[Federal Register Volume 62, Number 171 (Thursday, September 4, 1997)]
[Proposed Rules]
[Pages 46698-46707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23380]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 416

[BPD-831-P]
RIN 0938-AH15


Medicare Program; Adjustment in Payment Amounts for New 
Technology Intraocular Lenses

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish in regulations a process 
under which interested parties may request, with respect to a class of 
new technology intraocular lenses (IOLs), a review of the 
appropriateness of the current payment amount for IOLs furnished by 
Medicare-participating ambulatory surgical centers.
    The rule implements section 141(b) of the Social Security Act 
Amendments of 1994, which requires us to develop and implement this 
process.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on 
November 3, 1997.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPD-831-P, P.O. Box 26688, 
Baltimore, MD 21207-0488.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    Comments may also be submitted electronically to the following e-
mail address: <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="abe9fbef93989afbebc3c8cdca85ccc4dd85">[email protected]</a> E-mail comments must include the full 
name and address of the sender and must be submitted to the referenced 
address to be considered. All comments must be incorporated in the e-
mail message because we may not be able to access attachments. 
Electronically submitted comments will be available for public 
inspection at the Independence Avenue address below.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-831-P. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 309-G of 
the Department's offices at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).
    Copies: To order copies of the Federal Register containing this 
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FOR FURTHER INFORMATION CONTACT: Cathaleen Ahern, (410) 786-4515.

SUPPLEMENTARY INFORMATION:

I. Background

A. Payment for Ambulatory Surgical Center Facility Services

    Section 1832(a)(2)(F)(i) of the Social Security Act (the Act) 
provides that benefits under the Medicare supplementary medical 
insurance program (Part B) include services furnished in connection 
with surgical procedures that, under section 1833(i)(1)(A) of the Act, 
are specified by us and are performed on an inpatient basis in a 
hospital but that also can be performed safely on an ambulatory basis 
in an ambulatory surgical center (ASC) or in a hospital outpatient 
department. To participate in the Medicare program as an ASC, a 
facility must meet the standards specified under section 
1832(a)(2)(F)(i) of the Act and 42 CFR 416.25 (``Basic requirements''). 
Our regulations at 42 CFR part 416 contain the coverage and payment 
rules for services furnished by Medicare-participating ASCs.
    Section 1833(i)(2)(A) of the Act authorizes us to pay ASCs a 
prospectively-determined rate for facility services. ``Facility 
services'' means services that are furnished in conjunction with 
covered surgical procedures performed in an ASC, or in a hospital on an 
outpatient basis. Section 416.61 sets forth included and excluded 
facility services. ASC facility services payment rates represent our

[[Page 46699]]

estimate of a fair fee that takes into account the costs incurred by 
ASCs generally in furnishing facility services in connection with 
performing a surgical procedure. ASC payment rates do not include 
physician fees and other medical items and services, such as laboratory 
services or prosthetic devices, for which separate payment may be 
authorized under other provisions of the Medicare program. However, an 
intraocular lens (IOL) is included as an ASC facility service under 
section 1833(i)(2)(A)(iii) of the Act.
    Payment for ASC facility services is subject to the usual Medicare 
Part B deductible and coinsurance requirements. Therefore, 
participating ASCs are paid 80 percent of the prospectively-determined 
rate adjusted for regional wage variations. The beneficiary pays a 
coinsurance amount equal to 20 percent of the wage-adjusted ASC 
facility fee.
    Currently, the Medicare program covers approximately 2,300 
procedures performed in an ASC. We assign to each procedure one of 
eight standard payment rates. Collectively, the procedures assigned a 
particular payment rate constitute an ASC payment group. The current 
payment group rates follow:

Group 1--$312
Group 2--$419
Group 3--$479
Group 4--$591
Group 5--$674
Group 6--$785
Group 7--$935
Group 8--$923

All procedures within a payment group are paid the same rate, adjusted 
for geographic wage variation. (A detailed discussion of the ASC 
payment methodology and rate-setting procedures is set forth in the 
final notice published in the Federal Register on February 8, 1990, 
entitled ``Revision of Ambulatory Surgery Center Payment Rate 
Methodology'' (55 FR 4526).)
    A ninth payment group allotted exclusively to extracorporeal 
shockwave lithotripsy services was established in the notice with 
comment period published December 31, 1991 (56 FR 67666). The decision 
in American Lithotripsy Society v. Sullivan, 785 F. Supp. 1034 (D.D.C. 
1992), prohibits us from paying for these services under the ASC 
benefit at this time. Extracorporeal shockwave lithotripsy payment 
rates are the subject of a separate document, and a proposed notice was 
published October 1, 1993 (58 FR 51355).

B. Payment for Intraocular Lenses Furnished in an Ambulatory Surgical 
Center

    At the inception of the ASC benefit on September 7, 1982, Medicare 
paid 80 percent of the reasonable charge for IOLs supplied for 
insertion concurrent with or following cataract surgery performed in an 
ASC. Section 4063(b) of the Omnibus Budget and Reconciliation Act of 
1987 (OBRA 1987) (Pub. L. 100-203), enacted on December 22, 1987, 
amended section 1833(i)(2)(A) of the Act to mandate that we include 
payment for an IOL furnished by an ASC for insertion during or 
following cataract surgery as part of the ASC facility fee rather than 
paying for the IOL separately, in addition to the facility fee. Payment 
included in the facility fee for an IOL must be reasonable and related 
to the cost of acquiring the class of IOL involved.
    Thus, for services furnished beginning March 12, 1990, which was 
the effective date of the final notice published in the Federal 
Register on February 8, 1990, entitled ``Revision of Ambulatory Surgery 
Center Payment Rate Methodology'' (55 FR 4526), Medicare included 
payment for an IOL in payment group 6 and payment group 8, the two 
payment groups that include IOL insertion procedures. The Physicians' 
Current Procedural Terminology (CPT) codes for groups 6 and 8 and their 
descriptors follow:

Payment Group 6

    CPT code 66985--Insertion of intraocular lens prosthesis (secondary 
implant), not associated with concurrent cataract removal.
    CPT code 66986--Exchange of intraocular lens. (This CPT code was 
first listed in CPT 1992; we added it to the ASC list effective January 
30, 1992.)

Payment Group 8

    CPT code 66983--Intracapsular cataract extraction with insertion of 
intraocular lens prosthesis (one stage procedure).
    CPT code 66984--Extracapsular cataract removal with insertion of 
intraocular lens prosthesis (one stage procedure), manual or mechanical 
technique (eg, irrigation and aspiration or phacoemulsification).
    Initially, we set the payment amount for IOLs at $200. We did not 
categorize IOLs into different classes for the reasons discussed below. 
The $200 allowance applied to any IOL furnished for surgical insertion 
by an ASC.
    Our identification of $200 as the appropriate amount of payment for 
an IOL was influenced by the Office of Inspector General's (OIG's) 
finding that ASCs were able to negotiate an average IOL price of $200, 
and that discounts in unknown amounts were available to other ASCs. 
(See Medicare Certified Ambulatory Surgical Centers, Cataract Surgery 
Costs and Related Issues, OAI-09-88-00490, published March 1988. Copies 
can be obtained from the Office of Inspector General, Department of 
Health and Human Services, (415) 556-0675.)
    In Outpatient Ophthalmic Surgery Society, Inc. v. Shalala, No. 90-
0305 (D.D.C. January 31, 1994), the court rejected both arguments that 
were mounted in a challenge to the $200 IOL payment amount. The court 
deferred to our reliance on the OIG study as the basis for determining 
the IOL payment amount and upheld our determination that there is no 
medical justification to recognize different classes of IOLs.
    Section 4151(c)(3) of the Omnibus Budget Reconciliation Act of 1990 
(OBRA 1990) (Pub. L. 101-508), enacted on November 5, 1990, froze the 
IOL payment amount at $200 for IOLs furnished by ASCs in conjunction 
with surgery performed during the period beginning November 5, 1990 and 
ending December 31, 1992. We continued paying an IOL allowance of $200 
from January 1, 1993 through December 31, 1993.
    Section 13533 of the Omnibus Budget Reconciliation Act of 1993 
(OBRA 1993) (Pub. L. 103-66), enacted on August 10, 1993, mandated that 
payment for an IOL furnished by an ASC be equal to $150 beginning 
January 1, 1994 through December 31, 1998.

II. Provisions of This Proposed Rule

A. Requirement for Review of Payment for New Technology Intraocular 
Lenses

    On October 31, 1994, the Congress passed the Social Security Act 
Amendments of 1994 (SSAA 1994) (Pub. L. 103-432). Section 141(b) of 
SSAA 1994 requires us, not later than 1 year after the date of 
enactment (that is, by October 31, 1995), to develop and implement a 
process under which interested parties may request, with respect to a 
class of new technology IOLs, a review of the appropriateness of the 
payment amount provided for IOLs furnished by ASCs under section 
1833(i)(2)(A)(iii) of the Act. Since January 1, 1994, the payment 
amount for IOLs furnished by ASCs under section 1833(i)(2)(A)(iii) of 
the Act has been $150.
    Section 141(b)(1) of SSAA 1994 stipulates that an IOL may not be 
treated as a new technology IOL unless it has been approved by the Food 
and Drug

[[Page 46700]]

Administration (FDA). Section 141(b)(2) of SSAA 1994 requires that, in 
determining whether to provide a payment adjustment, we take into 
account whether use of the IOL is likely to result in reduced risk of 
intraoperative or postoperative complication or trauma, accelerated 
postoperative recovery, reduced induced astigmatism, improved 
postoperative visual acuity, more stable postoperative vision, or any 
other comparable clinical advantages.
    Section 141(b)(3) of SSAA 1994 requires that we publish at least 
annually a list of the requests received for review of the 
appropriateness of the IOL payment amount with respect to a new 
technology IOL. We must provide a 30-day comment period on the IOLs 
that are the subject of the requests for review. Within 90 days of the 
close of the comment period, we must publish a notice of the 
determinations made with respect to the appropriateness of the IOL 
payment amount for the IOLs for which a review was requested. Any 
adjustment of the IOL payment amount (or payment limit) for a 
particular IOL or class of IOLs that we determine is warranted would be 
effective not later than 30 days following publication of the final 
notice of our determination.
    Implementation of section 141(b) of SSAA 1994 requires three 
principal policy decisions:
    <bullet> Identification of a class or classes of new technology 
IOLs.
    <bullet> Determination of whether the current IOL payment amount is 
appropriate for an IOL identified as belonging to a class of new 
technology IOLs.
    <bullet> Identification of the payment adjustment to be applied if 
the current payment amount is found to be inappropriate.
    In the sections that follow, we discuss the factors that led us to 
the process that is the subject of this proposed rule. We welcome 
comments on the options selected and rejected, and on potential 
alternatives not considered.

B. Identification of a Class of New Technology Intraocular Lenses

1. Distinguishing Among Classes of Intraocular Lenses
    In order to prepare the final notice entitled ``Revision of 
Ambulatory Surgery Center Payment Rate Methodology'' (55 FR 4526) that 
was published in the Federal Register on February 8, 1990, we sought 
supporting documentation that would justify pricing IOLs according to 
IOL type or ``class,'' and that would establish the basis for 
distinguishing among different types of IOLs, such as placement of the 
IOL within the eye, either as anterior chamber or posterior chamber 
IOLs; or the style of the IOL, either single-piece or multi-piece; or 
characterization of the IOL as ``advanced technology.''
    On February 22, 1989, the FDA advised us in a letter that its 
premarket approval review process determined whether IOLs were ``safe 
and effective'' not by comparing IOLs with one another, but by 
comparing them with a set of historical IOL data known collectively as 
the ``grid.'' The FDA noted that no additional labeling or advertising 
claims of the superiority of one IOL (or type of IOL) over another had 
been approved at that time; that is, medical benefits of one IOL or 
type of IOL over another had not been proven in the studies that were 
submitted to the FDA. There were no across-the-board differences in the 
indications and contraindications or in the warnings sections of the 
package insert that would imply across-the-board medical benefits for 
one IOL or type of IOL over another.
    The studies that were submitted to HCFA at that time failed to 
yield conclusive evidence of specific clinical conditions or 
indications that required or influenced the use of one IOL over 
another, nor did HCFA find justification for a differentiated price 
structure based on IOL type. We therefore determined that a $200 
payment amount was both reasonable and related to the costs incurred by 
ASCs to acquire IOLs available at that time. As noted above, a Federal 
court sustained this determination. (See Outpatient Ophthalmic Surgery 
Society, Inc. v. Shalala, No. 90-0305 (D.D.C. January 31, 1994).)
2. Criterion To Define a Class of New Technology Intraocular Lenses
    There still is no universally accepted definition of what 
constitutes a ``class of new technology intraocular lenses.'' Section 
141(b) of SSAA 1994 does not define new technology IOLs other than to 
specify that an IOL may not be treated as a new technology IOL unless 
it has been approved by the FDA. We must therefore first define the 
characteristics that distinguish a ``new technology'' IOL from other 
IOLs in order to comply with section 141(b) of SSAA 1994.
    Section 141(b) of SSAA 1994 requires that we take clinical outcomes 
such as ``reduced risk of intraoperative or postoperative complication 
or trauma'' and ``reduced induced astigmatism'' into account in 
determining whether to provide a payment adjustment with respect to a 
particular IOL.
    Because they are identified with such specificity, we infer that 
the clinical outcomes listed in the law are intended to characterize 
IOLs that belong to a ``class of new technology intraocular lenses,'' 
the use of which not only produces the specified clinical outcomes, but 
does so to a greater degree than other IOLs. We submit that the latter 
consideration is crucial because of the abundant evidence that 
demonstrates that IOLs have attained a level of technical 
sophistication, clinical success, and patient satisfaction that exceeds 
that of the more than 1 million IOLs implanted during clinical trials 
conducted between 1978 and 1982. (An analysis of the 1978 through 1982 
clinical trial data forms the FDA's ``grid,'' the historical control 
group against which newer IOLs are measured.) To illustrate, 93 percent 
and 96.8 percent of patients in more recent trials of two IOLs that 
were approved in 1994 achieved visual acuity of 20/40 or better, 
compared to 88 percent of patients in the historical control group. The 
``best cases,'' those without any preoperative ocular pathology or 
macular degeneration at any time, achieved visual acuity of 20/40 or 
better in 97 percent and 99.5 percent of the patients in the two newer 
trials, compared to 94 percent of the control group grid patients. The 
high level of improved vision and the low rate of adverse effects 
already attainable using currently available IOLs seem to leave little 
room for substantive improvements in the areas listed as desirable 
outcomes in SSAA 1994. At issue, then, is how to recognize IOLs that 
exceed the already superior levels of performance of IOLs readily 
accessible in the current market to such an extent that they warrant 
being recognized as belonging to a separate and distinct class of IOLs.
    Determining if use of a particular IOL results in specific clinical 
outcomes, and the degree to which outcomes attainable by use of that 
IOL exceed what would be expected if a different IOL were used, 
requires an assessment of scientific data. We therefore considered 
convening an expert panel to evaluate claims of the clinical 
superiority of an IOL, or asking contractor medical directors to do so. 
Part of the FDA's responsibility is granting premarket approval of 
applications for new IOLs, through analysis by specialists such as 
ophthalmologists; chemical, biomedical, and mechanical engineers; 
microbiologists; and toxicologists. As part of the premarket approval 
process, an FDA group of experts evaluates

[[Page 46701]]

claims of safety and effectiveness, and approves the claims for the 
purposes of labeling and advertising. The FDA also has an advisory 
panel composed of practicing ophthalmologists and other clinicians who 
review clinical data and advise the FDA on the approvability of 
applications. This panel reviews any new device that presents new 
questions of safety and effectiveness.
    Because the expertise and review process already exist within the 
Department of Health and Human Services, it would be duplicative for us 
to convene an expert panel for the purpose of evaluating claims of the 
clinical superiority of an IOL. Therefore, we propose that the 
criterion for identifying an IOL to be treated by us as a ``new 
technology'' IOL under the process proposed in this rule be that all 
claims of the IOL's specific clinical advantages and superiority over 
existing IOLs with respect to the factors listed in section 141(b) of 
SSAA 1994, for example, reduced risk of intraoperative or postoperative 
complication or trauma, accelerated postoperative recovery, reduced 
induced astigmatism, improved postoperative visual acuity, more stable 
postoperative vision, or other comparable clinical advantages, have 
been approved by the FDA for labeling and advertising purposes.
    We asked the FDA if the premarket approval process would allow it 
to approve these claims for labeling and advertising purposes. The FDA 
responded on March 31, 1995 as follows:

    Intraocular lenses are regulated by the FDA as Class III, 
restricted devices that require premarket approval (PMA) prior to 
marketing in the United States. FDA's authority to regulate labeling 
can be found throughout the Federal Food, Drug and Cosmetic Act 
(FFDCA) (i.e., Sections 201, 301, 501, 502, 507, 519, 520, 701, 
704). IOL labeling is reviewed and approved by the FDA as part of 
the PMA review process (Section 515(c)(1)(f) of the FFDCA). Any 
extraordinary labeling claims are similarly reviewed by the FDA as 
part of the PMA process. A device would be deemed to be misbranded 
if `its labeling is false or misleading in any particular' (Section 
502(a) of the FFDCA).
    As a restricted device, an intraocular lens would also be deemed 
to be misbranded if its advertising is false or misleading or lacks 
information required by the FFDCA, including intended uses (Sections 
502(q) and (r) of the FFDCA). * * * Both clinical and bench testing 
could be used by firms to document additional claims, although 
clinical data would be needed if the clinical relevance or benefit 
of the ``high-tech'' feature were not well established.

    In order to further define what distinguishes an IOL that would be 
treated as a ``new technology'' IOL under section 141(b) of SSAA 1994, 
we considered proposing as a second criterion the requirement that the 
IOL be appropriately characterized as a product of ``new technology.'' 
We would have expected a ``new technology'' IOL to embody materials, 
design, fabrication, or other features that are ``new,'' that is, 
original and generally recognized as a significant innovation relative 
to the materials, design, fabrication, or features of contemporary 
IOLs. However, any lens, whether new or previously approved, would have 
to demonstrate clinical advantages to the FDA's satisfaction in order 
to comply with the SSAA 1994 requirement of achieving clinical 
advantages. Thus, we hold the view that this definition of ``new'' is 
not required. We welcome comments on this issue.
    Once we determine that an IOL satisfies the clinical criterion 
proposed above as the standard for treating an IOL as a ``new 
technology lens,'' that IOL will be considered as belonging to a 
``class of new technology lenses'' for the purposes of implementing the 
payment review in accordance with section 141(b) of SSAA 1994 as 
described below.
3. Five-Year Limit on Subsets of ``New Technology''
    We propose to impose certain constraints on payment adjustments 
that result from the process that is the subject of this proposed rule 
to ensure that Medicare payments for IOLs furnished under section 
1833(i)(2)(A)(iii) of the Act remain reasonable and related to their 
acquisition cost.
    We do not believe that all IOLs that could satisfy the overall 
criteria of ``new technology'' proposed in this rule would necessarily 
be of the same type or category. Rather, based on our assessment of the 
kinds of IOLs that are currently in clinical trials, we believe ``new 
technology'' IOLs could logically be grouped into smaller subsets of 
``new technology,'' each of which is defined or identified by a common 
salient feature or characteristic, such as fabrication from the same 
material, or being multifocal in design, or designed to correct 
astigmatism.
    For payment purposes, after we accept an IOL as satisfying the 
criterion that we have proposed for belonging to a ``class of new 
technology lenses,'' we propose to assign that IOL to a subset of IOLs 
with which it shares a common feature that distinguishes it from other 
``new technology'' IOLs. We further propose to set the lifespan of each 
subset of ``new technology'' IOLs at 5 years. That is, beginning the 
sixth year following our initial recognition of a ``new technology'' 
subset, the new technology attribute that the IOLs in the subset have 
in common would cease to be considered a characteristic of ``new 
technology,'' and the Medicare payment adjustment for IOLs in that 
subset would be discontinued. We would not consider for payment 
adjustment any other IOLs whose primary distinguishing feature was that 
attribute. For IOLs approved at the beginning of the fifth year of the 
subset term, Medicare would pay any ``new technology'' adjustment for 1 
year only.
    We are proposing a 5-year limit because defining a ``new 
technology'' characteristic as ``new'' for fewer than 5 years does not 
seem fair to manufacturers whose model(s) of the new technology IOL may 
receive FDA approval sometime after the original IOL that opened the 
subset within the class of ``new technology'' IOLs receives its 
premarket approval. But to define a ``new technology'' characteristic 
as ``new'' for more than 5 years seems to impose an unnecessary and 
unwarranted drain on the Medicare trust fund, given the natural course 
of market forces that have repeatedly succeeded in reducing IOL costs 
in a few years following introduction of a modification or innovation 
in design or material.
4. Impact of Memorandum of Understanding
    On September 19, 1995, we published a final rule with comment 
period in the Federal Register entitled ``Medicare Program; Criteria 
and Procedures for Extending Coverage to Certain Devices and Related 
Services'' (60 FR 48417). That regulation discussed a memorandum of 
understanding between the FDA and HCFA regarding extending Medicare 
coverage to certain investigational devices. Although the criteria to 
be used in the process described in the rule include determining 
whether or not a ``significant modification'' has been made to a 
device, that determination will not affect the process described in 
this proposed rule. We will consult with the FDA should issues arise 
concerning the classification of lenses.

C. Appropriateness of Payment Amount

    SSAA 1994 requires us to review the appropriateness of the current 
IOL payment amount with respect to a class of new technology IOLs. 
Although SSAA 1994 itself does not provide explicit guidance on the 
standard for judging the appropriateness of the current IOL payment 
amount, section 1833(i)(2)(A)(iii) of the Act requires that the IOL 
payment amount included in

[[Page 46702]]

the ASC facility fee be reasonable and related to the cost of acquiring 
the class of IOL involved. Therefore, after we determine that an IOL 
meets the criterion that qualifies it to be treated as a new technology 
IOL under the process proposed in this rule, we must next determine if 
the current IOL payment amount is reasonable and related to the cost of 
acquiring that IOL.
    At this time, the only method we are aware of for determining IOL 
acquisition costs is to survey purchasers and audit invoices. The OIG 
conducted such a survey in preparing its 1994 report entitled 
Acquisition Costs of Prosthetic Intraocular Lenses, OEI-05-92-01030. 
(Copies can be obtained from the Office of Inspector General, 
Department of Health and Human Services, (312) 353-4124.) The OIG found 
that when IOL payments were fixed at $200, ASCs could acquire and were 
acquiring IOLs for an average of $126 in 1991 and $112 in 1992. This 
does not take into account discounts available to the majority of 
purchasers because the financial arrangements took many forms, only a 
few of which were straightforward rebates or price reductions. The OIG 
also discovered that the newest type of IOL available at the time of 
its review (a foldable, ultraviolet-absorbing, silicone IOL) was 
obtainable within relatively the same price range as other IOLs in the 
study (from $75 to $475 for the foldable IOLs, compared to a range of 
$30 to $450 for rigid IOLs). The OIG determined that ASCs were buying 
foldable IOLs for $125 or less, at a time when the Medicare IOL payment 
amount was $200.
    We are developing IOL cost data as part of the 1994 Medicare 
Ambulatory Surgical Center Payment Rate Survey of Facility Overhead and 
Procedure Specific Costs (Form HCFA-452B). Although that information is 
not yet available, we believe that the current payment amount of $150 
continues to exceed the average cost to an ASC of acquiring an approved 
IOL.
    We may find, however, that IOLs affected by this regulation will 
not have been in widespread use by ASCs at the time a review of the IOL 
is requested under the provisions of section 141(b) of SSAA 1994. 
Therefore, because actual acquisition cost information may be sparse, 
we propose also to take into account list price; manufacturing costs; 
selling costs; general and administrative overhead costs; research and 
development costs; manufacturer discount and rebate packages; and any 
other factors that may be relevant indicators that the current payment 
amount is not appropriate for the type of new technology IOL under 
review. We welcome comments on criteria that would facilitate an 
objective determination of what constitutes a payment that is both 
reasonable and related to acquisition cost with respect to ``new 
technology'' IOLs. The criteria should include the use of readily 
verifiable data, for example, studies published in peer-reviewed 
journals.

D. Payment Adjustment When Current Payment Amount Is Inappropriate

    The final step in the process that is the subject of this proposed 
rule involves determining the amount of a payment adjustment if we find 
that the current IOL payment amount is inappropriate. Among the factors 
that we propose to take into account in order to determine the amount 
of the adjustment to be made if the current IOL allowance is found to 
be inappropriate with respect to the acquisition cost of the particular 
IOL are the following:
    <bullet> Market projections based on anticipated clinical 
indications of need for the IOL and the percent of the Medicare 
population expected to present that need on an annual basis.
    <bullet> Additional incremental costs incurred to manufacture a new 
technology IOL relative to the cost of manufacturing other IOLs, such 
as the cost attributable to using a more sophisticated piece of 
machinery or the cost of fabricating a new IOL material.
    <bullet> Additional costs incurred to conduct clinical trials that 
document for FDA approval the clinical superiority of the IOL relative 
to the costs incurred to conduct clinical trials for other IOLs.
    <bullet> Research and development costs incurred that exceed those 
associated with other IOLs approved by the FDA.
    <bullet> Current and historical pricing, sales volume, and 
revenues.
    <bullet> A reasonable rate of return and profit based on the 
manufacturer's investment in the IOL.
    We considered other options for determining the amount of an 
adjustment to be made if the current payment amount was found to be 
inappropriate for an IOL being reviewed under the provisions proposed 
in this rule including--
    <bullet> Application of a single flat, across-the-board percentage 
increase to the IOL payment amount for every IOL that we determined 
satisfied the criteria defining a ``new technology'' IOL;
    <bullet> The percent of the IOL industry's investment in research 
and development that ultimately leads to innovations in IOLs; and
    <bullet> The percentage of sales attributable to an IOL for which a 
review was requested.
    We rejected these options, however, primarily because they are 
inconsistent with the overall statutory mandate that payment be 
reasonable and related to the cost of acquiring an IOL.

E. Implementation of the Payment Adjustment

1. Two-Year Limit on Payment Adjustment
    A related issue pertains to the appropriate length of time the 
adjusted payment amount would be allowed by Medicare for a particular 
``new technology'' IOL. We propose to allow a single IOL the benefit of 
any payment adjustment determined to be appropriate for a period of 2 
years following the review process proposed in this rule. At the 
conclusion of the 2-year payment adjustment period, Medicare payment 
for the IOL would then revert to the payment rate for IOLs furnished by 
an ASC that is in effect at that time.
    Supporting a 2-year payment limit is the OIG's 1994 report 
(Acquisition Costs of Prosthetic Intraocular Lenses, OEI-05-92-01030), 
which found a decrease in IOL prices generally over a 2-year period 
ranging from 11 to 14 percent in various settings. We assume this 
decrease is attributable to technology diffusion and the associated 
development of similar lenses by competing firms. We believe a 
desirable new technology IOL with demonstrated clinical superiority 
would be subject to equivalent conditions, and thus experience a 
similar drop in acquisition cost over a 2-year period.
2. Operational Payment Principles
    The payment adjustments we publish in the Federal Register would be 
implemented prospectively, effective 30 days from the date of their 
publication. This implementation date of a payment adjustment is 
required under section 141(b) of SSAA 1994.
    We propose to apply the same payment adjustment amount established 
for the first IOL or IOLs approved within a new technology subset to 
all IOLs that we subsequently accept as satisfying the criteria for 
``new technology'' that are assigned to the same subset. If a new 
technology IOL were to qualify under more than one subset of 
technology, and the subsets had different payment rates, the IOL would 
be paid for at the higher (or highest) applicable rate.
    We expect that more than one manufacturer would be working to 
develop IOLs that rely on the same or similar technology that defines 
``new technology'' under the provisions of this

[[Page 46703]]

rule. If we were to make a payment adjustment under the provisions 
proposed in this rule, the payment adjustment amount would be based on 
information regarding IOL production, acquisition costs, and IOL 
benefits that is submitted by the manufacturer or manufacturers that 
first request review for a particular type of new technology IOLs. 
Manufacturers would have 3 years during which to submit requests for 
review of equivalent IOLs approved by the FDA that were in a ``new 
technology'' subset already approved by us and still benefit from the 
full 2-year payment adjustment term. Requests for review of an IOL 
submitted during the third year of a technology's designation as 
``new'' would only have the benefit of a payment adjustment for 1 year.
    If an interested party wants an IOL to be considered for a payment 
adjustment under section 141(b) of SSAA 1994, that interested party 
must request a review in accordance with the process proposed in this 
rule, which request would be approved and published in a final rule and 
codified in the Code of Federal Regulations. In accordance with section 
141(b) of SSAA 1994, we would adhere to a yearly cycle of receiving 
requests for review, publishing those requests, reviewing comments on 
the requests, reviewing the requests, and publishing our 
determinations. We would not make determinations or provide for payment 
adjustments outside this schedule, although interested parties may 
submit requests for review as soon as FDA grants its approval. We would 
compile these requests for publication in the next applicable Federal 
Register notice.
    We propose to assign codes to be used to bill for IOLs that qualify 
for the payment adjustment. The list of these IOLs, with the 
appropriate billing code, would be published annually in the Federal 
Register. Billing for any other IOLs using ``new technology'' billing 
codes would constitute fraud.
    We invite comments on the suitability of these proposals and 
solicit suggestions for alternative approaches for determining how to 
identify IOLs as ``new technology''; for evaluating the appropriateness 
of the current IOL allowance; for calculating the amount of an 
adjustment to be made in the event the current IOL payment amount is 
found to be inappropriate with respect to a particular IOL; and for 
defining the period of time during which the payment adjustment would 
be in effect. We believe that any adjustment amount should be modest, 
since the high quality, readily accessible IOLs currently on the market 
leave only marginal room for improvement. We do not believe that an 
upward adjustment is warranted unless the new technology IOLs, as a 
group, cost more to produce, are appreciably superior clinically, and 
successfully fulfill a need unmet before that time in an innovative 
manner.

F. Review and Adjustment Process

    In this section, we describe the process that we propose to 
implement annually in order to determine the appropriateness of IOL 
pricing as required under section 141(b) of SSAA 1994.
1. Federal Register Notice Inaugurates Annual Cycle
    The process, which is designed to be repeated annually on a 365-day 
cycle, would be initiated by publication of a Federal Register notice 
that would serve a threefold purpose.
    a. Deadline for submission of a request for review. The publication 
date of the Federal Register notice announcing the deadline by which 
any interested parties would have to submit requests in order for us to 
review the appropriateness of the Medicare payment allowance under 
section 1833(i)(2)(A)(iii) of the Act with respect to a particular IOL 
would be established as ``Day 1'' of the 365-day annual review cycle. 
The ``Day 1'' Federal Register notice would include the deadline for 
submission of requests to review (the date of publication of the 
Federal Register notice plus 125 days); the requirements to be 
satisfied in order for an IOL to be treated as a ``new technology'' IOL 
under section 141(b) of SSAA 1994; the specific information that must 
accompany a request for review as well as the format in which that 
information is to be submitted; the address to which the request is to 
be sent; the factors that we would take into account in determining 
whether the current IOL payment amount is appropriate; the factors that 
we would take into account in determining the payment adjustment to be 
made; and any other information that we believe is relevant and 
necessary.
    b. List of intraocular lenses for payment adjustment. The Federal 
Register notice published on ``Day 1'' of the 365-day cycle, in 
addition to announcing the deadline for submission of requests to 
review for the forthcoming year, would list those IOLs, identified as 
new technology IOLs, for which we had found a payment adjustment to be 
appropriate during the prior year's review. The ``Day 1'' notice would 
also include information on the amount of any payment adjustment 
determined for a particular IOL; the subset of ``new technology'' under 
which each IOL would be classified; the beginning date of the period 
when the payment adjustment would be effective (``Day 1,'' the date of 
publication of the Federal Register notice, plus 30 days); the code(s) 
to be used to bill for the IOL; the expiration date of the period 
during which the payment adjustment would be allowed (2 years from the 
date of publication of the Federal Register notice); and, the 
expiration date of the IOL's ``new technology'' designation (5 years 
from the date of publication of the Federal Register notice). Because 
ASC rates are prospectively set, we would make payment adjustments 
prospectively.
    c. Summary of previous year's determinations. The ``Day 1'' Federal 
Register notice would list any other IOLs to which a payment adjustment 
still applied as the result of reviews in earlier years; the type of 
``new technology'' under which each IOL had been classified whether or 
not it qualified for a payment adjustment; the amount of the payment 
adjustment allowed for each type of IOL; the code(s) to be used to 
bill; and the dates when the ``new technology'' designation of the IOL 
and the applicable payment adjustment would expire.
2. Publication of Requests for Review
    We would provide that we must receive requests for review no later 
than 125 days from the date of publication of the ``Day 1'' Federal 
Register notice inviting requests for review. We would compile a list 
of any requests for review that we received timely. The list, including 
the manufacturer's name and the model number of the IOL to be reviewed, 
would be published in a Federal Register notice with comment period. 
This second notice would be published no later than 245 days from the 
publication date of the first Federal Register notice that initiated 
the annual review cycle by inviting requests for review. The public 
would have 30 days to comment on the IOLs included in the list of those 
for which a payment review had been requested.
3. Our Review and Publication of Determinations
    We would review any comments that were submitted regarding the list 
of IOLs published in the Federal Register along with the information 
submitted with the request to review to decide whether an adjustment of 
the current IOL payment amount was appropriate with respect to each IOL 
on the list. Because of the rigid time frame for this process, the 
applicant must submit sufficient information in a timely manner to 
allow for review. At our

[[Page 46704]]

discretion, we may request additional information. If an initial 
submission is incomplete, however, we would make a determination based 
on the information submitted.
    As described in an earlier section, we propose to take the 
following factors into account in determining whether to provide a 
payment adjustment:
    <bullet> The IOL meets the definition of a ``new technology IOL'' 
in Sec. 416.180 (``Definitions'').
    <bullet> The extent to which the current IOL payment amount is 
reasonable and reflects the acquisition cost of the IOL under review.
    No later than 90 days after the close of the public comment period, 
we would publish in the Federal Register a notice announcing our 
determinations with respect to the requests for review that had been 
published 120 days previously announcing the amount of any new payment 
adjustments; announcing the deadline for submission of the upcoming 
year's requests for review 125 days from that time; and summarizing 
payment adjustments made previously that were still in effect. With 
publication of this notice, the annual cycle would be repeated with a 
new ``Day 1'' date.
    The following table summarizes the key events in the annual review 
cycle that is the subject of this proposed rule:

------------------------------------------------------------------------
                    Event                              Timeframe        
------------------------------------------------------------------------
Publication of a Federal Register notice       Date of publication of   
 inviting requests for review, announcing our   this notice constitutes 
 determinations of adjustments to be made to    ``Day 1'' of the annual 
 ``new technology'' IOL payment amounts, and    review cycle.           
 summarizing adjustments from prior years                               
 that are still in effect.                                              
Effective date for any payment adjustments     ``Day 1'' date plus 30   
 that we determine are appropriate as           days.                   
 published in the Federal Register on ``Day                             
 1.''.                                                                  
Deadline for receipt of the IOL review         ``Day 1'' date plus 125  
 requests for our consideration.                days.                   
Publication in the Federal Register of the     ``Day 1'' date plus 245  
 list of requests for review.                   days.                   
End of 30-day public comment period regarding  ``Day 1'' date plus 275  
 the list of requests for review.               days.                   
Publication of a Federal Register notice       ``Day 1'' date plus 365  
 inviting requests for review, announcing our   days; cycle starts over 
 determinations of adjustments to be made to    with new ``Day 1.''     
 ``new technology'' IOL payment amounts, and                            
 summarizing adjustments from prior years                               
 that are still in effect.                                              
------------------------------------------------------------------------

    To summarize the process that we propose in this rule, in order for 
us to treat an IOL as a new technology IOL under the provisions of SSAA 
1994, the IOL must have obtained FDA approval to include in labeling 
and advertising claims of superior clinical advantages over other IOLs. 
If we find that the IOL for which a review is requested meets this 
criterion and if we determine that the current payment amount for IOLs 
furnished by ASCs is inappropriate with respect to the IOL, that is, 
the current IOL payment amount is not reasonable and is not related to 
the cost of acquiring the IOL, we would adjust the payment amount for 
the IOL. In determining the amount of adjustment, we propose to take 
into account development and manufacturing costs and sales projections 
as elements of cost with respect to the IOL under review, both alone 
and relative to other IOLs.

G. Requirements for Content of a Request To Review

    We propose to require interested parties seeking a review of the 
IOL allowance under section 141(b) of the SSAA 1994 to submit certain 
information that we regard as critical if we are to make a fair and 
objective determination that the payment amount for an IOL paid under 
section 1833(i)(2)(A)(iii) of the Act is or is not appropriate. 
Interested parties requesting a review of the IOL payment amount with 
respect to a particular IOL would be required to submit the following: 
identification of the individual IOL under consideration as a ``new 
technology'' IOL for which a payment review is requested, including the 
name of the manufacturer, model number, trade name, and the date the 
FDA granted premarket approval for the IOL; a copy of the FDA's summary 
of safety and effectiveness; a copy of the labeling claims of specific 
clinical advantages approved by the FDA; reports of modifications made 
after FDA approval; development and manufacturing costs of the ``new 
technology'' IOL relative to the costs of manufacturing other approved 
IOLs; the costs of conducting clinical trials for the IOL in question 
relative to the costs of conducting clinical trials for other approved 
IOLs; indications and contraindications for use; epidemiological data 
indicating demand for the IOL; sales price, sales history, and 
revenues, and prices and projected revenues during the period of the 
payment adjustment; names of purchasers; and other information we 
consider appropriate for making a determination. We cannot be all-
inclusive in this list since we may need information that we cannot 
foresee at this time. We may modify our requests for information as 
changes in technology dictate. We may request supplemental information 
from individual interested parties during the review process. The 
interested party would be responsible for demonstrating to our 
satisfaction that a payment adjustment for the IOL under review is 
warranted, especially given the widespread availability of high quality 
IOLs at a cost equal to or less than the current Medicare IOL 
allowance. The burden of proof would be on the interested party to show 
that the current IOL payment amount is inappropriate for the new 
technology IOL for which a review is requested.
    Interested parties should be aware that 45 CFR 5.65(c) provides 
that a submitter of information may designate all or part of the 
information as being exempt from mandatory disclosure under Exemption 4 
of the Freedom of Information Act.

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

IV. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, 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 preamble, and, if we proceed with a subsequent 
document, we will respond to the comments in the preamble to that 
document.

V. Regulatory Impact Statement

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act

[[Page 46705]]

(RFA) (5. U.S.C. 601 through 612) unless the Secretary certifies that a 
proposed rule would not have a significant economic impact on a 
substantial number of small entities. For purposes of the RFA, we 
consider all manufacturers of IOLs, ASCs, hospital outpatient 
departments, and physicians who perform IOL insertion surgery to be 
small entities. Individuals and States are not included in the 
definition of a small entity. We are not preparing a regulatory 
flexibility analysis because we have determined, and the Secretary 
certifies, that this proposed regulation would not have a significant 
economic impact on a substantial number of small entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis if a proposed rule would 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 fewer than 50 beds. We are not 
preparing a rural hospital impact statement because we have determined, 
and the Secretary certifies, that this proposed regulation would not 
have a significant impact on the operations of a substantial number of 
small rural hospitals.
    Although this proposed rule is not an ``economically significant'' 
rule under Executive Order 12866, we present below a voluntary analysis 
of the effects of this proposed rule because many beneficiaries who 
undergo IOL insertion surgery following a cataract extraction could be 
affected.
    We believe that the fiscal impact of this rule would be negligible. 
We do not expect that making this payment adjustment would have an 
impact on the availability or prices of other IOLs. We do not expect 
that it would affect competition, employment, or investment. The ocular 
implant industry is mature, with a successful product readily available 
to purchasers. Our data suggest that we pay, under the Medicare 
program, more than the acquisition cost for most of the IOLs used 
today. New technology IOLs would achieve improvements in only small 
segments of the industry, since the majority of IOLs function superbly. 
The IOLs under development that we are aware of would substitute for 
spectacles in some cases, and in others would allow the patient to wear 
a single vision prescription rather than bifocals. The desirability of 
this feature to the Medicare population is not known.
    There would be no significant program savings, even if the use of 
these IOLs reduced expenditures for spectacles or eliminated the need 
for follow-up treatment. The complexities of claims processing for an 
additional payment on top of a bundled, fixed payment would be 
considerable. Manual claims processing or a significant reconfiguration 
of claims processing software would be required. The payment method for 
ASC-type procedures performed in hospital outpatient departments 
requires that we use a blend of 42 percent of the hospital's costs or 
charges and 58 percent of the ASC rate as a basis for payment. The 
addition of an adjustment to two of the ASC rates would complicate 
hospital payment. The review process to determine which IOLs qualify 
for a payment adjustment would be costly in terms of staff hours and 
Federal Register publication costs. We would have to develop new codes 
to identify specific IOLs, which creates the possibility of 
``upcoding,'' or using those codes for IOLs not eligible for the 
adjustment. We would also have to undertake an extensive educational 
effort, to explain the use of the new codes to the provider community 
and to our contractors. This would involve manual issuances and program 
memoranda. These direct and indirect costs more than outweigh the 
marginal benefit available to a few manufacturers.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 416

    Health facilities, Kidney diseases, Medicare, Reporting and 
recordkeeping requirements.
    For the reasons set forth in the preamble, 42 CFR part 416 would be 
amended as follows:

PART 416--AMBULATORY SURGICAL SERVICES

    1. The authority citation for part 416 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    2. A new subpart F, consisting of Secs. 416.180, 416.185, 416.190, 
416.195, and 416.200, is added to read as follows:
Subpart F--Adjustment in Payment Amounts for New Technology Intraocular 
Lenses
Secs.
416.180  Definitions.
416.185  Payment review process.
416.190  Who may request a review.
416.195  Content of a request to review.
416.200  Application of the payment adjustment.

Subpart F--Adjustment in Payment Amounts for New Technology 
Intraocular Lenses


Sec. 416.180  Definitions.

    As used in this subpart, the following definitions apply:
    Class of new technology intraocular lenses (IOLs) means all of the 
IOLs, collectively, that HCFA determines to have met the definition of 
``new technology IOL'' under the provisions of this subpart.
    Interested party means any individual, partnership, corporation, 
association, society, scientific or academic establishment, 
professional or trade organization, or any other legal entity.
    New technology IOL means an IOL that HCFA determines to have met 
the following criterion: The FDA has approved for use in labeling and 
advertising the IOL's claims of specific clinical advantages and 
superiority over existing IOLs with regard to reduced risk of 
intraoperative or postoperative complication or trauma, accelerated 
postoperative recovery, reduced induced astigmatism, improved 
postoperative visual acuity, more stable postoperative vision, or other 
comparable clinical advantages.
    New technology subset means a group of IOLs that HCFA determines to 
meet the criterion for being treated as new technology IOLs and that 
share a common feature or features that distinguish them from other 
IOLs. For example, all new technology IOLs that are made of a 
particular bioengineered material could comprise one subset, while all 
that rely on a particular optical innovation could comprise another.


Sec. 416.185  Payment review process.

    (a) HCFA publishes a Federal Register notice announcing the 
deadline and requirements for submitting a request for HCFA to review 
payment for an IOL.
    (b) HCFA receives requests for review of payment for an IOL.
    (c) HCFA compiles a list of the requests it receives timely and 
identifies the IOL manufacturer's name, the model number of the IOL to 
be reviewed, the interested party or parties that submit requests, and 
a summary of the interested party's grounds for requesting review of 
the appropriateness of the IOL payment amount.
    (d) HCFA publishes the list of requests in a Federal Register 
notice with comment period, giving the public 30 days to comment on the 
IOLs for which review was requested.

[[Page 46706]]

    (e) HCFA reviews the information submitted with the request to 
review, any timely comments that are submitted regarding the list of 
IOLs published in the Federal Register, and any other timely 
information that HCFA deems relevant to decide whether to provide a 
payment adjustment. Factors that HCFA takes into account in determining 
whether the IOL payment amount provided under section 
1833(i)(A)(2)(iii) of the Act is appropriate with respect to an IOL for 
which a review was requested include, but are not limited to, the 
following:
    (1) Whether the IOL meets the definition of a ``new-technology 
IOL'' in Sec. 416.180.
    (2) What it costs ASCs to acquire IOLs in the new technology subset 
to which the IOL under review belongs.
    (3) Whether the current IOL payment allowance is reasonable with 
regard to the IOL under review.
    (f) If HCFA determines that the current IOL payment allowance is 
not appropriate for the IOL under review, HCFA establishes a payment 
adjustment that takes into account the following factors:
    (1) IOL manufacturing costs.
    (2) The IOL manufacturer's selling costs and general and 
administrative overhead costs.
    (3) Research and development costs attributable to the IOL.
    (4) Manufacturer discount and rebate packages.
    (5) Other information that HCFA considers appropriate in 
determining a payment adjustment.
    (g) Within 90 days of the end of the comment period following the 
Federal Register notice identified in paragraph (d) of this section 
that lists IOLs for which a review was requested, HCFA publishes its 
determinations with regard to payment adjustments in the Federal 
Register. In the same Federal Register notice, HCFA also announces the 
deadline and requirements for submitting requests for the next annual 
cycle of reviews.
    (h) Payment adjustments are effective beginning 30 days after the 
publication of HCFA's determinations in the Federal Register.


Sec. 416.190  Who may request a review.

    Any party who is able to furnish the information required in 
Sec. 416.195 may request that HCFA review the appropriateness of the 
payment amount provided under section 1833(i)(2)(A)(iii) of the Act 
with respect to an IOL that meets the definition of a new technology 
IOL in Sec. 416.180.


Sec. 416.195  Content of a request to review.

    The interested party requesting a review of the IOL payment amount 
must timely furnish convincing evidence that the payment amount 
provided under section 1833(i)(2)(A)(iii) of the Act is not appropriate 
for a new technology IOL and that a payment adjustment is reasonable 
and warranted.
    (a) Requirements for a request to review the appropriateness of the 
IOL payment amount for a new technology IOL. In order for HCFA to 
consider a request to review the IOL payment amount with regard to a 
particular IOL, the request must meet all of the following 
requirements:
    (1) Identification of an IOL. The interested party must provide the 
following information:
    (i) The name of the manufacturer, the model number, and the trade 
name of the IOL.
    (ii) A copy of the FDA's summary of the IOL's safety and 
effectiveness.
    (iii) A copy of the labeling claims of specific clinical advantages 
approved by the FDA for the IOL.
    (iv) A copy of the IOL's original FDA approval notification.
    (v) Reports of modifications made subsequent to original FDA 
approval.
    (vi) Indications and contraindications for use of the IOL.
    (vii) Epidemiological data indicating demand for the IOL.
    (viii) Other information that HCFA finds necessary for 
identification of the IOL.
    (2) IOL costs. To enable HCFA to review the appropriateness of the 
payment amount provided under section 1833(i)(2)(A)(iii) of the Act 
with regard to the IOL, the following documented evidence of the cost 
of the IOL and the manufacturer's investment in the IOL is required:
    (i) The manufacturer's current list price for the IOL and a history 
of the IOL's pricing since FDA approval was obtained.
    (ii) Manufacturing costs of the IOL relative to the costs of 
manufacturing other approved IOLs.
    (iii) Research and development costs incurred to create the IOL, 
using research and development costs of other FDA-approved IOLs for 
purposes of comparison.
    (iv) Costs incurred to conduct clinical trials for the purpose of 
demonstrating for FDA approval the clinical superiority of the IOL 
relative to the costs incurred to conduct clinical trials for other 
approved IOLs.
    (v) Sales and revenue history of the IOL, and sales and revenues 
projected for the IOL if a payment adjustment were approved by HCFA.
    (vi) Names of purchasers of the IOL.
    (vii) Other information HCFA finds necessary for making a 
determination.
    (b) Confidential information. To the extent that information 
received from an IOL manufacturer can reasonably be characterized as a 
trade secret or as privileged or confidential commercial or financial 
information, Exemption 4 of the Freedom of Information Act (5 U.S.C. 
552(b)(4)) and, with respect to trade secrets, the Trade Secrets Act 
(18 U.S.C. 1905), allow HCFA to maintain the confidentiality of the 
information and to protect it from disclosure not otherwise authorized 
or required by Federal law.


Sec. 416.200  Application of the payment adjustment.

    (a) New technology subset. (1) HCFA designates a predominant 
characteristic of a new technology IOL that both sets it apart from 
other IOLs and links it with other similar IOLs with the same 
characteristic to establish within the ``class of new technology IOLs'' 
a specific subset of new technology.
    (2) Each subset is recognized for purposes of this subpart as 
belonging to the class of new technology IOLs for a period of 5 years, 
effective beginning the date that the first IOL that defines the subset 
is identified.
    (3) During the fifth year following the date that the first IOL is 
designated as belonging to the subset, requests to review IOLs that 
would be considered part of the subset that expires at the end of the 
year are not considered.
    (4) Beginning on the sixth anniversary date of the effective date 
of the recognition of a subset, payment adjustments applicable to IOLs 
in that subset cease for all IOLs in that subset and payment reverts to 
the payment rate in effect at that time for IOLs under section 
1833(i)(2)(A)(iii) of the Act.
    (b) Duration of payment adjustment. (1) Any single model of IOL for 
which HCFA determines that a payment adjustment is appropriate receives 
the payment adjustment for a period of 2 years.
    (2) On the second anniversary date of implementation of a payment 
adjustment approved for the IOL under the provisions of this subpart, 
payment for the IOL reverts to the IOL payment rate in effect at that 
time under section 1833(i)(2)(A)(iii) of the Act.
    (c) Similarity of payment adjustment. All IOLs included in the same 
subset of new technology IOLs and for which HCFA determines a payment 
adjustment is appropriate receive the same payment adjustment.
    (d) Basis for payment. (1) In order for HCFA to consider an IOL for 
a payment

[[Page 46707]]

adjustment under this subpart, an interested party must submit timely a 
request for review prepared in accordance with the requirements in 
Sec. 416.195, and the IOL must be included in the list of requests for 
review that is published annually in the Federal Register in accordance 
with the process described in Sec. 416.185.
    (2) In order for HCFA to make an IOL payment adjustment under this 
subpart, the IOL for which the adjustment is approved must be 
identified in the list of determinations HCFA publishes in the Federal 
Register 125 days after publication of the list of requests for review.
    (i) HCFA assigns a unique billing code to each IOL for which it 
determines a payment adjustment is appropriate.
    (ii) Using the billing code assigned to an IOL for which HCFA 
determines a payment adjustment is appropriate under this subpart in 
order to bill for a different IOL constitutes fraud.

(Sections 1832(a)(2)(F)(i) and 1833(i)(2)(a) of the Social Security 
Act (42 U.S.C. 1395k(a)(2)(F)(i) and 1395l(i)(2)(a)))

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: January 17, 1997.
Bruce C. Vladeck,
Administrator, Health Care
Financing Administration.
    Dated: March 10, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-23380 Filed 9-3-97; 8:45 am]
BILLING CODE 4120-01-P


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