

radiopharmaceuticals under the ASP 

methodology adopted for separately 

payable drugs and biologicals. If ASP 

information is unavailable for a 

therapeutic radiopharmaceutical, we 

base therapeutic radiopharmaceutical 

payment on mean unit cost data derived 

from hospital claims. We believe that 

the rationale outlined in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60524 through 60525) for 

applying the principles of separately 

payable drug pricing to therapeutic 

radiopharmaceuticals continues to be 

appropriate for nonpass-through 

separately payable therapeutic 

radiopharmaceuticals in CY 2014. 

Therefore, we are proposing for CY 2014 

to pay all nonpass-through, separately 

payable therapeutic 

radiopharmaceuticals at ASP+6 percent, 

based on the statutory default described 

in section 1833(t)(14)(A)(iii)(II) of the 

Act. For a full discussion of ASP-based 

payment for therapeutic 

radiopharmaceuticals, we refer readers 

to the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60520 

through 60521). We also are proposing 

to rely on CY 2012 mean unit cost data 

derived from hospital claims data for 

payment rates for therapeutic 

radiopharmaceuticals for which ASP 

data are unavailable and to update the 

payment rates for separately payable 

therapeutic radiopharmaceuticals, 

according to our usual process for 

updating the payment rates for 

separately payable drugs and 

biologicals, on a quarterly basis if 

updated ASP information is available. 

For a complete history of the OPPS 

payment policy for therapeutic 

radiopharmaceuticals, we refer readers 

to the CY 2005 OPPS final rule with 

comment period (69 FR 65811), the CY 

2006 OPPS final rule with comment 

period (70 FR 68655), and the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60524). 

The proposed CY 2014 payment rates 

for nonpass-through separately payable 

therapeutic radiopharmaceuticals are 

included in Addenda A and B to this 

proposed rule (which are available via 

the Internet on the CMS Web site). 

5. Proposed Payment for Blood Clotting 

Factors 

For CY 2013, 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 2013, we provided payment for 

blood clotting factors under the OPPS at 

ASP+6 percent, plus an additional 

payment for the furnishing fee. We note 

that when blood clotting factors are 

provided in physicians’ offices under 

Medicare Part B and in other Medicare 

settings, a furnishing fee is also applied 

to the payment. The CY 2013 updated 

furnishing fee was $0.188 per unit. 

For CY 2014, we are proposing to pay 

for blood clotting factors at ASP+6 

percent, consistent with our proposed 

payment policy for other nonpassthrough separately payable drugs and 

biologicals, and to continue our policy 

for payment of the furnishing fee using 

an updated amount. Our policy to pay 

for a furnishing fee for blood clotting 

factors under the OPPS is consistent 

with the methodology applied in the 

physician office and inpatient hospital 

setting, and first articulated in the CY 

2006 OPPS final rule with comment 

period (70 FR 68661) and later 

discussed in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66765). The proposed furnishing fee 

update is based on the percentage 

increase in the Consumer Price Index 

(CPI) for medical care for the 12-month 

period ending with June of the previous 

year. Because the Bureau of Labor 

Statistics releases the applicable CPI 

data after the MPFS and OPPS/ASC 

proposed rules are published, we are 

not able to include the actual updated 

furnishing fee in the proposed rules. 

Therefore, in accordance with our 

policy, as finalized in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66765), we are proposing 

to announce the actual figure for the 

percent change in the applicable CPI 

and the updated furnishing fee 

calculated based on that figure through 

applicable program instructions and 

posting on the CMS Web site at: http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Part-B-Drugs/ 

McrPartBDrugAvgSalesPrice/ 

index.html. 

6. Proposed Payment for NonpassThrough Drugs, Biologicals, and 

Radiopharmaceuticals With HCPCS 

Codes But Without OPPS Hospital 

Claims Data 

The Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (Pub. L. 108–173) did not address 

the OPPS payment in CY 2005 and 

subsequent years 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 was no 

statutory provision that dictated 

payment for such drugs, biologicals, and 

radiopharmaceuticals in CY 2005, and 

because we had no hospital claims data 

to use in establishing a payment rate for 

them, we investigated several payment 

options for CY 2005 and discussed them 

in detail in the CY 2005 OPPS final rule 

with comment period (69 FR 65797 

through 65799). 

For CYs 2005 to 2007, we 

implemented a policy to provide 

separate payment for new drugs, 

biologicals, and radiopharmaceuticals 

with HCPCS codes (specifically those 

new drug, biological, and 

radiopharmaceutical HCPCS codes in 

each of those calendar years that did not 

crosswalk to predecessor HCPCS codes) 

but which did not have pass-through 

status, at a rate that was equivalent to 

the payment they received in the 

physician’s office setting, established in 

accordance with the ASP methodology 

for drugs and biologicals, and based on 

charges adjusted to cost for 

radiopharmaceuticals. For CYs 2008 and 

2009, we finalized a policy to provide 

payment for new drugs (excluding 

contrast agents and diagnostic 

radiopharmaceuticals) and biologicals 

(excluding implantable biologicals for 

CY 2009) with HCPCS codes, but which 

did not have pass-through status and 

were without OPPS hospital claims 

data, at ASP+5 percent and ASP+4 

percent, respectively, consistent with 

the final OPPS payment methodology 

for other separately payable drugs and 

biologicals. New therapeutic 

radiopharmaceuticals were paid at 

charges adjusted to cost based on the 

statutory requirement for CY 2008 and 

CY 2009 and payment for new 

diagnostic radiopharmaceuticals was 

packaged in both years. 

For CY 2010, we continued to provide 

payment for new drugs (excluding 

contrast agents) and biologicals with 


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HCPCS codes that do not have passthrough 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 

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 CYs 2011, 2012, and 2013, 

paying for new drugs, biologicals, and 

radiopharmaceuticals that do not have 

pass-through status, and are without 

OPPS hospital claims data at ASP+5 

percent, ASP+4 percent, and ASP+6 

percent, respectively, consistent with 

the final OPPS payment methodology 

for other separately payable drugs and 

biological during those payment years. 

For CY 2014, we are proposing to 

provide payment for new drugs, 

biologicals, and therapeutic 

radiopharmaceuticals that do not have 

pass-through status at ASP+6 percent, 

consistent with the proposed CY 2014 

payment methodology for other 

separately payable nonpass-through 

drugs, biologicals, and therapeutic 

radiopharmaceuticals to pay at ASP+6 

percent based on the statutory default. 

We believe this proposed policy would 

ensure that new nonpass-through drugs, 

biologicals and therapeutic 

radiopharmaceuticals would be treated 

like other drugs, biologicals, and 

therapeutic radiopharmaceuticals under 

the OPPS. 

For CY 2014, we also are proposing to 

package payment for all new nonpassthrough diagnostic 

radiopharmaceuticals, contrast agents, 

anesthesia drugs, drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure, and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure, with 

HCPCS codes but without claims data 

(those new CY 2014 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, 

anesthesia drugs, drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure, and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure, as 

discussed in more detail in section 

II.A.3. of this proposed rule. 

In accordance with the OPPS ASP 

methodology, in the absence of ASP 

data, for CY 2014, we are proposing to 

continue the policy we implemented 

beginning in CY 2005 of using the WAC 

for the product to establish the initial 

payment rate for new nonpass-through 

drugs and biologicals with HCPCS 

codes, but which are without OPPS 

claims data and are not diagnostic 

radiopharmaceuticals and contrast 

agents. However, we noted that if the 

WAC is also unavailable, we would 

make payment at 95 percent of the 

product’s most recent AWP. We also are 

proposing to assign status indicator ‘‘K’’ 

(for separately paid nonpass-through 

drugs and biologicals, including 

therapeutic radiopharmaceuticals) to 

HCPCS codes for new drugs and 

biologicals without OPPS claims data 

and for which we have not granted passthrough status. With respect to new, 

nonpass-through drugs, biologicals, and 

therapeutic radiopharmaceuticals for 

which we do not have ASP data, we are 

proposing that once their ASP data 

become available in later quarterly 

submissions, their payment rates under 

the OPPS would be adjusted so that the 

rates would be based on the ASP 

methodology and set to the finalized 

ASP-based amount (proposed for CY 

2014 at ASP+6 percent) for items that 

have not been granted pass-through 

status. This proposed policy, which 

utilizes the ASP methodology that 

requires us to use WAC data when ASP 

data are unavailable and 95 percent of 

AWP when WAC and ASP data are 

unavailable, for new nonpass-through 

drugs and biologicals with an ASP, is 

consistent with prior years’ policies for 

these items, and would ensure that new 

nonpass-through drugs, biologicals, and 

therapeutic radiopharmaceuticals would 

be treated like other drugs, biologicals, 

and therapeutic radiopharmaceuticals 

under the OPPS, unless they are granted 

pass-through status. 

Similarly, we are proposing to 

continue to base the initial payment for 

new therapeutic radiopharmaceuticals 

with HCPCS codes, but which do not 

have pass-through status and are 

without claims data, on the WACs for 

these products if ASP data for these 

therapeutic radiopharmaceuticals are 

not available. If the WACs are also 

unavailable, we are proposing to make 

payment for new therapeutic 

radiopharmaceuticals at 95 percent of 

the products’ most recent AWP because 

we would not have mean costs from 

hospital claims data upon which to base 

payment. As we are proposing with new 

drugs and biologicals, we are proposing 

to continue our policy of assigning 

status indicator ‘‘K’’ to HCPCS codes for 

new therapeutic radiopharmaceuticals 

without OPPS claims data for which we 

have not granted pass-through status. 

Consistent with other ASP-based 

payment, for CY 2014 we are proposing 

to announce any changes to the 

payment amounts for new drugs and 

biologicals in the CY 2014 OPPS/ASC 

final rule with comment period and also 

on a quarterly basis on the CMS Web 

site during CY 2014 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 also would be 

changed accordingly based on later 

quarter ASP submissions. We note that 

the new CY 2014 HCPCS codes for 

drugs, biologicals and therapeutic 

radiopharmaceuticals are not available 

at the time of development of this 

proposed rule. However, these agents 

will be included in Addendum B to the 

CY 2014 OPPS/ASC final rule with 

comment period (which will be 

available via the Internet on the CMS 

Web site), where they will be assigned 

comment indicator ‘‘NI.’’ This comment 

indicator reflects that their interim final 

OPPS treatment is open to public 

comment in the CY 2014 OPPS/ASC 

final rule with comment period. 

There are several nonpass-through 

drugs and biologicals that were payable 

in CY 2012 and/or CY 2013 for which 

we did not have CY 2012 hospital 

claims data available for this proposed 

rule and for which there are no other 

HCPCS codes that describe different 

doses of the same drug, but which have 

pricing information available for the 

ASP methodology. We note that there 

are currently no therapeutic 

radiopharmaceuticals in this category. 

In order to determine the packaging 

status of these products for CY 2014, we 

calculated an estimate of the per day 

cost of each of these items by 

multiplying the payment rate of each 

product based on ASP+6 percent, 

similar to other nonpass-through drugs 

and biologicals paid separately under 

the OPPS, by an estimated average 

number of units of each product that 

would typically be furnished to a 

patient during one day in the hospital 

outpatient setting. This rationale was 

first adopted in the CY 2006 OPPS/ASC 

final rule with comment period (70 FR 

68666 and 68667). 

We are proposing to package items for 

which we estimated the per day 

administration cost to be less than or 

equal to $90, which is the general 


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packaging threshold that we are 

proposing for drugs, biologicals, and 

therapeutic radiopharmaceuticals in CY 

2014. We are proposing to pay 

separately for items with an estimated 

per day cost greater than $90 (with the 

exception of diagnostic 

radiopharmaceuticals, contrast agents, 

anesthesia drugs, drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure, and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure, 

which we are proposing to package 

regardless of cost, as discussed in more 

detail in section II.A.3. of this proposed 

rule) in CY 2014. We are proposing that 

the CY 2014 payment for separately 

payable items without CY 2012 claims 

data would be ASP+6 percent, similar to 

payment for other separately payable 

nonpass-through drugs and biologicals 

under the OPPS. In accordance with the 

ASP methodology paid in the 

physician’s office setting, in the absence 

of ASP data, we are proposing to use the 

WAC for the product to establish the 

initial payment rate. However, we note 

that if the WAC is also unavailable, we 

would make payment at 95 percent of 

the most recent AWP available. 

The proposed estimated units per day 

and status indicators for these items are 

displayed in Table 26 below. 

TABLE 26—DRUGS AND BIOLOGICALS WITHOUT CY 2012 CLAIMS DATA

CY 2014 HCPCS 

code CY 2014 Long descriptor 

Estimated 

average 

number of 

units per 

day 

Proposed 

CY 2014 

SI 

Proposed 

CY 2014 

APC 

90581 ........................ Anthrax vaccine, for subcutaneous or intramuscular use ........................................ 1 K 1422 

J0205 ........................ Injection, alglucerase, per 10 units .......................................................................... 420 K 0900 

J0215 ........................ Injection, alefacept, 0. 5 mg ..................................................................................... 29 K 1633 

J0220 ........................ Injection, alglucosidase alfa, 10 mg, not otherwise specified .................................. 150 K 9234 

J0364 ........................ Injection, apomorphine hydrochloride, 1 mg ............................................................ 1 N N/A 

J0395 ........................ Injection, arbutamine hcl, 1 mg ................................................................................ 20 K 1432 

J0725 ........................ Injection, chorionic gonadotropin, per 1,000 usp units ............................................ 1 N N/A 

J1324 ........................ Injection, enfuvirtide, 1 mg ....................................................................................... 216 K 1361 

J1435 ........................ Injection, estrone, per 1 mg ..................................................................................... 150 K 1435 

J1620 ........................ Injection, gonadorelin hydrochloride, per 100 mcg .................................................. 11 N N/A 

J1730 ........................ Injection, diazoxide, up to 300 mg ........................................................................... 1 N N/A 

J1835 ........................ Injection, itraconazole, 50 mg .................................................................................. 80 N N/A 

J2724 ........................ Injection, protein c concentrate, intravenous, human, 10 iu .................................... 1540 K 1139 

J2725 ........................ Injection, protirelin, per 250 mcg .............................................................................. 4 K 1357 

J3355 ........................ Injection, urofollitropin, 75 iu .................................................................................... 2 K 1741 

J7196 ........................ Injection, antithrombin recombinant, 50 i. U. ........................................................... 268 K 1332 

J7513 ........................ Daclizumab, parenteral, 25 mg ................................................................................ 2 K 1612 

J8562 ........................ Fludarabine phosphate, oral, 10 mg ........................................................................ 1 N N/A 

J8650 ........................ Nabilone, oral, 1 mg ................................................................................................. 4 K 1424 

J9216 ........................ Injection, interferon, gamma 1–b, 3 million units ..................................................... 1 K 0838 

J9226 ........................ Histrelin implant (supprelin la), 50 mg ..................................................................... 1 K 1142 

J9300 ........................ Injection, gemtuzumab ozogamicin, 5 mg ................................................................ 1 K 9004 

Q0515 ....................... Injection, sermorelin acetate, 1 microgram .............................................................. 70 K 3050 

Finally, there were 11 drugs and 

biologicals, shown in Table 27, that 

were payable in CY 2012 but for which 

we lacked CY 2012 claims data and any 

other pricing information for the ASP 

methodology for this CY 2014 OPPS/ 

ASC proposed rule. In CY 2009, for 

similar items without CY 2007 claims 

data and without pricing information for 

the ASP methodology, we stated that we 

were unable to determine their per day 

cost and we packaged these items for 

the year, assigning these items status 

indicator ‘‘N.’’ 

For CY 2010, we finalized a policy to 

change the status indicator for drugs 

and biologicals previously assigned a 

payable status indicator to status 

indicator ‘‘E’’ (Not paid by Medicare 

when submitted on outpatient claims 

(any outpatient bill type)) whenever we 

lacked claims data and pricing 

information and were unable to 

determine the per day cost. In addition, 

we noted that we would provide 

separate payment for these drugs and 

biologicals if pricing information 

reflecting recent sales became available 

mid-year in CY 2010 for the ASP 

methodology. If pricing information 

became available, we would assign the 

products status indicator ‘‘K’’ and pay 

for them separately for the remainder of 

CY 2010. We continued this policy for 

CYs 2011, 2012, and 2013 (75 FR 71973, 

76 FR 74334, and 77 FR 68396, 

respectively). 

For CY 2014, we are proposing to 

continue to assign status indicator ‘‘E’’ 

to drugs and biologicals that lack CY 

2012 claims data and pricing 

information for the ASP methodology. 

All drugs and biologicals without CY 

2012 hospital claims data and data 

based on the ASP methodology that are 

assigned status indicator ‘‘E’’ on this 

basis at the time of this proposed rule 

for CY 2014 are displayed in Table 27 

below. If pricing information becomes 

available, we are proposing to assign the 

products status indicator ‘‘K’’ and pay 

for them separately for the remainder of 

CY 2014. 


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TABLE 27—DRUGS AND BIOLOGICALS WITHOUT CY 2012 CLAIMS DATA AND WITHOUT PRICING INFORMATION FOR THE

ASP METHODOLOGY

CY 2014 HCPCS code CY 2014 Long 

descriptor 

Proposed 

CY 2014 

SI 

90393 ................................ Vaccina immune globulin, human, for intramuscular use ........................................................................... E 

90644 ................................ Meningococcal conjugate vaccine, serogroups c & y and hemophilus influenza b vaccine (hib-mency), 

4 dose schedule, when administered to children 2–15 months of age, for intramuscular use.

E 

90727 ................................ Plague vaccine, for intramuscular use ........................................................................................................ E 

J0190 ................................. Injection, biperiden lactate, per 5 mg .......................................................................................................... E 

J0350 ................................. Injection, anistreplase, per 30 units ............................................................................................................. E 

J1180 ................................. Injection, dyphylline, up to 500 mg .............................................................................................................. E 

J2460 ................................. Injection, oxytetracycline hcl, up to 50 mg .................................................................................................. E 

J2940 ................................. Injection, somatrem, 1 mg ........................................................................................................................... E 

J7191 ................................. Factor viii (antihemophilic factor (porcine)), per i. U. .................................................................................. E 

J9165 ................................. Injection, diethylstilbestrol diphosphate, 250 mg ......................................................................................... E 

J9215 ................................. Injection, interferon, alfa-n3, (human leukocyte derived), 250,000 iu ......................................................... E 

C. Nuclear Medicine Procedure-toRadiolabeled Product Edits 

Beginning January 1, 2008, CMS 

implemented OPPS edits that require 

hospitals to include a HCPCS code for 

a radiolabeled product when a 

separately payable nuclear medicine 

procedure is present on a claim. For CY 

2014, we are proposing to no longer 

require the nuclear medicine procedureto-radiolabeled product edits. Under 

this proposal, hospitals would still be 

expected to adhere to the guidelines of 

correct coding and append the correct 

radiolabeled product code to the claim 

when applicable. However, claims 

would no longer be returned to 

providers when HCPCS codes for 

radiolabeled products do not appear on 

claims with nuclear medicine 

procedures. We believe that this is 

appropriate because hospitals have now 

had several years of experience 

reporting procedures involving 

radiolabeled products and have grown 

accustomed to ensuring that they code 

and report charges so that their claims 

fully and appropriately reflect the costs 

of those radiolabeled products. 

Therefore, we do not believe that the 

burden on hospitals of adhering to the 

nuclear medicine procedure-toradiolabeled product edits continues to 

be warranted. As with all other items 

and services recognized under the 

OPPS, we expect hospitals to code and 

report their costs appropriately, 

regardless of whether there are claims 

processing edits in place. 

VI. Proposed Estimate of OPPS 

Transitional Pass-Through Spending 

for Drugs, Biologicals, 

Radiopharmaceuticals, and Devices 

A. Background 

Section 1833(t)(6)(E) of the Act limits 

the total projected amount of 

transitional pass-through payments for 

drugs, biologicals, 

radiopharmaceuticals, and categories of 

devices for a given year to an 

‘‘applicable percentage,’’ currently not 

to exceed 2.0 percent of total program 

payments estimated to be made for all 

covered services under the OPPS 

furnished for that year. If we estimate 

before the beginning of the calendar 

year that the total amount of passthrough 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 estimate the 

pass-through spending to determine 

whether payments exceed the 

applicable percentage and the 

appropriate prorata reduction to the 

conversion factor for the projected level 

of pass-through spending in the 

following year to ensure that total 

estimated pass-through spending for the 

prospective payment year is budget 

neutral, as required by section 

1833(t)(6)(E) of the Act. 

For devices, developing an estimate of 

pass-through spending in CY 2014 

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 

2014. The CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66778) 

describes the methodology we have 

used in previous years to develop the 

pass-through spending estimate for 

known device categories continuing into 

the applicable update year. The second 

group of items consists of items that we 

know are newly eligible, or project may 

be newly eligible, for device passthrough payment in the remaining 

quarters of CY 2013 or beginning in CY 

2014. The sum of the CY 2014 passthrough estimates for these two groups 

of device categories would equal the 

total CY 2014 pass-through spending 

estimate for device categories with passthrough status. We base the device passthrough estimated payments for each 

device category on the amount of 

payment as established in section 

1833(t)(6)(D)(ii) of the Act, and as 

outlined in previous rules, including the 

CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68397). We note 

that, beginning in CY 2010, the passthrough evaluation process and passthrough payment for implantable 

biologicals newly approved for passthrough payment beginning on or after 

January 1, 2010, that are surgically 

inserted or implanted (through a 

surgical incision or a natural orifice) is 

the device pass-through process and 

payment methodology (74 FR 60476). 

As has been our past practice (76 FR 

74335), we include an estimate of any 

implantable biologicals eligible for passthrough payment in our estimate of 

pass-through spending for devices. 

For drugs and biologicals eligible for 

pass-through payment, section 

1833(t)(6)(D)(i) of the Act establishes the 

pass-through payment amount as the 

amount by which the amount 

authorized under section 1842(o) of the 

Act (or, if the drug or biological is 

covered under a competitive acquisition 

contract under section 1847B of the Act, 

an amount determined by the Secretary 

equal to the average price for the drug 

or biological for all competitive 

acquisition areas and year established 

under such section as calculated and 

adjusted by the Secretary) exceeds the 

portion of the otherwise applicable fee 

schedule amount that the Secretary 

determines is associated with the drug 

or biological. We note that the Part B 

drug CAP program has been postponed 

since CY 2009, and such a program has 


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not been proposed to be reinstated for 

CY 2014. Because we are proposing to 

pay for most nonpass-through separately 

payable drugs and biologicals under the 

CY 2014 OPPS at ASP+6 percent, as we 

discussed in section V.B.3. of this 

proposed rule, which represents the 

otherwise applicable fee schedule 

amount associated with most passthrough drugs and biologicals, and 

because we are proposing to pay for CY 

2014 pass-through drugs and biologicals 

at ASP+6 percent, as we discussed in 

section V.A. of this proposed rule, our 

estimate of drug and biological passthrough payment for CY 2014 for this 

group of items is $0, as discussed below. 

Payment for certain drugs, specifically 

diagnostic radiopharmaceuticals and 

contrast agents, without pass-through 

status will always be packaged into 

payment for the associated procedures 

and these products would not be 

separately paid. In addition, we are 

proposing to policy-package all 

nonpass-through drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure for 

CY 2014, as discussed in section II.A.3. 

of this proposed rule. All of these 

policy-packaged drugs and biologicals 

with pass-through status would be paid 

at ASP+6 percent like other passthrough drugs and biologicals for CY 

2014. Therefore, our estimate of passthrough payment for policy-packaged 

drugs and biologicals with pass-through 

status approved prior to CY 2014 is not 

$0. In section V.A.4. of this proposed 

rule, we discuss our proposed policy to 

determine if the costs of certain policypackaged drugs or biologicals are 

already packaged into the existing APC 

structure. If we determine that a policypackaged drug or biological approved 

for pass-through payment resembles 

predecessor drugs or biologicals already 

included in the costs of the APCs that 

are associated with the drug receiving 

pass-through payment, we are proposing 

to offset the amount of pass-through 

payment for the policy-packaged drug or 

biological. For these drugs or 

biologicals, the APC offset amount is the 

portion of the APC payment for the 

specific procedure performed with the 

pass-through drug or biological which 

we refer to as the policy-packaged drug 

APC offset amount. If we determine that 

an offset is appropriate for a specific 

policy-packaged drug or biological 

receiving pass-through payment, we are 

proposing to reduce our estimate of 

pass-through payments for these drugs 

or biologicals by this amount. 

Similar to pass-through estimates for 

devices, the first group of drugs and 

biologicals requiring a pass-through 

payment estimate consists of those 

products that were recently made 

eligible for pass-through payment and 

that would continue to be eligible for 

pass-through payment in CY 2014. The 

second group contains drugs and 

biologicals that we know are newly 

eligible, or project will be newly 

eligible, in the remaining quarters of CY 

2013 or beginning in CY 2014. The sum 

of the proposed CY 2014 pass-through 

estimates for these two groups of drugs 

and biologicals equals the proposed 

total CY 2014 pass-through spending 

estimate for drugs and biologicals with 

pass-through status. 

B. Proposed Estimate of Pass-Through 

Spending 

We are proposing to set the applicable 

pass-through payment percentage limit 

at 2.0 percent of the total projected 

OPPS payments for CY 2014, consistent 

with section 1833(t)(6)(E)(ii)(II) of the 

Act, and our OPPS policy from CY 2004 

through CY 2013 (77 FR 68398). 

For the first group of devices for passthrough payment estimation purposes, 

there currently are no device categories 

receiving pass-through payment in CY 

2013 that would continue to be eligible 

for pass-through payment for CY 2014. 

As discussed in section IV.A. of this 

proposed rule, we finalized in the CY 

2013 OPPS/ASC final rule with 

comment period the expiration of passthrough payment for three device 

categories after the end of CY 2013. 

Therefore, we estimate that CY 2014 

pass-through expenditures for the first 

group of pass-through device categories 

to be $0. In estimating our CY 2014 

pass-through spending for device 

categories in the second group, we 

include: Device categories that we knew 

at the time of the development of the 

proposed rule will be newly eligible for 

pass-through payment in CY 2014 (of 

which there are none); additional device 

categories that we estimate could be 

approved for pass-through status 

subsequent to the development of the 

proposed rule and before January 1, 

2014; and contingent projections for 

new device categories established in the 

second through fourth quarters of CY 

2014. We are proposing to use the 

general methodology described in the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66778), while 

also taking into account recent OPPS 

experience in approving new passthrough device categories. For this 

proposed rule, the estimate of CY 2014 

pass-through spending for this second 

group of device categories is $10 

million. Using our established 

methodology, we are proposing that the 

total estimated pass-through spending 

for device categories for CY 2014 

(spending for the first group of device 

categories ($0) plus spending for the 

second group of device categories ($10 

million)) would be $10 million. 

To estimate CY 2014 pass-through 

spending for drugs and biologicals in 

the first group, specifically those drugs 

and biologicals recently made eligible 

for pass-through payment and 

continuing on pass-through status for 

CY 2014, we are proposing to utilize the 

most recent Medicare physician’s office 

data regarding their utilization, 

information provided in the respective 

pass-through applications, historical 

hospital claims data, pharmaceutical 

industry information, and clinical 

information regarding those drugs or 

biologicals to project the CY 2014 OPPS 

utilization of the products. 

For the known drugs and biologicals 

(excluding policy-packaged diagnostic 

radiopharmaceuticals. contrast agents, 

drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure, and drugs and biologicals 

that function as supplies or devices 

when used in a surgical procedure) that 

will be continuing on pass-through 

status in CY 2014, we estimate the passthrough payment amount as the 

difference between ASP+6 percent and 

the payment rate for nonpass-through 

drugs and biologicals that will be 

separately paid at ASP+6 percent, 

which is zero for this group of drugs. 

Because payment for policy-packaged 

drugs and biologicals is proposed to be 

packaged if the product was not paid 

separately due to its pass-through status, 

we are proposing to include in the CY 

2014 pass-through estimate the 

difference between payment for the 

policy-packaged drug or biological at 

ASP+6 percent (or WAC+6 percent, or 

95 percent of AWP, if ASP or WAC 

information is not available) and the 

policy-packaged drug APC offset 

amount, if we determined that the 

policy-packaged drug or biological 

approved for pass-through payment 

resembles predecessor drugs or 

biologicals already included in the costs 

of the APCs that are associated with the 

drug receiving pass-through payment. 

For this proposed rule, using the 

proposed methodology described above, 

we calculated a CY 2014 proposed 

spending estimate for this first group of 

drugs and biologicals of approximately 

$0.962 million. 

To estimate proposed CY 2014 passthrough spending for drugs and 

biologicals in the second group (that is, 


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drugs and biologicals that we knew at 

the time of development of the proposed 

rule are newly eligible for pass-through 

payment in CY 2014, additional drugs 

and biologicals that we estimate could 

be approved for pass-through status 

subsequent to the development of the 

proposed rule and before January 1, 

2014, and projections for new drugs and 

biologicals that could be initially 

eligible for pass-through payment in the 

second through fourth quarters of CY 

2014), we are proposing to use 

utilization estimates from pass-through 

applicants, pharmaceutical industry 

data, clinical information, recent trends 

in the per unit ASPs of hospital 

outpatient drugs, and projected annual 

changes in service volume and intensity 

as our basis for making the CY 2014 

pass-through payment estimate. We also 

are proposing to consider the most 

recent OPPS experience in approving 

new pass-through drugs and biologicals. 

Using our proposed methodology for 

estimating CY 2014 pass-through 

payments for this second group of 

drugs, we calculated a proposed 

spending estimate for this second group 

of drugs and biologicals of 

approximately $0.165 million. 

As discussed in section V.A. of this 

proposed rule, radiopharmaceuticals are 

considered drugs for pass-through 

purposes. Therefore, we include 

radiopharmaceuticals in our proposed 

CY 2014 pass-through spending 

estimate for drugs and biologicals. Our 

proposed CY 2014 estimate for total 

pass-through spending for drugs and 

biologicals (spending for the first group 

of drugs and biologicals ($0.962 million) 

plus spending for the second group of 

drugs and biologicals ($0.165 million)) 

equals $1.127 million. 

In summary, in accordance with the 

methodology described above in this 

section, for this proposed rule, we 

estimate that total pass-through 

spending for the device categories and 

the drugs and biologicals that are 

continuing to receive pass-through 

payment in CY 2014 and those device 

categories, drugs, and biologicals that 

first become eligible for pass-through 

payment during CY 2014 would be 

approximately $11 million 

(approximately $10 million for device 

categories and approximately $1 million 

for drugs and biologicals), which 

represents 0.02 percent of total 

projected OPPS payments for CY 2014. 

We estimate that pass-through spending 

in CY 2014 would not amount to 2.0 

percent of total projected OPPS CY 2014 

program spending. 

VII. Proposed OPPS Payment for 

Hospital Outpatient Visits 

A. Background 

Currently, hospitals report HCPCS 

visit codes to describe three types of 

OPPS services: clinic visits, emergency 

department (ED) visits, and critical care 

services, including trauma team 

activation. Historically, we have 

recognized the CPT and HCPCS codes 

describing clinic visits, Type A and 

Type B (ED) visits, and critical care 

services, which are listed below in 

Table 28. We refer readers to the CY 

2012 OPPS/ASC final rule with 

comment period (76 FR 74338 through 

74346) for a full discussion of our policy 

on OPPS payment for hospital 

outpatient visits for CY 2013 and prior 

years. 

TABLE 28—HCPCS CODES USED TO REPORT CLINIC AND EMERGENCY DEPARTMENT VISITS AND CRITICAL CARE

SERVICES

CY 2013 

HCPCS code CY 2013 descriptor 

Clinic Visit HCPCS Codes 

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

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

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

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

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

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

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

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

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

99215 ................ Office or other outpatient visit for the evaluation and management of an established patient (Level 5). 

Emergency Department Visit HCPCS Codes 

99281 ................ Emergency department visit for the evaluation and management of a patient (Level 1). 

99282 ................ Emergency department visit for the evaluation and management of a patient (Level 2). 

99283 ................ Emergency department visit for the evaluation and management of a patient (Level 3). 

99284 ................ Emergency department visit for the evaluation and management of a patient (Level 4). 

99285 ................ Emergency department visit for the evaluation and management of a patient (Level 5). 

G0380 ............... Type B emergency department visit (Level 1). 

G0381 ............... Type B emergency department visit (Level 2). 

G0382 ............... Type B emergency department visit (Level 3). 

G0383 ............... Type B emergency department visit (Level 4). 

G0384 ............... Type B emergency department visit (Level 5). 

Critical Care Services HCPCS Codes 

99291 ................ Critical care, evaluation and management of the critically ill or critically injured patient; first 30–74 minutes. 

99292 ................ Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes. 

G0390 ............... Trauma response associated with hospital critical care service. 


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B. Proposed Payment for Hospital 

Outpatient Clinic and Emergency 

Department Visits 

Since April 7, 2000, we have 

instructed hospitals to report facility 

resources for clinic and ED hospital 

outpatient visits using the CPT E/M 

codes and to develop internal hospital 

guidelines for reporting the appropriate 

visit level (65 FR 18451). 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 ED 

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. 

While many hospitals have advocated 

for hospital-specific national guidelines 

for visit billing since the OPPS started 

in 2000, and we have signaled through 

rulemaking our intent to develop 

guidelines, this complex undertaking 

has proven challenging. Our work with 

interested stakeholders, such as hospital 

associations, along with a contractor, 

has confirmed that no single approach 

could consistently and accurately 

capture hospitals’ relative costs. Public 

comments received on this issue, as 

well as our own knowledge of how 

clinics operate, have led us to conclude 

that it is not feasible to adopt a set of 

national guidelines for reporting 

hospital clinic visits that can 

accommodate the enormous variety of 

patient populations and service-mix 

provided by hospitals of all types and 

sizes throughout the country. Moreover, 

no single approach appears to be 

broadly endorsed by the stakeholder 

community. 

For CY 2014, we are proposing to 

modify our longstanding policies related 

to hospital outpatient clinic and ED 

visits. Rather than recognizing five 

levels of clinic and ED visits 

respectively, we are proposing to create 

three new alphanumeric Level II HCPCS 

codes to describe all levels of each type 

of clinic and ED visit, as discussed in 

greater detail below. We believe a policy 

that recognizes a single visit level for 

clinic visits, Type A ED visits, and Type 

B ED visits for payment under the OPPS 

is appropriate for several reasons. First, 

the proposal is in line with our strategic 

goal of using larger payment bundles to 

maximize hospitals’ incentives to 

provide care in the most efficient matter 

as stated in section II.A.3. of this 

proposed rule. We believe this proposal 

will remove any incentives hospitals 

may have to provide medically 

unnecessary services or expend 

additional, unnecessary resources to 

achieve a higher level of visit payment 

under the OPPS. Second, we believe 

that it is important to consider ways in 

which we can reduce the administrative 

burden that Medicare payment policies 

place on hospitals, while maintaining 

our ability to calculate accurate 

payment rates under the OPPS. We 

believe that replacing the 20 HCPCS 

codes currently recognized for clinic 

visits and ED visits with three new 

alphanumeric Level II HCPCS codes 

would reduce administrative burden 

and would be easily adopted by 

hospitals, because the three new codes 

would require hospitals to distinguish 

only among clinic visits, Type A ED 

visits, and Type B ED visits. 

Discontinuing the use of the five levels 

of HCPCS visit codes for clinic and 

Type A and Type B ED visits would 

reduce hospitals’ administrative burden 

by eliminating the need for them to 

develop and apply their own internal 

guidelines to differentiate among five 

levels of resource use for every clinic 

visit and ED visit they provide, and by 

eliminating the need to distinguish 

between new and established patients. 

Third, our proposal allows a large 

universe of claims to be utilized for 

ratesetting for each of the three newly 

proposed alphanumeric Level II HCPCS 

visit codes. We believe this large 

volume of claims available for 

ratesetting for each of the newly 

proposed alphanumeric Level II HCPCS 

visit codes will allow us to capture a 

very broad spectrum of cases ranging 

from extremely low complexity cases to 

extremely high complexity cases. We 

believe this large and diverse spectrum 

of clinical complexity and resource 

variation within the claims as well as 

the very high volume of claims that we 

propose to use for ratesetting for the 

newly proposed alphanumeric Level II 

HCPCS visit new codes will allow us to 

have very accurate data upon which to 

develop accurate and appropriate 

payments. Lastly, we also believe that 

removing the differentiation among five 

levels of intensity for each visit will 

eliminate any incentive for hospitals to 

‘‘upcode’’ patients whose visits do not 

fall clearly into one category or another. 

For these reasons, for CY 2014, we are 

proposing to discontinue our 

longstanding policy of recognizing five 

distinct visit levels for clinic visits and 

ED visits based on the existing HCPCS 

E/M codes, and instead recognize three 

new alphanumeric HCPCS codes for 

each visit type. Specifically, we are 

proposing to create a new alphanumeric 

HCPCS code (GXXXC) for hospital use 

only representing any clinic visit under 

the OPPS and to assign the newly 

created alphanumeric clinic visit 

HCPCS code (GXXXC) to its own newly 

created APC 0634. Using CY 2012 

claims data, we are proposing to 

develop CY 2014 OPPS payment rates 

for the new HCPCS code GXXXC based 

on the total mean cost of the levels one 

through five CPT E/M codes for clinic 

visits currently recognized under the 

OPPS (CPT codes 99201 through 99205 

and 99211 through 99215). While we 

would use data for CPT codes 99201 

through 99205 and 99211 through 99215 

from claims billed in CY 2012 to 

calculate the mean cost for new APC 

0634, we would no longer recognize 

those CPT codes when they appear on 

hospital claims effective January 1, 

2014. We also are proposing to no 

longer recognize a distinction between 

new and established patient clinic 

visits. Under this proposal, all clinic 

visits would be reported using new 

HCPCS code GXXXC, regardless of 

whether or not the patient has been 

registered as an inpatient or outpatient 

of the hospital within the 3 years prior 

to a visit. 

In addition, we are proposing to 

discontinue our longstanding policy of 

recognizing five distinct visit levels for 

Type A ED visits and instead are 

proposing to create a new alphanumeric 

HCPCS code (GXXXA) for hospital use 

only representing any Type A ED visit 

under the OPPS. We are proposing to 

assign the newly created alphanumeric 

Type A ED visit HCPCS code (GXXXA) 

to its own newly created APC 0635. 

Using CY 2012 claims data, we are 

proposing to develop CY 2014 OPPS 

payment rates for new HCPCS code 

GXXXA based on the total mean cost of 

the levels 1 through 5 CPT E/M codes 

for Type A ED visits currently 

recognized under the OPPS (CPT codes 

99281 through 99285). While we would 

use data for CPT codes 99281 through 

99285 from claims billed in CY 2012 to 

calculate the mean cost for new APC 

0635, we would no longer recognize 

those CPT codes when they appear on 

hospital claims effective January 1, 

2014. Similarly, we also are proposing 

to discontinue our longstanding policy 

of recognizing five distinct visit levels 

for Type B ED visits and instead are 

proposing to create a new alphanumeric 

HCPCS code (GXXXB) representing all 

Type B ED visits under the OPPS. We 

are proposing to assign the newly 

created alphanumeric Type B ED visit 

HCPCS code (GXXXB) to its own newly 

created APC 0636. Using CY 2012 

claims data, we are proposing to 

develop CY 2014 OPPS payment rates 


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for new HCPCS code GXXXB based on 

the total mean cost of the levels 1 

through 5 HCPCS codes for Type B ED 

visits currently recognized under the 

OPPS (HCPCS codes G0380 through 

G0384). While we would use data for 

HCPCS codes G0380 through G0384 

from claims billed in CY 2012 to 

calculate the mean cost for new APC 

0636, we would no longer recognize 

those HCPCS codes for Type B ED visits 

when they appear on hospital claims 

effective January 1, 2014. 

We note that we would use the 

hospital claims data for new HCPCS 

codes GXXXA, GXXXB, and GXXXC 

when available for future ratesetting. 

The proposed changes to the visit 

coding and payment structure are 

summarized below in Table 29. We 

welcome public comments on our CY 

2014 proposal to recognize a single visit 

level for clinic, Type A ED, and Type B 

ED visits for payment under the OPPS. 

We believe this proposal will allow us 

to make accurate payments for visits 

broad-scale because we will be using 

data from the universe of hospital 

outpatient visits, for which we have an 

extremely high volume of claims 

representing the entire spectrum of costs 

incurred by hospitals. Nonetheless, we 

are interested in hearing from 

stakeholders regarding whether a 

different approach may be preferable to 

capture the resource utilization for 

extremely low complexity cases as well 

as extremely high complexity cases or to 

otherwise recognize a difference among 

visit levels. While we do not believe, 

based on our current assessment, that it 

is necessary to provide additional 

payment levels or carve out these cases 

to make accurate and appropriate 

payments for visits, we are interested in 

hearing from hospitals whether there are 

certain cases that would not be best 

accommodated by a single level of 

payment. If such cases exist, we 

welcome stakeholder input into whether 

and how this proposal could be changed 

in the final rule to either make 

exceptions for or accommodate these 

special cases. If commenters provide 

compelling comments describing such 

special cases or the need for additional 

payment levels, should they exist, and 

if there are alternative policies that 

would more accurately and 

appropriately pay for visits, we would 

consider implementing a different 

policy in the final rule. We note that, to 

the extent that commenters recommend 

that additional levels of payment or 

special high complexity or low 

complexity cases be recognized, we also 

would be interested in how we should 

define and differentiate those levels or 

cases. 

TABLE 29—CY 2013 CLINIC AND EMERGENCY DEPARTMENT VISIT HCPCS CODES AND APC ASSIGNMENTS COMPARED

TO PROPOSED CY 2014 CLINIC AND EMERGENCY DEPARTMENT VISIT HCPCS CODES AND APC ASSIGNMENTS

Visit type 

CY 2013 Proposed CY 2014 

HCPCS 

code APC HCPCS code APC 

CLINIC VISIT ............................................................................................................................. 99201 0604 GXXXC 0634 

99202 0605 

99203 0606 

99204 0607 

99205 0608 

99211 0604 

99212 0605 

99213 0605 

99214 0606 

99215 0607 

TYPE A ED VISIT ..................................................................................................................... 99281 0609 GXXXA 0635 

99282 0613 

99283 0614 

99284 0615 

99285 0616 

TYPE B ED VISIT ..................................................................................................................... G0380 0626 GXXXB 0636 

G0381 0627 

G0382 0628 

G0383 0629 

G0384 0630 

C. Proposed Payment for Critical Care 

Services 

We are proposing to continue the 

methodology established in the CY 2011 

OPPS/ASC final rule with comment 

period for calculating a payment rate for 

critical care services that includes 

packaged payment of ancillary services. 

For CY 2010 and in prior years, the 

AMA CPT Editorial Panel defined 

critical care CPT codes 99291 (Critical 

care, evaluation and management of the 

critically ill or critically injured patient; 

first 30–74 minutes) and 99292 (Critical 

care, evaluation and management of the 

critically ill or critically injured patient; 

each additional 30 minutes (List 

separately in addition to code for 

primary service)) to include a wide 

range of ancillary services such as 

electrocardiograms, chest X-rays, and 

pulse oximetry. As we have stated in 

manual instruction, we expect hospitals 

to report in accordance with CPT 

guidance unless we instruct otherwise. 

For critical care in particular, we 

instructed hospitals that any services 

that the CPT Editorial Panel indicates 

are included in the reporting of CPT 

code 99291 (including those services 

that would otherwise be reported by and 

paid to hospitals using any of the CPT 

codes specified by the CPT Editorial 

Panel) should not be billed separately. 

Instead, hospitals were instructed to 

report charges for any services provided 

as part of the critical care services. In 

establishing payment rates for critical 

care services and other services, CMS 

packages the costs of certain items and 

services separately reported by HCPCS 

codes into payment for critical care 

services and other services, according to 

the standard OPPS methodology for 

packaging costs (Medicare Claims 

Processing Manual, Pub. 100–04, 

Chapter 4, Section 160.1). 

For CY 2011, the AMA CPT Editorial 

Panel revised its guidance for the 

critical care codes to specifically state 


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that, for hospital reporting purposes, 

critical care codes do not include the 

specified ancillary services. Beginning 

in CY 2011, hospitals that report in 

accordance with the CPT guidelines 

should report all of the ancillary 

services and their associated charges 

separately when they are provided in 

conjunction with critical care. Because 

the CY 2011 payment rate for critical 

care services was based on hospital 

claims data from CY 2009, during which 

time hospitals would have reported 

charges for any ancillary services 

provided as part of the critical care 

services, we stated in the CY 2011 

OPPS/ASC final rule with comment 

period that we believed it was 

inappropriate to pay separately in CY 

2011 for the ancillary services that 

hospitals may now report in addition to 

critical care services (75 FR 71988). 

Therefore, for CY 2011, we continued to 

recognize the existing CPT codes for 

critical care services and established a 

payment rate based on historical data, 

into which the cost of the ancillary 

services was intrinsically packaged. We 

also implemented claims processing 

edits that conditionally package 

payment for the ancillary services that 

are reported on the same date of service 

as critical care services in order to avoid 

overpayment. We noted in the CY 2011 

OPPS/ASC final rule with comment 

period that the payment status of the 

ancillary services would not change 

when they are not provided in 

conjunction with critical care services. 

We assigned status indicator ‘‘Q3’’ 

(Codes That May Be Paid Through a 

Composite APC) to the ancillary 

services to indicate that payment for 

these services is packaged into a single 

payment for specific combinations of 

services and made through a separate 

APC payment or packaged in all other 

circumstances, in accordance with the 

OPPS payment status indicated for 

status indicator ‘‘Q3’’ in Addendum D1 

to the CY 2011 OPPS/ASC final rule 

with comment period. The ancillary 

services that were included in the 

definition of critical care prior to CY 

2011 and that are conditionally 

packaged into the payment for critical 

care services when provided on the 

same date of service as critical care 

services for CY 2011 were listed in 

Addendum M to that final rule with 

comment period. 

Because the CY 2012 costs for critical 

care services were based upon CY 2010 

claims data, which reflected the CPT 

billing guidance that was in effect prior 

to CY 2011, in the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 

74343 through 74344), we continued the 

methodology established in the CY 2011 

OPPS/ASC final rule with comment 

period of calculating a payment rate for 

critical care services based on our 

historical claims data, into which the 

cost of the ancillary services is 

intrinsically packaged for CY 2012. We 

also continued to implement claims 

processing edits that conditionally 

package payment for the ancillary 

services that are reported on the same 

date of service as critical care services 

in order to avoid overpayment. 

As we discussed in the CY 2013 

OPPS/ASC final rule with comment 

period, the CY 2011 hospital claims data 

on which the CY 2013 payment rates are 

based reflect the first year of claims 

billed under the revised CPT guidance 

to allow the reporting of all the ancillary 

services and their associated charges 

separately when they are provided in 

conjunction with critical care (77 FR 

68402). Because our policy to establish 

relative payment weights based on 

geometric mean cost data for CY 2013 

represented a change from our historical 

practice to base payment rates on 

median costs, and because we now have 

hospital claims data for the first time 

reflecting the revised coding guidance 

for critical care, we reviewed the CY 

2011 hospital claims data available for 

the CY 2013 OPPS/ASC final rule with 

comment period and determined that 

the data showed increases in both the 

mean and median line item costs as well 

as the mean and median line item 

charges for CPT code 99291, when 

compared to CY 2010 hospital claims 

data. Specifically, we noted that the 

mean and median line item costs 

increased 13 percent and 16 percent, 

respectively, and the mean and median 

line item charges increased 11 percent 

and 14 percent, respectively. 

Additionally, when compared to CY 

2010 hospital claims data, CY 2011 

hospital claims data showed no 

substantial change in the ancillary 

services that were presented on the 

same claims as critical care services, 

and also showed continued low 

volumes of many ancillary services. We 

stated in the CY 2013 OPPS/ASC final 

rule with comment period that, had the 

majority of hospitals changed their 

billing practices to separately report and 

charge for the ancillary services 

formerly included in the definition of 

critical care CPT codes 99291 and 

99292, we would have expected to see 

a decrease in the costs and charges for 

these CPT codes, and a significant 

increase in ancillary services reported 

on the same claims. We indicated that 

the lack of a substantial change in the 

services reported on critical care claims, 

along with the increases in the line item 

costs and charges for critical care 

services, strongly suggested that many 

hospitals did not change their billing 

practices for CPT code 99291 following 

the revision to the CPT coding guidance 

effective January 1, 2011. 

In light of not having claims data to 

support a significant change in hospital 

billing practices, we stated in the CY 

2013 OPPS/ASC final rule with 

comment period that we continued to 

believe that it is inappropriate to pay 

separately in CY 2013 for the ancillary 

services that hospitals may now report 

in addition to critical care services. 

Therefore, for CY 2013, we continued 

our CY 2011 and CY 2012 policy to 

recognize the existing CPT codes for 

critical care services and establish a 

payment rate based on historical claims 

data. We also continued to implement 

claims processing edits that 

conditionally packaged payment for the 

ancillary services that were reported on 

the same date of service as critical care 

services in order to avoid overpayment. 

We stated that we would continue to 

monitor the hospital claims data for CPT 

code 99291 in order to determine 

whether revisions to this policy are 

warranted based on changes in 

hospitals’ billing practices. 

When compared to CY 2011 hospital 

claims data used for the CY 2013 OPPS 

ratesetting, CY 2012 hospital claims 

data used for the CY 2014 OPPS 

ratesetting show increases in the mean 

line- item costs as well as the mean lineitem charges for CPT code 99291, which 

continue to suggest that hospitals did 

not change their billing practices for 

CPT code 99291 following the revision 

to the CPT coding guidance effective 

January 1, 2011. In light of not having 

claims data to support a significant 

change in hospital billing practices, we 

continue to believe that it is 

inappropriate to pay separately in CY 

2014 for the ancillary services that 

hospitals may now report in addition to 

critical care services. Therefore, for CY 

2014, we are proposing to continue our 

CY 2011, CY 2012, and CY 2013 policy 

to recognize the existing CPT codes for 

critical care services and establish a 

payment rate based on historical claims 

data. We also are proposing to continue 

to implement claims processing edits 

that conditionally package payment for 

the ancillary services that are reported 

on the same date of service as critical 

care services in order to avoid 

overpayment. We will continue to 

monitor the hospital claims data for CPT 

code 99291 in order to determine 

whether revisions to this policy are 

warranted based on changes in 

hospitals’ billing practices. 


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VIII. Proposed Payment for Partial 

Hospitalization Services 

A. Background 

Partial hospitalization is an intensive 

outpatient program of psychiatric 

services provided to patients as an 

alternative to inpatient psychiatric care 

for individuals who have an acute 

mental illness. Section 1861(ff)(1) of the 

Act defines partial hospitalization 

services as ‘‘the items and services 

described in paragraph (2) prescribed by 

a physician and provided under a 

program described in paragraph (3) 

under the supervision of a physician 

pursuant to an individualized, written 

plan of treatment established and 

periodically reviewed by a physician (in 

consultation with appropriate staff 

participating in such program), which 

sets forth the physician’s diagnosis, the 

type, amount, frequency, and duration 

of the items and services provided 

under the plan, and the goals for 

treatment under the plan.’’ Section 

1861(ff)(2) of the Act describes the items 

and services included in partial 

hospitalization services. Section 

1861(ff)(3)(A) of the Act specifies that a 

partial hospitalization program (PHP) is 

a program furnished by a hospital to its 

outpatients or by a community mental 

health center (CMHC) (as defined in 

subparagraph (B)), and ‘‘which is a 

distinct and organized intensive 

ambulatory treatment service offering 

less than 24-hour-daily care other than 

in an individual’s home or in an 

inpatient or residential setting.’’ Section 

1861(ff)(3)(B) of the Act defines a 

community mental health center for 

purposes of this benefit. 

Section 1833(t)(1)(B)(i) of the Act 

provides the Secretary with the 

authority to designate the OPD services 

to be covered under the OPPS. The 

Medicare regulations that implement 

this provision specify, under 42 CFR 

419.21, that payments under the OPPS 

will be made for partial hospitalization 

services furnished by CMHCs as well as 

Medicare Part B services furnished to 

hospital outpatients designated by the 

Secretary, which include partial 

hospitalization services (65 FR 18444 

through 18445). 

Section 1833(t)(2)(C) of the Act, in 

pertinent part, requires the Secretary to 

‘‘establish relative payment weights for 

covered OPD services (and any groups 

of such services described in 

subparagraph (B)) based on median (or, 

at the election of the Secretary, mean) 

hospital costs’’ using data on claims 

from 1996 and data from the most recent 

available cost reports. In pertinent part, 

subparagraph (B) provides that the 

Secretary may establish groups of 

covered OPD services, within a 

classification system developed by the 

Secretary for covered OPD services, so 

that services classified within each 

group are comparable clinically and 

with respect to the use of resources. In 

accordance with these provisions, we 

have developed the PHP APCs. Section 

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

Secretary to ‘‘review not less often than 

annually and revise the groups, the 

relative payment weights, and the wage 

and other adjustments described in 

paragraph (2) to take into account 

changes in medical practice, changes in 

technology, the addition of new 

services, new cost data, and other 

relevant information and factors.’’ 

Because a day of care is the unit that 

defines the structure and scheduling of 

partial hospitalization services, we 

established a per diem payment 

methodology for the PHP APCs, 

effective for services furnished on or 

after July 1, 2000 (65 FR 18452 through 

18455). Under this methodology, the 

median per diem costs have been used 

to calculate the relative payment 

weights for PHP APCs. 

From CY 2003 through CY 2006, the 

median per diem costs for CMHCs 

fluctuated significantly from year to 

year, while the median per diem costs 

for hospital-based PHPs remained 

relatively constant. We were concerned 

that CMHCs may have increased and 

decreased their charges in response to 

Medicare payment policies. Therefore, 

we began efforts to strengthen the PHP 

benefit through extensive data analysis 

and policy and payment changes 

finalized in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66670 through 66676). We made two 

refinements to the methodology for 

computing the PHP median: the first 

remapped 10 revenue codes that are 

common among hospital-based PHP 

claims to the most appropriate cost 

centers; and the second refined our 

methodology for computing the PHP 

median per diem cost by computing a 

separate per diem cost for each day 

rather than for each bill. We refer 

readers to a complete discussion of 

these refinements in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66670 through 66676). 

In CY 2009, we implemented several 

regulatory, policy, and payment 

changes, including a two-tiered 

payment approach for PHP services 

under which we paid one amount for 

days with 3 services (APC 0172 Level I 

Partial Hospitalization) and a higher 

amount for days with 4 or more services 

(APC 0173 Level II Partial 

Hospitalization). We refer readers to 

section X.B. of the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 

68688 through 68693) for a full 

discussion of the two-tiered payment 

system. In addition, for CY 2009, we 

finalized our policy to deny payment for 

any PHP claims submitted for days 

when fewer than 3 units of therapeutic 

services are provided (73 FR 68694). 

Furthermore, for CY 2009, we revised 

the regulations at 42 CFR 410.43 to 

codify existing basic PHP patient 

eligibility criteria and to add a reference 

to current physician certification 

requirements under 42 CFR 424.24 to 

conform our regulations to our 

longstanding policy (73 FR 68694 

through 68695). These changes have 

helped to strengthen the PHP benefit. 

We also revised the partial 

hospitalization benefit to include 

several coding updates. We refer readers 

to section X.C.3. of the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68695 through 68697) for a full 

discussion of these requirements. 

For CY 2010, we retained the twotiered payment approach for PHP 

services and used only hospital-based 

PHP data in computing the APC per 

diem payment rates. We used only 

hospital-based PHP data because we 

were concerned about further reducing 

both PHP APC per diem payment rates 

without knowing the impact of the 

policy and payment changes we made 

in CY 2009. Because of the 2-year lag 

between data collection and rulemaking, 

the changes we made in CY 2009 were 

reflected for the first time in the claims 

data that we used to determine payment 

rates for the CY 2011 rulemaking (74 FR 

60556 through 60559). 

In CY 2011, in accordance with 

section 1301(b) of the Health Care and 

Education Reconciliation Act of 2010 

(HCERA 2010), we amended the 

description of a PHP in our regulations 

to specify that a PHP must be a distinct 

and organized intensive ambulatory 

treatment program offering less than 24- 

hour daily care ‘‘other than in an 

individual’s home or in an inpatient or 

residential setting.’’ In addition, in 

accordance with section 1301(a) of 

HCERA 2010, we revised the definition 

of a CMHC in the regulations to conform 

to the revised definition now set forth 

under section 1861(ff)(3)(B) of the Act. 

We discussed our finalized policies for 

these two provisions of HCERA 2010 in 

section X.C. of the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71990). 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71994), we 

also established four separate PHP APC 

per diem payment rates, two for CMHCs 

(for Level I and Level II services) and 

two for hospital-based PHPs (for Level 


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I and Level II services), based on each 

provider’s own unique data. As stated in 

the CY 2011 OPPS/ASC proposed rule 

(75 FR 46300) and the final rule with 

comment period (75 FR 71991), for CY 

2011, using CY 2009 claims data, CMHC 

costs had significantly decreased again. 

We attributed the decrease to the lower 

cost structure of CMHCs compared to 

hospital-based PHP providers, and not 

the impact of the CY 2009 policies. 

CMHCs have a lower cost structure than 

hospital-based PHP providers, in part, 

because the data showed that CMHCs 

generally provide fewer PHP services in 

a day and use less costly staff than 

hospital-based PHPs. Therefore, it was 

inappropriate to continue to treat 

CMHCs and hospital-based providers in 

the same manner regarding payment, 

particularly in light of such disparate 

differences in costs. We also were 

concerned that paying hospital-based 

PHPs at a lower rate than their cost 

structure reflects could lead to hospitalbased PHP closures and possible access 

problems for Medicare beneficiaries 

because hospital-based PHPs are located 

throughout the country and, therefore, 

offer the widest access to PHP services. 

In contrast, CMHC-based PHPs are 

largely concentrated in certain 

geographical areas with particular 

prevalence in Florida, Texas, and 

Louisiana. Creating the four payment 

rates (two for CMHCs and two for 

hospital-based PHPs) based on each 

provider’s data supported continued 

access to the PHP benefit, while also 

providing appropriate payment based 

on the unique cost structures of CMHCs 

and hospital-based PHPs. In addition, 

separation of data by provider type was 

supported by several hospital-based 

PHP commenters who responded to the 

CY 2011 OPPS/ASC proposed rule (75 

FR 71992). 

For CY 2011, we instituted a 2-year 

transition period for CMHCs to the 

CMHC APC per diem payment rates 

based solely on CMHC data. For CY 

2011, under the transition methodology, 

CMHC PHP APCs Level I and Level II 

per diem costs were calculated by taking 

50 percent of the difference between the 

CY 2010 final hospital-based PHP 

median costs and the CY 2011 final 

CMHC median and then adding that 

number to the CY 2011 final CMHC 

median. A 2-year transition under this 

methodology moved us in the direction 

of our goal, which is to pay 

appropriately for PHP services based on 

each provider type’s data, while at the 

same time allowing providers time to 

adjust their business operations and 

protect access to care for beneficiaries. 

We also stated that we would review 

and analyze the data during the CY 2012 

rulemaking cycle and, based on these 

analyses, we might further refine the 

payment mechanism. We refer readers 

to section X.B. of the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 71991 through 71994) for a full 

discussion. 

After publication of the CY 2011 

OPPS/ASC final rule with comment 

period, a CMHC and one of its patients 

filed an application for a preliminary 

injunction, challenging the OPPS 

payment rates for PHP services provided 

by CMHCs in CY 2011 as adopted in the 

CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71995). We refer 

readers to the court case, Paladin Cmty. 

Mental Health Ctr. v. Sebelius, No. 10– 

949, 2011 WL 3102049 (W.D.Tex. 2011), 

aff’d, No. 11–50682, 2012 WL 2161137 

(5th Cir. June 15, 2012) (Paladin). The 

plaintiffs in the Paladin case challenged 

the agency’s use of cost data derived 

from both hospitals and CMHCs in 

determining the relative payment 

weights for the OPPS payment rates for 

PHP services furnished by CMHCs, 

alleging that section 1833(t)(2)(C) of the 

Act requires that such relative payment 

weights be based on cost data derived 

solely from hospitals. As discussed 

above, section 1833(t)(2)(C) of the Act 

requires CMS to ‘‘establish relative 

payment weights for covered OPD 

services (and any groups of such 

services . . .) . . . based on . . . 

hospital costs.’’ Numerous courts have 

held that ‘‘based on’’ does not mean 

‘‘based exclusively on.’’ On July 25, 

2011, the District Court dismissed the 

plaintiffs’ complaint and application for 

a preliminary injunction for lack of 

subject-matter jurisdiction, which the 

plaintiffs appealed to the United States 

Court of Appeals for the Fifth Circuit. 

On June 15, 2012, the Court of Appeals 

affirmed the District Court’s dismissal 

for lack of subject-matter jurisdiction 

and found that the Secretary’s payment 

rate determinations for PHP services are 

not a facial violation of a clear statutory 

mandate. (Paladin at *6). 

For CY 2012, as discussed in the CY 

2012 OPPS/ASC final rule with 

comment period (76 FR 74348 through 

74352), we determined the relative 

payment weights for PHP services 

provided by CMHCs based on data 

derived solely from CMHCs and the 

relative payment weights for hospitalbased PHP services based exclusively on 

hospital data. The statute is reasonably 

interpreted to allow the relative 

payment weights for the OPPS payment 

rates for PHP services provided by 

CMHCs to be based solely on CMHC 

data and relative payment weights for 

hospital-based PHP services to be based 

exclusively on hospital data. Section 

1833(t)(2)(C) of the Act requires the 

Secretary to ‘‘establish relative payment 

weights for covered OPD services (and 

any groups of such services described in 

subparagraph (B)) based on . . . 

hospital costs.’’ In pertinent part, 

subparagraph (B) provides that ‘‘the 

Secretary may establish groups of 

covered OPD services . . . so that 

services classified within each group are 

comparable clinically and with respect 

to the use of resources.’’ In accordance 

with subparagraph (B), we developed 

the PHP APCs, as set forth in § 419.31 

of the regulations (65 FR 18446 and 

18447; 63 FR 47559 through 47562 and 

47567 through 47569). As discussed 

above, PHP services are grouped into 

APCs. 

Based on section 1833(t)(2)(C) of the 

Act, we believe that the word 

‘‘establish’’ can be interpreted as 

applying to APCs at the inception of the 

OPPS in 2000 or whenever a new APC 

is added to the OPPS. In creating the 

original APC for PHP services (APC 

0033), we did ‘‘establish’’ the initial 

relative payment weight for PHP 

services, provided in both hospitalbased and CMHC-based settings, only 

on the basis of hospital data. 

Subsequently, from CY 2003 through CY 

2008, the relative payment weights for 

PHP services were based on a 

combination of hospital and CMHC 

data. For CY 2009, we established new 

APCs for PHP services based exclusively 

on hospital data. Specifically, we 

adopted a two-tiered APC methodology 

(in lieu of the original APC 0033) under 

which CMS paid one rate for days with 

3 services (APC 0172) and a different 

payment rate for days with 4 or more 

services (APC 0173). These two new 

APCs were established using only 

hospital data. For CY 2011, we added 

two new APCs (APCs 0175 and 0176) 

for PHP services provided by hospitals 

and based the relative payment weights 

for these APCs solely on hospital data. 

APCs 0172 and 0173 were designated 

for PHP services provided by CMHCs 

and were based on a mixture of hospital 

and CMHC data. As the Secretary 

argued in the Paladin case, the courts 

have consistently held that the phrase 

‘‘based on’’ does not mean ‘‘based 

exclusively on.’’ Thus, the relative 

payment weights for the two APCs for 

PHP services provided by CMHCs in CY 

2011 were ‘‘based on’’ hospital data, no 

less than the relative payment weights 

for the two APCs for hospital-based PHP 

services. 

Although we used hospital data to 

establish the relative payment weights 

for APCs 0033, 0172, 0173, 0175, and 

0176 for PHP services, we believe that 


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we have the authority to discontinue the 

use of hospital data in determining the 

OPPS relative payment weights for PHP 

services provided by CMHCs. Other 

parts of section 1833(t)(2)(C) of the Act 

make plain that the data source for the 

relative payment weights is subject to 

change from one period to another. 

Section 1833(t)(2)(C) of the Act provides 

that, in establishing the relative 

payment weights, ‘‘the Secretary shall 

[ ] us[e] data on claims from 1996 and 

us[e] data from the most recent available 

cost reports.’’ We used 1996 data (in 

addition to 1997 data) in determining 

only the original relative payment 

weights for 2000. In the ensuing 

calendar year updates, we continually 

used more recent cost report data. 

Moreover, section 1833(t)(9)(A) of the 

Act requires the Secretary to ‘‘review 

not less often than annually and revise 

the groups, the relative payment 

weights, and the wage and other 

adjustments described in paragraph (2) 

to take into account changes in medical 

practice, changes in technology, the 

addition of new services, new cost data, 

and other relevant information and 

factors.’’ For purposes of the CY 2012 

update, we exercised our authority 

under section 1833(t)(9)(A) of the Act to 

change the data source for the relative 

payment weights for PHP services 

provided by CMHCs based on ‘‘new cost 

data, and other relevant information and 

factors.’’ 

In the CY 2013 OPPS/ASC final rule 

with comment period, we finalized our 

proposal to base the relative payment 

weights that underpin the OPPS APCs, 

including the four PHP APCs, on 

geometric means rather than on the 

medians. For CY 2013, we established 

the four PHP APC per diem payment 

rates based on geometric mean cost 

levels calculated using the most recent 

claims data for each provider type. We 

refer readers to the CY 2013 OPPS/ASC 

final rule with comment period for a 

more detailed discussion (77 FR 68406 

through 68412). 

B. Proposed PHP APC Update for CY 

2014 

For CY 2014, we are proposing to 

apply our established policies to 

calculate the four PHP APC per diem 

payment rates based on geometric mean 

per diem costs using the most recent 

claims data for each provider type. We 

computed proposed CMHC PHP APC 

geometric mean per diem costs for Level 

I (3 services per day) and Level II (4 or 

more services per day) PHP services 

using only CY 2012 CMHC claims data, 

and proposed hospital-based PHP APC 

geometric mean per diem costs for Level 

I and Level II PHP services using only 

CY 2012 hospital-based PHP claims 

data. These proposed geometric mean 

per diem costs are shown in Table 30 

below. 

TABLE 30—PROPOSED CY 2014 GEOMETRIC MEAN PER DIEM COSTS FOR CMHC AND HOSPITAL-BASED PHP SERVICES, 

BASED ON CY 2012 CLAIMS DATA

APC Group title 

Proposed 

geometric 

mean per 

diem costs 

0172 ....... Level I Partial Hospitalization (3 services) for CMHCs ...................................................................................................... $94.51 

0173 ....... Level II Partial Hospitalization (4 or more services) for CMHCs ........................................................................................ 106.20 

0175 ....... Level I Partial Hospitalization (3 services) for hospital-based PHPs ................................................................................. 212.85 

0176 ....... Level II Partial Hospitalization (4 or more services) for hospital-based PHPs .................................................................. 215.13 

For CY 2014, the proposed geometric 

mean per diem costs for days with 3 

services (Level I) is approximately 

$94.51 for CMHCs and approximately 

$212.85 for hospital-based PHPs. The 

proposed geometric mean per diem 

costs for days with 4 or more services 

(Level II) is approximately $106.20 for 

CMHCs and approximately $215.13 for 

hospital-based PHPs. Therefore, the 

proposed geometric mean per diem 

costs for CMHCs continue to be 

substantially lower than the proposed 

geometric mean per diem costs for 

hospital-based PHPs for the same level 

of service provided, which indicates 

that there continues to be fundamental 

differences between the cost structures 

of CMHCs and hospital-based PHPs. 

The CY 2014 proposed geometric 

mean per diem costs for CMHCs 

calculated under the proposed CY 2014 

methodology using CY 2012 claims data 

have remained relatively constant when 

compared to the CY 2013 final 

geometric mean per diem costs for 

CMHCs established in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68412), with proposed 

geometric mean per diem costs for Level 

I PHP services increasing from 

approximately $87 to approximately $95 

for CY 2014, and proposed geometric 

mean per diem costs for Level II PHP 

services decreasing from approximately 

$113 to approximately $106 for CY 

2014. 

The CY 2014 proposed geometric 

mean per diem costs for hospital-based 

PHPs calculated under the proposed CY 

2014 methodology using CY 2012 

claims data show more variation when 

compared to the CY 2013 final 

geometric mean per diem costs for 

hospital-based PHPs, with proposed 

geometric mean per diem costs for Level 

I PHP services increasing from 

approximately $186 to approximately 

$213 for CY 2014, and proposed 

geometric mean per diem costs for Level 

II PHP services decreasing from 

approximately $235 to approximately 

$215 for CY 2014. 

In summary, the proposed CY 2014 

geometric mean per diem costs for the 

PHP APCs are shown in Tables 31 and 

32 below. We are inviting public 

comments on these proposals. 

TABLE 31—PROPOSED CY 2014 GEOMETRIC MEAN PER DIEM COSTS FOR CMHC PHP SERVICES

APC Group title 

Proposed 

geometric 

mean per 

diem costs 

0172 ....... Level I Partial Hospitalization (3 services) for CMHCs ...................................................................................................... $94.51 

0173 ....... Level II Partial Hospitalization (4 or more services) for CMHCs ........................................................................................ 106.20 


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TABLE 32—PROPOSED CY 2014 GEOMETRIC MEAN PER DIEM COSTS FOR HOSPITAL-BASED PHP SERVICES

APC Group title 

Proposed 

geometric 

mean per 

diem costs 

0175 ....... Level I Partial Hospitalization (3 services) for Hospital-based PHPs ................................................................................. $212.85 

0176 ....... Level II Partial Hospitalization (4 or more services) for Hospital-based PHPs .................................................................. 215.13 

C. Discussion of Possible Future 

Initiatives and Request for Public 

Comments 

We are considering a number of 

possible future initiatives that may help 

to ensure the long-term stability of PHPs 

and further improve the accuracy of 

payment for PHP services. Along with 

our broad, ongoing objectives of 

ensuring stability of the PHP benefit and 

promoting payment accuracy for PHPs, 

we want to ensure that PHPs are used 

by individuals who are specifically in 

need of such services. The PHP benefit 

was designed to assist individuals with 

an acute exacerbation of a psychiatric 

illness to manage debilitating symptoms 

and prevent the need for admission and 

readmission into hospitals. Accordingly, 

we are considering a number of possible 

future modifications to certain aspects 

of the PHP benefit. We are not 

proposing new Medicare policy in this 

discussion of possible future 

modifications. Instead, we are 

requesting public comments on possible 

future initiatives. 

Under the current methodology, we 

use the most recent claims data to 

compute geometric mean per diem costs 

for Level I (3 services per day) and Level 

II (4 or more services per day) PHP 

services for CMHCs and for hospitalbased PHPs. We are interested in 

examining the payment structure for 

PHP services to determine alternative 

methodologies to pay for PHP services 

that would reduce unnecessary care 

while maintaining or increasing the 

quality of care. We are inviting public 

comments on alternative payment 

methodologies. 

One of the areas on which we would 

like to receive public comments is 

whether payment based on an episode 

of care, or a per diem similar to the 

inpatient psychiatric facility (IPF) PPS, 

would result in more appropriate 

payment for PHP services than the 

current payment structure. The IPF PPS 

is a per diem prospective payment 

system for inpatient psychiatric hospital 

services furnished in psychiatric 

hospitals, and psychiatric units in acute 

care hospitals and critical access 

hospitals. The IPF PPS base rate is 

adjusted to account for patient and 

facility characteristics that contribute to 

higher costs per day, including age, 

diagnosis-related group assignment, 

comorbidities, days of the stay, 

geographic wage area, rural location, 

teaching status, cost of living for IPFs 

located in Alaska and Hawaii, and the 

presence of a qualifying emergency 

department. The IPF PPS methodology 

includes a payment provision for 

interrupted stays, additional payment 

for outlier cases, and a per treatment 

payment for electroconvulsive therapy 

(ECT) treatments. For detailed 

information regarding the 

implementation of the IPF PPS, we refer 

readers to the FY 2005 IPF PPS final 

rule published in the Federal Register 

on November 15, 2004 (69 FR 66922). 

To find additional information about the 

IPF PPS, we refer readers to the CMS 

Web site at: http://www.cms.hhs.gov/ 

inpatientpsychfacilpps. 

Another area on which we would like 

to receive public comments is on 

physician certification/recertification 

that the individual would require 

inpatient psychiatric care in the absence 

of PHP services. In order for a hospital 

or CMHC to be paid for partial 

hospitalization services on behalf of a 

Medicare beneficiary, a physician must 

certify (and recertify when such services 

are furnished over a period of time), 

among other things, that the individual 

would require inpatient psychiatric care 

in the absence of such services. In 

addition, an individualized written plan 

of treatment for furnishing such services 

must be established and reviewed 

periodically by a physician, and such 

services must be furnished while the 

individual is under the care of a 

physician (We refer readers to 42 CFR 

424.24(e)). 

Currently, the recertification 

requirements specify that the physician 

recertification must be signed by a 

physician who is treating the patient 

and has knowledge of the patient’s 

response to treatment. The 

recertification is required as of the 18th 

day of partial hospitalization services. 

Subsequent recertifications are required 

at intervals established by the provider, 

but no less frequently than every 30 

days. We are inviting public comments 

on whether the current requirement 

under § 424.24(e)(3)(ii) of the 

regulations, which requires the first 

recertification by the physician to be as 

of the 18th day of partial hospitalization 

services, reflects current PHP treatment 

practices. Specifically, we are interested 

in whether the first recertification date 

should be changed to some other 

standard that accords with best 

practices and why. 

With respect to the individualized 

written plan of treatment for furnishing 

partial hospitalization services, as 

discussed above, a physician must 

establish and periodically review the 

written plan of treatment. The written 

plan of treatment sets forth the 

physician’s diagnosis, the type, amount, 

duration, and frequency of the services, 

and the treatment goals under the 

written plan. The physician determines 

the frequency and duration of the PHP 

services taking into account accepted 

norms of medical practice and a 

reasonable expectation of improvement 

in the patient’s condition. (We refer 

readers to § 424.24(e)(2) of the 

regulations.) We are interested in what 

requirements should be included in the 

written plan of treatment to better direct 

PHP resources toward appropriate 

discharge and follow-up with 

appropriate support services. 

Specifically, we are inviting public 

comments on two issues: (1) The best 

way that discharge from a PHP be 

expedited for those individuals no 

longer at risk of inpatient psychiatric 

hospitalization; and (2) whether the 

written plan of treatment requirements 

under § 424.24(e)(2)(i)(C), which require 

that the written plan of treatment set 

forth the treatment goals, should be 

revised to require that specific actions 

be taken by the physician and/or staff to 

assist a beneficiary in transitioning from 

a PHP to a lower level of care. For 

example, we are interested in whether 

the written plan of treatment should 

require that, upon discharge, patients 

have written instructions that include: 

• A full list of their medications, 

dosages and any necessary 

prescriptions; 

• Their next scheduled appointment 

with a psychiatrist or qualified 

practitioner who may bill for his or her 

professional services under Medicare 

Part B, including the phone number, 


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address, and appointment date and 

time; 

• Confirmed place to live in a stable 

environment with support services; and 

• Other care coordination 

information. 

We also are interested in receiving 

public feedback about quality measures 

for a PHP. Quality health care is a high 

priority for CMS. We implement quality 

initiatives to ensure quality health care 

for Medicare beneficiaries through 

accountability and public disclosure. 

We use quality measures under various 

quality initiatives, which utilize pay-forreporting and public reporting 

mechanisms. We are requesting public 

comments on quality measures for PHP 

services for future consideration. 

Specifically, if we were to establish 

quality measures for PHP services and 

require quality data reporting, what 

should be included in those measures? 

In addition, should the quality measures 

be similar or identical to those measures 

established for IPFs under the IPF 

Quality Reporting (IPFQR) Program? 

We would appreciate feedback on all 

of these areas for future consideration. 

Therefore, we are inviting public 

comments on these issues. 

D. Proposed Separate Threshold for 

Outlier Payments to CMHCs 

As discussed in the CY 2004 OPPS 

final rule with comment period (68 FR 

63469 through 63470), after examining 

the costs, charges, and outlier payments 

for CMHCs, we believed that 

establishing a separate OPPS outlier 

policy for CMHCs would be appropriate. 

A CMHC-specific outlier policy would 

direct OPPS outlier payments towards 

genuine cost of outlier cases, and 

address situations where charges were 

being artificially increased to enhance 

outlier payments. We created a separate 

outlier policy that would be specific to 

the estimated costs and OPPS payments 

provided to CMHCs. We note that, in 

the CY 2009 OPPS/ASC final rule with 

comment period, we established an 

outlier reconciliation policy to 

comprehensively address charging 

aberrations related to OPPS outlier 

payments (73 FR 68594 through 68599). 

Therefore, beginning for CY 2004, we 

designated a portion of the estimated 

OPPS outlier target amount specifically 

for CMHCs, consistent with the 

percentage of projected payments to 

CMHCs under the OPPS each year, 

excluding outlier payments, and 

established a separate outlier threshold 

for CMHCs. 

The separate outlier threshold for 

CMHCs resulted in $1.8 million in 

outlier payments to CMHCs in CY 2004, 

and $0.5 million in outlier payments to 

CMHCs in CY 2005. In contrast, in CY 

2003, more than $30 million was paid 

to CMHCs in outlier payments. We 

believe that this difference in outlier 

payments indicates that the separate 

outlier threshold for CMHCs has been 

successful in keeping outlier payments 

to CMHCs in line with the percentage of 

OPPS payments made to CMHCs. 

In this CY 2014 OPPS/ASC proposed 

rule, we are proposing to continue 

designating a portion of the estimated 

1.0 percent outlier target amount 

specifically for CMHCs, consistent with 

the percentage of projected payments to 

CMHCs under the OPPS in CY 2014, 

excluding outlier payments. CMHCs are 

projected to receive 0.18 percent of total 

OPPS payments in CY 2014, excluding 

outlier payments. Therefore, we are 

proposing to designate 0.0018 percent of 

the estimated 1.0 percent outlier target 

amount for CMHCs, and establish a 

threshold to achieve that level of outlier 

payments. Based on our simulations of 

CMHC payments for CY 2014, we are 

proposing to continue to set the 

threshold for CY 2014 at 3.40 times the 

highest CMHC PHP APC payment rate 

(that is, APC 0173 (Level II Partial 

Hospitalization)). We continue to 

believe that this approach would 

neutralize the impact of inflated CMHC 

charges on outlier payments and better 

target outlier payments to those truly 

exceptionally high-cost cases that might 

otherwise limit beneficiary access. In 

addition, we are proposing to continue 

to apply the same outlier payment 

percentage that applies to hospitals. 

Therefore, for CY 2014, we are 

proposing to continue to pay 50 percent 

of CMHC per diem costs over the 

threshold. In section II.G. of this 

proposed rule, for the hospital 

outpatient outlier payment policy, we 

are proposing to set a dollar threshold 

in addition to an APC multiplier 

threshold. Because the PHP APCs are 

the only APCs for which CMHCs may 

receive payment under the OPPS, we 

would not expect to redirect outlier 

payments by imposing a dollar 

threshold. Therefore, we are not 

proposing to set a dollar threshold for 

CMHC outlier payments. 

In summary, we are proposing to 

establish that if a CMHC’s cost for 

partial hospitalization services, paid 

under either APC 0172 or APC 0173, 

exceeds 3.40 times the payment rate for 

APC 0173, the outlier payment would 

be calculated as 50 percent of the 

amount by which the cost exceeds 3.40 

times the APC 0173 payment rate. We 

are inviting public comments on these 

proposals. 

IX. Proposed Procedures That Would 

Be Paid Only as Inpatient Procedures 

A. Background 

We refer readers to the CY 2012 

OPPS/ASC final rule with comment 

period (76 FR 74352 through 74353) for 

a full historical discussion of our 

longstanding policies on how we 

identify procedures that are typically 

provided only in an inpatient setting 

(referred to as the inpatient list) and, 

therefore, will not be paid by Medicare 

under the OPPS; and on the criteria that 

we use to review the inpatient list each 

year to determine whether or not any 

procedures should be removed from the 

list. 

B. Proposed Changes to the Inpatient 

List 

For the CY 2014 OPPS, we are 

proposing to use the same methodology 

(described in the November 15, 2004 

final rule with comment period (69 FR 

65835)) of reviewing the current list of 

procedures on the inpatient list to 

identify any procedures that may be 

removed from the list. The established 

criteria upon which we make such a 

determination are as follows: 

1. Most outpatient departments are 

equipped to provide the services to the 

Medicare population. 

2. The simplest procedure described 

by the code may be performed in most 

outpatient departments. 

3. The procedure is related to codes 

that we have already removed from the 

inpatient list. 

4. A determination is made that the 

procedure is being performed in 

numerous hospitals on an outpatient 

basis. 

5. A determination is made that the 

procedure can be appropriately and 

safely performed in an ASC, and is on 

the list of approved ASC procedures or 

has been proposed by us for addition to 

the ASC list. 

Using this methodology, we did not 

identify any procedures that potentially 

could be removed from the inpatient list 

for CY 2014. Therefore, we are 

proposing to not remove any procedures 

from the inpatient list for CY 2014. 

The complete list of codes that we are 

proposing to be paid by Medicare in CY 

2014 only as inpatient procedures is 

included as Addendum E to this 

proposed rule (which is available via 

the Internet on the CMS Web site). 


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X. Proposed Nonrecurring Policy 

Changes 

A. Supervision of Hospital Outpatient 

Therapeutic Services 

1. Enforcement Instruction for the 

Supervision of Outpatient Therapeutic 

Services in CAHs and Certain Small 

Rural Hospitals 

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 that direct supervision is 

required for hospital outpatient 

therapeutic services covered and paid 

by Medicare in hospitals as well as in 

provider-based departments of 

hospitals, as set forth in the CY 2000 

OPPS final rule with comment period 

(65 FR 18525). In the CY 2010 OPPS/ 

ASC final rule with comment period (74 

FR 60575 through 60591), we finalized 

a technical correction to the title and 

text of the applicable regulations at 42 

CFR 410.27 to clarify that this standard 

applies in CAHs as well as hospitals. In 

response to concerns expressed by the 

hospital community, in particular CAHs 

and small rural hospitals, that they 

would have difficulty meeting this 

standard, on March 15, 2010, we 

instructed all Medicare contractors not 

to evaluate or enforce the supervision 

requirements for therapeutic services 

provided to outpatients in CAHs from 

January 1, 2010 through December 31, 

2010, while the agency revisited the 

supervision policy during the CY 2011 

OPPS/ASC rulemaking cycle. 

Due to continued concerns expressed 

by CAHs and small rural hospitals, we 

extended this notice of nonenforcement 

(‘‘enforcement instruction’’) as an 

interim measure for CY 2011, and 

expanded it to apply to small rural 

hospitals having 100 or fewer beds (75 

FR 72007). We continued to consider 

the issue further in our annual OPPS 

notice-and-comment rulemaking, and 

implemented an independent review 

process to obtain advice from the 

Hospital Outpatient Payment Panel (the 

Panel) on this matter (76 FR 74360 

through 74371). Under this process used 

since CY 2012, the Panel considers and 

advises CMS regarding stakeholder 

requests for changes in the required 

level of supervision of individual 

hospital outpatient therapeutic services. 

We extended the enforcement 

instruction the past 2 years (through CY 

2012 and CY 2013) to provide hospitals 

with adequate opportunity to become 

familiar with the new independent 

review process and submit evaluation 

requests, and to meet the required 

supervision levels for all hospital 

outpatient therapeutic services (we refer 

readers to 76 FR 74371 and 77 FR 

68425). In the CY 2013 OPPS/ASC final 

rule with comment period (77 FR 

68426), we stated that we expect CY 

2013 to be the final year that the 

enforcement instruction would be in 

effect, as during this year there would 

be additional opportunities for 

stakeholders to bring their issues to the 

Panel, and for the Panel to evaluate and 

provide us with recommendations on 

those issues. The current enforcement 

instruction is available on the CMS Web 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/ 

index.html?redirect=/ 

HospitalOutpatientPPS/ 

01_overview.asp. 

In CY 2012 and CY 2013, the Panel 

met and considered several requests 

from CAHs and other stakeholders for 

changes in the required level of 

supervision for observation and other 

services. Based on the Panel’s 

recommendations, we modified our 

supervision requirements to provide 

that most of the services considered may 

be furnished under general supervision, 

in accordance with applicable Medicare 

regulations and policies. These 

decisions are posted on the CMS Web 

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

Medicare-Fee-for-Service-Payment/

HospitalOutpatientPPS/Downloads/ 

CY2013-OPPS-General-Supervision.pdf. 

We did not receive any requests from 

stakeholders for evaluation of the 

supervision levels of any other hospital 

outpatient therapeutic services at the 

March 2013 Panel meeting. We continue 

to believe that direct supervision is the 

most appropriate level of supervision 

for most hospital outpatient therapeutic 

services under the ‘‘incident to’’ 

provisions of section 1861(s)(2)(B) of the 

Act, as we discussed in the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72006). We believe the 

independent Panel review advisory 

process has proved an effective means 

for the hospital community to identify 

hospital outpatient therapeutic services 

that can safely be furnished under 

general supervision, where the 

supervising practitioner does not have 

to be immediately available in person to 

provide assistance and direction. We 

encourage hospitals to continue using 

the Panel process for bringing services 

to CMS’ attention that may not require 

the immediate availability of a 

supervising practitioner, especially 

where it is possible to reduce the 

burden on the workforce available to 

small rural hospitals and CAHs while 

ensuring the quality and safety of 

patient care. We encourage hospitals 

and CAHs to continue using the 

established Panel process to request 

changes they believe would be 

appropriate in supervision levels for 

individual hospital outpatient 

therapeutic services. Instructions for 

submitting evaluation requests are 

available on the Panel Web site at 

http://www.cms.gov/Regulations-andGuidance/Guidance/FACA/Advisory

PanelonAmbulatoryPayment

ClassificationGroups.html). 

We believe it is appropriate to allow 

the enforcement instruction to expire at 

the end of CY 2013, to ensure the 

quality and safety of hospital and CAH 

outpatient therapeutic services paid by 

Medicare. For CY 2014, we anticipate 

allowing the enforcement instruction to 

expire, such that all outpatient 

therapeutic services furnished in 

hospitals and CAHs would require a 

minimum of direct supervision unless 

the service is on the list of services that 

may be furnished under general 

supervision or is designated as a 

nonsurgical extended duration 

therapeutic service (the list of services 

is available on the CMS Web site at 

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

Medicare-Fee-for-Service-Payment/

HospitalOutpatientPPS/Downloads/ 

CY2013-OPPS-GeneralSupervision.pdf). We are interested in 

receiving public comments on any 

potential impacts on access to care and 

quality of care for specific services that 

may result from allowing the 

enforcement instruction to expire at the 

end of CY 2013. We are requesting 

public comments on specific services 

for which CAHs and small rural 

hospitals anticipate difficulty furnishing 

the required direct supervision, 

including specific factors that may 

contribute to the lack of available staff. 

2. Supervision Requirements for 

Observation Services 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71999 

through 72013), we revised the 

supervision requirements for 

observation services furnished in the 

hospital by designating observation 

services (HCPCS codes G0378 (Hospital 

observation services, per hour) and 

G0379 (Direct admission of patient for 

observation care)) as nonsurgical 

extended duration therapeutic services 

(‘‘extended duration services’’). As we 

provided in the CY 2011 OPPS/ASC 

final rule with comment period and 42 

CFR 410.27(a)(1)(iv)(E), extended 

duration services require direct 

supervision at the initiation of the 

service, which may be followed by 

general supervision for the remainder of 


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the service at the discretion of the 

supervising physician or appropriate 

nonphysician practitioner, once that 

practitioner has determined that the 

patient is stable. The determination by 

the supervising physician or appropriate 

nonphysician practitioner that the 

beneficiary is stable and may be 

transitioned to general supervision must 

be documented in progress notes or in 

the medical record (75 FR 72011). 

Since we designated observation 

services as extended duration services, 

we have received several inquiries from 

stakeholders regarding whether 

Medicare requires multiple evaluations 

of the beneficiary during the provision 

of observation services. Specifically, 

stakeholders asked whether, once the 

supervising physician or appropriate 

nonphysician practitioner transitions 

the beneficiary to general supervision 

and documents the transition in the 

medical record, Medicare require 

further assessment of the beneficiary 

either per hour (because observation 

services are billed per hour) or at some 

other point during provision of the 

service. We are clarifying that, for 

observation services, if the supervising 

physician or appropriate nonphysician 

practitioner determines and documents 

in the medical record that the 

beneficiary is stable and may be 

transitioned to general supervision, 

general supervision may be furnished 

for the duration of the service. Medicare 

does not require an additional initiation 

period(s) of direct supervision during 

the service. We believe that this 

clarification will assist hospitals in 

furnishing the required supervision of 

observation services without undue 

burden on their staff. 

B. Application of Therapy Caps in CAHs 

For outpatient physical therapy (PT), 

occupational therapy (OT), and speechlanguage pathology (SLP) (collectively, 

‘‘outpatient therapy’’) services covered 

under Medicare Part B, section 1833(g) 

of the Act applies annual, per 

beneficiary limitations on incurred 

expenses, commonly referred to as 

‘‘therapy caps.’’ There is one therapy 

cap for OT services and another separate 

therapy cap for PT and SLP services 

combined. In the CY 2014 Medicare 

Physician Fee Schedule (MPFS) 

proposed rule, we are proposing to 

subject outpatient therapy services that 

are furnished by a CAH to the therapy 

caps, the exceptions process, and the 

manual medical review process 

beginning on January 1, 2014. The 

American Taxpayer Relief Act of 2012 

(Pub. L. 112–240) required that therapy 

services furnished by a CAH during 

2013 are counted toward the therapy 

caps using the MPFS rate, and we are 

proposing to continue this methodology 

for 2014 and subsequent years. CAHs 

would still be paid for therapy services 

under the reasonable cost methodology 

for CAH outpatient services described at 

section 1834(g) of the Act. We refer 

readers to the CY 2014 MPFS proposed 

rule for detailed information about the 

proposed application of the therapy 

caps and related provisions to CAHs. 

We are including in this CY 2014 OPPS/ 

ASC proposed rule a reference to this 

proposal as an additional means to 

direct CAHs’ attention to our proposal 

in the CY 2014 MPFS proposed rule. We 

refer readers to the CY 2014 MPFS 

proposed rule for instructions for 

submitting public comments related to 

this proposal to apply the therapy cap 

to services furnished by CAHs. We look 

forward to reviewing the comments on 

this proposal. 

C. Requirements for Payment of 

Outpatient Therapeutic (‘‘Incident To’’) 

Hospital or CAH Services 

1. Overview 

In this section, we are proposing to 

amend the Medicare conditions of 

payment for therapeutic outpatient 

hospital or CAH services and supplies 

furnished ‘‘incident to’’ a physician’s or 

nonphysician practitioner’s service 

(which we refer to as hospital or CAH 

outpatient therapeutic services) to 

require that individuals furnishing these 

services do so in compliance with 

applicable State law. Under current 

policy, we generally defer to hospitals to 

ensure that State scope of practice and 

other State rules relating to health care 

delivery are followed, such that these 

services are performed only by qualified 

personnel in accordance with all 

applicable laws and regulations. We are 

proposing to revise the existing 

regulations to explicitly require that 

individuals who perform hospital or 

CAH outpatient therapeutic services 

must do so in compliance with 

applicable State laws and regulations as 

a condition of payment under Medicare 

Part B. In this section of this proposed 

rule, we are using the term ‘‘hospital’’ 

to include a CAH unless otherwise 

specified. Although the term ‘‘hospital’’ 

does not generally include a CAH, 

section 1861(e) of the Act provides that 

the term ‘‘hospital’’ includes a CAH if 

the context otherwise requires. We 

believe it would be appropriate to apply 

our proposed policy regarding 

compliance with applicable State law, 

as we do for other conditions of 

payment for hospital outpatient 

therapeutic services, to CAHs as well as 

other hospitals. 

2. Background 

Section 1861(s)(2)(B) of the Act 

establishes the benefit category for 

hospital ‘‘incident to’’ medical and 

other health services, which are paid 

under Medicare Part B. The statute 

specifies that ‘‘incident to’’ services are 

‘‘hospital services (including drugs and 

biological which are not usually selfadministered by the patient) incident to 

physicians’ services rendered to 

outpatients and partial hospitalization 

services incident to such services.’’ In 

the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74369 through 

74370), we clarified that Medicare 

defines these services as hospital 

outpatient therapeutic services, which 

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 (for example, radiation therapy 

services described under section 

1861(s)(4) of the Act). Because hospital 

outpatient therapeutic services are 

furnished ‘‘incident to’’ a physician’s 

professional service, we believe the 

conditions of payment that derive from 

the ‘‘incident to’’ nature of the services 

paid under section 1861(s)(2)(B) of the 

Act apply to all hospital outpatient 

therapeutic services, including those 

described under benefit categories other 

the specific ‘‘incident to’’ provision in 

section 1861(s)(2)(B) of the Act. 

In addition to the requirements of the 

statute, the regulation at 42 CFR 410.27 

sets forth specific requirements that 

must be met in order for hospital to be 

paid under Medicare Part B for 

therapeutic hospital or CAH services 

and supplies furnished incident to a 

physician’s or nonphysician 

practitioner’s service (hospital or CAH 

outpatient therapeutic services). Section 

410.27 describes hospital or CAH 

services and supplies furnished incident 

to a physician’s or nonphysician 

practitioner’s services as therapeutic 

services and provides the conditions of 

payment. Specifically, § 410.27(a) 

provides that Medicare Part B pays for 

therapeutic hospital or CAH services 

and supplies furnished incident to a 

physician’s or nonphysician 

practitioner’s service. These are defined, 

in part, 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 selfadministered, if they are furnished— 

• By or under arrangements made by 

the participating hospital or CAH, 


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except in the case of a SNF resident as 

provided in 42 CFR 411.15(p); 

• As an integral although incidental 

part of a physician’s or nonphysician 

practitioner’s services; 

• In the hospital or CAH or in a 

department of the hospital or CAH, as 

defined in 42 CFR 413.65 [a providerbased department]; and 

• Under the direct supervision (or 

other level of supervision as specified 

by CMS for the particular service) of a 

physician or a nonphysician 

practitioner. For purposes of this 

section, ‘‘nonphysician practitioner,’’ as 

defined in § 410.27(g), means a clinical 

psychologist, licensed clinical social 

worker, physician assistant, nurse 

practitioner, clinical nurse specialist, or 

certified nurse-midwife. 

Sections 410.27(b) through (f) provide 

additional conditions of payment for 

partial hospitalization services, drugs 

and biologicals, emergency services, and 

services furnished by an entity other 

than the hospital (or CAH). We 

commonly refer to the services 

described in § 410.27 as ‘‘incident to’’ 

services. 

In recent years, we have discussed 

and refined the supervision regulations 

under § 410.27, which are conditions of 

Medicare Part B payment for hospital 

outpatient ‘‘incident to’’ (‘‘therapeutic’’) 

services. For example, we have 

discussed our belief that direct 

supervision is the most appropriate 

level of supervision for most of these 

services, unless personal supervision or 

personal performance of the services by 

the physician or nonphysician 

practitioner is more appropriate, given 

the incident to nature of the services as 

an integral although incidental part of a 

physician’s or nonphysician 

practitioner’s services (74 FR 60584, 75 

FR 72006, and 76 FR 42281). We have 

stated our historical interpretation of 

section 1861(s)(2)(B) of the Act, 

specifically, that ‘‘incident to’’ services 

are furnished under the order of a 

physician (or nonphysician 

practitioner), the physician is involved 

in the management of the patient, and 

the physician supervises the provision 

of those services when he or she does 

not provide them directly (75 FR 

72006). This is reflected in our 

requirement for a minimum of direct 

supervision, except for a limited set of 

services that may be furnished under 

general supervision or are designated as 

nonsurgical extended duration 

therapeutic services which require 

direct supervision initially with 

potential transition to general 

supervision (we refer readers to the 

CMS Web site at http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/ 

Downloads/CY2013-OPPS-GeneralSupervision.pdf). 

In 42 CFR 410.27(a)(1)(iv), we regulate 

the qualifications of physicians and 

nonphysician practitioners supervising 

other personnel that are personally 

performing a service, or part of a 

service: ‘‘(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’’ and ‘‘(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.’’ 

Similarly, we provide in the Medicare 

Benefit Policy Manual (MBPM, Pub. 

100–02) that hospital outpatient 

therapeutic services and supplies must 

be furnished under the order of a 

physician or other practitioner 

practicing within the extent of the Act, 

the Code of Federal Regulations, and 

State law (Chapter 6, Section 20.5.2 of 

the MBPM). Section 20.5.2 of the MBPM 

specifies that the services must be 

furnished by hospital personnel under 

the appropriate supervision of a 

physician or nonphysician practitioner 

in accordance with 42 CFR 410.27 and 

482.12. This does not mean that each 

occasion of service by a nonphysician 

need also be the occasion of the actual 

rendition of a personal professional 

service by the physician responsible for 

care of the patient. However, during any 

course of treatment rendered by 

auxiliary personnel, the physician must 

personally see the patient periodically 

and sufficiently often to assess the 

course of treatment and the patient’s 

progress and, when necessary, to change 

the treatment regimen. A hospital 

service or supply would not be 

considered incident to a physician’s 

service if the attending physician 

merely wrote an order for the services 

or supplies and referred the patient to 

the hospital without being involved in 

the management of that course of 

treatment. 

Central to the issue of services that 

hospitals may bill to Medicare that are 

not performed personally by the 

physician is the assessment of the 

qualifications of the individuals to 

whom the services are delegated. As 

medical practice has evolved over time, 

the services performed in the hospital 

outpatient setting have expanded to 

include more complicated services such 

as advanced surgery and a complex 

variety of radiation therapy. In addition, 

the types of services that can be 

furnished ‘‘incident to’’ a physician’s or 

nonphysician practitioner’s services 

have increased. Under current Medicare 

Part B payment policy, we generally 

defer to hospitals to ensure that State 

scope of practice laws are followed and 

that the personnel who furnish hospital 

outpatient therapeutic (‘‘incident to’’) 

services are licensed and are otherwise 

qualified to do so. Specifically, we have 

stated that, considering that hospitals 

furnish a wide array of complex 

outpatient services and procedures, 

including surgical procedures, we 

would expect that hospitals have the 

credentialing procedures, bylaws, and 

other policies in place to ensure that 

hospital outpatient services furnished to 

Medicare beneficiaries are being 

provided only by qualified practitioners 

in accordance with all applicable laws 

and regulations (74 FR 60584; Chapter 

6, Section 20.5.4 of the MBPM). 

However, our payment regulations do 

not contain restrictions on the types of 

auxiliary personnel that can perform 

hospital outpatient therapeutic 

(‘‘incident to’’) services, other than rules 

relating to supervision by a physician or 

qualified nonphysician practitioner, and 

do not specifically require that 

performance of these services be in 

compliance with applicable State law. 

Over the past years, several situations 

have come to our attention where 

Medicare was billed for ‘‘incident to’’ 

services that were performed by an 

individual who did not meet the State 

standards for those services in the State 

in which services were performed. The 

physician or nonphysician practitioner 

billing for the services would have been 

permitted under State law to personally 

furnish the services, but the services 

were actually provided by other 

individuals who were not in compliance 

with State law in providing the 

particular services (or aspect of the 

services). 

Although we would expect that all 

hospital services for which Medicare 

payment is made would be furnished in 

accordance with State law, the Medicare 

requirements for hospital outpatient 

therapeutic services and supplies 

incident to a physician’s services 

(§ 410.27, discussed above) do not 

specifically make compliance with State 

law a condition of payment for services 

(or aspects of services) and supplies 

furnished and billed as ‘‘incident to’’ 

services. Nor do any of the regulations 

regarding hospital outpatient 

therapeutic services and supplies 

incident to the services of nonphysician 

practitioners contain this requirement. 


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Thus, Medicare has had limited 

recourse when hospital outpatient 

therapeutic (‘‘incident to’’) services are 

not furnished in compliance with State 

law. 

In 2009, the Office of the Inspector 

General (OIG) issued a report entitled 

‘‘Prevalence and Qualifications of 

Nonphysicians Who Performed 

Medicare Physician Services’’ (OEI–09– 

06–00430) that considered, in part, the 

qualifications of auxiliary personnel 

providing ‘‘incident to’’ physician 

services. After finding that services were 

being provided and billed to Medicare 

by auxiliary personnel ‘‘. . . who did 

not possess the required licenses or 

certifications according to State laws, 

regulations, and/or Medicare rules,’’ the 

OIG recommended that we revise the 

‘‘incident to’’ rules to, among other 

things, ‘‘require that physicians who do 

not personally perform the services they 

bill to Medicare ensure that no persons 

except . . . nonphysicians who have the 

necessary training, certification, and/or 

licensure pursuant to State laws, State 

regulations, and Medicare regulations 

personally perform the services under 

the direct supervision of a licensed 

physician.’’ We are proposing 

amendments to our regulations in order 

to address this recommendation. 

To ensure that the practitioners and 

other personnel providing hospital 

outpatient therapeutic services to 

Medicare beneficiaries incident to a 

physician’s or nonphysician 

practitioner’s service do so in 

accordance with the requirements of the 

State in which the services are 

furnished, and to ensure that Medicare 

payments can be recovered when such 

services are not furnished in compliance 

with the State law, we are proposing to 

add a new condition of payment to the 

‘‘incident to’’ regulations at § 410.27, 

Therapeutic outpatient hospital or CAH 

services and supplies incident to a 

physician’s or nonphysician 

practitioner’s service: Conditions. 

Specifically, we are proposing to add a 

provision under a new paragraph 

(a)(1)(vi) under § 410.27 to provide that 

‘‘Medicare Part B pays for therapeutic 

hospital or CAH services and supplies 

furnished incident to a physician’s or 

nonphysician practitioner’s service . . . 

if they are furnished ‘‘In accordance 

with applicable State law.’’ The 

proposed policy would recognize the 

role of States in establishing the 

licensure and other qualifications of 

physicians and other health care 

professionals for the delivery of hospital 

(or CAH) outpatient therapeutic 

services. 

This proposal is consistent with other 

areas of the Medicare program where 

CMS defers to State rules regarding the 

delivery of hospital services. For 

example, the hospital conditions of 

participation (CoPs) at 42 CFR 

482.12(c)(2) defer to State law in 

determining who can admit patients as 

inpatients of a hospital: ‘‘Patients are 

admitted to the hospital only on the 

recommendation of a licensed 

practitioner permitted by the State to 

admit patients to a hospital.’’ The CoP 

also provides that, ‘‘If a Medicare 

patient is admitted by a practitioner not 

specified in paragraph (c)(1) of this 

section (that lists practitioners that must 

care for Medicare patients), that patient 

is under the care of a doctor of medicine 

or osteopathy.’’ Thus, in determining 

who may admit inpatients to a hospital, 

Medicare defers to State law rules. Also, 

as we stated in a recent rule addressing 

credentialing and privileging and 

telemedicine services under the CoPs 

(77 FR 29047): ‘‘CMS recognizes that 

practitioner licensure laws and 

regulations have traditionally been, and 

continue to be, the provenance of 

individual States, and we are not 

seeking to preempt State authority in 

this matter.’’ We believe it is 

appropriate to similarly require that all 

hospital outpatient services furnished 

incident to a physician’s or 

nonphysician practitioner’s services be 

furnished in accordance with State law 

requirements. As evidenced by these 

examples, throughout the Medicare 

program the qualifications required for 

the delivery of health care services are 

generally determined with reference to 

State law. In addition to the health and 

safety benefits we believe would accrue 

to the Medicare patient population, this 

approach would assure that Federal 

dollars are not expended for services 

that do not meet the standards of the 

States in which they are being 

furnished, and provides the ability for 

the Federal government to recover funds 

paid where services and supplies are 

not furnished in accordance with State 

law. 

This proposal would not impose any 

new requirements on hospitals billing 

the Medicare program because 

practitioners and other personnel 

furnishing services in a given State 

would already be required to comply 

with the laws of that State. This 

regulatory change would simply adopt 

the existing requirements as a condition 

of payment under Medicare. Codifying 

this requirement would provide the 

Federal government with a clear basis to 

deny a claim for Medicare payment 

when services are not furnished in 

accordance with applicable State law, 

and the ability to recover funds, as well 

as assure that Medicare pays for services 

furnished to beneficiaries only when the 

services meet the requirements imposed 

by the States to regulate health care 

delivery for the health and safety of 

their citizens. We welcome public 

comments on this proposal. 

3. Technical Correction 

In our review of § 410.27, we noted 

that paragraph (a) defines therapeutic 

hospital or CAH services and supplies 

furnished incident to a physician’s or 

nonphysician practitioner’s service 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.’’ Section 

1861(s)(2)(B) of the Act describes these 

services as ‘‘hospital services (including 

drugs and biologicals which are not 

usually self-administered by the patient) 

incident to physicians’ services 

rendered to outpatients and partial 

hospitalization services incident to such 

services.’’ The statute includes in this 

benefit category ‘‘drugs and biologicals 

which are not usually self-administered 

by the patient.’’ We are proposing to 

make a technical correction that would 

amend the description of these drugs 

and biologicals at § 410.27(a) to more 

appropriately reflect the statutory 

language. Specifically, we are proposing 

to delete the phrase ‘‘drugs and 

biologicals that cannot be selfadministered’’ and replace it with the 

phrase ‘‘drugs and biologicals which are 

not usually self-administered.’’ Under 

this proposed technical correction, the 

language of § 410.27(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, 

which are defined as all services and 

supplies furnished to hopital 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 which are not usually 

self-administered. . . .’’ 

D. Collecting Data on Services 

Furnished in Off-Campus ProviderBased Departments 

In recent years, the research literature 

and popular press have documented the 

increased trend toward hospital 

acquisition of physician practices, 

integration of those practices as a 

department of the hospital, and the 

resultant increase in the delivery of 

physicians’ services in a hospital setting 

(for example, we refer readers to 


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Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43627 

Ostrom, Carol M., ‘‘Why you might pay 

twice for one visit to a doctor,’’ Seattle 

Times, November 3, 2012, and 

O’Malley, Ann, Amelia M. Bond, and 

Robert Berenson, Rising hospital 

employment of physicians: better 

quality, higher costs? Issue Brief No. 

136, Center for Studying Health System 

Change, August 2011). When a Medicare 

beneficiary receives outpatient services 

in a hospital, the total payment amount 

for outpatient services made by 

Medicare is generally higher than the 

total payment amount made by 

Medicare when a physician furnishes 

those same services in a freestanding 

clinic or in a physician office. As more 

physician practices become hospitalbased, news articles have highlighted 

beneficiary liability for an additional 

‘‘facility fee,’’ which is the payment 

Medicare makes when services are 

furnished in a hospital in addition to 

the payment to the physician. MedPAC 

has questioned the appropriateness of 

increased Medicare payment and 

beneficiary cost-sharing when 

physicians’ offices become hospital 

outpatient departments and has 

recommended that Medicare pay 

selected hospital outpatient services at 

the Medicare Physician Fee Schedule 

(MPFS) rates (MedPAC March 2012 

Report to Congress; ‘‘Addressing 

Medicare Payment Differences across 

Settings,’’ presentation to the 

Commission on March 7, 2013). 

The total payment (including both 

Medicare program payment and 

beneficiary cost-sharing) generally is 

higher when outpatient services are 

furnished in the hospital outpatient 

setting rather than a freestanding clinic 

or a physician office. Both the OPPS and 

the MPFS establish payment based on 

the relative resources involved in 

furnishing a service. In general, we 

expect hospitals to have overall higher 

resource requirements than physician 

offices because hospitals are required to 

meet the conditions of participation, to 

maintain standby capacity for 

emergency situations, and to be 

available to address a wide variety of 

complex medical needs in a community. 

When services are furnished in the 

hospital setting such as in off-campus 

provider-based departments, Medicare 

pays the physician a lower facility 

payment under the MPFS, but then also 

pays the hospital under the OPPS. The 

beneficiary pays coinsurance for both 

the physician payment and the hospital 

outpatient payment. The term ‘‘facility 

fee’’ refers to this additional hospital 

outpatient payment. 

Upon acquisition of a physician 

practice, hospitals frequently treat the 

practice locations as off-campus 

provider-based departments of the 

hospital and bill Medicare for services 

furnished at those locations under the 

OPPS. (For further information on the 

provider-based regulations at § 413.65, 

we refer readers to http://www.gpo.gov/ 

fdsys/pkg/CFR-2010-title42-vol2/pdf/ 

CFR-2010-title42-vol2-sec413-65.pdf. 

Since October 1, 2002, we have not 

required hospitals to seek from CMS a 

determination of provider-based status 

for a facility that is located off campus. 

We also do not have a formal process for 

gathering information on the frequency, 

type, and payment for services 

furnished in off-campus provider-based 

departments of the hospital. 

In order to better understand the 

growing trend toward hospital 

acquisition of physician offices and 

subsequent treatment of those locations 

as off-campus provider-based outpatient 

departments, we are considering 

collecting information that would allow 

us to analyze the frequency, type, and 

payment for services furnished in offcampus provider-based hospital 

departments. We have considered 

several potential methods. Claims-based 

approaches could include creating a 

HCPCS modifier that could be reported 

with every code for services furnished 

in an off-campus provider-based 

department of a hospital on the CMS– 

1500 claim form for physician services 

and the UB–04 (CMS form 1450) for 

hospital outpatient claims. In addition, 

we have considered asking hospitals to 

break out the costs and charges for their 

provider-based departments as 

outpatient service cost centers on the 

Medicare hospital cost report, form 

2552–10. We note that some hospitals 

already break out these costs voluntarily 

or because of cost reporting 

requirements for the 340B Drug 

Discount Program but this practice is 

not consistent or standardized. We are 

inviting public comments on the best 

means for collecting information on the 

frequency, type, and payment for 

services furnished in off-campus 

provider-based departments of 

hospitals. 

XI. Proposed CY 2014 OPPS Payment 

Status and Comment Indicators 

A. Proposed CY 2014 OPPS Payment 

Status Indicator Definitions 

Payment status indicators (SIs) that 

we assign to HCPCS codes and APCs 

serve 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 

complete list of the proposed CY 2014 

status indicators and their definitions is 

displayed in Addendum D1 on the CMS 

Web site at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/ 

index.html. The proposed CY 2014 

status indicator assignments for APCs 

and HCPCS codes are shown in 

Addendum A and Addendum B, 

respectively, on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. The 

proposed changes to CY 2014 status 

indicators and their definitions are 

discussed in detail below. 

For CY 2014, we are proposing to 

create a new status indicator ‘‘J1’’ to 

identify HCPCS codes that are paid 

under a comprehensive APC. A claim 

with the new proposed status indicator 

‘‘J1’’ will trigger a comprehensive APC 

payment for the claim. The 

comprehensive APCs that we are 

proposing to establish are described in 

detail in section II.A.2.e. of this 

proposed rule. 

For CY 2014, we are proposing to 

delete status indicator ‘‘X’’ and assign 

ancillary services that are currently 

assigned status indicator ‘‘X’’ to either 

status indicator ‘‘Q1’’ or ‘‘S’’. First, 

services that are proposed to be assigned 

status indicator ‘‘Q1’’ include many 

minor diagnostic tests that are generally 

ancillary to and performed with another 

service. However, services that are 

proposed to be assigned to status 

indicator ‘‘Q1’’ also may be performed 

alone. Given the nature of these services 

and their role in hospital outpatient 

care, we believe that when these 

services are performed with another 

service they should be packaged, but 

that they should be separately paid 

when performed alone. Therefore, we 

believe it is appropriate to conditionally 

package all ancillary services that are 

currently assigned to status indicator 

‘‘X,’’ and are proposing to assign them 

to status indicator ‘‘Q1.’’ We also are 

proposing that preventive services 

currently assigned status indicator ‘‘X’’ 

continue to receive separate payment in 

all cases and be assigned status 

indicator ‘‘S’’ for CY 2014. These 

proposed changes are discussed in 

greater detail in section II.A.3. of this 

proposed rule. In addition, we are 

proposing to revise the definition of 

status indicator ‘‘Q1’’ by removing 

status indicator ‘‘X’’ from the packaging 

criteria, so that codes assigned status 

indicator ‘‘Q1’’ are STV-packaged, 

rather than STVX-packaged, because 

status indicator ‘‘X’’ is proposed for 

deletion. 


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For CY 2014, we are proposing to 

revise the definitions of status 

indicators ‘‘S’’ and ‘‘T’’ to remove the 

word ‘‘significant’’ from these 

definitions. It is no longer necessary to 

distinguish significant procedures from 

ancillary services because we are 

proposing to delete the status indicator 

that describes ancillary services. We 

also are proposing to add the word 

‘‘service’’ to the definitions of status 

indicators ‘‘S’’ and ‘‘T’’ to indicate 

‘‘procedure or service; not discounted 

when multiple,’’ as applicable to status 

indicator ‘‘S’’ and ‘‘procedure or service; 

multiple reduction applies,’’ as 

applicable to status indicator ‘‘T.’’ 

In addition, we are proposing to 

update the definition of status indicator 

‘‘A’’ for CY 2014. We are proposing to 

remove ‘‘Routine Dialysis Services for 

ESRD Patients Provided in a Certified 

Dialysis Unit of a Hospital’’ from the list 

of items and services applicable for the 

definition of status indicator ‘‘A’’ 

because these services are not 

recognized by OPPS when submitted on 

an outpatient hospital Part B bill type 

and are instead assigned to status 

indicator ‘‘B.’’ 

B. Proposed CY 2014 Comment 

Indicator Definitions 

For the CY 2014 OPPS, we are 

proposing to use the same two comment 

indicators that are in effect for the CY 

2013 OPPS. 

• ‘‘CH’’—Active HCPCS codes in 

current and next calendar year; status 

indicator and/or APC assignment have 

changed or active HCPCS code that will 

be discontinued at the end of the 

current calendar year. 

• ‘‘NI’’—New code for the next 

calendar year or existing code with 

substantial revision to its code 

descriptor in the next calendar year as 

compared to current calendar year, 

interim APC assignment; comments will 

be accepted on the interim APC 

assignment for the new code. 

We are proposing to use the ‘‘CH’’ 

comment indicator in this CY 2014 

OPPS/ASC proposed rule to indicate 

HCPCS codes for which the status 

indicator or APC assignment, or both, 

are proposed for change in CY 2014 

compared to their assignment as of June 

30, 2013. We believe that using the 

‘‘CH’’ indicator in this proposed rule 

would facilitate the public’s review of 

the changes that we are proposing for 

CY 2014. Use of the comment indicator 

‘‘CH’’ in association with a composite 

APC indicates that the configuration of 

the composite APC is proposed to be 

changed in the CY 2014 OPPS/ASC final 

rule with comment period. 

We are proposing to use the ‘‘CH’’ 

comment indicator in the CY 2014 

OPPS/ASC final rule with comment 

period to indicate HCPCS codes for 

which the status indicator or APC 

assignment, or both, would change in 

CY 2014 compared to their assignment 

as of December 31, 2013. 

In addition, we are proposing that any 

existing HCPCS codes with substantial 

revisions to the code descriptors for CY 

2014 compared to the CY 2013 

descriptors will be labeled with 

comment indicator ‘‘NI’’ in Addendum 

B to the CY 2014 OPPS/ASC final rule 

with comment period. However, in 

order to receive the comment indicator 

‘‘NI,’’ the CY 2014 revision to the code 

descriptor (compared to the CY 2013 

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 will be open for 

comment as part of the CY 2014 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 2015 OPPS/ 

ASC final rule with comment period. 

In accordance with our usual practice, 

we are proposing that CPT and Level II 

HCPCS codes that are new for CY 2014 

also will be labeled with comment 

indicator ‘‘NI’’ in Addendum B to the 

CY 2014 OPPS/ASC final rule with 

comment period. 

Only HCPCS codes with comment 

indicator ‘‘NI’’ in the CY 2014 OPPS/ 

ASC final rule with comment period 

will be subject to comment. HCPCS 

codes that do not appear with comment 

indicator ‘‘NI’’ in the CY 2014 OPPS/ 

ASC final rule with comment period 

will not be open to public comment, 

unless we specifically request 

additional comments elsewhere in the 

final rule with comment period. 

We believe that the CY 2013 

definitions of the OPPS status indicators 

continue to be appropriate for CY 2014. 

Therefore, we are proposing to continue 

to use those definitions without 

modification for CY 2014. The proposed 

definitions are listed in Addendum D2 

on the CMS Web site at: http:// 

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

HospitalOutpatientPPS/index.html. 

XII. Proposed Updates to the 

Ambulatory Surgical Center (ASC) 

Payment System 

A. Background 

1. Legislative History, Statutory 

Authority, and Prior Rulemaking for the 

ASC Payment System 

For a detailed discussion of the 

legislative history and statutory 

authority related to ASCs, we refer 

readers to the CY 2012 OPPS/ASC final 

rule with comment period (76 FR 74377 

through 74378) and the June 12, 1998 

proposed rule (63 FR 32291 through 

32292). For a discussion of prior 

rulemaking on the ASC payment 

system, we refer readers to the CY 2012 

OPPS/ASC final rule with comment 

period (76 FR 74378 through 74379) and 

the CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68434 through 

68467). 

2. Policies Governing Changes to the 

Lists of Codes and Payment Rates for 

ASC Covered Surgical Procedures and 

Covered Ancillary Services 

Under § 416.2 and § 416.166 of the 

regulations, subject to certain 

exclusions, covered surgical procedures 

in an ASC are surgical procedures that 

are separately paid under the OPPS, that 

would not be expected to pose a 

significant risk to beneficiary safety 

when performed in an ASC, and that 

would not be expected to require active 

medical monitoring and care at 

midnight following the procedure 

(‘‘overnight stay’’). We adopted this 

standard for defining which surgical 

procedures are covered under the ASC 

payment system as an indicator of the 

complexity of the procedure and its 

appropriateness for Medicare payment 

in ASCs. We use this standard only for 

purposes of evaluating procedures to 

determine whether or not they are 

appropriate to be furnished to Medicare 

beneficiaries in ASCs. We define 

surgical procedures as those described 

by Category I CPT codes in the surgical 

range from 10000 through 69999, as 

well as those Category III CPT codes and 

Level II HCPCS codes that directly 

crosswalk or are clinically similar to 

ASC covered surgical procedures (72 FR 

42478). 

In the August 2, 2007 final rule, we 

also established our policy to make 

separate ASC payments for the 

following ancillary items and services 

when they are provided integral to ASC 

covered surgical procedures: (1) 

Brachytherapy sources; (2) certain 

implantable items that have passthrough status under the OPPS; (3) 

certain items and services that we 


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designate as contractor-priced, 

including, but not limited to, 

procurement of corneal tissue; (4) 

certain drugs and biologicals for which 

separate payment is allowed under the 

OPPS; and (5) certain radiology services 

for which separate payment is allowed 

under the OPPS. These covered 

ancillary services are specified in 

§ 416.164(b) and, as stated previously, 

are eligible for separate ASC payment 

(72 FR 42495). Payment for ancillary 

items and services that are not paid 

separately under the ASC payment 

system is packaged into the ASC 

payment for the covered surgical 

procedure. 

We update the lists of, and payment 

rates for, covered surgical procedures 

and covered ancillary services in ASCs 

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 XII.B. of this proposed 

rule, because we base ASC payment 

policies for covered surgical procedures, 

drugs, biologicals, and certain other 

covered ancillary services on the OPPS 

payment policies, we also provide 

quarterly update change requests (CRs) 

for ASC services throughout the year 

(January, April, July, and October). CMS 

releases new Level II codes to the public 

or recognizes the release of new CPT 

codes by the AMA and makes these 

codes effective (that is, the codes are 

recognized on Medicare claims) outside 

of the formal rulemaking process via 

these ASC quarterly update CRs. Thus, 

these quarterly updates are to 

implement newly created Level II 

HCPCS and Category III CPT codes for 

ASC payment and to update the 

payment rates for separately paid drugs 

and biologicals based on the most 

recently submitted ASP data. New 

Category I CPT codes, except vaccine 

codes, are released only once a year and, 

therefore, are implemented only through 

the January quarterly update. New 

Category I CPT vaccine codes are 

released twice a year and, therefore, are 

implemented through the January and 

July quarterly updates. We refer readers 

to Table 41 in the CY 2012 OPPS/ASC 

proposed rule for the process used to 

update the HCPCS and CPT codes (76 

FR 42291). 

In our annual updates to the ASC list 

of, and payment rates for, covered 

surgical procedures and covered 

ancillary services, we undertake a 

review of excluded surgical procedures 

(including all procedures newly 

proposed for removal from the OPPS 

inpatient list), new procedures, and 

procedures for which there is revised 

coding, to identify any that we believe 

meet the criteria for designation as ASC 

covered surgical procedures or covered 

ancillary services. Updating the lists of 

ASC covered surgical procedures and 

covered ancillary services, as well as 

their payment rates, in association with 

the annual OPPS rulemaking cycle is 

particularly important because the 

OPPS relative payment weights and, in 

some cases, payment rates, are used as 

the basis for the payment of covered 

surgical procedures and covered 

ancillary services under the revised ASC 

payment system. This joint update 

process ensures that the ASC updates 

occur in a regular, predictable, and 

timely manner. 

B. Proposed Treatment of New Codes 

1. Proposed Process for Recognizing 

New Category I and Category III CPT 

Codes and Level II HCPCS Codes 

Category I CPT, Category III CPT, and 

Level II HCPCS codes are used to report 

procedures, services, items, and 

supplies under the ASC payment 

system. Specifically, we recognize the 

following codes on ASC claims: (1) 

Category I CPT codes, which describe 

surgical procedures; (2) Category III CPT 

codes, which describe new and 

emerging technologies, services, and 

procedures; and (3) Level II HCPCS 

codes, which are used primarily to 

identify products, supplies, temporary 

procedures, and services not described 

by CPT codes. 

We finalized a policy in the August 2, 

2007 final rule to evaluate each year all 

new Category I and Category III CPT 

codes and Level II HCPCS codes that 

describe surgical procedures, and to 

make preliminary determinations 

during the annual OPPS/ASC 

rulemaking process regarding whether 

or not they meet the criteria for payment 

in the ASC setting as covered surgical 

procedures and, if so, whether or not 

they are office-based procedures (72 FR 

42533 through 42535). In addition, we 

identify new codes as ASC covered 

ancillary services based upon the final 

payment policies of the revised ASC 

payment system. 

We have separated our discussion 

below into two sections based on 

whether we are proposing to solicit 

public comments in this CY 2014 OPPS/ 

ASC proposed rule (and respond to 

those comments in the CY 2014 OPPS/ 

ASC final rule with comment period) or 

whether we will be soliciting public 

comments in the CY 2014 OPPS/ASC 

final rule with comment period (and 

responding to those comments in the CY 

2015 OPPS/ASC final rule with 

comment period). 

We note that we sought public 

comment in the CY 2013 OPPS/ASC 

final rule with comment period on the 

new Category I and III CPT and Level II 

HCPCS codes that were effective 

January 1, 2013. We also sought public 

comment in the CY 2013 OPPS/ASC 

final rule with comment period on the 

new Level II HCPCS codes effective 

October 1, 2012. These new codes, with 

an effective date of October 1, 2012, or 

January 1, 2013, were flagged with 

comment indicator ‘‘NI’’ in Addenda 

AA and BB to the CY 2013 OPPS/ASC 

final rule with comment period to 

indicate that we were assigning them an 

interim payment status and payment 

rate, if applicable, which were subject to 

public comment following publication 

of the CY 2013 OPPS/ASC final rule 

with comment period. We will respond 

to public comments and finalize the 

treatment of these codes under the ASC 

payment system in the CY 2014 OPPS/ 

ASC final rule with comment period. 

2. Proposed Treatment of New Level II 

HCPCS Codes and Category III CPT 

Codes Implemented in April 2013 and 

July 2013 for Which We Are Soliciting 

Public Comments in This CY 2014 

OPPS/ASC Proposed Rule 

In the April 2013 and July 2013 CRs, 

we made effective for April 1, 2013 and 

July 1, 2013, respectively, a total of nine 

new Level II HCPCS codes and two new 

Category III CPT codes that describe 

covered ASC services that were not 

addressed in the CY 2013 OPPS/ASC 

final rule with comment period. In the 

April 2013 ASC quarterly update 

(Transmittal 2662, CR 8237, dated 

March 1, 2013), we added one new 

surgical Level II HCPCS code and three 

new drug and biological Level II HCPCS 

codes to the list of covered surgical 

procedures and covered ancillary 

services, respectively. Table 33 below 

lists the new Level II HCPCS codes that 

were implemented April 1 2013, along 

with their proposed payment indicators 

for CY 2014. 

In the July 2013 quarterly update 

(Transmittal 2717, Change Request 

8328, dated May 31, 2013), we added 

one new surgical Level II HCPCS code 

to the list of covered surgical procedures 

and, one new vaccine Level II HCPCS 

code, and three new drug and biological 

Level II HCPCS codes to the list of 

covered ancillary services. Table 34 

below lists the new Level II HCPCS 

codes that were implemented July 1, 

2013, along with their proposed 

payment indicators and proposed ASC 

payment rates for CY 2014. 

We assigned payment indicator ‘‘K2’’ 

(Drugs and biologicals paid separately 

when provided integral to a surgical 


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procedure on the ASC list; payment 

based on OPPS rate) to the six new drug 

and biological Level II HCPCS codes 

that are separately paid when provided 

in ASCs. We assigned payment 

indicator ‘‘L1’’ (Influenza vaccine; 

pneumococcal vaccine. Packaged item/ 

service; no separate payment made) to 

the new vaccine Level II HCPCS code 

and payment indicator ‘‘G2’’ (Non 

office-based surgical procedure added in 

CY 2008 or later; payment based on 

OPPS relative payment weight) to the 

two new surgical Level II HCPCS codes. 

We are soliciting public comment on 

the proposed CY 2014 ASC payment 

indicators and payment rates for the 

covered surgical procedures and 

covered ancillary services listed in 

Tables 33 and 34 below. Those HCPCS 

codes became payable in ASCs, 

beginning April 1, or July 1, 2013, and 

are paid at the ASC rates posted for the 

appropriate calendar quarter on the 

CMS Web site at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/ 

11_Addenda_Updates.html. 

The HCPCS codes listed in Table 33 

are included in Addenda AA or BB to 

this proposed rule (which is available 

via the Internet on the CMS Web site). 

We note that all ASC addenda are only 

available via the Internet on the CMS 

Web site. Because the payment rates 

associated with the new Level II HCPCS 

codes that became effective July 1, 2013 

(listed in Table 34 of this proposed rule) 

are not available to us in time for 

incorporation into the Addenda to this 

OPPS/ASC proposed rule, our policy is 

to include these HCPCS codes and their 

proposed payment indicators and 

payment rates in the preamble to the 

proposed rule but not in the Addenda 

to the proposed rule. These codes and 

their final payment indicators and rates 

will be included in the appropriate 

Addendum to the CY 2014 OPPS/ASC 

final rule with comment period. Thus, 

the codes implemented by the July 2013 

ASC quarterly update CR and their 

proposed CY 2014 payment rates (based 

on July 2013 ASP data) that are 

displayed in Table 34 are not included 

in Addenda AA or BB to this proposed 

rule (which is available via the Internet 

on the CMS Web site). The final list of 

ASC covered surgical procedures and 

covered ancillary services and the 

associated payment weights and 

payment indicators will be included in 

Addenda AA or BB to the CY 2014 

OPPS/ASC final rule with comment 

period, consistent with our annual 

update policy. 

We are soliciting public comment on 

these proposed payment indicators and 

the proposed payment rates for the new 

Level II HCPCS codes that were newly 

recognized as ASC covered surgical 

procedures or covered ancillary services 

in April 2013 and July 2013 through the 

quarterly update CRs, as listed in Tables 

33 and 34 below. We are proposing to 

finalize their payment indicators and 

their payment rates in the CY 2014 

OPPS/ASC final rule with comment 

period. 

TABLE 33—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES

IMPLEMENTED IN APRIL 2013 

CY 2013 

HCPCS 

Code 

CY 2013 Long descriptor 

Proposed 

CY 2014 

payment 

indicator 

C9130 ..... Injection, immune globulin (Bivigam), 500 mg .................................................................................................................... K2 

C9297 ..... Injection, omacetaxine mepesuccinate, 0.01 mg ............................................................................................................... K2 

C9298 ..... Injection, ocriplasmin, 0.125 mg ......................................................................................................................................... K2 

C9735 ..... Anoscopy; with directed submucosal injection(s), any substance ..................................................................................... G2 

TABLE 34—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES

IMPLEMENTED IN JULY 2013 

CY 2013 HCPCS Code CY 2013 Long descriptor 

Proposed 

CY 2014 

payment 

indicator 

Proposed 

CY 2014 

payment 

rate 

C9131 ........................... Injection, ado-trastuzumab emtansine, 1 mg ......................................................................... K2 $29.40 

C9736 ........................... Laparoscopy, surgical, radiofrequency ablation of uterine fibroid(s), including intraoperative 

guidance and monitoring, when performed.

G2 2,010.00 

Q2033 ........................... Influenza Vaccine, Recombinant Himagglutinin Antigens, for Intramuscular Use (Flublok) .. L1 N/A 

Q2050* ......................... Injection, Doxorubicin Hydrochloride, Liposomal, Not Otherwise Specified, 10 mg .............. K2 545.44 

Q2051* ......................... Injection, Zoledronic Acid, Not Otherwise Specified, 1 mg .................................................... K2 196.42 

*Note: HCPCS code Q2050 replaced code J9002 and HCPCS code Q2051 replaced HCPCS codes J3487 and J3488 beginning July 1, 2013. 

Through the July 2013 quarterly 

update CR, we also implemented ASC 

payment for two new Category III CPT 

codes as ASC covered ancillary services, 

effective July 1, 2013. These codes are 

listed in Table 35 below, along with 

their proposed payment indicators and 

proposed payment rates for CY 2014. 

Because the payment rates associated 

with the new Category III CPT codes 

that became effective for July are not 

available to us in time for incorporation 

into the Addenda to this OPPS/ASC 

proposed rule, our policy is to include 

the codes, their proposed payment 

indicators, and proposed payment rates 

in the preamble to the proposed rule but 

not in the Addenda to the proposed 

rule. The codes listed in Table 35 of this 

proposed rule and their final payment 

indicators and rates will be included in 

Addendum BB to the CY 2014 OPPS/ 

ASC final rule with comment period. 

We are proposing to assign payment 

indicator ‘‘Z2’’ (Radiology service paid 

separately when provided integral to a 

surgical procedure on ASC list; payment 

based on OPPS relative payment weight) 

to the two new Category III CPT codes 

implemented in July 2013. ASC covered 

ancillary services are certain items and 

services that are integrally related to the 

provision of ASC covered surgical 

procedures that are paid separately 

under the OPPS. We are soliciting 


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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 ancillary services in July 2013 

through the quarterly update CR, as 

listed in Table 35 below. We are 

proposing to finalize their payment 

indicators and their payment rates in 

the CY 2014 OPPS/ASC final rule with 

comment period. 

TABLE 35—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2013 AS ASC COVERED ANCILLARY SERVICES

CY 2013 

CPT 

Code 

CY 2013 Long descriptor 

Proposed 

CY 2014 

payment 

indicator 

Proposed 

CY 2014 

payment 

rate 

0331T ..... Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment .................... Z2 $212.08 

0332T ..... Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment; with tomographic SPECT.Z2 212.08 

3. Proposed Process for New Level II 

HCPCS Codes and Category I and III 

CPT Codes for Which We Will Be 

Soliciting Public Comments in the CY 

2014 OPPS/ASC Final Rule With 

Comment Period 

As has been our practice in the past, 

we incorporate those new Category I 

and Category III CPT codes and new 

Level II HCPCS codes that are effective 

January 1 in the final rule with 

comment period updating the ASC 

payment system for the following 

calendar year. These codes are released 

to the public via the CMS HCPCS (for 

Level II HCPCS codes) and AMA Web 

sites (for CPT codes), and also through 

the January ASC quarterly update CRs. 

In the past, we also have released new 

Level II HCPCS codes that are effective 

October 1 through the October ASC 

quarterly update CRs and incorporated 

these new codes in the final rule with 

comment period updating the ASC 

payment system for the following 

calendar year. All of these codes are 

flagged with comment indicator ‘‘NI’’ in 

Addenda AA and BB to the OPPS/ASC 

final rule with comment period to 

indicate that we are assigning them an 

interim payment status which is subject 

to public comment. The payment 

indicator and payment rate, if 

applicable, for all such codes flagged 

with comment indicator ‘‘NI’’ are open 

to public comment in the OPPS/ASC 

final rule with comment period, and we 

respond to these comments in the final 

rule with comment period for the next 

calendar year’s OPPS/ASC update. 

We are proposing to continue this 

process for CY 2014. Specifically, for CY 

2014, we are proposing to include in 

Addenda AA and BB to the CY 2014 

OPPS/ASC final rule with comment 

period the new Category I and III CPT 

codes effective January 1, 2014, that 

would be incorporated in the January 

2014 ASC quarterly update CR and the 

new Level II HCPCS codes, effective 

October 1, 2013 or January 1, 2014, that 

would be released by CMS in its 

October 2013 and January 2014 ASC 

quarterly update CRs. These codes 

would be flagged with comment 

indicator ‘‘NI’’ in Addenda AA and BB 

to the CY 2014 OPPS/ASC final rule 

with comment period to indicate that 

we have assigned them an interim 

payment status. Their payment 

indicators and payment rates, if 

applicable, would be open to public 

comment in the CY 2014 OPPS/ASC 

final rule with comment period and 

would be finalized in the CY 2015 

OPPS/ASC final rule with comment 

period. 

C. Proposed Update to the Lists of ASC 

Covered Surgical Procedures and 

Covered Ancillary Services 

1. Covered Surgical Procedures 

a. 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 affected 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 

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, we are not proposing 

additions to the list of ASC covered 

surgical procedures for CY 2014. 

b. Proposed Covered Surgical 

Procedures Designated as Office-Based 

(1) Background 

In the August 2, 2007 ASC final rule, 

we finalized our policy to designate as 

‘‘office-based’’ those procedures that are 

added to the ASC list of covered 

surgical procedures in CY 2008 or later 

years that we determine are performed 

predominantly (more than 50 percent of 

the time) in physicians’ offices based on 

consideration of the most recent 

available volume and utilization data for 

each individual procedure code and/or, 

if appropriate, the clinical 

characteristics, utilization, and volume 

of related codes. In that rule, we also 

finalized our policy to exempt all 

procedures on the CY 2007 ASC list 

from application of the office-based 

classification (72 FR 42512). The 

procedures that were added to the ASC 

list of covered surgical procedures 

beginning in CY 2008 that we 

determined were office-based were 

identified in Addendum AA to that rule 

by payment indicator ‘‘P2’’ (Officebased surgical procedure added to ASC 

list in CY 2008 or later with MPFS 

nonfacility PE RVUs; payment based on 

OPPS relative payment weight); ‘‘P3’’ 

(Office-based surgical procedures added 

to ASC list in CY 2008 or later with 

MPFS nonfacility PE RVUs; payment 

based on MPFS nonfacility PE RVUs); or 

‘‘R2’’ (Office-based surgical procedure 

added to ASC list in CY 2008 or later 

without MPFS nonfacility PE RVUs; 

payment based on OPPS relative 

payment weight), depending on whether 

we estimated it would be paid according 

to the standard ASC payment 

methodology based on its OPPS relative 

payment weight or at the MPFS 

nonfacility PE RVU-based amount. 

Consistent with our final policy to 

annually review and update the list of 

surgical procedures eligible for payment 

in ASCs, each year we identify surgical 

procedures as either temporarily officebased, permanently office-based, or nonoffice-based, after taking into account 

updated volume and utilization data. 

(2) Proposed Changes for CY 2014 to 

Covered Surgical Procedures Designated 

as Office-Based 

In developing this proposed rule, we 

followed our policy to annually review 

and update the surgical procedures for 

which ASC payment is made and to 

identify new procedures that may be 


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appropriate for ASC payment, including 

their potential designation as officebased. We reviewed CY 2012 volume 

and utilization data and the clinical 

characteristics for all surgical 

procedures that are assigned payment 

indicator ‘‘G2’’ (Non-office-based 

surgical procedure added in CY 2008 or 

later; payment based on OPPS relative 

payment weight) in CY 2013, as well as 

for those procedures assigned one of the 

temporary office-based payment 

indicators, specifically ‘‘P2*,’’ ‘‘P3*,’’ or 

‘‘R2*’’ in the CY 2013 OPPS/ASC final 

rule with comment period (77 FR 68444 

through 68448). 

Our review of the CY 2012 volume 

and utilization data resulted in our 

identification of three covered surgical 

procedures that we believe meet the 

criteria for designation as office-based. 

The data indicate that the procedures 

are performed more than 50 percent of 

the time in physicians’ offices, and our 

medical advisors believe the services are 

of a level of complexity consistent with 

other procedures performed routinely in 

physicians’ offices. The three CPT codes 

we are proposing to permanently 

designate as office-based are listed in 

Table 36 below. 

TABLE 36—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR PERMANENT OFFICE-BASED DESIGNATION FOR CY 

2014 

CY 2013 

CPT 

Code 

CY 2013 Long descriptor 

CY 2013 

ASC 

Payment 

indicator 

Proposed 

CY 2014 

ASC 

payment 

indicator* 

26341 ..... Manipulation, palmar fascial cord (ie, dupuytren’s cord), post enzyme injection (eg, collagenase), single 

cord.

G2 P3 

37761 ..... Ligation of perforator vein(s), subfascial, open, including ultrasound guidance, when performed, 1 leg ...... G2 R2 

36595 ..... Mechanical removal of pericatheter obstructive material (eg, fibrin sheath) from central venous device via 

separate venous access.

G2 P3 

*Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard ratesetting methodology and 

the MPFS proposed rates. According to the statutory formula, current law requires a negative update to the MPFS payment rates for CY 2014. 

For a discussion of those rates, we refer readers to the CY 2014 MPFS proposed rule. 

We invite public comment on this 

proposal. 

We also reviewed CY 2012 volume 

and utilization data and other 

information for the eight procedures 

finalized for temporary office-based 

status in Table 51 and Table 53 in the 

CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68442, 68446 

through 68448). Among these eight 

procedures, there were very few claims 

data for four 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 C9800 

(Dermal injection procedure(s) for facial 

lipodystrophy syndrome (LDS) and 

provision of Radiesse or Sculptra 

dermal filler, including all items and 

supplies); and CPT code 67229 

(Treatment of extensive or progressive 

retinopathy, one or more sessions; 

preterm infant (less than 37 weeks 

gestation at birth), performed from birth 

up to 1 year of age (e.g., retinopathy of 

prematurity), photocoagulation or 

cryotherapy). Consequently, we are 

proposing to maintain their temporary 

office-based designations for CY 2014. 

The volume and utilization data for 

one procedure that has a temporary 

office-based designation for CY 2013, 

CPT code 0227T (Anoscopy, high 

resolution (HRA) (with magnification 

and chemical agent enhancement); with 

biopsy(ies)), is sufficient to indicate that 

this procedure is not performed 

predominantly in physicians’ offices 

and, therefore, should not be assigned 

an office-based payment indicator in CY 

2014. Consequently, we are proposing to 

assign payment indicator ‘‘G2’’ to this 

covered surgical procedure code in CY 

2014. 

The three remaining procedures that 

have temporary office-based 

designations for CY 2013 are proposed 

to be packaged under the OPPS for CY 

2014 as discussed in section II.A.3. of 

this proposed rule. Consequently, we 

are proposing the assign payment 

indicator ‘‘N1’’ to the following three 

covered surgical procedure codes in CY 

2014: 

• 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 0299T (Extracorporeal 

shock wave for integumentary wound 

healing, high energy, including topical 

application and dressing care; initial 

wound); and 

• CPT code 0300T (Extracorporeal 

shock wave for integumentary wound 

healing, high energy, including topical 

application and dressing care; each 

additional wound (list separately in 

addition to code for primary 

procedure)). 

The proposed CY 2014 payment 

indicator designations for the eight 

procedures that were temporarily 

designated as office-based in CY 2013 

are displayed in Table 37 below. The 

procedures for which the proposed 

office-based designations for CY 2014 

are temporary also are indicated by 

asterisks in Addendum AA to this 

proposed rule (which is available via 

the Internet on the CMS Web site). 

TABLE 37—PROPOSED CY 2014 PAYMENT INDICATORS FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED AS

TEMPORARILY OFFICE-BASED IN THE CY 2013 OPPS/ASC FINAL RULE WITH COMMENT PERIOD

CY 2013 

CPT 

Code 

CY 2013 Long descriptor 

CY 2013 

ASC 

payment 

indicator 

Proposed 

CY 2014 

ASC 

payment 

indicator** 

0099T ..... Implantation of intrastromal corneal ring segments ........................................................................................ R2* R2* 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43633 

TABLE 37—PROPOSED CY 2014 PAYMENT INDICATORS FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED AS

TEMPORARILY OFFICE-BASED IN THE CY 2013 OPPS/ASC FINAL RULE WITH COMMENT PERIOD—Continued 

CY 2013 

CPT 

Code 

CY 2013 Long descriptor 

CY 2013 

ASC 

payment 

indicator 

Proposed 

CY 2014 

ASC 

payment 

indicator** 

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* N1 

0227T ..... Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); with biopsy(ies) R2* G2 

0299T ..... Extracorporeal shock wave for integumentary wound healing, high energy, including topical application 

and dressing care; initial wound.

R2* N1 

0300T ..... Extracorporeal shock wave for integumentary wound healing, high energy, including topical application 

and dressing care; each additional wound (list separately in addition to code for primary procedure).

R2* N1 

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* 

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* 

* If designation is temporary. 

** Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard ratesetting methodology and 

the MPFS proposed rates. According to the statutory formula, current law requires a negative update to the MPFS payment rates for CY 2014. 

For a discussion of those rates, we refer readers to the CY 2014 MPFS proposed rule. 

We invite public comment on this 

proposal. 

c. ASC Covered Surgical Procedures 

Proposed to be Designated as DeviceIntensive 

(1) Background 

As discussed in the August 2, 2007 

final rule (72 FR 42503 through 42508), 

we adopted a modified payment 

methodology for calculating the ASC 

payment rates for covered surgical 

procedures that are assigned to the 

subset of OPPS device-dependent APCs 

with a device offset percentage greater 

than 50 percent of the APC cost under 

the OPPS, in order to ensure that 

payment for the procedure is adequate 

to provide packaged payment for the 

high-cost implantable devices used in 

those procedures. 

(2) Proposed Changes to List of ASC 

Covered Surgical Procedures Designated 

as Device-Intensive for CY 2014 

As discussed in section II.A.2.e of this 

proposed rule, for CY 2014, we are 

proposing to create 29 comprehensive 

APCs to replace 29 of the most costly 

device-dependent APCs under the 

OPPS. We are proposing to define a 

comprehensive APC as a classification 

for the provision of a primary service 

and all adjunctive services provided to 

support the delivery of the primary 

service. Because a comprehensive APC 

would treat all individually reported 

codes as representing components of the 

comprehensive service, our OPPS 

proposal is to make a single prospective 

payment based on the cost of all 

individually reported codes that 

represent the provision of a primary 

service and all adjunctive services 

provided to support the delivery of the 

primary service. We are proposing to 

apply our standard APC ratesetting 

methodology to the remaining 10 

device-dependent APCs to calculate 

their CY 2014 OPPS payment rates. 

Unlike the OPPS claims processing 

system that can be configured to make 

a single payment for the encounterbased comprehensive service whenever 

a HCPCS code that is assigned to a 

comprehensive APC appears on the 

claim, the ASC claims processing 

system does not allow for this type of 

conditional packaging. Therefore, we 

are proposing that all separately paid 

ancillary services that are provided 

integral to surgical procedures that map 

to comprehensive APCs would continue 

to be separately paid under the ASC 

payment system instead of being 

packaged into the payment for the 

comprehensive APC as under the OPPS. 

In addition, to avoid duplicate payment 

for separately paid ancillary services 

provided integral to the surgical 

procedure because the OPPS relative 

weights for comprehensive APCs 

include costs for ancillary services, we 

are proposing that the ASC payment 

rates and device offset amounts for 

comprehensive APCs would be based on 

the CY 2014 OPPS relative payments 

weights that have been calculated using 

the standard APC ratesetting 

methodology instead of the relative 

payment weights that are based on the 

comprehensive service. 

Payment rates for ASC deviceintensive procedures are based on a 

modified payment methodology to 

ensure that payment for the procedure 

is adequate to provide packaged 

payment for the high-cost implantable 

devices used in those procedures. 

Device-intensive procedures are 

currently defined as those procedures 

that are assigned to device-dependent 

APCs with a device offset percentage 

greater than 50 percent of the APC cost 

under the OPPS. Because we are 

proposing to create comprehensive 

APCs to replace 29 of the 39 devicedependent APCs under the OPPS, we 

are proposing to define ASC deviceintensive procedures as those 

procedures that are assigned to any APC 

with a device offset percentage greater 

than 50 percent based on the standard 

OPPS APC ratesetting methodology. We 

are proposing changes to § 416.171(b)(2) 

to reflect this proposal. 

We also are proposing to update the 

ASC list of covered surgical procedures 

that are eligible for payment according 

to our device-intensive procedure 

payment methodology, consistent with 

this modified definition of deviceintensive procedures, reflecting the 

proposed APC assignments of 

procedures and APC device offset 

percentages based on the CY 2012 OPPS 

claims and cost report data available for 

the proposed rule. 

The ASC covered surgical procedures 

that we are proposing to designate as 

device-intensive and that would be 

subject to the device-intensive 

procedure payment methodology for CY 

2014 are listed in Table 38 below. The 

CPT code, the CPT code short 

descriptor, the proposed CY 2014 ASC 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43634 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

payment indicator (PI), the proposed CY 

2014 OPPS APC assignment, the 

proposed CY 2014 OPPS APC device 

offset percentage, and an indication if 

the full credit/partial credit (FB/FC) 

device adjustment policy would apply 

are also listed in Table 38 below. All of 

these procedures are included in 

Addendum AA to this proposed rule 

(which is available via the Internet on 

the CMS Web site). 

We invite public comment on this 

proposal. 

d. Proposed Adjustment to ASC 

Payments for No Cost/Full Credit and 

Partial Credit Devices 

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 current OPPS 

policy. The established ASC policy 

adopts the OPPS policy and reduces 

payment to ASCs when a specified 

device is furnished without cost or with 

full credit or partial credit for the cost 

of the device for those ASC covered 

surgical procedures that are assigned to 

APCs under the OPPS to which this 

policy applies. We refer readers to the 

CY 2009 OPPS/ASC final rule with 

comment period for a full discussion of 

the ASC payment adjustment policy for 

no cost/full credit and partial credit 

devices (73 FR 68742 through 68744). 

As discussed in section IV.B. of this 

proposed rule, we are proposing to 

modify our existing policy of reducing 

OPPS payment for specified APCs when 

a hospital furnishes a specified device 

without cost or with a full or partial 

credit. Currently under the OPPS, our 

policy is to reduce OPPS payment by 

100 percent of the device offset amount 

when a hospital furnishes a specified 

device without cost or with a full credit 

and by 50 percent of the device offset 

amount when the hospital receives 

partial credit in the amount of 50 

percent or more of the cost for the 

specified device. For CY 2014, we are 

proposing to reduce OPPS payment for 

applicable APCs by the full or partial 

credit a provider receives for a replaced 

device. 

Although we are proposing to modify 

the policy of reducing payments when 

a hospital furnishes a specified device 

without cost or with full or partial credit 

under the OPPS, we are proposing to 

maintain our current ASC policy for 

reducing payments to ASCs for 

specified device-intensive procedures 

when the ASC furnishes a device 

without cost or with full or partial 

credit. Unlike the OPPS, there is 

currently no mechanism within the ASC 

claims processing system for ASCs to 

submit to CMS the actual amount 

received when furnishing a specified 

device at full or partial credit. 

Therefore, under the ASC payment 

system, we are proposing to continue to 

reduce ASC payments by 100 percent or 

50 percent of the device offset amount 

when an ASC furnishes a device 

without cost or with full or partial 

credit, respectively. We also are 

proposing to update the list of ASC 

covered device-intensive procedures 

that would be subject to the no cost/full 

credit and partial credit device 

adjustment policy for CY 2014. Table 38 

below displays the ASC covered deviceintensive procedures that we are 

proposing would be subject to the no 

cost/full credit or partial credit device 

adjustment policy for CY 2014. 

Specifically, when a procedure that is 

listed in Table 38 is subject to the no 

cost/full credit or partial credit device 

adjustment policy and is performed to 

implant a device that is furnished at no 

cost or with full credit from the 

manufacturer, the ASC would append 

the HCPCS ‘‘FB’’ modifier on the line 

with the procedure to implant the 

device. The contractor would reduce 

payment to the ASC by the device offset 

amount that we estimate represents the 

cost of the device when the necessary 

device is furnished without cost to the 

ASC or with full credit. We continue to 

believe that the reduction of ASC 

payment in these circumstances is 

necessary to pay appropriately for the 

covered surgical procedure being 

furnished by the ASC. 

For partial credit, we are proposing to 

reduce the payment for implantation 

procedures listed in Table 38 that are 

subject to the no cost/full credit or 

partial credit device adjustment policy 

by one-half of the device offset amount 

that would be applied if a device was 

provided at no cost or with full credit, 

if the credit to the ASC is 50 percent or 

more of the cost of the new device. The 

ASC would append the HCPCS ‘‘FC’’ 

modifier to the HCPCS code for a 

surgical procedure listed in Table 38 

that is subject to the no cost/full credit 

or partial credit device adjustment 

policy, when the facility receives a 

partial credit of 50 percent or more of 

the cost of a device. In order to report 

that they received a partial credit of 50 

percent or more of the cost of a new 

device, ASCs would have the option of 

either: (1) Submitting the claim for the 

device replacement procedure to their 

Medicare contractor after the 

procedure’s performance but prior to 

manufacturer acknowledgment of credit 

for the device, and subsequently 

contacting the contractor regarding a 

claim adjustment once the credit 

determination is made; or (2) holding 

the claim for the device implantation 

procedure until a determination is made 

by the manufacturer on the partial credit 

and submitting the claim with the ‘‘FC’’ 

modifier appended to the implantation 

procedure HCPCS code if the partial 

credit is 50 percent or more of the cost 

of the replacement device. Beneficiary 

coinsurance would continue to be based 

on the reduced payment amount. 

TABLE 38—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR DEVICE-INTENSIVE DESIGNATION FOR CY 2014, INCLUDING ASC COVERED SURGICAL PROCEDURES FOR WHICH WE PROPOSE THAT THE NO COST/FULL CREDIT OR

PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY

CPT 

Code Short descriptor 

Proposed 

CY 2014 

ASC PI 

Proposed 

CY 2014 

OPPS APC 

Proposed 

CY 2014 

devicedependent 

APC offset 

percent 

Proposing 

that FB/FC 

policy will 

apply 

24361 ..... Reconstruct elbow joint ................................................................................... J8 0425 59 Yes. 

24363 ..... Replace elbow joint ......................................................................................... J8 0425 59 Yes. 

24366 ..... Reconstruct head of radius ............................................................................. J8 0425 59 Yes. 

24370 ..... Revise reconst elbow joint .............................................................................. J8 0425 59 Yes. 

24371 ..... Revise reconst elbow joint .............................................................................. J8 0425 59 Yes. 

25441 ..... Reconstruct wrist joint ..................................................................................... J8 0425 59 Yes. 

25442 ..... Reconstruct wrist joint ..................................................................................... J8 0425 59 Yes. 

25446 ..... Wrist replacement ............................................................................................ J8 0425 59 Yes. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43635 

TABLE 38—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR DEVICE-INTENSIVE DESIGNATION FOR CY 2014, INCLUDING ASC COVERED SURGICAL PROCEDURES FOR WHICH WE PROPOSE THAT THE NO COST/FULL CREDIT OR

PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY—Continued 

CPT 

Code Short descriptor 

Proposed 

CY 2014 

ASC PI 

Proposed 

CY 2014 

OPPS APC 

Proposed 

CY 2014 

devicedependent 

APC offset 

percent 

Proposing 

that FB/FC 

policy will 

apply 

27446 ..... Revision of knee joint ...................................................................................... J8 0425 59 Yes. 

33206 ..... Insert heart pm atrial ....................................................................................... J8 0089 68 Yes. 

33207 ..... Insert heart pm ventricular .............................................................................. J8 0089 68 Yes. 

33208 ..... Insrt heart pm atrial & vent .............................................................................. J8 0655 72 Yes. 

33212 ..... Insert pulse gen sngl lead ............................................................................... J8 0090 67 Yes. 

33213 ..... Insert pulse gen dual leads ............................................................................. J8 0654 69 Yes. 

33214 ..... Upgrade of pacemaker system ....................................................................... J8 0655 72 Yes. 

33221 ..... Insert pulse gen mult leads ............................................................................. J8 0654 69 Yes. 

33224 ..... Insert pacing lead & connect ........................................................................... J8 0655 72 Yes. 

33227 ..... Remove&replace pm gen singl ....................................................................... J8 0090 67 Yes. 

33228 ..... Remv&replc pm gen dual lead ........................................................................ J8 0654 69 Yes. 

33229 ..... Remv&replc pm gen mult leads ...................................................................... J8 0654 69 Yes. 

33230 ..... Insrt pulse gen w/dual leads ........................................................................... J8 0107 80 Yes. 

33231 ..... Insrt pulse gen w/mult leads ........................................................................... J8 0107 80 Yes. 

33240 ..... Insrt pulse gen w/singl lead ............................................................................. J8 0107 80 Yes. 

33249 ..... Nsert pace-defib w/lead ................................................................................... J8 0108 82 Yes. 

33262 ..... Remv&replc cvd gen sing lead ....................................................................... J8 0107 80 Yes. 

33263 ..... Remv&replc cvd gen dual lead ....................................................................... J8 0107 80 Yes. 

33264 ..... Remv&replc cvd gen mult lead ....................................................................... J8 0107 80 Yes. 

33282 ..... Implant pat-active ht record ............................................................................. J8 0680 74 Yes. 

37227 ..... Fem/popl revasc stnt & ather .......................................................................... J8 0319 52 No 

37231 ..... Tib/per revasc stent & ather ............................................................................ J8 0319 52 No

53440 ..... Male sling procedure ....................................................................................... J8 0385 63 Yes. 

53444 ..... Insert tandem cuff ............................................................................................ J8 0385 63 Yes. 

53445 ..... Insert uro/ves nck sphincter ............................................................................ J8 0386 70 Yes. 

53447 ..... Remove/replace ur sphincter .......................................................................... J8 0386 70 Yes. 

54400 ..... Insert semi-rigid prosthesis ............................................................................. J8 0385 63 Yes. 

54401 ..... Insert self-contd prosthesis ............................................................................. J8 0386 70 Yes. 

54405 ..... Insert multi-comp penis pros ........................................................................... J8 0386 70 Yes. 

54410 ..... Remove/replace penis prosth .......................................................................... J8 0386 70 Yes. 

54416 ..... Remv/repl penis contain pros .......................................................................... J8 0386 70 Yes.

55873 ..... Cryoablate prostate ......................................................................................... J8 0674 55 No 

61885 ..... Insrt/redo neurostim 1 array ............................................................................ J8 0039 86 Yes. 

61886 ..... Implant neurostim arrays ................................................................................. J8 0315 88 Yes. 

62361 ..... Implant spine infusion pump ........................................................................... J8 0227 81 Yes.

62362 ..... Implant spine infusion pump ........................................................................... J8 0227 81 Yes.

63650 ..... Implant neuroelectrodes .................................................................................. J8 0040 54 Yes. 

63655 ..... Implant neuroelectrodes .................................................................................. J8 0061 65 Yes. 

63663 ..... Revise spine eltrd perq aray ........................................................................... J8 0040 54 Yes. 

63664 ..... Revise spine eltrd plate ................................................................................... J8 0040 54 Yes. 

63685 ..... Insrt/redo spine n generator ............................................................................ J8 0039 86 Yes. 

64553 ..... Implant neuroelectrodes .................................................................................. J8 0040 54 Yes. 

64555 ..... Implant neuroelectrodes .................................................................................. J8 0040 54 Yes. 

64561 ..... Implant neuroelectrodes .................................................................................. J8 0040 54 Yes. 

64565 ..... Implant neuroelectrodes .................................................................................. J8 0040 54 Yes. 

64568 ..... Inc for vagus n elect impl ................................................................................ J8 0318 87 Yes. 

64569 ..... Revise/repl vagus n eltrd ................................................................................. J8 0040 54 Yes. 

64575 ..... Implant neuroelectrodes .................................................................................. J8 0061 65 Yes. 

64580 ..... Implant neuroelectrodes .................................................................................. J8 0061 65 Yes. 

64581 ..... Implant neuroelectrodes .................................................................................. J8 0061 65 Yes. 

64590 ..... Insrt/redo pn/gastr stimul ................................................................................. J8 0039 86 Yes. 

65770 ..... Revise cornea with implant ............................................................................. J8 0293 64 No 

69714 ..... Implant temple bone w/stimul .......................................................................... J8 0425 59 Yes.

69715 ..... Temple bne implnt w/stimulat .......................................................................... J8 0425 59 Yes.

69717 ..... Temple bone implant revision ......................................................................... J8 0425 59 Yes. 

69718 ..... Revise temple bone implant ............................................................................ J8 0425 59 Yes.

69930 ..... Implant cochlear device ................................................................................... J8 0259 84 Yes. 

0282T ..... Periph field stimul trial ..................................................................................... J8 0040 54 Yes. 

0283T ..... Periph field stimul perm ................................................................................... J8 0318 87 Yes. 

0308T ..... Insj ocular telescope prosth ............................................................................ J8 0351 85 Yes. 

0316T ..... Replc vagus nerve pls gen .............................................................................. J8 0039 86 Yes. 

0319T ..... Insert subq defib w/eltrd .................................................................................. J8 0107 80 Yes. 

0321T ..... Insert subq defib pls gen ................................................................................. J8 0107 80 Yes. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43636 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

We invite public comment on these 

proposals. 

e. ASC Treatment of Surgical 

Procedures Proposed for Removal From 

the OPPS Inpatient List for CY 2014 

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. There are 

no procedures proposed for removal 

from the OPPS inpatient list for CY 

2014, so we are not proposing any 

procedures for possible inclusion on the 

ASC list of covered surgical procedures 

under this section. 

2. Covered Ancillary Services 

Consistent with the established ASC 

payment system policy, we are 

proposing to update the ASC list of 

covered ancillary services to reflect the 

proposed payment status for the 

services under the CY 2014 OPPS. 

Maintaining consistency with the OPPS 

may result in proposed changes to ASC 

payment indicators for some covered 

ancillary items and services because of 

changes that are being proposed under 

the OPPS for CY 2014. For example, a 

covered ancillary service that was 

separately paid under the revised ASC 

payment system in CY 2013 may be 

proposed for packaged status under the 

CY 2014 OPPS and, therefore, also 

under the ASC payment system for CY 

2014. More specifically, as discussed in 

section II.A.3 of this proposed rule, we 

are proposing to package the following 

categories of ancillary or adjunctive 

services under the OPPS for CY 2014: 

drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure; drugs and biologicals that 

function as supplies or devices when 

used in a surgical procedure; clinical 

diagnostic laboratory tests; procedures 

described by add-on codes; ancillary 

services (status indicator ‘‘X’’); 

diagnostic tests on the bypass list; and 

device removal procedures. 

To maintain consistency with the 

OPPS, we are proposing that these 

services would be also packaged under 

the ASC payment system for CY 2014. 

Comment indicator ‘‘CH,’’ discussed in 

section XII.F. of the this proposed rule, 

is used in Addendum BB to this 

proposed rule (which is available via 

the Internet on the CMS Web site) to 

indicate covered ancillary services for 

which we are proposing a change in the 

ASC payment indicator to reflect a 

proposed change in the OPPS treatment 

of the service for CY 2014. 

Except for the Level II HCPCS codes 

and Level III CPT codes listed in Table 

34 and Table 35 of this proposed rule, 

all ASC covered ancillary services and 

their proposed payment indicators for 

CY 2014 are included in Addendum BB 

to this proposed rule. 

We invite public comment on this 

proposal. 

D. Proposed ASC Payment for Covered 

Surgical Procedures and Covered 

Ancillary Services 

1. Proposed ASC Payment for Covered 

Surgical Procedures 

a. Background 

Our ASC payment policies for 

covered surgical procedures under the 

revised ASC payment system are fully 

described in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66828 through 66831). Under our 

established policy for the revised ASC 

payment system, the ASC standard 

ratesetting methodology of multiplying 

the ASC relative payment weight for the 

procedure by the ASC conversion factor 

for that same year is used to calculate 

the national unadjusted payment rates 

for procedures with payment indicators 

‘‘G2’’ and ‘‘A2.’’ Payment indicator 

‘‘A2’’ was developed to identify 

procedures that were included on the 

list of ASC covered surgical procedures 

in CY 2007 and were, therefore, subject 

to transitional payment prior to CY 

2011. Although the 4-year transitional 

period has ended and payment indicator 

‘‘A2’’ is no longer required to identify 

surgical procedures subject to 

transitional payment, we retained 

payment indicator ‘‘A2’’ because it is 

used to identify procedures that are 

exempted from application of the officebased designation. 

The rate calculation established for 

device-intensive procedures (payment 

indicator ‘‘J8’’) is structured so that the 

packaged device payment amount is the 

same as under the OPPS, and only the 

service portion of the rate is subject to 

the ASC standard ratesetting 

methodology. In the CY 2013 OPPS/ 

ASC final rule with comment period (77 

FR 68434 through 68467), we updated 

the CY 2012 ASC payment rates for ASC 

covered surgical procedures with 

payment indicators of ‘‘A2,’’ ‘‘G2,’’ and 

‘‘J8’’ using CY 2011 data, consistent 

with the CY 2013 OPPS update. 

Payment rates for device-intensive 

procedures also were updated to 

incorporate the CY 2013 OPPS device 

offset percentages. 

Payment rates for office-based 

procedures (payment indicators ‘‘P2,’’ 

‘‘P3,’’ and ‘‘R2’’) are the lower of the 

MPFS nonfacility PE RVU-based 

amount (we refer readers to the CY 2014 

MPFS proposed rule) or the amount 

calculated using the ASC standard 

ratesetting methodology for the 

procedure. In the CY 2013 OPPS/ASC 

final rule with comment period, we 

updated the payment amounts for 

office-based procedures (payment 

indicators ‘‘P2,’’ ‘‘P3,’’ and ‘‘R2’’) using 

the most recent available MPFS and 

OPPS data. We compared the estimated 

CY 2013 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 2013 

payment rate for the procedure 

according to the final policy of the 

revised ASC payment system 

(§ 416.171(d)). 

b. Proposed Update to ASC Covered 

Surgical Procedure Payment Rates for 

CY 2014 

We are proposing to update ASC 

payment rates for CY 2014 using the 

established rate calculation 

methodologies under § 416.171 and 

using our proposed modified definition 

for device-intensive procedures as 

discussed above. Because the proposed 

OPPS relative payment weights are 

based on geometric mean costs for CY 

2014, the ASC system will use 

geometric means to determine proposed 

relative payment weights under the ASC 

standard methodology. We are 

proposing to continue to use the amount 

calculated under the ASC standard 

ratesetting methodology for procedures 

assigned payment indicators ‘‘A2’’ and 

‘‘G2.’’ 

We are proposing that payment rates 

for office-based procedures (payment 

indicators ‘‘P2,’’ ‘‘P3,’’ and ‘‘R2’’) and 

device-intensive procedures (payment 

indicator ‘‘J8’’) be calculated according 

to our established policies, 

incorporating the device-intensive 

procedure methodology as appropriate. 

Thus, we are proposing to update the 

payment amounts for device-intensive 

procedures, using our proposed 

modified definition of device intensive 

procedures, based on the CY 2014 OPPS 

device offset percentages that have been 

calculated using the standard APC 

ratesetting methodology, and to make 

payment for office-based procedures at 

the lesser of the proposed CY 2014 

MPFS nonfacility PE RVU-based 

amount or the proposed CY 2014 ASC 

payment amount calculated according 

to the standard ratesetting methodology. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43637 

We invite public comment on these 

proposals. 

c. Waiver of Coinsurance and 

Deductible for Certain Preventive 

Services 

Section 1833(a)(1) and section 

1833(b)(1) of the Act waive the 

coinsurance and the Part B deductible 

for those preventive services under 

section 1861(ddd)(3)(A) of the Act as 

described in section 1861(ww)(2) of the 

Act (excluding electrocardiograms) that 

are recommended by the United States 

Preventive Services Task Force 

(USPSTF) with a grade of A or B for any 

indication or population and that are 

appropriate for the individual. Section 

1833(b) of the Act also waives the Part 

B deductible for colorectal cancer 

screening tests that become diagnostic. 

In the CY 2011 OPPS/ASC final rule 

with comment period, we finalized our 

policies with respect to these provisions 

and identified the ASC covered surgical 

procedures and covered ancillary 

services that are preventive services that 

are recommended by the USPSTF with 

a grade of A or B for which the 

coinsurance and the deductible are 

waived. For a complete discussion of 

our policies and categories of services, 

we refer readers to the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 72047 through 72049). We are not 

proposing any changes to our policies or 

the categories of services for CY 2014. 

We identify the specific services with a 

double asterisk in Addenda AA and BB 

to this proposed rule. 

d. Proposed Payment for Cardiac 

Resynchronization Therapy Services 

Cardiac resynchronization therapy 

(CRT) uses electronic devices to 

sequentially pace both sides of the heart 

to improve its output. CRT utilizes a 

pacing electrode implanted in 

combination with either a pacemaker or 

an implantable cardioverter defibrillator 

(ICD). CRT performed by the 

implantation of an ICD along with a 

pacing electrode is referred to as ‘‘CRT– 

D.’’ In the CY 2012 OPPS/ASC final rule 

with comment period, we finalized our 

proposal to establish the CY 2012 ASC 

payment rate for CRT–D services based 

on the OPPS payment rate applicable to 

APC 0108 when procedures described 

by CPT codes 33225 (Insertion of pacing 

electrode, cardiac venous system, for 

left ventricular pacing, at time of 

insertion of pacing cardioverterdefibrillator or pacemaker pulse 

generator (eg, for upgrade to dual 

chamber system) (list separately in 

addition to code for primary procedure)) 

and 33249 (Insertion or replacement of 

permanent pacing cardioverterdefibrillator system with transvenous 

lead(s), single or dual chamber) are 

performed on the same date of service 

in an ASC. ASCs use the corresponding 

HCPCS Level II G-code (G0448) for 

proper reporting when the procedures 

described by CPT codes 33225 and 

33249 are performed on the same date 

of service. For a complete discussion of 

our policy regarding payment for CRT– 

D services in ASCs, we refer readers to 

the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74427 through 

74428). For CY 2014, CPT code 33249, 

the primary code for CRT–D services, is 

proposed for continued assignment to 

APC 0108 but CPT code 33225 is 

proposed to be packaged under the 

OPPS. 

Consequently, we are proposing that 

CPT code 33225 would also be packaged 

under the ASC payment system for CY 

2014. Because CPT code 33225 is 

proposed to be packaged under the ASC 

payment system and, therefore, would 

not receive separate payment, it would 

no longer be necessary that ASCs use 

the 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. Therefore, we are proposing 

that the ASC payment rate for CRT–D 

services (procedures described by CPT 

codes 33249 and 33225) would be based 

on the OPPS relative payment weight 

for APC 0108 for CY 2014 and that ASCs 

would no longer be required to assign 

HCPCS code G0448 when the 

procedures described by CPT codes 

33225 and 33249 are performed on the 

same date of service. 

We invite public comment on these 

proposals. 

e. Payment for Low Dose Rate (LDR) 

Prostate Brachytherapy Composite 

LDR prostate brachytherapy is a 

treatment for prostate cancer in which 

hollow needles or catheters are inserted 

into the prostate, followed by 

permanent implantation of radioactive 

sources into the prostate through the 

needles/catheters. At least two CPT 

codes are used to report the treatment 

service because there are separate codes 

that describe placement of the needles/ 

catheters and the application of the 

brachytherapy sources: CPT code 55875 

(Transperineal placement of needles or 

catheters into prostate for interstitial 

radioelement application, with 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 on the same date of 

service to the Medicare beneficiary 

being treated with LDR brachytherapy 

for prostate cancer. 

In the CY 2013 OPPS/ASC final rule 

with comment period, we finalized our 

proposal to establish the CY 2013 ASC 

payment rate for LDR prostate 

brachytherapy services based on the 

OPPS relative payment weight 

applicable to APC 8001 when CPT 

codes 55875 and 77778 are performed 

on the same date of service in an ASC. 

ASCs use the corresponding HCPCS 

Level II G-code (G0458) for proper 

reporting when the procedures 

described by CPT codes 55875 and 

77778 are performed on the same date 

of service, and therefore receive the 

appropriate LDR prostate brachytherapy 

composite payment. When not 

performed on the same day as the 

service described by CPT code 55875, 

the service described by CPT code 

77778 will continue to be assigned to 

APC 0651. When not performed on the 

same day as the service described by 

CPT code 77778, the service described 

by CPT code 55875 will continue to be 

assigned to APC 0163. For a complete 

discussion of our policy regarding 

payment for LDR prostate brachytherapy 

services in ASCs, we refer readers to the 

CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68457). We are 

not proposing any changes to our 

current policy regarding ASC payment 

for LDR prostate brachytherapy services 

for CY 2014. 

2. Proposed Payment for Covered 

Ancillary Services 

a. Background 

Our final payment policies under the 

revised ASC payment system for 

covered ancillary services vary 

according to the particular type of 

service and its payment policy under 

the OPPS. Our overall policy provides 

separate ASC payment for certain 

ancillary items and services integrally 

related to the provision of ASC covered 

surgical procedures that are paid 

separately under the OPPS and provides 

packaged ASC payment for other 

ancillary items and services that are 

packaged or conditionally packaged 

(status indicators ‘‘N,’’ ‘‘Q1,’’ and ‘‘Q2’’) 

under the OPPS. In the CY 2013 OPPS/ 

ASC proposed rule (77 FR 45169), we 

further clarified our policy regarding the 

payment indicator assignment of codes 

that are conditionally packaged in the 

OPPS (status indicators ‘‘Q1’’ and 

‘‘Q2’’). Under the OPPS, a conditionally 

packaged code describes a HCPCS code 

where the payment is packaged when it 

is provided with a significant procedure 

but is separately paid when the service 

appears on the claim without a 


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significant procedure. Because ASC 

services always include a surgical 

procedure, HCPCS codes that are 

conditionally packaged under the OPPS 

are always packaged (payment indictor 

‘‘N1’’) under the ASC payment system. 

Thus, our final policy generally aligns 

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. We 

generally pay for separately payable 

radiology services at the lower of the 

MPFS nonfacility PE RVU-based (or 

technical component) amount or the 

rate calculated according to the ASC 

standard ratesetting methodology (72 FR 

42497). However, as finalized in the CY 

2011 OPPS/ASC final rule with 

comment period (75 FR 72050), 

payment indicators for all nuclear 

medicine procedures (defined as CPT 

codes in the range of 78000 through 

78999) that are designated as radiology 

services that are paid separately when 

provided integral to a surgical 

procedure on the ASC list are set to 

‘‘Z2’’ so that payment is made based on 

the ASC standard ratesetting 

methodology rather than the MPFS 

nonfacility PE RVU amount, regardless 

of which is lower. This modification to 

the ASC payment methodology for 

ancillary services was finalized in 

response to a comment on the CY 2011 

OPPS/ASC proposed rule that suggested 

it is inappropriate to use the MPFSbased payment methodology for nuclear 

medicine procedures because the 

associated diagnostic 

radiopharmaceutical, although packaged 

under the ASC payment system, is 

separately paid under the MPFS (42 

CFR 416.171(d)(1)). We set the payment 

indicator to ‘‘Z2’’ for these nuclear 

medicine procedures in the ASC setting 

so that payment for these procedures 

would be based on the OPPS relative 

payment weight rather than the MPFS 

nonfacility PE RVU-based amount to 

ensure that the ASC will be 

compensated for the cost associated 

with the diagnostic 

radiopharmaceuticals. 

In addition, because the same issue 

exists for radiology procedures that use 

contrast agents (the contrast agent is 

packaged under the ASC payment 

system but is separately paid under the 

MPFS), we finalized in the CY 2012 

OPPS/ASC final rule with comment 

period (76 FR 74429 through 74430) to 

set the payment indicator to ‘‘Z2’’ for 

radiology services that use contrast 

agents so that payment for these 

procedures will be based on the OPPS 

relative payment weight and will, 

therefore, include the cost for the 

contrast agent (42 CFR 416.171(d)(2)). 

ASC payment policy for 

brachytherapy sources mirrors the 

payment policy under the OPPS. ASCs 

are paid for brachytherapy sources 

provided integral to ASC covered 

surgical procedures at prospective rates 

adopted under the OPPS or, if OPPS 

rates are unavailable, at contractorpriced rates (72 FR 42499). Since 

December 31, 2009, ASCs have been 

paid for brachytherapy sources provided 

integral to ASC covered surgical 

procedures at prospective rates adopted 

under the OPPS. 

Other separately paid covered 

ancillary services in ASCs, specifically 

corneal tissue acquisition and device 

categories with OPPS pass-through 

status, do not have prospectively 

established ASC payment rates 

according to the final policies of the 

revised ASC payment system (72 FR 

42502 and 42508 through 42509; 42 CFR 

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 

C1830 (Powered bone marrow biopsy 

needle), HCPCS code C1840 (Lens, 

intraocular (telescopic)), and HCPCS 

code C1886 (Catheter, extravascular 

tissue ablation, any modality 

(insertable)). Payment amounts for 

HCPCS codes C1830, C1840, and C1886 

under the ASC payment system are 

contractor priced. In the CY 2013 OPPS/ 

ASC final rule with comment period, we 

finalized the expiration of pass-through 

payment for HCPCS codes C1830, 

C1840, and C1886, which will expire 

after December 31, 2013 (77 FR 68353). 

Therefore, after December 31, 2013, the 

costs for devices described by HCPCS 

codes C1830, C1840, and C1886, will be 

packaged into the costs of the 

procedures with which the devices are 

reported in the hospital claims data 

used in the development of the OPPS 

relative payment weights that will be 

used to establish ASC payment rates for 

CY 2014. 

b. Proposed Payment for Covered 

Ancillary Services for CY 2014 

For CY 2014, we are proposing to 

update the ASC payment rates and make 

changes to ASC payment indicators as 

necessary to maintain consistency 

between the OPPS and ASC payment 

system regarding the packaged or 

separately payable status of services and 

the proposed CY 2014 OPPS and ASC 

payment rates. The proposed CY 2014 

OPPS payment methodologies for 

brachytherapy sources and separately 

payable drugs and biologicals are 

discussed in section II.A. and section 

V.B. of this proposed rule, respectively, 

and we are proposing to set the CY 2014 

ASC payment rates for those services 

equal to the proposed CY 2014 OPPS 

rates. 

Consistent with established ASC 

payment policy (72 FR 42497), the 

proposed CY 2014 payment for 

separately payable covered radiology 

services is based on a comparison of the 

CY 2014 proposed MPFS nonfacility PE 

RVU-based amounts (we refer readers to 

the CY 2014 MPFS proposed rule) and 

the proposed CY 2014 ASC payment 

rates calculated according to the ASC 

standard ratesetting methodology and 

then set at the lower of the two amounts 

(except as discussed below for nuclear 

medicine procedures and radiology 

services that use contrast agents). 

Alternatively, payment for a radiology 

service may be packaged into the 

payment for the ASC covered surgical 

procedure if the radiology service is 

packaged or conditionally packaged 

under the OPPS. The payment 

indicators in Addendum BB to this 

proposed rule indicate whether the 

proposed payment rates for radiology 

services are based on the MPFS 

nonfacility PE RVU-based amount or the 

ASC standard ratesetting methodology, 

or whether payment for a radiology 

service is packaged into the payment for 

the covered surgical procedure 

(payment indicator ‘‘N1’’). Radiology 

services that we are proposing to pay 

based on the ASC standard ratesetting 

methodology are assigned payment 

indicator ‘‘Z2’’ (Radiology service paid 

separately when provided integral to a 

surgical procedure on ASC list; payment 

based on OPPS relative payment weight) 

and those for which the proposed 

payment is based on the MPFS 

nonfacility PE RVU-based amount are 

assigned payment indicator ‘‘Z3’’ 

(Radiology service paid separately when 

provided integral to a surgical 

procedure on ASC list; payment based 

on MPFS nonfacility PE RVUs). 

As finalized in the CY 2011 OPPS/ 

ASC final rule with comment period (75 


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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 for these 

procedures will be based on the OPPS 

relative payment weight (rather than the 

MPFS nonfacility PE RVU-based 

amount, regardless of which is lower) 

and, therefore, will include the cost for 

the diagnostic radiopharmaceutical. We 

are proposing to continue this 

modification to the payment 

methodology in CY 2014 and, therefore, 

set the payment indicator to ‘‘Z2’’ for 

nuclear medicine procedures. 

As finalized in the CY 2012 OPPS/ 

ASC final rule with comment period (76 

FR 74429 through 74430), payment 

indicators for radiology services that use 

contrast agents are set to ‘‘Z2’’ so that 

payment for these procedures will be 

based on the OPPS relative payment 

weight and, therefore, will include the 

cost for the contrast agent. We are 

proposing to continue this modification 

to the payment methodology in CY 2014 

and, therefore, set the payment indicator 

to ‘‘Z2’’ for radiology services that use 

contrast agents. 

Most covered ancillary services and 

their proposed payment indicators are 

listed in Addendum BB to this proposed 

rule (which is available via the Internet 

on the CMS Web site). We invite public 

comment on these proposals. 

E. New Technology Intraocular Lenses 

(NTIOLs) 

1. NTIOL Application Cycle 

Our process for reviewing 

applications to establish new classes of 

new technology intraocular lenses 

(NTIOLs) is as follows: 

• Applicants submit their NTIOL 

requests for review to CMS by the 

deadline. For a request to be considered 

complete, we require submission of the 

information that is found in the 

guidance document entitled 

‘‘Application Process and Information 

Requirements for Requests for a New 

Class of New Technology Intraocular 

Lenses (NTIOLs) or Inclusion of an IOL 

in an existing NTIOL Class’’ posted on 

the CMS Web site at: http:// 

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

NTIOLs.html. 

• We announce annually in the 

proposed rule updating the ASC and 

OPPS payment rates for the following 

calendar year, a list of all requests to 

establish new NTIOL classes accepted 

for review during the calendar year in 

which the proposal is published. In 

accordance with section 141(b)(3) of 

Public Law 103–432 and our regulations 

at § 416.185(b), the deadline for receipt 

of public comments is 30 days following 

publication of the list of requests in the 

proposed rule. 

• In the final rule updating the ASC 

and OPPS payment rates for the 

following calendar year, we— 

Æ Provide a list of determinations 

made as a result of our review of all new 

NTIOL class requests and public 

comments; 

Æ When a new NTIOL class is 

created, we identify the predominant 

characteristic of NTIOLs in that class 

that sets them apart from other IOLs 

(including those previously approved as 

members of other expired or active 

NTIOL classes) and that is associated 

with an improved clinical outcome. 

Æ 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. 

Æ Announce the deadline for 

submitting requests for review of an 

application for a new NTIOL class for 

the following calendar year. 

2. Requests To Establish New NTIOL 

Classes for CY 2014 

We did not receive any requests for 

review to establish a new NTIOL class 

for CY 2014 by the March 1, 2013, the 

due date published in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68461). 

3. Payment Adjustment 

The current payment adjustment for a 

5-year period from the implementation 

date of a new NTIOL class is $50 per 

lens. Since implementation of the 

process for adjustment of payment 

amounts for NTIOLs in 1999, we have 

not revised the payment adjustment 

amount, and we are not proposing to 

revise the payment adjustment amount 

for CY 2014. 

F. Proposed ASC Payment and 

Comment Indicators 

1. Background 

In addition to the payment indicators 

that we introduced in the August 2, 

2007 final rule, we also created final 

comment indicators for the ASC 

payment system in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66855). We created Addendum DD1 

to define ASC payment indicators that 

we use in Addenda AA and BB to 

provide payment information regarding 

covered surgical procedures and 

covered ancillary services, respectively, 

under the revised ASC payment system. 

The ASC payment indicators in 

Addendum DD1 are intended to capture 

policy relevant characteristics of HCPCS 

codes that may receive packaged or 

separate payment in ASCs, such as 

whether they were on the ASC list of 

covered services prior to CY 2008; 

payment designation, such as deviceintensive or office-based, and the 

corresponding ASC payment 

methodology; and their classification as 

separately payable ancillary services 

including radiology services, 

brachytherapy sources, OPPS passthrough devices, corneal tissue 

acquisition services, drugs or 

biologicals, or NTIOLs. 

We also created Addendum DD2 that 

lists the ASC comment indicators. The 

ASC comment indicators used in 

Addenda AA and BB to the proposed 

rules and final rules with comment 

period serve to identify, for the revised 

ASC payment system, the status of a 

specific HCPCS code and its payment 

indicator with respect to the timeframe 

when comments will be accepted. The 

comment indicator ‘‘NI’’ is used in the 

OPPS/ASC final rule with comment 

period to indicate new codes for the 

next calendar year for which the interim 

payment indicator assigned is subject to 

comment. The comment indicator ‘‘NI’’ 

is also assigned to existing codes with 

substantial revisions to their descriptors 

such that we consider them to be 

describing new services, as discussed in 

the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60622). In the 

CY 2014 OPPS/ASC final rule with 

comment period, we will respond to 

public comments and finalize the ASC 

treatment of all codes that are labeled 

with comment indicator ‘‘NI’’ in 

Addenda AA and BB to the CY 2013 

OPPS/ASC final rule with comment 

period. 

The ‘‘CH’’ comment indicator is used 

in Addenda AA and BB to this proposed 

rule (which are available via the Internet 

on the CMS Web site) to indicate that 

the payment indicator assignment has 

changed for an active HCPCS code in 

current year and next calendar year; an 

active HCPCS code is newly recognized 

as payable in ASCs; or an active HCPCS 

code is discontinued at the end of the 

current calendar year. The ‘‘CH’’ 

comment indicators that are published 

in the final rule with comment period 

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. 


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2. Proposed ASC Payment and 

Comment Indicators 

We are not proposing any changes to 

the definitions of the ASC payment and 

comment indicators for CY 2014. We 

refer readers to Addenda DD1 and DD2 

to this proposed rule (which are 

available via the Internet on the CMS 

Web site) for the complete list of ASC 

payment and comment indicators 

proposed for the CY 2014 update. 

G. Calculation of the Proposed ASC 

Conversion Factor and the Proposed 

ASC Payment Rates 

1. Background 

In the August 2, 2007 final rule (72 FR 

42493), we established our policy to 

base ASC relative payment weights and 

payment rates under the revised ASC 

payment system on APC groups and the 

OPPS relative payment weights. 

Consistent with that policy and the 

requirement at section 1833(i)(2)(D)(ii) 

of the Act that the revised payment 

system be implemented so that it would 

be budget neutral, the initial ASC 

conversion factor (CY 2008) was 

calculated so that estimated total 

Medicare payments under the revised 

ASC payment system in the first year 

would be budget neutral to estimated 

total Medicare payments under the prior 

(CY 2007) ASC payment system (the 

ASC conversion factor is multiplied by 

the relative payment weights calculated 

for many ASC services in order to 

establish payment rates). That is, 

application of the ASC conversion factor 

was designed to result in aggregate 

Medicare expenditures under the 

revised ASC payment system in CY 

2008 equal to aggregate Medicare 

expenditures that would have occurred 

in CY 2008 in the absence of the revised 

system, taking into consideration the 

cap on ASC payments in CY 2007 as 

required under section 1833(i)(2)(E) of 

the Act (72 FR 42522). We adopted a 

policy to make the system budget 

neutral in subsequent calendar years (72 

FR 42532 through 42533). 

We note that we consider the term 

‘‘expenditures’’ in the context of the 

budget neutrality requirement under 

section 1833(i)(2)(D)(ii) of the Act to 

mean expenditures from the Medicare 

Part B Trust Fund. We do not consider 

expenditures to include beneficiary 

coinsurance and copayments. This 

distinction was important for the CY 

2008 ASC budget neutrality model that 

considered payments across the OPPS, 

ASC, and MPFS payment systems. 

However, because coinsurance is almost 

always 20 percent for ASC services, this 

interpretation of expenditures has 

minimal impact for subsequent budget 

neutrality adjustments calculated within 

the revised ASC payment system. 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66857 

through 66858), we set out a step-bystep illustration of the final budget 

neutrality adjustment calculation based 

on the methodology finalized in the 

August 2, 2007 final rule (72 FR 42521 

through 42531) and as applied to 

updated data available for the CY 2008 

OPPS/ASC final rule with comment 

period. The application of that 

methodology to the data available for 

the CY 2008 OPPS/ASC final rule with 

comment period resulted in a budget 

neutrality adjustment of 0.65. 

For CY 2008, we adopted the OPPS 

relative payment weights as the ASC 

relative payment weights for most 

services and, consistent with the final 

policy, we calculated the CY 2008 ASC 

payment rates by multiplying the ASC 

relative payment weights by the final 

CY 2008 ASC conversion factor of 

$41.401. For covered office-based 

surgical procedures and covered 

ancillary radiology services (excluding 

covered ancillary radiology services 

involving certain nuclear medicine 

procedures or involving the use of 

contrast agents, as discussed in section 

XII.D.2.b. of this proposed rule), the 

established policy is to set the payment 

rate at the lower of the MPFS 

unadjusted nonfacility PE RVU-based 

amount or the amount calculated using 

the ASC standard ratesetting 

methodology. Further, as discussed in 

the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66841 through 

66843), we also adopted alternative 

ratesetting methodologies for specific 

types of services (for example, deviceintensive procedures). 

As discussed in the August 2, 2007 

final rule (72 FR 42517 through 42518) 

and as codified at § 416.172(c) of the 

regulations, the revised ASC payment 

system accounts for geographic wage 

variation when calculating individual 

ASC payments by applying the pre-floor 

and pre-reclassified hospital wage 

indices to the labor-related share, which 

is 50 percent of the ASC payment 

amount based on a GAO report of ASC 

costs using 2004 survey data. Beginning 

in CY 2008, CMS accounted for 

geographic wage variation in labor cost 

when calculating individual ASC 

payments by applying the pre-floor and 

pre-reclassified hospital wage index 

values that CMS calculates for payment, 

using updated Core Based Statistical 

Areas (CBSAs) issued by OMB in June 

2003. The reclassification provision 

provided at section 1886(d)(10) of the 

Act is specific to hospitals. We believe 

that using the most recently available 

raw pre-floor and pre-reclassified 

hospital wage indices results in the 

most appropriate adjustment to the 

labor portion of ASC costs. In addition, 

use of the unadjusted hospital wage data 

avoids further reductions in certain 

rural statewide wage index values that 

result from reclassification. We continue 

to believe that the unadjusted hospital 

wage indices, which are updated yearly 

and are used by many other Medicare 

payment systems, appropriately account 

for geographic variation in labor costs 

for ASCs. 

We note that in certain instances there 

might be urban or rural areas for which 

there is no IPPS hospital whose wage 

index data would be used to set the 

wage index for that area. For these areas, 

our policy has been to use the average 

of the wage indices for CBSAs (or 

metropolitan divisions as applicable) 

that are contiguous to the area that has 

no wage index (where ‘‘contiguous’’ is 

defined as sharing a border). We have 

applied a proxy wage index based on 

this methodology to ASCs located in 

CBSA 25980 (Hinesville-Fort Stewart, 

GA). 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72058 

through 72059), we finalized our 

proposal to set the ASC wage index by 

calculating the average of all wage 

indices for urban areas in the State 

when all contiguous areas to a CBSA are 

rural and there is no IPPS hospital 

whose wage index data could be used to 

set the wage index for that area. In other 

situations, where there are no IPPS 

hospitals located in a relevant labor 

market area, we will continue our 

current policy of calculating an urban or 

rural area’s wage index by calculating 

the average of the wage indices for 

CBSAs (or metropolitan divisions where 

applicable) that are contiguous to the 

area with no wage index. 

2. Proposed Calculation of the ASC 

Payment Rates 

a. Updating the ASC Relative Payment 

Weights for CY 2014 and Future Years 

We update the ASC relative payment 

weights each year using the national 

OPPS relative payment weights (and 

MPFS nonfacility PE RVU-based 

amounts, as applicable) for that same 

calendar year and uniformly scale the 

ASC relative payment weights for each 

update year to make them budget 

neutral (72 FR 42533). Consistent with 

our established policy, we are proposing 

to scale the CY 2014 relative payment 

weights for ASCs according to the 

following method. Holding ASC 

utilization and the mix of services 

constant from CY 2012, we are 


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proposing to compare the total payment 

using the CY 2013 ASC relative 

payment weights with the total payment 

using the CY 2014 relative payment 

weights to take into account the changes 

in the OPPS relative payment weights 

between CY 2013 and CY 2014. We are 

proposing to use the ratio of CY 2013 to 

CY 2014 total payment (the weight 

scaler) to scale the ASC relative 

payment weights for CY 2014. The 

proposed CY 2014 ASC scaler is 0.8961 

and scaling would apply to the ASC 

relative payment weights of the covered 

surgical procedures and covered 

ancillary radiology services for which 

the ASC payment rates are based on 

OPPS relative payment weights. 

Scaling would not apply in the case 

of ASC payment for separately payable 

covered ancillary services that have a 

predetermined national payment 

amount (that is, their national ASC 

payment amounts are not based on 

OPPS relative payment weights), such 

as drugs and biologicals that are 

separately paid or services that are 

contractor-priced or paid at reasonable 

cost in ASCs. Any service with a 

predetermined national payment 

amount would be included in the ASC 

budget neutrality comparison, but 

scaling of the ASC relative payment 

weights would not apply to those 

services. The ASC payment weights for 

those services without predetermined 

national payment amounts (that is, 

those services with national payment 

amounts that would be based on OPPS 

relative payment weights) would be 

scaled to eliminate any difference in the 

total payment between the current year 

and the update year. 

For any given year’s ratesetting, we 

typically use the most recent full 

calendar year of claims data to model 

budget neutrality adjustments. We 

currently have available 98 percent of 

CY 2012 ASC claims data. 

To create an analytic file to support 

calculation of the weight scaler and 

budget neutrality adjustment for the 

wage index (discussed below), we 

summarized available CY 2012 ASC 

claims by ASC and by HCPCS code. We 

used the National Provider Identifier for 

the purpose of identifying unique ASCs 

within the CY 2012 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/Research-Statistics-Dataand-Systems/Files-for-Order/ 

LimitedDataSets/ 

ASCPaymentSystem.html. 

b. Updating the ASC Conversion Factor 

Under the OPPS, we typically apply 

a budget neutrality adjustment for 

provider level changes, most notably a 

change in the wage index values for the 

upcoming year, to the conversion factor. 

Consistent with our final ASC payment 

policy, for the CY 2014 ASC payment 

system, we are proposing to calculate 

and apply a budget neutrality 

adjustment to the ASC conversion factor 

for supplier level changes in wage index 

values for the upcoming year, just as the 

OPPS wage index budget neutrality 

adjustment is calculated and applied to 

the OPPS conversion factor. For CY 

2014, we calculated this proposed 

adjustment for the ASC payment system 

by using the most recent CY 2012 claims 

data available and estimating the 

difference in total payment that would 

be created by introducing the proposed 

CY 2014 pre-floor and pre-reclassified 

hospital wage indices. Specifically, 

holding CY 2012 ASC utilization and 

service-mix and the proposed CY 2014 

national payment rates after application 

of the weight scaler constant, we 

calculated the total adjusted payment 

using the CY 2013 pre-floor and prereclassified hospital wage indices and 

the total adjusted payment using the 

proposed CY 2014 pre-floor and prereclassified hospital wage indices. We 

used the 50-percent labor-related share 

for both total adjusted payment 

calculations. We then compared the 

total adjusted payment calculated with 

the CY 2013 pre-floor and prereclassified hospital wage indices to the 

total adjusted payment calculated with 

the proposed CY 2014 pre-floor and prereclassified hospital wage indices and 

applied the resulting ratio of 1.0004 (the 

proposed CY 2014 ASC wage index 

budget neutrality adjustment) to the CY 

2013 ASC conversion factor to calculate 

the proposed CY 2014 ASC conversion 

factor. We note that, on February 28, 

2013, OMB issued OMB Bulletin No. 

13–01 announcing revisions to the 

delineation of Metropolitan Statistical 

Areas, Micropolitan Statistical Areas, 

and Combined Statistical Areas. The 

proposed pre-floor and pre-reclassified 

hospital wage indices for FY 2014 do 

not reflect OMB’s new area delineations. 

Because the ASC wage indices are the 

pre-floor and pre-reclassified hospital 

wage indices, the FY 2014 ASC wage 

indices will not reflect the OMB 

changes. 

Section 1833(i)(2)(C)(i) of the Act 

requires that, ‘‘if the Secretary has not 

updated amounts established’’ under 

the revised ASC payment system in a 

calendar year, the payment amounts 

‘‘shall be increased by the percentage 

increase in the Consumer Price Index 

for all urban consumers (U.S. city 

average) as estimated by the Secretary 

for the 12-month period ending with the 

midpoint of the year involved.’’ The 

statute, therefore, does not mandate the 

adoption of any particular update 

mechanism, but it requires the payment 

amounts to be increased by the CPI–U 

in the absence of any update. Because 

the Secretary updates the ASC payment 

amounts annually, we adopted a policy, 

which we codified at 42 CFR 

416.171(a)(2)(ii), to update the ASC 

conversion factor using the CPI–U for 

CY 2010 and subsequent calendar years. 

Therefore, the annual update to the ASC 

payment system is the CPI–U (referred 

to as the CPI–U update factor). 

Section 3401(k) of the Affordable Care 

Act amended section 1833(i)(2)(D) of the 

Act by adding a new clause (v) which 

requires that ‘‘any annual update under 

[the ASC payment] system for the year, 

after application of clause (iv), shall be 

reduced by the productivity adjustment 

described in section 

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

with the calendar year beginning 

January 1, 2011. The statute defines the 

productivity adjustment to be equal to 

the 10-year moving average of changes 

in annual economy-wide private 

nonfarm business multifactor 

productivity (MFP) (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, year, 

cost reporting period, or other annual 

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

(iv) of section 1833(i)(2)(D) of the Act 

authorizes the Secretary to provide for 

a reduction in any annual update for 

failure to report on quality measures. 

Clause (v) of section 1833(i)(2)(D) of the 

Act states that application of the MFP 

adjustment to the ASC payment system 

may result in the update to the ASC 

payment system being less than zero for 

a year and may result in payment rates 

under the ASC payment system for a 

year being less than such payment rates 

for the preceding year. 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74516), we 

finalized a policy that ASCs begin 

submitting data on quality measures for 

services beginning on October 1, 2012 

for the CY 2014 payment determination 

under the ASCQR Program. In the CY 

2013 OPPS/ASC final rule with 

comment period (77 FR 68499 through 

68500), we finalized a methodology to 

calculate reduced national unadjusted 

payment rates using the ASCQR 

Program reduced update conversion 

factor that would apply to ASCs that fail 

to meet their quality reporting 

requirements for the CY 2014 payment 

determination and subsequent years. 


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The application of the 2.0 percentage 

point reduction to the annual update 

factor, which currently is the CPI–U, 

may result in the update to the ASC 

payment system being less than zero for 

a year for ASCs that fail to meet the 

ASCQR Program requirements. We 

amended §§ 416.160(a)(1) and 416.171 

to reflect these policies. 

In accordance with section 

1833(i)(2)(C)(i) of the Act, before 

applying the MFP adjustment, the 

Secretary first determines the 

‘‘percentage increase’’ in the CPI–U, 

which we interpret cannot be a negative 

percentage. Thus, in the instance where 

the percentage change in the CPI–U for 

a year is negative, we would hold the 

CPI–U update factor for the ASC 

payment system to zero. For the CY 

2014 payment determination and 

subsequent years, under section 

1833(i)(2)(D)(iv) of the Act, we would 

reduce the annual update by 2.0 

percentage points for an ASC that fails 

to submit quality information under the 

rules established by the Secretary in 

accordance with section 1833(i)(7) of 

the Act. Section 1833(i)(2)(D)(v) of the 

Act, as added by section 3401(k) of the 

Affordable Care Act, requires that the 

Secretary reduce the annual update 

factor, after application of any quality 

reporting reduction, by the MFP 

adjustment, and states that application 

of the MFP adjustment to the annual 

update factor after application of any 

quality reporting reduction may result 

in the update being less than zero for a 

year. If the application of the MFP 

adjustment to the annual update factor 

after application of any quality reporting 

reduction would result in an MFPadjusted update factor that is less than 

zero, the resulting update to the ASC 

payment rates would be negative and 

payments would decrease relative to the 

prior year. Illustrative examples of how 

the MFP adjustment would be applied 

to the ASC payment system update are 

found in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72062 

through 72064). 

For this proposed rule, based on IHS 

Global Insight (IGI) 2013 first quarter 

forecast with historical data through 

2012 fourth quarter, for the 12-month 

period ending with the midpoint of CY 

2014, the CPI–U update is projected to 

be 1.4 percent. Also based on IGI’s 2013 

first quarter forecast, the MFP 

adjustment for the period ending with 

the midpoint of CY 2014 is projected to 

be 0.5 percent. IGI is a nationally 

recognized economic and financial 

forecasting firm that contracts with CMS 

to forecast the components of CMS’ 

market baskets as well as the CPI–U and 

MFP. The methodology for calculating 

the MFP adjustment was finalized in the 

CY 2011 MPFS final rule with comment 

period (75 FR 73394 through 73396) as 

revised in the CY 2012 MPFS final rule 

with comment period (76 FR 73300 

through 73301). Because the ASCQR 

Program affects payment rates beginning 

in CY 2014, there would be a 2.0 

percentage point reduction to the CPI– 

U for ASCs that fail to meet the ASCQR 

Program requirements. 

We are proposing to reduce the CPI– 

U update of 1.4 percent by the MFP 

adjustment of 0.5 percentage point, 

resulting in an MFP-adjusted CPI–U 

update factor of 0.9 percent for ASCs 

meeting the quality reporting 

requirements. Therefore, we are 

proposing to apply a 0.9 percent MFPadjusted CPI–U update factor to the CY 

2013 ASC conversion factor for ASCs 

meeting the quality reporting 

requirements. We are proposing to 

reduce the CPI–U update of 1.4 percent 

by 2.0 percentage points for ASCs that 

do not meet the quality reporting 

requirements and then apply the 0.5 

percentage point MFP reduction. 

Therefore, we are proposing to apply a 

¥1.1 percent quality reporting/MFPadjusted CPI–U update factor to the CY 

2013 ASC conversion factor for ASCs 

not meeting the quality reporting 

requirements. We also are proposing 

that if more recent data are subsequently 

available (for example, a more recent 

estimate of the CY 2014 CPI–U update 

and MFP adjustment), we would use 

such data, if appropriate, to determine 

the CY 2014 ASC update for the final 

rule with comment period. 

For CY 2014, we also are proposing to 

adjust the CY 2013 ASC conversion 

factor ($42.917) by the wage adjustment 

for budget neutrality of 1.0004 in 

addition to the MFP-adjusted update 

factor of 0.9 percent discussed above, 

which results in a proposed CY 2014 

ASC conversion factor of $43.321 for 

ASCs meeting the quality reporting 

requirements. For ASCs not meeting the 

quality reporting requirements, we are 

proposing to adjust the CY 2013 ASC 

conversion factor ($42.917) by the wage 

adjustment for budget neutrality of 

1.0004 in addition to the quality 

reporting/MFP-adjusted update factor of 

¥1.1 percent discussed above, which 

results in a proposed CY 2014 ASC 

conversion factor of $42.462. 

We invite public comment on these 

proposals. 

3. Display of Proposed CY 2014 ASC 

Payment Rates 

Addenda AA and BB to this proposed 

rule (which are available via the Internet 

on the CMS Web site) display the 

proposed updated ASC payment rates 

for CY 2014 for covered surgical 

procedures and covered ancillary 

services, respectively. These addenda 

contain several types of information 

related to the proposed CY 2014 

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 2014. 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 in the final rule 

with comment period. 

The values displayed in the column 

titled ‘‘CY 2014 Payment Weight’’ are 

the proposed relative payment weights 

for each of the listed services for CY 

2014. The payment weights for all 

covered surgical procedures and 

covered ancillary services whose ASC 

payment rates are based on OPPS 

relative payment weights were scaled 

for budget neutrality. Thus, scaling was 

not applied to the device portion of the 

device-intensive procedures, services 

that are paid at the MPFS nonfacility PE 

RVU-based amount, separately payable 

covered ancillary services that have a 

predetermined national payment 

amount, such as drugs and biologicals 

and brachytherapy sources that are 

separately paid under the OPPS, or 

services that are contractor-priced or 

paid at reasonable cost in ASCs. 

To derive the proposed CY 2014 

payment rate displayed in the ‘‘CY 2014 

Payment’’ column, each ASC payment 

weight in the ‘‘CY 2014 Payment 

Weight’’ column was multiplied by the 

proposed CY 2014 conversion factor of 

$43.321. The conversion factor includes 

a budget neutrality adjustment for 

changes in the wage index values and 

the annual update factor as reduced by 

the productivity adjustment (as 


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discussed in section XII.H.2.b. of this 

proposed rule). 

In Addendum BB, there are no 

relative payment weights displayed in 

the ‘‘CY 2014 Payment Weight’’ column 

for items and services with 

predetermined national payment 

amounts, such as separately payable 

drugs and biologicals. The ‘‘CY 2014 

Payment’’ column displays the 

proposed CY 2014 national unadjusted 

ASC payment rates for all items and 

services. The proposed CY 2014 ASC 

payment rates listed in Addendum BB 

for separately payable drugs and 

biologicals are based on ASP data used 

for payment in physicians’ offices in 

April 2013. 

XIII. Hospital Outpatient Quality 

Reporting Program Updates 

A. Background 

1. Overview 

CMS has implemented quality 

measure reporting programs for multiple 

settings of care. These programs 

promote higher quality, more efficient 

health care for Medicare beneficiaries. 

The quality data reporting program for 

hospital outpatient care, known as the 

Hospital Outpatient Quality Reporting 

(Hospital OQR) Program, formerly 

known as the Hospital Outpatient 

Quality Data Reporting Program (HOP 

QDRP), has been generally modeled 

after the quality data reporting program 

for hospital inpatient services known as 

the Hospital Inpatient Quality Reporting 

(Hospital IQR) Program (formerly 

known as the Reporting Hospital 

Quality Data for Annual Payment 

Update (RHQDAPU) Program). Both of 

these quality reporting programs for 

hospital services have financial 

incentives for the reporting of quality 

data to CMS. 

CMS also has implemented quality 

measure reporting programs for other 

settings of care and for certain 

professionals, including: 

• Care furnished by physicians and 

other eligible professionals, under the 

Physician Quality Reporting System 

(PQRS, formerly referred to as the 

Physician Quality Reporting Program 

Initiative (PQRI)); 

• Inpatient rehabilitation facilities, 

under the Inpatient Rehabilitation 

Facility Quality Reporting Program (IRF 

QRP); 

• Long-term care hospitals, under the 

Long-Term Care Hospital Quality 

Reporting (LTCHQR) Program; 

• PPS-exempt cancer hospitals, under 

the PPS-Exempt Cancer Hospital 

Quality Reporting (PCHQR) Program; 

• Ambulatory surgical centers, under 

the Ambulatory Surgical Center Quality 

Reporting (ASCQR) Program; 

• Inpatient psychiatric facilities, 

under the Inpatient Psychiatric Facility 

Quality Reporting (IPFQR) Program; 

• Home health agencies, under the 

Home Health Quality Reporting Program 

(HH QRP); and 

• Hospices, under the Hospice 

Quality Reporting Program. 

Finally, CMS has implemented a 

Hospital Value-Based Purchasing 

Program and an end-stage renal disease 

(ESRD) Quality Incentive Program that 

link payment to performance. 

In implementing the Hospital OQR 

Program and other quality reporting 

programs, we have focused on measures 

that have high impact and support 

national priorities for improved quality 

and efficiency of care for Medicare 

beneficiaries as reflected in the National 

Quality Strategy, as well as conditions 

for which wide cost and treatment 

variations have been reported, despite 

established clinical guidelines. To the 

extent possible under various 

authorizing statutes, our ultimate goal is 

to align the clinical quality measure 

requirements of the Hospital OQR 

Program and various other programs, 

such as the Hospital IQR Program, the 

ASCQR Program, and the Medicare and 

Medicaid Electronic Health Record 

(EHR) Incentive Programs, authorized 

by the Health Information Technology 

for Economic and Clinical Health Act, 

so that the burden for reporting will be 

reduced. As appropriate, we will 

consider the adoption of measures with 

electronic specifications, to enable the 

collection of this information as part of 

care delivery. Establishing such an 

alignment will require interoperability 

between EHRs, and CMS data collection 

systems, with data being calculated and 

submitted via certified EHR technology; 

additional infrastructural development 

on the part of hospitals and CMS; and 

the adoption of standards for capturing, 

formatting, and transmitting the data 

elements that make up the measures. 

Once these activities are accomplished, 

the adoption of many measures that rely 

on data obtained directly from EHRs 

will enable us to expand the Hospital 

OQR Program measure set with less cost 

and burden to hospitals. 

In implementing this and other 

quality reporting programs, we generally 

applied the same principles for the 

development and the use of measures, 

with some differences that relate to the 

specific characteristics of each program: 

• Our overarching goal is to support 

the National Quality Strategy’s goal of 

better health care for individuals, better 

health for populations, and lower costs 

for health care. The Hospital OQR 

Program will help achieve these goals 

by creating transparency around the 

quality of care at hospital outpatient 

departments to support patient 

decision-making and quality 

improvement. Given the availability of 

well validated measures and the need to 

balance breadth with minimizing 

burden, measures should take into 

account and address, as fully as 

possible, the six domains of 

measurement that arise from the six 

priorities of the National Quality 

Strategy: Clinical care; Person- and 

caregiver-centered experience and 

outcomes; Safety; Efficiency and cost 

reduction; Care coordination; and 

Community/population health. More 

information regarding the National 

Quality Strategy can be found at: 

http://www.healthcare.gov/law/ 

resources/reports/. HHS engaged a wide 

range of stakeholders to develop the 

National Quality Strategy, as required 

by the Affordable Care Act. 

• Pay-for-reporting and public 

reporting should rely on a mix of 

structural, processes, outcomes, 

efficiency, and patient experience of 

care measures, including measures of 

care transitions and changes in patient 

functional status. 

• To the extent possible and 

recognizing differences in payment 

system maturity and statutory 

authorities, measures should be aligned 

across Medicare and Medicaid public 

reporting and incentive payment 

systems to promote coordinated efforts 

to improve quality. The measure sets 

should evolve so that they include a 

focused set of measures appropriate to 

the specific provider category that 

reflects the level of care and the most 

important areas of service and measures 

for that provider category. 

• We weigh the relevance and the 

utility of measures compared to the 

burden on hospitals in submitting data 

under the Hospital OQR Program. The 

collection of information burden on 

providers should be minimized to the 

extent possible. To this end, we are 

working toward the eventual adoption 

of electronically-specified measures so 

that data can be calculated and 

submitted via certified EHR technology 

with minimal burden. We also seek to 

use measures based on alternative 

sources of data that do not require chart 

abstraction or that utilize data already 

being reported by many hospitals, such 

as data that hospitals report to clinical 

data registries, or all-payer claims 

databases. In recent years we have 

adopted measures that do not require 

chart abstraction, including structural 

measures and claims-based measures 


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that we can calculate using other data 

sources. 

• To the extent practicable and 

feasible, and recognizing differences in 

statutory authorities, measures used by 

CMS should be endorsed by a national, 

multi-stakeholder organization. 

• We take into account the views of 

multi-stakeholder groups. Section 3014 

of the Affordable Care Act added section 

1890A of the Act, establishing a prerulemaking process, which, among other 

steps, requires the Secretary to take into 

consideration input from multistakeholder groups in selecting certain 

categories of quality and efficiency 

measures described in section 

1890(b)(7)(B) of the Act. As part of the 

pre-rulemaking process, the consensusbased entity that CMS must contract 

with under section 1890 of the Act 

(currently the National Quality Forum 

(NQF)), convened the multi-stakeholder 

groups referred to as the Measure 

Applications Partnership (MAP). The 

MAP is a public-private partnership 

created for the primary purpose of 

providing input to HHS on the selection 

of the categories of measures in section 

1890(B)(7)(B) of the Act, which include 

measures for use in certain specific 

Medicare programs, measures for use in 

reporting performance information to 

the public, and measures for use in 

health care programs other than for use 

under the Act. Information about the 

MAP can be found at http:// 

www.qualityforum.org/Setting_

Priorities/Partnership/Measure_

Applications_Partnership.aspx. 

• Measures should be developed with 

the input of providers, purchasers/ 

payers, consumers, and other 

stakeholders. Measures should be 

aligned with best practices among other 

payers and the needs of the end users 

of the measures. We take into account 

widely accepted criteria established in 

medical literature. 

• HHS Strategic Plan and Initiatives. 

HHS is the U.S. government’s principal 

agency for protecting the health of all 

Americans. HHS accomplishes its 

mission through programs and 

initiatives. Every 4 years HHS updates 

its Strategic Plan and measures its 

progress in addressing specific national 

problems, needs, or mission-related 

challenges. The goals of the HHS 

Strategic Plan for Fiscal Years 2010 

through 2015 are to: Transform Health 

Care; Advance Scientific Knowledge 

and Innovation; Advance the Health, 

Safety, and Well-Being of the American 

People; Increase Efficiency, 

Transparency, and Accountability of 

HHS Programs; and Strengthen the 

Nation’s Health and Human Services 

Infrastructure and Workforce (http:// 

www.hhs.gov/about/FY2012budget/ 

strategicplandetail.pdf). HHS prioritizes 

policy and program interventions to 

address the leading causes of death and 

disability in the United States, 

including heart disease, cancer, stroke, 

chronic lower respiratory diseases, 

unintentional injuries and preventable 

behaviors. Initiatives such as the HHS 

Action Plan to Reduce Healthcareassociated Infections (HAIs) in clinical 

settings and the Partnership for Patients 

exemplify these programs. 

• CMS strives to ensure that quality 

measures for the Medicare, Medicaid, 

and the Children’s Health Insurance 

Programs are aligned with priority 

quality goals, that measure 

specifications are aligned across 

settings, that outcome measures are 

used, and that quality measures are 

collected from EHRs as appropriate. 

Quality goals are embedded in the CMS 

Strategy. 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74451 

through 74452), we responded to public 

comment on many of these principles. 

In the CY 2013 OPPS/ASC final 

rulemaking (77 FR 68467 through 

68469), with a few minor differences, 

we generally applied the same 

principles for our considerations for 

future measures. 

2. Statutory History of the Hospital 

Outpatient Quality Reporting (Hospital 

OQR) Program 

We refer readers to the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72064) for a detailed 

discussion of the statutory history of the 

Hospital OQR Program. 

3. Measure Updates and Data 

Publication 

a. Process for Updating Quality 

Measures 

Technical specifications for the 

Hospital OQR Program measures are 

listed in the Hospital OQR 

Specifications Manual, which is posted 

on the CMS QualityNet Web site at: 

http://www.qualitynet.org/dcs/ 

ContentServer?c=Page&

pagename=QnetPublic%2FPage%2F

SpecsManualTemplate&cid=12287

72438492. 

We maintain the technical 

specifications for the measures by 

updating this Hospital OQR 

Specifications Manual and including 

detailed instructions and calculation 

algorithms. In some cases where the 

specifications are available elsewhere, 

we may include links to Web sites 

hosting technical specifications. These 

resources are for hospitals to use when 

collecting and submitting data on 

required measures. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68766 

through 68767), we established an 

additional subregulatory process for 

making updates to the measures we 

have adopted for the Hospital OQR 

Program. We believe that a measure can 

be updated through this subregulatory 

process provided it is a nonsubstantive 

change. We expect to make the 

determination of what constitutes a 

substantive versus a nonsubstantive 

change on a case-by-case basis. 

Examples of nonsubstantive changes 

to measures might include updated 

diagnosis or procedure codes, 

medication updates for categories of 

medications, broadening of age ranges, 

and exclusions for a measure (such as 

the addition of a hospice exclusion to 

the 30-day mortality measures). We 

believe that non-substantive changes 

may include updates to NQF-endorsed 

measures based upon changes to 

guidelines upon which the measures are 

based. We will revise the Specifications 

Manual so that it clearly identifies the 

updates and provide links to where 

additional information on the updates 

can be found. As stated in CY 2009 

OPPS/ASC, we also will post the 

updates on the QualityNet Web site at 

https://www.QualityNet.org. We will 

provide sufficient lead time for facilities 

to implement the changes where 

changes to the data collection systems 

would be necessary. We generally 

release the Hospital OQR Specifications 

Manual every 6 months and release 

addenda as necessary. This release 

schedule provides at least 3 months of 

advance notice for nonsubstantive 

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. 

We will continue to use rulemaking to 

adopt substantive updates made by the 

NQF to the endorsed measures we have 

adopted for the OQR Program. Examples 

of changes that we might consider to be 

substantive would be those in which the 

changes are so significant that the 

measure is no longer the same measure, 

or when a standard of performance 

assessed by a measure becomes more 

stringent (for example: changes in 

acceptable timing of medication, 

procedure/process, or test 

administration). Another example of a 

substantive change would be where the 

NQF has extended its endorsement of a 

previously endorsed measure to a new 

setting, such as extending a measure 

from the inpatient setting to hospice. 


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We believe that the policy finalized in 

the CY 2009 OPPS/ASC final rule 

adequately balances our need to 

incorporate non-substantive NQF 

updates to NQF-endorsed Hospital OQR 

Program measures in the most 

expeditious manner possible, while 

preserving the public’s ability to 

comment on updates that so 

fundamentally change an endorsed 

measure that it is no longer the same 

measure that we originally adopted. We 

also note that the NQF process 

incorporates an opportunity for public 

comment and engagement in the 

measure maintenance process. These 

policies regarding what is considered 

substantive versus non-substantive 

apply to all measures in 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 

the Hospital OQR Program available to 

the public. It also states that such 

procedures must ensure that a hospital 

has the opportunity to review the data 

that are to be made public, with respect 

to the hospital prior to such data being 

made public. To meet these 

requirements, data that a hospital has 

submitted for the Hospital OQR Program 

are typically provided to hospitals for a 

preview period via QualityNet, and then 

are usually displayed on our Hospital 

Compare Web site, http:// 

www.hospitalcompare.medicare.gov, 

following the preview period, although 

we might use other Web sites, as 

discussed below. The Hospital Compare 

Web site is an interactive Web tool that 

assists beneficiaries by providing 

information on hospital quality of care. 

We believe this information motivates 

beneficiaries to work with their doctors 

and hospitals to discuss the quality of 

care hospitals provide to patients, thus 

providing additional incentives to 

hospitals to improve the quality of care 

that they furnish. 

Under our current policy, we publish 

quality data by the corresponding 

hospital CMS Certification Number 

(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. That is, in a situation in which a 

larger hospital has taken over ownership 

of a smaller hospital, the smaller 

hospital’s CCN will be replaced by the 

larger hospital’s CCN (the principal 

CCN). For data display purposes, we 

will only display data received under 

the principal CCN. If both hospitals are 

submitting data, those data are not 

distinguishable in the warehouse; and 

the data is calculated together as one 

hospital. 

Consistent with our current policy, 

we make Hospital IQR and Hospital 

OQR data publicly available whether or 

not the data have been validated for 

payment purposes. The Hospital 

Compare Web site currently displays 

information covering process of care 

measures, outcome of care measures, 

outpatient imaging efficiency measures 

and HCAHPS data. 

In general, we strive to display 

hospital quality measure data on the 

Hospital Compare Web site as soon as 

possible after measure data have been 

submitted to CMS. However, if there are 

unresolved display issues or pending 

design considerations, we may make the 

data available on other CMS Web sites 

such as: http://www.cms.hhs.gov/ 

HospitalQualityInits/ or https:// 

data.medicare.gov/. Publicly reporting 

the information in this manner, 

although not on the 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 email blasts, memoranda, 

Hospital Open Door Forums, national 

provider calls, and QualityNet 

announcements regarding the release of 

preview reports followed by the posting 

of data on a Web site other than 

Hospital Compare. 

We also require hospitals to complete 

and submit an online registration form 

(‘‘participation form’’) in order to 

participate in the Hospital OQR 

Program. With submission of this 

participation form, participating 

hospitals agree that they will allow CMS 

to publicly report the quality measure 

data submitted under the Hospital OQR 

Program, including measures that we 

calculate using Medicare claims. 

B. Process for Retention of Hospital 

OQR Program Measures Adopted in 

Previous Payment Determinations 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68471), for 

the purpose of streamlining the 

rulemaking process, we finalized a 

policy that, beginning with the CY 2013 

rulemaking, when we adopt measures 

for the Hospital OQR Program beginning 

with a payment determination and 

subsequent years, these measures are 

automatically adopted for all 

subsequent years payment 

determinations unless we propose to 

remove, suspend, or replace the 

measures. 

C. Removal or Suspension of Quality 

Measures From the Hospital OQR 

Program Measure Set 

1. Considerations in Removing Quality 

Measures From the Hospital OQR 

Program 

In the FY 2010 IPPS/LTCH PPS 

rulemaking, we finalized a process for 

immediate retirement of Hospital IQR 

Program measures based on evidence 

that the continued use of the measure as 

specified raises patient safety concerns 

(74 FR 43864 through 43865). We 

adopted this same immediate measure 

retirement policy for the Hospital OQR 

Program in the CY 2010 OPPS/ASC final 

rule with comment period (74 FR 

60634). 

In previous Hospital IQR Program 

rulemakings, we have referred to the 

removal of measures from the Hospital 

IQR Program as ‘‘retirement.’’ We have 

used this term to indicate that Hospital 

IQR Program measures are no longer 

included in the Hospital IQR Program 

measure set for one or more indicated 

reasons. However, we note that this 

term may imply that other payers/ 

purchasers/programs should cease using 

these measures that are no longer 

required for the Hospital IQR Program. 

In order to clarify that this is not our 

intent, we stated in the FY 2013 IPPS/ 

LTCH PPS final rule (77 FR 53506 

through 53507) that we will use the 

term ‘‘remove’’ rather than ‘‘retire’’ to 

refer to the action of no longer including 

a measure in the Hospital IQR Program. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68472 

through 68473), we adopted the same 

terminology of ‘‘removal’’ in the 

Hospital OQR Program to indicate our 

action of discontinuing a measure in the 

Hospital OQR Program. 

In the FY 2011 IPPS/LTCH PPS final 

rule (75 FR 50185), we finalized a set of 

criteria to use when determining 

whether to remove Hospital OQR 

Program measures. These criteria are: (1) 

Measure performance among hospitals 

is so high and unvarying that 

meaningful distinctions and 

improvements in performance can no 

longer be made (‘‘topped out’’ 

measures); (2) performance or 

improvement on a measure does not 

result in better patient outcomes; (3) a 

measure does not align with current 

clinical guidelines or practice; (4) the 

availability of a more broadly applicable 

(across settings, populations, or 

conditions) measure for the topic; (5) 

the availability of a measure that is more 

proximal in time to desired patient 


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outcomes for the particular topic; (6) the 

availability of a measure that is more 

strongly associated with desired patient 

outcomes for the particular topic; and 

(7) collection or public reporting of a 

measure leads to negative unintended 

consequences such as patient harm. 

These criteria were suggested by 

commenters during Hospital IQR 

Program rulemaking, and we 

determined that these criteria are also 

applicable in evaluating Hospital OQR 

Program quality measures for removal. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68472 

through 68473), we finalized our 

proposal to apply these measure 

removal criteria in the Hospital OQR 

Program as well. 

In addition to these criteria, we take 

into account the views of the MAP in 

the evaluation of measure removal. 

Furthermore, for efficiency and 

streamlining purposes, we strive to 

eliminate redundancy of similar 

measures. 

2. Proposed Removal of Two ChartAbstracted Measures From the Hospital 

OQR Program 

In this rulemaking, we are proposing 

to remove two measures from the 

Hospital OQR Program for the CY 2016 

payment determination and subsequent 

years: (1) OP–19: Transition Record 

with Specified Elements Received by 

Discharged ED Patients and (2) OP–24: 

Cardiac Rehabilitation Measure: Patient 

Referral from an Outpatient Setting. The 

rationales for these proposals are 

discussed below. 

a. Proposed Removal of OP–19: 

Transition Record With Specified 

Elements Received by Discharged ED 

Patients 

We previously adopted measure OP– 

19 for the Hospital OQR Program for the 

CY 2013 payment determination with 

data collection beginning with January 

1, 2012 encounters in the CY 2011 

OPPS/ASC final rule with comment 

period. Shortly after data collection for 

this measure began in January 2012, 

hospitals raised concerns about the 

measure specifications, including 

potential privacy issues related to 

releasing certain elements of the 

transition record to either the patient 

being discharged from an emergency 

department or the patient’s caregiver. 

Some examples provided by hospitals 

are the release of sensitive lab results or 

radiological findings to a parent, spouse, 

or guardian of a minor patient, or to the 

responsible party for a physically 

incapacitated patient. 

In order to address the safety concerns 

related to confidentiality as raised by 

the industry in the above discussion, in 

April 2012, we took immediate action to 

suspend OP–19. On April 12, 2012, we 

released a Memorandum entitled SDPS 

12–100–OD, ‘‘Revised: Temporary 

Suspension of Hospital Outpatient 

Quality Reporting Measure OP–19: 

Transition Record with Specified 

Elements Received by Discharged 

Patients’’ to make clear our intent not to 

use any data submitted on this measure 

for payment determinations, public 

reporting, or data validation. This 

memorandum can be located at http:// 

qualitynet.org) under the option ‘‘Email 

Notifications’’ within the ‘‘Hospitals— 

Outpatient’’ drop down menu found at 

the top of the page. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68474 

through 68476) for the CY 2014 

payment determination and subsequent 

years, we confirmed that we suspended 

the collection of data for the measure 

OP–19: Transition Record with 

Specified Elements Received by 

Discharged ED Patients, which specified 

that either patients or their caregivers 

(emphasis added) receive a transition 

record at the time of ED discharge. 

We chose to suspend this measure 

rather than to immediately remove the 

measure from the program because the 

probability of harm occurring was 

relatively low; any potential harm that 

occurred would not be the direct result 

of patient care rendered at facilities; and 

the measure steward, the American 

Medical Association Physician 

Consortium for Performance 

Improvement (AMA–PCPI), believed 

that the measure could be quickly respecified in a manner that would 

mitigate the concerns raised by 

hospitals and stakeholders. In the CY 

2013 OPPS/ASC final rule with 

comment period, we noted that the 

measure steward was working to revise 

the measure specifications to address 

the concerns raised by affected parties. 

We also noted that the measure was 

scheduled for NQF maintenance review 

in 2013. We stated that after completion 

of the NQF maintenance process, we 

anticipated that normal program 

operations for this measure could 

resume once we updated the Hospital 

OQR Specifications Manual and made 

any necessary changes to our data 

collection infrastructure. In addition, we 

stated that we would notify hospitals of 

changes in the suspension status of the 

measure for the Hospital OQR Program 

via email blast. However, we indicated 

that if we determined that these 

concerns cannot be adequately 

addressed by measure specifications, we 

would propose to remove this measure 

in a future OPPS/ASC rule. 

We have determined that the measure 

cannot be implemented with the degree 

of specificity that would be needed to 

fully address the concerns of 

stakeholders without being overly 

burdensome. The measure steward 

resolved the safety issue by refining the 

measure, but the refinement has made 

data abstraction more subjective because 

individual hospitals can determine 

which information should be included 

in the transition record in order to 

comply with this measure. In the 

absence of standardized data elements, 

we were not able to resolve this issue of 

data abstraction for common data 

elements, and therefore, could not 

ensure consistency of data submission 

and accuracy of measure results. 

We also learned that all aspects for 

this transition record measure are 

currently required to meet the Medicare 

EHR Incentive Program’s meaningful 

use (MU) core objective for eligible 

hospitals and critical access hospitals 

(CAHs) to provide patients the ability to 

view online, download, and transmit 

information about a hospital admission. 

This MU core objective provides 

patients discharged from the inpatient 

department or Emergency Department 

(ED) online access to their visit data. 

These ED visit data are the specified 

data elements included in the OP–19 

Transition Record measure. This means 

that if we were to keep this measure, 

hospitals would need to submit this 

data for both the Hospital OQR Program 

using chart-abstraction and via 

attestation for the MU core objective. 

Therefore, to reduce duplicative 

requirements among programs and 

measurement burden, we are proposing 

to remove this measure from the 

Hospital OQR Program. We invite 

public comment on the proposed 

removal of this measure from the 

Hospital OQR Program. 

b. Proposed Removal of OP–24: Cardiac 

Rehabilitation Measure: Patient Referral 

From an Outpatient Setting 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68476), we 

deferred data collection for this measure 

to January 1, 2014 encounters. This was 

due to the unavailability of detailed 

abstraction instructions for data 

collection in time for the July 2012 

release of the Hospital OQR 

Specifications Manual which was 

needed for chart-abstraction beginning 

on January 1, 2013. We also indicated 

that this measure would be applied to 

the CY 2015 payment determination. 

We are proposing to remove this 

measure from the Hospital OQR 

Program due to continued difficulties 

with defining the measure care setting. 


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The measure specifications provided by 

the measure steward, the American 

College of Cardiology (ACC), identify 

the applicable care setting as a 

‘Clinician Office/Clinic’ and not as a 

hospital outpatient setting. In 

developing the specifications for this 

measure for a hospital outpatient 

setting, several issues arose. First, it is 

difficult to accurately identify the 

purpose of hospital outpatient visits, 

such as for evaluation and management 

purposes, using solely HOPD claims 

data. Second, it is difficult for hospitals 

to determine which particular clinic 

visit resulted in a cardiac rehabilitation 

referral for any given patient. Therefore, 

given the difficulties in accurately 

applying the measure to the hospital 

outpatient setting, we are proposing to 

remove OP–24 from the Hospital OQR 

Program. We invite public comment on 

this proposal to remove this measure 

from the Hospital OQR Program. 

PROPOSED HOSPITAL OQR PROGRAM MEASURES TO BE REMOVED FOR THE CY 2016 PAYMENT DETERMINATION AND

SUBSEQUENT YEARS

NQF No. Measure 

0649 ....... OP–19: Transition Record with Specified Elements Received by Discharged ED Patients. 

0643 ....... OP–24: Cardiac Rehabilitation Measure: Patient Referral from an Outpatient Setting. 

D. Quality Measures Previously Adopted 

for the CY 2014 and CY 2015 Payment 

Determinations and Subsequent Years 

The table below lists 25 measures that 

we previously adopted and retained for 

the CY 2014 and CY 2015 payment 

determinations and subsequent years 

under the Hospital OQR Program. This 

list includes measures we are proposing 

to remove in this proposed rule. 

HOSPITAL OQR PROGRAM MEASURES FOR THE CY 2014 AND CY 2015 PAYMENT DETERMINATIONS AND SUBSEQUENT

YEARS

NQF No. Measure name 

0287 ....... OP–1: Median Time to Fibrinolysis. 

0288 ....... OP–2: Fibrinolytic Therapy Received Within 30 Minutes. 

0290 ....... OP–3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. 

0286 ....... OP–4: Aspirin at Arrival. 

0289 ....... OP–5: Median Time to ECG. 

0270 ....... OP–6: Timing of Antibiotic Prophylaxis. 

0268 ....... OP–7: Prophylactic Antibiotic Selection for Surgical Patients. 

0514 ....... OP–8: MRI Lumbar Spine for Low Back Pain. 

OP–9: Mammography Follow-up Rates. 

OP–10: Abdomen CT—Use of Contrast Material. 

0513 ....... OP–11: Thorax CT—Use of Contrast Material. 

0489 ....... OP–12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their ONC-Certified EHR System as 

Discrete Searchable Data. 

0669 ....... 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. * 

0491 ....... OP–17: Tracking Clinical Results between Visits. 

0496 ....... OP–18: Median Time from ED Arrival to ED Departure for Discharged ED Patients. 

0649 ....... OP–19: Transition Record with Specified Elements Received by Discharged ED Patients. 

OP–20: Door to Diagnostic Evaluation by a Qualified Medical Professional. 

0662 ....... OP–21: Median Time to Pain Management for Long Bone Fracture. 

OP–22: ED—Patient Left Without Being Seen. 

0661 ....... OP–23: ED—Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT or MRI Scan 

Interpretation Within 45 minutes of Arrival. 

0643 ....... OP–24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting. 

OP–25: Safe Surgery Checklist Use. 

OP–26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures. ** 

* Public reporting for OP–15 continues to be deferred at the time of this CY 2014 OPPS/ASC proposed rule. 

** OP–26 Procedure categories and corresponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache

=true&blobwhere=1228889963089&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheader

value1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata&blobtable=MungoBlobs. 

E. Proposed Quality Measures for the 

CY 2016 Payment Determination and 

Subsequent Years 

In this rulemaking, we are proposing 

to adopt five new measures for the 

Hospital OQR Program for the CY 2016 

payment determination and subsequent 

years. These measures include one HAI 

measure—Influenza Vaccination 

Coverage among Healthcare Personnel 

(NQF #0431), currently collected by the 

Centers for Disease Control and 

Prevention (CDC) via the National 

Healthcare Safety Network (NHSN)— 

and four chart-abstracted measures. The 

chart-abstracted measures are: (1) 

Complications within 30 Days 

Following Cataract Surgery Requiring 

Additional Surgical Procedures (NQF 

#0564), (2) Endoscopy/Poly 

Surveillance: Appropriate follow-up 

interval for normal colonoscopy in 

average risk patients (NQF #0658), (3) 

Endoscopy/Poly surveillance: 

Colonoscopy Interval for Patients with a 

History of Adenomatous Polyps— 

Avoidance of Inappropriate Use (NQF 


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43648 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

1Maltezou, H.C., Drancourt, M.: Nosocomial 

influenza in children. Journal of Hospital Infection 

2003; 55:83–91. 

2Hurley, J.C., Flockhart, S.: An influenza 

outbreak in a regional residential facility. Journal of 

Infection Prevention 2010; 11:58–61. 

3Salgado, 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. 

4Wilde, M.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. 

#0659), and (4) Cataracts: Improvement 

in Patient’s Visional Function within 90 

Days Following Cataract Surgery (NQF 

#1536). 

The proposed measures were 

included on a publicly available 

document entitled ‘‘List of Measures 

Under Consideration for December 1, 

2012’’ on the NQF Web site at: http:// 

www.qualityforum.org/Setting_Priorities

/Partnership/Measure_Applications

_Partnership.aspx in compliance with 

section 1890A(a)(2) of the Act. They 

were reviewed by the MAP in its ‘‘MAP 

Pre-Rulemaking Report: 2013 

Recommendations on Measures Under 

Consideration by HHS,’’ which has been 

made available on the NQF Web site at: 

http://www.qualityforum.org/

Setting_Priorities/Partnership/ 

Measure_Applications

_Partnership.aspx. We considered the 

input and recommendations provided 

by the MAP in selecting measures to 

propose for the Hospital OQR Program. 

All five of the proposed measures are 

NQF-endorsed, and therefore meet the 

requirements 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. 

Furthermore, the services targeted in the 

proposed measures are services 

commonly provided to patients who 

visit hospital outpatient departments 

and, for this reason, we believe that 

these proposed measures are 

appropriate for the measurement of 

quality of care furnished by hospitals in 

outpatient settings as required under 

section 1833(t)(17)(C)(i) of the Act. 

We are proposing to collect aggregate 

data (numerators, denominators, 

exclusions) for the four chart-abstracted 

measures via an online, Web-based tool 

that will be made available to HOPDs 

via the QualityNet Web site, just as we 

do for OP–22. This Web-based tool is 

currently in use in the Hospital OQR 

Program to collect structural measure 

information. 

More information regarding this 

proposed method of collection is 

provided in section XIII.H.2. of this 

proposed rule. 

To enhance our efforts to collect high 

quality data for the Hospital OQR 

measures while minimizing burden for 

HOPDs, we also seek public comment 

on whether we should collect patientlevel data via certified EHR technology 

on the four proposed measures 

excluding the Influenza Vaccination 

Coverage among Healthcare Personnel 

measure, and the potential timing for 

doing so. Collecting patient-level data, 

as we do for other Hospital OQR 

Program measures such as OP–1 

through OP–7, would allow CMS to 

validate the accuracy of the data and 

also link data for patients over time to 

assess patient outcomes of care related 

to treatment. 

The proposed measures are described 

in greater detail below. 

1. Influenza Vaccination Coverage 

Among Healthcare Personnel (NQF 

#0431) 

This proposed measure assesses the 

percentage of healthcare personnel 

(HCP) who have been immunized for 

influenza. 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 longstanding concern.123

Vaccination is an effective preventive 

measure against influenza, and can 

prevent many illnesses, deaths, and 

losses in productivity.4 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. 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. 

We are proposing to adopt this 

process measure for the CY 2016 

payment determination and subsequent 

years. We are also proposing that 

Hospital OPDs use the NHSN 

infrastructure and protocol to report the 

measure for Hospital OQR program 

purposes. The measure numerator is: 

HCP in the denominator population 

who during the time from October 1 (or 

when the vaccine became available) 

through March 31 of the following year: 

(a) Received an influenza vaccination 

administered at the healthcare facility, 

or reported in writing (paper or 

electronic) or provided documentation 

that influenza vaccination was received 

elsewhere; (b) were determined to have 

a medical contraindication/condition of 

severe allergic reaction to eggs or to 

other component(s) of the vaccine, or 

history of Guillain-Barre Syndrome 

within 6 weeks after a previous 

influenza vaccination; (c) declined; or 

(d) persons with unknown vaccination 

status or who do not otherwise meet any 

of the definitions of the abovementioned numerator categories. The 

measure denominator is: the number of 

HCP who are working in the healthcare 

facility for at least 1 working day 

between October 1 and March 31 of the 

influenza season, regardless of clinical 

responsibility or patient contact. The 

specifications for this measure are 

available at http:// 

www.qualityforum.org/QPS/ 

QPSTool.aspx?Exact=false&

Keyword=0431. 

In its 2013 Pre-Rulemaking Report, 

(http://www.qualityforum.org/ 

Publications/2013/02/MAP_PreRulemaking_Report_- 

_February_2013.aspx), the MAP 

supported inclusion of this measure in 

the Hospital OQR Program and noted 

that the measure would address a 

measure type that is not adequately 

represented in the program measure set. 

Furthermore, the adoption of this 

measure will align with both the 

Hospital IQR Program, which adopted 

the measure for the FY 2015 payment 

determination and subsequent years, 

and the ASCQR Program, which 

adopted the measure for the CY 2016 

payment determination and subsequent 

years. 

In the CY 2012 OPPS/ASC proposed 

rule (76 FR 42323 through 42324), we 

proposed this measure for the CY 2015 

payment determination. However, in the 

CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74470 through 

74472), we decided not to finalize the 

measure (76 FR 74472) and, instead, 

decided to propose it in future 

rulemaking for the CY 2016 payment 

determination and subsequent years in 

order to address measure refinements in 

the denominator and operational issues. 

We believe that these refinements have 

been made and that the operational 

issues have been resolved. 

We have learned that many States are 

proactively aligning their reporting 

requirements for this measure to mirror 


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5National Quality Measures Clearing House. 

Agency for Healthcare Research and Quality. 

Available at http://qualitymeasures.ahrq.gov/ 

content.aspx?id=27981&search=

complications+within+30+days+following+

cataract+surgery. 

6 Davila RE, Rajan E, Baron TH, Adler DG, Egan 

JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, 

Lichtenstein D, Qureshi WA, Shen B, Zuckerman 

MJ, VanGuilder T, Fanelli RD, Standards of Practice 

Committee, American Society for Gastrointestinal 

Endoscopy. ASGE guideline: colorectal cancer 

screening and surveillance. Gastrointest Endosc 

2006 Apr;63(4):546–57. http:// 

www.ncbi.nlm.nih.gov/pubmed/ 

16564851?dopt=Abstract. 

7National Quality Measures Clearing House. 

Agency for Healthcare Research and Quality. 

Available at http://qualitymeasures.ahrq.gov/ 

content.aspx?id=27981&search=

complications+within+30+days+following+cataract

+surgery. 

8 Davila RE, Rajan E, Baron TH, Adler DG, Egan 

JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, 

Continued 

the federal requirements in an effort to 

reduce burden on providers and 

suppliers. We also recently learned that 

the measure may soon be undergoing 

some minor updates and review by 

NQF. Consistent with our policy to use 

a subregulatory process to adopt 

nonsubstantive changes to measures 

arising out of the NQF process (73 FR 

68766 through 68767), we would use 

this process to adopt the upcoming NQF 

revisions for this measure, if the 

revisions are nonsubstantive. 

We refer readers to section XIII.H.2. of 

this proposed rule for a detailed 

discussion of data collection. We invite 

public comment on this proposal. 

2. Complications Within 30 Days 

Following Cataract Surgery Requiring 

Additional Surgical Procedures (NQF 

#0564) 

This proposed measure assesses the 

percentage of patients aged 18 years and 

older with a diagnosis of uncomplicated 

cataract who had cataract surgery and 

had any of a specified list of surgical 

procedures in the 30 days following 

cataract surgery which would indicate 

the occurrence of any of the following 

major complications: Retained nuclear 

fragments, endophthalmitis, dislocated 

or wrong power intraocular lens (IOL), 

retinal detachment, or wound 

dehiscence. 

Although complications that may 

result in a permanent loss of vision 

following cataract surgery are 

uncommon, this outcome measure seeks 

to identify those complications from 

surgery that can reasonably be attributed 

to the surgery. It focuses on patient 

safety and monitoring for events that, 

while uncommon, can signify important 

issues in the care being provided. 

Advances in technology and surgical 

skills over the last 30 years have 

rendered cataract surgery safer and more 

effective. An analysis of Managed Care 

Organization data demonstrated that the 

rate of complications for this measure 

were 1 to 2 percent. However, with an 

annual volume of 2.8 million cataract 

surgeries in the United States, many of 

which are performed in hospital 

surgical outpatient departments, a 2- 

percent rate is a significant number of 

surgeries associated with 

complications.5

The measure numerator is: Patients 

who had one or more specified 

operative procedures for any of the 

following major complications within 

30 days following cataract surgery: 

retained nuclear fragments, 

endophthalmitis, dislocated or wrong 

power IOL, retinal detachment, or 

wound dehiscence. The measure 

denominator is: All patients aged 18 

years and older who had cataract 

surgery and no significant pre-operative 

ocular conditions impacting the surgical 

complication rate. This measure 

excludes patients with certain comorbid 

conditions impacting the surgical 

complication rate. The specifications for 

this measure are available at http:// 

www.qualityforum.org/QPS/0564. 

In its 2013 Pre-Rulemaking Report, 

(http://www.qualityforum.org/

Publications/2013/02/MAP_PreRulemaking_Report_-_February

_2013.aspx), the MAP supported this 

measure and noted that the measure 

addresses a high impact condition that 

is not adequately addressed in the 

Hospital OQR measure set. Currently 

the NQF endorsement is time-limited. 

We refer readers to section XIII.H.2. of 

this proposed rule for a detailed 

discussion of data collection. We invite 

public comment on this proposal. 

3. Endoscopy/Poly Surveillance: 

Appropriate Follow-Up Interval for 

Normal Colonoscopy in Average Risk 

Patients (NQF #0658) 

This proposed measure assesses the 

percentage of patients aged 50 years and 

older receiving screening colonoscopy 

without biopsy or polypectomy who 

had a recommended follow-up interval 

of at least 10 years for repeat 

colonoscopy documented in their 

colonoscopy report. 

In the average-risk population, 

colonoscopy screening is recommended 

in current guidelines at 10-year 

intervals.6 Our analysis indicated that 

about 25 percent of surgeries/ 

procedures performed in HOPDs and 

ASCs are colonoscopies. Performing 

colonoscopy too frequently increases 

patients’ exposure to procedural harm. 

This measure aims to assess whether 

average risk patients with normal 

colonoscopies receive a 

recommendation to receive a repeat 

colonoscopy in an interval that is less 

than the recommended amount of 10 

years. 

The measure numerator is: Patients 

who had a recommended follow-up 

interval of at least 10 years for repeat 

colonoscopy documented in their 

colonoscopy report. The measure 

denominator is: all patients aged 50 

years and older receiving screening 

colonoscopy without biopsy or 

polypectomy. This measure excludes 

patients with documentation of medical 

reason(s) for recommending a follow-up 

interval of less than 10 years (for 

example, an above-average risk patient 

or inadequate prep). The specifications 

for this measure are available at: http:// 

www.qualityforum.org/QPS/0658. 

In its 2013 Pre-Rulemaking Report, 

(http://www.qualityforum.org/ 

Publications/2013/02/MAP_PreRulemaking_Report_-_

February_2013.aspx), the MAP 

supported the direction of the measure. 

Currently the NQF endorsement is timelimited. 

We refer readers to section XIII.H.2. of 

this proposed rule for a detailed 

discussion of data collection. We invite 

public comment on this proposal. 

4. Endoscopy/Poly Surveillance: 

Colonoscopy Interval for Patients With 

a History of Adenomatous Polyps— 

Avoidance of Inappropriate Use (NQF 

#0659) 

The proposed Endoscopy/Poly 

Surveillance: Colonoscopy Interval for 

Patients with a History of Adenomatous 

Polyps—Avoidance of Inappropriate 

Use measure assesses the percentage of 

patients aged 18 years and older 

receiving a surveillance colonoscopy, 

with a history of a prior colonic polyp 

in previous colonoscopy findings who 

had a follow-up interval of 3 or more 

years since their last colonoscopy 

documented in the colonoscopy report. 

Colonoscopy is the recommended 

method of surveillance after the removal 

of adenomatous polyps, because it has 

been shown to significantly reduce 

subsequent colorectal cancer incidence. 

The timing of follow-up colonoscopy 

should be tailored to the number, size, 

and pathologic findings of the 

adenomatous polyps removed. A 

randomized trial of 699 patients showed 

that after newly diagnosed adenomatous 

polyps have been removed by 

colonoscopy, follow-up colonoscopy at 

3 years detects important colonic 

lesions as effectively as follow-up 

colonoscopy at both 1 and 3 years.7 8


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43650 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

Lichtenstein D, Qureshi WA, Shen B, Zuckerman 

MJ, VanGuilder T, Fanelli RD, Standards of Practice 

Committee, American Society for Gastrointestinal 

Endoscopy. ASGE guideline: colorectal cancer 

screening and surveillance. Gastrointest Endosc 

2006 Apr;63(4):546–57. http:// 

www.ncbi.nlm.nih.gov/pubmed/ 

16564851?dopt=Abstract. 

9National Quality Measures Clearing House. 

Agency for Healthcare Research and Quality. 

Available at http://www.qualitymeasures.ahrq.gov/ 

content.aspx?id=27982. 

The measure numerator for this 

proposed measure is: Patients who had 

an interval of 3 or more years since their 

last colonoscopy. The measure 

denominator is: all patients aged 18 

years and older receiving a surveillance 

colonoscopy with a history of a prior 

colonic polyp in a previous 

colonoscopy. This measure excludes 

patients with: (1) Documentation of 

medical reason(s) for an interval of less 

than 3 years since the last colonoscopy 

(for example, last colonoscopy 

incomplete, last colonoscopy had 

inadequate prep, piecemeal removal of 

adenomas, or last colonoscopy found 

greater than 10 adenomas); or (2) 

documentation of a system reason(s) for 

an interval of less than 3 years since the 

last colonoscopy (for example, unable to 

locate previous colonoscopy report, 

previous colonoscopy report was 

incomplete). The specifications for this 

measure are available at http:// 

www.qualityforum.org/QPS/0659. 

In its 2013 Pre-Rulemaking Report, 

(http://www.qualityforum.org/ 

Publications/2013/02/MAP_PreRulemaking_Report_-_

February_2013.aspx), the MAP 

supported the direction of the measure. 

Currently the NQF endorsement is timelimited. 

We refer readers to section XIII.H.2. of 

this proposed rule for a detailed 

discussion of data collection. We invite 

public comment on this proposal. 

5. Cataracts—Improvement in Patient’s 

Visual Function Within 90 Days 

Following Cataract Surgery (NQF #1536) 

This proposed measure assesses the 

percentage of patients aged 18 years and 

older who had cataract surgery and had 

improvement in visual function 

achieved within 90 days following the 

cataract surgery. 

Cataract surgery is performed to 

improve a patient’s vision and 

associated functioning. This outcome is 

achieved consistently through careful 

attention to the accurate measurement 

of axial length and corneal power and 

the appropriate selection of an IOL. 

Failure to achieve improved visual 

functioning after surgery in eyes 

without comorbid ocular conditions that 

could impact the success of the surgery 

would reflect care that should be 

assessed for opportunities for 

improvement. Evidence suggests that 

visual improvement occurs in about 

86—98 percent of surgeries in eyes 

without comorbid conditions. However, 

with an annual volume of 2.8 million 

cataract surgeries in the United States, 

many of which are performed in 

hospital outpatient surgical 

departments, the impact could affect a 

significant number of patients per year.9

We are proposing to adopt this 

measure for the CY 2016 payment 

determination and subsequent years. 

The measure numerator is: Patients 18 

years and older (with a diagnosis of 

uncomplicated cataract) in a sample 

who had improvement in visual 

function achieved within 90 days 

following cataract surgery, based on 

completing a pre-operative and postoperative visual function instrument. 

The measure denominator is: All 

patients aged 18 years and older in 

sample who had cataract surgery. There 

are no exclusions. 

The specifications for this measure 

are available at http:// 

www.qualityforum.org/QPS/1536. 

Additional information for the measure 

specifications can be found in the NQF 

Measure Evaluation available at http:// 

www.qualityforum.org/WorkArea/linkit.

aspx?LinkIdentifier=id&ItemID=68317. 

In its 2013 Pre-Rulemaking Report, 

(http://www.qualityforum.org/ 

Publications/2013/02/MAP_PreRulemaking_Report_-_

February_2013.aspx), the MAP 

supported the inclusion of the measure 

in the Hospital OQR Program and noted 

that the measure addresses a high 

impact condition not adequately 

addressed in the program measure set. 

The MAP added that this measure, 

which addresses outcomes, falls under a 

category of measures inadequately 

represented in the program measure set. 

Currently the NQF endorsement is timelimited. 

We refer readers to section XIII.H.2. of 

this proposed rule for a detailed 

discussion of data collection. We invite 

public comment on this proposal. 

The proposed measure set for the 

Hospital OQR Program for the CY 2016 

payment determination and subsequent 

years is listed in the table below. 

PROPOSED HOSPITAL OQR PROGRAM MEASURE SET FOR THE CY 2016 PAYMENT DETERMINATION AND SUBSEQUENT

YEARS

NQF# Measure name 

0287 ... OP–1: Median Time to Fibrinolysis. 

0288 ... OP–2: Fibrinolytic Therapy Received Within 30 Minutes. 

0290 ... OP–3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. 

0286 ... OP–4: Aspirin at Arrival. 

0289 ... OP–5: Median Time to ECG. 

0270 ... OP–6: Timing of Antibiotic Prophylaxis. 

0268 ... OP–7: Prophylactic Antibiotic Selection for Surgical Patients. 

0514 ... OP–8: MRI Lumbar Spine for Low Back Pain. 

OP–9: Mammography Follow-up Rates. 

OP–10: Abdomen CT—Use of Contrast Material. 

0513 ... OP–11: Thorax CT—Use of Contrast Material. 

0489 ... OP–12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their ONC-Certified EHR System as 

Discrete Searchable Data. 

0669 ... 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*. 

0491 ... OP–17: Tracking Clinical Results between Visits. 

0496 ... OP–18: Median Time from ED Arrival to ED Departure for Discharged ED Patients. 

OP–20: Door to Diagnostic Evaluation by a Qualified Medical Professional. 

0662 ... OP–21: Median Time to Pain Management for Long Bone Fracture. 


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PROPOSED HOSPITAL OQR PROGRAM MEASURE SET FOR THE CY 2016 PAYMENT DETERMINATION AND SUBSEQUENT

YEARS—Continued 

NQF# Measure name 

OP–22: ED- Patient Left Without Being Seen. 

0661 ... OP–23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT or MRI Scan Interpretation Within 45 minutes of Arrival. 

OP–25: Safe Surgery Checklist Use. 

OP–26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures.** 

0431 ... OP–27: Influenza Vaccination Coverage among Healthcare Personnel.*** 

0564 ... OP–28: Complications within 30 days Following Cataract Surgery Requiring Additional Surgical Procedures.*** 

0658 ... OP–29: Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients.*** 

0659 ... OP–30: Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoidance of Inappropriate Use***. 

1536 ... OP–31: Cataracts—Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.*** 

* Public reporting for OP–15 continues to be deferred at the time of this CY 2014 OPPS/ASC proposed rule. 

** OP–26: Procedure categories and corresponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache

=true&blobwhere=1228889963089&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=

attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata&blobtable=MungoBlobs. 

*** New measures proposed for the CY 2016 payment determination and subsequent years. 

F. Possible Hospital OQR Program 

Measure Topics for Future 

Consideration 

The current measure set for the 

Hospital OQR Program includes 

measures that assess process of care, 

imaging efficiency patterns, care 

transitions, ED throughput efficiency, 

the use of HIT care coordination, patient 

safety, and volume. We anticipate that 

as EHR technology evolves and more 

infrastructure is put into place, we will 

have the capacity to accept electronic 

reporting of many clinical chartabstracted measures that are currently 

part of the Hospital OQR Program using 

certified EHR technology. We are 

working diligently toward this goal. We 

believe that this progress, at a near 

future date, would significantly reduce 

the administrative burden on hospitals 

under the Hospital OQR Program to 

report chart-abstracted measures. We 

recognize that considerable work needs 

to be done by measure owners and 

developers to make this possible with 

respect to the clinical quality measures 

targeted for e-specifications. This 

includes completing electronic 

specifications for measures, pilot 

testing, reliability and validity testing, 

and implementing such specifications 

into certified EHR technology to capture 

and calculate the results, and 

implementing the systems. 

We seek to develop a comprehensive 

set of quality measures to be available 

for widespread use for informed 

decision-making and quality 

improvement in the hospital outpatient 

setting. Therefore, through future 

rulemaking, we intend to propose new 

measures that help us further our goal 

of achieving better health care and 

improved health for Medicare 

beneficiaries who receive health care in 

hospital outpatient settings, including 

partial hospitalization programs (PHPs) 

that are part of HOPDs. 

We are considering the following 

measure domains for future measures: 

Clinical quality of care; care 

coordination; patient safety; patient and 

caregiver experience of care; 

population/community health; and 

efficiency. We believe this approach 

will promote better care while bringing 

the Hospital OQR Program in line with 

other established quality reporting 

programs such as the Hospital IQR 

Program and the ASCQR Program. 

We invite public comment on this 

approach and on our suggestions and 

rationale for possible measure topics for 

future consideration in the Hospital 

OQR Program. 

In addition, we are soliciting 

comments on the following potential 

quality measure topics for PHPs in 

HOPDs: Poly-therapy with antipsychotic 

medications; Post-discharge of 

continuity of care; Alcohol screening; 

Alcohol and drug use; Tobacco use 

assessment; and Follow-up after 

hospitalization for mental illness. These 

topics would align measurement of 

PHPs in HOPDs with that of the IPFQR 

Program. 

XIII. Hospital Outpatient Quality 

Reporting Program Updates 

G. Proposed Payment Reduction for 

Hospitals That Fail To Meet the 

Hospital OQR Program Requirements 

for the CY 2014 Payment Update 

1. Background 

Section 1833(t)(17) of the Act, which 

applies to subsection (d) hospitals (as 

defined under section 1886(d)(1)(B) of 

the Act), states that hospitals that fail to 

report data required to be submitted on 

the measures selected by the Secretary, 

in the form and manner, and at a time, 

required by the Secretary will incur a 

2.0 percentage point reduction to their 

Outpatient Department (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. 

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 in order to 

receive the full payment update factor 

and that fail to meet the Hospital OQR 

Program requirements. All other 

hospitals paid under the OPPS that meet 

the reporting requirement receive the 

full OPPS payment update without the 

reduction. For a more detailed 

discussion of how the payment 

reduction for failure to meet the 

administrative, data collection, and data 

submission requirements of the Hospital 

OQR Program was initially 

implemented, we refer readers to the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68769 through 

68772). 

The national unadjusted payment 

rates for many services paid under the 

OPPS equal the product of the OPPS 

conversion factor and the scaled relative 

weight for the APC to which the service 

is assigned. The OPPS conversion 

factor, which is updated annually by the 

OPD fee schedule increase factor, is 

used to calculate the OPPS payment rate 

for services with the following status 

indicators (listed in Addendum B to this 

proposed rule with comment period, 

which is available via the Internet on 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43652 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

the CMS Web site): ‘‘P,’’ ‘‘Q1,’’ ‘‘Q2,’’ 

‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘U.’’ We 

note that we are proposing to delete 

status indicator ‘‘X’’ as described in 

sections II.A.3. and XI. of this proposed 

rule. We also note that we are proposing 

to develop status indicator ‘‘J1’’ as part 

of the proposed comprehensive APC 

discussed in section II.A.2.e. of this 

proposed rule. Payment for all services 

assigned to these status indicators will 

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’’. We refer readers to the CY 2009 

OPPS/ASC final rule with comment 

period (73 FR 68770) for a discussion of 

this policy. 

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 multiplied the 

final full national unadjusted payment 

rate found in Addendum B of the CY 

2010 OPPS/ASC final rule with 

comment period by the CY 2010 OPPS 

final reporting ratio of 0.980 (74 FR 

60642). 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68771 

through 68772), we established a policy 

that the Medicare beneficiary’s 

minimum unadjusted copayment and 

national unadjusted copayment for a 

service to which a reduced national 

unadjusted payment rate applies would 

each equal the product of the reporting 

ratio and the national unadjusted 

copayment or the minimum unadjusted 

copayment, as applicable, for the 

service. Under this policy, we apply the 

reporting ratio to both the minimum 

unadjusted copayment and national 

unadjusted copayment for those 

hospitals that receive the payment 

reduction for failure to meet the 

Hospital OQR Program reporting 

requirements. This application of the 

reporting ratio to the national 

unadjusted and minimum unadjusted 

copayments is calculated according to 

§ 419.41 of our regulations, prior to any 

adjustment for a hospital’s failure to 

meet the quality reporting standards 

according to § 419.43(h). Beneficiaries 

and secondary payers thereby share in 

the reduction of payments to these 

hospitals. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68772), we 

established the policy that all other 

applicable adjustments to the OPPS 

national unadjusted payment rates 

apply in those cases when the OPD fee 

schedule increase factor is reduced for 

hospitals that fail to meet the 

requirements of the Hospital OQR 

Program. For example, the following 

standard adjustments apply to the 

reduced national unadjusted payment 

rates: the wage index adjustment; the 

multiple procedure adjustment; the 

interrupted procedure adjustment; the 

rural sole community hospital 

adjustment; and the adjustment for 

devices furnished with full or partial 

credit or without cost. We believe that 

these adjustments continue to be 

equally applicable to payments for 

hospitals that do not meet the Hospital 

OQR Program requirements. Similarly, 

OPPS outlier payments made for high 

cost and complex procedures 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 

established this policy in the OPPS 

beginning in the CY 2010 OPPS/ASC 

final rule with comment period (74 FR 

60642). For a complete discussion of the 

OPPS outlier calculation and eligibility 

criteria, we refer readers to section II.G. 

of this proposed rule. 

2. Proposed Reporting Ratio Application 

and Associated Adjustment Policy for 

CY 2014 

We are proposing to continue our 

established policy of applying the 

reduction of the OPD fee schedule 

increase factor through the use of a 

reporting ratio for those hospitals that 

fail to meet the Hospital OQR Program 

requirements for the full CY 2014 

annual payment update factor. For the 

CY 2014 OPPS, the proposed reporting 

ratio is 0.980, calculated by dividing the 

proposed reduced conversion factor of 

$71.273 by the proposed full conversion 

factor of $72.728. We are proposing to 

continue to apply the reporting ratio to 

all services calculated using the OPPS 

conversion factor. For the CY 2014 

OPPS, we are proposing to apply the 

reporting ratio, when applicable, to all 

HCPCS codes to which we have 

assigned status indicators ‘‘P,’’ ‘‘Q1,’’ 

‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ and 

‘‘U’’ (other than new technology APCs 

to which we have assigned status 

indicators ‘‘S’’ and ‘‘T’’). We note that 

we are proposing to delete status 

indicator ‘‘X’’ as described in sections 

II.A.3. and XI. of this proposed rule. We 

also note that we are proposing to 

develop status indicator ‘‘J1’’ as part of 

the proposed comprehensive APC 

discussed in section II.A.2.e. of this 

proposed rule and to apply the reporting 

ratio to the comprehensive APCs. We 

are proposing to continue to exclude 

services paid under New Technology 

APCs. We are proposing to continue to 

apply the reporting ratio to the national 

unadjusted payment rates and the 

minimum unadjusted and national 

unadjusted copayment rates of all 

applicable services for those hospitals 

that fail to meet the Hospital OQR 

Program reporting requirements. We 

also are proposing to continue to apply 

all other applicable standard 

adjustments to the OPPS national 

unadjusted payment rates for hospitals 

that fail to meet the requirements of the 

Hospital OQR Program. Similarly, we 

are proposing to continue to calculate 

OPPS outlier eligibility and outlier 

payment based on the reduced payment 

rates for those hospitals that fail to meet 

the reporting requirements. 

We invite public comment on these 

proposals. 

H. Proposed Requirements for Reporting 

of Hospital OQR Data for the CY 2015 

Payment Determination and Subsequent 

Years 

1. Administrative Requirements for the 

CY 2015 Payment Determination and 

Subsequent Years 

To participate successfully 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 


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payment rate update. Instead, in 

accordance with section 1833(t)(17)(A) 

of the Act, those hospitals will receive 

a reduction of 2.0 percentage points to 

their OPD fee schedule increase factor 

for the applicable payment year. 

We established administrative 

requirements for the payment 

determination requirements for the CY 

2013 payment update and subsequent 

years in the CY 2012 OPPS/ASC final 

rule with comment period (76 FR 74479 

through 74487). In the CY 2013 OPPS/ 

ASC final rule with comment period (77 

FR 68480 through 68481), we modified 

these requirements by extending the 

deadline for certain hospitals to submit 

a participation form. For the CY 2014 

payment determination and subsequent 

years, we modified the deadline for 

hospitals that are not currently 

participating in the Hospital OQR 

Program and wish to participate, 

provided they have a Medicare 

acceptance date before January 1 of the 

year prior to the affected annual 

payment update. For example, 2013 

would be the year prior to the affected 

CY 2014 annual payment update, and 

we are referring to an acceptance date 

before January 1, 2013. The hospitals 

must submit a participation form by July 

31 rather than March 31 of the year 

prior to the affected annual payment 

update in order to participate in the 

Hospital OQR Program for purposes of 

the CY 2014 payment update. In the 

example, the deadline would be July 31, 

2013. 

The Hospital OQR Program 

procedural requirements are unchanged 

from those adopted in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68480 through 68481). We 

are proposing to codify these procedural 

requirements at § 419.46(a). To 

participate in the Hospital OQR 

Program, a hospital—as defined in 

section 1886(d)(1)(B) of the Act and that 

is reimbursed under the OPPS—must: 

• Register with QualityNet before 

beginning to report data. 

• Identify and register a QualityNet 

security administrator as part of the 

registration process located on the 

QualityNet Web site (http:// 

www.QualityNet.org); 

• Complete and submit an online 

participation form available at the 

QualityNet Web site if this form has not 

been previously completed, if a hospital 

has previously withdrawn, or if the 

hospital acquires a new CMS 

Certification Number (CCN). For 

Hospital OQR Program purposes, 

hospitals that share the same CCN are 

required to complete a single online 

participation form. Once a hospital has 

submitted a participation form, it is 

considered to be an active Hospital OQR 

Program participant until such time as 

it submits a withdrawal form to CMS or 

no longer has an effective Medicare 

provider agreement. 

Deadlines to submit the notice of 

participation form are based on the date 

identified as a hospital’s Medicare 

acceptance date: 

• If a hospital has a Medicare 

acceptance date before January 1 of the 

year prior to the affected annual 

payment update, the hospital must 

complete and submit to CMS a 

completed Hospital OQR Notice of 

Participation Form by July 31 of the 

calendar year prior to the affected 

annual payment update. 

• If a hospital has a Medicare 

acceptance date on or after January 1 of 

the year prior to the affected annual 

payment update, the hospital must 

submit a completed participation form 

no later than 180 days from the date 

identified as its Medicare acceptance 

date. 

Hospitals may withdraw from 

participating in the Hospital OQR 

Program and the procedural 

requirements for this are unchanged 

from those adopted in the CY 2012 

OPPS/ASC final rule with comment 

period (76 FR 77480). We are proposing 

to codify these procedural requirements 

at § 419.46(b). Under these procedures, 

a participating hospital may withdraw 

from the Hospital OQR Program by 

submitting to CMS a withdrawal form 

that can be found in the secure portion 

of the QualityNet Web site. The hospital 

may withdraw any time from January 1 

to November 1 of the year prior to the 

affected annual payment update. A 

withdrawn hospital will not be able to 

later sign up to participate in that 

payment update, is subject to a reduced 

annual payment update as specified 

under § 419.43(h), and is required to 

submit a new participation form in 

order to participate in any future year of 

the Hospital OQR Program. 

We invite public comment on this 

proposal. 

2. Form, Manner, and Timing of Data 

Submitted for the Hospital OQR 

Program 

a. Background 

We refer readers to the following 

OPPS/ASC final rules with comment 

period for a history of measures adopted 

for the Hospital OQR Program, 

including lists of: 11 measures finalized 

for the CY 2011 payment determination 

(74 FR 60637); 15 measures finalized for 

the CY 2012 payment determination (75 

FR 72083 through 72084); 23 measures 

finalized for the CY 2013 payment 

determination (75 FR 72090); 26 

measures finalized for the CY 2014 and 

CY 2015 payment determination (76 FR 

74469 and 74473) and no additional 

measures finalized for the CY 2015 

payment determination (77 FR 68476 

through 68478). In the CY 2013 OPPS/ 

ASC final rule with comment period, we 

confirmed the removal of one measure 

for the CY 2013 payment determination 

and subsequent years (77 FR 68473 

through 68474), confirmed the 

suspension of one measure for the CY 

2014 payment determination (77 FR 

68474 through 68476), and finalized the 

deferred data collection for one measure 

(77 FR 68476). 

b. Effects of Proposed Changes on Data 

Submission for CY 2015 and CY 2016 

Payment Determinations and 

Subsequent Years 

For the CY 2015 payment 

determination and subsequent years, we 

are proposing to remove OP–19 as 

discussed in section XIII.C.2.a. of this 

proposed rule. Effective with January 1, 

2013 encounters, we previously 

suspended OP–19 and have not used 

OP–19 data to meet requirements for 

any payment determination under the 

Hospital OQR Program or in public 

reporting. Therefore, our proposal to 

remove OP–19 from the Hospital OQR 

Program would not require a 

participating hospital to take any new 

action. 

For the CY 2015 payment 

determination and subsequent years, we 

are proposing to remove OP–24 from the 

Hospital OQR program, as discussed in 

section XIII.C.2.b. of this proposed rule. 

To date, we have not required hospitals 

to submit data for OP–24. Based on this 

proposal, hospitals would not be 

required to take any new action; that is, 

they would continue having no 

requirement to abstract or submit data 

for OP–24. 

For the CY 2016 payment 

determination and subsequent years, in 

section XIII.E. of this proposed rule we 

are proposing to add five additional 

measures to the program. 

We would require hospitals to submit 

data for these measures annually via an 

online tool located on either the NHSN 

Web site or the QualityNet Web site 

depending on the measure. We discuss 

proposed data collection for each of 

these new measures by mode of data 

submission in the following sections of 

this proposed rule. 

The proposed new measures are: 

• OP–27: Influenza Vaccination 

Coverage among Healthcare Personnel; 

• OP–28: Complications within 30 

Days Following Cataract Surgery 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43654 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

Requiring Additional Surgical 

Procedures; 

• OP–29: Endoscopy/Poly 

Surveillance: Appropriate follow-up 

interval for normal colonoscopy in 

average risk patients; 

• OP–30: Endoscopy/Poly 

Surveillance: Colonoscopy Interval for 

Patients with a History of Adenomatous 

Polyps—Avoidance of Inappropriate 

Use; and 

• OP–31: Cataracts—Improvement in 

Patient’s Visual Function within 90 

Days Following Cataract Surgery. 

c. General Requirements 

The proposed Hospital OQR Program 

procedural requirements are unchanged 

from those discussed and adopted in the 

CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74480 through 

74482). We are proposing to codify the 

policy that, to be eligible to receive the 

full OPD fee schedule increase factor for 

any payment determination, hospitals 

that participate in the Hospital OQR 

Program must submit to CMS data on 

measures selected under section 

1833(17)(C) of the Act in a form and 

manner, and at a time specified by CMS. 

This means that hospitals must comply 

with our submission requirements for 

chart-abstracted data, population and 

sampling data, claims-based measure 

data, and Web-based quality measure 

data. We are proposing to codify these 

general submission requirements at 

§ 419.46(c). 

Submission deadlines by measure and 

data type are posted on the QualityNet 

Web site. In general, deadlines for 

patient-level data submitted directly to 

CMS would be approximately 4 months 

after the last day of each calendar 

quarter. For example, the submission 

deadline for data for services furnished 

during the first quarter of CY 2014 

(January–March 2014) would be on or 

around August 1, 2014. We are 

proposing to codify language at 

§ 419.46(c)(2) stating our practice of 

posting actual submission deadlines by 

measure and by data type on the 

QualityNet Web site (http:// 

www.QualityNet.org). 

We are proposing to codify our 

policies for initial data collection 

periods and submission deadlines for a 

hospital that did not participate in the 

previous year’s Hospital OQR Program 

in § 419.46(c)(3) of our regulations. We 

refer readers to our previously finalized 

policy in the CY 2013 OPPS/ASC final 

rule with comment period (77 FR 

68481) to establish data collection and 

submission requirements for the CY 

2014 payment determination and 

subsequent years. To determine when a 

hospital that did not participate in a 

previous year’s payment determination 

must begin collecting and submitting 

data to meet Hospital OQR Program 

requirements for a full annual payment 

update, we continue to use the January 

1 Medicare acceptance date. If a hospital 

has a Medicare acceptance date before 

January 1 of the year prior to the 

affected annual payment update, the 

hospital must collect data beginning 

with encounters occurring during the 

first calendar quarter of the year prior to 

the affected annual payment update, in 

addition to submitting a completed 

Hospital OQR Notice of Participation 

Form. If a hospital has a Medicare 

acceptance date on or after January 1 of 

the year prior to the affected annual 

payment update, the hospital must 

collect data for encounters beginning 

with the first full quarter following 

submission of the completed Hospital 

OQR Notice of Participation Form. 

Hospitals with a Medicare acceptance 

date before or after January 1 of the year 

prior to an affected annual payment 

update must follow data submission 

deadlines as specified on the QualityNet 

Web site. 

We invite public comment on these 

proposals. 

d. Proposed Chart-Abstracted Measure 

Requirements for the CY 2015 and CY 

2016 Payment Determinations and 

Subsequent Years 

The following chart-abstracted 

measures in the Hospital OQR Program 

require data submission for the CY 2015 

payment determination and subsequent 

years: 

• 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–18: Median Time from ED 

Arrival to ED Departure for Discharged 

ED Patients; 

• OP–20: Door to Diagnostic 

Evaluation by a Qualified Medical 

Professional; 

• OP–21: ED—Median Time to Pain 

Management for Long Bone Fracture; 

• OP–22: ED Patient Left Without 

Being Seen; and 

• 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. 

The form and manner for submission 

of one of these measures, OP–22: ED 

Patient Left Without Being Seen, is 

unique, and is detailed in section 

XV.G.2.f. of the CY 2013 OPPS/ASC 

final rule with comment period (77 FR 

68484). As discussed above, we are not 

proposing any new chart-abstracted 

measures where patient-level data is 

submitted directly to CMS in this 

proposed rule. 

e. Proposed Claims-Based Measure Data 

Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

The table in section XIII.D. of this 

proposed rule includes measures that 

the Hospital OQR Program collects by 

accessing electronic Medicare claims 

data submitted by hospitals for 

reimbursement. 

We are not proposing new claimsbased measures in this proposed rule. 

Therefore, the following 6 claims-based 

measures will be included for the CY 

2015 payment determination and 

subsequent years: 

• OP–8: MRI Lumbar Spine for Low 

Back Pain; 

• OP–9: Mammography Follow-Up 

Rates; 

• OP–10: Abdomen CT—Use of 

Contrast Material; 

• OP–11: Thorax CT—Use of Contrast 

Material; 

• OP–13: Cardiac Imaging for 

Preoperative Risk Assessment for NonCardiac Low Risk Surgery; and 

• OP–14: Simultaneous Use of Brain 

Computed Tomography (CT) and Sinus 

Computed Tomography (CT). 

We deferred the public reporting of 

OP–15, a claims-based measure (76 FR 

74456). We are not proposing any 

change to this policy. Public reporting 

for OP–15 continues to be deferred, and 

this deferral has no effect on any 

payment determinations at this time. 

We will continue our policy of 

calculating the measures using the 

hospital’s Medicare claims data as 

specified in the Hospital OQR 

Specifications Manual; therefore, no 

additional data submission is required 

for hospitals. In the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 

74483), we stated that for the CY 2014 

payment update, we will use paid 

Medicare FFS claims for services 

furnished from January 1, 2011 to 

December 31, 2011. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68482 

through 68485), for the CY 2015 

payment determination, we finalized 

our proposal to use paid Medicare FFS 

claims for services from a 12 month 

period from July 1, 2012 through June 

30, 2013 for the calculation of the 

claims-based measures. This is a 

departure from the traditional 12 month 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43655 

10Maintz, J. Defining and Classifying Clinical 

Indicators for Quality Improvement, Inter J Quality 

Health Care (2003) 15(6), 523–530). 

calendar year period we have used for 

these measures. As stated in that final 

rule with comment period, we adopted 

this period in order to align the data 

period for inpatient and outpatient 

claims based measures reported on the 

Hospital Compare Web site, and also to 

be able to post more recent data for 

claims-based measures on the Web site. 

Under our policy prior to the CY 2013 

final rule, the time period would have 

been January 1, 2011 to December 31, 

2011, whereas, under the policy 

finalized in that final rule with 

comment period, the time period is July 

1, 2012 to June 30, 2013. 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing to continue this approach 

and to use paid Medicare FFS claims for 

services from a 12 month period from 

July three years before the payment 

determination through June of the next 

year. For CY 2016, this 12 month period 

would be from July 1, 2013 through June 

30, 2014 for the calculation of the 

claims-based measures. We invite 

public comment on this proposal. 

f. Proposed Data Submission 

Requirements for Measure Data 

Submitted via Web-Based Tool for the 

CY 2016 Payment Determination and 

Subsequent Years 

In previous rulemaking, we have 

referred to measures where data are 

submitted via a Web-based tool on a 

CMS Web site under our quality data 

reporting programs as structural 

measures (measures concerned with 

attributes of where care occurs, such as 

material resources, human resources, 

and organizational structure.10 For 

example, the Hospital OQR Measure 

OP–12: The Ability for Providers with 

HIT to Receive Laboratory Data 

Electronically Directly into their ONCCertified EHR System as Discrete 

Searchable Data is a structural measure. 

However, because measures where data 

is submitted in this manner may or may 

not be structural, for example, the 

Hospital IQR chart-abstracted, process 

of care measure PC–01: Elective 

Delivery Prior to 39 Completed Weeks 

Gestation, we have refined our 

terminology and now refer to the mode 

of data submission as Web-based. 

Thus, the previously finalized Webbased measures where data is entered 

on a CMS Web site that we require for 

the CY 2015 payment determination and 

subsequent years are listed below: 

• OP–12: The Ability for Providers 

with HIT to Receive Laboratory Data 

Electronically Directly into their 

Qualified/Certified EHR System as 

Discrete Searchable Data; 

• OP–17: Tracking Clinical Results 

Between Visits; 

• OP–22: ED Patient Left Without 

Being Seen; 

• OP 25: Safe Surgery Check List Use; 

and 

• OP 26: Hospital Outpatient Volume 

on Selected Outpatient Surgical 

Procedures. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68483 

through 68484), we finalized that, for 

the CY 2014 payment determination, 

hospitals are required to submit data on 

all Web-based measures between July 1, 

2013 and November 1, 2013 with 

respect to the time period from January 

1, 2012 to December 31, 2012. This 

schedule also applies to the encounter 

periods and deadlines to submit data for 

OP–22: ED Patient Left Without Being 

Seen. While patient-level data for this 

measure is collected via chartabstraction, aggregate data is submitted 

using an online tool. 

We also finalized in the CY 2013 

OPPS/ASC final rule with comment 

period for the CY 2015 payment 

determination, that hospitals are 

required to submit data on all Webbased measure data between July 1, 

2014 and November 1, 2014 with 

respect to the time period from January 

1, 2013 to December 31, 2013. 

We are proposing to apply a similar 

schedule for the CY 2016 payment 

determination and subsequent years. 

For the CY 2016 payment determination 

and subsequent years, we are proposing 

that hospitals would be required to 

submit data between July 1 and 

November 1 of the year prior to a 

payment determination with respect to 

the time period of January 1 to 

December 31 of two years prior to a 

payment determination year. Thus, for 

example, for the CY 2016 payment 

determination, hospitals would be 

required to submit data between July 1, 

2015 and November 1, 2015 with 

respect to the time period of January 1, 

2014 to December 31, 2014. 

We are also proposing to apply the 

same mode of data collection and 

deadlines to the following proposed 

measures: 

• OP–28: Complications within 30 

days Following Cataract Surgery 

Requiring Additional Surgical 

Procedures; 

• OP–29: Endoscopy/Poly 

Surveillance: Appropriate follow-up 

interval for normal colonoscopy in 

average risk patients; 

• OP–30: Endoscopy/Poly 

Surveillance: Colonoscopy Interval for 

Patients with a History of Adenomatous 

Polyps—Avoidance of Inappropriate 

Use; and 

• OP–31: Cataracts—Improvement in 

Patient’s Visual Function within 90 

Days Following Cataract Surgery. 

Specifically, for data collection, we 

are proposing that hospitals submit 

aggregate-level data through the CMS 

Web-based tool (the QualityNet Web 

site). As with OP–22, hospitals would 

submit all the data required for a 

particular program year once annually 

during the data submission window we 

are proposing above, and would do so 

via the Outpatient section on the 

QualityNet secure Web site. While we 

are proposing submission deadlines 

with an annual frequency, the data 

input forms on the QualityNet Web site 

for such submission will require 

hospitals to submit aggregate data 

represented by each separate quarter. 

We are proposing to both use the Webbased collection tool and collect 

aggregate-level data because we believe 

these options are less burdensome to 

hospitals than patient-level reporting. 

While this proposal applies to the CY 

2016 payment determination and 

subsequent years, we summarize below, 

for chart-abstracted measures collected 

via the Web-based tool, the proposed 

and finalized measures, data collection 

periods, and deadlines for just the CY 

2016 payment determination. 


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43656 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

PROPOSED AND FINALIZED CHART-ABSTRACTED MEASURES WITH DATA COLLECTION BY WEB-BASED TOOL: CY 2016 

PAYMENT DETERMINATION

Measure Hospital OQR program 

status Encounter dates Data submission timeframe 

OP–22: ED Patient Left Without Being Seen ................. Finalized ............................ January 1, 2014–December 31, 2014.July 1, 2015–November 1, 

2015. 

OP–28: Complications within 30 days Following Cataract Surgery Requiring Additional Surgical Procedures.Proposed ........................... January 1, 2014–December 31, 2014.July 1, 2015–November 1, 

2015. 

OP–29: Endoscopy/poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average 

risk patients.

Proposed ........................... January 1, 2014–December 31, 2014.July 1, 2015–November 1, 

2015. 

OP–30: Endoscopy/poly surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoidance of Inappropriate Use.Proposed ........................... January 1, 2014–December 31, 2014.July 1, 2015–November 1, 

2015. 

OP–31: Cataracts—Improvement in Patient’s Visual 

Function within 90 Days Following Cataract Surgery.

Proposed ........................... January 1, 2014–December 31, 2014.July 1, 2015–November 1, 

2015. 

We recognize that aggregate-level 

reporting has the potential to result in 

less accurate measure rates than patientlevel reporting. However, to reduce 

burden for hospitals, we believe that an 

aggregate data submission approach is 

the preferable approach at this time. 

We invite public comment on these 

proposals. 

g. Proposed Data Submission 

Requirements for a Measure Reported 

via NHSN for the CY 2016 Payment 

Determination and Subsequent Years 

As discussed above, we are proposing 

to add the measure OP–27: Influenza 

Vaccination Coverage among Healthcare 

Personnel to the Hospital OQR Program 

measure set. We are also proposing to 

use the data submission and reporting 

standard procedures 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 using 

NHSN. Our proposal seeks to reduce 

hospital burden by aligning our data 

submission and reporting procedures 

with NHSN procedures currently used 

by hospitals who participate in the 

reporting requirements for the Hospital 

IQR Program as well as hospitals in the 

30 States and the District of Columbia 

that mandate HAI reporting via NHSN. 

We are proposing to adopt the NHSN 

HAI measure data collection timeframe 

of October 1 through March 31st, as 

previously finalized in the Hospital IQR 

Program (76 FR 51631 through 51633), 

which links data collection to the time 

period in which influenza vaccinations 

are administered during the influenza 

season. Because data for this measure 

would be collected seasonally, we are 

proposing that hospitals submit their 

data for this measure to NHSN for 

purposes of the Hospital OQR Program 

by May 15th of the calendar year in 

which the vaccination season has 

ended. For example, for vaccinations 

given from October 1, 2014 (or when the 

vaccine becomes available) to March 31, 

2015, the submission deadline would be 

May 15, 2015. This data submission 

deadline for this measure corresponds 

to that proposed by the Hospital IQR 

Program (78 FR 27700). 

We invite public comment on these 

proposals. 

h. Population and Sampling Data 

Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68484), for 

the CY 2014 payment determination and 

subsequent years, we continued our 

policy that hospitals may submit 

voluntarily on a quarterly basis, 

aggregate population and sample size 

counts for Medicare and non-Medicare 

encounters for the measure populations 

for which chart-abstracted data must be 

submitted, but they will not be required 

to do so. Where hospitals do choose to 

submit this data, the deadlines for 

submission are the same as those for 

reporting data for chart-abstracted 

measures, and hospitals may also 

choose to submit data prior to these 

deadlines. The deadline schedule is 

available on the QualityNet Web site. 

We refer readers to the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 72101 through 72103) and the CY 

2012 OPPS/ASC final rule with 

comment period (76 FR 74482 through 

74483) for discussions of these policies. 

We are not proposing any changes to 

this policy. 

3. Hospital OQR Program Validation 

Requirements for Chart-Abstracted 

Measure Data Submitted Directly to 

CMS for the CY 2015 Payment 

Determination and Subsequent Years 

a. Selection of Hospitals for Data 

Validation of Chart-Abstracted Measures 

for the CY 2015 Payment Determination 

and Subsequent Years 

We refer readers to the CY 2012 and 

CY 2013 OPPS/ASC final rules with 

comment period (76 FR 74484 through 

74487 and 77 FR 68484 through 68487) 

for a discussion of finalized policies 

regarding our sampling methodology, 

including sample size, eligibility for 

validation selection, and encounter 

minimums for patient-level data for 

measures where data is obtained from 

chart abstraction and submitted directly 

to CMS from selected hospitals. We are 

not proposing any changes to these 

policies. 

We are, however, proposing to codify 

at § 419.46(e) of our regulations the 

existing policy that we may validate one 

or more measures selected under section 

1833(17)(C) of the Act by reviewing 

documentation of patient encounters 

submitted by selected participating 

hospitals. Upon written request, a 

hospital must submit to CMS or its 

contractor supporting medical record 

documentation that the hospital used 

for purposes of data submission under 

the program. The specific sample that a 

hospital must submit will be identified 

in the written request. A hospital must 

submit the supporting medical record 

documentation to CMS or its contractor 

within 45 days of the date identified on 

the written request, in the form and 

manner specified in the written request. 

A hospital meets the validation 

requirement with respect to a fiscal year 

if it achieves at least a 75-percent 

reliability score, as determined by CMS. 


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We invite public comment on our 

proposal to codify these requirements. 

b. Targeting Criteria for Data Validation 

Selection for the CY 2015 Payment 

Determination and Subsequent Years 

We refer readers to the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68485 through 68486) for 

a discussion of our targeting criteria. We 

are not proposing any changes to this 

policy. 

c. Methodology for Encounter Selection 

for the CY 2015 Payment Determination 

and Subsequent Years 

We refer readers to the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68486) for a discussion of 

our methodology for encounter 

selection. We are not proposing any 

changes to this policy. 

d. Medical Record Documentation 

Requests for Validation and Validation 

Score Calculation for the CY 2015 

Payment Determination and Subsequent 

Years 

We refer readers to the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68486 through 68487) for 

a discussion of our procedures for 

requesting medical record 

documentation for validation and 

validation score calculation. We are not 

proposing any changes to our 

procedures regarding medical record 

requests. 

However, we are proposing to codify 

these procedures at § 419.46(e)(1) and 

(e)(2) as summarized below: 

• CMS may validate one or more 

measures selected under section 

1833(17)(C) of the Act by reviewing 

documentation of patient encounters 

submitted by selected participating 

hospitals. 

• Upon written request by CMS or its 

contractor, a hospital must submit to 

CMS supporting medical record 

documentation that the hospital used 

for purposes of data submission under 

the program. The specific sample that a 

hospital must submit will be identified 

in the written request. A hospital must 

submit the supporting medical record 

documentation to CMS or its contractor 

within 45 days of the date identified on 

the written request, in the form and 

manner specified in the written request. 

• A hospital meets the validation 

requirement with respect to a fiscal year 

if it achieves at least a 75-percent 

reliability score, as determined by CMS. 

We invite public comment on our 

proposal to codify these procedures. 

I. Proposed Hospital OQR 

Reconsideration and Appeals 

Procedures for the CY 2015 Payment 

Determination and Subsequent Years 

We refer readers to the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68487) for a discussion of 

our reconsideration and appeals 

procedures. We are proposing one 

change to the reconsideration request 

procedures to ensure our deadline for 

reconsideration requests will always fall 

on a business day. We also are 

proposing to codify the process, 

including our proposal to change the 

deadline by which participating 

hospitals may submit requests for 

reconsideration at § 419.46(f) of our 

regulations. 

Under the proposed change to our 

procedures, a hospital seeking 

reconsideration would submit to CMS, 

via the QualityNet Web site, a 

Reconsideration Request form that will 

be made available on the QualityNet 

Web site. Where we have required that 

this form must be submitted by 

February 3 of the affected payment year 

(for example, for the CY 2014 payment 

determination, the request was required 

to be submitted by February 3, 2014), 

we are proposing to modify this 

requirement so that the Reconsideration 

Request form would be required to be 

submitted on the first business day in 

February of the affected payment year. 

If this proposal is finalized, the 

Reconsideration Request form for the 

CY 2014 payment determination would 

be required on February 3, 2014, which 

is a Monday, and the form for the CY 

2015 payment determination would be 

required on February 2, 2015, which is 

also a Monday. We note that while we 

use the CY 2014 and 2015 payment 

determinations as examples, we are 

proposing this policy for the CY 2014 

payment determination and subsequent 

years. The other requirements of the 

form would remain unchanged. We 

request public comment on this 

proposal. 

We also are proposing to codify this 

process by which participating hospitals 

may submit requests for reconsideration 

including our proposal to change the 

reconsideration request deadline at 

§ 419.46(f). Under these proposed 

procedures, the hospital must submit to 

CMS via QualityNet, a reconsideration 

request via the QualityNet Web site, no 

later than the first business day of the 

month of February of the affected year 

containing the following information: 

• The hospital’s CMS Certification 

Number (CCN); 

• The name of the hospital; 

• The 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; 

• The hospital’s basis for requesting 

reconsideration. The hospital must 

identify its specific reason(s) for 

believing it should not be subject to the 

reduced annual payment update; 

• The hospital-designated personnel 

contact information, including name, 

email address, telephone number, and 

mailing address (must include physical 

address, not just a post office box). 

• The hospital-designated personnel’s 

signature; 

• A copy of all materials that the 

hospital submitted to comply with the 

requirements of the affected Hospital 

OQR Program payment determination 

year; and 

• If the hospital is requesting 

reconsideration on the basis that CMS 

has determined it did not meet an 

affected payment determination year’s 

validation requirement set forth in 

paragraph (e)(1) of this section, 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 are eligible to be 

reconsidered. 

We also are proposing to codify 

language at § 419.46(f)(3) stating that a 

hospital that is dissatisfied with a 

decision made by CMS on its 

reconsideration request may file an 

appeal with the Provider 

Reimbursement Review Board. 

While we are not proposing to codify 

the following process, we note that, after 

receiving a request for reconsideration, 

CMS— 

• Provides an email 

acknowledgement, using the contact 

information provided in the 

reconsideration request, to the 

designated hospital personnel notifying 

them that the hospital’s request has 

been received. 

• Provides a formal response to the 

hospital-designated personnel, using the 

contact information provided in the 

reconsideration request, notifying the 

hospital of the outcome of the 

reconsideration process. 

• Applies policies regarding the 

scope of our review when a hospital 

requests reconsideration because it 

failed our validation requirement. 

These policies are as follows: 

• If a hospital requests 

reconsideration on the basis that it 

disagrees with a determination that one 

or more data elements were classified as 

mismatches, we only consider the 


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hospital’s request if the hospital timely 

submitted all requested medical record 

documentation to the CMS contractor 

each quarter under the validation 

process. 

• If a hospital requests 

reconsideration on the basis that it 

disagrees with a determination that one 

or more of the complete medical records 

it submitted during the quarterly 

validation process was classified as an 

invalid record selection (that is, the 

CMS contractor determined that one or 

more of the complete medical records 

submitted by the hospital did not match 

what was requested), thus resulting in a 

zero validation score for the 

encounter(s), our review is initially 

limited. We will review only to 

determine whether the medical 

documentation submitted in response to 

the designated CMS contractor’s request 

was the correct and complete 

documentation. If we determine that the 

hospital did submit correct and 

complete medical documentation, we 

abstract the data elements and compute 

a new validation score for the 

encounter. If we conclude that the 

hospital did not submit correct and 

complete medical record 

documentation, we do not further 

consider the hospital’s request. 

• If a hospital requests 

reconsideration on the basis that it 

disagrees with a determination that it 

did not submit the requested medical 

record documentation to the CMS 

contractor within the proposed 30 

calendar day timeframe, our review is 

initially 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 

copies of the requested medical record 

documentation, we abstract data 

elements from the medical record 

documentation submitted by the 

hospital and compute a validation score 

for the hospital. If we determine that the 

hospital received two letters requesting 

medical documentation but did not 

submit the requested documentation 

within the 30 calendar day period, we 

do not further consider the hospital’s 

request. 

If a hospital is dissatisfied with the 

result of a Hospital OQR reconsideration 

decision, the hospital is able to file an 

appeal under 42 CFR Part 405, Subpart 

R (PRRB appeal). 

We invite public comment on these 

proposals. 

J. Extraordinary Circumstances 

Extension or Waiver for the CY 2014 

Payment Determination and Subsequent 

Years 

In our experience, there have been 

times when facilities have been unable 

to submit information to meet program 

requirements due to extraordinary 

circumstances that are not within their 

control. It is our goal to not penalize 

such entities for such circumstances and 

we do not want to unduly increase their 

burden during these times. We refer 

readers to the CY 2013 OPPS/ASC final 

rule with comment period (77 FR 

68489) for a complete discussion of our 

extraordinary circumstances extension 

or waiver process under the Hospital 

OQR Program. 

We are proposing one change to our 

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. Specifically, we 

are proposing that we may grant a 

waiver or extension to hospitals if we 

determine that a systemic problem with 

one of our data collection systems 

directly or indirectly affected the ability 

of hospitals to submit data. Because we 

do not anticipate that such systemic 

errors will happen often, we do not 

anticipate granting a waiver or 

extension on this basis frequently. 

We also are proposing to codify 

language for the general requirements 

for our extension or waiver process 

including the proposal for systemic 

errors at § 419.46(d) as described below: 

CMS may grant an extension or 

waiver of one or more data submission 

deadlines and requirements in the event 

of extraordinary circumstances beyond 

the control of the hospital such as when 

an act of nature affects an entire region 

or locale or a systemic problem with one 

of CMS’ data collection systems directly 

or indirectly affects data submission. 

CMS may grant an extension or waiver 

as follows: 

• Upon request by the hospital. 

Specific requirements for submission of 

a request for an extension or waiver are 

available on the QualityNet Web site. 

• At the discretion of CMS. CMS may 

grant waivers or extensions to hospitals 

that have not requested them when CMS 

determines that an extraordinary 

circumstance has occurred. 

For the hospital to request 

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 follow specific requirements for 

submission of a request available on 

QualityNet. While we are not proposing 

to codify the following process, we note 

that, the following information must 

appear on the request form: 

• Hospital CCN; 

• Hospital Name; 

• CEO or other hospital-designated 

personnel contact information, 

including name, email address, 

telephone number, and mailing address 

(must include a physical address, a post 

office box address is not acceptable); 

• Hospital’s reason for requesting an 

extension or waiver; 

• Evidence of the impact of the 

extraordinary circumstances, including 

but not limited to photographs, 

newspaper and other media articles; and 

• A date when the hospital believes it 

would again be able to submit Hospital 

OQR data and/or medical record 

documentation, and a justification for 

the proposed date. 

The request form must be signed by 

the hospital’s designated contact, 

whether or not that individual is the 

CEO. A request form is 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 an email 

acknowledgement using the contact 

information provided in the request 

notifying the designated contact that the 

hospital’s request has been received; 

(2) Provide a formal response to the 

hospital’s designated contact using the 

contact information provided in the 

request notifying them of our decision; 

and 

(3) Complete our review and 

communicate our response within 90 

days following our receipt of such a 

request. 

We can also grant waivers or 

extensions to hospitals that have not 

requested them when we determine that 

an extraordinary circumstance, such as 

when an act of nature (for example, 

hurricane) affects an entire region or 

locale or a systemic problem with one 

of our data collection systems directly 

or indirectly affects data submission. If 

we make the determination to grant a 

waiver or extension to hospitals in a 

region or locale, we would 

communicate this decision to hospitals 

and vendors through routine 

communication channels, including but 

not limited to emails and notices on the 

QualityNet Web site. 

We invite public comment on these 

proposals. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43659 

XIV. Hospital Value-Based Purchasing 

(VBP) Program Updates 

A. Background 

Section 1886(o) of the Act, as added 

by section 3001(a)(1) of the Affordable 

Care Act, requires the Secretary to 

establish a hospital value-based 

purchasing program (the Hospital 

Value-Based Purchasing (VBP) Program) 

under which value-based incentive 

payments are made in a fiscal year to 

hospitals that meet 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. 

B. Proposal for Additional CMS Appeals 

Review Process 

1. Statutory Basis 

Section 1886(o)(11)(A) of the Act 

requires the Secretary to establish a 

process by which hospitals may appeal 

the calculation of a hospital’s 

performance assessment with respect to 

the performance standards (section 

1886(o)(3)(A) of the Act) and the 

hospital performance score (section 

1886(o)(5) of the Act). 

Under section 1886(o)(11)(B) of the 

Act, there is no administrative or 

judicial review under section 1869 of 

the Act, section 1878 of the Act, or 

otherwise of the following: (1) The 

methodology used to determine the 

amount of the value-based incentive 

payment under section 1886(o)(6) of the 

Act and the determination of such 

amount; (2) the determination of the 

amount of funding available for the 

value-based incentive payments under 

section 1886(o)(7)(A) of the Act and the 

payment reduction under section 

1886(o)(7)(B)(i) of the Act; (3) the 

establishment of the performance 

standards under section 1886(o)(3) of 

the Act and the performance period 

under section 1886(o)(4) of the Act; (4) 

the measures specified under section 

1886(b)(3)(B)(viii) of the Act and the 

measures selected under section 

1886(o)(2) of the Act; (5) the 

methodology developed under section 

1886(o)(5) of the Act that is used to 

calculate hospital performance scores 

and the calculation of such scores; or (6) 

the validation methodology specified in 

section 1886(b)(3)(B)(XI) of the Act. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53581), we finalized an 

administrative appeals process and 

codified that process at 42 CFR 412.167. 

2. Independent CMS Review Proposal 

In this proposed rule, for the Hospital 

VBP Program, we are proposing to 

implement an independent CMS review 

that will be an additional appeal process 

available to the hospitals, beyond the 

existing review and corrections process 

(77 FR 53578 through 53581 and 76 FR 

74544 through 74547) and appeal 

process codified at 42 CFR 412.167. We 

are proposing that a hospital would be 

able to request this additional 

independent CMS review only if it first 

completes the appeal process at 42 CFR 

412.167(b) and is dissatisfied with the 

result. We believe that our proposal to 

require hospitals to complete the 

existing appeal process at 42 CFR 

412.167(b) before they can request an 

additional independent CMS review 

will facilitate the efficient resolution of 

many disputed issues, thus decreasing 

the number of independent CMS 

reviews that are requested. We intend to 

provide hospitals with our independent 

review decision within 90 calendar days 

following the receipt of a hospital’s 

independent review request. We also are 

proposing to codify this policy in our 

regulations at 42 CFR 412.167 by 

redesignating the existing paragraph (c) 

as paragraph (d), and inserting a new 

paragraph (c). We are inviting public 

comments on these proposals. 

C. Proposed Performance and Baseline 

Periods for Certain Outcome Measures 

for the FY 2016 Hospital VBP Program 

As described in the FY 2014 IPPS/ 

LTCH PPS proposed rule (78 FR 27610 

through 27611), we have proposed to 

adopt CLABSI, CAUTI, and SSI, which 

are measures reported to CDC’s National 

Healthcare Safety Network (NHSN), for 

the FY 2016 Hospital VBP Program. 

However, when we published that 

proposed rule, we inadvertently did not 

make FY 2016 performance and baseline 

period proposals for these proposed 

measures. We are proposing to adopt FY 

2016 performance and baseline periods 

for these measures in this proposed rule 

so that we have enough time to consider 

and respond to public comments before 

the proposed start of the performance 

periods. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53597 through 53598), we 

finalized an 11-month performance 

period for the CLABSI measure for the 

FY 2015 Hospital VBP Program 

(February 1, 2013 through December 31, 

2013), with a corresponding baseline 

period of January 1, 2011 through 

December 31, 2011. While we adopted 

an 11-month performance period for the 

CLABSI measure for FY 2015 based on 

its posting date on the Hospital 

Compare Web site, beginning with FY 

2016, we are proposing to align the 

NHSN measures’ performance and 

baseline periods with other domains’ 

performance and baseline periods, 

where possible, and with the calendar 

year. As we have stated with regard to 

other domains, a 12-month performance 

period provides us more data on which 

to score hospital performance, which is 

an important goal both for CMS and for 

stakeholders. 

Therefore, we are proposing to adopt 

CY 2014 (January 1, 2014 through 

December 31, 2014) as the performance 

period for the CLABSI, CAUTI, and SSI 

measures for the FY 2016 Hospital VBP 

Program, with CY 2012 (January 1, 2012 

through December 31, 2012) as the 

baseline period. We are inviting public 

comments on these proposals. 

The proposed performance and 

baseline periods for the CAUTI, 

CLABSI, and SSI measures for the FY 

2016 Hospital VBP Program appear in 

the following table. 

PROPOSED PERFORMANCE AND BASELINE PERIODS FOR CAUTI/CLABSI/SSI UNDER THE FY 2016 HOSPITAL VBP 

PROGRA

Domain Baseline period Performance period 

Outcome 

• CAUTI/CLABSI/SSI ... • January 1, 2012–December 31, 2012 ......................... • January 1, 2014–December 31, 2014. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43660 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

XV. Proposed Requirements for the 

Ambulatory Surgical Center Quality 

Reporting (ASCQR) Program 

A. Background 

1. Overview 

We refer readers to section XIII.A.1. of 

this proposed rule for a general 

overview of our quality reporting 

programs. 

2. Statutory History of the ASC Quality 

Reporting (ASCQR) Program 

We refer readers to section XIV.K.1. of 

the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74492 through 

74493) for a detailed discussion of the 

statutory history of the ASCQR Program. 

3. Regulatory History of the ASCQR 

Program 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66875), the 

CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68780), the CY 

2010 OPPS/ASC final rule with 

comment period (74 FR 60656), and the 

CY 2011 OPPS/ASC final rule with 

comment period (75 FR 72109), we did 

not implement a quality data reporting 

program for ASCs. We determined that 

it would be more appropriate to allow 

ASCs to acquire some experience with 

the revised ASC payment system, which 

was implemented for CY 2008, before 

implementing new quality reporting 

requirements. 

However, in these rules, we indicated 

that we intended to implement a quality 

reporting program for ASCs in the 

future. In preparation for proposing a 

quality reporting program for ASCs, in 

the CY 2011 OPPS/ASC proposed rule 

(75 FR 46383), we solicited public 

comment on 10 measures. 

In addition to CMS preparing to 

propose implementation of a quality 

reporting program for ASCs, HHS 

developed a plan to implement a valuebased purchasing (VBP) program for 

payments under title XVIII of the Act for 

ASCs, and submitted a report to 

Congress entitled ‘‘Medicare 

Ambulatory Surgical Center ValueBased Purchasing Implementation Plan’’ 

that details this plan. The plan and the 

report to Congress were required under 

section 3006(f) of the Affordable Care 

Act as added by section 10301(a) of the 

Affordable Care Act. The report is found 

on the CMS Web site at: http:// 

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

Downloads/C_ASC_RTC–2011.pdf. 

Currently, we do not have express 

statutory authority to implement an 

ASC VBP program. 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74492 

through 74517), we finalized our 

proposal to implement the ASCQR 

Program beginning with the CY 2014 

payment determination. We adopted 

quality measures for the CY 2014, CY 

2015, and CY 2016 payment 

determinations and subsequent years, 

and finalized some data collection and 

reporting timeframes for these measures. 

We also adopted policies with respect to 

the maintenance of technical 

specifications and the updating of 

measures, publication of ASCQR 

Program data, and, for the CY 2014 

payment determination, data collection 

and submission requirements for the 

claims-based measures. For a discussion 

of these final policies, we refer readers 

to the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74492 

through 74517). 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74515), we 

indicated our intent to issue proposals 

for administrative requirements, data 

validation and completeness 

requirements, and reconsideration and 

appeals processes in the FY 2013 IPPS/ 

LTCH PPS proposed rule, rather than in 

the CY 2013 OPPS/ASC proposed rule, 

because the FY 2013 IPPS/LTCH PPS 

proposed rule was scheduled to be 

finalized earlier and prior to data 

collection for the CY 2014 payment 

determination, which was to begin with 

services furnished on October 1, 2012. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53636 through 53644), we 

issued final policies for administrative 

requirements, data completeness 

requirements, extraordinary 

circumstances waiver or extension 

requests, and a reconsideration process. 

For a complete discussion of these 

policies, we refer readers to the FY 2013 

IPPS/LTCH PPS final rule. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68492 

through 68500), we issued final policies 

regarding our approach to selecting 

quality measures, reporting 

requirements, and payment reductions 

for ASCs that fail to meet the ASCQR 

Program requirements. 

B. ASCQR Program Quality Measures 

1. Considerations in the Selection of 

ASCQR Program Quality Measures 

We refer readers to the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68493 through 68494) for 

a detailed discussion of the 

considerations we use for the selection 

of ASCQR Program quality measures. 

2. ASCQR Program Quality Measures 

Adopted in Previous Rulemaking 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74492 

through 74517), we finalized our 

proposal to implement the ASCQR 

Program beginning with the CY 2014 

payment determination and adopted 

measures for the CY 2014, CY 2015, and 

CY 2016 payment determinations. In an 

effort to streamline the rulemaking 

process, we also finalized our policy 

that, when we adopt measures for the 

ASCQR Program, these measures are 

automatically adopted for all 

subsequent years payment 

determinations unless we propose to 

remove, suspend, or replace the 

measures (76 FR 74494, 74504, 74509, 

and 74510). 

The quality measures that we have 

previously adopted are listed below. 

ASC PROGRAM MEASUREMENT SET ADOPTED IN PREVIOUS RULEMAKING

ASC–1: Patient Burn.* 

ASC–2: Patient Fall.* 

ASC–3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant.* 

ASC–4: Hospital Transfer/Admission.* 

ASC–5: Prophylactic Intravenous (IV) Antibiotic Timing.* 

ASC–6: Safe Surgery Checklist Use.** 

ASC–7: ASC Facility Volume Data on Selected ASC Surgical Procedures.** 

Procedure categories and corresponding HCPCS codes are located at: http://qualitynet.org/dcs/ 

ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 

ASC–8: Influenza Vaccination Coverage among Healthcare Personnel*** 

*New measure for the CY 2014 payment determination. 

**New measure for the CY 2015 payment determination. 

***New measure for the CY 2016 payment determination. 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43661 

11National Quality Measures Clearing House. 

Agency for Healthcare Research and Quality. 

Available at http://qualitymeasures.ahrq.gov/

content.aspx?id=27981&search=complications+

within+30+days+following+cataract+surgery. 

3. Proposed Additional ASCQR Program 

Quality Measures for the CY 2016 

Payment Determination and Subsequent 

Years 

We are proposing quality measures for 

the CY 2016 payment determination and 

subsequent years based on our approach 

for future measure selection and 

development finalized in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68493 through 68494), 

which includes, among other 

considerations, aligning the ASCQR 

Program measures with our efforts in 

other clinical care settings and taking 

into account the views of the MAP. 

We believe that ASCs and HOPDs are 

similar in their delivery of surgical and 

related nonsurgical services. Therefore, 

we seek to propose quality measures 

that can be applied to both HOPDs and 

ASCs to the extent possible because 

many of the same surgical procedures 

are performed in both of these settings. 

Measure harmonization assures that 

quality of care for similar services is 

measured in a comparable manner 

across settings. This approach would 

provide meaningful information for 

Medicare beneficiaries to make 

informed decisions. 

Section 3014 of the Affordable Care 

Act added section 1890A of the Act 

establishing a pre-rulemaking process, 

which, among other steps, requires the 

Secretary to take into consideration the 

input from multi-stakeholder groups in 

selecting certain categories of quality 

and efficiency measures described in 

section 1890(b)(7)(B) of the Act. As part 

of the pre-rulemaking process, the 

consensus-based entity that CMS must 

contract with under section 1890 of the 

Act (currently NQF), convened the 

multi-stakeholder groups, referred to as 

the MAP. The MAP is a public-private 

partnership created for the primary 

purpose of providing input to HHS on 

the selection of the categories of 

measures in section 1890(b)(7)(B), 

which includes measures for use in 

certain specific Medicare programs, 

measures for use in reporting 

performance information to the public, 

and measures for use in health care 

programs other than for use under the 

Act. 

After we selected quality measures 

that we might propose for the ASCQR 

Program based on our established 

policies regarding the approach to 

selecting quality measures in CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68493 through 68494), we 

included the measures in a publicly 

available document entitled ‘‘List of 

Measures Under Consideration for 

December 1, 2012’’ in compliance with 

section 1890A(a)(2) of the Act, and they 

were reviewed by the MAP in its ‘‘MAP 

Pre-Rulemaking Report: 2013 

Recommendations on Measures Under 

Consideration by HHS,’’ which has been 

made available on the NQF Web site at: 

http://www.qualityforum.org/

Publications/2013/02/MAP_PreRulemaking_Report_-_February_

2013.aspx. We considered the input and 

recommendations provided by the MAP 

in selecting measures to propose for the 

ASCQR Program. 

In addition, in its 2013 PreRulemaking Report, the MAP also 

supports: (1) HHS’ efforts to move 

toward greater alignment across the 

Hospital OQR and ASCQR Programs; 

and (2) the inclusion of ASCs within a 

broader approach to measuring 

performance and improving care that is 

aligned across health care settings (page 

35, MAP Pre-Rulemaking Report: 2013 

Recommendations on Measures Under 

Consideration by HHS). 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing to adopt four measures for 

the ASCQR Program, all of which were 

reviewed by the MAP and three of 

which are NQF-endorsed for the ASC 

setting: (a) Complications within 30 

Days following Cataract Surgery 

Requiring Additional Surgical 

Procedures; (b) Endoscopy/Poly 

Surveillance: Appropriate follow-up 

interval for normal colonoscopy in 

average risk patients (NQF #0658); (c) 

Endoscopy/Poly Surveillance: 

Colonoscopy Interval for Patients with a 

History of Adenomatous Polyps— 

Avoidance of Inappropriate Use (NQF 

#0659); and (d) Cataracts: Improvement 

in Patient’s Visual Function within 90 

Days Following Cataract Surgery (NQF 

#1536). 

For purposes of the ASCQR Program, 

sections 1833(i)(7)(B) and 

1833(t)(17)(C)(i) of the Act, read 

together, 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. As 

stated in the CY 2012 OPPS/ASC final 

rule with comment period (76 FR 74465 

and 74505), 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 measures are 

described in greater detail below. 

We are proposing that data collection 

for these four measures would begin in 

CY 2014. We refer readers to section 

XV.D. of this proposed rule for detailed 

discussion of data collection and 

submission time frames. We are 

proposing to collect aggregate data 

(numerators, denominators, and 

exclusions) on all ASC patients for these 

four proposed chart-abstracted measures 

via an online Web-based tool that would 

be made available to ASCs via the 

QualityNet Web site. This online Webbased tool is currently in use in the 

ASCQR Program to collect measure 

information for ASC–6 (Safe Surgery 

Checklist Use) and ASC–7 (ASC Facility 

Volume Data on Selected ASC Surgical 

Procedures). We invite public comment 

on these proposals. More information 

regarding this proposed method of 

collection is provided in section 

XV.D.5.c. of this proposed rule. 

To advance our efforts to collect high 

quality data on all ASC patients for the 

ASCQR measures while minimizing 

burden for ASCs, we also seek public 

comment on alternative data collection 

strategies for these four proposed 

measures. In particular, we seek 

comment on collection of patient-level 

data through registries or other third 

party data aggregators, and via certified 

EHR technology, along with the 

potential timing for doing so. 

a. Complications Within 30 Days 

Following Cataract Surgery Requiring 

Additional Surgical Procedures 

It is uncommon to have complications 

that may result in a permanent loss of 

vision following cataract surgery. 

Cataract surgery has become safer and 

more effective due to advances in 

technology and surgical skills over the 

last 30 years. Based on an analysis of 

Managed Care Organization data, it is 

estimated that the annual volume for 

cataract surgeries is 2.8 million in the 

U.S. with the rate of cataract surgery 

complications being 1 to 2 percent. 

However, with an annual volume of 2.8 

million cataract surgeries in the United 

States, a 2 percent rate is significant and 

translates to over 36,000 surgeries 

associated with complications.11

Thus, for the CY 2016 payment 

determination and subsequent years, we 

are proposing to adopt the 

Complications within 30 Days 

Following Cataract Surgery Requiring 

Additional Surgical Procedures 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43662 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

12 Davila RE, Rajan E, Baron TH, Adler DG, Egan 

JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, 

Lichtenstein D, Qureshi WA, Shen B, Zuckerman 

MJ, VanGuilder T, Fanelli RD, Standards of Practice 

Committee, American Society for Gastrointestinal 

Endoscopy. ASGE guideline: colorectal cancer 

screening and surveillance. Gastrointest Endosc 

2006 Apr;63(4):546–57. http:// 

www.ncbi.nlm.nih.gov/pubmed/16564851

?dopt=Abstract. 

measure, which assesses the 

‘‘[p]ercentage of patients aged 18 years 

and older with a diagnosis of 

uncomplicated cataract who had 

cataract surgery and had any of a 

specified list of surgical procedures in 

the 30 days following cataract surgery 

which would indicate the occurrence of 

any of the following major 

complications: retained nuclear 

fragments, endophthalmitis, dislocated 

or wrong power IOL retinal detachment, 

or wound dehiscence.’’ This outcome 

measure seeks to identify those 

complications from surgery that can 

reasonably be attributed to the surgery. 

It focuses on patient safety and 

monitoring for events that, while 

uncommon, can signify important issues 

in the care being provided. The 

numerator for this measure is the 

number of ‘‘[p]atients who had one or 

more specified operative procedures for 

any of the following major 

complications within 30 days following 

cataract surgery: retained nuclear 

fragments, endophthalmitis, dislocated 

or wrong power IOL, retinal 

detachment, or wound dehiscence.’’ The 

denominator for this measure is the total 

number of ‘‘[p]atients aged 18 years and 

older who had cataract surgery and no 

significant pre-operative ocular 

conditions impacting the surgical 

complication rate.’’ This measure 

excludes ‘‘[p]atients with certain 

comorbid conditions impacting the 

surgical complication rate.’’ The 

measure specifications can be found at: 

http://www.qualityforum.org/QPS/0564. 

This measure has been endorsed by 

NQF for the ‘‘Ambulatory Care: Clinic’’ 

setting (NQF #0564) but, currently, is 

not NQF-endorsed for the ASC setting. 

We believe this measure meets the 

statutory requirements discussed above. 

This measure is not NQF-endorsed in 

the ASC setting and we could not find 

any other comparable measure that is 

specifically endorsed for the ASC 

setting. However, we believe that this 

measure is appropriate for the 

measurement of quality of care 

furnished by ASCs because this 

procedure is commonly performed in 

ASCs and, as discussed above, can 

signify important issues in the care 

being provided in ASCs. Further, this 

measure reflects consensus among 

affected parties as it has been endorsed 

by NQF for the ‘‘Ambulatory Care: 

Clinic’’ setting. We believe that this 

consensus also applies to the same 

surgeries that are performed in other 

ambulatory settings, such as ASCs and 

HOPDs. Given the high volume of 

cataract surgeries performed in 

ambulatory care settings and the 

potential 2 percent complication rate, 

we believe it is important for us to 

include this measure in the ASCQR 

Program measure set, and that this is an 

appropriate application of NQF #0564 to 

the ASC setting. 

We note that section 1833(t)(17) of the 

Act does not require that each measure 

we adopt be endorsed by a national 

consensus building entity. Further, 

section 1833(i)(7)(B) of the Act states 

that section 1833(t)(17) of the Act 

applies to the ASCQR program, except 

as the Secretary may otherwise provide. 

Under this provision, the Secretary has 

further authority to adopt non-endorsed 

measures. In its 2013 Pre-Rulemaking 

Report, the MAP supported inclusion of 

this measure in the ASCQR Program and 

noted that this measure ‘‘[a]ddresses a 

high impact condition not adequately 

addressed in the program measure set.’’ 

Currently, the NQF endorsement for this 

measure is time-limited. 

We invite public comment on this 

proposal. 

b. Endoscopy/Poly Surveillance: 

Appropriate Follow-Up Interval for 

Normal Colonoscopy in Average Risk 

Patients (NQF #0658) 

The American Cancer Society’s 

current guidelines recommend 

colonoscopy screening at 10-year 

intervals 12 for the average risk 

population (http://www.cancer.org/ 

cancer/colonandrectumcancer/ 

moreinformation/colonandrectum

cancerearlydetection/colorectal-cancerearly-detection-acs-recommendations). 

For the CY 2016 payment and 

subsequent years, we are proposing to 

adopt the Endoscopy/Poly Surveillance: 

Appropriate follow-up interval for 

normal colonoscopy in average risk 

patients measure, which assesses the 

‘‘[p]ercentage of patients aged 50 years 

and older receiving screening 

colonoscopy without biopsy or 

polypectomy who had a recommended 

follow-up interval of at least 10 years for 

repeat colonoscopy documented in their 

colonoscopy report.’’ Performing 

colonoscopy too frequently increases a 

patients’ exposure to procedural harm. 

This measure aims to assess whether 

average risk patients with normal 

colonoscopies receive a 

recommendation to receive a repeat 

colonoscopy in an interval that is less 

than the recommended amount of 10 

years. This measure is NQF-endorsed 

for the ASC setting. The numerator for 

this measure is the number of 

‘‘[p]atients who had a recommended 

follow-up interval of at least 10 years for 

repeat colonoscopy documented in their 

colonoscopy report.’’ The denominator 

for this measure is the total number of 

‘‘[p]atients aged 50 years and older 

receiving screening colonoscopy 

without biopsy or polypectomy.’’ The 

measure excludes patients whose 

medical records contain reason(s) for 

recommending a follow up interval of 

less than 10 years. The specifications for 

this measure can be found at: http:// 

www.qualityforum.org/QPS/0658. 

We believe this measure meets the 

statutory requirements discussed above. 

This measure is appropriate for the 

measurement of quality of care 

furnished by ASCs because colonoscopy 

screening is commonly performed in 

ASCs and this measure was developed 

to specifically measure quality of care 

furnished by ASCs. We also believe it 

meets the consensus requirement and 

the requirement that it be set forth by a 

national consensus building entity 

because it is NQF-endorsed for the ASC 

setting. 

In its 2013 Pre-Rulemaking Report, 

the MAP supported the direction of this 

measure. Currently, the NQF 

endorsement for this measure is timelimited. 

We invite public comment on this 

proposal. 

c. Endoscopy/Poly Surveillance: 

Colonoscopy Interval for Patients With 

a History of Adenomatous Polyps— 

Avoidance of Inappropriate Use (NQF 

#0659) 

According to the American Cancer 

Society, in patients with increased or 

high risk of colorectal cancer, 

colonoscopy screening is recommended 

based on risk factors. One such factor is 

a history of adenomatous polyps. The 

frequency of colonoscopy screening 

varies depending on the size and 

amount of polyps found; however, the 

general recommendation is a 3 year 

follow-up (http://www.cancer.org/ 

cancer/colonandrectumcancer/ 

moreinformation/colonandrectum

cancerearlydetection/colorectal-cancerearly-detection-acs-recommendations). 

A randomized trial of 699 patients 

showed that after newly diagnosed 

adenomatous polyps have been removed 

by colonoscopy, follow-up colonoscopy 

at 3 years detects important colonic 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43663 

13 Davila RE, Rajan E, Baron TH, Adler DG, Egan 

JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, 

Lichtenstein D, Qureshi WA, Shen B, Zuckerman 

MJ, VanGuilder T, Fanelli RD, Standards of Practice 

Committee, American Society for Gastrointestinal 

Endoscopy. ASGE guideline: colorectal cancer 

screening and surveillance. Gastrointest Endosc 

2006 Apr;63(4):546–57. http:// 

www.ncbi.nlm.nih.gov/pubmed/16564851?

dopt=Abstract. 

14National Quality Measures Clearing House. 

Agency for Healthcare Research and Quality. 

Available at http://www.qualitymeasures.ahrq.gov/ 

content.aspx?id=27982. 

lesions as effectively as follow-up 

colonoscopy at both 1 and 3 years.13

For the CY 2016 payment 

determination and subsequent years, we 

are proposing to adopt the Endoscopy/ 

Poly Surveillance: Colonoscopy Interval 

for Patients with a History of 

Adenomatous Polyps—Avoidance of 

Inappropriate Use measure, which 

assesses the ‘‘[p]ercentage of patients 

aged 18 years and older receiving a 

surveillance colonoscopy, with a history 

of a prior colonic polyp in previous 

colonoscopy findings who had a followup interval of 3 or more years since their 

last colonoscopy documented in the 

colonoscopy report’’ This measure is 

NQF-endorsed for the ASC setting. The 

numerator for this measure is the 

number of ‘‘[p]atients who had an 

interval of 3 or more years since their 

last colonoscopy.’’ The denominator for 

this measure is the total number of 

‘‘[p]atients aged 18 years and older 

receiving a surveillance colonoscopy 

with a history of a prior colonic polyp 

in a previous colonoscopy.’’ This 

measure excludes patients with: (1) 

Documentation of medical reason(s) for 

an interval of less than 3 years since the 

last colonoscopy (for example, last 

colonoscopy incomplete, last 

colonoscopy had inadequate prep, 

piecemeal removal of adenomas, or last 

colonoscopy found greater than 10 

adenomas); or (2) documentation of a 

system reason(s) for an interval of less 

than 3 years since the last colonoscopy 

(for example, unable to locate previous 

colonoscopy report, previous 

colonoscopy report was incomplete). 

The specifications for this measure can 

be found at: http:// 

www.qualityforum.org/QPS/0659. 

We believe this measure meets the 

statutory requirements discussed above. 

This measure is appropriate for the 

measurement of quality of care 

furnished by ASCs because colonoscopy 

is commonly performed in ASCs and 

this measure was developed to 

specifically measure quality of care 

furnished by ASCs. We also believe it 

meets the consensus requirement and 

the requirement that it be set forth by a 

national consensus building entity 

because it is NQF-endorsed for the ASC 

setting. 

In its 2013 Pre-Rulemaking Report, 

the MAP supported the direction of this 

measure. Currently, the NQF 

endorsement for this measure is timelimited. 

We invite public comment on this 

proposal. 

d. Cataracts: Improvement in Patient’s 

Visual Function Within 90 Days 

Following Cataract Surgery (NQF #1536) 

Cataract surgery is performed to 

improve a patient’s vision and 

associated functioning. This outcome is 

achieved consistently with careful 

attention to the accurate measurement 

of axial length and corneal power and 

the appropriate selection of an IOL lens. 

Failure to achieve improved visual 

functioning after surgery in eyes 

without comorbid ocular conditions that 

could impact the success of the surgery 

would reflect care that should be 

assessed for opportunities for 

improvement. Evidence suggests that 

visual improvement occurs in about 86 

to 98 percent of surgeries in eyes 

without comorbid conditions. However, 

with an annual volume of 2.8 million 

cataract surgeries in the U.S., an 

improvement rate from 86 to 98 percent 

could impact a significant number of 

patients per year.14

For the CY 2016 payment 

determination and subsequent years, we 

are proposing to adopt the Cataracts: 

Improvement in Patient’s Visual 

Function within 90 Days Following 

Cataract Surgery measure, which 

assesses the ‘‘[p]ercentage of patients 

aged 18 years and older who had 

cataract surgery and had improvement 

in visual function achieved within 90 

days following the cataract surgery.’’ 

This measure is NQF-endorsed for the 

ASC setting. The measure numerator is 

the number of ‘‘[p]atients 18 years and 

older in sample who had improvement 

in visual function achieved within 90 

days following cataract surgery, based 

on completing a pre-operative and postoperative visual function instrument.’’ 

The measure denominator is the total 

number of ‘‘[p]atients aged 18 years and 

older in sample who had cataract 

surgery.’’ There are no exclusions. The 

specifications for this measure are 

available at: http:// 

www.qualityforum.org/QPS/1536. 

Additional information for the measure 

specifications can be found in the NQF 

Measure Evaluation available at http:// 

www.qualityforum.org/WorkArea/ 

linkit.aspx?LinkIdentifier=id&ItemID=

68317. 

We believe this measure meets the 

statutory requirements discussed above. 

This measure is appropriate for the 

measurement of quality of care 

furnished by ASCs because cataract 

surgery is commonly performed in ASCs 

and this measure was developed to 

specifically measure quality of care 

furnished by ASCs.’’ We believe it also 

meets the consensus requirement and 

the requirement that it be set forth by a 

national consensus building entity 

because it is NQF-endorsed for the ASC 

setting. 

In its 2013 Pre-Rulemaking Report, 

the MAP supported the inclusion of this 

measure in the ASCQR Program and 

noted that this measure ‘‘[a]ddresses a 

high-impact condition not adequately 

addressed in the program measure set.’’ 

We invite public comment on this 

proposal. 

In summary, we are proposing to 

adopt four new measures for the ASCQR 

Program for the CY 2016 payment 

determination and subsequent years, 

with data collection beginning in CY 

2014, as discussed in section XV.D.7.of 

this proposed rule. We are proposing to 

collect aggregate data (numerators, 

denominators, and exclusions) on all 

ASC patients for these four proposed 

chart-abstracted measures via an online 

Web-based tool that will be made 

available to ASCs via the QualityNet 

Web site. The proposed new measures 

for the CY 2016 payment determination 

and subsequent years for the ASCQR 

Program are listed in the table below. 

PROPOSED NEW ASC PROGRAM MEASURE SET FOR THE CY 2016 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

NQF No. Measure name 

0564* ..... Complications within 30 Days following Cataract Surgery Requiring Additional Surgical Procedures. 

0658 ....... Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients. 

0659 ....... Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoidance of Inappropriate 

Use. 


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PROPOSED NEW ASC PROGRAM MEASURE SET FOR THE CY 2016 PAYMENT DETERMINATION AND SUBSEQUENT

YEARS—Continued 

NQF No. Measure name 

1536 ....... Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery. 

* This measure has not been NQF endorsed for the ASC setting. 

4. ASCQR Program Measure Topics for 

Future Consideration 

We seek to develop a comprehensive 

set of quality measures to be available 

for widespread use for informed 

decision-making and quality 

improvement in the ASC setting. 

Through future rulemaking, we intend 

to propose new measures that address 

clinical quality of care, patient safety, 

care coordination, patient experience of 

care, surgical outcomes, surgical 

complications, complications of 

anesthesia, and patient reported 

outcomes of care. We invite public 

comment on these measurement topics. 

5. Technical Specification Updates and 

Data Publication 

In the CY 2012 OPPS/ASC final rule 

with comment period, we finalized our 

proposal to follow the same process for 

updating the ASCQR Program measures 

that we adopted for the Hospital OQR 

Program measures (76 FR 74513 through 

74514). In the CY 2009 OPPS/ASC final 

rule with comment period (73 FR 68766 

through 68767), we established an 

additional subregulatory process for 

making updates to the measures we 

have adopted for the Hospital OQR 

Program. We believe that a measure can 

be updated through this subregulatory 

process provided it is a nonsubstantive 

change. We expect to make the 

determination of what constitutes a 

substantive versus a nonsubstantive 

change on a case-by-case basis. 

Examples of nonsubstantive changes 

to measures might include updated 

diagnosis or procedure codes, 

medication updates for categories of 

medications, broadening of age ranges, 

and exclusions for a measure (such as 

the addition of a hospice exclusion to 

the 30-day mortality measures). We 

believe that non-substantive changes 

may include updates to NQF-endorsed 

measures based upon changes to 

guidelines upon which the measures are 

based. We will revise the Specifications 

Manual so that it clearly identifies the 

updates and provide links to where 

additional information on the updates 

can be found. As stated in CY 2009 

OPPS/ASC final rule with comment 

period, we also will post the updates on 

the QualityNet Web site at: https:// 

www.QualityNet.org. We will provide 

sufficient lead time for facilities to 

implement the changes where changes 

to the data collection systems would be 

necessary. We generally release the 

Hospital OQR Specifications Manual 

every 6 months and release addenda as 

necessary. This release schedule 

provides at least 3 months of advance 

notice for nonsubstantive 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. 

We will continue to use rulemaking to 

adopt substantive updates made by the 

NQF to the endorsed measures we have 

adopted for the Hospital OQR Program. 

Examples of changes that we might 

consider to be substantive would be 

those in which the changes are so 

significant that the measure is no longer 

the same measure, or when a standard 

of performance assessed by a measure 

becomes more stringent (for example, 

changes in acceptable timing of 

medication, procedure/process, or test 

administration). Another example of a 

substantive change would be where the 

NQF has extended its endorsement of a 

previously endorsed measure to a new 

setting, such as extending a measure 

from the inpatient setting to hospice. 

We believe that the policy finalized in 

the CY 2009 OPPS/ASC final rule with 

comment period adequately balances 

our need to incorporate non-substantive 

NQF updates to NQF-endorsed Hospital 

OQR Program measures in the most 

expeditious manner possible, while 

preserving the public’s ability to 

comment on updates that so 

fundamentally change an endorsed 

measure that it is no longer the same 

measure that we originally adopted. We 

also note that the NQF endorsement 

process incorporates an opportunity for 

public comment and engagement in the 

measure maintenance process. These 

policies regarding what is considered 

substantive versus non-substantive 

apply to all measures in the Hospital 

OQR Program. 

In the CY 2012 OPPS/ASC final rule 

with comment period, we finalized our 

proposal to follow the same process for 

updating the ASCQR Program measures 

that we adopted for the Hospital OQR 

Program measures (76 FR 74513 through 

74514) and, in the CY 2013 OPPS/ASC 

final rule with comment period, we 

provided additional clarification 

regarding the ASCQR Program policy in 

the context of the previously finalized 

Hospital OQR program policy. We refer 

readers to the CY 2013 OPPS/ASC final 

rule with comment period for a 

discussion of the process for updating 

the ASCQR Program quality measures 

(77 FR 68496 through 68497). 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74514 

through 74515), we also finalized a 

policy to make data that an ASC 

submitted for the ASCQR program 

publicly available on a CMS Web site 

after providing an ASC an opportunity 

to review the data to be made public. 

These data will be displayed at the CCN 

level. 

We are not proposing any changes to 

these policies. 

C. Payment Reduction for ASCs That 

Fail To Meet the ASCQR Program 

Requirements 

1. Statutory Background 

Section 1833(i)(2)(D)(iv) of the Act 

states that the Secretary may implement 

the revised ASC payment system ‘‘in a 

manner so as to provide for a reduction 

in any annual update for failure to 

report on quality measures in 

accordance with paragraph (7).’’ 

Paragraph (7) contains subparagraphs 

(A) and (B). Subparagraph (A) of 

paragraph (7) states the Secretary may 

provide that an ASC that does not 

submit ‘‘data required to be submitted 

on measures selected under this 

paragraph with respect to a year’’ to the 

Secretary in accordance with this 

paragraph will incur a 2.0 percentage 

point reduction to any annual increase 

provided under the revised ASC 

payment system for such year. It also 

specifies that this reduction applies 

only with respect to the year involved 

and will not be taken into account in 

computing any annual increase factor 

for a subsequent year. Subparagraph (B) 

of paragraph (7) makes many of the 

provisions of the Hospital OQR Program 

applicable to the ASCQR Program 

‘‘[e]xcept as the Secretary may 

otherwise provide.’’ Finally, section 

1833(i)(2)(D)(v) of the Act states that, in 

implementing the revised ASC payment 


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system for 2011 and each subsequent 

year, ‘‘any annual update under such 

system for the year, after application of 

clause (iv) [regarding the reduction in 

the annual update for failure to report 

on quality measures] shall be reduced 

by the productivity adjustment 

described in section 

1886(b)(3)(B)(xi)(II).’’ Section 

1833(i)(2)(D)(v) of the Act also states 

that the ‘‘application of the preceding 

sentence may result in such update 

being less than 0.0 for a year, and may 

result in payment rates under the 

[revised ASC payment system] for a year 

being less than such payment rates for 

the preceding year.’’ 

2. Reduction to the ASC Payment Rates 

for ASCs That Fail To Meet the ASCQR 

Program Requirements for the CY 2015 

Payment Determination and Subsequent 

Years 

The national unadjusted payment 

rates for many services paid under the 

ASC payment system equal the product 

of the ASC conversion factor and the 

scaled relative payment weight for the 

APC to which the service is assigned. 

Currently, the ASC conversion factor is 

equal to the conversion factor calculated 

for the previous year updated by the 

MFP-adjusted CPI–U update factor, 

which is the adjustment set forth in 

section 1833(i)(2)(D)(v) of the Act. The 

MFP-adjusted CPI–U update factor is 

the Consumer Price Index for all urban 

consumers (CPI–U), which currently is 

the annual update for the ASC payment 

system, minus the MFP adjustment. As 

discussed in the CY 2011 MPFS final 

rule with comment period (75 FR 

73397), if the CPI–U is a negative 

number, the CPI–U would be held to 

zero. Under the ASCQR Program, any 

annual update would be reduced by 2.0 

percentage points for ASCs that fail to 

meet the reporting requirements of the 

ASCQR Program. This reduction would 

apply beginning with the CY 2014 

payment rates. For a complete 

discussion of the calculation of the ASC 

conversion factor, we refer readers to 

section XII.G. of this proposed rule. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68499 

through 68500), in order to implement 

the requirement to reduce the annual 

update for ASCs that fail to meet the 

ASCQR Program requirements, we 

finalized our proposal that we would 

calculate two conversion factors: a full 

update conversion factor and an ASCQR 

Program reduced update conversion 

factor. We finalized our proposal to 

calculate the reduced national 

unadjusted payment rates using the 

ASCQR Program reduced update 

conversion factor that would apply to 

ASCs that fail to meet their quality 

reporting requirements for that calendar 

year payment determination. We 

finalized our proposal that application 

of the 2.0 percentage point reduction to 

the annual update may result in the 

update to the ASC payment system 

being less than zero prior to the 

application of the MFP adjustment. 

The ASC conversion factor is used to 

calculate the ASC payment rate for 

services with the following payment 

indicators (listed in Addenda AA and 

BB to this proposed rule, which are 

available via the Internet on the CMS 

Web site): ‘‘A2,’’ ‘‘G2,’’ ‘‘P2,’’ ‘‘R2,’’ 

‘‘Z2,’’ as well as the service portion of 

device- intensive procedures identified 

by ‘‘J8.’’ We finalized our proposal that 

payment for all services assigned the 

payment indicators listed above would 

be subject to the reduction of the 

national unadjusted payment rates for 

applicable ASCs using the ASCQR 

Program reduced update conversion 

factor. 

The conversion factor is not used to 

calculate the ASC payment rates for 

separately payable services that are 

assigned status indicators other than 

payment indicators ‘‘A2,’’ ‘‘G2,’’ ‘‘J8,’’ 

‘‘P2,’’ ‘‘R2,’’ and ‘‘Z2.’’ These services 

include separately payable drugs and 

biologicals, pass-through devices that 

are contractor-priced, brachytherapy 

sources that are paid based on the OPPS 

payment rates, and certain office-based 

procedures and radiology services 

where payment is based on the MPFS 

PE RVU amount and a few other specific 

services that receive cost-based 

payment. As a result, we also finalized 

our proposal that the ASC payment rates 

for these services would not be reduced 

for failure to meet the ASCQR Program 

requirements because the payment rates 

for these services are not calculated 

using the ASC conversion factor and, 

therefore, not affected by reductions to 

the annual update. 

Office-based surgical procedures 

(performed more than 50 percent of the 

time in physicians’ offices) and 

separately paid radiology services 

(excluding covered ancillary radiology 

services involving certain nuclear 

medicine procedures or involving the 

use of contrast agents, as discussed in 

section XII.C.1.b. of this proposed rule) 

are paid at the lesser of the MPFS nonfacility PE RVU-based amounts and the 

standard ASC ratesetting methodology. 

We finalized our proposal that the 

standard ASC ratesetting methodology 

for this comparison would use the ASC 

conversion factor that has been 

calculated using the full ASC update 

adjusted for productivity. This is 

necessary so that the resulting ASC 

payment indicator, based on the 

comparison, assigned to an office-based 

or radiology procedure is consistent for 

each HCPCS code regardless of whether 

payment is based on the full update 

conversion factor or the reduced update 

conversion factor. 

For ASCs that receive the reduced 

ASC payment for failure to meet the 

ASCQR Program requirements, we 

believe that it is both equitable and 

appropriate that a reduction in the 

payment for a service should result in 

proportionately reduced copayment 

liability for beneficiaries. Therefore, we 

finalized our proposal in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68500) that the Medicare 

beneficiary’s national unadjusted 

copayment for a service to which a 

reduced national unadjusted payment 

rate applies would be based on the 

reduced national unadjusted payment 

rate. 

We finalized our proposal that all 

other applicable adjustments to the ASC 

national unadjusted payment rates 

would apply in those cases when the 

annual update is reduced for ASCs that 

fail to meet the requirements of the 

ASCQR Program. For example, the 

following standard adjustments would 

apply to the reduced national 

unadjusted payment rates: the wage 

index adjustment, the multiple 

procedure adjustment, the interrupted 

procedure adjustment, and the 

adjustment for devices furnished with 

full or partial credit or without cost. We 

believe that these adjustments continue 

to be equally applicable to payment for 

ASCs that do not meet the ASCQR 

Program requirements. 

We are not proposing any changes to 

these policies. 

D. Administrative Requirements 

1. Proposed Requirements Regarding 

QualityNet Account and Security 

Administrator 

a. Background for the CY 2014 and CY 

2015 Payment Determinations 

A QualityNet account is required to 

submit quality measure data to the 

QualityNet Web site via a Web-based 

tool and, in accordance with CMS 

policy, a QualityNet security 

administrator is necessary to set-up 

such an account for the purpose of 

submitting this information to the 

QualityNet Web site. In previous 

rulemaking, we referred to this role as 

the QualityNet administrator; we are 

referring to this role in this rulemaking 

as the QualityNet security 

administrator, which emphasizes its 

security function and aligns terminology 

for the ASCQR Program with the 


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Hospital IQR and OQR Programs. While 

the main purpose of a QualityNet 

security administrator is to serve as a 

point of contact for security purposes 

for quality reporting programs, we 

believe from our experience that a 

QualityNet security administrator 

typically fulfills a variety of tasks 

related to quality reporting, such as 

creating, approving, editing, and 

terminating QualityNet user accounts 

within an organization, and monitoring 

QualityNet usage to maintain proper 

security and confidentiality measures. 

Thus, we highly recommend that ASCs 

have and maintain a QualityNet security 

administrator. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53638 through 53639), we 

did not require that ASCs do so for the 

CY 2014 payment determination 

because ASCs are not required to submit 

data directly to the quality data 

warehouse for the CY 2014 payment 

determination (76 FR 74504) and we do 

not want to unduly burden ASCs by 

requiring ASCs to have a QualityNet 

security administrator. We note that a 

QualityNet account is not necessary to 

access information that is posted to the 

QualityNet Web site, such as 

specifications manuals and educational 

materials. 

As finalized in the CY 2012 OPPS/ 

ASC final rule with comment period (76 

FR 74504 through 74509), for the CY 

2015 payment determination, we 

require ASCs to submit some quality 

measure data via an online tool located 

on the QualityNet Web page. As set 

forth in the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53638 through 53639), 

to enter these data into our data system, 

we require that ASCs identify and 

register a QualityNet security 

administrator who follows the 

registration process located on the 

QualityNet Web site and submits the 

information as specified on this site. 

Because submission of these data is not 

required until the July 1, 2013 to August 

15, 2013 time period, we require that 

ASCs have a QualityNet security 

administrator at the time ASCs submit 

Web-based measure data in 2013 for the 

CY 2015 payment determination, which 

is no later than August 15, 2013. ASCs 

may have a QualityNet security 

administrator prior to this date, but we 

do not require that ASCs do so. 

We noted that there are necessary 

mailing and processing procedures that 

must be completed in order to have a 

QualityNet security administrator which 

are separate from completion of the 

forms by the ASC that can require 

significant time to complete. We 

strongly cautioned ASCs to not wait 

until the deadline to apply; instead, we 

recommended allowing a minimum of 2 

weeks, and strongly suggested allowing 

additional time prior to the deadline to 

submit required documentation in case 

of unforeseen issues. Because ASCs will 

need a QualityNet security 

administrator only to have the ability to 

set up a user account for the purpose of 

submitting such measure data once a 

year, we do not require that ASCs 

maintain a QualityNet security 

administrator after the entry of their 

data via an online tool located on the 

QualityNet Web site in 2013 for the CY 

2015 payment determination. 

We also note that QualityNet users 

must complete a user enrollment 

process, which is part of the registration 

process, to ensure access to the Secure 

QualityNet Portal beginning July 1, 

2013. Portal access will be required for 

ASCs submitting data under the ASCQR 

Program using an online tool located on 

the QualityNet Web site. 

b. Proposed Requirements for the CY 

2016 Payment Determination and 

Subsequent Years 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing that, similar to the 

requirement for the CY 2015 payment 

determination, ASCs would be required 

to have a QualityNet security 

administrator for the purposes of setting 

up a QualityNet account for the purpose 

of entering data via an online tool 

located on the QualityNet Web site if 

this had not been completed previously 

or no current user accounts were 

available. If an ASC does not already 

have a QualityNet account, the facility 

would need to identify and register a 

QualityNet security administrator who 

follows the registration process located 

on the QualityNet Web site and submits 

the information as specified on this site. 

A QualityNet security administrator is 

not required for submitting data, a 

QualityNet security administrator is 

required to set up user accounts and for 

security purposes; a current user 

account is required for submitting data. 

Thus, an ASC would need to acquire a 

QualityNet security administrator only 

if no current QualityNet account existed 

for the ASC. An ASC would be required 

to have an active account by any 

specified data entry deadline. For 

example, the deadline would be August 

15, 2014 for the CY 2016 payment 

determination. Although we highly 

recommend that ASCs have and 

maintain a QualityNet security 

administrator, we believe that requiring 

an ASC to maintain a QualityNet 

administrator throughout the year 

would unnecessarily increase burden on 

ASCs. 

As noted previously, there are 

necessary mailing and processing 

procedures for having a QualityNet 

security administrator assigned by CMS 

separate from completion of the forms 

by the ASC that can require significant 

time to complete and we strongly 

caution ASCs to not wait until any data 

entry deadline to apply. While we 

previously recommended allowing a 

minimum of 2 weeks, based upon recent 

experience, we strongly suggest 

allowing 4 to 6 weeks prior to any data 

submission deadline to submit required 

documentation for processing and in 

case of unforeseen issues. Also, 

QualityNet users must complete a user 

enrollment process, which is part of the 

registration process, to ensure access to 

the Secure QualityNet Portal. Portal 

access will be required for ASCs 

submitting data under the ASCQR 

Program to meet CMS IT security 

requirements. The legislative source for 

this requirement originates in the 

Federal Information Security 

Management Act of 2002 which was 

amended by the Cybersecurity Act of 

2012. The Document Library on the 

http://www.idmanagement.gov Web site 

contains documentation related to 

identity management including the 

Federal Identity, Credential and Access 

Management (FICAM) Roadmap and 

Implementation Guidance (version 2, 

12/08/2011). 

We invite public comment on these 

proposals. 

2. Proposed Requirements Regarding 

Participation Status 

a. Background for the CY 2014 Payment 

Determination and Subsequent Years 

We finalized in the CY 2012 OPPS/ 

ASC final rule with comment period (76 

FR 74516) a policy to consider an ASC 

as participating in the ASCQR Program 

for the CY 2014 payment determination 

if the ASC includes Quality Data Codes 

(QDCs) specified for the ASCQR 

Program on their CY 2012 claims 

relating to the finalized measures. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53639 through 53640), we 

stated that once an ASC submits any 

quality measure data, it would be 

considered to be participating in the 

ASCQR Program. Further, once an ASC 

submits any quality measure data and is 

considered to be participating in the 

ASCQR Program, an ASC would 

continue to be considered participating 

in the ASCQR Program, regardless of 

whether the ASC continues to submit 

quality measure data, unless the ASC 

withdraws from the Program by 

indicating on a participation form that 

it is withdrawing, as discussed below. 


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For example, if an ASC includes any 

QDCs on its claims for the CY 2014 

payment determination, it would be 

considered participating in the ASCQR 

Program for the CY 2014 payment 

determination and for each subsequent 

year’s payment determination unless the 

ASC withdraws. 

Likewise, if an ASC did not submit 

any QDCs for the CY 2014 payment 

determination, but submitted quality 

measure data for the CY 2015 payment 

determination, the ASC would be 

considered participating in the ASCQR 

Program starting with the CY 2015 

payment determination and continuing 

for each subsequent year’s payment 

determination unless the ASC 

withdraws from the ASCQR Program. 

We considered whether to require that 

an ASC complete and submit a notice of 

participation form for each year’s 

payment determination to indicate that 

the ASC is participating in the ASCQR 

Program as we require for hospitals, but 

decided against this approach because 

we were concerned about the burden on 

ASCs. We believe these requirements 

will reduce burden on ASCs while 

accomplishing the purpose of notifying 

us of an ASC’s participation in the 

ASCQR Program. 

We stated that any and all quality 

measure data submitted by the ASC 

while participating in the ASCQR 

Program could be made publicly 

available. This policy allows us to 

provide information on the quality of 

care provided to Medicare beneficiaries 

which promotes transparency. 

Once an ASC submits quality measure 

data indicating its participation in the 

ASCQR Program, an ASC must complete 

and submit an online form indicating 

withdrawal in order to withdraw from 

the ASCQR Program. This form will be 

located on the QualityNet Web site 

starting in July 2013. We also require 

that an ASC indicate on the form the 

initial payment determination year to 

which the withdrawal applies. We 

established a different process for ASCs 

to withdraw from participation than the 

process we established for an ASC to 

participate in the ASCQR Program 

because of the payment implications of 

withdrawal. We stated that, in 

withdrawing from the ASCQR Program, 

the ASC would incur a 2.0 percentage 

point reduction in its annual payment 

update for that payment determination 

year and any subsequent payment 

determinations in which it is 

withdrawn. 

We stated that we will not make 

quality measure data publicly available 

for that payment determination year and 

any subsequent payment determinations 

for which the ASC is withdrawn from 

the ASCQR Program. 

We established that an ASC would 

continue to be deemed withdrawn 

unless the ASC starts submitting quality 

measure data again. Once an ASC starts 

submitting quality measure data, the 

ASC would be considered participating 

unless the ASC withdraws, as discussed 

above. We believe that these policies 

reduce the burden on ASCs by not 

having to notify us as to when they are 

participating. 

We established that an ASC can 

withdraw from the ASCQR Program at 

any time up to August 31, 2013 for the 

CY 2014 payment determination. We 

anticipated that this will be the latest 

date possible to allow an ASC to 

withdraw before payment 

determinations affecting CY 2014 

payment are made. We established that 

an ASC can withdraw from the ASCQR 

Program at any time up to August 31, 

2014 for the CY 2015 payment 

determination. We clarify here that 

these deadlines include August 31st for 

each respective year. 

We stated that these program 

requirements would apply to all ASCs 

designated as open in the CASPER 

system before January 1, 2012 for the CY 

2014 payment determination. Because 

ASCs were not required to include 

QDCs on claims until October 2012 for 

the CY 2014 payment determination, an 

ASC designated as open in the CASPER 

system before January 1, 2012 was 

operating for at least 10 months before 

having to report any data. We believe 

this is a sufficient amount of time for 

ASCs to be established to report quality 

data for the CY 2014 payment 

determination. 

For the CY 2015 payment 

determination, we established that 

program requirements would apply to 

all ASCs designated as open in the 

CASPER system for at least 4 months 

prior to January 1, 2013. We believe that 

this date and length of operations 

experience would provide new ASCs 

sufficient time before having to meet 

quality data reporting requirements after 

the ASCQR Program’s initial 

implementation year. 

b. Proposed Requirements for the CY 

2016 Payment Determination and 

Subsequent Years 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing that an ASC can withdraw 

from the ASCQR Program at any time up 

to and including August 31 of the year 

preceding a payment determination. We 

anticipate that this will be the latest 

date possible to allow an ASC to 

withdraw before payment 

determinations affecting the next 

calendar year’s payment are made. 

Thus, for example, for the CY 2016 

payment determination, an ASC would 

be able to withdraw from the ASCQR 

Program at any time up to and including 

August 31, 2015. Once an ASC has 

withdrawn for any payment 

determination year, it would have a 2.0 

percentage point reduction in their 

annual payment update and it would 

not be possible to reinstate participation 

status for that year. 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing that all program 

requirements would apply to all ASCs 

designated as open in the CASPER 

system at least 4 months prior to the 

beginning of data collection for a 

payment determination. Thus, for the 

CY 2016 payment determination, data 

collection begins with January 1, 2014 

services; these program requirements 

would apply to all ASCs designated as 

open in the CASPER system for at least 

4 months prior to January 1, 2014 (that 

is, an open date of September 1, 2013 

or earlier). We believe that this date and 

length of operations experience would 

provide any new ASCs sufficient time 

before having to meet quality data 

reporting requirements. 

We invite public comment on these 

proposals. 

3. Requirements Regarding Data 

Processing and Collection Periods for 

Claims-Based Measures for the CY 2014 

Payment Determination and Subsequent 

Years 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74496 

through 74511), we adopted five claimsbased measures for the CY 2014, CY 

2015, and CY 2016 payment 

determinations and subsequent years. 

We also finalized that, to be eligible for 

the full CY 2014 ASC annual payment 

update, for the claims-based measures, 

an ASC must submit complete data on 

individual quality measures through a 

claims-based reporting mechanism by 

submitting the appropriate QDCs on the 

ASC’s Medicare claims (76 FR 74515 

through 74516). Further, we finalized 

the data collection period for the CY 

2014 payment determination, as the 

Medicare fee-for-service ASC claims 

submitted for services furnished 

between October 1, 2012 and December 

31, 2012. ASCs will add the appropriate 

QDCs on their Medicare Part B claims, 

using the Form CMS–1500 or associated 

electronic data set submitted for 

payment, to submit the applicable 

quality data. A listing of the QDCs with 

long and short descriptors is available in 

Transmittal 2425, Change Request 7754 


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43668 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

released March 16, 2012 (http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ASCPayment/ASCTransmittals-Items/ASC-CR7754- 

R2425CP.html). Details on how to use 

these codes for submitting numerator 

and denominator information are 

available in the ASCQR Program 

Specifications Manual located on the 

QualityNet Web site (https:// 

www.QualityNet.org). 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53640), we adopted a policy 

that claims for services furnished 

between October 1, 2012 and December 

31, 2012 would have to be paid by the 

administrative contractor by April 30, 

2013 to be included in the data used for 

the CY 2014 payment determination. 

We believe that this claim paid date 

allows ASCs sufficient time to submit 

claims while allowing sufficient time for 

CMS to complete required data analysis 

and processing to make payment 

determinations and to supply this 

information to administrative 

contractors. 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68497 

through 68498), we finalized a data 

collection and processing period for the 

CY 2015 payment determination and 

subsequent years. For the CY 2015 

payment determination and subsequent 

years, an ASC must submit complete 

data on individual claims-based quality 

measures through a claims-based 

reporting mechanism by submitting the 

appropriate QDCs on the ASC’s 

Medicare claims. The data collection 

period for such claims-based quality 

measures is the calendar year 2 years 

prior to a payment determination year. 

The claims for services furnished in 

each calendar year have to be paid by 

the administrative contractor by April 

30 of the following year of the ending 

data collection time period to be 

included in the data used for the 

payment determination year. Thus, for 

example, for the CY 2015 payment 

determination, the data collection 

period is claims for services furnished 

in CY 2013 (January 1, 2013 through 

December 31, 2013) which are paid by 

the administrative contractor by April 

30, 2014. 

We are not proposing any changes to 

these policies. 

4. Proposed Minimum Threshold, 

Minimum Case Volume, and Data 

Completeness for Claims-Based 

Measures Using QDCs 

a. Background for the CY 2014 Payment 

Determination and Subsequent Years 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74516), we 

finalized our proposal that data 

completeness for claims-based measures 

for the CY 2014 payment determination 

be determined by comparing the 

number of claims meeting measure 

specifications that contain the 

appropriate QDCs with the number of 

claims that would meet measure 

specifications, but did not have the 

appropriate QDCs on the submitted 

claims. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53641), we finalized our 

policy for the CY 2014 and CY 2015 

payment determination years that the 

minimum threshold for successful 

reporting be that at least 50 percent of 

claims meeting measure specifications 

contain QDCs. We believe that 50 

percent is a reasonable minimum 

threshold for the initial implementation 

years of the ASCQR Program because 

ASCs are not familiar with how to 

report quality data under the ASCQR 

Program and because many ASCs are 

relatively small and may need more 

time to set up reporting systems. We 

stated in that final rule that we intend 

to propose to increase this percentage 

for subsequent years’ payment 

determinations as ASCs become more 

familiar with reporting requirements for 

the ASCQR Program. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53641), we stated that, 

because private payers would not have 

QDCs in their required HCPCS data files 

until January 1, 2013, claims with QDCs 

received prior to January 1, 2013 could 

be rejected for invalid codes. Because it 

is not possible for ASCs to submit 

differing codes on primary versus 

secondary payer claims for at least some 

payers, we specified that only claims 

where Medicare is the primary payer— 

not the secondary payer—will be used 

in the calculation of data completeness 

for the CY 2014 payment determination. 

We also finalized our proposal in the 

CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68498 through 

68499) that data completeness for 

claims-based quality measures for the 

CY 2015 payment determination and 

subsequent years will be determined by 

comparing the number of Medicare 

claims (where Medicare is the primary 

or secondary payer) meeting measure 

specifications that contain the 

appropriate QDCs with the number of 

Medicare claims (where Medicare is the 

primary or secondary payer) that would 

meet measure specifications, but did not 

have the appropriate QDCs on the 

submitted claims for the CY 2015 

payment determination and subsequent 

years. We made this change based on 

the fact that private payers had QDCs in 

their required HCPCS data files 

beginning January 1, 2013. 

b. Proposed Requirements for the CY 

2016 Payment Determination and 

Subsequent Years 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing to continue our policy 

that the minimum threshold for 

successful reporting be that at least 50 

percent of claims meeting measure 

specifications contain QDCs. We believe 

that 50 percent is a reasonable 

minimum threshold for the initial 

implementation years of the ASCQR 

Program. Because ASCs cannot resubmit claims for the sole purpose of 

adding QDCs (such claims are rejected 

by administrative contractors as 

duplicate claims), we believe 

maintaining this minimum as the 

program matures is reasonable. We 

intend to propose to increase this 

percentage for future payment 

determinations as ASCs, administrative 

contractors, and billing clearing houses 

become more familiar with reporting 

requirements for the ASCQR Program 

and the program itself becomes more 

established. 

As finalized in the FY 2013 IPPS/ 

LTCH PPS final rule, data completeness 

for claims-based quality measures will 

be determined by comparing the 

number of Medicare claims (where 

Medicare is the primary or secondary 

payer) meeting measure specifications 

that contain the appropriate QDCs with 

the number of Medicare claims (where 

Medicare is the primary or secondary 

payer) that would meet measure 

specifications, but did not have the 

appropriate QDCs on the submitted 

claims for the CY 2015 payment 

determination and subsequent years. 

In our initial implementation of 

claims-based measures, we determined 

that some ASCs have relatively small 

numbers of Medicare claims. Thus, for 

the CY 2016 payment determination and 

subsequent years, we are proposing a 

minimum case volume of 240 Medicare 

claims (primary plus secondary payer) 

per year (which is an average of 60 per 

quarter). ASCs that have fewer than 240 

Medicare claims per year during a 

reporting period for a payment 

determination year would not be 

required to participate in the ASCQR 

Program for the subsequent reporting 

period for that subsequent payment 

determination year. For example, if an 

ASC had 200 Medicare claims during 

the calendar year of January 1, 2013 to 

December 31, 2013 (data submitted on 

claims during this year would be 

applied to CY 2015 payment 

determinations), the ASC would not be 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 43669 

15Maintz, J. Defining and Classifying Clinical 

Indicators for Quality Improvement, Inter J Quality 

Health Care (2003) 15(6), 523–530. 

required to participate in the ASCQR 

Program for the CY 2016 payment 

determination (which would use data 

submitted on claims during the January 

1, 2014 to December 31, 2014 calendar 

year). We are proposing a minimum 

case threshold to exempt smaller 

facilities where program 

implementation can be overly 

burdensome. We have selected 240 

Medicare claims per year because 10 

percent of ASCs have less than 240 

Medicare claims per year so this policy 

would exempt only those ASCs with the 

fewest number of Medicare claims. If an 

ASC exceeds this 240 Medicare claim 

threshold in any given calendar year, 

the ASC would be required to 

participate in the ASCQR Program the 

subsequent calendar year and would be 

subject to all program requirements. 

We invite public comment on this 

proposal. 

5. Proposed Requirements for Data 

Submitted Via a CMS Online Data 

Submission Tool 

a. Background for the CY 2015 Payment 

Determination and Subsequent Years 

In the CY 2012 OPPS/ASC final rule 

with comment period, we finalized two 

measures with data submission required 

using an online measure submission 

Web page available at http:// 

www.qualitynet.org beginning with the 

CY 2015 payment determination: Safe 

Surgery Checklist Use and ASC Facility 

Volume Data on Selected ASC Surgical 

Procedures (76 FR 74509). In that final 

rule with comment period, we finalized 

that, for the CY 2015 payment 

determination, ASCs would report data 

for these two measures between July 1, 

2013 and August 15, 2013 for services 

furnished between January 1, 2012 and 

December 31, 2012. 

b. Proposed Requirements for the CY 

2016 Payment Determination and 

Subsequent Years for Measures 

Currently Finalized 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing for the Safe Surgery 

Checklist Use and ASC Facility Volume 

Data on Selected ASC Surgical 

Procedures for which data will be 

submitted via a using an online data 

submission tool available on http:// 

www.qualitynet.org, that the data 

collection time periods would be for 

services furnished during the calendar 

year two years prior to the payment 

determination year and that data would 

be submitted during the January 1 to 

August 15 time period in the year prior 

to the payment determination. Thus, for 

the CY 2016 payment determination, the 

data collection time period for these 

measures would be calendar year 2014 

(January 1, 2014 to December 31, 2014) 

and the data submission time period 

would be January 1, 2015 to August 15, 

2015. We are proposing these changes to 

increase the timeframe for allowing data 

submission for these measures and to 

align the data collection time periods for 

the claims-based and Web-based 

measures. This alignment has the 

additional benefit of providing more 

current data for these Web-based 

measures for a payment determination 

and would prevent the need for 

retrospective data collection by ASCs 

which can be burdensome. 

Under this proposal, no data would be 

collected for calendar year 2013 

(January 1, 2013 to December 31, 2013) 

for the Safe Surgery Checklist Use and 

ASC Facility Volume Data on Selected 

ASC Surgical Procedures because the 

CY 2015 payment determination will 

use data from services performed in the 

January 1, 2012 to December 31, 2012 

time period and, under our proposal, 

the CY 2016 payment determination 

would use data from services performed 

in January 1, 2014 to December 1, 2014. 

We invite public comment on these 

proposals. 

c. Proposed Requirements for the CY 

2016 Payment Determination and 

Subsequent Years for Proposed New 

Measures With Data Submission Via a 

CMS Web-Based Tool 

We are proposing to adopt four 

additional chart-abstracted measures for 

the ASCQR Program and proposing that 

aggregate data (numerators, 

denominators, and exclusions) on all 

ASC patients would be collected via an 

online Web-based tool that would be 

made available to ASCs via the 

QualityNet Web site. 

These measures are: (1) Complications 

within 30 Days following Cataract 

Surgery Requiring Additional Surgical 

Procedures; (2) Endoscopy/Poly 

Surveillance: Appropriate follow-up 

interval for normal colonoscopy in 

average risk patients; (3) Endoscopy/ 

Poly Surveillance: Colonoscopy Interval 

for Patients with a History of 

Adenomatous Polyps—Avoidance of 

Inappropriate Use; and (4) Cataracts: 

Improvement in Patient’s Visual 

Function within 90 Days Following 

Cataract Surgery. We describe our 

timeframes and process for measure 

specifications in section XV.B.5. of this 

proposed rule. 

We wish to clarify that, while we have 

referred to measures where data are 

submitted via a Web-based tool on a 

CMS Web site under our quality data 

reporting programs by the type of 

measure, that is, structural measures 

(measures concerned with attributes of 

where care occurs, such as material 

resources, human resources, and 

organizational structure 15), not all 

quality measures where data are 

submitted via a Web-based tool on a 

CMS Web site are structural measures. 

For example, the four proposed new 

measures proposed are not structural 

measures. Thus, we have refined our 

terminology and now refer to the mode 

of data submission, Web-based, rather 

than the type of measure. 

We are proposing that data collection 

and reporting for these measures would 

begin with the CY 2016 payment 

determination. 

Additionally, we are proposing for 

these measures, and any future 

measures for the ASCQR Program where 

data is submitted via a using an online 

measure submission Web page available 

on http://www.qualitynet.org, that 

beginning with the CY 2016 payment 

determination: 

• The data collection time period 

would be the calendar year (January 1 

to December 31) 2 years prior to the 

affected payment determination year, 

and; 

• Data collected would be submitted 

during the time period of January 1 to 

August 15 in the year prior to the 

affected payment determination year. 

Thus, for the CY 2016 payment 

determination, the data collection time 

period would be January 1, 2014 to 

December 31, 2014 and the data 

submission time period for the collected 

data would be January 1, 2015 to August 

15, 2015. These proposals are in 

alignment with proposals in section 

XV.D.5. of this proposed rule regarding 

data collection and submission time 

frames for measures already adopted for 

the ASCQR Program where data is 

submitted via an online data submission 

tool available on http:// 

www.qualitynet.org. 

We invite public comment on these 

proposals. 

6. Proposed Data Submission 

Requirements for a Measure Reported 

Via the National Healthcare Safety 

Network (NHSN) for the CY 2016 

Payment Determination 

a. Background for the CY 2016 Payment 

Determination 

For the CY 2016 payment 

determination, we finalized the 

adoption of the Influenza Vaccination 

Coverage among Healthcare Personnel 

(NQF #0431), a process of care, 


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healthcare-associated infection (HAI) 

measure, in the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 

74510). We specified that data 

collection for the influenza vaccination 

measure would be via the NHSN from 

October 1, 2014 to March 31, 2015 and 

that details for data submission would 

be made in future rulemaking. 

b. Proposed Requirements for the CY 

2016 Payment Determination 

We are proposing 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 (for detailed enrollment 

(http://www.cdc.gov/nhsn/ambulatorysurgery/enroll.html), set-up (http:// 

www.cdc.gov/nhsn/ambulatory-surgery/ 

setup.html), and reporting (https:// 

sdn.cdc.gov; data certificate required for 

this site) procedures. We believe that 

ASCs would know and be comfortable 

with these procedures because these 

procedures are already used by many 

ASCs to fulfill State-mandated reporting 

of HAI data through the NHSN in at 

least 17 States. 

We are proposing that ASCs would 

have until August 15, 2015 to submit 

their 2014–2015 influenza season data 

to NHSN. We are proposing an August 

15, 2015 deadline because this date is 

the latest date possible for data entry 

that will provide sufficient time for 

CMS to make the CY 2016 payment 

determinations. Further, this date aligns 

the data entry deadline with the 

deadline for the measures entered via 

the CMS online tool. We believe this 

data submission deadline allows ASCs 

to have sufficient time to collect and 

compile the necessary data while taking 

into account ASCQR Program 

considerations. 

We invite public comment on these 

proposals. 

7. ASCQR Program Validation of 

Claims-Based and CMS Web-Based 

Measures 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53641 through 53642), 

consistent with other CMS quality 

reporting programs, we did not require 

validation of claims-based measures 

(beyond the usual claims validation 

activities conducted by our 

administrative contractors) or structural 

(Web-based) measures for the ASCQR 

Program. We also do not require 

validation of claims-based or Web-based 

measures under the Hospital IQR and 

OQR Programs. 

We noted that with regard to the 

current ASCQR Program claims-based 

measures, the number of events 

expected to be reported is small because 

most of the measures are for adverse or 

rare events. In this situation, any 

random selection of cases would require 

a burdensome sample size. Further, we 

expect the accuracy for reported adverse 

events to be high. We stated that, 

because we do not believe at this time 

that any results that could be obtained 

justify the burden associated with a data 

validation process which would 

necessitate an independent validation 

effort, we also are not requiring a data 

validation process for our current 

claims-based measures, and we 

continue to believe so. 

We stated that as we gain more 

experience with the ASCQR Program, 

we will reassess whether a data 

validation process for claims-based and 

measures where aggregate data is 

reported via an online tool is needed. At 

this time, we believe that it would be 

overly burdensome to validate the 

reported data given the inexperience 

that ASCs have with reporting quality 

data to CMS coupled with the low 

incidence of cases for the claims-based 

measures. 

8. Extraordinary Circumstances 

Extensions or Waivers for the CY 2014 

Payment Determination and Subsequent 

Years 

a. Background 

In our experience, there have been 

times when facilities have been unable 

to submit information to meet program 

requirements due to extraordinary 

circumstances that are not within their 

control. It is our goal to not penalize 

such entities for such circumstances and 

we do not want to unduly increase their 

burden during these times. Therefore, in 

the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53642 through 53643), we 

established procedures for extraordinary 

circumstance extension or waiver 

requests for the submission of 

information required under the ASCQR 

Program. We refer readers to that rule 

for a complete discussion of the process. 

b. Proposed Additional Criterion for 

Extraordinary Circumstance Waivers or 

Extensions for CY 2014 

We are proposing that starting in CY 

2014 we may grant a waiver or 

extension to ASCs for data submission 

requirements if we determine that a 

systematic problem with one of our data 

collection systems directly or indirectly 

affected the ability of ASCs to submit 

data. Because we do not anticipate that 

such systematic errors will happen 

often, we do not anticipate granting a 

waiver or extension on this basis 

frequently. If we make the 

determination to grant a waiver or 

extension, we are proposing to 

communicate this decision through 

listserv notice and posting via our 

QualityNet Web site (https:// 

www.qualitynet.org) as we have done in 

the past with CMS-issued waivers 

where a geographic location was 

affected by adverse weather. 

We invite public comment on this 

proposal. 

9. ASCQR Program Reconsideration 

Procedures for the CY 2014 Payment 

Determination and Subsequent Years 

We have established similar processes 

by which participating hospitals can 

submit requests for reconsideration of 

quality reporting program payment 

determinations for the Hospital IQR 

Program and the Hospital OQR Program. 

We believe these reconsideration 

processes have been effective in the 

hospital quality reporting programs and 

such a process would be effective for 

ASC quality reporting. Therefore, in the 

FY 2013 IPPS/LTCH PPS final rule (77 

FR 53643 through 56344), we adopted 

an informal reconsideration process for 

the ASCQR Program for the CY 2014 

payment determination and subsequent 

years modeled after the reconsideration 

processes we implemented for the 

Hospital IQR and Hospital OQR 

Programs. We refer readers to that rule 

for a complete discussion of our 

procedures. 

We are not proposing any changes to 

this informal reconsideration process. 

However, we want to clarify some 

aspects of the informal reconsideration 

review process that we established in 

the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53643 to 53644). As we stated in 

that rule, 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. For those 

ASCs that submit a reconsideration 

request, the reconsideration 

determination would be the final 

ASCQR Program payment 

determination. For those ASCs that do 

not submit a reconsideration request or 

do not submit a reconsideration request 

as specified in the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53643 through 

53644), for example, the request was not 

submitted by the deadline, the CMS 

determination would be the final 

payment determination. There would be 

no appeal of any final ASCQR Program 

payment determination. 


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XVI. Proposed Changes to the 

Conditions for Coverage (CfCs) for 

Organ Procurement Organizations 

(OPOs) (42 CFR Part 486, Subpart G) 

A. Background 

The Organ Procurement Organization 

Certification Act of 2000 (section 701 of 

Pub. L. 106–505) amended section 

371(b)(1) of the Public Health Service 

Act (42 U.S.C. 273(b)(1)) and directed 

the Secretary to establish regulations 

governing the certification and/or 

recertification of Organ Procurement 

Organizations (OPOs). Among other 

things, section 371(b)(1)(D)(ii) of the 

Public Health Service Act, as amended 

by section 701 of Public Law 106–505, 

requires that regulations be established 

for the certification and/or 

recertification process, which (1) ‘‘rely 

on outcome and process performance 

measures that are based on empirical 

evidence obtained through reasonable 

efforts, of organ donor potential and 

other related factors in each service area 

of qualified organ procurement 

organizations,’’ and (2) ‘‘use multiple 

outcome measures as part of the 

certification process.’’ Payment under 

the Medicare and Medicaid programs 

for organ procurement costs may only 

be made if, among other requirements, 

the OPO is certified or recertified as 

meeting the standards to be a qualified 

OPO under section 371(b) of the Public 

Health Service Act and meets the 

performance-related standards 

prescribed by the Secretary, as provided 

for in section 1138(b) of the Social 

Security Act. 

The final rules implementing these 

statutory requirements and setting out 

the Conditions for Coverage (CfCs) for 

OPOs (OPO CfCs) were published in the 

Federal Register on May 31, 2006 (71 

FR 30982). The OPO CfCs are codified 

at 42 CFR Part 486 and set forth the 

certification and recertification 

processes for OPOs. OPOs are required 

to meet their CfCs, which include both 

outcome and process performance 

measures. We refer readers to 42 CFR 

486.316 for the compliance 

requirements for recertification and 42 

CFR 486.318 for the three outcome 

measures. 

In general, with the exception of 

OPOs operating exclusively in 

noncontiguous States, Commonwealths, 

Territories, or possessions, the three 

outcome measures are: (1) A donation 

rate of eligible donors as a percentage of 

eligible deaths; (2) an observed donation 

rate as compared to the expected 

donation rate; and (3) a yield measure, 

which requires that two of the following 

three outcome measures be met: (i) The 

number of organs transplanted per 

standard criteria donor, (ii) the number 

of organs transplanted per expanded 

criteria donors, and (iii) the number of 

organs used for research per donor. For 

OPOs that operate exclusively in 

noncontiguous States, Commonwealths, 

Territories, and possessions, the three 

outcome measures are: (1) A donation 

rate of eligible donors as a percentage of 

eligible deaths; (2) an observed donation 

rate as compared to the expected 

donation rate; and (3) a yield measure, 

which requires that two of the following 

three outcome measures be met: (i) The 

number of kidneys transplanted per 

standard criteria donor; (ii) the number 

of kidneys transplanted per expanded 

criteria donors; and (iii) the number of 

organs used for research per donor. All 

of the yield measures include pancreata 

used for islet cell transplantation as 

required by section 371(c) of the Public 

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

The first and third outcome measures 

are compared to a national mean. The 

second outcome measure is calculated 

by the Scientific Registry of Transplant 

Recipients (SRTR). 

B. Proposed Regulatory Changes 

We are proposing to modify the 

requirements in § 486.316(a)(1) and (b) 

and the introductory text of § 486.318(a) 

and (b) of the regulations so that all of 

the OPOs must meet two out of the three 

outcome measures to be recertified. We 

have become concerned about the 

requirement to automatically decertify 

OPOs if they fail to meet all three of the 

outcome measures. We now believe that 

the requirement that each OPO meet all 

three outcome measures as set forth in 

§ 486.318 is unnecessarily stringent. For 

that reason, we are proposing to modify 

the outcome measure requirement so 

that OPOs would be required to meet 

two of the three outcome measures. 

The majority of all of the OPOs are 

meeting all three of the outcome 

measures. From our experience with 

OPOs, we have observed that many of 

the OPOs that are failing to meet all 

three outcome measures are meeting 

two of the three measures and are in 

compliance with all of the other 

requirements in the OPO CfCs; that is, 

the process performance measures set 

forth at §§ 486.320 through 486.348. We 

believe these OPOs are performing 

satisfactorily and should not be 

decertified based solely on their failure 

to meet one outcome measure. This 

belief is based not only on our 

observation and monitoring of these 

OPOs’ performance, but also on some 

concerns with the outcome measures. 

From the feedback we have received 

from the OPO community, there may be 

some variance in how OPOs are 

determining the ‘‘eligible deaths’’ in 

their donation service area (DSA), 

which is the denominator in the first 

outcome measure. Various members of 

the OPO community have indicated that 

the same donor could be counted as an 

eligible donor by one OPO, but not 

another OPO. This is apparently due to 

differences in how the definition of 

‘‘eligible death’’ is being clinically 

interpreted and implemented. Another 

reason for this variance could be how 

the determination is made. One member 

of the OPO community stated that, in 

one OPO, that determination may be 

made by a group of clinical staff, while 

in another, it is made by the data entry 

person. Therefore, we are concerned 

that this apparent variance may be 

adversely affecting the performance of 

some OPOs on the outcome measures. 

We also are concerned that the 

current measures may not be accurately 

allowing for adjustment of various 

factors. OPOs’ DSAs vary substantially 

in their demographics. For example, the 

first of the possible three yield outcome 

measures involves standard criteria 

donors. However, many individuals in 

the OPO community have indicated that 

there is a considerable difference 

between standard criteria donors (SCDs) 

around the country and that this could 

explain at least some of the differences 

in some of the OPOs’ yield measures. 

Because a SCD is anyone who meets the 

eligibility criteria for an eligible donor 

and does not meet the criteria to be an 

expanded criteria donor or a donor after 

cardiac death, the demographics of an 

OPO’s DSA could have a significant 

impact on the organ yield that could 

reasonably be expected in that DSA. For 

example, if a particular DSA has an 

older potential donor population or one 

that is typically not as healthy, this 

could significantly impact the organ 

yield in that DSA as compared to a DSA 

with a population of generally more 

healthy individuals. 

We also have received anecdotal 

reports that OPOs may be making 

clinical decisions based on their 

assessment of their own performance on 

the outcome measures. In particular, 

there may have been cases when OPOs 

did not pursue certain potential donors 

with multiple comorbidities because 

they believed that they would only be 

able to procure one or two organs from 

that potential donor. If an OPO is 

concerned about its performance on the 

yield measures specified under 

§ 486.318(a)(3) and (b)(3), it may be 

advantageous to its performance on the 

yield measures to forgo a potential 

donor rather than procure only one 

organ and worsen its performance on 

the yield measures. This would result in 


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not only one potentially transplantable 

organ being averted, but consequently a 

potential transplant recipient not 

receiving a transplant. This could have 

a significant impact on the potential 

transplant recipient waiting for 

transplants nationwide. This is 

especially problematic in the case of 

extra-renal organs for which there is no 

viable alternative to an organ transplant. 

We are proposing to hold the OPOs 

accountable for meeting two out of three 

current outcome measures. We believe 

this will avoid the automatic 

decertification of OPOs that are 

performing satisfactorily. Therefore, we 

are proposing to revise paragraphs (a)(1) 

and (b) of § 486.316 and the 

introductory text of paragraphs (a) and 

(b) of § 486.318 of the regulations to 

require that OPOs meet at least two out 

of the three outcome measures instead 

of the requirement to meet all three 

outcome measures. 

In addition to soliciting public 

comments on the proposals we discuss 

above, we are soliciting public 

comments on the current outcome 

measures in the OPO CfCs, as well as 

public comments on any other potential 

empirically based outcome measures for 

OPOs that might be used in the future. 

We would especially appreciate public 

comments on the new yield measure 

that is produced by the SRTR and is 

being used by the Organ Procurement 

and Transplantation Network (OPTN). 

The OPTN recently adopted this new 

yield measure that calculates the 

expected number of organs transplanted 

for each donor based on multiple donor 

risk factors. The measure uses more 

extensive risk factors that mitigate the 

differences in the donor pool of the each 

DSA. This allows an OPO’s performance 

to be measured in terms of the expected 

outcomes for the DSA based upon the 

expected outcomes for individual 

donors within the DSA and not against 

a national average. 

When comparing OPOs currently 

identified to be below expected 

performance levels by the OPTN matrix 

and the OPOs identified as below 

expected performance levels by the 

CMS measures, we have noted that the 

lists are not the same. If the new OPTN 

measure is a more accurate reflection of 

performance as measured by the organs 

transplanted for each donor in each 

individual DSA (as is accepted by the 

HRSA and the OPO community), this 

could mean that we may take 

inappropriate enforcement action when 

using the current yield measure. 

Therefore, we are specifically soliciting 

public comments on this new OPTN 

yield measure. Specific details on the 

risk adjustment models used for this 

measure are located on the SRTR Web 

site at: http://www.srtr.org/csr/current/ 

Tech_notes.aspx. 

In summary, we are proposing to 

revise §§ 486.316 and 486.318 of our 

regulations by modifying the current 

outcome measures requirement to 

require that OPOs must meet two out of 

the three outcome measures instead of 

all three outcome measures. 

XVII. Proposed Revisions of the Quality 

Improvement Organization (QIO) 

Regulations 

A. Legislative History 

The Utilization and Quality Control 

Peer Review Program was originally 

established by sections 142 and 143 of 

the Tax Equity and Fiscal Responsibility 

Act (TEFRA) of 1982 (Pub. L. 97–248). 

The name of the individual 

organizations covered under the 

program was ‘‘Peer Review 

Organizations.’’ In a final rule with 

comment period published in the 

Federal Register on May 24, 2002 (67 

FR 36539), we revised the regulatory 

references to these organizations to 

‘‘Quality Improvement Organizations’’ 

(QIOs)—without changing the definition 

or functions of the QIOs—to reflect the 

program’s shift from a complianceoriented focus to one emphasizing 

quality improvement. There have been a 

number of amendments to the QIO 

statute over the years, but they have not 

resulted in any substantial changes in 

how the program operates. However, in 

section 261 of the recently enacted 

Trade Adjustment Assistance Extension 

Act of 2011 (TAAEA) (Pub. L. 112–40), 

Congress authorized numerous changes 

to the original legislation to modernize 

and improve the QIO Program and 

included additional flexibility for the 

Secretary in the administration of the 

QIO Program. This legislation also 

updated the nomenclature from the Peer 

Review Organization Program to the 

QIO Program and included amendments 

to update the terminology of the 

program (replacing ‘‘peer review 

organization’’ and ‘‘utilization and 

quality control peer review 

organization’’ with ‘‘quality 

improvement organization’’ in relevant 

provisions of the Act.) 

Specifically, section 261 of the 

TAAEA increased the flexibility 

available to the Secretary by updating 

the statutory definition of the 

organizations that can contract with 

CMS as QIOs (as described in section 

1152 of the Act), changing certain 

contract terms and processes by which 

the Secretary contracts with QIOs (as 

described in section 1153 of the Act), 

and broadening the Secretary’s authority 

to delineate the scope of work for QIOs 

(as described in section 1154 of the Act). 

The regulations that implement 

sections 1152 and 1153 of the Act are 

codified at 42 CFR Part 475; Subpart C 

of Part 475 includes provisions that 

specifically govern the types of 

organizations eligible to become QIOs. 

The regulations that implement section 

1154 of the Act and much of the work 

performed by QIOs are codified at 42 

CFR Part 476. Section 1154 of the Act 

states that much of the work QIOs will 

perform is subject to the terms of their 

contracts with CMS. We note that, 

consistent with this provision, the 

contracts and requests for proposals 

used to contract with QIOs include 

significant detail on the work performed 

by the QIOs. 

B. Basis for Proposals 

Section 261 of the TAAEA eliminated 

certain limitations specified in sections 

1152 and 1153 of the Act that appear in 

several existing provisions in Part 475. 

In order to eliminate these limitations in 

the regulations and fully utilize the 

flexibility provided as a result of the 

statutory changes, we are proposing 

regulatory changes to implement the 

statutory amendments. These changes 

involve, among other things, changing 

the eligibility standards for an entity to 

be awarded a QIO contract and defining 

specific terms that will be used to 

describe QIOs and their quality 

improvement work. We are proposing to 

change the terminology related to the 

geographic area in which a QIO must 

perform its different functions. As the 

statute authorizes, the QIO area can now 

be any geographic area CMS believes 

will be most effective in accomplishing 

its goals for the QIO contract. We also 

are proposing to revise provisions 

regarding the eligibility of a health care 

facility association to be a QIO and to 

eliminate an obsolete provision at 

§ 475.106 regarding the eligibility of 

payor organizations to be QIOs. The 

statutory amendments also include a 

change in the contract period for a QIO, 

extending it from 3 to 5 years. Although 

we did not previously update this 

regulation with a prior statutory change 

in the QIO contract term from 2 years 

to 3 years, we are now including the 5- 

year time period in the proposed rule as 

a technical correction in order to bring 

the regulations up to date with the 

amended statutory timeframe. We 

believe that these changes would be 

instrumental in improving aspects of the 

QIO’s review activities and would 

enable us to improve the program by 

ensuring that QIOs are better able to 

meet the needs of Medicare 

beneficiaries. The specific proposed 


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changes and corrections are explained 

in more detail in the following sections. 

QIOs work at the grassroots level of 

American health care delivery systems 

in all 50 States, the District of Columbia, 

and most U.S. Territories in order to 

improve care for Medicare beneficiaries. 

QIOs originally reviewed Medicare 

services to determine whether they were 

reasonable and medically necessary, 

met professionally recognized standards 

of care, and were provided in the 

appropriate setting. However, the QIO 

contract has evolved over the course of 

the years as the literature supports the 

concept that defects in the health care 

process are rarely related to the 

performance of one individual but to a 

system of care with multiple 

opportunities for failure. Attempts to 

improve quality through inspection 

methods, that is, by performing one 

chart review at a time, are less likely to 

yield the systemic improvements in care 

for Medicare beneficiaries that can come 

from analyzing data in order to identify 

problems, developing a plan of action, 

monitoring the result through data 

driven processes, and making changes 

as needed based on those results. 

The qualifications and expertise 

required to execute these quality 

improvement initiatives have evolved to 

now include expertise from disciplines 

such as physicians, nurses, other 

clinicians, health care leaders, experts 

in statistics and health care system 

reengineering, and many other kinds of 

professionals. We intend to interpret our 

proposed regulation so as not to prohibit 

the use of professionals in the health 

care industry that are not licensed 

physicians or certified practitioners. We 

recognize/anticipate that these other 

professionals may offer valuable insight 

to QIOs on ways to enhance the 

performance of their QIO functions, as 

well as provide services designed to 

help QIOs maximize their impact. We 

propose to adopt this approach to 

further our goal that the regulations 

under 42 CFR Part 475 reflect a 

multidisciplinary approach to the 

performance of QIOs. Therefore, the 

proposed standards here would not be 

a barrier to the inclusion of any other 

nonphysician or nonpractitioner 

professional that CMS or the QIO deems 

appropriate for the successful 

performance of QIO functions. Patients 

and their families also play a critical 

role in the success of quality 

improvement initiatives. Amendments 

to the Act made by the TAAEA would 

accommodate the evolution of quality 

improvement and would allow CMS the 

flexibility to expand the types of 

organizations eligible to provide multidisciplinary support in quality 

improvement. We seek with this 

proposal to ensure that the regulations 

governing QIO eligibility reflect the 

increased flexibility afforded by the 

TAAEA. This will help us ensure that 

we can administer the QIO Program in 

a manner that reflects contemporary 

practices and allows us to include the 

appropriate individuals and entities in 

working toward improving care 

processes. 

As described in section 1154 of the 

Act, QIOs perform many specific review 

functions that are necessary to ensure 

the quality of care provided to Medicare 

beneficiaries. The addition to section 

1154 of subparagraph (a)(18) by the 

TAAEA explicitly provides the 

Secretary with the broad authority to 

require that QIOs perform any 

additional activities the Secretary 

determines may be necessary for the 

purposes of improving the quality of 

Medicare services. Based on this 

authority, QIOs will, as a general matter, 

be required to represent CMS as 

‘‘change agents’’ that work at local 

levels in their individual QIO 

geographic areas. Through the 

contracting process, different QIOs 

might now be required to work on one 

or more different tasks; that is, all QIOs 

might no longer be required to handle 

the complete and broad range of QIO 

activities within their geographic areas 

but to focus on particular tasks of QIO 

work. For example, QIOs might be 

required to offer to a variety of 

stakeholders the knowledge and 

resources for improving health quality, 

efficiency, and value designed to 

improve the care provided to Medicare 

beneficiaries. Stakeholders might 

include providers, practitioners, 

patients, and others who are interested 

in improving care. 

As under the current program, QIOs 

will be required to base their work on 

clinical evidence and some may be 

required to generate reliable data about 

clinical performance. QIOs may also 

serve as independent, objective, and 

collaborative partners that support CMS’ 

mission to improve health care quality 

in the Medicare program (which, in 

turn, has the potential to greatly benefit 

the broader health care community) by 

leveraging the best efforts of all health 

care stakeholders, including patients 

and their families. While the goal of the 

QIOs is to benefit Medicare 

beneficiaries, the work of the QIOs may 

also, as a secondary matter, benefit other 

patients and residents who receive 

medical care. In this context, we are 

seeking to ensure that the regulations 

governing QIO eligibility reflect 

contemporary practices and include 

those that can help to improve care 

processes for Medicare beneficiaries. We 

are proposing to do so by removing 

restrictions that are no longer statutorily 

mandated and including requirements 

that reflect the current goals of the QIO 

program. 

One such contemporary practice is 

the inclusion of patients and families in 

health care quality improvement. As a 

result, we have added to the QIO 

requirements a new focus on patient 

and family engagement and patient and 

family inclusion in quality 

improvement initiatives. 

We believe that the TAAEA 

legislation allows us a great deal of 

flexibility in how we restructure the 

work that QIOs perform and the types 

of organizations qualified to perform 

that work. We intend to continually 

examine methods for providing care to 

beneficiaries in a way that maximizes 

efficiency, eliminates waste, decreases 

harm, lowers costs through 

improvement, and engages patients 

more effectively. One way to continue 

improving the quality, efficacy, and 

efficiency of care in the Medicare 

program is to reconsider how QIOs 

provide services to determine whether 

the current longstanding contract 

structure and eligibility requirements 

best fit the continually evolving science 

related to driving quality improvement. 

The changes we are proposing are 

intended to ensure that we have the 

flexibility we need to reconsider certain 

aspects of the QIO program structure in 

response to experience and changes in 

research findings and the health care 

community’s approach to quality 

improvement. 

The regulatory proposals here focus 

on the primary functional 

responsibilities of a QIO as a basis for 

determining eligibility. These are case 

review (which includes the statutory 

minimum standards) and quality 

improvement initiatives. We believe 

that the proposed eligibility and 

contracting standards for QIOs focus on 

the necessary minimum requirements 

for successful operation of the QIO 

Program. 

C. Proposed Changes to the 

Nomenclature and Regulations Under 

42 CFR Parts 475 and 476 

In this proposed rule, we set forth 

proposals for updating the 

nomenclature and the definition of 

physician in both 42 CFR Parts 475 and 

476 and for the partial deletion and 

revision of the regulations under 42 CFR 

Parts 475. Currently, Part 475 includes 

definitions and standards governing 

eligibility and the award of contracts to 

QIOs. We are proposing to replace 

nomenclature that has been amended by 


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the TAAEA, revise the existing 

definition in Part 475, Subpart A and 

Part 476, Subpart A of the term 

‘‘physician’’, add new definitions to Part 

475, Subpart A as necessary to support 

proposed new substantive provisions in 

Part 475, Subpart C, and revise, add, 

and replace some substantive provisions 

in Part 475, Subpart C. 

1. Proposed Nomenclature Changes 

In order to conform the regulations to 

the nomenclature changes made by 

section 261 of the TAAEA, we are 

proposing nomenclature changes where 

necessary in 42 CFR Part 475. We are, 

for example, proposing to revise the 

heading of Subpart C of Part 475 to read 

‘‘Subpart C—Quality Improvement 

Organizations’’ and to replace the term 

‘‘peer review’’ with ‘‘quality 

improvement.’’ In each proposed 

provision in Part 475, Subpart C, we use 

the new nomenclature where 

appropriate. 

In addition, Part 476 is currently 

entitled ‘‘Utilization and Quality 

Control Review,’’ and Subpart C of Part 

476 is entitled ‘‘Review Responsibilities 

of Utilization and Quality Control 

Quality Improvement Organizations 

(QIOs),’’ both of which reflect the 

terminology used before enactment of 

the TAAEA. In order to reflect the 

nomenclature changes made by the 

TAAEA, we are proposing to revise the 

title of Part 476 to read: ‘‘Part 476— 

Quality Improvement Organization 

Review’’ and the title of Subpart C of 

Part 476 to read: ‘‘Subpart C—Review 

Responsibilities of Quality Improvement 

Organizations (QIOs).’’ 

2. Proposals To Add and Revise 

Definitions 

We are proposing changes to 

§§ 475.101 through 475.107 to reflect 

new eligibility standards for an entity to 

be awarded a QIO contract and to use 

specific terms that will be used to 

describe QIOs and their quality 

improvement work. In connection with 

these changes, we are proposing to add 

definitions of ‘‘case review’’, and ‘‘QIO 

area,’’ add cross-references to 

definitions in § 476.1 of ‘‘practitioner’’ 

and ‘‘quality improvement initiative,’’ 

and revise the definition of ‘‘physician’’ 

under § 475.1 and § 476.1, as discussed 

below. We are soliciting public 

comments on our proposed definitions. 

We are proposing to define ‘‘case 

reviews’’ to mean ‘‘the different types of 

reviews that QIOs are authorized to 

perform. Such reviews include, but are 

not limited to: (1) Beneficiary complaint 

reviews; (2) general quality of care 

reviews; (3) Emergency Medical 

Treatment and Labor Act (EMTALA) 

reviews; (4) medical necessity reviews, 

including appeals and DRG validation 

reviews; and (5) admission and 

discharge reviews.’’ We are providing 

this list to illustrate the range and scope 

of case reviews but note that the Act and 

other provisions in Chapter IV of Title 

42 of the Code of Federal Regulations 

require additional reviews and that the 

Secretary, pursuant to section 

1154(a)(18) of the Act, may require 

additional reviews under the contracts 

awarded to QIOs. 

We are proposing to expand the 

definition of ‘‘physician’’ beyond its 

existing definition under § 475.1 and 

§ 476.1 to reflect the definition in 

section 1861(r) of the Act, as well as to 

cover several additional characteristics 

that are unique to the QIO Program. We 

are proposing the following definition of 

physician for both Parts 475 and 476: A 

physician is ‘‘(1) A doctor of medicine 

or osteopathy, a doctor of dental surgery 

or dental medicine, a doctor of podiatry, 

a doctor of optometry, or a chiropractor 

as described in section 1861(r) of the 

Act; (2) An intern, resident, or Federal 

Government employee authorized under 

State or Federal law to practice as a 

doctor as described in paragraph (1) 

above; and (3) An individual licensed to 

practice as a doctor as described in 

paragraph (1) above in any Territory or 

Commonwealth of the United States of 

America.’’ We believe these revisions 

are necessary to eliminate references in 

paragraphs (1) and (2) of the definition 

in § 475.1 to physicians licensed in the 

State in which the QIO is located, in 

order to reflect the fact that a QIO’s 

contract area may no longer be limited 

to one State. In addition, we are 

proposing to amend paragraph (3) of the 

definition in § 475.1 so that it no longer 

applies to just American Samoa, the 

Northern Mariana Islands, and the Trust 

Territory of the Pacific Islands. We are 

proposing to enlarge this part of the 

definition to apply to physicians 

licensed to practice in all U.S. 

Territories and Commonwealths to more 

closely align with the Secretary’s 

flexibility in awarding QIO contracts 

granted by the TAAEA. We are 

soliciting public comments on whether 

our proposed definition is sufficiently 

inclusive and appropriate to achieve 

these goals. We also are proposing to 

define the term ‘‘practitioner’’ and 

‘‘quality improvement initiative’’ for 

purposes of Part 475 by crossreferencing the existing definitions at 42 

CFR 476.1. 

In connection with our proposal to 

revise the requirements that an entity 

must meet to serve as a QIO, we also are 

proposing to define, in § 475.1, the 

terminology related to the geographic 

area in which a QIO must perform its 

different functions. Currently, the 

regulations in Part 475 do not define 

this area, but do refer to a QIO’s ‘‘review 

area’’ in a number of places in existing 

text at §§ 475.102 and 475.103 and ‘‘QIO 

area’’ in §§ 475.1, 475.105(a), and 

475.107(a) and (d). The term ‘‘review 

area’’ was used to refer to the geographic 

area in which each QIO performs its 

review functions under its contract with 

CMS while the term ‘‘QIO area’’ was 

used to refer to the geographic area 

covered by the contract. We are 

proposing to define and use the term 

‘‘QIO area’’ to mean ‘‘the defined 

geographic area, such as the State(s), 

region(s), or community(ties), in which 

the CMS contract directs the QIO to 

perform.’’ Our addition of this proposed 

definition is meant to reflect the 

flexibility afforded to us by the TAAEA 

to establish a QIO area as the geographic 

area we believe will be most effective in 

accomplishing the goals of a particular 

QIO contract. In addition, the change in 

terminology from ‘‘QIO review area’’ to 

‘‘QIO area’’ is intended to emphasize 

that the term can encompass more than 

just ‘‘review’’ functions. With this 

change, we intend to not only broaden 

the scope for choosing an appropriately 

sized geographic area, but also to 

identify capability and functionality as 

the primary way to identify the 

appropriate organization to perform 

specific QIO contract functions. 

3. Proposals Relating To Scope and 

Applicability of Subpart C of Part 475 

We believe that the scope and 

applicability provision for 42 CFR Part 

475, Subpart C should reflect that the 

statutory authority for the QIO program 

was amended by the TAAEA, in 

particular the definition of a QIO and 

the eligibility and contracting standards. 

We are proposing to replace the 

regulatory language in § 475.100 with 

new language that explicitly 

acknowledges that the regulations in 

Subpart C implement sections 1152 and 

1153(b) and (c) of the Act as amended 

by section 261 of the TAAEA. In 

addition, we are proposing to include 

the reference to section 1153(c) of the 

Act to reflect our proposal, in 

§ 475.107(c), to include the 5-year 

contract term that now appears in 

amended section 1153(c)(3) of the Act. 

The proposed revisions to §§ 475.101 

through 475.107 are intended to allow 

organizations that currently perform 

QIO work to compete for new QIO 

contracts, while expanding eligibility to 

additional entities under the new 

authority granted by the TAAEA. As the 

program evolves, we will focus contract 

determinations on the ability of 


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organizations to perform QIO functions 

as stated in the Request for Proposal 

(RPF). We are soliciting public 

comments on whether our proposed 

regulation text for Subpart C of Part 475 

sufficiently meets this goal as well as 

our explained goal to implement the 

flexibility provided by Congress in the 

TAAEA amendments. 

4. Proposals Relating to Eligibility 

Requirements for QIOs (§§ 475.101 

through 475.106) 

Prior to the TAAEA amendments, 

section 1152 of the Act defined a QIO 

as an entity that: (1) Is composed of a 

substantial number of licensed doctors 

of medicine and osteopathy engaged in 

the practice of medicine or surgery in 

the area where the QIO will perform or 

has available the services of a sufficient 

number of licensed doctors of medicine 

or osteopathy engaged in the area where 

the QIO will perform to assure adequate 

review of the services provided by 

various medical specialties and 

subspecialties; (2) is able, in the 

judgment of the Secretary, to perform 

review functions in a manner consistent 

with the efficient and effective 

administration of the QIO statute and to 

perform reviews of the pattern of quality 

of care in an area of medical practice 

where actual performance is measured 

against objective criteria which define 

acceptable and adequate practice; and 

(3) has at least one individual who is a 

representative of consumers on its 

governing body. In section 261 of the 

TAAEA, Congress replaced the first two 

of these requirements with requirements 

that a QIO: (1) Be able, as determined 

by the Secretary, to perform QIO 

functions in a manner consistent with 

the efficient and effective 

administration of Part B of Title XI and 

Title XVIII of the Act; and (2) have at 

least one individual who is a 

representative of health care providers 

on its governing body. Congress left 

unchanged the third requirement in 

section 1152(3) of the Act that a QIO 

have at least one individual 

representing consumers on its governing 

body. We have interpreted and the 

regulations in Part 475 implement the 

statutory definition in section 1152 of 

the Act as setting minimum eligibility 

requirements for an entity to hold a QIO 

contract. Our regulatory proposal in this 

proposed rule would implement the 

changes in the QIO eligibility standards 

made by the TAAEA. 

We recognize the vital role of 

physicians in the work of the QIOs and 

also believe that some of the functions 

of the QIOs necessitate a 

multidisciplinary approach to quality 

improvement, inclusive of expertise 

from a wide breadth of disciplines. With 

the elimination of the requirement that 

a QIO be sponsored by or have access 

to physicians in a specific organization 

structure, we are proposing to delete the 

eligibility requirements in §§ 475.101 

through 476.104 related to the concepts 

of ‘‘physician-sponsored organization’’ 

and ‘‘physician-access organization.’’ In 

light of the current multidisciplinary 

approach to QIO activities, we believe 

that expanding the existing eligibility 

requirements beyond ‘‘physiciansponsored organizations’’ and 

‘‘physician-access organizations’’ will 

both better reflect the flexibility 

Congress provided in the TAAEA 

amendments to section 1152 of the Act 

and be inclusive of the 

multidisciplinary approach that 

currently exists in contemporary quality 

improvement. 

In addition, to implement the 

language added by section 261 that a 

QIO must be able, as determined by the 

Secretary, to perform the functions 

under the Act consistent with the 

purposes of the QIO program and the 

Medicare program, we are proposing 

language in §§ 475.101 through 475.103 

to distinguish the requirements for QIOs 

to be able to perform case reviews from 

the requirements for QIOs to be able to 

perform quality improvement 

initiatives. We are soliciting public 

comments on our focus on these 

primary QIO functions and how this 

functional approach will ensure that 

QIOs are appropriately selected for 

contract award. We are proposing to 

vacate and reserve existing §§ 475.104 

and 475.106. 

a. Eligibility To Be Awarded a QIO 

Contract (§ 475.101) 

As proposed here, revised § 475.101 

would no longer reference ‘‘physiciansponsored organizations’’ and 

‘‘physician-access organizations,’’ 

would retain the requirement that the 

governing body of the QIO include at 

least one consumer representative, and 

would include new eligibility standards 

for an organization to be awarded a QIO 

contract based on the TAAEA 

amendments to section 1152 of the Act. 

First, in paragraph (a), we are proposing 

that a QIO must have a governing body 

that includes at least one representative 

of health care providers and one 

representative of consumers as required 

by section 1152(2) and (3) of the Act as 

amended by the TAAEA. Second, in 

paragraph (b), we are proposing to 

interpret and implement the amended 

language in section 1152(1) of the Act 

that an organization awarded a QIO 

contract must be able, as determined by 

the Secretary, to perform the functions 

under the Act consistent with the 

purposes of the QIO program and the 

Medicare program by requiring that an 

organization demonstrate the ability to 

meet eligibility requirements and 

perform the functions of a QIO. Our 

proposal characterizes the functions of a 

QIO as the contractual requirements for 

QIOs to perform activities that are built 

into the request for proposals used to 

award QIO contracts and the ability to 

perform case reviews and/or quality 

improvement initiatives as described in 

these regulations. In our view, these 

broad categories encompass the work 

QIOs are required to perform under 

section 1154 of the Act. Our proposal 

reflects a different approach to 

structuring the QIO requirements than 

the current rule; we are proposing to 

focus on the functions the organization 

performs under the QIO contract instead 

of the structure of the organization 

itself. As discussed in more detail below 

in connection with proposed §§ 475.102 

and 475.103, this function-focused 

approach also reflects both the 

important role of physicians and a 

multidisciplinary approach for the two 

primary functions of the QIO contracts: 

(1) Case reviews and (2) quality 

improvement initiatives. These two 

primary functions are based on the 

statutory requirements for the functions 

QIOs must perform and our current 

approach of using quality improvement 

initiatives to improve the quality of care 

provided to Medicare beneficiaries. By 

referencing the contractual requirements 

set forth in the requests for proposals, 

we are proposing to incorporate the 

flexibility provided in section 1154(a) to 

require a QIO to perform one or more of 

the listed QIO functions and section 

1154(a)(18) of the Act for the inclusion 

of additional activities for QIOs to 

perform when we determine that they 

are necessary to improve the quality of 

care for Medicare beneficiaries. 

Finally, in paragraph (c), we are 

proposing that a QIO must 

demonstration the ability to actively 

engage beneficiaries, families, and 

consumers, as applicable, in case 

reviews and quality improvement 

initiatives. Although this is not a 

specifically required qualification for a 

QIO under sections 1152 and 1153 of 

the Act, we are proposing this 

requirement because it reflects the 

multidisciplinary and multistakeholder 

approach to QIO functions that we 

intend to establish. Health care costs 

have doubled as a share of the economy 

over the past three decades, causing 

stress on beneficiaries, families, 

employers, and government budgets. We 

believe that motivating beneficiaries to 


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become involved in their own health 

care may reduce waste and ultimately 

improve the quality and efficiency of 

health care. One important way to 

accomplish this is by educating 

beneficiaries, their families, providers, 

and the public about the importance of 

identifying and pursuing value in health 

care. Value represents the best possible 

quality of health care at the most 

reasonable cost. A major component of 

a successful value initiative depends on 

a QIO’s understanding of patient and 

family goals, expectations, motivations, 

and aspirations. Our inclusion of the 

requirement that a QIO have the ability 

to understand the needs of beneficiaries, 

families, and consumers and actively 

engage them in health care decisions 

emphasizes our commitment to patient 

and family engagement as an essential 

component of the QIO program. 

We are soliciting public comments on 

whether our proposal sufficiently 

incorporates the statutory flexibility, 

identifies the goals of the QIO eligibility 

requirements, and provides guidance on 

how organizations will be determined 

eligible for QIO contracts. 

b. Eligibility Requirements for QIOs to 

Perform Case Reviews (§ 475.102) 

In this proposed rule, we are 

proposing to list the type of factors CMS 

will use to determine that an 

organization has demonstrated its 

ability to perform case reviews. We do 

not consider this list to be 

comprehensive, but an indication of 

what we intend to focus on. The list of 

factors emphasizes the importance of 

QIOs having access to qualified 

physicians and practitioners for this 

purpose. In paragraph (a) of § 475.102, 

we are proposing that CMS will 

determine that an organization has 

demonstrated the ability to perform case 

reviews based on factors related to how 

the QIO work will be performed and the 

underlying capabilities necessary for 

performing well. Under our proposal, 

CMS will consider such factors as (1) 

the organization’s proposed processes, 

capabilities, quantitative and/or 

qualitative performance objectives, and 

case review methodology; (2) the 

organization’s proposed involvement of 

and access to physicians and 

practitioners in the QIO area with 

appropriate expertise and specialization 

in the areas of health care related to case 

reviews; (3) the organization’s ability to 

take into consideration urban versus 

rural and regional characteristics in the 

health care setting where the care under 

review was provided; (4) the 

organization’s ability to take into 

consideration evidence-based national 

clinical guidelines and professionally 

recognized standards of care; and (5) the 

organization’s access to qualified 

information technology (IT) expertise. In 

this paragraph, we intend to propose 

these general factors and standards CMS 

may use to establish the minimum level 

of resources and skills the organization 

must have in order to demonstrate that 

its processes and capabilities are 

satisfactory and meet the purposes of 

the QIO program. 

In paragraph (b) of § 475.102, we are 

proposing that CMS may consider 

characteristics such as the geographic 

location, size and prior experience of an 

organization in order to determine 

whether the organization has the 

capability to perform case reviews. In 

terms of prior experience, we are 

proposing that CMS will gauge the 

significance of an organization’s 

experience based on how relevant it is 

to the tasks that CMS intends to include 

in the QIO contract and the goals CMS 

intends to accomplish. While we intend 

to emphasize the importance of prior 

experience, we do not intend to limit 

the evidence an organization may 

present to us to demonstrate its 

capability to perform case reviews. 

Therefore, we have included language 

in proposed § 475.102(b) to indicate that 

CMS can consider a variety of factors, as 

indicated in section 1153(b)(4) of the 

Act. 

Finally, we are proposing to include 

in paragraph (c) of § 475.102 

clarifications to the text that reflect the 

existing regulatory text at § 475.104(d), 

with some minor modifications. The 

existing provision states that a State 

government that operates a Medicaid 

program will be considered incapable of 

performing utilization and quality 

review functions in an effective manner, 

unless the State demonstrates to CMS’ 

satisfaction that it will act with 

complete independence and objectivity. 

As proposed, the provision at 

§ 475.102(c) maintains the substance of 

the existing rule while making it clear 

that the scope of its review will be 

limited to case reviews. In order to do 

this, we have proposed to replace the 

term ‘‘utilization and quality review 

functions’’ with the term ‘‘case 

reviews.’’ In addition, we are proposing 

to revise the language to clarify that the 

objectivity and independence 

mentioned in the existing regulation 

relate to objectivity and independence 

from the Medicaid program, as we 

believe there is an inherent conflict of 

interest that arises from the State’s 

financial interest in the administration 

of that program. 

Our proposal at § 475.102 implements 

the statutory responsibility for the 

Secretary to determine whether an 

organization can perform the QIO 

function of case reviews in a manner 

that is consistent with the efficient and 

effective operation of the QIO Program 

and the Medicare Program. We are 

soliciting public comments on whether 

the regulation text should incorporate 

the standards for QIOs that we propose 

to use and the factors we intend to 

consider when determining whether 

those standards have been met. 

We are proposing to delete and 

reserve all of § 475.104 in light of our 

proposed changes to § 475.102. We 

believe that aspects of § 475.104 that we 

have not proposed to incorporate into 

§ 475.102 are obsolete due to the 

revisions in the TAAEA legislation. 

c. Eligibility Requirements for QIOs to 

Conduct Quality Improvement 

Initiatives (§ 475.103) 

Case reviews are concerned with care 

that was provided, or should be 

provided, based on the facts of a 

particular case, concerning a particular 

episode of care or concerning a 

particular beneficiary, or both. By 

contrast, the vast majority of quality 

improvement initiatives are not initiated 

in the same manner as case reviews. 

Rather, quality improvement initiatives 

are based on patterns of care that reveal 

problems that are more systematic in 

nature, such as those that result in 

inefficiency, waste, or high cost, or that 

could potentially harm beneficiaries. 

These patterns of care can reflect 

problems that might impact large 

segments of the population, or single 

episodes of care where the impact might 

affect fewer people, but the QIO is 

concerned about the health and safety of 

the public due to the severity of the 

quality of care issue. We are proposing 

under revised § 475.103(a) that CMS 

will determine if an organization is 

capable of performing quality 

improvement initiatives using factors 

similar to those listed for QIOs that will 

perform case reviews. In paragraph (a), 

we are proposing a list of the type of 

factors CMS will use to determine that 

an organization has demonstrated its 

ability to perform quality improvement 

initiatives. We do not consider this list 

to be comprehensive, but an indication 

of what we intend to focus on. 

Specifically, in revised paragraph 

§ 475.103(a), we are proposing that CMS 

will determine that an organization has 

demonstrated the ability to perform 

quality improvement initiatives based 

on factors tied to how the QIO work will 

be performed and the underlying 

capabilities necessary for performing 

well. Under our proposal, CMS will 

consider such factors as (1) The 

organization’s proposed processes, 


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capabilities, quantitative and/or 

qualitative performance objectives, and 

methodology to perform quality 

improvement initiatives; (2) the 

organization’s proposed involvement of 

and access to physicians and 

practitioners in the QIO area with 

appropriate expertise and specialization 

in the areas of health care concerning 

the quality improvement initiative; and 

(3) the organization’s access to 

professionals with requisite knowledge 

of quality improvement methodologies 

and practices as well as qualified 

information technology and technical 

expertise. We plan to use these factors, 

and others as necessary, to determine if 

an organization has satisfactory 

capabilities and sufficient resources to 

initiate, follow up on, and follow 

through to completion quality 

improvement initiatives that it agrees to 

undertake. We consider appropriate 

quality improvement resources to 

include a multidisciplinary team that is 

comprised of appropriate health care 

professionals to perform quality 

improvement initiatives as well as the 

administrative, IT and technical staff 

necessary to accomplish the quality 

improvement initiatives. 

In paragraph (b), we are proposing 

that CMS may consider characteristics 

such as the geographic location, size, 

and prior experience of an organization 

in order to determine whether the 

organization has the capability to 

perform quality improvement 

initiatives. In terms of prior experience, 

we are proposing that CMS will gauge 

the significance of an organization’s 

experience based on how relevant it is 

to the tasks that CMS intends to include 

in the QIO contract and the goals CMS 

intends to accomplish. While we intend 

to emphasize the importance of prior 

experience, we do not intend to limit 

the evidence an organization may 

present to us to demonstrate its 

capability to perform quality 

improvement initiatives. We are 

proposing to include language in 

proposed § 475.103(b) to indicate that 

CMS can also consider a variety of other 

factors, as indicated in section 

1153(b)(4) of the Act. 

Finally, we are proposing to include 

in paragraph (c) clarifications to the text 

that reflect the existing regulatory text at 

§ 475.104(d), with some minor 

modifications. The current provision 

states that a State government that 

operates a Medicaid program will be 

considered incapable of performing 

utilization and quality review functions 

in an effective manner, unless the State 

demonstrates to CMS’ satisfaction that it 

will act with complete independence 

and objectivity. As proposed, the 

provision at § 475.103(c) maintains the 

substance of the existing rule while 

making it clear that the scope of its 

review will be limited to quality 

improvement initiatives. In order to do 

this, we have proposed to replace the 

term ‘‘utilization and quality review 

functions’’ with the term ‘‘quality 

improvement initiatives.’’ In addition, 

we are proposing to revise the language 

to clarify that the objectivity and 

independence mentioned in the existing 

regulation relate to objectivity and 

independence from the Medicaid 

program, as we believe there is an 

inherent conflict of interest that arises 

from the State’s financial interest in the 

administration of that program. 

Our proposal at § 475.103 implements 

the statutory responsibility for the 

Secretary to determine whether an 

organization can perform the QIO 

function of quality improvement 

initiatives in a manner that is consistent 

with the efficient and effective 

operation of the QIO Program and the 

Medicare Program. We solicit comment 

on whether the regulation text should 

incorporate the standards for QIOs that 

we propose to use and the factors we 

intend to consider when determining 

whether those standards have been met. 

d. Prohibitions on Eligibility as a QIO 

(§ 475.105) 

We are proposing revisions to 

§ 475.105(a)(2) to eliminate the 

prohibition against an association of 

health care facilities being awarded a 

QIO contract, to reflect a TAAEA 

amendment deleting this restriction 

from section 1153(b)(3) of the Act. We 

also are proposing to move the existing 

provision covering the exclusion of 

health care facility affiliates in 

paragraph (a)(3) to paragraph (a)(2), and 

to create a revised paragraph (a)(3) that 

would include payor organizations as 

excluded entities unless they meet 

certain exception requirements 

identified in section 1153(b)(2)(B) of the 

Act. Prior to the TAAEA amendment, 

the statute imposed two prohibitions on 

CMS contracting with a payor 

organization to perform QIO functions: 

A prohibition applicable before 

November 15, 1984 and a prohibition 

with exceptions for periods of time after 

November 15, 1984. After November 15, 

1984, a payor organization could 

perform as a QIO if the Secretary 

determined that there were no other 

entities available for a QIO area. These 

restrictions were implemented in the 

existing regulations codified at 

§§ 475.105(b) and 475.106. The TAAEA 

amendments left unchanged the 

prohibition in effect for the period of 

time before November 15, 1984, but 

revised section 1153(b)(2)(B) of the Act 

to add exceptions to the prohibition 

applicable after November 15, 1984. 

Section 1153(b)(2)(B) of the Act, as 

amended, permits the award of a QIO 

contract to a payor organizations not 

only when the Secretary determines that 

there is no other entity available for an 

area, but also when the Secretary 

determines that there is a more qualified 

entity to perform one or more of the 

functions in section 1154(a) of the Act, 

if the entity meets all other 

requirements and standards in the QIO 

statute. We read this provision to mean 

that when the Secretary determines that 

a payor organization is more qualified 

than a nonpayor organization in the QIO 

area to perform one or more of the 

functions in section 1154(a) of the Act, 

that payor entity can qualify as a QIO so 

long as all other eligibility criteria are 

met. We have reflected this 

interpretation in the proposed rule as 

§ 475.105(a)(3). 

The existing paragraph (b) prohibits 

payor organizations from being QIOs 

prior to November 15, 1984. Since that 

date has long passed, we believe this 

paragraph should be eliminated. We are 

proposing to delete and reserve 

paragraph (b) of § 475.105 in its entirety. 

Paragraph (c) would remain largely 

unchanged except for a minor 

terminology update to clarify in the 

regulation text that the term ‘‘facility’’ is 

meant to refer to a ‘‘health care facility’’ 

and to change the term ‘‘conduct any 

review activities’’ to ‘‘perform any case 

review activities’’ to indicate our 

separation of case review functions from 

quality improvement initiatives. We do 

not believe that these changes affect the 

underlying prohibitions. 

As noted above, we are proposing to 

delete and reserve all of § 475.106 in 

light of our proposed changes to 

§ 475.105. We believe that aspects of 

§ 475.106 that we have not proposed to 

incorporate into § 475.105 are obsolete 

due to the passage of time. 

5. Proposals Relating to QIO Contract 

Awards (§ 475.107) 

The existing regulations at 42 CFR 

Part 475 also include requirements 

related to the establishment of QIO 

contracts and the assignment of bonus 

points. We are proposing to delete the 

portions of existing § 475.107(c) 

pertaining to the assignment of up to 10 

percent of available bonus points to 

physician-sponsored organizations, and 

the assignment of points in connection 

with the structure of the organization as 

‘‘physician-sponsored’’ or ‘‘physicianaccess.’’ These provisions are obsolete 

in light of the changes to section 1152(1) 

of the Act and our proposals above 


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relating to the eligibility standards for 

an organization awarded a QIO contract. 

We also are proposing to use crossreferences in § 475.107(a) and (b) to the 

revised standards we are proposing in 

§§ 475.101 through 475.103. We are 

proposing to retain the regulatory 

language that requires CMS to identify 

proposals that meet the requirements of 

§ 475.101 (proposed § 475.107(a)) and to 

identify those proposals that set forth 

minimally acceptable plans in 

accordance with the requirements of 

§ 475.102 or § 475.103, or both as 

applicable (proposed § 475.107(b)). 

The existing § 475.107(d) states that 

the contract for a given QIO area to the 

selected organization cannot exceed 2 

years, which is inconsistent with the 

current statutory provision at section 

1153(c)(3) of the Act. We are proposing 

here to redesignate this provision as 

paragraph (c) and to provide for a 5-year 

contract term as required by section 

1153(c)(3) of the Act, as amended by 

section 261 of the TAAEA. 

XVIII. Medicare Fee-for-Service 

Electronic Health Record (EHR) 

Incentive Program 

A. Incentive Payments for Eligible 

Professionals (EPs) Reassigning Benefits 

to Method II CAHs 

Section 1848(o)(1)(A) of the Act, as 

amended by section 4101(a) of the 

HITECH Act, establishes the Medicare 

EHR Incentive Program, which provides 

for incentive payments to eligible 

professionals (EPs) who are meaningful 

users of certified EHR technology during 

the relevant EHR reporting periods. 

Section 1848(o)(1)(A)(i) of the Act 

provides that EPs who are meaningful 

EHR users during the relevant EHR 

reporting period are entitled to an 

incentive payment amount, subject to an 

annual limit, equal to 75 percent of the 

Secretary’s estimate of the Medicare 

allowed charges for covered 

professional services furnished by the 

EP during the relevant payment year. 

Under section 1848(o)(1)(B)(ii) of the 

Act, an EP is entitled to an incentive 

payment for up to 5 years. In addition, 

in accordance with section 

1848(o)(1)(A)(ii) of the Act, there shall 

be no incentive payments made with 

respect to a year after 2016. 

1. Background for Definition of EPs and 

EHR Incentive Payments to EPs 

In accordance with section 

1848(o)(5)(C) of the Act, in the final rule 

for Stage 1 of the EHR Incentive 

Program (75 FR 44442), we established 

a definition of the term ‘‘eligible 

professional’’ in the regulations at 42 

CFR 495.100 to mean a physician as 

defined under section 1861(r) of the Act. 

Section 1861(r) of the Act defines the 

term ‘‘physician’’ to mean the following 

five types of professionals, each of 

which must be legally authorized to 

practice their profession under State 

law: A doctor of medicine or 

osteopathy; a doctor of dental surgery or 

dental medicine; a doctor of podiatric 

medicine; a doctor of optometry; or a 

chiropractor. As also discussed in that 

final rule (75 FR 44439), in accordance 

with section 1848(o)(1)(C) of the Act, 

hospital-based EPs are not eligible for an 

EHR incentive payment. The term 

‘‘hospital-based EP’’ is defined in 

§ 495.4 of the regulations as ‘‘Unless it 

meets the requirements of § 495.5 of this 

part, a hospital-based EP means an EP 

who furnishes 90 percent or more of his 

or her covered professional services in 

sites of service identified by the codes 

used in the HIPAA standard transaction 

as an inpatient hospital or emergency 

room setting in the year preceding the 

payment year, or in the case of a 

payment adjustment year, in either of 

the 2 years before such payment 

adjustment year.’’ Paragraphs (1)(i) and 

(1)(ii) of the definition specify how the 

percentage of covered professional 

services is calculated for Medicare for 

purposes of the payment years and 

payment adjustment years, respectively. 

We note a discrepancy between the 

regulation text for this definition and 

the final policy we established in the 

preamble of the EHR Incentive Program 

Stage 2 final rule (77 FR 54102). Under 

the policy we finalized in that rule, we 

determine whether an EP is hospitalbased for a payment adjustment year 

using either of the following Federal 

fiscal year’s (FY) data: (1) The fiscal year 

before the year that is 1 year prior to the 

payment adjustment year (for example, 

FY 2013 data for payment adjustment 

year 2015); or (2) the fiscal year before 

the year that is 2 years prior to the 

payment adjustment year (for example, 

FY 2012 data for payment adjustment 

year 2015). If the data from either year 

result in a hospital-based determination, 

the EP would not be subject to the 

payment adjustments for the relevant 

year. In the definition under § 495.4 of 

the regulations, however, paragraph 

(1)(ii) incorrectly refers to the fiscal year 

preceding the payment adjustment year 

and the fiscal year 2 years before the 

payment adjustment year. The 

introductory text of the definition also 

incorrectly references either of the 2 

years before such payment adjustment 

year. We are taking this opportunity to 

make a technical correction to 

paragraph (1)(ii) and the introductory 

text of the definition of ‘‘hospital-based 

EP’’ at § 495.4 to conform to the policy 

stated in the preamble of the EHR 

Incentive Program Stage 2 final rule (77 

FR 54102). We are proposing to revise 

paragraph (1)(ii)(A) of the definition to 

read ‘‘The Federal fiscal year 2 years 

before the payment adjustment year; or’’ 

and paragraph (1)(ii)(B) of the definition 

to read ‘‘The Federal fiscal year 3 years 

before the payment adjustment year.’’ 

We also are proposing to revise the 

introductory text of the definition to 

reference, in the case of a payment 

adjustment year, either of the 2 years 

before the year preceding such payment 

adjustment year. Section 1848(o)(5)(A) 

of the Act defines covered professional 

services as having the same meaning as 

in section 1848(k)(3) of the Act; that is, 

services furnished by an eligible 

professional for which payment is made 

under, or is based on, the Medicare 

Physician Fee Schedule (MPFS). In 

accordance with section 1848(a)(1) of 

the Act, the Medicare allowed charge for 

covered professional services is the 

lesser of the actual charge or the MPFS 

amount established in section 1848 the 

Act. As specified under section 

1848(o)(1)(A)(i) of the Act, the 

Secretary’s estimate of allowed charges 

for EHR incentive payments is based on 

claims submitted to Medicare no later 

than 2 months following the end of the 

relevant payment year. 

Section 1848(o)(1)(B)(i) of the Act sets 

forth the annual limits on the EHR 

incentive payments to EPs. Specifically, 

section 1848(o)(1)(B) of the Act provides 

that the incentive payment for an EP for 

a given payment year shall not exceed 

the following amounts: 

• For the EP’s first payment year, for 

such professional, $15,000 (or $18,000, 

if the EP’s first payment year is 2011 or 

2012); 

• For the EP’s second payment year, 

$12,000; 

• For the EP’s third payment year, 

$8,000; 

• For the EP’s fourth payment year, 

$4,000; 

• For the EP’s fifth payment year, 

$2,000; and 

• For any succeeding year, $0. 

Under section 1848(o)(1)(B)(iv) of the 

Act, for EPs who predominantly furnish 

services in a geographic HPSA (as 

designated by the Secretary under 

section 332(a)(1)(A) of the Public Health 

Service Act), the incentive payment 

limitation amounts for each payment 

year are increased by 10 percent. 

Section 1848(o)(1)(B)(iii) of the Act also 

provides for a phased reduction in 

payment limits for EPs who first 

demonstrate meaningful use of certified 

EHR technology after 2013. Section 

1848(o)(1)(D)(i) of the Act, as amended 


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by section 4101(a) of the HITECH Act, 

provides that the incentive payments 

may be disbursed as a single 

consolidated payment or in periodic 

installments as the Secretary may 

specify. We make a single, consolidated, 

annual incentive payment to EPs. 

Payments are made on a rolling basis, as 

soon as we ascertain that an EP has 

demonstrated meaningful use for the 

applicable reporting period (that is, 90 

days for the first year or a calendar year 

for subsequent years), and reached the 

threshold for maximum payment. 

Section 1848(o)(1)(A) of the Act 

provides that ‘‘with respect to covered 

professional services provided by an 

eligible professional,’’ the incentive 

payment ‘‘shall be paid to the eligible 

professional (or to an employer or 

facility in the cases described in clause 

(A) of section 1842(b)(6)).’’ Section 

1842(b)(6)(A) of the Act allows for 

reassignment of payments to an 

employer or entity with which the 

physician has a valid contractual 

arrangement allowing the entity to bill 

for the physician’s services. Therefore, 

we provided that EPs would be allowed 

to reassign their incentive payments to 

their employer or an entity that they 

have a valid employment agreement or 

contract providing for such 

reassignment, consistent with all rules 

governing reassignments (75 FR 44445). 

Section 495.10(f) of the regulations 

permits EPs to reassign their incentive 

payments to an employer or to an entity 

with which they have a contractual 

arrangement, consistent with all rules 

governing reassignments, including 42 

CFR Part 424, Subpart F. Section 

495.10(f) also precludes an EP from 

reassigning the incentive payment to 

more than one employer or entity. To 

implement this requirement, we use the 

EP’s Medicare enrollment information 

to determine whether an EP belongs to 

more than one practice (that is, whether 

the EP’s National Provider Identifier 

(NPI) is associated with more than one 

practice). In cases where an EP is 

associated with more than one practice, 

the EP would select one tax 

identification number to receive any 

applicable EHR incentive payment. 

2. Special Circumstances of EPs 

Reassigning Benefits to Method II CAHs 

Since we implemented the EHR 

Incentive Program, we have received 

many requests from CAHs billing under 

Method II (Method II CAHs), members 

of Congress, and hospital associations 

requesting that we make it possible for 

EPs who assign their reimbursement 

and billing to a Method II CAH to 

participate in the program. Under 

section 1834(g)(2) of the Act, a CAH 

may elect to receive a cost-based 

payment for the facility costs of 

providing outpatient services, plus 115 

percent of the fee schedule amount for 

professional services included within 

outpatient CAH services. CAHs that 

elect to receive both a facility payment 

and a professional payment for 

outpatient services are commonly 

referred to as Method II CAHs. The 

statute also provides that, as a condition 

for applying this provision, the 

Secretary may not require that each 

physician or other practitioner 

providing professional services in a 

CAH must assign billing rights for such 

services to the CAH. Physicians and 

other practitioners who do not assign 

such rights to their Method II CAH 

continue to receive payment for their 

professional services directly under the 

appropriate professional fee schedule. 

Since the inception of the EHR 

Incentive Program, we have been unable 

to account for the services furnished by 

EPs in Method II CAH outpatient 

departments (including emergency 

departments) due to limitations in our 

information systems. Specifically, our 

information systems have not been 

capable of receiving and storing linelevel rendering EP identifying 

information for these Method II CAH 

claims for services furnished by EPs in 

outpatient departments. These claims 

are billed by the CAH on behalf of the 

EPs furnishing the services using the 

institutional claim form UB–04 or its 

electronic counterpart, the X12 837I 

format. Until a recent information 

systems change was implemented, we 

were unable to identify the NPI of the 

EP furnishing the service at the service 

line-level on the claim. While the 

information systems received and stored 

NPIs from each claim, the NPIs were not 

tied to the specific services furnished on 

the claim. This limitation made it 

impossible to take into account the 

services furnished by EPs in Method II 

CAH outpatient settings when we 

annually determined the hospital-based 

status of each EP for each payment year 

for purposes of the EHR Incentive 

Program. In addition, for those EPs who 

were determined to be not hospitalbased and who successfully 

demonstrated meaningful use, we were 

unable to take into account such 

services in calculating the amount of an 

EP’s EHR incentive payment for a 

payment year. Because the limitations 

in our information systems prevented us 

from identifying the NPIs of the EPs 

who furnished the services on the 

Method II CAH claims, we were unable 

to include those claims for purposes of 

the hospital-based determinations and 

EHR incentive payment calculations. 

However, it is important to note that 

these EPs could still participate in the 

EHR Incentive Program and qualify for 

an incentive payment based on their 

non-Method II CAH claims. 

We began soon after the 

implementation of the EHR Incentive 

Program to develop the requisite 

changes so that our information systems 

would be able to receive and store linelevel rendering EP identifying 

information for these Method II CAH 

claims. We were able to implement 

these information systems changes 

effective for claims submitted on or after 

October 1, 2012 (in other words, on or 

after the start of FY 2013). Under the 

existing regulations at § 495.4, we 

determine an EP’s hospital-based status 

for a payment year based on claims data 

from the fiscal year preceding the 

payment year. Thus, for purposes of the 

2013 payment year, we determine 

whether an EP is hospital-based using 

claims data from FY 2012. However, as 

noted above, we are unable to take into 

account Method II CAH claims prior to 

the start of FY 2013. As a result, under 

the existing regulations, the hospitalbased determinations for EPs for the 

2013 payment year are based on FY 

2012 claims data that do not include 

Method II CAH claims. The earliest that 

we would be able to include such 

claims under the existing regulations 

would be for the hospital-based 

determinations for the 2014 payment 

year, which are based on FY 2013 

claims data. 

We want to avoid further delay in 

taking into account the services 

furnished by EPs in Method II CAH 

outpatient settings. Therefore, we are 

proposing to add a provision to the 

definition of ‘‘hospital-based EP’’ at 

§ 495.4 under new paragraph (3) to 

provide a special methodology for 

making hospital-based determinations 

for the 2013 payment year for EPs with 

services billed by Method II CAHs. We 

are making this proposal solely in order 

to take into account the special 

circumstances of those EPs as described 

above. Under this proposal, we would 

be able to take into account Method II 

CAH claims when making hospitalbased determinations for payment year 

2013, one year before we would be able 

to do so under the existing regulations. 

Specifically, we are proposing that, for 

payment year 2013 only, we would use 

a two-step process to make hospitalbased determinations for EPs who 

furnish covered professional services 

billed by Method II CAHs. First, after we 

have accumulated the Method II CAH 

claims with the line-level furnishing EP 

identifying information for FY 2013 


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(October 1, 2012 through September 30, 

2013), we would use that data to 

identify which EPs had Method II CAH 

service billings during that year, and we 

would make a special hospital-based 

determination for that subset of EPs for 

payment year 2013. Any EP determined 

to be nonhospital-based on the basis of 

FY 2013 claims data would be eligible 

to demonstrate meaningful use for the 

relevant EHR reporting period and 

potentially qualify for an EHR incentive 

payment for payment year 2013. An EP 

who believes that he or she would be 

determined to be nonhospital-based 

under this proposed provision and 

wishes to qualify for the EHR incentive 

payment for payment year 2013 should 

not wait for the determination to 

implement Certified EHR Technology 

and begin meaningful use for an EHR 

reporting period in 2013. To qualify for 

an EHR incentive payment for payment 

year 2013, an EP will need to 

demonstrate meaningful use of Certified 

EHR Technology for an EHR reporting 

period in 2013. As is the case with other 

EPs that reassign their EHR incentive 

payments to another entity, these EPs 

may reassign their EHR incentive 

payments to the Method II CAH that 

bills on their behalf if the CAH is an 

employer or they have a contractual 

arrangement, consistent with the rules 

governing reassignments. Second, in the 

case of an EP determined to be hospitalbased on the basis of FY 2013 claims 

data, we would check the hospital-based 

determination we have already for that 

EP under the existing regulation using 

the FY 2012 file. Any EP found to be 

nonhospital-based on the basis of the FY 

2012 claims data (which do not include 

Method II CAH claims) would be held 

harmless to the determination made on 

the basis of FY 2013 claims data and 

considered nonhospital-based for 

payment year 2013. We believe that this 

second step of the proposed 

methodology is important to protect EPs 

who were initially determined 

nonhospital-based at the beginning of 

payment year 2013 under the existing 

regulation. We do not believe those EPs 

who were determined nonhospitalbased under the existing regulation 

should have those determinations 

reversed by later (although more 

complete) FY 2013 claims data. This 

hold-harmless provision would preserve 

the prospectivity of nonhospital-based 

determinations for payment year 2013 

that were made under the existing 

regulation and maintain the eligibility of 

those EPs to receive EHR incentive 

payments for payment year 2013. At the 

same time, the first step of our proposal 

would provide an opportunity for EPs 

who were determined to be hospitalbased for payment year 2013 on the 

basis of FY 2012 data, which did not 

include the Method II CAH claims for 

their services, to establish their 

nonhospital-based status on the basis of 

the more complete FY 2013 data. It is 

important to note that, due to the 

systems limitations described above, we 

are unable to propose any special 

method for making EHR incentive 

payments and hospital-based 

determinations for the payment years 

prior to payment year 2013. We lack the 

ability to retrieve line-level furnishing 

EP identifying information for Method II 

CAH claims during the years prior to FY 

2013. We are inviting public comments 

on this proposal. 

B. Cost Reporting Periods for Interim 

and Final EHR Incentive Payments to 

Eligible Hospitals 

1. Background 

In the July 28, 2010 final rule for 

Stage 1 of the EHR Incentive Program, 

we established the cost report periods 

from which we would draw the 

requisite data (for example, hospital 

acute care inpatient discharges and 

Medicare Part A acute care inpatient 

days) for determining interim and final 

EHR incentive payments to eligible 

hospitals (75 FR 44450). We specified in 

§ 495.104(c)(2) of the regulations that we 

would use discharge and other relevant 

data from the hospital’s most recently 

submitted 12-month cost report in order 

to determine preliminary hospital EHR 

incentive payments. Similarly, we 

specified in § 495.104(c)(2) that we 

would make final EHR incentive 

payments to hospitals based on 

discharge and other relevant data from 

the hospital’s first 12-month cost 

reporting period that begins on or after 

the first day of the payment year. (For 

purposes of EHR incentive payments for 

eligible hospitals, a payment year is a 

Federal fiscal year.) As we noted in the 

final rule (75 FR 44450 through 44451), 

section 1886(n)(2)(C) of the Act requires 

that a ‘‘12-month period selected by the 

Secretary’’ be employed for purposes of 

determining the discharge related 

amount. As we also stated in that final 

rule (77 FR 44452), we believe that the 

requirement for using 12-month cost 

reporting periods for purposes of 

determining preliminary and final 

payments is important to avoid the use 

of nonstandard cost reporting periods, 

which are often quite short (for 

example, 3 months) and therefore are 

‘‘not likely to be truly representative of 

a hospital’s experience, even if methods 

were to be adopted for extrapolating 

data over a full cost reporting period.’’ 

2. Special Circumstances 

Since the publication of the EHR 

Incentive Program final rule for Stage 1, 

we have become aware of circumstances 

in which the only cost reporting period 

for an eligible hospital that begins on or 

after the first day of a payment year is 

a nonstandard cost reporting period. For 

example, a hospital may be merging 

with another hospital under an 

arrangement in which its CCN, and 

therefore its existence as an identifiable 

hospital for Medicare EHR Incentive 

Program purposes, will not survive the 

merger. In such circumstances, the last 

cost reporting period for the hospital 

after its final payment year and prior to 

its merger into the surviving hospital 

may be a short period. In order to 

accommodate these situations, we are 

proposing to revise § 495.104(c)(2) of the 

regulations to provide that, in cases 

where there is no 12-month cost 

reporting period that begins on or after 

the beginning of a payment year, we 

will use the most recent 12-month cost 

reporting period available at the time of 

final settlement in order to determine 

final EHR incentive payments for the 

hospital. We understand that, under this 

proposal, the last available cost 

reporting period that we would use for 

the final determination of EHR incentive 

payments may be the same 12-month 

cost reporting period that had been used 

for purposes of determining the 

hospital’s interim EHR incentive 

payments. We believe that this result is 

preferable to resorting to a nonstandard 

cost reporting period because a 12- 

month period is required by the statute 

to determine the discharge related 

amount and such periods tend, for 

reasons discussed in the EHR Incentive 

Program Stage 1 final rule, to be 

unrepresentative of the hospital’s 

experience. We are inviting public 

comments on this proposal. 

XIX. Medicare Program: Provider 

Reimbursement Determinations and 

Appeals 

A. Matters Not Subject to 

Administrative or Judicial Review 

(§ 405.1804) 

1. Background 

Section 1878(a) of the Act addresses 

appeals of certain Medicare payment 

determinations to the Provider 

Reimbursement Review Board (the 

‘‘Board’’). Below we briefly discuss the 

prospective payment system (PPS) 

under which payments for certain 

Medicare inpatient hospital services are 

made. 

The Social Security Amendments of 

1983 (Pub. L. 98–21) added section 


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1886(d) to the Act, which changed the 

method of payment for inpatient 

hospital services under Medicare Part A 

for short-term acute care hospitals. The 

method of payment for these hospitals 

was changed from a cost-based 

retrospective reimbursement system to a 

system based on prospectively set 

payment rates; that is, a PPS. Under 

Medicare’s hospital inpatient 

prospective payment system (the 

hospital IPPS), payment is made at a 

predetermined rate for each hospital 

discharge. 

The Social Security Amendments of 

1983 also added section 1886(e)(1) to 

the Act, which required that, for cost 

reporting periods beginning in FYs 1984 

and 1985, the IPPS result in aggregate 

program reimbursement equal to ‘‘what 

would have been payable’’ under the 

reasonable cost-based reimbursement 

provisions of prior law; that was, for 

FYs 1984 and 1985, the IPPS would be 

‘‘budget neutral.’’ Section 1886(e)(1)(A) 

of the Act required that the projected 

aggregate payments for the hospitalspecific portion should equal the 

comparable share of estimated 

reimbursement under prior law. Section 

1886(e)(1)(B) of the Act required that 

projected aggregate reimbursement for 

the Federal portion of the prospective 

payment rates equal the corresponding 

share of estimated amounts payable 

prior to the passage of Public Law 98– 

21. In the 1983 IPPS interim final rule 

published in the Federal Register on 

September 1, 1983, we explained how 

the adjustment of the Federal portion of 

the prospective payment rate was 

determined, as well as the resulting 

adjustment factors for FY 1984 (48 FR 

39887). 

Under section 1878 of the Act and the 

regulations at Subpart R of 42 CFR Part 

405, the Board has the authority to 

adjudicate certain reimbursement 

appeals by providers. The Board’s 

decisions are subject to review by the 

Administrator of CMS under section 

1878(f)(1) of the Act, as implemented by 

§ 405.1875 of the regulations. A final 

decision of the Board, or any reversal, 

affirmance, or modification of a final 

Board decision by the Administrator, 

may be subject to review by a United 

States District Court. 

2. Proposed Technical Conforming 

Change 

Certain matters affecting payment to 

hospitals under the IPPS are not subject 

to administrative or judicial review. For 

example, section 1886(d)(7) of the Act 

precludes administrative and judicial 

review of the budget neutrality 

adjustment effected pursuant to section 

1886(e)(1) of the Act. This preclusion of 

review is also reflected in section 

1878(g)(2) of the Act (which states that 

‘‘determinations and other decisions 

described in section 1886(d)(7) shall not 

be reviewed by the Board or any other 

court . . . .’’). The existing regulatory text 

at § 405.1804(a) provides that there is no 

administrative or judicial review of 

‘‘any budget neutrality adjustment in 

the prospective payment rates.’’ 

The language of § 405.1804(a) was 

promulgated as part of the 

implementing regulations (48 FR 39785 

and 39835) for the hospital IPPS. 

Section 405.1804(a) was codified 

pursuant to section 1886(d)(7) of the 

Act. At the time of promulgation, 

section 1886(d)(7) of the Act specified 

only the budget neutrality adjustment in 

section 1886(e)(1) of the Act. Additional 

budget neutrality adjustments under the 

IPPS were added by law and were not 

precluded from administrative or 

judicial review. For example, section 

4410 of the Balanced Budget Act of 1997 

(the BBA), Public Law 105–33, 

established the rural floor wage index 

budget neutrality adjustment, and did 

not preclude administrative or judicial 

review in the statute for this adjustment. 

We recognize that the language of the 

regulation at § 405.1804(a) is overly 

broad because it states that there is no 

administrative or judicial review of 

‘‘any’’ budget neutrality adjustment in 

the prospective payment rates, and its 

terms are not limited to the budget 

neutrality adjustment specified in 

section 1886(e)(1) of the Act. We 

understand that the Board has relied on 

§ 405.1804(a) to deny jurisdiction in 

appeals relating to budget neutrality 

adjustments other than the adjustment 

in section 1886(e)(1) of the Act. To the 

extent that the existing § 405.1804(a) 

refers to ‘‘any’’ budget neutrality 

adjustment, we believe that this 

regulatory text is not consistent with the 

current statute. Therefore, we are 

proposing to make a technical 

conforming change to § 405.1804(a) to 

conform the regulation to the current 

statute. This proposed technical 

conforming change would clarify that 

there is no administrative or judicial 

review with respect to the budget 

neutrality adjustments enumerated in 

section 1886(e)(1) of the Act, and this 

preclusion of review does not apply to 

other budget neutrality adjustments 

under the IPPS. 

B. Clarification of Reopening of 

Predicate Facts in Intermediary 

Determinations of Provider 

Reimbursement (§ 405.1885) 

A provider must submit an annual 

cost report to a fiscal intermediary 

(currently referred to as a Medicare 

Administrative Contractor (MAC)), as 

specified in regulations at §§ 413.20(b) 

and 413.24(f). Through its review and 

settlement process, the intermediary 

determines the total amount of 

reimbursement due a provider for its 

cost reporting period. This constitutes 

an ‘‘intermediary determination,’’ as 

defined in § 405.1801(a). In accordance 

with § 405.1803, an intermediary 

determination is set forth in a notice of 

program reimbursement (NPR), which 

explains the intermediary’s final 

determination of the total amount of 

program reimbursement due the 

provider for the cost reporting period in 

question. 

Section 405.1803(b) requires that the 

NPR explain any differences between 

the intermediary determination and the 

amount of program reimbursement 

claimed by the provider. Such 

differences may be attributable to 

specific provisions of the Medicare 

statute, regulations, CMS rulings, or 

program instructions. In addition, the 

intermediary determination may reflect 

specific findings of fact by the 

intermediary that differ from the 

provider’s understanding of the facts. 

The factual underpinnings of a 

specific determination of the amount of 

reimbursement due a provider 

sometimes first arise in, or are 

determined for, the same fiscal period as 

the cost reporting period under review. 

For example, the determination of 

whether a hospital subject to the 

inpatient prospective payment system 

(IPPS) should receive a payment 

adjustment for serving a significantly 

disproportionate share of low income 

patients under section 1886(d)(5)(F) of 

the Act and § 412.106 of the regulations 

in a given fiscal period depends on the 

number of the hospital’s patient days for 

the same period. 

However, the factual underpinnings 

of a specific determination of the 

amount of reimbursement due a 

provider may first arise in, or be 

determined for, a different fiscal period 

than the cost reporting period under 

review. We refer to these factual 

determinations as ‘‘predicate facts.’’ For 

example, the determination of an IPPSexempt hospital’s target amount (that is, 

per-discharge (case) limitation) or rateof-increase ceiling under section 1886(b) 

of the Act and regulations at § 413.40 

depends on: (1) The hospital’s allowable 

net inpatient operating costs for a base 

period of at least 12 months before the 

first cost reporting period subject to the 

rate-of-increase ceiling; or (2) for later 

cost reporting periods, the target amount 

for the preceding 12-month cost 

reporting period. The hospital’s 

allowable costs for its base period are 


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‘‘predicate facts’’ with respect to the 

first cost reporting period that is subject 

to the target amount because such base 

period costs figure in the determination 

of the hospital’s first target amount. The 

target amount for each cost reporting 

period after the base period then 

becomes a ‘‘predicate fact’’ for the next 

cost reporting period. We refer readers 

to section 1886(b)(3)(A) of the Act (for 

the first period, the target amount is 

calculated using ‘‘allowable operating 

costs of inpatient hospital services for 

the preceding 12-month cost reporting 

period;’’ the target amount for later cost 

reporting periods is calculated using the 

target amount for the preceding 12- 

month cost reporting period, increased 

by an applicable update factor). 

A provider may challenge an 

intermediary determination by filing an 

appeal within 180 days of the NPR to 

the Board (under section 1878(a) of the 

Act and regulations at § 405.1835) or, if 

the amount in controversy is at least 

$1,000 but less than $10,000, to the 

intermediary hearing officer(s) (under 

§ 405.1811). Alternatively, in 

accordance with § 405.1885, the 

provider may request that the 

intermediary reopen its NPR. In 

addition, the intermediary may reopen 

the NPR on its own motion. Under 

§ 405.1885(b), reopening must be 

requested by the provider, or initiated 

on the intermediary’s own motion, 

within 3 years of the NPR, although 

there is no time limit for the reopening 

of an intermediary determination that 

was procured by fraud or similar fault 

of a party to such determination. 

Appeal and reopening of an 

intermediary determination are both 

‘‘issue-specific.’’ In order to meet the 

jurisdictional requirements for appeal to 

the Board or to the intermediary hearing 

officer(s), the provider must establish its 

dissatisfaction with each specific matter 

at issue in the intermediary 

determination. We refer readers to 

section 1878(a) of the Act and 

regulations at § 405.1835(a)(1) and (b) 

(Board appeals) and § 405.1811(a)(1) 

and (b) (intermediary hearing officer 

appeals). Similarly, § 405.1885(a)(1) 

provides that the intermediary 

determination may be reopened ‘‘for 

findings on matters at issue in a 

determination.’’ We also refer readers to 

§ 405.1887, which provides that a notice 

of reopening and any revised 

intermediary determination must 

specify the findings on matters at issue 

to be reopened and the particular 

findings to be revised through 

reopening, respectively, and 

§ 405.1889(b), which specifies that a 

provider’s appeal rights after reopening 

are limited to the specific matters 

altered in the revised intermediary 

determination. 

In many instances, a factual matter 

arises in, or is determined for, the same 

fiscal period as the cost reporting period 

at issue, and such a factual 

determination may be appealed or 

reopened as part of that period’s 

intermediary determination. For 

example, if an IPPS hospital challenges 

the patient day count used to determine 

its DSH payment adjustment for its 2010 

cost reporting period, the hospital must 

appeal its DSH patient day count within 

180 days of the NPR for the 2010 cost 

reporting period (and meet the other 

jurisdictional requirements for appeal to 

the Board or to the intermediary hearing 

officer(s), as applicable). Similarly, the 

hospital would have to request, or the 

intermediary would have to initiate on 

its own motion, the reopening of the 

hospital’s 2010 DSH patient day count 

within 3 years of the NPR for the 2010 

cost reporting period. 

When the specific matter at issue is a 

predicate fact that first arose in, or was 

determined for, a different fiscal period 

than the cost reporting period in 

question, our longstanding 

interpretation and practice is that the 

pertinent provisions of the statute and 

regulations provide for review and 

potential redetermination of such 

predicate fact only by a timely appeal or 

reopening of the NPR for the cost 

reporting period in which the predicate 

fact first arose or the NPR for the period 

for which such predicate fact was first 

determined by the fiscal intermediary. 

For example, assuming base period 

costs calculated for the period 

consisting of the 12 months prior to the 

hospital’s 2002 cost reporting period, if 

an IPPS-exempt hospital challenges the 

determination of its 2008 cost reporting 

period target amount, the hospital could 

not appeal the determination of the base 

period predicate facts unless it was 

within 180 days of the NPR for the base 

period. Similarly, the hospital would 

have to request, or the intermediary 

would have to initiate on its own 

motion, the reopening of the 

determination of the hospital’s base 

period costs within 3 years of the NPR 

for the base year cost reporting period. 

In addition, the hospital could appeal 

the determination of the 2008 cost 

reporting period target rate within 180 

days of the NPR for the 2008 cost 

reporting period and, similarly, could 

request the reopening of the 

determination of its 2008 cost reporting 

period target amount within 3 years of 

the NPR for the 2008 cost reporting 

period. There are no additional periods 

subject to appeal and reopening of such 

predicate fact unless the predicate facts 

are redetermined at a later time through 

an appeal or reopening. Thus, if the 

same hospital’s allowable base period 

costs or 2008 cost reporting period’s 

target amount was redetermined on 

appeal or reopening, the hospital could 

appeal such redetermination within 180 

days of the revised NPR for the 

redetermination of its base period costs 

or the revised NPR for the 

redetermination of the 2008 cost 

reporting period’s target amount, 

respectively. The reopening of such a 

redetermination (in this example, of the 

hospital’s base period costs or its 2008 

cost reporting period’s target amount) 

also could be available within 3 years of 

the revised NPR for the base period or 

the 2008 cost reporting period, 

respectively. 

Many reimbursement formulas 

require the use of predicate facts, where 

the factual underpinnings of a specific 

determination of the amount of provider 

reimbursement first arise in, or are 

determined for, a different fiscal period 

than the cost reporting period under 

review. As discussed above, we believe 

that predicate facts should be subject to 

change only through a timely appeal or 

reopening for the fiscal period in which 

the predicate fact first arose or the fiscal 

period in which such fact was first 

determined by the intermediary. In 

some instances, a predicate fact from a 

prior fiscal period is used in a later 

period with additional information, 

which is not found in the original cost 

report or NPR. We believe this kind of 

determination may be reviewed and 

redetermined through a timely appeal or 

reopening of the NPR for the cost 

reporting period in which the predicate 

fact was first used (or applied) by the 

intermediary to determine the 

provider’s reimbursement. However, we 

recognize exceptions when a particular 

legal provision (of the Medicare statute, 

regulations, or CMS rulings) authorizes, 

as part of a specific reimbursement rule, 

the review and revision of a predicate 

fact after the expiration of the 3-year 

reopening period. For example, the 

reaudit regulation in § 413.77(a), 

promulgated to implement section 

1886(h)(2) of the Act (which is related 

to the determination of the average perresident amount used to calculate 

reimbursement for graduate medical 

education (GME) costs), authorizes 

intermediaries to modify base-period 

costs solely for purposes of computing 

the per-resident amount after the 

hospital’s base-period cost report is no 

longer subject to reopening under 

§ 405.1885. We refer readers to the 

decision in Regions Hospital v. Shalala, 

522 U.S. 448 (1998), which sustained 


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the lawfulness of the reaudit regulation 

(then designated as § 413.86(e)(1)). 

We believe that the above-described 

interpretation of our rules regarding the 

appeal or reopening of predicate facts 

furthers the interests of both providers 

and the agency in maintaining the 

finality of intermediary determinations. 

The alternative, of allowing appeal and 

reopening of a predicate fact after the 

expiration of the 3-year reopening 

period, may result in inconsistent 

intermediary determinations on a 

reimbursement matter recurring in 

different fiscal periods for the same 

provider. An alternative approach of 

allowing appeal and reopening of a 

predicate fact beyond the 3-year 

reopening period could also result in 

intermediary determinations that are 

contrary to Medicare law and policy 

regarding a specific reimbursement 

matter. As with the target amount 

example discussed above, 

reimbursement for various items is 

premised on a base period cost 

determination that could affect 

reimbursement for a given item for 

many cost reporting periods thereafter. 

If a provider disputes such a base period 

cost determination, it can appeal or 

request reopening of the NPR for the 

base period. However, unless such an 

appeal or reopening results in a 

different finding as to the predicate fact 

in question, reimbursement for a given 

provider cost should not be based on 

one finding about a predicate fact in the 

base period and a different finding 

about the same predicate fact for 

purposes of determining reimbursement 

in later fiscal periods. 

Under our longstanding interpretation 

and practice, once the 3-year reopening 

period has expired, neither the provider 

nor the intermediary is allowed to 

revisit a predicate fact that was not 

changed through the appeal or 

reopening of the cost report for the fiscal 

period where such predicate fact first 

arose or for the fiscal period for which 

such fact was first determined by the 

intermediary. Further, the application of 

such facts is subject to change only 

through a timely appeal or reopening of 

the cost report for the fiscal period 

where the predicate fact was first used 

(or applied) by the intermediary to 

determine the reimbursement for the 

provider cost in question. Accordingly, 

we are proposing to revise § 405.1885 to 

clarify that, absent a specific statute, 

regulation, or other legal provision 

permitting reauditing, revising, or 

similar actions changing, predicate 

facts: (1) A predicate fact is subject to 

change only through a timely appeal or 

reopening for the fiscal period in which 

the predicate fact first arose or the fiscal 

period for which such fact was first 

determined by the intermediary; and (2) 

the application of the predicate fact is 

subject to change only through a timely 

appeal or reopening of the cost report 

for the fiscal period in which it was first 

used (or applied) by the intermediary to 

determine the provider’s 

reimbursement. 

We note that a recent court decision 

conflicts with our settled interpretation 

of the regulations for provider appeals 

and cost report reopening. In Kaiser 

Foundation Hospitals v. Sebelius, 708 

F.3d 226 (D.C. Cir. 2013), the court held 

that providers could appeal predicate 

facts used to determine their 

reimbursement in later fiscal periods 

even though such predicate facts were 

not timely appealed or reopened for the 

periods when they first arose or were 

determined by the intermediary nor was 

the application of those facts to the 

periods when those facts were first used 

by the intermediary to determine the 

providers’ reimbursement. The 

predicate facts at issue in this case were 

the teaching hospitals’ resident full-time 

equivalent (FTE) counts for their 1996 

cost reporting periods, which, as 

required by section 1886(h)(4)(F)(i) of 

the Act, were used to calculate the 

statutory cap on residents for GME cost 

reimbursement for the first time in the 

hospitals’ 1998 cost reporting periods. 

The providers could have challenged 

their resident FTE counts through 

timely appeals or reopening of their 

1996 fiscal period NPRs, and they could 

have challenged the calculation of their 

resident caps through timely appeals or 

reopening of their 1998 fiscal period 

NPRs, the first time the caps were 

applied. Instead, the hospitals appealed 

their resident caps as applied to later 

cost reporting periods. The court held 

that the definition of ‘‘intermediary 

determination’’ under § 405.1801(a)(1), 

which is incorporated in the reopening 

rules at § 405.1885(a)(1), did not include 

factual findings, standing alone, where 

the providers made no attempt to 

challenge their GME cost 

reimbursement for their 1996 or 1998 

fiscal periods due to the expiration of 

the 180-day appeal period and the 3- 

year period for reopening. Because the 

providers were not challenging the total 

amount of program reimbursement paid 

for their 1996 or 1998 fiscal periods, the 

court concluded that the intermediary 

determinations for those periods were 

not at issue and thus the 3-year 

limitation on reopening was not 

applicable. 

We disagree with the court’s decision, 

which we believe is contrary to our 

reopening regulations at § 405.1885(a), 

and the corresponding appeals 

regulations (discussed above), and 

which necessitates our proposed 

clarification of the regulations. As noted 

above, we are proposing to revise 

§ 405.1885 to clarify that the specific 

‘‘matters at issue in a determination’’ 

that are subject to the reopening rules 

include factual findings for one fiscal 

period that are predicate facts for later 

fiscal periods. The general 3-year 

reopening period applies to findings 

about such predicate facts and the 

reopening period is calculated 

separately for each finding about a 

predicate fact. We note that this 

proposed revision of § 405.1885 would 

apply to all Medicare reimbursement 

determinations, and not only to GME 

payment, which was the particular issue 

in Kaiser Foundation Hospitals v. 

Sebelius. Because this proposed revision 

clarifies longstanding agency policy, we 

are proposing that it be effective for any 

intermediary determination issued on or 

after the effective date of the final rule, 

and for any appeals or reopenings (or 

requests for reopening) that are pending 

on or after the effective date of the final 

rule, even if the intermediary 

determination (at issue in such an 

appeal or reopening) preceded the 

effective date of the final rule. We 

believe the proposed revision is not 

impermissibly retroactive in effect 

because the proposal simply clarifies 

longstanding agency policy and 

practice, and is procedural in nature. 

We refer readers, for example, to 

Heimmermann v. First Union Mortgage 

Corp., 305 F.3d 1257, 1260–61 (11th Cir. 

2002) (a rule clarifying the law, 

especially in an unsettled or confusing 

area of the law, is not a substantive 

change in the law, and thus the rule 

may apply to matters that preceded 

issuance of the rule). However, if the 

proposed revision to § 405.1885 were 

deemed a retroactive application of a 

substantive change to a regulation, 

section 1871(e)(1)(A) of the Act permits 

retroactive application of a substantive 

change to a regulation if the Secretary 

determines that such retroactive 

application is necessary to comply with 

statutory requirements or that failure to 

apply the change retroactively would be 

contrary to the public interest. We have 

determined that retroactive application 

of the proposed revision to § 405.1885 is 

necessary to ensure compliance with the 

3-year limit on reopening and with 

various statutory payment provisions 

such as the target amount (under section 

1886(b) of the Act) and the cap on 

residents for GME cost reimbursement 

(under section 1886(h)(4)(F)(i) of the 

Act). We have further determined that it 

would be in the public interest to apply 


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the proposed revision to intermediary 

determinations, appeals, and reopenings 

(including requests for reopening) that 

are pending on or after the effective date 

of the final rule. Not applying the 

proposed revisions to pending 

intermediary determinations, appeals, 

and reopenings would undermine the 3- 

year limit on reopening and the interests 

of both the Medicare program and 

Medicare providers in the finality of 

reimbursement determinations, and 

would be inconsistent with the statutory 

scheme. 

Finally, although we have provided 

proposed revisions only to § 405.1885, 

in order to clarify our regulations in 

accordance with this proposal, we are 

considering making similar changes 

regarding predicate facts to the 

regulations governing intermediary 

appeals at § 405.1811 and appeals to the 

Board at § 405.1835. We are requesting 

public comments with respect to 

amending the language of these 

additional regulations for appeals before 

the intermediary and the Board. 

XX. Files Available to the Public via the 

Internet 

We are proposing to create new 

Addendum P—Proposed OPPS Items 

and Services That Will be Packaged for 

CY 2014. 

The Addenda of the proposed rules 

and the final rules with comment period 

will be published and available only via 

the Internet on the CMS Web site. To 

view the Addenda of this proposed rule 

pertaining to the proposed CY 2014 

payments under the OPPS, go to the 

CMS Web site at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/ 

Hospital-Outpatient-Regulations-andNotices.html and select ‘‘1601–P’’ from 

the list of regulations. All Addenda for 

this proposed rule are contained in the 

zipped folder entitled ‘‘2014 OPPS 

1601–P Addenda’’ at the bottom of the 

page. 

To view the Addenda of this proposed 

rule pertaining to the proposed CY 2014 

payments under the ASC payment 

system, go to the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

ASCPayment/ASC-Regulations-andNotices.html and select ‘‘1601–P’’ from 

the list of regulations. All Addenda for 

this proposed rule are contained in the 

zipped folder entitled ‘‘Addendum AA, 

BB, DD1 and DD2,’’ and ‘‘Addendum 

EE’’ at the bottom of the page. 

XXI. Collection of Information 

Requirements 

A. Legislative Requirements for 

Solicitation of Comments 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

to solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

In this proposed rule, we are 

soliciting public comments on each of 

the issues outlined above for the 

information collection requirements 

discussed below. 

B. Requirements in Regulation Text 

1. Proposed Changes to the Outcome 

Measure Requirement for OPOs 

In section XVI. Of this proposed rule, 

we discussed our proposal to modify the 

outcome measures requirement for 

OPOs set forth at § 486.318. Currently, 

OPOs are required to meet all three 

outcome measures in that section or 

they are automatically decertified. We 

are proposing to modify that 

requirement so that OPOs will meet the 

outcome measures requirement if they 

meet two out of the three outcome 

measures. 

Based on our experience with OPOs 

and historical data concerning how 

many OPOs typically fail to meet one of 

the outcome measures, we believe that 

there would be about five OPOs that 

would fail to meet one of the outcome 

measures. Our proposal would result in 

those five OPOs meeting the outcome 

measures requirement and not being 

automatically de-certified. Therefore, 

these five OPOs would not have to 

perform the ICRs under this section, 

which would be the time and resources 

needed to go through the appeals 

process in an attempt to secure a 

reversal of the decertification. 

The ICRs that an OPO would be 

required to expend would depend upon 

how it chose to handle the 

decertification. An OPO may choose to 

not engage in the appeals process and 

merge with another OPO prior to the 

effective date of the decertification. 

Other OPOs would likely choose to take 

advantage of the appeals process, which 

would begin with reconsideration at the 

regional administrator level. It is likely 

that an OPO would expend considerable 

resources during the reconsideration 

and, if that was unsuccessful, a hearing 

before a CMS hearing officer. We believe 

both would require considerable time 

and other resources from the OPO’s 

senior staff and legal counsel. We also 

believe that those OPOs that went onto 

a hearing would expend considerably 

more resources than those that received 

a reversal of their decertification at the 

reconsideration. While we do not have 

a reliable estimate on how much these 

OPOs would save due to the numerous 

unknown variables, we are confident 

that these OPOs would sustain a 

significantly positive effect from not 

being automatically de-certified as is 

currently required under the OPO CfCs. 

In addition, under 5 CFR 1320.3(c), a 

‘‘collection of information’’’ does not 

include requirements imposed on fewer 

than 10 entities. Therefore, the 

requirements of this section are not 

subject to the PRA. 

2. Proposed Changes to the Medicare 

Fee-for-Service EHR Incentive Program 

In section XVIII. of this proposed rule, 

we are proposing to revise 42 CFR 495.4 

to provide a special method for making 

hospital-based determinations for 2103 

only in the cases of those EPs who 

reassign their benefits to Method II 

CAHs. We also are proposing a minor 

clarification to the regulations at 

§ 495.104(c)(2) concerning the cost 

reporting period to be used in 

determining final EHR payments for 

hospitals. We refer readers to the Stage 

1 (75 FR 44536 ff) and Stage 2 (77 FR 

54126 ff) final rules for the Medicare 

EHR Incentive Program for the 

discussions of the burden of the 

information collection requirements of 

the Medicare Fee-for-Service EHR 

Incentive Program. Our proposals in this 

rule do not modify or increase the 

information collection requirements of 

the program in any way. 

C. Associated Information Collections 

Not Specified in Regulatory Text 

In this proposed rule, we make 

reference to proposed associated 

information collection requirements that 

are not discussed in the regulation text 

contained in this proposed rule. The 

following is a discussion of those 

requirements. 


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1. Hospital OQR Program 

As we stated in section XIV. of the CY 

2012 OPPS/ASC final rule with 

comment period, the Hospital OQR 

Program has been generally modeled 

after the quality data reporting program 

for the Hospital IQR Program. We refer 

readers to the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72111 

through 72114), the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 

74549 through 74554) and the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68527 through 68532) for 

detailed discussions of the Hospital 

OQR Program information collection 

requirements we have previously 

finalized. 

a. Hospital OQR Program Requirements 

for the CY 2015 Payment Determination 

and Subsequent Years 

We refer readers to the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68531) for a discussion on 

the burden of the information collection 

requirements of the previously adopted 

Hospital OQR Program measures for the 

CY 2015 payment determination. We are 

not proposing to add any additional 

measures for the CY 2015 payment 

determination and subsequent years, so 

there will be no change in our previous 

burden estimate. 

We note that we had previously 

suspended data collection for the OP–19 

measure and deferred data collection for 

the OP–24 measure. 

In addition, we are proposing to 

codify existing policies related to 

program participation and withdrawal, 

data submission, program waivers, data 

validation, and the reconsideration 

process. Because we are only codifying 

existing policies, we do not anticipate 

any additional burden to hospitals 

based on this proposal affecting the CY 

2015 payment determination or 

subsequent years. 

b. Web-Based Measures for the CY 2016 

Payment Determination and Subsequent 

Years 

For the CY 2016 payment 

determination and subsequent years, we 

are proposing to add five measures to 

the program with data collection 

beginning during CY 2014. We are 

soliciting public comment on the impact 

of adding these measures and requiring 

data submission of aggregate data via a 

Web-based tool for four chart-abstracted 

measures. Hospitals will vary greatly as 

to the number of cases per HOPD due 

to specialization. However, we estimate 

based on our past experiences with 

chart-abstracted measures that each 

participating hospital will spend 35 

minutes per case to collect and submit 

the data, and that the estimated burden 

associated with there being one case per 

hospital would be 1,924 hours (3,300 

hospitals × 0.583 hours per hospital). 

In addition, HOPDs will incur a 

financial burden associated with chart 

abstraction and data submission for 

these four proposed measures. We 

estimate the burden associated with 

there being one case per hospital would 

be $57,717 (3,300 hospitals × $30.00 per 

hour × 0.583 hours). 

For the CY 2016 payment 

determination, the burden associated 

with Hospital OQR Program procedures 

is the time and effort associated with 

collecting and submitting the data on 

the measures. For the chart-abstracted 

measures where patient-level data is 

submitted directly to CMS, we estimate 

that there will be approximately 3,300 

respondents per year. For hospitals to 

collect and submit this information, we 

estimate it will take 35 minutes per 

submitted case. Based upon the data 

submitted for the CY 2012 and CY 2013 

payment determinations, we estimate 

there will be a total of 1,679,700 cases 

per year, approximately 509 cases per 

year per hospital. Therefore, the 

estimated annual hourly burden 

associated with the aforementioned data 

submission requirements for the chartabstracted data is 979,265 hours 

(1,679,700 cases per year × 0.583 hours 

per case). 

In addition, HOPDs will incur a 

financial burden associated with chart 

abstraction and data submission where 

patient-level data are submitted directly 

to CMS. We estimate the burden 

associated with these measures is 

$29,377,953 (1,679,700 cases per year × 

$30.00 per hour × 0.583 hours per case). 

For the measures where data is 

submitted to CMS via a Web-based 

online tool (OP–12, 17, 22, 25, 26, 28, 

29, 30, 31) located on a CMS Web site, 

we estimate that each participating 

hospital would spend 10 minutes per 

year to collect and submit the data, 

making the estimated annual burden 

associated with these measures 4,960 

hours (3,300 hospitals × 0.167 hours per 

measure × 9 measures per hospital) in 

CY 2015. 

In addition, HOPDs will incur a 

financial burden associated with chart 

abstraction and data submission for 

these 9 measures. We estimate that the 

financial burden associated with these 

measures would be $148,797 (3,300 

hospitals × $30.00 per hour × 0.167 

hours per measure x 9 measures). 

For the NHSN HAI measure: Influenza 

Vaccination Coverage among Healthcare 

Personnel, we estimate that the total 

annual burden associated with this 

measure for an HOPD for data 

submission would be 27,555 hours 

(3,300 hospitals × 0.167 hour per 

response for 50 workers per hospital). 

In addition, HOPDs will incur a 

financial burden associated with data 

submission for this measure. We 

estimate that the financial burden 

associated with these measures would 

be $826,650 ($30.00 per hour × 27,555 

hours). 

We invite public comment on the 

burden associated with these 

information collection requirements. 

c. Hospital OQR Program Validation 

Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

We are not proposing to make any 

changes to our validation procedures. 

As a result, the burden associated with 

the validation procedures for the CY 

2015 payment determination as 

proposed is the same as previously 

finalized for CY 2014 in the CY 2013 

OPPS/ASC final rule with comment 

period (77 FR 68531) and 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 would submit up to 48 cases for 

the affected year for review. All selected 

hospitals must comply with these 

requirements each year, which would 

result in a total of up to 24,000 charts 

being submitted by the sampled 

hospitals (500 selected hospitals x 48 

cases per hospital). The estimated 

annual burden associated with the data 

validation process for the CY 2015 

payment determination is 

approximately 6,000 hours. 

In addition, HOPDs will incur a 

financial burden associated with the 

required data abstraction and data 

submission for this measure. We 

estimate that the financial burden 

associated with this measure would be 

$180,000 ($30.00 per hour × 6,000 

hours). 

These requirements are currently 

approved under OCN: 0938–1109. This 

approval expires on October 31, 2013. 

We invite public comment on the 

burden associated with data validation 

information collection procedures. 

d. Hospital OQR Program 

Reconsideration and Appeals 

Procedures 

In section XIII.I. of this proposed rule, 

for the CY 2015 payment determination 

and subsequent years, we are proposing 

a minor change to the reconsideration 

request process to ensure our deadline 


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for these requests will always fall on a 

business day. We also are proposing to 

codify our reconsideration request 

process at 42 CFR 419.46(h). 

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, or 

appeals or all of these actions. 

2. ASCQR Program Requirements 

a. Claims-Based Measures for the CY 

2014 Payment Determination 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68532), we 

discussed the information collection 

requirements for the five claims-based 

measures (four outcome measures and 

one process measure) to be used for the 

CY 2014 payment determination. The 

five measures are: (1) Patient Burn (NQF 

#0263); (2) Patient Fall (NQF #0266); (3) 

Wrong Site, Wrong Side, Wrong Patient, 

Wrong Procedure, Wrong Implant (NQF 

#0267); (4) Hospital Transfer/Admission 

(NQF #0265); and (5) Prophylactic 

Intravenous (IV) Antibiotic Timing 

(NQF #0264). We collected quality 

measure data for the five claims-based 

measures using QDCs placed on 

submitted claims for services furnished 

from October 1, 2012 through December 

31, 2012 that were paid by the 

contractor by April 30, 2013. 

Approximately 71 percent of ASCs 

participated in Medical Event 

Reporting, which included reporting on 

the first four claims-based measures, 

which are outcome measures. 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 Surgical 

Center Environmental Scan (July 2008) 

(Contract No. GS–10F–0096T)). We 

estimated the burden to report QDCs for 

these 4 claims-based outcome measures 

to be nominal due to the small number 

of cases. Based on the data above, 

extrapolating from 71 percent to 100 

percent of ASCs reporting, there would 

be an average of 11.8 events per year or 

less than 1 case per month per ASC. 

For the claims-based process measure, 

Prophylactic IV Antibiotic Timing, we 

also estimated the burden associated 

with submitting QDCs to be nominal 

because few procedures performed by 

ASCs will require prophylactic 

antibiotic administration. 

We invite public comment on the 

burden associated with these 

information collection requirements. 

b. Claims-Based and Web-Based 

Measures for the CY 2015 and CY 2016 

Payment Determinations 

In the CY 2013 OPPS/ASC final rule 

with comment period (77 FR 68532), we 

discussed the information collection 

requirements for the measures to be 

used for the CY 2015 and CY 2016 

payment determinations. For the CY 

2015 payment determination, we 

finalized the retention of the five 

measures we adopted for the CY 2014 

payment determination, and we added 

two structural, Web-based, measures: 

Safe Surgery Checklist Use and ASC 

Facility Volume Data on Selected ASC 

Surgical Procedures (76 FR 74504 

through 74509). For the CY 2016 

payment determination, we finalized 

the retention of the seven measures for 

the CY 2015 payment determination and 

added Influenza Vaccination Coverage 

among Healthcare Personnel (NQF 

#0431) (76 FR 74509). 

Based on our data for CY 2014 

payment determinations above for 

claims-based measures, extrapolating to 

100 percent of ASCs reporting, there 

would be an average of 11.8 events per 

year. Thus, we estimated the burden to 

report QDCs on this number of claims 

per year for the first four claims-based 

outcome measures to be nominal due to 

the small number of cases 

(approximately one case per month per 

ASC) for the CY 2015 and CY 2016 

payment determinations. We estimated 

the burden associated with submitting 

QDCs for the fifth measure to be 

nominal as well, as discussed above. 

For the CY 2015 payment 

determination, for the Web-based 

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 measure, we estimated 

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 878 hours (5,260 

ASCs × 1 measure × 0.167 hours per 

ASC). For the CY 2015 payment 

determination, we estimate that, for the 

ASC Facility Volume Data on Selected 

ASC Surgical Procedures measure, each 

participating ASC would spend 10 

minutes per year to collect and submit 

the required data, making the estimated 

annual burden associated with this 

measure 878 hours (5,260 ASCs × 1 

measure 0.167 hours per ASC). 

For the CY 2016 payment 

determination, in this proposed rule we 

are proposing that ASCs would report 

data for the Safe Surgery Checklist 

measure and the ASC Volume Data on 

Selected ASC Surgical Procedures 

measure between January 1, 2015 and 

August 15, 2015 for services furnished 

between January 1, 2014 and December 

31, 2014. For the Safe Surgery Checklist 

measure for the CY 2016 payment 

determination, we estimate that each 

participating ASC would spend 10 

minutes per year to collect and submit 

the required data, making the estimated 

annual burden associated with this 

measure 878 hours (5,260 ASCs × 1 

measure × 0.167 hours per ASC). For the 

CY 2016 payment determination, for the 

ASC Volume Data on Selected ASC 

Surgical Procedures measure, we 

estimate that each participating ASC 

would spend 10 minutes per year to 

collect and submit the required data, 

making the estimated annual burden 

associated with this measure 878 hours 

(5,260 ASCs × 1 measure × 0.167 hours 

per ASC). 

For the CY 2016 payment 

determination, for the NHSN HAI 

measure: Influenza Vaccination 

Coverage among Healthcare Personnel, 

we estimate that the total annual burden 

associated with this measure for ASCs, 

including NHSN registration (5,260 

ASCs × 0.083 hour per facility = 437 

hours) and data submission (5,260 ASCs 

× 0.167 hour per response for 20 

workers per facility = 17,568), will be 

18,005 hours. This estimate is based 

upon burden estimates from the CDC 

(OMB No. 0920–0666) and reported 

numbers for the average number of 

workers per ASC. 

For the CY 2016 payment 

determination, in this proposed rule, we 

are proposing to add four measures to 

the program with data collection to 

begin during CY 2014 and submission to 

be via a Web-based tool. As chartabstracted measures, we estimate that 

each participating ASC would spend 35 

minutes per case to collect and submit 

the data, making the total estimated 

burden for ASCs with a single case per 

ASC would be 3,067 hours (5,260 ASCs 

× 0.583 hours per case per ASC). We 

expect that ASCs would vary greatly as 

to the number of cases per ASC due to 

ASC specialization. 

In addition, ASCs would incur a 

financial burden associated with chart 

abstraction and data submission for 

these four proposed measures. We 

estimate that, for a per chart abstracted 

case, an ASC would incur a cost of 

$91,997 (5,260 ASCs × $30.00 per hour 

× 0.583 hours). We are soliciting public 

comment on the impact of adding these 

measures and requiring data 

submission. 

We invite public comment on the 

burden associated with these 

information collection requirements. 


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c. Program Administrative 

Requirements and QualityNet Accounts; 

Extraordinary Circumstance and 

Extension Requests; Reconsideration 

Requests 

In the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74516), we 

finalized our proposal to consider an 

ASC to be participating in the ASCQR 

Program for the CY 2014 payment 

determination if the ASC includes QDCs 

specified for the program on their CY 

2012 claims relating to the finalized 

measures. 

In the FY 2013 IPPS/LTCH PPS final 

rule, we finalized, for the CY 2015 

payment determination and subsequent 

years, that once an ASC submits any 

quality measure data, it would be 

considered to be participating in the 

ASCQR Program. Once an ASC submits 

quality measure data indicating its 

participation in the ASCQR Program, in 

order to withdraw, an ASC must 

complete and submit an online form 

indicating that it is withdrawing from 

the program. 

For the CY 2015 payment 

determination and subsequent years, if 

the ASC submits quality measure data, 

there is no additional action required by 

the ASC to indicate participation in the 

program. The burden associated with 

the requirements to withdraw from the 

program is the time and effort associated 

with accessing, completing, and 

submitting the online form. Based on 

the number of hospitals that have 

withdrawn from the Hospital OQR 

Program over the past 4 years, we 

estimated that 2 ASCs would withdraw 

per year and that an ASC would expend 

30 minutes to access and complete the 

form, for a total burden of 1 hour per 

year. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53638 through 53639), we 

finalized for the CY 2015 payment 

determination the requirement that 

ASCs to identify and register a 

QualityNet administrator in order to set 

up accounts necessary to enter 

structural measure data. We estimated 

that, based upon previous experience 

with the Hospital OQR Program, it 

would take an ASC 10 hours to obtain, 

complete, and submit an application for 

a QualityNet administrator and then set 

up the necessary accounts for structural 

measure data entry. We estimated the 

total burden to meet these requirements 

to be 52,600 hours (10 hours × 5,260 

ASCs). The financial burden associated 

with these requirements is estimated to 

be $1,578,000 ($30.00 per hour × 52,600 

hours). 

In the FY 2013 IPPS/LTCH PPS final 

rule, we adopted a process for an 

extension or waiver for submitting 

information required under the program 

due to extraordinary circumstances that 

are not within the ASC’s control. We are 

requiring that an ASC would complete 

a request form that would be available 

on the QualityNet Web site, supply 

requested information, and submit the 

request. The burden associated with 

these requirements is the time and effort 

associated with gathering required 

information as well as accessing, 

completing, and submitting the form. 

Based on the number of ASCs that have 

submitted a request for an extension or 

waiver from the ASCQR Program over 

the past year, we estimate that 200 ASCs 

per year would request an extension or 

waiver and that an ASC would expend 

2 hours to gather required information 

as well as access, complete, and submit 

the form, for a total burden of 400 hours 

per year. This estimate takes into 

account continued billing and claims 

processing issues. 

We also adopted a reconsideration 

process that would apply to the CY 2014 

payment determination and subsequent 

payment determination years under the 

ASCQR Program. While there is burden 

associated with an ASC filing a 

reconsideration request, the regulations 

at 5 CFR 1320.4 for the Paperwork 

Reduction Act of 1995 exclude data 

collection activities during the conduct 

of administrative actions such as 

redeterminations, reconsiderations, or 

appeals or all of these actions. 

We invite public comment on the 

burden associated with these 

information collection requirements. 

3. Hospital VBP Program Requirements 

In section XIV. of this proposed rule, 

for the Hospital VBP Program, we are 

proposing to allow hospitals to request 

an independent CMS review that would 

be an additional appeal process beyond 

the existing review and corrections 

process (77 FR 53578 through 53581 

and 76 FR 74544 through 74547) and 

appeal process codified at 42 CFR 

412.167. 

While there is burden associated with 

a hospital requesting an independent 

CMS review, the regulations at 5 CFR 

1320.4 for the Paperwork Reduction Act 

of 1995 exclude collection activities 

during the conduct of administrative 

actions such as redeterminations, 

reconsiderations, or appeals or all of 

these actions. 

We invite public comment on the 

burden associated with these 

information collection requirements. 

If you comment on these information 

collection and recordkeeping 

requirements, please submit your 

comments to the Office of Information 

and Regulatory Affairs, Office of 

Management and Budget, Attention: 

CMS Desk Officer, CMS–1601–P; Fax: 

(202) 395–6974; or Email: 

OIRAsubmissions_@omb.eop.gov 

XXII. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this proposed rule, and, when we 

proceed with a subsequent document(s), 

we will respond to those comments in 

the preamble to that document. 

XXIII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We have examined the impacts of this 

proposed rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, section 202 of 

the Unfunded Mandates Reform Act of 

1995 (UMRA) (March 22, 1995, Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Contract with America Advancement 

Act of 1996 (Pub. L. 104–121) (5 U.S.C. 

804(2)). This section of the proposed 

rule contains the impact and other 

economic analyses for the provisions 

that we are proposing. 

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 

proposed 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 

proposed rule has been reviewed by the 

Office of Management and Budget. We 

have prepared a regulatory impact 

analysis that, to the best of our ability, 

presents the costs and benefits of this 

proposed rule. In this proposed rule, we 


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are soliciting public comments on the 

regulatory impact analysis provided. 

2. Statement of Need 

This proposed rule is necessary to 

update the Medicare hospital OPPS 

rates. It is necessary to propose to make 

changes to the payment policies and 

rates for outpatient services furnished 

by hospitals and CMHCs in CY 2014. 

We are required under section 

1833(t)(3)(C)(ii) of the Act to update 

annually the OPPS conversion factor 

used to determine the payment rates for 

APCs. We also are required under 

section 1833(t)(9)(A) of the Act to 

review, not less often than annually, 

and revise the groups, the relative 

payment weights, and the wage and 

other adjustments described in section 

1833(t)(2) of the Act. We must review 

the clinical integrity of payment groups 

and relative payment weights at least 

annually. We are proposing to revise the 

APC relative payment weights using 

claims data for services furnished on 

and after January 1, 2012, through and 

including December 31, 2012, and 

updated cost report information. 

For CY 2014, we are proposing to 

continue the current payment 

adjustment for rural SCHs, including 

EACHs. In addition, section 10324 of 

the Affordable Care Act, as amended by 

HCERA, authorizes a wage index of 1.00 

for certain frontier States. Section 

1833(t)(17) of the Act requires that 

subsection (d) hospitals that fail to meet 

quality reporting requirements under 

the Hospital OQR Program incur a 

reduction of 2.0 percentage points to 

their OPD fee schedule increase factor. 

In this proposed rule, we are proposing 

to implement these payment provisions. 

Also, we list the 15 drugs and 

biologicals in Table 19 that we are 

proposing to remove from pass-through 

payment status for CY 2014. 

This proposed rule is also necessary 

to update the ASC payment rates for CY 

2014, enabling CMS to make changes to 

payment policies and payment rates for 

covered surgical procedures and 

covered ancillary services that are 

performed in an ASC in CY 2014. 

Because the ASC payment rates are 

based on the OPPS relative payment 

weights for the majority of the 

procedures performed in ASCs, the ASC 

payment rates are updated annually to 

reflect annual changes to the OPPS 

relative payment weights. In addition, 

because the services provided in ASCs 

are identified by HCPCS codes that are 

reviewed and revised either quarterly or 

annually, depending on the type of 

code, it is necessary to update the ASC 

payment rates annually to reflect these 

changes to HCPCS codes. In addition, 

we are required under section 1833(i)(1) 

of the Act to review and update the list 

of surgical procedures that can be 

performed in an ASC not less frequently 

than every 2 years. Sections 

1833(i)(2)(D)(iv) and 1833(i)(7) of the 

Act authorize the Secretary to 

implement a quality reporting system 

for ASCs in a manner so as to provide 

for a reduction of 2.0 percentage points 

in any annual update with respect to the 

year involved for ASCs that fail to meet 

the quality reporting requirements. For 

CY 2014, we discuss the impacts 

associated with this payment reduction 

in section XV.C. of this proposed rule. 

3. Overall Impacts for the Proposed 

OPPS and ASC Payment Provisions 

We estimate that the effects of the 

proposed OPPS payment provisions 

would result in expenditures exceeding 

$100 million in any 1 year. We estimate 

that the total increase from the proposed 

changes in this proposed rule in Federal 

government expenditures under the 

OPPS for CY 2014 compared to CY 2013 

would be approximately $600 million. 

Taking into account our estimated 

changes in enrollment, utilization, and 

case-mix, we estimate that the proposed 

OPPS expenditures for CY 2014 would 

be approximately $4.372 billion higher, 

relative to expenditures in CY 2013. 

Because this proposed rule is 

‘‘economically significant’’ as measured 

by the $100 million threshold, we have 

prepared this regulatory impact analysis 

that, to the best of our ability, presents 

its costs and benefits. Table 39 displays 

the redistributional impact of the 

proposed CY 2014 changes in OPPS 

payment to various groups of hospitals 

and for CMHCs. 

We estimate that the proposed update 

to the conversion factor and other 

adjustments (not including the effects of 

outlier payments, the pass-through 

estimates, and the application of the 

frontier State wage adjustment for CY 

2014) would increase total OPPS 

payments by 1.8 percent in CY 2014. 

The proposed changes to the APC 

weights, the proposed changes to the 

wage indices, the proposed continuation 

of a payment adjustment for rural SCHs, 

including EACHs, and the proposed 

payment adjustment for cancer hospitals 

would not increase OPPS payments 

because these proposed changes to the 

OPPS would be budget neutral. 

However, these proposed updates 

would change the distribution of 

payments within the budget neutral 

system. We estimate that the proposed 

total change in payments between CY 

2013 and CY 2014, considering all 

proposed payments, including proposed 

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 proposed OPD fee schedule 

increase factor after all adjustments 

required by sections 1833(t)(3)(F), 

1833(t)(3)(G) and 1833(t)(17) of the Act, 

would increase total estimated OPPS 

payments by 1.8 percent. 

We estimate the total increase (from 

proposed changes to the ASC provisions 

in this proposed rule as well as from 

enrollment, utilization, and case-mix 

changes) in expenditures under the ASC 

payment system for CY 2014 compared 

to CY 2013 to be approximately $133 

million. Because the provisions for the 

ASC payment system are part of a 

proposed rule that is ‘‘economically 

significant’’ as measured by the $100 

million threshold, we have prepared a 

regulatory impact analysis of the 

proposed changes to the ASC payment 

system that, to the best of our ability, 

presents the costs and benefits of this 

portion of the proposed rule. Tables 40 

and Table 41 of this proposed rule 

display the redistributional impact of 

the proposed CY 2014 changes on ASC 

payment, grouped by specialty area and 

then grouped by procedures with the 

greatest ASC expenditures, respectively. 

4. Detailed Economic Analyses 

a. Estimated Effects of Proposed OPPS 

Changes in This Proposed Rule 

(1) Limitations of Our Analysis 

The distributional impacts presented 

here are the projected effects of the 

proposed CY 2014 policy changes on 

various hospital groups. We post on the 

CMS Web site our proposed hospitalspecific estimated payments for CY 

2014 with the other supporting 

documentation for this proposed rule. 

To view the hospital-specific estimates, 

we refer readers to the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. At 

the Web site, select ‘‘regulations and 

notices’’ from the left side of the page 

and then select ‘‘CMS–1601–P’’ from the 

list of regulations and notices. The 

hospital-specific file layout and the 

hospital-specific file are listed with the 

other supporting documentation for this 

proposed rule. We show hospitalspecific data only for hospitals whose 

claims were used for modeling the 

impacts shown in Table 39 below. We 

do not show hospital-specific impacts 

for hospitals whose claims we were 

unable to use. We refer readers to 

section II.A. of this proposed rule for a 

discussion of the hospitals whose 


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claims we do not use for ratesetting and 

impact purposes. 

We estimate the effects of the 

proposed 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 proposed policy 

changes. In addition, we do not make 

adjustments for future changes in 

variables such as service volume, 

service-mix, or number of encounters. In 

this proposed rule, we are soliciting 

public comment and information about 

the anticipated effects of our proposed 

changes on providers and our 

methodology for estimating them. Any 

public comments that we receive will be 

addressed in the applicable sections of 

the final rule with comment period that 

discuss the specific policies. 

(2) Estimated Effects of Proposed OPPS 

Changes on Hospitals 

Table 39 below shows the estimated 

impact of this proposed rule on 

hospitals. Historically, the first line of 

the impact table, which estimates the 

proposed change in payments to all 

facilities, has always included cancer 

and children’s hospitals, which are held 

harmless to their pre-BBA amount. We 

also include CMHCs in the first line that 

includes all providers because we 

include CMHCs in our weight scaler 

estimate. We now include a second line 

for all hospitals, excluding permanently 

held harmless hospitals and CMHCs. 

We present separate impacts for 

CMHCs in Table 39 and we discuss 

them separately below, because CMHCs 

are paid only for partial hospitalization 

services under the OPPS and are a 

different provider type from hospitals. 

In CY 2013, we are paying CMHCs 

under APC 0172 (Level I Partial 

Hospitalization (3 services) for CMHCs) 

and APC 0173 (Level II Partial 

Hospitalization (4 or more services) for 

CMHCs), and we are paying hospitals 

for partial hospitalization services under 

APC 0175 (Level I Partial 

Hospitalization (3 services) for hospitalbased PHPs) and APC 0176 (Level II 

Partial Hospitalization (4 or more 

services) for hospital-based PHPs). We 

display separately the impact of our 

proposed updates on CMHCs, and we 

discuss its impact on hospitals as part 

of our discussion of the hospital 

impacts. 

The estimated increase in the total 

payments made under the OPPS is 

determined largely by the increase to 

the conversion factor under the 

statutory methodology. The 

distributional impacts presented do not 

include assumptions about changes in 

volume and service-mix. The 

conversion factor is updated annually 

by the OPD fee schedule increase factor 

as discussed in detail in section II.B. of 

this proposed rule. Section 

1833(t)(3)(C)(iv) of the Act provides that 

the OPD fee schedule increase factor is 

equal to the market basket percentage 

increase applicable under section 

1886(b)(3)(B)(iii) of the Act, which we 

refer to as the IPPS market basket 

percentage increase. The proposed IPPS 

market basket percentage increase for 

FY 2014 is 2.5 percent (78 FR 27497). 

Section 1833(t)(3)(F)(i) of the Act 

reduces that 2.5 percent by the 

multifactor productivity adjustment 

described in section 1886(b)(3)(B)(xi)(II) 

of the Act, which is proposed to be 0.4 

percentage points for FY 2014 (which is 

also the proposed MFP adjustment for 

FY 2014 in the FY 2014 IPPS/LTCH PPS 

proposed rule (78 FR 27786); and 

sections 1833(t)(3)(F)(ii) and 

1833(t)(3)(G)(ii) of the Act further 

reduce the market basket percentage 

increase by 0.3 percentage points, 

resulting in the proposed OPD fee 

schedule increase factor of 1.8 percent, 

which we are proposing to use in the 

calculation of the proposed CY 2014 

OPPS conversion factor. Section 10324 

of the Affordable Care Act, as amended 

by HCERA, further authorized 

additional expenditures outside budget 

neutrality for hospitals in certain 

frontier States that have a wage index 

less than 1.00. The amounts attributable 

to this frontier State wage index 

adjustment are incorporated in the CY 

2014 estimates in Table 39. 

To illustrate the impact of the 

proposed CY 2014 changes, our analysis 

begins with a baseline simulation model 

that uses the CY 2013 relative payment 

weights, the FY 2013 final IPPS wage 

indices that include reclassifications, 

and the final CY 2013 conversion factor. 

Table 39 shows the estimated 

redistribution of the proposed increase 

in payments for CY 2014 over CY 2013 

payments to hospitals and CMHCs as a 

result of the following factors: APC 

reconfiguration and recalibration for CY 

2014 compared to CY 2013 payments 

(Column 2); the marginal impact of our 

packaging proposals other than 

packaging for clinical laboratory tests 

(Column 3); the marginal impact of our 

proposal to package clinical laboratory 

services (Column 4); the combined 

impact of all of our packaging proposals 

and proposed APC reconfiguration and 

recalibration for CY 2014, compared to 

CY 2013 payments (Column 5: the 

combined effect of columns 2, 3 and 4); 

the proposed wage indices and the rural 

adjustment (Column 6); the combined 

impact of proposed APC recalibration, 

the proposed wage indices and rural 

adjustment, and the proposed OPD fee 

schedule increase factor update to the 

conversion factor (Column 7); the 

combined impact of proposed APC 

recalibration, the proposed wage indices 

and rural adjustment, the proposed 

conversion factor update, and the 

proposed CY 2014 frontier State wage 

index adjustment (Column 8); and the 

estimated impact taking into account all 

proposed payments for CY 2014 relative 

to all payments for CY 2013 (Column 9), 

including the impact of proposed 

changes in estimated outlier payments 

and proposed changes to the passthrough payment estimate. 

We did not model an explicit budget 

neutrality adjustment for the rural 

adjustment for SCHs because we are not 

proposing to make any changes to the 

policy for CY 2014. Because the updates 

to the conversion factor (including the 

update of the OPD fee schedule increase 

factor), the estimated cost of the rural 

adjustment, and the estimated cost of 

projected pass-through payment for CY 

2014 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 will change), and the impact of 

the wage index changes on the hospital. 

However, total payments made under 

this system and the extent to which this 

proposed rule would redistribute money 

during implementation also would 

depend on changes in volume, practice 

patterns, and the mix of services billed 

between CY 2013 and CY 2014 by 

various groups of hospitals, which CMS 

cannot forecast. 

Overall, we estimate that the 

proposed OPPS rates for CY 2014 would 

have a positive effect for providers paid 

under the OPPS, resulting in a 1.8 

percent estimated increase in Medicare 

payments. Removing payments to 

cancer and children’s hospitals because 

their payments are held harmless to the 

pre-OPPS ratio between payment and 

cost and removing payments to CMHCs 

suggest that these proposed changes 

would result in a 1.8 percent estimated 

increase in Medicare payments to all 

other hospitals. Those estimated 

payments would not significantly 

impact other providers. 

Column 1: Total Number of Hospitals 

The first line in Column 1 in Table 39 

shows the total number of facilities 

(3,953), including designated cancer and 

children’s hospitals and CMHCs, for 

which we were able to use CY 2012 


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hospital outpatient and CMHC claims 

data to model CY 2013 and CY 2014 

payments, by classes of hospitals, for 

CMHCs and for dedicated cancer 

hospitals. We excluded all hospitals and 

CMHCs for which we could not 

plausibly estimate CY 2013 or CY 2014 

payment and entities that are not paid 

under the OPPS. The latter entities 

include CAHs, all-inclusive hospitals, 

and hospitals located in Guam, the U.S. 

Virgin Islands, Northern Mariana 

Islands, American Samoa, and the State 

of Maryland. This process is discussed 

in greater detail in section II.A. of this 

proposed rule. At this time, we are 

unable to calculate a disproportionate 

share (DSH) variable for hospitals not 

participating in the IPPS. Hospitals for 

which we do not have a DSH variable 

are grouped separately and generally 

include freestanding psychiatric 

hospitals, rehabilitation hospitals, and 

long-term care hospitals. We show the 

total number (3,791) 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 100 CMHCs at the bottom of 

the impact table and discuss that impact 

separately below. 

Column 2: APC Recalibration 

Column 2 shows the estimated effect 

of the reconfiguration and recalibration 

of the APCs from CY 2013 to CY 2014 

excluding the CY 2014 OPPS packaging 

proposals. Outpatient laboratory 

services paid at CLFS rates are included 

on both sides of the comparison. We 

estimate that most hospitals would not 

experience significant changes in 

payment rates from the APC 

recalibration alone, though we estimate 

that Puerto Rico would experience a 4.3 

percent increase in payments and that 

low volume rural hospitals (measured 

by lines of services) would experience a 

1.8 percent payment decrease. 

Column 3: APC Recalibration With CY 

2014 Packaging Proposals Other than 

Outpatient Laboratory Services 

Column 3 shows the estimated impact 

of the APC recalibration from CY 2013– 

2014 with our proposed packaging 

policies other than packaging for 

outpatient laboratory services currently 

paid at CLFS rates. Outpatient 

laboratory services paid at CLFS rates 

are included on both sides of the 

comparison. Hospitals that specialize in 

a limited set of services would 

experience the most significant changes 

in payment. Urban hospitals with less 

than 21,000 service lines would 

experience estimated payment decreases 

ranging from 0.4 to 1.9 percent. 

Hospitals where DSH data are not 

available (specialized hospitals not paid 

under the IPPS) would experience 

estimated payment decreases of 1.4 

percent. 

Column 4: APC Recalibration With CY 

2014 Outpatient Laboratory Services 

Packaging Proposal 

Column 4 shows the estimated effect 

of APC recalibration plus our proposed 

policy for packaging outpatient 

laboratory services paid at CLFS rates. 

Outpatient laboratory services paid at 

CLFS rates are included in the 

comparison. It does not include 

estimated effects for other packaging 

proposals. We estimate that smaller 

rural hospitals, particularly in the midAtlantic region, would experience the 

most significant payment changes 

related to the laboratory packaging 

policy proposal, as they likely furnish 

more ancillary laboratory services 

relative to other services than larger 

hospitals. We estimate that rural 

hospitals overall would experience a 1.3 

percent decrease in payment, and rural 

hospitals with 100 or fewer beds would 

experience payment decreases between 

1.9 and 3.5 percent. Urban hospitals 

overall would experience limited 

estimated payment increases ranging 

from 0.1 to 0.3 percent. 

Column 5: APC Recalibration With All 

Proposed Changes 

Column 5 shows the combined effects 

of the proposed reconfiguration, 

recalibration, and other policies (such as 

proposing to set payment for separately 

payable drugs and biologicals at the 

statutory default of ASP+6), plus our 

proposals to package outpatient 

laboratory services and other services 

for CY 2014. We modeled the effect of 

the APC recalibration changes by 

varying only the relative payment 

weights (the final CY 2013 relative 

weights versus the proposed CY 2014 

relative weights calculated using the 

service-mix and volume in the CY 2012 

claims used for this proposed rule) and 

calculating the percent difference in the 

relative weight. Column 5 also reflects 

any proposed changes in multiple 

procedure discount patterns or 

conditional packaging that occur as a 

result of the proposed changes in the 

relative magnitude of payment weights. 

Overall, we estimate that proposed 

changes in APC reassignment and 

recalibration across all services paid 

under the OPPS, together with our 

proposed packaging policies, would 

slightly increase payments to urban 

hospitals by 0.1 percent. We estimate 

that rural hospitals would experience a 

decrease in payments of 0.7 percent. 

Classifying hospitals according to 

teaching status, we estimate that the 

APC recalibration together with our 

proposed packaging policies would lead 

to a payment increase of 1.2 percent for 

major teaching hospitals. We estimate 

that nonteaching hospitals would 

experience a decrease of 0.6 percent. 

Classifying hospitals by type of 

ownership suggests that voluntary, 

proprietary, and governmental hospitals 

would experience changes ranging from 

a decrease of 0.6 percent to an increase 

of 0.2 percent as a result of the APC 

recalibration and proposed packaging 

policies. 

Column 6: New Wage Indices and the 

Effect of the Rural and Cancer Hospital 

Adjustments 

Column 6 demonstrates the combined 

budget neutral impact of proposed APC 

recalibration; the proposed wage index 

update; the proposed rural adjustment; 

and the proposed cancer hospital 

payment adjustment. We modeled the 

independent effect of the proposed 

budget neutrality adjustments and the 

proposed OPD fee schedule increase 

factor by using the relative payment 

weights and wage indices for each year, 

and using a CY 2013 conversion factor 

that included the OPD fee schedule 

increase and a budget neutrality 

adjustment for differences in wage 

indices. 

Column 6 reflects the independent 

effects of the proposed 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 

proposed frontier State wage index 

adjustment, which is not budget neutral 

and is included in Column 8. We did 

not model a budget neutrality 

adjustment for the rural adjustment for 

SCHs because we are not proposing to 

make any changes to the policy for CY 

2014. The differential impact between 

the CY 2013 cancer hospital payment 

adjustment and the proposed CY 2014 

cancer hospital payment adjustment 

would have a minimal effect on the 

budget neutral adjustment to the 

conversion factor. We modeled the 

independent effect of updating the wage 

indices by varying only the wage 

indices, holding APC relative payment 

weights, service-mix, and the rural 

adjustment constant and using the 

proposed CY 2014 scaled weights and a 


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CY 2013 conversion factor that included 

a budget neutrality adjustment for the 

effect of changing the wage indices 

between CY 2013 and CY 2014. This 

column estimates the impact of 

applying the proposed FY 2014 IPPS 

wage indices for the proposed CY 2014 

OPPS without the influence of the 

frontier State wage index adjustment, 

which is not budget neutral. The 

proposed frontier State wage index 

adjustment is reflected in the combined 

impact shown in Column 8. We are 

proposing to continue the rural payment 

adjustment of 7.1 percent to rural SCHs 

for CY 2014, as described in section II.E. 

of this proposed rule. We estimate that 

the combination of updated wage data 

and nationwide application of rural 

floor budget neutrality would 

redistribute payment among regions. We 

also are proposing to update the list of 

counties qualifying for the section 505 

out-migration adjustments. 

Overall, we estimate that as a result of 

the proposed updated wage indices and 

the proposed rural adjustment, urban 

hospitals would experience no change 

from CY 2013 to CY 2014. However, 

rural hospitals would experience an 

estimated decrease of 0.3 percent. Urban 

hospitals in the New England, Mid 

Atlantic, and Pacific regions and in 

Puerto Rico would experience the most 

significant payment changes of 0.6 to 

0.7 percent increases. Regionally, the 

proposed changes would range from a 

decrease of 0.6 in the rural East South 

Central region to an increase of 0.7 

percent in the rural Pacific region. 

Column 7: All Proposed Budget 

Neutrality Changes Combined With the 

Proposed OPD Fee Schedule Increase 

Column 7 demonstrates the 

cumulative impact of the proposed 

budget neutral adjustments from 

Columns 5 and 6 and the proposed OPD 

fee schedule increase factor of 1.8 

percent. We estimate that, for some 

hospitals, the addition of the proposed 

OPD fee schedule increase factor of 1.8 

percent would mitigate the impacts 

created by the proposed budget 

neutrality adjustments made in 

Columns 5 and 6. 

Most classes of hospitals would 

receive an increase that is in line with 

the proposed 1.8 percent overall 

increase after the update is applied to 

the budget neutrality adjustments. The 

largest rural hospitals by number of 

beds (200+ beds) would experience 

payment increases of 1.4 percent. 

Proprietary, voluntary, and government 

hospitals would experience payment 

increases ranging from 1.0 to 2.0 

percent. Hospitals in Puerto Rico would 

receive an estimated payment increase 

of 6.3 percent. The rural Mid-Atlantic 

region would experience a 0.4 percent 

payment decrease, while the urban MidAtlantic region would experience a 2.8 

percent payment increase. Classified by 

teaching status, nonteaching hospitals 

would experience a small payment 

increase of 1.1 percent, with minor and 

major teaching hospitals experiencing 

increases ranging from 1.8 to 3.2 

percent, respectively. 

Column 8: All Proposed Adjustments 

With the Proposed Frontier State Wage 

Index Adjustment 

This column shows the impact of all 

proposed budget neutrality adjustments, 

application of the proposed 1.8 percent 

OPD fee schedule increase factor, and 

the nonbudget neutral impact of 

applying the proposed frontier State 

wage adjustment (that is, the proposed 

frontier State wage index change in 

addition to all proposed changes 

reflected in Column 7). This column 

differs from Column 7 solely based on 

application of the proposed nonbudget 

neutral frontier State wage index 

adjustment. 

In general, we estimate that all 

facilities and all hospitals would 

experience a combined increase of 1.9 

percent due to the proposed nonbudget 

neutral frontier State wage index 

adjustment. The index would only affect 

urban hospitals in the West North 

Central and Mountain regions. Urban 

hospital in those regions would 

experience estimated increases of 4.5 

percent (West North Central) and 2.3 

percent (Mountain) that are attributable 

to the proposed frontier State wage 

index and the OPD fee schedule 

increase factor, and rural hospitals 

would experience estimated increases of 

3.5 percent (West North Central) and 3.4 

percent (Mountain) that are attributable 

to the proposed frontier State wage 

index and the OPD fee schedule 

increase factor. 

Column 9: All Proposed Changes for CY 

2014 

Column 9 depicts the full impact of 

the proposed CY 2014 policies on each 

hospital group by including the effect of 

all of the proposed changes for CY 2014 

and comparing them to all estimated 

payments in CY 2013. Column 9 shows 

the combined budget neutral effects of 

Column 5 and 6; the proposed OPD fee 

schedule increase; the impact of the 

proposed frontier State wage index 

adjustment; the impact of estimated 

OPPS outlier payments as discussed in 

section II.G. of this proposed rule; the 

proposed change in the Hospital OQR 

Program payment reduction for the 

small number of hospitals in our impact 

model that failed to meet the reporting 

requirements (discussed in section XIII. 

of this proposed rule); and the impact of 

decreasing the estimate of the 

percentage of total OPPS payments 

dedicated to transitional pass-through 

payments. Of those hospitals that failed 

to meet the Hospital OQR Program 

reporting requirements for the full CY 

2013 update (and assumed, for 

modeling purposes, to be the same 

number for CY 2014), we included 34 

hospitals in our model because they had 

both CY 2012 claims data and recent 

cost report data. We estimate that the 

cumulative effect of all proposed 

changes for CY 2014 would increase 

payments to all providers by 1.8 percent 

for CY 2014. We modeled the 

independent effect of all proposed 

changes in Column 9 using the final 

relative payment weights for CY 2013 

and the proposed relative payment 

weights for CY 2014. We used the final 

conversion factor for CY 2013 of 

$71.313 and the proposed CY 2014 

conversion factor of $72.728 discussed 

in section II.B. of this proposed rule. 

Column 9 contains simulated outlier 

payments for each year. We used the 

one year proposed charge inflation 

factor used in the proposed FY 2014 

IPPS/LTCH PPS proposed rule (78 FR 

27767) of 4.85 percent (1.0485) to 

increase individual costs on the CY 

2012 claims, and we used the most 

recent overall CCR in the April 2013 

Outpatient Provider-Specific File 

(OPSF) to estimate outlier payments for 

CY 2013. Using the CY 2012 claims and 

a 4.85 percent charge inflation factor, 

we currently estimate that outlier 

payments for CY 2013, using a multiple 

threshold of 1.75 and a proposed fixeddollar threshold of $2,025 should be 

approximately 1.2 percent of total 

payments. The estimated current outlier 

payments of 1.2 percent are 

incorporated in the comparison in 

Column 9. We used the same set of 

claims and a proposed charge inflation 

factor of 9.93 percent (1.0993) and the 

CCRs in the April 2013 OPSF, with an 

adjustment of 0.9732, to reflect relative 

changes in cost and charge inflation 

between CY 2012 and CY 2014, to 

model the proposed CY 2014 outliers at 

1.0 percent of estimated total payments 

using a multiple threshold of 1.75 and 

a proposed fixed-dollar threshold of 

$2,775. 

We estimate that the anticipated 

change in payment between CY 2013 

and CY 2014 for the hospitals failing to 

meet the Hospital OQR Program 

requirements would be negligible. 

Overall, we estimate that facilities 

would experience an increase of 1.8 

percent under this proposed rule in CY 


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2014 relative to total spending in CY 

2013. This projected increase (shown in 

Column 9) of Table 39 reflects the 

proposed 1.8 percent OPD fee schedule 

increase factor, with 0.13 percent for the 

proposed change in the pass-through 

estimate between CY 2013 and CY 2014, 

less 0.2 percent for the difference in 

estimated outlier payments between CY 

2013 (1.2 percent) and CY 2014 (1.0 

percent), less 0.1 percent due to the 

frontier adjustment in CY 2013, plus 0.1 

percent due to the proposed frontier 

State wage index adjustment in CY 

2014. When we exclude cancer and 

children’s hospitals (which are held 

harmless to their pre-BBA amount) and 

CMHCs, the estimated update increases 

to 1.8 percent after rounding. We 

estimate that the combined effect of all 

proposed changes for CY 2014 would 

increase payments to urban hospitals by 

2.0 percent. 

Overall, we estimate that rural 

hospitals would experience a 0.9 

percent increase as a result of the 

combined effects of all proposed 

changes for CY 2014. We estimate that 

rural hospitals that bill less than 5,000 

lines of OPPS services would 

experience an increase of 2.2 percent 

and rural hospitals that bill 5,000 or 

more lines of OPPS services would 

experience increases ranging from 0.9 to 

2.4 percent. 

Among teaching hospitals, we 

estimate that the impacts resulting from 

the combined effects of all proposed 

changes would include an increase of 

3.1 percent for major teaching hospitals 

and 1.2 percent for nonteaching 

hospitals. Minor teaching hospitals 

would experience an estimated increase 

of 1.8 percent. 

In our analysis, we also have 

categorized hospitals by type of 

ownership. Based on this analysis, we 

estimate that voluntary hospitals would 

experience an increase of 2.1 percent, 

proprietary hospitals would experience 

an increase of 1.3 percent, and 

governmental hospitals would 

experience an increase of 1.0 percent. 

TABLE 39—ESTIMATED IMPACT OF THE PROPOSED CY 2014 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE

PAYMENTS SYSTEM

Number of 

hospitals 

APC Recalibration 

(CY 2013– 

2014) (%) 

Impact of 

packaging 

proposals 

other than 

outpatient 

laboratory 

services (%) 

Impact of 

outpatient 

laboratory 

services 

packaging 

proposal 

(%) 

APC Recalibration 

(all 

changes) 

(%) 

New wage 

index and 

provider adjustments 

(%) 

Combined 

cols 5, 6 

with market 

basket update (%) 

Column 7 

with frontier 

wage index 

adjustment 

(%) 

All proposed 

changes 

(%) 

(1) (2) (3) (4) (5) (6) (7) (8) (9) 

ALL FACILITIES * ..................... 3,953 0.0 0.0 0.0 0.0 0.0 1.8 1.9 1.8 

ALL HOSPITALS ....................... 3,791 0.1 ¥0.1 0.0 0.0 0.0 1.8 1.9 1.8 

(excludes hospitals permanently 

held harmless and CMHCs) 

URBAN HOSPITALS ................ 2,859 0.1 ¥0.2 0.2 0.1 0.0 1.9 2.0 2.0 

LARGE URBAN ................. 1,566 0.1 0.0 0.3 0.4 0.2 2.3 2.3 2.3 

(GT 1 MILL.).

OTHER URBAN ................. 1,293 0.0 ¥0.3 0.1 ¥0.2 ¥0.1 1.5 1.7 1.5 

(LE 1 MILL.).

RURAL HOSPITALS ................. 932 0.0 0.6 ¥1.3 ¥0.7 ¥0.3 0.9 1.1 0.9 

SOLE COMMUNITY .......... 389 0.1 0.8 ¥1.0 ¥0.1 ¥0.3 1.4 1.8 1.5 

OTHER RURAL ........................ 543 0.0 0.4 ¥1.6 ¥1.2 ¥0.2 0.3 0.4 0.4 

BEDS (URBAN) 

0–99 BEDS ........................ 959 0.0 ¥0.3 0.3 0.0 0.1 1.8 2.0 1.9 

100–199 BEDS .................. 831 0.1 ¥0.3 ¥0.2 ¥0.4 ¥0.1 1.3 1.4 1.4 

200–299 BEDS .................. 454 0.1 ¥0.6 0.1 ¥0.4 0.0 1.4 1.6 1.4 

300–499 BEDS .................. 407 0.3 ¥0.4 0.5 0.3 0.0 2.1 2.2 2.1 

500 + BEDS ....................... 208 ¥0.1 0.6 0.2 0.7 0.2 2.6 2.6 2.6 

BEDS (RURAL) 

0–49 BEDS ........................ 352 0.7 1.3 ¥3.5 ¥1.5 ¥0.6 ¥0.3 ¥0.1 ¥0.3 

50–100 BEDS .................... 342 0.2 1.5 ¥1.9 ¥0.3 ¥0.1 1.4 1.6 1.4 

101–149 BEDS .................. 133 ¥0.3 0.1 ¥0.6 ¥0.8 ¥0.5 0.5 0.7 0.6 

150–199 BEDS .................. 61 ¥0.5 0.2 ¥0.8 ¥1.1 ¥0.1 0.5 1.0 0.5 

200 + BEDS ....................... 44 0.1 ¥0.6 0.3 ¥0.2 ¥0.2 1.4 1.4 1.6 

VOLUME (URBAN) 

LT 5,000 Lines ................... 485 ¥1.4 ¥0.4 2.4 0.5 0.2 2.5 2.7 2.6 

5,000—10,999 Lines .......... 109 ¥1.4 ¥0.5 3.2 1.3 ¥0.1 3.0 3.5 2.4 

11,000–20,999 Lines ......... 132 0.1 ¥1.9 2.4 0.6 0.0 2.5 2.6 2.5 

21,000–42,999 Lines ......... 262 0.4 ¥1.8 1.2 ¥0.2 ¥0.2 1.4 1.4 1.4 

42,999—89,999 Lines ........ 517 0.2 ¥0.9 0.7 ¥0.1 0.1 1.8 1.8 1.8 

GT 89,999 Lines ................ 1,354 0.1 0.0 0.1 0.1 0.0 2.0 2.1 2.0 

VOLUME (RURAL) 

LT 5,000 Lines ................... 31 ¥1.8 0.3 2.2 0.6 ¥0.4 2.1 6.7 2.2 

5,000–10,999 Lines ........... 34 5.8 ¥0.1 ¥4.4 1.0 ¥0.5 2.3 2.3 2.4 

11,000–20,999 Lines ......... 67 3.0 0.2 ¥2.6 0.5 ¥0.7 1.6 1.7 1.5 

21,000–42,999 Lines ......... 182 1.0 1.2 ¥2.4 ¥0.3 ¥0.3 1.2 1.8 1.1 

GT 42,999 Lines ................ 618 ¥0.1 0.6 ¥1.2 ¥0.7 ¥0.2 0.8 1.0 0.9 

REGION (URBAN) 

NEW ENGLAND ................ 150 0.0 2.2 ¥1.4 0.7 0.6 3.1 3.1 3.0 

MIDDLE ATLANTIC ........... 342 0.0 0.8 ¥0.5 0.3 0.7 2.8 2.8 2.8 

SOUTH ATLANTIC ............ 432 ¥0.3 ¥0.6 0.5 ¥0.4 ¥0.3 1.1 1.1 1.2 

EAST NORTH CENT. ........ 459 0.2 0.1 ¥0.3 0.0 ¥0.2 1.5 1.5 1.6 

EAST SOUTH CENT. ........ 172 ¥0.2 ¥0.8 0.9 ¥0.1 ¥0.3 1.4 1.4 1.5 

WEST NORTH CENT. ....... 193 0.0 0.5 1.5 2.0 ¥0.3 3.5 4.5 3.5 

WEST SOUTH CENT. ....... 487 0.7 ¥2.1 0.5 ¥0.9 ¥0.2 0.8 0.8 0.9 

MOUNTAIN ........................ 194 ¥0.6 0.4 0.8 0.5 ¥0.3 2.0 2.3 2.0 

PACIFIC ............................. 385 0.5 ¥0.9 0.6 0.2 0.6 2.6 2.6 2.5 

PUERTO RICO .................. 45 4.3 ¥0.5 0.0 3.9 0.6 6.3 6.3 6.6 

REGION (RURAL) 

NEW ENGLAND ................ 25 ¥0.3 3.5 ¥1.6 1.6 0.6 3.9 3.9 3.8 


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TABLE 39—ESTIMATED IMPACT OF THE PROPOSED CY 2014 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE

PAYMENTS SYSTEM—Continued 

Number of 

hospitals 

APC Recalibration 

(CY 2013– 

2014) (%) 

Impact of 

packaging 

proposals 

other than 

outpatient 

laboratory 

services (%) 

Impact of 

outpatient 

laboratory 

services 

packaging 

proposal 

(%) 

APC Recalibration 

(all 

changes) 

(%) 

New wage 

index and 

provider adjustments 

(%) 

Combined 

cols 5, 6 

with market 

basket update (%) 

Column 7 

with frontier 

wage index 

adjustment 

(%) 

All proposed 

changes 

(%) 

(1) (2) (3) (4) (5) (6) (7) (8) (9) 

MIDDLE ATLANTIC ........... 68 0.3 1.7 ¥3.9 ¥2.0 ¥0.3 ¥0.4 ¥0.4 ¥0.4 

SOUTH ATLANTIC ............ 158 ¥0.3 ¥0.2 ¥0.9 ¥1.4 ¥0.4 0.0 0.0 0.1 

EAST NORTH CENT. ........ 124 0.0 0.8 ¥1.8 ¥1.1 ¥0.4 0.4 0.4 0.4 

EAST SOUTH CENT. ........ 170 0.0 ¥0.3 ¥0.8 ¥1.1 ¥0.6 0.1 0.1 0.2 

WEST NORTH CENT. ....... 99 ¥0.1 0.8 0.0 0.7 ¥0.1 2.3 3.5 2.5 

WEST SOUTH CENT. ....... 196 0.6 ¥0.4 ¥1.3 ¥1.1 ¥0.4 0.3 0.3 0.4 

MOUNTAIN ........................ 63 ¥0.1 1.6 ¥1.6 ¥0.2 0.2 1.9 3.4 1.4 

PACIFIC ............................. 29 0.2 1.9 ¥0.2 1.8 0.7 4.3 4.3 4.3 

TEACHING STATUS 

NON-TEACHING ............... 2,792 0.0 ¥0.4 ¥0.2 ¥0.6 ¥0.1 1.1 1.2 1.2 

MINOR ............................... 686 0.0 ¥0.5 0.5 0.0 0.0 1.8 2.0 1.8 

MAJOR ............................... 313 0.2 1.2 ¥0.2 1.2 0.2 3.2 3.2 3.1 

DSH PATIENT PERCENT 

0 ......................................... 12 1.8 ¥5.4 3.5 ¥0.3 ¥0.1 1.5 1.5 1.4 

GT 0–0.10 .......................... 349 ¥0.4 0.2 0.6 0.4 0.1 2.3 2.4 2.3 

0.10–0.16 ........................... 334 ¥0.2 0.3 0.1 0.2 0.1 2.1 2.2 2.2 

0.16–0.23 ........................... 680 ¥0.1 0.3 ¥0.2 0.1 0.0 1.8 2.0 1.9 

0.23–0.35 ........................... 1,045 ¥0.2 0.1 0.1 0.0 0.0 1.7 1.9 1.8 

GE 0.35 .............................. 831 0.7 ¥0.8 ¥0.2 ¥0.3 0.0 1.5 1.5 1.5 

DSH NOT AVAILABLE ** .. 540 2.3 ¥1.4 1.6 2.4 0.0 4.2 4.2 3.9 

URBAN TEACHING/DSH 

TEACHING & DSH ............ 909 0.1 0.2 0.2 0.5 0.1 2.4 2.5 2.4 

NO TEACHING/DSH ......... 1,429 0.0 ¥0.8 0.2 ¥0.5 0.0 1.2 1.3 1.3 

NO TEACHING/NO DSH ... 12 1.8 ¥5.4 3.5 ¥0.3 ¥0.1 1.5 1.5 1.4 

DSH NOT AVAILABLE** ... 509 2.0 ¥1.2 1.5 2.3 0.1 4.2 4.2 3.9 

TYPE OF OWNERSHIP 

VOLUNTARY ..................... 2,004 0.0 0.2 0.0 0.2 0.1 2.0 2.2 2.1 

PROPRIETARY ................. 1,250 0.3 ¥1.5 0.9 ¥0.4 ¥0.1 1.3 1.4 1.3 

GOVERNMENT ................. 537 0.3 0.1 ¥1.0 ¥0.6 ¥0.2 1.0 1.0 1.0 

CMHCs ...................................... 100 ¥5.4 ¥3.6 3.5 ¥5.7 ¥0.2 ¥4.1 ¥4.1 ¥3.8 

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 proposed recalibration of APC weights 

based on CY 2012 hospital claims data. Changes in this column do not include reconfigurations and data changes from the 2014 packaging proposal. 

Column (3) shows the additional impact of changes resulting from the reclassification of HCPCS codes among APC groups and other data changes as a result of 

including the 2014 OPPS packaging proposal (but excluding the proposed packaging of outpatient laboratory services currently paid at CLFS rates). 

Column (4) shows the additional impact of changes resulting from the reclassification of HCPCS codes among APC groups and other data changes as a result of 

including the 2014 OPPS proposal to package outpatient laboratory services currently paid at CLFS rates. 

Column (5) includes all CY 2014 OPPS proposals and compares those to the CY 2013 OPPS (which includes outpatient laboratory services previously paid at 

CLFS rates). 

Column (6) shows the budget neutral impact of updating the wage index by applying the FY 2014 hospital inpatient wage index. The proposed rural adjustment 

continues our current policy of 7.1 percent so the budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for the proposed adjustment is minimal and thus results in a budget neutrality factor of 1.0001. 

Column (7) shows the impact of all budget neutrality adjustments and the proposed addition of the 1.8 percent OPD fee schedule update factor (2.5 percent reduced by 0.4 percentage points for the proposed productivity adjustment and further reduced by 0.3 percentage point in order to satisfy statutory requirements set 

forth in the Affordable Care Act). 

Column (8) shows the non-budget neutral impact of applying the frontier State wage adjustment. 

Column (9) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier payments, and 

applying payment wage indexes. 

* These 3,953 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. Payments for laboratory services at 

CLFS rates, which we are proposing to package in the CY 2014 OPPS, are included in the columns where appropriate. 

** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care hospitals. 

(3) Estimated Effects of Proposed OPPS 

Changes on CMHCs 

The last line of Table 39 demonstrates 

the isolated impact on CMHCs, which 

furnish only partial hospitalization 

(PHP) services under the OPPS. In CY 

2013, CMHCs are paid under two APCs 

for these services: APC 0172 (Level I 

Partial Hospitalization (3 services) for 

CMHCs) and APC 0173 (Level II Partial 

Hospitalization (4 or more services) for 

CMHCs). In contrast, hospitals are paid 

for partial hospitalization services under 

APC 0175 (Level I Partial 

Hospitalization (3 services) for hospitalbased PHPs) and APC 0176 (Level II 

Partial Hospitalization (4 or more 

services) for hospital-based PHPs). We 

use our standard rate-setting 

methodology to derive the 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. For CY 2014, we are 

proposing to continue the providerspecific APC structure that we adopted 

in CY 2011. We modeled the impact of 

this proposed 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 2012 

claims data used for this proposed. 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 proposed 

relative payment weights for APC 0173 

(Level II Partial Hospitalization (4 or 

more services) for CMHCs) decline in 

CY 2014, we estimate that there would 

be an overall 3.8 percent decrease in 

payments to CMHCs (shown in Column 

9). 

Column 6 shows that the estimated 

impact of adopting the proposed FY 

2014 wage index values would result in 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43694 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

a small decrease of 0.2 percent to 

CMHCs. We note that all providers paid 

under the OPPS, including CMHCs, 

would receive a 1.8 percent OPD fee 

schedule increase factor. Column 7 

shows that combining this proposed 

OPD fee schedule increase factor, along 

with proposed changes in APC policy 

for CY 2014 and the proposed FY 2014 

wage index updates, would result in an 

estimated decrease of 4.1 percent. 

Column 8 shows that adding the 

proposed frontier State wage adjustment 

would result in no change to the 

cumulative 4.1 percent decrease. 

Column 9 shows that adding the 

proposed changes in outlier and passthough payments would result in a 3.8 

percent decrease in payment for 

CMHCs. This reflects all proposed 

changes to CMHCs for CY 2014. 

(4) Estimated Effect of Proposed OPPS 

Changes on Beneficiaries 

For services for which the beneficiary 

pays a copayment of 20 percent of the 

payment rate, the beneficiary share of 

payment would increase for services for 

which the OPPS payments will rise and 

would decrease for services for which 

the OPPS payments will fall. For further 

discussion on the calculation of the 

national unadjusted copayments and 

minimum unadjusted copayments, we 

refer readers to section II.I. of this 

proposed rule. In all cases, the statute 

limits beneficiary liability for 

copayment for a procedure to the 

hospital inpatient deductible for the 

applicable year. The CY 2013 hospital 

inpatient deductible is $1,184. The 

amount of the CY 2014 hospital 

inpatient deductible is not available at 

the time of publication of this proposed 

rule. 

In order to better understand the 

impact of proposed changes in 

copayment on beneficiaries, we 

modeled the percent change in total 

copayment liability using CY 2012 

claims. We estimate, using the claims of 

the 3,791 hospitals and CMHCs on 

which our modeling is based, that total 

beneficiary liability for copayments 

would remain approximately the same 

as an overall percentage of total 

payments, being 20.4 percent in CY 

2013 and 20.2 percent in CY 2014. 

(5) Estimated Effects of Proposed OPPS 

Changes on Other Providers 

The relative payment weights and 

payment amounts established under the 

OPPS affect the payments made to ASCs 

as discussed in section XII. of this 

proposed rule. No types of providers or 

suppliers other than hospitals, CMHCs 

and ASCs would be affected by the 

proposed changes in this proposed rule. 

(6) Estimated Effects of Proposed OPPS 

Changes on the Medicare and Medicaid 

Programs 

The effect on the Medicare program is 

expected to be $600 million in 

additional program payments for OPPS 

services furnished in CY 2014. The 

effect on the Medicaid program is 

expected to be limited to increased 

copayments that Medicaid may make on 

behalf of Medicaid recipients who are 

also Medicare beneficiaries. We refer 

readers to our discussion of the impact 

on beneficiaries in section XXIII.A. of 

this proposed rule. 

(7) Alternative OPPS Policies 

Considered 

Alternatives to the OPPS changes we 

are proposing to make and the reasons 

for our selected alternatives are 

discussed throughout this proposed 

rule. In this section, we discuss some of 

the major issues and the alternatives 

considered. 

• Alternatives Considered for the 

Establishment of Comprehensive APCs 

We are proposing in section II.A.2.e. 

of this proposed rule to create 29 

comprehensive APCs for CY 2014 to 

prospectively pay for device-dependent 

services associated with 121 HCPCS 

codes. We are proposing to define a 

comprehensive APC as a classification 

for the provision of a primary service 

and all adjunct services provided to 

support the delivery of the primary 

service. The comprehensive APC would 

treat all individually reported codes as 

representing components of the 

comprehensive service, resulting in a 

single prospective payment based on the 

cost of all individually reported codes 

that represent the provision of a primary 

service as well as all adjunct services 

provided to support that delivery of the 

primary service. For these APCs, we are 

proposing to treat all previously 

individually reported codes as 

representing components of the 

comprehensive service, making a single 

payment for the comprehensive service 

based on all charges on the claim, 

excluding only charges for services that 

cannot be covered by Medicare Part B or 

that are not payable under the OPPS. 

This would create a single all-inclusive 

payment for the claim that is subject to 

a single beneficiary copayment, up to 

the cap set at the level of the inpatient 

hospital deductible. 

We are proposing this as a step that 

we believe will further improve the 

accuracy of our payments for these 

services where there is a substantial cost 

for a device that is large compared to the 

other costs that contribute to the cost of 

the procedure, and where the cost of the 

procedure is large compared to the 

adjunctive and supportive services 

delivered along with that procedure. We 

also believe our proposal will enhance 

beneficiary understanding and 

transparency for the beneficiary, for 

physicians, and for hospitals by creating 

a common reference point with a similar 

meaning for all three groups by using 

the comprehensive service concept that 

already identifies these same services 

when they are performed in an inpatient 

environment. 

In proposing to package into the 

comprehensive APCs all other services 

and supplies, we are including the 

diagnostic procedures, tests and 

treatments that assist in the delivery of 

the primary procedure, visits and 

evaluations performed in association 

with the procedure, uncoded services 

and supplies used during the service, 

outpatient department services 

delivered by therapists as part of the 

comprehensive service, durable medical 

equipment as well as the supplies to 

support that equipment, and any other 

components reported by HCPCS codes 

that are provided during the 

comprehensive service, except for 

mammography services and ambulance 

services, which are never payable as 

OPD services in accordance with section 

1833(t)(1)(B)(iv) of the Act. 

We also considered several ranges of 

alternatives. First, we considered but are 

not proposing a limitation of the 

services that we considered to be 

ancillary and supportive to the primary 

service. We did not propose to limit the 

comprehensive APCs to only HCPCS 

codes that are currently paid using 

OPPS payment calculations because we 

could not identify a unique clinical 

characteristic that set these services 

apart from other services reported on 

the claim. We determined that services 

currently excluded by the Secretary 

from OPPS calculations, including, for 

example, such services as laboratory 

tests and certain orthotics and supplies, 

were adjunctive and supportive to the 

primary procedure in the same manner 

as the other services currently paid 

using our OPPS methodology were 

adjunctive and supportive. We also 

noted that these services that are 

currently priced using other payment 

systems represented a very small 

fraction of the costs reported on these 

device dependent claims, typically on 

the order of 1 percent of the total 

reported costs. This was consistent with 

our determination that these services 

were adjunctive and supportive and 

should be included in our definition of 

a comprehensive APC. 

Second, we considered but did not 

propose creating comprehensive APCs 


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for a different cohort of device 

dependent procedures. We did not 

propose a more limited list because we 

determined that the 29 APCs we 

proposed all consistently identified 

truly device dependent services where 

the other services that are currently 

assigned to the other device dependent 

APCs that are not being proposed as 

comprehensive APCs were clearly 

provided in support of a primary 

procedure. We considered limiting our 

proposal to the five or ten procedures 

with the most expensive devices but 

believed that such a division would be 

arbitrary and would ignore the natural 

division that occurred when the costs 

and clinical characteristics of these 

services were compared to similar 

procedures delivered as comprehensive 

services to inpatients. Alternatively, we 

considered limiting the proposal to 

those comprehensive services where the 

procedure itself, without consideration 

of the device, was responsible for the 

most significant portion of the cost and 

was also responsible for the need to 

deliver the majority of the additional 

services provided during the encounter. 

However, although we considered that 

this last consideration did in fact 

identify services that were consistent 

with our proposal to define 

comprehensive services, we did not 

propose this alternative as we believe 

our proposal to create comprehensive 

APCs for only the 29 most costly device 

dependent APCs is most consistent with 

our past practices of iteratively 

improving the OPPS in small and welldefined increments. 

Third, we considered proposing 

payment adjustments for instances 

when multiple procedures assigned to 

comprehensive APCs were reported on 

the same claim. However, we did not 

propose this. In examining our claims 

data, we determined that multiple 

procedures assigned to comprehensive 

APCs were reported in only 25 percent 

of the claims, and that these multiple 

procedures were almost always 

reporting components of the same 

service, such as cardiac stenting, and 

were assigned to the same APC. In our 

claims data it was very uncommon to 

find multiple unrelated device 

dependent procedures being delivered 

at the same time. Therefore, we decided 

to propose that the primary procedure 

would determine the comprehensive 

APC and that, in the rare event that 

procedures were reported that mapped 

to two different comprehensive APCs on 

the same claim, the most expensive 

procedure according to our traditional 

OPPS accounting methodology would 

determine the comprehensive APC 

assignment. We believe that this is 

consistent with the methodology for 

assigning payments for those inpatient 

claims that represent the same or similar 

comprehensive procedures and that it 

most accurately reflects the 

comprehensive service on those 

occasions in which two or more device 

dependent HCPCS codes are used to 

report the single comprehensive service. 

Finally, we considered retaining the 

device-to-procedure edits and 

procedure-to-device edits that were 

characteristic of our device-dependent 

APCs but we instead proposed the 

elimination of the edits along with the 

elimination of the status of device 

dependent APC. We noted that the 

device-dependent APC was created in 

response to concerns that hospitals were 

not coding for the device and that our 

relative cost estimations were 

consequently incorrect. In the 

intervening years we have noticed a 

significant improvement and 

stabilization in the reporting of costs, to 

the extent that we believe that hospitals 

are now fully accustomed to appropriate 

cost reporting under the OPPS such that 

special billing constraints are 

unnecessary. We further believe that, 

under our proposal to create 

comprehensive APCs, there would now 

be an additional mechanism to ensure 

accurate cost estimation for the most 

expensive devices for which an 

inadvertent omission of costs would be 

most significant. In the calculations of 

relative cost for the comprehensive 

APCs, costs for the device would be 

correctly assigned to the procedure as 

long as the hospital reports covered 

costs anywhere on the claim. Specific 

device reporting would still be expected 

and required, but variations in 

accounting practices would be less 

likely to influence the final cost 

accounting. 

In summary, we determined to 

propose to make an all-inclusive 

comprehensive payment for the 

procedures in the 29 most costly device 

dependent APCs because we believe 

that this identified a consistent set of 

procedures that were typically provided 

as a primary procedure supported by a 

set of adjunctive services, and that this 

set of services represented an 

incremental improvement in our 

prospective payments similar to other 

prior incremental improvements 

through which we have established our 

approach to updating and improving the 

OPPS. 

• Alternatives Considered for 

Payment of Hospital Outpatient Visits 

As described in section VII. of this 

proposed rule, we are proposing to 

replace the current five levels of visit 

codes for each clinic, Type A ED, and 

Type B ED visits with three new 

alphanumeric Level II HCPCS codes 

representing a single level of payment 

for the three types of visits, respectively. 

We are proposing to assign the new 

alphanumeric Level II HCPCS to newly 

created APCs with CY 2014 OPPS 

payment rates based on the total mean 

costs of Level 1 through Level 5 visit 

codes obtained from CY 2012 OPPS 

claims data for each visit type. 

In developing this policy, we 

considered another alternative, which 

was to replace the current five levels of 

visit codes for each clinic, Type A ED, 

and Type B ED visit with 6 new 

alphanumeric Level II HCPCS codes 

representing two levels (lower level and 

higher level) of payment for each of the 

three types of visits. The lower-level 

alphanumeric codes for clinic, Type A 

ED, and Type B ED visits would replace 

the current Level 1 and Level 2 visit 

codes, respectively, and would be 

assigned to newly created or 

reconfigured APCs with CY 2014 OPPS 

payment rates based on the total mean 

costs of Level 1 and 2 visit codes 

obtained from CY 2012 OPPS claims 

data for each visit type. The higher-level 

alphanumeric codes for clinic, Type A 

ED, and Type B ED visits would replace 

the current Level 3 through Level 5 visit 

codes, respectively, and would be 

assigned to newly created or 

reconfigured APCs with CY 2014 OPPS 

payment rates based on the total mean 

costs of Level 3 through Level 5 visit 

codes obtained from CY 2012 OPPS 

claims data for each visit type. 

While we believe that this alternative 

could offer advantages over the current 

CY 2013 OPPS visit payment policy, we 

did not choose this alternative because 

as we describe in section VII. of this 

proposed rule we believed that a single 

level of payment for each type of clinic 

and ED visit was the best policy option 

as this proposal would be easily 

implemented by hospitals; reduces 

administrative burden relative to the 

existing five-level visit payment 

structure; and maximizes hospitals’ 

incentives to provide care in the most 

efficient manner as there would be no 

incentive to provide unnecessary care to 

achieve a higher level visit threshold. A 

two-level visit payment structure would 

not be as easily implemented by 

hospitals as a single-level visit payment 

structure, and the need for hospitals to 

develop and implement guidelines to 

differentiate the levels of service would 

continue to exist. Also, while the twolevel visit payment structure may 

provide incentives for hospitals to be 

efficient, the incentives may not be so 

great as under a single-level visit 


emcdonald on DSK67QTVN1PROD with PROPOSALS3
43696 Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / Proposed Rules 

payment structure. Therefore, we are 

proposing to create three new 

alphanumeric Level II HCPCS codes to 

describe all levels of each type of clinic 

and ED visit rather than continue to 

recognize five levels each of clinic and 

ED visits. 

b. Estimated Effects of ASC Payment 

System Proposed Policies 

ASC payment rates are calculated by 

multiplying the ASC conversion factor 

by the ASC relative payment weight. As 

discussed fully in section XII. of this 

proposed rule, we are proposing to set 

the CY 2014 ASC relative payment 

weights by scaling the proposed CY 

2014 OPPS relative payment weights by 

the proposed ASC scaler of 0.8961. The 

estimated effects of the proposed 

updated relative payment weights on 

payment rates are varied and are 

reflected in the estimated payments 

displayed in Tables 40 and 41 below. 

Beginning in CY 2011, section 3401 of 

the Affordable Care Act requires that the 

annual update to the ASC payment 

system (which currently is the CPI–U) 

after application of any quality reporting 

reduction be reduced by a productivity 

adjustment. The Affordable Care Act 

defines the productivity adjustment to 

be equal to the 10-year moving average 

of changes in annual economy-wide 

private nonfarm business multifactor 

productivity (MFP) (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, year, 

cost reporting period, or other annual 

period). For ASCs that fail to meet their 

quality reporting requirements, the CY 

2014 payment determinations will be 

based on the application of a 2.0 

percentage point reduction to the 

annual update factor, which currently is 

the CPI–U. We calculated the proposed 

CY 2014 ASC conversion factor by 

adjusting the CY 2013 ASC conversion 

factor by 1.0004 to account for changes 

in the pre-floor and pre-reclassified 

hospital wage indices between CY 2013 

and CY 2014 and by applying the 

proposed CY 2014 MFP-adjusted CPI–U 

update factor of 0.9 percent (projected 

CPI–U update of 1.4 percent minus a 

projected productivity adjustment of 

0.5. percent). The proposed CY 2014 

ASC conversion factor is $43.321. 

(1) Limitations of Our Analysis 

Presented here are the projected 

effects of the proposed changes for CY 

2014 on Medicare payment to ASCs. A 

key limitation of our analysis is our 

inability to predict changes in ASC 

service-mix between CY 2012 and CY 

2014 with precision. We believe that the 

net effect on Medicare expenditures 

resulting from the proposed CY 2014 

changes would be small in the aggregate 

for all ASCs. However, such changes 

may have differential effects across 

surgical specialty groups as ASCs 

continue to adjust to the payment rates 

based on the policies of the revised ASC 

payment system. We are unable to 

accurately project such changes at a 

disaggregated level. Clearly, individual 

ASCs would experience changes in 

payment that differ from the aggregated 

estimated impacts presented below. 

(2) Estimated Effects of ASC Payment 

System Proposed Policies on ASCs 

Some ASCs are multispecialty 

facilities that perform the gamut of 

surgical procedures from excision of 

lesions to hernia repair to cataract 

extraction; others focus on a single 

specialty and perform only a limited 

range of surgical procedures, such as 

eye, digestive system, or orthopedic 

procedures. The combined effect on an 

individual ASC of the proposed update 

to the CY 2014 payments would depend 

on a number of factors, including, but 

not limited to, the mix of services the 

ASC provides, the volume of specific 

services provided by the ASC, the 

percentage of its patients who are 

Medicare beneficiaries, and the extent to 

which an ASC provides different 

services in the coming year. The 

following discussion presents tables that 

display estimates of the impact of the 

proposed CY 2014 updates to the ASC 

payment system on Medicare payments 

to ASCs, assuming the same mix of 

services as reflected in our CY 2012 

claims data. Table 40 depicts the 

estimated aggregate percent change in 

payment by surgical specialty or 

ancillary items and services group by 

comparing estimated CY 2013 payments 

to estimated CY 2014 payments, and 

Table 41 shows a comparison of 

estimated CY 2013 payments to 

estimated CY 2014 payments for 

procedures that we estimate would 

receive the most Medicare payment in 

CY 2014. 

Table 40 shows the estimated effects 

on aggregate Medicare payments under 

the ASC payment system by surgical 

specialty or ancillary items and services 

group. We have aggregated the surgical 

HCPCS codes by specialty group, 

grouped all HCPCS codes for covered 

ancillary items and services into a single 

group, and then estimated the effect on 

aggregated payment for surgical 

specialty and ancillary items and 

services groups. The groups are sorted 

for display in descending order by 

estimated Medicare program payment to 

ASCs. The following is an explanation 

of the information presented in Table 

40. 

• Column 1—Surgical Specialty or 

Ancillary Items and Services Group 

indicates the surgical specialty into 

which ASC procedures are grouped and 

the ancillary items and services group 

which includes all HCPCS codes for 

covered ancillary items and services. To 

group surgical procedures by surgical 

specialty, we used the CPT code range 

definitions and Level II HCPCS codes 

and Category III CPT codes as 

appropriate, to account for all surgical 

procedures to which the Medicare 

program payments are attributed. 

• Column 2—Estimated CY 2013 ASC 

Payments were calculated using CY 

2012 ASC utilization (the most recent 

full year of ASC utilization) and CY 

2013 ASC payment rates. The surgical 

specialty and ancillary items and 

services groups are displayed in 

descending order based on estimated CY 

2013 ASC payments. 

• Column 3—Estimated CY 2014 

Percent Change is the aggregate 

percentage increase or decrease in 

Medicare program payment to ASCs for 

each surgical specialty or ancillary 

items and services group that would be 

attributable to proposed updates to ASC 

payment rates for CY 2014 compared to 

CY 2013. 

As seen in Table 40, we estimate that 

the proposed update to ASC rates for CY 

2014 would result in a 3 percent 

decrease in aggregate payment amounts 

for eye and ocular adnexa procedures, 

an 8 percent increase in aggregate 

payment amounts for digestive system 

procedures, and a 1 percent increase in 

aggregate payment amounts for nervous 

system procedures. 

Generally, for the surgical specialty 

groups that account for less ASC 

utilization and spending, we estimate 

that the payment effects of the proposed 

CY 2014 update are variable. For 

instance, we estimate that, in the 

aggregate, payment for musculoskeletal 

system procedures would decrease by 1 

percent, whereas payment for 

genitourinary system procedures, 

integumentary system procedures and 

respiratory system procedures would 

increase by 5 to 7 percent under the 

proposed CY 2014 rates. 

An estimated increase in aggregate 

payment for the specialty group does 

not mean that all procedures in the 

group would experience increased 

payment rates. For example, the 

estimated increase for CY 2014 for 

digestive system procedures is likely 

due to an increase in the ASC payment 

weight for some of the high volume 

procedures, such as CPT code 43239 

(Upper GI endoscopy biopsy) where 

estimated payment would increase by 

13 percent for CY 2014. 


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Also displayed in Table 40 is a 

separate estimate of Medicare ASC 

payments for the group of separately 

payable covered ancillary items and 

services. The payment estimates for the 

covered surgical procedures include the 

costs of packaged ancillary items and 

services. We estimate that aggregate 

payments for these items and services 

would decrease by 12 percent for CY 

2014. 

TABLE 40—ESTIMATED IMPACT OF THE PROPOSED CY 2014 UPDATE OF THE ASC PAYMENT SYSTEM ON AGGREGATE

CY 2014 MEDICARE PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND SERVICES GROUP

Surgical specialty group 

Estimated CY 

2013 ASC 

Payments (in 

millions) 

Estimated CY 

2014 percent 

change 

(1) (2) (3) 

Total ......................................................................................................................................................................... $3,625 1 

Eye and ocular adnexa ............................................................................................................................................ 1,496 ¥3 

Digestive system ...................................................................................................................................................... 743 8 

Nervous system ....................................................................................................................................................... 540 1 

Musculoskeletal system ........................................................................................................................................... 441 ¥1 

Genitourinary system ............................................................................................................................................... 159 5 

Integumentary system ............................................................................................................................................. 130 7 

Respiratory system .................................................................................................................................................. 46 7 

Cardiovascular system ............................................................................................................................................ 32 ¥2 

Ancillary items and services .................................................................................................................................... 20 ¥12 

Auditory system ....................................................................................................................................................... 12 4 

Hematologic & lymphatic systems ........................................................................................................................... 5 17 

Table 41 below shows the estimated 

impact of the proposed updates to the 

revised ASC payment system on 

aggregate ASC payments for selected 

surgical procedures during CY 2014. 

The table displays 30 of the procedures 

receiving the greatest estimated CY 2014 

aggregate Medicare payments to ASCs. 

The HCPCS codes are sorted in 

descending order by estimated CY 2014 

program payment. 

• Column 1–CPT/HCPCS code. 

• Column 2–Short Descriptor of the 

HCPCS code. 

• Column 3–Estimated CY 2013 ASC 

Payments were calculated using CY 

2012 ASC utilization (the most recent 

full year of ASC utilization) and the 

proposed CY 2014 ASC payment rates. 

The estimated CY 2014 payments are 

expressed in millions of dollars. 

• Column 4–Estimated CY 2014 

Percent Change reflects the percent 

differences between the estimated ASC 

payment for CY 2013 and the estimated 

payment for CY 2014 based on the 

proposed update. 

TABLE 41—ESTIMATED IMPACT OF THE PROPOSED CY 2014 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE

PAYMENTS FOR SELECTED PROCEDURES

CPT/ 

HCPCS 

code* 

Short descriptor 

Estimated CY 

2013 ASC 

payments (in 

millions) 

Estimated CY 

2014 percent 

change 

(1) (2) (3) (4) 

66984 ....... Cataract surg w/iol, 1 stage ............................................................................................................... $1,107 ¥3 

43239 ....... Upper GI endoscopy, biopsy ............................................................................................................. 163 13 

45380 ....... Colonoscopy and biopsy ................................................................................................................... 154 7 

45385 ....... Lesion removal colonoscopy ............................................................................................................. 98 7 

66982 ....... Cataract surgery, complex ................................................................................................................. 89 ¥3 

45378 ....... Diagnostic colonoscopy ..................................................................................................................... 80 7 

64483 ....... Inj foramen epidural l/s ...................................................................................................................... 79 14 

62311 ....... Inject spine l/s (cd) ............................................................................................................................ 71 14 

66821 ....... After cataract laser surgery ............................................................................................................... 59 ¥1 

G0105 ...... Colorectal scrn; hi risk ind ................................................................................................................. 42 0 

15823 ....... Revision of upper eyelid .................................................................................................................... 40 2 

64493 ....... Inj paravert f jnt l/s 1 lev .................................................................................................................... 40 14 

63650 ....... Implant neuroelectrodes .................................................................................................................... 39 4 

G0121 ...... Colon ca scrn not hi rsk ind .............................................................................................................. 36 0 

29827 ....... Arthroscop rotator cuff repr ............................................................................................................... 34 5 

64590 ....... Insrt/redo pn/gastr stimul ................................................................................................................... 33 6 

64721 ....... Carpal tunnel surgery ........................................................................................................................ 31 ¥1 

63685 ....... Insrt/redo spine n generator .............................................................................................................. 31 6 

64636** .... Destroy l/s facet jnt addl .................................................................................................................... 31 ¥100 

29881 ....... Knee arthroscopy/surgery .................................................................................................................. 30 ¥3 

64635 ....... Destroy lumb/sac facet jnt ................................................................................................................. 26 73 

29880 ....... Knee arthroscopy/surgery .................................................................................................................. 25 ¥3 

43235 ....... Uppr gi endoscopy diagnosis ............................................................................................................ 23 13 

45384 ....... Lesion remove colonoscopy .............................................................................................................. 22 7 

52000 ....... Cystoscopy ........................................................................................................................................ 21 5 

62310 ....... Inject spine c/t .................................................................................................................................... 20 14 


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TABLE 41—ESTIMATED IMPACT OF THE PROPOSED CY 2014 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE

PAYMENTS FOR SELECTED PROCEDURES—Continued 

CPT/ 

HCPCS 

code* 

Short descriptor 

Estimated CY 

2013 ASC 

payments (in 

millions) 

Estimated CY 

2014 percent 

change 

(1) (2) (3) (4) 

29823 ....... Shoulder arthroscopy/surgery ............................................................................................................ 19 5 

67042 ....... Vit for macular hole ........................................................................................................................... 19 0 

28285 ....... Repair of hammertoe ......................................................................................................................... 18 5 

50590 ....... Fragmenting of kidney stone ............................................................................................................. 18 2 

*Note that HCPCS codes we are proposing to delete for CY 2014 are not displayed in this table. 

** The 100 percent decrease in estimated payment reflects our CY 2014 proposal to package the payment for CPT code 64636. 

(3) Estimated Effects of ASC Payment 

System Proposed Policies on 

Beneficiaries 

We estimate that the proposed CY 

2014 update to the ASC payment system 

would be generally positive for 

beneficiaries with respect to the new 

procedures that we are proposing to add 

to the ASC list of covered surgical 

procedures and for those that we are 

proposing to designate as office-based 

for CY 2014. First, other than certain 

preventive services where coinsurance 

and the Part B deductible is waived to 

comply with sections 1833(a)(1) and (b) 

of the Act, the ASC coinsurance rate for 

all procedures is 20 percent. This 

contrasts with procedures performed in 

HOPDs, where the beneficiary is 

responsible for copayments that range 

from 20 percent to 40 percent of the 

procedure payment. Second, in almost 

all cases, the ASC payment rates under 

the ASC payment system are lower than 

payment rates for the same procedures 

under the OPPS. Therefore, the 

beneficiary coinsurance amount under 

the ASC payment system will almost 

always be less than the OPPS 

copayment amount for the same 

services. (The only exceptions would be 

if the ASC coinsurance amount exceeds 

the inpatient deductible. The statute 

requires that copayment amounts under 

the OPPS not exceed the inpatient 

deductible.) Beneficiary coinsurance for 

services migrating from physicians’ 

offices to ASCs may decrease or increase 

under the revised ASC payment system, 

depending on the particular service and 

the relative payment amounts for that 

service in the physician’s office 

compared to the ASC. However, for 

those additional procedures that we are 

proposing to designate as office-based in 

CY 2014, the beneficiary coinsurance 

amount would be no greater than the 

beneficiary coinsurance in the 

physician’s office because the 

coinsurance in both settings is 20 

percent (except for certain preventive 

services where the coinsurance is 

waived in both settings). 

(4) Alternative ASC Payment Policies 

Considered 

Alternatives to the minor changes that 

we are proposing to make to the ASC 

payment system and the reasons that we 

have chosen specific options are 

discussed throughout this proposed 

rule. There are no proposed major 

changes to ASC policies for CY 2014. 

c. Accounting Statements and Tables 

As required by OMB Circular A–4 

(available on the Office of Management 

and Budget Web site at: http:// 

www.whitehouse.gov/sites/default/files/ 

omb/assets/regulatory_matters_pdf/a4.pdf), we have prepared two 

accounting statements to illustrate the 

impacts of this proposed rule. The first 

accounting statement, Table 42 (below) 

illustrates the classification of 

expenditures for the CY 2014 estimated 

hospital OPPS incurred benefit impacts 

associated with the proposed CY 2014 

OPD fee schedule increase, based on the 

2013 Trustee’s Report. The second 

accounting statement, Table 43 (below) 

illustrates the classification of 

expenditures associated with the 

proposed 0.9 percent CY 2014 update to 

the ASC payment system, based on the 

provisions of this proposed rule and the 

baseline spending estimates for ASCs in 

the 2013 Trustee’s Report. The third 

accounting statement, Table 44 (below), 

illustrates the classification of 

expenditures associated with the 

proposed revision to the definition of 

hospital-based EP in payment year 2013 

for EPs reassigning benefits to Method II 

CAHs. Lastly, the tables classify most 

estimated impacts as transfers. 

TABLE 42—ACCOUNTING STATEMENT: CY 2014 ESTIMATED HOSPITAL OPPS TRANSFERS FROM CY 2013 TO CY 2014 

ASSOCIATED WITH THE PROPOSED CY 2014 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 receive payment under the hospital 

OPPS. 

Total ......................................... $600 million. 

TABLE 43—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A

RESULT OF THE PROPOSED CY 2014 UPDATE TO THE REVISED ASC PAYMENT SYSTEM

Category Transfers 

Annualized Monetized Transfers .... $27 million. 

From Whom to Whom .................... Federal Government to Medicare Providers and Suppliers. 


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TABLE 43—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A

RESULT OF THE PROPOSED CY 2014 UPDATE TO THE REVISED ASC PAYMENT SYSTEM—Continued 

Category Transfers 

Total ......................................... $27 million. 

TABLE 44—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A RESULT OF THE PROPOSED REVISIONS TO THE DEFINITION OF PROVIDER–BASED EP UNDER THE EHR INCENTIVE PROGRAM

Category Transfers 

Annualized Monetized Transfers .... $17,985,000 to $35,970,000. 

From Whom to Whom .................... Federal Government to Medicare Providers. 

Total ......................................... $17,985,000 to $35,970,000. 

d. Effects of Proposed Requirements for 

the Hospital OQR Program 

In section XIII. of this proposed rule, 

we are proposing to adopt policies 

affecting the Hospital OQR Program. 

We determined that 114 hospitals did 

not meet the requirements to receive the 

full OPD fee schedule increase factor for 

CY 2013. Most of these hospitals (106 of 

the 114) received little or no OPPS 

payment on an annual basis and did not 

participate in the Hospital OQR 

Program. We estimate that 106 hospitals 

may not receive the full OPD fee 

schedule increase factor in CY 2014 and 

that 106 hospitals may not receive the 

full OPD fee schedule increase factor in 

CY 2015. 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 2016. 

In section XVI.E.3.a. of the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60647 through 60650), for 

the CY 2011 payment update, as part of 

the validation process, we required 

hospitals to submit paper copies of 

requested medical records to a 

designated contractor within the 

required timeframe. Failure to submit 

requested documentation could result in 

a 2.0 percentage point reduction to a 

hospital’s CY 2011 OPD fee schedule 

increase factor, but the failure to attain 

a validation score threshold would not. 

In section XVI.D.3.b of the CY 2011 

OPPS/ASC final rule with comment 

period, we finalized our proposal to 

validate data submitted by 800 hospitals 

of the approximately 3,200 participating 

hospitals for purposes of the CY 2012 

Hospital OQR Program payment 

determination. We stated our belief that 

this approach was suitable for the CY 

2012 Hospital OQR Program because it 

would: produce a more reliable estimate 

of whether a hospital’s submitted data 

have been abstracted accurately; provide 

more statistically reliable estimates of 

the quality of care delivered in each 

selected hospital as well as at the 

national level; and reduce overall 

hospital burden because most hospitals 

would not be selected to undergo 

validation each year. We adopted a 

threshold of 75 percent as the threshold 

for the validation score because we 

believed this level was reasonable for 

hospitals to achieve while still ensuring 

accuracy of the data. Additionally, this 

level is consistent with what we 

adopted in the Hospital IQR Program 

(75 FR 50225 through 50229). As a 

result, we believed that the effect of our 

validation process for CY 2012 would be 

minimal in terms of the number of 

hospitals that would not meet all 

program requirements. 

In the CY 2012 OPPS/ASC final rule 

with comment period, we finalized our 

proposal to validate data submitted by 

up to 500 of the approximately 3,200 

participating hospitals for purposes of 

the CY 2013 Hospital OQR Program 

payment determination. Under our 

policy for CY 2011, CY 2012, and CY 

2013, we stated that we would conduct 

a measure level validation by assessing 

whether the measure data submitted by 

the hospital matches the independently 

reabstracted measure data. 

In the CY 2013 OPPS/ASC final rule 

with comment period, for the CY 2014 

payment determination and subsequent 

years, we made some modifications to 

administrative requirements in 

extending a deadline to submit a Notice 

of Participation as well as to 

extraordinary circumstance waiver or 

extension and reconsideration processes 

to broaden the scope of personnel who 

can sign these requests. However, we 

did not make any modifications to our 

validation requirements. We expect 

these policies to have minimal impact 

on the program. 

In this proposed rule, for CY 2016 

payment determination and subsequent 

years, we are proposing to add five 

quality measures with data collection to 

begin in CY 2014. For four of these 

measures, data would be submitted via 

an online tool located on a CMS Web 

site and one would be submitted via 

CDC’s NHSN. We are proposing to 

remove two measures from the Hospital 

OQR Program. 

As stated above, we are unable to 

estimate the number of hospitals that 

may not receive the full OPD fee 

schedule increase factor in CY 2016. We 

also are unable to estimate the number 

of hospitals that would fail the 

validation documentation submission 

requirement for the CY 2016 payment 

update. 

The validation requirements for CY 

2014 would result in medical record 

documentation for approximately 6,000 

cases per quarter for CY 2014, being 

submitted to a designated CMS 

contractor. We will pay for the cost of 

sending this medical record 

documentation to the designated CMS 

contractor at the rate of 12 cents per 

page for copying and approximately 

$1.00 per case for postage. We have 

found that an outpatient medical chart 

is generally up to 10 pages. Thus, as a 

result of validation requirements 

effective for CY 2014, we estimate that 

we will have expenditures of 

approximately $13,200 per quarter for 

CY 2014. Because we will pay for the 

data collection effort, we believe that a 

requirement for medical record 

documentation for 6,000 total cases per 

quarter for up to 500 hospitals for CY 

2014 represents a minimal burden to 

Hospital OQR Program participating 

hospitals. 

e. Effects of Proposals for the ASCQR 

Program 

In section XV. of this proposed rule, 

for the ASCQR Program, we are 

proposing four additional quality 


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measures for the CY 2016 payment 

determination and subsequent years. 

Data collection for these proposed 

measures would begin in CY 2014. We 

are proposing to collect aggregate data 

(numerators, denominators, and 

exclusions) on all ASC patients for these 

four proposed chart-abstracted measures 

via an online Web-based tool located on 

a CMS Web page. We are also proposing 

for the CY 2016 payment determination 

and subsequent years requirements for 

facility participation, data collection, 

and submission for claims-based, CMS 

Web-based, and NHSN measures. 

We are unable at this time to estimate 

the number of ASCs that may not 

receive the full ASC annual payment 

update in CYs 2014, 2015, and 2016. 

However, we do expect our new policies 

to significantly affect the number of 

ASCs that do not receive a full annual 

payment update in CY 2016, though we 

are not able to estimate the level of this 

impact at this time. 

f. Effects of Proposed Changes to the 

CfCs for OPOs Relating to the Outcome 

Measures Requirement for 

Recertification 

In section XVI. of this proposed rule, 

we discussed our proposal to modify the 

current outcome measures requirement 

that OPOs meet all three outcome 

measures set forth in § 486.318 to a 

requirement that they meet two out of 

the three outcome measures. Our 

proposal would result in those OPOs 

that fail only one outcome measures 

avoiding automatic decertification based 

upon the current outcome measures 

requirement. 

While we are confident that our 

proposal would have a significantly 

positive effect on the OPOs that avoided 

automatic decertification, it is very 

difficult to quantify the impact of this 

change. As discussed under section 

XXI.C. of this proposed rule relating to 

the ICR requirements, we anticipate that 

most OPOs that are decertified would 

engage in the appeals process as set 

forth in § 486.314. However, we have no 

reliable way of estimating how many 

OPOs would likely obtain reversals of 

their decertifications during 

reconsideration or how many continue 

on to a hearing before a CMS hearing 

officer. Therefore, although we believe 

there would be a considerably large 

positive effect as a result of our 

proposed change to the outcome 

measures requirement, we are unable to 

provide a specific estimate of that cost 

savings. 

g. Effects of Proposed Revisions of the 

QIO Regulations 

In section XVII. of this proposed rule, 

we are proposing to update the 

regulations at 42 CFR parts 475 and 476 

based on the recently enacted Trade 

Adjustment Assistance Extension Act of 

2011 (TAAEA) (Pub. L. 112–40, Section 

261) whereby Congress authorized 

numerous changes to the original 

legislation and included additional 

flexibility for the Secretary in the 

administration of the QIO program. 

Currently, 42 CFR Part 475 includes 

definitions and standards governing 

eligibility and the award of contracts to 

QIOs. In this proposed rule, we set forth 

proposals for the partial deletion and 

revision of the regulations under 42 CFR 

Parts 475 and 476, which relate to the 

QIO program, including the following: 

(1) Replace nomenclature that has been 

amended by the TAAEA; (2) revise the 

existing definition for the term 

‘‘physician’’ in Parts 475 and 476; (3) 

add new definitions as necessary to 

support the new substantive provisions 

in Subpart C; and (4) revise, add, and 

replace some of the substantive 

provisions in Subpart C to fully exercise 

the Secretary’s authority for the program 

and update the contracting requirements 

to align with contemporary quality 

improvement. 

We estimate the effects of the 

proposed QIO Program changes to be 

consistent with the Congressional 

Budget Office’s 2011 Cost Estimate of 

the Trade Bill (H.R. 2832) which 

included a reduction in spending of 

$330 million over the 2012–2021 

period. According to the CBO Estimate, 

the Act and subsequently the proposed 

regulatory changes ‘‘would modify the 

provisions under which CMS contracts 

with independent entities called 

[‘‘]Quality Improvement Organizations 

[(QIOs)’’] in Medicare. QIOs, generally 

staffed by health care professionals, 

review medical care, help beneficiaries 

with complaints about the quality of 

care, and implement care 

improvements. H.R. 2832 would make 

several changes to the composition and 

operation of QIOs, and would 

harmonize QIO contracts with 

requirements of the Federal Acquisition 

Regulation. Among those changes are a 

modification to expand the geographic 

scope of QIO contracts and a 

lengthening of the contract period. CBO 

estimates that those provisions would 

reduce spending by $330 million over 

the 2012–2021 period.’’ 

h. Effects of Proposals Regarding 

Medicare-Fee-for-Service EHR Incentive 

Program 

(1) Incentive Payments for Eligible 

Professionals (EPs) Reassigning Benefits 

to Method II CAHs 

As discussed in section XVIII.A. of 

this proposed rule, we are proposing to 

revise the regulations to provide, during 

payment year 2013 alone, a special 

method for determining the hospitalbased status of EPs who reassign their 

benefits to Method II CAHs. It is 

difficult to determine with precision the 

cost impact of this proposal. We lack 

specific information on key factors 

affecting this impact, including the 

number of EPs who reassign their 

benefits to Method II CAHs, the 

proportion of those EPs who would be 

determined to be nonhospital-based for 

2013 under our proposal, the proportion 

of those EPs who will qualify for 

Medicaid incentive payments and 

choose to accept those payments 

because they are higher, and the 

proportion of the remaining EPs who 

will successfully demonstrate 

meaningful use in order to qualify for 

Medicare incentive payments. It is 

therefore necessary to rely on estimates 

for each of these factors. As much as 

possible we will employ the methods of 

cost estimation that we used to 

determine the estimated costs of the 

Medicare incentives for EPs in our Stage 

1 final rule (75 FR 44549) and Stage 2 

final rule (77 FR 54139) for the 

Medicare Electronic Health Record 

Incentive Program, as well as the 

estimates that we have previously 

employed for specific factors. 

Of the approximately 1,200 CAHs, 

about three-quarters, or 900, elect under 

section 1834(g)(2) of the Act to receive 

a cost-based payment for the facility 

costs of providing outpatient services, 

plus 115 percent of the fee schedule 

amount for professional services 

included within outpatient CAH 

services. As we have indicated, we lack 

specific information on the numbers of 

EPs who reassign their benefits to these 

Method II CAHs. While CAHs are 

relatively small inpatient facilities, we 

understand that many of them have 

fairly substantial outpatient clinics. At 

the same time, we have also been 

informed that they rely largely on 

nonphysician practitioners (nurses and 

nurse practitioners) to staff these 

outpatient clinics. Therefore, we will 

assume that the typical outpatient 

department in a Method II CAH has a 

relatively small number of physicians, 

between 5 and 10, on staff and billing 

for professional services that are 

reassigned to the CAH. We will also use 


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this estimate of 5 to 10 physicians per 

Method II CAH to establish an upper 

and lower range to our impact estimate. 

The number of EPs reassigning benefits 

for outpatient services to Method II 

CAHs is therefore between 4,500 and 

9,000. 

In our Stage 2 final rule (77 FR 54139) 

for the Medicare Electronic Health 

Record Incentive Program, we 

determined that about 14 percent of EPs 

with Medicare claims were hospitalbased, and thus ineligible to receive 

Medicare EHR incentive payments. For 

purposes of this impact statement, we 

will assume that 10 percent of EPs 

reassigning benefits to Method II CAHs 

are hospital-based. Because CAHs have 

relatively small inpatient hospital 

facilities, we believe that the physicians 

practicing in these facilities will bill for 

somewhat fewer inpatient services than 

EPs generally. Using this assumption, 

the estimate of nonhospital-based EPs 

reassigning benefits to Method II CAHs 

is therefore between 4,050 and 8,100. Of 

these nonhospital-based EPs reassigning 

benefits to Method II CAHs, some 

proportion will qualify for Medicaid 

incentive payments and will choose to 

receive payments under that program 

because the payments are higher. For 

these purposes we will employ the same 

estimate (20 percent) that we have 

employed for developing cost estimate 

in our Stage 2 final rule (77 FR 54140). 

Thus, we estimate that between 3,240 

and 6,480 non-hospital-based EPs 

reassigning benefits to Method II CAHs 

do not choose to receive Medicaid 

incentive payments. 

As we have discussed in prior rules 

(77 FR 54140) our estimates for the 

number of EPs that will successfully 

demonstrate meaningful use of CEHRT 

are uncertain. The percentage of 

Medicare EPs who will satisfy the 

criteria for demonstrating meaningful 

use of CEHRT and will qualify for 

incentive payments is a key, but highly 

uncertain factor in developing cost 

estimates for the EHR incentive program 

in general and for the present purposes 

in particular. Consistent with the 

estimates that we have employed for 

EPs generally in developing cost 

estimates in the Stage II final rule, we 

will assume that 37 percent of the 

nonhospital-based EPs reassigning 

benefits to Method II CAHs will satisfy 

the criteria for demonstrating 

meaningful use of CEHRT and will 

qualify for incentive payments in 

payment years 2013. Thus, we estimate 

that between 1,199 and 2,398 EPs 

reassigning benefits to Method II CAHs 

will actually qualify to receive Medicare 

EHR incentive payments in 2013. As we 

have previously discussed, section 

1848(o)(1)(B) of the Act provides that 

the incentive payment for an EP for a 

given payment year shall not exceed the 

following amounts: 

• For the EP’s first payment year, for 

such professional, $15,000 (or $18,000, 

if the EP’s first payment year is 2011 or 

2012); 

• For the EP’s second payment year, 

$12,000; 

• For the EP’s third payment year, 

$8,000; 

• For the EP’s fourth payment year, 

$4,000; 

• For the EP’s fifth payment year, 

$2,000; and 

• For any succeeding year, $0. 

We lack any information on how 

many of the EPs reassigning benefits to 

Method II CAHs will qualify for 

incentive payments for the first time in 

2013. However, if we assume for 

purposes of setting upper limits on our 

estimates, that all of the 1,199 to 2,398 

EPs we have estimated will receive 

qualify for the first time and receive the 

maximum incentive payment, our 

proposal will cost between $17,985,000 

and $35,970,000 in payments that we 

have not previously been making in 

2013. Despite the uncertainties of the 

assumptions that we have employed in 

developing these estimates, we can state 

with reasonable confidence that our 

proposal will result in considerably less 

than $50,000,000 in payments over and 

above the payments we would make in 

the absence of this proposal for 2013. 

(2) Cost Reporting Periods for Interim 

and Final EHR Incentive Payments to 

Eligible Hospitals 

As we discussed in section XVIII.B. of 

this proposed rule, we are proposing to 

revise the regulations to provide that, in 

cases where there is no 12-month cost 

reporting period that begins on or after 

the beginning of a payment year, we 

will use the most recent 12-month cost 

reporting period available at the time of 

final settlement in order to determine 

final EHR incentive payments for the 

hospital. We are making this proposal 

solely to address situations in which 

hospitals have been receiving interim 

EHR payments but the contractors have 

not been able to make a determination 

of final payments because there is no 

hospital cost report that meets the 

existing requirements of the regulations. 

Therefore, we do not expect this to have 

any financial impact. This proposal 

would merely allow us to make final 

settlements in cases that the current 

regulations do not cover. 

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 $35.5 

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. 

We estimate that this proposed rule may 

have a significant impact on 

approximately 2,004 hospitals with 

voluntary ownership. For details, see 

the Small Business Administration’s 

‘‘Table of Small Business Size 

Standards’’ at http://www.sba.gov/ 

content/table-small-business-sizestandards. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

100 or fewer beds. We estimate that this 

proposed rule may have a significant 

impact on approximately 694 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 $141 

million. This proposed rule does not 

mandate any requirements for State, 

local, or tribal governments, or for the 

private sector. 

D. Conclusion 

The changes we are proposing to 

make in this proposed rule would affect 

all classes of hospitals paid under the 

OPPS and will affect both CMHCs and 


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ASCs. We estimate that most classes of 

hospitals paid under the OPPS would 

experience a modest increase or a 

minimal decrease in payment for 

services furnished under the OPPS in 

CY 2013. Table 39 demonstrates the 

estimated distributional impact of the 

OPPS budget neutrality requirements 

that would result in a 1.8 percent 

increase in payments for all services 

paid under the OPPS in CY 2014, after 

considering all of the proposed changes 

to APC reconfiguration and 

recalibration, as well as the proposed 

OPD fee schedule increase factor, 

proposed wage index changes, 

including the proposed frontier State 

wage index adjustment, estimated 

payment for outliers, and proposed 

changes to the pass-through payment 

estimate. However, some classes of 

providers that are paid under the OPPS 

would experience more significant gains 

and others would experience modest 

losses in OPPS payments in CY 2014. 

We estimate that rural hospitals with 

100 or fewer beds would experience a 

decrease of 3.9 percent. CMHCs would 

see an overall decrease in payment of 

7.7 percent as a result of a decrease in 

their estimated costs. However, urban 

hospitals in Puerto Rico would 

experience an estimated 7.9 percent 

increase in payment, and non-teaching 

hospitals for whom DSH data are not 

available (non-IPPS hospitals) would 

experience a 5.3 percent increase in 

payment. 

The proposed updates to the ASC 

payment system for CY 2014 would 

affect each of the approximately 5,300 

ASCs currently approved for 

participation in the Medicare program. 

The effect on an individual ASC would 

depend on its mix of patients, the 

proportion of the ASC’s patients who 

are Medicare beneficiaries, the degree to 

which the payments for the procedures 

offered by the ASC are proposed to be 

changed under the ASC payment 

system, and the extent to which the ASC 

provides a different set of procedures in 

the coming year. Table 40 demonstrates 

the estimated distributional impact 

among ASC surgical specialties of the 

proposed MFP-adjusted CPI–U update 

factor of 0.9 percent for CY 2014. 

XXIIV. Federalism Analysis 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. We have 

examined the OPPS and ASC provisions 

included in this proposed rule in 

accordance with Executive Order 13132, 

Federalism, and have determined that 

they will not have a substantial direct 

effect on State, local or tribal 

governments, preempt State law, or 

otherwise have a Federalism 

implication. As reflected in Table 39 of 

this proposed rule, we estimate that 

OPPS payments to governmental 

hospitals (including State and local 

governmental hospitals) would increase 

by 0.5 percent under this proposed rule. 

While we do not know the number of 

ASCs or CMHCs with government 

ownership, we anticipate that it is 

small. The analyses we have provided 

in this section of this proposed rule, in 

conjunction with the remainder of this 

document, demonstrate that this 

proposed rule is consistent with the 

regulatory philosophy and principles 

identified in Executive Order 12866, the 

RFA, and section 1102(b) of the Act. 

This proposed rule would affect 

payments to a substantial number of 

small rural hospitals and a small 

number of rural ASCs, as well as other 

classes of hospitals, CMHCs, and ASCs, 

and some effects may be significant. 

List of Subjects 

42 CFR Part 405 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medicare, 

Reporting and recordkeeping, Rural 

areas, X-rays. 

42 CFR Part 410 

Health facilities, Health professions, 

Laboratories, Medicare, Rural areas, Xrays. 

42 CFR Part 412 

Administrative practice and 

procedure, Health facilities, Medicare, 

Puerto Rico, Reporting and 

recordkeeping requirements. 

42 CFR Part 416 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 419 

Hospitals, Medicare, Reporting and 

recordkeeping requirements. 

42 CFR Part 475 

Grant programs-health, Health care, 

Health professions, Quality 

Improvement Organization (QIO) 

42 CFR Part 476 

Health care, Health professional, 

Health record, Quality Improvement 

Organization (QIO), Penalties, Privacy, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 486 

Grant programs-health, Health 

facilities, Medicare, Reporting and 

recordkeeping requirements, X-rays. 

42 CFR Part 495 

Computer technology, Electronic 

health records, Electronic transactions, 

Health, Health care. Health information 

technology, Health insurance, Health 

records, Hospitals, Laboratories, 

Medicaid, Medicare, Privacy, Reporting 

and recordkeeping requirements, Public 

health, Security. 

For reasons stated in the preamble of 

this document, the Centers for Medicare 

& Medicaid Services is proposing to 

amend 42 CFR Chapter IV as set forth 

below: 

PART 405—FEDERAL HEALTH 

INSURANCE FOR THE AGED AND 

DISABLED 

■ 1. The authority citation for part 405, 

Subpart R continues to read as follows: 

Authority: Secs. 205, 1102, 1814(b), 

1815(a), 1833, 1861(v), 1871, 1872, 1878, and 

1886 of the Social Security Act (42 U.S.C. 

405, 1302, 1395f(b), 1395g(a), 1395l, 

1395x(v), 1395hh, 1395ii, 1395oo, and 

1395ww). 

■ 2. Section 405.1804 is amended by 

revising paragraph (a) to read as follows: 

§ 405.1804 Matters not subject to 

administrative and judicial review under 

prospective payment system. 

* * * * * 

(a) The determination of the 

requirement, or the proportional 

amount, of the budget neutrality 

adjustment in the prospective payment 

rates required under section 1886(e)(1) 

of the Social Security Act. 

* * * * * 

■ 3. Section 405.1885 is amended by 

revising paragraph (a)(1) and adding 

paragraph (b)(2)(iv) to read as follows: 

§ 405.1885 Reopening an intermediary 

determination or reviewing entity decision. 

(a) * * * 

(1) A Secretary determination, an 

intermediary determination, or a 

decision by a reviewing entity (as 

described in § 405.1801(a)) may be 

reopened, with respect to specific 

findings on matters at issue in a 

determination or decision, by CMS 

(with respect to Secretary 

determinations), by the intermediary 

(with respect to intermediary 

determinations), or by the reviewing 

entity that made the decision (as 

described in paragraph (c) of this 

section). 


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(i) A specific finding on a matter at 

issue may be legal or factual in nature 

or a mixed matter of both law and fact. 

(ii) A specific finding on a matter at 

issue may include a factual matter that 

arose in or was determined for the same 

cost reporting period as the period at 

issue in an appeal filed, or a reopening 

requested by a provider or initiated by 

an intermediary, under this subpart. 

(iii) A specific finding on a matter at 

issue may include a predicate fact, 

which is a factual matter that arose in 

or was determined for a cost reporting 

period that predates the period at issue 

(in an appeal filed, or a reopening 

requested by a provider or initiated by 

an intermediary, under this subpart), 

and such factual matter was used in 

determining an aspect of the provider’s 

reimbursement for a later cost reporting 

period. 

(iv) A specific finding on a matter at 

issue may not be reopened, and if 

reopened, revised, except as provided 

for by this section, § 405.1887, and 

§ 405.1889. 

* * * * * 

(b) * * * 

(2) * * * 

(iv) The 3-year period described in 

paragraphs (b)(2)(i) through (b)(2)(iii) of 

this section applies to, and is calculated 

separately for, each specific finding on 

a matter at issue (as described in 

paragraphs (a)(1)(i) through (iv) of this 

section. 

* * * * * 

PART 410—SUPPLEMENTARY 

MEDICAL INSURANCE (SMI) 

BENEFITS 

■ 4. 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). 

■ 5. Section 410.27 is amended by— 

■ a. Revising paragraph (a) introductory 

text. 

■ b. Removing the word ‘‘and’’ at the 

end of paragraph (a)(1)(iii). 

■ c. Removing the period at the end of 

paragraph (a)(1)(iv)(E) and adding in its 

place ‘‘; and’’. 

■ d. Adding paragraph (a)(1)(v). 

The revisions and addition 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 which 

are not usually self-administered, if— 

(1) * * * 

(v) In accordance with applicable 

State law. 

* * * * * 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

■ 6. The authority citation for part 412 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh) and sec. 124 of Public Law 106–113 

(113 Stat. 1501A–332). 

■ 7. Section 412.167 is amended by 

redesignating paragraph (c) as paragraph 

(d) and adding a new paragraph (c) to 

read as follows: 

§ 412.167 Appeals under the Hospital 

Value-Based Purchasing (VBP) Program. 

* * * * * 

(c) If a hospital is dissatisfied with 

CMS’ decision on an appeal request 

submitted under paragraph (b) of this 

section, the hospital may request an 

independent CMS review of that 

decision. 

* * * * * 

PART 416—AMBULATORY SURGICAL 

SERVICES 

■ 8. 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). 

■ 9. Section 416.171 is amended by 

revising paragraph (b)(2) to read as 

follows: 

§ 416.171 Determination of payment rates 

for ASC services. 

* * * * * 

(b) * * * 

(2) Device-intensive procedures 

assigned to any APC under the OPPS 

with device costs greater than 50 

percent of the APC costs based on the 

standard OPPS APC ratesetting 

methodology. 

* * * * * 

PART 419—PROSPECTIVE PAYMENT 

SYSTEM FOR HOSPITAL OUTPATIENT 

DEPARTMENT SERVICES 

■ 10. 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). 

■ 11. Section 419.2 is amended by 

revising paragraphs (b) introductory 

text, (b)(3), (b)(4), (b)(7), (b)(11), and 

(b)(12) and adding paragraphs (b)(13) 

through (17) to read as follows: 

§ 419.2 Basis of payment. 

* * * * * 

(b) Determination of hospital 

outpatient prospective payment rates: 

Packaged costs. The prospective 

payment system establishes a national 

payment rate, standardized for 

geographic wage differences, that 

includes operating and capital-related 

costs that are integral, ancillary, 

supportive, dependent, or adjunctive to 

performing a procedure or furnishing a 

service on an outpatient basis. In 

general, these packaged costs may 

include, but are not limited to, the 

following items and services, the 

payment for which are packaged or 

conditionally packaged into the 

payment for the related procedures or 

services. 

* * * * * 

(3) Observation services; 

(4) Anesthesia, certain drugs, 

biologicals, and other pharmaceuticals; 

medical and surgical supplies 

(including, for example, but not limited 

to, implantable or certain 

nonimplantable medical devices, certain 

drugs and biologicals, implantable 

biologicals, and skin substitutes or 

similar wound treatment products) and 

equipment; surgical dressings; and 

devices used for external reduction of 

fractures and dislocations; 

* * * * * 

(7) Ancillary services; 

* * * * * 

(11) Implantable and insertable 

medical items and devices, including, 

but not limited to, prosthetic devices 

(other than dental) which replace all or 

part of an internal body organ 

(including colostomy bags and supplies 

directly related to colostomy care), 

including replacement of these devices; 

(12) Costs incurred to procure donor 

tissue other than corneal tissue; 

(13) Image guidance, processing, 

supervision, and interpretation services; 

(14) Intraoperative items and services; 

(15) Drugs, biologicals, and 

radiopharmaceuticals that function as 

supplies when used in a diagnostic test 

or procedure (including but not limited 

to, diagnostic radiopharmaceuticals, 

contrast agents, and pharmacologic 

stress agents; 

(16) Certain clinical diagnostic 

laboratory tests; and 


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(17) Procedures described by add-on 

codes. 

* * * * * 

■ 12. Section 419.22 is amended by 

revising the introductory text and 

paragraphs (j) and (1) to read as follows: 

§ 419.22 Hospital outpatient services 

excluded from payment under the hospital 

outpatient prospective payment system. 

The following services are not paid 

for under the hospital outpatient 

prospective payment system (except 

when packaged as a part of a bundled 

payment): 

* * * * * 

(j) Except as provided in § 419.2(b)(4) 

and (11), prosthetic devices,-prosthetic 

supplies, and orthotic devices. 

* * * * * 

(l) Except as provided in 

§ 419.2(b)(16), clinical diagnostic 

laboratory tests. 

* * * * * 

■ 13. Section 419.32 is amended by 

adding paragraph (b)(1)(iv)(B)(5) to read 

as follows: 

§ 419.32 Calculation of prospective 

payment rates for hospital outpatient 

services. 

* * * * * 

(b) * * * 

(1) * * * 

(iv) * * * 

(B) * * * 

(5) For calendar year 2014, a 

multifactor productivity adjustment (as 

determined by CMS) and 0.3 percentage 

point. 

* * * * * 

■ 14. Section 419.46 is added to Subpart 

D to read as follows: 

§ 419.46 Participation, data submission, 

and validation requirements under the 

Hospital Outpatient Quality Reporting 

(OQR) Program. 

(a) Participation in the Hospital OQR 

Program. To participate in the Hospital 

OQR Program, a hospital as defined in 

section 1886(d)(1)(B) of the Act and is 

paid under the OPPS must— 

(1) Register on the QualityNet Web 

site before beginning to report data; 

(2) Identify and register a QualityNet 

security administrator as part of the 

registration process under paragraph 

(a)(1) of this section; and 

(3) Complete and submit an online 

participation form available at the 

QualityNet.org Web site if this form has 

not been previously completed, if a 

hospital has previously withdrawn, or if 

the hospital acquires a new CMS 

Certification Number (CCN). For 

Hospital OQR Program purposes, 

hospitals that share the same CCN are 

required to complete a single online 

participation form. Once a hospital has 

submitted a participation form, it is 

considered to be an active Hospital OQR 

Program participant until such time as 

it submits a withdrawal form to CMS or 

no longer has an effective Medicare 

provider agreement. Deadlines for the 

participation form are described in 

paragraphs (a)(3)(i) and (ii) of this 

section, and are based on the date 

identified as a hospital’s Medicare 

acceptance date. 

(i) If a hospital has a Medicare 

acceptance date before January 1 of the 

year prior to the affected annual 

payment update, the hospital must 

complete and submit to CMS a 

completed Hospital OQR Notice of 

Participation Form by July 31 of the 

calendar year prior to the affected 

annual payment update. 

(ii) If a hospital has a Medicare 

acceptance date on or after January 1 of 

the year prior to the affected annual 

payment update, the hospital must 

submit a completed participation form 

no later than 180 days from the date 

identified as its Medicare acceptance 

date. 

(b) Withdrawal from the Hospital 

OQR Program. A participating hospital 

may withdraw from the Hospital OQR 

Program by submitting to CMS a 

withdrawal form that can be found in 

the secure portion of the QualityNet 

Web site. The hospital may withdraw 

any time from January 1 to November 1 

of the year prior to the affected annual 

payment updates. A withdrawn hospital 

will not be able to later sign up to 

participate in that payment update, is 

subject to a reduced annual payment 

update as specified under § 419.43(h), 

and is required to submit a new 

participation form in order to 

participate in any future year of the 

Hospital OQR Program. 

(c) Submission of Hospital OQR 

Program data—(1) General rule. Except 

as provided in paragraph (d) of this 

section, hospitals that participate in the 

Hospital OQR Program must submit to 

CMS data on measures selected under 

section 1833(17)(C) of the Act in a form 

and manner, and at a time, specified by 

CMS. 

(2) Submission deadlines. Submission 

deadlines by measure and by data type 

are posted on the QualityNet Web site. 

(3) Initial submission deadlines for a 

hospital that did not participate in the 

previous year’s Hospital OQR Program. 

(i) If a hospital has a Medicare 

acceptance date before January 1 of the 

year prior to the affected annual 

payment update, the hospital must 

submit data beginning with encounters 

occurring during the first calendar 

quarter of the year prior to the affected 

annual payment update, in addition to 

submitting a completed Hospital OQR 

Notice of Participation Form under 

paragraph (a)(3)(i) of this section. 

(ii) If a hospital has a Medicare 

acceptance date on or after January 1 of 

the year prior to the affected annual 

payment update, the hospital must 

submit data for encounters beginning 

with the first full quarter following 

submission of the completed Hospital 

OQR Notice of Participation Form under 

paragraph (a)(3)(ii) of this section. 

(iii) Hospitals with a Medicare 

acceptance date before or after January 

1 of the year prior to an affected annual 

payment update must follow data 

submission deadlines as specified in 

paragraph (c)(2) of this section. 

(d) Exception. CMS may grant an 

extension or waiver of one or more data 

submission deadlines and requirements 

in the event of extraordinary 

circumstances beyond the control of the 

hospital, such as when an act of nature 

affects an entire region or locale or a 

systemic problem with one of CMS’ data 

collection systems directly or indirectly 

affects data submission. CMS may grant 

an extension or waiver as follows: 

(1) Upon request by the hospital. 

Specific requirements for submission of 

a request for an extension or waiver are 

available on the QualityNet Web site. 

(2) At the discretion of CMS. CMS 

may grant waivers or extensions to 

hospitals that have not requested them 

when CMS determines that an 

extraordinary circumstance has 

occurred. 

(e) Validation of Hospital OQR 

Program data. CMS may validate one or 

more measures selected under section 

1833(17)(C) of the Act by reviewing 

documentation of patient encounters 

submitted by selected participating 

hospitals. 

(1) Upon written request by CMS or 

its contractor, a hospital must submit to 

CMS supporting medical record 

documentation that the hospital used 

for purposes of data submission under 

the program. The specific sample that a 

hospital must submit will be identified 

in the written request. A hospital must 

submit the supporting medical record 

documentation to CMS or its contractor 

within 45 days of the date identified on 

the written request, in the form and 

manner specified in the written request. 

(2) A hospital meets the validation 

requirement with respect to a fiscal year 

if it achieves at least a 75-percent 

reliability score, as determined by CMS. 

(f) Reconsiderations and appeals of 

Hospital OQR Program decisions. (1) A 

hospital may request reconsideration of 

a decision by CMS that the hospital has 

not met the requirements of the Hospital 


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OQR Program for a particular fiscal year. 

Except as provided in paragraph (d) of 

this section, a hospital must submit a 

reconsideration request to CMS via the 

QualityNet Web site, no later than the 

first business day of the month of 

February of the affected payment year. 

(2) A reconsideration request must 

contain the following information: 

(i) The hospital’s CMS Certification 

Number (CCN); 

(ii) The name of the hospital; 

(iii) The 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; 

(iv) The hospital’s basis for requesting 

reconsideration. The hospital must 

identify its specific reason(s) for 

believing it should not be subject to the 

reduced annual payment update; 

(v) The hospital-designated personnel 

contact information, including name, 

email address, telephone number, and 

mailing address (must include physical 

mailing address, not just a post office 

box); 

(vi) The hospital-designated 

personnel’s signature; 

(vii) A copy of all materials that the 

hospital submitted to comply with the 

requirements of the affected Hospital 

OQR Program payment determination 

year; and 

(viii) If the hospital is requesting 

reconsideration on the basis that CMS 

determined it did not meet the affected 

payment determination year’s validation 

requirement set forth in paragraph (e)(1) 

of this section, 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 are eligible to 

be reconsidered. 

(3) A hospital that is dissatisfied with 

a decision made by CMS on its 

reconsideration request may file an 

appeal with the Provider 

Reimbursement Review Board under 

part 405, subpart R, of this chapter. 

■ 15. Section 419.66 is amended by 

revising paragraph (b)(3) to read as 

follows: 

§ 419.66 Transitional pass-through 

payments: Medical devices. 

* * * * * 

(b) * * * 

(3) The device is an integral part of 

the service furnished, is used for one 

patient only, comes in contact with 

human tissue, and is surgically 

implanted or inserted, whether or not is 

remains with the patient when the 

patient is released from the hospital. 

* * * * * 

PART 475—QUALITY IMPROVEMENT 

ORGANIZATIONS 

■ 16. The authority citation for part 475 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

■ 17. Section 475.1 is amended by— 

■ a. Redesignating paragraphs (a) 

through (d) in the definition of ‘‘Five 

percent or more owner’’ as paragraphs 

(1) through (4). 

■ b. Adding, in alphabetical order, the 

definitions of ‘‘Case reviews’’, 

‘‘Practitioner’’, ‘‘QIO area’’, and Quality 

improvement initiative’’. 

■ c. Revising the definition of 

‘‘Physician’’. 

The additions and revision read as 

follows: 

§ 475.1 Definitions. 

* * * * * 

Case reviews means the different 

types of reviews that QIOs are 

authorized to perform. Such reviews 

include, but are not limited to— 

(1) Beneficiary complaint reviews; 

(2) General quality of care reviews; 

(3) Emergency Medical Treatment and 

Labor Act (EMTALA) reviews; 

(4) Medical necessity reviews, 

including appeals and DRG validation 

reviews; and 

(5) Admission and discharge reviews. 

* * * * * 

Physician means: 

(1) A doctor of medicine or 

osteopathy, a doctor of dental surgery or 

dental medicine, a doctor of podiatry, a 

doctor of optometry, or a chiropractor as 

described in section 1861(r) of the Act; 

(2) An intern, resident, or Federal 

Government employee authorized under 

State or Federal law to practice as a 

doctor as described in paragraph (1) of 

this definition; and 

(3) An individual licensed to practice 

as a doctor as described in paragraph (1) 

of this definition in any Territory or 

Commonwealth of the United States of 

America. 

Practitioner has the same meaning as 

provided in § 476.1 of this chapter. 

QIO area means the defined 

geographic area, such as the State(s), 

region(s), or community(ies), in which 

the CMS contract directs the QIO to 

perform. 

Quality improvement initiative has 

the same meaning as provided in § 476.1 

of this chapter. 

■ 18. Subpart C is revised to read as 

follows: 

Subpart C—Quality Improvement 

Organizations 

Sec. 

475.100 Scope and applicability. 

475.101 Eligibility requirements for QIO 

contracts. 

475.102 Requirements for performing case 

reviews. 

475.103 Requirements for performing 

quality improvement initiatives. 

475.104 [Reserved] 

475.105 Prohibition against contracting 

with health care facilities, affiliates, and 

payor organizations. 

475.106 [Reserved] 

475.107 QIO contract awards. 

Subpart C—Quality Improvement 

Organizations 

§ 475.100 Scope and applicability. 

This subpart implements sections 

1152 and 1153(b) and (c) of the Social 

Security Act as amended by section 261 

of the Trade Adjustment Assistance 

Extension Act of 2011. This subpart 

defines the types of organizations that 

are eligible to become Quality 

Improvement Organizations (QIOs) and 

describes certain steps CMS will take in 

selecting QIOs. 

§ 475.101 Eligibility requirements for QIO 

contracts. 

In order to be eligible for a QIO 

contract, an organization must meet the 

following requirements: 

(a) Have a governing body that 

includes at least one individual who is 

a representative of health care providers 

and at least one individual who is a 

representative of consumers. 

(b) Demonstrate the ability to perform 

the functions of a QIO, including— 

(1) The ability to meet the eligibility 

requirements and perform activities as 

set forth in the QIO Request for 

Proposal; and 

(2) The ability to— 

(i) Perform case reviews as described 

in § 475.102; and/or 

(ii) Perform quality improvement 

initiatives as set forth in § 475.103. 

(c) Demonstrate the ability to actively 

engage beneficiaries, families, and 

consumers, as applicable, in case 

reviews as set forth in § 475.102, or 

quality improvement initiatives as set 

forth in § 475.103. 

§ 475.102 Requirements for performing 

case reviews. 

(a) In determining whether or not an 

organization has demonstrated the 

ability to perform case review, CMS will 

take into consideration factors such as: 

(1) The organization’s proposed 

processes, capabilities, quantitative, 

and/or qualitative performance 

objectives and methodology to perform 

case reviews; 

(2) The organization’s proposed 

involvement of and access to physicians 

and practitioners in the QIO area with 


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the appropriate expertise and 

specialization in the areas of health care 

related to case reviews; 

(3) The organization’s ability to take 

into consideration urban versus rural, 

and regional characteristics in the 

health care setting where the care under 

review was provided; 

(4) The organization’s ability to take 

into consideration evidence-based 

national clinical guidelines and 

professionally recognized standards of 

care; and 

(5) The organization’s access to 

qualified information technology (IT) 

expertise. 

(b) In making determinations under 

this section, CMS may consider 

characteristics such as the 

organization’s geographic location and 

size. CMS may also consider prior 

experience in health care quality 

improvement that CMS considers 

relevant to performing case reviews; 

such prior experience may include prior 

similar case review experience. 

(c) A State government that 

administers a Medicaid program will be 

considered incapable of performing case 

review in an effective manner, unless 

the State demonstrates to the 

satisfaction of CMS that the State agency 

performing the case review will act with 

complete objectivity and independence 

from the Medicaid program. 

§ 475.103 Requirements for performing 

quality improvement initiatives. 

(a) In determining whether or not an 

organization has demonstrated the 

ability to perform quality improvement 

initiatives, CMS will take into 

consideration factors such as: 

(1) The organization’s proposed 

processes, capabilities, quantitative, 

and/or qualitative performance 

objectives, and methodology to perform 

quality improvement initiatives; 

(2) The organization’s proposed 

involvement of and access to physicians 

and practitioners in the QIO area that 

have the requisite expertise and 

specialization in the areas of health care 

concerning the quality improvement 

initiative; and 

(3) The organization’s access to 

professionals with requisite knowledge 

of quality improvement methodologies 

and practices, as well as qualified 

information technology and technical 

expertise. 

(b) In making determinations under 

this section, CMS may consider 

characteristics such as the 

organization’s geographic location and 

size. CMS may also consider prior 

experience in health care quality 

improvement that CMS considers 

relevant to performing quality 

improvement initiatives; such prior 

experience may include prior similar 

quality improvement initiative 

experience. 

(c) A State government that 

administers a Medicaid program will be 

considered incapable of performing 

quality improvement initiative 

functions in an effective manner, unless 

the State demonstrates to the 

satisfaction of CMS that the State agency 

performing the quality improvement 

initiatives will act with complete 

objectivity and independence from the 

Medicaid program. 

§ 475.104 [Reserved] 

§ 475.105 Prohibition against contracting 

with health care facilities, affiliates, and 

payor organizations. 

(a) Basic rule. Except as permitted 

under paragraph (a)(3) of this section, 

the following are not eligible for QIO 

contracts: 

(1) A health care facility in the QIO 

area. 

(2) A health care facility affiliate; that 

is, an organization in which more than 

20 percent of the members of the 

governing body are also either a 

governing body member, officer, 

partner, five percent or more owner, or 

managing employee in a health care 

facility in the QIO area. 

(3) A payor organization, unless the 

Secretary determines that there is no 

other entity available for an area with 

which the Secretary can enter into a 

contract under this part or the Secretary 

determines that a payor organization is 

a more qualified entity to perform one 

or more of the functions of a QIO 

described in § 475.101(b) and this more 

qualified entity meets all other 

requirements and standards of this part. 

(b) [Reserved] 

(c) Subcontracting. A QIO must not 

subcontract with a health care facility to 

perform any case review activities 

except for the review of the quality of 

care. 

§ 475.106 [Reserved] 

§ 475.107 QIO contract awards. 

Subject to the provisions of § 475.105, 

CMS will take the following actions in 

awarding QIO contracts: 

(a) Identify, from among all proposals 

submitted in response to a Request for 

Proposal, all proposals submitted by 

organizations that meet the 

requirements of § 475.101; 

(b) Identify, from among all proposals 

identified in paragraph (a) of this 

section, all proposals that set forth 

minimally acceptable plans in 

accordance with the requirements of 

§ 475.102 or § 475.103, as applicable; 

and 

(c) Award the contract to the selected 

organization for a specific QIO area for 

a period of 5 years. 

PART 476—QUALITY IMPROVEMENT 

ORGANIZATION REVIEW 

■ 19. The authority for part 476 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

■ 20. The heading of part 476 is revised 

to read as set forth above. 

■ 21. In § 461.1, paragraphs (a) through 

(d) in the definition of ‘‘Five percent or 

more owner’’ are redesignated as 

paragraphs (1) though (4) and the 

definition of ‘‘Physician’’ is revised to 

read as follows: 

§ 476.1 Definitions. 

* * * * * 

Physician means: 

(1) A doctor of medicine or 

osteopathy, a doctor of dental surgery or 

dental medicine, a doctor of podiatry, a 

doctor of optometry, or a chiropractor, 

as described in section 1861(r) of the 

Act; 

(2) An intern, resident, or Federal 

Government employee authorized under 

State or Federal law to practice as a 

doctor as described in paragraph (1) of 

this definition; and 

(3) An individual licensed to practice 

as a doctor as described in paragraph (1) 

of this definition in any Territory or 

Commonwealth of the United States of 

America. 

■ 22. The heading of Subpart C is 

revised to read as follows: 

Subpart C—Review Responsibilities of 

Quality Improvement Organizations 

(QIOs) 

PART 486—CONDITIONS FOR 

COVERAGE OF SPECIALIZED 

SERVICES FURNISHED BY 

SUPPLIERS 

■ 23. The authority citation of part 486 

continues to read as follows: 

Authority: Secs. 1102, 1138, and 1871 of 

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

1302b-8, and 1395hh) and section 371 of the 

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

■ 24. Section 486.316 is amended by 

revising paragraphs (a)(1) and (b) to read 

as follows: 

§ 486.316 Re-certification and competition 

processes. 

(a) * * * 

(1) Meets two out of the three 

outcome measures requirements at 

§ 486.318; and * * * 

(b) Decertification and competition. If 

an OPO does not meet two out of the 


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three outcome measures as described in 

paragraph (a)(1) of this section or the 

requirements described in paragraph 

(a)(2) of this section, the OPO is 

decertified. If the OPO does not appeal 

or the OPO appeals and the 

reconsideration official and CMS 

hearing officer uphold the 

decertification, the OPO’s service area is 

opened for competition from other 

OPOs. The decertified OPO is not 

permitted to compete for its open area 

or any other open area. An OPO 

competing for an open service area must 

submit information and data that 

describe the barriers in its service area, 

how they affected organ donation, what 

steps the OPO took to overcome them, 

and the results. 

* * * * * 

■ 25. Section 486.318 is amended by 

revising paragraph (a) introductory text 

and paragraph (b) introductory text to 

read as follows: 

§ 486.318 Condition: Outcome measures. 

(a) With the exception of OPOs 

operating exclusively in noncontiguous 

States, Commonwealths, Territories, or 

possessions, an OPO must meet two out 

of the three following outcome 

measures: 

* * * * * 

(b) For OPOs operating exclusively in 

noncontiguous States, Commonwealths, 

Territories, and possessions, an OPO 

must meet two out of the three 

following outcome measures: 

* * * * * 

PART 495—STANDARDS FOR THE 

ELECTRONIC HEALTH RECORD 

TECHNOLOGY INCENTIVE PROGRAM 

■ 26. 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). 

■ 27. Section 495.4 is amended by 

revising the definition of ‘‘Hospitalbased EP’’ to read as follows: 

§ 495.4 Definitions. 

* * * * * 

Hospital-based EP. Unless it meets the 

requirements of § 495.5, a hospitalbased EP means an EP who furnishes 90 

percent or more of his or her covered 

professional services in sites of service 

identified by the codes used in the 

HIPAA standard transaction as an 

inpatient hospital or emergency room 

setting in the year preceding the 

payment year, or in the case of a 

payment adjustment year, in either of 

the 2 years before the year preceding 

such payment adjustment year. 

(1) For Medicare, this is calculated 

based on— 

(i) The Federal fiscal year preceding 

the payment year; and 

(ii) For the payment adjustments, 

based on— 

(A) The Federal fiscal year 2 years 

before the payment adjustment year; or 

(B) The Federal fiscal year 3 years 

before the payment adjustment year. 

(2) For Medicaid, it is at the State’s 

discretion if the data are gathered on the 

Federal fiscal year or calendar year 

preceding the payment year. 

(3) For the CY 2013 payment year 

only, an EP who furnishes services 

billed by a CAH receiving payment 

under Method II (as described in 

§ 413.70(b)(3) of this chapter) is 

considered to be hospital-based if 90 

percent or more of his or her covered 

professional services are furnished in 

sites of service identified by the codes 

used in the HIPPA standard transaction 

as an inpatient hospital or emergency 

room setting in each of the Federal fiscal 

years 2012 and 2013. 

* * * * * 

■ 28. Section 495.104 is amended by 

revising paragraph (c)(2) to read as 

follows: 

§ 495.104 Incentive payments to eligible 

hospitals. 

* * * * * 

(c) * * * 

(2) Interim and final payments. CMS 

uses data on hospital acute care 

inpatient discharges, Medicare Part A 

acute care inpatient bed-days, Medicare 

Part C acute care inpatient bed-days, 

and total acute care inpatient bed-days 

from the latest submitted 12-month 

hospital cost report as the basis for 

making preliminary incentive payments. 

Final payments are determined at the 

time of settling the first 12-month 

hospital cost report for the hospital 

fiscal year that begins on or after the 

first day of the payment year, and 

settled on the basis of data from that 

cost reporting period. In cases where 

there is no 12-month hospital cost 

report period beginning on or after the 

first day of the payment year, final 

payments may be determined and 

settled on the basis of data from the 

most recently submitted 12-month 

hospital cost report. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; Program No. 93.774, Medicare— 

Supplementary Medical Insurance Program; 

and Program No. 93.778 (Medical Assistance) 

Dated: June 18, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: June 26, 2013. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2013–16555 Filed 7–8–13; 4:15 pm] 

BILLING CODE 4120–01–P 


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