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DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 405, 410, 412, 419, 475, 476, 486, and 495 

[CMS-1601-FC] 

RIN 0938-AR54 

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 

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

ACTION: Final rule with comment period and final rules. 

SUMMARY: This final rule with comment period revises 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 final rule with comment period, we describe the 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 final rule with comment period 

updates and refines the requirements for the Hospital Outpatient Quality Reporting 

(OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Hospital ValueBased Purchasing (VBP) Program. 
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 In the final rules in this document, we are finalizing 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: Effective Dates: The final rule with comment period and final rules in 

this document are effective on January 1, 2014, with the exception of 42 CFR 412.167; 

42 CFR 486.316 and 486.318; 42 CFR 475.1 and 475.100 through 475.107; and 42 CFR 

495.4 and 495.104, which are effective on [insert 60 days from date of display at the 

Office of the Federal Register]. 

 Implementation Date: The implementation date for the policies specified under 

section II.A.2.e. of the final rule with comment period relating to comprehensive 

Ambulatory Payment Classification (APC) groups is January 1, 2015. 

 Comment Period: We will consider comments on the payment classification 

assigned to HCPCS codes identified in Addenda B, AA, and BB of this final rule with 

comment period with the “NI” comment indicator, and on other areas specified 

throughout this rule, received at one of the addresses provided in the ADDRESSES 

section no later than 5 p.m. EST on [Insert 60 days from date of display at the Office 

of the Federal Register]. 

 Application Deadline—New Class of New Technology Intraocular Lenses: 

Request for review of applications for a new class of new technology intraocular lenses 

must be received by 5 p.m. EST on March 3, 2014. 
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ADDRESSES: In commenting, please refer to file code CMS-1601-FC. 

Because of staff and resource limitations, we cannot accept comments by facsimile 

(FAX) transmission. 

 You may submit comments in one of four ways (no duplicates, please): 

 1. Electronically. You may (and we encourage you to) submit electronic 

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

under the “submit a comment” tab. 

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

ONLY: 

Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-1601-FC, 

 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-FC, 

 Mail Stop C4-26-05, 
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 7500 Security Boulevard, 

 Baltimore, MD 21244-1850. 

 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your 

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

addresses: 

 a. For delivery in Washington, DC— 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, S.W., 

 Washington, DC 20201. 

 (Because access to the interior of the Hubert H. Humphrey Building is not readily 

available to persons without Federal Government identification, commenters are 

encouraged to leave their comments in the CMS drop slots located in the main lobby of 

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. 
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 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. 

 Applications for a new class of new technology intraocular lenses: Requests for 

review of applications for a new class of new technology intraocular lenses must be sent 

by regular mail to: ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, 

Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 

21244-1850. 

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, platelet rich plasma, 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). 
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 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. 
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 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 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 provider-based 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 
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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 are published and available only on the CMS 

Web site. The Addenda relating to the OPPS are available at: 
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http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. The Addenda relating to the ASC payment 

system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/index.html.

Alphabetical List of Acronyms 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, Pub. L. 105-33 

BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance 

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

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 

Act of 2000, Pub. L. 106-554 

BLS Bureau of Labor Statistics 

CAH Critical access hospital 

CAP Competitive Acquisition Program 

CASPER Certification and Survey Provider Enhanced Reporting 

CAUTI Catheter associated urinary tract infection 
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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, Pub. L. 109-171 
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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, Pub. L. 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, Pub. L. 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, 

Pub. L. 104-191 
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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 
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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 the Tax Relief Health Care Act of 2006, Pub. L. 109-432 

MIPPA Medicare Improvements for Patients and Providers Act of 2008, 

Pub. L. 110-275 

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 

2003, Pub. L. 108-173 

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

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

MPFS Medicare Physician Fee Schedule 

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 
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OBRA Omnibus Budget Reconciliation Act of 1996, Pub. L. 99-509 

OIG [HHS] Office of the Inspector General 

OMB Office of Management and Budget 

OPD [Hospital] Outpatient Department 

OPO Organ Procurement Organization 

OPPS [Hospital] Outpatient Prospective Payment System 

OPSF Outpatient Provider-Specific File 

OQR [Hospital] Outpatient Quality Reporting 

OT Occupational therapy 

PBD Provider-Based 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], Pub. L. 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 
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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 Document 

 1. Purpose 

 2. Summary of the Major Provisions 
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 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 2014 OPPS/ASC Proposed 

Rule 

 G. Public Comments Received on the CY 2013 OPPS/ASC Final Rule with 

Comment Period 

 II. Updates Affecting OPPS Payments 

 A. Recalibration of APC Relative Payment Weights 

 1. Database Construction 

 a. Database Source and Methodology 

 b. Use of Single and Multiple Procedure Claims 

 c. Calculation and Use of Cost-to-Charge Ratios (CCRs) 

 2. Data Development Process and Calculation of Costs Used for Ratesetting 

 a. Claims Preparation 
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 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 Panel Regarding Data Development 

 d. Calculation of Single Procedure APC Criteria-Based Costs 

 (1) Device-Dependent APCs 

 (2) Blood and Blood Products 

 (3) Brachytherapy Source Payment 

 e. Establishment of Comprehensive APCs 

 (1) Definitions and General Principles 

 (2) Comprehensive APCs for Device-Dependent Services 

 f. 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) 
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 (6) Cardiac Resynchronization Therapy Composite APC (APC 0108) 

 3. Changes to Packaged Items and Services 

 a. Summary of CY 2014 Final Packaging Policies 

b. Background 

 c. Basis for New Packaging Policies for CY 2014 

d. 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 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 

 e. Clarification Regarding Supplies That Are Packaged in the OPPS 

 f. 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 

 4. Calculation of OPPS Scaled Payment Weights 

 B. Conversion Factor Update 

 C. Wage Index Changes 
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 D. Statewide Average Default CCRs 

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

Act 

 F. OPPS Payment to Certain Cancer Hospitals Described by Section 

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

 1. Background 

 2. Payment Adjustment for Certain Cancer Hospitals for CY 2014 

 G. Hospital Outpatient Outlier Payments 

 1. Background 

 2. Proposed Outlier Calculation 

 3. Final Outlier Calculation 

 H. Calculation of an Adjusted Medicare Payment from the National Unadjusted 

Medicare Payment 

 I. Beneficiary Copayments 

 1. Background 

 2. OPPS Copayment Policy 

 3. Calculation of an Adjusted Copayment Amount for an APC Group 

III. OPPS Ambulatory Payment Classification (APC) Group Policies 

 A. OPPS Treatment of New CPT and Level II HCPCS Codes 

 1. Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective 

April 1, 2013 and July 1, 2013 for Which We Solicited Public Comments in the CY 2014 

OPPS/ASC Proposed Rule 
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 2. 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 Are Soliciting Public Comments in this CY 2014 

OPPS/ASC Final Rule with Comment Period 

 B. OPPS Changes--Variations within APCs 

 1. Background 

 2. Application of the 2 Times Rule 

 3. Exceptions to the 2 Times Rule 

 C. OPPS APC-Specific Policies 

 1. Cardiovascular and Vascular Services 

 a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263) 

 b. Subcutaneous Defibrillator (APC 0107) 

 c. Thrombolytic Therapy (APC 0621) 

 d. Vascular Ligation (APCs 0091 and 0092) 

 2. Gastrointestinal Services 

 a. Fecal Microbiota Transplantation (APC 0340) 

 b. Transoral Incisionless Fundoplication (APC 0422) 

 3. Genitourinary Services 

 a. Percutaneous Renal Cryoablation (APC 0423) 

 b. Anoscopy with Directed Submucosal Injection (APC 0150) 

 4. Musculoskeletal Services 

 a. Arthroplasty (APC 0425) 

 b. Joint Stabilization (APC 0052) 
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 5. Nervous System Services 

 a. Chemodenervation (APCs 0161 and 0204) 

 b. Nerve Conduction Studies (APCs 0216 and 0218) 

 c. Parasympathetic Function and Sympathetic Function (APC 0215) 

 d. Epidural Lysis (APCs 0203 and 0207) 

 e. Cerebrospinal Shunt Reprogramming (APC 0692) 

 6. Ocular Services 

 a. Retinal Prosthesis (APC 0672) 

 b. Tear Film (APC 0230) 

 7. Imaging 

 a. Myocardial Sympathetic Innervation Imaging (APC 0398) 

 b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414) 

 8. Radiology Oncology 

 a. Intraoperative Radiation Therapy (IORT) Related Services (APCs 0028 and 

0065) 

 b. Proton Beam Therapy (APCs 0664 and 0667) 

 c. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067) 

 9. Respiratory Services 

 a. Bronchial Thermoplasty (APC 0415) 

 b. Direct Laryngoscopy (APC 0074) 

 c. Pulmonary Rehabilitation Services (APC 0077) 

 10. Other Services 
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 a. Balloon Sinus Dilation (APCs 0074 and 0075) 

 b. Radiofrequency Ablation of Uterine Fibroids (APC 0174) 

 c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065) 

 d. Flow Cytometry (APC 0443) 

 e. Hormone Pellet Implant (APC 0420) 

 f. Peyronie Disease Injection Procedure (APC 0164) 

 g. Negative Pressure Wound Therapy (NPWT) (APC 0016) 

 h. Platelet Rich Plasma (PRP) (APC 0186) 

 i. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium 

(HEU) Sources (APC 1442) 

IV. OPPS Payment for Devices 

 A. Pass-Through Payments for Devices 

 1. Expiration of Transitional Pass-Through Payments for Certain Devices 

 a. Background 

 b. CY 2014 Policy 

 2. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs 

Packaged into APC Groups 

 a. Background 

 b. CY 2014 Policy 

 3. Changes to Device Pass-Through Criteria: Integral and Subordinate Criterion 

 B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit 

Devices 
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 1. Background 

 2. Policy for CY 2014 

V. OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals 

 A. OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, 

Biologicals, and Radiopharmaceuticals 

 1. Background 

 2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2013 

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

Pass-Through Status in CY 2014 

 4. 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 When Used in a Surgical Procedure to Offset 

Costs Packaged into APC Groups 

 a. Background 

 b. Payment Offset Policy for Diagnostic Radiopharmaceuticals 

 c. Payment Offset Policy for Contrast Agents 

 d. Payment Offset Policy for Products Packaged According to the 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 When Used in a Surgical Procedure 
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 B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals without 

Pass-Through Status 

 1. Background 

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

Radiopharmaceuticals 

 a. Background 

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

Certain Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals (“ThresholdPackaged Drugs”) 

 c. Packaging Determination for HCPCS Codes That Describe the Same Drug or 

Biological But Different Dosages 

 3. Payment for Drugs and Biologicals without Pass-Through Status That Are Not 

Packaged 

 a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other 

Separately Payable and Packaged Drugs and Biologicals 

 b. CY 2014 Payment Policy 

 4. Payment Policy for Therapeutic Radiopharmaceuticals 

 5. Payment for Blood Clotting Factors 

 6. 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 
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VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, 

Radiopharmaceuticals, and Devices 

 A. Background 

 B. Estimate of Pass-Through Spending 

VII. OPPS Payment for Hospital Outpatient Visits 

 A. Background 

 B. Payment for Hospital Outpatient Clinic and Emergency Department Visits 

 C. Payment for Critical Care Services 

VIII. Payment for Partial Hospitalization Services 

 A. Background 

 B. PHP APC Update for CY 2014 

 C. Discussion of Possible Future Initiatives, Request for Public Comments, and 

Summary of Public Comments Received 

 D. Separate Threshold for Outlier Payments to CMHCs 

IX. Procedures That Will Be Paid Only as Inpatient Procedures 

 A. Background 

 B. Changes to the Inpatient List 

X. Nonrecurring Policy Changes 

 A. Supervision of Hospital 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 
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 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. Proposed and Final Policy 

 4. Technical Correction 

 D. Collecting Data on Services Furnished in Off-Campus Provider-Based 

Departments 

XI. CY 2014 OPPS Payment Status and Comment Indicators 

 A. CY 2014 OPPS Payment Status Indicator Definitions 

 B. CY 2014 Comment Indicator Definitions 

XII. 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. Treatment of New Codes 

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

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

Implemented in April 2013 and July 2013 for Which We Solicited Public Comments in 

the CY 2014 OPPS/ASC Proposed Rule 

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

Codes for Which We Are Soliciting Public Comments in This CY 2014 OPPS/ASC Final 

Rule with Comment Period 

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

Ancillary Services 

 1. Covered Surgical Procedures 

 a. Additions to the List of ASC Covered Surgical Procedures 

 b. Covered Surgical Procedures Designated as Office-Based 

 (1) Background 

 (2) Changes for CY 2014 to Covered Surgical Procedures Designated as 

Office-Based 

 c. ASC Covered Surgical Procedures Designated as Device-Intensive 

 (1) Background 

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

Device-Intensive for CY 2014 

 d. Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit 

Devices 

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

for CY 2014 
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 2. Covered Ancillary Services 

 D. ASC Payment for Covered Surgical Procedures and Covered Ancillary 

Services 

 1. ASC Payment for Covered Surgical Procedures 

 a. Background 

 b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2014 

 c. Waiver of Coinsurance and Deductible for Certain Preventive Services 

 d. Payment for Cardiac Resynchronization Therapy Services 

 e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite 

 2. Payment for Covered Ancillary Services 

 a. Background 

 b. 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 2015 

 3. Payment Adjustment 

 4. Announcement of CY 2014 Deadline for Submitting Requests for CMS 

Review of Applications for a New Class of NTIOLs 

 F. ASC Payment and Comment Indicators 

 1. Background 

 2. ASC Payment and Comment Indicators 

 G. Calculation of the ASC Conversion Factor and the ASC Payment Rates 
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 1. Background 

 2. 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 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. Removal of Two Chart-Abstracted Measures from the Hospital OQR Program 

 a. Removal of OP-19: Transition Record with Specified Elements Received by 

Discharged ED Patients 
30 

 b. 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. 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/Polyp Surveillance: Appropriate Follow-up Interval for Normal 

Colonoscopy in Average Risk Patients (NQF #0658) 

 4. Endoscopy/Polyp 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. Payment Reduction for Hospitals That Fail to Meet the Hospital OQR 

Program Requirements for the CY 2014 Payment Update 

 1. Background 

 2. Reporting Ratio Application and Associated Adjustment Policy for CY 2014 

 H. Requirements for Reporting of Hospital OQR Data for the CY 2015 Payment 

Determination and Subsequent Years 
31 

 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 Changes on Data Submission for CY 2015 and CY 2016 Payment 

Determinations and Subsequent Years 

 c. General Requirements 

 d. Chart-Abstracted Measure Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

 e. Claims-Based Measure Data Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

 f. Data Submission Requirements for Measure Data Submitted via Web-Based 

Tool for the CY 2016 Payment Determination and Subsequent Years 

 g. 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 
32 

 b. Targeting Criteria for Data Validation Selection for the CY 2015 Payment 

Determination and 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. 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. Additional CMS Appeals Review Process 

 1. Statutory Basis 

 2. Independent CMS Review 

 C. Performance and Baseline Periods for Certain Outcome Measures for the FY 

2016 Hospital VBP Program 

XV. Requirements for the Ambulatory Surgical Centers Quality Reporting (ASCQR) 

Program 

 A. Background 

 1. Overview 

 2. Statutory History of the ASC Quality Reporting (ASCQR) Program 
33 

 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. 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/Polyp Surveillance: Appropriate Follow-Up for Normal 

Colonoscopy in Average Risk Patients (NQR #0658) 

 c. Endoscopy/Polyp 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 Each Payment Determination Year 

 D. Administrative Requirements 
34 

 1. Requirements Regarding QualityNet Account and Security Administrator 

 a. Background for the CY 2014 and CY 2015 Payment Determinations 

 b. Requirements for the CY 2016 Payment Determination and Subsequent Years 

 2. Requirements Regarding Participation Status 

 a. Background for the CY 2014 Payment Determination and Subsequent Years 

 b. 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. 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. Requirements for the CY 2016 Payment Determination and Subsequent Years 

 5. Requirements for Data Submitted Via a CMS Online Data Submission Tool 

 a. Background for the CY 2015 Payment Determination and Subsequent Years 

 b. Requirements for the CY 2016 Payment Determination and Subsequent Years 

for Measures Currently Finalized 

 c. Requirements for the CY 2016 Payment Determination and Subsequent Years 

for New Measures with Data Submission Via a CMS Web-Based Tool 

 6. 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 

 b. Requirements for the CY 2016 Payment Determination 
35 

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

 8. Extraordinary Circumstances Extensions or Waivers for the CY 2014 Payment 

Determination and Subsequent Years 

 a. Background 

 b. Additional Criterion for Extraordinary Circumstance Waiver or Extension for 

CY 2014 and Subsequent Years 

 9. ASCQR Program Reconsideration Procedures for the CY 2014 Payment 

Determination and Subsequent Years 

XVI. Final Rule: Changes to the Conditions for Coverage (CfCs) for Organ 

Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G) 

 A. Background 

 B. Regulatory Changes 

XVII. Final Rule: Revisions of the Quality Improvement Organization (QIO) 

Regulations 

 A. Legislative History 

 B. Basis for Proposals and Finalized Policies 

 C. Changes to the Nomenclature and Regulations under 42 CFR Parts 475 and 

476 

 1. Nomenclature Changes 

 2. Addition and Revision of Definitions 

 3. Scope and Applicability of Subpart C of Part 475 

 4. Eligibility Requirements for QIOs (§§ 475.101 through 475.106) 
36 

 a. Eligibility to be Awarded a QIO Contract (§ 475.101) 

 b. Eligibility Requirements for QIOs to Perform Case Reviews and Quality 

Improvement Initiatives (§ 475.102 and § 475.103) 

 c. Prohibitions on Eligibility as a QIO (§§ 475.105 and 475.106) 

 5. QIO Contract Awards (§ 475.107) 

XVIII. Final Rule: 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: Final 

Rule 

 A. Matters Not Subject to Administrative or Judicial Review (§ 405.1804) 

 1. Background 

 2. Technical Conforming Change 

 B. Clarification of Reopening of Predicate Facts in Intermediary Determinations 

of Provider Reimbursement (§ 405.1885) 
37 

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. Changes to the Outcome Measure Requirement for OPOs 

 2. Changes to the Medicare Fee-for-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 Payment 

Determinations and subsequent Years 

 b. Chart-Abstracted Measures for the CY 2016 Payment Determination and 

Subsequent Years 

 c. Web-Based Measures Submitted Directly to CMS for the CY 2016 Payment 

Determination and Subsequent Years 

 d. NHSN HAI Measure for the CY 2016 Payment Determination and Subsequent 

Years 

 e. Hospital OQR Program Validation Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

 f. Hospital OQR Program Reconsideration and Appeals Procedures 

 2. ASCQR Program Requirements 

 a. Claims-Based Measures for the CY 2014 Payment Determination 
38 

 b. Claims-Based and Web-Based Measures for the CY 2015 and CY 2016 

Payment Determinations 

 c. Program Administrative Requirements and QualityNet Accounts; 

Extraordinary Circumstance and Extension or Waiver 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 OPPS and ASC Payment Provisions 

 4. Detailed Economic Analyses 

 a. Estimated Effects of Final OPPS Changes in this Final Rule With Comment 

Period 

 (1) Limitations of Our Analysis 

 (2) Estimated Effects of OPPS Changes on Hospitals 

 (3) Estimated Effects of OPPS Changes on CMHCs 

 (4) Estimated Effect of OPPS Changes on Beneficiaries 

 (5) Estimated Effects of OPPS Changes on Other Providers 

 (6) Estimated Effects of OPPS Changes on the Medicare and Medicaid Programs 

 (7) Alternative OPPS Policies Considered 
39 

 b. Estimated Effects of CY2014 ASC Payment System Final Policies 

 (1) Limitations of Our Analysis 

 (2) Estimated Effects of CY2014ASC Payment System Final Policies on ASCs 

 (3) Estimated Effects of ASC Payment System Final Policies on Beneficiaries 

 (4) Alternative ASC Payment Policies Considered 

 c. Accounting Statements and Tables 

 d. Effects of Requirements for the Hospital OQR Program 

 e. Effects of CY2014 Policies for the ASCQR Program 

 f. Effects of Changes to the CfCs for OPOs Relating to the Outcome Measure 

Requirement for Recertification 

 g. Effects of Revisions of the QIO Regulations 

 h. Effects of Revised Policies Regarding Medicare Fee-for-Service EHR 

Incentive Program 

 B. Regulatory Flexibility Act (RFA) Analysis 

 C. Unfunded Mandates Reform Act Analysis 

 D. Conclusion 

XXIV. Federalism Analysis 

XXV. Waiver of 60-Day Delay of Effective Date 

Regulation Text 

I. Summary and Background 

A. Executive Summary of This Document

1. Purpose 
40 

 In the final rule with comment period of this document, we are updating 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 final 

rule with comment period. In addition, the final rule with comment period updates and 

refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, 

the ASC Quality Reporting (ASCQR) Program, and the Hospital Value-Based 

Purchasing (VBP) Program. 

 In the final rules in this document, we are finalizing 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. 

 After publication of our annual proposed rule for CY 2014, we discovered that in 

applying our established and proposed methodologies to develop the CY 2014 proposed 

OPPS and ASC payment rates, specific cost estimation errors occurred in the OPPS 

modeling process. The errors resulting from the cost modeling used to develop the 

CY 2014 proposed OPPS payment rates were isolated to a few specific ambulatory 
41 

payment classifications (APCs). However, because the OPPS is a budget neutral 

payment system, there was a resulting impact on other proposed OPPS payment rates. In 

addition, because the ASC payment rates are based on the OPPS relative payment 

weights for the majority of items and services that are provided at ASCs, corrections to 

the proposed CY 2014 OPPS relative payment weights also had an impact on the 

proposed CY 2014 ASC relative payment weights and ASC payment rates. Therefore, 

we released corrected data files on August 28, 2013, and extended the comment period to 

September 16, 2013, on the technical corrections noted in the correcting document 

published in the Federal Register on September 6, 2013 (78 FR 54842). This final rule 

with comment period refers to the corrected OPPS and ASC information. 

2. Summary of the Major Provisions 

● OPPS Update: For CY 2014, we are increasing the payment rates under the 

OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.7 percent. 

This increase is based on the final hospital inpatient market basket percentage increase of 

2.5 percent for inpatient services paid under the hospital inpatient prospective payment 

system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.5 percentage 

points, and minus a 0.3 percentage point adjustment required by the Affordable Care Act. 

Under this final rule with comment period, we estimate that total payments for CY 2014, 

including beneficiary cost-sharing, to the approximately 4,100 facilities paid under the 

OPPS (including general acute care hospitals, children’s hospitals, cancer hospitals, and 

community mental health centers (CMHCs)), will be approximately $50.4 billion, an 
42 

increase of approximately $4.372 billion compared to CY 2013 payments, or $600 

million excluding our estimated changes in enrollment, utilization, and case-mix. 

 We are continuing 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 continuing 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 pass-through payment policy, and items paid at charges reduced to cost. 

● Cancer Hospital Payment Adjustment: For CY 2014, we are continuing our 

policy to provide additional payments to cancer hospitals so that the hospital’s 

payment-to-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 0.89 will be used to determine the 

CY 2014 cancer hospital payment adjustment to be paid at cost report settlement. That 

is, the payment amount associated with the cancer hospital payment adjustment will be 

the additional payment needed to result in a PCR equal to 0.89 for each cancer hospital. 

● Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2014, 

payment for the acquisition and pharmacy overhead costs of separately payable drugs and 
43 

biologicals that do not have pass-through status will be set at the statutory default of 

average sales price (ASP) plus 6 percent. 

● Packaging Policies: Beginning in CY 2014, we are unconditionally or 

conditionally packaging the following five categories of items and services and adding 

them to the list of OPPS packaged items and services in 42 CFR 419.2(b): 

 (1) Drugs, biologicals, and radiopharmaceuticals used in a diagnostic test or 

procedure; 

 (2) Drugs and biologicals when used as supplies in a surgical procedure; 

 (3) Certain clinical diagnostic laboratory tests; 

 (4) Procedures described by add-on codes; and 

 (5) Device removal procedures. 

 Further details are provided in section II.A.3. of this document. 

● Establishing Comprehensive APCs: In order to improve the accuracy and 

transparency of our payment for certain device-dependent services, we are finalizing our 

policy to establish 29 comprehensive APCs to prospectively pay for the most costly 

hospital outpatient device-dependent services, but we are delaying implementation of this 

policy until CY 2015. We have defined 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. For services that trigger a comprehensive APC payment, the 

comprehensive APC will treat all individually reported codes on the claim as representing 

components of the comprehensive service, resulting in a single prospective payment 

based on the cost of all individually reported codes on the claim. We will make a single 
44 

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. We also have modified our methodology to make larger payments for 

many complex and costly multiple device procedures. Due to our decision to delay 

implementation until CY 2015 for operational reasons, we are inviting comment on this 

section of the final rule. We have published tables in the rule to demonstrate how this 

policy would have been implemented in CY 2014, and we will be considering comments 

as we update the policy for CY 2015 to account for changes that may occur in the CY 

2013 claims data. 

● Payment of Hospital Outpatient Visits: For CY 2014, we are finalizing our 

proposal to replace the current five levels of visit codes for each clinic visit with a new 

alphanumeric Level II HCPCS code representing a single level of payment for clinic 

visits. We are finalizing our proposal to assign the new alphanumeric Level II HCPCS to 

newly created APC 0634 with CY 2014 OPPS payment rates based on the total mean 

costs of Level 1 through Level 5 clinic visit codes obtained from CY 2012 OPPS claims 

data. For CY 2014, we are not finalizing our proposal to replace the current five levels of 

visit codes for each Type A ED, and Type B ED visits with two new alphanumeric Level 

II HCPCS codes representing a single level of payment for two types of ED visits, 

respectively. 

● OPPS Nonrecurring Policy Changes: The enforcement instruction for the 

supervision of outpatient therapeutic services furnished in CAHs and small rural hospitals 

will expire at the end of CY 2013. In addition, we are amending the conditions of 
45 

payment for “incident to” hospital or CAH outpatient services (sometimes referred to as 

hospital or CAH “therapeutic” services) to explicitly require that individuals furnishing 

these services be in compliance with State law. In the CY 2014 OPPS/ASC proposed 

rule, we solicited public comments regarding a potential new claims or other data element 

that would indicate that the services were furnished in an off-campus provider-based 

department, which we discuss in this final rule with comment period. Finally, we refer 

readers to the CY 2014 Medicare Physician Fee Schedule (MPFS) final rule 

(CMS-1600-F) to review Medicare’s policies on application of the therapy caps and 

related provisions under section 1833(g) of the Act to physical therapy (PT), speechlanguage 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 increasing 

payment rates under the ASC payment system by 1.2 percent. This increase is based on a 

projected CPI-U update of 1.7 percent minus a multifactor productivity adjustment 

required by the Affordable Care Act that is projected to be 0.5 percent. Based on this 

update, we estimate that total payments to ASCs (including beneficiary cost-sharing and 

estimated changes in enrollment, utilization, and case-mix) for CY 2014 will be 

approximately $3.992 billion, an increase of approximately $143 million compared to 

estimated CY 2013 payments. 

● Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital 

OQR Program, we are adopting four new quality measures for the CY 2016 payment 

determination and subsequent years: three where aggregate data (numerators, 
46 

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 removing two measures and are codifying administrative 

procedures. 

● Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the 

ASCQR Program, we are adopting three new quality measures for the CY 2016 payment 

determination and subsequent years where data collection will begin in CY 2014. We are 

collecting aggregate data (numerators, denominators, and exclusions) on all ASC patients 

for these four chart-abstracted measures via an online Web-based tool located on a CMS 

Web page. We also are adopting, for the CY 2016 payment determination and 

subsequent years’ payment determinations, requirements for a QualityNet account and 

security administrator, facility participation, a minimum threshold and minimum volume 

for claims-based measures, and data collection and submission for new measures and for 

certain previously finalized measures. 

● Changes to Organ Procurement Organization ( OPO) Regulations. In section 

XVI. of this document, we are finalizing our proposals to modify the current requirement 

that OPOs meet all three outcome measures set forth in 42 CFR 486.318. Specifically, 

the final rule provides that an OPO must meet two out of the three outcome measures. 

This change to the outcome measures requirement will allow those OPOs that fail only 

one outcome measure to avoid automatic decertification in the 2014 recertification cycle. 

● Revisions to the Quality Improvement Organizations Regulations. We are 

updating the regulations at 42 CFR Parts 475 and 476 based on the recently enacted 
47 

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. 

The existing regulations at 42 CFR Part 475 include definitions and standards governing 

eligibility and the award of contracts to QIOs. In this final rule with comment period, we 

are finalizing 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 Parts 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. 

● Changes to the Medicare Fee-for-Service Electronic Health Record (EHR) 

Incentive Program. We are revising the regulations to provide a special method for 

making hospital-based determinations for 2014 only in the cases of those eligible 

professionals (EPs) who reassign their benefits to Method II CAHs. Previously, 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. Finalizing the adoption of our method for 2014 will allow us to begin 

making payments based on CAH II one year earlier than we would be able to do under 

existing regulations. We also are adopting a minor clarification to the regulations 
48 

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 final rule with comment period, we set forth 

a detailed analysis of the regulatory and federalism impacts that the changes will have on 

affected entities and beneficiaries. Key estimated impacts are described below. 

a. Impacts of the OPPS Update 

(1) Impacts of All OPPS Changes 

 Table 55 in section XXIII. of this final rule with comment period displays the 

distributional impact of all the 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 policies in this final rule will result in a 1.8 percent overall increase in OPPS 

payments to providers. We estimate that the increase in OPPS expenditures, including 

beneficiary cost-sharing, will 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 total OPPS 

payments, including beneficiary cost-sharing, will be $50.4 billion for CY 2014. 

 We estimated the isolated impact of our OPPS policies on CMHCs because 

CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the 

provider-specific structure that we adopted beginning in CY 2011 and basing payment 
49 

fully on the type of provider furnishing the service, we estimate a 1.8 percent increase in 

CY 2014 payments to CMHCs relative to their CY 2013 payments. 

(2) Impacts of Policies Other than Outpatient Laboratory Test Packaging 

 We estimate that our final policies other than packaging outpatient laboratory 

tests will have a less significant impact than we proposed for CY 2014, as several 

proposed policies were not finalized. These final policies include packaging drugs, 

biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic 

test or procedure (stress agents and Cysview), drugs and biologicals that function as 

supplies when used in a surgical procedure (skin substitutes), certain procedures 

described by add-on codes, and device removal procedures; new cost report data for 

estimating CT and MRI relative weights; and revisions to coding and APC structure for 

stereotactic radiosurgery. 

(3) Impacts of Packaging Outpatient Laboratory Tests 

 Packaging laboratory services modestly reduces payment to rural and major 

teaching hospitals, as they will no longer receive separate payment for common 

laboratory tests. 

(4) Impacts of the Updated Wage Indices 

 Adjustments to the wage indices other than the frontier State wage adjustment 

will not significantly affect most hospitals and CMHCs. The nonbudget neutral frontier 

wage index adjustment will result in payment increases to rural and urban hospitals in 

West North Central and Mountain States. 

(5) Impacts of the Rural Adjustment and the Cancer Hospital Payment Adjustment 
50 

 There are no significant impacts of our CY 2014 payment policies for hospitals 

that are eligible for the rural adjustment or for the cancer hospital payment adjustment. 

We are not making any change in policies for determining the rural and cancer hospital 

payment adjustments, and the adjustment amounts do not significantly impact the budget 

neutrality adjustments for these policies. 

(6) Impacts of the OPD Fee Schedule Increase Factor 

 We estimate that, for many hospitals, the application of the OPD fee schedule 

increase factor of 1.7 percent to the conversion factor for CY 2014 will mitigate the small 

negative impacts of the budget neutrality adjustments. While most classes of hospitals 

will receive an increase that is in line with the 1.7 percent overall increase after the 

update is applied to the budget neutrality adjustments, some hospitals will receive smaller 

but still generally positive overall increases. 

b. Impacts of the ASC Payment Update 

 For impact purposes, the procedures on the ASC list of covered surgical 

procedures are aggregated into surgical specialty groups using CPT and HCPCS code 

range definitions. The percentage change in estimated total payments by specialty groups 

under the CY 2014 payment rates compared to estimated CY 2013 payment rates ranges 

between -11 percent for ancillary items and services and 14 percent for respiratory 

system procedures. 

c. Impacts of the Hospital OQR Program 

 We do not expect our CY 2014 final policies to significantly affect the number of 

hospitals that do not receive a full annual payment update. 
51 

d. Impacts of the ASCQR Program 

 We do not expect our CY 2014 final 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 QIO Program Changes 

 We estimate the effects of the 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 and subsequently the 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.” 

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 
52 

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

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

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

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

for the OPPS are located at 42 CFR 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 
53 

December 23, 2011; the Middle Class Tax Relief and Job Creation Act of 2012 

(MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; and the American Taxpayer 

Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013. 

 Under the OPPS, we pay for hospital 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 final rule with comment period. Section 1833(t)(1)(B) of 

the Act provides for payment under the OPPS for hospital outpatient services designated 

by the Secretary (which includes partial hospitalization services furnished by 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 labor-related amount is 

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

locality in which the hospital or CMHC is located. 

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

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

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

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

highest median cost (or mean cost, if elected by the Secretary) for an item or service in 
54 

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 pass-through payments,” for at 

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

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

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

for which we lack sufficient 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 
55 

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

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

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

annual wellness visit providing personalized prevention plan services. The Secretary 

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 under the 

Clinical Laboratory Fee Schedule (CLFS); 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 final rule with comment period modifies 42 CFR 419.22 and 

includes in the OPPS some of these previously 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 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
56 

 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-ServicePayment/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 

Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-113, requires that 

we consult with an external advisory panel of experts to annually review the 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, 
57 

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 fulltime, 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 
58 

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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp#TopOfPage. 

3. Panel Meetings and Organizational Structure 

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

March 11, 2013 and August 26-27, 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 
59 

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 at the August 2013 

meeting that the subcommittees continue. We accepted this recommendation. 

 Discussions of the other recommendations made by the Panel at the March 2013 

and August 2013 Panel meetings 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 in Response to the CY 2014 OPPS/ASC Proposed Rule

 We received approximately 2,677 timely pieces of correspondence on the 

CY 2014 OPPS/ASC proposed rule that appeared in the Federal Register on 

July 19, 2013 (78 FR 43534) and the correcting document published in the Federal 

Register on September 6, 2013 (78 FR 54842). This final rule with comment period 

refers to the corrected information wherever applicable. We note that we received some 

public comments that were outside the scope of the proposed rule and that are not 

addressed in this final rule with comment period. Summaries of the public comments to 
60 

the proposed rule and the correcting document that are within the scope of the proposed 

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

period under the appropriate subject-matter headings. 

G. 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 are set forth in 

various sections of this final rule with comment period under the appropriate 

subject-matter headings.
61 

II. Updates Affecting OPPS Payments 

A. Recalibration of APC Relative Payment Weights

1. Database Construction 

a. Database Source and Methodology 

 Section 1833(t)(9)(A) of the Act requires that the Secretary 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43544), for the CY 2014 OPPS, 

we proposed 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 proposed to recalibrate the relative payment weights for each APC 

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

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

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

weights for CY 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 this final rule with comment period, for the purpose of recalibrating 

the final APC relative payment weights for CY 2014, we used approximately 158 million 
62 

final action claims (claims for which all disputes and adjustments have been resolved and 

payment has been made) for HOPD 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 the CY 2014 OPPS/ASC 

proposed rule and this final rule with comment period on the CMS Web site at: 

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

 Of the approximately 158 million final action claims for services provided in 

hospital outpatient settings used to calculate the CY 2014 OPPS payment rates for this 

final rule with comment period, approximately 125 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 125 million claims, 

approximately 6 million claims were not for services paid under the OPPS or were 

excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) 

or no HCPCS codes reported on the claim). From the remaining approximately 119 

million claims, we created approximately 125 million single records, of which 

approximately 80 million were “pseudo” single or “single session” claims (created from 

approximately 31 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 

124 million single bills for ratesetting. As described in section II.A.2. of this final rule 

with comment period, our data development process is designed with the goal of using 
63 

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

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

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

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

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

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

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

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

for ratesetting purposes. 

 The final APC relative weights and payments for CY 2014 in Addenda A and B 

to this final rule with comment period (which are available via the Internet on the CMS 

Web site) were calculated using claims from CY 2012 that were processed through 

June 30, 2013. While prior to CY 2013 we had 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 proposed and are using 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 
64 

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. Use of Single and Multiple Procedure Claims 

 For CY 2014, in general, as we proposed, we are continuing 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 continuing 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 
65 

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 multiple imaging 

services through CY 2013, and as we proposed, we are continuing this policy for 

CY 2014. In addition, as we proposed, we are further expanding our packaging policies 

for CY 2014. We refer readers to section II.A.2.f. of this final rule with comment period 

for a discussion of the use of claims in modeling the costs for composite APCs and to 

section II.A.3. of this final rule with comment period for a discussion of our packaging 

policies for CY 2014. 

 As we proposed, we are continuing 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 final rule with comment period, approximately 80 million 

“pseudo” single procedure claims, including multiple imaging composite “single session” 

bills (we refer readers to section II.A.2.f.(5) of this final rule with comment period for 
66 

further discussion), to add to the approximately 43 million “natural” single procedure 

claims. 

 For CY 2014, we proposed to bypass 179 HCPCS codes that were identified in 

Addendum N to the CY 2014 OPPS/ASC proposed rule (which is available via the 

Internet on the CMS Web site). Since the inception of the bypass list, which is the list of 

codes to be bypassed to convert multiple 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 proposed to continue to bypass all of the HCPCS codes on the CY 2013 

OPPS bypass list, with the exception of HCPCS codes that we proposed to delete for 

CY 2014, which were listed in Table 1 of the proposed rule (78 FR 43546). We also 

proposed 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 proposed to remove from the CY 2014 bypass list are 

affected by the CY 2014 packaging final policy, discussed in section II.A.3. of this final 

rule with comment period. In addition, we proposed to add to the bypass list for 
67 

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 final policy to continue to develop 

OPPS relative payment weights based on geometric mean costs, we also proposed 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) was open to public comment in the CY 2014 OPPS/ASC proposed rule. Because 

we must make some assumptions about packaging in the multiple procedure claims in 

order to assess a HCPCS code for addition to the bypass list, we assumed that the 

representation of packaging on “natural” single procedure claims for any given code is 

comparable to packaging for that code in the multiple procedure claims. As we proposed, 

the 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. 
68 

● 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 proposed 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 proposed 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 proposed for CY 2014 to continue to update the 

packaged cost threshold by the market basket increase. By applying the final CY 2013 
69 

market basket increase of 1.8 percent to the prior nonrounded dollar threshold of $53.76 

(77 FR 68221), we determined that the threshold remains for CY 2014 at $55 ($54.73 

rounded to $55, the nearest $5 increment). Therefore, we proposed 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 proposed to continue to include on the bypass list HCPCS codes 

that CMS medical advisors believe have minimal associated packaging based on their 

clinical assessment of the complete CY 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 proposed 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 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 
70 

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 final rule 

with comment period for further discussion of the treatment of “overlap bypass codes.”) 

This process also created multiple imaging composite “single session” bills that could be 

used for calculating composite APC costs. “Overlap bypass codes” that are members of 

the multiple imaging composite APCs are identified by asterisks (*) in Addendum N to 

this final rule with comment period (which is available via the Internet on the CMS Web 

site). 

 Comment: One commenter supported the CY 2014 proposal to remove certain 

codes from the bypass list, in particular for the anatomic pathology procedures, 

suggesting that the bypass list undervalues codes, and artificially lowers their estimated 

costs, as evidenced by the estimated increase in payment for some of those services in the 

proposed CY 2014 OPPS. 

 Response: We appreciate the commenter’s support. The bypass list process is 

used to extract more data from claims that would otherwise be unusable. We use a 
71 

variety of information in identifying codes that could be potentially added to the bypass 

list each year, including codes selected based on the empirical criteria, CMS medical 

advisor recommendations, and commenter requests. In doing so, we attempt to ensure 

that the amount of packaged cost being redistributed as a result of the process is limited. 

 As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43545 through 

43546), we proposed to remove the bypass codes listed in Table 1 of the proposed rule, 

several of which were affected by the CY 2014 proposed packaging policy. Codes that 

would not be separately paid in the prospective year, whether because of prospective 

packaging policies or deletions prior to the claims year, would not be appropriately 

applied to the bypass process. Bypassing packaged codes would potentially remove costs 

that would otherwise be used in calculating payment weights for other separately payable 

procedures, which would be inappropriate. We note that OPPS payment rates may 

fluctuate from year to year based on a variety of other factors, including updated data, 

APC recalibration, and increased packaging. 

 Comment: Several commenters believed that an inconsistency existed in the 

application of the bypass policy and the E&M codes. They noted that visit codes 99211 

and 99215 were not included on the proposed CY 2014 OPPS bypass list, and that 

because those codes were part of the proposed new visit APC 0634 (Hospital Clinic 

Visits), which also would be used in calculating the OPPS relative payment weights, an 

error had occurred. 

 Response: We acknowledge that the proposed CY 2014 OPPS bypass list did not 

include several of the E&M codes. With the exception of CPT code 99205, which we 
72 

proposed to add to the CY 2014 OPPS bypass list, the other visit codes already had been 

on the bypass list in prior years based on the empirical criteria previously described. 

Applying those empirical criteria would continue to exclude the remaining E&M codes 

from the bypass list. Therefore, we do not believe that those exclusions are an error. 

While we recognize that there are interactions between the visits policy discussed in 

section VII. of this final rule with comment period and the bypass process to derive more 

information, those interactions allow for policy interpretations based on the individual 

rules and goals being applied. In developing the proposed CY 2014 OPPS bypass list, we 

tried to retain the principles and guidelines we have used in the past while 

accommodating other proposals where they might interact, such as with the CY 2014 

OPPS proposed packaging policy. We appreciate the meaningful policy comments that 

stakeholders provide, especially where these policy intersections occur. We will continue 

to review the codes on the bypass list and their appropriateness, especially in the context 

of the packaging policies described in section II.A.3. of this final rule with comment 

period. 

 We note that while we proposed that the new CY 2014 visit APC 0634 would be 

the new base APC on which the scaled weights would be calculated, it was selected as a 

baseline because clinic visits are one of the most frequently performed services in the 

hospital outpatient setting, similar to APCs 0606 and 0601 in prior years. However, 

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 the weights are scaled 

for budget neutrality. Therefore, any potential miscalculations or policy issues related to 
73 

an APC would generally be concentrated in those APCs because, for scaling purposes, it 

would be similar to selecting any number as a baseline, which would later be budget 

neutralized through a weight scaler. The CY 2014 OPPS weight scaler is discussed in 

section II.A.4. of this final rule with comment period. 

 Comment: One commenter noted that many of the codes on the bypass list may 

no longer be appropriate because the proposed CY 2014 packaging policy would 

potentially cause many of the natural single major claims, to which CMS applies the 

empirical criteria, to exceed the packaged cost thresholds. 

 Response: We appreciate the issue that the commenter has raised regarding the 

application of the bypass list and its interaction with our proposed CY 2014 policies. In 

prior years, we generally continued bypassing codes that were on the previous year’s 

bypass list under the assumption that packaging, billing, and clinical patterns would 

generally remain similar from year to year. As the commenter noted, under the proposed 

CY 2014 OPPS packaging policies, the data on which we identify codes potentially 

added to the bypass list may change. We will continue to examine the cost patterns for 

codes which may be appropriately added or removed from the bypass list. 

 After consideration of the public comments we received, we are adopting as final 

the proposed “pseudo” single claims process. As discussed earlier in this section, there 

are interactions between the application of a bypass list and various other OPPS payment 

policies. As a result of modifications to the packaging policies described in section III. of 

this final rule with comment period, we are adding codes that we had originally proposed 

to remove from the CY 2014 bypass list back on the CY 2014 final OPPS bypass list. 
74 

Addendum N to this final rule with comment period (which is available via the Internet 

on the CMS Web site) includes the 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 CY 2012 and used for 

billing but were deleted for CY 2013. We retained these deleted bypass codes on the 

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 multiple imaging composite APCs are identified by 

asterisks (*) in the third column of Addendum N to this final rule with comment period. 

HCPCS codes that we are adding for CY 2014 are identified by asterisks (*) in the fourth 

column of Addendum N. 

 Table 1 of the proposed rule contained the list of codes that we proposed to 

remove from the CY 2014 bypass list for CY 2014 (78 FR 43546). Table 1 below 

contains the list of codes that we are removing from the final 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 CY 2014 OPPS because these codes are not used for ratesetting through the bypass 

process. The list of codes for removal from the bypass list includes those that will be 

affected by the CY 2014 OPPS packaging policy described in section II.A.3. of this final 

rule with comment period. 
75 

TABLE 1.—HCPCS CODES REMOVED FROM THE CY 2014 BYPASS LIST

HCPCS 

Code HCPCS Short Descriptor 

17003 Destruct premalg les 2-14 

88185 Flowcytometry/tc add-on 

88311 Decalcify tissue 

88314 Histochemical stains add-on 

90472 Immunization admin each add 

90474 Immune admin oral/nasal addl 

96371 Sc ther infusion reset pump 

c. Calculation and Use of Cost-to-Charge Ratios (CCRs) 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43547), we proposed to 

continue to use the hospital-specific overall ancillary and departmental cost-to-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 were based, we calculated hospital-specific overall ancillary 

CCRs and hospital-specific departmental CCRs for each hospital for 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 code-to-cost 

center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges 

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

on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. 
76 

 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 final rule with comment period and 

which has been our standard policy since the CY 2005 OPPS. 

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

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

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

outpatient charges by the volume of outpatient services furnished by the hospital. We 

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 
77 

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 hospital-specific data 

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

available cost report data, which, in most cases, were from cost reports with cost 

reporting periods beginning in CY 2011. For the proposed rule, we used the most 

recently submitted cost reports to calculate the CCRs to be used to calculate costs for the 

proposed CY 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 proposed 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 
78 

widely varying costs in the same cost center. This issue was evaluated in a report by the 

Research Triangle Institute, International (RTI). The RTI final report can be found on 

RTI’s Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-

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,” a summary of public comments received, and our responses to those public 

comments, we refer readers to the FY 2009 IPPS final rule. 
79 

 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, as we proposed, we are continuing 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 these new cost 

centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the 

FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the 

costs and charges of CT scans, MRIs, and 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 hospitals to report separately the 

costs and charges for those services and in order for CMS to calculate unique CCRs to 
80 

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 used to estimate costs in the 

CY 2014 OPPS ratesetting process, as discussed in the CY 2014 OPPS/ASC proposed 

rule (78 FR 43549), 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 believed that there was 

a sufficient amount of data in the Form CMS 2552-10 cost reports from which to 

generate a meaningful analysis of the impact on CCRs associated with using the new 

MRI, CT, and cardiac catheterization cost centers. We provided the data analyses in 

Tables 2 and 3 of the proposed rule (and are republishing them below) demonstrating the 

changes as a result of including the distinct 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 

CMS-2552-96 

CCRs only 

Using Form 

CMS-2552-96 

and Form 

CMS-2552-10 

CCRs 

Cardiology 0.2915 0.5112

Cardiac Catheterization * 0.1685 0.1590
81 

Calculated CCR 

“New” 

Standard 

Cost 

Center 

Using Form 

CMS-2552-96 

CCRs only 

Using Form 

CMS-2552-96 

and Form 

CMS-2552-10 

CCRs 

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 FORM CMS-2552-10 COST REPORTS 

APC APC Descriptor 

Percentage 

Change in 

Estimated 

Cost 

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 -14.9%
82 

APC APC Descriptor 

Percentage 

Change in 

Estimated 

Cost 

Angiography with Contrast 

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%

 In our CY 2014 OPPS/ASC proposed rule discussion, we noted that the estimated 

changes in geometric mean estimated APC cost of using data from the new standard cost 

centers for CT scans and MRIs appeared consistent with RTI’s analysis of cost report and 

claims data in the July 2008 final report (pages 5 and 6). RTI concludes that “in hospitals 

that aggregate data for CT scanning, MRI, or 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 noted that there were limited additional impacts 

in the implantable device-related APCs from adopting the new cost report form 
83 

CMS 2552-10 because we had used data from the standard cost center for implantable 

medical devices in CY 2013 OPPS ratesetting, as discussed above. 

 As we have indicated in prior rulemaking (77 FR 68223 through 68225), once we 

have determined that cost report data for the new standard cost centers were sufficiently 

available, we would analyze that data and, if appropriate, we would propose to use the 

distinct CCRs for new standard cost centers described above in the calculation of the 

OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43550), we have conducted our analysis and concluded that we should develop 

distinct CCRs for each of the new cost centers and use them in ratesetting. Therefore, 

beginning in the CY 2014 OPPS, we proposed 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 

final rule with comment period includes the impacts of calculating the CY 2014 OPPS 

relative payment weights using these new standard cost centers. 

 Comment: Commenters generally supported the proposals to implement the 

standard cost center CCRs for implantable devices and cardiac catheterization. However, 

many commenters requested that CMS reconsider the impact of distinct CCRs for MRI 

and CT scan cost centers before adopting them. Various commenters opposed the 

implementation of distinct MRI and CT scan CCRs, expressing concern that doing so 

would result in very low CCRs for these services because of gross hospital cost reporting 

practices that allocate capital costs for MRIs and CT scans across the entire hospital, 

rather than to the appropriate CT scan and MRI cost centers. Specifically, commenters 
84 

reported that some hospitals currently use an imprecise “square feet” allocation 

methodology for the costs of large moveable equipment like CT scan and MRI machines. 

They indicated that while CMS recommends using two alternative allocation methods, 

“direct assignment” or “dollar value,” as a more accurate methodology for directly 

assigning equipment costs, industry analysis suggests that approximately only half of the 

reported cost centers for CT scans and MRIs rely on these preferred methodologies. The 

commenters expressed concern that “square feet” allocation results in CCRs that lack 

face validity because the proposed CCRs for CT scans and MRIs are less than the 

proposed CCR for general diagnostic radiology, inaccurately reflecting the higher 

resources used for MRIs and CT scans relative to the less expensive plain film x-rays. 

These commenters also noted that, under the CY 2014 OPPS proposed policy of using 

standard CT and MRI cost center data from the Medicare cost report Form 

CMS 2552-10, payment for certain x-rays would be similar to that of CT imaging 

services, despite their belief that CT services would cost significantly more to perform. 

Other commenters suggested that if CMS were to finalize the new CCRs, CMS should 

only use cost report data that meet minimum data quality standards, such as only 

including: (1) cost report data based on dollar value or direct assignment cost allocation 

methods; (2) “plausible” costs for CT and MRI cost centers; and (3) data when there is 

evidence of reclassified costs from diagnostic radiology to standard CT and MRI cost 

centers. Commenters also raised concerns with CMS’ analysis and indicated that 

similarity of the APC payment impacts in the CY 2014 OPPS proposed rule and those in 

the RTI report did not confirm the validity of the proposed CCRs. Commenters asserted 
85 

that more time is needed by hospitals to modify their cost reporting practices, while other 

commenters suggested that it was unrealistic to expect hospitals to adopt cost allocation 

methods that would improve the accuracy of the cost data at all, due to the significant 

expenses involved and the limited benefit to each individual hospital. 

 Commenters also noted that the Deficit Reduction Act (DRA) of 2005 sets the 

technical component (TC) of advanced imaging services under the Medicare Physician 

Fee Schedule (MPFS) to the lesser of: (1) the payment under the MPFS; or (2) the 

payment under the OPPS. The commenters stated that, as proposed, the separate cost 

centers for MRI and CT scans would result in significant cuts to the MPFS technical 

component payments and that such payment cuts could affect beneficiary access to care. 

The commenters urged CMS not to use the proposed CCRs for MRIs and CT scans until 

the payment effects have been thoroughly analyzed. 

 Response: We appreciate the comments regarding the use of standard cost center 

CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. We 

appreciate the support for our proposal to use distinct CCRs for implantable devices and 

cardiac catheterization. We have reviewed the comments objecting to implementation of 

distinct CCRs for MRIs and CT scans. We note that the new standard cost centers for CT 

scans, MRIs, and cardiac catheterization have been in effect since cost reporting periods 

beginning on or after May 1, 2010, on the revised Medicare cost report 

Form CMS-2552-10. Therefore, the cost reports that we are using to develop the 

CY 2014 OPPS relative payment weights were either the first or the second opportunity 

for hospitals to submit cost reports with the new CT scan and MRI cost centers (lines 57 
86 

and 58 of Worksheets A and C, Part I of the Form CMS–2552–10), depending on the 

hospital’s cost reporting period. Simultaneous with implementing the new CT scan and 

MRI cost centers, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50077) and the 

CY 2011 OPPS/ASC final rule (75 FR 71824), we also notified hospitals of the need and 

importance of properly reporting the capital costs of moveable equipment on the 

Medicare cost report. 

 In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50078), we explained that, in 

accordance with Section 104 of CMS Pub. 15–1, Chapter 1, CT scans and MRIs are 

major moveable equipment, and the costs should be reported together with the rest of the 

hospital’s major moveable equipment cost in the Capital-Related Costs—Moveable 

Equipment cost centers on Worksheet A (lines 2 and 4 on the Form CMS–2552–96 and 

line 2 on the Form CMS–2552–10). The costs in these cost centers are allocated to all the 

hospital’s cost centers that use major moveable equipment (including CT and MRI), 

using “dollar value” (which is the “recommended” or default statistical basis, in 

accordance with the cost reporting instructions contained in Section 4095 of CMS Pub. 

15–2, for the Form CMS-2552–10). Alternatively, the hospital may have obtained the 

contractor’s approval under Section 2313 of CMS Pub. 15–1 to use the simplified cost 

allocation methodology known as “square feet.” However, a hospital that historically has 

been using “square feet” and is concerned that this method of allocation may result in 

inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and other ancillary cost 

centers may request contractor approval in accordance with Section 2307 of the CMS 

Pub. 15–1 to use the “direct assignment” allocation method, and directly assign the cost 
87 

of moveable equipment to all of the hospital’s cost centers that use moveable equipment, 

including CT scans and MRIs, using the provider’s routine accounting process. This 

would ensure that the cost of the CT scanning and MRI equipment would be reflected in 

the CCR that would be calculated for those departments and that would be used to 

estimate the cost of CT scan and MRI services. In any case, hospitals should correct their 

cost reporting practices to come into compliance with CMS’ longstanding policy 

regarding the “Capital-Related Costs—Moveable Equipment” cost center, by either using 

the recommended statistical allocation method of “dollar value” for costs in 

Worksheet A, Column 2 for Capital- Related Costs—Moveable Equipment or by 

requesting contractor approval in accordance with Section 2307 of CMS Pub. 15–1 to use 

the “direct assignment” allocation method. In the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53283), we reiterated this policy, and added that “Hospitals that still need to 

correct their cost reporting practices in this regard should do so soon” so that distinct CT 

and MRI cost center CCRs would accurately reflect the costs associated with providing 

those services. 

 In the CY 2014 OPPS/ASC proposed rule, we provided information about the CT 

and MRI cost center CCRs and the estimated effects on APC payment of adopting those 

cost centers. We noted the similarities between our estimations and the RTI report results 

not only to demonstrate that they were generally consistent with each other, but to again 

note that any concerns and criticisms of the data and its corresponding impact on the 

payment rates would be the same as were expected when the report was initially 

published in July 2008, absent any improvements in cost reporting practice. We further 
88 

note that some of the concerns that commenters described related to differentials in 

payment for plain film x-rays based on proposed CY 2014 OPPS payment rates being 

similar to those of the CT and MRI services have abated because the ancillary services 

and diagnostic tests on the bypass list packaging proposals are not being finalized for 

CY 2014. Various packaged items and services under those proposals may have created 

some of the estimated increase in service cost for plain film x-rays. 

 While some commenters believe that it is unrealistic for hospitals to adopt cost 

allocation methods that improve data and payment accuracy, we believe that those 

recommended changes are critical in the shared goal of developing OPPS relative 

payment weights that accurately reflect service costs. We also believe that because 

approximately half of hospitals reporting either the new CT scan or MRI standard cost 

center thus far have adopted one of the more accurate cost allocation methods, other 

hospitals also should be able to do so. Of the 1,961 hospitals reporting a new CT scan 

standard cost center, 1,055 hospitals reported using either “direct assignment” or “dollar 

value” as the cost allocation method. Similarly, of the 1,871 hospitals reporting a new 

MRI standard cost center, approximately 985 hospitals report using either “direct 

assignment” or “dollar value” as the cost allocation method. Commenters have 

previously recognized the significant impact that the CT scan and MRI standard cost 

center data would have on multiple payment systems, and we believe that the significant 

effects of these data on payment should inherently encourage more accurate cost 

reporting (75 FR 71824). Standard cost centers for CT and MRI services were developed 

in the revised Medicare cost report Form CMS-2552-10 to more accurately capture the 
89 

costs associated with providing these important services. Not including the cost report 

data derived from these cost centers in ratesetting with no future indication of 

improvement would be contrary to their purpose and our goal to develop OPPS relative 

payment weights that accurately reflect service costs. 

 We have considered the public comments recommending that if CMS does 

finalize distinct CCRs for CT scans and MRIs for the OPPS relative payment weights, 

CMS adopt certain minimum quality standards, such as using only cost report data of 

hospitals that use either direct assignment or the dollar value statistical allocation method, 

have at least $250,000 of cost in the CT scan or MRI cost center, and have reclassified 

overhead costs from the diagnostic radiology cost center to the CT scan and/or MRI cost 

centers. We appreciate the commenters’ shared concern surrounding the goal of using 

the best available information to estimated costs associated with these new standard cost 

centers. 

 For the FY 2014 IPPS/LTCH PPS final rule, we did not agree with the adoption 

of commenters’ suggested minimum data standards because doing so would have ignored 

the fact that many hospitals have chosen (at least up to this point) to employ the square 

feet statistical allocation methodology, perhaps for reasons unrelated to the costs of MRIs 

and CT scans, and, therefore, those data reflect, in large part, the best available data that 

we have. It also is not administratively feasible for CMS to determine, using HCRIS 

data, whether hospitals have reclassified overhead costs from the diagnostic radiology 

cost center to the CT scan and/or MRI cost centers. However, in the FY 2014 

IPPS/LTCH PPS final rule, we recognized that while only a fraction of the negative 
90 

impact would be manifested in the IPPS MS-DRGs, the OPPS relative payment weights 

would be more significantly affected by the adoption of the new standard cost center 

CCRs (78 FR 50521). 

 We took note of the many comments regarding the ramifications of developing 

distinct CT scan and MRI CCRs on beneficiary access to care and other payment 

systems. We understand that any such change could have significant payment impacts 

under the MPFS where the TC payment for many imaging services is capped at the OPPS 

payment. These significant payment effects based on adoption of the new CT scan and 

MRI standard cost center CCRs further underscore the need for accurate cost reporting 

for ratesetting purposes. Although these payment effects are significant, we do not 

believe that they would likely significantly affect beneficiary access to imaging because 

imaging is readily available at different sites of service and the magnitude of the payment 

effects are not so drastic that providers and suppliers of imaging would likely discontinue 

offering CT and MRI services. 

 We appreciate the concerns expressed by the commenters related to payment 

changes of implementing these cost center CCRs, and the importance of not providing an 

incentive for hospitals to furnish, or not furnish, certain services. However, we are not 

convinced that further delay or further trimming of CCR values is necessary in order to 

implement all of the proposed CCRs. Although hospitals have been permitted to use the 

alternative basis cost allocation (that is, “square feet”) under Section 2313 of CMS Pub. 

15–1, this methodology does not ensure precise CCRs for CT scans and MRIs. 

Therefore, we encouraged hospitals over the past several years to use the most precise 
91 

cost reporting methods in response to the new cost report lines. Specifically, the 

longstanding cost report instructions contained in Section 4020 (previously Section 3617) 

of CMS Pub. 15-2 state that “The statistical basis shown at the top of each column on 

Worksheet B–1 is the recommended basis of allocation of the cost center indicated which 

must be used by all providers completing this form (Form CMS–2552–10), even if a 

basis of allocation other than the recommended basis of allocation was used in the 

previous iteration of the cost report (Form CMS–2552–96).” Under Table 1 of the 

Medicare cost report, which lists the Record Specifications for the cost centers on 

Worksheet B–1, “dollar value” is specified as the recommended statistical allocation 

method for Column 2, Capital-Related Costs—Moveable Equipment. While the “dollar 

value” statistical allocation method is more precise than “square feet,” to ensure even 

more precise CCRs for CT scans and MRIs, 90 days prior to the beginning of their next 

cost reporting period, hospitals may request permission from their Medicare contractors 

in accordance with Section 2307 of CMS Pub. 15–1 to use the “direct assignment” 

allocation method on Worksheet B, Part II, Column 0. Although “direct assignment” is 

the preferred and most precise allocation method, hospitals that do not have the resources 

to directly assign the costs of every cost center are strongly encouraged to instead use the 

“dollar value” statistical allocation method. (We note that, under Section 2313 of CMS 

Pub. 15–1, hospitals not currently using “dollar value” should notify their contractor of 

their intention to switch their statistical allocation basis to “dollar value” at least 90 days 

prior to the end of a cost reporting period.) We also intend to communicate with the 

Medicare contractors to facilitate approval of hospitals’ requests to switch from the 
92 

square feet statistical allocation method to the “direct assignment” or “dollar value” 

allocation method for the costs of major moveable equipment. We believe that, by 

adopting more refined CCRs, we are fostering more careful cost reporting. Therefore, we 

generally do not believe that the concerns expressed by the commenters warrant further 

delay in implementing the proposed CCRs for CT scans and MRIs for use in OPPS 

ratesetting. 

 However, we recognize the commenters’ concerns with regard to the application 

of the new CT and MRI standard cost center CCRs and their use in OPPS ratesetting. As 

compared to the IPPS, there is increased sensitivity to the cost allocation method being 

used on the cost report forms for these new standard imaging cost centers under the 

OPPS due to the limited size of the OPPS payment bundles and because the OPPS 

applies the CCRs at the departmental level for cost estimation purposes. As a means of 

addressing the commenters’ concerns related to the new CT and MRI standard cost 

centers, when calculating the CT and MRI cost center CCRs used to estimate costs for the 

CT and MRI APCs listed in Table 4 below, we removed all claims from providers that 

use “square feet” as a cost allocation method. We identified providers using “square 

feet” as the cost allocation method by extracting HCRIS data on Worksheet B-1. Table 4 

displays information about the relative effect on CT and MRI APC payments after 

removing cost data for providers that report CT and MRI standard cost centers using 

“square feet” as the cost allocation method. Table 5 below provides statistical values 

based on the CT and MRI standard cost center CCRs using the different cost allocation 

methods. 
93 

TABLE 4.—PERCENTAGE CHANGE IN ESTIMATED COST FOR CT AND 

MRI APCs WHEN EXCLUDING CLAIMS FROM PROVIDERS USING 

“SQUARE FEET” AS THE COST ALLOCATION METHOD 

CY 

2014 

APC CY 2014 APC Descriptor 

Percent 

Change 

0282 Miscellaneous Computed Axial Tomography 17.7%

0283 Computed Tomography with Contrast 8.7%

0284 

Magnetic Resonance Imaging and Magnetic Resonance 

Angiography with Contrast 4.5%

0331 Combined Abdomen and Pelvis CT without Contrast 10.4%

0332 Computed Tomography without Contrast 14.0%

0333 Computed Tomography without Contrast followed by Contrast 11.6%

0334 Combined Abdomen and Pelvis CT with Contrast 9.3%

0336 

Magnetic Resonance Imaging and Magnetic Resonance 

Angiography without Contrast 8.3%

0337 

Magnetic Resonance Imaging and Magnetic Resonance 

Angiography without Contrast followed by Contrast 6.1%

0383 Cardiac Computed Tomographic Imaging 2.6%

0662 CT Angiography 9.9%

8005 CT and CTA without Contrast Composite 12.4%

8006 CT and CTA with Contrast Composite 8.7%

8007 MRI and MRA without Contrast Composite 7.4%

8008 MRI and MRA with Contrast Composite 6.4%
94 

TABLE 5.—CCR STATISTICAL VALUES BASED ON USE OF DIFFERENT 

COST ALLOCATION METHODS 

 CT MRI 

Cost Allocation Method 

Median 

CCR 

Mean 

CCR 

Median 

CCR 

Mean 

CCR 

All Providers 0.049 0.063 0.093 0.118 

Square Feet Only 0.038 0.049 0.081 0.101 

Direct Assign 0.061 0.070 0.112 0.126 

Dollar Value 0.059 0.070 0.106 0.129 

Direct Assign and Dollar 

Value 0.058 0.070 0.108 0.129 

As we have stated in prior rulemaking (77 FR 53281 through 53283 and 

77 FR 68224), once we determined that a sufficient amount of cost report data were 

available from which to generate a meaningful analysis, we would propose, and finalize 

if appropriate, the use of the distinct CCRs described above in the calculation of the 

OPPS relative payment weights. We believe that the analytic findings described in the 

proposed rule, and the volume of hospitals that have “valid” CCRs described above, 

computed using the July 2013 HCRIS update, support our original decision to create new 

cost centers and distinct CCRs for implantable devices, MRIs, CT scans, and cardiac 

catheterization, and we see no reason to further delay implementation of the CCRs of 

each of these cost centers for the OPPS. Therefore, we are finalizing a policy for the 

CY 2014 OPPS to remove claims from providers that use a cost allocation method of 

“square feet” to calculate CCRs used to estimate costs associated with the CT and MRI 

APCs identified in Table 4. This change allows hospitals additional time to use one of 

the more accurate cost allocation methods, and thereby improve the accuracy of the 
95 

CCRs on which the OPPS relative payment weights are developed. As part of this 

transitional policy to estimate the CT and MRI APC relative payment weights using only 

cost data from providers that do not use “square feet” as the cost allocation statistic, we 

will sunset this policy in 4 years once the updated cost report data become available for 

ratesetting purposes. We believe that 4 years is sufficient time for hospitals that have not 

done so to transition to a more accurate cost allocation method and for the related data to 

be available for ratesetting purposes. Therefore, in CY 2018, we will estimate the CT 

and MRI APC relative payment weights using cost data from all providers, regardless of 

the cost allocation statistic employed. 

 After consideration of the public comments we received, we are finalizing, 

without modification, our proposal to use data from the “Implantable Devices Charged to 

Patients” and “Cardiac Catheterization” cost centers to create distinct CCRs for use in 

calculating the OPPS relative payment weights for CY 2014. For the “Magnetic 

Resonance Imaging (MRI)” and “Computed Tomography (CT) Scan” APCs identified in 

Table 4 earlier in this section, we are modifying our proposal so that the final policy will 

remove claims from cost modeling for those providers using “square feet” as the cost 

allocation statistic. 

2. Data Development Process and Calculation of Costs Used for Ratesetting 

 In this section of this final rule with comment period, we discuss the use of claims 

to calculate the OPPS payment rates for CY 2014. The Hospital OPPS page on the CMS 

Web site on which this final rule with comment period is posted 

(http://www.cms.gov/Medicare/Medicare-Fee-for-Service-
96 

Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in 

the development of the final payment rates. That accounting provides additional detail 

regarding the number of claims derived at each stage of the process. In addition, below 

in this section we discuss the file of claims 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-Fee-for-ServicePayment/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 final 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, as we proposed, we are 
97 

continuing to use geometric mean costs to calculate the relative weights on which the 

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 

final rule with comment period to calculate the costs we used to establish the relative 

weights used in calculating the OPPS payment rates for CY 2014 shown in Addenda A 

and B to this final rule with comment period (which are available via the Internet on the 

CMS Web site). We refer readers to section II.A.4. of this final rule with comment 

period for a discussion of the conversion of APC costs to scaled payment weights. 

 Comment: Commenters expressed concern with respect to the volatility of the 

OPPS payment rates from year to year. One commenter suggested a “dampening policy” 

that would limit declines in payment service from year to year. 

 Response: As previously discussed in the CY 2013 OPPS/ASC final rule with 

comment period (77 FR 68225), there are a number of factors that contribute to cost 

fluctuations from one year to the next, including (but not limited to) hospital behavior in 

adjusting mix of services, changes in hospital costs and charges each year resulting in 

changes to the CCRs, reassignments of HCPCS codes, changes to OPPS payment policy 

(for example, changes to packaging policies), and implementation of composite APCs. 

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

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

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

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

used to set the APC costs. Moreover, we have tried to eliminate APCs with very small 
98 

numbers of single bills where we could do so. We recognize that changes to payment 

policies, such as the packaging of payment for ancillary and supportive services and the 

implementation of composite APCs, may contribute to volatility in payment rates in the 

short term. However, we believe that larger payment packages and bundles should help 

to stabilize payments in the long term by enabling us to use more claims data and by 

establishing payments for larger groups of services. Further, in seeking to mitigate 

fluctuations in the OPPS, we believe that implementing the policy suggested by the 

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

decreases to payments across all APCs in a budget neutral payment system could unfairly 

reduce the payments for other services due to the effects of the scaling that is necessary to 

maintain budget neutrality and would distort the relativity of payment that is based on the 

cost of all services. 

a. Claims Preparation 

 For this final rule with comment period, we used the CY 2012 hospital outpatient 

claims processed through June 30, 2013, to calculate the geometric mean costs of APCs 

that underpin the relative payment weights for CY 2014. (For the proposed rule, we used 

CY 2012 hospital outpatient claims processed through December 31, 2012.) To begin the 

calculation of the 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). 
99 

 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 125 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 
100 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

inspection on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use 
101 

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 line-items 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. 
102 

 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, as we proposed, we are 

continuing the CY 2013 payment policy for separately payable drugs and biologicals. 

We refer readers to section V.B.3. of this final rule with comment period for a complete 

discussion of our CY 2014 final 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,” “V,” or “X,” in the prospective 

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

been paid in the claim year but for which some estimate of cost is needed for the 
103 

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, as we proposed, we are continuing 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 
104 

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 our packaging of certain clinical diagnostic 

laboratory tests, we also 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 final policy to 

package certain clinical diagnostic laboratory tests, we refer readers to section 

II.A.3.b.(3) of this final rule with comment period. 

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 final 

CY 2014 OPPS packaging policy, we are not deleting status indicator “X” and not 

revising the title and description of status indicator “Q1” to reflect that deletion, as 

discussed in sections II.A.3. and XI. of this final rule with comment period. For 

CY 2014, as we proposed, we are continuing our current policy of defining major 

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

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

“U,” or “N”; and classifying “other” procedures as any code having a status indicator 

other than one that we have classified as major or minor. For CY 2014, we had originally 
105 

proposed to delete status indicator “X” as part of our proposal to package ancillary 

services under that status indicator. However, as discussed in section II.A.3. of this final 

rule with comment period, we are not establishing that policy in CY 2014 and may 

reexamine that policy in the future. Therefore, for CY 2014, we are defining HCPCS 

codes having a status indicator of “X” as major procedure, due to the retention of the 

status indicator. For CY 2014, we are continuing to assign status indicator “R” to blood 

and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” 

to all “STVX-packaged codes”; status indicator “Q2” to all “T-packaged codes”; and 

status indicator “Q3” to all codes that may be paid through a composite APC based on 

composite-specific criteria or paid separately through single code APCs when the criteria 

are not met. 

 As discussed in the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate 

identification of the different categories of codes. As we proposed, we are treating 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 
106 

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 final rule with comment 

period. 

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

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

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

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

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

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

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

claim on the same date. 

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

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

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

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

procedure with a status indicator “T” on the same claim on the same date of service but 

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

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

in this set claims that contained one unit of one code when the bilateral modifier was 
107 

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

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

notwithstanding that only one unit was billed. 

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

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

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

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

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

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

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

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

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

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

service. 

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

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

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

paid under other fee schedules, for example, durable medical equipment, 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). 
108 

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

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

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

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

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

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

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

calculation. 

(2) Creation of “Pseudo” Single Procedure Claims 

 To develop “pseudo” single procedure claims for this final rule with comment 

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

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

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

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

single major procedures by using dates of 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). 

 As proposed, we also use the bypass codes listed in Addendum N to this final rule 

with comment period (which is available via the Internet on our Web site) and discussed 

in section II.A.1.b. of this final rule with comment period to remove separately payable 

procedures which we determined contained limited or no packaged costs or that were 

otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As 
109 

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 final CY 2014 “overlap 

bypass codes” are listed in Addendum N to this final rule with comment period (which is 

available via the Internet on the CMS Web site). When one of the two separately payable 

procedures on a multiple procedure claim was on the bypass list, we split the claim into 

two “pseudo” single procedure claim records. The single procedure claim record that 

contained the bypass code did not retain packaged services. The single procedure claim 

record that contained the other separately payable procedure (but no bypass code) 

retained the packaged revenue code charges and the packaged HCPCS code charges. We 

also removed lines that contained multiple units of codes on the bypass list and treated 

them as “pseudo” single procedure claims by dividing the cost for the multiple units by 

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

remained on the claim after removal of the multiple units of the bypass code, we created 

a “pseudo” single procedure claim from that residual claim record, which retained the 

costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use 

claims that would otherwise be multiple procedure claims and could not be used. 

 We then assessed the claims to determine if the criteria for the multiple imaging 

composite APCs, discussed in section II.A.2.f.(5) of this final rule with comment period, 

were met. If the criteria for the imaging 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 
110 

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 CY 2014 OPPS relative payment weights are based. 

Having identified “single session” claims for the imaging composite APCs, we reassessed 

the claim to determine if, after removal of all lines for bypass codes, including the 

“overlap bypass codes,” a single unit of a 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. 

 As we proposed, we also examined the multiple procedure minor claims to 

determine whether we could create “pseudo” single procedure claims. Specifically, 

where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) 

on the same date of service or contained multiple units of a single code with status 

indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest 

CY 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 “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 
111 

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” (“T-packaged”) or multiple units of a single code with status 

indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest 

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

T-packaged status indicator “Q2” HCPCS code that had the highest relative payment 
112 

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” (“STVX-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” (“T-packaged”) code from a data status indicator of “N” to the status 

indicator of the APC to which the selected code was assigned and we considered this 

claim as a major procedure claim. 

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

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

us to create single procedure claims from them, 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 final rule with comment 

period. 

 Lastly, we excluded those claims that we were not able to convert to single 

procedure claims even after applying all of the techniques for creation of “pseudo” single 
113 

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 proposed to continue to apply the methodology described above for the 

purpose of creating “pseudo” single procedure claims for the CY 2014 OPPS. 

 We did not receive any public comments on this proposal, and therefore are 

finalizing our proposal 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 final rule with comment period (which is 

available via the Internet on the CMS Web site) and the costs of those lines for codes 

with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of 

the services reported under packaged revenue codes in Table 6 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 final CY 2014 OPPS packaging policy, 

we refer readers to section II.A.3. of this final rule with comment period. 
114 

 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, and as we proposed, we are continuing 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 proposed to package for CY 2014. We 

believe that the charges reported under the revenue codes listed in Table 6 below 

continue to reflect ancillary and supportive services for which hospitals report charges 

without HCPCS codes. Therefore, for CY 2014, we proposed to continue to package the 

costs that we derive from the charges reported without HCPCS codes under the revenue 
115 

codes displayed in Table 6 below for purposes of calculating the geometric mean costs on 

which the final CY 2014 OPPS/ASC payment rates are based. 

 Comment: One commenter recommended that CMS consider examining revenue 

codes not currently on the list of CY 2014 packaged revenue codes for potential addition 

to the list of packaged revenue codes. The commenter stated that with increased 

packaging of ancillary and adjunctive services, it becomes more important to ensure that 

all OPPS service costs are packaged into the pertinent OPPS furnished service. 

 Response: In the CY 2010 OPPS/ASC proposed rule and the final rule with 

comment period, we reviewed the revenue code-to-cost center crosswalk and the revenue 

codes which are considered for use in OPPS ratesetting. Although there was an extensive 

discussion in the CY 2010 OPPS/ASC final rule with comment period about the use of 

revenue codes in OPPS ratesetting, we did not receive any public comments regarding 

additions or removals of revenue codes from the packaged revenue code list 

(78 FR 43554). Similarly, commenters’ specific concerns have typically been isolated to 

the adoption of the new standard cost center CCRs in the Medicare cost report Form 

CMS-2552-10. However, we recognize the commenter’s concern and believe that an 

examination of both the current packaged revenue code list and potential addition or 

removal of revenue codes in the future may be worth performing. 

 After consideration of the public comments we received, we are finalizing the 

proposed packaged revenue codes for CY 2014, which are identified in Table 6 below, 

without modification. We note that these revenue codes include only revenue codes that 
116 

were in effect in CY 2012, the year of the claims data on which the final CY 2014 OPPS 

payment rates are based. 

TABLE 6.—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 
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Revenue 

Code Description 

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 

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 
118 

Revenue 

Code Description 

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 proposed 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 
119 

would not yield a valid estimate of relative provider cost. We proposed to continue these 

processes for the CY 2014 OPPS. 

 For the remaining claims, we proposed 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 proposed to use the pre-reclassified wage indices for 

standardization because we believe that they better reflect the true costs of items and 

services in the area in which the hospital is located than the post-reclassification wage 

indices and, therefore, would result in the most accurate unadjusted geometric mean 

costs. 

 In accordance with our longstanding practice, we also proposed 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 119 million claims were left. Using these 
120 

approximately 119 million claims, we created approximately 125 million single and 

“pseudo” single procedure claims, of which we used approximately 124 million single 

bills (after trimming out approximately 1 million claims as discussed in section II.A.1.a. 

of this final rule with comment period) 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 we 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 final rule with comment 

period. 

 We proposed 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 
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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 the 2 times rule based on geometric mean costs. For the CY 2014 

OPPS, we are continuing 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 124 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 

median-based 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 
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their costs used in the calculation of the APC geometric mean. Finally, we reviewed the 

geometric mean costs for the services for which we pay separately under this final rule 

with comment period, and we reassigned HCPCS codes to different APCs where it was 

necessary to ensure clinical and 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. 

 Comment: Several commenters remarked on the quality of the data and the 

degree to which technical errors caused modeling problems throughout the rest of the 

system. These commenters believed that CMS did not provide adequate data to allow 

hospitals to assess the impact of the major revisions. Commenters also commented on 

the complexity inherently in the payment system and increased by the many interactions 

between various proposed and existing policies. These commenters remarked that CMS 

had not fully explained the impacts of each proposal in a manner that would allow 

stakeholders to provide meaningful input. Based on the assertions about a lack of 

transparency, impact analysis, guidance on how rates were developed, policy details, 

technical errors, etc., commenters suggested that those proposals be delayed until more 

accurate and detailed information was available. Other commenters stated that CMS had 

ignored previous HOP Panel suggestions on analyzing the impact of expanded packaging 

policies, and believed that the potential for unintended downstream consequences existed. 
123 

 Response: We appreciate the commenters’ concerns with regards to the 

complexity of modeling the OPPS. There are many interactions between the various 

goals and pieces of the payment system. For example, as discussed in section II.A.1.b. of 

this final rule with comment period, the goal of extracting more data from the available 

claims through the bypass list process is also balanced by the impact of any packaged 

costs that may be redistributed as a result of that data process. In developing the 

CY 2014 OPPS/ASC proposed rule, we strived to provide as accurate information as 

possible with regard to the calculated rates. We discovered that, in the process of 

applying established and proposed methodologies to develop the CY 2014 proposed 

OPPS and ASC payment rates, specific cost estimation errors occurred in the OPPS 

modeling process. We released corrected data files on August 28, 2013, and extended the 

comment period to September 16, 2013, on the technical corrections noted in the 

correcting document published in the Federal Register on September 6, 2013 

(78 FR 54842). While, in a budget neutral system, changes to any OPPS relative 

payment weights have redistributional effects throughout the system, any policy change 

or data update has the potential to do the same. Therefore, the technical corrections 

described in the correcting document were made to address issues where the calculated 

payment rates were not appropriately reflective of the proposed policies. While, as 

discussed in the correcting document to the CY 2014 OPPS/ASC proposed rule, new 

proposed visit APC 0634 contained a technical error that excluded certain packaged costs 

from the APC, the fact that we proposed to use APC 0634 as the baseline APC for scaling 

the aggregate CY 2014 OPPS weight for budget neutrality, did not distort the relativity of 
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the OPPS payment weights. As discussed in section II.A.4. of this final rule with 

comment period, the selection of the base APC or any other number, from which to 

establish the relative payment weights, does not have an impact because OPPS weights 

are scaled for budget neutrality. 

 With regard to the adequacy of available data, each year, CMS makes available an 

extensive amount of OPPS data that can be used for any data analysis an interested party 

would care to perform. Specifically, we make available a considerable amount of data 

for public analysis each year through the supporting data files that are posted on the CMS 

Web site in association with the display of the proposed and final rules. In addition, we 

make available the public use files of claims, including, for CY 2008 and later, 

supplemental line item cost data for every HCPCS code under the OPPS and a detailed 

narrative description of our data process for the annual OPPS/ASC proposed and final 

rules that the public can use to perform any desired analyses. Therefore, we believe 

commenters are able to examine and analyze these data to develop specific information to 

assess the impact and effect of packaging for the services of interest to them. This 

information is available to support their requests for changes to payments under the 

OPPS, whether with regard to separate payment for a packaged service or other issues. 

We understand that the OPPS is a complex payment system and that it may be difficult to 

determine the quantitative amount of packaged cost included in the geometric mean cost 

for every independent service. However, commenters routinely provide us with 

meaningful analyses at a very detailed and service-specific level based on the claims data 

we make available. We routinely receive complex and detailed public comments, 
125 

including extensive code-specific data analysis on packaged and separately paid codes 

using the data from this and prior proposed and final rules. Among the public comments 

received in response to the CY 2014 OPPS/ASC proposed rule, we received many 

detailed public comments that included data analysis. 

 We disagree that the CY 2014 OPPS policy proposals should be delayed as a 

result of the data concerns that commenters have raised. While we are sympathetic to the 

challenges that have been described, we develop policy and model the OPPS payment 

rates under those same constraints. In general, we have tried to limit the changes beyond 

the current year OPPS with regards to data modeling, so that little additional logic 

changes would be necessary and would instead be built off existing processes. While we 

continuously examine ways in which the data process could be simplified or made 

clearer, we also welcome and appreciate public comment with regards to potential 

improvements. Similarly, we appreciate the meaningful comments that stakeholders 

provide regarding ways that the cost modeling process could be more accurate or 

methods to extract more appropriate data from the claims available for OPPS cost 

modeling. 

 The technical errors described in the correcting document published in the 

Federal Register on September 6, 2013 (78 FR 54842) were generally isolated to 

specific policy areas and did not substantively affect the proposed policies described in 

the CY 2014 OPPS/ASC proposed rule. The correcting document merely corrected the 

underlying data errors to conform to the proposed policies clearly intended in the 

preamble of the proposed rule. 
126 

 As commenters have described, modeling the OPPS payment rates can sometimes 

be a complex undertaking. We have tried to alleviate some of those concerns about the 

complexity and transparency of the OPPS cost modeling process by having an extensive 

discussion of the data process in the preamble discussion, through providing code lists, 

isolating the impacts of certain proposals in the regulatory impact analysis, and providing 

a claims accounting with documented claims volume throughout each stage of the 

process. Commenters have stated that CMS has not provided data regarding packaging 

policies to the Advisory Panel on Hospital Outpatient Payment (referred to in this 

document as the Panel). However, in the CY 2009 OPPS/ASC final rule with comment 

period (73 FR 68573), the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60409 through 60412), the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71682 through 71868), the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74184 through 74185), and the CY 2013 OPPS/ASC final rule final rule with 

comment period (77 FR 68273 through 68274), we describe various data analyses we 

have provided to the Panel based on its recommendations. 

 After consideration of the public comments we received, we are finalizing our 

proposed CY 2014 methodology for calculating the geometric mean costs upon which the 

CY 2014 OPPS payment rates are based. 

 As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this final rule with 

comment period, in some cases, APC geometric mean costs are calculated using 

variations of the process outlined above. Specifically, section II.A.2.d. of this final rule 

with comment period addresses the calculation of single APC criteria-based geometric 
127 

mean costs. Section II.A.2.f. of this final rule with comment period discusses the 

calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of 

this final rule with comment period addresses the methodology for calculating the 

geometric mean costs for partial hospitalization services. 

(2) Recommendations of the Panel Regarding Data Development 

 At the August 2013 meeting of the Panel, we discussed the claims accounting 

process for the CY 2014 OPPS proposed rule, the proposed adoption of the new standard 

cost centers for CT, MRI, and cardiac catheterization in the new Medicare cost report 

Form CMS-2552-10, as well as the CY 2014 OPPS policy of calculating OPPS relative 

payment weights using geometric mean costs. 

 At the August 2013 Panel meeting, the Panel made a number of recommendations 

related to the data process. The Panel’s data-related recommendations and our responses 

follow. 

 Recommendation: The Panel recommends that the work of the Data 

Subcommittee continue. 

 CMS Response: We are accepting this recommendation. 

 Recommendation: The Panel recommends that John Marshall, C.R.A., R.C.C, 

R.T., serve as chair of the Data Subcommittee. 

 CMS Response: We are accepting this recommendation. 

 In addition, the Panel requested that CMS provide additional information about 

the impacts of certain CY 2014 policy proposals at the 2014 spring meeting. Depending 

upon the CY 2014 final policy decisions, we will consider providing additional relevant 
128 

information to the Panel at the Spring 2014 Panel meeting.
129 

d. 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 device-dependent 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-to-procedure edits used 

in ratesetting for device-dependent APCs are available in the CY 2005 OPPS final rule 

with comment period (69 FR 65761 through 65763) and the CY 2007 OPPS/ASC final 

rule with comment period (71 FR 68070 through 68071). 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43558 through 43561), for 

CY 2014, we proposed in section II.A.2.e. to define 29 device-dependent APCs as single 

complete services and to assign them to comprehensive APCs that would provide allinclusive payments for those services. As we explained in that section, we proposed this 
130 

policy 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 of the proposed rule provided a list of the 39 

APCs currently recognized as device-dependent APCs and identified those 29 APCs that 

we proposed to include in the comprehensive APCs proposal (78 FR 43557). We 

proposed 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. As we stated in the 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 were 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 (78 FR 43556). 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557), 

beginning in CY 2014, we also proposed to no longer implement procedure-to-device 

edits and device-to-procedure edits for any APCs. We explained that, under this 
131 

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 stated that 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-to-procedure 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. 

 Comment: Commenters urged CMS not to finalize its proposal to eliminate 

device-to-procedure edits and procedure-to-device edits in order to ensure continued 

complete and accurate cost reporting by hospitals. In addition, one commenter requested 

that CMS, if it elects to delete these edits, commit to only using complete and correctly 

coded claims from CY 2014 for the CY 2016 ratesetting process. Some commenters, 

while supporting elimination of the contractor edits, opposed dropping the use of the edit 

criteria when selecting the set of claims to be used to calculate the geometric mean costs 

of services. One commenter requested that CMS remove APC 0648 from the list of 

device-dependent APCs. 
132 

 Response: We continue to believe that the elimination of device-to-procedure 

edits and procedure-to-device edits is appropriate due to the experience hospitals now 

have 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. We remind commenters that, under our proposed 

policy, hospitals would still be expected to adhere to the guidelines of correct coding and 

append the correct device code to the claim when applicable. 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. We 

expect the CY 2014 claims that we will use for the CY 2016 ratesetting to reflect this 

correct coding and cost reporting. While we believe that device-to-procedure edits and 

procedure-to-device edits are no longer necessary at this time, we are sensitive to the 

commenters’ concerns that all relevant costs for the 39 APCs currently recognized as 

device-dependent APCs are appropriately included in the claims that CMS will use for 

ratesetting. In light of those concerns, we are further assessing whether we need to 

continue claims processing edits requiring a device code to be on the claim under the 

comprehensive APCs in CY 2015. 

 We believe that APC 0648 is appropriately included in the current list of 

device-dependent APCs, as APC 0648 is populated by HCPCS codes that usually, but not 

always, require that a device be implanted or used to perform the procedure. 

 After consideration of the public comments we received, and in conjunction with 

our finalized comprehensive APC policy, which is fully discussed in section II.A.2.e. of 
133 

this final rule with comment period, we are finalizing our proposal to no longer apply the 

current device-dependent APC ratesetting methodology to the 10 currently recognized 

device-dependent APCs not included in the comprehensive APC proposal and apply our 

standard APC ratesetting methodology to calculate their payment rates, but delaying the 

implementation of this finalized policy until CY 2015. For CY 2014, we will continue to 

apply the current device-dependent APC ratesetting methodology to the 39 currently 

recognized device-dependent APCs. 

 Table 7 below provides a list of the 39 APCs currently recognized as 

device-dependent APCs for CY 2014 and identifies those 29 APCs that we are including 

in the finalized comprehensive APCs policy for CY 2015. 

TABLE 7.—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 
134 

APC APC Title 

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 comprehensive APC for CY 2015. 

(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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43557), for CY 2014, we 

proposed to continue to establish payment rates for blood and blood products using our 
135 

blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most 

recently available hospital cost reports to convert hospital charges for blood and blood 

products to costs. This methodology has been our standard ratesetting methodology for 

blood and blood products since CY 2005. It was developed in response to data analysis 

indicating that there was a significant difference in CCRs for those hospitals with and 

without blood-specific cost centers, and past public comments indicating that the former 

OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a 

blood-specific cost center often resulted in an underestimation of the true hospital costs 

for blood and blood products. Specifically, in order to address the differences in CCRs 

and to better reflect hospitals’ costs, we proposed to continue to simulate blood CCRs for 

each hospital that does not report a blood cost center by calculating the ratio of the 

blood-specific CCRs to hospitals’ overall CCRs for those hospitals that do report costs 

and charges for blood cost centers. We would then apply this mean ratio to the overall 

CCRs of hospitals not reporting costs and charges for blood cost centers on their cost 

reports in order to simulate blood-specific CCRs for those hospitals. We stated that 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 hospital-specific, blood-specific CCR methodology 

best responds to the absence of a blood-specific CCR for a hospital than alternative 

methodologies, such as defaulting to the overall hospital CCR or applying an average 
136 

blood-specific CCR across hospitals. Because this methodology takes into account the 

unique charging and cost accounting structure of each hospital, we believe that it yields 

more accurate estimated costs for these products. We 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 did not receive any public comments on this proposal. Therefore, we are 

finalizing our proposed policy, without modification, 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, for CY 2014. We 

continue to believe that this methodology in CY 2014 will 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 final rule with comment 

period, we are establishing comprehensive APCs that will provide all-inclusive payments 

for certain device-dependent procedures. Under this policy, we will include the costs of 

blood and blood products when calculating the overall costs of these comprehensive 

APCs. We note that we will 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 will be reflected in the overall costs of the comprehensive 
137 

APCs (and, as a result, in the payment rates of the comprehensive APCs), we will 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 final rule with comment period (which is 

available via the Internet on the CMS Web site) for the 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). 

(3) Brachytherapy Source Payment 

 Section 1833(t)(2)(H) of the Act provides that the Secretary shall create additional 

groups of covered OPD services that classify devices of brachytherapy consisting of a 

seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other 

services or groups of services, in a manner that reflects the number, isotope, and 

radioactive intensity of the brachytherapy sources furnished and must include separate 

groups for palladium-103 and iodine-125 sources, and for stranded and non-stranded 

devices furnished on or after July 1, 2007. In the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60533 through 60537), we adopted for CY 2010 the general 

OPPS prospective payment methodology for brachytherapy sources, consistent with 

section 1833(t)(2)(C) of the Act, with payment rates based on source-specific costs, 

which has been utilized for each year’s brachytherapy source payment since CY 2010 
138 

(74 FR 60537; 75 FR 71980; 76 FR 74162; 77 FR 68242). As we have previously stated, 

we believe that adoption of the general OPPS prospective payment methodology for 

brachytherapy sources is appropriate (77 FR 68240). 

 Comment: Commenters expressed concern regarding CMS’ brachytherapy 

source data and stated that there are longstanding problems with CMS’ OPPS data used 

to set brachytherapy source payment rates. Commenters also stated that the 

brachytherapy source data continue to show huge variation in per unit costs across 

hospitals. Commenters noted that high dose rate (HDR) brachytherapy sources decay 

over a 90-day period and are used to treat multiple patients. Therefore, the commenters 

believed that the true cost of brachytherapy sources per use depends on the number of 

patients treated during the 90-day period, which makes it difficult to establish fair and 

adequate payment rates. Commenters also believed that CMS’ claims data contain rank 

order anomalies between the high-activity palladium-103 source (HCPCS code C2635) 

and the low-activity palladium-103 sources (HCPCS codes C2640 and C2641), and stated 

that the high-activity palladium-103 source always costs more than low-activity 

palladium-103 sources. 

 Response: We believe that the claims data used for brachytherapy ratesetting are 

adequate to ensure accurate payment for these services. Also, as we have stated in 

previous OPPS/ASC proposed and final rules, we believe that our per-source payment 

methodology specific to each source’s radioisotope, radioactive intensity, and stranded or 

non-stranded configuration, supplemented by payment based on the number of sources 

used in a specific clinical case, adequately accounts for the major expected sources of 
139 

variability across treatments (72 FR 66782; 74 FR 60534; 75 FR 71979; 76 FR 74161; 

and 77 FR 68241). We have also explained in previous OPPS/ASC proposed and final 

rules that a prospective payment system such as the OPPS relies on the concept of 

averaging, where the payment may be more or less than the estimated cost of providing a 

service for a particular patient, and with the exception of outlier cases, the prospective 

payment is adequate to ensure access to appropriate care (72 FR 66782; 74 FR 60535; 

75 FR 71979; and 77 FR 68241). In the case of brachytherapy sources for which the law 

requires separate payment groups, without packaging, the costs of these individual items 

could be expected to show greater variation than some other APCs under the OPPS 

because higher variability in costs for some component items and services is not balanced 

with lower variability in costs for other component items and services. In addition, 

relative payment weights are typically estimated using a smaller set of claims.

As we have stated in previous OPPS/ASC proposed and final rules, we agree that 

HDR brachytherapy sources such as HDR irirdium-192 have a fixed active life and must 

be replaced every 90 days (75 FR 71980; 76 FR 74162; and 77 FR 68242). As a result, 

hospitals’ per-treatment cost for the source would be dependent on the number of 

treatments furnished per source. The source cost must be amortized over the life of the 

source. Therefore, when establishing their charges for HDR iridium-192, we expect 

hospitals to project the number of treatments that would be provided over the life of the 

source and establish their charges for the source accordingly (72 FR 66783; 74 FR 60535; 

75 FR 71980; 76 FR 74162; and 77 FR 68242). For most of these OPPS services, our 

practice is to establish prospective payment rates based on the costs determined from 
140 

hospitals’ claims data to provide incentives for efficient and cost effective delivery of 

these services.

In the case of high-activity and low-activity iodine-125 sources, our CY 2012 

claims data show that the hospitals’ relative costs for the high-activity source as reported 

on hospital claims and in cost report data are greater than the costs of the low-activity 

sources, as we have noticed in the past. However, this relationship is reversed for 

palladium-103 sources, as a few commenters pointed out. As we have stated in the past, 

we do not have any information about the expected cost differential between high-activity 

and low-activity sources of various isotopes other than what is available in our claims and 

hospital cost report data (75 FR 71979; 76 FR 74162; and 77 FR 68242). For the 

high-activity palladium-103 source, only 7 hospitals reported this service in CY 2012, 

compared to 118 and 171 hospitals for the low-activity palladium-103 sources described 

by HCPCS codes C2640 and C2641, respectively. As we stated regarding this issue in 

the CYs 2010, 2011, 2012, and 2013 OPPS/ASC final rules with comment period, it is 

clear that fewer hospitals furnished the high-activity palladium-103 source than the 

low-activity palladium-103 sources, and we expect that the hospital cost distribution for 

those hospitals could be different than the cost distribution of the large number of 

hospitals reporting the low-activity palladium-103 sources (74 FR 60535; 75 FR 71979; 

76 FR 74162; and 77 FR 68242).

 After consideration of the public comments we received, we are finalizing our 

proposal to continue to set the payment rates for brachytherapy sources using our 

established prospective payment methodology, which is based on geometric mean costs. 
141 

The CY 2014 final payment rates for brachytherapy sources are found in Addendum B to 

this final rule with comment period. 

e. 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014, we 

proposed to create 29 comprehensive APCs to replace 29 existing device-dependent 

APCs. We proposed 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 was 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 proposed to create 

comprehensive APCs for the 29 most costly device-dependent services, where the cost of 
142 

the device is more expensive than the other costs that contribute to the cost of delivering 

the primary service. 

 We stated in the proposed rule that 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 stated that we believe that 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. 

 We also stated that we believe that our policy will enhance beneficiary 

understanding and transparency. Typically beneficiaries understand the primary 
143 

procedure to be the OPPS service they receive, and do not generally consider that the 

other HCPCS codes are separate services. For example, beneficiaries believe that a 

single service includes procedures 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 providers to tailor 

services to the specific needs of individual beneficiaries, thereby increasing the 

opportunities for efficiencies and improving the delivery of medical care. 

 Comment: Overall, commenters were generally supportive of the concept of 

creating larger payment bundles, but were uncertain that they fully understood the 

specifics of the proposed comprehensive APC payment policy. Commenters 

acknowledged many potential advantages for hospitals, and possibly also for 

beneficiaries in terms of lower coinsurance payments and increased transparency, as well 

as for increased physician flexibility. 

 A few commenters fully endorsed the proposal for CY 2014. For example, 

MedPAC stated that it has long supported CMS’ efforts to expand the size of payment 

units in the OPPS and supported this proposal, as well as other packaging proposals in 
144 

this final rule with comment period. MedPAC stated that the comprehensive APC groups 

have similarities to the diagnosis related groups (DRGs) used in the inpatient prospective 

payment system (IPPS) and that this payment structure encourages hospitals to identify 

the most efficient and efficacious methods to provide care for each patient, which will 

help contain Medicare spending. Another commenter believed that the proposed 

device-dependent APCs were particularly appropriate for comprehensive APCs because 

the independent services that require these devices are generally clearly defined and the 

other services furnished during the encounter are generally furnished in order to facilitate 

the independent service. The commenter supported the ability of this proposal to use all 

claims data in establishing a payment rate for the comprehensive APC. 

 Several commenters recommended a more expansive policy. One commenter 

recommended that CMS identify other procedures that would be suitable for the creation 

of comprehensive APCs. Other commenters suggested that CMS require hospitals to 

report charges for all items and services for which comprehensive APC payment is being 

made as covered charges and specify that hospitals may not charge beneficiaries for these 

items and services (because the copayment for the APC constitutes the only beneficiary 

cost sharing for the package of services). Commenters also suggested that CMS limit the 

national unadjusted payment for each comprehensive APC under the OPPS to no more 

than the standardized DRG amount that would be paid for the same service provided to 

an inpatient without complications or comorbidities. 

 Response: We appreciate the support of the commenters for our proposal to 

create comprehensive packages. We agree with the commenters that this would improve 
145 

our ability to more accurately establish payment rates for these services by enabling us to 

use all claims for the primary service in a comprehensive APC when establishing 

payment for that APC. We appreciate the commenters’ interest in identifying other 

services that would be suitable for the creation of comprehensive APCs, as well as ways 

to consider setting payment relative to the IPPS. We agree with the commenters that 

hospitals should report charges for all items and services for which a comprehensive APC 

payment is being made, and note that it has been a longstanding requirement as stated in 

the Claims Processing Manual IOM 100-4, Chapter 4, Section. 10.4.A that hospitals must 

report all services that were furnished on an outpatient claim regardless of whether or not 

those services are separately paid, and that Medicare providers may not separately bill 

beneficiaries for services that are covered under Medicare. 

 Comment: The majority of commenters recommended that CMS delay 

implementation of the comprehensive APCs until CY 2015 or later. While they generally 

supported the idea of larger payment bundles, commenters were concerned that they 

could not verify the accuracy of the proposed payments and urged CMS not to implement 

these policies until the agency has verified that its calculations are accurate. Commenters 

asserted that it has become increasingly difficult for stakeholders to verify OPPS payment 

rates because the complexity of the modeling logic is far beyond other payment systems 

that CMS administers, such as the IPPS. Some commenters were concerned that they 

were not able to replicate CMS’ calculations, preventing independent analyses and 

affecting their ability to develop comments and alternative proposals. Some commenters 

requested that CMS provide stakeholders with additional information about how 
146 

estimated costs for these APCs are being calculated for CY 2014, and give stakeholders 

an opportunity to comment on the additional information provided. 

 Some commenters requested that CMS provide individual impacts of each 

proposed policy when proposing several policies that have an interactive effect. Several 

commenters stated that CMS’ packaging proposals discussed in section II.A.3. of the 

proposed rule, combined with this proposal to create 29 new comprehensive APCs, 

created a complicated “layering” effect that made their understanding of how final 

estimated costs for proposed comprehensive APCs would be calculated a much more 

involved process. 

 Finally, commenters recommended a delayed implementation to allow hospitals 

more time to assess the impact of such a new payment approach on their particular 

institution and to consider how they may need to adjust organizational processes. 

Commenters also suggested that we might need more time to implement revisions to our 

claims processing systems. 

 Response: We agree with the commenters that we should delay implementation 

of the proposed comprehensive APCs. As we discuss later in this section, we are 

finalizing our proposal to create 29 comprehensive APCs with modification, but we are 

delaying implementation and final configuration of those comprehensive APCs until CY 

2015. We acknowledge commenters’ concerns that this is a complex proposal for a new 

payment structure under the OPPS. We agree that hospitals should have time to prepare 

for a comprehensive payment structure, and we also agree with the commenters that a 
147 

delay in implementation will allow us more time to operationalize changes necessary to 

process comprehensive payments. 

 In response to public commenters’ requesting additional detail on our calculation 

of the comprehensive APC relative payment weights, we provide a granular discussion of 

our methodology for constructing the comprehensive APC payment rates later in this 

section, as well as the specific APC configurations we would implement for CY 2014 if 

we had not delayed implementation until CY 2015. We also believe that the delay in 

implementation will give hospitals more time to study the final methodology for 

calculating APC relative payment weights that we discuss in this section for the 

modification that recognizes resource differences in complex and simple versions of the 

same primary service. We are taking advantage of the delay in implementation and 

requesting additional public comments on this methodology. 

 With regard to the commenters’ concern that they could not fully model the 

proposal, we provide all of the information we would have used to create APC relative 

payment weights for CY 2014 using the CY 2012 claims data to illustrate the final 

methodology below. We believe that this will assist interested parties in replicating our 

methodology. We will recalibrate all of the comprehensive APC relative payment 

weights for CY 2015 using CY 2013 claims data consistent with our annual recalibration 

of APC relative payment weights to reflect the most recently available claims and cost 

report information in next year’s rulemaking cycle. We discuss the limited 

methodological errors that we discovered in the proposed rule and subsequent correcting 

document in section II.A.3. of this final rule with comment period. 
148 

 With regard to the availability of detailed impacts, we believe that a delay in 

implementation until CY 2015 along with the illustrations of the methodology included in 

this section will give stakeholders the requested time to model this final policy and assess 

the impact on their organization. We will incorporate the proposed payment rates for 

CY 2015 comprehensive APCs in our CY 2015 impact analysis in the CY 2015 

OPPS/ASC proposed rule. 

 Comment: Commenters were also concerned that this proposal would impose a 

significant administrative burden on providers and that there is not sufficient time for 

information system technology vendors and operational processes to adjust to the new 

regulations or to allow hospitals enough time to fully understand how the proposals 

would affect their outpatient finances, making hospital budgeting for the upcoming year 

nearly impossible. Moreover, several commenters were concerned that neither CMS nor 

its Medicare Administrative Contractors (MACs) would be prepared to implement the 

proposed changes for CY 2014. 

 Other commenters believed that providers are likely to have increased costs and 

challenges in their efforts to accurately separate claims for unrelated services. One 

commenter recommended that CMS make the necessary operational changes to billing 

instructions before moving forward with its proposal, and implement the proposed 

comprehensive APCs only after the agency has used the new billing instructions long 

enough to have claims data that identify related services for the purpose of defining a 

comprehensive APC. 
149 

 Response: This proposal does not require any changes in provider coding and 

billing practices, nor would we expect providers to change their billing and coding 

practices in response to a change in payments. We do expect providers to assess their 

delivery of these comprehensive services in light of internal organizational processes. As 

previously stated, we are finalizing the comprehensive APC proposal with modification 

in this final rule with comment period, but we are delaying implementation of the 

finalized policy until CY 2015. This will allow us sufficient time to develop appropriate 

claims processing systems protocols for comprehensive APCs and to test those new 

protocols prior to implementation. 

 Comment: Many commenters were concerned that a comprehensive DRG-like 

payment would provide a single payment for a wide range of cases characterized by 

widely varying complexity and widely varying costs. Such a system could potentially 

disadvantage hospitals willing to take on the treatment of sicker, more complex and 

costly cases while rewarding those that handle less complex and less costly cases. One 

commenter was specifically concerned that the level of payment was not sufficient to 

support the higher level of diagnostic testing and ancillary services that occur at academic 

medical centers. Another commenter stated that the costs of these cases are relatively 

fixed when they are dependent on one or more expensive devices and hospitals can either 

perform these complex procedures at a loss or cease performing them altogether, which 

has implications for beneficiary access to care. One commenter stated that hospitals have 

only limited ability to reduce costs for complex procedures and recommended that CMS 

incorporate a “severity level” APC similar to the Medicare Severity Diagnosis Related 
150 

Group (MS-DRG) system where there is a base DRG, a complication or comorbidity 

DRG (CC DRG), and a major complication or comorbitity DRG (MCC DRG). In 

adapting the concept to the APC classification system, the commenter recommended that 

complexity could be based on the included components, for example, an ICD insertion 

comprehensive APC and another higher-weighted comprehensive APC for ICD insertion 

with removal of previously implanted device. 

 A few commenters believed that the comprehensive payment may have 

unintended consequences that could include quality consequences, cost consequences, 

and payment consequences. Several commenters were concerned that the quality of care 

could suffer because the commenters believed that there are currently no outcome 

programs or measures in place, similar to inpatient quality measures, readmission 

reduction programs and value based purchasing incentives, to monitor the quality of care 

provided under an encounter-based payment that creates an incentive for hospitals to 

improve delivery efficiency. The commenters believed that inappropriate attempts to 

garner additional profit could lead to reduced access and lower quality of health care 

services provided in the hospital outpatient setting. Several commenters were concerned 

that there might be unintended Medicare cost consequences if hospitals split services and 

delayed ancillary procedures until a subsequent encounter. Some of these commenters 

believed that the proposal should be tested or evaluated through a demonstration project 

or some other appropriate mechanism before broader introduction, while one commenter 

objected to the CY 2014 implementation because CMS had not proposed mechanisms to 

retrospectively assess the ramifications of these proposed policy changes on patients. 
151 

Finally, one commenter opined that the proposal does not conform the requirement under 

section 1833(t)(2) of the Act that items and services shall not be treated as comparable 

with respect to the use of resources if the highest mean cost for an item or service is more 

than 2 times greater than the lowest mean cost. 

 Response: We agree with the commenters that there is wide spread variation in 

the comprehensive costs of individual claims within each primary procedure, and we 

further agree with the commenters that we do not want to financially disadvantage 

hospitals that treat beneficiaries who require more complex and costly procedures. We 

also understand that complex beneficiaries may require more diagnostic tests. We agree 

with the commenters that there are constraints on individual hospitals’ ability to reduce 

costs associated with complex procedures, and we agree with the commenters who 

recommended recognizing the level of resources associated with more complex forms of 

a procedure not unlike the severity levels used in the IPPS. Therefore, we are modifying 

our proposed policy for creating comprehensive APCs to recognize variation in the 

complexity of services that will be paid through comprehensive APCs for CY 2015. 

 We do not believe that there is any issue with 2 times rule violations in the 

proposed rule or in this final rule with comment period. The statute directs the Secretary 

to establish groups of covered OPD services that are comparable both clinically and with 

respect to use of resources. In doing so, the statute requires the Secretary to compare the 

mean cost of items and services within a group and ensure that the highest mean cost item 

or service is no more than 2 times greater than the lowest mean cost item or service 

within a group (2 times rule). With respect to each proposed comprehensive APC, no 
152 

2 times rule violations were observed. However, as noted above, we do observe 

widespread variation within the comprehensive costs of primary services. As we discuss 

below in more detail, our final policy recognizes differences in complexity and resource 

costs of complex forms of the primary service to address variation within the 

comprehensive costs of individual primary procedures. 

 Commenters raised concerns about quality decreases because of economic 

pressures, and access issues because of a reluctance of facilities to provide these 

device-intensive procedures to certain beneficiaries if the expected costs for complex 

cases would greatly exceed the comprehensive APC payment. We note that these same 

concerns were raised with the introduction of both the IPPS and the OPPS, but that 

claims data continue to show that hospitals continue to provide complex services to 

beneficiaries. We believe that hospitals understand that there will be considerable 

variation in the costs of providing a comprehensive primary service to individual 

beneficiaries relative to the comprehensive payment amount. 

 We disagree with the commenters on the need for greater outcomes measures 

prior to implementation of the comprehensive APC payment policy. As noted, in this 

final rule with comment period, we are recognizing the resource differential for complex 

forms of primary procedures. Further, we believe that outpatient procedures, such as 

these device-intensive procedures, that are also performed on an inpatient basis benefit 

from hospital protocols established for inpatient hospital quality programs such as quality 

measures, readmission reduction programs, and value-based purchasing incentives. 

Therefore, we do not agree with the commenters who were concerned that patient care 
153 

might suffer or that quality measures need to be strengthened before implementation of 

the comprehensive APC policy. 

 We are concerned by some of the comments that imply that some providers might 

change their practice of providing a comprehensive service and instead perform split or 

staged procedures in order to maximize payment. Although we do not believe that 

practitioners or facilities would voluntarily expose beneficiaries to an increased risk of 

additional surgery and anesthesia, we recognize that payment can influence behavior. 

When we implement the finalized comprehensive APC policy in CY 2015, we will 

closely monitor billing patterns for split or staged procedures and consider claims 

processing edits or other approaches to ensure that our prospective payments uniformly 

apply to complete services, if necessary. 

 With regard to the commenters’ request for evaluation under a demonstration 

project before full implementation, we do not believe that comprehensive APCs are 

sufficiently different from our historical hospital payment practices to warrant a 

demonstration project. Further, we are adopting the proposed policy with modification 

and are delaying implementation of the comprehensive APC policy until CY 2015 in this 

final rule with comment period to the public to allow us and the public time to transition 

to this new payment approach. 

(2) Comprehensive APCs for Device-Dependent Services 

(a) Identification of High-Cost Device-Dependent Procedures 

 As we discussed in the CY 2014 OPPS/ASC proposed rule, in order to identify 

those services for which comprehensive packaging would have the greatest impact on 
154 

cost validity, payment accuracy, beneficiary transparency, and hospital efficiency, we 

ranked all APCs by CY 2012 costs and then identified 29 device-dependent APCs where 

we believe that the device-dependent APC is characterized by a costly primary service 

with relatively small cost contributions from adjunctive services. 

 Comment: Several commenters asked for additional information on the criteria 

utilized by CMS to create the comprehensive APCs and how CMS would evaluate 

services and procedures to qualify for comprehensive APCs going forward. One 

commenter asked why the other 10 device-dependent APCs were not included, and why 

no other nondevice-dependent APCs were classified as a comprehensive APC. Another 

commenter recommended that CMS consider the comprehensive approach for a smaller 

number of APCs (four or five), while other commenters recommended that additional 

APCs be paid as comprehensive APCs, including recommendations for a broader 

application of the comprehensive APC criteria to all claims dominated by a single 

procedure and specifically recommended procedures such as those assigned to APC 0067 

(Stereotactic Radiosurgery). 

 Response: As we stated in the proposed rule, we initially proposed a subset of 

device-dependent APCs for conversion to comprehensive APCs because we believed that 

these procedures represented a cohesive subgroup with which to introduce a broader 

packaging initiative. We stated that comprehensive APCs are appropriate when they 

reflect a single global service that the beneficiary would be receiving from the hospital. 

In this case, we have identified procedures where the beneficiary would reasonably 

consider the encounter to be for the implantation of a device, and we limited our proposal 
155 

to the most costly procedures where the geometric mean cost of the comprehensive 

procedure was approximately five times the current beneficiary inpatient deductible or 

greater. This created a consistent group of services with similar clinical and resource 

characteristics, which were archetypal for our definition of a comprehensive service. 

 However, we agree with the commenters that there is no reason that 

comprehensive payments could not be extended in future years to other procedures. In 

addition, we do not agree with the commenters that we should limit the comprehensive 

APCs to a small trial of four or five APCs. We are adopting the proposed policy with 

modification and are delaying implementation of the comprehensive APC policy until 

CY 2015 in this final rule with comment period to the public to allow us and the public 

time to transition to this new payment approach. We believe that the identified subgroup 

of device-related APCs is clinically cohesive and similar in resource construction. We 

will consider possibly adding a comprehensive APC for single session cranial stereotactic 

radiosurgery (procedures assigned to APC 0067) in CY 2015. 

(b) Creation of Comprehensive APCs for Certain Device-Dependent Procedures 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014, we 

proposed to create 29 comprehensive APCs to prospectively pay for device-dependent 

services associated with 136 HCPCS codes. We proposed to base the single all-inclusive 

comprehensive APC payment on all outpatient charges reported 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: (1) packaged payment for all 

packaged services and supplies in CY 2014 and as discussed in section II.A.3. of this 
156 

final rule with comment period; and (2) packaged payment for all adjunctive services, 

which are those services and supplies that typically would receive separate payment when 

appearing on any claim that does not contain a HCPCS code reported as a primary 

service assigned to a comprehensive APC, including certain items and services currently 

paid through other fee schedules. We present these two categories for ease of 

presentation, but generally consider both sets of services to be “adjunctive” in that they 

are integral and ancillary to, supportive of, and dependent on the primary procedure. 

Therefore, we consider all outpatient services on a comprehensive APC claim to be 

adjunctive to the primary service with a few exceptions, such as mammography services 

and ambulance services, which are never payable as hospital outpatient services in 

accordance with section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which must 

receive separate payment under section 1833(t)(2)(H) of the Act; and pass-through drugs 

and devices, which also require separate payment under section 1833(t)(6) of the Act. 

(3) Inclusion of Otherwise Packaged Services and Supplies 

 As part of the comprehensive APCs, we proposed to package all services that are 

packaged in CY 2013, and all services proposed for unconditional or conditional 

packaging for CY 2014. 

 We did not receive any separate public comments on this proposal outside of the 

public comments we received on our proposal to create comprehensive APCs for 

CY 2014 (which final policy with modification, we are delaying implementation until 

CY 2015) discussed in section II.A.3. of this final rule with comment period. 
157 

(4) Inclusion of Adjunctive Services 

 We previously noted in section II.A.3.a. of the 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 proposed to package into the 

comprehensive APCs all of 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. 

 Comment: Several commenters expressed concerns regarding the packaging of 

unrelated services reported on the claim. Given that a single claim can span multiple 

days, a few commenters believed that under current billing instructions this proposal 

would arbitrarily package all services occurring within a 30-day or 60-day period. 

Currently, there is no means on outpatient claims to differentiate between adjunct 

services that are related to the primary procedure and other services that are ordered by 
158 

other physicians and/or are unrelated to the primary procedure. These commenters were 

concerned that if CMS assumed that all services reported on the claim are related, it could 

lead to incorrect ratesetting. Alternatively, these commenters reasoned that if CMS 

revised billing instructions to allow all unrelated services (not merely labs) to be billed on 

separate claims, hospitals would need to change their billing systems to bill separately for 

unrelated services and would experience significant administrative burden separating 

unrelated from related items and services. 

 Response: We do not agree with the commenters’ assertions that a significant 

amount of unrelated services would be billed on the claim for the primary service. We 

note that most commenters were concerned about unrelated services reported on claims 

spanning 30 days. We remind hospitals that we have previously issued manual guidance 

in the Internet Only Manual at 100-4, Chapter 1, Section 50.2.2 that only recurring 

services should be billed monthly. Moreover, we have further specified that in the event 

that a recurring service occurs on the same day as an acute service that falls within the 

span of the recurring service claim, hospitals should bill separately for recurring services 

on a monthly claim (repetitive billing) and submit a separate claim for the acute service. 

We also do not expect that these claims for comprehensive services in the outpatient 

setting would extend beyond a few days. 

 Additionally, we have noted that occasionally beneficiaries may, for reasons of 

convenience or coincidence, receive laboratory services at the hospital that are unrelated 

to the primary service. When beneficiaries are at the hospital for the non-trivial 

procedures in comprehensive APCs, we do not expect that unrelated laboratory services 
159 

would be a common occurrence, but we have nonetheless instructed hospitals that 

laboratory tests ordered by unrelated providers for unrelated medical conditions may be 

billed on a 14X bill-type. We refer readers to section II.A.3.c.(3) of this final rule with 

comment period for more discussion of this final policy. 

 Beyond these two sets of circumstances, we believe that other services performed 

at the time of these major procedures can reasonably be considered to be related to the 

primary service or procedure. We proposed that we would consider all services reported 

on the claim to be related to the primary service. Under such a presumption, all services 

delivered to a beneficiary during an encounter for a comprehensive procedure would be 

included in establishing the payment rate for the comprehensive APC. As we are 

including all adjunctive services in the comprehensive APC calculation, hospitals would 

not need to look for unrelated services. We considered all covered costs when 

calculating the comprehensive APC payment as is done with IPPS DRGs. As previously 

noted, hospitals would continue to code and bill for these services in the same way that 

they currently code and bill. 

 Comment: One commenter asked that CMS modify the proposal by specifically 

excluding clinical diagnostic laboratory tests and the facility component of anatomic 

pathology procedures from comprehensive APC payment for the same reasons that other 

commenters believed that these services should not be packaged as part of our general 

packaging proposals. 

 Response: We do not agree with this commenter that laboratory and the facility 

component of anatomic pathology procedures should be excluded from the 
160 

comprehensive APC payment. We are finalizing our other proposed policy to package 

laboratory tests, as described in section II.A.3.c.(3) of this final rule with comment 

period. We note that laboratory and anatomic pathology tests are almost always 

performed as part of the provision of the primary service in the case of these 

comprehensive services and are, therefore, appropriately considered ancillary and 

supportive. In summary, we believe that these device-dependent procedures represent 

archetypal cases of a single comprehensive service and that laboratory and anatomic 

pathology services are classic examples of adjunctive services that are supportive of the 

primary procedure. 

(5) Inclusion of Devices, Durable Medical Equipment, Prosthetics, Orthotics and 

Supplies (DMEPOS) 

 As part of the comprehensive service packaging policy described above, we 

proposed 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 (t)(1)(B)(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 § 419.2(b)(4) of the regulations. Under this 
161 

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 noted 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 proposed to consider all DMEPOS items to be covered hospital 

outpatient department services and to be adjunctive to the primary service when they are 

delivered during the comprehensive service, as described above and, therefore, proposed 

to package such items into the applicable comprehensive service. This policy 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 proposed that they are covered OPD services as provided under sections 

1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and §§ 419.2(b)(4), (b)(10), and (b)(11) of 

the regulations, and payable under the OPPS, as described above. 
162 

 We did not receive any public comments on our proposal to include these 

DMEPOS items in the comprehensive APC payment. We did receive public comments 

on the impact of these new items on budget neutrality, which we discuss below, and 

comments on how DMEPOS items impact APC 0227 (Implantation of Drug Infusion 

Device), which we discuss in greater detail later in this section. 

(6) 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 that these 

services 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. These services 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 
163 

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 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, in the CY 2014 

OPPS/ASC proposed rule (78 FR 43534), we proposed 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 perioperative 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. These services 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. 

 Comment: Physical therapy stakeholders commented that they were concerned 

about the effect this proposal may have on necessary physical therapy services that are 

provided in conjunction with these proposed 29 APCs and any comprehensive APCs that 

may be added in the future. The commenter stated that, generally, section 

1833(t)(1)(B)(4) of the Act excludes therapy services from the OPPS. The commenter 

further stated that, instead, the majority of therapy services in the hospital setting are 
164 

provided by therapists under a plan of care, and are paid under the physician fee schedule 

(we refer readers to section 1834(k) of the Act). However, the commenter acknowledged 

that there is a subset of services designated as “sometimes therapy” services that are paid 

under the OPPS when they are not furnished as therapy under a certified plan of care in 

an outpatient hospital or critical access hospital (CAH). 

 The commenter stated that physical therapy should not be considered to be an 

adjunctive service because physical therapists are consultative members of the health care 

team, physical therapy is a separate benefit, and some services provided during the 

perioperative period, such as a physical therapy evaluation to establish a plan of care, 

could still be considered to be therapy services. The commenter was also concerned that 

the comprehensive APC payment would not be adequate to cover the services provided 

by therapists during this perioperative period, that rehabilitation could be prolonged if the 

therapist is unable to intervene “to increase the patient’s mobility, function and endurance 

prior to surgery,” and that it could be difficult to reliably and reproducibly differentiate 

those perioperative services that are not therapy from those that could be separately billed 

as therapy services. Another commenter asked if functional reporting requirements 

would apply in these cases of adjunctive services reported with therapy codes. 

 Response: We agree with the commenter that physical therapy is a separate 

benefit that is not part of an OPPS service. However, after consideration of the public 

comments we received, we continue to believe that services provided during the 

perioperative period are adjunctive services and not therapy services as described in 

section 1834(k) of the Act regardless of whether the services are delivered by therapists 
165 

or other nontherapist health care workers. We note that adjunctive services are those 

services provided in support of another service, that is, they are typically performed to 

facilitate the primary service and are unnecessary or serve a different function if the 

primary service is not provided. Adjunctive services may be provided by consultative 

members of the healthcare team. For example, an add-on procedure performed by a 

cardiac surgeon is nonetheless adjunctive to the primary procedure, as an add-on 

procedure by definition cannot exist in the absence of the procedure to which it is added. 

 We have previously noted that therapy services are those provided by therapists 

under a plan of care in accordance with section 1835(a)(2)(C) and section 1835(a)(2)(D) 

of the Act 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. Specifically, we have said in the Claims Processing 

Manual IOM 100-4, Chapter 5, Section 20.1 that some services, described as “sometimes 

therapy services,” may at times be considered therapy, but at other times may be consider 

to be outpatient department services, such as when those services are provided by nontherapists or provided in the absence of a plan of care. We stated in the proposed rule 

that we believe services reported with therapy codes, but that are provided as part of a 

comprehensive service are similar to “sometimes therapy” services in that these services 

are not properly considered to be therapy services even though they may be reported with 

therapy HCPCS codes (78 FR 43559 through 43560). 

 Considering the services that commenters believed should be therapy services, we 

note that these are outpatient procedures; therefore, the comprehensive procedure 
166 

includes only the perioperative period, a brief period of time immediately before and 

immediately following the procedure. We would not expect that an evaluation performed 

immediately following the surgery would establish the beneficiary’s needs for 

rehabilitation because the beneficiary is still under the influence of the completed primary 

surgical procedure. Rather, services reported with therapy codes during that brief time 

period may represent interventions to promote breathing and ambulation, traditional postoperative nursing services, or may represent assessments to provide the surgeon with 

specific clinical information relative to the immediate effects of the surgery. We would 

not expect therapy assessments or rehabilitative therapy until after the patient has 

recovered from the immediate effects of the procedure and associated anesthesia. With 

respect to the statement that it may be beneficial to increase the beneficiary’s endurance 

prior to surgery, we agree with the commenter that this can be a desirable and necessary 

service, but we would not expect that therapists are routinely increasing “mobility, 

function and endurance” in the hour or two immediately before the surgery. Therefore, 

we do not expect that providers and reviewers would struggle to differentiate separately 

paid therapy services from appropriately packaged nontherapy services. We believe that 

therapy services would be separated in time from the comprehensive services, and would 

not be provided during the span of the comprehensive service, from OPD registration to 

discharge, because we do not expect that the comprehensive service would extend 

beyond the immediate perioperative period. We also believe that, for a beneficiary who 

is already receiving therapy on an ongoing basis, it is very unlikely that a therapist would 

deliver that service during a comprehensive service. There are rare exceptions, for 
167 

example, in the case of a beneficiary receiving therapy for a burn or contracture. In that 

case, we have previously published guidance stating that recurring services may be 

separated from acute services and billed on a separate claim. 

 We have stated that the relative cost of these comprehensive services includes all 

of the estimated costs reported on the claims for these services. Therefore, the total 

payment for the comprehensive service includes a payment for the services reported with 

therapy codes that is proportional to the frequency with which these codes are reported on 

the claims. As the comprehensive payment now reflects costs, we believe that the 

aggregate comprehensive payment will continue to be adequate to cover the cost of the 

service provided, and we do not expect that these services would be discontinued when 

they are medically necessary. We also note that there is no provision in this final rule 

with comment period that prohibits a hospital from providing any medically necessary 

service as part of a comprehensive service, regardless of the code with which it is 

otherwise commonly reported. 

 With respect to functional reporting, we note that these services reported with 

therapy codes are outpatient department services not therapy services and, therefore, the 

requirement for functional reporting does not apply. These changes will be implemented 

in the claims processing systems prior to the start of CY 2015. 

(7) Inclusion of Additional Hospital Room and Board Revenue Cost Centers in the 

Calculation of Covered Costs 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we stated that we 

believe that the cost of the bed and room occupied by the patient, the cost of nursing 
168 

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 reported on the 

claim to the comprehensive service, we believe that we have an opportunity to better 

capture costs by including these costs in our calculations even when they appear in 

certain revenue cost centers not usually used to report OPPS costs. Specifically, we 

proposed to include 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 because we believe 

these revenue cost centers are sometimes associated with the costs of room, nutrition, and 

nursing care provided during these comprehensive services. 

 Comment: One commenter supported the specific inclusion of room and board 

revenue cost centers on outpatient claims, but another commenter believed that reporting 

may be difficult for hospitals and hospital systems. Commenters were concerned that 

CMS did not discuss how those charges would be included in the cost calculation for the 

comprehensive APCs or provide a cost center source for converting those charges to 

costs in the CY 2014 OPPS Revenue Code to Cost Center Crosswalk released with the 

proposed rule. Another commenter was concerned that additional funds were not moved 

into the OPPS system to account for these “new” costs. 

 Response: We appreciate the commenter’s support for our decision to 

specifically identify the costs of room and board as being covered costs in certain 

outpatient stays. We understand the other commenters’ confusion as to why room and 
169 

board revenue codes would appear on an outpatient claim because our claims processing 

instructions do not allow payment for these revenue codes on Part B claims as they are 

reserved exclusively for inpatient use. (For example, we refer readers to our recent 

contractor instructions under Change Request (CR) 8185, “CMS Administrator's Ruling: 

Part A to Part B Rebilling of Denied Hospital Inpatient Claims”, which excludes these

revenue codes on rebilled Part B inpatient claims because room and board services are not 

covered under Medicare Part B). For this reason, we have not included these revenue 

codes on our revenue code to cost center crosswalk. Although we proposed to include 

costs estimated from charges for these revenue codes in our estimate of comprehensive 

APC costs, we did not include any of these costs. We failed to modify our revenue 

code-to-cost center crosswalk that we use to estimate costs from charges on claims to 

include room and board revenue codes. Without revenue codes and associated CCRs 

from identified cost centers, our model ignored those revenue codes and did not estimate 

a cost for the room and board revenue codes. We did not include any additional 

estimated costs in our proposed comprehensive APC payment calculation. We discuss 

the role of the revenue code-to-cost center crosswalk in section II.A.1.c. of this final rule 

with comment period. 

 We now believe that the appearance of these revenue codes on hospital outpatient 

claims would be improper billing. Charges on ancillary revenue codes for recovery room 

and observation, for example, should reflect the complete costs of furnishing those 

services, including the capital cost of the room and nursing labor costs. Further, we 

would expect that hospitals would allocate these costs, and if appropriate, board costs for 

services furnished to outpatients, to ancillary cost centers on their Medicare hospital cost 
170 

report consistent with the matching principles of cost accounting principles. We believe 

that, as calculated, our estimated costs for comprehensive APCs appropriately includes 

all costs and charges associated with staying in a room for the duration of the 

comprehensive service as an outpatient, and we are not finalizing our proposal to include 

the costs reported with certain inpatient room, board, and nursing revenue codes. 

(8) Inclusion of Hospital-Administered Drugs 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we also proposed 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 noted 

that, in defining these packaged drugs, we were 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 proposed 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 payment. We stated that we believe that the physician 
171 

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 proposed 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. 

 Comment: Commenters generally supported the inclusion of drugs as supplies in 

the comprehensive APC payment. For example, one commenter stated that this proposal 

would be extremely helpful to beneficiaries by reducing their financial burden and would 

greatly reduce the processing burden on the hospital. Several commenters stated that 

CMS’ reasoning was sound and the concept should be expanded to all self-administered 

drugs incident to practitioners’ therapeutic services, not just in comprehensive APCs 

because the commenters believed that the concept that drugs are integral and adjunctive 

to the furnishing of a therapeutic service applies to observation and other procedures. For 

example, one commenter stated that self-administered drugs provided during an ED visit 

are directly related to the necessary care. The commenter suggested that a requirement to 

bill for self-administered drugs be established so that these costs could be identified for 

inclusion in ratesetting. 

 However, one commenter was concerned that including all hospital-administered 

drugs, regardless of the route of administration, in the cost calculations of the 
172 

comprehensive APCs will not accurately account for the significant cost variation in 

required drugs from beneficiary to beneficiary based on individual beneficiary 

requirements and that, as a result, the payment rate for a comprehensive APC might not 

provide adequate payment for the specific drugs and biologicals an individual beneficiary 

needs, and that hospitals would be discouraged from providing appropriate drugs during a 

comprehensive service. 

 Response: We appreciate the commenters’ support for our proposal to consider 

drugs, regardless of their route of administration, to be adjunctive supplies used in 

support of the primary comprehensive service when ordered by a physician and delivered 

during the administration of a comprehensive service. 

 Self-administered drugs are a special issue because they are excluded from 

Medicare Part B coverage by section 1861(s)(2)(B) of the Act as implemented in the 

regulations at 42 CFR 410.27. However, as we have stated in the Benefit Policy Manual 

IOM 100-2, Chapter 15, Section 50.2, drugs that are integral to a procedure are 

considered to be supplies used in the delivery of covered hospital outpatient services, and 

not part of the Part B drug benefit as described under section 1861(s)(2)(B) of the Act 

and 42 CFR 410.27. We do not view this proposal to include all medications provided by 

the hospital for delivery during a comprehensive service pursuant to a physician order, 

regardless of the route of administration, as adjunctive supplies to be an exception to the 

benefit category exclusion for self-administered drugs, but rather that covered outpatient 

services include supplies and other ancillary items needed to deliver these comprehensive 

services. As stated in our discussion above, we have historically instructed hospitals to 
173 

include charges for self-administered drugs as supplies on submitted claims, and we, 

therefore, include them in our calculation of APC payments. We also do not view this 

proposal as an expansion of coverage, but rather as the application of an existing policy 

to a broader payment bundle. 

 Although some cost of drugs that are used as supplies have been included in APC 

payments, we recognize that there are some drugs that previously may not have been 

considered as supplies because previously they were provided outside of the defined 

service. We generally address public comments about how costs for newly included 

adjunctive items will be considered under budget neutrality below. 

 We do not believe that including these drugs and biologicals in the comprehensive 

APC payment greatly increases a hospital’s financial risk for providing a comprehensive 

service. Further, we expect that a payment based on geometric mean estimated cost 

would reflect the relative resources of drugs used as supplies included on comprehensive 

service claims, along with all other ancillary supplies and services, and that while the cost 

of any given case will vary, the hospital would receive a payment based on average 

estimated cost for all cases. We do not believe that comprehensive APC payments that 

include physician-ordered, hospital-administered drugs delivered during the 

comprehensive service would be inadequate to cover the cost of providing the service, 

and we do not believe that the comprehensive APC payment would discourage hospitals 

from providing appropriate drugs during delivery of these comprehensive services. 

 Finally, we agree with the commenters that all covered costs related to a service 

should be included on the claim per our manual instruction in the Claims Processing 
174 

Manual IOM 100-4, Chapter 4, Section 10.4.A and as discussed in section II.3.a. 

(Packaging) of this final rule with comment period and that those costs should be 

reported as precisely as possible using HCPCS codes when available or uncoded revenue 

cost centers when HCPCS codes do not exist. Overall, we believe that drug costs, 

regardless of the route of administration, are accurately accounted for in the APC relative 

payment weight. We believe that overall payment for the comprehensive service is 

adequate and will permit access to the specific drugs and biologicals required for an 

individual beneficiary. 

 After consideration of all of the public comments we received, we are finalizing 

our proposal to package all outpatient services, including 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; 

coded and 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 outpatient components reported by HCPCS codes 

that are provided during the comprehensive service, except for certain services including 

mammography services, ambulance services, brachytherapy seeds, and pass-through 

drugs and devices. When billed on a claim in conjunction with a primary procedure 

assigned to status indicator “J1” in CY 2015, we will pay for these services through the 

OPPS comprehensive APC payment. We are not finalizing our proposal to include costs 

reported with room, board, and nursing revenue codes 012X, 013X, 015X, 0160, 0169, 
175 

0200 through 0204, 0206 through 0209, 0210 through 0212, 0214, 0219, 0230 through 

0234, 0239, 0240 through 0243, and 0249. 

 The APCs for which we are finalizing this proposal for CY 2015 are identified 

below in Table 8. 

TABLE 8.—CY 2014 COMPREHENSIVE APCs ILLUSTRATION 

Clinical 

Family 

CY 

2014 

APC* Group Title Comments 

CY 2014 

Estimated 

Geometric 

Mean Cost* 

CY 2014 

Proposed 

APC 

NSTIM 0039 Level I Implantation of Neurostimulator Renamed $17,590.47 0039 

NSTIM 0040 Level I 

Implantation/Revision/Replacement of 

Neurostimulator Electrodes 

 $4,714.87 0040 

NSTIM 0061 Level II 

Implantation/Revision/Replacement of 

Neurostimulator Electrodes 

 $6,567.49 0061 

EVASC 0083 Level I Endovascular Procedures Renamed $4,229.68 0083 

EPHYS 0085 Level II Electrophysiologic Procedures $5,058.62 0085 

AICDP 0089 Level III Insertion/Replacement of 

Permanent Pacemaker 

Renamed $10,754.87 0089 

AICDP 0090 Level I Insertion/Replacement of 

Permanent Pacemaker 

 $7,480.34 0090 

EVASC 0104 Level 1 Endovascular Stents Renamed $8,554.42 0104 

AICDP 0106 Insertion/Replacement of Pacemaker 

Components 

Renamed $4,946.02 0106 

AICDP 0107 Level I Implantation of CardioverterDefibrillators (ICDs)  $25,557.38 0107 

AICDP 0108 Level II Implantation of CardioverterDefibrillators (ICDs)  $32,947.68 0108 

UROGN 0202 Level VII Female Reproductive 

Procedures 

 $4,595.75 0202 

PUMPS 0227 Implantation of Drug Infusion Device $15,790.66 0227 

EVASC 0229 Level II Endovascular Procedures Renamed $8,769.82 0229 

ENTXX 0259 Level VII ENT Procedures $30,445.75 0259 

EYEXX 0293 Level VI Anterior Segment Eye 

Procedures 

 $8,459.01 0293 

NSTIM 0318 Level II Implantation of 

Neurostimulator 

Renamed $27,227.27 0318 

EVASC 0319 Level IV Endovascular Procedures Renamed $15,891.12 0319 

UROGN 0385 Level I Urogenital Procedures Renamed $7,668.56 0385 

UROGN 0386 Level II Urogenital Procedures Renamed $13,611.48 0386 

ARTHR 0425 Level II Arthroplasty or Implantation 

with Prosthesis 

 $10,240.36 0425 
176 

Clinical 

Family 

CY 

2014 

APC* Group Title Comments 

CY 2014 

Estimated 

Geometric 

Mean Cost* 

CY 2014 

Proposed 

APC 

EPHYS 0444 Level IV Electrophysiologic Procedures New $14,302.41 

EVASC 0445 Level III Endovascular Procedures New $13,375.31 

BREAS 0648 Level IV Breast and Skin Surgery $7,262.53 0648 

AICDP 0654 Level II Insertion/Replacement of 

Permanent Pacemaker 

 $8,424.63 0654 

AICDP 0655 Insertion/Replacement/Conversion of a 

Permanent Dual Chamber Pacemaker or 

Pacing Electrode 

 $15,425.03 0655 

EVASC 0656 Level II Endovascular Stents Renamed $10,061.92 0656 

UROGN 0674 Level III Urogenital Procedures Renamed $15,729.54 0674 

EVENT 0680 Insertion of Patient Activated Event 

Recorders 

 $6,993.24 0680 

EVASC (Deleted) Deleted 0082 

NSTIM (Deleted) Deleted 0315 

EPHYS (Deleted) Deleted 8000 

* APC and associated geometric mean costs from CY 2012 claims data that we would have implemented 

for CY 2014; finalizing the comprehensive APC policy for CY 2015. We will recalibrate all of the 

comprehensive APC relative payment weights for CY 2015 using CY 2013 claims data. 

Keys: 

AICDP = Implantable Cardiac Defibrillators and Pacemakers 

ARTHRO = Arthroplasty 

BREAS = Breast Surgery 

ENTXX = ENT Procedures 

EPHYS = Cardiac Electrophysiology 

EYEXX = Ophthalmologic Procedures 

EVASC = Endovascular Procedures 

EVENT = Event Monitoring 

NSTIM = Neurostimulators 

UROGN = Urogenital Procedures

(c) Methodology 

 As we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we 

calculated the proposed relative payment weights for these device-dependent 

comprehensive APCs by using relative costs derived from our standard process as 

described in section II.A. of the proposed rule and this final rule with comment period. 

Specifically, after converting charges to costs on the claims, we identified all claims 

containing 1 of the 136 HCPCS codes that define procedures specified as constituting a 
177 

comprehensive service. These claims were, by definition, classified as single major 

procedure claims. Any claims that contained more than one of these HCPCS codes were 

identified, but were not 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. Comprehensive claims for each primary 

service reported by a HCPCS code were excluded when their comprehensive claim cost 

exceeded +/- 3 standard deviations from the geometric mean comprehensive cost of the 

primary service HCPCS code. 

(d) Payments 

 As we further stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we 

used the proposed APC relative payment weights for each of these device-dependent 

comprehensive services to calculate proposed payments following our standard 

methodology. The proposed payments for the HCPCS codes assigned to these proposed 

comprehensive APCs were included in Addendum B of the proposed rule (which is 

available via the Internet on the CMS Web site). We proposed to assign a new status 

indicator, “J1” (OPD services paid through a comprehensive APC), to these devicedependent procedures. The claims processing system would be configured to make a 

single payment for the device-dependent comprehensive service whenever a HCPCS 

code reporting 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 
178 

identified on a claim. From our data, we determined that multiple primary HCPCS codes 

are reported together in 24 percent of these device-dependent claims, but rarely represent 

unrelated services. Having determined that having multiple unrelated device-dependent 

services reported on a claim is an uncommon event, we proposed to only pay 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. 

 Comment: Some commenters suggested that errors and lack of clarity pertaining 

to some HCPCS codes proposed for comprehensive payment in the proposed rule 

prevented the public from being able to respond informatively to the comprehensive APC 

proposal. One commenter was concerned that CMS stated in the preamble text that there 

are 136 HCPCS codes that define the device-dependent services to be included in the 

proposed comprehensive APCs whereas, in Addendum B to the proposed rule, there are 

148 HCPCS codes listed. Other commenters identified occasional instances in the 

proposed rule APC cost statistics data files where the number of single procedures was 

reported as more than the number of total procedures, and they also identified several 

inconsistencies in Addendum B where the HCPCS code’s status indicator was listed as 

“Q2” (conditionally packaged), yet the APC assignment was associated with status 

indicator “J1” (comprehensive APC, all other items on the claim are packaged). 

 Response: We discussed 136 primary procedure codes in our proposal for 

comprehensive APCs (78 FR 43534). Commenters are correct that we also identified 148 
179 

primary procedure codes in Addendum B to the proposed rule as corrected (which is 

available on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html). As we discussed in our September 

6, 2013 correcting document, we revised the status indicators of several HCPCS codes 

that appeared in Addendum B from “Q2” to “J1” to reflect their status as a primary 

procedure code in a comprehensive APC. The remaining difference in these two 

numbers is that 136 represents the number of CY 2012 device-dependent HCPCS codes 

reported on the CY 2012 claims that we are using to model CY 2014 geometric mean 

costs to illustrate the comprehensive APC methodology. We generally discuss our 

modeling of the CY 2012 claims data to establish CY 2014 payment rates in section 

II.A.1.c. of this final rule with comment period. However, considering the revisions to 

specific procedure codes used to report certain procedures, such as the new percutaneous 

coronary intervention procedure codes (CPT codes 92920 through 92943) beginning in 

CY 2013, the number of CY 2013 device-dependent HCPCS codes appropriately 

assigned to comprehensive APCs increased to 148. Upon adoption of the new coding 

scheme for CY 2014, the number of HCPCS codes assigned to a comprehensive APC for 

payment in this final rule with comment period as it would have been implemented for 

CY 2014 is 167. All of these comprehensive HCPCS codes for each year (CY 2012 

through 2014) appear below in Table 9. Before we implement this policy in CY 2015, 

we will assess all active codes for CY 2015 and assign the procedure to status indicator 

“J1,” as appropriate. 
180 

 We believe that the corrections to the status indicators assigned to the devicedependent procedure codes that appeared in Addendum B to our correcting document 

(http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html) were minor and did not compromise the 

ability of commenters to analyze and respond to our comprehensive APC proposal. We 

note that some commenters were able to correctly identify the claims that we used to 

model the proposed CY 2014 payment rates for comprehensive APCs by identifying the 

device-related HCPCS codes associated with the 29 comprehensive APCs for CY 2012. 

Some commenters also were able to correctly identify the HCPCS codes that we 

proposed would trigger a comprehensive payment in CY 2014 based on our identification 

of HCPCS codes in Addendum B. The commenters were able to model relative 

payments based on our identification of the inclusion of all services reported on the claim 

except mammography, ambulance, and pass-through services, and were able to determine 

the impact of the proposal based on our publication of proposed payment rates for those 

29 comprehensive APCs. Our proposed payment rate for these comprehensive APCs did 

not change appreciably with the correcting document. In addition, we are delaying 

implementation of the finalized comprehensive APC policy until CY 2015, and we are 

providing a detailed discussion of our final methodology for establishing comprehensive 

APC relative payment weights through this final rule with comment period. 

TABLE 9.—APC ASSIGNMENTS FOR HCPCS CODES PROPOSED TO BE 

ASSIGNED TO STATUS INDICATOR “JI” FOR CY 2014 AND DISPLAYED 

HERE FOR ILLUSTRATION 
181 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

19296 

Place po breast 

cath for rad 0648 0648 

Existing 

Code 

CY 2012 

Data $6,430 $5,789 

19298 

Place breast rad 

tube/caths 0648 0648 

Existing 

Code 

CY 2012 

Data $6,430 $5,290 

19325 

Enlarge breast 

with implant 0648 0648 

Existing 

Code 

CY 2012 

Data $6,430 $5,328 

19342 

Delayed breast 

prosthesis 0648 0648 

Existing 

Code 

CY 2012 

Data $6,430 $4,836 

19357 

Breast 

reconstruction 0648 0648 

Existing 

Code 

CY 2012 

Data $6,430 $7,600 

23470 

Reconstruct 

shoulder joint 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $9,816 

23473 

Revis reconst 

shoulder joint 0425 0425 

New For 

2013 Model/2013 $10,184 $6,169 

24361 

Reconstruct 

elbow joint 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $11,921 

24363 

Replace elbow 

joint 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $15,496 

24366 

Reconstruct head 

of radius 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $8,989 

24370 

Revise reconst 

elbow joint 0425 0425 

New For 

2013 Model/2013 $10,184 TBD 

24371 

Revise reconst 

elbow joint 0425 0425 

New For 

2013 Model/2013 $10,184 TBD 

25441 

Reconstruct wrist 

joint 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $10,973 

25442 

Reconstruct wrist 

joint 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $10,754 

25446 Wrist replacement 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $12,987 

27446 

Revision of knee 

joint 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $10,640 

33206 

Insert heart pm 

atrial 0089 0089 

Existing 

Code 

CY 2012 

Data $10,752 $10,272 
182 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

33207 

Insert heart pm 

ventricular 0089 0089 

Existing 

Code 

CY 2012 

Data $10,752 $9,319 

33208 

Insrt heart pm 

atrial & vent 0655 0089 

Existing 

Code 

CY 2012 

Data $10,752 $11,087 

33210 

Insert electrd/pm 

cath sngl 0106 0106 

Existing 

Code 

CY 2012 

Data $4,944 $4,447 

33211 

Insert card 

electrodes dual 0106 0106 

Existing 

Code 

CY 2012 

Data $4,944 $5,129 

33212 

Insert pulse gen 

sngl lead 0090 0090 

Existing 

Code 

CY 2012 

Data $7,479 $7,212 

33213 

Insert pulse gen 

dual leads 0654 0654 

Existing 

Code 

CY 2012 

Data $8,423 $9,087 

33214 

Upgrade of 

pacemaker system 0655 0089 

Existing 

Code 

CY 2012 

Data $10,752 $11,158 

33216 

Insert 1 electrode 

pm-defib 0106 0106 

Existing 

Code 

CY 2012 

Data $4,944 $5,066 

33217 

Insert 2 electrode 

pm-defib 0106 0090 

Existing 

Code 

CY 2012 

Data $7,479 $7,256 

33221 

Insert pulse gen 

mult leads 0654 0089 

Existing 

Code 

CY 2012 

Data $10,752 $12,539 

33224 

Insert pacing lead 

& connect 0655 0089 

Existing 

Code 

CY 2012 

Data $10,752 $12,176 

33227 

Remove&replace 

pm gen singl 0090 0090 

Existing 

Code 

CY 2012 

Data $7,479 $7,499 

33228 

Remv&replc pm 

gen dual lead 0654 0654 

Existing 

Code 

CY 2012 

Data $8,423 $8,384 

33229 

Remv&replc pm 

gen mult leads 0654 0655 

Existing 

Code 

CY 2012 

Data $15,419 $14,543 

33230 

Insrt pulse gen 

w/dual leads 0107 0107 

Existing 

Code 

CY 2012 

Data $25,556 $26,715 
183 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

33231 

Insrt pulse gen 

w/mult leads 0107 0108 

Existing 

Code 

CY 2012 

Data $32,946 $30,149 

33240 

Insrt pulse gen 

w/singl lead 0107 0107 

Existing 

Code 

CY 2012 

Data $25,556 $26,540 

33249 

Nsert pace-defib 

w/lead 0108 0108 

Existing 

Code 

CY 2012 

Data $32,946 $32,938 

33262 

Remv&replc cvd 

gen sing lead 0107 0107 

Existing 

Code 

CY 2012 

Data $25,556 $21,896 

33263 

Remv&replc cvd 

gen dual lead 0107 0107 

Existing 

Code 

CY 2012 

Data $25,556 $23,795 

33264 

Remv&replc cvd 

gen mult lead 0107 0107 

Existing 

Code 

CY 2012 

Data $25,556 $28,165 

33282 

Implant pat-active 

ht record 0680 0680 

Existing 

Code 

CY 2012 

Data $6,992 $6,992 

35458 

Repair arterial 

blockage 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $4,824 

35460 

Repair venous 

blockage 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $4,670 

35471 

Repair arterial 

blockage 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $6,413 

35472 

Repair arterial 

blockage 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $5,319 

35475 

Repair arterial 

blockage 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $4,411 

35476 

Repair venous 

blockage 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $4,000 

37183 

Remove hepatic 

shunt (tips) 0229 0229 

Existing 

Code 

CY 2012 

Data $8,767 $4,953 

37204 

Transcatheter 

occlusion 0082 0229 

Deleted 

for 2014 

CY 2012 

Data $8,767 $8,508 

37205 

Transcath iv stent 

percut 0229 0229 

Deleted 

for 2014 

CY 2012 

Data $8,767 $9,534 

37206 

Transcath iv 

stent/perc addl N/A N/A 

Deleted 

for 2014 Packaged N/A N/A 
184 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

37207 

Transcath iv stent 

open 0229 0229 

Deleted 

for 2014 

CY 2012 

Data $8,767 $8,803 

37208 

Transcath iv 

stent/open addl N/A N/A 

Deleted 

for 2014 Packaged N/A N/A 

37210 

Embolization 

uterine fibroid 0229 0229 

Deleted 

for 2014 

CY 2012 

Data $8,767 $6,044 

37220 Iliac revasc 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $5,561 

37221 

Iliac revasc 

w/stent 0229 0229 

Existing 

Code 

CY 2012 

Data $8,767 $9,068 

37224 

Fem/popl revas 

w/tla 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $5,528 

37225 

Fem/popl revas 

w/ather 0229 0229 

Existing 

Code 

CY 2012 

Data $8,767 $10,489 

37226 

Fem/popl revasc 

w/stent 0229 0229 

Existing 

Code 

CY 2012 

Data $8,767 $10,317 

37227 

Fem/popl revasc 

stnt & ather 0319 0319 

Existing 

Code 

CY 2012 

Data $15,857 $17,239 

37228 

Tib/per revasc 

w/tla 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $6,157 

37229 

Tib/per revasc 

w/ather 0229 0445 

Existing 

Code 

CY 2012 

Data $13,336 $12,527 

37230 

Tib/per revasc 

w/stent 0229 0445 

Existing 

Code 

CY 2012 

Data $13,336 $11,318 

37231 

Tib/per revasc 

stent & ather 0319 0319 

Existing 

Code 

CY 2012 

Data $15,857 $17,095 

37236 

Open/perq place 

stent 1st N/A 0229 

New For 

2014 Model $8,767 TBD 

37237 

Open/perq place 

stent ea add N/A 0445 

New For 

2014 Model $13,375 TBD 

37238 

Open/perq place 

stent same N/A 0229 

New For 

2014 Model $8,767 TBD 

37239 

Open/perq place 

stent ea add N/A 0445 

New For 

2014 Model $13,375 TBD 
185 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

37241 

Vasc 

embolize/occlude 

venous N/A 0229 

New For 

2014 Model $8,767 TBD 

37242 

Vasc 

embolize/occlude 

artery N/A 0229 

New For 

2014 Model $8,767 TBD 

37243 

Vasc 

embolize/occlude 

organ N/A 0229 

New For 

2014 Model $8,767 TBD 

37244 

Vasc 

embolize/occlude 

bleed N/A 0229 

New For 

2014 Model $8,767 TBD 

43647 

Lap impl 

electrode antrum 0061 0039 

Existing 

Code 

CY 2012 

Data $17,590 $20,380 

51845 

Repair bladder 

neck 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,057 

53440 

Male sling 

procedure 0385 0385 

Existing 

Code 

CY 2012 

Data $7,666 $8,252 

53444 Insert tandem cuff 0385 0385 

Existing 

Code 

CY 2012 

Data $7,666 $7,953 

53445 

Insert uro/ves nck 

sphincter 0386 0674 

Existing 

Code 

CY 2012 

Data $15,726 $15,515 

53447 

Remove/replace 

ur sphincter 0386 0386 

Existing 

Code 

CY 2012 

Data $13,609 $12,323 

54400 

Insert semi-rigid 

prosthesis 0385 0385 

Existing 

Code 

CY 2012 

Data $7,666 $9,493 

54401 

Insert self-contd 

prosthesis 0386 0386 

Existing 

Code 

CY 2012 

Data $13,609 $13,420 

54405 

Insert multi-comp 

penis pros 0386 0386 

Existing 

Code 

CY 2012 

Data $13,609 $14,161 

54410 

Remove/replace 

penis prosth 0386 0386 

Existing 

Code 

CY 2012 

Data $13,609 $12,887 

54416 

Remv/repl penis 

contain pros 0386 0386 

Existing 

Code 

CY 2012 

Data $13,609 $12,167 
186 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

55873 

Cryoablate 

prostate 0674 0385 

Existing 

Code 

CY 2012 

Data $7,666 $8,188 

57220 

Revision of 

urethra 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $3,806 

57265 

Extensive repair 

of vagina 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,510 

57282 

Colpopexy 

extraperitoneal 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $5,437 

57283 

Colpopexy 

intraperitoneal 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $5,258 

57284 

Repair paravag 

defect open 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,580 

57285 

Repair paravag 

defect vag 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $5,011 

57288 

Repair bladder 

defect 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,484 

57310 

Repair 

urethrovaginal 

lesion 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $3,131 

57423 

Repair paravag 

defect lap 0202 0385 

Existing 

Code 

CY 2012 

Data $7,666 $9,672 

57556 

Remove cervix 

repair bowel 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,568 

58290 Vag hyst complex 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,643 

58291 

Vag hyst incl t/o 

complex 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,660 

58292 

Vag hyst t/o & 

repair compl 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $4,154 

58294 

Vag hyst 

w/enterocele 

compl 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $6,231 
187 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

58356 

Endometrial 

cryoablation 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $2,771 

58565 

Hysteroscopy 

sterilization 0202 0202 

Existing 

Code 

CY 2012 

Data $4,593 $3,958 

61623 

Endovasc 

tempory vessel 

occl 0082 0229 

Existing 

Code 

CY 2012 

Data $8,767 $8,571 

61626 

Transcath 

occlusion non-cns 0082 0229 

Existing 

Code 

CY 2012 

Data $8,767 $9,151 

61885 

Insrt/redo 

neurostim 1 array 0039 0039 

Existing 

Code 

CY 2012 

Data $17,590 $17,828 

61886 

Implant neurostim 

arrays 0315 0318 

Existing 

Code 

CY 2012 

Data $27,197 $23,245 

62361 

Implant spine 

infusion pump 0227 0227 

Existing 

Code 

CY 2012 

Data $15,789 $12,307 

62362 

Implant spine 

infusion pump 0227 0227 

Existing 

Code 

CY 2012 

Data $15,789 $15,854 

63650 

Implant 

neuroelectrodes 0040 0040 

Existing 

Code 

CY 2012 

Data $4,754 $4,640 

63655 

Implant 

neuroelectrodes 0061 0039 

Existing 

Code 

CY 2012 

Data $17,590 $12,339 

63663 

Revise spine eltrd 

perq aray 0040 0040 

Existing 

Code 

CY 2012 

Data $4,754 $5,426 

63664 

Revise spine eltrd 

plate 0040 0061 

Existing 

Code 

CY 2012 

Data $6,552 $6,852 

63685 

Insrt/redo spine n 

generator 0039 0039 

Existing 

Code 

CY 2012 

Data $17,590 $20,143 

64553 

Implant 

neuroelectrodes 0040 0061 

Existing 

Code 

CY 2012 

Data $6,552 $6,860 

64555 

Implant 

neuroelectrodes 0040 0040 

Existing 

Code 

CY 2012 

Data $4,754 $3,959 
188 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

64561 

Implant 

neuroelectrodes 0040 0040 

Existing 

Code 

CY 2012 

Data $4,754 $4,875 

64565 

Implant 

neuroelectrodes 0040 0040 

Existing 

Code 

CY 2012 

Data $4,754 $5,575 

64568 

Inc for vagus n 

elect impl 0318 0318 

Existing 

Code 

CY 2012 

Data $27,197 $27,561 

64569 

Revise/repl vagus 

n eltrd 0040 0040 

Existing 

Code 

CY 2012 

Data $4,754 $5,329 

64575 

Implant 

neuroelectrodes 0061 0061 

Existing 

Code 

CY 2012 

Data $6,552 $8,377 

64580 

Implant 

neuroelectrodes 0061 0061 

Existing 

Code 

CY 2012 

Data $6,552 $10,676 

64581 

Implant 

neuroelectrodes 0061 0061 

Existing 

Code 

CY 2012 

Data $6,552 $6,991 

64590 

Insrt/redo pn/gastr 

stimul 0039 0039 

Existing 

Code 

CY 2012 

Data $17,590 $17,254 

65770 

Revise cornea 

with implant 0293 0293 

Existing 

Code 

CY 2012 

Data $8,459 $8,459 

69714 

Implant temple 

bone w/stimul 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $9,167 

69715 

Temple bne 

implnt w/stimulat 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $10,188 

69717 

Temple bone 

implant revision 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $5,907 

69718 

Revise temple 

bone implant 0425 0425 

Existing 

Code 

CY 2012 

Data $10,184 $14,575 

69930 

Implant cochlear 

device 0259 0259 

Existing 

Code 

CY 2012 

Data $30,356 $30,356 

75960 

Transcath iv stent 

rs&i N/A N/A 

Deleted 

for 2014 Packaged N/A N/A 

92920 

Prq cardiac 

angioplast 1 art 0083 0083 

New For 

2013 Model/2013 $4,229 TBD 
189 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

92921 

Prq cardiac angio 

addl art 0083 0229 

New For 

2013 Model/2013 $8,767 TBD

92924 

Prq card 

angio/athrect 1 art 0082 0229 

New For 

2013 Model/2013 $8,767 TBD

92925 

Prq card 

angio/athrect addl 0082 0445 

New For 

2013 Model/2013 $13,375 TBD

92928 

Prq card stent 

w/angio 1 vsl 0104 0104 

New For 

2013 Model/2013 $8,550 TBD

92929 

Prq card stent 

w/angio addl 0104 0656 

New For 

2013 Model/2013 $10,059 TBD

92933 

Prq card 

stent/ath/angio 0104 0656 

New For 

2013 Model/2013 $10,059 TBD

92934 

Prq card 

stent/ath/angio 0104 0445 

New For 

2013 Model/2013 $13,375 TBD

92937 

Prq revasc byp 

graft 1 vsl 0104 0104 

New For 

2013 Model/2013 $8,550 TBD

92938 

Prq revasc byp 

graft addl 0104 0656 

New For 

2013 Model/2013 $10,059 TBD 

92941 

Prq card revasc 

mi 1 vsl 0104 0104 

New For 

2013 Model/2013 $8,550 TBD

92943 

Prq card revasc 

chronic 1vsl 0104 0104 

New For 

2013 Model/2013 $8,550 TBD

92944 

Prq card revasc 

chronic addl 0104 0445 

New For 

2013 Model/2013 $13,375 TBD

92980 

Insert 

intracoronary 

stent N/A 0104 

Deleted 

for 2013 

CY 2012 

Data $8,550 $8,637 

92981 

Insert 

intracoronary 

stent N/A 0656 

Deleted 

for 2013 

CY 2012 

Data $10,059 $12,602 

92982 

Coronary artery 

dilation N/A 0083 

Deleted 

for 2013 

CY 2012 

Data $4,229 $6,420 
190 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

92984 

Coronary artery 

dilation N/A 0104 

Deleted 

for 2013 

CY 2012 

Data $8,550 $7,616 

92986 

Revision of aortic 

valve 0083 0083 

Existing 

Code 

CY 2012 

Data $4,229 $7,029 

92987 

Revision of mitral 

valve 0083 0104 

Existing 

Code 

CY 2012 

Data $8,550 $8,540 

92990 

Revision of 

pulmonary valve 0083 0104 

Existing 

Code 

CY 2012 

Data $8,550 $8,181 

92995 

Coronary 

atherectomy N/A 0445 

Deleted 

for 2013 

CY 2012 

Data $13,336 $9,712 

92996 

Coronary 

atherectomy addon N/A 0229 Deleted 

for 2013 

CY 2012 

Data $8,767 $14,966 

92997 

Pul art balloon 

repr percut 0083 0104 

Existing 

Code 

CY 2012 

Data $8,550 $8,405 

93619 

Electrophysiology 

evaluation 0085 0085 

Existing 

Code 

CY 2012 

Data $5,056 $3,616 

93620 

Electrophysiology 

evaluation 0085 0085 

Existing 

Code 

CY 2012 

Data $5,056 $5,160 

93624 

Electrophysiologi

c study 0085 0085 

Existing 

Code 

CY 2012 

Data $5,056 $8,633 

93650 

Ablate heart 

dysrhythm focus 0085 0083 

Existing 

Code 

CY 2012 

Data $4,229 $4,161 

93653 

Ep & ablate 

supravent arrhyt 8000 0444 

New For 

2013 Model/2013 $14,302 TBD

93654 

Ep & ablate 

ventric tachy 8000 0444 

New For 

2013 Model/2013 $14,302 TBD

93656 

Tx atrial fib pulm 

vein isol 8000 0444 

New For 

2013 Model/2013 $14,302 TBD

0234T 

Trluml perip athrc 

renal art 0082 0229 

Existing 

Code 

CY 2012 

Data $8,767 $7,217 

0236T 

Trluml perip athrc 

abd aorta 0082 0229 

Existing 

Code Model $8,767 $9,578 
191 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

0237T 

Trluml perip athrc 

brchiocph 0082 0229 

Existing 

Code 

CY 2012 

Data $8,767 $9,601 

0238T 

Trluml perip athrc 

iliac art 0082 0229 

Existing 

Code 

CY 2012 

Data $8,767 $9,621 

0268T 

Implt/rpl crtd sns 

dev gen 0039 0040 

Existing 

Code 

CY 2012 

Data $4,754 $1,588 

0282T 

Periph field 

stimul trial 0040 0040 

Existing 

Code 

CY 2012 

Data $4,754 $5,114 

0283T 

Periph field 

stimul perm 0318 0318 

Existing 

Code 

CY 2012 

Data $27,197 $26,616 

0302T 

Icar ischm mntrng 

sys compl 0089 0089 

New for 

2013 Model/2013 $10,752 TBD

0303T 

Icar ischm mntrng 

sys eltrd 0106 0106 

New for 

2013 Model/2013 $4,944 TBD

0304T 

Icar ischm mntrng 

sys device 0090 0090 

New for 

2013 Model/2013 $7,479 TBD

0316T 

Replc vagus nerve 

pls gen 0039 0039 

New For 

2013 Model/2013 $17,590 TBD

0319T 

Insert subq defib 

w/eltrd 0107 0107 

New For 

2013 Model/2013 $25,556 TBD

0320T 

Insert subq defib 

electrode 0106 0106 

New For 

2013 Model/2013 $4,944 TBD

0321T 

Insert subq defib 

pls gen 0107 0107 

New For 

2013 Model/2013 $25,556 TBD

0323T 

Rmvl & replc 

subq pls gen 0107 0107 

New For 

2013 Model/2013 $25,556 TBD

C9600 

Perc drug-el cor 

stent sing 0656 0656 

New For 

2013 Model/2013 $10,059 TBD

C9601 

Perc drug-el cor 

stent bran 0656 0445 

New For 

2013 Model/2013 $13,375 TBD

C9602 

Perc d-e cor stent 

ather s 0656 0656 

New For 

2013 Model/2013 $10,059 TBD

C9603 

Perc d-e cor stent 

ather br 0656 0445 

New For 

2013 Model/2013 $13,375 TBD
192 

HCPCS 

Code Short Descriptor 

Propose

d CY 

2014 

APC 

CY 

2014 

APC* Comment Source 

APC 

Single 

“J1” 

Geometric 

Mean 

Cost* 

HCPCS 

Single 

“J1” 

Geometric 

Mean 

Modeled 

Cost* 

C9604 

Perc d-e cor 

revasc t cabg s 0656 0656 

New For 

2013 Model/2013 $10,059 TBD

C9605 

Perc d-e cor 

revasc t cabg b 0656 0445 

New For 

2013 Model/2013 $13,375 TBD

C9606 

Perc d-e cor 

revasc w AMI s 0656 0445 

New For 

2013 Model/2013 $13,375 TBD

C9607 

Perc d-e cor 

revasc chro sin 0656 0656 

New For 

2013 Model/2013 $10,059 TBD

C9608 

Perc d-e cor 

revasc chro add 0656 0445 

New For 

2013 Model/2013 $13,375 TBD

G0290 

Drug-eluting 

stents, single N/A 0656 

Deleted 

for 2013 

CY 2012 

Data $10,059 $9,998 

G0291 

Drug-eluting 

stents,each add N/A 0319 

Deleted 

for 2013 

CY 2012 

Data $15,857 $11,179 

*APC and associated “J1” single claim geometric mean cost for APC and HCPCS derived from CY 2012 

claims data that we would have used in cost calculations for CY 2014 instead of finalizing the 

comprehensive APC policy for CY 2015. We will recalibrate all of the cost information for CY 2015 using 

CY 2013 claims data. For codes deleted in CY 2013, the CY 2014 APC indicates the primary APC 

assignment that we used in modeling the presented cost information. 

 Comment: Commenters stated that they had difficulty understanding the APC 

assignment of a specific claim when two or more procedure codes assigned to status 

indicator “J1” appear on a single claim and indicated that they could not independently 

replicate the proposed comprehensive APC methodology. Commenters believed that 

there was ambiguity in whether the primary HCPCS code assignment was based on 

CY 2012 Medicare payment for the primary procedure or CY 2012 claims cost as 

determined by reported charges converted to costs in the CY 2012 claims data set using 

CMS’ methodology outlined in section II.A.1.c. of the proposed rule and this final rule 
193 

with comment period. One commenter believed that using a ranking based on CY 2012 

payments would be inconsistent with setting a prospective payment rate for CY 2014 

because prioritizing by payment was potentially more reflective of historical costs than 

CY 2102 costs and also reflected units in a way that assigned some procedures reporting 

claims with single units to one APC and other procedures reporting claims with multiple 

units to a different APC. This latter issue was particularly concerning to commenters 

because the commenters believed that some claims contributed to the cost of one APC, 

yet would actually be paid through a different APC. 

 Response: We disagree with the commenters that we proposed different criteria 

to assign procedures to comprehensive APCs for modeling payments and to assign 

procedures to comprehensive APCs for payment in the claims processing system. 

However, we recognize that the wording of our proposed methodology for assigning 

procedures to comprehensive APCs could be interpreted in several ways, and we are 

receptive to commenters concerns that they better understand the proposed 

comprehensive APC payment methodology for the treatment of claims reporting multiple 

device-related procedures. While we are finalizing a comprehensive APC policy, we are 

delaying the effective date of this policy until CY 2015, and we invite comment on the 

final methodology discussed in this section. 

 We stated in the proposed rule that, “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.” Using this methodology, we proposed to identify a primary service on claims 
194 

reporting multiple HCPCS codes assigned to status indicator “J1” by identifying the 

HCPCS code assigned to status indicator “J1” on the claim that had the highest 

device-dependent APC geometric mean cost. The primary service is not only the most 

costly service but also typically represents the most significant or core service that is 

being provided to the beneficiary. To facilitate claims processing and to ensure that we 

identified the most costly device-related procedure on each claim, including those billed 

with multiple units, we envisioned using the CY 2014 device-dependent APC payment 

amount that would have been made for the service in the absence of a proposal for 

comprehensive APCs to identify the most costly procedure described by a HCPCS code 

assigned to status indicator “J1” on the claim. We proposed to assign the procedure 

described by a HCPCS code assigned to status indicator “J1”with the highest devicedependent APC line-item payment, considering the entire payment when multiple units 

are billed, as the primary procedure and to make payment for the claim through the 

associated comprehensive APC. We note that the device-dependent APC payment rates 

have the same relativity as device-dependent geometric mean costs, as those costs 

underpin final budget neutral payment rates. 

 We agree with the commenters that the methodology by which a claim that has at 

least one procedure described by a HCPCS code that is assigned to status indicator “J1” 

is assigned to a comprehensive APC is fundamental to understanding final payment under 

the comprehensive APC policy. If there is only one procedure described by a HCPCS 

code assigned to status indicator “J1”reported on the claim, the comprehensive APC 

assignment is straightforward; the claim is paid through the comprehensive APC 
195 

associated with that procedure. This is true under the proposed methodology as well as 

under the revised methodology we are finalizing in this final rule with comment period. 

In the event that more than one procedure described by a HCPCS code assigned to status 

indicator “J1” was present on the claim, an important goal of our proposed methodology 

was to ensure that the costliest procedure, including increased cost due to multiple units, 

would be identified as the primary procedure on the claim so that the claim would be paid 

through the most costly potential comprehensive APC and ultimately garner the highest 

potential comprehensive APC payment. After review of the public comments we 

received, we are modifying our proposed methodology for assigning a primary procedure 

described by a HCPCS code assigned to status indicator “J1” reported on a claim to an 

appropriate comprehensive APC when more than one procedure described by a HCPCS 

code assigned to status indicator “J1” is reported. First, we will only use current 

ratesetting estimated cost information and not device-dependent APC payment rates to 

identify the primary procedure described by the HCPCS code assigned to status indicator 

“J1” on the claim and the subsequent comprehensive APC through which payment for the 

service would be made. For CY 2015, we will use estimated costs on CY 2013 claims to 

calibrate comprehensive APC payment amounts. 

 Second, we will recognize the greater resources attributable to more complex 

cases. Commenters suggested addressing variations in cost of comprehensive APCs by 

recognizing the greater resources attributable to more complex cases with multiple 

device-dependent procedures in some manner similar to the severity adjustment 

incorporated into the IPPS MS-DRG system. We agree with the commenters that 
196 

instituting a higher comprehensive payment for complex cases would both allow us to 

continue a comprehensive payment methodology where the most costly service reported 

with status indicator “J1” on the claim determines the comprehensive APC assignment 

and also recognize relative resource differences associated with multiple 

device-dependent procedures. In this response, we discuss the first step in this process of 

identifying a primary HCPCS service assigned to status indicator of “J1” for each claim. 

We present the methodology for identifying complex subsets of primary services and 

reassigning claims to higher-level APCs in the following comment and response. 

 To address concerns presented by some of the commenters that they could not 

fully model the proposal, we provide all of the information we used to create relative 

payment weights for CY 2014 using the CY 2012 claims data to illustrate the final 

methodology below. We believe that this will assist interested parties in replicating our 

methodology. We will recalibrate all of the comprehensive APC relative payment 

weights for CY 2015 using CY 2013 claims data, consistent with our annual recalibration 

of APC relative payment weights, to reflect the most recently available claims and cost 

information. 

 To arrive at the illustrative CY 2014 comprehensive geometric mean cost for the 

comprehensive APCs in Table 8, we began by first identifying all claims reporting a 

single procedure described by a HCPCS code with status indicator “J1.” As noted earlier, 

this is approximately 75 percent of claims with any procedure described by a HCPCS 

code reported with status indicator “J1.” On claims reporting a single procedure 

described by a HCPCS code with status indicator “J1,” we considered that procedure to 
197 

be the primary service that determines the comprehensive APC assignment. We then 

used these single “J1” claims to calculate a comprehensive APC single “J1” procedure 

claim geometric mean cost for all comprehensive APCs using the total cost on each 

claim. These comprehensive APC single “J1” procedure claim geometric mean costs 

appear in Table 9. 

 We then began the process of identifying a “primary HCPCS code” that 

represents the “primary service” or “primary procedure” on a claim reporting multiple 

procedures described by HCPCS codes with status indicator “J1.” We used the APC 

geometric mean comprehensive cost based on claims reporting a single “J1” procedure 

described by a HCPCS code with status indicator “J1” (Table 9) to identify the most 

costly procedure reported on each claim. Specifically, we selected the primary HCPCS 

code by determining the comprehensive procedure that is assigned to the APC with the 

highest geometric mean comprehensive cost based on claims with a single service with 

status indicator “J1.” We undertook a second step when a comprehensive service claim 

contained two or more procedures described by a HCPCS code with status indicator “J1” 

that are assigned to the same APC. Of those procedures described by a HCPCS code 

with status indicator “J1” that are also assigned to the same APC with the highest 

comprehensive APC cost from Table 9, we identified the service described by a HCPCS 

code reported with status indicator “J1” with the highest HCPCS-level geometric mean 

cost, also derived from the comprehensive cost of claims that contain a single procedure 

with status indicator “J1,” to be the primary HCPCS code on the claim. 
198 

 In the event that a HCPCS-level geometric mean comprehensive cost cannot be 

determined for a particular HCPCS code from the claims data, such as new HCPCS codes 

that are not represented in the claims data or an add-on code for which there are no 

claims with only that procedure, we will model a HCPCS-level comprehensive geometric 

mean cost that we will only use to identify a primary procedure. For procedure codes 

with missing data, we will include an estimated comprehensive HCPCS code geometric 

mean cost in each proposed or final rule, as appropriate, using the best information we 

have available about each code. However, we will not use modeled HCPCS-level 

comprehensive geometric mean costs to set comprehensive APC payment rates. We will 

only use modeled HCPCS-level comprehensive geometric mean costs in our claims 

processing systems to identify a primary HCPCS code reported on a claim with multiple 

procedures described by HCPCS codes assigned to status indicator “J1” in the same 

comprehensive APC. Our goal in modeling such a HCPCS-specific geometric mean cost 

is to identify a primary HCPCS code on a claim with multiple procedures in the same 

comprehensive APC with sufficient accuracy for a few years until actual claims data 

become available. This modeled geometric mean cost is not intended in any way to 

presuppose the actual cost of the service for future ratesetting. 

 Table 9 contains a list of all HCPCS codes assigned to status indicator “J1” that 

are assigned to APCs, which are associated with a comprehensive payment. Deleted 

codes are those codes that were used to estimate geometric mean costs, but are not valid 

codes for CY 2104 while new codes are those codes that will be valid for payment in 

CY 2014, but were not present in the CY 2012 claims data. The comprehensive APC 
199 

assignment that we proposed for each HCPCS code assigned to status indicator “J1” in 

the proposed rule is shown in Column 3, and the illustrative final CY 2014 

comprehensive APC assignment that we would have been established based on public 

comment on the CY 2014 proposed rule and using CY 2012 claims data is shown in 

Column 4. Column 7 shows the APC geometric mean cost and Column 8 shows the 

HCPCS code geometric mean cost; together these two columns allow the determination 

of the primary service HCPCS code and initial APC assignment for any claims with a 

combination of HCPCS codes reported with status indicator “J1.” We have not provided 

any modeled HCPCS geometric mean costs for CY 2013 or CY 2014 “J1” HCPCS codes 

for which we do not have claims data as we are finalizing this policy with modification, 

but delaying implementation until CY 2015. We will make those modeled geometric 

mean costs available in next year’s proposed rule. 

 Comment: Commenters expressed concern that CMS’ proposal for a single, 

comprehensive APC payment would not adequately cover the higher cost of cases where 

multiple expensive devices are used. Commenters also raised several concerns with 

paying claims with multiple primary procedures under a single APC payment. The 

commenters noted that, under comprehensive APCs, hospitals would find simple claims 

with a single comprehensive HCPCS code and few services to be more profitable on a 

case basis than complex claims with a greater number of comprehensive HCPCS codes 

and more ancillary services. Commenters believed that this could be a significant issue 

for many of the comprehensive APCs because only one primary service is paid and one 

quarter of all claims have multiple procedures. Many commenters believed that a single, 
200 

comprehensive APC payment for single and multiple device insertion procedures would 

create an incentive to not perform complex and multiple procedures where the cost 

materially exceeds payment and that it also could create an incentive for hospitals to use 

inappropriately less expensive devices, services, and supplies to offset the financial threat 

of reduced “packaged” payments, including cases where those substitutions could 

increase program costs as a whole and carry greater risk for beneficiaries. 

 Commenters argued that hospitals systematically performing more multiple 

device insertion procedures may face severe financial hardship because they would not 

have enough simple, single primary procedure cases to cover the cost of their many 

multiple device insertion procedures, which may limit their ability to provide these 

services as they have in the past. While we stated that we believed that the 

comprehensive APC proposal would encourage hospitals to negotiate better rates on 

supplies and increase the efficiency of individual procedures, commenters stated that the 

added cost of additional expensive devices cannot be routinely reduced to approximate 

the cost of a single device procedure. 

 Response: We agree with the commenters that there is wide spread variation in 

the comprehensive costs of individual claims within each primary procedure, and we 

further agree with the commenters that we do not want to financially disadvantage 

hospitals that treat sicker beneficiaries that require more complex and costly procedures. 

We also agree with the commenters that the presence of certain device-related procedures 

reported together on a claim can, but does not always, constitute a more complex and 

resource-intensive subset of a comprehensive procedure. 
201 

 In calculating the proposed payment rates for comprehensive APCs, we proposed 

to allocate the costs of all ancillary and adjunctive services to the primary procedure 

assigned to status indicator “J1,” including the costs of additional procedures identified 

with status indicator “J1.” A comprehensive approach increases opportunities for 

hospitals to garner efficiencies in the delivery of these services, but also increases the 

variation in estimated total claim costs contributing to the comprehensive APC relative 

payment weight calculation. We agree with the commenters that, in certain instances, 

cost variation could be too large and could potentially create undue financial risk for 

hospitals that treat complex patients. We also agree with the commenters that there are 

some limitations on individual hospitals’ ability to reduce costs associated with complex 

procedures, especially in the short term. Cost reductions may involve changing suppliers 

or renegotiating contracts for expensive devices. Further, it may be difficult for hospitals 

to immediately analyze the effects of changing payment models and rapidly implement 

the practices that they use to handle cost variations within inpatient DRGs. 

 Given our interest in establishing a comprehensive APC payment under the OPPS 

that is comparable to a severity level DRG payment adjustment, we agree with the 

commenters who recommended assigning combinations of procedures that are reported 

together which indicate a more complex and resource-intensive version of the primary 

procedure to higher level comprehensive APCs, not unlike the IPPS policy of assigning 

procedures with certain conditions to higher paying MS-DRGs. After reviewing 

significant public comments pointing out common clinical scenarios for combinations of 

device insertion procedures assigned to status indicator “J1,” we decided to recognize 
202 

complexity in these device-dependent procedures by reassigning claims for certain forms 

of the primary procedures to higher level comprehensive APCs as a modification to our 

proposal. We welcome public comments on recognizing the cost of more complex forms 

of primary procedures through our final policy to reassign claims for complex forms of 

the primary procedures discussed below. We identify the complex forms of primary 

procedures that we would reassign for CY 2014 using CY 2012 claims data if we were 

implementing the comprehensive APC policy in CY 2014 in Table 10. We discuss our 

consideration of code-specific comments by clinical family later in this section. 

 We took several steps to moderate resource cost variation in comprehensive APC 

payments. First, we undertook a standard APC recalibration. We specifically evaluated 

the APC assignment of some primary procedures and moved those procedures from one 

APC to another to better align resource and clinical homogeneity. In considering the 

APC assignment of these procedures, we looked at the traditional parameters of 

geometric mean cost for the primary service and clinical characteristics of the APC. We 

created, consolidated, or redefined the primary procedures in the comprehensive APCs as 

necessary to better group services with clinical and resource homogeneity. Second, we 

identified complex subsets of primary procedures, which consist of the primary HCPCS 

code reported in combination with other HCPCS codes that together describe a more 

complex form of the primary service. We reassigned many claims with complex subsets 

of primary procedures to a higher level comprehensive APC in the same clinical family 

through this methodology. We define a clinical family of comprehensive APCs to be a 
203 

set of clinically related comprehensive APCs that represent different resource levels of 

clinically comparable services. 

 Reassignment of claims with complex subsets of the primary procedures does not 

change the primary service identified on a claim. We continue to consider all services 

reported on the claim, even the additional “J1” HCPCS codes identifying a claim as 

complex, to be adjunctive and packaged into the primary service. We make a distinction 

here between the idea of a primary service under comprehensive APCs and the concept of 

a composite service as discussed in section II.A.2.f. of this final rule with comment 

period. Both methodologies foster more accurate ratesetting by allowing us to use 

additional information reported on a claim to establish a geometric mean cost and 

accompanying relative payment weight. However, under a composite payment approach, 

we identify certain procedures that are frequently performed together during a single 

clinical encounter as a single service and identify that set of services as a complete 

service. For comprehensive APCs, we assess many combinations of procedure codes for 

purposes of determining complex forms of a primary service, but the combination of 

codes is not considered to be separate and distinct service. For comprehensive APCs, the 

primary service continues to represent the complete furnished service. 

 For the purpose of evaluating HCPCS code combinations for reassignment to a 

higher level comprehensive APC after identifying one of the procedures described by a 

HCPCS code assigned to status indicator “J1”reported on the claim as being the primary 

service, we recognized a combination of procedure codes as complex and appropriately 
204 

reassigned to a higher level APC in the same clinical family of services if the complex 

combination of procedures met all of the following criteria. 

● The comprehensive geometric mean cost of the claims with the combination of 

procedures was more than two times the comprehensive geometric mean cost of claims 

reporting only a single comprehensive procedure described by a HCPCS code assigned to 

status indicator “J1.” 

● There were greater than 100 claims with the specific combination of procedure 

codes.

● The number of claims reporting the specific combination of procedure codes 

exceeded 5 percent of the total volume of claims reporting that procedure as the primary 

service described by a HCPCS code assigned to status indicator “J1”, and we did not 

determine that the combination of procedure codes represented an uncommon clinical or 

resource extreme value within the entire family of services. 

 In reviewing the CY 2012 claims data for purposes of illustrating this final 

methodology, we addressed all of the combinations of procedures reported on claims that 

met all of these criteria, but also addressed other combinations of procedures reported on 

claims that did not meet all of these criteria if clinical consistency suggested that 

additional reassignment was necessary. 

 Once we determined that a particular procedure code combination for a primary 

service was complex because it represented a sufficiently costly case and frequent subset 

within the primary procedure overall, we evaluated alternate APC assignments for those 

claims reporting a combination of procedure codes. We assessed resource variation for 
205 

reassigned claims within the receiving APC using the geometric mean cost for all 

reassigned claims for the primary service relative to other services assigned to that APC 

using the 2 times rule criteria. We maintained clinical homogeneity by reassigning 

claims within the same clinical family of comprehensive APCs. Any combinations of 

multiple comprehensive HCPCS codes that were not sufficiently frequent or which did 

not represent sufficiently costly cases relative to the cost of the primary procedure 

established with simple, single procedure claims were not identified as complex subsets 

of the primary procedures and were not reassigned. We repeated this process for each 

APC for which commenters expressed concerns regarding complexity of cases 

contributing to wide variation in costs. After both reassigning some procedure codes to 

different comprehensive APCs and reassigning claims for complex cases of primary 

services, we then calculated the final comprehensive geometric mean cost for the 

comprehensive APCs. The illustrative comprehensive geometric mean costs that we 

would have calculated for the comprehensive APCs for CY 2014 appear in Table 8. 

 Infrequently, we will not have claims data for some procedures described by 

HCPCS codes that are assigned to status indicator “J1” and, therefore, no claims cost 

information upon which to base an assessment of volume or costliness. In this case, we 

will use the best information available to us to prospectively identify a complex version 

of the primary service, which is indicated by the combination of procedure codes reported 

on a claim and assign those complex cases to a higher level comprehensive APC. We 

will reassess the appropriateness of identifying certain combinations of procedure codes 

as complex subsets of a primary service once cost information becomes available. This is 
206 

comparable to our policy for assigning new codes or codes without claims data to an 

APC based on the best information we have available at the time of assignment and 

reassessing that resource homogeneity of that APC assignment when claims data become 

available. 

 Table 10 shows the combinations of procedure codes that we identified within the 

136 primary procedure codes assigned to status indicator “J1” in the CY 2012 claims data 

that we used in our illustration of CY 2014 modeling and the APC to which those 

combinations of procedures would be reassigned, as well as combinations of CY 2013 

and CY 2014 procedure codes that are not represented in our modeling dataset for which 

we identified a clinical similarity to existing services and would have identified for 

reassignment as a complex subset of the primary service for CY 2014. We intend to 

reassess both procedure code assignments in the comprehensive APCs and our 

identification and reassignment of complex cases represented by combinations of 

procedure codes using updated claims and cost report data as we establish relative 

payment weights each year. We note that we will have CY 2013 claims data for some of 

the procedure codes listed in Table 10 and we will reassess our identification of 

combinations of procedures as complex for CY 2015 in light of data and in response to 

comments received on this final rule with comment period in our CY 2015 OPPS/ASC 

proposed rule. 

 In summary, after consideration of the public comments we received, we are 

finalizing the following methodology for establishing an APC relative payment weight 

for the comprehensive APC policy, which is our proposed policy with a modification. 
207 

During ratesetting, single claims reporting a single procedure described by a HCPCS 

code assigned to status indicator “J1” are used to establish an initial APC assignment for 

each procedure described by that HCPCS code. The geometric mean of the total 

estimated costs on each claim is used to establish resource similarity for each procedure 

code’s APC assignment and is evaluated within the context of clinical similarity, with 

assignment starting from the APC assignments in effect for the current payment year. 

Claims reporting multiple procedures described by HCPCS codes assigned to status 

indicator “J1” are identified and the procedures are then assigned to a comprehensive 

APC, based on the primary HCPCS code, that has the highest geometric mean estimated 

cost. This ensures that multiple procedures described by HCPCS codes assigned to status 

indicator “J1” reported on claims are always paid through and assigned to the 

comprehensive APC that would generate the highest APC payment. If multiple 

procedures described by HCPCS codes assigned to status indicator “J1” that are reported 

on the same claim have the same APC geometric mean estimated cost, as would be the 

case when two different procedures described by HCPCS codes assigned to status 

indicator “J1” are assigned to the same APC, identification of the primary HCPCS code 

is then based on the procedure described by the HCPCS code assigned to status indicator 

“J1” with the highest HCPCS-level geometric mean cost based on claims with a single 

HCPCS code assigned to status indicator “J1.” Where we have no claims data upon 

which to establish a HCPCS-level comprehensive geometric mean cost, we will model a 

HCPCS-level geometric mean cost for the sole purpose of appropriately assigning the 

primary HCPCS code reported on a claim. The comprehensive APC assignment of each 
208 

procedure described by HCPCS codes assigned to status indicator “J1” is then confirmed 

by verifying that the APC assignment remains appropriate when considering the clinical 

similarity, as well as the estimated cost of all claims reporting each procedure described 

by HCPCS codes assigned to status indicator “J1,” including simple and complex claims, 

with multiple device-related procedures. 

 We are providing in Table 9 the APC assignments for each procedure described 

by HCPCS codes assigned to status indicator “J1,” the APC geometric mean estimated 

cost based on claims reporting single procedures, and the HCPCS geometric mean 

estimated cost based on the claims reporting single procedures that we used to identify 

primary HCPCS codes and to assign the procedure to an appropriate comprehensive 

APC. If we were implementing this policy in CY 2014, Table 9 would contain the same 

information as the claims processing system and could, therefore, be used to determine 

the initial APC assignment and APC geometric mean estimated cost for any procedure 

described by HCPCS codes assigned to status indicator “J1” reported on claims prior to 

any reassignment of certain costly claims for a primary service that represent a complex 

form of the primary service to higher level APCs. Table 9 is configured for CY 2104 and 

will be updated for implementation in CY 2015. 

 We then considered reassigning complex subsets of claims for each primary 

service HCPCS code. All claims reporting more than one procedure described by 

HCPCS codes assigned to status indicator “J1” are evaluated for the existence of 

commonly occurring combinations of procedure codes reported on claims that exhibit a 

materially greater comprehensive geometric mean cost relative to the geometric mean 
209 

cost of the claims reporting that primary HCPCS code. This indicates that the subset of 

procedures identified by the secondary HCPCS code has increased resource requirements 

relative to less complex subsets of that procedure. If a combination of procedure codes 

reported on claims is identified that meets these requirements, that is, commonly 

occurring and exhibiting materially greater resource requirements, it is further evaluated 

to confirm clinical validity as a complex subset of the primary procedure and the 

combination of procedure codes is then identified as complex, and primary service claims 

with that combination of procedure codes are subsequently reassigned as appropriate. If 

a combination of procedure codes does not meet the requirement for a materially 

different cost or does not occur commonly, it is not considered to be a complex, and 

primary service claims with that combination of procedure codes are not reassigned. All 

combinations of procedures described by HCPCS codes assigned to status indicator “J1” 

for each primary HCPCS code are similarly evaluated. 

 Once all combinations of procedures described by HCPCS codes assigned to 

status indicator “J1” have been evaluated, all claims identified for reassignment for each 

primary service are combined and the group is assigned to a higher level comprehensive 

APC within a clinical family of comprehensive APCs, that is, an APC with greater 

estimated resource requirements than the initially assigned comprehensive APC and with 

appropriate clinical homogeneity. We assessed resource variation for reassigned claims 

within the receiving APC using the geometric mean cost for all reassigned claims for the 

primary service relative to other services assigned to that APC using the 2 times rule 

criteria. 
210 

 For new HCPCS codes and codes without data, we will use the best data available 

to us to identify combinations of procedures that represent a more complex form of the 

primary procedure and warrant reassignment to a higher level APC. We will reevaluate 

our APC assignments, and identification and APC placement of complex claims once 

claims data become available. We then recalculate all APC comprehensive geometric 

mean costs and ensure clinical and resource homogeneity. 

 We have provided in Table 10 the combinations of procedures described by 

HCPCS codes assigned to status indicator “J1” that we used to set payment rates and the 

additional combinations of procedures described by new HCPCS codes assigned to status 

indicator “J1” that would be identified for reassignment as a complex form of the primary 

procedure in CY 2014. If we were implementing this policy in CY 2014, Table 10 would 

contain the same information as the claims processing system and could, therefore, be 

used to determine the final comprehensive APC assignment and comprehensive APC 

geometric mean estimated cost for any procedure described by HCPCS codes assigned to 

status indicator “J1” reported on an individual claims. Table 10 is configured for CY 

2104. We will update this table for implementation in CY 2015. 
211 

TABLE 10.—CY 2014 COMPLEXITY REASSIGNMENTS: ILLUSTRATION 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

33206 

Insert heart 

pm atrial 0089 93620 

Electrophy

siology 

evaluation 0655 Yes Yes 

33207 

Insert heart 

pm 

ventricular 0089 33210 

Insert 

electrd/pm 

cath sngl 0655 Yes Yes 

33207 

Insert heart 

pm 

ventricular 0089 93620 

Electrophy

siology 

evaluation 0655 Yes Yes 

33207 

Insert heart 

pm 

ventricular 0089 93650 

Periph field 

stimul 

perm 0655 Yes Yes 

33208 

Insrt heart 

pm atrial & 

vent 0089 G0290 

Drugeluting 

stents, 

single 0655 Yes Yes 

33208 

Insrt heart 

pm atrial & 

vent 0089 33208 

Insrt heart 

pm atrial & 

vent 0655 Yes Yes 

33208 

Insrt heart 

pm atrial & 

vent 0089 33210 

Insert 

electrd/pm 

cath sngl 0655 Yes Yes 

33208 

Insrt heart 

pm atrial & 

vent 0089 33217 

Insert 2 

electrode 

pm-defib 0655 Yes Yes 

33208 

Insrt heart 

pm atrial & 

vent 0089 92980 

Insert 

intracorona

ry stent 0655 Yes Yes 

33208 

Insrt heart 

pm atrial & 

vent 0089 93619 

Electrophy

siology 

evaluation 0655 Yes Yes 

33208 

Insrt heart 

pm atrial & 

vent 0089 93620 

Electrophy

siology 

evaluation 0655 Yes Yes 
212 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

33208 

Insrt heart 

pm atrial & 

vent 0089 93650 

Periph field 

stimul 

perm 0655 Yes Yes 

33210 

Insert 

electrd/pm 

cath sngl 0106 92982 

Coronary 

artery 

dilation 0090 Yes Yes 

33212 

Insert pulse 

gen sngl lead 0090 33210 

Insert 

electrd/pm 

cath sngl 0654 Yes Yes 

33213 

Insert pulse 

gen dual 

leads 0654 33210 

Insert 

electrd/pm 

cath sngl 0089 Yes Yes 

33216 

Insert 1 

electrode 

pm-defib 0106 33210 

Insert 

electrd/pm 

cath sngl 0089 Yes Yes 

33216 

Insert 1 

electrode 

pm-defib 0106 33216 

Insert 1 

electrode 

pm-defib 0089 Yes Yes 

33216 

Insert 1 

electrode 

pm-defib 0106 35476 

Repair 

venous 

blockage 0089 Yes Yes 

33224 

Insert pacing 

lead & 

connect 0089 33208 

Insrt heart 

pm atrial & 

vent 0655 Yes Yes 

33224 

Insert pacing 

lead & 

connect 0089 33216 

Insert 1 

electrode 

pm-defib 0655 Yes Yes 

33224 

Insert pacing 

lead & 

connect 0089 33217 

Insert 2 

electrode 

pm-defib 0655 Yes Yes 

33224 

Insert pacing 

lead & 

connect 0089 93650 

Periph field 

stimul 

perm 0655 Yes Yes 

33227 

Remove&rep

lace pm gen 

singl 0090 33210 

Insert 

electrd/pm 

cath sngl 0654 Yes Yes 
213 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

33227 

Remove&rep

lace pm gen 

singl 0090 35475 

Repair 

arterial 

blockage 0654 Yes Yes 

33228 

Remv&replc 

pm gen dual 

lead 0654 33210 

Insert 

electrd/pm 

cath sngl 0089 Yes Yes 

33228 

Remv&replc 

pm gen dual 

lead 0654 33211 

Insert card 

electrodes 

dual 0089 Yes Yes 

33228 

Remv&replc 

pm gen dual 

lead 0654 33228 

Remv&repl

c pm gen 

dual lead 0089 Yes Yes 

33228 

Remv&replc 

pm gen dual 

lead 0654 93620 

Electrophy

siology 

evaluation 0089 Yes Yes 

33230 

Insrt pulse 

gen w/dual 

leads 0107 33216 

Insert 1 

electrode 

pm-defib 0108 Yes Yes 

33240 

Insrt pulse 

gen w/singl 

lead 0107 33216 

Insert 1 

electrode 

pm-defib 0108 Yes Yes 

33240 

Insrt pulse 

gen w/singl 

lead 0107 33217 

Insert 2 

electrode 

pm-defib 0108 Yes Yes 

33263 

Remv&replc 

cvd gen dual 

lead 0107 33263 

Remv&repl

c cvd gen 

dual lead 0108 Yes Yes 

33264 

Remv&replc 

cvd gen mult 

lead 0107 33210 

Insert 

electrd/pm 

cath sngl 0108 Yes Yes 

33264 

Remv&replc 

cvd gen mult 

lead 0107 33216 

Insert 1 

electrode 

pm-defib 0108 Yes Yes 

33264 

Remv&replc 

cvd gen mult 

lead 0107 33217 

Insert 2 

electrode 

pm-defib 0108 Yes Yes 
214 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

33264 

Remv&replc 

cvd gen mult 

lead 0107 33224 

Insert 

pacing lead 

& connect 0108 Yes Yes 

33264 

Remv&replc 

cvd gen mult 

lead 0107 35476 

Repair 

venous 

blockage 0108 Yes Yes 

33264 

Remv&replc 

cvd gen mult 

lead 0107 93620 

Electrophy

siology 

evaluation 0108 Yes Yes 

33264 

Remv&replc 

cvd gen mult 

lead 0107 93650 

Periph field 

stimul 

perm 0108 Yes Yes 

35471 

Repair 

arterial 

blockage 0083 35471 

Repair 

arterial 

blockage 0229 Yes Yes 

35471 

Repair 

arterial 

blockage 0083 35476 

Repair 

venous 

blockage 0229 Yes Yes 

35471 

Repair 

arterial 

blockage 0083 37220 Iliac revasc 0229 Yes Yes 

35471 

Repair 

arterial 

blockage 0083 37224 

Fem/popl 

revas w/tla 0229 Yes Yes 

35475 

Repair 

arterial 

blockage 0083 35476 

Repair 

venous 

blockage 0229 Yes Yes 

35476 

Repair 

venous 

blockage 0083 35476 

Repair 

venous 

blockage 0229 Yes Yes 

37204 

Transcatheter 

occlusion 0229 37204 

Transcathet

er 

occlusion 0445 Yes Yes 

37205 

Transcath iv 

stent percut 0229 G0290 

Drugeluting 

stents, 

single 0445 Yes Yes 
215 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

37205 

Transcath iv 

stent percut 0229 37204 

Transcathet

er 

occlusion 0445 Yes Yes 

37205 

Transcath iv 

stent percut 0229 37205 

Transcath 

iv stent 

percut 0445 Yes Yes 

37220 Iliac revasc 0083 37220 Iliac revasc 0104 Yes Yes 

37221 

Iliac revasc 

w/stent 0229 37205 

Transcath 

iv stent 

percut 0445 Yes Yes 

37221 

Iliac revasc 

w/stent 0229 37220 Iliac revasc 0445 Yes Yes 

37221 

Iliac revasc 

w/stent 0229 37221 

Iliac revasc 

w/stent 0445 Yes Yes 

37224 

Fem/popl 

revas w/tla 0083 35475 

Repair 

arterial 

blockage 0104 Yes Yes 

37224 

Fem/popl 

revas w/tla 0083 37220 Iliac revasc 0104 Yes Yes 

37224 

Fem/popl 

revas w/tla 0083 37224 

Fem/popl 

revas w/tla 0104 Yes Yes 

37225 

Fem/popl 

revas w/ather 0229 35476 

Repair 

venous 

blockage 0445 Yes Yes 

37225 

Fem/popl 

revas w/ather 0229 37205 

Transcath 

iv stent 

percut 0445 Yes Yes 

37225 

Fem/popl 

revas w/ather 0229 37220 Iliac revasc 0445 Yes Yes 

37225 

Fem/popl 

revas w/ather 0229 37221 

Iliac revasc 

w/stent 0445 Yes Yes 
216 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

37225 

Fem/popl 

revas w/ather 0229 37225 

Fem/popl 

revas 

w/ather 0445 Yes Yes 

37225 

Fem/popl 

revas w/ather 0229 37226 

Fem/popl 

revasc 

w/stent 0445 Yes Yes 

37225 

Fem/popl 

revas w/ather 0229 37228 

Tib/per 

revasc 

w/tla 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 G0290 

Drugeluting 

stents, 

single 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 35471 

Repair 

arterial 

blockage 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 37204 

Transcathet

er 

occlusion 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 37205 

Transcath 

iv stent 

percut 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 37220 Iliac revasc 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 37221 

Iliac revasc 

w/stent 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 37226 

Fem/popl 

revasc 

w/stent 0445 Yes Yes 

37226 

Fem/popl 

revasc 

w/stent 0229 37228 

Tib/per 

revasc 

w/tla 0445 Yes Yes 

37228 

Tib/per 

revasc w/tla 0083 35476 

Repair 

venous 

blockage 0104 Yes Yes 
217 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

37228 

Tib/per 

revasc w/tla 0083 37220 Iliac revasc 0104 Yes Yes 

37228 

Tib/per 

revasc w/tla 0083 37224 

Fem/popl 

revas w/tla 0104 Yes Yes 

37228 

Tib/per 

revasc w/tla 0083 37228 

Tib/per 

revasc 

w/tla 0104 Yes Yes 

37229 

Tib/per 

revasc 

w/ather 0445 37221 

Iliac revasc 

w/stent 0319 Yes Yes 

37229 

Tib/per 

revasc 

w/ather 0445 37226 

Fem/popl 

revasc 

w/stent 0319 Yes Yes 

37229 

Tib/per 

revasc 

w/ather 0445 37229 

Tib/per 

revasc 

w/ather 0319 Yes Yes 

37230 

Tib/per 

revasc 

w/stent 0445 37221 

Iliac revasc 

w/stent 0319 Yes Yes 

37230 

Tib/per 

revasc 

w/stent 0445 37226 

Fem/popl 

revasc 

w/stent 0319 Yes Yes 

37230 

Tib/per 

revasc 

w/stent 0445 37228 

Tib/per 

revasc 

w/tla 0319 Yes Yes 

54405 

Insert multicomp penis 

pros 0386 53440 

Male sling 

procedure 0674 Yes Yes 

54405 

Insert multicomp penis 

pros 0386 53447 

Remove/re

place ur 

sphincter 0674 Yes Yes 

54405 

Insert multicomp penis 

pros 0386 54410 

Remove/re

place penis 

prosth 0674 Yes Yes 

57265 

Extensive 

repair of 

vagina 0202 57288 

Repair 

bladder 

defect 0385 Yes Yes 
218 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

57282 

Colpopexy 

extraperitone

al 0202 57285 

Repair 

paravag 

defect vag 0385 Yes Yes 

57282 

Colpopexy 

extraperitone

al 0202 57288 

Repair 

bladder 

defect 0385 Yes Yes 

57283 

Colpopexy 

intraperitone

al 0202 57285 

Repair 

paravag 

defect vag 0385 Yes Yes 

57283 

Colpopexy 

intraperitone

al 0202 57288 

Repair 

bladder 

defect 0385 Yes Yes 

57285 

Repair 

paravag 

defect vag 0202 57288 

Repair 

bladder 

defect 0385 Yes Yes 

61885 

Insrt/redo 

neurostim 1 

array 0039 61885 

Insrt/redo 

neurostim 

1 array 0318 Yes Yes 

61885 

Insrt/redo 

neurostim 1 

array 0039 64553 

Implant 

neuroelectr

odes 0318 Yes Yes 

61885 

Insrt/redo 

neurostim 1 

array 0039 64569 

Revise/repl 

vagus n 

eltrd 0318 Yes Yes 

63650 

Implant 

neuroelectro

des 0040 63650 

Implant 

neuroelectr

odes 0061 Yes Yes 

63650 

Implant 

neuroelectro

des 0040 64555 

Implant 

neuroelectr

odes 0061 Yes Yes 

63663 

Revise spine 

eltrd perq 

aray 0040 63663 

Revise 

spine eltrd 

perq aray 0061 Yes Yes 

63663 

Revise spine 

eltrd perq 

aray 0040 64555 

Implant 

neuroelectr

odes 0061 Yes Yes 

63685 

Insrt/redo 

spine n 

generator 0039 63650 

Implant 

neuroelectr

odes 0318 Yes Yes 
219 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

63685 

Insrt/redo 

spine n 

generator 0039 63655 

Implant 

neuroelectr

odes 0318 Yes Yes 

63685 

Insrt/redo 

spine n 

generator 0039 63663 

Revise 

spine eltrd 

perq aray 0318 Yes Yes 

63685 

Insrt/redo 

spine n 

generator 0039 63664 

Revise 

spine eltrd 

plate 0318 Yes Yes 

63685 

Insrt/redo 

spine n 

generator 0039 63685 

Insrt/redo 

spine n 

generator 0318 Yes Yes 

63685 

Insrt/redo 

spine n 

generator 0039 64555 

Implant 

neuroelectr

odes 0318 Yes Yes 

63685 

Insrt/redo 

spine n 

generator 0039 64565 

Implant 

neuroelectr

odes 0318 Yes Yes 

63685 

Insrt/redo 

spine n 

generator 0039 64575 

Implant 

neuroelectr

odes 0318 Yes Yes 

64555 

Implant 

neuroelectro

des 0040 64555 

Implant 

neuroelectr

odes 0061 Yes Yes 

64590 

Insrt/redo 

pn/gastr 

stimul 0039 63650 

Implant 

neuroelectr

odes 0318 Yes Yes 

64590 

Insrt/redo 

pn/gastr 

stimul 0039 63664 

Revise 

spine eltrd 

plate 0318 Yes Yes 

64590 

Insrt/redo 

pn/gastr 

stimul 0039 64555 

Implant 

neuroelectr

odes 0318 Yes Yes 

64590 

Insrt/redo 

pn/gastr 

stimul 0039 64575 

Implant 

neuroelectr

odes 0318 Yes Yes 

64590 

Insrt/redo 

pn/gastr 

stimul 0039 64590 

Insrt/redo 

pn/gastr 

stimul 0318 Yes Yes 
220 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

92920 

Prq cardiac 

angioplast 1 

art 0083 92920 

Prq cardiac 

angioplast 

1 art 0229 No Yes 

92928 

Prq card 

stent w/angio 

1 vsl 0104 92928 

Prq card 

stent 

w/angio 1 

vsl 0656 No Yes 

92928 

Prq card 

stent w/angio 

1 vsl 0104 92928 

Prq card 

stent 

w/angio 1 

vsl 0656 No Yes 

92928 

Prq card 

stent w/angio 

1 vsl 0104 92937 

Prq revasc 

byp graft 1 

vsl 0656 No Yes 

92933 

Prq card 

stent/ath/angi

o 0656 92933 

Prq card 

stent/ath/an

gio 0445 No Yes 

92941 

Prq card 

revasc mi 1 

vsl 0104 92941 

Prq card 

revasc mi 1 

vsl 0656 No Yes 

92943 

Prq card 

revasc 

chronic 1vsl 0104 92943 

Prq card 

revasc 

chronic 

1vsl 0656 No Yes 

92980 

Insert 

intracoronary 

stent 0104 33210 

Insert 

electrd/pm 

cath sngl 0656 Yes Yes 

92980 

Insert 

intracoronary 

stent 0104 92980 

Insert 

intracorona

ry stent 0656 Yes Yes 

92981 

Insert 

intracoronary 

stent 0656 92981 

Insert 

intracorona

ry stent 0319 Yes Yes 

92982 

Coronary 

artery 

dilation 0083 92982 

Coronary 

artery 

dilation 0229 Yes Yes 

92995 

Coronary 

atherectomy 0445 G0290 

Drugeluting 

stents, 

single 0319 Yes Yes 
221 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

93619 

Electrophysi

ology 

evaluation 0085 93650 

Ablate 

heart 

dysrhythm 

focus 0444 Yes Yes 

93619 

Electrophysi

ology 

evaluation 0085 93651 

Ablate 

heart 

dysrhythm 

focus 0444 Yes No 

93619 

Electrophysi

ology 

evaluation 0085 93652 

Ablate 

heart 

dysrhythm 

focus 0444 Yes No 

93620 

Electrophysi

ology 

evaluation 0085 93650 

Ablate 

heart 

dysrhythm 

focus 0444 Yes Yes 

93620 

Electrophysi

ology 

evaluation 0085 93651 

Ablate 

heart 

dysrhythm 

focus 0444 Yes No 

93620 

Electrophysi

ology 

evaluation 0085 93652 

Ablate 

heart 

dysrhythm 

focus 0444 Yes No 

0238T 

Trluml perip 

athrc iliac art 0229 37220 Iliac revasc 0445 Yes Yes 

0282T 

Periph field 

stimul trial 0040 0282T 

Periph field 

stimul trial 0039 Yes Yes 

0282T 

Periph field 

stimul trial 0040 63650 

Implant 

neuroelectr

odes 0039 Yes Yes 

C9600 

Perc drug-el 

cor stent sing 0656 C9600 

Perc drugel cor stent 

sing 0445 No Yes 

C9602 

Perc d-e cor 

stent ather s 0656 C9602 

Perc d-e 

cor stent 

ather s 0445 No Yes 

C9602 

Perc d-e cor 

stent ather s 0656 C9600 

Perc drugel cor stent 

sing 0445 No Yes 
222 

Primary 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Initial 

APC** 

Combination 

HCPCS 

Assigned 

to Status 

Indicator 

“J1” Descriptor 

Final 

APC** 

Used 

in CY 

2012 

Data 

Would be 

Used in 

CY 2014 

Claim 

Processing 

C9604 

Perc d-e cor 

revasc t cabg 

s 0656 C9604 

Perc d-e 

cor revasc t 

cabg s 0445 No Yes 

C9604 

Perc d-e cor 

revasc t cabg 

s 0656 C9600 

Perc drugel cor stent 

sing 0445 No Yes 

C9606 

Perc d-e cor 

revasc w 

AMI s 0656 C9606 

Perc d-e 

cor revasc 

w AMI s 0445 No Yes 

C9606 

Perc d-e cor 

revasc w 

AMI s 0656 C9600 

Perc drugel cor stent 

sing 0445 No Yes 

C9607 

Perc d-e cor 

revasc chro 

sin 0656 C9600 

Perc drugel cor stent 

sing 0445 No Yes 

C9608 

Perc d-e cor 

revasc chro 

add 0656 C9608 

Perc d-e 

cor revasc 

chro add 0445 No Yes 

G0290 

Drug-eluting 

stents, single 0656 G0290 

Drugeluting 

stents, 

single 0445 Yes No 

G0290 

Drug-eluting 

stents, single 0656 33210 

Insert 

electrd/pm 

cath sngl 0445 Yes No 

G0290 

Drug-eluting 

stents, single 0656 37224 

Fem/popl 

revas w/tla 0445 Yes No 

G0290 

Drug-eluting 

stents, single 0656 37228 

Tib/per 

revasc 

w/tla 0445 Yes No 

G0290 

Drug-eluting 

stents, single 0656 93620 

Electrophy

siology 

evaluation 0445 Yes No 

G0291 

Drug-eluting 

stents,each 

add 0319 G0290 

Drugeluting 

stents, 

single 0319 Yes No 

G0291 

Drug-eluting 

stents,each 

add 0319 G0291 

Drugeluting 

stents,each 

add 0319 Yes No 
223 

** For codes deleted in 2013, primary APC and complexity reassignment APC derived from CY 2012 

claims data that we would have used in cost calculations for CY 2014 instead of finalizing the 

comprehensive APC policy for CY 2015. We will recalibrate all of the cost information for CY 2015 using 

updated CY 2013 claims data. 

(e) Impact of Proposed Comprehensive APCs for Device-Dependent Procedures 

● Impact on Medicare Payments 

 In our proposed rule, we stated that because these device-dependent 

comprehensive APCs are entirely derived from existing services currently reported on 

Medicare claims, the policy is effectively budget neutral in its impact on Medicare 

payments. We noted 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 proposed to include new revenue center costs for 

room and board when reported on these claims, we emphasized that we were proposing 

to include them to increase the accuracy of reporting and not because they represent a 

new cost. 

 Comment: One commenter opined that CMS is correct to include the costs of all 

component services and supplies that would be packaged under the proposal for CY 

2014; all adjunctive services, including laboratory tests, diagnostic tests and evaluation 

and management services; DMEPOS for which payment would be made under the OPPS; 

services reported by therapy codes that would be payable under the OPPS; room and 

board as reported in room and board revenue cost centers; and cost of 

hospital-administered drugs (regardless of the route of administration) to ensure that the 

geometric mean cost upon which the payment for these comprehensive APCs would be 
224 

based would include all necessary costs of the services. However, several commenters 

were concerned that CMS did not account for the payments for services proposed to 

contribute to the comprehensive APC geometric mean costs into the CY 2013 current 

year payment estimates in budget neutrality calculations, but included these costs in the 

CY 2014 OPPS payment rate calculations. The commenters pointed out that CMS 

proposed to include the CLFS payments for laboratory services proposed for packaging 

in the OPPS current year (CY 2013) total payment amount when calculating budget 

neutrality adjustments for the prospective payment year (CY 2014), but that CMS 

apparently did not add payments to the OPPS current year total payment estimate for the 

adjunctive items and services that would be newly paid under the OPPS through the 29 

comprehensive APCs. In short, payment for newly added services should be added to the 

total CY 2013 payment level against which CY 2014 payments would be held budget 

neutral. These commenters defined the additional services that would be newly paid 

under the OPPS to include durable medical equipment, therapy services, inpatient nursing 

services, and inpatient room and board for overnight outpatient stays. The commenters 

further stated that the proposed rule provides no information concerning how this 

calculation was made and data was not provided to allow the public to review and 

validate the determination of budget neutrality. 

 Response: We appreciate the acknowledgement that we correctly identified and 

included the costs of adjunctive services contributing to these comprehensive OPD 

services, with the exception of charges on inpatient revenue codes, including room and 

board revenue codes. We agree with the commenters that we should have included 
225 

payments for adjunctive services proposed for payment through the OPPS for the first 

time in the current year budget neutrality calculations as well as in the relative payment 

weights for the proposed year calculation. In calculating budget neutrality adjustments 

for CY 2015 we will incorporate modeled payments for services that will be newly 

included in the comprehensive APCs on both sides of the budget neutrality calculation as 

we did for those laboratory services that we are packaging for CY 2014. 

 Comment: Several commenters stated that, although they recognized that 

changes in assignments in a prospective (average) payment system cause some payments 

to increase and others to decrease, the commenters were concerned that payment amounts 

have not been set to appropriately encompass the additional services that will be 

packaged. Another commenter noted that the shift from limited to comprehensive APCs 

would be accompanied by wide shifts in payment and questioned whether the changes 

with the expanded bundles, including occasional decreases, accurately reflected the costs 

of the additional packaged services. They requested that CMS delay proposed payments 

for the comprehensive APCs to ensure payment amounts have been set appropriately to 

include the additional packaged services. 

 Response: We agree with commenters that, for some services, there was 

considerable variation in the payment change from an isolated payment for the primary 

service, a device-related procedure, to a comprehensive payment for the complete 

service. There were a number of reasons for this variation. First, services varied 

considerably with respect to the number and estimated cost of adjunctive services that 

were typically provided during the same encounter. Some services were almost 
226 

completely described by the primary HCPCS code with status indicator “J1” with few 

additional adjunctive services reported in the claims data. Proposed comprehensive 

payment for these services did not change significantly. Other services, however, appear 

with many adjunctive services reported in the claims data that became packaged into the 

comprehensive payment, so the comprehensive payment for those primary HCPCS codes 

was considerably greater than the payment for the primary service alone. 

 Second, comprehensive payments allow us to use almost all of the claims for the 

primary service, rather than using a smaller subset of claims that have a single major 

procedure and no other significant procedures. We believe that this methodology 

provides much more accurate cost estimates for these comprehensive services, including 

incorporating the cost of all adjunctive services proportional to their presence on claims 

reporting comprehensive services into our final APC relative payment weight calculation. 

Our adoption of the geometric mean-based methodology rather than the median-based 

methodology to establish relative payment weights finalized in the CY 2013 OPPS/ASC 

final rule with comment period (77 FR 68229 through 68233) ensures that the final APC 

relative payment weight captures the complete spectrum of estimated geometric mean 

costs of procedures reported on claims and assigned to that APC. We recognize that the 

magnitude and direction of the change in payment from current OPPS payment structure 

for more granular payment for individual services to the proposed single comprehensive 

APC payment for the primary service and its adjunctive services varied from primary 

service to primary service. In a few instances, the relative geometric mean cost of the 

entire comprehensive service was less than the geometric mean cost of the primary 
227 

service alone. We believe that this is largely attributable to the improved accuracy of our 

ratesetting process. Under our traditional ratesetting methodology, we attempt to identify 

a cost for each separately payable service from our claims data. We use many strategies 

to use as much claims data as possible, but we cannot use all claims to estimate the APC 

geometric mean cost underpinning the relative payment weight. Comprehensive APCs 

allow us to use almost all of the claims for the primary service to calculate the geometric 

mean cost and the comprehensive APC to which the primary service is assigned. 

 Finally, we note that we reassigned some procedures described by HCPCS codes 

assigned to status indicator “J1” to different comprehensive APCs based on public 

comments that we received. Also in response to public comments that we received, we 

are finalizing a methodology for identifying complex subsets of the procedures reported 

in combination with the primary service that contain multiple device-dependent 

procedures and require greater resources, and we are reassigning these complex cases to a 

higher level comprehensive APC. We believe that reassigning claims for complex forms 

of the primary procedure to a higher level APC within the same clinical family directly 

addresses commenters’ concerns regarding recognizing the additional cost of ancillary 

services in complex procedures and improves the relative accuracy of the final OPPS 

payment for the primary service. 

 Comment: Several commenters questioned whether outlier payments would be 

adequate under the OPPS as the new comprehensive APCs are formed and packaging is 

expanded. The commenters noted that under the IPPS outlier payments are set at 5.1 

percent of total payments, compared to 1 percent under the OPPS, and costs reported 
228 

above the outlier threshold under the IPPS are paid at 80 percent compared to 50 percent 

under the OPPS. One commenter suggested that CMS increase outlier payments for 

comprehensive APCs, while another commenter suggested that outlier payments are an 

issue that CMS should examine and perhaps should have examined prior to advancing 

new packaging policies. 

 Response: Although we did not propose a change in outlier payments, we will 

consider whether we should expand our current outlier payment policy. Section 

1833(t)(5)(C) of the Act specifies that the estimated total of additional payments for 

outliers cannot exceed 3 percent of estimated total program payments in that year. 

Currently, we allocate 1 percent of total program payments to outlier payments each year. 

Overall, we believe that the current structure of the OPPS, which continues to make 

separate payment for most services, does not create the same financial risk for 

individually costly cases as IPPS payment through MS-DRGs, for example. Further, we 

are not sure an expansion to our outlier payment policy is necessary because we believe 

that our final policy to reassign claims for complex forms of primary services to higher 

level APCs reduces financial risk associated with comprehensive APC payment. 

● Impact on APCs 

 Impact on Composite APCs. There is currently one device-dependent composite 

service under the OPPS, cardiac resynchronization therapy, which is assigned to APC 

0108. Because a comprehensive APC will treat all individually reported codes as 

representing components of the comprehensive service, all of the elements of the 

composite service are included in the new comprehensive service. Therefore, cardiac 
229 

resynchronization therapy will no longer be identified as a composite service, but will be 

identified as a comprehensive service. All services currently assigned to APC 0108, 

including cardiac resynchronization therapy services, were assigned to the new 

comprehensive APC in our CY 2014 proposal. 

 Comment: Several commenters noted that, whereas we proposed making APC 

0085 (Level II Electrophysiologic Procedures) a comprehensive APC, we did not discuss 

composite APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite), 

which also would be absorbed by the new comprehensive APC policy. The commenters 

also noted that they believed that CMS calculated an APC geometric mean cost and 

payment rate based on the same set of claims for both APCs. 

 Response: We stated that cardiac resynchronization therapy services (assigned to 

APC 0108 Cardiac Resychronization Therapy) would no longer be identified as a 

composite service because it would be incorporated into a comprehensive service. 

However, we did not state in the proposed rule that the same situation existed in terms of 

APC 8000. Commenters are correct that the same principle applies. Because one of the 

components of the composite service is assigned a procedure assigned to status indicator 

“J1,” all of those claims reporting these services would trigger the comprehensive 

payment policy that we are finalizing with modification in this final rule with comment 

period. Commenters also are correct that in the proposed rule, we incorrectly assigned 

procedures to both APCs and calculated geometric mean costs and relative payment 

weights based on the same set of claims. We will reassign the previous status indicators 

for procedures assigned to APC 8000 from “S” and “T” to status indicator “J1” for CY 
230 

2015, and we will make a comprehensive APC payment for cardiac electrophysiologic 

evaluation and ablation services. 

 Impact on Claims Used to Calculate Other APCs. Some of the 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 final rule with comment period. However, the loss of usable cost data for 

these services will not create a significant impact on other APCs 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 x-rays 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 also important 

to note that the impact associated with the loss in usable claims data is lessened when 

assessing the benefit of more accurate cost calculations and ratesetting that will be 

achieved from the use of 400,000 new claims that can now be used for these purposes 

because of the establishment of the comprehensive APCs. 

 Impact on Device-Dependent APCs. The impact on current device-dependent 

APCs is described above in section II.A.2.d.(1) of this final rule with comment period. 

Comprehensive APC geometric mean costs generally exceed the device-dependent 

procedure geometric mean costs by an average of 11 percent, less than $1,000 per claim. 

The direct cost contribution of other adjunctive OPPS services accounts for most of this 

increase, with laboratory tests contributing approximately $18 per claim (a 0.1 percent 

increase) and other adjunctive covered outpatient services (not currently paid under the 
231 

OPPS) contributing an additional $18 per claim. There is significant variation across 

comprehensive APCs, however, not only because the distribution of adjunctive services 

varies, but also because the larger bundles allow a more complete incorporation of 

packaged 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 relative cost estimates. 

 Comment: Several commenters were concerned about hospitals’ willingness to 

consider new technologies, which can be costly. The commenters expressed concern that 

this proposal would impact device pass-through payment, New Technology APC 

provisions, and payments for device-dependent APCs. The commenters also were 

concerned that packaging is likely to limit the data available for future OPPS updates 

because the commenters believed that hospital reporting would be less accurate if there 

were no payment consequences for omitting a device on the claim and that the sunset of 

device edits would reduce the reliability of the data provided for payment calculations for 

the same reason. The commenters also were concerned that future potential pass-through 

device categories may be disadvantaged because pass-through eligibility includes 

demonstrating costliness relative to several thresholds based on APC payment. 

Specifically, the commenters were concerned that fewer device categories would be 

eligible for pass-though payment because fewer device categories would exceed a new 

higher threshold as a percent of the APC payment amount as payment increases with 

expanded packaging. Some commenters requested that CMS continue to apply the 

procedure-to-device and device-to-procedure edits. One commenter asserted that 
232 

hospitals do not find these edits to be burdensome, that the edits are a useful flag for 

accurate charging and that, if it is eliminated, providers could fail to report device charges 

completely. 

 Response: We do not agree with commenters that comprehensive APC payment 

will inhibit adoption of new technology. We have not proposed any changes to the New 

Technology APCs or device pass-through payment provisions and we discuss these 

payment policies in sections II.A.2.d.(1) and I.B. of this final rule with comment period. 

These processes for supporting new technologies will continue. New Technology APCs 

are reserved for new services that are not eligible for transitional pass-through payments 

for a device, drug, or biological, and for which we lack sufficient clinical information and 

cost data to appropriately assign them to a clinical APC group. Our proposed policy does 

not impact our New Technology APC policy, and our determination of new technology 

eligibility is not dependent on a particular cost threshold. 

 With regard to pass-through payment eligibility, we agree with the commenters 

that comprehensive APCs will create expanded bundles and generally higher payment 

from which the dollar value of the various cost thresholds that are part of the 

pass-through eligibility process will be determined. The specific cost thresholds used in 

determining eligibility of a new device pass-through category are listed in 42 CFR 

419.66(d). For CY 2015, payment for device-dependent procedures through 

comprehensive APC payment will create a higher costliness threshold against which new 

device categories interested in pass-through status must demonstrate costliness. We 

believe that the statutory construction of the OPPS envisions the relative cost of services 
233 

to vary over time as services are redefined, recoded, and reassigned among APCs, and as 

new claims and cost report data become available, which would raise or lower the cost 

threshold for pass-through payment eligibility under section 1833(t)(6)(A)(iv)(II) of the 

Act. We estimate that, for CY 2014, the inclusion of additional adjunctive packaged 

services, in aggregate, account for approximately 11 percent of the cost of these 

device-intensive services. Relative payment weights for device-related procedures can 

change by this amount each year due to annual recalibration. As we implement the 

comprehensive APC payment policy in CY 2015, we will monitor the impact of 

eligibility for device pass-through payments for a change in the percent of potential 

device categories failing to clear the current cost threshold criteria. 

We also believe that that expanded payment bundles encourage adoption of new 

technologies by giving hospitals more flexibility over how they deliver a particular 

service and creating more opportunities for hospitals to make tradeoffs to absorb the cost 

of improved devices. As we discuss in section II.A.2.d.(1) of this final rule with 

comment period, we plan to continue our historical device editing in CY 2014. Also as 

indicated in that section, we are further assessing whether we need to continue claims 

processing edits requiring a device HCPCS code to be reported on the claim when we 

implement the comprehensive APCs policy in CY 2015. 

● Impact on Beneficiary Payments 

 Under the 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 can expect to only pay a 
234 

single copayment that is subject to the cap. This will likely reduce beneficiary overall 

liability for most of these claims. 

 Comment: Several commenters agreed with CMS that, due to the inpatient 

deductible cap on beneficiary copayments, net beneficiary coinsurance would decrease 

under the proposed change. One commenter was concerned that beneficiary out-ofpocket costs may still be higher for any individual beneficiary. The commenter was 

particularly concerned that new cost-sharing with beneficiaries for laboratory services 

would be contrary to statue and congressional intent. The commenter objected to a 

proposal that would impose new beneficiary cost-sharing requirements in order to cut 

total projected Medicare spending for outpatient services. 

 Response: We believe that this proposal decreases the liability for almost all 

beneficiaries receiving primary procedures assigned to comprehensive APCs in CY 2015 

because the inpatient deductible cap, mandated by statute to apply to single services, will 

now apply to the entire hospital claim, as it is now considered a single service or 

procedure. We agree with the commenters that there may be some isolated beneficiaries 

who may have a higher beneficiary liability than they would have had we not proposed 

comprehensive APCs. In many instances, and for these device-related procedures in 

particular, beneficiaries will no longer make copayments for individual ancillary services. 

Because the device insertion procedures that we have proposed as comprehensive 

services are universally very expensive, the cap will apply to the majority of claims 

reporting services assigned to comprehensive APC. We received many public comments 

on our proposal to package laboratory services and address those comments and concerns 
235 

in our discussion of that final policy in section II.A.3.c.(3) of this final rule with comment 

period. 

● Impact on Specific APCs 

 In conjunction with our proposed rule, we published Addendum B, which 

identified specific proposed comprehensive payments associated with HCPCS codes 

proposed for assignment to status indicator “J1” under the proposed comprehensive APC 

payment policy. We identified the 29 device-dependent APCs proposed for 

comprehensive APCs and assigned HCPCS codes based on their prior APC assignment. 

Most of the public comments that we received were specific to certain HCPCS codes, 

certain APCs, or certain families of services. 

 Although we are not implementing this final comprehensive APC payment policy 

until CY 2015, to address concerns by some commenters that they could not fully model 

the proposal, we provide all of the information we would use to create a relative payment 

weight for CY 2014 using the CY 2012 claims data in order to illustrate the final 

comprehensive APC methodology. We summarize and respond to the public comments 

on individual services in this section, as if we were implementing this policy for 

CY 2014, grouped by those families of services below. We will recalibrate all of the 

comprehensive APC relative payment weights for CY 2015 using CY 2013 claims data, 

consistent with our annual recalibration of APC relative payment weights, to reflect the 

most recently available claims and cost information in next year’s rulemaking cycle. 

 Comment: With reference to the neurostimulator family of APCs, APCs 0039, 

0041, 0061, and 0318, one commenter was concerned that the CY 2014 proposal would 
236 

broadly decrease payments for neurostimulator insertions. Other commenters believed 

that total payments would remain approximately the same, but also believed that the 

spread of costs within a given APC was too great when certain combinations of devices 

were used. Commenters argued that there is a vast difference in supply (device) costs 

between a battery or generator replacement and a paddle lead implant or even a 

percutaneous lead implant. Commenters argued that bundling all of the different 

variations of neurostimulator implants into one comprehensive payment could create an 

unintended incentive to use less effective single leads and to increase the number of 

device replacements and revisions, which could potentially limit the therapeutic 

effectiveness for patients with complex pain syndromes. 

 With respect to leads, commenters stated that payment for dual lead trials would 

be decreased by nearly 40 percent, while single lead trials would be increased by 25 

percent, encouraging single lead trials. Similarly, the payment for the initial dual lead 

implant would decrease by 16 percent. The commenter asserted that this policy may 

reverse the common clinical practice of dual lead trials for the majority of patients and 

create a financial incentive to reduce the number of leads used for permanent implants, 

increasing the need for additional lead placements at a later time, which would result in 

an increase in readmissions and possible increase in adverse events and complications. 

 Additionally, commenters believed that this proposal could create incentives to 

use shorter life devices such as non-rechargeable devices, requiring more frequent 

replacement procedures in future years. The commenters stated that on the one hand, 

providers would have a financial incentive to use less expensive devices initially. 
237 

However, the commenter further stated that on the other hand because CMS is proposing 

to increase the generator replacement payment rate by 29 percent, providers could be 

encouraged to use shorter life devices that may require more frequent replacements with 

a consequent increase in Medicare spending and beneficiary cost sharing. 

 Commenters proposed a number of modifications to address these issues, 

including the creation of composite APCs to pay appropriately for the combination of 

devices provided to an individual patient. The commenters recommended that CMS 

retain the existing single component APCs for use when only one component (that is, a 

generator or an array) is implanted or replaced, and create two new composite APCs that 

reflect different combinations of components – pulse generator and one array and pulse 

generator and two or more arrays. Alternatively, the commenters recommended 

Comprehensive APC 0318 (Implantation of Neurostimulator Pulse Generator and 

Electrode) as the appropriate assignment for most complete neurostimulator systems 

procedures because it is already used to describe complete cranial nerve and vagus nerve 

systems procedures. Several commenters recommended maintaining a differentiation 

between laminectomy lead implants and percutaneous implants, and between spinal 

systems and sacral systems. 

 Response: We do not agree with the commenters who are concerned that we are 

underestimating payments for neurostimulators. We believe that by using all claims for 

these services, instead of the much smaller subsets of single claims that we used for our 

device-dependent methodology, any adjustments in the payments for specific services 

represent a more accurate estimation of relative resources required for the primary service 
238 

than past estimates. We also note that by estimating the total cost of the procedure by 

packaging all charges reported on the claim, we ensure that all of the estimated costs of 

all of these services contribute to the cost estimation for the neurostimulator procedure. 

Our methodology for identifying single claims, which is designed to isolate the unique 

costs associated with a specific service, makes some assumptions about assigning 

packaged costs to individual services. However, we agree with the commenters who 

were concerned that complex procedures such as those characterized by multiple units 

and multiple comprehensive components have a wide variation in comprehensive costs 

and that the geometric mean cost of these subsets is often materially greater than the 

geometric mean cost of all claims that include both simple and complex versions of the 

procedure. We agree with the commenters that delivery of these complex services could 

potentially be impacted under our proposed comprehensive APC payment policy. 

 Specifically, we agree with the commenters that procedures that implant 

individual elements of device systems, such as a generator without leads, may have 

significantly different costs than procedures that implant entire systems. We also agree 

with the commenters that there may be significant resource differences between 

individual elements of neurostimulator systems, such as transcutaneous leads and 

implanted paddles, and between different systems, such as epidural systems and sacral 

systems. These differences may then be reflected in the variation in the estimated 

geometric mean costs of the comprehensive service due to different combinations of 

component services. Therefore, we are accepting the commenters’ suggestions and we 

would reconfigure these APCs to better separate procedures for individual elements of 
239 

neurostimulator systems from procedures in which the entire system is implanted, and to 

more closely align relative resource requirements of complex subsets of the service with 

the corresponding payment for that subset if we were implementing this comprehensive 

APC policy in CY 2014. 

 Once we reassign complex claims for a primary service to a higher level APC, as 

we discuss below, we believe that many of the concerns raised by the commenters would 

be directly addressed, and therefore, we do not believe that we should not consider these 

procedures for a comprehensive APC assignment in CY 2015. We believe that hospitals 

understand that under a prospective payment system the cost of providing care to 

individual patients may vary relative to the payment amount, which is one hallmark of a 

prospective payment system. We are comfortable implementing comprehensive APCs 

for neurostimulators in CY 2015 with variance in the geometric mean costs of individual 

services that are comparable to the variance we see in estimated hospital costs for 

traditional, discrete, noncomprehensive services. 

 To implement the commenters’ suggestions we would use the four techniques 

described above to reassign claims for complex forms of the primary service to higher 

level APCs. We have analyzed the claims in which multiple units or multiple HCPCS 

codes assigned to status indicator “J1”are present and have divided individual services 

into simple and complex services, with complex services characterized by complete 

systems, multiple components or other associations that correlate with high resource 

requirements (high cost). We are adopting the basic suggestion of differentiating 

between partial systems and complete systems, and we plan to use the claims data to 
240 

group clinically similar, high-volume, complex procedures into APCs with similar costs 

in CY 2015. In this final rule with comment period, we invite commenters to apply the 

analysis, methodology, and the payment estimation techniques presented here to specific 

neurostimulator services and to provide comment on these illustrative CY 2014 

reassignments of complex neurostimulator claims. 

 Changes to implement the commenters’ suggestions and concerns for CY 2014, if 

we were implementing this policy for CY 2014, for this neurostimulator family of APCs 

are as follows: 

● APC Redesignations: We would eliminate APC 0315, and we would rename 

APC 0039 and APC 0318. 

● APC Reassignments: We would reassign CPT codes 43647 and 63655 from 

APC 0061 to APC 0039; CPT code 0268T from APC 0039 to APC 0040; CPT codes 

63664 and 64553 from APC 0040 to APC 0061; and CPT code 61886 from APC 0315 to 

APC 0318.

● Complexity Reassignment: We would reassign certain HCPCS code 

combinations that occur with CPT codes 0282T, 61885, 63650, 63663, 63685, 64555, 

and 64590 as complex forms of the primary service. We summarize all of the codes that 

we would reassign as complex forms of their primary procedure in Table 10 as if we were 

implementing this policy in CY 2014. 

 We request comment on these specific HCPCS code movements and complex 

claim reassignments. We will reassess the application of this policy to this 

neurostimulator family of APCs with CY 2013 claims data for CY 2015 implementation, 
241 

and we will update them based on new claim and cost report data and any relevant new 

CY 2015 codes through next year’s rulemaking cycle. 

 Comment: With reference to the endovascular family of APCs, APCs 0082, 

0083, 0104, 0229, 0319, and 0656, one commenter was supportive of the approach to 

further integrate the payment methodologies for the inpatient and outpatient systems in 

this case and agreed that patients who receive the major services contained within the 29 

comprehensive APCs are unlikely to be receiving unrelated services on the same day. 

The commenter urged CMS to monitor the effects of this new system to ensure that 

patients continue to receive access to the most appropriate care. Other commenters were 

generally supportive of the approach, but believed that there were specific reasons for not 

applying comprehensive status to the endovascular family APCs, for delaying the 

implementation for these comprehensive APCs, or for modifying payments within the 

family. One commenter specifically was concerned about a substantial decline in 

payment for APC 0083 (Coronary Angioplasty, Valvuloplasty, and Level I Endovascular 

Revascularization of the Lower Extremity). 

 Commenters noted that for CY 2011, 16 new HCPCS codes were implemented to 

create comprehensive codes for endovascular treatment in the lower extremity arterial 

territories; for CY 2013, new base and add-on codes were created for coronary artery 

interventions; and four new comprehensive endovascular codes will be added for 

CY 2014. Several commenters objected to the creation of any comprehensive APCs 

using any CPT codes that are less than 3 years old, as they believe the data is not yet 

reliable. 
242 

 Several commenters noted that the existing OPPS payment structure for coronary 

and peripheral revascularization procedures (angioplasty and stent placement) is 

component-based, providing separate but often reduced APC payments for each clinical 

aspect of the revascularization service, which are frequently assigned a status indicator of 

“T” (multiple reduction applies). Commenters argued that the clinical scenarios for 

revascularization procedures are based on each beneficiary’s unique clinical needs, 

making them incredibly complex with required resources varying significantly from 

patient to patient. Given this complexity, one commenter opined that coronary and 

peripheral revascularization procedures are ill-suited for comprehensive APCs because 

this type of payment structure is unable to capture the differences in hospital resources 

associated with the differences in revascularization services offered to patients. A few 

commenters believed that the proposal will inevitably give hospitals an incentive to use 

less expensive items and less extensive procedures even if those items will increase 

program costs as a whole and carry greater risk for beneficiaries. In a specific example, 

one commenter was concerned that all cardiac magnetic resonance imaging and other 

imaging studies within a 30-day period would be bundled into payment for the 

comprehensive APC, discourage the use of appropriate imaging modalities, and result in 

cost as the driving factor in patient access to needed medical imaging services. 

 Finally, another commenter believed that comprehensive APCs for stent 

placement procedures would allow a few patients receiving all the possible components 

of the bundle to experience a lesser hospital outpatient copayment amount, but would 

cause many beneficiaries to pay for services that they have not received and do not need. 
243 

 Response: We appreciate the commenters’ support for our conclusion that 

beneficiaries receiving these major services are unlikely to be receiving unrelated 

services on the same day, and we appreciate commenters who were generally supportive 

of our intent to create comprehensive packages. We recognize that there has been recent 

change in the coding and billing of many of these endovascular procedures, but we 

believe that hospitals prepare to adopt new codes each year and establish a charge relative 

to the best cost information available to them. We use estimated costs from claims data 

as soon as it becomes available to establish APC relative payment weights generally, and 

we have no reason to believe that continuing that practice for comprehensive APCs is not 

appropriate. With respect to the comments concerning APC 0083, for example, we note 

that the estimated hospital costs for the procedure alone did not change significantly 

between CY 2011 and CY 2012, and that the proposed comprehensive service geometric 

mean cost was approximately 10 percent higher than the single procedure geometric 

mean cost, a ratio that is comparable to the average aggregate increase in cost for the 

additional ancillary services observed across all proposed comprehensive services, 

indicating continued stability in the relative cost estimations despite changes to a 

methodology that now aggregates all estimated costs reported on each claim before 

calculating a geometric mean cost. 

 However, we agree with the commenters that endovascular procedure coding has 

historically been component based. In general, commenters argued that multi-vessel 

endovascular procedures have different resource requirements than single-vessel 

procedures. We agree with the commenters that there is a correlation between the 
244 

number of vessels treated and hospital costs. However, we also observe that there are a 

variety of endovascular procedures where the geometric mean costs of some single-vessel 

procedures are similar to the geometric mean costs of other multi vessel procedures. 

Nonetheless, we generally agree with the commenters that the range of estimated costs 

for any individual HCPCS code or HCPCS code combination is wide, with considerable 

overlap occurring across primary service codes and code combinations. We agree that, in 

general, payments for multiple vessel services should be adjusted to account for higher 

complexity and resources when those higher resources are reflected in our claims data. 

 To model commenters’ suggestions for illustration purposes in CY 2014, we have 

used the techniques described above to reassign claims for certain high-cost, complex 

versions of the primary service, primarily multiple vessel endovascular procedures. We 

analyzed the claims in which multiple units of a primary service or multiple HCPCS 

codes assigned to status indicator “J1,” including the primary service, are present. We 

divided individual services into simple and complex services, with complex services 

characterized by multiple components, multiple vessels, or other associations that 

correlate with high resource requirements (high cost). For our CY 2014 illustration, we 

are adopting the basic suggestion of differentiating between single vessel and multiple 

vessel procedures, and we are using the claims data to group clinically similar, 

high-volume, complex procedures into APCs with similar costs. In this final rule with 

comment period, we invite commenters to apply the analysis, methodology, and the 

payment estimation techniques presented here to specific endovascular services and to 
245 

provide comment on these illustrative CY 2014 reassignments of complex claims for 

endovascular services. 

 Changes to implement the commenters’ suggestions and concerns for CY 2014, if 

we were implementing this policy for CY 2014 for this endovascular family of APCs are 

as follows: 

● APC Redesignations: We would delete APC 0082 and reassign its services to 

other APCs. We would create a new APC, APC 0445 (Level III Endovascular 

Procedures). We would rename APCs 0083, 0104, 0229, 0319, and 0656. 

● APC Reassignments: We would reassign CPT codes 37229, 37230 and 92995 

from APC 0082 to APC 0445; CPT codes 92984, 92987, 92990, and 92997 from APC 

0083 to APC 0104; and HCPCS code G0291 from APC 0656 to APC 0319 (for the 

purpose of estimating geometric mean costs from CY 2012 claims data used for CY 2014 

ratesetting). 

● New HCPCS Codes: The comprehensive APC assignments that we would 

make for new HCPCS codes for this family are listed in Table 9. The new codes in this 

family would include CPT codes 37236, 37237, 37238, 37239, 37241, 37242, 37243, 

37244, 92920, 92921, 92924, 92925, 92928, 92933, 92934, 92937, 92938, 92941, 92943, 

92944, and HCPCS codes C9600, C9601, C9602, C9603, C9604, C9605, C9606, C9607, 

and C9608. 

● Complexity Reassignments: We would reassign certain HCPCS code 

combinations that occur with HCPCS and CPT codes 0238T, 35471, 35475,35476, 

37204, 37205, 37220, 37221, 37224, 37225, 92920, 92928, 92933, 92941, 92943, 92980, 
246 

92981, 92982, 92995, C9600, C9602, C9604, C9606, C9608, G0290, and G0291. We 

summarize all of the codes that we would reassign as complex forms of their primary 

service in Table 10 as if we were implementing this policy in CY 2014. 

 We request comment on these specific HCPCS movements and complex claim 

reassignments. We will reassess the application of this policy to this endovascular 

services family of APCs with CY 2013 claims data for CY 2015 implementation, and we 

will update them based on new claims data and any relevant new CY 2015 codes through 

next year’s rulemaking cycle. 

 Comment: Commenters generally did not object to the creation of comprehensive 

APCs for cardiac electrophysiology (EP) studies and one commenter specifically 

supported the proposal. However, commenters were confused and concerned about the 

impact of comprehensive APCs on payment for certain ablation procedures when 

performed in conjunction with EP studies. In the proposed rule, we discussed the 

creation of comprehensive APCs for EP studies, applying our proposed methodology in 

which all adjunctive services, with a few exceptions already discussed, reported on the 

claim are packaged into the payment for the primary service, which is based on the 

average comprehensive cost of those claims. However, we also inadvertently included a 

discussion of the continued existence of composite APC 8000 (Cardiac 

Electrophysiologic Evaluation and Ablation), a composite payment based on the 

performance of an ablation procedure with an EP service. Claims containing HCPCS 

codes for both an ablation and an EP study would, therefore, meet the criteria for the 

composite, but would also meet the criteria for comprehensive APC 0085 (Level II 
247 

Electrophysiologic Procedures), understandably generating reader confusion and causing 

commenters to ask how any services would be paid as composite APC 8000 services 

when they would all be subsumed under comprehensive APC 0085. We also believe that 

we added to this confusion by initially including some claims and estimated costs in the 

cost calculation of both APC 8000 and APC 0085, duplicating the reporting of composite 

APC 8000 claims and causing some statistics for the two APCs to be incorrect. 

Moreover, we also were not consistent in our application of status indicators or in our 

treatment of EP-ablation composites that for CY 2013 were reported with new CPT 

codes. 

 Commenters proposed several alternatives to our proposed treatment of EP 

studies and ablations but all of the alternatives involved differentially paying for ablation 

procedures when those procedures were performed in conjunction with EP procedures. 

One commenter recommended retaining one of the remaining ablation codes, CPT code 

93650 (Ablate heart dysrhythm focus), as a status indicator “Q3” codes that may be paid 

through a composite APC when not conditionally packaged. Noting that a status 

indicator of “Q3” would have the same packaging effect as including it in the 

comprehensive package as proposed, we believe this commenter intended to recommend 

a higher payment for EP procedures performed with an ablation, such as would occur 

when the two codes would determine a composite APC assignment. Another commenter 

expressed concerns that CPT code 93620 (Electrophysiology evaluation) was also listed 

with a status indicator of “Q3” but assigned to comprehensive APC 0085. Commenters 

requested that we clarify the intended treatment of EP and ablation services, differentially 
248 

pay for the lower costs of EP studies performed alone relative to the higher costs of EPablation procedures, and create a consistent treatment of services within these sets of 

codes. 

 Response: We agree with the commenters that our proposed rule provisions were 

not consistent in regard to our treatment of the electrophysiology-ablation procedures as 

composite services and as comprehensive services. We also agree with the commenters 

that there are significant differences between estimated costs of EP studies and estimated 

costs of EP-ablation procedures, and that the costs of services reported with EP-ablation 

combination codes are similar to the costs of single EP-ablation services assigned to 

composite APC 8000. For CY 2015, we intend to modify our proposal to create a 

separate comprehensive APC for new CY 2013 HCPCS codes that represent an EP study 

procedure with ablation, and we also intend to identify combined EP-ablation services 

reported with multiple HCPCS codes as a complex form of EP services and reassign them 

to a higher level APC. Finally, we also intend to delete composite APC 8000 as we move 

payment for these services under the comprehensive APC payment policy. In this final 

rule with comment period, we invite commenters to apply the analysis, methodology, and 

the payment estimation techniques presented here to specific EP services and to provide 

comment on these illustrative CY 2014 reassignments of complex claims for EP services. 

 Changes to implement the commenters’ suggestions and concerns for CY 2014, as 

if we were implementing this policy for CY 2014, for this set of electrophysiologic 

evaluation and ablation APCs are as follows: 
249 

● APC Redesignations: We would redesignate composite APC 8000 as 

comprehensive APC 0444 (Level III Electrophysiologic Procedures). 

● New codes: We would reassign CPT codes 93653, 93654 and 93656 from 

APC 8000 to APC 0444. 

● Complexity Reassignments: We would reassign HCPCS codes 93619 and 

93620, in combination with CPT code 93650, as complex forms of the primary EP 

service, and we would reassign those claims to APC 0444. For purposes of modeling the 

policy for CY 2014, we treated claims previously assigned to composite APC 8000 as 

complex forms of the primary service. We summarize all of the codes that we would 

reassign as complex forms of their primary procedures in Table 10 as if we were 

implementing this policy in CY 2014. 

 We request public comment on these specific HCPCS movements and complex 

claim reassignments. We will reassess the application of this policy to this set of 

electrophysiologic evaluation and ablation APCs with CY 2013 claims data for CY 2015 

implementation, and we will update them based on new claims data and any relevant new 

CY 2015 codes through next year’s rulemaking cycle. 

 Comment: In addition to the general comment that CMS should ensure that 

complex (multiple device) procedures are not inappropriately grouped with single device 

insertions, there were several public comments regarding the pacemaker-defibrillator 

family of services, APCs 0089, 0090, 0106, 0107, 0108, 0654, 0655, and 0674. With the 

exception of public comments on cardiac resynchronization therapy (CRT), these 

comments dealt with general issues such as the difficulty in modeling the impacts of 
250 

payment changes based on the information provided in the proposed rule and are 

discussed elsewhere in this final rule with comment period. Currently, we pay for CRT 

services through composite APC 0108 (Level II Implantation of CardioverterDefibrillators (ICDs)) based on the geometric mean costs of procedures reported on 

claims with a specific set of codes describing the parts of this composite service 

(77 FR 68258). Our proposal for comprehensive payment would have subsumed the 

need for a composite APC in CY 2014. One commenter requested that CRT services 

continue to be paid based on the geometric mean cost of the composite service rather than 

based on the geometric mean cost of all services furnished with multiple lead pacemakers 

or defibrillators that would occur with both our proposal to package procedures described 

by add-on codes and the comprehensive APC policy. 

 Response: We agree with the commenters that complex forms of certain services, 

generally characterized by combinations of codes in which components were separately 

reported in order to describe the delivery of an entire pacemaker or defibrillator system, 

have different resource profiles from simple procedures that implant system components 

or certain simple devices. We agree that CRT services are one of the most costly subsets 

of pacemaker implantation services but that other complex combinations of codes also 

exist. However, as part of the process of converting these APCs to comprehensive APCs, 

we noted that the comprehensive geometric mean cost of these services differed 

considerably, in some cases, from our estimates of the primary service calculated through 

our traditional single bill methodology and these new cost estimates suggested 

reassigning codes among the family of pacemaker APCs in order to increase resource 
251 

homogeneity. These reassignments also suggested renaming or restructuring APCs as 

necessary. We found these reassignments would reduce much of the cost to payment 

variance. 

 Therefore, in response to public comments we received, we would modify our 

proposal to establish comprehensive payments for pacemaker related services. We would 

realign the APCs by moving primary services subject to our standard 2 times rule 

methodology. In addition, we have identified a number of HCPCS combinations that 

represent high volume, high cost, more complex subsets of the primary service, and we 

would reassign those claims to a higher level APC. We note that our decision to finalize 

this proposed comprehensive APC policy with modification in this final rule with 

comment period, but to delay implementation of the policy until CY 2015 creates the 

opportunity for the public to further review the illustrative reconfigurations of 

comprehensive APCs that we would make in response to comment. In this final rule with 

comment period, we invite commenters to apply the analysis, methodology, and the 

payment estimation techniques presented here to specific pacemaker services and to 

provide comment on these illustrative CY 2014 APC configurations, APC assignments, 

and complexity reassignments. 

 Changes to implement commenters’ suggestions and concerns for CY 2014, if we 

were implementing this policy for CY 2014, for this pacemaker-defibrillator family of 

APCs are as follows: 
252 

● APC Redesignations: We would rename APC 0089 “Level III 

Insertion/Replacement of Permanent Pacemaker,” and we would rename APC 0106 

“Insertion/Replacement of Pacemaker Components.” 

● APC Reassignments: We would reassign CPT code 33217 from APC 0106 to 

APC 0090; CPT code 33229 from APC 0645 to APC 0655; CPT code 33231 from APC 

0107 to APC 0108; CPT codes 33208, 33214, and 33224 from APC 0655 to APC 0089; 

and CPT code 33221 from APC 0654 to APC 0089. 

● Complexity Reassignments: We would reassign certain combinations of the 

following CPT codes 33206, 33207, 33208, 33210, 33212, 33213, 33216, 33224, 33227, 

33228, 33230, 33240, 33263, and 33264 as complex forms of the primary pacemakerdefibrillator service. We summarize all of the codes that we would reassign as complex 

forms of their primary procedures in Table 10 as if we were implementing this policy in 

CY 2014. 

 We request comment on these specific HCPCS movements and complex claim 

reassignments. We will reassess the application of this policy to this pacemakerdefibrillator family of APCs with CY 2013 claims data for CY 2015 implementation, and 

we will update them based on new claims data and any relevant new CY 2015 codes 

through next year’s rulemaking cycle. 

 Comment: Several commenters requested that CMS not designate APC 0202 

(Level VII Female Reproductive Procedures) as a comprehensive APC. The commenters 

opined that, as opposed to the stated description of comprehensive APCs, APC 0202 does 

not contain a single major procedure with relatively small cost contributions from 
253 

adjunctive services but contains independent services that are frequently performed in 

combination with each other. Commenters also noted that CMS is currently achieving 

payment efficiencies for these concomitant procedures by reducing the payment for any 

second procedure to 50 percent even when that second procedure contains an additional 

medical device. The commenters stated that when multiple services are performed 

together under a comprehensive payment, the averaged payment assigned to the APC 

may be significantly less than the cost of the individual services performed. The 

commenters believed that this may encourage some hospitals to delay or stage procedures 

inappropriately, increasing overall Medicare costs and potentially threatening patient 

access to certain devices. 

 One commenter believed that APCs 0385 (Level I Prosthetic Urological 

Procedures) and 0386 (Level II Prosthetic Urological Procedures) similarly would have 

sizable reductions in Medicare payments that could create significant disincentives for 

hospitals to perform certain procedures that utilize medical devices. Another commenter 

believed that this result also applied to APC 0674 (Prostate Cryoablation). 

 Response: We do not agree with the commenters that these APCs represent a 

different class of services. All of the services described by the HCPCS codes in these 

APCs represent major surgical procedures where the encounter can be viewed as a single 

primary service and where a beneficiary would view the encounter globally. What 

commenters are describing as unrelated procedures are individual components of a single 

surgical procedure, which is, in turn, the primary reason for the encounter. CPT codes 

are designed by physicians to facilitate reporting of variation in physician work and, as a 
254 

result, often describe individual components of services that can be grouped in various 

ways. However, from a hospital payment perspective, many of those component codes 

are ancillary to or supportive of a primary service. For example, during a procedure to 

repair the urogenital tract the surgeon may report CPT code 57265 (Extensive repair of 

vagina) along with CPT code 57288 (Repair bladder defect), but these individual 

physician services are both part of the comprehensive surgical repair procedure. In the 

proposed rule, we proposed defining the most costly component of a comprehensive 

service as the primary service that determines the APC assignment and final payment of 

the service, and we believe that this methodology remains appropriate for these services. 

 We agree with the commenters generally and that, with respect to these 

reproductive surgery APCs specifically, there are some instances of commonly 

performed clinically coherent combinations of HCPCS codes assigned to status indicator 

“J1” that are associated with high estimated cost and sufficient volume, and we would 

designate these procedures as complex subsets of these primary services eligible for 

reassignment to a higher level APC if we were implementing this policy in CY 2014. We 

would have applied this methodology along with other techniques described above for 

CY 2014 in order to facilitate the transition from discrete incremental payments to a 

single comprehensive payment for the entire service. For APCs 0385, 0386, and 0674, as 

well as APC 0202, we also identified several combinations of HCPCS codes that 

represented common, costly subsets of services and we would reassign several HCPCS 

codes to different APCs to reduce the variance between the geometric mean estimated 

cost of the complex services and geometric mean cost of the APC to which the services 
255 

would be assigned. In this final rule with comment period, we are inviting commenters 

to apply the analysis, methodology, and the payment estimation techniques presented 

here to specific reproductive services and to provide comment on these illustrative CY 

2014 reassignment of complex reproductive services claims. 

 Changes to implement the commenters’ suggestions and concerns for CY 2014, if 

we were implementing the policy for CY 2014, for this urogenital procedures family of 

APCs are as follows: 

● APC Redesignations: We would rename APC 0385 “Level I Urogenital 

Procedures”; APC 0386 “Level II Urogenital Procedures”; and APC 0674 “Level III 

Urogenital Procedures”. 

● APC Reassignments: We would reassign CPT code 53445 from APC 0386 to 

APC 0674; CPT code 55873 from APC 0674 to APC 0385; and CPT code 57423 from 

APC 0202 to APC 0385. 

● Complexity Reassignments: We would reassign certain combinations of CPT 

codes 54405, 57265, 57282, and 57285 as complex forms of the primary service. We 

summarize all of the codes that we would reassign as complex forms of their primary 

procedures in Table 10 as if we were implementing this policy in CY 2014. 

 We request comment on these specific HCPCS movements and complex claim 

reassignments. We will reassess the application of this policy to this urogenital 

procedures family of APCs with CY 2013 claims data for CY 2015 implementation, and 

we will update them based on new claims data and any relevant new CY 2015 codes 

through next year’s rulemaking cycle. 
256 

 Comment: One commenter noted that APC 0082, a cardiovascular APC, includes 

CPT code 37204 (Transcatheter occlusion), which is occasionally used to report 

brachytherapy for liver therapy. The commenter believed that packaging yttrium in the 

cost of APC 0082 would be in conflict with section 1833(t)(2)(H) of the Act, which 

requires separate payment for brachytherapy. 

 Response: We agree with the commenters that the statute specifies that 

brachytherapy devices (seeds) shall be classified separately under the OPPS from other 

services. Because brachytherapy devices could be used during some encounters to 

deliver comprehensive services, we will modify our proposal to state that brachytherapy 

devices, like mammography and ambulance services, will not be included in the 

comprehensive payments beginning in CY 2015 and will continue to receive separate 

payment. 

 Comment: One commenter stated that CMS should not consider APC 0227 

(Implantation of Drug Infusion Device) to be a comprehensive APC because the drug that 

is used to fill the reservoir is not part of the comprehensive service. The commenter 

stated that the drug that is used to fill the pump should not be considered adjunctive 

because the drug itself is therapeutic and separate and apart from the implantation of the 

primary (pump) service. This commenter believed that therapeutic drugs in general 

should be excluded from a comprehensive APC payment and expressed concern that 

packaging may decrease hospital use of costly drugs, such as PRIALT, which is a 

non-narcotic alternative. Another commenter stated that CMS should provide greater 

data transparency if it decides to move ahead with the inclusion of DME items within a 
257 

comprehensive APC. The commenter was concerned that there will be a decrease in the 

payment rate for APC 0227 relative to the CY 2013 payment rate, which will render the 

payment inadequate to cover the cost of the services in question. 

 Response: We do not agree with the commenters that drugs being supplied to the 

patient to fill the reservoir of a pump at the time of pump implantation should be 

excluded from the comprehensive APC payment. Drugs supplied to fill the pump during 

implantation of the pump are adjunctive to the procedure. As we have noted above, costs 

of costly adjunctive services are included proportionally into the cost estimation for the 

primary services through our ability to use almost all claims for a service and adoption of 

the geometric mean cost upon which to establish relative payment weights. Certainly, the 

greater the cost variance of a particular component and the less frequently that 

exceptional component is used, the less the relative payment weight, based on a 

geometric mean of estimated cost, will reflect those less frequent, costly cases. Hospitals 

are also aware that the costs of extremely costly cases are partially mitigated by outlier 

payments, which would continue to apply in this case upon implementation of the 

comprehensive APC policy in CY 2015. Finally, with respect to APC 0227, we note that 

the comprehensive estimated geometric mean costs are in fact approximately 10 percent 

higher than the individual procedure estimated geometric mean costs, consistent with the 

relative contribution of adjunctive services across all comprehensive APCs. 

 Therefore, we are confirming that drugs used to fill in pumps at the time of a 

comprehensive pump insertion procedure are considered to be ancillary and supportive to 

the primary procedure and packaged as part of the comprehensive APC payment 
258 

regardless of whether the drug was previously packaged within the OPPS payment, was 

previously separately paid under the OPPS, or was previously paid according to a 

DMEPOS fee schedule. 

(f) Summary of Creation of Comprehensive APCs for High-Cost Device Dependent 

Procedures for Implementation in CY 2015 

 In summary, in response to public comments we received, we have decided to 

finalize the comprehensive APCs with modification and to delay the implementation or 

effective date of the policy until CY 2015. We acknowledge commenters’ concerns that 

this is a complex new payment structure under the OPPS. We agree that hospitals should 

have time to prepare for this comprehensive payment structure, and we also agree with 

the commenters that a delay in implementation will allow us (and them) more time to 

operationalize changes necessary to process comprehensive payments. 

 In response to public commenters’ request for additional detail on our calculation 

of the comprehensive APC relative payment weights, we have provided a granular 

discussion of our methodology for constructing the comprehensive APC payment rates as 

well as the specific APC configurations we would implement for CY 2014 if we were not 

delaying implementation to CY 2015. We also believe that the delay in implementation 

will give hospitals more time to study the final methodology for calculating relative 

payment weights that we discuss in this section, and specifically how the methodology 

recognizes resource differences in complex and simple versions of the same primary 

service. We are taking advantage of the delay in implementation and requesting 

additional comment on this methodology. 
259 

 For CY 2015, we will recalibrate comprehensive APCs and final reassignment of 

complex claims in light of any comments on the illustrative CY 2014 assignments that we 

present and updated CY 2013 claims and cost report data next year. For CY 2014, we 

will continue our payment for device-dependent APCs and composite payment for both 

CRT and cardiac electrophysiologic evaluation and ablation as discussed elsewhere in 

this final rule with comment period. 

 Effective for CY 2015, we will include all integral, ancillary, supportive, 

dependent, and adjunctive outpatient services into the comprehensive APC payment, 

excluding certain services such as ambulance services; mammography services; 

brachytherapy sources; and drugs, biologicals, and devices receiving pass-through 

payment. We will not include charges reported with inpatient room and board revenue 

codes as we do not believe outpatient costs are correctly reported in those revenue codes. 

Adjunctive items and services that will be unconditionally packaged into the 

comprehensive APC payment for CY 2015 include the following. 

● All packaged services that were packaged in CY 2013. 

● All services finalized for unconditional or conditional packaging for CY 2014. 

● All adjunctive services and supplies provided during the delivery of the 

comprehensive service, which includes all other cover OPPS items and services 

appearing on a claim, including those with a HCPCS with status indicator “J1”; 

implantable DMEPOS supplies provided during the comprehensive OPPS service; 

services performed by therapists provided during the OPPS service; and all other covered 

outpatient items and services appearing on the claim. 
260 

● All packaged hospital-administered drugs pursuant to a physician order, 

excluding pass-through drugs that are required to be separately paid by statute. 

 We are finalizing a modification to our proposed methodology for identifying a 

primary service, assigned to status indicator “J1” on a claim reporting multiple 

procedures described by HCPCS codes assigned to status indicator “J1” in order to 

effectuate an appropriate comprehensive APC payment. We are finalizing a multiple step 

process to include an evaluation of costliness based on the comprehensive geometric 

mean cost of single procedures assigned to status indicator “J1” reported on claims. We 

also have determined that there are certain subsets of outpatient cases for a primary 

service that should be more appropriately paid when stratified according to the 

complexity of the service. Therefore, we have identified a number of complexity 

reassignments for certain high-volume, costly, complex versions of a primary service, 

and we have reassigned these subsets of procedures representing a complex version of the 

primary service to higher-level APCs in the same clinical family. 

 In response to public comments we received, we discuss how we would have 

revised some comprehensive APC definitions and reassigned HCPCS codes to specific 

APCs in order to better align the comprehensive geometric mean cost of primary services 

with APCs that better capture the resource and clinical aspects of the service if we were 

implementing this policy for CY 2014. We discuss the methodology that we followed for 

all of those modifications to our proposal in detail earlier in this section. We display the 

final APC revisions that we would make and final comprehensive geometric mean cost 

for those APCs, if we were implementing this policy for CY 2014 in Table 8. We display 
261 

final HCPCS assignments in Table 9 and complexity reassignments in Table 10 that we 

would make if we were implementing this policy for CY 2014. 

 We have reconciled the inconsistency in our proposal to pay for cardiac 

electrophysiology-ablation procedures under both composite and comprehensive 

methodologies. For CY 2015, we are reassigning the codes assigned to composite APC 

8000 into a new composite APC 0444, along with complex services from APC 0085 that 

are characterized by composite EP-ablation procedures described by HCPCS code 

combinations. 

 Therefore, for CY 2015, we are creating 29 comprehensive APCs to prospectively 

pay for services associated with 167 CY 2014 HCPCS codes, which is the most recent 

code set available. We note that the list of HCPCS codes represent the procedures that 

would be assigned to a comprehensive APC if we implemented this policy for CY 2014. 

We will update this list as indicated in our proposed and final OPPS rules for CY 2015. 

 For CY 2015, we are treating all individually reported procedures that are 

assigned to status indicator “J1,” which will appear in the CY 2015 Addendum B to the 

proposed rule, as representing components of a comprehensive service characterized by a 

primary service, and we will make a single payment for the comprehensive service. We 

will be making a single all-inclusive payment for each comprehensive service reported on 

a claim with that payment 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. 

f. Calculation of Composite APC Criteria-Based Costs 
262 

 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 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43561), for CY 2014, we 

proposed to continue our composite policies for extended assessment and management 

services, LDR prostate brachytherapy services, cardiac electrophysiologic evaluation and 
263 

ablation services, mental health services, and multiple imaging services, as discussed 

below. We proposed to discontinue and supersede the cardiac resynchronization therapy 

composite APC with our proposed comprehensive APC 0108, as discussed in section 

II.A.2.e. of the proposed rule (78 FR 43561). Comments on cardiac resynchronization 

therapy relating to comprehensive APCs are discussed in section II.A.2.e. of this final 

rule with comment period. 

(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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43562 through 43563), for 

CY 2014, we proposed to modify our longstanding policy to provide payment to hospitals 
264 

in certain circumstances when extended assessment and management of a patient occur. 

We proposed to create one new composite APC, entitled “Extended Assessment and 

Management (EAM) Composite” (APC 8009), to provide payment for all qualifying 

extended assessment and management encounters rather than recognize two levels of 

EAM composite APCs. We proposed to allow any visit furnished by a hospital in 

conjunction with observation services of substantial duration to qualify for payment 

through EAM composite APC 8009. These policies are discussed in greater detail below. 

(b) Payment for Extended Assessment and Management Services 

 As we discussed in section VII. of the CY 2014 OPPS/ASC proposed rule 

(78 FR 43614 through 43617), we proposed 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. We stated that 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 
265 

assessment and management of a patient occur, for CY 2014, we proposed 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 proposed 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 the proposed rule, 

is accompanied by observation care of substantial duration on a claim. We would no 

longer recognize composite APC 8002 or APC 8003. The specific criteria we proposed 

to be met for the proposed new EAM composite APC to be paid is provided below in the 

description of the claims that we proposed to select for the calculation of the proposed 

CY 2016 geometric mean costs for this composite APC. 

 We proposed to calculate the geometric 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 
266 

● 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 
267 

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 geometric means cost resulting from this methodology for 

the proposed new EAM composite APC (APC 8009) was approximately $1,357, which 

was calculated from 318,265 single and “pseudo” single claims that met the required 

criteria. 

 We stated in the proposed rule that when hospital claims data for the CY 2014 

proposed clinic and ED visit codes becomes available, we proposed to calculate the 

geometric mean cost 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.); 
268 

● 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 HCPCS 

code 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. 

 Comment: One commenter supported CMS’ proposal to delete composite APCs 

8002 and 8003 and to pay for extended assessment and management services through 

newly created composite APC 8009. Another commenter, who did not support the 

proposal, stated that the proposed policy did not accurately account for the cost of 

providing an extended assessment and management service and urged CMS to carefully 

assess the potential impact of this proposal upon different types of facilities and patients 

before moving forward. 

 Response: We appreciate the commenter’s support of our proposal. We disagree 

with the one commenter’s argument that our proposal does not accurately account for the 

cost of providing an extended assessment and management service. We believe that this 

proposal accurately accounts for the cost of providing an extended assessment and 
269 

management service and that this proposal does not have any substantial impact on any 

particular type of facility or patient type. 

 After consideration of the public comments we received, we are finalizing our 

proposal 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 rather than recognizing two levels of 

EAM Composite APCs. In light of our CY 2014 final visit payment policy, which is 

discussed in detail in section VII. of this final rule with comment period, we are 

modifying our proposal to allow any clinic and certain high level ED visits furnished by a 

hospital in conjunction with observation services of substantial duration to qualify for 

payment through the newly created Extended Assessment and Management (EAM) 

Composite APC (APC 8009). Specifically, we are allowing a clinic visit (for CY 2014, 

there will be one code to describe all clinic visits), a Level 4 or Level 5 Type A ED visit, 

or a Level 5 Type B ED visit furnished by a hospital in conjunction with observation 

services of substantial duration to qualify for payment through composite APC 8009. 

This modification of the proposed EAM composite APC criteria is due to our decision 

not to finalize any changes to the Type A or Type B ED visit codes for CY 2014. 

Because we are not changing the ED visit codes for CY 2014, we also are not changing 

for CY 2014 the particular ED visit codes that qualify for the EAM composite APC. 

 We also are modifying our proposal to calculate the payment rate for the new 

EAM composite APC (APC 8009). Specifically, we calculated the geometric mean cost 
270 

for procedures assigned to APC 8009 for CY 2014 using CY 2012 single and “pseudo” 

single procedure claims that met 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 HCPCS 

code 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)); 
271 

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 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 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 final CY 2014 payment rate for composite APC 8009 is approximately 

$1,199. 

(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 
272 

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 geometric mean 

cost derived from claims for the same date of service that contain both CPT codes 55875 

and 77778 and that do not contain other 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 services and a detailed description of how we developed the LDR prostate 

brachytherapy composite APC. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43563), for CY 2014, we 

proposed 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 proposed 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 proposed not to use the 

claims that meet these criteria in the calculation of the geometric mean costs of 

procedures or services assigned to 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. 
273 

We proposed to continue to calculate the geometric mean costs of procedures or services 

assigned to APCs 0163 and 0651 using single and “pseudo” single procedure claims. We 

stated that 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 geometric mean cost upon which to base the composite APC payment rate. 

 Using a partial year of CY 2012 claims data available for the 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 geometric mean cost of these procedures upon 

which the proposed CY 2014 payment rate for composite APC 8001 was based. The 

proposed payment rate for composite APC 8001 for CY 2014 was approximately $4,340. 

 Comment: A few commenters asserted that the existing methodology to create 

“pseudo” single claims from multiple procedure claims is not yielding a significant 

number of claims to be used to calculate adequate payment rates for APC 8001, APC 

0312 (Radioelement Applications), and APC 0313 (Brachytherapy). The commenters 

believed that use of this methodology and its insignificant results is a continuing trend. 

 Response: For CY 2014, we have 591 final rule claims available for APC 8001 

geometric mean cost calculation, while for CY 2013 we were able to use 677 claims that 

contained both CPT codes 55875 and 77778 to calculate the geometric mean cost of these 

procedures upon which the final CY 2013 payment rate for composite APC 8001 was 

based. For CY 2014, we have 52 single claims available for geometric mean cost 
274 

calculation for APC 0312, compared to 74 claims available for CY 2013. For APC 0313, 

we have 17,810 single claims available for CY 2014 for geometric mean cost calculation 

compared to 17,743 single claims available for CY 2013. Therefore, there is 

approximately the same number of “pseudo” single claims available for APCs 8001 and 

0313 geometric mean cost calculation compared to CY 2013. With regard to APC 0312 

geometric mean cost calculation, the number of single claims available for ratesetting for 

CY 2014 compared to CY 2013 is somewhat low for both years. We agree with the 

commenter that it would be preferable if we had a larger volume of single claims on 

which to base the payment rate for APC 0312. We will continue to evaluate additional 

refinements and improvements to our ratesetting methodologies in order to maximize our 

use of claims data. In addition, we will continue to study means by which we can use a 

larger volume of claims data to establish the payment rate for APC 0312 specifically. 

 Comment: One commenter supported CMS’ proposal to continue paying for 

LDR prostate brachytherapy services using composite APC 8001 and noted recognition 

of the proposed increase in payment. 

 Response: We appreciate the commenter’s support for this proposal. 

 After consideration of the public comments we received, we are finalizing our 

policy to continue paying for LDR prostate brachytherapy services using composite 

APC 8001 for CY 2014, with a final CY 2014 geometric mean cost for APC 8001 of 

approximately $3,858. 

(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000)

 Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic 
275 

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 geometric mean costs for these services, and 

advanced our stated goal of promoting hospital efficiency through larger payment 

bundles. In order to calculate the geometric mean 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 
276 

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 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); 

● 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 
277 

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 
278 

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” (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 geometric mean 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. 
279 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43564), for CY 2014, we 

proposed to continue to pay for cardiac electrophysiologic evaluation and ablation 

services using the composite APC methodology proposed and implemented for CY 2008 

through CY 2013. We also proposed 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 stated that we continue to 

believe that the geometric mean 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 proposed not 

to use the claims that met the composite payment criteria in the calculation of the 

geometric mean costs for APC 0085, to which the CPT codes in both Groups A and B for 

composite APC 8000 are otherwise assigned. We proposed that the geometric mean 

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 the 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 geometric mean cost of approximately $13,402 for composite 

APC 8000. 

 Table 6 of the proposed rule listed the groups of procedures upon which we 

proposed to base composite APC 8000 for CY 2014 (78 FR 43565). 
280 

 Comment: One commenter on the CY 2013 OPPS/ASC final rule with comment 

period expressed concern with CMS’ treatment of CPT codes 93653, 93654, and 93656, 

which are assigned to new Group C and paid at the composite APC 8000 payment rate. 

Specifically, the commenter stated that CMS considers CPT code 93462 (Left heart 

catheterization by transseptal puncture through intact septum or by transapical puncture 

(List separately in addition to code for primary procedure)) as separately payable. 

However, the commenter believed that when CPT code 93462 appears on the claim in 

combination with CPT code 93656 CMS should treat the claims as single procedures for 

building composite APC 8000 in regard to cases where CPT code 93462 was used to 

describe services to treat atrial fibrillation (AF). The commenter contended that CMS did 

not do so for CY 2013, which resulted in an underpayment for cases assigned to 

composite APC 8000. The commenter noted that when the CPT Editorial Panel created 

CPT code 93656, it specifically listed CPT code 93462 as one of the codes that should 

not be reported in combination with CPT code 93656. The commenter asserted that 

CMS’ treatment of CPT code 93462 had several ratesetting consequences. According to 

the commenter, when CPT code 93462 appeared on any electrophysiology (EP) claim, it 

prevented that claim from becoming a “single procedure” claim for composite APC 8000 

ratesetting purposes. Because CPT code 93462 occurs most frequently for EP treatment 

of AF, preventing EP claims with CPT code 93462 from becoming “single procedure” 

claims disproportionately excludes AF claims from composite APC 8000 cost 

calculation. In addition, the commenter stated, because those claims are more expensive 

than the average EP claim, this result also reduces both the frequency and average cost of 
281 

claims used to calculate the geometric mean cost of composite APC 8000. The 

commenter stated that separate payment of CPT code 93462 prevents packaging CPT 

code 93462 costs on claims for EP involved with AF, which is contrary to the CPT 

instructions regarding CPT code 93656. 

 In response to the CY 2014 OPPS/ASC proposed rule, this same commenter and 

one other commenter expressed appreciation for CMS’ proposal to package the cost of 

CPT code 93462 within the APC payment rates of other services, and recommended that 

CMS finalize the proposed method of calculating the cost of APC 8000 for CY 2014. 

 Response: We assigned CPT code 93462 to APC 0080 for CY 2013, with a 

payment rate of $2,649.52. CPT code 93462 is an add-on code. For CY 2014, we 

proposed to package most add-on codes, including CPT code 93462. As a result of our 

packaging proposal, the geometric mean cost and frequency for composite APC 8000 

have increased. Based on CY 2014 final cost data, the geometric mean cost of composite 

APC 8000 is approximately $13,161 based on 16,937 claims available for cost 

calculation of composite APC 8000. We believe that packaging the cost of CPT code 

93462 within the APC payment rates of other services as a result of the add-on code 

packaging policy addresses the commenters’ concerns. 

 Comment: One commenter who agreed with CMS’ proposed methodology not to 

use claims that meet the composite APC 8000 criteria for geometric mean cost 

calculation purposes for APC 0085, expressed concern regarding the proposed payment 

rate for APC 0085. The commenter noted that the proposed payment rate for APC 0085 

for CY 2014 is $11,517 (the corrected proposed rate included in the September 6, 2013 
282 

OPPS Addendum B, which was posted on the CMS Web site is approximately $11,345), 

which is significantly higher than the CY 2013 payment rate of $4,035. However, the 

commenter believed that this variation is a result of unintended reuse of claims used to 

calculate the composite APC 8000 payment rate. The commenter further believed that 

excluding the composite APC 8000 claims from APC 0085 cost calculation will lower 

the geometric mean cost of APC 0085 significantly, and urged CMS to correct this error. 

 Response: We acknowledge that the proposed payment rate for APC 0085 was 

incorrectly initially published as approximately $11,517, as well as the corrected payment 

rate (which was posted on the CMS Web site) of $11,345. The proposed rule payment 

rate for APC 0085 was based on our comprehensive APC methodology, which packaged 

the cost of ancillary and other services. However, our comprehensive APC methodology 

will not be effective until CY 2015. The final geometric mean cost for APC 0085 is 

approximately $4,248, based on 6,362 claims available for ratesetting. 

 After consideration of the public comments we received, we are finalizing our 

proposal to continue payment for composite APC 8000 for CY 2014. Based on a full 

year of CY 2012 claims data, the final geometric mean cost of composite APC 8000 is 

approximately $13,162, based on 16,935 claims available for ratesetting. We also are 

finalizing the payment for APC 0085, based on a geometric mean cost of approximately 

$4,248. 

 Table 11 below lists the groups of procedures upon which we based composite 

APC 8000 for CY 2014 
283 

TABLE 11.—GROUPS OF CARDIAC ELECTROPHYSIOLOGIC 

EVALUATION AND ABLATION PROCEDURES UPON WHICH COMPOSITE 

APC 8000 IS BASED FOR CY 2014 

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 

Single Code 

CY 2014 

APC 

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 
284 

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 
285 

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

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43565), for CY 2104, we 

proposed 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 

through 18455) for the initial discussion of this longstanding policy and the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74168) for more recent background. 

 We proposed that when the aggregate payment for specified mental health 

services provided by one hospital to a single beneficiary on one date of service based on 

the payment rates associated with the APCs for the 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 proposed to continue to set the payment 

rate for APC 0034 at the same payment rate that we proposed to establish for APC 0176 

(Level II Partial Hospitalization (4 or more services) for hospital-based PHPs), which is 

the maximum partial hospitalization per diem payment rate for a hospital and proposed 

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 
286 

that single date of service. We stated that we continue to believe that the costs associated 

with administering a partial hospitalization program at a hospital represent the most 

resource-intensive 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. 

 We did not receive any public comments on this proposal. Therefore, we are 

finalizing our CY 2014 proposal, without modification, to continue our longstanding 

policy of limiting the aggregate payment for specified less resource-intensive mental 

health services furnished on the same date by a hospital to the payment for APC 0176, 

which is the maximum partial hospitalization per diem payment for a hospital for 

CY 2014. 

(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).
287 

 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, 
288 

we refer readers to the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68559 through 68569). 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43566), for CY 2014, we 

proposed to continue to pay for all multiple imaging procedures within an imaging family 

performed on the same date of service using the multiple imaging composite APC 

payment methodology. 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) 

were based on geometric mean costs calculated from a partial year of CY 2012 claims 

available for the 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 geometric mean 

costs, we used the same methodology that we used to calculate the final CY 2012 and 

CY 2013 geometric mean 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 geometric mean costs, 

pursuant to our established methodology (76 FR 74169), were identified by asterisks in 

Addendum N to the proposed rule (which is available via the Internet on the CMS Web 

site) and were discussed in more detail in section II.A.1.b. of the proposed rule. 
289 

 For the CY 2014 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 geometric mean costs for the multiple imaging composite APCs. 

 Table 7 of the proposed rule listed the proposed HCPCS codes that would be 

subject to the multiple imaging composite policy and their respective families and 

approximate composite APC geometric mean costs for CY 2014 (78 FR 43567). We 

noted that the proposed geometric mean costs calculated for many imaging APCs, 

including the multiple imaging composite APCs, have changed significantly from the 

geometric mean 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 the proposed rule. 

 Comment: Some commenters supported CMS’ decision not to propose any new 

multiple imaging composite APCs. Other commenters urged CMS to restore separate 

payment for each imaging procedure, regardless of the date of service because of the 

decreases in payment for imaging services over several years, which according to the 

commenters may create disincentives to performing multiple imaging services on the 

same date. Some commenters stated that other CMS proposals such as the CY 2014 

proposed new CCRs for CT and MRI services have further decreased payment rates for 

imaging services for CY 2014, and the use of the new cost centers is directly responsible 

for the substantial decreases in payment for multiple imaging APCs, including composite 
290 

APCs. Some commenters suggested that CMS provide an analysis of the impacts from 

decreases in payments for imaging services. 

 Response: As explained earlier in this section, we continue to believe that our 

multiple imaging composite policies reflect and promote the efficiencies hospitals can 

achieve when performing multiple imaging procedures during a single session. We have 

a total of 1.6 million composite cases in our claims data for CY 2014 ratesetting, which 

we believe is a sufficiently robust number of multiple imaging cases performed for 

ratesetting purposes. We address the concern that the new cost centers may be 

responsible for substantial decreases in payment for multiple imaging APCs in section 

II.A.1.c. of this final rule with comment period. 

 After consideration of the public comments we received, for this CY 2014 final 

rule with comment period, we were able to identify approximately 0.7 million “single 

session” claims out of an estimated 1.6 million potential composite cases from our 

ratesetting claims data, approximately 45 percent of all eligible claims, to calculate the 

final CY 2014 geometric mean costs for the multiple imaging composite APCs. 

 Table 12 below lists the HCPCS codes that will be subject to the multiple imaging 

composite policy and their respective families and approximate composite APC 

geometric mean costs for CY 2014. 
291 

TABLE 12.—OPPS IMAGING FAMILIES AND MULTIPLE IMAGING 

PROCEDURE COMPOSITE APCs 

Family 1 – Ultrasound 

CY 2014 APC 8004 (Ultrasound Composite) CY 2014 Approximate 

 APC Geometric Mean Cost = $287 

76604 Us exam, chest 

76700 Us exam, abdom, complete 

76705 Echo exam of abdomen 

76770 Us exam abdo back wall, comp 

76775 Us exam abdo back wall, lim 

76776 Us exam k transpl w/Doppler 

76831 Echo exam, uterus 

76856 Us exam, pelvic, complete 

76870 Us exam, scrotum 

76857 Us exam, pelvic, limited 

Family 2 - CT and CTA with and without Contrast 

CY 2014 APC 8005 (CT and CTA without 

Contrast Composite)* 

CY 2014 Approximate 

APC Geometric Mean Cost = $307 

70450 Ct head/brain w/o dye 

70480 Ct orbit/ear/fossa w/o dye 

70486 Ct maxillofacial w/o dye 

70490 Ct soft tissue neck w/o dye 

71250 Ct thorax w/o dye 

72125 Ct neck spine w/o dye 

72128 Ct chest spine w/o dye 

72131 Ct lumbar spine w/o dye 

72192 Ct pelvis w/o dye 

73200 Ct upper extremity w/o dye 

73700 Ct lower extremity w/o dye 

74150 Ct abdomen w/o dye 

74261 Ct colonography, w/o dye 

74176 Ct angio abd & pelvis 

CY 2014 APC 8006 (CT and CTA with 

Contrast Composite) 

CY 2014 Approximate 

 APC Geometric Mean Cost = $550 

70487 Ct maxillofacial w/dye 
292 

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 
293 

* If a “without contrast” CT or CTA procedure is performed during the same session as a 

“with contrast” CT or CTA procedure, the I/OCE will assign APC 8006 rather than 

APC 8005. 

Family 3 - MRI and MRA with and without Contrast 

CY 2014 APC 8007 (MRI and MRA without 

Contrast Composite)* 

CY 2014 Approximate 

APC Geometric Mean Cost = $623 

70336 Magnetic image, jaw joint 

70540 Mri orbit/face/neck w/o dye 

70544 Mr angiography head w/o dye 

70547 Mr angiography neck w/o dye 

70551 Mri brain w/o dye 

70554 Fmri brain by tech 

71550 Mri chest w/o dye 

72141 Mri neck spine w/o dye 

72146 Mri chest spine w/o dye 

72148 Mri lumbar spine w/o dye 

72195 Mri pelvis w/o dye 

73218 Mri upper extremity w/o dye 

73221 Mri joint upr extrem w/o dye 

73718 Mri lower extremity w/o dye 

73721 Mri jnt of lwr extre w/o dye 

74181 Mri abdomen w/o dye 

75557 Cardiac mri for morph 

75559 Cardiac mri w/stress img 

C8901 MRA w/o cont, abd 

C8904 MRI w/o cont, breast, uni 

C8907 MRI w/o cont, breast, bi 

C8910 MRA w/o cont, chest 

C8913 MRA w/o cont, lwr ext 

C8919 MRA w/o cont, pelvis 

C8932 MRA, w/o dye, spinal canal 

C8935 MRA, w/o dye, upper extr 

CY 2014 APC 8008 (MRI and MRA with 

Contrast Composite) 

CY 2014 Approximate 

APC Geometric Mean Cost = $931 

70549 Mr angiograph neck w/o & w/dye 

70542 Mri orbit/face/neck w/dye 

70543 Mri orbt/fac/nck w/o & w/dye 
294 

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 
295 

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. 

(6) Cardiac Resynchronization Therapy Composite APC (APC 0108) 

 Cardiac resynchronization therapy (CRT) uses electronic devices to sequentially 

pace both sides of the heart to improve its output. CRT utilizing a pacing electrode 

implanted in combination with an implantable cardioverter defibrillator (ICD) is known 

as CRT-D. Hospitals commonly report the implantation of a CRT-D system using CPT 

codes 33225 (Insertion of pacing electrode, cardiac venous system, for left ventricular 

pacing, at time of insertion of pacing cardioverter-defibrillator or pacemaker pulse 

generator (including upgrade to dual chamber system) (List separately in addition to code 

for primary procedure)) and 33249 (Insertion or repositioning of electrode lead(s) for 

single or dual chamber pacing cardioverter-defibrillator and insertion of pulse generator). 

As described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74176), 

over the past several years, stakeholders have pointed out significant fluctuations in the 

payment rate for CPT code 33225 and that, because the definition of CPT code 33225 

specifies that the pacing electrode is inserted at the same time as an ICD or pacemaker, 

CMS would not have many valid claims upon which to calculate an accurate cost. In 

response to these concerns, we established a policy beginning in CY 2012 to recognize 
296 

CPT codes 33225 and 33249 as a single, composite service when the procedures are 

performed on the same day and to assign them to APC 0108 

(Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes) when 

they appear together on a claim with the same date of service. We refer readers to the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74176 through 74182) for a 

full description of how we developed this policy. 

 As described in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74182), hospitals continue to use the same CPT codes to report CRT-D 

implantation services, and the I/OCE will identify when the combination of CPT codes 

33225 and 33249 on the same day qualify for composite service payment. We make a 

single composite payment for such cases. When not performed on the same day as the 

procedure described by CPT code 33225, the procedure described by CPT code 33249 is 

also assigned to APC 0108. When not performed on the same day as the procedure 

described by CPT code 33249, the procedure described by CPT code 33225 is assigned to 

APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber 

Pacemaker). 

 In order to ensure that hospitals correctly code for CRT services, we also finalized 

a policy in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74182) to 

implement claims processing edits that will return to providers incorrectly coded claims 

on which a pacing electrode insertion (the procedure described by CPT code 33225) is 

billed without one of the following procedures to insert an ICD or pacemaker, as 

specified by the AMA in the CPT codebook: 
297 

● 33206 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); atrial); 

● 33207 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); ventricular); 

● 33208 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); atrial and ventricular); 

● 33212 (Insertion or replacement of pacemaker pulse generator only; single 

chamber, atrial or ventricular); 

● 33213 (Insertion or replacement of pacemaker pulse generator only; dual 

chamber, atrial or ventricular); 

● 33214 (Upgrade of implanted pacemaker system, conversion of single chamber 

system to dual chamber system (includes removal of previously placed pulse generator, 

testing of existing lead, insertion of new lead, insertion of new pulse generator)); 

● 33216 (Insertion of a single transvenous electrode, permanent pacemaker or 

cardioverter-defibrillator); 

● 33217 (Insertion of 2 transvenous electrodes, permanent pacemaker or 

cardioverter-defibrillator); 

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

● 33233 (Removal of permanent pacemaker pulse generator); 

● 33234 (Removal of transvenous pacemaker electrode(s); single lead system, 

atrial or ventricular); 
298 

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

atrial or ventricular); 

● 33240 (Insertion of single or dual chamber pacing cardioverter-defibrillator 

pulse generator); or 

● 33249 (Insertion or repositioning of electrode lead(s) for single or dual 

chamber pacing cardioverter-defibrillator and insertion of pulse generator). 

 We continued for CY 2013 to recognize CRT-D as a single, composite service as 

described above and finalized in the CY 2013 OPPS/ASC final rule with comment period 

(77 FR 68259). By continuing to recognize these procedures as a single, composite 

service, we are able to use a higher volume of correctly coded claims for CPT code 

33225, which, because of its add-on code status, is always performed in conjunction with 

another procedure. We also noted that this policy is consistent with the principles of a 

prospective payment system, specifically to place similar services that utilize 

technologies with varying costs in the same APC in order to promote efficiency and 

decision-making based on individual patient’s clinical needs rather than financial 

considerations. Because CPT codes 33225 and 33249 may be treated as a composite 

service for payment purposes, we continued to assign them status indicator “Q3” (Codes 

that may be paid through a composite APC) in Addendum B to the proposed rule (which 

is available via the Internet on the CMS Web site). The assignment of CPT codes 33225 

and 33249 to APC 0108 when treated as a composite service was also reflected in 

Addendum M to the proposed rule (which is available via the Internet on the CMS Web 

site). 
299 

 In addition, for CY 2013, we revised the claims processing edits in place for CPT 

code 33225 due to revised guidance from the AMA in the CPT codebook specifying the 

codes that should be used in conjunction with CPT code 33225. Specifically, on 

February 27, 2012, the AMA posted a correction as errata to the CY 2012 CPT codebook 

on the AMA Web site at: http://www.ama-assn.org/resources/doc/cpt/cptcorrections.pdf. This correction removed CPT code 33222 (Revision or relocation of 

skin pocket for pacemaker) as a service that should be provided in conjunction with CPT 

code 33225, and added CPT codes 33228 (Removal of permanent pacemaker pulse 

generator with replacement of pacemaker pulse generator; dual lead system), 33229 

(Removal of permanent pacemaker pulse generator with replacement of pacemaker pulse 

generator; multiple lead system), 33263 (Removal of pacing cardioverter-defibrillator 

pulse generator with replacement of pacing cardioverter-defibrillator pulse generator; 

dual lead system), and 33264 (Removal of pacing cardioverter-defibrillator pulse 

generator with replacement of pacing cardioverter-defibrillator pulse generator; multiple 

lead system). In accordance with this revised guidance, we deleted CPT code 33222 as a 

code that can satisfy the claims processing edit for CPT code 33225, and added CPT 

codes 33228, 33229, 33263, and 33264 as codes that can satisfy this edit beginning in 

CY 2012 (77 FR 68259). 

 For CY 2014, we proposed to discontinue and supersede the cardiac 

resynchronization therapy composite APC with our proposed comprehensive APC 0108, 

as discussed in section II.A.2.e. of the proposed rule (78 FR 43561). The public 

comments that we received on cardiac resynchronization therapy that relate to proposed 
300 

comprehensive APCs are discussed in section II.A.2.e. of this final rule with comment 

period. 

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

comprehensive APCs will not be effective until CY 2015. Therefore, for CY 2014, we 

are finalizing the continuation of our current CRT-D composite policy, without 

modification and finalizing payment for CRT services using the composite APC 0108 

payment methodology that we used for CYs 2012 and 2013, as discussed above. That is, 

for CY 2014, CRT-D will be recognized as a single, composite service as described 

above and finalized in the CY 2012 and CY 2013 OPPS/ASC final rules with comment 

period. In calculating the costs upon which the final payment rate for APC 0108 is based 

for CY 2014, for this final rule with comment period, we included single procedure 

claims for the individual services assigned to APC 0108, as well as single procedure 

claims that contain the composite CRT-D service, defined as the combination of CPT 

codes 33225 and 33249 with the same date of service. We were able to use 15,454 single 

bills from the CY 2014 final rule claims data to calculate a final geometric mean cost of 

approximately $32,257 for APC 0108. Because CPT codes 33225 and 33249 may be 

treated as a composite service for payment purposes, we are continuing to assign them 

status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B 

to this final rule with comment period. 
301 

3. Changes to Packaged Items and Services 

a. Summary of CY 2014 Final Packaging Policies 

 Beginning in CY 2014, we are unconditionally or conditionally packaging the 

following items and services and adding 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 when 

used in a diagnostic test or procedure; 

 (2) Drugs and biologicals that function as supplies when used in a surgical 

procedure; 

 (3) Certain clinical diagnostic laboratory tests; 

 (4) Certain procedures described by add-on codes; and 

 (5) Device removal procedures. 

 The HCPCS codes that we are packaging for CY 2014 are displayed in both 

Addendum P and Addendum B of this final rule with comment period. The supporting 

documents for this final rule with comment period, including but not limited to these 

Addenda, are available at the CMS Web site at: 

http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. Further details including comments and 

responses on the particular packaging proposals are discussed below. 

b. Background 

 Like other prospective payment systems, the OPPS relies on the concept of 

averaging to establish a payment rate for services. The payment may be more or less 
302 

than the estimated cost of providing a specific service or bundle of specific services for a 

particular patient. The OPPS packages payment for multiple interrelated items and 

services into a single payment to create incentives for hospitals to furnish services most 

efficiently and to manage their resources with maximum flexibility. Our packaging 

policies support our strategic goal of using larger payment bundles to maximize 

hospitals’ incentives to provide care in the most efficient manner. 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 

use a more expensive item, which often results if separate payment is provided for the 

items. 

 Packaging also encourages hospitals to effectively negotiate with manufacturers 

and suppliers to reduce the purchase price of 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 
303 

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 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/ASC proposed rule 

(72 FR 42628) and the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66580). 

 Over the last 15 years, we have refined our understanding and implementation of 

the OPPS and have packaged numerous services that we originally paid as primary 

services. As we continue to 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 currently 

separately pay as primary services. 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 a dependent service. 

 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 for the combination of the separately payable services and any associated 

packaged services. We emphasize that hospitals should report all HCPCS codes for 
304 

provided services, including those for packaged services, 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, in the 

CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed 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 42 CFR 419.2(b). Composite APCs under the 

OPPS, which are described in section II.A.2.f. of this final rule with comment period, and 
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comprehensive APCs, which are described in section II.A.2.e. of this final rule with 

comment period, also include packaging. 

c. Basis for 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 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 
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according to existing OPPS packaging policies or a logical expansion of those existing 

OPPS packaging policies. In general, in the CY 2014 OPPS/ASC proposed rule, we 

proposed 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 proposed to package beginning in CY 2014. In 

several cases, we proposed 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. 

d. New Packaging Policies for CY 2014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43570 through 43575), we 

proposed to package the following categories of items and services beginning in 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 when used in a surgical 

procedure; 

 (3) Certain 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 
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 (7) Device removal procedures. 

 Category (2) listed above was described in the proposed rule as “drugs and 

biologicals that function as supplies or devices when used in a surgical procedure.” In 

this final rule with comment period, we are deleting the words “or devices” from the 

name of this category because the words are redundant of “supplies.” In this context, 

devices are a type of supply (78 FR 43571), so it is not necessary to include the words “or 

devices” after supplies in the name of this category of packaged items. 

 Comment: Many commenters requested that CMS postpone finalizing all of the 

packaging proposals because of the commenters’ inability to replicate the CY 2014 

proposed OPPS payment rates, which the commenters asserted limited their ability to 

fully evaluate and, therefore, meaningfully comment on the packaging proposals. Many 

commenters also stated that, given the significance and scope of the proposals, CMS 

should delay implementation of these policies to allow stakeholders more time to 

evaluate these packaging proposals. In addition, the Advisory Panel on Hospital 

Outpatient Payment recommended that CMS delay implementation of the CY 2014 

packaging proposals until data can be reviewed by the Panel at its spring 2014 meeting 

regarding interactions between the proposals and their potential cumulative impact. 

 Response: We appreciate that it requires time and effort to examine proposed 

policies. We discovered some limited methodological errors concentrated in a handful of 

APCs during the comment period. In response, we issued corrected data files on August 

28, 2013, and published a correcting document in the Federal Register on September 6, 

2013 (78 FR 54842) to address these technical errors. We also afforded the public a 10-
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day extension of the comment period on those topics affected by the corrected proposed 

rates. We believe that our standard 60-day comment period afforded commenters an 

adequate amount of time to meaningfully comment on the proposed policies. While we 

acknowledge that the OPPS is one of the more complicated Medicare payment systems to 

simulate, we make extensive data files and descriptions publicly available, in addition to 

proposed payment rates, in an effort to assist commenters in their review. Furthermore, 

the isolated technical errors that were corrected in the correcting document had limited 

interaction with the packaging proposals, and we believe the relativity (the relative 

magnitude of the difference between payment rates for different procedures) of the 

proposed payment rates for almost all APCs was sufficient for meaningful comment. 

Finally, we received numerous substantive, thoughtful, and helpful comments on our 

packaging proposals, which suggested that the public had sufficient time to meaningfully 

comment on the seven CY 2014 proposed packaging policies, and therefore, we do not 

believe a delay in implementation is necessary. We will review additional information 

regarding the impacts of the packaging policies with the Panel at future Panel meetings. 

 Below we discuss our proposals and summarize and respond to the numerous 

substantive public comments we received on each packaging proposal. 

(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used 

in a Diagnostic Test or Procedure 

 As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43570), in the 

OPPS, we currently unconditionally package the following six categories of drugs, 

biologicals, and radiopharmaceuticals (unless temporary pass-through status applies): (1) 
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those with per day costs at or below the packaging threshold (discussed further in section 

V.B.2. of the proposed rule and this final rule with comment period); (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 when 

used in a diagnostic test or procedure. Although in the past we identified these specific 

categories of drugs, biologicals, and radiopharmaceuticals as packaged unless passthrough status applied, 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 
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agents represent specific examples of a broader category of drugs, biologicals, or 

radiopharmaceuticals that function as supplies that are integral and supportive to a 

diagnostic test or procedure, we proposed to unconditionally package drugs, biologicals, 

and radiopharmaceuticals that function as supplies when used in a diagnostic test or 

procedure, except when the drug, biological, or radiopharmaceutical has pass-through 

payment 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 proposed to revise 

the regulations at 42 CFR 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. 

 In the proposed rule, we identified one new class of drugs (stress agents) and one 

specific drug (Cysview) that we believe also fit within this new category of packaged 

items, that is, drugs, biologicals, and radiopharmaceuticals that function as supplies when 

used in a diagnostic test or procedure. We discuss the application of this policy to these 

specific drugs and the associated comments below. 
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(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 imaging. The primary diagnostic test in which these agents are used 

is myocardial perfusion imaging (MPI), which is primarily reported with CPT code 

78452 and is the highest cost nuclear medicine procedure in the OPPS, with total 

payments exceeding $800 million in CY 2012. In the proposed rule, we reported that 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we proposed 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 
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imaging service, the stress test, and either exercise to induce stress or the administration 

of a pharmacologic stress agent. In the proposed rule, we included Table 8 which 

showed the CY 2013 separate payment versus the proposed CY 2014 packaged payment 

for MPI (78 FR 43571). We note that some of the payment rates for MPI in Table 8 were 

corrected in the correcting document published in the Federal Register on 

September 6, 2013 (78 FR 54842). 

 Comment: Some commenters supported packaging stress agents into MPI 

because they believed that it supports CMS’ goal to make OPPS payments more 

consistent with those of a prospective payment system. 

 Response: We appreciate the commenters’ support. 

 Comment: Several commenters objected to this proposal. Some commenters 

stated that CMS should not expand packaging to any new categories of drugs, 

biologicals, and radiopharmaceuticals, including stress agents. One commenter objected 

to the proposed policy for the following reasons and suggested changes or alternatives to 

the proposed policy: 

● Packaging stress agents into MPI could adversely affect patient access to stress 

agents; 

● Because a stress agent is not used with 100 percent of MPI tests, CMS should 

only package drugs that are used at least 80 percent of the time with the primary 

procedure, to ensure that the packaged payment reflects the full cost of the packaged 

drug; 
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● Hospitals would have a financial incentive not to use a stress agent with MPI, 

because stress can be induced with exercise instead of a stress agent; 

● To avoid incurring the cost of a stress agent, hospitals will encourage patients 

to exercise, and this could be dangerous for the patient; 

● As a consequence of packaging stress agents, hospitals may perform 

inadequate MPI tests (without proper stress), resulting is misdiagnoses; 

● CMS should require hospitals to code stress agents on MPI claims to ensure 

that costs are adequately captured; and 

● CMS should create separate APCs for MPI with and without use of a stress 

agent. 

 Response: We disagree with the commenter that packaging stress agents will 

limit beneficiary access to MPI tests with a stress agent when it is not clinically 

appropriate for the patient to induce stress through exercise. Rather, as we discuss below, 

we believe that a single payment for MPI establishes better incentives to ensure clinically 

appropriate patient care. 

 We are not adopting the commenter’s recommendation that we adopt a minimum 

utilization requirement of 80 percent for drug packaging. We package services that are 

typically integral, ancillary, supportive, dependent, or adjunctive to a primary service, 

irrespective of the frequency with which this packaged service is used in any given 

primary procedure. This policy has been a fundamental part of the OPPS since its 

implementation in August 2000. In some cases, a packaged item may be associated with 

a primary service 100 percent of the time and in other cases a packaged item may be 
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rarely used with the procedure or service with which it is packaged. Using the geometric 

mean cost for an APC ensures that minor changes in the total for items and services from 

low volume packaged services will impact the APC payment rate. Receiving some 

incremental amount for packaged items allows the hospital to best determine the most 

efficient and clinically appropriate delivery of a service. An 80 percent utilization 

threshold for packaging is more reflective of a fee schedule than a prospective payment 

system, creating payment for a single service of MPI and stress agent that would not 

encourage the efficient delivery of MPI. We believe a minimum utilization threshold 

would be unduly restrictive in the context of a prospective payment system because such 

a threshold would exclude services or items from packaging that are typically integral, 

ancillary, supportive, dependent, or adjunctive to a primary service. 

 Regarding the commenter’s concern that hospitals will have a financial incentive 

not to use a stress agent with MPI, again we note that the established payment rate is 

based on the geometric mean cost of claims with and without a stress agent and that 

hospitals will now receive incrementally more payment for each MPI, proportional to 

included costs for stress agents on the claims, even when they do not use a stress agent. 

We believe that knowing the full amount of payment for the MPI, with or without the 

stress agent, will allow the hospital to make the most efficient decision that is clinically 

appropriate. As we state above, 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. 
315 

Finally, the recent availability of certain generic stress agents should further mitigate any 

financial incentive not to use a stress agent with MPI. 

 With regard to clinical concerns that hospitals may encourage physicians to order 

exercise rather than an MPI with stress agent, we disagree that hospitals and physicians 

are likely to settle for inadequate stress-MPI tests rather than incur the cost of the stress 

agent because a truly inadequate stress test would not provide the physician with 

sufficient information to arrive at a diagnosis and would require repeat testing. We 

believe that hospitals and physicians choose the most clinically appropriate diagnostic 

testing approach for their patients and that they will use a stress agent when necessary. 

 With regard to the suggestion that we require hospitals to code stress agents in 

MPI claims, we have repeatedly stated that hospitals should report all codes and 

associated charges on the claim for the item and services provided to the patient, so that 

we will be able to monitor trends in stress agent utilization over time. 

 Finally, we are not accepting the suggestion that we assign MPI tests with and 

without the use of a stress agent to different APCs. As with the minimum utilization 

threshold, we believe that establishing separate APCs would result in unnecessary 

differentiation between stress MPI with stress induced through exercise and stress MPI 

with stress induced through a stress agent, and that such a difference could discourage the 

efficient delivery of MPI. Further, the MPI CPT code descriptors include stress or rest, 

and stress can be induced either through exercise or use of a stress agent. 

 After consideration of the public comments we received, we are finalizing our 

proposed policy to package stress agents under our policy that packages all drugs, 
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biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic 

test or procedure. We are assigning HCPCS codes J0151 (which replaces HCPCS code 

J0152 in CY 2014) and J2785 the status indicator of “N,” indicating unconditional 

packaging in the OPPS for CY 2014. 

(b) Hexaminolevulinate Hydrochloride (Cysview®)—HCPCS Code C9275 

 Cysview is a drug for which pass-through 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.” 
317 

 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, in the CY 2014 OPPS/ASC proposed rule, we proposed 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 proposed to package Cysview 

for CY 2014 under the OPPS (78 FR 43571). 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. 

 Comment: Many of the commenters on CMS’ proposal to package Cysview were 

urologists who consider Cysview to be valuable in the care of bladder cancer patients and 

who expressed concern that CMS’ proposed packaging policy will restrict access to blue 

light cystoscopy, which is the service in which Cysview is employed. One commenter 

stated that: 
318 

● Packaging Cysview limits patient access to the drug; 

● Cystoscopy procedures that employ Cysview are not clinically comparable to 

other procedures assigned to the same APCs; 

● CMS does not have the authority to package drugs, biologicals, and 

radiopharmaceuticals used in a diagnostic test or procedure; 

● Packaging Cysview results in an inequitable payment for Cysview; 

● Cysview does not function as a supply and therefore should not be packaged; 

● Cysview is a treatment and is not used in a diagnostic test and therefore should 

not be packaged under the policy that packages drugs, biologicals, and 

radiopharmaceuticals used as a supply in a diagnostic test or procedure. 

● CMS must create a separate APC for Cysview as it has done for procedures 

that use contrast agents. 

 Response: We disagree with the commenters that packaging will limit patient 

access to Cysview. As we state above, 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. There are many items and services in the OPPS in which use of the 

item or service may increase the cost per case above that of the average or typical case, 

and there are cases where no additional items or services are necessary and the cost of a 

typical case is much less than the average. This is a fundamental aspect of a prospective 

payment system. Overall, we believe that OPPS payments reflect average estimated costs 
319 

for both situations and encourage the hospital to assess the appropriate use of those 

additional items and services in diagnosing bladder cancer and other diseases. 

 Cysview is used in blue light cystoscopy, which is an optional adjunct to white 

light cystoscopy. The various CPT codes for cystoscopy include white light cystoscopy 

with or without blue light cystoscopy. Cysview is packaged into the cystoscopy 

procedures. We believe that the current structure of the APCs that include the various 

cystoscopy procedures sufficiently reflects clinical and resource homogeneity as required 

by section 1833(t)(2)(B) of the Act because most of the codes in these APCs are 

cystoscopy procedures or other urological endoscopy procedures that, like cystoscopy, 

employ an endoscope. We also do not believe that packaging Cysview in the OPPS is 

inequitable. We package all drugs that function as supplies when used in a diagnostic test 

or procedure, and we will continue to review drugs used in the OPPS to assess whether 

they function as supplies or are otherwise integral, ancillary, and supportive to a 

diagnostic test or procedure, and therefore appropriately packaged into the procedure. 

 We disagree with the commenters who suggested that we do not have the 

authority to package drugs, biologicals, and radiopharmaceuticals that function as 

supplies when used in a diagnostic test or procedure. We discussed our authority to 

package drugs, biologicals, and radiopharmaceuticals extensively in 2008, when we 

packaged diagnostic radiopharmaceuticals and contrast agents, and refer readers to that 

discussion in the CY 2008 OPPS final rule (72 FR 66610). 

 We disagree with the commenter’s view that Cysview should not be packaged 

because it does not function as a supply when used in a diagnostic test. We believe that 
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the commenter misunderstands the term “supply” as it is used in the OPPS. Supply is a 

very broad term that describes many types of products in the OPPS. As discussed 

elsewhere in this section and in the CY 2014 OPPS/ASC proposed rule (78 FR 43571 

through 43575), 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. A supply in the OPPS can 

be anything that is not equipment, and supplies can be either expensive or inexpensive 

and either commonly or uncommonly used. According to OPPS policy, drugs, 

biologicals, radiopharmaceuticals, medical devices, and other items and products that are 

not equipment can be supplies in the OPPS (78 FR 43571 and 43575). Since the 

inception of the OPPS, implantable medical devices have been considered supplies in the 

OPPS (65 FR 18443). Many implantable medical devices are very technologically 

sophisticated, costly, and tailored to specific medical needs but they are nonetheless 

supplies in the OPPS. Cysview facilitates diagnosis through blue light cystoscopy, and 

therefore we consider it to be a drug that functions as a supply in a diagnostic test in the 

OPPS. 

 We do not believe that Cysview and blue light cystoscopy are therapeutic. The 

FDA-approved label for Cysview states that Cysview is used for “cystoscopic detection 

of non-muscle invasive papillary cancer of the bladder,” which is a diagnostic purpose 

according to our definition of a diagnostic test described above and in the proposed rule 

(78 FR 43570). Also, Cysview itself does not eliminate bladder cancer cells. It enables 

better localization of the bladder cancer cells as compared to white light cystoscopy 

alone, which then requires a therapeutic procedure such as resection. 
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 Finally, we disagree with the commenter’s suggestion that we must create a 

separate APC according to section 1833(t)(2)(G) of the Act for procedures that use 

Cysview. Cysview is not being packaged as a contrast agent. Instead, it is being 

packaged into the service in which it is used under the policy of packaging drugs, 

biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic 

test or procedure, which also currently includes diagnostic radiopharmaceuticals, contrast 

agents, and stress agents. 

 Comment: One commenter requested clarification regarding CMS’ definition of 

the term “contrast agent,” and requested that CMS recognize these products as drugs and 

that CMS refrain from calling these products supplies. 

 Response: The purpose of the clarification of the term “contrast agent” in the 

proposed rule (78 FR 43571), which is repeated above, was to explain that we believe 

that contrast agents are products used in certain types of imaging techniques (or 

advancements of those techniques), namely x-ray, computed tomography (CT), 

ultrasound, and magnetic resonance imaging (MRI). Contrast agents are typically drugs 

and are eligible for pass-through as drugs in the OPPS. However, as mentioned above, 

drugs can also function as supplies, and be paid as such, when used in a diagnostic test or 

procedure in the OPPS. Contrast agents function as supplies when used in an imaging 

test and are packaged in the OPPS, unless pass-through status applies. This is a 

well-established OPPS packaging policy, and this policy makes no fundamental changes 

to the policy of unconditionally packaging contrast agents. We consider packaging of 

contrast agents under the more general packaging category of drugs, biologicals, and 
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radiopharmaceuticals that function as supplies when used in a diagnostic test or 

procedure, and this packaging category is being codified at 42 CFR 419.2(b)(15). 

 After consideration of the public comments we received, we are finalizing our 

proposed policy to package Cysview as a drug under our policy that packages drugs, 

biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic 

test or procedure. Therefore, HCPCS code C9275 (Cysview) will be assigned status 

indicator “N” (unconditionally packaged) in CY 2014. 

 Comment: One commenter requested that radiopharmaceuticals used for 

dosimetry not be considered diagnostic radiopharmaceuticals but instead be treated as 

therapeutic radiopharmaceuticals. 

 Response: Radiopharmaceuticals used for dosimetry are packaged supplies in the 

OPPS according to established OPPS policy (68 FR 63443). In addition, the purpose of 

dosimetry is to establish the treatment dose or the optimal treatment for the patient. As 

stated in the proposed rule (78 FR 43570) and again above, diagnostic items “include 

tests or procedures performed to determine which treatment option is optimal.” 

Therefore, because dosimetry is performed to determine the optimal treatment dose of a 

therapeutic radiopharmaceutical, we believe, according to our definition of a diagnostic 

item, test, or procedure, that it is diagnostic and not therapeutic. Therefore, 

radiopharmaceuticals used for dosimetry are packaged in the OPPS. 

(2) Drugs and Biologicals That Function as Supplies 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). 
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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). 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 of implantable biologicals. 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 when used in a 

surgical procedure. Therefore, in the CY 2014 OPPS/ASC proposed rule (78 FR 43571), 

beginning in the CY 2014 OPPS, we proposed to unconditionally package all drugs and 

biologicals that function as supplies in a surgical procedure, following the current 

packaging policy for implantable biologicals. 

 Skin substitutes are a class of products that we treat as biologicals that fit within 

the proposed packaging category of drugs and biologicals that function as supplies in a 
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surgical procedure. The term “skin substitutes” refers to a category of products that are 

most commonly used in outpatient settings for the treatment 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 applied to wounds to aid wound healing and through various 

mechanisms of action they stimulate the host to regenerate lost tissue. 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_skinsubst-final.pdf. 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. Most of the various skin substitutes 

are applied to a wound during a surgical procedure described by CPT codes under the 

heading in the 2013 CPT codebook “Skin Replacement Surgery” and the subheading 

“Skin Substitute Grafts” in the CPT code 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. 
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 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, the FDA classifies many skin substitutes as 

wound dressings, which make them in many cases 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 that are used as skin 

substitutes have dual uses as both skin substitutes and implantable biologicals, which 

underscores the similarity of these overlapping classes of products. Some products that 

function as skin substitutes can also function as implantable biologicals. Implantable 

biologicals and skin substitutes both function as supplies that are used in surgical 

procedures and, therefore, we believe that they should be packaged with the surgical 

procedure in which the products are used. Since CY 2009, we have packaged 

implantable biologicals. We see no reason to distinguish skin substitutes from 

implantable biologicals for OPPS packaging purposes based on the clinical application of 

individual products. Therefore, in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43572), we proposed 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 would result in a total prospective 
326 

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. Pass-through payment 

status would still be available to new skin substitutes that meet the pass-through payment 

criteria. 

 Comment: Many commenters supported CMS’ proposal to package skin 

substitutes, and believed that packaging will result in greater access to the full range of 

skin substitute products, that patients will benefit, and that Medicare will also benefit 

through cost savings from this proposed change in payment policy. 

 Response: We appreciate the commenters’ support. 

 Comment: Many commenters opposed CMS’ proposal to package skin 

substitutes and argued that because all skin substitutes or two skin substitutes in 

particular, Apligraf and Dermagraft, are specified covered outpatient drugs (SCODs) 

under section 1833(t)(14)(B) of the Act, CMS cannot package these products and instead 

must pay separately for them in the OPPS. 

 Response: We disagree with the commenters’ assertion that skin substitutes 

generally or Apligraf and Dermagraft specifically are SCODs. Section 1833(t)(14)(B) of 

the Act defines a SCOD as a “covered outpatient drug (as defined in section 

1927(k)(2)) . . . .” Covered outpatient drugs under section 1927(k)(2) of the Act are 

generally limited to products approved as drugs by the FDA, biologicals licensed under 

section 351 of the Public Health Service Act, and insulin. Skin substitutes, including 
327 

Apligraf and Dermagraft, are not within any of these categories of products because they 

were approved by the FDA as either medical devices or as human cell, tissue, and cellular 

and tissue-based products (HCT/Ps) under section 361 of the Public Health Service Act. 

Therefore, none of these products are covered outpatient drugs under section 1927(k)(2) 

of the Act, and therefore no skin substitutes are SCODs according to 

section 1833(t)(14)(B) of the Act. Furthermore, we explained in finalizing our policies of 

packaging diagnostic radiopharmaceuticals and contrast agents in the CY 2008 OPPS 

final rule (72 FR 66766) that CMS has the authority to package the payment of SCODs in 

the OPPS and that we may consider additional packaging options for SCODs and other 

separately payable drugs in the future. 

 Comment: Many commenters believed that skin substitutes should continue to be 

separately paid and not packaged because, according to these commenters, they are 

neither supplies, nor comparable to implantable biologicals, nor wound dressings, and 

because they have a therapeutic purpose. Some commenters requested that CMS begin 

referring to these products as “cellular and/or tissue based products for wounds (CTPs)” 

instead of using the term “skin substitutes” to describe the products that are applied in the 

procedures described by the CPT codes 15271 through 15278. Commenters also 

expressed concern about CMS’ use of the term “wound dressing” to describe skin 

substitutes. 

 Response: We disagree with the commenters that we should not describe skin 

substitutes as a type of supply used in a surgical procedure. As explained in the proposed 

rule (78 FR 43571 and 43575) and elsewhere in this final rule with comment period, 
328 

supplies are a large category of items that typically are either for single patient use or 

have a shorter life span in use than equipment. Supplies can be anything that is not 

equipment and 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, which we have considered supplies since the inception of 

the OPPS (65 FR 18443). Supplies can also be drugs, biologicals, or 

radiopharmaceuticals. We consider implantable medical devices to be integral to, 

dependent on, and supportive to a surgical implantation procedure. We consider 

implantable biologicals to be supplies used in a surgical procedure because, as a part of a 

surgical procedure, they reinforce and aid the healing of various internal structures, which 

makes them integral to, dependent on, and supportive to a surgical procedure. Similarly, 

we believe that skin substitutes are supplies used in a surgical procedure because, as a 

part of a surgical repair procedure, they reinforce and aid the healing of tissue like 

implantable biologicals, but with skin substitutes, the tissue is skin instead of internal 

connective tissues. Like implantable biologicals, skin substitutes are integral to, 

dependent on, and supportive to the surgical procedures in which they are used. 

Therefore, we believe it is appropriate to describe skin substitutes as supplies, and it is 

consistent with OPPS policy to consider skin substitutes as a type of supply (like an 

implantable biological or medical device) used in a surgical repair procedure. 

 We disagree with the commenters who stated that skin substitutes are unlike 

packaged implantable biologicals and therefore should not be packaged. Our proposal to 

package skin substitutes relies on our determination that these products act as supplies 
329 

that are integral to, dependent on, and supportive to a surgical procedure. We also 

believe that a reasonable analogy can be made that skin substitutes are similar to and 

operate as implantable biologicals in terms of composition, clinical use, role in hospital 

outpatient care, and product function in healing and repair such that packaging skin 

substitutes represents a logical expansion of our current packaging policy that packages 

implantable biologicals as surgical supplies. For example, implantable biologicals are 

used in internal surgeries for healing and to improve the structural integrity of joints, soft 

tissues and nerves, among others, and skin substitutes do the same for external surgical 

repairs of the integumentary system. In fact, several of the skin substitute products that 

are described by HCPCS Q-codes in the Q4100 series are used both as implantable 

biologicals and skin substitutes. 

 With regard to the comments relating to our use of the term “wound dressing” to 

describe skin substitutes, we discussed surgical dressings in the proposed rule as an 

example of packaged surgical supplies that have some similarities to skin substitutes, 

many of which FDA classifies as “wound dressings.” We believe that commenters may 

have misunderstood our description of skin substitutes in the proposed rule as wound 

dressings and assumed that we were conflating skin substitutes with products in the 

Medicare benefit category of surgical dressings described in section 1861(s)(5) of the 

Act. We are not conflating these two product categories. We note that the FDA uses the 

term “wound dressing” to classify many of the skin substitutes. For example, the skin 

substitutes Apligraf and Dermagraft are classified by the FDA as “dressing, wound and 

burn, interactive,” and the skin substitute Oasis is classified by the FDA as “dressing, 
330 

wound, collagen.” Further, we assign HCPCS A-codes to surgical dressings; HCPCS 

Q-codes are typically assigned to drugs and biologicals and are used to describe skin 

substitutes, unless a HCPCS C-code has been assigned to a skin substitute with 

pass-through payment status. 

 Regarding the comment that skin substitutes should not be packaged because they 

have a therapeutic purpose, we proposed for CY 2014 the packaging of drugs and 

biologicals that function as supplies when used in a surgical procedure, and surgical 

procedures typically have a therapeutic purpose. This CY 2014 packaging proposal for 

drugs and biologicals that function as supplies does not exclude items with a therapeutic 

purpose. 

 We use the term “skin substitute” to describe the products that are used in the 

surgical procedures described by CPT codes 15271 through 15278 because the CPT code 

descriptors for these codes include the term “skin substitute graft” for the products that 

are applied in these procedures. For example, the descriptor for CPT code 15271 is 

“Application of skin substitute graft to trunk, arms, legs, total wound surface area up to 

100 sq cm; first 25 sq cm or less wound surface area.” While we acknowledge that the 

term “skin substitutes” may be more or less appropriate for specific products, we believe 

that this term is currently the best term for these products in order to avoid ambiguity. 

The term “skin substitutes” is conventional in the medical vernacular for these products 

and it is also used in the CPT code descriptor for the surgical procedures that apply these 

products. In addition, we do not believe that we should adopt the term “cellular and/or 

tissue based products for wounds (CTPs) to describe skin substitutes,” because “CTP” is 
331 

too close to the abbreviation HCT/P that the FDA uses to refer to human cell, tissue, and 

cellular and tissue-based products (HCT/Ps) under section 361 of the Public Health 

Service Act, which is the regulatory pathway for only some skin substitutes. 

 We acknowledge that there are differences in composition among the various skin 

substitute products and that is why each is assigned a distinct HCPCS Q-code (or HCPCS 

C-code in some cases). If all of the products were identical, we would only need one 

code to describe all of them. Skin substitutes are those products that are used in wound 

healing procedures and that are typically assigned a HCPCS Q-code in the Q4100 series 

(or assigned a HCPCS C-code if OPPS pass-through payment status applies). We 

understand that some of the products described by HCPCS Q-codes in the HCPCS code 

Q4100 series function both as skin substitutes and implantable biologicals. 

 Comment: Many commenters opposed packaging skin substitutes, but also 

requested that, if CMS does package skin substitutes, CMS exclude from the packaging 

policy any products that are approved by the FDA through the premarket approval 

(PMA) process, the biologic license application (BLA) process, or the new drug 

application (NDA) process. Some commenters believed that products that achieve 

marketability through one of these processes are clinically superior to the other skin 

substitutes that are regulated by FDA as either 510(k) medical devices or as HCT/Ps 

because the PMA, NDA, or BLA-approval routes are more rigorous. As a consequence, 

they believe that PMA, NDA, or BLA-approved products deserve special recognition 

under the OPPS versus other skin substitutes that are regulated by FDA through another 

process. However, other commenters stated that the FDA regulatory pathway does not 
332 

necessarily establish the clinical utility of the product. Other commenters argued that the 

various skin substitutes should not be packaged because they are different products each 

with different characteristics; for example, some skin substitutes are constructed of living 

cells while others are not. 

 Commenters also stated that among the range of skin substitutes, some products, 

including those approved through the PMA process, have higher costs than other skin 

substitutes that are used in the skin substitute surgical procedures. They argued that 

surgical procedures using these higher cost skin substitutes should not receive the same 

payment rate as those surgical procedures using less costly skin substitutes. These 

commenters were concerned that hospitals would have a financial incentive to use the 

least expensive skin substitute. Other commenters suggested different approaches to 

payment based on differential skin substitute cost or other skin substitute properties. 

 Response: Payment under the OPPS is established based on an assessment of 

resource and clinical homogeneity. We disagree that certain products with FDA 

regulatory approval should be exempt from packaging. With notable regulatory and 

statutory exceptions, clinical superiority, utility, and efficacy are not aspects of a service 

or product that we consider in developing a payment rate under the OPPS. However, we 

are persuaded by numerous public comments that there is a significant difference in 

resource costs among the numerous skin substitute products and that multiple codes 

based on resource differences may be more appropriate. 

 We do not believe that the FDA approval process should exempt products from 

this packaging proposal or factor into the level of Medicare payment. While some skin 
333 

substitutes have been approved by FDA as medical devices through the PMA process, 

including Apligraf, Dermagraft, and the Integra skin substitutes, all of the other current 

skin substitutes are regulated as either 510(k) medical devices or HCT/Ps under section 

361 of the Public Health Service Act. Proponents of some of the products approved 

through the PMA process request that we make an exception to packaging for these 

products (or any products approved through a PMA, NDA, or BLA). We believe that this 

request is based on the presumption that, because these FDA approval routes typically 

require clinical trials, these products have stronger evidence that supports their clinical 

performance as compared to the non-PMA approved products, and therefore PMA 

approval can be used as a proxy for evidence of clinical superiority relative to 

non-PMA-approved skin substitutes. However, we consider factors such as clinical and 

resource homogeneity for OPPS payment. As previously stated in regard to implantable 

biologicals, “We do not believe that it is necessary to make our OPPS payment policies 

regarding implantable biologicals dependent on categories of FDA approval, the intent of 

which is to ensure safety and efficacy . . .” (74 FR 60476), but rather according to our 

established criteria of clinical and resource homogeneity. Therefore, as in the case of 

implantable biologicals, we also believe that the FDA regulatory pathway should not 

determine OPPS skin substitute payment policy. Generally, once a service is covered, 

clinical and resource homogeneity, as well as other considerations, determines APC 

placement and packaging status. Determinations related to the clinical merits of a 

product are outside the scope of this rule. We proposed to apply the packaging policy to 

all skin substitutes recognized by CMS, regardless of the FDA regulatory pathway. 
334 

 However, we agree with commenters that, among the range of skin substitutes, 

there is sufficient resource heterogeneity such that all of the skin substitutes should not be 

packaged into the same application procedures and placed in the same APC. As noted 

above, factors in APC assignment in the OPPS include clinical homogeneity and resource 

homogeneity. While the procedures described by CPT codes 15271 through 15278 are 

clearly clinically homogeneous, there is significant resource heterogeneity in the payment 

amount for the various skin substitutes from approximately $6.95 per sq cm for the least 

expensive to approximately $200 per sq cm for the most expensive. In order to ensure 

adequate resource homogeneity among APC assignments, in this final rule with comment 

period, we are dividing the skin substitutes into two groups for packaging purposes: high 

cost skin substitutes and low cost skin substitutes. Assignments to the high cost or low 

cost groups depended upon a comparison of the July 2013 payment amount for the skin 

substitute in OPPS Addendum B to the weighted average payment per unit of all skin 

substitutes using the skin substitute utilization from the CY 2012 claims data and the July 

2013 payment amounts in OPPS Addendum B; this weighted average is $32 per sq cm. 

Skin substitutes with a payment amount above $32 per sq cm are classified in the high 

cost group and those at or below $32 are classified in the low cost group. Table 13 below 

lists the skin substitutes and their assignment as either a high cost or low cost skin 

substitute. We also note that a few skin substitute products are applied as either liquids 

or powders per milliliter or per milligram and are employed in procedures outside of CPT 

codes 15271 through 15278. These products will not be classified as either high cost or 

low cost but will be packaged into the surgical procedure in which they are used. These 
335 

products are not listed below in Table 13 but appear in Addendum B to this final rule 

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

TABLE 13.—SKIN SUBSTITUTE ASSIGNMENTS TO HIGH COST 

AND LOW COST GROUPS 

CY 2014 

HCPCS 

Code CY 2014 Short Descriptor 

CY 2014 

SI 

Low/High 

Cost Skin 

Substitute 

C9358 SurgiMend, fetal N Low 

C9360 SurgiMend, neonatal N Low 

C9363 Integra Meshed Bil Wound Mat N Low 

Q4100 Skin substitute, NOS N Low 

Q4101 Apligraf N High 

Q4102 Oasis wound matrix N Low 

Q4103 Oasis burn matrix N Low 

Q4104 Integra BMWD N Low 

Q4105 Integra DRT N Low 

Q4106 Dermagraft N High 

Q4107 Graftjacket N High 

Q4108 Integra matrix N Low 

Q4110 Primatrix N High 

Q4111 Gammagraft N Low 

Q4115 Alloskin N Low 

Q4116 Alloderm N High 

Q4117 Hyalomatrix N Low 

Q4119 Matristem wound matrix N Low 

Q4120 Matristem burn matrix N Low 

Q4121 Theraskin N Low 

Q4122 Dermacell G n/a 

Q4123 Alloskin N Low 

Q4124 Oasis tri-layer wound matrix N Low 

Q4125 Arthroflex N High 

Q4126 Memoderm/derma/tranz/integup N High 

Q4127 Talymed G n/a 

Q4128 Flexhd/Allopatchhd/matrixhd N Low 

Q4129 Unite biomatrix N Low 

Q4131 Epifix G n/a 
336 

CY 2014 

HCPCS 

Code CY 2014 Short Descriptor 

CY 2014 

SI 

Low/High 

Cost Skin 

Substitute 

Q4132 Grafix core G n/a 

Q4133 Grafix prime G n/a 

Q4134 HMatrix N High 

Q4135 Mediskin N Low 

Q4136 EZderm N Low 

Q4137 Amnioexcel or biodexcel, 1cm N Low 

Q4138 BioDfence DryFlex, 1cm N Low 

Q4140 Biodfence 1cm N Low 

Q4141 Alloskin ac, 1 cm N Low 

Q4142 Xcm biologic tiss matrix 1cm N Low 

Q4143 Repriza, 1cm N Low 

Q4146 Tensix, 1cm N Low 

Q4147 Architect ecm, 1cm N Low 

Q4148 Neox 1k, 1cm N Low 

 We will update the groupings of high cost and low cost skin substitutes annually 

through rulemaking for existing skin substitutes according to the current skin substitute 

prices. We also will initially assign new skin substitutes that do not qualify for 

pass-through payment status to either the high cost or low cost category on a quarterly 

basis using the weighted average per square centimeter number defining high and low 

cost identified in each final rule. For any new skin substitute products approved for 

payment during CY 2014, we will use $32 per square centimeter to determine mapping to 

the high or low cost skin substitute category. We expect manufacturers to continue 

reporting ASP to facilitate cost category assignment. Any new skin substitutes without 

pricing information will be assigned to the low cost category until pricing information is 

available. 
337 

 High cost skin substitutes will continue to be billed using the existing skin 

substitute application CPT codes 15271 through 15278. We are creating a new set of 

HCPCS C-codes that parallel the current set of skin substitute application CPT codes 

(15271 through 15278) for application of low cost skin substitutes beginning in CY 2014 

(HCPCS codes C5271, C5272, C5273, C5274, C5275, C5276, C5277, and C5278). We 

are establishing code edits in our claims processing system that require that the high cost 

skin substitutes be reported with the CPT codes and the low cost skin substitutes be 

reported with the new HCPCS C-codes. Geometric mean costs for the various 

procedures were calculated using only claims for the skin substitutes that are assigned to 

each class; that is, claims for services described by CPT codes 15271, 15273, 15275, and 

15277, including only high cost skin substitutes, were used to calculate the geometric 

mean costs for these procedures and claims for HCPCS codes C5271, C5273, C5275, and 

C5277, including only low cost skin substitutes, were used to calculate the geometric 

mean costs for these procedures. The add-on CPT skin substitute application codes (CPT 

codes 15272, 15274, 15276, and 15278) and the add-on HCPCS C-codes for skin 

substitute application (HCPCS codes C5272, C5274, C5276, and C5278) are packaged in 

the OPPS under the add-on code packaging policy described in section II.B.3.d.(4) of this 

final rule with comment period. CPT codes 15271, 15273, 15275, and 15277 and 

HCPCS C-codes C5271, C5273, C5275, and C5277 were assigned to one of the 

following four skin repair APCs according to the geometric mean cost for the code: 

APC 0326 (Level I Skin Repair); APC 0327 (Level II Skin Repair); APC 0328 (Level III 

Skin Repair); and APC 0329 (Level IV Skin Repair). These procedure codes and the 
338 

CY 2014 APC assignments and status indicator for each of the procedure codes are listed 

in the Table 14 below. 

TABLE 14.—CY 2014 SKIN REPAIR PROCEDURE CODES, APC 

ASSIGNMENTS, AND STATUS INDICATORS 

CY 

2014 

HCPCS 

Code CY 2014 Long Descriptor 

CY 

2014 

SI 

CY 

2014 

APC 

Skin Substitute Application Procedures for High Cost Skin Substitute Products 

15271 

Application of skin substitute graft to trunk, arms, legs, total wound 

surface area up to 100 sq cm; first 25 sq cm or less wound surface 

area 

T 0328 

15272 

Application of skin substitute graft to trunk, arms, legs, total wound 

surface area up to 100 sq cm; each additional 25 sq cm wound 

surface area, or part thereof (list separately in addition to code for 

primary procedure) 

N n/a 

15273 

Application of skin substitute graft to trunk, arms, legs, total wound 

surface area greater than or equal to 100 sq cm; first 100 sq cm 

wound surface area, or 1% of body area of infants and children 

T 0329 

15274 

Application of skin substitute graft to trunk, arms, legs, total wound 

surface area greater than or equal to 100 sq cm; each additional 100 

sq cm wound surface area, or part thereof, or each additional 1% of 

body area of infants and children, or part thereof (list separately in 

addition to code for primary procedure) 

N n/a 

15275 

Application of skin substitute graft to face, scalp, eyelids, mouth, 

neck, ears, orbits, genitalia, hands, feet, and/or multiple digits, total 

wound surface area up to 100 sq cm; first 25 sq cm or less wound 

surface area 

T 0328 

15276 

Application of skin substitute graft to face, scalp, eyelids, mouth, 

neck, ears, orbits, genitalia, hands, feet, and/or multiple digits, total 

wound surface area up to 100 sq cm; each additional 25 sq cm 

wound surface area, or part thereof (list separately in addition to 

code for primary procedure) 

N n/a 

15277 

Application of skin substitute graft to face, scalp, eyelids, mouth, 

neck, ears, orbits, genitalia, hands, feet, and/or multiple digits, total 

wound surface area greater than or equal to 100 sq cm; first 100 sq 

cm wound surface area, or 1% of body area of infants and children 

T 0328 
339 

CY 

2014 

HCPCS 

Code CY 2014 Long Descriptor 

CY 

2014 

SI 

CY 

2014 

APC 

15278 

Application of skin substitute graft to face, scalp, eyelids, mouth, 

neck, ears, orbits, genitalia, hands, feet, and/or multiple digits, total 

wound surface area greater than or equal to 100 sq cm; each 

additional 100 sq cm wound surface area, or part thereof, or each 

additional 1% of body area of infants and children, or part thereof 

(list separately in addition to code for primary procedure) 

N n/a 

Skin Substitute Application Procedures for Low Cost Skin Substitute Products

C5271 

Application of low cost skin substitute graft to trunk, arms, legs, 

total wound surface area up to 100 sq cm; first 25 sq cm or less 

wound surface area 

T 0327 

C5272 

Application of low cost skin substitute graft to trunk, arms, legs, 

total wound surface area up to 100 sq cm; each additional 25 sq cm 

wound surface area, or part thereof (list separately in addition to 

code for primary procedure) 

N n/a 

C5273 

Application of low cost skin substitute graft to trunk, arms, legs, 

total wound surface area greater than or equal to 100 sq cm; first 

100 sq cm wound surface area, or 1% of body area of infants and 

children 

T 0327 

C5274 

Application of low cost skin substitute graft to trunk, arms, legs, 

total wound surface area greater than or equal to 100 sq cm; each 

additional 100 sq cm wound surface area, or part thereof, or each 

additional 1% of body area of infants and children, or part thereof 

(list separately in addition to code for primary procedure) 

N n/a 

C5275 

Application of low cost skin substitute graft to face, scalp, eyelids, 

mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple 

digits, total wound surface area up to 100 sq cm; first 25 sq cm or 

less wound surface area 

T 0327 

C5276 

Application of low cost skin substitute graft to face, scalp, eyelids, 

mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple 

digits, total wound surface area up to 100 sq cm; each additional 25 

sq cm wound surface area, or part thereof (list separately in addition 

to code for primary procedure) 

N n/a 

C5277 

Application of low cost skin substitute graft to face, scalp, eyelids, 

mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple 

digits, total wound surface area greater than or equal to 100 sq cm; 

first 100 sq cm wound surface area, or 1% of body area of infants 

and children 

T 0327 
340 

CY 

2014 

HCPCS 

Code CY 2014 Long Descriptor 

CY 

2014 

SI 

CY 

2014 

APC 

C5278 

Application of low cost skin substitute graft to face, scalp, eyelids, 

mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple 

digits, total wound surface area greater than or equal to 100 sq cm; 

each additional 100 sq cm wound surface area, or part thereof, or 

each additional 1% of body area of infants and children, or part 

thereof (list separately in addition to code for primary procedure) 

N n/a 

 Skin substitutes with pass-through payment status should be reported with CPT 

codes 15271 through 15278. We will apply an offset to the payment for pass-through 

skin substitutes according to the offset policy described in section V.A.4.d of this final 

rule with comment period. 

 Comment: A few commenters stated that CMS should not package skin 

substitutes because the claims data used for modeling the cost does not accurately 

represent the actual cost of the skin substitutes used in the HOPD. They suggested that 

inaccurate coding and reporting by hospitals, and charge compression, result in packaged 

costs that are lower than the actual costs of the skin substitutes used in the surgical 

procedures in which skin substitutes are employed. 

 Response: It is our longstanding policy to use the claims and cost report data 

available to us, without significant editing or modification, to model the prospective 

payment year OPPS payment rates. We have stated previously that: “[b]eyond our 

standard OPPS trimming methodology . . . that we apply to those claims that have passed 

various types of claims processing edits, it is not our general policy to judge the accuracy 

of hospital coding and charging for purposes of ratesetting” (75 FR 71838). We do not 
341 

believe that a problem exists with skin substitute reporting or with the associated data 

used in modeling the packaged payments for the procedures that includes the cost of the 

skin substitute. Currently, there is an incentive to code properly for skin substitute 

application services as the significant majority of the overall payment for these services 

stems from the separately paid and reported skin substitute, which we believe provides 

sufficient motivation for the hospitals to accurately report the amount of skin substitute 

used. We do not have any evidence of systemic underreporting of these products. We 

have estimated costs for skin substitutes as we have for all other services in our claims 

data using our standard methodology outlined in section II.A.2.c. of this final rule with 

comment period, and we believe these costs to be sufficient for establishing payment for 

skin substitute application procedures as they are for all other services paid under the 

OPPS and ASC payment systems. Regarding charge compression, we have addressed 

charge compression in the OPPS through new cost centers. We refer readers to section 

II.A.1.c. of this final rule with comment period for a discussion of this topic. 

 Comment: A few commenters requested that CMS not package implantable 

biologicals that are used for various surgical procedures in which the implantable 

biological product is implanted into the body as a part of surgical procedure. 

 Response: Implantable biologicals have been packaged in the OPPS since 2009. 

We did not propose to reconsider this packaging policy for CY 2014. In fact, part of the 

rationale for extending packaging in the OPPS to include skin substitutes that function as 

surgical supplies is that we already package several products that are the same as or 

similar to skin substitutes in the OPPS that are described by the term “implantable 
342 

biological” due to their particular clinical use. Several of the products in the HCPCS 

code Q4100 series are dual use or multi-use products in that they serve as both skin 

substitutes and implantable biologicals. We believe that both implantable biologicals and 

skin substitutes should be packaged into the surgical procedures that employ these 

products when they function as supplies. 

 Comment: Some commenters expressed concern that packaging skin substitutes 

in the OPPS will inhibit the development of biotechnology products and that this 

proposed policy will result in less investment in such technology. 

 Response: We do not believe that this policy will result in less investment in 

biotechnology. New skin substitutes remain eligible for pass-through payment status for 

at least 2 years, but not more than 3 years. Pass-through payments are intended to 

facilitate the adoption of certain new products. In addition, we believe that the packaged 

payments for the associated surgical procedures, including payment for the skin substitute 

are adequate and will not discourage use of the skin substitute products used in these 

procedures. Furthermore, the final policy that distinguishes high cost from low cost skin 

substitutes addresses the issue of differential cost among the range of skin substitute 

products. Finally, this packaging policy applies to skin substitutes and other drugs and 

biologicals used in surgical procedures. It does not apply broadly to all biotechnology. 

 Comment: Some commenters mentioned that the skin substitute packaging policy 

will result in a site-of-service shift to the physician office setting where separate payment 

for skin substitutes will be made in CY 2014. 
343 

 Response: The physician, in consultation with his or her patient, decides the site 

of service for treatment and many factors are considered as a part of that decision. We 

believe that we have adequately addressed concerns about heterogeneous resource costs 

resulting in payment inadequacy and that these procedures will continue to be performed 

in the HOPD. 

 We received a few additional public comments regarding a single product that we 

also proposed to package because it is a drug that functions as a supply in a surgical 

procedure. We summarize and respond to these comments below. 

 Comment: A few commenters objected to the packaging of the drug Mitosol 

(HCPCS code J7315) when used as a supply in a surgical procedure, which was the 

interim assignment for new HCPCS code J7315 in the CY 2013 OPPS/ASC final rule 

with comment period. We refer readers to Addendum B.-Final OPPS Payment by 

HCPCS Code for CY 2013 available on the Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-NoticesItems/CMS-1589-FC.html?DLPage=1&DLSort=2&DLSortDir=descending. One 

commenter in particular complained that, although Mitosol is indicated as “an adjunct for 

ab externo glaucoma surgery,” OPPS packaging requires that an item be integral to the 

procedure. The commenter stated that because the use of Mitosol is optional in some 

cases of glaucoma surgery, it should not be packaged in the OPPS. The commenter 

stated that “up to 20% of glaucoma surgeries do not include an anti-fibrotic [including 

Mitosol].” The commenter further stated that Mitosol serves a separate clinical purpose 
344 

from glaucoma surgery. The commenter emphasized CMS’ threshold packaging policy 

for drugs, biologicals, and radiopharmaceuticals, and suggested that drugs with per day 

costs above the threshold should not be packaged. Finally, the commenter stated that the 

clinical benefits and orphan drug designation are reasons to not package Mitosol. 

 Response: Mitosol is an anti-fibrotic drug (meaning that it inhibits wound 

healing) that is used in glaucoma surgery. Since this comment was filed, we granted 

Mitosol pass-through payment status. We address the commenter’s specific points as 

follows. First, we want to dispel the notion that packaged drugs must be used in the 

associated procedure 100 percent of the time that the procedure is performed. That is not 

our OPPS packaging policy. As stated above and throughout the proposed rule, we 

believe packaging is appropriate for items and services that are integral or ancillary or 

supportive or dependent or adjunctive to the primary procedure. Therefore, items and 

services that fall within any of these categories may be properly packaged in the OPPS. 

Mitosol, as an adjunct to trabeculectomy, would therefore be appropriately packaged as a 

surgical supply if pass-through payment status were not in effect because it functions as a 

supply in a surgical procedure, and supplies are integral to, dependent on, and supportive 

of a primary service, as noted above. 

 We also disagree with the commenter’s assertion that Mitosol serves a different 

clinical purpose than trabeculectomy, which is to create a functioning filtering bleb for 

control of intraocular pressure. Mitosol prevents the bleb from scarring, which helps to 

maintain a functioning filtering bleb, which is the purpose of the glaucoma surgery. 

Determinations related to the clinical merit of a product are outside the scope of this rule. 
345 

As noted above, relative clinical value or effectiveness was not proposed as a criterion for 

OPPS packaging determinations. Finally, while FDA orphan drug designation results in 

additional exclusivity according to the Federal Food Drug, and Cosmetic Act, it does not 

exempt a drug from packaging in the OPPS. Upon expiration of pass-through payment 

status for Mitosol, it is our intent to package it as a supply with glaucoma surgery in the 

OPPS. 

 After consideration of the public comments we received, we are packaging all 

skin substitutes according to the scheme described above, which assigns skin substitutes 

to either the high cost category or the low cost category unless pass-through payment 

status applies. Skin substitutes assigned to the high cost category will be reported with 

CPT codes 15271 through 15278 and the applicable skin substitute HCPCS Q-code, 

while skin substitutes assigned to the low cost category will be reported with HCPCS 

codes C5271 through C5278 and the applicable skin substitute HCPCS Q-code. In 

addition, the few skin substitute products that are applied as either liquids or powders per 

milliliter or per milligram and are currently employed in procedures outside of the CPT 

code range of 15271 through 15278 will not be classified as either high cost or low cost, 

but will be packaged into the surgical procedure in which they are used. 

 The skin substitute products that are unconditionally packaged under this final 

policy and assigned to status indicator “N” for CY 2014 are listed in Addendum P to this 

CY 2014 OPPS/ASC final rule with comment period. The payment for CPT codes 15271 

through 15278 for surgical application of high cost skin substitutes (payment rate per 

square centimeter over $32 for CY 2014) and HCPCS codes C5271 through C5278 for 
346 

surgical application of low cost skin substitutes (payment rate per square centimeter $32 

and under for CY 2014), including the cost of the packaged skin substitutes, for CY 2014, 

are listed in Addendum B to this final rule with comment period. The OPPS addenda are 

available on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-forService-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 revise the structure of the OPPS to adopt 

greater aspects of a prospective payment system and retain less of a fee schedule 

structure, which makes separate payment for each separately coded item. We have 
347 

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 decision making 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, in the 

CY 2014 OPPS/ASC proposed rule (78 FR 43572), we proposed 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. Specifically, we proposed 

that laboratory tests would be integral, ancillary, supportive, dependent, or adjunctive to a 

primary service or services provided in the hospital outpatient setting and appropriate for 

packaging into the payment of the primary service 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 stated that the laboratory test codes that we were 

proposing to be packaged and assigned status indicator “N” for CY 2014 were listed in 

Addendum P to the proposed rule (which is available via the Internet on the CMS Web 
348 

site). We also proposed to revise the regulation text at § 419.2(b) and § 419.22(l) to 

reflect this laboratory test packaging proposal. 

 We stated that we would consider a laboratory test to be unrelated to a primary 

service and, therefore, not part of the proposed packaging policy when the laboratory test 

is the only service provided on a date of service or when the laboratory test is provided 

on the 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. We stated that 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 note that hospitals already use the 14X bill type 

to bill for referred specimens or any situation where the beneficiary receives laboratory 

tests but is not a registered outpatient of the hospital. 

 We also proposed an exception to our proposal to package laboratory tests for 

molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 

81400 through 81408, and 81479. We did not propose that these services be packaged 

because we believe that these relatively new tests may 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 proposed to 

package. As we gain more experience with molecular pathology tests, we stated that we 

will consider if packaging them in the OPPS in the future would be appropriate. These 

services would continue to be billed on a 13x claim and be assigned status indicator “A.” 
349 

 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 exclude laboratory tests 

with costs greater than some dollar threshold 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 and that the deductible and 

coinsurance would apply to laboratory tests packaged into other services in the OPPS. 

The purpose of the laboratory packaging proposal was not to shift program costs onto 

beneficiaries. It is to encourage greater efficiency by hospitals and the most economical 

delivery of medically necessary laboratory tests which would contain unnecessary growth 

in hospital outpatient spending over the long run, which benefits all stakeholders. We 

stated that 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 
350 

longstanding 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 the proposed 

rule (78 FR 43586 through 43587), 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 stated that we believe that creating these larger bundles will result in a 

more efficient use of laboratory tests 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 invited public comments on the effect of packaging laboratory tests on 

beneficiary coinsurance. 

 Comment: Some commenters supported the proposal to package laboratory tests 

because they believed that packaging laboratory tests is consistent with CMS’ goal to 

move the structure of the OPPS closer to a prospective payment system and away from a 

fee schedule construction. 

 Response: We appreciate the commenters’ support. 

 Comment: A few commenters opposed the proposal to package laboratory tests 

because they believed that it could harm beneficiary access to these laboratory tests.

 Response: We disagree. We believe that beneficiaries will continue to receive 

laboratory tests that are medically necessary. We are continuing to pay for these 
351 

laboratory tests and have included the cost of the associated laboratory tests with the 

estimated cost of primary hospital outpatient services when establishing payment for 

these services. We believe that packaged payment will allow hospitals to better assess 

when and which laboratory tests are appropriate and provide these services more 

efficiently, but that this policy will not affect beneficiaries’ access to reasonable and 

appropriate care. 

 Comment: A few commenters opposed the proposal to package laboratory tests 

because they believed that it would not achieve CMS’ objective of greater cost efficiency 

in hospitals. 

 Response: We disagree. 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. We believe that packaging encourages hospitals to furnish services in the most 

efficient way by enabling hospitals to manage their resources with the maximum 

flexibility, thereby encouraging long-term cost containment. Therefore, our packaging 

policies support our strategic goal of incentivizing hospitals to provide appropriate care in 

the most efficient manner. 

 Comment: One commenter suggested that CMS does not have the legislative 

authority to package laboratory tests in the OPPS. The commenter states that 

section 1833(h)(1)(A) of the Act requires that CMS pay for laboratory tests (except 

inpatient laboratory tests) in all settings according to the CLFS. 
352 

 Response: We disagree. Although section 1833(h)(1)(A) of the Act established 

the CLFS, it does not prohibit outpatient laboratory tests from being paid either 

separately or as part of a packaged payment under the OPPS. Section 1833(t) of the Act 

gives the Secretary discretion to designate which services are covered OPD services, with 

the exception of those listed in section 1833(t)(1)(B)(iv) of the Act, and laboratory tests 

are not among the services listed in section 1833(t)(1)(B)(iv) of the Act. Laboratory tests 

provided in the hospital outpatient department have always been considered hospital 

outpatient services. However, until this proposal, we have since the inception of the 

OPPS elected to separately pay for laboratory tests in the hospital outpatient setting at the 

CLFS payment rates. For CY 2014, we proposed to include certain laboratory tests as 

covered OPD services under the OPPS, and we proposed to package payment for certain 

tests, similar to other covered outpatient services that are typically integral, ancillary, 

supportive, dependent, or adjunctive to a primary hospital outpatient services under the 

OPPS. 

 Comment: A few commenters expressed concern about increased beneficiary 

liability associated with laboratory tests being paid under the OPPS, which has a 

coinsurance obligation, unlike payment for laboratory tests under the CLFS, which does 

not have an associated coinsurance obligation by statute. One commenter also requested 

that, if CMS does finalize the laboratory test packaging policy for CY 2014, it exclude 

laboratory tests from the services into which they are packaged for the purpose of 

determining the coinsurance amount. 
353 

 Response: We appreciate the commenters’ concern about the welfare of 

Medicare beneficiaries. We assessed the financial impact of packaging laboratory tests 

on beneficiaries for the proposed rule and reassessed the impact for this final rule with 

comment period. We estimated in the proposed rule that the combination of packaging 

laboratory tests into a wide array of primary services provided in the hospital outpatient 

setting combined with our longstanding 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 the proposed rule (78 FR 43573, 43586 through 43587), 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 offset the financial 

impact on Medicare beneficiaries receiving laboratory tests that will be subject to the 

finalized packaging policy. 

 In this final rule with comment period, we are not finalizing our proposed policy 

to package ancillary services with a CY 2013 status indicator of “X” and diagnostic tests 

on the bypass list in response to public comments. We estimate that, in aggregate, the 

percentage of beneficiary liability for OPPS payments for CY 2014, including payment 

for certain clinical diagnostic laboratory tests, will be 21.7 percent in CY 2014, consistent 

with aggregate beneficiary liability under the OPPS in recent years. We believe that our 

final policy to create 29 comprehensive APCs for CY 2015 will reduce the aggregate 

beneficiary liability in CY 2015. 

 In addition, we believe that creating larger payment bundles will result in a more 

efficient use of clinical diagnostic laboratory tests when they are integral or supportive of 
354 

an outpatient service. Furthermore, 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, which will continue to be paid under the CLFS. 

 Regarding the commenter’s request that CMS exclude laboratory tests from the 

services into which they are packaged for the purpose of determining the coinsurance 

amount, we do not have the authority under section 1833(t)(8) of the Act to exclude 

laboratory tests from the services into which they are packaged for the purpose of 

determining the coinsurance amount. 

 Comment: Some commenters expressed concern about CMS’ proposed exception 

to packaging for laboratory tests provided on the same date of service as another hospital 

outpatient service or services, but that are ordered by a different practitioner than the 

practitioner who ordered the primary hospital outpatient service or services and where the 

ordered laboratory test also is for a different purpose than the primary service. 

Commenters were concerned about hospitals’ administrative burden associated with 

billing for separately paid laboratory tests. Commenters suggested that CMS implement 

claims processing changes and instructions in advance of adopting the laboratory 

packaging policy to ease hospitals’ transition to this policy and the exceptions to this 

policy. 

 Response: We believe that these commenters may have misunderstood the nature 

of the proposed laboratory packaging policy. We proposed to package laboratory tests 

when they are integral, ancillary, supportive, dependent, or adjunctive to a primary 
355 

service or services provided in the hospital outpatient setting; that is, 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. One exception to our proposal to 

package laboratory tests is to exempt molecular pathology tests, which would continue to 

be separately paid when billed on a 13x claim. 

 A laboratory test can be separately paid when (1) the laboratory test is the only 

service provided to that beneficiary on that date of service; or (2) the laboratory test is on 

the 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. When a laboratory test is the only service provided to a beneficiary at 

the hospital, the hospital can receive separate payment for those laboratory tests by 

billing for these services on a 14x claim; we would pay hospitals for these laboratory 

tests based on the CLFS payment rate. To illustrate the second scenario, a beneficiary 

has eye surgery scheduled with physician A, an ophthalmologist, but also has an order 

from physician B, a cardiologist, for unrelated laboratory tests. The beneficiary goes to 

the hospital for the eye procedure and decides to have the laboratory tests that have been 

ordered by physician B for a different purpose than the eye procedure on the same date of 

service. While the laboratory test is on the same date of service as the eye procedure, the 

laboratory tests are ordered for a different purpose than the primary service by a 

practitioner different than the practitioner who ordered the eye procedure. In this 

situation, the hospital can bill Medicare for the unrelated laboratory tests on a 14x claim 

and receive separate payment under the CLFS, similar to when the laboratory tests are the 
356 

only service performed in the hospital outpatient department on a given date of service. 

However, if, in this example, physician A also ordered some laboratory tests as a part of a 

preoperative evaluation for the eye procedure and the beneficiary had the tests on the 

same date of service as the eye procedure, then the hospital would report those laboratory 

tests on a 13x claim along with the eye surgery. Payment for those preoperative 

laboratory tests would be packaged into the payment for the surgery, which is the primary 

procedure that would be paid separately. It will be the hospital’s responsibility to 

determine when to separately bill laboratory tests on the 14x claim according to this 

description of these limited exceptions. We plan to issue revised contractor instructions 

for billing for these laboratory tests on a 14x bill type in January 2014, and we also will 

install claims processing edits. 

 Comment: A few commenters suggested that CMS adopt the alternative 

laboratory packaging policy discussed briefly above and in the proposed rule 

(78 FR 43573) to package only those laboratory tests with payment rates below some 

dollar threshold, similar to the approach that CMS uses for most drugs, biologicals, and 

therapeutic radiopharmaceuticals in the OPPS. Commenters stated that such a policy 

would enable hospital specialty clinics to perform more complex, expensive, and esoteric 

laboratory tests. 

 Response: We appreciate the commenters’ thoughts on this alternative. We 

continue to believe that a dollar packaging threshold is not appropriate for laboratory 

tests because almost all laboratory tests are inexpensive (97 percent of all laboratory tests 

have CLFS national limitation amounts of less than $100) relative to other services that 
357 

are provided in the hospital outpatient department. This is unlike many of the drugs and 

biologicals that are used in the hospital outpatient department that not uncommonly cost 

thousands of dollars per dose. Therefore, we continue to believe that it is not necessary 

to adopt a payment threshold policy for packaging laboratory tests similar to the 

threshold policy for packaging drugs and biologicals. 

 Comment: A few commenters requested additional exceptions to the proposal to 

package specific laboratory tests, including, for example, tests for in situ hybridization 

and cardiovascular screening. These commenters stated that, like molecular pathology 

tests for which CMS proposed an exception to the proposal to conditionally package 

laboratory tests, these tests have a different pattern of clinical use than most other 

laboratory tests and, therefore, should continue to be separately paid in the hospital 

outpatient setting. 

 Response: After considering the various requests for exceptions for specific 

laboratory tests that we received, we do not believe that additional exceptions to the 

laboratory packaging policy are necessary. We understand that there are laboratory tests 

that are less common and frequent than a standard panel, such as new tests. We do not 

believe that the tests described by the commenters or other laboratory tests that were 

proposed to be packaged are similar to the tests in the molecular pathology test series 

such that additional exceptions are warranted. We proposed to exclude the molecular 

pathology tests from our packaging proposal because, as a class of laboratory tests, their 

overall pattern of clinical use has not yet developed and we believe that these tests are 

less tied to a primary service than other laboratory tests. Once their pattern of use 
358 

develops, we will assess whether we believe these laboratory tests also should be 

conditionally packaged. We do not believe that in situ hybridization and cardiovascular 

screening or other types of laboratory tests are a developing class of laboratory tests for 

which we do not know the pattern of use. For example, in situ hybridization may be a 

part of a comprehensive evaluation for a suspected malignancy. In response to 

commenter requests for additional exceptions, we also reviewed all of the laboratory tests 

listed in Addendum P to the proposed rule and do not believe that further exceptions to 

our proposal to conditionally package laboratory tests are necessary. 

 After consideration of the public comments we received, for CY 2014, we are 

finalizing our proposal without modification to package laboratory tests in the OPPS 

when they are integral, ancillary, supportive, dependent, or adjunctive to a primary 

service or services provided in the hospital outpatient setting; that is, 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. This means that a laboratory test 

will not be packaged when (1) a laboratory test is the only service provided to that 

beneficiary on that date of service; or (2) a laboratory test is conducted on the 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. 

We also are finalizing our proposal without modification to except molecular pathology 

tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 

81408, and 81479 from this packaging proposal. In addition, we are finalizing our 
359 

proposal without modification to revise the regulation text at § 419.2(b) and § 419.22(l) 

to reflect this conditional laboratory test packaging policy. 

 The laboratory test codes subject to this packaging policy will be assigned status 

indicator “N” because any laboratory tests reported on a 13x bill type will be packaged 

for CY 2014. These codes are listed in Addendum P to this final rule with comment 

period (which is available via the Internet on the CMS Web site). 

(4) Procedures Described by Add-On Codes 

 Add-on codes describe procedures that are always performed in addition to a 

primary procedure. CPT defines add-on codes as codes that describe “procedures [that] 

are commonly carried out in addition to the primary procedure performed,” and also 

states that “[a]dd-on codes are always performed in addition to the primary service or 

procedure and must never be reported as a stand-alone code” (2013 CPT Codebook 

Professional Edition, page xi). CPT add-on codes are listed in Appendix D of the CPT 

codebook. Add-on codes can also be 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. Historically, the OPPS has 

generally paid separately for add-on codes based on an APC assignment with status 

indicator “T” indicating that the multiple procedure payment reduction for surgeries 

applies. 
360 

 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 service, which is usually a surgical procedure. The primary code 

defines the purpose and typical scope of the patient encounter and the add-on code 

describes incremental work, when the extent of the procedure encompasses a range rather 

than a single defined endpoint applicable to all patients. The CPT codebook states that an 

add-on code describes “additional intra-service work associated with the primary 

procedure” (2013 CPT Codebook Professional Edition, page xi). For example, add-on 

CPT code 11001 is used for each additional 10 percent of debridement beyond that 

described by the primary code. Given the dependent nature and adjunctive characteristics 

of procedures described by add-on codes and in light of longstanding OPPS packaging 

principles described above, we believe add-on procedures should be packaged with the 

primary procedure. In the CY 2014 OPPS/ASC proposed rule (78 FR 43573), we 

proposed to unconditionally package all procedures described by add-on codes in the 

OPPS. 

 Aside from advancing the OPPS as a prospective payment system by packaging 

add-on codes, an additional benefit to packaging add-on codes is more accurate OPPS 

payment for procedures described by add-on codes. Currently, calculating geometric 

mean costs for procedures described by add-on codes is problematic in the OPPS 

because, as with many claims with multiple procedures, 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 
361 

procedure claims for ratesetting, we generally must rely on incorrectly coded claims 

containing only the add-on code to determine 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” to) 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 problem because the costs of the add-on code would be packaged into the 

primary procedure, and we would no longer have to use miscoded claims to calculate 

estimated costs for add-on codes. Packaging add-on codes also would increase the 

number of single bills available for ratesetting for the primary procedures. We discuss 

how we model claims to establish relative payment weights, including definitions of 

multiple, single, and pseudo single claims in section II.A.2. of this final rule with 

comment period. 

 We proposed to revise the regulations at § 419.2(b) to include the packaging of 

add-on codes. The specific add-on codes that we proposed to be unconditionally 

packaged and assigned status indicator “N” for CY 2014 are listed in Addendum P to the 

proposed rule, which is available via the Internet on the CMS Web site. 

 Comment: Some commenters supported the proposal to package add-on codes, 

and agreed with CMS that packaging add-on codes is consistent with a prospective 

payment system and will improve OPPS ratesetting. 

 Response: We appreciate the commenters’ support. 

 Comment: Several commenters objected to the proposal to package add-on codes 

for the following reasons: 
362 

● According to the commenters, procedures described by add-on codes are not 

necessarily integral, ancillary, supportive, dependent, or adjunctive to the primary service 

into which they would be packaged. 

● Some procedures described by add-on codes include expensive implantable 

medical devices, and although they are integral to the primary procedure, commenters 

note that packaging these procedures into the primary procedure risks significant 

underpayment for the overall procedure that includes additional medical devices, which 

could negatively affect patient access to these devices. 

● Add-on code packaging should not apply to infrequently performed add-on 

codes as the cost of these infrequent services will not be sufficiently reflected in the 

payment for the primary procedure. 

● Some add-on codes are not related to the primary procedure but represent 

incremental additional physician work, and for this reason should not be packaged. 

 To insure continued patient access to these procedures, commenters requested that 

CMS establish exceptions to its proposal to package add-on codes for specific services 

that commenters believed would be underpaid under the policy, including, but not limited 

to, kyphoplasty add-on procedure, endoscopic retrograde cholangiopancreatography 

add-on procedure, pelvic reconstruction add-on procedures, neurolysis, and pathology 

services. 

 Response: We disagree with commenters that add-on services are not integral, 

ancillary, supportive, dependent, or adjunctive to the primary service. The fundamental 

nature of an add-on code procedure is that it typically describes some form of a related 
363 

extension of or addition to the primary procedure or service described by the primary 

procedure. The very definition of an add-on code is that it is an extension of a primary, 

base service. CPT states that “add-on codes describe additional intra-service work 

associated with the primary procedure” (emphasis added) (2013 CPT Codebook 

Professional Edition, page xi). Therefore, we believe that add-on code procedures are 

related extensions, supportive, integral, or adjunctive of the primary procedure and, 

therefore, it is appropriate to package the cost of the add-on codes into the payment 

calculation for the primary procedure. For the same reasons, we also do not agree with 

commenters that some add-on codes are not related to the primary procedure but 

represent a separate procedure that should be paid separately from the primary procedure. 

 Regarding the packaging of add-on procedures that use expensive medical 

devices, we note that the most expensive medical devices used in procedures to insert or 

implant devices in the outpatient setting are included in procedures we proposed to be 

assigned to comprehensive APCs. In section II.A.2.e. of this final rule with comment 

period, we discuss this policy, which we are adopting, but delaying the implementation 

until CY 2015. We will continue to separately pay for procedures described by add-on 

codes that are currently assigned to device-dependent APCs. We note that almost all 

such codes will be included in a comprehensive APC for CY 2015. Therefore, until the 

comprehensive APC policy is implemented, we will continue to pay separately for 

procedures described by add-on codes that are assigned to device-dependent APCs. The 

device-dependent add-on codes that will continue to be separately paid in CY 2014 are 

listed below in Table 15. 
364 

TABLE 15.—ADD-ON CODES ASSIGNED TO DEVICE-DEPENDENT APCS 

FOR CY 2014 

CY 2014 Add-on Code Short Descriptor CY 2014 APC 

19297 Place breast cath for rad 0648 

33225 L ventric pacing lead add-on 0655 

37222 Iliac revasc add-on 0083 

37223 Iliac revasc w/stent add-on 0083 

37232 Tib/per revasc add-on 0083 

37233 Tibper revasc w/ather add-on 0229 

37234 Revsc opn/prq tib/pero stent 0083 

37235 Tib/per revasc stnt & ather 0083 

37237 Open/perq place stent ea add 0083 

37239 Open/perq place stent ea add 0083 

49435 Insert subq exten to ip cath 0427 

92921 Prq cardiac angio addl art 0083 

92925 Prq card angio/athrect addl 0082 

92929 Prq card stent w/angio addl 0104 

92934 Prq card stent/ath/angio 0104 

92938 Prq revasc byp graft addl 0104 

92944 Prq card revasc chronic addl 0104 

92998 Pul art balloon repr percut 0083 

C9601 Perc drug-el cor stent bran 0656 

C9603 Perc d-e cor stent ather br 0656 

C9605 Perc d-e cor revasc t cabg b 0656 

C9608 Perc d-e cor revasc chro add 0656 
365 

 However, in general the cost of all medical devices used along with all of the 

other costs associated with the add-on code procedures are a part of the costs used to 

calculate the payment for a primary procedure when add-on codes are packaged. Most 

important, a prospective payment system pays an average amount for a unit of service, 

which may be more or less costly on a case-by-case basis. Unless an ancillary service is 

always performed with a primary procedure or service, a prospective payment will not 

reflect the full estimated cost of the packaged procedure or service. Payment for the 

primary procedure rather would reflect some payment for the ancillary procedure, but 

each time the primary procedure is performed, the hospital receives additional payment, 

even when the ancillary service is not provided. Unless an add-on code is always 

performed with a primary procedure, we would not expect the relative payment weight to 

reflect the full costs associated with performing the primary procedure and certain add-on 

procedures, especially if the add-on procedures are performed relatively infrequently as 

compared to the primary procedure. Our experience with packaging services under the 

OPPS, where we continue to see packaged services furnished with the primary procedure, 

leads us to believe that hospitals will continue to provide the full range of medically 

necessary care to beneficiaries under overall prospective payment for the primary 

procedure and any add-on procedures. Therefore, we do not believe that it is necessary to 

create additional exceptions to the add-on code policy for select infrequently performed 

services that may cost more (in addition to the cost of the primary procedure) to pay more 

than the prospective payment for the primary service with add-on code procedures 

packaged into them. 
366 

 However, we acknowledge that, under certain circumstances, certain primary 

code and add-on code combinations could be more likely to result in a relatively highly 

costly case as compared to the packaged payment for the primary code. Therefore, in 

light of this new policy to unconditionally package most add-on codes, we will examine 

our estimated OPPS outlier percentage in light of all final packaging policies contained in 

this final rule with comment period and consider increasing it in the future to 

accommodate greater potential risk from high cost outlier cases that would result from 

packaging of certain add-on codes. An increase in the outlier percentage would 

accommodate more relatively high cost cases. 

 Comment: Some commenters objected to packaging drug administration add-on 

codes, which typically describe each additional hour of infusion or each additional 

intravenous push, etc. in addition to the initial drug administration service. The 

commenters believed that such a policy could disadvantage providers of longer drug 

administration services, which are often protocol driven and are not necessarily dictated 

by the hospital but by the characteristics of the specific drug or biological being 

administered to the patient. 

 Response: We believe that, given the frequency of drug administration services 

in the hospital outpatient department and their use in such a wide variety of different drug 

treatment protocols for various diseases in all types of hospitals, further study of the 

payment methodology for these services is warranted at this time. Therefore, we are not 

finalizing our proposal to package the drug administration add-on codes in CY 2014. 
367 

However, we may continue to explore other payment options, including packaging and 

variations on packaging, in future years. 

 After consideration of the public comments we received, we are finalizing our 

proposal to unconditionally package procedures described by add-on codes, with the 

exception of add-on codes for drug administration services and for CY 2014 add-on 

codes assigned to device-dependent APCs. In addition, for CY 2014 only, we will 

continue to separately pay for procedures described by add-on codes that are currently 

assigned to device-dependent APCs. We also are revising § 419.2(b) to include add-on 

code procedures among the services that are packaged in the OPPS. The specific add-on 

codes that we are unconditionally packaging and assigning status indicator “N” for CY 

2014 are listed in Addendum P and Addendum B to this final rule with comment period 

(which are 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.” Those ancillary services 

assigned status indicator “X” in the OPPS and paid separately are, by definition, ancillary 

to primary services provided in the OPPS and include many minor diagnostic tests and 

procedures that are typically performed with a primary service, although there are 

instances where hospitals provide such services alone and without another primary 

service on the same date. 

 As mentioned above, our intent is that the OPPS be more of a prospective 

payment system through expanded packaging. Given that the longstanding OPPS policy 
368 

is to package items and services that are integral, ancillary, supportive, dependent, or 

adjunctive to a primary service, we stated in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43573) that 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. We indicated that this 

packaging approach is most consistent with a prospective payment system and the 

regulation 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, in the proposed rule, we proposed 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 did 

not propose to conditionally package preventive services assigned to status indicator “X” 

and instead proposed 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 were proposed to be conditionally 

packaged and assigned to status indicator “Q1” for CY 2014 were listed in Addendum P 

to the proposed rule (which is available via the Internet on the CMS Web site). 

 Comment: A few commenters agreed with CMS’ proposal to package services 

assigned the status indictor “X” (ancillary services) because they believed that this 
369 

proposal was consistent with CMS’ policy of packaging services that are typically 

integral, ancillary, supportive, dependent, or adjunctive to a primary HOPD service. 

 Response: We appreciate the commenters’ support. 

 Comment: Many commenters opposed the proposal to conditionally package 

services currently assigned status indicator “X.” These commenters stated that this 

category of services is too varied and that the services in this category are not always 

ancillary to the services into which they would be packaged. The commenters 

specifically mentioned radiation oncology planning services and pathology services as 

examples of services that, under the proposal, could be packaged into a visit but would 

not be ancillary to that visit. They also objected because, in some cases, relatively costly 

services could be packaged into services with a low payment, especially a visit code 

because there is so much volume in visit codes that high cost, low volume ancillary 

services would not measurably impact visit payments. 

 Response: We believe that the commenters have raised some valid points 

regarding whether all of the services currently assigned status indicator “X” are in all 

cases ancillary to the services into which their payment would be packaged. We believe 

that a reexamination of this group of services is warranted to determine which services 

are best described as ancillary services and packaged on that basis and which services 

should either be packaged under a different policy or separately paid in the OPPS. 

 However, we will finalize the conditional packaging of one ancillary service 

described by CPT code 93017 (Cardiovascular stress test using maximal or submaximal 

treadmill or bicycle exercise, continuous electrocardiographic monitoring, and/or 
370 

pharmacological stress; tracing only, without interpretation and report). Stress testing is 

often performed as a part of myocardial perfusion imaging (MPI). MPI is most 

commonly reported with CPT code 78452 (Myocardial perfusion imaging, tomographic 

(SPECT) (including attenuation correction, qualitative or quantitative wall motion, 

ejection fraction, by first pass or gated technique, additional quantification, when 

performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/or 

redistribution and/or rest reinjection). As indicated by the code descriptor, MPI includes 

stress testing as described by CPT code 93017, and approximately 96 percent of MPI is 

performed under stress. Therefore, we believe that, because stress testing is both integral 

and ancillary to MPI, it should be packaged into MPI when a stress test accompanies 

MPI. 

 After consideration of the public comments we received, we are not finalizing our 

proposal to conditionally package codes currently assigned the ancillary service status 

indicator “X” for CY 2014 when performed with another service, with the exception that 

CPT code 93017 will be conditionally packaged. We may review the services assigned 

status indicator “X” (ancillary services) to determine which may be appropriate for 

packaging as ancillary services in the OPPS in future years. 

(6) Diagnostic Tests on the Bypass List 

 For the CY 2013 OPPS, we continued our policy to use a bypass list to convert 

lines from multiple procedure claims into “pseudo” single procedure claims. In the 

CY 2014 OPPS/ASC proposed rule (78 FR 43574), we proposed to continue developing 

“pseudo” single procedure claims using a bypass list for the CY 2014 OPPS, as discussed 
371 

in section II.A.1.b. of the 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 the isolated costs of 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we also 

proposed 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 certain 

clinical laboratory tests. We stated that 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 proposed 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. 
372 

 We proposed to conditionally package codes on the bypass list and to assign them 

the appropriate 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 proposed to be 

conditionally packaged and assigned to status indicator “Q1” for CY 2014 were listed in 

Addendum P to the 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 did not propose to conditionally package preventive services that 

are diagnostic tests on the bypass list. 

 Comment: Some commenters supported CMS’ proposal to package diagnostic 

codes on the bypass list because they believed that they are generally ancillary and 

supportive to other HOPD services. 

 Response: We appreciate the commenters’ support. 

 Comment: Some commenters opposed packaging diagnostic tests on the bypass 

list for the following reasons: 

● Some of the tests, for example, echocardiography, included in this category are 

not typically integral, ancillary, supportive, dependent, or adjunctive to the service into 

which they would be packaged. 
373 

● Some of the procedures on the bypass list would be packaged into significantly 

lower paying procedures, including visits. 

● The interaction between conditional packaging of these diagnostic tests and 

other status indicator logic sometimes produces anomalous payments. 

● Hospitals have an incentive to schedule procedures on different days to avoid 

packaging. 

● Access to some of these tests may be negatively impacted by packaging. 

 Response: We believe that the commenters have raised some valid points 

regarding whether all of the services included in the category “diagnostic codes on the 

bypass list” are integral, ancillary, supportive, dependent, or adjunctive to the service into 

which their payment is packaged. We believe that a reexamination of this group of 

services is warranted to determine which services are best described as integral, ancillary, 

supportive, dependent, or adjunctive services to the service into which it would be 

packaged to determine which services should either be packaged under a different policy 

or separately paid in the OPPS. 

 Therefore, after consideration of the public comments we received, we are not 

finalizing our proposal to conditionally package diagnostic tests on the bypass list for 

CY 2014, or our proposal to assign these codes a status indicator of “Q1.” We will 

review the services currently listed in Addendum P under “diagnostic tests on the bypass 

list” to determine which tests may be appropriate for packaging in the OPPS in future 

years. Codes that would have been affected by the CY 2014 packaging proposal for this 
374 

category of services will remain on the bypasss list for the CY 2014 OPPS, as discussed 

in section II.A.1.b. of this final rule with comment period. 

(7) Device Removal Procedures 

 Implantable devices frequently require a procedure to remove or replace the 

device due to wear, failure, recall, and infection, among other reasons. Since the 

beginning of the OPPS, implantable devices have been packaged (either as supplies, 

implantable prosthetics, or implantable DME) into their associated procedures. A device 

removal procedure is sometimes described by a code that may include repair or 

replacement. In other cases, a device removal procedure is described by a separate code 

that only describes the surgical procedure to remove a device. Device removal 

procedures are frequently performed with procedures to repair or replace devices, 

although it is possible that a device removal procedure 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 should be 

considered as one part of an overall procedure for removing a device with repair or 

replacement of the device. 

 Given that a separately coded device removal procedure that accompanies a 

device repair or replacement procedure represents a service that is integral and supportive 

to a primary service, in the CY 2014 OPPS/ASC proposed rule (78 FR 73574), we 

proposed to conditionally package device removal codes when they are billed with other 

surgical procedures involving repair or replacement and assign a status indicator of “Q2.” 
375 

We stated that 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 proposed to be 

conditionally packaged and assigned to status indicator “Q2” for CY 2014 were listed in 

Addendum P to the proposed rule (which is available via the Internet on the CMS Web 

site). 

 Comment: Some commenters agreed with CMS’ proposal to conditionally 

package device removal procedures in the OPPS because they are often part of a larger 

procedure to revise or replace a device. 

 Response: We appreciate the commenters’ support. 

 After consideration of the public comments we received, we are finalizing our 

policy to conditionally package device removal procedures in the OPPS when performed 

together with a repair or replacement of a device and to assign a status indicator of “Q2.” 

The specific device removal procedure codes that we are conditionally packaging and 

assigning to status indicator “Q2” for CY 2014 are listed in Addendum P to this final rule 

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

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 unconditionally packaged in the OPPS and have been since the beginning 
376 

of the payment system. 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 hospital outpatient setting are prosthetic supplies 

under § 419.22(j), and if paid separately, they are paid according to the DMEPOS fee 

schedule. As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43575), 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 proposed 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). 

 Comment: A few commenters supported CMS’ proposed change in the status 

indicators for these supplies from “A” to “N.” One commenter urged CMS not to finalize 

this proposal because the commenter believed that hospitals should be separately paid for 

supplies given to the patient to take home. 

 Response: Our longstanding regulations at § 419.2(b)(4) require that we package 

all supplies in the OPPS except prosthetic supplies. 

 After consideration of the public comments we received, we are updating the 

status indicators for all supplies (except prosthetic supplies) to “N.” The specific Level II 

HCPCS A-codes whose status indicator are revised from “A” to “N” are listed in 
377 

Addendum P to this CY 2014 OPPS/ASC final rule with comment period (which is 

available via the Internet on the CMS Web site). 

f. 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 the CY 2014 OPPS/ASC 

proposed rule (78 FR 43575), we proposed 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 proposed 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 proposed to revise the list of 

services excluded from the OPPS at § 419.22. 

 Comment: Some commenters urged CMS not to revise the regulations at 

42 CFR 419.2(b) as a part of their request that CMS not adopt any of the packaging 

proposals. 

 Response: We believe that codifying the new policies will promote clarity 

regarding OPPS packaging policy, and therefore we are finalizing our revision of the 

regulations. 
378 

 After consideration of the public comments received, we are finalizing our 

revision of the regulations at 42 CFR 419.2(b) and 419.22 to reflect the new packaging 

policies. 

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 to these imaging services that are 

either packaged or proposed to be packaged, we stated in the CY 2014 OPPS/ASC 

proposed rule (78 FR 43575) that we are considering a proposal for CY 2015 that would 

conditionally package all imaging services with any associated surgical procedures. We 

stated that 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 

requested public comments on this potential CY 2015 proposal. 

 Comment: Some commenters objected to this potential future proposal on the 

grounds that such a packaging policy could result in less access to imaging in the HOPD. 

One commenter asked about the claims logic hierarchy for packaging imaging into 

surgery as it relates to the imaging composites. 

 Response: We appreciate these thoughtful comments, and we will consider them 

as we further consider packaging imaging services in the OPPS. 

4. Calculation of OPPS Scaled Payment Weights 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43576), for CY 2014, we 

proposed to calculate the relative payment weights for each APC for CY 2014 shown in 
379 

Addenda A and B to the proposed rule (which are available via the Internet on the CMS 

Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of the proposed 

rule. For this CY 2014 final rule with comment period, we are continuing to use this 

methodology to calculate the relative payment weights for each APC for CY 2014. In 

years prior to CY 2007, we standardized all the relative payment weights to APC 0601 

(Mid-Level Clinic Visit) because mid-level clinic visits were among the most frequently 

performed services in the hospital outpatient setting. We assigned APC 0601 a relative 

payment weight of 1.00 and divided the median cost for each APC by the median cost for 

APC 0601 to derive the relative payment weight for each APC. 

 Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the 

relative payment weights 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 proposed to continue basing the relative payment weights on which 

OPPS payments will be made by using geometric mean costs (78 FR 43576). As we 

discuss in section VII. of the proposed rule and this final rule with comment period, we 

proposed 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 
380 

proposed to use the cost of the clinic visit APC in calculating unscaled weights, which for 

CY 2014 was 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 proposed to have a single APC for each visit type. The 

proposal to reconfigure the visit APCs is discussed in more detail in section VII. of the 

proposed rule and this final rule with comment period. 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 

proposed 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, as we proposed, we compare the estimated aggregate 

weight using the CY 2013 scaled relative payment weights to the estimated aggregate 

weight using the CY 2014 unscaled relative payment weights. 
381 

 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 applying the same 

process using the CY 2014 unscaled relative payment weights rather than scaled relative 

payment weights. We calculate the weight scaler by dividing the CY 2013 estimated 

aggregate weight by the 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 OPPS packaging policy for laboratory tests described in section 

II.A.3.b.(3) of this final rule with comment period, we need to incorporate the estimated 

relative payment weights from those services. Therefore, the CY 2013 estimated OPPS 

aggregate weight 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-ServicePayment/HospitalOutpatientPPS/index.html.

 We 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, 
382 

we adjusted the CY 2014 unscaled relative payment weights for purposes of budget 

neutrality. The CY 2014 unscaled relative payment weights were adjusted by 

multiplying them by a weight scaler of 1.2732 to ensure that the 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 final rule with comment period) is included in the budget neutrality 

calculations for the CY 2014 OPPS. 

 Comment: One commenter expressed the concern that CMS may have 

underfunded the OPPS in developing the budget neutral weight scaler for the additional 

costs associated with laboratory tests for CY 2014. 

 Response: We appreciate the commenter’s concern. We discussed the 

calculation of the proposed CY 2014 budget neutral weight scaler in the CY 2014 

OPPS/ASC proposed rule (78 FR 43576) as well as the claims accounting narrative that 

we make available via the Internet on the CMS Web site. In calculating the CY 2014 

OPPS budget neutral weight scaler, we calculated the CY 2013 aggregate payment 

weight associated with the laboratory tests paid at CLFS rates by applying the CY 2013 

CLFS payment rates to the laboratory tests performed in the hospital setting. We note 

that this is the standard process we use to develop relative payment weights for budget 
383 

neutrality for items and services that have predetermined payment rates, such as 

separately paid OPPS drugs and New Technology APCs. We note that we released 

corrected data files on August 28, 2013, and extended the comment period to 

September 16, 2013, on the technical corrections noted in the correcting document 

published in the Federal Register on September 6, 2013 (78 FR 54842). However, there 

were no corrections associated with the amount of the estimated payment weight being 

budget neutralized from these clinical diagnostic laboratory tests. 

 After consideration of the public comments we received, we are finalizing our 

proposed methodology for calculating the OPPS scaled relative payment weights without 

modification, including updating of the budget neutrality scaler for this final rule with 

comment period. Under this methodology, the final unscaled relative payment weights 

were adjusted by a weight scaler of 1.2732 for this final rule with comment period. The 

CY 2014 unscaled relative payment weights listed in Addenda A and B to this final rule 

with comment period (which are available via the Internet on the CMS Web site) 

incorporate the recalibration adjustments discussed in sections II.A.1. and II.A.2. of this 

final rule with comment period. 
384 

B. 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 final rule (78 FR 50607), consistent with 

current law, based on IHS Global Insight, Inc.’s second quarter 2013 forecast of the 

FY 2014 market basket increase, the final 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 
385 

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 was 0.4 percentage point. 

 We proposed that if more recent data became subsequently available after the 

publication of the 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 this CY 2014 OPPS/ASC final rule with comment period. In 

the FY 2014 IPPS/LTCH PPS final rule (78 FR 50607), we discussed the calculation of 

the final MFP adjustment for FY 2014, which is 0.5 percentage point. 

 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43577), we proposed to apply a 

0.3 percentage point reduction to the OPD fee schedule increase factor for CY 2014. 
386 

 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, using the final methodology and more recent 

data results in an OPD fee schedule increase factor of 1.7 percent for the CY 2014 OPPS 

(which is 2.5 percent, the final estimate of the hospital inpatient market basket percentage 

increase, less the final 0.5 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, using the final methodology and more recent data, those hospitals 

failing to meet the Hospital OQR Program reporting requirements will receive an OPD 

fee schedule increase factor of –0.3 percent (which is 2.5 percent, the final estimate of the 

hospital inpatient market basket percentage increase, less the final 0.5 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 final rule with 

comment period. 
387 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43577), we proposed 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. 

 We did not receive any public comments on our proposed adjustments to the OPD 

fee schedule increase factor or on the proposed changes to § 419.32(b)(1)(iv)(B) to add a 

new paragraph (5). For the reasons discussed above, we are adjusting the OPD fee 

schedule increase factor and adopting, as final, the amendment to § 419.32(b)(1)(iv)(B), 

as proposed. 

 We did not receive any public comments on our proposed methodology for 

calculating the CY 2014 conversion factor. Therefore, we are finalizing our proposed 

methodology for calculating the budget neutrality adjustment factors, as described in the 

following discussion. 

 As we proposed, to set the OPPS conversion factor for CY 2014, we are 

increasing the CY 2013 conversion factor of $71.313 by 1.7 percent. In accordance with 

section 1833(t)(9)(B) of the Act, we are further adjusting 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 calculating an overall 

budget neutrality factor of 1.0002 for wage index changes by comparing total estimated 
388 

payments from our simulation model using the final FY 2014 IPPS wage indices to those 

payments using the FY 2013 IPPS wage indices, as adopted on a calendar year basis for 

the OPPS. 

 For CY 2014, we did not propose to make a change to our rural adjustment 

policy, and as discussed in section II.E. of this final rule with comment period, we are not 

making any changes to the rural adjustment policy. Therefore, the budget neutrality 

factor for the rural adjustment is 1.0000. 

 For CY 2014, we are finalizing our proposal to continue previously established 

policies for implementing the cancer hospital payment adjustment described in section 

1833(t)(18) of the Act, as discussed in section II.F. of this final rule with comment 

period. We are calculating 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 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 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 applying a 

budget neutrality adjustment factor of 1.0005 to the conversion factor to ensure that the 

cancer hospital payment adjustment is budget neutral. 

 For this final rule with comment period, we estimate that pass-through spending 

for both drugs and biologicals and devices for CY 2014 will equal approximately $12.3 
389 

million, which represents 0.02 percent of total projected CY 2014 OPPS spending. 

Therefore, the conversion factor is also 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 pass-through spending, resulting in an adjustment for CY 2014 of 

0.13 percent. Finally, estimated payments for outliers remain at 1.0 percent of total 

OPPS payments for CY 2014. 

 The final OPD fee schedule increase factor of 1.7 percent for CY 2014 (that is, 

the estimate of the hospital inpatient market basket percentage increase of 2.5 percent less 

the final 0.5 percentage point MFP adjustment and less the 0.3 percentage point required 

under section 1833(t)(3)(F)(ii) of the Act), the required wage index budget neutrality 

adjustment of approximately 1.0002, the cancer hospital payment adjustment of 1.0005, 

and the adjustment of 0.13 percent of projected OPPS spending for the difference in the 

pass-through spending result in a conversion factor for CY 2014 of $72.672. 

 As we stated in the proposed rule (78 FR 43578), hospitals that fail to meet the 

reporting requirements of the Hospital OQR Program will 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 final rule with comment period. To calculate the CY 2014 reduced market 

basket conversion factor for those hospitals that fail to meet the requirements of the 
390 

Hospital OQR Program for the full CY 2014 payment update, we are making all other 

adjustments discussed above, but using a reduced OPD fee schedule update factor of 

-0.3 percent (that is, the OPD fee schedule increase factor of 1.7 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 reduced conversion 

factor for CY 2014 of $71.219 for those hospitals that fail to meet the Hospital OQR 

requirements (a difference of -$1.453 in the conversion factor relative to those hospitals 

that met the Hospital OQR requirements). 

 In summary, for CY 2014, we are using a final conversion factor of $72.672 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 finalizing our 

proposed amendment to § 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 using a reduced conversion factor of $71.219 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. Wage Index Changes

 Section 1833(t)(2)(D) of the Act requires the Secretary to “determine a wage 

adjustment factor to adjust the portion of payment and coinsurance attributable to 

labor-related costs for relative differences in labor and labor-related costs across 
391 

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 final rule with comment period. 

 The OPPS labor-related share is 60 percent of the national OPPS payment. This 

labor-related share is based on a regression analysis that determined that, for all hospitals, 

approximately 60 percent of the costs of services paid under the OPPS were attributable 

to wage costs. We confirmed that this labor-related share for outpatient services is 

appropriate during our regression analysis for the payment adjustment for rural hospitals 

in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we did 

not propose to revise this policy for the CY 2014 OPPS. We refer readers to section II.H. 

of this final rule with comment period for a description and example of how the wage 

index for a particular hospital is used to determine the payment for the hospital. 

 As discussed in section II.A.2.c. of this final rule with comment period, for 

estimating APC costs, we standardize 60 percent of estimated claims costs for geographic 

area wage variation using the same 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 
392 

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. In the CY 2014 OPPS/ASC 

proposed rule, we stated that, for the CY 2014 OPPS, we will implement this provision in 

the same manner as we have since CY 2011. That is, frontier State hospitals will 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 will receive a wage index based on the geographic location of the specific 

inpatient hospital with which it is associated. Therefore, if the associated hospital is 

located in a frontier State, the wage index adjustment applicable for the hospital will also 
393 

apply for the affiliated HOPD. We refer readers to the following sections in the FY 2011 

through FY 2014 IPPS/LTCH PPS final rules for discussions 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: FY 2011 (75 FR 50160 

through 50161), FY 2012 (76 FR 51793, 51795, and 51825), FY 2013 (77 FR 53369 

through 53370), and FY 2014 (78 FR 50590 through 50591). 

 In addition to the changes required by the Affordable Care Act, we note that the 

final 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 final rule (78 FR 50585 through 50596) for a detailed 

discussion of all 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 proposed 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 noted that, because non-IPPS hospitals cannot reclassify, they 
394 

are eligible for the out-migration wage adjustment. Table 4J from the FY 2014 

IPPS/LTCH PPS final rule as corrected (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 will receive the adjustment for FY 2014. We also noted 

that, beginning with FY 2012, under the IPPS, an eligible hospital that waives its Lugar 

status in order to receive the out-migration adjustment has effectively waived its deemed 

urban status and, thus, is rural for all purposes under the IPPS, including being 

considered rural for the disproportionate share hospital (DSH) payment adjustment, 

effective for the fiscal year in which the hospital receives the out-migration adjustment. 

We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50592) for a more 

detailed discussion on the Lugar redesignation waiver for the out-migration adjustment. 

As we have done in prior years, we are including Table 4J from the FY 2014 IPPS/LTCH 

PPS final rule as corrected as Addendum L to this final rule with comment period with 

the addition of non-IPPS hospitals that will receive the section 505 out-migration 

adjustment under the CY 2014 OPPS. Addendum L is available via the Internet on the 

CMS Web site. 

 As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), 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: 
395 

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 did not propose to change our current regulations which require that we use the 

FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014. 

 We did not receive any public comments on our proposals. Therefore, we are 

finalizing our proposals without modification and are adopting the FY 2014 IPPS wage 

index for the CY 2014 OPPS in its entirety, including the rural floor, geographic 

reclassifications, and all other wage index adjustments. 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 using the final FY 2014 IPPS 

wage indices for calculating OPPS payments in CY 2014. With the exception of the 

out-migration wage adjustment table (Addendum L to this final rule with comment 
396 

period, which is available via the Internet on the CMS Web site), which includes 

non-IPPS hospitals paid under the OPPS, we are not reprinting the final FY 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-Fee-forService-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link 

to the final FY 2014 IPPS wage index tables. 

D. Statewide Average Default CCRs

 In addition to using CCRs to estimate costs from charges on claims for ratesetting, 

CMS uses overall hospital-specific CCRs calculated from the hospital’s most recent cost 

report to determine outlier payments, payments for pass-through devices, and monthly 

interim transitional corridor payments under the OPPS during the PPS year. Medicare 

contractors cannot calculate a CCR for some hospitals because there is no cost report 

available. For these hospitals, CMS uses the statewide average default CCRs to 

determine the payments mentioned above until a hospital’s Medicare contractor is able to 

calculate the hospital’s actual CCR from its most recently submitted Medicare cost 

report. These hospitals include, but are not limited to, hospitals that are new, have not 

accepted assignment of an existing hospital’s provider agreement, and have not yet 

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 the CY 2014 OPPS/ASC proposed 
397 

rule (78 FR 43579), we proposed 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 proposed to continue to use our standard methodology of 

calculating the statewide average default CCRs using the same hospital overall CCRs that 

we use to adjust charges to costs on claims data for setting the proposed CY 2014 OPPS 

relative payment weights. Table 9 published in the proposed rule (78 FR 43580 through 

43581) listed the proposed CY 2014 default urban and rural CCRs by State and compared 

them to last year’s default CCRs. These proposed CCRs represented the ratio of total 

costs to total charges for those cost centers relevant to outpatient services from each 

hospital’s most recently submitted cost report, weighted by Medicare Part B charges. We 

also proposed 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 proposed to weight each hospital’s CCR by the volume 

of separately paid line-items on hospital claims corresponding to the year of the majority 

of cost reports used to 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 
398 

the statewide average default CCRs, including the hospitals used in our calculations and 

our trimming criteria. 

 We did not receive any public comments on our CY 2014 proposal. We are 

finalizing our proposal to apply our standard methodology of calculating the statewide 

average default CCRs using the same hospital overall CCRs that we used to adjust 

charges to costs on claims data for setting the CY 2014 OPPS relative payment weights. 

We used this methodology to calculate the statewide average default CCRs listed in 

Table 16 below. 

 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 16 below lists the finalized statewide average default CCRs for OPPS 

services furnished on or after January 1, 2014. 
399 

TABLE 16.–CY 2014 STATEWIDE AVERAGE CCRs 

State Urban/Rural

CY 2014 

Default 

CCR 

Previous 

Default 

CCR (CY 

2013 OPPS 

Final Rule) 

ALASKA RURAL 0.473 0.489 

ALASKA URBAN 0.302 0.307 

ALABAMA RURAL 0.229 0.209 

ALABAMA URBAN 0.188 0.193 

ARKANSAS RURAL 0.244 0.219 

ARKANSAS URBAN 0.220 0.234 

ARIZONA RURAL 0.254 0.238 

ARIZONA URBAN 0.182 0.190 

CALIFORNIA RURAL 0.190 0.192 

CALIFORNIA URBAN 0.206 0.202 

COLORADO RURAL 0.393 0.331 

COLORADO URBAN 0.221 0.226 

CONNECTICUT RURAL 0.343 0.364 

CONNECTICUT URBAN 0.276 0.287 

DISTRICT OF 

COLUMBIA URBAN 0.279 0.302 

DELAWARE RURAL 0.246 0.282 

DELAWARE URBAN 0.356 0.353 

FLORIDA RURAL 0.160 0.182 

FLORIDA URBAN 0.160 0.167 

GEORGIA RURAL 0.260 0.237 

GEORGIA URBAN 0.205 0.214 

HAWAII RURAL 0.345 0.323 

HAWAII URBAN 0.298 0.306 

IOWA RURAL 0.308 0.296 

IOWA URBAN 0.266 0.269 

IDAHO RURAL 0.359 0.417 

IDAHO URBAN 0.478 0.357 

ILLINOIS RURAL 0.252 0.240 

ILLINOIS URBAN 0.222 0.230 

INDIANA RURAL 0.326 0.285 

INDIANA URBAN 0.288 0.256 

KANSAS RURAL 0.313 0.290 
400 

State Urban/Rural

CY 2014 

Default 

CCR 

Previous 

Default 

CCR (CY 

2013 OPPS 

Final Rule) 

KANSAS URBAN 0.239 0.210 

KENTUCKY RURAL 0.221 0.217 

KENTUCKY URBAN 0.225 0.241 

LOUISIANA RURAL 0.257 0.242 

LOUISIANA URBAN 0.222 0.225 

MARYLAND RURAL 0.283 0.275 

MARYLAND URBAN 0.248 0.246 

MASSACHUSETTS RURAL 0.395 0.427 

MASSACHUSETTS URBAN 0.336 0.323 

MAINE RURAL 0.452 0.445 

MAINE URBAN 0.438 0.449 

MICHIGAN RURAL 0.341 0.303 

MICHIGAN URBAN 0.322 0.303 

MINNESOTA RURAL 0.462 0.469 

MINNESOTA URBAN 0.349 0.321 

MISSOURI RURAL 0.263 0.241 

MISSOURI URBAN 0.280 0.262 

MISSISSIPPI RURAL 0.233 0.226 

MISSISSIPPI URBAN 0.200 0.182 

MONTANA RURAL 0.481 0.431 

MONTANA URBAN 0.384 0.384 

NORTH 

CAROLINA RURAL 0.258 0.253 

NORTH 

CAROLINA URBAN 0.256 0.254 

NORTH DAKOTA RURAL 0.661 0.322 

NORTH DAKOTA URBAN 0.400 0.414 

NEBRASKA RURAL 0.323 0.318 

NEBRASKA URBAN 0.243 0.254 

NEW HAMPSHIRE RURAL 0.326 0.317 

NEW HAMPSHIRE URBAN 0.287 0.292 

NEW JERSEY URBAN 0.213 0.207 

NEW MEXICO RURAL 0.291 0.256 

NEW MEXICO URBAN 0.304 0.279 

NEVADA RURAL 0.220 0.234 
401 

State Urban/Rural

CY 2014 

Default 

CCR 

Previous 

Default 

CCR (CY 

2013 OPPS 

Final Rule) 

NEVADA URBAN 0.154 0.162 

NEW YORK RURAL 0.345 0.420 

NEW YORK URBAN 0.351 0.369 

OHIO RURAL 0.327 0.321 

OHIO URBAN 0.232 0.237 

OKLAHOMA RURAL 0.258 0.239 

OKLAHOMA URBAN 0.205 0.212 

OREGON RURAL 0.311 0.314 

OREGON URBAN 0.357 0.335 

PENNSYLVANIA RURAL 0.257 0.267 

PENNSYLVANIA URBAN 0.198 0.200 

PUERTO RICO URBAN 0.614 0.504 

RHODE ISLAND URBAN 0.295 0.264 

SOUTH 

CAROLINA RURAL 0.190 0.211 

SOUTH 

CAROLINA URBAN 0.203 0.214 

SOUTH DAKOTA RURAL 0.287 0.307 

SOUTH DAKOTA URBAN 0.219 0.218 

TENNESSEE RURAL 0.207 0.209 

TENNESSEE URBAN 0.190 0.195 

TEXAS RURAL 0.235 0.235 

TEXAS URBAN 0.197 0.206 

UTAH RURAL 0.474 0.374 

UTAH URBAN 0.334 0.359 

VIRGINIA RURAL 0.226 0.227 

VIRGINIA URBAN 0.238 0.237 

VERMONT RURAL 0.456 0.408 

VERMONT URBAN 0.397 0.384 

WASHINGTON RURAL 0.330 0.366 

WASHINGTON URBAN 0.360 0.301 

WISCONSIN RURAL 0.344 0.345 

WISCONSIN URBAN 0.291 0.307 

WEST VIRGINIA RURAL 0.283 0.277 

WEST VIRGINIA URBAN 0.319 0.338 
402 

State Urban/Rural

CY 2014 

Default 

CCR 

Previous 

Default 

CCR (CY 

2013 OPPS 

Final Rule) 

WYOMING RURAL 0.400 0.379 

WYOMING URBAN 0.269 0.301 

E. 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. 
403 

Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 

68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) of the 

regulations to clarify that 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 

Pub. L. 105-33, a hospital can no longer become newly classified as an EACH. 

 This adjustment for rural SCHs is budget neutral and applied before calculating 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed 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. 
404 

 Comment: Several commenters supported the proposed continuation of the 7.1 

percent rural SCH adjustment. One commenter also recommended that CMS update the 

analysis in the near future to assess if the 7.1 percent payment adjustment remains a valid 

figure. One commenter recommended that any potential future changes to the rural 

adjustment be implemented 12 months after the changes are finalized, to address 

concerns about budgeting. 

 Response: We appreciate the commenters’ support. We agree that it is 

appropriate to continue the 7.1 percent adjustment for rural SCHs (including EACHs) as 

we proposed for CY 2014. As we indicated in the proposed rule (78 FR 43582), we may 

reassess the 7.1 percent rural adjustment in the near future by examining differences 

between urban hospitals’ costs and rural hospitals’ costs using updated claims, cost 

reports, and provider information. We recognize the concerns that commenters present 

regarding budgeting concerns and will take into consideration these concerns for any 

review and revision of the adjustment in the future. 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal, without modification, to apply the 7.1 percent payment adjustment to 

rural SCHs, including EACHs, for all services and procedures paid under the OPPS in 

CY 2014, excluding separately payable drugs and biologicals, devices paid under the 

pass-through payment policy, and items paid at charges reduced to costs. 

F. OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of 

the Act

1. Background 
405 

 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 “pre-BBA 

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-to-cost 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 
406 

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 
407 

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. Payment Adjustment for Certain Cancer Hospitals for CY 2014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed 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 were 

available at the time of the development of the 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 the 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 
408 

hospital, using data from each hospital’s most recent cost report, whether as submitted or 

settled. We estimated that, on average, the OPPS payments to other hospitals furnishing 

services under the OPPS were approximately 90 percent of reasonable cost (weighted 

average PCR of 0.90). Based on these data, we proposed a target PCR of 0.90 that would 

be used to determine the CY 2014 cancer hospital payment adjustment that would be paid 

at cost report settlement. Therefore, we proposed 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. 

 Comment: Similar to public comments received in response to the CY 2013 

OPPS/ASC proposed rule that we addressed in the CY 2013 OPPS/ASC final rule with 

comment period, commenters representing the cancer hospitals again stated that the PCR 

is only one component of the adjustment needed to account for the differences in 

providing cancer care. The commenters suggested that CMS utilize a methodology that 

they stated would ensure that the 11 cancer hospitals’ losses (on a per unit PCR basis) 

equal the losses (on a per unit PCR basis) of the other PPS hospitals. The commenters 

provided details of this “equivalent loss per unit” methodology which they indicated 

would result in a target PCR equal to 0.94 for CY 2014. 

 Response: As we indicated in the CY 2013 OPPS/ASC final rule with comment 

period (77 FR 68293), section 3138 of the Affordable Care Act provides that if the 

Secretary determines under section 1833(t)(18)(A) of the Act that costs incurred by 

cancer hospitals exceed those costs of other hospitals furnishing services under section 
409 

1833(t) of the Act, the Secretary shall provide for an appropriate adjustment under 

section 1833(t)(2)(E) of the Act to reflect the higher costs. Because the statute requires 

that we provide a cancer hospital payment adjustment to reflect the higher costs, not 

losses, incurred at cancer hospitals, we believe that it would be inappropriate to revise our 

cancer hospital payment adjustment policy so that the target PCR is calculated based on 

the cancer hospitals’ losses per unit PCR compared to the other OPPS hospitals’ losses 

per unit PCR. 

 Comment: Commenters stated that CMS should not recalculate the target PCR 

annually because the cancer hospitals require payment stability and predictability in order 

to provide services to Medicare beneficiaries. 

 Response: As we stated in the CY 2013 OPPS/ASC final rule with comment 

period (77 FR 68294) in response to this same comment, we believe that annual 

recalculation of the target PCR will provide a timely assessment of the changes in OPPS 

payments relative to costs and, therefore, will enable us to provide payment adjustments 

to cancer hospitals that are accurate and equitable. In addition, because the target PCR is 

set in advance of each calendar year, cancer hospitals can easily predict the amount of 

their hospital-specific payment adjustment associated with the target PCR for the 

following year and budget accordingly. 

 After consideration of the public comments we received, we are finalizing our 

proposal 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 for the other 

OPPS hospitals using the most recent submitted or settled cost report data that were 
410 

available at the time of this final rule with comment period. To calculate the final 

CY 2014 target PCR, we used the same extract of cost report data from HCRIS, as 

discussed in section II.A. of this final rule with comment period, used to estimate 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 with 

CY 2012 claims data that we used to model the impact of the final CY 2014 APC relative 

payment weights (4,044 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 48 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 116 hospitals because these hospitals had cost report data that 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 an analytic file of 3,880 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 

89 percent of reasonable cost (weighted average PCR of 0.89). Based on these data, we 
411 

used a target PCR of 0.89 to determine the CY 2014 cancer hospital payment adjustment 

to be paid at cost report settlement. Therefore, the payment amount associated with the 

cancer hospital payment adjustment to be determined at cost report settlement will be the 

additional payment needed to result in a PCR equal to 0.89 for each cancer hospital. 

 Table 17 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 17.—ESTIMATED CY 2014 HOSPITAL-SPECIFIC PAYMENT 

ADJUSTMENT FOR CANCER HOSPITALS TO BE PROVIDED AT COST 

REPORT SETTLEMENT 

Provider 

Number Hospital Name 

Estimated 

Percentage 

Increase in 

OPPS Payments 

for CY 2014 

050146 City of Hope Comprehensive Cancer Center 13.7% 

050660 USC Norris Cancer Hospital 27.5% 

100079 Sylvester Comprehensive Cancer Center 15.4% 

100271 H. Lee Moffitt Cancer Center & Research Institute 22.3% 

220162 Dana-Farber Cancer Institute 46.5% 

330154 Memorial Sloan-Kettering Cancer Center 45.7% 

330354 Roswell Park Cancer Institute 33.7% 

360242 James Cancer Hospital & Solove Research Institute 34.1% 
412 

Provider 

Number Hospital Name 

Estimated 

Percentage 

Increase in 

OPPS Payments 

for CY 2014 

390196 Fox Chase Cancer Center 15.4% 

450076 M.D. Anderson Cancer Center 57.1% 

500138 Seattle Cancer Care Alliance 53.3% 

G. 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 
413 

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 1.2 percent of the 

total aggregated OPPS payments. Therefore, for CY 2012, we estimate that we paid 

0.2 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 1.1 percent of the total 

CY 2013 OPPS payments. The difference between 1.1 percent and 1.0 percent is 

reflected in the regulatory impact analysis in section XXIII. of this final rule with 

comment period. 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 
414 

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

2. Proposed Outlier Calculation 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43584), we proposed to 

continue our policy of estimating outlier payments to be 1.0 percent of the estimated 

aggregate total payments under the OPPS for outlier payments. We proposed that a 

portion of that 1.0 percent, 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 the CY 2014 OPPS/ASC proposed rule 

(78 FR 43622), for CMHCs, we proposed to continue our longstanding policy that if a 

CMHC’s cost for partial hospitalization services, paid under either APC 0172 (Level I 

Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial 

Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment 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 final rule with 

comment period. 

 To ensure that the estimated CY 2014 aggregate outlier payments would equal 

1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the 

hospital outlier threshold be set so that outlier payments would be triggered when the cost 
415 

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 fixed-dollar threshold using largely the standard 

methodology, most recently used for CY 2013 (77 FR 68295 through 68297). For 

purposes of estimating outlier payments for the proposed rule, we used the 

hospital-specific overall ancillary CCRs available in the April 2013 update to the 

Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, 

such as the most current CCR, which are maintained by the Medicare contractors and 

used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS 

update lag by 2 years. 

 In order to estimate the CY 2014 hospital outlier payments for the 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 well as the FY 2014 IPPS/LTCH PPS 

final rule (78 FR 50982). 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. 
416 

 As noted in the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 68011), we are concerned that we could systematically overestimate the OPPS 

hospital outlier threshold if we did not apply a CCR inflation adjustment factor. 

Therefore, in the CY 2014 OPPS/ASC proposed rule, we proposed to apply the same 

CCR inflation adjustment factor that we apply for the FY 2014 IPPS outlier calculation to 

the CCRs used to simulate the CY 2014 OPPS outlier payments to determine the 

fixed-dollar threshold. Specifically, for CY 2014, we proposed 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) as well as the FY 2014 IPPS/LTCH PPS final rule (78 FR 50978 through 50982). 

 Therefore, to model hospital outlier payments for the 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 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 
417 

threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated 

total OPPS payments to outlier payments. We proposed to continue to make an outlier 

payment that equals 50 percent of the amount by which the cost of furnishing the service 

exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and 

the proposed fixed-dollar threshold of $2,775 were met. For CMHCs, we proposed that, 

if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 or APC 

0173, exceeds 3.40 times the payment 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 proposed 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 
418 

information on the Hospital OQR Program, we refer readers to section XIII. of this final 

rule with comment period. 

 Comment: Several commenters urged CMS to reconsider the increase in the 

CY 2014 OPPS outlier threshold. The commenters believed that the thresholds were 

being set higher than was necessary to achieve the OPPS outlier spending target, based 

on their analysis of the thresholds and aggregate outlier spending in prior years. 

Commenters also desired transparency about why an outlier threshold increase was 

necessary, when historical evidence suggested that such a change is unwarranted. One 

commenter recommended that the OPPS outlier percentage spending target be reduced to 

0.5 percent of the system because patients who develop complications requiring complex 

care are highly likely to be admitted to inpatient care. 

 Response: Many of the commenters who recommended changes to the OPPS 

fixed-dollar outlier threshold relied on direct comparisons between aggregate spending 

and the OPPS outlier thresholds. As discussed earlier in this section, OPPS outliers are 

paid and modeled based on comparisons between APC payment and estimated cost. As a 

result, changing the OPPS fixed-dollar outlier threshold by any increment does not result 

in an evenly distributed change in OPPS outlier spending as well as services that receive 

OPPS outlier payments. 

 There are a variety of factors that may affect the OPPS fixed-dollar outlier 

threshold, including data changes such as hospital charging practices and fluctuations in 

the overall ancillary CCRs as well as changes in OPPS payment policy such as those 

involving packaging and compositing. Those changes can influence the individual 
419 

comparisons between APC service payment and estimated costs. While the OPPS outlier 

threshold has been relatively stable in the past several years, historically the OPPS 

fixed-dollar outlier threshold has fluctuated from year to year as identified in the Annual 

Policy Files which are available via the Internet on the CMS Web site. In the CY 2014 

OPPS/ASC proposed rule, we proposed to update several OPPS packaging policies which 

would have a corresponding effect on the OPPS fixed-dollar outlier threshold by 

potentially increasing APC payment for certain paid service lines while moving affected 

services from previously being on the payment portion of the OPPS outlier payment 

comparison into the cost portion. In particular, by conditionally packaging certain 

clinical diagnostic laboratory tests previously paid at CLFS rates, the CY 2014 fixeddollar OPPS outlier threshold would have to account for significant changes to both the 

APC payment and estimated cost portions of the OPPS outlier payment comparison. 

 We appreciate the recommendation regarding revisiting the correct OPPS outlier 

spending target and will continue to consider whether a 1.0 percent OPPS outlier 

percentage spending target continues to remain appropriate. 

3. Final Outlier Calculation 

 Consistent with historical practice, we use updated data for this final rule with 

comment period for our outlier calculation. For CY 2014, we are applying the overall 

CCRs from the October 2013 OPSF with a CCR adjustment factor of 0.9645 to 

approximate CY 2014 CCRs to charges on the final CY 2012 claims that were adjusted to 

approximate CY 2014 charges (using the final 2-year charge inflation factor of 1.0969). 

These are the same CCR adjustment and charge inflation factors that were used to set the 
420 

IPPS fixed dollar threshold for the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). 

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 payment would continue to be made at 50 percent of the amount by 

which the cost of furnishing the service would exceed 1.75 times the APC payment 

amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total 

CY 2014 OPPS payments. We estimate that a fixed-dollar threshold of $2,900, combined 

with the multiple threshold of 1.75 times the APC payment rate, will allocate 1.0 percent 

of estimated aggregated total OPPS payments to outlier payments. 

 In summary, for CY 2014, we will continue to make an outlier payment that 

equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 

times the APC payment amount when both the 1.75 multiple threshold and the final 

fixed-dollar threshold of $2,900 are met. For CMHCs, if a CMHC’s cost for partial 

hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times 

the payment rate for APC 0173, the outlier payment is calculated as 50 percent of the 

amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We estimate 

that this threshold will allocate 0.16 percent of outlier payments to CMHCs for PHP 

outlier payments. 

H. Calculation of an Adjusted Medicare Payment from the National Unadjusted 

Medicare Payment

 The basic methodology for determining prospective payment rates for HOPD 

services under the OPPS is set forth in existing regulations at 42 CFR Part 419, Subparts 
421 

C and D. For this CY 2014 OPPS/ASC final rule with comment period, the payment rate 

for most services and procedures for which payment is made under the OPPS is the 

product of the conversion factor calculated in accordance with section II.B. of this final 

rule with comment period and the relative payment weight determined under section II.A. 

of this final rule with comment period. Therefore, the national unadjusted payment rate 

for most APCs contained in Addendum A to this final rule with comment period (which 

is available via the Internet on the CMS Web site) and for most HCPCS codes to which 

separate payment under the OPPS has been assigned in Addendum B to this final rule 

with comment period (which is available via the Internet on the CMS Web site) was 

calculated by multiplying the CY 2014 scaled weight for the APC by the 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 
422 

payment reduction for hospitals that fail to meet the requirements of the Hospital OQR 

Program, we refer readers to section XIII. of this final rule with comment period. 

 We demonstrate in the steps below how to determine the APC payments that will 

be made in a calendar year under the OPPS to a hospital that fulfills the Hospital OQR 

Program requirements and to a hospital that fails to meet the Hospital OQR Program 

requirements for a service that has any of the following status indicator assignments: 

“P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to 

this final rule with comment period), in a circumstance in which the multiple procedure 

discount does not apply, the procedure is not bilateral, and conditionally packaged 

services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, 

although blood and blood products with status indicator “R” and brachytherapy sources 

with status indicator “U” are not subject to wage adjustment, they are subject to reduced 

payments when a hospital fails to meet the Hospital OQR Program requirements. We 

note that we had proposed to create status indicator “J1” to reflect the comprehensive 

APCs discussed in section II.A.2.e. of this final rule with comment period. However, the 

comprehensive APCs will not be implemented in the CY 2014 OPPS, and therefore status 

indicator “J1” will not apply. We also note that we had proposed to delete status 

indicator “X” as part of the CY 2014 packaging proposal for ancillary services, discussed 

in section II.A.4. of this final rule with comment period. We are not finalizing the 

ancillary services packaging policy, and therefore status indicator “X” will continue to be 

active in the CY 2014 OPPS. 
423 

 Individual providers interested in calculating the payment amount that they will 

receive for a specific service from the national unadjusted payment rates presented in 

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

Internet on the CMS Web site) should follow the formulas presented in the following 

steps. For purposes of the payment calculations below, we refer to the national 

unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR 

Program as the “full” national unadjusted payment rate. We refer to the national 

unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital 

OQR Program as the “reduced” national unadjusted payment rate. The reduced national 

unadjusted payment rate is calculated by multiplying the reporting ratio of 0.980 times 

the “full” national unadjusted payment rate. The national unadjusted payment rate used 

in the calculations below is either the full national unadjusted payment rate or the reduced 

national unadjusted payment rate, depending on whether the hospital met its Hospital 

OQR Program requirements in order to receive the full CY 2014 OPPS fee schedule 

increase factor of 1.7 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 
424 

final rule with comment period (70 FR 68553), we confirmed that this labor-related share 

for hospital outpatient services is appropriate. 

 The formula below is a mathematical representation of Step 1 and identifies the 

labor-related portion of a specific payment rate for a specific service. 

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 Pub. L. 98-21. (For further discussion of the 

changes to the FY 2014 IPPS wage indices, as applied to the CY 2014 OPPS, we refer 

readers to section II.C. of this final rule with comment period.) As we proposed, we are 

continuing to apply a wage index floor of 1.00 to frontier States, in accordance with 

section 10324 of the Affordable Care Act 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 Pub. L. 108-173. Addendum L to this final rule with comment period (which is 

available via the Internet on the CMS Web site) contains the qualifying counties and the 
425 

associated wage index increase developed for the FY 2014 IPPS and listed as Table 4J in 

the FY 2014 IPPS/LTCH PPS final 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 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). 
426 

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 

rural adjustment for rural SCHs. 

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 1.071. 

 We have provided examples below of the calculation of both the full and reduced 

national unadjusted payment rates that will apply to certain outpatient items and services 

performed by hospitals that meet and that fail to meet the Hospital OQR Program 

requirements, using the steps outlined above. For purposes of this example, we 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 

CY 2014 full national unadjusted payment rate for APC 0019 is approximately $318.79. 

The reduced national unadjusted payment rate for APC 0019 for a hospital that fails to 

meet the Hospital OQR Program requirements is approximately $312.41. This reduced 

rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted 

payment rate for APC 0019. 

 The FY 2014 wage index for a provider located in CBSA 35644 in New York is 

1.3129. The labor-related portion of the full national unadjusted payment is 
427 

approximately $251.12 (.60 * $318.79 * 1.3129). The labor-related portion of the 

reduced national unadjusted payment is approximately $246.10 (.60 * $312.41 * 1.3129). 

The nonlabor-related portion of the full national unadjusted payment is approximately 

$127.52 (.40 * 318.79). The nonlabor-related portion of the reduced national unadjusted 

payment is approximately $124.96 (.40 * $312.41). The sum of the labor-related and 

nonlabor-related portions of the full national adjusted payment is approximately $378.64 

($251.12 + $127.52). The sum of the reduced national adjusted payment is 

approximately $371.06 ($246.10 + $124.96). 

I. Beneficiary Copayments

1. Background 

 Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining 

the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. 

Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national 

unadjusted copayment amount for a covered OPD service (or group of such services) 

furnished in a year in a manner so that the effective copayment rate (determined on a 

national unadjusted basis) for that service in the year does not exceed a specified 

percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, 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 
428 

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. OPPS Copayment Policy 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43586), for CY 2014, we 

proposed to determine copayment amounts for new and revised APCs using the same 

methodology that we implemented beginning in CY 2004. (We refer readers to the 

November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, 

we proposed to use the same standard rounding principles that we have historically used 

in instances where the application of our standard copayment methodology would result 

in a copayment amount that is less than 20 percent and cannot be rounded, under standard 

rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66687) in which we discuss our rationale for applying 

these rounding principles.) The proposed national unadjusted copayment amounts for 
429 

services payable under the OPPS that would be effective January 1, 2014, were shown in 

Addenda A and B to the proposed rule (which are available via the Internet on the CMS 

Web site). As discussed in section XIII.G. of the 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 noted that OPPS 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). 

 We did not receive any public comments regarding the proposed methodology for 

calculating copayments for CY 2014. Therefore, for the reasons set forth in this final rule 

with comment period, we are finalizing our CY 2014 copayment methodology without 

modification. 
430 

3. Calculation of an Adjusted Copayment Amount for an APC Group 

 Individuals interested in calculating the national copayment liability for a 

Medicare beneficiary for a given service provided by a hospital that met or failed to meet 

its Hospital OQR Program requirements should follow the formulas presented in the 

following steps. 

 Step 1. Calculate the beneficiary payment percentage for the APC by dividing the 

APC’s national unadjusted copayment by its payment rate. For example, using 

APC 0019, approximately $63.76 is 20 percent of the full national unadjusted payment 

rate of approximately $318.79. For APCs with only a minimum unadjusted copayment in 

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

Internet on the CMS Web site), the beneficiary payment percentage is 20 percent. 

 The formula below is a mathematical representation of Step 1 and calculates 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 final 

rule with comment period. Calculate the rural adjustment for eligible providers as 

indicated in Step 6 under section II.H. of this final rule with comment period. 

 Step 3. Multiply the percentage calculated in Step 1 by the payment rate 

calculated in Step 2. The result is the wage-adjusted copayment amount for the APC.

 The formula below is a mathematical representation of Step 3 and applies the 
431 

beneficiary payment percentage to the adjusted payment rate for a service calculated 

under section II.H. of this final rule with comment period, with and without the rural 

adjustment, to calculate the adjusted beneficiary copayment for a given service. 

 Wage-adjusted copayment amount for the APC = Adjusted Medicare 

Payment * B. 

 Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted 

Medicare Payment * 1.071) * B. 

 Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, 

multiply the copayment calculated in Step 3 by the reporting ratio of 0.980. 

 The unadjusted copayments for services payable under the OPPS that will be 

effective January 1, 2014, are shown in Addenda A and B to this final rule with comment 

period (which are available via the Internet on the CMS Web site). We note that the 

national unadjusted payment rates and copayment rates shown in Addenda A and B to 

this final rule with comment period reflect the full CY 2014 OPD fee schedule increase 

factor discussed in section II.B. of this final rule with comment period. 

 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. 
432 

III. OPPS Ambulatory Payment Classification (APC) Group Policies 

A. OPPS Treatment of New CPT and Level II HCPCS Codes

 CPT and Level II HCPCS codes are used to report procedures, services, items, 

and supplies under the hospital OPPS. Specifically, CMS recognizes the following codes 

on OPPS claims: 

● Category I CPT codes, which describe 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 (AMA) and the 

Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are 

updated and changed throughout the year. CPT and HCPCS code changes that affect the 

OPPS are published both through the annual rulemaking cycle and through the OPPS 

quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to 

the public or recognizes the release of new CPT codes by the AMA and makes these 

codes effective (that is, the codes can be reported on Medicare claims) outside of the 

formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers 

hospitals access to codes that may more accurately describe items or services furnished 

and/or provides payment or more accurate payment for these items or services in a 

timelier manner than if CMS waited for the annual rulemaking process. We solicit public 
433 

comments on these new codes and finalize our proposals related to these codes through 

our annual rulemaking process. As we proposed in the CY 2014 OPPS/ASC proposed 

rule (78 FR 43587), in Table 18 below (Table 11 of the proposed rule), we summarized 

our process for updating codes through our OPPS quarterly update CRs, seeking public 

comments, and finalizing their treatment under the OPPS. We note that because the 

payment rates associated with codes effective July 1 were not available to us in time for 

incorporation into the Addenda of the proposed rule, the Level II HCPCS codes and the 

Category III CPT codes implemented through the July 2013 OPPS quarterly update CR 

were not included in Addendum B of the proposed rule (which is available via the 

Internet on the CMS Web site), while those codes based upon the April 2013 OPPS 

quarterly update were included in Addendum B. Nevertheless, we requested public 

comments on the codes included in the July 2013 OPPS quarterly update and included 

these codes in the preamble of the proposed rule. 

TABLE 18.—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 

Level II HCPCS 

Codes July 1, 2013 

CY 2014 

OPPS/ASC 

proposed rule 

CY 2014 

OPPS/ASC final 

rule with 

comment period July 1, 2013 

Category I 

(certain vaccine July 1, 2013 CY 2014 OPPS/ASC 

CY 2014 

OPPS/ASC final 
434 

OPPS 

Quarterly 

Update CR 

Type of Code Effective Date Comments 

Sought When Finalized 

codes) and III 

CPT codes 

proposed rule 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 

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 January 1, 2014 

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 solicited public comments in the CY 2014 OPPS/ASC 

proposed rule or whether we are soliciting public comments in this 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 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 
435 

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 are 

responding to public comments and finalizing our interim OPPS treatment of these codes 

in this CY 2014 OPPS/ASC final rule with comment period. 

 We received public comments on several new codes that were assigned to 

comment indicator “NI” in Addendum B of the CY 2013 OPPS/ASC final rule with 

comment period. We respond to those comments in sections II.A.2., III.C., V.A., and 

V.B. of this CY 2014 OPPS/ASC final rule with comment period. Table 19 below lists 

the long descriptors for the CPT and Level II HCPCS codes that were assigned to 

comment indicator “NI” for which we received public comments on the CY 2013 

OPPS/ASC final rule with comment period and the specific sections where the comments 

are addressed. 

TABLE 19.—COMMENTS TO THE CY 2013 OPPS/ASC FINAL RULE WITH 

COMMENT PERIOD ON NEW HCPCS CODES ASSIGNED TO COMMENT 

INDICATOR “NI” 

CY 2013 

CPT/HCPCS 

Code CY 2013 Long Descriptor 

Section in This CY 2014 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

0319T 

Insertion or replacement of subcutaneous 

implantable defibrillator system with 

subcutaneous electrode 

III.C.1.b. 

(Subcutaneous 

Defibrillator) 

37211 

Transcatheter therapy, arterial infusion for 

thrombolysis other than coronary, any method, 

including radiological supervision and 

interpretation, initial treatment day 

III.C.1.c. 

(Thrombolytic Therapy) 
436 

CY 2013 

CPT/HCPCS 

Code CY 2013 Long Descriptor 

Section in This CY 2014 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

37212 

Transcatheter therapy, venous infusion for 

thrombolysis, any method, including radiological 

supervision and interpretation, initial treatment 

day 

III.C.1.c. 

(Thrombolytic Therapy) 

52287 Cystourethroscopy, with injection(s) for 

chemodenervation of the bladder 

III.C.5.a. 

(Chemodenervation) 

64615 

Chemodenervation of muscle(s); muscle(s) 

innervated by facial, trigeminal, cervical spinal 

and accessory nerves, bilateral (eg, for chronic 

migraine) 

III.C.5.a. 

(Chemodenervation) 

93653 

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, cavotricuspid isthmus or other single atrial focus or 

source of atrial re-entry 

II.A.2.f.(3) 

(Cardiac 

Electrophysiologic 

Evaluation and Ablation 

Composite) 
437 

CY 2013 

CPT/HCPCS 

Code CY 2013 Long Descriptor 

Section in This CY 2014 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

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 

II.A.2.f.(3) 

(Cardiac 

Electrophysiologic 

Evaluation and Ablation 

Composite) 

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) 

II.A.2.f.(3) 

(Cardiac 

Electrophysiologic 

Evaluation and Ablation 

Composite) 

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 

II.A.2.f.(3) 

(Cardiac 

Electrophysiologic 

Evaluation and Ablation 

Composite) 

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) 

II.A.2.f.(3) 

(Cardiac 

Electrophysiologic 

Evaluation and Ablation 

Composite) 
438 

CY 2013 

CPT/HCPCS 

Code CY 2013 Long Descriptor 

Section in This CY 2014 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

95907 Nerve conduction studies; 1-2 studies 

III.C.5.b. 

(Nerve Conduction 

Studies) 

95908 Nerve conduction studies; 3-4 studies 

III.C.5.b. 

(Nerve Conduction 

Studies) 

95909 Nerve conduction studies; 5-6 studies 

III.C.5.b. 

(Nerve Conduction 

Studies)

95910 Nerve conduction studies; 7-8 studies 

III.C.5.b. 

(Nerve Conduction 

Studies) 

95911 Nerve conduction studies; 9-10 studies 

III.C.5.b. 

(Nerve Conduction 

Studies)

95912 Nerve conduction studies; 11-12 studies 

III.C.5.b. 

(Nerve Conduction 

Studies) 

95913 Nerve conduction studies; 13 or more studies 

III.C.5.b. 

(Nerve Conduction 

Studies)

95943 

Simultaneous, independent, quantitative 

measures of both parasympathetic function and 

sympathetic function, based on time-frequency 

analysis of heart rate variability concurrent with 

time-frequency analysis of continuous respiratory 

activity, with mean heart rate and blood pressure 

measures, during rest, paced (deep) breathing, 

valsalva maneuvers, and head-up postural change 

III.C.5.c. 

(Parasympathetic 

Function and Sympathetic 

Function) 
439 

CY 2013 

CPT/HCPCS 

Code CY 2013 Long Descriptor 

Section in This CY 2014 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

G0456 

Negative pressure wound therapy, (e.g. vacuum 

assisted drainage collection) using a 

mechanically-powered device, not durable 

medical equipment, including provision of 

cartridge and dressing(s), topical application(s), 

wound assessment, and instructions for ongoing 

care, per session; total wounds(s) surface area 

less than or equal to 50 square centimeters 

III.C.10.g. 

(Negative Pressure 

Wound Therapy) 

G0457 

Negative pressure wound therapy, (e.g. vacuum 

assisted drainage collection) using a 

mechanically-powered device, not durable 

medical equipment, including provision of 

cartridge and dressing(s), topical application(s), 

wound assessment, and instructions for ongoing 

care, per session; total wounds(s) surface area 

greater than 50 square centimeters 

III.C.10.g. 

(Negative Pressure 

Wound Therapy) 

J7315 Mitomycin, opthalmic, 0.2 mg 

V. 

(OPPS Drugs, 

Biologicals, and 

Radiopharmaceuticals) 

Q9969 Tc-99m from non-highly enriched uranium 

source, full cost recovery add-on, per study dose 

III.C.10.i. 

(Payment for 

Radioisotopes Derived 

From Non-HEU-) 

1. Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective April 1, 2013 

and July 1, 2013 for Which We Solicited Public Comments in the 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 
440 

(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 and CPT 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 of the 

proposed rule, 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 20.—NEW LEVEL II HCPCS CODES IMPLEMENTED IN APRIL 2013 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

April 2013 

Status 

Indicator 

April 

2013 

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, S 0067 
441 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

April 2013 

Status 

Indicator 

April 

2013 

APC 

with magnetic resonance (MR) guidance 

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 payment rate for HCPCS codes C9130, C9297, and C9298 are based on ASP+6 percent. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43588), we solicited public 

comments on the proposed status indicators and APC assignments for Level II HCPCS 

codes C9130, C9297, C9298, C9734, C9735, Q0507, Q0508, and Q0509, which were 

listed in Table 12 of the proposed rule (78 FR 43588) and now appear in Table 20 of this 

final rule with comment period. 

 We did not receive any public comments on the proposed APC assignments and 

status indicators for HCPCS codes C9130, C9297, C9298, Q0507, Q0508, and Q0509. 

However, we received several public comments on HCPCS codes C9734 and C9735, 

which are addressed in sections III.C.10.c. and III.C.3.b., respectively, of this final rule 

with comment period. 

 For CY 2014, the HCPCS Workgroup replaced HCPCS codes C9130, C9297, and 

C9298 with permanent HCPCS J-codes. Table 21 below lists the replacement HCPCS 

J-codes for the temporary HCPCS C-codes. Consistent with our general policy of using 
442 

permanent HCPCS codes rather than using temporary HCPCS codes for the reporting of 

drugs under the OPPS in order to streamline coding, we are showing the replacement 

HCPCS codes for HCPCS codes C9130, C9297, and C9298, which are effective 

January 1, 2014, in Table 21. 

 In this final rule with comment period, we are assigning the Level II HCPCS 

codes listed in Table 21 below to the specified APCs and status indicators for CY 2014. 
443 

TABLE 21.—FINAL CY 2014 STATUS INDICATORS AND APC ASSIGNMENTS 

FOR THE LEVEL II HCPCS CODES THAT WERE NEWLY IMPLEMENTED 

IN APRIL 2013 

CY 2013 

HCPCS 

Code 

CY 2014 

HCPCS 

Code 

CY 2014 Long Descriptor 

Final 

CY 2014 

Status 

Indicator

Final 

CY 2014 

APC 

C9130 J1556 Injection, immune globulin (Bivigam), 500 mg G 9130 

C9297 J9262 Injection, omacetaxine mepesuccinate, 0.01 mg G 9297 

C9298 J7316 Injection, ocriplasmin, 0.125mg G 9298 

C9734 C9734 

Focused ultrasound ablation/therapeutic 

intervention, other than uterine leiomyomata, 

with magnetic resonance (MR) guidance S 0065 

C9735 C9735 

Anoscopy; with directed submucosal 

injection(s), any substance T 0150 

Q0507 Q0507 

Miscellaneous supply or accessory for use with 

an external ventricular assist device N N/A 

Q0508 Q0508 

Miscellaneous supply or accessory for use with 

an implanted ventricular assist device N N/A 

Q0509 Q0509 

Miscellaneous supply or accessory for use with 

any implanted ventricular assist device for 

which payment was not made under Medicare 

Part A N N/A 

 For CY 2014, we note that we are not making any changes to the status indicator 

and APC assignment for HCPCS code C9735. Specifically, HCPCS code C9735 will 

continue to be assigned to APC 0150 for CY 2014 with a status indicator of “T.” 

However, we are reassigning HCPCS code C9734 from APC 0067 (Level II Stereotactic 

Radiosurgery) to APC 0065 (IORT, MRgFUS, and MEG), as discussed in section 

III.C.10.c. of this final rule with comment period. In addition, we are reassigning 

HCPCS codes Q0507, Q0508, and Q0509 from status indicator “A” to “N” to indicate 
444 

that they are now packaged under the hospital OPPS, consistent with our packaging 

guidelines, which are discussed in section II.A.3. of this final rule with comment period. 

 Furthermore, because HCPCS codes J1556, J9262, and J7316 describe the same 

drug and the same dosage currently described by HCPCS codes C9130, C9297, and 

C9298, respectively, these drugs will continue their pass-through status in CY 2014. 

Therefore, we are assigning HCPCS codes J1556, J9262, and J7316 to the same APCs 

and the same status indicators as their predecessor HCPCS codes, as shown in Table 21. 

 As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43589), through 

the July 2013 OPPS quarterly update CR, which included HCPCS codes that were made 

effective July 1, 2013, we allowed separate payment for 5 of the 10 new Level II HCPCS 

codes. Specifically, as displayed in Table 22 below (also Table 13 of the proposed rule), 

we provided separate OPPS payment for HCPCS codes C9131, C9736, G0460, Q2050, 

and Q2051.
445 

TABLE 22.—NEW LEVEL II HCPCS CODES IMPLEMENTED IN JULY 2013 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor July 

2013 SI 

July 2013 

APC 

C9131* Injection, ado-trastuzumab emtansine, 1 mg G 9131 

C9736 

Laparoscopy, surgical, radiofrequency ablation 

of uterine fibroid(s), including intraoperative 

guidance and monitoring, when performed 

T 0131 

G0460 

Autologous platelet rich plasma for chronic 

wounds/ulcers, including phlebotomy, 

centrifugation, and all other preparatory 

procedures, administration and dressings, per 

treatment 

T 0013 

K0008 Custom Manual Wheelchair Base Y N/A 

K0013 Custom Motorized/Power Wheelchair Base Y N/A 

K0900 Customized Durable Medical Equipment, 

Other Than Wheelchair Y N/A 

Q0090 Levonorgestrel-Releasing Intrauterine 

Contraceptive System (SKYLA), 13.5 mg E N/A 

Q2033 

Influenza Vaccine, Recombinant 

Hemagglutinin Antigens, For Intramuscular 

Use (Flublok) 

L N/A 

Q2050** Injection, Doxorubicin Hydrochloride, 

Liposomal, Not Otherwise Specified, 10mg K 7046 

Q2051*** Injection, Zoledronic Acid, Not Otherwise 

Specified, 1mg K 1356 

*The 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 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 payment rate for HCPCS code Q2051 is based on ASP+6 percent.

 We note that two of the Level II HCPCS Q-codes 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 
446 

(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 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” (Nonpass-through drugs and nonimplantable biologicals, including 

therapeutic radiopharmaceuticals; paid under OPPS; separate APC payment). We also 

assigned 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 HCPCS codes J3487 and J3488 were changed to “E,” effective 

July 1, 2013, to indicate that the codes were not separately payable by Medicare. 

Because HCPCS code Q2051 described 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 was assigned to APC 1356 (Zoldedronic acid 1mg), effective July 1, 2013. 
447 

 Of the 10 Level II HCPCS codes that were made effective July 1, 2013, we did 

not recognize for separate payment the following 5 HCPCS codes: HCPCS codes K0008, 

K0013, and K0900, which were assigned to status indicator “Y” (Non-implantable 

durable medical equipment; not paid under OPPS); HCPCS code Q2033, which was 

assigned to status indicator “L” (Not paid under OPPS; paid at reasonable cost); and 

HCPCS code Q0090, which was assigned to status indicator “E” (Not payable/Noncovered by Medicare; not paid under OPPS). 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we solicited public 

comments on the proposed status indicators and APC assignments for the HCPCS codes 

that were listed in Table 13 of the proposed rule and now appear in Tables 22 and 23 of 

this final rule with comment period. 

 We did not receive any public comments on the proposed APC assignments and 

status indicators for HCPCS codes C9131, K0008, K0013, K0900, Q0090, Q2033, 

Q2050, and Q2051. Therefore, we are adopting as final, without modification, our 

proposal to assign these eight Level II HCPCS codes to the APCs and status indicators as 

proposed for CY 2014. 

 We received several public comments on HCPCS codes C9736 and G0460, which 

are addressed in section III.C. of this final rule with comment period. 

 Table 23 below includes a complete list of the Level II HCPCS codes that were 

made effective July 1, 2013, with their final status indicators and APC assignments for 

CY 2014.
448 

TABLE 23.—FINAL CY 2014 STATUS INDICATORS AND APC ASSIGNMENTS 

FOR THE LEVEL II HCPCS CODES THAT WERE NEWLY IMPLEMENTED 

IN JULY 2013 

CY 2013 

HCPCS 

Code 

CY 2014 

HCPCS 

Code 

CY 2014 Long Descriptor 

Final 

CY 2014 

Status 

Indicator

Final 

CY 

2014 

APC 

C9131 J9354 Injection, ado-trastuzumab emtansine, 1 mg G 9131 

C9736 0336T 

Laparoscopy, surgical, ablation of uterine 

fibroid(s), including intraoperative ultrasound 

guidance and monitoring, radiofrequency 

T 0174 

G0460 G0460 

Autologous platelet rich plasma for chronic 

wounds/ulcers, including phlebotomy, 

centrifugation, and all other preparatory 

procedures, administration and dressings, per 

treatment 

T 0327 

K0008 K0008 Custom Manual Wheelchair Base Y N/A 

K0013 K0013 Custom Motorized/Power Wheelchair Base Y N/A 

K0900 K0900 Customized Durable Medical Equipment, 

Other Than Wheelchair Y N/A 

Q0090 J7301 Levonorgestrel-Releasing Intrauterine 

Contraceptive System (Skyla), 13.5 mg E N/A 

Q2033 90673 

Influenza virus vaccine, trivalent, derived from 

recombinant DNA (RIV3), hemagglutinin 

(HA) protein only, preservative and antibiotic 

free, for intramuscular use 

L N/A 

Q2050 Q2050 Injection, Doxorubicin Hydrochloride, 

Liposomal, Not Otherwise Specified, 10mg K 7046 

Q2051 J3489 Injection, Zoledronic Acid, 1mg K 1356 

 We note that the HCPCS Workgroup replaced HCPCS codes C9131, Q0090, and 

Q2051 with HCPCS codes J9354, J7301, and J3489, respectively, effective 

January 1, 2014. Because HCPCS code J9354 describes the same drug currently 

described by HCPCS code C9131, this drug will continue its pass-through status in 
449 

CY 2014. Therefore, we are assigning HCPCS code J9354 to the same APC and status 

indicator as its predecessor HCPCS code, which shares the same dosage descriptor, as 

shown in Table 23. We note that because HCPCS code Q2051 is assigned to status 

indicator “K” (Nonpass-Through Drugs; Paid under OPPS; Separate APC payment), its 

replacement HCPCS code J3489, which describes the same item as its predecessor code, 

will also continue its nonpass-through status and APC assignment in CY 2014. In 

addition, because HCPCS code Q0090 is assigned to status indicator “E” to indicate that 

this drug is not covered by Medicare, its replacement HCPCS code J7301 will also 

continue its noncovered status in CY 2014. We note that two HCPCS codes, specifically, 

HCPCS codes C9736 and Q2033, will be replaced with CPT codes 0336T and 90673, 

respectively, effective January 1, 2014. As noted in Table 23, CPT code 90673, which is 

the replacement code for HCPCS code Q2033, will be assigned to status indicator “L.” 

However, CPT code 0336T, which replaces HCPCS code C9736, will be assigned to 

APC 0174. We refer readers to section III.C.10.b. of this final rule with comment period 

for further discussion of the APC assignment of CPT code 0336T, which replaced 

HCPCS code C9736. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we proposed to 

continue our established policy of recognizing Category I CPT vaccine codes for which 

FDA approval is imminent and Category III CPT codes that the AMA releases in January 

of each year for implementation in July through the OPPS quarterly update process. 

Under the OPPS, Category I 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 
450 

through the July 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 

Tables 22 and 23, 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 24 

(also shown in Table 14 of the CY 2014 OPPS/ASC proposed rule), 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 24, both CPT codes 0329T and 0333T were 

assigned to status indicator “E” (Not payable/Non-covered by Medicare; not paid under 

OPPS). 

 We received public comments on several of the Category III CPT codes that were 

implemented in July 2013, specifically on CPT codes 0330T, 0331T, 0332T, and 0334T, 

which are addressed in section III.C. of this final rule with comment period. Table 24 

below lists the Category III CPT codes that were implemented in July 2013, along with 

their final status indicators, APC assignments, and payment rates for CY 2014.

TABLE 24.—NEW CATEGORY III CPT CODES IMPLEMENTED 

IN JULY 2013 
451 

In the CY 2014 OPPS/ASC proposed rule (78 FR 43588 through 43590), we 

proposed to continue our process of soliciting public comments on our status indicators 

and APC assignments for the CPT/HCPCS codes effective April 1 and July 1. For the 

CY 2014 update, we solicited 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, 

through the respective OPPS quarterly update CRs. These codes were listed in Tables 12, 

CY 2013 

CPT 

Code

CY 2013 Long Descriptor

Final 

CY 2014 

Status 

Indicator

Final 

CY 

2014 

APC

Final 

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 $51.55 

0331T 

Myocardial sympathetic innervation 

imaging, planar qualitative and quantitative 

assessment; 

S 0377 $1,153.62 

0332T 

Myocardial sympathetic innervation 

imaging, planar qualitative and quantitative 

assessment; with tomographic SPECT 

S 0377 $1,153.62 

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 0052 $6,506.96 
452 

13, and 14 of the proposed rule. We proposed to finalize their status indicators and their 

APC assignments and payment rates, if applicable, in this 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 were listed in Tables 13 and 14, respectively, of the 

proposed rule. We proposed to incorporate these codes into Addendum B to this 

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 update CR and displayed in Table 12 were included in Addendum B to 

the proposed rule (which is available via the Internet on the CMS Web site), where their 

proposed CY 2014 payment rates were also shown.

We did not receive any additional public comments on this process. The final 

status indicators, APC assignments, and payment rates, if applicable, for the Level II 

HCPCS codes and the Category III CPT codes that were implemented or modified 

through the April 2013 or July 2013 OPPS update CR can be found in Tables 21, 23, and 

24, or in Addendum B to this final rule with comment period (which is available via the 

Internet on the CMS Web site).

2. Process for New Level II HCPCS Codes That Were Effective October 1, 2013 and 

New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2014 for Which 
453 

We Are Soliciting Public Comments in this 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 via the CMS HCPCS Workgroup Web site (for Level II HCPCS 

codes) and the AMA Web site (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 are flagged with comment indicator 

“NI” in Addendum B to this 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, are 

flagged with comment indicator “NI” in Addendum B to this final rule with comment 

period. Specifically, the status indicator and the APC assignment and payment rate, if 

applicable, for all such codes flagged with comment indicator “NI” are open to public 

comment in the final rule with comment period, and we respond to these comments in the 

final rule with comment period for the next calendar year’s OPPS/ASC update. In the 

CY 2014 OPPS/ASC proposed rule (78 FR 43590), we proposed to continue this process 

for CY 2014. Specifically, for CY 2014, we proposed to include in Addendum B to this 

CY 2014 OPPS/ASC final rule with comment period the new Category I and III CPT 
454 

codes effective January 1, 2014 (including the Category III CPT codes that were released 

by the AMA in July 2013) that would be incorporated in the January 2014 OPPS 

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 

OPPS quarterly update CRs. As proposed, in this final rule with comment period, the 

October 1, 2013 and January 1, 2014 codes are flagged with comment indicator “NI” in 

Addendum B to this CY 2014 OPPS/ASC final rule with comment period to indicate that 

we have assigned them an interim OPPS payment status for CY 2014. As proposed, in 

this final rule with comment period, their status indicators and their APC assignments and 

payment rates, if applicable, are open to public comment and will be finalized in the 

CY 2015 OPPS/ASC final rule with comment period. 

 For the CY 2014 update, we are finalizing our proposal to flag new Level II 

HCPCS codes that become effective October 1, 2013, and new CPT and Level II HCPCS 

codes that become effective January 1, 2014 with comment indicator “NI” in Addendum 

B to this CY 2014 OPPS/ASC final rule with comment period to indicate that these codes 

have been assigned an interim OPPS payment status for CY 2014. In addition, because 

these codes have been assigned to comment indicator “NI,” their status indicators and 

their APC assignments and payment rates, if applicable, are open to public comment and 

will be finalized in the CY 2015 OPPS/ASC final rule with comment period. 

B. OPPS Changes--Variations within APCs
455 

1. Background 

 Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification 

system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the 

Act provides that the Secretary may establish groups of covered OPD services within this 

classification system, so that services classified within each group are comparable 

clinically and with respect to the use of resources. In accordance with these provisions, 

we developed a grouping classification system, referred to as Ambulatory Payment 

Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and 

Level II HCPCS codes to identify and group the services within each APC. The APCs 

are organized such that each group is homogeneous both clinically and in terms of 

resource use. Using this classification system, we have established distinct groups of 

similar services. We also have developed separate APC groups for certain medical 

devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices. 

 We have packaged into payment for each procedure or service within an APC 

group the costs associated with those items or services that are directly related to, and 

supportive of, performing the main independent procedures or furnishing the primary and 

complete 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; 
456 

 (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) were proposed. Further 

discussion of our packaging proposals was included in section II.A.3. of the proposed 

rule (78 FR 43568 through 43575). 

 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). 
457 

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 final 

rule with comment period. 

 Under the OPPS, we generally pay for hospital outpatient services on a 

rate-per-service basis, where the service may be reported with one or more HCPCS 

codes. Payment varies according to the APC group to which the independent service or 

combination of services is assigned. Each APC relative payment 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 APC 0634 because it is the hospital clinic visit APC 

and because clinic visits are among the most frequently furnished services in the hospital 
458 

outpatient setting. We refer readers to section VII. of the proposed rule and this final rule 

with comment period for further discussion of the establishment of new 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 Panel 

recommendations for specific services for the CY 2014 OPPS and our responses to them 

are discussed in the relevant specific sections throughout this final rule with comment 

period). 

 Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, 

the items and services within an APC group cannot be considered comparable with 

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). 
459 

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 of 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 

criterion to determine when a HCPCS code is significant for purposes of the 2 times rule 

was established 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 the CY 2014 OPPS/ASC proposed rule 

(78 FR 43592), we proposed to make exceptions to this limit on the variation of costs 

within each APC group in unusual cases, such as low-volume items and services, for 

CY 2014. 

 In the CY 2014 OPPS/ASC proposed rule, we identified APCs with 2 times rule 

violations, for which we proposed changes to their HCPCS codes’ APC assignments in 
460 

Addendum B to the proposed rule. We note that Addendum B did not appear in the 

printed version of the Federal Register as part of the CY 2014 OPPS/ASC proposed 

rule. Rather, it was published and made available via the Internet on the CMS Web site 

at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2 times rule 

violation or to improve clinical and resource homogeneity, we proposed to reassign the 

HCPCS codes to APCs that contain services that are similar with regard to both their 

clinical and resource characteristics. We also proposed to rename existing APCs or 

create new clinical APCs to accommodate proposed HCPCS code reassignments. In 

many cases, the proposed HCPCS code reassignments and associated APC 

reconfigurations for CY 2014 included in the 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 proposed changes to the status indicators for some HCPCS codes 

that were not specifically and separately discussed in the CY 2014 OPPS/ASC proposed 

rule. In these cases, we proposed to change the status indicators for some HCPCS codes 

because we believe that another status indicator would more accurately describe their 

payment status from an OPPS perspective based on the policies that we proposed for 

CY 2014. Addendum B to the CY 2014 OPPS/ASC proposed rule identified with 

comment indicator “CH” those HCPCS codes for which we proposed 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-
461 

Payment/HospitalOutpatientPPS/index.html). In contrast, Addendum B to this final rule 

with comment period (available via the Internet on the CMS Web site) identifies with the 

“CH” comment indicator the final CY 2014 changes compared to the HCPCS codes’ 

status as reflected in the October 2013 Addendum B update. 

3. Exceptions to the 2 Times Rule 

 As discussed earlier, we may make exceptions to the 2 times limit on the variation 

of costs within each APC group in unusual cases such as low-volume items and services. 

Taking into account the APC changes that we proposed for CY 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). 

 For the CY 2014 OPPS/ASC proposed rule, the list of 10 APCs that appeared in 

Table 15 of the CY 2014 OPPS/ASC proposed rule (78 FR 43592) that were excepted 

from the 2 times rule were based on claims data for dates of service between January 1, 

2012, and December 31, 2012, that were processed before January 1, 2013. For this final 
462 

rule with comment period, we used 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. Therefore, after considering the public comments we 

received on the CY 2014 OPPS/ASC proposed rule and making changes to APC 

assignments based on those comments, we analyzed the CY 2012 claims data used for 

this final rule with comment period to identify the APCs with 2 times rule violations. 

Based on the final CY 2012 claims data, we found 10 APCs with 2 times rule violations, 

which is the same number of APCs that violated the 2 times rule in the proposed rule. 

We applied the criteria as described earlier to identify the APCs that are exceptions to the 

2 times rule for CY 2014, and identified six new APCs that meet the criteria for 

exception to the 2 times rule for this final rule with comment period, but that did not meet 

the criteria using proposed rule claims data. Specifically, we found that the following six 

new APCs violated the 2 times rule: APC 0066 (Level I Stereotactic Radiosurgery); APC 

0067 (Level II Stereotactic Radiosurgery); APC 0193 (Level V Female Reproductive 

Procedures); APC 0342 (Level I Pathology); APC 0370 (Multiple Allergy Tests); and 

APC 0634 (Hospital Clinic Visits). 

 After consideration of the public comments we received and our review of the 

CY 2012 costs from hospital claims and cost report data available for this final rule with 

comment period, we are finalizing our proposals with some modifications. Specifically, 

we are finalizing our proposal to except 4 of the proposed 10 original APCs from the 

2 times rule for CY 2014, specifically, APCs 0057, 0272, 0330, and 0690. In contrast, 

we are not finalizing our proposal to except 6 of the proposed 10 original APCs from the 
463 

2 times rule, specifically, APCs 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), 0278 (Diagnostic Urography), and 

0402 (Level II Nervous System Imaging). Our data analysis for this final rule with 

comment period revealed that these six APCs no longer violate the 2 times rule. Table 25 

below lists 10 APCs that we are excepting from the 2 times rule for CY 2014 based on 

the criteria above and a review of updated claims data. We note that, for cases in which 

a recommendation by the HOP Panel appears to result in or allow a 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. The geometric mean costs for hospital outpatient services for these 

and all other APCs that were used in the development of this final rule with comment 

period can be found on the CMS Web site at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-andNotices.html.
464 

TABLE 25.—FINAL APC EXCEPTIONS TO THE 2 TIMES RULE FOR CY 2014 

Final 

CY 2014 

APC Description 

0057 Bunion Procedures 

0066 Level I Stereotactic Radiosurgery 

0067 Level II Stereotactic Radiosurgery 

0193 Level V Female Reproductive Procedures 

0272 Fluoroscopy 

0330 Dental Procedures 

0342 Level I Pathology 

0370 Multiple Allergy Tests 

0634 Hospital Clinic Visits 

0690 Level I Electronic Analysis of Devices 

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services 

a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263) 

 We created HCPCS code C9733 (Non-ophthalmic fluorescent vascular 

angiography (FVA)), effective April 1, 2012, for a service that became known to us 

through the new technology APC application process. We assigned HCPCS code C9733 

to APC 0397 (Vascular Imaging), which had a CY 2012 payment rate of $154.87 and a 

status indicator of “Q2.” The “Q2” status indicator shows that payment for the service 

will be packaged in the APC payment if billed on the same date of service as a HCPCS 

code assigned status indicator “T”; and in all other circumstances, a separate APC 

payment for the service will be made. We maintained the assignment of HCPCS code 

C9733 to APC 0397 for CY 2013, which has a payment rate of $330.97, and continued 

the assignment of status indicator “Q2.” 
465 

 Comment: One commenter objected to the continued assignment of status 

indicator “Q2” to the service described by HCPCS code C9733, as well as packaging 

payment for the service as a result of the breast reconstruction surgery primary code 

being included in a comprehensive APC, because the commenter believed that both of 

these proposed policies would result in packaging the payment for the service described 

by HCPCS code C9733. The commenter stated that packaging payment for a service or 

item is only appropriate when the cost of the service or item can be taken into account in 

establishing the payment rate for the separately paid services. The commenter pointed 

out that there were no single claims reporting HCPCS code C9733 in the claims data used 

for the proposed rule ratesetting, and asserted that, because HCPCS code C9733 

described a new service with no single claims, payment should not be packaged until 

several years after the code’s creation, when there will be sufficient claims data. The 

commenter further asserted that the proposed packaging payment for the service 

described by HCPCS code C9733 with payment for CPT code 19357 (Breast 

reconstruction, immediate or delayed, with tissue expander, including subsequent 

expansion) does not comport with CMS’ principle that packaging payment for services 

should reflect how the service is reported. The commenter stated that its disagreement 

with the packaging proposals is supported by CMS’ acknowledgement that none of the 

10 claims reporting HCPCS code C9733 were identified as single claims and, according 

to an analysis that the commenter conducted, HCPCS code C9733 was reported in 

combination with CPT code 19357 approximately 90 percent of the time. The 

commenter also believed that packaging payment for HCPCS code C9733 contradicts the 
466 

principle that CMS should be able to map the costs of the packaged service to the 

separately payable services with which it is performed. 

 Response: We disagree with the commenter that payment for the service 

described by HCPCS code C9733 should not be packaged when it is used 

intraoperatively on the same date of service as the primary procedure. While it is true 

that HCPCS code C9733 is a relatively new service, the commenter stated that its own 

data analysis shows that the service is being reported in combination with CPT code 

19357 approximately 90 percent of the time. Therefore, payment for the service 

described by HCPCS code C9733 is being taken into account in establishing the payment 

rate for the separately paid services with which it is performed. In addition, we believe 

that packaging payment for the service described by HCPCS code C9733 does reflect 

how the service is furnished and how it is being reported on a claim in combination with 

CPT code 19357. Although none of the 10 claims available for the proposed rule 

ratesetting were single claims, the services reported on the 10 claims appear to have been 

mapped to appropriate separately paid procedures. The procedure described by HCPCS 

code C9733 is often performed intraoperatively in combination with a number of primary 

procedures, including facial reconstruction and reanimation, muscle flaps, trauma 

reconstruction, and digital and limb reattachment and, as the commenter stated, breast 

reconstruction, which appears to be the focus of the commenter’s concern. In other 

words, there are a number of plastic and reconstructive surgical procedures with which 

the imaging procedure described by HCPCS code C9733 can be used, not just breast 

reconstruction surgery. 
467 

 While we proposed to maintain the assignment of HCPCS code C9733 to APC 

0397, in this final rule with comment period, we are deleting APC 0397 because of 

multiple 2 times rule violations in APC 0397 based on the final rule claims data. Once 

we removed the high-cost services from APC 0397, only several low-volume services 

remained in this APC, including HCPCS code C9733, which we reassigned to another 

APC. We have reassigned HCPCS code C9733 to APC 0263 (Level I Miscellaneous 

Radiology Procedures) for CY 2014, with a final rule geometric mean cost of 

approximately $319. 

 After consideration of the public comment we received, we are finalizing our 

proposal to maintain the assignment of “Q2” status indicator to HCPCS code C9733. 

However, we are reassigning HCPCS code C9733 to APC 0263 when the service 

described by HCPCS code C9733 is performed and reported separately. Further 

discussion of comprehensive APCs is included in section II.A.2.e. of this final rule with 

comment period. However, we note that we are not implementing our comprehensive 

APC policy until CY 2015. 

b. Subcutaneous Defibrillator (APC 0107) 

 For CY 2014, we proposed to continue to assign CPT code 0319T (Insertion or 

replacement of subcutaneous implantable defibrillator system with subcutaneous 

electrode) to APC 0107 (Level I Implantation of Cardioverter-Defibrillators (ICDs)), for 

which we proposed a CY 2014 geometric mean cost of approximately $25,447. (The 

proposed payment rate reflects the corrected proposed rate included in the 

September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.) 
468 

 Comment: Commenters objected to the proposed assignment of CPT code 0319T 

to APC 0107 and requested that CMS reassign CPT code 0319T to APC 0108 (Level II 

Implantation of Cardioverter-Defibrillators (ICDs)), for which we proposed a CY 2014 

geometric mean cost of approximately $31,911. The commenters believed that CPT code 

0319T is similar in clinical application and resource use to CPT code 33249 (Insertion or 

replacement of permanent pacing cardioverter-defibrillator system with transvenous 

lead(s), single or dual chamber), which is currently assigned to APC 0108. 

 Response: We believe that the procedure described by CPT code 0319T is 

sufficiently clinically similar to the other procedures assigned to APC 0107. In addition, 

because we do not have CY 2012 claims data for CPT code 0319T for the CY 2014 

ratesetting cycle, we cannot determine the resource costs for this procedure at this time. 

We expect to have claims data for CPT code 0319T in preparation for the CY 2015 

rulemaking cycle and will reevaluate the APC assignment of CPT code 0319T at that 

time. 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal, without modification, to continue to assign CPT code 0319T to 

APC 0107, which has a final CY 2014 APC geometric mean cost of approximately 

$25,106. 

c. Thrombolytic Therapy (APC 0621) 

 For CY 2014, we proposed to continue to assign CPT code 37211 (Transcatheter 

therapy, arterial infusion for thrombolysis other than coronary, any method, including 

radiological supervision and interpretation, initial treatment day) and CPT code 37212 

(Transcatheter therapy, venous infusion for thrombolysis other than coronary, any 
469 

method, including radiological supervision and interpretation, initial treatment day) to 

APC 0621 (Level I Vascular Access Procedures), for which we proposed a CY 2014 

geometric mean cost of approximately $866. (The proposed payment rate reflects the 

corrected proposed rate included in the September 6, 2013 OPPS Addendum B, which 

was posted on the CMS Web site.) 

 Comment: One commenter objected to the proposed continued assignment of 

CPT codes 37211 and 37212 to APC 0621. The commenter stated that CPT codes 37211 

and 37212, which both are assigned status indicator “T,” are often times performed in 

conjunction with CPT code 75710 (Angiography, spinal selective, radiological 

supervision and interpretation) which is assigned status indicator “Q2” and is assigned to 

APC 0279 (Level II Angiography and Venography), for which we proposed a CY 2014 

geometric mean cost of approximately $2,700. The commenter stated that, because CPT 

code 75710 is not separately paid when it appears on a claim in combination with other 

services assigned to status indicator “T” (such as CPT codes 37211 and 37212), providers 

receive significantly lower payment for CPT code 75710 when performed and reported in 

conjunction with CPT code 37211 or CPT code 37212, compared to payment for the 

services when performed and reported separately, although significantly more resources 

are used. The commenter stated that payment for CPT codes 37211 and 37212 should 

not be packaged with payment for CPT code 75710 when the services described by CPT 

codes 37211 and 37212 are performed on the same date as CPT code 75710. 

 Response: We believe that the procedure described by CPT codes 37211 and 

37212 are sufficiently clinically similar to the other procedures assigned to APC 0621. In 
470 

addition, CPT codes 37211 and 37212 are new codes for CY 2013, and because we do 

not have claims data available for these two new CPT codes for CY 2013 ratesetting, we 

do not have a way to validate or substantiate the claims made by commenters. We expect 

to have claims data for CPT codes 37211 and 37212 in preparation for the CY 2015 

rulemaking cycle and will reevaluate the APC assignment of CPT codes 37211 and 

37212 at that time. 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal, without modification, to continue to assign CPT codes 37211 and 

37212 to APC 0621, which has a final CY 2014 APC geometric mean cost of 

approximately $853. 

d. Vascular Ligation (APCs 0091 and 0092) 

 For CY 2014, we proposed to continue to assign CPT codes 36475 (Endovenous 

ablation therapy of incompetent vein, extremity, inclusive of all imaging guidance and 

monitoring, percutaneous, radiofrequency; first vein treated) and 37191 (Insertion of 

intravascular vena cava filter, endovascular approach including vascular access, vessel 

selection, and radiological supervision and interpretation, intraprocedural roadmapping, 

and imaging guidance (ultrasound and fluoroscopy), when performed) to APC 0091 

(Level II Vascular Ligation), which had a proposed payment rate of approximately 

$2,882. 

 In addition, we proposed to continue to assign CPT code 36478 (Endovenous 

ablation therapy of incompetent vein, extremity, inclusive of all imaging guidance and 
471 

monitoring, percutaneous, laser; first vein treated) to APC 0092 (Level I Vascular 

Ligation), which had a proposed payment rate of approximately $2,047. 

 (The proposed payment rates reflect the corrected proposed rates included in the 

September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.) 

 Comment: One commenter stated that the CPT codes assigned to APCs 0091 and 

0092 do not meet the CMS requirement of clinical and cost homogeneity, and requested 

that CMS consider restructuring APCs 0091 and 0092. The commenter requested that 

CMS review the clinical and cost characteristics of all the procedures assigned to these 

APCs and consider either combining APCs 0091 and 0092 or reassigning specific 

procedures to more appropriate APCs in order to establish clinical homogeneity. In 

particular, the commenter requested that CMS review the APC assignments for CPT 

codes 37191 and 36475 (assigned to APC 0091) and CPT code 36478 (assigned to APC 

0092). The commenter stated that CPT code 37191 is not similar to the other procedures 

assigned to APC 0091 because it is not a ligation procedure, and is the only procedure 

assigned to APC 0091 that requires an expensive implanted device. The commenter 

further stated that the cost associated with CPT code 37191 is significantly higher than 

the cost of most of the other procedures assigned to APC 0091. The commenter also 

recommended that CPT codes 36475 and 36478 be assigned to the same APC because 

they are nearly identical procedures. The commenter stated that the CPT clinical 

vignettes for CPT code 36475 (radiofrequency) and CPT code 36478 (laser) show 

similarities between these two procedures, which further support the clinical 

homogeneity of these two procedures. The commenter believed that assigning both of 
472 

these procedures to two different APCs, and maintaining a payment differential between 

CPT code 36475 and CPT code 36478, incentivizes providers to choose radiofrequency 

instead of laser, which is a clinically comparable procedure. The commenter believed 

that assigning the two procedures to the same APC would encourage providers to make 

treatment decisions based solely on clinical characteristics. 

 Response: We appreciate the commenter’s suggestions. We agree with the 

commenter’s recommendations for reassignment of CPT codes 36475, 36478, and 37191. 

With respect to CPT codes 36475 and 36478, we have further analyzed updated hospital 

outpatient claims data and determined that both procedures are comparable in terms of 

clinical homogeneity and resource costs and should be assigned to the same APC. 

Analysis of updated CY 2012 hospital outpatient claims data for the CY 2014 final rule 

shows a geometric mean cost of approximately $1,966 for CPT code 36478, which is 

comparable to the geometric mean cost of approximately $2,382 for CPT code 36475. 

We also agree with the commenter that CPT code 37191 should be reassigned to another 

APC that is more appropriate based on the nature of the procedure. Based on our review 

of the existing vascular-related APCs and input from our medical advisors, we believe 

that CPT code 37191 would be more appropriately reassigned to APC 0093 (Vascular 

Reconstruction/Fistula Repair) because of the clinical homogeneity and similar resource 

costs of other procedures assigned to APC 0093. 

 By accepting the commenter’s recommendation to reassign CPT code 37191 from 

APC 0091 to APC 0093, and after taking into consideration all of the procedures in APCs 

0091 and 0092, we have determined that combining APCs 0091 and 0092 into one APC 
473 

is appropriate. To accomplish this reconfiguration, we are establishing new APC 0219 

(Vascular Ligation), which has a geometric mean cost of approximately $2,147. The 

geometric mean cost of new APC 0219 is based on the costs of all of the 22 procedures 

assigned to APCs 0091 and 0092; the most significant cost among these 22 procedures 

ranged between $1,455 (for CPT code 37765) and $2,382 (for CPT code 36475). In 

addition, because of the reassignment of CPT code 37191 to APC 0093, we are 

modifying the title of APC 0093 to read: “Vascular Reconstruction/Fistula Repair” to 

appropriately describe all the procedures assigned to this APC. 

 After further consideration of the public comment that we received, we are 

revising the APC assignment for CPT codes 36475, 36478, and 37191. Specifically, we 

are reassigning CPT codes 36475 and 36478 to new APC 0219, reassigning CPT code 

37191 to APC 0093, and modifying the title of APC 0093 to read: “Vascular 

Reconstruction/Fistula Repair”. The final CY 2014 geometric mean cost of APC 0219 is 

approximately $2,147, and approximately $2,857 for APC 0093. The final CY 2014 

payment rates for CPT codes 36475, 36478, and 37191 can be found in Addendum B to 

this CY 2014 OPPS/ASC final rule with comment period (which is available via the 

Internet on the CMS Web site). 
474 

2. Gastrointestinal Services 

a. Fecal Microbiota Transplantation (APC 0340) 

 For CY 2014, we proposed to continue to assign HCPCS code G0455 

(Preparation with instillation of fecal microbiota by any method, including assessment of 

donor specimen) to APC 0340 (Level I Minor Procedures), which had a proposed 

payment rate of approximately $74. Although the CPT Editorial Panel established CPT 

code 44705 (Preparation of fecal microbiota for instillation, including assessment of 

donor specimen), effective January 1, 2013, to describe a fecal microbiota procedure, we 

did not recognize the CPT code for payment under the OPPS. As we stated in the 

CY 2013 MPFS final rule with comment period (77 FR 69052), by policy, Medicare’s 

payment for the preparation of the donor specimen would only be made if the specimen is 

ultimately used for the treatment of a beneficiary. Because of this policy, we believe that 

it was appropriate to bundle the preparation and instillation of fecal microbiota into one 

payable HCPCS code. Consequently, we established HCPCS code G0455, effective 

January 1, 2013, for Medicare reporting of the fecal microbiota procedure. 

 Comment: One commenter stated that the CY 2013 payment rate of 

approximately $50 for HCPCS code G0455 is insufficient. The commenter further stated 

that this payment rate does not appear to recognize the patient preparation for the 

implantation or the instillation of the donor microbes, the supplies, or the overall work 

involved in providing this procedure. The commenter stated that if the microbiota 

instillation is performed via colonoscopy or esophagogastroduodenoscopy (EGD), the 

CY 2013 payment rate for the procedure does not include the cost of the endoscopic 
475 

portion of the procedure. To pay appropriately for this procedure, the commenter 

recommended that CMS delete existing HCPCS code G0455 and replace it with three 

new HCPCS G-codes. The commenter suggested that the three recommended HCPCS 

G-codes differentiate the various preparation methods used in performing the procedure 

and be assigned accordingly to appropriate APCs. Specifically, the commenter 

recommended that one HCPCS G-code describe instillation by oronasogastric tube or 

enema, the second HCPCS G-code describe instillation by upper endoscopy, and the third 

HCPCS G-code describe instillation by colonoscopy. 

 Response: We appreciate the commenter’s suggestions. However, we believe 

that the existing HCPCS code G0455 appropriately describes the procedure for which 

Medicare should pay. Under Medicare, payment for the preparation of the donor 

specimen would only be made if the specimen is ultimately used for the treatment of a 

beneficiary because Medicare is not authorized to pay for the costs of any services not 

directly related to the diagnosis and treatment of a beneficiary. Because of this policy, 

we believe that it is appropriate to bundle the preparation and instillation of fecal 

microbiota under HCPCS code G0455. 

 Based on our understanding of the procedure, we believe that HCPCS code 

G0455 is appropriately assigned to APC 0340 for CY 2014. Because this code was new 

for CY 2013, we expect to have claims data for HCPCS code G0455 for the CY 2015 

ratesetting process. As has been our practice since the implementation of the OPPS, we 

annually review all the items and services within an APC group to determine, with 

respect to comparability of the use of resources, for any 2 times rule violations. In 
476 

making this determination, we review our claims data and determine whether we need to 

make changes to the current APC assignments for the following year. We will reevaluate 

the status indicator and APC assignment for HCPCS code G0455 for the CY 2015 OPPS 

rulemaking cycle. 

 After consideration of the public comment that we received, we are finalizing our 

CY 2014 proposal, without modification, to continue to assign HCPCS code G0455 to 

APC 0340. The final CY 2014 geometric mean cost of HCPCS code G0455 is 

approximately $54. The final CY 2014 payment rate for HCPCS code G0455 can be 

found in Addendum B to this CY 2014 OPPS/ASC final rule with comment period 

(which is available via the Internet on the CMS Web site). 

b. Transoral Incisionless Fundoplication (APC 0422) 

 For CY 2014, we proposed to continue to assign CPT code C9724 (Endoscopic 

full-thickness plication of the stomach using endoscopic plication system (eps); includes 

endoscopy) to APC 0422 (Level III Upper GI Procedures), which had a proposed 

payment rate of approximately $1,967. (The proposed payment rate reflects the corrected 

proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted 

on the CMS Web site.) 

 HCPCS code C9724, which was established by CMS effective April 1, 2005, 

describes an endoscopic full-thickness plication procedure for the treatment of 

gastroesophageal reflux disease (GERD). Since April 2005, HCPCS code C9724 has 

been assigned to APC 0422. Of the three existing upper GI APCs, APC 0422 is the 

highest paying APC. 
477 

 In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68333), we 

stated that a presenter at the August 2012 HOP Panel meeting requested that CMS either 

reassign HCPCS code C9724 from APC 0422 to New Technology APC 1565 (New 

Technology—Level XXVIII ($5000-$5500)) or create a new APC with a descriptor of 

“Level IV Upper GI Procedures.” We also stated that, based on the Panel’s review and 

discussion of the claims data, we accepted the Panel’s recommendation to continue to 

assign HCPCS code C9724 to APC 0422 for the CY 2013 update. 

 Furthermore, because of concerns related to the descriptor of HCPCS code 

C9724, in that same final rule with comment period, we revised the long descriptor of 

HCPCS code C9724 to read “Endoscopic full-thickness plication of the stomach using 

endoscopic plication system (eps); includes endoscopy,” effective January 1, 2013, to 

accurately describe how the procedure is currently performed. 

 At the August 2013 HOP Panel meeting, the same presenter at the August 2012 

HOP Panel meeting requested that the Panel recommend that CMS reassign HCPCS code 

C9724 from APC 0422 to a new APC with a descriptor of “Level IV Upper GI 

Procedures.” The Panel did not make this recommendation at the meeting. 

 Comment: Several commenters disagreed with the proposal to continue to assign 

HCPCS code C9724 to APC 0422. The commenters stated that the proposed payment 

rate for APC 0422 does not adequately pay for the cost of performing the procedure. 

These commenters urged CMS to establish a new APC with a descriptor of “Level IV 

Upper GI Procedures” or “Level IV Upper GI Transoral Procedures,” with a payment rate 
478 

of between $3,000 and $5,000, and reassign HCPCS code C9724 and CPT code 43257 to 

this newly created APC. 

 Response: Because HCPCS code C9724 became effective April 1, 2005, we have 

several years of claims data. We examined the latest hospital outpatient claims data for 

HCPCS code C9724, based on claims data for dates of service between January 1, 2012, 

and December 31, 2012, that were processed on or before June 30, 2013. Our analysis of 

these latest claims data shows a geometric mean cost of approximately $6,801 based on 

12 single claims (out of 73 total claims) for HCPCS code C9724. Overall, APC 0422 has 

a geometric mean cost of approximately $1,976, which is based on the seven procedures 

assigned to this APC. Of the seven procedures assigned to APC 0422, three procedures 

have geometric mean cost ranging between approximately $1,431 (for CPT code 43830) 

and approximately $2,042 (for CPT code 43228). 

 APC 0422 consists of other procedures that manipulate the natural or an artificial 

entrance to the stomach, similar to the procedure described by TIF. We believe that 

maintaining the assignment of HCPCS code C9724 to APC 0422 continues to be 

appropriate because several other procedures assigned to this APC are highly clinically 

similar to the procedure described by HCPCS code C9724 in that they are upper 

gastrointestinal endoscopy procedures. In particular, CPT code 43257 describes an upper 

gastrointestinal endoscopy procedure for the treatment of GERD, which is also the 

method and purpose of HCPCS code C9724. Consistent with our longstanding policy 

since the implementation of OPPS in 2000, we will reevaluate the APC assignment for 

every code during our annual rulemaking cycle. 
479 

After consideration of the public comments that we received, we are finalizing 

our CY 2014 proposal, without modification, to maintain the assignment of HCPCS code 

C9724 to APC 0422. The final CY 2014 geometric mean costs for APC 0422 is 

approximately $1,976. The final CY 2014 payment rate for HCPCS code C9724 can be 

found in Addendum B to this CY 2014 OPPS/ASC final rule with comment period 

(which is available via the Internet on the CMS Web site). 

3. Genitourinary Services 

a. Percutaneous Renal Cryoablation (APC 0423) 

 For CY 2014, we proposed to continue to assign CPT code 50593 (Ablation, renal 

tumor(s), unilateral, percutaneous, cryotherapy) to APC 0423 (Level II Percutaneous 

Abdominal and Biliary Procedures), with a proposed payment rate of approximately 

$4,114. (The proposed payment rate reflects the corrected proposed rate included in the 

September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.) CPT 

code 50593 became effective in CY 2008; however, the same service was previously 

described by CPT code 0135T (Ablation renal tumor(s), unilateral, percutaneous, 

cryotherapy). We note that, for CY 2007, based upon the APC Panel’s recommendation 

made at its March 2006 meeting, we reassigned CPT code 0135T (now CPT code 50593) 

from APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) to 

APC 0423, effective January 1, 2007. 

 Comment: One commenter expressed concern that the proposed payment rate of 

approximately $4,114 for APC 0423, the APC to which CPT code 50593 is assigned, is 

inadequate because the proposed payment rate does not accurately account for the costs 
480 

incurred by hospitals in performing the procedure described by CPT code 50593. 

Further, the commenter indicated that hospitals are hesitant to perform this procedure 

because of the inadequate APC payment rate assigned to the procedure. The commenter 

asked CMS to designate CPT code 50593 as a “device-dependent” procedure and require 

hospitals to submit claims with the appropriate device C-code, specifically, HCPCS code 

C2618 (Probe, cryoablation). The commenter believed that the inadequacy of the 

proposed payment rate for APC 0423 is attributable to claims data that do not accurately 

capture the full costs of the procedure described by CPT code 50593. The commenter 

stated that approximately half of the single claims reporting CPT code 50593 do not 

contain the associated charge for the required device used in performing the service, 

specifically HCPCS code C2618 (Probe, cryoablation). The commenter stated that 

designating CPT code 50593 as a device-dependent procedure would result in a more 

accurate payment for the procedure and continued Medicare beneficiary access to 

percutaneous renal cryoablation in the HOPD. 

 Response: We continue to believe that CPT code 50593 is appropriately assigned 

to APC 0423 based on clinical and resource similarities compared to other procedures 

also proposed for assignment to APC 0423 for CY 2014. As we stated in the CY 2007 

OPPS final rule with comment period (71 FR 68049 through 68050), the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66709), the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 68611), the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60444), and the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 71910), we initially revised the APC assignment for the percutaneous renal 
481 

cryoablation procedure from APC 0163 to APC 0423 in CY 2007 based on the APC 

Panel’s recommendation. In addition, based on our CY 2012 claims data, the resource 

use associated with CPT code 50593 is comparable to the other procedures assigned to 

APC 0423. Specifically, our latest hospital outpatient claims data shows that the 

geometric mean cost for CPT code 50593, based on 667 single claims (out of 1,357 total 

claims), is approximately $5,047. Overall, APC 0423 has a geometric mean cost of 

approximately $4,121, which is based on claims data for the eight procedures assigned to 

this APC. Of the eight procedures, six procedures have the most significant geometric 

mean cost, ranging between approximately $3,117 (for CPT code 47511) and 

approximately $5,047 (for CPT code 50593). Based on our latest claims data, and the 

clinical homogeneity and resource similarity of the procedure described by CPT code 

50593 to the other procedures assigned to APC 0423, we believe that CPT code 50593 is 

appropriately assigned to APC 0423. 

 Moreover, we disagree with the commenter’s assertion that hospitals are reluctant 

to perform this procedure because of the inadequate payment rate. We believe that the 

payment rate for APC 0423, the APC to which CPT code 50593 is assigned, is sufficient 

to ensure Medicare beneficiary access to this service. 

 With regard to the commenter’s request to designate CPT code 50593 as a 

device-dependent procedure in an APC, we do not agree that CPT code 50593 should be 

designated as a device-dependent procedure. We do not identify individual HCPCS 

codes as device-dependent HCPCS codes under the OPPS. Rather, we first consider the 

clinical and resource characteristics of a procedure and determine the most appropriate 
482 

APC assignment. When we determine that we should assign a procedure to an APC that 

is device-dependent, based on whether that APC has been historically identified under the 

OPPS as having very high device costs, we then consider the implementation of device 

edits, as appropriate. We again note that the identification of device-dependent APCs 

was particularly important in the early years of the OPPS when separate pass-through 

payment for many implantable devices expired. At that time, a variety of methodologies 

to package the costs of those devices into procedural APCs was utilized over several 

years to ensure appropriate incorporation of the device costs into the procedure payments. 

At this point in time, hospitals have significantly more experience reporting HCPCS 

codes for packaged and separately payable items and services under the OPPS and the 

payment groups are more mature. We believe that our standard ratesetting methodology 

typically results in appropriate payment rates for new procedures that utilize devices, as 

well as those that do not use high-cost devices. In recent years, we have not encountered 

circumstances whereby we have had to establish new device-dependent APCs because 

we were not able to accommodate the clinical and resource characteristics of a procedure 

by assigning it to an existing APC (whether device-dependent or non-device-dependent), 

and the procedure described by CPT code 50593 is no exception. 

 While all of the procedures assigned to APC 0423 require the use of implantable 

devices, for many of the procedures, there are no Level II HCPCS codes that describe all 

of the technologies that may be used in the procedures. Therefore, it would not be 

possible for us to develop procedure-to-device edits for all of the CPT codes assigned to 

APC 0423. Under the OPPS, there are many other procedures that require the use of 
483 

implantable devices that, because they are assigned to OPPS APCs that are not devicedependent, do not have procedure-to-device edits applied, even if those claims processing 

edits would be feasible. We continue to believe that our payments for procedures that 

utilize high-cost devices are appropriate for those services, even when those services are 

grouped with other procedures that either do not require the use of implantable devices or 

which utilize devices that are not described by specific Level II HCPCS codes. When 

reporting CPT code 50593, we expect hospitals to also report the device HCPCS code 

C2618, which is associated with this procedure. We also remind hospitals that they must 

report all of the HCPCS codes that appropriately describe the items used to provide 

services, regardless of whether the HCPCS codes are packaged or paid separately. If 

hospitals use more than one probe in performing the procedure described by CPT code 

50593, we expect hospitals to report this information on the claim and adjust their 

charges accordingly. Hospitals should report the number of cryoablation probes used to 

perform the procedure described by CPT code 50593 as the number of units of HCPCS 

code C2618, which describes these devices, with their charges for the probes. Since 

CY 2005, we have required hospitals to report device HCPCS codes for all devices used 

in procedures if there are appropriate HCPCS codes available. In this way, we can be 

confident that hospitals have included charges on their claims for costly devices used in 

procedures when they submit claims for those procedures. For further discussion of 

device-dependent edits, we refer readers to section II.A.2.d. of this CY 2014 OPPS/ASC 

final rule with comment period. 
484 

 Comment: One commenter requested that CMS revise the code descriptor for 

device HCPCS code C2618 consistent with how cryoablation probes are now classified 

by the medical industry. The commenter stated that since the implementation of the 

OPPS and the development of device descriptions, cryoablation probes have improved 

and these devices are now referred to as cryoablation needles. The commenter believed 

that modifying the description of HCPCS code C2618 will enable hospitals to 

appropriately report the use of the device when submitting claims to CMS and other 

payers. 

 Response: Based on input from our medical advisors, we agree that a change in 

the description of HCPCS code C2618 is appropriate. Therefore, for the CY 2014 

update, we are revising the description for HCPCS code C2618 from “Probe, 

cryoablation” to “Probe/needle, cryoablation” effective January 1, 2014. 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal, without modification, to continue to assign CPT code 50593 to APC 

0423, which has a final CY 2014 geometric mean cost of approximately $4,121. In 

addition, we are revising the code descriptor for HCPCS code C2618 to read: 

“Probe/needle, cryoablation” effective January 1, 2014. The final CY 2014 payment rate 

for CPT code 50593 can be found in Addendum B to this CY 2014 OPPS/ASC final rule 

with comment period (which is available via the Internet on the CMS Web site). 
485 

b. Anoscopy with Directed Submucosal Injection (APC 0150) 

 We created HCPCS code C9735 (Anoscopy; with directed submucosal 

injection(s), any substance) effective April 1, 2013, and assigned the code to APC 0150 

(Level IV Anal/Rectal Procedures) for CY 2013, which has a payment rate of $2,365.97. 

The procedure described by HCPCS code C9735 involves injection of a bulking agent, 

L8605 (Injectable bulking agent dextranomer/hyaluronic acid copolymer implant, anal 

canal, 1 ml, includes shipping and necessary supplies). For CY 2014, we proposed to 

maintain the assignment of HCPCS code C9735 to APC 0150, with a proposed payment 

rate of approximately $2,520. (The proposed payment rate reflects the corrected 

proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted 

on the CMS Web site.) 

 Comment: One commenter believed that the proposed assignment of HCPCS 

code C9735 to APC 0150 is inappropriate. The commenter stated that the bulking agent 

used in the performance of the procedure described by HCPCS code C9735 costs $4,900 

for the 4 mL required for the injections, and that the total cost of the procedure described 

by HCPCS code C9735 is more than the proposed payment rate of approximately $2,519 

for APC 0150. The commenter recommended creating a new Level V Anal/Rectal 

Procedures APC, composed of HCPCS code C9735, and two other procedures, CPT code 

46762 (Sphincteroplasty, anal, for incontinence, adult; implantation artificial sphincter), 

and CPT code 0184T (Excision of rectal tumor, transanal endoscopic microsurgical 

approach (ie, TEMS), including muscularis propria (ie, full thickness)). The commenter 

stated that the procedure described by CPT code 46762 is clinically similar to the 
486 

procedure described by HCPCS code C9735 because both procedures involve 

implantation of a product to treat fecal incontinence, and that the procedure described by 

HCPCS code C9735 is similar to the procedure described by CPT code 0184T because 

both procedures involve new technology with significant procedure costs. 

 Alternatively, the commenter recommended assigning HCPCS code C9735 to 

New Technology APC 1526, with a CY 2014 proposed payment rate of approximately 

$4,250. 

 Response: HCPCS code C9735 was created effective April 1, 2013. Therefore, 

we do not have claims data on this procedure at this time. Our longstanding policy is to 

wait until claims data are available on a new procedure before reassigning the procedure 

to another clinical APC. We do not agree with the commenter that creating a Level V 

Anal/Rectal Procedures APC is warranted at this time. The three codes recommended for 

assignment to such an APC, all of which are currently assigned to the Level IV 

Anal/Rectal Procedures APC, are low volume or no volume services. According to our 

CY 2012 claims data, CPT code 0184T has 104 single frequency claims, CPT code 

46762 has 8 single claims, and HCPCS code C9735 has no claims volume. The low 

volume of claims for such an APC would contribute to APC cost and payment volatility. 

Regarding the commenter’s recommendation to assign HCPCS code C9735 to a New 

Technology APC, we believe that HCPCS code C9735 is clinically similar to the other 

services assigned to APC 0150, which includes another anoscopy service, and, therefore, 

APC 0150 is an appropriate APC assignment for HCPCS code C9735. Based on our 

established OPPS ratesetting methodology, we will review the APC assignment for 
487 

HCPCS code C9735 once we have OPPS claims data for this service during our annual 

OPPS update process. Therefore, we are finalizing our proposal to maintain the 

assignment of HCPCS code C9735 to APC 0150 for CY 2014. The final CY 2014 

geometric mean cost for APC 0150 is approximately $2,510. 

4. Musculoskeletal Services 

a. Arthroplasty (APC 0425) 

 APC 0425 (Level II Arthroplasty or Implantation with Prosthesis) contains 

arthroplasty procedures as well as osseointegrated implant procedures. For CY 2014, we 

proposed to convert APC 0425 to a comprehensive APC, with a proposed geometric 

mean cost of approximate $9,939. (The proposed payment rate reflects the corrected 

proposed rate included in the September 6, 2013 OPPS Addendum B, which was posted 

on the CMS Web site.) 

 Comment: One commenter requested that CMS review the current composition 

of APC 0425 for clinical homogeneity and resource cost cohesion, including the newly 

added adjunctive costs that would result from converting APC 0425 to a comprehensive 

APC. The commenter recommended that CMS remove the following osseointegrated 

implant procedure codes from APC 0425 and assign them to a more clinically appropriate 

APC: CPT code 69714 (Implantation, osseointegrated implant, temporal bone, with 

percutaneous attachment to external speech processor/cochlear stimulator; without 

mastoidectomy); CPT code 69715 (Implantation, osseointegrated implant, temporal bone, 

with percutaneous attachment to external speech processor/cochlear stimulator; with 

mastoidectomy); CPT code 69717 (Replacement (including removal of existing device), 
488 

osseointegrated implant, temporal bone, with percutaneous attachment to external speech 

processor/cochlear stimulator; without mastoidectomy); and CPT code 69718 

(Replacement (including removal of existing device), osseointegrated implant, temporal 

bone, with percutaneous attachment to external speech processor/cochlear stimulator; 

with mastoidectomy). 

 Response: In response to the commenter’s request, we have again reviewed the 

composition of APC 0425 for clinical and resource homogeneity. Although we are not 

making comprehensive APCs effective until CY 2015, the proposed procedural 

composition of APC 0425 is the same whether this APC is a comprehensive APC or not. 

We found in our review that the clinical and resource composition of proposed APC 0425 

is appropriate because all of the procedures assigned to the APC involve surgical 

procedures that use high-cost devices, including the osseointegrated device procedures 

represented by CPT codes 69714, 69715, 69717, and 69718. Therefore, we do not 

believe that it is necessary to reconfigure the proposed APC 0425. 

 After consideration of the public comment we received, we are finalizing the 

proposed composition of APC 0425 for CY 2014 with the modification that APC 0425 

will not be made a comprehensive APC until CY 2015. The final CY 2014 geometric 

mean cost of APC 0425 is approximately $9,766. 

b. Joint Stabilization (APC 0052) 

The CPT Editorial Panel created CPT Code 0334T (Sacroiliac joint stabilization 

for arthrodesis, percutaneous or minimally invasive (indirect visualization), includes 

obtaining and applying autograft or allograft (structural or morselized) when performed, 
489 

includes image guidance when performed (eg., CT or fluoroscopic)), effective July 1, 

2013. For CY 2013, we assigned CPT code 0334T to APC 0208 (Laminotomies and 

Laminectomies) with a payment rate of $3,758.59. For CY 2014, we proposed to 

maintain the assignment of CPT code 0334T to APC 0208, with a proposed payment rate 

of approximately $4,109. (The proposed payment rate reflects the corrected proposed 

rate included in the September 6, 2013 OPPS Addendum B, which was posted on the 

CMS Web site.) 

 Comment: A few commenters objected to our proposed assignment of CPT code 

0334T to APC 0208, and stated that APC 0208 is not an appropriate assignment for CPT 

code 0334T either in terms of resources or clinical homogeneity. The commenters stated 

that the proposed payment rate for APC 0208 is insufficient to cover the approximately 

$10,500 in implant costs. The commenters further stated that the other procedures 

assigned to APC 0208 do not have appreciable device costs. One commenter performed 

a cost analysis on claims reporting CPT code 27280 (Arthrodesis, sacroiliac joint 

(including obtaining graft)), the CPT code that would have been used for minimally 

invasive Sacroiliac (SI) fusion procedures in CY 2012, the year used for the CY 2014 

ratesetting. Based on the commenter’s analysis, 38 hospitals submitted outpatient claims 

reporting CPT code 27280. However, no claims were used for CY 2014 Medicare 

ratesetting because CPT code 27280 was included on the OPPS inpatient only list for 

CY 2012 (and currently remains on this list). The commenter calculated a geometric 

mean cost of $14,733 based on these 38 claims. The commenter believed that these 38 

claims represented migration of the procedure described by CPT code 27280, which uses 
490 

minimally invasive techniques and implants, to the hospital outpatient setting. Some 

commenters also stated that other procedures assigned to APC 0208 are primarily used 

for decompressing the disc and neural structures, which differ in location and purpose 

from the procedure described by CPT code 0334T. The commenters recommended that 

CMS consider assigning CPT code 0334T to a New Technology APC with a payment 

rate range between $14,500 and $15,000, based on the commenter’s analysis of the 

claims reporting CPT code 27280; or creating a new clinical APC and assigning CPT 

code 0334T to that APC based on the cost estimate for performing the procedure 

described by CPT code 27280 because there are no other clinical APCs that are 

appropriate to assign CPT code 0334T. 

 Response: We appreciate the commenters’ suggestions. However, in regard to 

the commenter’s cost analysis performed using the 38 CY 2012 claims for CPT code 

27280, we do not believe that these 38 claims likely represent the cost of performing the 

procedure described by CPT code 0334T. As the commenter stated, CPT code 27280 

was listed as an inpatient only service for CY 2012, currently remains on the inpatient 

only list for CY 2013, and is proposed to remain on the inpatient only list for CY 2014. 

CPT code 27280 is used primarily to report open sacroiliac joint fusion procedures, rather 

than minimally invasive SI joint fusion procedures. Therefore, while some of the 38 

claims may involve the minimally invasive techniques, we are not convinced that these 

claims represent minimally invasive techniques, but consist mainly of open SI joint 

fusion procedures, which are the primarily reported procedures for this code. Regarding 

the commenters’ suggested option to create a new device pass-through category, we do 
491 

not discuss the merits of OPPS pass-through status applications in our proposed or final 

rules. Regarding the commenters’ recommended option to assign CPT code 0334T to a 

New Technology APC or to create a new clinical APC for CPT code 0334T, we agree 

with the commenters that there may be a more appropriate APC to which we could assign 

CPT code 0334T based on resource use and clinical homogeneity. However, we believe 

that CPT code 0334T can be appropriately assigned to an existing clinical APC, which is 

preferable because other clinically similar procedures populate the APC. The final 

geometric mean cost of APC 0208 is approximately $4,017. We agree that the resource 

use associated with the procedure described by CPT code 0334T is likely to be greater 

than the resource use associated with the typical procedures assigned to APC 0208. 

Therefore, we believe that a more appropriate initial APC assignment based on clinical 

and resource homogeneity for this new procedure is APC 0052 (Level IV 

Musculoskeletal Procedures Except Hand and Foot). APC 0052 includes several 

orthopedic fusion procedures that are clinically similar to the procedure described by 

CPT code 0334T, and we believe that it is appropriate clinically to assign CPT code 

0344T to APC 0052, which has a final geometric mean cost of approximately $6,530. In 

accordance with our longstanding policy, we will review the assignment of CPT code 

0334T in a future annual OPPS update, when we have available claims data for 

ratesetting. 

 After consideration of the public comments we received, we are not finalizing our 

CY 2014 proposal to maintain the assignment of CPT code 0334T to APC 0208. Rather, 
492 

for CY 2014, we are assigning CPT code 0334T to APC 0052, which has a final 

geometric mean cost of approximately $6,530. 

5. Nervous System Services 

a. Chemodenervation (APCs 0161 and 0204) 

 CPT codes 64615 (Chemodenervation of muscle(s); muscle(s) innervated by 

facial, trigeminal, cervical spinal and accessory nerves, bilateral (e.g., for chronic 

migraine)) and 52287 (Cystourethroscopy, with injection(s) for chemodenervation of the 

bladder) both became effective January 1, 2013. For CY 2014, we proposed to continue 

to assign CPT code 52287 to APC 0161 (Level II Cystourethroscopy and Other 

Genitourinary Procedures), with a proposed payment rate of approximately $1,201. In 

addition, we proposed to continue to assign CPT code 64615 to APC 0204 (Level I Nerve 

Injections), with a proposed payment rate of approximately $214. (The proposed 

payment rates reflect the corrected proposed rates included in the September 6, 2013 

OPPS Addendum B, which was posted on the CMS Web site.) 

 Comment: One commenter requested that CMS reassign CPT code 64615 from 

APC 0204 to APC 0206 (Level II Nerve Injections) because of the clinical similarity to 

the procedure described by CPT code 64613 (Chemodenervation of muscle(s); neck 

muscle(s) (eg, for spasmodic torticollis, spasmodic dysphonia)), which is assigned to 

APC 0206. This commenter stated that the payment rate for APC 0204 does not 

adequately pay for the cost of providing the procedure. The commenter submitted this 

same request in response to the CY 2013 OPPS/ASC final rule with comment period. 
493 

 Response: We disagree with the commenter’s assertion that the procedure 

described by CPT code 64615 is more similar to the procedure described by CPT code 

64613. Based on the description of the procedure, the procedure described by CPT code 

64615 is most similar to the procedure described by CPT code 64612 (Chemodenervation 

of muscle(s); muscle(s) innervated by facial nerve, unilateral (eg, for blepharospasm, 

hemifacial spasm)), which is assigned to APC 0204. The procedures described by CPT 

codes 64612 and 64615 both involve facial nerve muscles, whereas the procedure 

described by CPT code 64613 involves the neck muscles. Consequently, we believe that 

CPT code 64615 is appropriately assigned to APC 0204 based on its clinical 

homogeneity to CPT code 64612. 

 We note that, in addition to the payment for the procedure, hospitals would 

receive separate payment for the drug onabotulinumtoxina, which is described by HCPCS 

code J0585 (Injection, onabotulinumtoxina, 1 unit), when the drug is administered during 

the procedure. 

 Consistent with CMS’ longstanding policy since the implementation of the OPPS 

in 2000, we evaluate, on an annual basis, all of the APC assignments for appropriateness. 

We note that because CPT code 64615 is a new code that became effective for CY 2013, 

we will have a full year of claims data available next year, and as with every HCPCS 

code or CPT code, we will reevaluate its APC assignment during the annual rulemaking 

cycle. 

 Comment: One commenter requested that CMS reassign CPT code 52287 from 

APC 0161 to APC 0162 (Level III Cystourethroscopy and Other Genitourinary 
494 

Procedures). The commenter stated that the proposed APC assignment for CPT code 

52287 is economically and clinically inappropriate. The commenter further stated that 

the procedure described by CPT code 52287 is more clinically similar to the procedure 

described by CPT code 52283 (Cystourethroscopy, with steroid injection into stricture), 

which is assigned to APC 0162. The commenter submitted this same request in response 

to the CY 2013 OPPS/ASC final rule with comment period. 

 Response: APC 0161 consists of a variety of procedures, some of which describe 

cystourethroscopic procedures of the urethra and bladder. We believe that the procedure 

described by CPT code 52287 is more clinically similar to the other cystourethroscopic 

procedures assigned to APC 0161, such as the procedure described by CPT code 52281, 

than to procedures assigned to APC 0162, such as the procedure described by CPT code 

52287 as mentioned by the commenter. We also note that in addition to a payment for 

the procedure at the payment rate for APC 0161, hospitals also receive separate payment 

for the chemodenervation drug. For the CY 2014 update, the payment rate for APC 0161 

is approximately $1,205. As has been our practice since the implementation of the 

OPPS, we annually review all of the items and services within an APC group to 

determine, with respect to comparability of the use of resources, any 2 times rule 

violations. In making this determination, we review all claims data and determine 

whether we need to make changes to the current APC assignments for the following year. 

We will reevaluate the status indicator and APC assignment for CPT code 52287 for the 

CY 2015 OPPS rulemaking cycle. 
495 

 After consideration of the public comments received, we are finalizing our 

CY 2014 proposals, without modification, to continue to assign CPT code 64615 to APC 

0204, and to continue to assign CPT code 52287 to APC 0161. The final CY 2014 

geometric mean costs for APCs 0204 and 0161 are approximately $203 and $1,209, 

respectively. 

b. Nerve Conduction Studies (APCs 0216 and 0218) 

 For CY 2013, the AMA’s CPT Editorial Panel established seven new CPT codes 

to describe nerve conduction tests, which were effective January 1, 2013. For CY 2014, 

we proposed to continue to assign CPT codes 95907, 95908, 95909, and 95910 to APC 

0215 (Level I Nerve and Muscle Services), with a proposed payment rate of 

approximately $67. In addition, we proposed to reassign CPT codes 95911, 95912, and 

95913 from APC 0218 (Level II Nerve and Muscle Services) to APC 0215. The 

descriptors for these seven CPT codes and our proposed APC assignments are listed in 

Table 26 below. 

 Comment: Some commenters expressed concern with the proposed APC 

assignments of CPT codes that describe the nerve conduction tests. The commenters 

stated that the proposed payment of $67 for APC 0215 is inadequate because it does not 

cover the expenses associated with providing these services. The commenters urged 

CMS to reconsider the proposed APC assignments for CPT codes 95907 through 95913, 

and suggested specific alternative APC assignments for these specific codes. 

Specifically, the commenters recommended the reassignment of CPT code 95907 from 

APC 0215 to APC 0218, the reassignment of CPT codes 95908, 95909, and 95910 from 
496 

APC 0215 to APC 0216 (Level III Nerve and Muscle Services), and the reassignment of 

CPT codes 95911, 95912, and 95913 from APC 0218 to APC 0216. 

 We also received a comment in response to the CY 2013 OPPS/ASC final rule 

with comment period relating to these codes. The commenter stated that the CY 2013 

OPPS payment rates for these new codes were significantly lower for these services when 

they were performed in the hospital outpatient setting compared to when they were 

performed in the physician office setting, and suggested that the lower payment rates 

would negatively impact beneficiary access to neurologic care. 

 Response: After further consultation with our medical advisors, we agree with 

the commenters that a revision to the APC assignments for CPT codes 95907 through 

95913 is necessary. Based on the nature of the procedures described by these codes and 

the additional information submitted to us by the commenters on the CY 2013 

OPPS/ASC final rule with comment period and the CY 2014 OPPS/ASC proposed rule, 

we believe that the nerve conduction tests described by CPT codes 95908, 95909, 95910, 

95911, 95912, and 95913 would be more appropriately assigned to APC 0216. In 

addition, we believe that the nerve conduction test described by CPT code 95907 would 

be more appropriately assigned to APC 0218. 

 Therefore, after consideration of the public comments we received, we are 

revising our CY 2014 proposed APC reassignment of CPT codes 95908, 95909, 95910, 

95911, 95912, and 95913 from APC 0215 to APC 0216. In addition, we are revising our 

CY 2014 proposed APC reassignment of CPT code 95907 from APC 0215 to APC 0218. 

The final APC assignments for these codes, along with the final status indicators are 
497 

listed in Table 26 below. The final CY 2014 payment rates for CPT codes 95907 through 

95913 are included in Addendum B to this final rule with comment period (which is 

available via the Internet on the CMS Web site). 

 We remind hospitals that, consistent with our longstanding policy since the 

implementation of OPPS in 2000, we will reevaluate the APC assignments for these 

codes in next year’s rulemaking cycle. As has been our practice, we annually review all 

the items and services within an APC group to determine, with respect to comparability 

of the use of resources, if the geometric mean cost of the highest cost item or service 

within an APC group is more than 2 times greater than the geometric mean cost of the 

lowest cost item or service within that same group. In making this determination, we 

review our claims data and determine whether we need to make changes to the current 

APC assignments for the following year. We note that, because CPT codes 95907 

through 95913 became effective for CY 2013, we will not have applicable claims data 

available for these services for ratesetting until the CY 2015 rulemaking cycle. 

TABLE 26.—FINAL CY 2014 APC ASSIGNMENTS FOR THE 

NERVE CONDUCTION CPT CODES 

CPT 

Code Long Descriptor 

Proposed 

CY 2014 

SI 

Proposed 

CY 2014 

APC 

Final 

CY 

2014 

SI 

Final 

CY 

2014 

APC 

95907 Nerve conduction studies; 1-2 

studies S 0215 S 0218 

95908 Nerve conduction studies; 3-4 

studies S 0215 S 0216 

95909 Nerve conduction studies; 5-6 

studies S 0215 S 0216 

95910 Nerve conduction studies; 7-8 

studies S 0215 S 0216 
498 

CPT 

Code Long Descriptor 

Proposed 

CY 2014 

SI 

Proposed 

CY 2014 

APC 

Final 

CY 

2014 

SI 

Final 

CY 

2014 

APC 

95911 Nerve conduction studies; 9-10 

studies S 0215 S 0216 

95912 Nerve conduction studies; 11-

12 studies S 0215 S 0216 

95913 Nerve conduction studies; 13 

or more studies S 0215 S 0216 

c. Parasympathetic Function and Sympathetic Function (APC 0215) 

 In CY 2013, the AMA’s Editorial Panel created two new codes to describe testing 

of parasympathetic and sympathetic functions of the autonomic nervous system at the 

same time, with and without use of passive tilt: CPT code 95943 (Simultaneous, 

independent, quantitative measures of both parasympathetic function and sympathetic 

function) and CPT code 95924 (Testing of autonomic nervous system function; combined 

parasympathetic and sympathetic adrenergic function testing with at least 5 minutes of 

passive tilt). For CY 2013, we assigned CPT code 95943 to APC 0215 (Level I Nerve 

and Muscle Tests), which has a CY 2013 payment rate of approximately $43. We also 

assigned comment indicator “NI” to CPT code 95943 to indicate that the code was new 

for CY 2013 with an interim APC assignment that was subject to public comment 

following the publication of the CY 2013 final rule with comment period. We assigned 

CPT code 95924 (Testing of autonomic nervous system function; combined 

parasympathetic and sympathetic adrenergic function testing with at least 5 minutes of 

passive tilt) to APC 0218 (Level II Nerve and Muscle Tests), which has a CY 2013 

payment rate of approximately $80. 
499 

 Comment: One commenter who addressed the interim APC assignment of CPT 

code 95943 believed that the test described by CPT code 95943 is more similar in terms 

of clinical homogeneity and resource use to the services assigned to APC 0218, and 

requested that CMS reassign CPT code 95943 to APC 0218 for CY 2014, which has a 

final rule geometric mean cost of approximately $128. APC 0215 has a final rule 

geometric mean cost of approximately $50. The commenter noted that the predecessor 

codes for CPT code 95943, CPT code 95921 (Testing of autonomic nervous system 

function; cardiovagal innervation (parasympathetic function)) and CPT code 95922 

(Testing of autonomic nervous system function; vasomotor adrenergic innervation 

(sympathetic adrenergic function)), were assigned to APC 0218. In addition, the 

commenter stated that the test described by CPT code 95943 is almost identical to the test 

described by CPT code 95924, which is assigned to APC 0218. The commenter stated 

that, although the test described by CPT code 95924 is the only test that uses a tilt table, 

the monitor used to perform the test described by CPT code 95943 is more expensive 

than the monitor used to perform the test described by CPT code 95924. 

 Response: We agree with the commenter that the service described by CPT code 

95943 is clinically similar to the other services assigned to APC 0218, including its 

predecessor codes, CPT codes 95921 and 95922. Therefore, for CY 2014, we are 

reassigning CPT code 95943 from APC 0215 to APC 0218. 

 We will reconsider the APC assignments for this code once claims data are 

available, as part of our usual ratesetting methodology for CY 2015. 

d. Epidural Lysis (APCs 0203 and 0207) 
500 

 For CY 2013, CPT code 62263 (Epidural lysis, multiple sessions) and CPT code 

62264 (Epidural lysis on single day) are assigned to APC 0203 (Level IV Nerve 

Injections), with a payment rate of approximately $857. For CY 2014, we proposed to 

reassign CPT code 62264, which had a proposed rule geometric mean cost of 

approximately $874 from APC 0203 (which had a proposed rule geometric mean cost of 

approximately $1,574) to APC 0207 (Level III Nerve Injections), which had a proposed 

rule geometric mean cost of approximately $687. 

 Comment: One commenter objected to the reassignment of CPT code 62264 

from APC 0203 to APC 0207 asserting that the resources used to perform the procedures 

described by CPT codes 62263 and 62264 are the same and that CPT code 62263 is 

rarely used. 

 Response: The geometric mean costs for performing the procedures described by 

CPT codes 62263 and 62264 were not the same for CY 2013: CPT code 62263 had a CY 

2013 final rule geometric mean cost of approximately $1,406, and CPT code 62264 had a 

CY 2013 final rule geometric mean cost of approximately $876. The geometric mean 

costs of the procedures described by CPT codes 62263 and 62264 continued to differ by a 

similar magnitude for CY 2014: the CY 2014 proposed rule geometric mean cost of the 

procedure described by CPT code 62263 was approximately $1,492, while the CY 2014 

proposed rule geometric mean cost of CPT code 62264 was approximately $874. 

However, for CY 2014, we determined that continuing to assign CPT code 62264 to APC 

0203 would create a 2 times rule violation because the geometric mean cost of the APC 

increased from approximately $881 in CY 2013 to approximately $1,550 for CY 2014. 
501 

To correct the 2 times rule violation, we proposed to reassign CPT code 62264 from APC 

0203 to APC 0207, which has a final rule geometric mean cost of approximately $672. 

 Based on updated claims data, the resources required to furnish the procedure 

described by CPT code 62264 (which has a final rule geometric mean cost of 

approximately $883) continue to be more similar to the resources required for services 

assigned to APC 0207 (which has a final rule geometric mean cost of approximately 

$672) than for services assigned to APC 0203 (which has a final rule geometric mean 

cost of approximately $1,550). Therefore, after consideration of the public comment we 

received, we are finalizing our proposal to reassign CPT code 62264 from APC 0203 to 

APC 0207 for CY 2014. 

e. Cerebrospinal Shunt Reprogramming (APC 0692) 

 For CY 2014, we proposed to reassign CPT code 62252 (Reprogramming of 

programmable cerebrospinal shunt), which had a proposed rule geometric mean cost of 

approximately $155, from APC 0691 (Level III Electronic Analysis of Devices), which 

had a proposed payment rate of approximately $274, to APC 0692 (Level II Electronic 

Analysis of Devices), which had a proposed payment rate of approximately $139. (These 

proposed rates reflect the corrected proposed rates included in the September 6, 2013 

OPPS Addendum B, which was posted on the CMS Web site.) 

 Comment: One commenter asked CMS to explain the rationale for the proposed 

reassignment of CPT code 62252 from APC 0691 to APC 0692. 

 Response: We proposed to reassign CPT code 62252 from APC 0691 to APC 

0692 because it would violate the 2 times rule if we continued to assign it to APC 0691. 
502 

 After consideration of the public comment we received, we are finalizing our 

proposal to reassign CPT code 62252 from APC 0691 to APC 0692, which has a final 

rule geometric mean cost of approximately $116. In addition, based on our review of the 

configuration of APCs 0691 and 0692, we determined that we need to improve the 

clinical and resource homogeneity of these two APCs. In order to avoid several 2 times 

rule violations in these APCs, we are reassigning CPT code 95971 (Simple 

neurostimulator analysis), which has a final rule geometric mean cost of approximately 

$113 and CPT code 95972 (Complex neurostimulator analysis), which has a final rule 

geometric mean cost of approximately $145 from the higher Level III APC 0691 (which 

has a final rule geometric mean cost of approximately $277) to the lower Level II APC 

0692 (which has a final rule geometric mean cost of approximately $116). In addition, to 

avoid 2 times rule violations we are reassigning CPT code 62367 (Analysis of spinal 

fusion pump), which has a final rule geometric mean cost of approximately $202, CPT 

code 62368 (Analysis with reprogramming), which has a final rule geometric mean cost 

of approximately $216, CPT code 62369 (Analysis with reprogramming and fill), which 

has a final rule geometric mean cost of approximately $339, and CPT code 62370 

(Analysis with reprogramming and fill requiring the skill of a physician or other qualified 

health care professional), which has a final rule geometric mean cost of approximately 

$286, from the lower Level II APC 0692 to the higher Level III APC 0691, which has a 

final rule geometric mean cost of approximately $277. 

6. Ocular Services 

a. Retinal Prosthesis (APC 0672) 
503 

 For CY 2014, we proposed to continue to assign the category III CPT code 0100T 

(Placement of a subconjunctival retinal prosthesis receiver and pulse generator, and 

implantation of intra-ocular retinal electrode array, with vitrectomy), to APC 0672 (Level 

III Posterior Segment Eye Procedures), based on the similarity of the procedure to the 

other services currently assigned to APC 0672. The device implanted during this 

procedure (HCPCS code C1841 (Retinal prosthesis)) includes all internal and external 

components, and was granted pass-through status beginning October 1, 2013. 

 Comment: One commenter requested that CMS reassign CPT code 0100T to a 

new APC with a payment rate of approximately $6,500, which the commenter estimated 

by combining the costs of procedures that the commenter believed to be components of 

CPT code 0100T. The commenter also asserted that the procedure described by CPT 

code 0100T is more complex than the other procedures assigned to APC 0672. 

 Response: There are no claims data available for the procedure described by CPT 

code 0100T at this time. We estimate that more than 95 percent of the overall cost of the 

procedure is associated with the device, which is paid separately as a pass-through 

payment device. Because the device used in the procedure described by CPT code 0100T 

is in pass-through payment status, we do not believe that it is appropriate to create and 

assign CPT code 0100T to a new APC at this time. We also believe that the procedure 

described by CPT code 0100T is similar to the other procedures assigned to APC 0672. 

While we acknowledge that the procedure described by CPT code 0100T is complex, the 

other services assigned to APC 0672, for example the procedure described by CPT code 
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67113 (Repair of complex retinal detachment), are also complex and involve many 

different techniques and require extensive resources. 

b. Tear Film (APC 0230) 

 For CY 2014, we proposed to assign the new Category III CPT code 0330T (Tear 

film imaging, unilateral or bilateral, with interpretation and report), effective 

July 1, 2013, to APC 0230 (Level I Eye Tests and Treatments) based on the similarity of 

the service to the other services currently assigned to APC 0230. 

 Comment: One commenter requested that CMS reassign CPT code 0330T to 

APC 0698 (Level II Eye Tests and Treatments). The commenter believed that the 

clinical and resource similarities of the service described by CPT code 0330T to the 

services currently assigned to APC 0698 warrant reassignment. 

 Response: We believe that the service described by CPT code 0330T is most 

similar to the other imaging services assigned to APC 0230, such as corneal topography 

or eye photography. We currently have no claims data for this service for ratesetting 

purposes because CPT code 0330T became effective July l, 2013, and is considered new. 

Once we have claims data for CPT code 0330T, we will reevaluate the APC assignment 

of CPT code 0330T in future years through our standard review process. 

 After consideration of the public comment we received, we are finalizing our 

CY 2014 proposal to assign CPT code 0330T to APC 0230. 

7. Imaging 

a. Myocardial Sympathetic Innervation Imaging (APC 0398) 
505 

 Effective July 1, 2013, the AMA’s CPT Editorial Panel created CPT code 0331T 

(Myocardial sympathetic innervation imaging, planar qualitative and quantitative 

assessment) and CPT code 0332T (Myocardial sympathetic innervation imaging, planar 

qualitative and quantitative assessment; with tomographic SPECT). For CY 2014, we 

proposed to assign CPT codes 0331T and 0332T to APC 0398 (Level I Cardiac Imaging), 

which had a proposed payment rate of approximately $397. (The proposed payment rate 

reflects the corrected proposed rate in the September 6, 2013 OPPS Addendum B, which 

was posted on the CMS Web site.) 

 Comment: Several commenters disagreed with the proposed assignment of CPT 

codes 0331T and 0332T to APC 0398. The commenters stated that the proposed 

payment rate for APC 0398 would not cover the cost of performing the new procedures. 

Some of these commenters emphasized that the proposed payment rate for APC 0398 is 

substantially lower than the cost of the radiopharmaceutical alone used in these 

procedures. The commenters believed that the assignment of CPT codes 0331T and 

0332T to APC 0398 would impede Medicare beneficiaries’ access to these new services. 

Some commenters suggested that CPT codes 0331T and 0332T be assigned to a New 

Technology APC with a payment rate that would better reflect the estimated costs for 

these procedures. Other commenters indicated that these new procedures are more 

comparable to the procedures assigned to APC 0377 (Level II Cardiac Imaging) in terms 

of clinical and resource similarities. 

 Response: We do not agree with the commenters that CPT codes 0331T and 

0332T should be assigned to a New Technology APC for CY 2014 because we believe 
506 

that these procedures are clinically similar to the other services assigned to either APC 

0398 (Level I Cardiac Imaging) or APC 0377 (Level II Cardiac Imaging). However, 

because the estimated cost of the diagnostic radiopharmaceutical that is used in 

performing the procedures described by CPT codes 0331T and 0332T (HCPCS code 

A9582) is approximately $1,320 based on the drug cost statistics file for the proposed 

rule, we agree with the commenters that it is more appropriate in terms of resource 

similarity to assign CPT codes 0331T and 0332T to APC 0377 and, therefore, are 

modifying the codes’ APC assignment for CT 2014. 

 After consideration of the public comments we received, for CY 2014, we are 

assigning CPT codes 0331T and 0332T to APC 0377, which has a final geometric mean 

cost of approximately $1,158. 

b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414) 

 The pass-through payment status of HCPCS code A9584 (Iodine I-123 ioflupane, 

diagnostic, per study dose up to 5 millicuries) expires on December 31, 2013. For 

CY 2014, payment for this radiopharmaceutical, typically referred to as DaTscan, will be 

packaged with payment for CPT code 78607 (Brain imaging; tomographic (SPECT)), 

which had a CY 2014 proposed rule geometric cost of approximately $1,179). The 

procedure described by CPT code 78607 is used to assist in the evaluation of adult 

patients with suspected Parkinson’s disease. For CY 2014, we proposed to continue to 

assign CPT code 78607 to APC 0402 (Level II Nervous System Imaging), which had a 

proposed payment rate of approximately $1,009. (The proposed payment rate reflects the 

corrected proposed rate in the September 6, 2013 OPPS Addendum B, which was posted 
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on the CMS Web site.) We proposed to maintain the assignment of CPT code 78607 to 

APC 0402 for CY 2014, providing an exception to a 2 times rule violation involving the 

cost of CPT code 78645 as compared to the cost of CPT code 78607 (78 FR 43592). 

 For CY 2014, we proposed to reassign CPT code 78647 (Cerebrospinal fluid 

flow, imaging (not including introduction of material); tomographic (SPECT)), which 

had a proposed rule geometric mean cost of approximately $467 from APC 0402 (Level 

II Nervous System Imaging), which had a proposed rule geometric mean cost of 

approximately $1,009) to APC 0403 (Level I Nervous System Imaging), which had a 

proposed rule geometric mean cost of approximately $179. 

 For CY 2014, we proposed to reassign CPT code 78605 (Brain imaging, 4 or 

more static views), which had a CY 2014 proposed rule geometric mean cost of 

approximately $835 from APC 0403 (Level I Nervous System Imaging), which has a 

CY 2013 payment rate of approximately $264, to APC 0402 (Level II Nervous System 

Imaging) which had a CY 2014 proposed payment rate of approximately $1,009. 

 For CY 2014, we also proposed to reassign CPT code 78801 

(Radiopharmaceutical localization of tumor or distribution of radiopharmaceutical 

agent(s); multiple areas) from APC 0414 (Level II Tumor/Infection Imaging), which has 

a CY 2013 payment rate of approximately $503, to APC 0406 (Level I Tumor/Infection 

Imaging), which had a proposed rule payment rate of approximately $383. 

 (The proposed payment rates cited above reflect the corrected proposed rates in 

the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.) 
508 

 Comment: Several commenters objected to the proposed reduction in the 

CY 2014 payment rate for the DaTscan imaging procedure (including the packaged 

radiopharmaceutical) as a result of packaging of the radiopharmaceutical into CPT code 

78607 and retention of the procedure in APC 0402, following expiration of the passthrough status of the procedure. The commenters objected to the reduction from the 

pass-through payment amount of approximately $1,975 for HCPCS code A9584 in 

addition to the payment of approximately $458 for CPT code 78607 for CY 2013. The 

commenters believed that the payment rate reduction for CPT code 78607 (into which the 

radiopharmaceutical will be packaged for CY 2014) would hinder beneficiary access to 

care for this service. Several commenters believed that CPT code 78607 would be more 

appropriately assigned to APC 0308 (Positron Emission Tomography (PET) Imaging) 

rather than APC 0402 because CPT code 78607 is a new imaging service that uses more 

resources and is not clinically similar to the cisternography and shunt evaluation scans 

assigned to APC 0402. (We note that the CY 2014 final rule geometric mean cost of 

APC 0308 is approximately $1,315.) 

 Response: We agree with the commenters that it would be appropriate to reassign 

CPT code 78607 to an APC that contains services more similar in terms of costs to CPT 

code 78607 and to correct the 2 times rule violation in APC 0402. However, we do not 

agree with the commenters that the procedure described by CPT code 78607 is clinically 

similar to PET scans. Therefore, we are not assigning CPT code 78607 to APC 0308. 

Based on clinical homogeneity and similar resource use, we are reassigning CPT code 
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78607 from APC 0402 to APC 0408 (Level III Tumor/Infection Imaging) for CY 2014, 

which has a final rule geometric mean cost of approximately $1,161. 

 Comment: One commenter asked CMS to explain its rationale for proposing to 

reassign CPT code 78647 from APC 0402 to APC 0403. The commenter believed that 

this reassignment would decrease the payment rate for the procedure described by CPT 

code 78647. 

 Response: The final rule geometric mean cost of APC 0402 is approximately 

$535, and the final rule geometric mean cost of APC 0403 is approximately $163. The 

final rule geometric mean cost of CPT code 78647 is approximately $434, which is much 

closer to the final rule geometric mean cost of APC 0402 than the final rule geometric 

mean cost of APC 0403. While there is no violation of the 2 times rule in APC 0403 due 

to the claims volume of the services in this APC, the geometric mean cost of CPT code 

78647 is more than two times the geometric mean cost of the other services in APC 0403. 

Because the final rule geometric mean cost of CPT code 78647 is more similar to the 

geometric mean costs of the services assigned to APC 0402, we are not finalizing our 

proposal to reassign CPT code 78647 from APC 0402 to APC 0403. We will continue to 

maintain the code’s current assignment to APC 0402 for CY 2014. 

 Comment: One commenter asked CMS to explain its rationale for proposing to 

reassign CPT code 78605 from APC 0403 to APC 0402 for CY 2014. 

 Response: Based on updated CY 2012 claims data, the final rule geometric mean 

cost of CPT code 78605 (approximately $781) is much closer to the final rule geometric 

mean cost of APC 0402 (approximately $535) than to the final rule geometric mean cost 
510 

of APC 0403 (approximately $163). Therefore, based on the similarity of the costs of the 

services assigned to APCs 0402 and 0403, we are finalizing our proposal to reassign CPT 

code 78605 from APC 0403 to APC 0402. 

 Comment: One commenter asked CMS to explain its rationale for proposing to 

reassign CPT code 78801 from APC 0414 to APC 0406 for CY 2014. 

 Response: We proposed the reassignment of CPT code 78801 from APC 0414 to 

APC 0406 for CY 2014 because we had updated claims data for CY 2014 ratesetting, 

which indicated that the continued assignment of CPT code 78801 to APC 0414 would 

violate the 2 times rule. The final rule geometric mean cost of CPT code 78801 

(approximately $362) is much closer to the final rule geometric mean cost of APC 0406 

(approximately $384) than the final rule geometric mean cost of APC 0414 

(approximately $659), and is clinically similar to the other tumor imaging services 

assigned to APC 0406. Therefore, we are finalizing our proposal to reassign CPT code 

78801 from APC 0414 to APC 0406 for CY 2014. 
511 

8. Radiology Oncology 

a. 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 

procedure of placing and removing (if performed) an applicator into the breast for 

radiation therapy. We became aware of the procedure via a New Technology APC 

application, and upon approval of the application, we created HCPCS code C9726 

because there were no HCPCS codes that described this procedure. For CY 2013, 

HCPCS code C9726 is assigned to APC 0028, which has a payment rate of $1,862.77. 

Based on our CY 2014 proposed rule claims data, HCPCS code C9726 had a proposed 

geometric mean cost of approximately $2,165 based upon 8 single claims, and APC 0028 

had a proposed geometric mean cost of approximately $2,047. 

 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 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG), with a CY 2013 

payment rate of $978.25 because we believed these IORT service codes were similar to 

other services assigned to APC 0065 in terms of clinical characteristics, and the range of 

estimated costs for IORT services (77 FR 68345). For CY 2014, we proposed to 

maintain the APC assignment for CPT codes 77424 and 77425 to APC 0065, which we 
512 

proposed to rename “APC 0065 (IORT, MRgFUS, and MEG)”, with a proposed payment 

rate of approximately $1,715. (The proposed payment rate reflects the corrected 

proposed rate in the September 6, 2013 OPPS Addendum B, which was posted on the 

CMS Web site.) 

 In the CY 2014 OPPS/ASC proposed rule, we noted that both 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 that it would no longer be required to report the placement and 

removal of the applicator via HCPCS code C9726 on a claim. Therefore, we proposed to 

delete HCPCS code C9726, effective January 1, 2014 (78 FR 43593). 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 proposed to continue to assign to APC 0065. 

 Comment: Many commenters disagreed with CMS’ assertion that IORT services 

include 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 with the proposal to delete HCPCS code C9726 because it would no 

longer be required to report that service on the claim. Several commenters indicated that 

the service described by HCPCS code C9726 is performed by the surgeon before and 

after IORT delivery, and represents the cost of the applicator and hospital costs related to 

the surgeon’s placement of the applicator, while CPT codes 77424 and 77425 represent 
513 

radiation therapy treatment delivery performed by the radiation oncologist and medical 

physicist and are limited to the technical costs of IORT delivery. Many commenters 

stated that the AMA’s CPT Editorial Panel did not include placement and removal of the 

applicator in the descriptions of CPT codes 77424 and 77425. Some commenters also 

indicated that placement and removal of applicators for radiation therapy for various 

other parts of the body are separately reported on claims and paid under the OPPS. Some 

commenters expressed concern with the quality of the data used for ratesetting, such as 

the small number of single frequency claims available reporting CPT codes 77424 and 

77425. One commenter suggested that CMS propose a comprehensive APC payment 

methodology for IORT for CY 2015 to include CPT codes 77424 and 77424 because the 

services are performed in a single operative session. 

 Response: Our proposal to delete HCPCS code C9726 was based on the premise 

that placement of an applicator is a necessary part of the delivery of IORT, and that the 

placement of an applicator was included in the procedures described by CPT codes 77424 

and 77425. There are currently no service codes other than HCPCS code C9726 that 

separately describe placement of a rigid applicator for IORT breast radiation delivery, as 

there are for some other radiation delivery services. The commenters argued that the 

service that has been reported along with HCPCS code C9726 by providers on claims is 

surgical, not a radiation oncology service, and that the service is not included in the 

descriptions of CPT codes 77424 and 77425. Therefore, after considering all of the 

public comments on IORT, we are not finalizing our proposal to delete HCPCS code 

C9726 for CY 2014. However, to make the coding consistent with other intraoperative 
514 

procedures involving catheters or applicators used for radiation therapy treatment of the 

breast, for CY 2014, we are designating HCPCS code C9726 as an add-on code to the 

primary procedure that involved the intraoperative placement of the applicator into the 

breast. We are revising the code descriptor for HCPCS code C9726 to read: “Placement 

and removal (if performed) of applicator into breast for intraoperative radiation therapy, 

add-on to primary breast procedure.” Payment for HCPCS code C9726 is being 

packaged into the payment for the primary procedure, consistent with our policy to 

package add-on codes for CY 2014. 

 We agree with the commenters that there are a small number of single frequency 

claims for CPT codes 77424 and 77425, and we believe that is the case for HCPCS code 

C9726 as well. We appreciate the commenters’ suggestions for alternative payment 

methodologies for IORT and may consider such alternatives in the future. 

 After consideration of the public comments we received, we are not finalizing our 

proposal to delete HCPCS code C9726 for CY 2014. We are designating HCPCS code 

C9726 as an add-on code for which payment is being packaged into the payment for CPT 

codes 77424 and 77425, the primary procedures that involve the intraoperative placement 

of the applicator into the breast, consistent with our policy to package add-on codes for 

CY 2014. We are revising the code descriptor for HCPCS code C9726 to read: 

“Placement and removal (if performed) of applicator into breast for intraoperative 

radiation therapy, add-on to primary breast procedure.” We are continuing to assign CPT 

codes 77424 and 77425 to APC 0065 for CY 2014, which has a final geometric mean 
515 

cost of $1,253. We are also changing the descriptor of APC 0065 to “IORT, MRgFUS, 

and MEG”. 

b. Proton Beam 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) and CPT 

code 77522 (Proton treatment delivery; simple, with compensation). APC 0667 (Level II 

Proton Beam Radiation Therapy) also includes two procedures: CPT code 77523 (Proton 

treatment delivery, intermediate) and CPT code 77525 (Proton treatment delivery, 

complex). 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 the claims data used in developing the CY 2014 proposed rule, we 

determined a violation of the 2 times rule in APC 0664. As we discuss in section III.B. 

of this final rule with comment period, a 2 times rule violation occurs when the cost of 

the highest cost significant item or service within an APC group is more than 2 times 

greater than the cost of the lowest cost significant 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 is met, there is not a 2 times rule 

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 rule 
516 

violation within APC 0664 because the claims volume for CPT code 77520 was not 

significant (72 FR 66719; 75 FR 71901; and 77 FR 68341). However, for CY 2014, the 

volume of claims in the proposed rule claims data for CPT code 77520 increased--the 

number of single claims was greater than 99 and contributed at least 2 percent of the 

single claims used to establish the cost of APC 0664—resulting in a 2 times rule violation 

within APC 0664. 

 To resolve the 2 times rule violation, in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43593), we proposed 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 proposed 

to delete APC 0664. We invited public comments on this proposal. 

 Comment: Several commenters stated that they duplicated CMS’ ratesetting 

calculations for proton beam therapy services and determined that the threshold for 

claims volume that would constitute a 2 times rule violation in APC 0664 was not met. 

The commenters asserted that because there was no 2 times rule violation within APC 

0664 according to their calculations, CMS should not finalize its proposal to delete APC 

0664 and reassign CPT codes 77520 and 77522 to APC 0667 in order to avoid a 2 times 

rule violation. The commenters also believed that the simple proton beam treatment 

delivery services assigned to APC 0664 are not clinically similar enough to warrant their 

combination with the intermediate and complex proton beam treatment delivery services 

currently assigned to APC 0667. 
517 

 Response: Using the additional final rule claims data in accordance with our 

standard OPPS ratesetting methodology, we determined that the number of claims for 

CPT code 77520 is not significant and, therefore, a 2 times rule violation within APC 

0664 does not exist for CY 2014. 

 After consideration of the public comments we received, because there is now no 

2 times rule violation within APC 0664, we are not finalizing our proposal to delete APC 

0664 and reassign CPT codes 77520 and 77522 to APC 0667. We are continuing the 

current APC configuration for CY 2014. As we do annually for all APCs, we will review 

the appropriateness of the APC assignments for proton beam therapy services for the 

CY 2015 rulemaking cycle. 

c. 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 radiation source 

types, specifically, Cobalt-60 and linear accelerator (linac). Among the linac-based SRS 

procedures, the current HCPCS G-codes distinguish between procedures that use robotic 

and non-robotic linac devices (66 FR 59865). In CY 2007, new CPT codes for SRS were 

established, and at that time, we recognized one of the three SRS CPT codes for separate 

payment under the OPPS. We did not replace all of the HCPCS G-codes for SRS with all 

of the new CPT codes in CY 2007 because we believed at that time that the distinctions 

reflected in the HCPCS G-codes should be maintained for APC assignment purposes. 

Specifically, in CY 2007 we replaced HCPCS code G0243 (Multi-source photon 

stereotactic radiosurgery, delivery including collimator changes and custom plugging, 
518 

complete course of treatment, all lesions) with CPT code 77371 because this CPT code 

corresponded directly to procedures described by 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 CY 2007, HCPCS codes G0173, G0251, G0339, G0340, and CPT code 

77371 have been the codes used under the OPPS to describe SRS treatment delivery 

procedures. However, SRS techniques and equipment have evolved and expanded over 

time. In light of these developments and our understanding of current SRS technology 

and clinical practice, 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 for purposes of 

OPPS payment. Based on our review of the current SRS technology, we understand 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 non-robotic linac-based SRS through the HCPCS G-codes. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43593 through 43594), we 

proposed to replace the existing four HCPCS codes: G0173, G0251, G0339, and G0340 

with the SRS CPT codes 77372 and 77373. We stated that we believe that utilizing all of 

the CPT codes for SRS (CPT codes 77371, 77372, and 77373) would more accurately 

capture the distinctions between the various SRS procedures that are currently used; 

namely, (1) Cobalt-60 versus linac and (2) single session cranial treatment versus 
519 

fractionated treatments. Table 16 of the proposed rule showed the complete list of 

HCPCS G-codes and CPT codes for SRS, along with their long descriptors. The table 

also showed the proposed CPT codes and their associated status indicators and APC 

assignments for the current HCPCS G-codes for SRS that we proposed to replace. We 

proposed to assign only CPT code 77373 to APC 0066, which we proposed to rename 

“Level I Stereotactic Radiosurgery.” We proposed to reassign CPT code 77371 and 

assign CPT code 77372, the two single session cranial treatment codes, to APC 0067, 

which we proposed 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. The CY 2014 

proposed APC payment rates for the CPT codes for SRS were listed in Addendum B to 

the proposed rule (which is available via the Internet on the CMS Web site). Further, we 

proposed to finalize their status indicators and their APC assignments and payment rates 

in this CY 2014 OPPS/ASC final rule with comment period. 

 We note that we published a corrected OPPS Addendum B payment file that was 

posted on the CMS Web site on September 6, 2013, after it was brought to our attention 

that the initial proposed payment rates that were published on July 19, 2013, for the SRS 

codes did not include the claims data for the SRS HCPCS G-codes. Specifically, our 

initial proposed payment rate of approximately $2,481 for APC 0066 only included 

claims data for CPT code 77373 and did not include claims data for HCPCS codes 

G0251, G0339, and G0340. In addition, our initial proposed payment rate of 

approximately $8,576 for APC 0067 only included claims data for CPT codes 77372 and 
520 

77371 and did not include claims data for HCPCS code G0173. Consequently, we 

corrected this error and posted the corrected payment rates for APCs 0066 and 0067 on 

September 6, 2013. Because of this correction, we extended the public comment period 

for the CY 2014 SRS proposals to September 16, 2013 (78 FR 54842). Table 27 below 

shows the list of HCPCS G-codes and CPT codes for SRS, along with their long 

descriptors, and the corrected CY 2014 proposed APC payment rates. 

 In addition, although the SRS HCPCS G-codes will no longer be separately 

payable under the OPPS, the HCPCS codes will remain active under the MPFS for 

CY 2014. Consequently, we proposed to change the OPPS status indicator for HCPCS 

G-codes for SRS from status indicator “S” to “B” (Alternative code may be available 

under the OPPS) for CY 2014. 

 Comment: Most commenters agreed with CMS’ proposal and urged CMS to 

finalize the coding, APC assignment, and payment levels for the SRS CPT codes. The 

commenters agreed that utilizing the CPT codes would standardize the reporting of SRS 

services across all payers, which the hospital industry has favored since the SRS 

treatment delivery CPT codes were established in CY 2007. One commenter noted that 

the use of the CPT codes would eliminate confusion among providers regarding how to 

report the SRS treatment delivery services. 

 Response: We appreciate the commenters’ support for our proposal. We believe 

that adopting the SRS treatment delivery CPT codes and restructuring the SRS APCs 

appropriately distinguishes payment for single session cranial SRS treatment from 

fractionated SRS treatment. 
521 

 Comment: Several commenters that utilize both the linear accelerator-based SRS 

technology and Cobalt-60 SRS technology supported CMS’ proposal and stated that the 

change would equalize payments for both technologies for single session cranial SRS. 

One commenter stated that the proposal is appropriate because there is no clinical data 

that supports the need for differential payment for these technologies. This commenter 

further stated that current medical literature cites no difference in clinical effectiveness 

for one system over another, and stated that in terms of outcomes, the linac-based system 

is clinically comparable to a Cobalt-60 system for single session cranial SRS. In 

addition, some commenters stated that the proposal is consistent with the provisions of 

section 634 of the American Taxpayer Relief Act (ATRA) of 2012. 

 Response: We appreciate the commenters’ support for our proposal. As specified 

in the April 2013 OPPS Update CR (Transmittal 2664, CR 8228) dated March 1, 2013, 

section 634 of the ATRA requires that, effective April 1, 2013, if the payment amount for 

Cobalt-60 based SRS, as described by CPT code 77371, exceeds the payment amount for 

linear accelerator-based SRS, as described by HCPCS code G0173 (or a successor code), 

the payment for CPT code 77371 must be reduced to the payment amount for HCPCS 

code G0173. The requirement does not apply to rural hospitals, sole community 

hospitals, or rural referral centers. In this final rule with comment period, for CY 2014, 

we are reassigning CPT code 77371 and assigning CPT code 77372 (the successor codes 

for HCPCS code G0173) to APC 0067. Therefore, CPT codes 77371 and 77372 will 

have the same payment amount. We agree with the commenters that this APC 

assignment satisfies the requirements of section 634 of the ATRA. 
522 

 Comment: Some commenters expressed concern regarding the proposal for SRS 

and suggested that CMS delay implementation of the proposal. The commenters 

suggested that, to pay appropriately for SRS services, CMS consider for CY 2015 the 

development of a comprehensive APC for the procedures assigned to APC 0067 (which 

includes CPT codes 77371 and 77372), similar to the comprehensive APC proposal for 

high-cost, device-dependent services. The commenters stated that single session cranial 

SRS procedures performed with either Cobalt 60-based SRS or linac-based SRS are 

device-dependent procedures and cannot be performed without use of the costly 

technology. The commenter further stated that having one comprehensive APC for 

single session cranial SRS is appropriate and consistent with the requirements of section 

634 of the ATRA. The commenters encouraged CMS to consider the comprehensive 

APC payment methodology to appropriately pay for services, regardless of the specific 

equipment used to deliver SRS treatment. 

 Response: We do not agree with the commenters’ suggestion to delay 

implementation of the proposal because we believe that adopting the CPT codes and 

restructuring the SRS APCs improve the clinical and resource homogeneity for SRS 

while satisfying the requirements of section 634 of the ATRA. 

 We appreciate the commenters’ suggestion to create a comprehensive APC 

payment methodology for SRS services. However, because such a change would require 

public notice and opportunity to comment, we will consider and evaluate the 

appropriateness of such a payment methodology in the future. 
523 

 Comment: Some commenters who were not supportive of the proposals relating 

to SRS stated that the corrected proposed APC payment rates for the SRS codes were too 

low, and requested that CMS utilize the initial proposed APC payment rates for APCs 

0066 and 0067. 

 Response: As explained above, we revised the initial proposed payment rates for 

APCs 0066 and 0067 after it was brought to our attention that our ratesetting for these 

APCs did not include claims data for the appropriate HCPCS codes, including the various 

HCPCS G-codes that were proposed for deletion. We should have included the CY 2012 

SRS HCPCS G-code claims data in our proposed CY 2014 ratesetting; otherwise, some 

of the services would be significantly underrepresented in the APC payment calculations. 

We believe that the corrected proposed APC payment rates that include claims data for 

the SRS HCPCS G-codes accurately reflect all of the SRS services that are used to 

configure APCs 0066 and 0067. 
524 

TABLE 27.—PROPOSED (ORIGINAL AND CORRECTED) CY 2014 APC 

ASSIGNMENTS FOR THE STEREOTACTIC RADIOSURGERY (SRS) 

 CPT CODES 

CY 2013 

CPT 

Code 

Long descriptor 

CY 

2013 

APC 

CY 2013 

Payment 

CY 

2014 

CPT 

Code 

Long descriptor 

Original 

Proposed 

OPPS 

CY 2014 

APC 

Corrected

Proposed 

OPPS 

CY 2014 

Payment#

77371 

Radiation treatment 

delivery, stereotactic 

radiosurgery (SRS), 

complete course of 

treatment of cranial 

lesion(s) consisting of 

1 session; multisource Cobalt 60 

based 

0127 

$3,300.64* 

----------------- 

$7,910.51* 

77371 

Radiation treatment 

delivery, 

stereotactic 

radiosurgery (SRS), 

complete course of 

treatment of cranial 

lesion(s) consisting 

of 1 session; multisource Cobalt 60 

based 

0067 $5,615.41 

G0173 

Linear accelerator 

based stereotactic 

radiosurgery, 

complete course of 

therapy in one session 

0067 $3,300.64 77372 

Radiation treatment 

delivery, 

stereotactic 

radiosurgery (SRS), 

complete course of 

treatment of cranial 

lesion(s) consisting 

of 1 session; linear 

accelerator based 

0067 $5,615.41 

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 

0065 $978.25 

G0339** Image-guided robotic 

linear acceleratorbased stereotactic 

radiosurgery

0067 $3,300.64 

77373 

Stereotactic body 

radiation therapy, 

treatment delivery, 

per fraction to 1 or 

more lesions, 

including image 

guidance, entire 

course not to exceed 

5 fractions 

0066 $2,047.86 
525 

*Under section 634 of the ATRA of 2012, effective April 1, 2013, payment to rural hospitals, rural referral 

centers, and sole community hospitals for CPT code 77371 is $7,910.51. Payment to most hospital 

outpatient facilities is $3,300.64. 

**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. 

#These payment rates reflect the corrected payment rates that were published on the CMS Web site on 

September 6, 2013. 

 Comment: Some commenters expressed concern with the proposed packaging of 

payments for certain CPT codes describing the Cobalt-60 SRS procedure. In particular, 

the commenters indicated that the proposal to package ancillary services, including 

certain SRS radiation planning codes, penalizes hospitals for providing the more efficient 

form of SRS, namely, the Cobalt-60 technology, which is provided as a single-day 

service. Some of the commenters stated that under CMS’ packaging proposal, hospitals 

would experience a decrease in payment for performing the Cobalt-60 procedure because 

the procedures that they perform on the same day would no longer be paid separately. In 

particular, the commenters were concerned that the proposed policy for packaging 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. 

0066 $2,354.79 
526 

payment for CPT codes 77290, 77295, 77300, 77334, and 77370, if finalized, would 

result in higher payments for patients treated with linac-based SRS technologies because 

the payment for planning services would not be packaged—that is, planning services 

occur on a different day than the day of delivery of linac-based SRS services. 

 Response: As discussed in section II.A.3. of this final rule with comment period, 

we are not finalizing our proposal to package payment of ancillary tests. The SRS 

planning services, specifically those described by CPT codes 77290, 77295, 77300, 

77334, and 77370, for which payments were initially proposed to be packaged under our 

packaging proposal for ancillary services, will continue to be paid separately for CY 

2014. The final CY 2014 long descriptors, status indicators, and APC assignments for 

these CPT codes are listed in Table 28 below. 
527 

TABLE 28.—FINAL CY 2014 STATUS INDICATORS (SIs) AND APC 

ASSIGNMENTS FOR 

CPT CODES 77290, 77295, 77300, 77334, and 77370 

CY 2014 

CPT 

Code 

Long Descriptor 

Proposed

OPPS 

CY 2014 

SI 

Proposed 

OPPS 

CY 2014 

APC 

Final 

OPPS 

CY 

2014 

SI 

Final 

OPPS 

CY 

2014 

APC 

77290 

Therapeutic radiology 

simulation-aided field setting; 

complex 

Q1 0310 X 0305 

77295 

Therapeutic radiology 

simulation-aided field setting; 3-

dimensional 

Q1 0316 X 0310 

77300 

Basic radiation dosimetry 

calculation, central axis depth 

dose calculation, tdf, nsd, gap 

calculation, off axis factor, 

tissue inhomogeneity factors, 

calculation of non-ionizing 

radiation surface and depth 

dose, as required during course 

of treatment, only when 

prescribed by the treating 

physician 

Q1 0305 X 0304 

77334 

Treatment devices, design and 

construction; complex (irregular 

blocks, special shields, 

compensators, wedges, molds or 

casts) 

Q1 0303 X 0303 

77370 Special medical radiation 

physics consultation Q1 0304 X 0304 

 Comment: Some commenters questioned the use of claims data for certain 

HCPCS G-codes for determining the corrected payment rates for APCs 0066 and 0067. 

The commenters stated that the initial proposed payment rates were correct. In addition, 

some commenters did not believe that claims data for HCPCS code G0173 should have 

been used to determine the payment rate for APC 0067 because this code was more than 
528 

likely reported for “other than brain” tumors. In addition, the commenters stated that the 

corrected payment rates result in a 2 times rule violation in both APC 0066 and APC 

0067, and, therefore, CMS should not finalize its proposal. 

 Response: HCPCS code G0173 describes a single session linac-based SRS 

procedure. We believe that this code is appropriately crosswalked to CPT code 77372, 

and adequately represents single session cranial SRS cases. Although a 2 times rule 

violation did occur in APC 0067, as we describe in section II.A.B.3. of this final rule with 

comment period, we may make exceptions to the 2 times rule in certain cases. In the case 

of the SRS treatment delivery services, we believe that adopting the CPT codes and 

restructuring the SRS APCs improves clinical and resource homogeneity for both types 

of cranial single session SRS procedures. Furthermore, assigning CPT codes 77371 and 

77372 to the same APC also satisfies the requirements of section 634 of the ATRA. If 

CPT codes 77371 and 77372 were assigned to different APCs, the payment rate for CPT 

code 77371 would have to be reduced to equal the payment rate for CPT code 77372. As 

a majority of the commenters preferred, we believe that the assignment of CPT codes 

77371 and 77372 to the same APC, with the blended payment rate as opposed to current 

CY 2013 payment reduction for CPT code 77371, is most appropriate. 

 Comment: One commenter recommended that CMS exclude the claims data 

associated with HCPCS code G0251 when determining the payment rate for APC 0066. 

The commenter indicated that HCPCS code G0251 is used most often for fractionated 

cranial SRS, not for stereotactic body radiation therapy (SBRT), as described by CPT 
529 

code 77373. The commenter recommended that CMS reassign HCPCS code G0251 to its 

own APC, which is similar to the CY 2013 APC assignment. 

 Response: Both HCPCS code G0251 and CPT code 77373 describe fractionated 

cranial SRS services that involve between 1 to 5 fractions of treatment. Based on the 

code descriptor, we believe that the service described by HCPCS code G0251 is 

appropriately crosswalked to CPT code 77373. 

 Comment: Some commenters stated that CMS only used approximately 20 

percent of the claims data for CPT code 77371 to set the payment rate for APC 0067, and 

suggested that CMS use more of the claims data for Cobalt-60 SRS in the ratesetting 

process. 

 Response: For the CY 2014 update, we proposed to set the payment rate for APC 

0067 based on claims data for HCPCS code G0173 and CPT codes 77371 and 77372. To 

determine the corrected proposed APC payment rates, we used approximately 41 percent 

(953 single claims out of 4,672 total claims) of the claims for CPT code 77371 to set the 

proposed payment rate for APC 0067. For this final rule with comment period, we used 

approximately 27 percent (425 single claims out of 4,672 total claims) of the claims for 

CPT code 77371 and approximately 72 percent of the claims for HCPCS code G0173 

(1,136 single claims out of 1,771 total claims to set the payment rate for APC 0067. 

Based on these codes, our analysis of the latest hospital outpatient claims data shows a 

final CY 2014 geometric mean cost of approximately $3,604 for APC 0067. 

 Comment: Several commenters disagreed with the proposal to replace the 

HCPCS G-codes and use the CPT codes to describe the SRS treatment delivery services. 
530 

The commenters stated that the SRS HCPCS G-codes are preferable to the CPT codes 

because they accurately describe the current standard SRS techniques. The commenters 

further stated that the CPT code descriptors reflect old technologies. In addition, some 

commenters requested that CMS retain the existing APC structure and use of HCPCS 

G-codes for SRS treatment delivery services because they believed the HCPCS G-codes 

more accurately reflect the costs and practice of full body, cranial, multi- and singlesession robotic SRS. One commenter also suggested that CMS delete CPT codes 77371 

and 77372 and replace them with one code that describes a single session intracranial 

SRS treatment procedure with no mention of the radiation source in the code descriptor. 

 Response: As stated above, we believe that it is no longer necessary to continue 

to distinguish robotic versus non-robotic linac-based SRS through HCPCS G-codes. We 

believe that the CPT codes for SRS treatment delivery, although more general than the 

HCPCS G-codes, accurately describe the most significant distinctions between the 

various SRS procedures: (1) Cobalt-60 versus linac radiation sources; and (2) single 

session cranial versus fractionated treatments. If the three-code SRS delivery CPT 

coding scheme that was created by the CPT Editorial Panel for CY 2007 is considered to 

be inadequate by SRS stakeholders, we believe that coding reform in this area would be 

best addressed through a dedicated CPT workgroup that would include all of the various 

physician specialties, such as neurosurgery and radiation oncology, and the other 

stakeholders involved in the delivery of this critical treatment modality. We also believe 

that it is best that we generally refrain from creating supplemental HCPCS G-codes or 

C-codes that describe the attributes of a particular device under the assumption of more 
531 

precise coding but without the benefit of a broad perspective of stakeholder and physician 

specialist input. Otherwise, we risk unintentionally creating a competitive advantage for 

a particular technology through the establishment and use of codes that may not be based 

on the most complete understanding of the clinical science of SRS treatment delivery. 

 Comment: Several commenters requested that CMS clarify the report instructions 

for CPT codes 77372 and 77373 because there is confusion regarding how these services 

should be reported. The commenters stated that the lack of clarify promotes inefficiency 

and ensures misuse of CPT codes. 

 Response: We agree with the commenters that the transition from the HCPCS 

G-codes to the CPT codes could be confusing in certain cases. Therefore, we are 

providing the following coding guidance for CPT codes 77371, 77372, and 77373. CPT 

code 77371 is to be used only for single session cranial SRS cases performed with a 

Cobalt-60 device, and CPT code 77372 is to be used only for single session cranial SRS 

cases performed with a linac-based device. The term “cranial” means that the 

pathological lesion(s) that are the target of the radiation is located in the patient’s cranium 

or head. The term “single session” means that the entire intracranial lesion or lesions that 

comprise the patient’s diagnosis are treated in their entirety during a single treatment 

session on a single day. CPT code 77372 is never to be used for the first fraction or any 

other fraction of a fractionated treatment. CPT code 77372 is to be used only for single 

session cranial linac-based SRS treatment. Fractionated SRS treatment is any SRS 

delivery service requiring more than a single session of SRS treatment for a cranial 

lesion, up to a total of no more than five fractions, and one to five sessions (but no more 
532 

than five) for non-cranial lesions. CPT code 77373 is to be used for any fraction 

(including the first fraction) in any series of fractionated treatments, regardless of the 

anatomical location of the lesion or lesions being radiated. Fractionated cranial SRS 

treatment is any cranial SRS delivery service that exceeds one treatment session and 

fractionated non-cranial SRS treatment is any non-cranial SRS delivery service, 

regardless of the number of fractions but never more than five. Therefore, CPT code 

77373 is the exclusive code (and the use of no other SRS treatment delivery code is 

permitted) for any and all fractionated SRS treatment services delivered anywhere in the 

body, including, but not limited to, the cranium or head. CPT code 77372 is not to be 

used for the first fraction of a fractionated cranial SRS treatment series and must only be 

used in cranial SRS delivery service when there is a single treatment session to treat the 

patient’s entire condition. 

 Although we believe that this coding guidance is clear to ensure reporting 

compliance, we will activate coding edits to prevent the use of more than one type of 

SRS treatment delivery CPT code per diagnosis per patient along with no more than five 

fractions for CPT code 77373. 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal without modification. Specifically, we are finalizing our proposal to 

reassign CPT code 77371 to APC 0067; replace HCPCS code G0173 with CPT code 

77372 and assign the code to APC 0067; and replace HCPCS codes G0251, G0339, and 

G0340 with CPT code 77373 and assign this code to APC 0066. In addition, although 

the SRS HCPCS G-codes will no longer be separately payable under the OPPS, the codes 
533 

will remain active under the MPFS for CY 2014. Consequently, we are finalizing our 

proposal to change the status indicator for the HCPCS G-codes for SRS services to OPPS 

status indicator “B” (Alternative code may be available under the OPPS) for CY 2014. 

Table 29 below shows the final CPT codes for the SRS treatment delivery services, their 

status indicators, APC assignments, and payment rates for CY 2014. 

TABLE 29.—FINAL CY 2014 APC ASSIGNMENTS FOR THE 

STEREOTACTIC RADIOSURGERY (SRS) CPT CODES 

CY 

2013 

CPT 

Code 

Long descriptor 

CY 

2013 

APC 

CY 2013 

Payment 

CY 

2014 

CPT 

Code 

Long descriptor 

Final 

OPPS 

CY 2014 

APC 

Final 

OPPS 

CY 2014 

Payment 

77371 

Radiation treatment 

delivery, stereotactic 

radiosurgery (SRS), 

complete course of 

treatment of cranial 

lesion(s) consisting of 

1 session; multi-source 

Cobalt 60 based 

0127 

$3,300.64* 

----------------- 

$7,910.51* 

77371 

Radiation treatment 

delivery, stereotactic 

radiosurgery (SRS), 

complete course of 

treatment of cranial 

lesion(s) consisting of 

1 session; multisource Cobalt 60 

based 

G0173 

Linear accelerator 

based stereotactic 

radiosurgery, complete 

course of therapy in 

one session 

0067 $3,300.64 77372 

Radiation treatment 

delivery, stereotactic 

radiosurgery (SRS), 

complete course of 

treatment of cranial 

lesion(s) consisting of 

1 session; linear 

accelerator based 

0067 $3,591.65

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 

0065 $978.25 77373 

Stereotactic body 

radiation therapy, 

treatment delivery, 

per fraction to 1 or 

more lesions, 

including image 

guidance, entire 

course not to exceed 

5 fractions 

0066 $1,921.30
534 

*Under section 634 of the ATRA of 2012, effective April 1, 2013, payment to rural hospitals, rural referral 

centers, and sole community hospitals is $7,910.51. Payment to most hospital outpatient facilities is 

$3,300.64. 

9. Respiratory Services 

a. Bronchial Thermoplasty (APC 0415) 

 Effective January 1, 2013, the CPT Editorial Panel created two new Category I 

CPT codes: CPT code 31660 (Bronchoscopy, rigid or flexible, including fluoroscopic 

guidance, when performed; with bronchial thermoplasty, 1 lobe) and CPT code 31661 

(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with 

bronchial thermoplasty, 2 or more lobes). These new CPT codes replaced two Category 

III CPT codes: CPT code 0276T (Bronchoscopy, rigid or flexible, including fluoroscopic 

guidance, when performed; with bronchial thermoplasty, 1 lobe) and CPT code 0277T 

G0339 

Image-guided robotic 

linear acceleratorbased stereotactic 

radiosurgery, complete 

course of therapy in 

one session or first 

session of fractionated 

treatment. 

0067 $3,300.64 

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. 

0066 $2,354.79 
535 

(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with 

bronchial thermoplasty, 2 or more lobes), which were deleted as of January 1, 2013. In 

the CY OPPS/ASC 2013 final rule with comment period (77 FR 68352), we finalized a 

policy that, beginning January 1, 2014, device category C1886 (Catheter, extravascular 

tissue ablation, any modality (insertable)) will no longer be eligible for pass-through 

payments, and its device costs will be packaged with the costs of the procedures with 

which the HCPCS code C1886 device is reported in the claims data. We reiterated that 

final policy in the CY 2014 OPPS/ASC proposed rule (78 FR 43595). The HCPCS code 

C1886 device is used in the procedures described by CPT codes 31660 and 31661. 

Therefore, the HCPCS code C1886 device costs will be packaged with the costs of the 

procedures described by CPT codes 31660 and 31661. Bronchial thermoplasty CPT 

codes 0276T and 0277T are assigned to APC 0415 (Level II Endoscopy Lower Airway) 

for CY 2013, and we proposed to assign bronchial thermoplasty CPT codes 31660 and 

31661 to APC 0415 for CY 2014 with a proposed payment rate of approximately $2,177. 

 Comment: One commenter stated that bronchial thermoplasty CPT codes 31660 

and 31661 (as well as the CPT codes 0276T and 0277T) are inappropriately assigned to 

APC 0415. The commenter expressed concern that under the CMS proposal to expire 

device HCPCS code C1886 from pass-through payment status, the payment rate for APC 

0415 will not reflect the costs associated with CPT codes 31660 and 31661, the 

procedure with which the HCPCS code C1886 device is used. The commenter stated that 

the two bronchial thermoplasty CPT codes available in CY 2012, CPT code 0276T and 

CPT code 0277T, were subject to noncoverage policies for all Category III CPT codes by 
536 

most Medicare Administrative Contractors (MACs), which resulted in few Medicare 

claims for CY 2012, the claims data year used for CY 2014 ratesetting. The commenter 

further stated that claims data show that some providers submitted claims reporting 

bronchial thermoplasty services with the HCPCS code C1886 device, while others did 

not, and that, as a result, the HCPCS code C1886 device charge data understate the cost 

of the C1886 device, which is reportedly $2,500. 

 The commenter also expressed its concerns regarding the composition of APC 

0415. The commenter believed that the payment rate for APC 0415 is driven by claims 

reporting one high-volume code, CPT code 31629 (Bronchoscopy, rigid or flexible, 

including fluoroscopic guidance, when performed; with transbronchial needle aspiration 

biopsy(s), trachea, main stem and/or lobar bronchus(i)) because the proposed payment 

rate of APC 0415 of approximately $2,177 is close to the CPT code 31629 proposed rule 

geometric mean cost of approximately $2,122. The commenter recommended two 

options to increase the payment rate for bronchial thermoplasty services as a means to 

adequately pay for the cost of the service. One option was to split APC 0415 into two 

levels, with many of the higher volume, lower cost procedure codes assigned to the Level 

II Endoscopy Lower Airway APC and the lower volume, higher cost procedure codes 

assigned to a new proposed Level III Endoscopy Lower Airway APC. The second option 

recommended by the commenter was to assign CPT codes 31660 and 31661 to APC 0423 

(Level II Percutaneous Abdominal and Biliary Procedures), which the commenter 

believed has a number of clinical similarities, including one pulmonary procedure 

described by CPT code 32998 (Ablation therapy for reduction or eradication of 1 or more 
537 

pulmonary tumor(s) including pleura or chest wall when involved by tumor extension, 

percutaneous, radiofrequency, unilateral). 

 Response: Regarding the commenter’s concerns about the claims data for 

bronchial thermoplasty services, we believe that the cost of the HCPCS code C1886 

device is reflected in the proposed payment rate for APC 0415, the APC to which we 

proposed to assign CPT codes 31660 and 31661. In a data analysis of the claims 

reporting CPT codes 0276T and 0277T, we found that, of the 37 single frequency claims 

available for the data analysis for CPT code 0276T, 16 single claims reported the HCPCS 

code C1886 device with a geometric mean cost of approximately $3,726, while 21 single 

claims did not report the HCPCS code C1886 device, yet the geometric mean cost was 

approximately $3,825. Therefore, it appears that hospitals did not separately report the 

HCPCS code C1886 device for pass-through payment on claims reporting CPT code 

0276T but instead reported the cost of the HCPCS code C1886 device as part of the cost 

of the procedure described by CPT code 0276T. Of the 18 claims reporting the procedure 

described by CPT code 0277T in our CY 2012 claims data, 10 claims were submitted 

with the HCPCS code C1886 device reported separately, with a geometric mean cost of 

approximately $4,175, while 8 claims were submitted without the HCPCS code C1886 

device reported separately, with a somewhat lower geometric mean cost of $2,780. 

However, our final geometric mean costs (based on the final rule claims data) for CPT 

codes 0276T and 0277T, $4,019 and $3,700, respectively, are similar to the geometric 

mean cost of bronchial thermoplasty services with the HCPCS code C1886 device 

reported separately that we found in our analysis of CPT codes 0276T and 0277T 
538 

described above. Therefore, we believe that the payment rate for APC 0415 

appropriately reflects the costs of the HCPCS code C1886 device. 

 We do not agree that APC 0423 would be a more appropriate APC assignment for 

CPT codes 31660 and 31661. Although there is one pulmonary procedure in APC 0423, 

CPT code 32998, it is a procedure with a percutaneous approach, which is very different 

than a bronchoscopy approach. In addition, we do not agree with the commenter’s 

suggestion that APC 0415 be split into two lower airway endoscopy APCs. The creation 

of a Level III lower airway endoscopy APC suggested by the commenter would result in 

relatively few single frequency claims available for ratesetting--495 claims for the 

suggested Level III APC compared to 5,174 single claims for the suggested Level II 

APC, based on CY 2014 final rule claims data. This lower frequency would promote 

volatility of costs for such a Level III lower airway endoscopy APC. Based on the 

reasons set forth above, we are finalizing our proposal to assign bronchial thermoplasty 

services CPT codes 31660 and 31661 to APC 0415 for CY 2014, which has a geometric 

mean cost of approximately $2,007. 

b. Direct Laryngoscopy (APC 0074) 

 For CY 2013, we assigned CPT code 31571 (Laryngoscopy, direct, with injection 

into vocal cord(s), therapeutic; with operating microscope or telescope) to APC 0075 

(Level V Endoscopy Upper Airway), with a payment rate of $2,026.82. For CY 2014, 

we proposed to assign CPT code 31571 to APC 0074 (Level IV Endoscopy Upper 

Airway), with a proposed payment rate of approximately $1,532. (The proposed 
539 

payment rate reflects the corrected proposed rate in the September 6, 2013 OPPS 

Addendum B, which was posted on the CMS Web site.) 

 Comment: One commenter stated that the proposed rule cost of CPT code 31571 

does not support the reassignment of this procedure code from APC 0075 to APC 0074. 

The commenter believed that the proposed payment rate for APC 0074 does not 

adequately cover the cost of the procedure described by CPT code 31571, in light of the 

fact that the geometric mean cost of CPT code 31571 increased from approximately 

$1,849 for CY 2013 to $1,956 in the CY 2014 proposed rule. 

 Response: The structure of APCs 0074 and 0075 required the proposed 

realignment of the procedures within those APCs to avoid 2 times rule violations. If CPT 

code 31571 remained assigned to APC 0075, a 2 times rule violation would have resulted 

because the cost of the procedure is more than two times less than the significant 

procedure with the highest geometric mean cost, CPT code 31276 (Nasal/sinus 

endoscopy, surgical with frontal sinus exploration, with or without removal of tissue from 

frontal sinus), which had a proposed rule geometric mean cost of approximately $4,623. 

This situation appears to remain the case based on final rule claims data. The final rule 

geometric mean cost of CPT code 31571 is approximately $1,951 and the final rule 

geometric mean cost of CPT code 31276 is approximately $4,504, which would result in 

a 2 times rule violation if the two procedures were assigned to the same APC. We note 

that the geometric mean cost of APC 0074 has increased from $1,390.85 for CY 2013, to 

approximately $1,547 for the CY 2014 proposed rule, and approximately $1,887 for this 

CY 2014 final rule with comment period. Furthermore, we believe that the procedure 
540 

described by CPT code 31571 is similar in terms of clinical composition and resource 

costs to the other procedures assigned to APC 0074. The final rule geometric mean cost 

of CPT code 31571 is approximately $1,951, while the final rule geometric mean cost for 

APC 0074 is approximately $1,887, and the final rule geometric mean cost for APC 0075 

is approximately $3,062. Therefore, we are finalizing our proposal to reassign CPT code 

31571 from APC 0075 to APC 0074 for CY 2014. 

c. Pulmonary Rehabilitation Services (APC 0077) 

 For CY 2014, we proposed to reassign HCPCS code G0424 (Pulmonary 

rehabilitation, including exercise (includes monitoring), one hour, per session, up to two 

sessions per day) from APC 0102 (Level II Pulmonary Treatment) to APC 0077 (Level I 

Pulmonary Treatment), with a proposed payment rate of approximately $39. (The 

proposed payment rate reflects the corrected proposed rate in the September 6, 2013 

OPPS Addendum B, which was posted on the CMS Web site.) We note that, for 

CY 2013, HCPCS code G0424 was assigned to APC 0102 with a similar payment rate of 

approximately $39. 

 CMS established HCPCS code G0424 effective January 1, 2010, to describe a 

one-hour session of pulmonary rehabilitation. This HCPCS code was established 

consistent with the requirements set forth in section 144(a)(1) of Public Law 110-275 

(MIPPA), which added section 1861(fff) to the Act, to provide Medicare Part B coverage 

and payment for a comprehensive program of pulmonary rehabilitation services furnished 

to beneficiaries with chronic obstructive pulmonary disease, effective January 1, 2010. 
541 

 Comment: Several commenters expressed concern about the reassignment of 

HCPCS code G0424 to APC 0077, which is the same APC to which HCPCS codes 

G0237 (Therapeutic procedures to increase strength or endurance of respiratory muscles, 

face to face, one on one, each 15 minutes (includes monitoring)), G0238 (Therapeutic 

procedures to improve respiratory function, other than described by G0237, one on one, 

face to face, per 15 minutes (includes monitoring)), and G0239 (Therapeutic procedures 

to improve respiratory function or increase strength or endurance of respiratory muscles, 

two or more individuals (includes monitoring)), are assigned. Several commenters stated 

that the length of time in performing the service described by HCPCS code G0424 is not 

consistent with the length of time to perform the other services assigned to APC 0077. In 

particular, the commenters stated that HCPCS code G0424 represents a 60-minute to 90-

minute procedure, which is not similar to the time requirement of the two procedures 

assigned to APC 0077, HCPCS codes G0237 and G0238, which represent 15-minute 

procedures. Because of the time required to perform the service, the commenters 

believed that HCPCS code G0424 should not be assigned to the same APC as HCPCS 

codes G0237 and G0238. In addition, several commenters stated that the assignment of 

HCPCS code G0424 to APC 0077 would create a 2 times rule violation. Some 

commenters further believed that hospitals are underreporting the costs of the procedure 

described by HCPCS code G0424, and stated that hospitals may be confused about the 

differences in costs for the procedures described by HCPCS codes G0237 and G0238 

(15-minute procedures) and G0424 (60-90 minute procedures). Some commenters 

recommended that CMS establish a payment for HCPCS code G0424 using claims data 
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from HCPCS codes G0237, G0238, and G0239, similar to the simulated methodology 

that CMS used in CY 2010 before actual claims data for HCPCS code G0424 became 

available. 

 Response: Prior to CY 2012, we did not have available actual claims data for 

HCPCS code G0424, and consequently, for CY 2010 and CY 2011, we utilized a 

simulated methodology to arrive at an appropriate payment for the procedure described 

by HCPCS code G0424. We discussed this simulated methodology extensively in the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74263 through 74267). 

Because HCPCS code G0424 became effective January 1, 2010, the first year of actual 

claims data for this service was used in the CY 2012 OPPS update. Specifically, in 

CY 2012, we had data available for HCPCS code G0424 for payments for OPPS services 

based on claims submitted from January 1, 2010 through December 31, 2010. Payment 

for HCPCS code G0424 for CY 2012 was approximately $37.42. For the CY 2014 OPPS 

update, payment for the procedure described by HCPCS code G0424 is based on claims 

submitted from January 1, 2012 through December 31, 2012. Similar to our findings for 

the CY 2012 and CY 2013 OPPS updates, we have a very robust set of claims for the 

procedure described by HCPCS code G0424 for the CY 2014 update. Based on our latest 

hospital outpatient claims data, the resource cost associated with HCPCS code G0424 is 

comparable to the other services assigned to APC 0077. Specifically, our latest hospital 

outpatient claims data show that the geometric mean cost for HCPCS code G0424 is 

approximately $43, based on 457,226 single claims (out of 459,199 total claims), which 

is similar to the proposed payment rate of approximately $39 for APC 0077. We note 
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that APC 0077 included various pulmonary treatments whose geometric mean costs 

range between $23 and $43. Based on the latest hospital outpatient claims data, we 

believe that HCPCS code G0424 can be appropriately reassigned to APC 0077. 

 Regarding the commenters’ statement about hospitals underreporting the costs of 

the procedure described by HCPCS code G0424, we have no evidence of such 

underreporting. Furthermore, as we have previously stated, “[b]eyond our standard 

OPPS trimming methodology . . . that we apply to those claims that have passed various 

types of claims processing edits, it is not our general policy to judge the accuracy of 

hospital coding and charging for purposes of ratesetting” (75 FR 71838). We expect 

hospitals to report their services appropriately. 

 We disagree with the commenters’ assertion that assigning HCPCS code G0424 

to APC 0077 would create a 2 times rule violation. We reviewed the costs of the 

procedures that would be assigned to APC 0077, including the cost of the procedure 

described by HCPCS code G0424 and did not find a violation of the 2 times rule in the 

APC. As has been our practice since the implementation of the OPPS, we annually 

review all the items and services within an APC group to determine, with respect to 

comparability of the use of resources, any 2 times rule violations. In making this 

determination, we review our claims data and determine whether we need to make 

changes to the current APC assignments for the following year. For HCPCS code 

G0424, we evaluated its APC assignment for the CY 2014 update, and determined that 

APC 0077 is the appropriate assignment for this service based on its clinical homogeneity 

and resource similarity to the other services assigned to APC 0077. 
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 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal, without modification, to reassign HCPCS code G0424 from APC 

0102 to APC 0077. APC 0077 has a final CY 2014 geometric mean cost of 

approximately $39. The final CY 2014 payment rate for HCPCS code G0424 can be 

found in Addendum B to this CY 2014 OPPS/ASC final rule with comment period 

(which is available via the Internet on the CMS Web site). 

10. Other Services 

a. Balloon Sinus Dilation (APCs 0074 and 0075) 

 For CY 2013, we assigned CPT codes 31295 (Nasal/sinus endoscopy, surgical; 

with dilation of maxillary sinus ostium (eg, balloon dilation), transnasal or via canine 

fossa), 31296 (Nasal/sinus endoscopy, surgical; with dilation of frontal sinus ostium (eg, 

balloon dilation)), and 31297 (Nasal/sinus endoscopy, surgical; with dilation of sphenoid 

sinus ostium (eg, balloon dilation)) to APC 0075 (Level V Endoscopy Upper Airway), 

with a payment rate of $2,026.82. For CY 2014, we proposed to continue to assign CPT 

codes 31295, 31296, and 31297 to APC 0075. 

 Comment: One commenter stated that the proposed geometric mean cost of APC 

0075 of approximately $2,378 is driven by the cost and frequency of a single code, CPT 

code 31541 (Laryngoscopy, direct, operative, with excision of tumor and/or stripping of 

vocal cords or epiglottis; with operating microscope or telescope), which had a proposed 

geometric mean cost of approximately $2,085, and comprised 61 percent of the APC’s 

single frequency claims for ratesetting. The commenter requested that CMS analyze the 
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appropriateness of continuing to assign CPT codes 31295, 31296, and 31297 to APC 

0075 and/or the appropriateness of continuing to assign CPT code 31541 to APC 0075. 

 Response: Based on updated claims data, we reviewed the procedures in APC 

0074 (Level IV Endoscopy Upper Airway) and APC 0075. During our review, we found 

2 times rule violations in both APCs. To resolve one of the 2 times rule violations, we 

reassigned CPT code 31541 from APC 0075 to APC 0074 for CY 2014. As a result, the 

final rule geometric mean cost of APC 0075 increased to approximately $3,062. 

 The final rule geometric mean costs of CPT codes 31295, 31296, and 31297 are 

$2,456, $2,894, and $1,905, respectively. Therefore, while we are continuing to assign 

CPT codes 31295 and 31296 to APC 0075 for CY 2014, to avoid another 2 times rule 

violation, we are reassigning CPT code 31297, which has an appreciably lower geometric 

mean cost than the geometric mean cost of CPT codes 31295 and 31296, to APC 0074 

for CY 2014. APC 0074 has a CY 2014 final geometric mean cost of approximately 

$1,887. 

 After consideration of the public comments we received, we are continuing to 

assign CPT codes 31295 and 31296 to APC 0075 for CY 2014, as we proposed. 

However, we are reassigning CPT code 31297 to APC 0074 for CY 2014. In addition, 

we are reassigning CPT code 31541 from APC 0075 to APC 0074 for CY 2014. 

b. Radiofrequency Ablation of Uterine Fibroids (APC 0174) 

 We created HCPCS code C9736 (Laparoscopy, surgical, radiofrequency ablation 

of uterine fibroid(s), including intraoperative guidance and monitoring, when performed) 

effective July 1, 2013. The procedure became known to us by means of an application to 
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assign the procedure to a New Technology APC. We assigned HCPCS code C9736 to 

APC 0131 (Level II Laparoscopy) because we believed that it has the greatest degree of 

clinical similarity to the laparoscopic procedures assigned to that APC. APC 0131 has a 

CY 2013 payment rate of $3,487.15. We proposed to continue to assign HCPCS code 

C9736 to APC 0131 for CY 2014, with a proposed payment rate of approximately 

$3,765. (The proposed payment rate reflects the corrected proposed rate in the 

September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.) 

 The AMA’s CPT Editorial Panel recently created new Category III CPT code 

0336T (Laparoscopy, surgical, ablation of uterine fibroid(s), including intraoperative 

ultrasound guidance and monitoring, radiofrequency), to be effective January 1, 2014, 

which describes the procedure described by HCPCS code C9736. Because HCPCS code 

C9736 became effective July 1, 2013, there are no claims data available for this code for 

ratesetting purposes. 

 At its August 26, 2013 meeting, the HOP Panel recommended that CMS move 

HCPCS code C9736 from APC 0131 to APC 0174 (Level IV Laparoscopy). 

Comment: A few commenters recommended that CMS reassign HCPCS code 

C9736 (or its successor code, CPT code 0336T) to APC 0174 for CY 2014 because the 

resources involved in performing the procedure are more similar to the resources used in 

performing procedures assigned to APC 0174. The commenters stated that two CPT 

codes assigned to APC 0174, CPT code 47370 (Laparoscopy, surgical, ablation of 1 or 

more liver tumor(s); radiofrequency) and CPT code 50542 (Laparoscopy, surgical; 

ablation of renal mass lesion(s), including intraoperative ultrasound guidance and 
547 

monitoring, when performed), have clinical and resource characteristics similar to the 

characteristics of the procedures described by HCPCS code C9736. The commenters 

stated that both procedures are performed in an operating room (OR) under general 

anesthesia and involve diagnostic laparoscopy, and both procedures use approximately 

160 to 180 minutes of OR time. One commenter estimated that OR time for other 

procedures assigned to APC 0131 averages 122 minutes. Other commenters stated that 

the single-use RF probe used in the procedure described by HCPCS code C9736 costs 

$2,584, which is part of more than $3,400 in total device and supply costs. They added 

that other procedures assigned to APC 0131 are not as device intensive, whereas 

procedures assigned to APC 0174 are device intensive. The commenters also requested 

that CMS delete HCPCS code C9736 and use the new CPT code 0336T, upon its 

effective date, January 1, 2014. 

 Response: We do not have claims data on HCPCS code C9736 for ratesetting 

purposes because the code is new, effective July 1, 2013. We routinely assign procedure 

or service codes to clinical APCs before we have claims data that are indicative of the 

resource costs of a procedure or service. We make these assignments initially, using the 

best currently available information, while reviewing claims data once such data become 

available and making reassignments accordingly, based on those data. We agree with the 

HOP Panel and the commenters that resources used to perform the procedure described 

by HCPCS code C9736 appear to be more similar to the resources used to perform some 

of the services already assigned to APC 0174. Because new CPT code 0336T describes 

the procedure described by HCPCS code C9736 and is considered its successor code, we 
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are deleting HCPCS code C9736, effective January 1, 2014, and assigning CPT code 

0336T to APC 0174 for CY 2014. As with all new services under the OPPS, the APC 

assignment of CPT code 0336T is subject to review once our claims data begin to reflect 

the cost of this procedure. 

 After consideration of the public comments we received, we are deleting HCPCS 

code C9736, effective January 1, 2014, and assigning CPT code 0336T to APC 0174 for 

CY 2014, which has a final geometric mean cost of approximately $8,623. 

c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065) 

 The AMA’s CPT Editorial Panel created two Category III CPT codes that 

describe Magnetic Resonance Image Guided Focused Ultrasound (MRgFUS) used in 

ablation of uterine fibroids, effective January 1, 2005: CPT codes 0071T (Focused 

ultrasound ablation of uterine leiomyomata, including MR guidance; total leiomyomata 

volume less than 200 cc of tissue) and 0072T (Focused ultrasound ablation of uterine 

leiomyomata, including MR guidance; total leiomyomata volume greater or equal to 200 

cc of tissue). The CMS HCPCS Workgroup created a third code related to MRgFUS, 

HCPCS code C9734 (Focused ultrasound ablation/therapeutic intervention, other than 

uterine leiomyomata, with magnetic resonance (MR) guidance), effective April 1, 2013. 

HCPCS code C9734 originally described the service “with or without MR guidance”. 

However, effective July l, 2013, we changed the descriptor to only specify “with 

magnetic resonance guidance”. For CY 2013, all three of the MRgFUS codes are 

assigned to APC 0067 (Level II Stereotactic Radiosurgery), with HCPCS code C9734 

added to APC 0067 effective April 1, 2013. The CY 2013 payment rate for APC 0067 is 
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$3,300.64. For CY 2014, as part of a proposed restructuring of the Stereotactic 

Radiosurgery (SRS) APCs and procedures, we proposed to reassign SRS procedures to 

other APCs and to maintain intraoperative radiation therapy (IORT) and 

magnetoencephalography (MEG) procedures in APC 0065. We proposed to reassign the 

service codes for MRgFUS procedures to APC 0065 based on clinical coherence to the 

other procedures assigned to APC 0065. In addition, we proposed to rename APC 0065 

“IORT, MRgFUS, and MEG,” which has a CY 2014 proposed payment rate of 

approximately $1,714 (78 FR 43593 through 43594). (The CY 2014 proposed payment 

rate reflects the corrected proposed rate in the September 6, 2013 OPPS Addendum B, 

which was posted on the CMS Web site.) The proposal to restructure the APCs that pay 

for SRS, IORT, MRgFUS, and MEG procedures would reduce the number of APCs 

under which payment is made for SRS, IORT, MRgFUS, and MEG procedures from four 

to three APCs. We note that there are no claims data for CPT codes 0071T and 0072T, or 

HCPCS code C9734, available for CY 2014 ratesetting purposes. 

 Comment: Commenters expressed concern about the CY 2014 proposed 

reassignment of MRgFUS services to APC 0065, and stated that MRgFUS services are 

not appropriate for assignment to APC 0065 based on clinical and resource characteristics 

of other services assigned to APC 0065. One commenter opined that MRgFUS services 

are more similar clinically to the SRS services assigned to APC 0067, in terms of 

treatment set-up, delivery of radiation, and post-procedure recovery, except that 

MRgFUS services use nonionizing radiation. This commenter also believed that 

MRgFUS services are similar in resources to the SRS services assigned to APC 0067, 
550 

estimating hospital costs for services described by CPT codes 0071T and 0072T at 

$5,439 each, and the cost of the service described by HCPCS code C9734 at $6,073, 

which are similar to the proposed payment rate of APC 0067 of approximately $5,615. 

 A few commenters urged CMS not to reduce the payment rates for MRgFUS 

services, as part of restructuring the SRS APCs, or to package payment for other services 

related to MRgFUS. The commenters noted that the CY 2014 proposal would reduce the 

payment rate for MRgFUS services by nearly half of the amount of the payment rate for 

APC 0067 for CY 2013, in addition to reductions in payment as a result of the packaging 

of related radiation oncology services. 

 One commenter identified a number of services performed with MRgFUS for 

which CMS has proposed to package payment and estimated the foregone separate 

payments for these services, if CMS packages them, to total approximately $2,800. The 

commenter recommended that, if CMS finalizes packaging of these services, CMS 

compensate providers for performance of the MRgFUS services by assigning MRgFUS 

procedure codes to either APC 0229 (Level II Endovascular Revascularization of the 

Lower Extremity), which has a proposed payment rate of approximately $10,314, or a 

New Technology APC reflecting a similar level of resources use. The commenter 

acknowledged that there are few Medicare claims data reporting the MRgFUS procedure 

codes, and stated that the procedures described by CPT codes 0071T and 0072T are 

generally performed on younger women and that, although HCPCS code C9734 is a new 

code effective in CY 2013, the commenter expects there will be a significant number of 
551 

patients over age 65 with metastatic bone cancer who will receive treatment with the 

procedure described by HCPCS code C9734. 

 Response: We do not agree with the commenter that MRgFUS procedures are 

similar to SRS procedures assigned to APC 0067 because of the clinical differences 

between MRgFUS and SRS, which is a specialized type of radiation therapy. We believe 

that MRgFUS procedures are more similar to the services in restructured APC 0065, 

which are distinct from SRS clinical characteristics. We note there are no claims data 

available for CPT codes 0071T and 0072T or HCPCS code C9734 for CY 2014 

ratesetting. Regarding the cost estimates for MRgFUS procedures presented by the 

commenter, it is our longstanding policy to reassign procedures to APCs based on 

Medicare claims data that support reassignment, rather than relying on external cost 

estimates. 

 After consideration of the public comments we received, we are finalizing our 

proposal to reassign CPT codes 0071T, 0072T, and HCPCS code C9734 to APC 0065 for 

CY 2014. The final rule geometric mean cost of APC 0065 is approximately $1,253. 

 Our proposed and final packaging policies for CY 2014 are discussed in section 

II.A.3. of this final rule with comment period. 

d. Flow Cytometry (APC 0433) 

 For CY 2014, we proposed to reassign CPT code 88184 (Flow cytometry, cell 

surface, cytoplasmic, or nuclear marker, technical component only; first marker) from 

APC 0433 (Level II Pathology) to APC 0344 (Level IV Pathology), with a proposed 

payment rate of approximately $273. (The proposed payment rate reflects the corrected 
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proposed rate in the September 6, 2013 OPPS Addendum B, which was posted on the 

CMS Web site.) In addition, for CY 2014, we proposed to package payment for CPT 

code 88185 (Flow cytometry, cell surface, cytoplasmic, or nuclear marker, technical 

component only; each additional marker (list separately in addition to code for first 

marker)), which is currently assigned to APC 0342 (Level I Pathology) as an add-on 

code. We refer readers to section II.A.3. of this final rule with comment period for 

further discussion of our proposed and final payment methodology for add-on codes for 

CY 2014. 

 Comment: One commenter expressed disappointment with CMS’ decision to 

decrease the payment rate for flow cytometry CPT codes 88184 and 88185. 

 Response: We note that the CY 2013 payment rate for CPT code 88184 was 

approximately $23 and the CY 2013 payment rate for CPT code 88185 was 

approximately $13. For CY 2014, we proposed to reassign CPT code 88184 from APC 

0433 to APC 0344 with a payment rate of approximately $273 based on our claims data 

for the proposed rule. 

 We also proposed to package payment for CPT code 88185 because it is an addon code. We refer readers to section II.A.3. of this final rule with comment period for 

further discussion of our final payment methodology for add-on codes for CY 2014. 

 Based on our latest hospital outpatient claims data, we decided not to revise the 

APC assignment for CPT code 88184 and instead decided to retain the code’s assignment 

to APC 0433 (Level II Pathology), which is the same APC to which CPT code 88184 was 

assigned for CY 2013. Analysis of the claims data shows a final rule geometric mean 
553 

cost of approximately $35 for CPT code 88184, which is similar to the final rule 

geometric mean cost of approximately $37 for APC 0433. 

 After consideration of the public comment that we received and review of our 

latest hospital outpatient claims data for this final rule with comment period, we are 

revising our proposal and will continue to assign CPT code 88184 to APC 0433 for 

CY 2014. CPT code 88184 has a final payment rate of approximately $37 for CY 2014, 

which is slightly higher than the payment rate of approximately $23 for CY 2013. This 

final payment rate also can be found in Addendum B to this CY 2014 OPPS/ASC final 

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

final policy for packaging CPT code 88185 as an add-on code for CY 2014 is discussed 

in section II.A.3. of this final rule with comment period. 

e. Hormone Pellet Implant (APC 0420) 

 For CY 2014, we proposed to reassign CPT code 11980 (Subcutaneous hormone 

pellet implantation (implantation of estradiol and/or testosterone pellets beneath the 

skin)) from APC 0340 (Level I Minor Procedures) to APC 0420 (Level II Minor 

Procedures), with a proposed payment rate of approximately $103. (The proposed 

payment rate reflects the corrected proposed rate in the September 6, 2013 OPPS 

Addendum B, which was posted on the CMS Web site.) 

 In the proposed rule, we note that we proposed to make some changes related to 

APC 0340 for CY 2014. We proposed to revise the title of APC 0340 from “Minor 

Ancillary Procedures” to “Level I Minor Procedures” and to establish a second level APC 

to describe minor ancillary procedures, specifically, APC 0420, with the title of “Level II 
554 

Minor Procedures,” as listed in Addendum A to the CY 2014 OPPS/ASC proposed rule, 

which was posted on the CMS Web site. Based on our review of the latest CY 2012 

hospital outpatient claims data, we believed that these changes were necessary to pay 

appropriately for the services assigned to APC 0340. 

 Comment: One commenter expressed concern about the APC assignment of CPT 

code 11980 and suggested two options to address the code’s APC assignment. Under the 

first option, the commenter suggested that CMS consider establishing a new APC that 

describes minor ancillary procedures, specifically a Level III Minor Procedures APC, and 

assign CPT code 11980 to this newly created APC. Because there are several procedures 

with varying costs assigned to APC 0340 and APC 0420, the commenter suggested 

restructuring the minor procedures APCs by establishing payment ranges for each level 

of service. In particular, the commenter suggested that the Level I Minor Procedures 

APC would have a geometric means cost in the range of $0 to $120, the Level II Minor 

Procedures APC would have a geometric mean cost in the range of $121 to $300, and the 

Level III Minor Procedures would have a geometric mean cost of greater than $300. As 

an alternative option, the commenter recommended that CMS reassign CPT code 11980 

to APC 0189 (Level III Female Reproductive Procedure). 

 Response: As the commenter stated, the procedure described by CPT code 11980 

involves both testosterone pellets for men and estradiol pellets for women. Because all 

the procedures in APC 0189 relate to female procedures, we do not believe that APC 

0189 would be an appropriate APC assignment for CPT code 11980. In addition, based 

on our review of the updated hospital outpatient claims data, we believe the two-level 
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APC appropriately pays for the minor procedures that are currently assigned to APCs 

0340 and 0420. 

 As has been our practice since the implementation of the OPPS, we annually 

review all the items and services within an APC group to determine, with respect to 

comparability of the use of resources, for any 2 times rule violations. In making this 

determination, we review our claims data and determine whether we need to make 

changes to the current APC assignments for the following year. We will reevaluate the 

APC assignment of CPT code 11980 for the CY 2015 OPPS rulemaking cycle. 

 After consideration of the public comment that we received, we are finalizing our 

proposal to reassign CPT code 11980 to APC 0420, which has a final geometric mean 

cost of approximately $99 for CY 2014. The final CY 2014 payment rate for CPT code 

11980 can be found in Addendum B to this final rule with comment period (which is 

available via the Internet on the CMS Web site). 

f. Peyronie Disease Injection Procedure (APC 0164) 

 For CY 2014, we proposed to reassign CPT code 54200 (Injection procedure for 

peyronie disease) from APC 0164 (Level II Urinary and Anal Procedures) to APC 0126 

(Level I Urinary and Anal Procedures), with a proposed payment rate of approximately 

$137, based on its clinical and resource similarity to other procedures assigned to APC 

0126. (The proposed payment rate reflects the corrected proposed rate in the 

September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.) 

 Comment: One commenter expressed concern with the proposal to reassign CPT 

code 54200 to APC 0126 and requested that CMS continue to assign this code to APC 
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0164, which is the APC assignment for CY 2013. The commenter stated the CPT code 

54200 is clinically similar to the procedures described by CPT codes 54220 (Irrigation of 

corpora cavernosa for priapism) and 54235 (Injection of corpora cavernosa with 

pharmacologic agent(s) (eg, papaverine, phentolamine)), which are assigned to APC 

0164. The commenter indicated that all three procedures (CPT codes 54200, 54220, and 

54235) involve needle placements and should be assigned to the same APC. In addition, 

the commenter requested that CMS establish a low geometric mean cost of $163 for 

APC 0164. 

 Response: We examined the latest CY 2012 hospital outpatient claims data, 

which are based on claims submitted from January 1, 2012 through December 31, 2012, 

and we agree with the commenter’s suggestion to continue to assign CPT code 54200 to 

APC 0164. Our analysis reveals that the resource cost associated with the procedure 

described by CPT code 54200 is similar to the resource cost of the procedure described 

by CPT code 54220, which is assigned to APC 0164. Specifically, the geometric mean 

cost for CPT code 54200 is approximately $167 based on 330 single claims (out of 351 

total claims), which is similar to the geometric mean cost of approximately $166 for CPT 

code 54220 based on 25 single claims (out of 427 total claims). Based on the claims 

data, we believe that CPT code 54200 should continue to be assigned to APC 0164. 

 With regard to the commenter’s suggestion to set the geometric mean cost at $163 

for APC 0164, we do not cap the geometric mean cost based on suggested amounts. The 

geometric mean cost is determined based on consideration of the costs of all of the 

procedures and the number of claims within a given APC. We refer readers to section 
557 

II.A. of this final rule with comment period for a discussion of our methodology in 

determining the APC geometric mean costs. 

After consideration of the public comment we received, we are not finalizing our 

proposal to reassign CPT code 54200 from APC 0164 to APC 0126 for CY 2014. 

Rather, we are maintaining the APC assignment for CPT code 54200 to APC 0164, 

which has a final CY 2014 geometric mean cost of approximately $212. The final 

CY 2014 payment rate for CPT code 54200 can be found in Addendum B to this final 

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

g. Negative Pressure Wound Therapy (NPWT) (APC 0016) 

 We established HCPCS code G0456 (Negative pressure wound therapy, (e.g. 

vacuum assisted drainage collection) using a mechanically-powered device, not durable 

medical equipment, including provision of cartridge and dressing(s), topical 

application(s), wound assessment, and instructions for ongoing care, per session; total 

wound(s) surface area less than or equal to 50 square centimeters) and HCPCS code 

G0457 (Negative pressure wound therapy, (e.g. vacuum assisted drainage collection) 

using a mechanically-powered device, not durable medical equipment, including 

provision of cartridge and dressing(s), topical application(s), wound assessment, and 

instructions for ongoing care, per session; total wound(s) surface area greater than 50 

square centimeters), effective January 1, 2013, to provide a payment mechanism for 

negative pressure wound therapy services furnished through a disposable device. We 

assigned these services to APC 0016 (Level IV Debridement & Destruction), which has a 

CY 2013 payment rate of approximately $210. For CY 2014, we proposed to continue to 
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assign HCPCS codes G0456 and G0457 to APC 0016, with a proposed payment rate of 

approximately $272. (The proposed payment rate reflects the corrected proposed rate in 

the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.) 

 Comment: Some commenters requested that CMS reassign HCPCS codes G0456 

and G0457 from APC 0016 to proposed APC 0186 (Level III Skin Repair). The 

commenters believed that, based on clinical homogeneity and resource costs of the other 

procedures assigned to proposed APC 0186, proposed APC 0186 is the most appropriate 

assignment for HCPCS codes G0456 and G0457. Another commenter stated that the cost 

of providing NPWT is in the range of $450 to $500, which more closely aligns with the 

CY 2013 payment rate of approximately $393 for proposed APC 0135 (Level IV Skin 

Repair). One commenter believed that HCPCS codes G0456 and G0457 are clinically 

similar to the wound care procedures described by CPT codes 12020, 13100, 13101, 

15002, and 15003, which were assigned to APC 0135 for CY 2013. 

 Response: We disagree with the commenters’ assertion that HCPCS codes 

G0456 and G0457 are similar, in terms of clinical homogeneity or resource costs, to CPT 

codes 12020, 13100, 13101, and 15002. Our analysis of the latest hospital outpatient 

claims data indicates that the resource costs for the services described by CPT codes 

12020, 13100, 13101, and 15002 are in the range of $474 to $570. Specifically, the 

geometric mean cost for CPT code 12020 is approximately $522 based on 1,082 single 

claims (out of 2,254 total claims), for CPT code 13100, approximately $474 based on 81 

single claims (out of 341 total claims), for CPT code 13101, approximately $570 based 

on 1,198 single claims (out of 3,725 total claims), and for CPT code 15002, 
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approximately $547 based on 657 single claims (out of 4,119 total claims). (We have not 

included the geometric mean cost for CPT code 15003 in this discussion because it is an 

add-on code that will be packaged in the CY 2014 OPPS update.) We believe that the 

resource costs for the services described by the negative pressure wound therapy HCPCS 

codes G0456 and G0457 may be slightly higher than the resource costs for the services 

described by the negative pressure wound therapy CPT codes 97605 and 97606, but not 

as significant as those services described by CPT codes 12020, 13100, 13101, and 15002. 

Our claims data show that the geometric mean cost for HCPCS code 97605 is 

approximately $100 based on 66,355 single claims (out of 85,285 total claims), and 

approximately $140 for CPT code 97606 based on 7,681 single claims (out of 10,771 

total claims). Based on the nature of the procedure, the advice from our medical 

advisors, and our claims data for CPT codes 12020, 13100, 13101, 15002, 97605, and 

97606, we believe that APC 0016, which has a geometric mean cost of approximately 

$276, is the more appropriate APC assignment for HCPCS codes G0456 and G0457 

because these procedures describe debridement-type services rather than skin repair 

procedures. 

 Because HCPCS codes G0456 and G0457 are new for CY 2013, we expect to 

have claims data next year, at which time, we will reevaluate the APC assignments for 

both codes in preparation for the CY 2015 rulemaking cycle. We remind hospitals that 

we review, on an annual basis, the APC assignments for all services and items paid under 

the OPPS. 
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 Comment: One commenter who responded to the CY 2013 OPPS/ASC final rule 

with comment period believed that the CY 2013 payment rate of approximately $210 for 

both HCPCS codes G0456 and G0457 is inappropriate considering that the current 

national average selling price for the device used with the procedure is approximately 

$270. In addition, the commenter requested that CMS revise the status indicator of 

HCPCS codes G0456 and G0457 from “T” (Significant Procedure, Multiple Reduction 

Applies) to “S” (Significant Procedure, Not Discounted When Multiple) in order to not 

undercompensate hospitals for performing the procedure when it is performed with other 

services on the same day. 

 Response: For the CY 2014 update, the payment rate for HCPCS codes G0456 

and G0457 will increase from $210 for CY 2013 to approximately $275 for CY 2014. As 

stated above, because HCPCS codes G0456 and G0457 are new for CY 2013, we expect 

to have claims data next year, at which time we will reevaluate the APC assignments for 

both codes in preparation for the CY 2015 rulemaking cycle. 

 With regards to the status indicator assignment of HCPCS codes G0456 and 

G0457, we note that all codes assigned to APC 0016 are crosswalked to status indicator 

“T” and have no corresponding “S” status indicator. In addition, we do not believe that 

every service or procedure should be paid at 100 percent. The multiple procedure 

reduction for status indicator “T” services recognizes that efficiencies are gained when 

multiple procedures are performed in a single session. We believe that this policy is 

appropriately applied to the wound treatment procedures in question. 
561 

 After consideration of the public comments that we received, we are finalizing 

our CY 2014 proposal, without modification, to continue to assign HCPCS codes G0456 

and G0457 to APC 0016, which has a final CY 2014 geometric mean cost of 

approximately $276. The final CY 2014 payment rate for HCPCS codes G0456 and 

G0457 can be found in Addendum B to this final rule with comment period (which is 

available via the Internet on the CMS Web site). 

h. Platelet Rich Plasma (PRP) (APC 0327) 

 For CY 2014, we proposed to continue to assign HCPCS code G0460 

(Autologous platelet rich plasma for chronic wounds/ulcers, including phlebotomy, 

centrifugation, and all other preparatory procedures, administration and dressings, per 

treatment) to APC 0013 (Level II Debridement & Destruction) with a proposed payment 

rate of approximately $83. (The proposed payment rate reflects the corrected proposed 

rate in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web 

site.) 

 Comment: Many of the commenters disagreed with the proposed APC 

assignment for HCPCS code G0460. Several commenters stated that the proposed 

payment rate of approximately $83 for APC 0013 does not adequately pay for the cost of 

providing the service described by HCPCS code G0460. Some of the commenters 

reported that the actual cost to provide PRP services is between $400 and $450. Other 

commenters reported a specific cost of $458 to perform the procedure. Most of the 

commenters stated that HCPCS code G0460 is inappropriately assigned to APC 0013 and 

urged CMS to reassign the code to APC 0135 (Level IV Skin Repair), which had a 
562 

proposed payment rate of approximately $862. One commenter stated that PRP services 

are more analogous to the tissue-based wound procedures that are assigned to APC 0135 

(Level III Skin Repair) for CY 2013, which has a payment rate of $393.38 for the first 

100cm2. 

 Response: We reviewed all the codes assigned to the Debridement & Destruction 

APCs as well as the Skin Repair APCs. After further consultation with our medical 

advisors, we agree with the commenters that HCPCS code G0460 would be more 

appropriately assigned to one of the Skin Repair APCs. For CY 2014, there are four Skin 

Repair APCs. We have renumbered these APCS with sequential numbers as follows: (1) 

APC 0326 (Level I Skin Repair); (2) APC 0327 (Level II Skin Repair); (3) APC 0328 

(Level III Skin Repair); and (4) APC 0329 (Level IV Skin Repair). After consideration 

of the public comments we received, and based on the clinical comparability of the 

procedure and the approximate resource costs associated with the procedure as compared 

to other procedures assigned to the Skin Repair APCs, we believe that APC 0327 is the 

most appropriate APC assignment for HCPCS code G0460. APC 0327 has a final 

geometric mean cost of approximately $411 for CY 2014. The final CY 2014 payment 

rate for HCPCS code G0460 can be found in Addendum B to this final rule with 

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

 It has been our practice since the implementation of the OPPS in 2000 to review, 

on an annual basis, the APC assignments for the procedures and services paid under the 

OPPS. We will review the APC assignment for HCPCS code G0460 and determine 

whether an APC reassignment is necessary for the CY 2015 ratesetting. 
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i. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium (HEU) 

Sources (APC 1442) 

 Radioisotopes are widely used in modern medical imaging, particularly for 

cardiac imaging and predominantly for the elderly (Medicare) population. Technetium 

99 (Tc-99m), the radioisotope used in the majority of such diagnostic imaging services, is 

currently produced in legacy reactors outside of the United States using highly enriched 

uranium (HEU). 

 The Administration has established an agenda to eliminate domestic reliance on 

these reactors, and is promoting the conversion of all medical radioisotope production to 

non-HEU sources. Alternative methods for producing Tc-99m without HEU are 

technologically and economically viable, and conversion to such production has begun 

and is expected to be completed within a 5-year time period. We expect this change in 

the supply source for the radioisotope used for modern medical imaging will introduce 

new costs into the payment system that are not accounted for in the historical claims data. 

Therefore, for CY 2013, we finalized a policy to provide an additional payment of $10 

for the marginal cost for radioisotopes produced from non-HEU sources over the costs 

for radioisotopes produced by HEU sources (77 FR 68316). Under this policy, hospitals 

report HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full cost 

recovery add-on, per study dose) once per dose along with any diagnostic scan or scans 

furnished using Tc-99m as long as the Tc-99m doses used can be certified by the hospital 

to be at least 95 percent derived from non-HEU sources. 
564 

 Comment: Several commenters requested changes in the additional payment for 

Technetium-99m produced from non-highly enriched uranium (non-HEU) sources, as 

described by HCPCS code Q9969. One commenter was concerned that CMS did not 

utilize stakeholder feedback to craft a more effective payment methodology, such as 

ensuring that the payment leads to Full Cost Recovery higher in the supply chain, or 

paying radiopharmacies for the additional costs of maintaining segregated channels for 

HEU and LEU. One commenter was concerned about the beneficiary’s responsibility for 

a 20-percent copayment. That commenter also believed that the $10 payment was too 

low. Specific changes requested by commenters included elimination of the copayment, 

increase in the payment rate, expanding it to other radioisotopes, and modifying the 

payment in response to industry suggestions during stakeholder meetings and/or paying 

separately for diagnostic radiopharmaceuticals. 

Response: We implemented this payment for a specific purpose based on 

industry and government concerns and considering stakeholder requests and stakeholder 

feedback. We determined that non-HEU sourced Mo-99, the Tc-99m precursor, is 

expected to cost more than current sources from legacy reactors, and this increased cost 

will adversely impact hospitals. In evaluating that concern, we determined that there is a 

probability that those costs will not be passed on uniformly as the industry converts. 

Therefore, we used our authority under section 1833(t)(2)(E) of the Act to ensure 

payment equity among hospitals to propose and finalize a policy through rulemaking that 

created this additional payment to address the incremental cost of obtaining Tc-99m from 

the new sources of supply. We stated in our CY 2013 OPPS/ASC final rule with 
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comment period (77 FR 68316) that our expectation was that the transition to non-HEU 

sourced Mo-99 would be completed within 4 to 5 years and that there might be a need to 

make differential payments for a period of 4 to 5 years. We further stated that we would 

reassess, and propose if necessary, on an annual basis, whether such an adjustment 

continued to be necessary and whether any changes to the adjustment were warranted. 

We have reassessed this payment for CY 2014 and have not identified any new 

information that would cause us to modify the payment at this time. We do not agree 

with the commenters’ suggestion to eliminate the beneficiary’s copayment because 

section 1833(t)(8) of the Act and §§ 419.41 through 419.45 of the regulations require a 

beneficiary copayment.

IV. OPPS Payment for Devices 

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices 

a. Background 

 Section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of 

devices be eligible for transitional pass-through payments for at least 2, but not more than 

3 years. This pass-through payment eligibility period begins with the first date on which 

transitional pass-through payments may be made for any medical device that is described 

by the category. We may establish a new device category for pass-through payment in 

any quarter. Under our established policy, we base the pass-through status expiration 

date for a device category on the date on which pass-through payment is effective for the 
566 

category, which is the first date on which pass-through payment may be made for any 

medical device that is described by such category. We propose and finalize the dates for 

expiration of pass-through status for device categories as part of the OPPS annual update. 

 We also have an established policy to package the costs of the devices that are no 

longer eligible for pass-through payments into the costs of the procedures with which the 

devices are reported in the claims data used to set the payment rates (67 FR 66763). 

Brachytherapy sources, which are now separately paid in accordance with section 

1833(t)(2)(H) of the Act, are an exception to this established policy. 

 There currently are three 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 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. CY 2014 Policy 
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 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 CY 2013 OPPS/ASC proposed rule (78 FR 43595), in the 

case of device category C1840, we proposed 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 had a proposed geometric 

mean cost of approximately $1,794. When the HCPCS 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 geometric mean cost of the 

procedure is approximately $15,249. Based on this geometric mean cost for CPT code 

0308T, we proposed to create new APC 0351 (Level VII Anterior Segment Eye 

Procedures), and to assign CPT code 0308T to this APC, which had a proposed geometric 

mean cost of approximately $15,249. We stated in the proposed rule that the geometric 

mean cost for CY 2014 that will be reported in the final rule for this new APC will 

depend on the geometric mean cost of CPT code 0308T (including the cost of HCPCS 

code C1840) as calculated using claims data available for the final rule. 

 Comment: One commenter requested that CMS extend the pass-through payment 

period of HCPCS code C1830 because one local Medicare contractor had denied ASC 
568 

payment at least twice because the Medicare claim form was reportedly incorrectly 

completed. The commenter stated that there is a lack of consistent guidance on how ASC 

claims for pass-through items are to be submitted. 

 Response: We are not extending the period of pass-through payment of HCPCS 

code C1830. Under the ASC payment system, § 416.164(b)(2) of the regulations requires 

that we pay separately for certain implantable items and services that have pass-through 

status under the OPPS. 

 HCPCS code C1830 was made effective for pass-through payment as of 

October 1, 2011, and we finalized a December 31, 2013 expiration date from passthrough payment for HCPCS code C1830 under the OPPS in the CY 2013 OPPS/ASC 

final rule with comment period (77 FR 68353). We cannot extend the pass-through 

payment status of HCPCS code C1830 through CY 2014, because such an extension 

would make the pass-through payment status effective longer than the maximum 3-year 

period permitted under section 1833(t)(6)(B)(iii) of the Act. As we stated in the proposed 

rule, after December 31, 2013, the costs for devices described by HCPCS code C1830 

will be packaged into the costs of the procedure with which the device is reported in the 

hospital claims data used in the development of the OPPS relative payment weights that 

will be used to establish the ASC payment rates for CY 2014 (78 FR 43638). Therefore, 

we are not altering the decision to expire category C1830 from pass-through payment as 

of January 1, 2014, or our ASC policy. We are not aware of systematic problems with 

billing of HCPCS code C1830 either in the OPPS payment system or the ASC payment 

system. The commenter cited that there were several instances in which one local 
569 

contractor rejected HCPCS code C1830 claims from an ASC. Our OPPS claims data 

reflect that nearly 1,900 claims from for HCPCS code C1830 were processed with a 

geometric mean cost of approximately $126. Therefore, it appears that most HCPCS 

code C1830 pass-through payment claims were adjudicated successfully in the OPPS, 

and we believe this is true in the ASC setting as well. Because pass-through devices are 

contractor priced in the ASC, there may be more interactions between ASCs and MACs 

on pass-through claims than is typical for hospitals. We are not aware of widespread 

problems with ASC processing of claims for HCPCS code C1830. 

 Comment: One commenter concurred with the proposed assignment of CPT code 

0308T to new APC 0351, as well as the designation of this procedure as device-intensive 

in the ASC setting. The commenter also urged CMS to only use claims from hospitals 

that are customers of the manufacturer of the HCPCS code C1840 device as claims used 

with CPT code 0308T because that company is reportedly the sole manufacturer of the 

device. The commenter noted that four claims were from a hospital that was not a 

customer, and which apparently reported costs with CPT code 0308T that were much too 

low to represent the HCPCS code C1840 device cost. 

 Response: We appreciate the commenter’s support for the APC assignment of 

CPT code 0308T. Regarding the recommendation to use claims only from customers of 

the device manufacturer, we do not generally screen claims in the manner suggested by 

the commenter. 

 After consideration of the public comments we received, we are maintaining our 

previous decision to expire device categories C1830, C1840, and C1886 from 
570 

pass-through payment status, which we finalized in the CY 2013 OPPS/ASC final rule 

with comment period, and we are finalizing our proposal to package the costs of these 

devices with the procedures with which they are billed. We also are finalizing for 

CY 2014 the proposed assignment of CPT code 0308T to APC 0351. The final CY 2014 

geometric mean cost of APC 0351 is approximately $15,606. 

 As we indicated in the CY 2014 OPPS/ASC proposed rule, with the expiration of 

device categories C1830, C1840, and C1886 from pass-through payment status at the end 

of CY 2013, there are no currently active categories for which we would expire 

pass-through status in CY 2014. If we create new device categories for pass-through 

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. (There is one new device category eligible for pass-through payment that we 

created effective October 1, 2013, C1841 (Retinal prosthesis, includes all internal and 

external components). However, this category will not expire in CY 2014.) 

2. 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 
571 

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 pass-through 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-ServicePayment/HospitalOutpatientPPS/index.html. The dollar amounts are used as the device 

APC offset amounts. In addition, in accordance with our established practice, the device 
572 

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 pass-through process and payment methodology only 

(74 FR 60476). 

b. CY 2014 Policy 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), we proposed 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 pass-through payment, using claims data from the period 

used for the most recent recalibration of the APC payment rates. We proposed to 

continue our policy, for CY 2014, that the pass-through evaluation process and 

pass-through payment methodology for implantable biologicals that are surgically 

inserted or implanted (through a surgical incision or a natural orifice) and that are newly 

approved for pass-through status beginning on or after January 1, 2010, be the device 

pass-through process and payment methodology only. The rationale for this policy is 
573 

provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 

through 60477). We also proposed to continue our established policies for calculating 

and setting the device APC offset amounts for each device category eligible for 

pass-through payment. In addition, we proposed to continue to review each new device 

category on a case-by-case basis to determine whether device costs associated with the 

new category are already packaged into the existing APC structure. If device costs 

packaged into the existing APC structure are associated with the new category, we 

proposed to deduct the device APC offset amount from the pass-through payment for the 

device category. As stated earlier, these device APC offset amounts also would be used 

in order to evaluate whether the cost of a device in an application for a new device 

category for pass-through payment is not insignificant in relation to the APC payment 

amount for the service related to the category of devices (§ 419.66(d)). 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), for CY 2014, we also 

proposed to continue our policy established in CY 2010 to include implantable 

biologicals in our calculation of the device APC offset amounts. In addition, we 

proposed to continue to calculate and set any device APC offset amount for any new 

device pass-through category that includes a newly eligible implantable biological 

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 pass-through 

payment, and to include the costs of implantable biologicals in the calculation of the 

device APC offset amounts (78 FR 43596). 
574 

 In addition, in the CY 2014 OPPS/ASC proposed rule (78 FR 43596), we 

proposed 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-ServicePayment/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. 

 We did not receive any public comments on these proposals. Therefore, we are 

finalizing them for CY 2014 without modification. In addition, we will update, on the 

CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html, 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 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. Changes to Device Pass-Through Criteria: Integral and Subordinate Criterion 

 We established a number of specific criteria that new medical devices must meet 

to be considered eligible for pass-through payments under section 1833(t)(6) of the Act 

(42 CFR 419.66; 65 FR 18480 and 65 FR 47672 through 47674). In the CY 2014 

OPPS/ASC proposed rule (78 FR 43596), we proposed 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, 
575 

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 proposed to provide guidance on the meaning of the term “integral” and 

delete the term “subordinate” from the existing regulation in the proposed rule. In the 

proposed rule, we stated that 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 pass-through 

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 
576 

previously explained, we proposed 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 read as follows: “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.” 

 We did not receive any public comments on this proposal. Therefore, we are 

finalizing, without modification, our proposal to delete the term “subordinate” from this 

criterion’s regulatory text under existing § 419.66(b)(3). The final revised § 419.66(b)(3) 

regulatory language reads as follows: “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. 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 
577 

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. Policy for CY 2014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597), 

beginning in CY 2014, we proposed 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 proposed to reduce OPPS payment, 
578 

for the applicable APCs listed in Table 17 of the proposed rule, by the full or partial 

credit a hospital 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 of the proposed rule 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597), for 

CY 2014, we proposed to continue using the three criteria established in the CY 2007 

OPPS/ASC final rule with comment period for determining the APCs to which 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 temporarily); and (3) the device offset amount must 

be significant, which, for purposes of this policy, is defined as exceeding 40 percent of 

the APC cost. We also proposed to continue to restrict the devices to which the APC 

payment adjustment would apply to a specific set of costly devices to ensure that the 

adjustment would not be triggered by the implantation of an inexpensive device whose 

cost would not constitute a significant proportion of the total payment rate for an APC. 

We stated that we continue to believe these criteria are appropriate because no cost 
579 

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. 

 Comment: A majority of commenters supported CMS’ proposed adjustment to 

the OPPS payment for no cost/full credit and partial credit devices, while some 

commenters requested that CMS rescind its proposal because they believed it would 

cause additional administrative burden. One commenter argued that using the “FD” 

value code methodology in the OPPS would lead to inaccuracy of claims. One 

commenter stated that, in some cases, if a full credit were received, the entire APC 

payment would be consumed by the credit and the hospital would receive no payment for 

the procedural portion of the service. That commenter suggested that CMS develop a 

floor for the offset and urged CMS to work with hospital stakeholders to better 

understand the overall impact to hospitals and to ensure that hospitals would be 

appropriately paid for the procedural aspect of the device/lead replacement. Another 

commenter requested that CMS remove APCs 0082, 0083 0104, 0229, 0319, and 0656 

from the final listing of APCs covered by the no cost/full credit policy. 

 Response: We appreciate the support of our proposal by the majority of 

commenters. We disagree with commenters’ assertion that the proposed change from the 

“FB”/”FC” modifiers to the “FD” value code for the adjustment to OPPS payment for no 
580 

cost/full credit and partial credit devices would cause added administrative burden. We 

believe that the use of the “FD” value code will not cause added administrative burden 

for hospitals. We also disagree with the assertion that using the “FD” value code 

methodology in the OPPS would lead to an inaccuracy in claims. We believe that the use 

of the “FD” value code methodology could lead to greater accuracy in our claims data. 

However, we are sensitive to the commenter’s concerns that, in some cases, if a full 

credit were received, the entire APC payment would be consumed by the credit and the 

hospital would receive no payment for the nondevice portion of the costs related to the 

service. Therefore, we are limiting the OPPS payment deduction for the applicable APCs 

listed below in Table 30 of this final rule with comment period to the total amount of the 

device offset when the “FD” value code appears on a claim. Hospitals would still be 

required to report the amount of the credit in the amount portion for value code “FD” 

when the hospital receives a credit for a replaced device listed in Table 18 of the 

proposed rule that is 50 percent or greater than the cost of the device. We continue to 

believe that APCs 0082, 0083 0104, 0229, 0319, and 0656 are appropriately identified as 

APCs to which the no cost/full credit and partial credit device adjustment policy will 

apply for CY 2014. 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal 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. Specifically, we are finalizing our proposal to require hospitals to report the 

amount of the credit in the amount portion for value code “FD” (Credit Received from 
581 

the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for 

a replaced device listed in Table 31 of this final rule with comment period that is 50 

percent or greater than the cost of the device. We also are finalizing our proposal to limit 

the OPPS payment deduction for the applicable APCs listed below in Table 30 of this 

final rule with comment period to the total amount of the device offset when the “FD” 

value code appears on a claim. 

 We proposed 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. 

 We examined the offset amounts calculated from the CY 2014 final rule data and 

the clinical characteristics of the final CY 2014 APCs to determine which APCs meet the 

criteria for CY 2014. Based on the CY 2012 claims data available for this final rule with 

comment period, we are not making any changes to the proposed lists of APCs and 

devices to which this modified policy applies. 

 Table 30 below lists the APCs to which the finalized modified payment 

adjustment policy for no cost/full credit and partial credit devices applies in CY 2014. 

 Table 31 below lists the devices to which the finalized modified payment 

adjustment policy for no cost/full credit and partial credit devices applies in CY 2014.
582 

TABLE 30.—APCs TO WHICH THE MODIFIED NO COST/FULL CREDIT 

AND PARTIAL CREDIT DEVICE PAYMENT ADJUSTMENT POLICY 

APPLIES IN CY 2014 

CY 2014 

APC 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 
583 

CY 2014 

APC CY 2014 APC Title 

0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents 

0674 Prostate Cryoablation 

0680 Insertion of Patient Activated Event Recorders 
584 

TABLE 31.—DEVICES TO WHICH THE MODIFIED NO COST/FULL CREDIT 

AND PARTIAL CREDIT DEVICE PAYMENT ADJUSTMENT POLICY 

APPLIES IN CY 2014 

CY 2014 Device 

HCPCS Code CY 2014 Short Descriptor 

C1721 AICD, dual chamber 

C1722 AICD, single chamber 

C1728 Cath, brachytx seed adm 

C1764 Event recorder, cardiac 

C1767 Generator, neurostim, imp 

C1771 Rep dev, urinary, w/sling 

C1772 Infusion pump, programmable 

C1776 Joint device (implantable) 

C1777 Lead, AICD, endo single coil 

C1778 Lead, neurostimulator 

C1779 Lead, pmkr, transvenous VDD 

C1785 Pmkr, dual, rate-resp 

C1786 Pmkr, single, rate-resp 

C1789 Prosthesis, breast, imp 

C1813 Prosthesis, penile, inflatab 

C1815 Pros, urinary sph, imp 

C1820 Generator, neuro rechg bat sys 

C1881 Dialysis access system 

C1882 AICD, other than sing/dual 

C1891 Infusion pump, non-prog, perm 

C1895 Lead, AICD, endo dual coil 

C1896 Lead, AICD, non sing/dual 

C1897 Lead, neurostim, test kit 

C1898 Lead, pmkr, other than trans 

C1899 Lead, pmkr/AICD combination 

C1900 Lead coronary venous 

C2619 Pmkr, dual, non rate-resp 

C2620 Pmkr, single, non rate-resp 

C2621 Pmkr, other than sing/dual 

C2622 Prosthesis, penile, non-inf 

C2626 Infusion pump, non-prog, temp 
585 

CY 2014 Device 

HCPCS Code CY 2014 Short Descriptor 

C2631 Rep dev, urinary, w/o sling 

V. OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals 

A. OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, Biologicals, 

and Radiopharmaceuticals

1. Background 

 Section 1833(t)(6) of the Act provides for temporary additional payments or 

“transitional pass-through payments” for 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 also are provided for certain “new” drugs and 

biologicals that were not being paid for as an HOPD service as of December 31, 1996 

and whose cost is “not insignificant” in relation to the OPPS payments for the procedures 

or services associated with the new drug or biological. For pass-through payment 

purposes, radiopharmaceuticals are included as “drugs.” As required by statute, 

transitional pass-through payments for a drug or biological described in section 
586 

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 were assigned status indicator “G” in Addenda A and B to the 

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 competitive acquisition program (CAP) 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 pass-through 

payment equals the amount determined under section 1842(o) of the Act minus the 

portion of the APC payment that CMS determines is associated with the drug or 

biological. Section 1847A of the Act establishes the average sales price (ASP) 

methodology, which is used for payment for drugs and biologicals described in section 
587 

1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, 

as applied under the OPPS, uses several sources of data as a basis for payment, including 

the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). 

In this final rule with comment period, the term “ASP methodology” and “ASP-based” 

are inclusive of all data sources and methodologies described therein. Additional 

information on the ASP methodology can be found on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-BDrugs/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-forService-Payment/HospitalOutpatientPPS/passthrough_payment.html. 

2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2013

In the CY 2014 OPPS/ASC proposed rule (78 FR 43598), we proposed that the 

pass-through status of 15 drugs and biologicals would expire on December 31, 2013, as 

listed in Table 19 of the proposed rule (78 FR 43599). 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 passthrough 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 groups of policy packaged products described in section II.A.3. of the proposed rule, 

namely drugs, biologicals, and radiopharmaceuticals that function as supplies when used 
588 

in a diagnostic test or procedure and drugs and biologicals that function as supplies 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 $90 for CY 2014), as discussed 

further in section V.B.2. of this final rule with comment period. 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 ASP+6 

percent for CY 2014, as discussed further in section V.B.3. of this final rule with 

comment period). 

 Comment: One commenter recommended that CMS provide pass-through status 

for new drugs, specifically diagnostic radiopharmaceuticals, for a full 3-year period. The 

commenter asserted that providing pass-through status for 3 years would help provide a 

more current and accurate data set on which to base payment for the associated nuclear 

medicine procedure into which the radiopharmaceutical is subsequently packaged. To 

provide for a full 3-year pass-through period, the commenter recommended that the passthrough status for drugs and biologicals expire on a quarterly basis rather than on an 

annual basis. 
589 

 Response: As we stated in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74287), the CY 2013 OPPS/ASC final rule with comment period 

(77 FR 68363), and as described in section V.A. of this final rule with comment period, 

section 1833(t)(6)(C)(i)(II) of the Act permits CMS to make pass-through payments for a 

period of at least 2 but not more than 3 years, after the product’s first payment as a 

hospital outpatient service under Medicare Part B. We continue to believe that this 

period of payment appropriately facilitates dissemination of these new products into 

clinical practice and facilitates the collection of sufficient hospital claims data reflective 

of their costs for future OPPS ratesetting. Our longstanding practice has been to provide 

pass-through payment for a period of 2 to 3 years, with expiration of pass-through status 

proposed and finalized through the annual rulemaking process. Each year, when 

proposing to expire the pass-through status of certain drugs and biologicals, we examine 

our claims data for these products. We observe that hospitals typically have incorporated 

these products into their chargemasters based on the utilization and costs observed in our 

claims data. Under the existing pass-through policy, we begin pass-through payment on 

a quarterly basis, depending on when applications are submitted to us for consideration. 

We are confident that the period of time for which drugs, biologicals, contrast agents, and 

radiopharmaceuticals receive pass-through status, which is at least 2 but no more than 3 

years, is appropriate for CMS to collect the sufficient amount of data to make a 

packaging determination. We further note that we are in full compliance with the 

requirements of the Act, which states that pass-through status is given for at least 2 but no 

more than 3 years. 
590 

 Comment: One commenter stated that the pass-through status for HCPCS code 

Q4131 (Epifix, per square centimeter) should not expire on December 31, 2013, because 

this product has not received pass-through payments for a period of at least 2 years after 

the payment was first made for this product as a hospital outpatient service under 

Medicare Part B, as required by statute. The commenter indicated that pass-through 

payment for HCPCS code Q4131 was first made in February 2012. 

 Response: Upon review of our CY 2012 claims data, we agree with the 

commenter that HCPCS code Q4131 has not received pass-through payments for the 

minimum period of “at least 2 years” as required by statute. Therefore, we are not 

finalizing our proposal to expire the pass-through status for HCPCS code Q4131 on 

December 31, 2013. 

 After consideration of the public comments we received, we are modifying our 

proposal to expire the pass-through status of the 15 drugs and biologicals that were listed 

in Table 19 of the CY 2014 OPPS/ASC proposed rule (78 FR 43599). The pass-through 

status for HCPCS code Q4131 will not expire on December 31, 2013, but will continue 

for CY 2014. Table 32 lists the drugs and biologicals for which pass-through status will 

expire on December 31, 2013, as well as the final status indicators and the final APC 

assignments for these drugs and biologicals for CY 2014. 
591 

TABLE 32.—DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH 

STATUS WILL EXPIRE DECEMBER 31, 2013 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

CY 2014 

SI 

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 

3. Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing Pass-Through 

Status in CY 2014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43599), we proposed to 

continue pass-through 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 
592 

were approved for pass-through status between April 1, 2012 and July 1, 2013, were 

listed in Table 20 of the proposed rule (78 FR 43600). The APCs and HCPCS codes for 

these drugs and biologicals approved for pass-through status through April 1, 2013 were 

assigned status indicator “G” in Addenda A and B of the proposed rule. Addenda A and 

B for the 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 

stated in the proposed rule that 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, which is the amount that drugs and biologicals receive 

under section 1842(o) of the Act. 

 Therefore, for CY 2014, we proposed to pay for pass-through drugs and 

biologicals at ASP+6 percent, equivalent to the rate these drugs and biologicals would 

receive in the physician’s office setting in CY 2014. We proposed that a $0.00 

pass-through 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 
593 

applicable OPD fee schedule that the Secretary determines is appropriate, proposed at 

ASP+6 percent, is $0. 

 In the case of policy-packaged drugs (which include contrast agents, diagnostic 

radiopharmaceuticals, anesthesia drugs, and our new groups of policy packaged products 

described in section II.A.3. of this final rule with comment period, 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 when used in a 

surgical procedure), we proposed 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 proposed 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 proposed to provide payment for both diagnostic 

and therapeutic radiopharmaceuticals that are granted pass-through status based on the 

ASP methodology. As stated above, for purposes of pass-through payment, we consider 

radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or 

therapeutic radiopharmaceutical receives pass-through status during CY 2014, we 
594 

proposed to follow the standard ASP methodology to determine the pass-through 

payment rate that drugs receive under section 1842(o) of the Act, which is ASP+6 

percent. If ASP data are not available for a radiopharmaceutical, we proposed to provide 

pass-through payment at WAC+6 percent, the equivalent payment provided to passthrough drugs and biologicals without ASP information. If WAC information is also not 

available, we proposed to provide payment for the pass-through radiopharmaceutical at 

95 percent of its most recent AWP. 

 Comment: One commenter requested that CMS provide a higher payment 

amount for radiopharmaceuticals that are granted pass-through status.

 Response: We note that, for CY 2014, consistent with our CY 2013 payment 

policy for diagnostic and therapeutic radiopharmaceuticals, we proposed to provide 

payment for both diagnostic and therapeutic radiopharmaceuticals with pass-through 

status based on the ASP methodology. As stated above, the ASP methodology, as 

applied under the OPPS, uses several sources of data as a basis for payment, including 

the ASP, WAC if ASP is unavailable, and 95 percent of the radiopharmaceutical’s most 

recent AWP if ASP and WAC are unavailable. For purposes of pass-through payment, 

we consider radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic 

or therapeutic radiopharmaceutical receives pass-through status during CY 2014, we 

proposed to follow the standard ASP methodology to determine its pass-through payment 

rate under the OPPS to account for the acquisition as well as pharmacy overhead and 

handling costs. We continue to believe that a single payment is appropriate for 

diagnostic radiopharmaceuticals with pass-through status in CY 2014, and that the 
595 

payment rate of ASP+6 percent (or payment based on the ASP methodology) is 

appropriate to provide payment for both the radiopharmaceutical’s acquisition cost and 

any associated handling and overhead costs. 

 After consideration of the public comments we received, we are finalizing our 

proposal to provide payment for drugs, biologicals, diagnostic and therapeutic 

radiopharmaceuticals, and contrast agents that are granted pass-through status based on 

the ASP methodology. If a diagnostic or therapeutic radiopharmaceutical receives passthrough status during CY 2014, we will follow the standard ASP methodology to 

determine the pass-through payment rate that drugs receive under section 1842(o) of the 

Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, 

we will provide pass-through payment at WAC+6 percent, the equivalent payment 

provided to pass-through drugs and biologicals without ASP information. If WAC 

information is also not available, we will provide payment for the pass-through 

radiopharmaceutical at 95 percent of its most recent AWP. 

 As discussed in more detail in section II.A.3. of this final rule with comment 

period, over the last 6 years, we implemented a policy whereby payment for all 

nonpass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs is 

packaged into payment for the associated procedure. In the CY 2014 OPPS/ASC 

proposed rule, we proposed to continue the packaging of these items, and we also 

proposed new groups of policy-packaged products described in section II.A.3. of the 

proposed rule, namely drugs, biologicals, and radiopharmaceuticals that function as 

supplies when used in a diagnostic test or procedure and drugs and biologicals that 
596 

function as supplies 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 calculation of the 

policy-packaged drug APC offset amounts is described in more detail in section IV.A.2. 

of this final rule with comment period. It follows that the copayment for the 

nonpass-through payment portion (the otherwise applicable fee schedule amount that we 

would also offset from payment for the drug or biological if a payment offset applies) of 

the total OPPS payment for those drugs and biologicals would, therefore, be accounted 

for in the copayment for the associated clinical APC in which the drug or biological is 

used. 

 According to section 1833(t)(8)(E) of the Act, the amount of copayment 

associated with pass-through items is equal to the amount of copayment that would be 

applicable if the pass-through adjustment was not applied. Therefore, as we did in 

CY 2013, we proposed 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 proposed to set the associated copayment amount to zero for the 
597 

additional categories of policy-packaged products proposed for CY 2014 described in 

section II.A.3. of the 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 proposed to not publish a copayment amount for these items 

in Addenda A and B to the proposed rule (which are available via the Internet on the 

CMS Web site). 

 Comment: Commenters supported the CY 2014 proposal to continue to set the 

associated copayment amounts to zero for pass-through diagnostic radiopharmaceuticals, 

contrast agents, and other drugs and biologicals that would otherwise be packaged if the 

product did not have pass-through status. The commenters noted that this policy is 

consistent with statutory requirements and provides cost-saving benefits to beneficiaries. 

One commenter requested that CMS expand the $0 copayment policy to pass-through 

therapeutic radiopharmaceuticals as well. 

 Response: We appreciate the commenters’ support of our proposal. According to 

section 1833(t)(8)(E) of the Act, the amount of copayment associated with pass-through 

items is equal to the amount of copayment that would be applicable if the pass-through 

adjustment was not applied. Therefore, we believe that the copayment amount should be 

zero for drugs and biologicals that would otherwise be packaged if the item did not have 

pass-through status. However, therapeutic radiopharmaceuticals without pass-through 

status are not packaged but are paid at ASP + 6 percent. Therefore, the copayment for a 
598 

therapeutic radiopharmaceutical with pass-through status cannot be zero but must be 

based on the payment amount for the therapeutic radiopharmaceutical when it does not 

have pass-through status. 

 After consideration of the public comments received, we are finalizing our 

proposal, without modification, to continue to set the associated copayment amount for 

pass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs that 

would otherwise be packaged if the item did not have pass-through status to zero for 

CY 2014. We also are finalizing our proposal to extend this policy to the additional 

categories of policy-packaged drugs and biologicals that have pass-through status, and to 

set a copayment amount of zero for these drugs and biologicals for CY 2014. 

 The 26 drugs and biologicals that will continue to have pass-through status for 

CY 2014 or have been granted pass-through status as of January 2014 are shown in Table 

33 below. As is our standard methodology, we annually review new permanent HCPCS 

codes and delete temporary HCPCS C-codes if an alternate permanent HCPCS code is 

available for purposes of OPPS billing and payment. Table 33 includes those coding 

changes. 
599 

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

IN CY 2014 

*HCPCS codes C9133, C9441, C9497, J7508, and J9371 are effective January 1, 2014. 

CY 2013 

HCPCS 

Code 

CY 

2014 

HCPCS 

Code CY 2014 Long Descriptor 

Final 

CY 

2014 SI 

Final 

CY 

2014 

APC 

C1204 A9520 Technetium Tc 99m tilmanocept, diagnostic, 

up to 0.5 millicuries G 1463 

C9130 J1556 Injection, immune globulin (Bivigam), 500 

mg 

G 9130 

C9131 J9354 Injection, ado-trastuzumab emtansine, 1 mg G 9131 

C9132 C9132 Prothrombin complex concentrate (human), 

Kcentra, per i.u. of Factor IX activity G 9132 

C9290 C9290 Injection, bupivicaine liposome, 1 mg G 9290 

C9292 J9306 Injection, pertuzumab, 1 mg G 9292 

C9293 C9293 Injection, glucarpidase, 10 units G 9293 

C9294 J3060 Injection, taliglucerase alfa, 10 units G 9294 

C9295 J9047 Injection, carfilzomib, 1 mg G 9295 

C9296 J9400 Injection, ziv-aflibercept, 1 mg G 9296 

C9297 J9262 Injection, omacetaxine mepesuccinate, 0.01 

mg 

G 9297 

C9298 J7316 Injection, ocriplasmin, 0.125 mg G 9298 

N/A C9133 Factor ix (antihemophilic factor, 

recombinant), Rixubus, per i.u. G 1467 

N/A C9441 Injection, ferric carboxymaltose, 1 mg G 9441 

N/A C9497 Loxapine, inhalation powder, 10 mg G 9497 

N/A J7508 Tacrolimus, Extended Release, Oral, 0.1 mg G 1465 

N/A J9371 Injection, Vincristine Sulfate Liposome, 1 

mg

G 1466 

J0178 J0178 Injection, aflibercept, 1 mg vial G 1420 

J0716 J0716 Injection, centruroides (scorpion) immune 

f(ab)2, up to 120 milligrams G 1431 

J7315 J7315 Mitomycin, ophthalmic, 0.2 mg G 1448 

J9019 J9019 Injection, asparaginase (erwinaze), 1,000 iu G 9289 

Q4122 Q4122 Dermacell, per square centimeter G 1419 

Q4127 Q4127 Talymed, per square centimeter G 1449 

Q4131 Q4131 Epifix, per square centimeter G 9366 

Q4132 Q4132 Grafix core, per square centimeter G 9368 

Q4133 Q4133 Grafix prime, per square centimeter G 9369 
600 

4. 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 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, in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43601), we proposed 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 when used in a surgical procedure, as discussed in section II.A.3. of 

this final rule with comment period. 
601 

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals 

 As previously noted, radiopharmaceuticals are considered to be drugs for OPPS 

pass-through payment purposes. As described above, section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional pass-through payment amount for pass-through drugs and 

biologicals is the difference between the amount paid under section 1842(o) of the Act 

and the otherwise applicable OPD fee schedule amount. There are currently two 

diagnostic radiopharmaceuticals with pass-through status under the OPPS. HCPCS code 

A9584 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries) was 

granted pass-through status using HCPCS code C9406 beginning July 1, 2011, and we 

proposed that its pass-through status would expire on December 31, 2013. HCPCS code 

C1204 (Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries) was granted 

pass-through status beginning October 1, 2013. We currently apply the established 

radiopharmaceutical payment offset policy to pass-through payment for these products. 

As described earlier in section V.A.3. of this final rule with comment period, we 

proposed that new pass-through diagnostic radiopharmaceuticals would be paid at ASP+6 

percent, while those new pass-through 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 
602 

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 

nonpass-through 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 pass-through status beginning in CY 2010 or later as devices, for 

purposes of the OPPS, 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 
603 

diagnostic radiopharmaceutical is used and, accordingly, reduce the separate OPPS 

payment for the pass-through diagnostic radiopharmaceutical by this amount. For 

CY 2014, as we did in CY 2013, we proposed to continue to apply the diagnostic 

radiopharmaceutical offset policy to payment for pass-through diagnostic 

radiopharmaceuticals. 

 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 proposed 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 (78 FR 43601). Under this proposed 

policy, the OPPS payment amount for nuclear medicine procedures are not 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. Therefore, we do not believe that the burden on hospitals of adhering to the 

nuclear medicine “FB” modifier policy continues to be warranted. 

 Comment: Commenters recommended that CMS publish preliminary offset 

amounts for diagnostic radiopharmaceuticals and contrast agents with the proposed rule 

to allow for meaningful assessment of and public comment on the data. 
604 

 Response: The exact data used to calculate all of the proposed and final payment 

rates, including the associated offset amounts, for the CY 2014 OPPS are available for 

purchase under a CMS data use agreement through the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. This Web site includes information about 

purchasing the “OPPS Limited Data Set,” which now includes the additional variables 

previously available only in the OPPS identifiable data set, including ICD 9 CMS 

diagnosis codes and revenue code payment amounts. We do not post the offset amounts 

by APC until publication of the final rule with comment period because we assign 

services to APCs based on our estimate of their full resource cost, including, but not 

limited to, packaged diagnostic radiopharmaceuticals and contrast agents. The offset 

amount is the portion of each APC payment rate that could reasonably be attributed to the 

cost of predecessor diagnostic radiopharmaceuticals and contrast agents when 

considering a new diagnostic radiopharmaceutical and contrast agent for pass-through 

payment and has no bearing on APC assignment. 

 Comment: One commenter believed that CMS should not discontinue the 

requirement for hospitals to append modifier “FB” to specified nuclear medicine 

procedures in cases in which the diagnostic radiopharmaceutical is received at no cost or 

full credit. The commenter suggested that this is a relatively new policy and, therefore, 

should be maintained for at least another year. 

 Response: Based on claims data, it appears that hospitals rarely receive 

diagnostic radiopharmaceuticals at no cost or full credit. Therefore, we do not believe 
605 

that the “FB” modifier policy, as it relates to diagnostic radiopharmaceuticals, is 

warranted. 

 After consideration of the public comments we received, we are finalizing our 

proposal, without modification, to continue to apply the diagnostic radiopharmaceutical 

offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described 

in the CY 2014 OPPS/ASC proposed rule (78 FR 43601). We will continue to reduce the 

payment amount for procedures in the APCs listed in Table 34 in this final rule with 

comment period by the full policy-packaged offset amount appropriate for diagnostic 

radiopharmaceuticals. We also are finalizing our proposal 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 or full credit. Under this finalized policy, the OPPS payment amount for 

nuclear medicine procedures is not reduced when a diagnostic radiopharmaceutical is 

received at no cost or full credit. 

 Table 34 below displays the APCs to which nuclear medicine procedures will 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. 
606 

TABLE 34.—APCs TO WHICH A DIAGNOSTIC RADIOPHARMACEUTICAL 

OFFSET MAY BE APPLICABLE IN CY 2014 

CY 2014 

APC 

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 

0398 Level I Cardiac Imaging 

0400 Hematopoietic Imaging 

0401 Level I Pulmonary Imaging 

0402 Level II Nervous System Imaging 

0403 Level I Nervous System Imaging 

0404 Renal and Genitourinary Studies 

0406 Level I Tumor/Infection Imaging 

0408 Level III Tumor/Infection Imaging 

0414 Level II Tumor/Infection Imaging 

c. Payment Offset Policy for Contrast Agents 

 Section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through 

payment amount for pass-through drugs and biologicals is the difference between the 

amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee 

schedule amount. Currently, there are no contrast agents with pass-through status under 

the OPPS. As described in section V.A.4.c. of the proposed rule (78 FR 43602), we 

proposed 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 
607 

WAC+6 percent or, if WAC is not available, at 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 pass-through 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 pass-through status. In accordance with our standard 

offset methodology, in the CY 2014 OPPS/ASC proposed rule (78 FR 43602), we 

proposed, for new contrast agents that are approved for pass-through status as a drug or 

biological during CY 2014, to deduct from the payment an amount that reflects the 

portion of the APC payment associated with predecessor contrast agents. This was 

proposed in order to ensure that 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 proposed to continue to apply this same policy 

to contrast agents. Specifically, we proposed 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 proposed to multiply the policy packaged drug 
608 

offset fraction by the APC payment amount for the procedure with which the 

pass-through contrast agent is used and, accordingly, reduce the separate OPPS payment 

for the pass-through contrast agent by this amount. We proposed to continue to apply 

this methodology for CY 2014 to recognize that when a contrast agent with pass-through 

status is billed with any procedural APC listed in Table 22 of the proposed rule (78 FR 

43602 through 43603), 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. 

 We proposed to identify procedural APCs for which we expect a contrast offset 

could be applicable in the case of a pass-through contrast agent as any procedural APC 

with a policy-packaged drug amount greater than $20 that is not a nuclear medicine APC 

identified in Table 34 above, and these APCs are displayed in Table 35 below. The 

methodology used to determine a threshold cost for application of a contrast agent offset 

policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period 

(70 FR 60483 through 60484). For CY 2014, we proposed to continue to recognize that 

when a contrast agent with pass-through status is billed with any procedural APC listed in 

Table 22 of the proposed rule (78 FR 43602 through 43603), a specific offset based on 

the procedural APC would be applied to payment for the contrast agent to ensure that 

duplicate payment is not made for the contrast agent. 

 As we proposed, for this final rule with comment period, we will continue to post 

annually on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset 
609 

amounts that will be used for that year for purposes of both evaluating cost significance 

for candidate pass-through device categories and drugs and biologicals, including 

contrast agents, and establishing any appropriate APC offset amounts. Specifically, the 

file will continue to provide the amounts and percentages of APC payment associated 

with packaged implantable devices, “policy packaged” drugs, and “threshold-packaged” 

drugs and biologicals for every OPPS clinical APC. 

 After consideration of the public comments we received, we are finalizing our 

proposal for CY 2014 without modification. We will continue to recognize that when a 

contrast agent with pass-through status is billed with any procedural APC listed in Table 

35 below, a specific offset based on the procedural APC will be applied to the payment 

for the contrast agent to ensure that duplicate payment is not made for the contrast agent. 
610 

TABLE 35.—APCs TO WHICH A CONTRAST AGENT OFFSET MAY BE 

APPLICABLE FOR CY 2014 

CY 2014 

APC 

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 

0104 Transcatheter 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 

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 
611 

d. Payment Offset Policy for Products Packaged According to the 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 When 

Used in a Surgical Procedure 

 Section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through 

payment amount for pass-through drugs and biologicals is the difference between the 

amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee 

schedule amount. As discussed in section II.A.3. of the CY 2014 OPPS/ASC 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 when used in a surgical 

procedure, we specifically proposed 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 (78 FR 43570 

through 43572). 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 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 proposed for CY 2014 to deduct an amount that reflects the portion of 
612 

the APC payment associated with predecessor products in order to ensure no duplicate 

payment is made 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 when used in a surgical 

procedure (78 FR 43603). 

 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 proposed 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 when used in a surgical procedure (78 FR 43603). Specifically, in 

the case of pass-through skin substitutes, we proposed 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 policypackaged 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 proposed 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 
613 

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 proposed to multiply the policy-packaged drug offset fraction by the 

APC payment amount for the procedure with which the pass-through skin substitute or 

pass-through stress agent is used and, accordingly, reduce the separate OPPS payment for 

the pass-through skin substitute or pass-through stress agent by this amount 

(78 FR 43603). 

 We did not receive any public comments on this proposal. Therefore, we are 

finalizing our proposal, without modification, to recognize that when a skin substitute 

with pass-through status is billed with any procedural APC listed in Table 36 below, a 

specific offset based on the procedural APC will be applied to the payment for the skin 

substitute to ensure that duplicate payment is not made for the skin substitute. In 

addition, when a stress agent with pass-through status is billed with any procedural APC 

listed in Table 37 below, a specific offset based on the procedural APC will be applied to 

the payment for the stress agent to ensure that duplicate payment is not made for the 

stress agent. 

 Table 36 below displays the APCs to which skin substitute procedures will be 

assigned in CY 2014 and for which we expect that an APC offset could be applicable in 

the case of skin substitutes with pass-through status. 

 Table 37 below displays the APCs to which MPI procedures will 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. 
614 

 As we proposed, we will continue to post annually on the CMS Web site at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/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. 

TABLE 36.—APCs TO WHICH A SKIN SUBSTITUTE OFFSET MAY BE 

APPLICABLE FOR CY 2014 

CY 2014 

APC 

CY 2014 APC Title 

0328 Level III Skin Repair 

0329 Level IV Skin Repair 

TABLE 37.—APCs TO WHICH A STRESS AGENT OFFSET MAY BE 

APPLICABLE FOR CY 2014 

CY 2014 

APC CY 2014 APC Title 

0100 Cardiac Stress Tests 

0377 Level II Cardiac Imaging 
615 

B. 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. 
616 

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

a. Background 

 As indicated in section V.B.1. of this final rule with comment period, in 

accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate 

APCs for payment of drugs and biologicals was set to $50 per administration during 

CYs 2005 and 2006. In CY 2007, we used the four quarter moving average Producer 

Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the 

$50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 

mandated threshold became effective) to the third quarter of CY 2007. We then rounded 

the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 

threshold amount of $55. Using the same methodology as that used in CY 2007 (which 

is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 68085 through 68086)), we set the packaging threshold for establishing separate 

APCs for drugs and biologicals at $60 for CYs 2008 and 2009. For CY 2010, we set the 

packaging threshold at $65; 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 the CY 2014 OPPS/ASC proposed rule 

(78 FR 43604), 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 
617 

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 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 proposed 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. Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain 

Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals (“ThresholdPackaged Drugs”) 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43604), to determine the 

proposed CY 2014 packaging status for all nonpass-through drugs and biologicals that 

are not policy packaged, we calculated, on a HCPCS code-specific basis, the per day cost 
618 

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 the proposed rule, or for diagnostic 

radiopharmaceuticals, contrast agents, anesthesia drugs, and implantable biologicals that 

we proposed 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 the 

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 proposed for separately payable drugs and biologicals for CY 2014, as 

discussed in more detail in section V.B.3.b. of the 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. 
619 

 As is our standard methodology, for CY 2014, we proposed 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 the proposed rule (which are available via the Internet on the CMS Web site) 

because these were the most recent data available for use at the time of development of 

the 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 proposed to package items with a per day cost less than or equal to $90, and 

identify items with a per day cost greater than $90 as separately 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 displayed in Addendum 

B of the proposed rule (which is available via the Internet on the CMS Web site) for 

payment in CY 2014. 

 Comment: The majority of commenters objected to the proposed increase in the 

OPPS packaging threshold to $90 for CY 2014. The commenters recommended that 

CMS consider either eliminating the drug packaging threshold and providing separate 

payment for all drugs with HCPCS codes or freezing the packaging threshold at $80 for 

CY 2014. A few commenters suggested that CMS limit increases in the packaging 

threshold amount to the hospital market basket update factor for the year that is reflective 

of all statutory adjustments. 
620 

 Response: As stated in the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 68086), we believe that packaging certain items is a fundamental component of a 

prospective payment system, that updating the packaging threshold of $50 for the 

CY 2005 OPPS is consistent with industry and government practices, and that the PPI for 

Prescription Drugs is an appropriate mechanism to gauge Part B drug inflation. 

Therefore, because of our continued belief that packaging is a fundamental component of 

a prospective payment system that continues to provide important flexibility and 

efficiency in the delivery of high quality hospital outpatient services, we are not adopting 

the commenters’ recommendations to pay separately for all drugs, biologicals, and 

radiopharmaceuticals for CY 2014 or to eliminate or to freeze the packaging threshold at 

$80. 

 We disagree with the commenters who suggested that CMS limit increases in the 

outpatient drug packaging threshold amount to the hospital update factor for the year, 

reflective of all statutory adjustments or the market basket update. As stated above, we 

continue to believe that updating the $50 threshold of the CY 2005 OPPS is consistent 

with industry and government practices and that the PPI for Prescription Drugs is an 

appropriate mechanism to gauge Part B drug inflation. As we stated in the CY 2007 

OPPS/ASC final rule with comment period (71 FR 68085), we believe that the PPI for 

Prescription Drugs reflects price changes at the wholesale or manufacturer stage. 

Because OPPS payment rates for drugs and biologicals are generally based on the ASP 

data that are reported by their manufacturers, we believe that the PPI for Prescription 

Drugs is an appropriate price index to use to update the packaging threshold for CY 2007 
621 

and beyond. In contrast, the market basket update contains numerous price proxies, 

including, but not limited to, proxies for wages and salaries, utilities, and 

nonlabor-related expenses, that are not related to price increases for prescription drugs. 

Therefore, we believe that the market basket as a whole is not an appropriate mechanism 

for determining the outpatient drug packaging threshold amount. Within the calculation 

of the market basket update, we use the PPI for Prescription Drugs specifically to 

measure the price growth for prescription drugs, but price changes for prescription drugs 

are only one component of price changes for the numerous items and services hospitals 

purchase. 

 Since publication of the CY 2014 OPPS/ASC proposed rule, consistent with our 

policy of updating the packaging threshold with more recently available data for this final 

rule with comment period, we have again followed the CY 2007 methodology for 

CY 2014 and used updated four quarter moving average PPI index levels provided by the 

CMS Office of the Actuary to trend the $50 threshold forward from the third quarter of 

CY 2005 to the third quarter of CY 2014. We then rounded the resulting updated dollar 

amount ($91.27) to the nearest $5 increment, which yielded a figure of $90. Therefore, 

after consideration for the public comments we received, and consistent with our 

methodology for establishing the packaging threshold using the most recent PPI forecast 

data, we are adopting a CY 2014 packaging threshold of $90. 

 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 
622 

with comment period. We note that it is also our policy to make an annual packaging 

determination for a HCPCS code only when we develop the OPPS/ASC final rule with 

comment period for the update year. Only HCPCS codes that are identified as separately 

payable in the final rule with comment period are subject to quarterly updates. For our 

calculation of per day costs of HCPCS codes for drugs and biologicals in this final rule 

with comment period, we used 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 used these data for budget neutrality 

estimates and impact analyses for this final rule with comment period. 

 Payment rates for HCPCS codes for separately payable drugs and biologicals 

included in Addenda A and B to this final rule with comment period are based on ASP 

data from the second quarter of CY 2013. These data are the basis for calculating 

payment rates for drugs and biologicals in the physician’s office setting using the ASP 

methodology, effective October 1, 2013. These payment rates will 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 recalculated their mean unit cost from all of the CY 2012 

claims data and updated cost report information available for this 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 final rule with 
623 

comment period may be different from the same drug HCPCS code’s packaging status 

determined based on the data used for the proposed rule. Under such circumstances, we 

proposed to continue to follow the established policies initially adopted for the CY 2005 

OPPS (69 FR 65780) in order to more equitably pay for those drugs whose 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 proposed 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 were 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 proposed packaged 

payment in CY 2014 but then have per day costs greater than the CY 2014 final rule drug 
624 

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. 

 We did not receive any public comments on our proposal to apply the established 

policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more 

equitably pay for those drugs whose cost fluctuates relative to the CY 2014 OPPS drug 

packaging threshold and the drug’s payment status (packaged or separately payable) in 

CY 2013. Therefore, we are finalizing our proposal, without modification, for CY 2014. 

 We note that we proposed to package HCPCS codes 90734 (Meningococcal 

conjugate vaccine, serogroups a, c, y and w-135 (tetravalent), for intramuscular use), 

J0630 (Injection, calcitonin salmon, up to 400 units), and J1570 (Injection, ganciclovir 

sodium, 500 mg) for CY 2014. Using updated ASPs and the CY 2012 hospital claims 

data available for this final rule with comment period, HCPCS codes 90734, J0630, and 

J1570 now have per day costs greater than $90. In accordance with our established 

policy for such cases, for CY 2014 we will pay for HCPCS codes 90734, J0630, and 

J1570 separately. 

 In addition, because we did not have claims data for HCPCS code J7191 (Factor 

viii (antihemophilic factor (porcine)), per IU) in the CY 2014 OPPS/ASC proposed rule, 

we had proposed a status indicator of “E” for this product in CY 2014. However, since 

publication of the proposed rule, we have received claims data and the per day cost for 

this product is more than the $90 CY 2014 packaged threshold. HCPCS code J7191 will 

be paid separately and will be assigned a status indicator of “K” for CY 2014. 
625 

c. Packaging Determination for HCPCS Codes That Describe the Same Drug or 

Biological But Different Dosages 

 In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we 

began recognizing, for OPPS payment purposes, multiple HCPCS codes reporting 

different dosages for the same covered Part B drugs or biologicals in order to reduce 

hospitals’ administrative burden by permitting them to report all HCPCS codes for drugs 

and biologicals. In general, prior to CY 2008, the OPPS recognized for payment only the 

HCPCS code that described the lowest dosage of a drug or biological. We extended this 

recognition to multiple HCPCS codes for several other drugs under the CY 2009 OPPS 

(73 FR 68665). During CYs 2008 and 2009, we applied a policy that assigned the status 

indicator of the previously recognized HCPCS code to the associated newly recognized 

code(s), reflecting the packaged or separately payable status of the new code(s). In the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we explained that 

once claims data were available for these previously unrecognized HCPCS codes, we 

would determine the packaging status and resulting status indicator for each HCPCS code 

according to the general, established HCPCS code-specific methodology for determining 

a code’s packaging status for a given update year. However, we also stated that we 

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. 
626 

 In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 

60491), we finalized a policy to make a single packaging determination for a drug, rather 

than an individual HCPCS code, when a drug has multiple HCPCS codes describing 

different dosages. We analyzed CY 2008 claims data for the HCPCS codes describing 

different dosages of the same drug or biological that were newly recognized in CY 2008 

and found that our claims data would result in several different packaging determinations 

for different codes describing the same drug or biological. Furthermore, we found that 

our claims data included few units and days for a number of newly recognized HCPCS 

codes, resulting in our concern that these data reflected claims from only a small number 

of hospitals, even though the drug or biological itself may be reported by many other 

hospitals under the most common HCPCS code. Based on these findings from our first 

available claims data for the newly recognized HCPCS codes, we believed that adopting 

our standard HCPCS code-specific packaging determinations for these codes could lead 

to payment incentives for hospitals to report certain HCPCS codes instead of others, 

particularly because we do not currently require hospitals to report all drug and biological 

HCPCS codes under the OPPS in consideration of our previous policy that generally 

recognized only the lowest dosage HCPCS code for a drug or biological for OPPS 

payment. 

 For CY 2014, we continue to believe that adopting the standard HCPCS 

code-specific packaging determinations for these codes could lead to payment incentives 

for hospitals to report certain HCPCS codes for drugs instead of others. Making 

packaging determinations on a drug-specific basis eliminates these incentives and allows 
627 

hospitals flexibility in choosing to report all HCPCS codes for different dosages of the 

same drug or only the lowest dosage HCPCS code. Therefore, in the CY 2014 

OPPS/ASC proposed rule (78 FR 43606), we proposed to continue our policy to make 

packaging determinations on a drug-specific basis, rather than a HCPCS code-specific 

basis, for those HCPCS codes that describe the same drug or biological but different 

dosages in CY 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. The following drugs did not have 

pricing information available for the ASP methodology for this CY 2014 OPPS/ASC 

final rule with comment period 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 anti-emetic, for 
628 

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); 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); 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); 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). 

 For all other drugs and biologicals that have HCPCS codes describing different 

doses, 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). 

 We did not receive any public comments on this proposal. Therefore, we are 

finalizing our CY 2014 proposal, without modification, to continue to make packaging 

determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for 
629 

those HCPCS codes that describe the same drug or biological but different dosages. The 

packaging status of each drug and biological HCPCS code to which this methodology 

will apply is displayed in Table 38 below. 

TABLE 38.—HCPCS CODES TO WHICH THE CY 2014 DRUG-SPECIFIC 

PACKAGING DETERMINATION METHODOLOGY APPLIES 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

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 K 

J1560 Injection, gamma globulin, intramuscular over 10 cc K 

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 

J2270 Injection, morphine sulfate, up to 10 mg N 

J2271 Injection, morphine sulfate, 100mg N 

J2788 Injection, rho d immune globulin, human, minidose, 50 

micrograms (250 i.u.) N 

J2790 Injection, rho d immune globulin, human, full dose, 300 

micrograms (1500 i.u.) N 

J2920 Injection, methylprednisolone sodium succinate, up to 40 mg N 

J2930 Injection, methylprednisolone sodium succinate, up to 125 mg N 

J3120 Injection, testosterone enanthate, up to 100 mg N 

J3130 Injection, testosterone enanthate, up to 200 mg N 

J3471 Injection, hyaluronidase, ovine, preservative free, per 1 usp 

unit (up to 999 usp units) N 

J3472 Injection, hyaluronidase, ovine, preservative free, per 1000 usp 

units N 

J7050 Infusion, normal saline solution , 250 cc N 
630 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

CY 2014 

SI 

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 antiemetic, for use as a complete therapeutic substitute for an IV 

anti-emetic at the time of chemotherapy treatment, not to 

exceed a 48-hour dosage regimen 

N 

Q0168 

Dronabinol, 5 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV 

anti-emetic at the time of chemotherapy treatment, not to 

exceed a 48-hour dosage regimen 

N 

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 
631 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

CY 2014 

SI 

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 antiemetic, for use as a complete therapeutic substitute for an IV 

anti-emetic at the time of chemotherapy treatment, not to 

exceed a 48-hour dosage regimen 

N 

Q0176 

Perphenazine, 8 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV 

anti-emetic at the time of chemotherapy treatment, not to 

exceed a 48-hour dosage regimen 

N 

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. Payment for Drugs and Biologicals without Pass-Through Status That Are Not 

Packaged 

a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately 

Payable and Packaged Drugs and Biologicals 

 Section 1833(t)(14) of the Act defines certain separately payable 

radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these 

items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” 

(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 
632 

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. Most 

physician Part B drugs are paid at ASP+6 percent pursuant to section 1842(o) and section 

1847A of the Act. 
633 

 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43608), we 

proposed to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs 

and biologicals, including SCODs. Although we do not distinguish SCODs in this 

discussion, we note that we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act 

to SCODs, but we also are applying this 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 
634 

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 
635 

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 
636 

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 the range of 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, 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). 
637 

b. CY 2014 Payment Policy 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43608), we proposed to 

continue our CY 2013 policy and pay for separately payable drugs and biologicals at 

ASP+6 percent pursuant to section 1833(t)(14)(A)(iii)(II) of the Act, referred to as the 

“statutory default.” We proposed 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 

proposed 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. 

 Comment: Commenters supported CMS’ proposal to pay for separately payable 

drugs and biologicals based on the statutory default rate of ASP+6 percent. The 

commenters stated that ASP+6 percent is administratively simple, improves stability of 

drug and biological payments, and better covers the costs of drug acquisition and 

pharmacy overhead. A few commenters supported CMS’ proposal, but recommended 

that CMS examine ways to compensate hospitals for the unique, higher overhead and 

handling costs associated with therapeutic radiopharmaceuticals. One commenter 

recommended that CMS design a payment strategy that would maintain the current 

ASP+6 percent for branded drug products but provide for a much higher payment rate for 

multi-source generic drugs. 
638 

 Response: We appreciate the commenters’ support of our proposal. We continue 

to believe that ASP+6 percent based on the statutory default is appropriate for hospitals 

for CY 2014 and that this percentage amount includes payment for acquisition and 

overhead cost. We see no evidence that an additional overhead adjustment is required for 

separately payable drugs, biologicals and therapeutic radiopharmaceuticals for CY 2014. 

With regard to the development of a multi-tiered payment strategy that would encourage 

the use of generic drugs over their branded counterparts, we made no such proposal and, 

therefore, consider this comment outside the scope of the proposed rule. 

 Comment: Some commenters recommended that CMS require hospitals to bill all 

drugs with HCPCS codes under revenue code 0636 in order to improve its data on 

packaged drugs. 

 Response: We do not accept the commenter’s recommendation that CMS require 

drugs and biologicals to be reported under revenue code 0636. We believe that drugs and 

biologicals also may be appropriately reported in revenue code categories other than 

revenue code 0636, including, but not limited to, revenue codes 025x and 062x. As we 

stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71966), we 

recognize that hospitals may carry the costs of drugs and biologicals in multiple cost 

centers and that it may not be appropriate to report the cost of all drugs and biologicals in 

one specified revenue code. In addition, we generally require hospitals to follow 

National Uniform Billing Committee (NUBC) guidance for the choice of an appropriate 

revenue code that is also appropriate for the hospital’s internal accounting processes. 
639 

 Comment: One commenter asked that, for CY 2014, CMS consider paying for 

influenza and PPV vaccines at 106 percent of ASP instead of paying for the items at 

reasonable cost. 

 Response: We consider this comment outside the scope of the proposed rule. 

 After consideration of the public comments we received, we are finalizing our 

proposal, without modification, to pay for separately payable drugs and biologicals at 

ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). 

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 for CY 2014. In addition, we are finalizing 

our proposal which states that payment for separately payable drugs and biologicals be 

included in the budget neutrality adjustments, under the requirements of section 

1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in 

determining payment of these separately paid drugs and biologicals. 

 We note that separately payable drug and biological payment rates listed in 

Addenda A and B to this final rule with comment period, which illustrate the final 

CY 2014 payment of ASP+6 percent for separately payable nonpass-through drugs and 

biologicals and ASP+6 percent for pass-through drugs and biologicals, reflect either ASP 

information that is the basis for calculating payment rates for drugs and biologicals in the 

physician’s office setting effective October 1, 2013, or WAC, AWP, or mean unit cost 

from CY 2012 claims data and updated cost report information available for this final 

rule with comment period. In general, these published payment rates are not reflective of 
640 

actual January 2014 payment rates. This is because payment rates for drugs and 

biologicals with ASP information for January 2014 will be determined through the 

standard quarterly process where ASP data submitted by manufacturers for the third 

quarter of 2013 (July 1, 2013 through September 30, 2013) are used to set the payment 

rates that are released for the quarter beginning in January 2014 near the end of 

December 2013. In addition, payment rates for drugs and biologicals in Addenda A and 

B to this final rule with comment period for which there was no ASP information 

available for October 2013 are based on mean unit cost in the available CY 2012 claims 

data. If ASP information becomes available for payment for the quarter beginning in 

January 2014, we will price payment for these drugs and biologicals based on their newly 

available ASP information. Finally, there may be drugs and biologicals that have ASP 

information available for this final rule with comment period (reflecting October 2013 

ASP data) that do not have ASP information available for the quarter beginning in 

January 2014. These drugs and biologicals will then be paid based on mean unit cost 

data derived from CY 2012 hospital claims. Therefore, the payment rates listed in 

Addenda A and B to this final rule with comment period are not for January 2014 

payment purposes and are only illustrative of the CY 2014 OPPS payment methodology 

using the most recently available information at the time of issuance of this final rule 

with comment period. 

4. 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 
641 

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, in the 

CY 2014 OPPS/ASC proposed rule (78 FR 43609), we proposed 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 proposed 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). 
642 

 Comment: Commenters supported CMS’ proposal to pay for separately payable 

therapeutic radiopharmaceuticals under the statutory default payment rate of ASP+6 

percent, if ASP data are submitted to CMS. 

 Response: We appreciate the commenters’ support. We continue to believe that 

providing payment for therapeutic radiopharmaceuticals based on ASP or mean unit cost 

if ASP information is not available would provide appropriate payment for these 

products. When ASP data are not available, we believe that paying for therapeutic 

radiopharmaceuticals using mean unit cost will appropriately pay for the average hospital 

acquisition and associated handling costs of nonpass-through separately payable 

therapeutic radiopharmaceuticals. As we stated in the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60523), although using mean unit cost for payment for 

therapeutic radiopharmaceuticals when ASP data are not available is not the usual OPPS 

process (the usual process relies on alternative data sources such as WAC or AWP when 

ASP information is temporarily unavailable, prior to defaulting to the mean unit cost 

from hospital claims data), we continue to believe that WAC or AWP is not an 

appropriate proxy to provide OPPS payment for average therapeutic radiopharmaceutical 

acquisition cost and associated handling costs when manufacturers are not required to 

submit ASP data. Payment based on WAC or AWP under the established OPPS ASP 

methodology for payment of separately payable drugs and biologicals is usually 

temporary for a calendar quarter until a manufacturer is able to submit the required ASP 

data in accordance with the quarterly ASP submission timeframes for reporting under 

section 1847A of the Act. Because ASP reporting for OPPS payment of separately 
643 

payable therapeutic radiopharmaceutical is not required, a manufacturer’s choice to not 

submit ASP could result in payment for a separately payable therapeutic 

radiopharmaceutical based on WAC or AWP for a full year, a result which we believe 

would be inappropriate. 

 Comment: One commenter indicated that the proposed payment rate for the 

therapeutic radiopharmaceutical identified by HCPCS code A9517 (Iodine i-131 sodium 

iodide capsule(s), therapeutic, per millicurie) decreased by 54 percent compared to the 

CY 2013 payment rate and questioned the reason for this proposed reduction. 

 Response: The CY 2013 payment rate for HCPCS code A9517 is $17.74 per 

millicurie. The proposed CY 2014 payment rate for HCPCS code A9517 was $18.70, 

which is a 5.4 percent increase compared to the CY 2013 payment rate. The final CY 

2014 payment rate for HCPCS code A9517 is $18.52, which is a 4.4 percent increase 

compared to the CY 2013 payment rate. 

 After consideration of the public comments we received, we are finalizing our 

proposal, without modification, to continue to pay all nonpass-through, separately 

payable therapeutic radiopharmaceuticals at ASP+6 percent. We are also finalizing our 

proposal to continue 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. The CY 2014 final rule payment rates for nonpass-through separately 

payable therapeutic radiopharmaceuticals are included in Addenda A and B to this final 

rule with comment period (which are available via the Internet on the CMS Web site). 
644 

5. 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43609), for CY 2014, we 

proposed to pay for blood clotting factors at ASP+6 percent, consistent with our proposed 

payment policy for other nonpass-through separately payable drugs and biologicals, and 

to continue our policy for payment of the furnishing fee using an updated amount. Our 

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 was based on the percentage 

increase in the Consumer Price Index (CPI) for medical care for the 12-month period 

ending with June of the previous year. Because the Bureau of Labor Statistics releases 

the applicable CPI data after the MPFS and OPPS/ASC proposed rules are published, we 

were not able to include the actual updated furnishing fee in the proposed rules. 
645 

Therefore, in accordance with our policy, as finalized in the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66765), we proposed to announce the actual figure for 

the percent change in the applicable CPI 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-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html. 

 Comment: Commenters supported CMS’ proposal to pay for blood clotting 

factors at ASP+6 percent and to continue to apply the furnishing fee for blood clotting 

factors provided in the OPD. 

 Response: We appreciate the commenters’ support of our policy. 

 After consideration of the public comments we received, we are finalizing our 

proposal, without modification, to provide payment for blood clotting factors under the 

same methodology as other separately payable drugs and biologicals under the OPPS and 

to continue payment of an updated furnishing fee. We will announce the actual figure of 

the percent change in the applicable CPI and the updated furnishing fee calculation based 

on that figure through the applicable program instructions and posting on the CMS Web 

site. 

6. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with 

HCPCS Codes but without OPPS Hospital Claims Data 

 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 

(Pub. L. 108-173) did not address the OPPS payment in CY 2005 and subsequent years 

for drugs, biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but 
646 

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. 
647 

 For CY 2010, we continued to provide payment for new drugs (excluding contrast 

agents) and biologicals with HCPCS codes that do not have pass-through status and are 

without OPPS hospital claims data at ASP+4 percent, consistent with the CY 2010 

payment methodology for other separately payable nonpass-through drugs and 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43610), we proposed 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, 
648 

biologicals, and therapeutic radiopharmaceuticals would be treated like other drugs, 

biologicals, and therapeutic radiopharmaceuticals under the OPPS. 

 For CY 2014, we also proposed to package payment for all new nonpass-through 

policy-packaged products (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 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 of 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 when used in a surgical 

procedure, as discussed in more detail in section II.A.3. of the proposed rule and this final 

rule with comment period. 

 In accordance with the OPPS ASP methodology, in the absence of ASP data, for 

CY 2014, we proposed to continue our policy of using the WAC for the product to 

establish the initial payment rate for new nonpass-through drugs and biologicals with 

HCPCS codes, but which are without OPPS claims data. However, we noted that if the 

WAC is also unavailable, we would make payment at 95 percent of the product’s most 

recent AWP. We also proposed to assign status indicator “K” (Separately paid nonpassthrough drugs and biologicals, including therapeutic radiopharmaceuticals) to HCPCS 

codes for new drugs and biologicals without OPPS claims data and for which we have 
649 

not granted pass-through status. With respect to new nonpass-through drugs and 

biologicals for which we do not have ASP data, we proposed that once their ASP data 

become available in later quarterly submissions, their payment rates under the OPPS 

would be adjusted so that the rates would be based on the ASP methodology and set to 

the finalized ASP-based amount (proposed for CY 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 and biologicals would be treated like 

other drugs and biologicals under the OPPS, unless they are granted pass-through status. 

 Similarly, we proposed 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 proposed 

to make payment for new therapeutic radiopharmaceuticals at 95 percent of the products’ 

most recent AWP because we would not have mean costs from hospital claims data upon 

which to base payment. As we proposed with new drugs and biologicals, we proposed to 

continue our policy of assigning status indicator “K” to HCPCS codes for new 

therapeutic radiopharmaceuticals without OPPS claims data for which we have not 

granted pass-through status. 
650 

 Consistent with other ASP-based payment, we proposed to announce any changes 

to the payment amounts for new drugs and biologicals in this 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 were not available at the time of 

development of the proposed rule. However, these agents are included in Addendum B 

to this CY 2014 OPPS/ASC final rule with comment period (which is available via the 

Internet on the CMS Web site), where they are assigned comment indicator “NI.” This 

comment indicator reflects that their interim final OPPS treatment is open to public 

comment in this 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 the proposed rule and for which there are no other HCPCS codes that 

describe different doses of the same drug, but which have pricing information available 

for the ASP methodology. In order to determine the packaging status of these products 

for CY 2014, we proposed to continue our policy to calculate 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 
651 

typically be furnished to a patient during one day in the hospital outpatient setting (78 FR 

43610). This rationale was first adopted in the CY 2006 OPPS/ASC final rule with 

comment period (70 FR 68666 and 68667). We proposed to package items for which we 

estimated the per day administration cost to be less than or equal to $90 and to pay 

separately for items for which we estimated the per day administration cost to be greater 

than $90 (with the exception of diagnostic radiopharmaceuticals, contrast agents, 

anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that function as supplies 

when used in a diagnostic test or procedure, and drugs and biologicals that function as 

supplies when used in a surgical procedure, which we proposed to package regardless of 

cost) in CY 2014. We also proposed 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 proposed to use the WAC for the product to establish the initial 

payment rate and, if the WAC is also unavailable, we would make payment at 95 percent 

of the most recent AWP available. The proposed estimated units per day and status 

indicators for these items were displayed in Table 26 of the proposed rule (78 FR 43611). 

 Finally, there were 11 drugs and biologicals, shown in Table 27 of the proposed 

rule (78 FR 43612), 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 the CY 2014 

OPPS/ASC proposed rule. For CY 2010, we finalized a policy to assign status indicator 

“E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill 
652 

type)) whenever we lacked claims data and pricing information and were unable to 

determine the per day cost of a drug or biological. 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 for the ASP methodology. We continued this 

policy for CY 2011, CY 2012, and CY 2013 (75 FR 71973, 76 FR 74334, and 

77 FR 68396, respectively). For CY 2014, we proposed 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 were assigned status 

indicator “E” on this basis at the time of the proposed rule for CY 2014 were displayed in 

Table 27 of the proposed rule (78 FR 43612). We also proposed to continue our policy to 

assign the products status indicator “K” and pay for them separately for the remainder of 

CY 2014 if pricing information were to become available. 

 We did not receive any public comments on our CY 2014 proposals to provide 

payment for new drugs, biologicals, and therapeutic radiopharmaceuticals using the ASP 

methodology and to use an estimated per day cost in order to determine the packaging 

status of drugs and biologicals for which we have pricing information available but do 

not have hospital claims data available. Therefore, we are finalizing these proposals 

without modification. The final estimated units per day and status indicators for drugs 

and biologicals for which we have pricing information available but do not have hospital 

claims data available for CY 2014 are displayed in Table 39 below. 
653 

 We also did not receive any public comments on our proposal to continue to 

assign status indicator “E” to drugs and biologicals that lack CY 2012 claims data and 

pricing information for the ASP methodology and, therefore, we are finalizing this 

proposal without modification. 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 final rule with comment period for CY 2014 are displayed 

in Table 40 below. 

TABLE 39.—DRUGS AND BIOLOGICALS WITHOUT CY 2012 CLAIMS DATA 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

Estimated 

Average 

Number 

of Units 

Per Day 

CY 2014 

SI 

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 

J0364 Injection, apomorphine hydrochloride, 1 

mg 

1 N N/A 

J0725 Injection, chorionic gonadotropin, per 

1,000 usp units 1 N N/A 

J1324 Injection, enfuvirtide, 1 mg 216 K 1361 

J2724 Injection, protein c concentrate, 

intravenous, human, 10 iu 1540 K 1139 

J2725 Injection, protirelin, per 250 mcg 4 K 1357 

J2941 Injection, somatropin, 1 mg 1 N N/A 

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 
654 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

Estimated 

Average 

Number 

of Units 

Per Day 

CY 2014 

SI 

CY 2014 

APC 

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 

 
655 

TABLE 40.—DRUGS AND BIOLOGICALS WITHOUT CY 2012 CLAIMS DATA 

AND WITHOUT PRICING INFORMATION FOR THE ASP METHODOLOGY 

CY 2014 

HCPCS Code CY 2014 Long Descriptor 

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 

90681 Rotavirus vaccine, human, attenuated, 2 dose schedule, 

live, for oral use E 

90727 Plague vaccine, for intramuscular use E 

J0190 Injection, biperiden lactate, per 5 mg E 

J0205 Injection, alglucerase, per 10 units E 

J0350 Injection, anistreplase, per 30 units E 

J0395 Injection, arbutamine hcl, 1 mg E 

J1180 Injection, dyphylline, up to 500 mg E 

J1435 Injection estrone per 1 MG E

J1446 Injection, TBO-Filgrastim, 5 micrograms E 

J1562 Injection, immune globulin (vivaglobin), 100 mg E 

J1620 Injection, gonadorelin hydrochloride, per 100 mcg E

J1730 Injection, diazoxide, up to 300 mg E

J1835 Injection, itraconazole, 50 mg E

J2460 Injection, oxytetracycline hcl, up to 50 mg E 

J2725 Injection, protirelin, per 250 mcg E 

J2940 Injection, somatrem, 1 mg E 

J3365 Injection, iv, urokinase, 250,000 i.u. vial E 

J9165 Injection, diethylstilbestrol diphosphate, 250 mg E 

J9219 Leuprolide acetate implant, 65 mg E 

Q0515 Injection, sermorelin acetate, 1 microgram E 

C. Nuclear Medicine Procedure-to-Radiolabeled 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. In the CY 2014 OPPS/ASC proposed rule 
656 

(78 FR 43612), we proposed to no longer require the nuclear medicine 

procedure-to-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. 

 Comment: Several commenters indicated that CMS should continue to apply the 

nuclear medicine procedure-to-radiolabeled product edits to ensure that all packaged 

costs are included on nuclear medicine claims in order to establish appropriate payment 

rates in the future. 

 Response: We do not agree with commenters that we should continue the nuclear 

medicine procedure-to-radiolabeled product edits. We believe that 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. 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. 

 After consideration of the public comments we received, we are finalizing our 

proposal to no longer require the nuclear medicine procedure-to-radiolabeled product 

edits. Hospitals will still be expected to adhere to the guidelines of correct coding and 

append the correct radiolabeled product code to the claim when applicable. 
657 

VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, 

Radiopharmaceuticals, and Devices 

A. Background

 Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional 

pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of 

devices for a given year to an “applicable percentage,” currently 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 pass-through payments in that year would exceed the applicable 

percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 

in the amount of each of the transitional pass-through payments made in that year to 

ensure that the limit is not exceeded. We 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 
658 

in previous years to develop the pass-through spending estimate for known device 

categories continuing into the applicable update year. The second group of items consists 

of items that we know are newly eligible, or project may be newly eligible, for device 

pass-through payment in the remaining quarters of CY 2013 or beginning in CY 2014. 

The sum of the CY 2014 pass-through estimates for these two groups of device categories 

equals the total CY 2014 pass-through spending estimate for device categories with 

pass-through status. We base the device pass-through 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 

pass-through evaluation process and pass-through payment for implantable biologicals 

newly approved for pass-through payment beginning on or after January 1, 2010, that are 

surgically inserted or implanted (through a surgical incision or a natural orifice) 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 pass-through payment in our estimate of pass-through spending for devices. 

 For drugs and biologicals eligible for pass-through payment, section 

1833(t)(6)(D)(i) of the Act 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 
659 

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 not been proposed to be reinstated for CY 2014. 

Because we will 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 

final rule with comment period, which represents the otherwise applicable fee schedule 

amount associated with most pass-through drugs and biologicals, and because we will 

pay for CY 2014 pass-through drugs and biologicals at ASP+6 percent, as we discussed 

in section V.A. of this final rule with comment period, our estimate of drug and 

biological pass-through payment for CY 2014 for this group of items was $0, as 

discussed below. 

 Furthermore, 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 will not be 

separately paid. In addition, as we proposed, we are policy-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 when used in a surgical procedure for CY 2014, as discussed in section II.A.3. of 

this final rule with comment period. All of these policy-packaged drugs and biologicals 

with pass-through status will be paid at ASP+6 percent like other pass-through drugs and 

biologicals for CY 2014. Therefore, our estimate of pass-through payment for policy-
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packaged drugs and biologicals with pass-through status approved prior to CY 2014 is 

not $0. In section V.A.4. of this final rule with comment period, we discuss our proposed 

and finalized policy to determine if the costs of certain policy-packaged drugs or 

biologicals are already packaged into the existing APC structure. If we determine that a 

policy-packaged drug or biological approved for pass-through payment resembles 

predecessor drugs or biologicals already included in the costs of the APCs that are 

associated with the drug receiving pass-through payment, we offset the amount of passthrough 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 

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 will 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 CY 2014 

pass-through estimates for these two groups of drugs and biologicals equals the total 
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CY 2014 pass-through spending estimate for drugs and biologicals with pass-through 

status. 

B. Estimate of Pass-Through Spending

 As we proposed in the CY 2014 OPPS/ASC proposed rule (78 FR 43613), we are 

setting 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 pass-through payment estimation purposes, there 

is one device category, C1841 (Retinal prosthesis, includes all internal and external 

components), receiving pass-through payment for CY 2013, made effective subsequent to 

the proposed rule on October 1, 2013, that will continue to be eligible for pass-through 

payment for CY 2014. As discussed in section IV.A. of this final rule with comment 

period, we finalized in the CY 2013 OPPS/ASC final rule with comment period the 

expiration of pass-through 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 $0.5 million 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 final 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 final rule and before January 1, 2014; and contingent 

projections for new device categories established in the second through fourth quarters of 
662 

CY 2014. We are using the general methodology described in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 66778), while also taking into account recent 

OPPS experience in approving new pass-through device categories. 

 We did not receive any public comments regarding our proposed estimate for 

device pass-through spending. For this final rule with comment period, the estimate of 

CY 2014 pass-through spending for this second group of device categories is $9.5 

million, which is a slight decrease from the $10 million estimate in the proposed rule 

(78 FR 43613). Using our established methodology, we are establishing that the total 

estimated pass-through spending for device categories for CY 2014 (spending for the first 

group of device categories ($0.5 million) plus spending for the second group of device 

categories ($9.5 million)) will 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 utilized 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 when used in a surgical procedure) that will be 
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continuing on pass-through status in CY 2014, we estimate the pass-through payment 

amount as the difference between ASP+6 percent and the payment rate for nonpassthrough 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 packaged if the product was not paid separately due to its pass-through status, we 

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 the proposed rule, using the methodology described above, we calculated a 

CY 2014 proposed spending estimate for this first group of drugs and biologicals of 

approximately $0.962 million. 

 We did not receive any public comments on our proposed methodology for 

calculating the spending estimate for the first group of drugs and nonimplantable 

biologicals. Therefore, for this final rule with comment period, we are finalizing our 

proposed methodology. Using our established methodology and updated data and 

information, we calculated a final CY 2014 spending estimate for the first group of drugs 

and nonimplantable biologicals of approximately $1.4 million. 

 To estimate CY 2014 pass-through spending for drugs and biologicals in the 

second group (that is, drugs and biologicals that we knew at the time of development of 
664 

the final 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 final 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 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 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 spending 

estimate for this second group of drugs and biologicals of approximately $0.165 million. 

 We did not receive any public comments on our proposed methodology for 

estimating CY 2014 pass-through payments for this second group of drugs and 

nonimplantable biologicals. Therefore, for this final rule with comment period, we are 

finalizing our proposed methodology. Using that methodology and updated data and 

information, we calculated a final CY 2014 spending estimate for this second group of 

drugs and implantable biologicals of approximately $0.9 million. 

 As discussed in section V.A. of this final rule with comment period, 

radiopharmaceuticals are considered drugs for pass-through purposes. Therefore, we 

include radiopharmaceuticals in our CY 2014 pass-through spending estimate for drugs 

and biologicals. Our CY 2014 estimate for total pass-through spending for drugs and 
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biologicals (spending for the first group of drugs and biologicals ($1.4 million) plus 

spending for the second group of drugs and biologicals ($0.9 million)) equals $2.3 

million. 

 In summary, in accordance with the methodology described above in this section, 

for this final rule with comment period, we estimate that total pass-through spending for 

the device categories and the drugs and 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 will be 

approximately $12.3 million (approximately $10 million for device categories and 

approximately $2.3 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 will not amount to 2.0 percent of total projected OPPS CY 2014 program 

spending. 

VII. OPPS Payment for Hospital Outpatient Visits 

A. Background

 Currently, hospitals report HCPCS visit codes to describe three types of OPPS 

services: clinic visits, emergency department (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 41. 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. 
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TABLE 41.—CY 2013 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) 
667 

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 

B. 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 
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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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43614 through 43616), for 

CY 2014, we proposed 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 proposed 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 stated that 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, we indicated that 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 manner as stated in section II.A.3. of the proposed rule. We stated that we 

believed 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 stated that 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 believed that replacing the 20 HCPCS codes 

currently recognized for clinic visits and ED visits with three new alphanumeric Level II 
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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. We stated that 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, we stated that our proposal 

would allow a large universe of claims to be utilized for ratesetting for each of the three 

newly proposed alphanumeric Level II HCPCS visit codes. We stated that 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 believed 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 proposed 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 stated that we 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 proposed to discontinue our longstanding 

policy of recognizing five distinct visit levels for clinic visits and ED visits based on the 
670 

existing HCPCS E/M codes, and instead recognize three new alphanumeric HCPCS 

codes for each visit type. Specifically, we proposed to create a new alphanumeric 

HCPCS G-code for hospital use only representing any clinic visit under the OPPS and to 

assign the newly created alphanumeric clinic visit HCPCS G-code to its own newly 

created APC 0634. Using CY 2012 claims data, we proposed to develop CY 2014 OPPS 

payment rates for the new HCPCS G-code based on the total geometric mean cost of the 

levels 1 through 5 CPT E/M codes for clinic visits currently recognized under the OPPS 

(CPT codes 99201 through 99205 and 99211 through 99215). We stated that while we 

would use data for CPT codes 99201 through 99205 and 99211 through 99215 from 

claims billed in CY 2012 to calculate the geometric 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 proposed to no longer recognize a distinction between 

new and established patient clinic visits. Under this proposal, all clinic visits would be 

reported using the new HCPCS G-code, 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43614 through 

43617), we proposed to discontinue our longstanding policy of recognizing five distinct 

visit levels for Type A ED visits and instead proposed to create a new alphanumeric 

HCPCS G-code for hospital use only representing any Type A ED visit under the OPPS. 

We proposed to assign the newly created alphanumeric Type A ED visit HCPCS G-code 

to its own newly created APC 0635. Using CY 2012 claims data, we proposed to 

develop CY 2014 OPPS payment rates for new HCPCS G-code based on the total 
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geometric 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). We stated that 

while we would use data for CPT codes 99281 through 99285 from claims billed in 

CY 2012 to calculate the geometric 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 proposed to discontinue our longstanding policy of 

recognizing five distinct visit levels for Type B ED visits and instead proposed to create a 

new alphanumeric HCPCS G-code representing all Type B ED visits under the OPPS. 

We proposed to assign the newly created alphanumeric Type B ED visit HCPCS G-code 

to its own newly created APC 0636. Using CY 2012 claims data, we proposed to 

develop CY 2014 OPPS payment rates for new HCPCS G-code based on the total 

geometric 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). We stated 

that while we would use data for HCPCS codes G0380 through G0384 from claims billed 

in CY 2012 to calculate the geometric 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 noted that we would use the hospital claims data for the three new HCPCS 

G-codes when available for future ratesetting. We summarized the proposed changes to 

the visit coding and payment structure in Table 29 of the proposed rule (78 FR 43616). 

We welcomed 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 stated 
672 

that we believe this proposal will allow us to make accurate payments for visits broadscale 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 indicated that we were 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. We stated 

that 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 were 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 welcomed 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. We stated that if commenters provided 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 noted that, to the 

extent that commenters recommended 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. 

 Comment: Commenters specifically opposed CMS’ proposal to collapse the 

current five levels of ED visits into a single visit level for both Type A and Type B ED 
673 

visits. Commenters stated that the proposed single payment for Type A ED and Type B 

ED visits captures too broad a range of ED visits, which could result in payment rates 

that are inadequate for treatment of beneficiaries who require higher levels of care. 

Commenters also stated that a single ED visit level would result in higher copayment 

amounts for beneficiaries receiving services consistent with a lower level ED visit. 

Commenters expressed concern that hospitals would pressure physicians and hospital 

staff to reduce the time in the ED to lessen the potential loss of revenues associated with 

a single level ED visit payment, potentially leading to a deterioration of patient care. 

Commenters argued that the proposed ED visit policy is inequitable to hospitals that 

consistently have a more complex case-mix and a greater than average utilization of the 

higher level ED visit codes, such as trauma centers, teaching hospitals, and hospitals that 

have taken steps to shift lower-acuity ED patients into Type B EDs or onsite or nearby 

urgent care clinics. Commenters urged CMS to exclude trauma care from any 

consolidation of ED payment levels to ensure that designated trauma centers are fairly 

paid for the care they provide. Commenters expressed reservations about a single 

payment for ED visits in light of a potential increase in ED usage and ED patient acuity 

due to newly insured individuals having access to care under the Affordable Care Act. 

 Commenters also argued that there is a bias toward lower level visit code costs in 

calculating the geometric mean cost for the new collapsed visit codes as higher level visit 

codes are more often billed with separately paid procedures on the same day of service. 

Commenters expressed additional reservations with the proposed policy in light of their 

inability to conduct impact analysis on the proposed policy due to initial errors in the 
674 

CY 2014 OPPS/ASC proposed rule data. Commenters also stated the proposed policy 

removes CMS’ ability to track and document differences in patient acuity and is 

inconsistent with CMS’ previously stated purpose in creating Medicare Severity 

Diagnosis-Related Groups (MS-DRGs) under the IPPS to account for differences in costs 

due to differences in patient severity. 

 Moreover, commenters stated that the proposed policy should not be implemented 

in CY 2014 due to its interaction with CMS’ proposal to expand packaging of services 

and hospitals’ administrative training sessions currently underway to implement 

International Classification of Diseases, 10th Edition (ICD-10). Commenters asserted that 

the proposed policy would create added administrative burden as other payers will 

continue to require the reporting of the five E/M code levels. Commenters suggested that 

CMS work with the AMA to develop facility-specific CPT codes for Type A ED and 

Type B ED visits and seek input from industry stakeholders, specifically hospital 

representatives, to develop descriptions for these new codes that allow for their consistent 

application by hospital outpatient departments. Commenters also recommended that 

CMS develop hospital-specific national guidelines for hospitals to report ED visits. 

 Commenters stated that they did not understand why this proposal is necessary in 

light of CMS’ previous statements that hospitals are generally billing appropriately and in 

a consistent manner that distinguishes among the different levels of visits based on the 

required hospital resources and CMS’ current utilization of Comprehensive Error Rate 

Testing (CERT), Recovery Audit Contractors (RACs), Zone Program Integrity 

Contractors (ZPICs), and other methods of review to identify medically unnecessary 
675 

services. Commenters stated that CMS should conduct selected focused audits in lieu of 

the proposed policy if CMS believes that hospitals are upcoding. 

 Response: We appreciate all of the public comments we received on our proposal 

to collapse the current five levels of ED visits into a single visit level for both Type A and 

Type B ED visits. We specifically sought comment on whether there are certain high or 

low complexity cases that would not be best accommodated by a single level of payment. 

We stated in the proposed rule that, if such cases exist, we would 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. We also stated in the proposed rule 

that if commenters provided 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. As discussed above, we received 

several comments that a single payment for an ED visit might underrepresent resources 

required to treat the most complex patients, such as trauma patients. We find this to be a 

compelling issue, for which an alternative payment structure, possibly including more 

than one payment level, may be warranted. However, at this time, additional study is 

needed to fully assess the most suitable payment structure for ED visits, including the 

particular number of visit levels that would not underrepresent resources required to treat 

the most complex patients, such as trauma patients. For CY 2014, we believe it is best to 

delay any change in ED visit coding while we reevaluate the most appropriate payment 

structure for Type A and Type B ED visits. We will maintain the current coding 
676 

structure consisting of five visit levels for CY 2014 while we consider alternative 

payment structures. 

 Comment: Commenters suggested the following alternatives to our proposed 

policy: One commenter requested that CMS alter its proposal and create one APC for 

Type A ED and Type B ED visits as proposed, but continue to allow the reporting of the 

current CPT E/M codes instead of creating new HCPCS codes. Multiple commenters 

suggested that CMS employ a three acuity level model to pay for Type A ED and Type B 

ED visits under the OPPS. Another commenter suggested CMS continue to use the 

current CPT codes for clinic E/M services but assign the CPT codes to one of three ED 

Visit APCs. One commenter suggested CMS create three composite ED services based 

on the ancillary services packaged with ED claim. A few commenters recommended, on 

a short-term basis, that CMS develop a set of three trauma‐specific HCPCS codes for all 

trauma patients, for whom a trauma team is activated. 

 Response: We appreciate the thoughtful and detailed alternatives presented by 

commenters. We need additional time to study and fully consider these alternatives and 

other comments received with respect to how our proposed ED visits policy would affect 

payments for the most complex patients. We believe it is best to delay any change in ED 

visit coding while we consider further the most appropriate payment structure for Type A 

and Type B ED visits. 
677 

 Comment: Commenters generally opposed our proposal to create a single new 

alphanumeric HCPCS G-code for hospital use only representing all clinic visits under the 

OPPS and to assign the newly created alphanumeric clinic visit HCPCS G-code to its 

own newly created APC 0634. Some commenters raised similar concerns about a single 

payment for clinic visits as they did for ED visits, although there were fewer objections to 

a single payment for clinic visits and those objections lacked the forcefulness and 

specificity of the objections to a single level of payment for Type A and Type B ED 

visits. A few commenters stated that, while they did not favor a single payment for clinic 

visits, given the nature of the services provided at clinic visits, a single payment level 

would be acceptable. A majority of commenters supported CMS’ proposal to eliminate 

the distinction between “new” and “established” patient visits. As with ED visits, 

commenters stated that the proposed single clinic visit code and associated single 

payment are overly broad, which could result in payment rates that are inadequate for 

treatment of beneficiaries who require higher levels of care and higher copayment 

amounts for beneficiaries receiving lower level visits. Commenters expressed concern 

that hospitals would pressure physicians and hospital staff to reduce the time in clinic 

visits to lessen the potential loss of revenues associated with a single level clinic visit 

payment, potentially leading to a deterioration of patient care. Commenters asserted that 

the proposed policy would create added administrative burden as other payers will 

continue to require the reporting of the five E/M CPT codes to describe clinic visits. 

Commenters argued that the proposed policy is inequitable to many tertiary care and 

teaching hospitals, including those hospitals that consistently have a more complex case-
678 

mix and a greater than average utilization of the higher level E/M codes. Commenters 

also argued there is a likely bias toward lower level visit code costs in calculating the 

geometric mean cost for the new collapsed visit codes as higher level visit codes are more 

often billed with separately paid procedures on the same day of service. Commenters 

expressed additional reservations with the proposal in light of their inability to conduct 

impact analysis on the proposed policy due to initial errors in the CY 2014 OPPS/ASC 

proposed rule data. Commenters stated that the proposed policy removes CMS’ ability to 

track and document differences in patient acuity and is inconsistent with CMS’ 

previously stated purpose in creating MS-DRGs under the IPPS to account for differences 

in costs due to differences in patient severity. Moreover, commenters stated the proposed 

policy should not be implemented in CY 2014 due to its interaction with CMS’ proposal 

to expand packaging and hospitals’ administrative training sessions currently underway 

to implement ICD-10. Commenters suggested CMS work with the AMA to develop 

facility-specific CPT codes for E/M clinic visits (with no distinction between new and 

established patients) and seek input from industry stakeholders, specifically hospital 

representatives, to develop descriptions for these new codes that allow for their consistent 

application by hospital outpatient clinics. Commenters also recommended that CMS 

develop hospital-specific national guidelines for hospitals to report clinic visits. 

 Commenters expressed a lack of understanding of why this proposal is necessary 

in light of CMS’ previous statements that hospitals are generally billing appropriately and 

in a consistent manner that distinguishes among the different levels of visits based on the 

required hospital resources and CMS’ current utilization of CERT, RACs, ZPICs, and 
679 

other methods of review to identify medically unnecessary services. Commenters stated 

that CMS should conduct selected focused audits in lieu of the proposed policy if CMS 

believes that hospitals are upcoding. 

 Response: We appreciate all of the public comments we received on our 

proposed policy to create a single new alphanumeric HCPCS G-code for hospital use 

only representing any clinic visit under the OPPS and the assignment of the newly 

created alphanumeric clinic visit HCPCS G-code to its own newly created APC 0634. 

We disagree with the commenters that the proposed clinic visit code is overly broad. 

While we agree that the proposed clinic APC encompasses a range of visits for 

beneficiaries with different medical issues, we believe that the spectrum of hospital 

resources provided during an outpatient hospital clinic visit is appropriately captured and 

reflected in the single level payment for clinic visits. We also believe that a single visit 

code is consistent with a prospective payment system, where payment is based on an 

average estimated relative cost for the service, although the cost of individual cases may 

be more or less costly than the average. We do not observe wide disparity among the 

estimated geometric mean costs for new or established clinic visits in our data, and there 

is significantly less disparity in estimated geometric mean costs among the current five 

clinic visit levels than there is among the five ED visit levels. 

 We believe the proposed payment rate for APC 0634 represents an appropriate 

payment for clinic visits as it is based on the geometric mean costs of all visits. Although 

the cost for any given clinic visit may be higher or lower than the geometric mean cost of 

APC 0634, the payment remains appropriate to the hospital delivering a variety of clinic 
680 

visits. The high volume of claims from every level of clinic CPT code that we used for 

ratesetting for the newly created alphanumeric Level II HCPCS clinic visit code allows 

us to have accurate data upon which to develop appropriate payment rates. 

 With regard to specific concerns for hospitals that treat patients with a more 

complex case-mix, we note that the relatively low estimated cost of clinic visits overall 

would result in much less underpayment or overpayment for hospitals that may serve a 

population with a more complex overall case-mix. We also note that the range among the 

geometric mean cost of the current five clinic visit levels is much smaller than the range 

for the current five levels of ED visits. In addition, the commenters’ support for 

eliminating distinctions for new and established patients suggests that hospitals prefer the 

administrative ease of not tracking new or established patients even though we make 

differential payment for these visits, and we observe differential costs for these CPT 

codes in our claims data. 

 We disagree with the commenters’ statement that there is a likely bias toward 

including more lower level visit code costs in calculating the geometric mean cost for the 

new collapsed visit codes. Commenters have argued that higher level visit codes are 

more often billed with separately paid procedures on the same day of service and that we 

are less likely to be able to isolate claims with a single higher level CPT code. For clinic 

visits, we observed comparable distributions of claims between higher and lower levels 

across new and established clinic visit CPT codes in both the single bill claims used for 

ratesetting and all claims. We concluded that the distribution of claims data among 

higher and lower level CPT codes used to establish the proposed payment rate for 
681 

APC 0634 is comparable to the total distribution of claims among CPT code levels in the 

CY 2012 claims data in our CPT cost files. We do not believe that our single bill 

methodology biases the resulting geometric mean in any way. 

 We disagree with commenters that our proposal for a single payment is contrary 

to CMS’ stated purpose in creating MS-DRGs under the IPPS to account for differences 

in costs due to differences in patient severity. MS-DRGs are designed to reflect 

significant differences in resource costs for an inpatient stay. The MS-DRG 

classification of a particular discharge is based, as appropriate, on the patient’s age, sex, 

principal diagnosis (that is, the diagnosis established after study to be chiefly responsible 

for causing the patient’s admission to the hospital), secondary diagnoses, procedures 

performed, and discharge status. A single payment for a clinic visit does not pose the 

same level of financial risk. The observed cost differences among levels of CPT codes in 

the claims data are not dramatic. Further, hospitals will receive separate payment for 

many other services furnished in the same encounter and will not incur the same level of 

financial risk as for an inpatient stay. 

 Regarding the commenters’ inability to conduct impact analysis on our visit 

proposal because of some initial limited errors in the proposed rule payment files, we 

note that we released corrected data files on August 28, 2013, and extended the comment 

period to September 16, 2013, on the technical corrections noted in the correcting 

document published in the Federal Register on September 6, 2013 (78 FR 54842). For a 

more detailed discussion of the OPPS data process, we refer readers to section II.A. of 

this final rule with comment period. 
682 

 We disagree with the commenters that hospitals would pressure physicians and 

hospital staff to furnish a diminished level of care to beneficiaries in an attempt to 

mitigate any potential loss of revenue associated with a single level clinic visit payment 

that is based on an average of relative costs of all clinic visit codes and is proportional to 

their appearance in the claims data. As with all prospective payment systems that depend 

upon a prospectively established payment derived from relative cost, less costly cases 

generate greater net revenue for the hospital than more costly cases. Payments may be 

greater than or less than the cost of any particular case. It is our belief and continued 

expectation that hospitals and physicians and other practitioners will furnish appropriate 

care to Medicare beneficiaries. 

 We continue to believe discontinuing the use of the five levels of HCPCS visit 

codes for clinic visits will 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 they provide. We believe the advantages 

of this reduced administrative burden outweigh any potential loss in CMS’ ability to track 

and document differences in patient acuity for clinic visits. We note that the level of CPT 

code is not the only method for assessing patient acuity. Diagnosis coding and the type 

and frequency of other services billed on a visit claim also communicate patient acuity. 

We disagree with the commenters that finalization of our proposed clinic visit policy 

should be delayed because of our CY 2014 proposal to expand packaging or the presence 

of hospital training sessions to implement ICD-10 coding. We note that our CY 2014 

OPPS packaging policies create no additional administrative burden for hospital coding 
683 

for visits. We continue to expect hospitals to correctly code for the services they furnish. 

We also believe that the combination of a single HCPCS G-code to describe all clinic 

visits, the discontinuance of the requirement that hospitals track criteria for billing either 

new or established clinic visits, and the discontinuance of the requirement for hospitals to 

distinguish different clinic visit levels through internal guidelines will result in significant 

administrative simplification for hospitals. 

 With regard to national guidelines, we have stated that it would be desirable to 

many hospitals to have national guidelines (76 FR 74345 through 74346). However, we 

also understand that it would be disruptive and administratively burdensome to other 

hospitals that have successfully adopted internal guidelines to implement any new set of 

national guidelines. With regard to the potential for facility-specific CPT codes, as we 

have also stated in the past (76 FR 74346), if the AMA were to create facility-specific 

CPT codes for reporting visits provided in HOPDs, we would consider such codes for 

OPPS use. 

 With regard to the comment that the proposal is unexpected, each annual 

rulemaking cycle includes some proposed policy changes to the OPPS, and some of those 

proposals may be more or less predictable. We believe that, despite hospitals’ use of 

internal guidelines, differentiating between five different clinic visit levels is challenging 

because the difference between consecutive levels is incremental and nuanced. A single 

code and a single level of payment for all clinic visits eliminate the difficulty of 

distinguishing, for example, a level 1 clinic visit versus a level 2, or a level 2 versus a 

level 3, etc. A single code also negates the ability or incentive for hospitals to “upcode” 
684 

patients whose visits do not fall clearly into one category or another, and removes any 

financial advantage to any hospitals that would engage in upcoding in the future. 

 Comment: Commenters suggested the following alternatives to our proposed 

policy: One commenter suggested that CMS alter its proposal and create one APC for 

each type of E/M visit per encounter as proposed, but continue to allow the reporting of 

the current CPT E/M codes instead of creating new HCPCS codes. Multiple commenters 

suggested that CMS employ a three acuity level model to pay for clinic visits under the 

OPPS. Another commenter suggested that CMS continue to use the current CPT codes 

for clinic E/M services but assign the CPT codes to one of two Clinic Visit APCs. 

 Response: We appreciate the thoughtful and detailed suggestions presented by 

the commenters. We continue to believe that creating a new HCPCS code is more 

appropriate than maintaining the current CPT coding and then creating a separate 

payment. Separate CPT codes would continue to require guidelines. It also would be 

more difficult to eliminate the distinction between new and established clinic visits while 

continuing to recognize CPT codes that make that distinction. With regard to creating 

three APCs rather than one, we do not believe this achieves the incentive for efficiency 

associated with a single clinic visit code, and that three APCs would maintain some of the 

same incentives in the current five levels of APCs. At this time we believe that 

collapsing the existing five levels of clinic visit codes into one new alphanumeric HCPCS 

G-code and assigning this code to new APC 0634 is the optimal OPPS payment policy 

for clinic visits. 
685 

 After consideration of the public comments we received, we are finalizing our 

proposal to create a new alphanumeric HCPCS code, G0463 (Hospital outpatient clinic 

visit for assessment and management of a patient), for hospital use only representing any 

clinic visit under the OPPS and to assign new HCPCS code G0463 to new APC 0634. 

We also are finalizing our proposal to use CY 2012 claims data to develop CY 2014 

OPPS payment rates for the new HCPCS code G0463 based on the total geometric mean 

cost of the levels one through five CPT E/M codes for clinic visits currently recognized 

under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). In 

addition, we are finalizing our proposal to no longer recognize a distinction between new 

and established patient clinic visits. 

 We are not finalizing our proposal for CY 2014 to discontinue our longstanding 

policy of recognizing five distinct visit levels for Type A ED visits and to create a new 

alphanumeric HCPCS G-code for hospital use only representing any Type A ED visit 

under the OPPS. Similarly, we are not finalizing our proposal for CY 2014 to 

discontinue our longstanding policy of recognizing five distinct visit levels for Type B 

ED visits and to create a new alphanumeric HCPCS G-code for hospital use only 

representing any Type B ED visit under the OPPS. In addition, we are not finalizing our 

proposal to assign the newly created alphanumeric Type A ED visit HCPCS G-code to its 

own newly created APC 0635, nor are we finalizing our proposal to assign the newly 

created alphanumeric Type B ED visit HCPCS G-code to its own newly created APC 

0636. Instead, we will continue to use our existing methodology to recognize the existing 

CPT codes for Type A ED visits as well as the five HCPCS codes that apply to Type B 
686 

ED visits, and establish the CY 2014 OPPS payment under our established standard 

process (77 FR 68399 through 68404). These codes and their APC assignments for 

CY 2013 compared to their APC assignments for CY 2014 are depicted below in 

Table 42. 
687 

TABLE 42.—CY 2013 CLINIC AND EMERGENCY DEPARTMENT VISIT 

HCPCS CODES AND APC ASSIGNMENTS COMPARED TO CY 2014 CLINIC 

AND EMERGENCY DEPARTMENT VISIT HCPCS CODES AND APC 

ASSIGNMENTS 

CY 2013 CY 2014 Visit Type 

HCPCS Code APC HCPCS Code APC 

99201 0604 

99202 0605 

99203 0606 

99204 0607 

99205 0608 

99211 0604 

99212 0605 

99213 0605 

99214 0606 

CLINIC 

VISIT 

99215 0607 

G0463 0634 

99281 0609 99281 0609 

99282 0613 99282 0613 

99283 0614 99283 0614 

99284 0615 99284 0615 

TYPE A 

ED VISIT 

99285 0616 99285 0616 

G0380 0626 G0380 0626 

G0381 0627 G0381 0627 

G0382 0628 G0382 0628 

G0383 0629 G0383 0629 

TYPE B 

ED VISIT 

G0384 0630 G0384 0630 

 We intend to further explore the issues described above related to ED visits, for 

example, concerns about excessively costly patients, such as trauma patients, and 

potential alternatives that commenters provided to address this issue. We may propose 

changes to the coding and APC assignments for ED visits in future rulemaking. 
688 

C. Payment for Critical Care Services

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43616 through 43617), we 

proposed 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). 
689 

 For CY 2011, the AMA CPT Editorial Panel revised its guidance for the critical 

care codes to specifically state that, for hospital reporting purposes, critical care codes do 

not include the specified ancillary services. Beginning in CY 2011, hospitals that report 

in accordance with the CPT guidelines should report all of the ancillary services and their 

associated charges separately when they are provided in conjunction with critical care. 

Because the CY 2011 payment rate for critical care services 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 
690 

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 had 

hospital claims data for the first time reflecting the revised coding guidance for critical 
691 

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 geometric mean and median line item costs as well as the geometric 

mean and median line item charges for CPT code 99291, when compared to CY 2010 

hospital claims data. Specifically, we noted that the geometric mean and median line 

item costs increased 13 percent and 16 percent, respectively, and the geometric 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 
692 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43617), we stated that 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 showed increases in 

the geometric mean line item costs as well as the geometric mean line item 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 stated that 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 proposed 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 
693 

data. We also proposed to continue to implement claims processing edits that 

conditionally package payment for the ancillary services that are reported on the same 

date of service as critical care services in order to avoid overpayment. 

 Comment: Commenters recommended that CMS, in setting the payment rate for 

packaging ancillary services into the critical care services, establish a methodology that 

ensures that multiple cost report revenue centers are included in the review. 

 Response: The methodology that the commenters recommended is consistent 

with the methodology we already have in place. As discussed in section II.A.1.c. of this 

final rule with comment period, we calculate hospital-specific overall ancillary CCRs and 

hospital-specific departmental CCRs for each hospital for which we have claims data. 

We apply the hospital-specific CCR to the hospital’s charges at the most detailed level 

possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of 

CCRs used to estimate costs from charges for each revenue code. Therefore, we base our 

cost estimation of each packaged ancillary service on the most specific cost center to 

which the revenue code reported with that service maps. We then package the cost that 

we estimate as a result of that process into the geometric mean cost calculation for critical 

care. 

 After consideration of the public comments received, we are finalizing our 

proposal 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 finalizing our proposal to continue to implement 

claims processing edits that conditionally package payment for the ancillary services that 
694 

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. 

VIII. Payment for Partial Hospitalization Services 

A. Background

 Partial hospitalization is an intensive outpatient program of psychiatric services 

provided to patients as an alternative to inpatient psychiatric care for individuals who 

have an acute mental illness. 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 
695 

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.” 
696 

 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). 
697 

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 two-tiered 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). 
698 

 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 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 
699 

paying hospital-based PHPs at a lower rate than their cost structure reflects could lead to 

hospital-based 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 
700 

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). 
701 

 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 hospital-based 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 hospital-based and CMHC-based settings, only on the basis of hospital 

data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for 
702 

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 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 
703 

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. PHP APC Update for CY 2014

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43618 through 43622), for 

CY 2014, we proposed 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 
704 

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 that were shown in Table 30 of the CY 2014 OPPS/ASC proposed rule 

(78 FR 43620) are reflected in Table 42a below. 

TABLE 42a.—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) was approximately $95 for CMHCs and approximately $213 for 

hospital-based PHPs. The proposed geometric mean per diem costs for days with 4 or 

more services (Level II) was approximately $106 for CMHCs and approximately $215 

for 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 
705 

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. 

 The proposed CY 2014 geometric mean per diem costs for the PHP APCs were 

shown in Tables 31 and 32 of the CY 2014 OPPS/ASC proposed rule (78 FR 43620 

through 43621). We invited public comments on these proposals. 

 Comment: Many commenters supported the continued distinction between APC 

payments for PHP services provided by CMHCs and APC payments for PHP services 

provided by hospital-based PHPs. These commenters believed that the cost structures of 

the two provider types are significantly different and, therefore, the payments should be 

different. Conversely, a few commenters stated that they do not like the distinction 

between provider types. Instead, these commenters believed that CMHCs and 
706 

hospital-based PHPs should receive the same payment rates. The commenters believed 

that the ratesetting methodology used to establish payment rates for PHP services also 

has fueled a fundamental shift in payments away from less expensive CMHCs to more 

expensive hospital-based PHPs, resulting in overall higher CMS expenditures for the 

same services, which is discriminating against CMHCs that provide identical PHP 

services. 

 One commenter did not agree with CMS’ statement that “CMHCs have a lower 

cost structure than hospital-based PHP providers, in part because the data showed that 

CMHCs provide fewer PHP services in a day and use less costly staff than hospital-based 

PHPs.” The commenter stated that CMS implies that “CMHCs provide less valuable 

services than hospital-based PHPs, hire less qualified staff, and overall perform very 

poorly compared to hospital-based PHPs.” 

 Some commenters also continued to support CMS’ creation of two-tiered 

payments for partial hospitalization services. They believed that these changes to the 

PHP payment structure have been a positive step in addressing the twin goals of ensuring 

long-term stability and improving the accuracy of payments. 

 Response: We understand the concerns raised by the commenters regarding the 

differences between CMHC PHP APC per diem payment rates and hospital-based PHP 

APC per diem payment rates. We are not discriminating against CMHCs or any other 

health care provider, nor are we encouraging the use of a specific provider type which 

would lead to a shift in payments; we are calculating the payment rates for PHP services 

based on the claims and cost report data submitted by our providers. We continue to 
707 

believe that it is important to calculate PHP APC per diem payment rates based on the 

data for each type of provider in order to appropriately pay for PHP services. We also 

believe that the CMHC and the hospital-based PHP APC per diem payment rates 

accurately reflect the claims and cost report data of CMHCs and hospital-based 

providers, respectively. The PHP APC per diem payment rates are directly related to the 

accuracy of the claims and cost report data submitted by providers. Therefore, it is 

imperative that providers submit accurate claims and cost reports in order for the 

payment rates to most accurately reflect the costs to providers. The resulting PHP APC 

per diem payment rates reflect the cost of what providers expend to maintain such 

programs. 

 CMHCs and hospital-based PHPs continue to show significant differences in their 

costs. As we explained in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74347), we attributed the decrease in costs to CMHCs having a lower cost 

structure than hospital-based PHP providers, in part, because the data showed (and 

continue to show) that CMHCs provide fewer PHP services in a day and use less costly 

staff than hospital-based PHPs. In other words, hospital-based providers have 

traditionally provided more services than CMHCs during a PHP day. Providing fewer 

services during a PHP day results in less overhead expense for the provider; that is, less 

time the provider needs to pay staff, less time the provider needs to heat the building, and 

less time the provider needs to light the building. Therefore, providing fewer PHP 

services during a day directly contributes to a lower overall cost structure. We did not 

intend to imply that, in comparison to hospital-based PHPs, CMHCs provide inferior, less 
708 

valuable or poor quality services or are poor performers; we were merely stating the 

differences in these providers’ cost structures based on cost analysis. In light of these 

differences in cost structures between provider types, it is inappropriate to treat CMHCs 

and hospital-based PHP providers in the same manner. We have been concerned that 

paying hospital-based PHPs at a lower payment rate than their cost structure reflects 

could lead to closures and possible access problems for hospital-based programs 

providing services to Medicare beneficiaries, given that hospital-based PHPs offer the 

widest access to PHP services because they are located across the country. At the same 

time, we believe it is inappropriate to overpay CMHCs in comparison to their cost 

structures. 

 We appreciate the commenters who continue to support the two-tiered payments 

for PHP services. We believe that paying providers based on the four PHP APC per diem 

payment rates supports continued access to the PHP benefit, while also providing 

appropriate payment based on the unique cost structures of CMHCs and hospital-based 

PHPs. 

 Finally, we consistently monitor the OPPS to identify potential refinements that 

would improve the accuracy and stability of the payment system. We will continue to 

monitor the impact of our payment policies on the PHP benefit and its providers. 

 Comment: A few commenters expressed concern regarding the adverse impact 

the proposed payment rates for CY 2014 would have on CMHC providers across the 

country. One commenter stated that since the adoption of the provider-specific structure 

in CY 2011, payment for partial hospitalization services provided by CMHCs has 
709 

decreased by approximately 50 percent. This commenter indicated that, in CY 2013, the 

per diem payment rates for PHP services provided by CMHCs decreased by another 4.4 

percent as a result of changing the methodology from median-based relative payment 

weights to geometric mean-based relative payment weights. The commenter also stated 

that, for CY 2014, CMS is proposing to further decrease payments for PHP services 

provided by CMHCs by approximately 3.8 percent. A few commenters stated that many 

Medicare CMHCs have closed over the years and they believed that payment rate 

reductions are a primary reason for the closures. These commenters pointed out that 

another reduction in the per diem payment rates may result in more CMHC closures, 

therefore decreasing the number of providers and available resources for the most 

disadvantaged portion of the beneficiary population. 

 Commenters also expressed concern regarding the decrease in payment rates for 

Level II hospital-based PHP services. One commenter stated that the proposed 9.2 

percent decrease in the Level II per diem payment rate for hospital-based PHPs would 

result in inadequate payment for hospitals’ direct and indirect costs and that any further 

reductions to Medicare payment rates will put their program in jeopardy. A few 

commenters requested that CMS suspend the proposed PHP per diem payment rates for 

CY 2014 and, instead, maintain the CY 2013 PHP per diem payment rates for CY 2014. 

 Response: We understand the concerns raised by the commenters that a reduction 

in payment rates for CY 2014 will not adequately pay for their costs to provide PHP 

services and may result in closures for both CMHCs and hospital-based PHPs. However, 

based on the final geometric mean per diem costs for CY 2014, CMHCs will receive an 
710 

increase in geometric mean per diem costs from CY 2013 to CY 2014 for APC 0172 

Level I (3 service days) from $87.39 to $99.39 and the geometric mean per diem costs for 

APC 0173 Level II (4 or more service days) will basically remain the same ($112.12 for 

CY 2014 compared to $112.82 for CY 2013). Hospital-based PHPs also will receive an 

increase in geometric mean per diem costs from CY 2013 to CY 2014 for APC 0175 

Level I (3 service days) from $185.90 to $190.82. Only the geometric mean per diem 

costs for APC 0176 Level II (4 or more service days) will decrease from CY 2013 to 

CY 2014 from $234.81 to $214.39. As discussed in the prior response, we believe that 

the CMHC and the hospital-based PHP APC per diem payment rates accurately reflect 

the claims and cost report data of the CMHCs and hospital-based providers, respectively. 

The resulting PHP APC per diem payment rates and the APC payment structures reflect 

the cost of what providers expend to maintain such programs. Therefore, it is unclear to 

us why this would lead to program or business closures. As we stated in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74350), the closure of PHPs may be 

due to a number of reasons, such as poor business management or marketing decisions, 

competition, oversaturation of certain geographic areas, and Federal and State fraud and 

abuse efforts, among others. However, we take seriously the commenters’ concerns that 

a reduction in PHP APC per diem payment rates could erode the viability of PHPs and 

make it more difficult for beneficiaries to receive needed mental health services. 

Therefore, we monitor facility closings and openings to make sure that access issues do 

not exist, and we will continue to do so in the future. 
711 

 In response to the comment that the payment rates for PHP services have 

decreased as a result of changing the methodology from median-based relative payment 

weights to geometric mean-based relative payment weights, we have made changes 

throughout the history of the OPPS with a goal of deriving more accurate information 

from available claims and cost report data, as well as increasing the benefits of using a 

metric that more accurately describes the range of costs associated with providing 

services and, thus, resulting in the most appropriate payments. We continue to believe 

that basing the relative payment weights on geometric mean costs promotes better 

stability in the payment system by making OPPS payments more reflective of the range 

of costs associated with providing services. Therefore, we believe that using geometric 

mean costs to calculate the relative payment weights for the OPPS represents an 

improvement to our cost estimation process and leads to the establishment of relative 

payment weights that are more reflective of service cost patterns. 

 Finally, in response to commenters requesting that we suspend the proposed 

CY 2014 PHP payment rates and maintain the CY 2013 PHP APC payment rates, as we 

discussed above, we cannot establish payment rates that do not accurately reflect current 

claims and cost report data. Therefore, we are not suspending implementation of the 

CY 2014 PHP APC per diem payment rates. 

 Comment: Several commenters indicated that the proposed PHP per diem 

payment rates for CY 2014 show again that payment rates continue to materially 

fluctuate from one year to another. The commenters expressed concern regarding the 

variation in payment from year to year for this critically important service and noted that 
712 

significant fluctuations from year to year make budgeting difficult for hospital-based 

PHPs. Another commenter asked if the decrease in the APC 0176 payment rate is due 

solely to the costs associated with the services, or if the decrease is compounded by the 

other significant changes in the proposed rule—namely, a significant change in the 

packaging of services, which will shift significant dollars around in the OPPS system. 

 Response: We recognize the commenters’ concern regarding variance in payment 

rates from year to year. We believe that payment rates for PHP services fluctuate from 

year to year based on a variety of factors, including direct changes to the PHP APC per 

diem payment rate, changes to the OPPS, and provider-driven changes. 

 Over the past several years, we have made changes to PHP APC per diem 

payment rates to more accurately align the payments with costs. The changes have 

included establishing separate APCs and associated per diem payment rates for CMHCs 

and hospital-based providers based on each provider’s costs, under which we pay one 

amount for days with 3 services and another amount for days with 4 or more services. 

 Additionally, the OPPS is a budget neutral payment system, and as a result, 

changes in the relative payment weights associated with certain services may affect those 

of other services in the payment system. Further, changes in payment policy also may 

have effects on the payment rates each year. For example, basing the relative payment 

weights on geometric mean costs rather than median costs affected the payment rates. 

 Finally, provider-driven changes affect the payment rates. The case-mix and 

number of services provided, as well as changes to the charging structure and the variety 

of hospitals and CMHCs providing the services, contribute to changes in the payment 
713 

rates. Providers may choose to update or maintain their charges each year based on a 

variety of business reasons, but these changes to charges often vary depending on the 

different services each provider furnishes as well as the business decisions of the 

provider. Therefore, a provider’s decision to change its mix of services or to change its 

charges and clinical practice for some services also contributes to the fluctuation in 

payment rates. Therefore, both policy and data changes influence the changes in the PHP 

APC payment rates, as they do for all services each year. 

 In response to the commenter who asked if the decrease in the payment rate for 

APC 0176 is due solely to the costs associated with PHP services, or if the decrease is 

compounded by other significant changes in the proposed rule, the decrease is due to 

both. There is a decrease in the Level II PHP hospital-based geometric mean per diem 

costs of approximately $21 from the CY 2013 Level II hospital-based PHP per diem 

amount of $235 to the CY 2014 Level II hospital-based PHP per diem amount of 

approximately $214 before any changes that may result from relative payment weights 

associated with other services in the OPPS. That said, we believe that the payment rate 

for APC 0176 continues to accurately reflect the costs associated with providing PHP 

services in the hospital setting. 

 We will continue to explore ways to minimize fluctuations in the PHP payment 

rates because we agree that a high level of volatility is not desirable. However, we also 

believe that changes in estimated costs from one year to the next are appropriate in a 

payment system that is annually updated to more accurately estimate the cost of a service 

upon which the relative payment weights are based. 
714 

In summary, after consideration of the public comments we received, we are 

finalizing our CY 2014 proposal, without modification, to update 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. The updated PHP APCs geometric mean per diem 

costs for PHP services that we are finalizing for CY 2014 are shown in Tables 43 and 44 

below. 

TABLE 43.--CY 2014 GEOMETRIC MEAN PER DIEM COSTS FOR CMHC PHP 

SERVICES

APC Group Title Geometric Mean Per 

Diem Costs 

0172 Level I Partial Hospitalization (3 

services) for CMHCs 

$99.39 

0173 Level II Partial Hospitalization (4 or 

more services) for CMHCs 

$112.12 

TABLE 44.--CY 2014 GEOMETRIC MEAN PER DIEM COSTS FOR 

HOSPITAL-BASED PHP SERVICES

APC Group Title Geometric Mean Per 

Diem Costs 

0175 Level I Partial Hospitalization (3 

services) for Hospital-based PHPs 

$190.82 

0176 Level II Partial Hospitalization (4 or 

more services) for Hospital-based PHPs 

$214.39 

C. Discussion of Possible Future Initiatives, Request for Public Comments, and 

Summary of Public Comments Received

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 through 43622), we 

noted that we are considering a number of possible future initiatives that may help to 
715 

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 stated that we are considering a number of possible future 

modifications to certain aspects of the PHP benefit. We did not propose new Medicare 

policy in this discussion of possible future modifications in the CY 2014 OPPS/ASC 

proposed rule. Instead, we requested public comments on possible future initiatives.

 For example, 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 hospital-based PHPs. We 

are interested in examining the payment structure for PHP services to determine whether 

alternative methodologies to pay for PHP services would reduce unnecessary care while 

maintaining or increasing the quality of care provided. We invited public comments on 

alternative payment methodologies.

 Another area in which we solicited public comments is whether payment based on 

an episode of care, or a per diem similar to those used in 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 
716 

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.

 Comment: Commenters primarily opposed changing the PHP payment 

methodology from a per diem based calculation to an episode of care based calculation. 

We received several public comments requesting a single payment for PHP services, as 

well as several public comments stating that there is a need for more research to 

determine the best method of payment. Mainly, commenters suggested that CMS take 

three steps: (1) establish a ratesetting task force to develop a new payment rate 

methodology that captures all relevant data and reflects the real costs to providers to 

deliver these services; (2) examine the Medicare mental health benefits; and 

(3) encourage legislative changes to expand mental health services. These commenters 

stressed that any proposed change to the payment methodology for PHP services must 
717 

involve relevant stakeholders in Federal agencies (such as SAMHSA) as well as 

representatives from CMHCs and hospital providers and associations. 

 Response: We appreciate the commenters’ input and suggestions and will take 

them under advisement for future refinements. 

 Comment: Commenters indicated that the Medicare PHP benefit is critical in 

keeping beneficiaries out of emergency rooms and in the community, and urged CMS to 

proceed cautiously in proposing reforms that may erode what is already a fragile safety 

net of providers. The commenters believed that any changes to the PHP payment 

methodology should not be considered in isolation. The commenters suggested that CMS 

look at Medicare benefits for psychiatric services overall and take the necessary steps to 

develop coverage of a comprehensive set of services across all settings of care that meet 

the needs of the population. 

 Several commenters cited a recent report sponsored by the National Association 

of Psychiatric Health Systems which they said found that the benefits derived from 

patients participating in PHPs extend the time between readmissions. According to their 

analysis, the time-to-readmission ratio for these Medicare beneficiaries was 131 days 

versus 59 days between admissions for those beneficiaries who did not participate in 

PHPs. 

 Many commenters representing hospitals and hospital associations indicated that 

it would be premature to assume that a change in the payment methodology would 

achieve the goals that CMS has described in the proposed rule without statutory changes 

to the existing PHP benefit. A few commenters indicated that in the absence of any 
718 

relevant payment research or substantive proposals, they could not comment on whether 

an episode of care or a per diem based payment for the PHP benefit would result in more 

suitable payment rates, indicating that additional research is an important next step before 

determining whether or not either approach would have the intended effects and is 

sustainable. 

 One commenter believed that improvements in PHP models can be made and 

suggested that CMS consider other treatment approaches that are less rigid than the 

current PHP guidelines, especially the required number of service hours and days of 

treatment required per week. The commenter believed that more flexibility in this area is 

necessary to accommodate patients’ work and family schedules. For example, a model of 

intensive outpatient services estimated at 3 hours per day, 3 days per week would allow 

more flexibility to meet patient needs clinically and personally. The commenter did not 

believe that the application of an episode of care payment methodology for PHP services 

would be appropriate due to the vagueness of the period and the intensity and uniqueness 

of each patient’s illness. However, the commenter supported CMS’ efforts to 

communicate with stakeholders on possible future initiatives for PHP services. 

 Commenters also stated that an enhanced per diem payment rate that reflects the 

costs of treating patients with more complicated clinical needs similar to the IPF PPS 

would also be worth considering. 

 Many commenters representing hospital associations indicated that it would be 

useful to evaluate the way in which overall Medicare mental health benefits are 

structured. The commenters believed that, compared to the scope of services many 
719 

private health insurers cover, Medicare benefits are much narrower. The commenters 

stated, for instance, that Medicare beneficiaries are currently limited to only 190 days of 

inpatient psychiatric hospital care in their lifetime. According to the commenters, no 

other Medicare inpatient hospital service has this type of arbitrary cap on benefits. In 

addition, the commenters stated that, rather than covering the full continuum of 

behavioral health care services, Medicare currently covers only inpatient psychiatric care, 

hospital-based and CMHC-based PHP services, and office-based services. The 

commenters further stated that the PHP benefit is drawn very narrowly so as to only 

cover care for the most acutely ill patients who would otherwise require hospitalization. 

As a result, according to the commenters, the parts of the continuum missing from current 

Medicare benefits include formal coverage of intensive outpatient care, residential 

treatment, psychosocial rehabilitation, and care management. The commenters believed 

that this makes it difficult for providers to provide Medicare beneficiaries with the 

appropriate services at the right level and time. 

 These commenters stated that broadening the Medicare mental health benefit 

structure to encompass the other components of the continuum would require statutory 

changes. The commenters believed that making minimal changes, such as revising the 

PHP payment structure, will not address the larger limitations of the Medicare benefit 

design. 

 One commenter recommended that a single provider-based payment structure be 

established for PHP services that reflects the intensity of services that people with serious 

mental illnesses generally require because this benefit is meant to substitute for inpatient 
720 

care or as a step-down level of care. To achieve long-term stability and payment 

accuracy, the commenter suggested that CMS maintain the per diem payment 

methodology. The commenter believed that an episode-of-care payment methodology is 

more appropriate for the typical and predictable treatment of physical ailments and 

issues, but not for mental health treatment. 

 One commenter recommended that CMS establish the same payment rates and 

two-tiered payment structure for all providers with no differentiation between payment 

rates for hospital-based PHP services and payments rates for PHP services provided by 

CMHCs. The commenter also urged CMS to establish quality and outcomes criteria to 

evaluate performance, influence future ratesetting, and provide rewards to individual 

providers for outstanding quality and outcomes while at the same time keeping their cost 

under control. 

 Response: We appreciate the commenters’ suggestions and recommendations for 

strengthening the PHP benefit and payment structure. We will take them under 

advisement for any future refinements. 

 Another area on which we solicited public comments was physician 

certification/recertification that an 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 furnished to 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 
721 

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. For more details, 

we refer readers to 42 CFR 424.24(e).

 Current regulations specify that a physician recertification must be signed by a 

physician who is treating the patient and has knowledge of the patient’s response to 

treatment. A 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 invited 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 stated that we were interested 

in whether the first recertification date should be changed to some other standard that 

accords with best practices and why.

 Comment: Several commenters indicated that they had no recommended changes 

to physician certification and recertification requirements and did not believe that an 

alternative recommendation is warranted at this time. The commenters indicated that 

they did not believe that there was any reason to change the 18-day recertification 

requirement and the “no longer than 30 days” length of time requirement for a subsequent 

recertification. In addition, the commenters indicated that their organization member 

hospitals have not identified these requirements as a problem, nor are they aware of any 

best practices that would suggest the need for such a change in the requirements. 
722 

 Response: We thank the commenters for their input and suggestions and will take 

them under advisement for future refinements 

 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 indicated that 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 invited public comments on two issues: (1) the best way that discharge 

from a PHP could 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;
723 

● 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, address, and appointment date and time;

● A confirmed place to live in a stable environment with support services; and

● Other care coordination information.

 Comment: With regard to additions to the written plan of treatment, several 

commenters supported including in the written plan of treatment a full list of patients’ 

medications, dosages, and any necessary prescriptions as well as written notice of the 

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, 

address and appointment date and time. However, the commenters did not believe that it 

would be feasible for a PHP to provide a “confirmed place to live in a stable environment 

with support services” for its patients. The commenters noted that among the admission 

criteria for a PHP is the requirement that the patient “have an adequate support system to 

sustain/maintain themselves outside the partial hospitalization program.” The 

commenters believed that, while a PHP may be able to provide some limited assistance 

for a patient to maintain and enhance his or her stable environment, the program cannot 

ensure the sustainability of the environment or keep a patient enrolled in a PHP until that 

environment can be established. 

 The commenters pointed out that ensuring this type of environment would require 

intensive case management. The commenters believed that, if intensive case 

management was included in the PHP benefit available to Medicare beneficiaries, it 
724 

would be a helpful enhancement to the program. Therefore, the commenters urged CMS 

to continue stakeholder engagement to discuss the goals of additional documentation 

requirements within the written plan of treatment. 

 Several commenters suggested additional requirements for the written plan of 

treatment to better direct PHP resources to ensure appropriate discharges and follow-up 

services, such as expedited discharge for patients who are no longer at risk for inpatient 

psychiatric hospitalizations, and specific actions to assist patients at discharge, including 

providing written instructions for medications, documentation of the next appointment 

with the appropriate Medicare Part B participating practitioner, confirmation of a place of 

residence, and other care coordination information. One commenter stated that the PHP 

medical necessity criterion should include care for the acute exacerbation of a psychiatric 

condition and care for prevention of admission or readmission to the hospital. One 

commenter suggested that any written treatment plan for a patient receiving PHP services 

include goals that will curtail the patient’s need for a higher level of care through 

adherence to the PHP’s attendance requirements and his or her prescribed medication 

regimen, identify the patient’s symptoms and prognosis for improvement, and take into 

consideration the patient’s coping skills. The commenter stated that the treatment plan 

must be concise. Another commenter agreed that the diagnosis of a patient enrolled in a 

PHP should be consistent with those attributable to persons with chronic and persistent 

mental illnesses and included in the written treatment plan for PHP services. 

 Response: We thank the commenters for their input and suggestions and will take 

them under advisement for future refinements. 
725 

 We also stated that we were 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-for-reporting and public reporting mechanisms. We 

requested 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?

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43622), we stated that we 

would appreciate feedback on all of these areas for future consideration and invited 

public comments on these issues.

 Comment: Many commenters indicated that they have long supported the quality 

measures that are now included as part of the IPFQR program, and noted that the 

measures are well tested, reliable, and valid and have broad stakeholder support. The 

commenters asked that CMS initiate a conversation with the measure developers to 

determine if any of these measures would be suitable for the outpatient setting. In 

particular, the commenters indicated that the care transition measure (HBIPS 7) and the 

antipsychotic medication measures (HBIPS 4 and 5) are likely candidates and worthy of 

further discussion. Other commenters also suggested that CMS consider the HBIPS 6 

measure regarding continuity of care and the HBIPS 1 measure regarding admission 
726 

screening for violence risk, substance use, psychological trauma history, and patient 

strengths. These commenters stated that preserving the continuity of care between the 

inpatient and outpatient setting is an important goal, and indicated that starting with these 

inpatient measures may prove informative as CMS moves forward in considering 

alternative measures for the hospital outpatient department setting. 

 Many commenters urged CMS to work collaboratively with the Technical Expert 

Panel that it has established to develop, test, and fully vet any measure concepts before 

proceeding with measure development. Many commenters supported measuring the 

quality and safety of behavioral health care across the continuum of care and indicated 

that it may be appropriate to implement measures for PHPs. However, the commenters 

stated that any measures selected to assess the quality of PHP services should be 

specified, tested and National Quality Forum (NQF)-endorsed for that care setting, and 

reviewed by the Measure Applications Partnership (MAP) before the measures are 

proposed for inclusion under a quality reporting program for PHP services provided on 

an outpatient basis. One commenter supported the development of quality measures for 

PHP services and recommended that CMS work with SAMHSA on their proposed 

National Behavioral Health Quality Framework that was recently released for public 

comment, to determine how this framework might apply or be modified to apply to 

quality measures for PHP services. 

 Another commenter stated that the quality indicators CMS are seeking must be 

very specific and relate to the patient’s current outpatient visit. The commenter 

suggested the following quality indicators and discharge requirements for PHP services 
727 

in order to evaluate performance: (1) Access--The number of program days of scheduled 

operation from the time of a request for services to the first scheduled day of service; (2) 

Treatment Intensity--The percentage of scheduled attendance consistent with a minimum 

attendance average of 4 days per calendar week over an episode of care; (3) Discharge 

Planning--The percentage of patients with a scheduled follow-up appointment within 14 

days after the date of discharge (as needed); and (4) Continuity of Care--The percentage 

of post-discharge continuity of care plans provided to the next level of care providers 

upon discharge. 

 Another commenter suggested that, instead of calculating the PHP APC per diem 

payment rates using claims data, CMS should use the quality of the provided services to 

base payments, including record reviews, denials due to lack of medical necessity or 

inadequate documentation, site visits, interviews with patients, and most importantly 

patient outcomes. The commenter stated that rewarding providers for higher quality care 

as measured by selected standards instead of rewarding providers for increasing the cost 

of the services provided is a better way to improve the quality of any service. The 

commenter further stated that establishing quality measures will support constructive 

changes throughout the payment system and will encourage performance improvements 

by all providers (regardless of setting - CMHC or hospital outpatient department). The 

commenter believed that value-based purchasing incentives (rather than antiquated 

payment methodologies involving cost-based purchasing) is more appropriate to improve 

the quality of care provided. 
728 

 Response: We thank the commenters for their input and suggestions and will take 

them under advisement for future refinements. 

 We appreciate the wide range of comments we received from health and 

behavioral health care associations, hospitals, providers and professionals interested in 

future initiatives related to partial hospitalization services. We will take them into 

consideration for further rulemaking to strengthen the PHP benefit and payment structure. 

D. 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 in 

CY 2004, we designated a portion of the estimated OPPS outlier target amount 

specifically for CMHCs, consistent with the percentage of projected payments to CMHCs 

under the OPPS each year, excluding outlier payments, and established a separate outlier 

threshold for CMHCs. 
729 

 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43622), we proposed 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 0.07 percent of total OPPS payments in CY 2014, excluding outlier payments. 

Therefore, we proposed to designate 0.0016 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 proposed 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 stated that 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 proposed to continue to apply the same outlier payment percentage that applies to 

hospitals. Therefore, for CY 2014, we proposed to continue to pay 50 percent of CMHC 

per diem costs over the threshold. In section II.G. of the CY 2014 OPPS/ASC proposed 
730 

rule (78 FR 43622), for the hospital outpatient outlier payment policy, we proposed to set 

a dollar threshold in addition to an APC multiplier threshold. Because the PHP APCs are 

the only APCs for which CMHCs may receive payment under the OPPS, we would not 

expect to redirect outlier payments by imposing a dollar threshold. Therefore, we did not 

propose to set a dollar threshold for CMHC outlier payments. 

 In summary, we proposed to establish that if a CMHC’s cost for partial 

hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times 

the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of 

the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We 

invited public comments on these proposals. 

 Comment: A few commenters stated that no changes should be made to outlier 

payments for CMHCs. 

 Response: We appreciate the commenters’ input. 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal to set a separate outlier threshold for CMHCs. As discussed in section 

II.G. of this final rule with comment period, using more recent data for this final rule with 

comment period, we set the target for hospital outpatient outlier payments at 1.00 percent 

of total estimated OPPS payments. We allocated a portion of the 1.00 percent, an amount 

equal to 0.16 percent of outlier payments or 0.0016 percent of total estimated OPPS 

payments to CMHCs for PHP outlier payments. For CY 2014, as proposed, we are 

setting the CMHC outlier threshold at 3.40 multiplied by the APC 0173 payment amount 

and the CY 2014 outlier percentage applicable to costs in excess of the threshold at 50 
731 

percent. In other words, if a CMHC’s cost for partial hospitalization services, paid under 

either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the 

outlier payment will be calculated as 50 percent of the amount by which the cost exceeds 

3.40 times the APC 0173 payment rate.

IX. Procedures That Will 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. Changes to the Inpatient List

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43622), for the CY 2014 OPPS, 

we proposed to use the same methodology (described in the November 15, 2004 final 

rule with comment period (69 FR 65835)) of reviewing the current list of procedures on 

the inpatient list to identify any 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. 
732 

 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 proposed to not remove 

any procedures from the inpatient list for CY 2014. 

 Comment: Several commenters requested that CMS remove CPT codes 37182 

(Insertion of transvenous intrahepatic portosystemic shunt(s) (TIPS) (includes venous 

access, hepatic and portal vein catheterization, portography with hemodynamic 

evaluation, intrahepatic tract formation/dilatation, stent placement and all associated 

imaging guidance and documentation); 37183 (Revision of transvenous intrahepatic 

portosystemic shunt(s) (TIPS) (includes venous access, hepatic and portal vein 

catheterization, portography with hemodynamic evaluation, intrahepatic tract 

recanulization/dilatation, stent placement and all associated imaging guidance and 

documentation); 54411 (Removal and replacement of a multi-component inflatable penile 

prosthesis through an infected field at the same operative session); and 54417 (Removal 
733 

and replacement of a non-inflatable (semi-rigid) or inflatable (self-contained) penile 

prosthesis through an infected field at the same operative session) from the CY 2014 

inpatient list based on their own experience, specialty society recommendation, or 

designation of a procedure as safe in the outpatient setting under one of the many clinical 

guidelines available. 

 Response: We reevaluated data on CPT codes 37182, 37183, 54411, and 54417 

using recent utilization data and further clinical review performed by CMS medical 

advisors. As a result of the reevaluation, we have determined that these procedures can 

be safely performed only in the inpatient setting. We are not removing them from the 

inpatient list for CY 2014. 

 Comment: Some commenters requested that CMS add CPT codes 44202 

(Laparoscopy, surgical; enterectomy, resection of small intestine, single resection and 

anastomosis), 44203 (Laparoscopy, surgical; each additional small intestine resection and 

anastomosis), 44204 (Laparoscopy, surgical; colectomy, partial, with anastomosis); 

44205 (Laparoscopy, surgical; colectomy, partial, with removal of terminal ileum with 

ileocolostomy), 44206 (Laparoscopy, surgical; colectomy, partial, with end colostomy 

and closure of distal segment (Hartmann type procedure)), 44207 (Laparoscopy, surgical; 

colectomy, partial, with anastomosis, with coloproctostomy (low pelvic anastomosis)), 

44208 (Laparoscopy, surgical; colectomy, partial, with anastomosis, with 

coloproctostomy (low pelvic anastomosis) with colostomy), and 44213 (Laparoscopy, 

surgical, mobilization (take-down) of splenic flexure performed in conjunction with 

partial colectomy (List separately in addition to primary procedure)) to the inpatient list. 
734 

 Response: We reevaluated data on CPT codes 44206, 44207, 44208, and 44213 

using recent utilization data and further clinical review performed by CMS medical 

advisors. As a result of the reevaluation, we agree with the commenters that these 

procedures can be safely performed only in the inpatient setting. Therefore, we are 

adding CPT codes 44206, 44207, 44208, and 44213 to the inpatient list. We note that 

CPT codes 44202, 44203, 44204, and 44205 are currently assigned to the inpatient list. 

 Comment: Other commenters requested that CMS add CPT codes 33233 

(Removal of permanent pacemaker pulse generator only), 33234 (Removal of 

transvenous pacemaker electrode(s): single lead system, atrial or Ventricular), 33235 

(Removal of transvenous pacemaker electrode(s): dual lead system), 33241 (Removal of 

pacing cardioverter defibrillator pulse generator only), and 33244 (Removal of single or 

dual chamber pacing cardioverter-defibrillator electrodes; by transvenous extraction) to 

the inpatient list. 

 Response: We reevaluated data on CPT codes 33233, 33234, 33235, 33241, and 

33244 using recent utilization data and further clinical review performed by CMS 

medical advisors. As a result of the reevaluation, we determined that these five 

procedures can be safely performed in the outpatient setting. Therefore, we are not 

adding CPT codes 33233, 33234, 33235, 33241, and 33244 to the inpatient list for 

CY 2014. 

 Comment: A few commenters requested that the inpatient list be eliminated in its 

entirety. 
735 

 Response: We continue to believe that the inpatient only list is a valuable tool for 

ensuring that the OPPS only pays for services that can safely be performed in the hospital 

outpatient setting, and we are not eliminating the inpatient only list at this time. We 

believe that there are many surgical procedures that cannot be safely performed on a 

typical Medicare beneficiary in the hospital outpatient setting. Therefore, it would be 

inappropriate for us to assign them separately payable status indicators and establish 

payment rates in the OPPS. 

 Comment: One commenter recommended that CMS remove the fourth criterion, 

“A determination is made that the procedure is being performed in numerous hospitals on 

an outpatient basis,” to determine whether codes potentially could be removed from the 

inpatient list because it will be difficult, if not impossible, to meet this criterion. 

 Response: We disagree with the commenter that this criterion is impossible to 

meet and note that the criterion has been a part of our longstanding and established 

methodology for identifying any procedures that potentially could be removed from the 

inpatient list for a number of years without significant concern raised by public 

commenters. We also remind the commenter that removal from the inpatient list does not 

necessarily require that all five criteria be satisfied. It is possible that a procedure could 

be removed from the inpatient list even if only a subset of the five criteria is satisfied for 

a particular service. Therefore, we do not find reason to remove the fourth criterion from 

our established methodology for identifying any procedures that potentially could be 

removed from the inpatient list. If this were the case for a service (even though it may 

appear unlikely), the service may be a good candidate for removal from the inpatient list. 
736 

 After consideration of the public comments we received, we are finalizing our 

proposal to continue to use the methodology described in the November 15, 2004 final 

rule with comment period to identify any procedure that may be removed from the 

inpatient list, and are modifying our proposal for procedures on the inpatient list for 

CY 2014 by adding CPT codes 44206, 44207, 44208, and 44213 to the CY 2014 

inpatient only list. 

 The procedures that we are adding to the inpatient only list for CY 2014 and their 

CPT codes, long descriptors, and status indictors are displayed in Table 45 below. 

TABLE 45.—PROCEDURES ADDED THE INPATIENT ONLY LIST 

FOR CY 2014 

HCPCS 

Code Long Descriptor 

CY 2014 

Status 

Indicator 

44206 Laparoscopy, surgical; colectomy, partial, with end colostomy 

and closure of distal segment (Hartmann type procedure) C 

44207 Laparoscopy, surgical; colectomy, partial, with anastomosis, 

with coloproctostomy (low pelvic anastomosis) C

44208 Laparoscopy, surgical; colectomy, partial, with anastomosis, 

with coloproctostomy (low pelvic anastomosis) with colostomy C

44213 Laparoscopy, surgical, mobilization (take-down) of splenic 

flexure performed in conjunction with partial colectomy C

 The complete list of codes that we will be paid by Medicare in CY 2014 only as 

inpatient procedures is included as Addendum E to this final rule with comment period 

(which is available via the Internet on the CMS Web site). 
737 

X. 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 
738 

OPPS notice and comment rulemaking, and implemented an independent review process 

in 2012 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. In addition, 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-ServicePayment/HospitalOutpatientPPS/index.html?redirect=/HospitalOutpatientPPS/01_overvi

ew.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 
739 

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-ServicePayment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf. 

 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. Therefore, as we discussed in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43623), 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. We stated in the proposed rule that, for CY 2014, 

we anticipated 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-ServicePayment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf). 

In the proposed rule, we stated that we were 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 
740 

requested 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. 

 Comment: Most commenters urged CMS to extend the direct supervision 

enforcement instruction for at least one more year in order to study the possible unintended 

consequences on Medicare beneficiary access to care and, at the same time, to develop 

policies that exempt CAHs and small, rural PPS hospitals from the requirement for direct 

supervision. The commenters stated that some small rural hospitals and CAHs have 

insufficient staff available to furnish direct supervision in CY 2014. The primary 

contributing factors cited were difficulty recruiting physician and nonphysician practitioners 

to practice in rural areas, and a desire by patients to see the providers they are familiar and 

comfortable with locally, outside of working hours. The commenters stated that it is 

particularly difficult to furnish direct supervision for critical specialty services, such as 

radiation oncology services, that cannot be supervised by a hospital emergency department 

physician or nonphysician practitioner, because of the volume of emergency patients or lack 

of specialty expertise. 

 These commenters believed that if the direct supervision requirement is enforced 

in CY 2014 for CAHs and small rural hospitals, some of these facilities will be forced to 

close altogether, and others will have to limit their hours of operation for chemotherapy, 

intravenous infusion of antibiotics and other drugs, cardiac and pulmonary rehabilitation, 

observation, blood transfusion, radiation oncology and wound care services. The 

commenters expressed concern that hospital revenues would be reduced from these 

business lines, and that some patients would elect to discontinue their care because of 
741 

increased cost or inability to travel farther distances to obtain access to these services. 

The commenters believed that reduced access will result in additional hospital 

readmissions and increased Medicare spending. Several commenters believed that access 

will be especially difficult given the anticipated increase in utilization likely to begin in 

2014 as a result of the implementation of the online health insurance marketplaces and 

the expansion of Medicaid under the Affordable Care Act. 

 MedPAC stated in its public comment that, in light of the decision to enforce the 

supervision instructions, CMS should continue working with the Panel to define services 

that are appropriate for general supervision. 

 Response: 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). Most hospital outpatient 

therapeutic services must be furnished directly (are not delegable); therefore, general 

supervision would not be appropriate for the majority of services. The independent Panel 

review advisory process was established through notice and comment rulemaking as the 

means of identifying 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 (76 FR 74360 

through 74371). We encourage hospitals to continue using the Panel process to bring to 

CMS’ attention services that may not require the immediate availability of a supervising 

practitioner, especially where it is possible to reduce the burden on the workforce 
742 

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, especially those the commenters 

mentioned that have not yet been evaluated by the Panel, such as blood transfusion, 

chemotherapy and radiation therapy, and wound care services. Instructions for 

submitting evaluation requests are available on the Panel Web site at: 

http://www.cms.gov/Regulations-andGuidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.ht

ml). 

 Regarding pulmonary rehabilitation (PR) and cardiac rehabilitation (CR) services 

also mentioned by the commenters, in the CY 2009 OPPS/ASC final rule with comment 

period (74 FR 60573), we stated that while we have some flexibility to determine the type 

of practitioner who may supervise other hospital outpatient therapeutic services, in the 

case of PR, CR, and intensive cardiac rehabilitation (ICR) services, the statutory 

language does not provide such flexibility. Section 1861(eee)(2)(B) of the Act imposes 

strict requirements, describing the direct physician supervision standard for PR, CR, and 

ICR services, and does not give flexibility to modify the requirement to allow for other 

supervisory practitioners. 

 After consideration of the public comments we received, we are not extending the 

enforcement instruction another year for CY 2014. The enforcement instruction will 

expire December 31, 2013. 
743 

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 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). 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43624), we stated that 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 requires further assessment of the beneficiary either per hour 

(because observation services are billed per hour) or at some other point during provision 
744 

of the service. In the CY 2014 OPPS/ASC proposed rule, we stated that 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. 

 Comment: Commenters supported this clarification, stating that it answers many 

questions regarding whether Medicare requires hourly evaluations of the patient during 

the provision of observation services. 

 Response: We appreciate the commenters’ support and are finalizing our 

clarification without modification. 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 

speech-language 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,” for these 

services. There is one therapy cap for OT services and another separate therapy cap for 

PT and SLP services combined. As we discussed in the CY 2014 OPPS/ASC proposed 

rule (78 FR 43624), in the CY 2014 Medicare Physician Fee Schedule (MPFS) proposed 

rule (78 FR 43332), we proposed to subject outpatient therapy services furnished by a 

CAH to the therapy caps and, if extended by statute, the exceptions process and the 
745 

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 proposed 

to continue this methodology for 2014 and subsequent years. CAHs will still be paid for 

therapy services under the reasonable cost methodology for CAH outpatient services 

described under section 1834(g) of the Act. We refer readers to the CY 2014 MPFS final 

rule with comment period for detailed information about our proposal, a summation of 

the public comments we received on the proposal and our responses, and detailed 

information about our final policy. After consideration of all of the public comments we 

received, in the CY 2014 MPFS final rule, we are finalizing our proposal to apply the 

therapy caps and related provisions to services furnished by a CAH beginning on January 

1, 2014. We are including in this CY 2014 OPPS/ASC final rule with comment period a 

reference to the final policy as an additional means to direct CAHs’ attention to our 

policies in the CY 2014 MPFS final rule. 

C. Requirements for Payment of Outpatient Therapeutic (“Incident To”) Hospital or 

CAH Services

1. Overview 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626), we 

proposed 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 
746 

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 proposed 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, 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 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 self-administered 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 hospital outpatient therapeutic services 

furnished incident to a physician’s service even when described by benefit categories 
747 

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, the conditions of payment that derive from the “incident to” nature 

of the services paid apply to all hospital outpatient therapeutic services. 

 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 a 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 self-administered, 

if they are furnished— 

● By or under arrangements made by the participating hospital or CAH, 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; 
748 

● In the hospital or CAH or in a department of the hospital or CAH, as defined in 

42 CFR 413.65 [a provider-based 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 
749 

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-General-Supervision.pdf). 

 In § 410.27(a)(1)(iv)(C) and (D), we regulate the qualifications of physicians and 

nonphysician practitioners supervising other personnel that are personally performing a 

service, or part of a service. In the CY 2011 OPPS/ASC final rule with comment period, 

we stated our belief that that in order to furnish assistance and direction, the supervising 

practitioner would have to be State-licensed and possess hospital privileges to perform 

the supervised procedure (75 FR 72007). Similarly, in the CY 2010 OPPS/ASC final rule 

with comment period, we stated that the supervisory practitioner “must have, within his 

or her State scope of practice and hospital-granted privileges, the ability to perform the 

service or procedure” that he or she is supervising (74 FR 60580). 

 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 
750 

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 expanded. 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 
751 

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 payment regulations regarding hospital 
752 

outpatient therapeutic services and supplies incident to the services of nonphysician 

practitioners contain this requirement. Therefore, 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 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.” In the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626), we 

proposed amendments to our regulations in order to address this recommendation. 

3. Proposed and Final Policy 

 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 
753 

services are not furnished in compliance with the State law, in the CY 2014 OPPS/ASC 

proposed rule (78 FR 43624 through 43626), we proposed 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 proposed to add a provision under a new paragraph 

(a)(1)(vi) under § 410.27 to specify 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.” 

We stated that 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. 

 We indicated that the proposal is consistent with other areas of the Medicare 

program where CMS defers to State rules regarding the delivery of hospital services. For 

example, in determining who can admit patients as inpatients of a hospital, the hospital 

conditions of participation (CoPs) defer to State law and the authority of the hospital’s 

governing body and medical staff to grant admitting privileges in accordance with the 

laws of the State in which the hospital is located. Section 482.12(c)(2) provides: 

“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 [which lists practitioners that must care for Medicare patients], that patient 

is under the care of a doctor of medicine or osteopathy.” Therefore, in determining who 
754 

may admit inpatients to a hospital, Medicare defers to State law rules. 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.” Similarly, under the CoP at 42 

CFR 482.22(a), we provide that a hospital’s medical staff which grants admitting 

privileges “must include doctors of medicine or osteopathy. In accordance with State 

law, including scope-of-practice laws, the medical staff may also include other categories 

of nonphysician practitioners determined as eligible for appointment by the governing 

body.” Under the CoP at 42 CFR 482.11(c), the hospital must assure that personnel are 

licensed or meet other applicable standards that are required by State or local laws. 

 We believe it is appropriate to similarly require as a condition of payment for 

individual services 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. 

 We solicited public comments on our proposal. 
755 

 Comment: Several commenters supported the general premise that individuals 

who provide services and supplies incident to a physician’s services must do so in 

compliance with State law. However, the commenters opposed the “broad nature” of the 

proposed regulatory text because they believed that it might expose hospitals to liability 

under the False Claims Act in situations where a hospital improperly billed Medicare for 

services because the physician or practitioner had some minor defect with his or her 

license or certification, but there was no concern about a practitioner acting outside the 

scope of practice or the quality of care furnished. Several commenters asserted that the 

proposal is not necessary or appropriate because sanctions for these issues are already 

available under the CoPs and section 1156 of the Act. These commenters noted that 

section 1156 of the Act requires hospitals to ensure that the services it furnishes are of a 

quality that meet professionally recognized standards of care, and, upon a finding that in 

a substantial number of cases the hospital failed to comply substantially with this 

obligation, or that it grossly and flagrantly violated this obligation in one or more 

instances, the hospital is subject to a corrective action plan. The commenters noted that, 

while the sanction for violating the CoPs and the penalties under section 1156 of the Act 

do not include payment recoupment for the particular services furnished, the sanctions, 

including termination of the Medicare provider agreement and corrective action plans, are 

significant. 

 Several commenters supported the proposal because they recommended that CMS 

allow hospital personnel to continue working, possibly indefinitely, without the direct 

supervision of physicians or other qualified nonphysician practitioners in certain smaller 
756 

hospitals. These commenters believed the proposal would be an important means of 

ensuring that ancillary personnel are properly trained, experienced, and potentially–in 

some States–even licensed, given that they would furnish services relatively 

independently in CAHs and small rural hospitals without direct supervision. The 

commenters stated that the proposal would ensure that technicians and other individuals 

furnishing “incident to” services are properly educated, trained, and experienced, and 

would ensure high quality care, not just for Medicare beneficiaries, but for all patients. 

 Response: We agree with commenters that the CoPs and other statutory 

provisions provide for corrective action plans as a condition to continued eligibility to 

provide Medicare and Medicaid services on a reimbursable basis. However, we believe it 

is appropriate to also recoup payment for individual services if they are not furnished in 

accordance with applicable State law, and that the possibility of sanctions in the form of 

payment recoupment can help ensure compliance with the law. 

 We are concerned with the comments that indicated that our proposed revision to 

§ 410.27 is necessary, in the absence of a direct supervision standard for payment, to 

ensure the safety and quality of care or compliance with State law. The instruction 

regarding enforcement of supervision requirements (discussed in section XI.A. of this 

final rule with comment period) does not relieve CAHs or small rural hospitals of their 

obligations under State law, the hospital CoPs, or section 1156 of the Act, to ensure that 

the individuals who furnish hospital outpatient therapeutic services are licensed and 

otherwise qualified to do so. The enforcement instruction (available on the CMS Web 

site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-
757 

Payment/HospitalOutpatientPPS/Downloads/Physician_Supervision_Nonenf_Notice.pdf) 

specifically states, “CMS continues to expect the hospitals covered under this notice to 

fulfill all other Medicare program requirements when providing services to Medicare 

beneficiaries and when billing Medicare for those services. While CMS is instructing 

contractors not to enforce the supervision requirements for outpatient therapeutic services 

in these hospitals for CY 2010-2013, we continue to emphasize quality and safety for 

services provided to all patients in these facilities.” We note that as discussed in section 

X.A.1. of this final rule with comment period, the enforcement instruction will not be 

extended for CY 2014. These public comments reinforce our belief that conditions of 

payment for individual services, in the form of both the outpatient supervision rules and 

the proposed requirement for compliance with State laws, are necessary to ensure the 

safety and quality of care for Medicare beneficiaries. The hospital outpatient supervision 

rules are directed at ensuring that supervisory practitioners are licensed or authorized by 

the State and possess hospital privileges to direct and, if necessary, intervene in the 

services they supervise (75 FR 72007), while our proposed requirement for compliance 

with applicable State law ensures that supervised individuals are licensed and qualified to 

provide the services or aspects of services that are delegated to them. 

 After consideration of the public comments we received, we are finalizing 

proposed new paragraph (a)(1)(vi) under § 410.27, without modification, 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.” This final policy does not impose any new 
758 

requirements on hospitals that bill the Medicare program because practitioners and other 

personnel furnishing services already are required to comply with the laws of the State in 

which the services are furnished. This regulatory change simply adopts the existing 

requirements as a condition of payment under Medicare. Codifying this requirement 

provides the Federal government with a clear basis to deny Medicare payment when 

services are not furnished in accordance with applicable State law, as well as to ensure 

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. 

4. Technical Correction 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43626), we stated that, 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.” In the CY 2014 

OPPS/ASC proposed rule, we proposed to make a technical correction that would amend 
759 

the description of these drugs and biologicals at § 410.27(a) to more appropriately reflect 

the statutory language. Specifically, we proposed to delete the phrase “drugs and 

biologicals that cannot be self-administered” 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 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....” 

 We did not receive any public comments on this proposed technical correction. 

Therefore, we are finalizing the correction without modification. 

D. Collecting Data on Services Furnished in Off-Campus Provider-Based Departments

 As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43626) and in 

the CY 2014 Medicare Physician Fee Schedule (MPFS) proposed rule (78 FR 43301), 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 Carol M. Ostrom, “Why 

You Might Pay Twice for One Visit to a Doctor,” Seattle Times, November 3, 2012, and 

Ann O’Malley, Amelia M. Bond, and Robert Berenson, Rising Hospital Employment of 

Physicians: Better Quality, Higher Costs?, Issue Brief No. 136, Center for Studying 
760 

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’s office. As more 

physician practices become hospital-based, news articles have highlighted beneficiary 

liability that is incurred when services are provided in a hospital-based physician 

practice. 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 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 in a freestanding clinic or in a physician office. When a 

service is furnished in a freestanding clinic or a physician office, only one payment is 

made to the physician (under the MPFS). However, when a service is provided in a 

hospital or a “physician office” that is a provider-based department of a hospital, 

Medicare pays the hospital a “facility fee” and pays the physician separately for the 

physician portion of the service. When a service is furnished in a hospital (or a 

provider-based department of a hospital), the payment to the physician is lower than the 

payment to the physician for the same service furnished outside the hospital (or the 
761 

provider-based department of a hospital). However, the total payment (facility fee plus 

physician fee) is generally more for a service furnished in a hospital (or a provider-based 

department of a hospital) than for the same service furnished in a freestanding clinic or a 

physician office. The beneficiary pays coinsurance for both the physician payment and 

the 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 42 CFR 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 of services furnished in off-campus provider-based departments of the 

hospital. 

 We stated in the CY 2014 OPPS/ASC and MPFS proposed rules that 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 were considering collecting information that would allow us to analyze 

the frequency, type, and payment of services furnished in off-campus provider-based 

hospital departments. We stated that we have considered several potential methods for 

physician and hospital claims. Claims-based approaches could include: (1) for physician 
762 

services, creating a new place of service (POS) code for off campus departments of a 

provider as part of item 24B of the CMS–1500 claim form, comparable to current POS 

codes such as “22 Outpatient” and “23 Emergency Room-Hospital” when physician 

services are furnished in an off-campus provider-based department; or (2) 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, CMS Form 2552-10. We noted 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. In the proposed rules, we 

invited public comments on the best means for collecting information on the frequency, 

type, and payment of services furnished in off-campus provider-based departments of 

hospitals. 

 Comment: While most commenters agreed on the need to collect information on 

the frequency, type, and payment of services furnished in off-campus provider-based 

departments of hospitals, they expressed different opinions on how to best collect these 

additional data. Some commenters preferred identifying services furnished in 

provider-based departments on the Medicare cost report, while other commenters 

preferred one of the claims-based approaches. Some commenters supported either 

approach and noted the trade-offs in terms of the type of data that could be collected 
763 

accurately and the administrative burden involved. Some commenters suggested that 

CMS convene a group of stakeholders to develop consensus on the best approach. 

Commenters generally recommended that CMS choose the least administratively 

burdensome approach that would ensure accurate data collection, but did not necessarily 

agree on what approach would optimally achieve that result. For example, commenters 

indicated that limiting the data collection to cost report approaches results in little 

administrative burden for physicians because they do not file cost reports, but could result 

in varying degrees of administrative effort for hospitals, depending on the specific cost 

reporting requirements. 

 Several commenters noted that some hospitals already voluntarily identify costs 

specific to provider-based departments on their cost reports. These commenters asserted 

that because cost and charge information is already reported separately, there would be 

no additional burden, although additional variables or changes to the structure of the cost 

report may be required. In addition, the commenters noted that cost report information 

would be transparent and audited for accuracy. One commenter recommended aggregate 

reporting of all off-campus provider-based departments as one or several cost centers. 

Another commenter suggested that CMS consider assigning separate subprovider 

numbers for off-campus departments similar to those used for rehabilitation and 

psychiatric units. 

 Other commenters believed that a HCPCS modifier would more clearly identify 

specific services provided, and would provide better information about the type and level 

of care furnished. Some commenters believed that a HCPCS modifier would be the least 
764 

administratively burdensome approach because hospitals and physicians already report a 

number of claims-based modifiers. However, other commenters, using this same fact 

about the number of existing claims-based modifiers, argued that additional modifiers 

would increase administrative burden because this approach would increase the modifiers 

that would need to be considered when billing. Commenters recommended that CMS 

consider the establishment of a new POS code because they believed this approach would 

be less administratively burdensome than attaching a modifier to each service reported on 

the claim that was furnished in an off-campus provider-based department. Some 

commenters stated that establishing a new POS code would generate a better outcome 

under the MPFS than the OPPS because, under the OPPS, a single claim is more likely to 

contain lines for services furnished in both on-campus and off-campus departments of the 

hospital on the same day for the same beneficiary. 

 MedPAC believed there may be some limited value in collecting data on services 

furnished in off-campus provider-based departments to validate the accuracy of 

site-of-service reporting when the physician’s office is off-campus but bills as an 

outpatient department, but did not recommend a particular data collection approach. 

MedPAC indicated that any data collection effort should not prevent the development of 

policies to align payment rates across settings. 

 Response: We appreciate the public feedback in response to our solicitation of 

public comments in the CY 2014 OPPS/ASC and MPFS proposed rules. We will take 

the public comments received into consideration as we continue to consider approaches 

to collecting data on services furnished in off-campus provider-based departments. 
765 

XI. CY 2014 OPPS Payment Status and Comment Indicators 

A. 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 CY 2014 status indicators and their definitions is displayed in 

Addendum D1 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/index.html. The 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-forService-Payment/HospitalOutpatientPPS/index.html. The changes to CY 2014 status 

indicators and their definitions are discussed in detail below. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43627), for CY 2014, we 

proposed to create a new status indicator “J1” to identify HCPCS codes that are paid 

under a comprehensive APC. We proposed that a claim with the new proposed status 

indicator “J1” would trigger a comprehensive APC payment for the claim. 

 The public comments that we received on the status indicator “J1” are discussed 

in detail in section II.A.2.e. of this final rule with comment period. After consideration of 

the public comments we received, we have decided to finalize status indicator “J1” but 

with a delayed effective date of CY 2015. 
766 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43627), for CY 2014, we 

proposed to delete status indicator “X” and assign ancillary services that are currently 

assigned status indicator “X” to either status indicator “Q1” or “S.” Services assigned 

status indicator “Q1” include many minor diagnostic tests that are generally ancillary to 

and performed with another service. However, services assigned to status indicator “Q1” 

also may be performed alone. Given the nature of these services and their role in hospital 

outpatient care, we stated that 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 stated that we believe it is appropriate to conditionally 

package all ancillary services that are currently assigned to status indicator “X,” and we 

proposed to assign them to status indicator “Q1.” We also proposed that preventive 

services currently assigned status indicator “X” would 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 final rule with comment 

period. In addition, we proposed 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” was proposed for deletion. 

 The public comments that we received regarding ancillary services assigned to 

status indicator “X” are discussed in detail in section II.A.3. of this final rule with 

comment period. As discussed in that section, we are not finalizing our CY 2014 
767 

proposal to package ancillary services. Therefore, we are not deleting status indicator 

“X” for CY 2014. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43628), for CY 2014, we 

proposed to revise the definitions of status indicators “S” and “T” to remove the word 

“significant” from these definitions. We stated that it is no longer necessary to 

distinguish significant procedures from ancillary services because we proposed to delete 

the status indicator that describes ancillary services. We also proposed 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.” 

 Comment: One commenter recommended that CMS consider allowing different 

status indicator assignments for HCPCS codes within an APC (for example, some of the 

codes within an APC could be assigned status indicator “S” and others could be assigned 

status indicator “T”) and evaluate the need to permit HCPCS codes within the same APC 

to have a different assigned status indicator than that assigned to the APC under which it 

is being paid. The commenter believed this was needed to ensure appropriate payments 

and access to affected services. 

 Response: We appreciate the commenter’s interest in refining the methodology 

used for assigning status indicators “S” and “T” under the OPPS. However, we did 

propose a change to our policy of assigning status indicators to APCs and, therefore, are 

not making such a change for CY 2014. However, we may consider this comment during 

future rulemaking. 
768 

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal, without modification. We are finalizing our proposal to revise the 

definitions of status indicators “S” and “T” to remove the word “significant” from these 

definitions; and to add the word “service” to the definition of status indicator “S” to 

indicate “procedure or service; not discounted when multiple” and to status indicator “T” 

to indicate “procedure or service; multiple reduction applies.” We believe that these 

revisions better describe the entire range of procedures and services that will be assigned 

these status indicators for CY 2014. 

 In addition, we proposed to update the definition of status indicator “A” for 

CY 2014. We proposed 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.” 

 We did not receive any public comments regarding our proposed update of the 

definition of status indicator “A.” Therefore, we are adopting, as final, our proposal for 

CY 2014. 

B. CY 2014 Comment Indicator Definitions

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43628), for the CY 2014 OPPS, 

we proposed to use the same two comment indicators that are in effect for the CY 2013 

OPPS. 
769 

● “CH”—Active HCPCS codes in current and next calendar year; status indicator 

and/or APC assignment have changed or active HCPCS code that will be discontinued at 

the end of the current calendar year. 

● “NI”—New code for the next calendar year or existing code with substantial 

revision to its code descriptor in the next calendar year as compared to current calendar 

year, interim APC assignment; comments will be accepted on the interim APC 

assignment for the new code. 

 We proposed to use the “CH” comment indicator in the CY 2014 OPPS/ASC 

proposed rule to indicate HCPCS codes for which the status indicator or APC 

assignment, or both, were proposed for change in CY 2014 compared to their assignment 

as of June 30, 2013. We stated that we believe that using the “CH” indicator in the 

proposed rule would facilitate the public’s review of the changes that we proposed for 

CY 2014. 

 We proposed to use the “CH” comment indicator in this 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. We stated that the use of the comment indicator “CH” in association 

with a composite APC indicates that the configuration of the composite APC would be 

changed in the CY 2014 OPPS/ASC final rule with comment period. 

 In addition, we proposed that any existing HCPCS codes with substantial 

revisions to the code descriptors for CY 2014 compared to the CY 2013 descriptors 

would be labeled with comment indicator “NI” in Addendum B to the CY 2014 
770 

OPPS/ASC final rule with comment period. However, we stated that 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 

this CY 2014 OPPS/ASC final rule with comment period. Like all codes labeled with 

comment indicator “NI,” we stated that we would 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 proposed that CPT and Level II HCPCS 

codes that are new for CY 2014 also would 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 this CY 2014 OPPS/ASC 

final rule with comment period are subject to comment. HCPCS codes that do not appear 

with comment indicator “NI” in this CY 2014 OPPS/ASC final rule with comment period 

are not open to public comment, unless we specifically request additional comments 

elsewhere in this final rule with comment period. 

 Comment: One commenter requested that CMS create a new comment indicator 

for changes to an APC assignment and to keep comment indicator “CH” to designate 

changes to status indicators. The commenter also suggested that CMS create a new 

comment indictor to indicate that a code’s descriptor has changed significantly while 

retaining comment indicator “NI” to indicate that a code is brand new. 
771 

 Response: We have no operational need to create additional comment indicators 

that are specific to various types of changes. Therefore, we believe that the CY 2013 

definitions of the OPPS comment indicators continue to be appropriate for CY 2014 and 

we are continuing to use those definitions without modification for CY 2014. The final 

definitions of the OPPS status indicators are listed in Addendum D2 on the CMS Web 

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

XII. 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 
772 

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 pass-through status under the OPPS; (3) certain items and 

services that we designate as contractor-priced, including, but not limited to, procurement 

of corneal tissue; (4) certain drugs and biologicals for which separate payment is allowed 

under the OPPS; and (5) 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. 
773 

 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 final rule with 

comment period, because we base ASC payment policies for covered surgical 

procedures, drugs, biologicals, and certain other covered ancillary services on the OPPS 

payment policies, we also provide quarterly 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 
774 

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. Treatment of New Codes

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

HCPCS Codes 

 Category I CPT, Category III CPT, and 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 and vaccine codes; (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 
775 

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 

proposed to solicit public comments in the CY 2014 OPPS/ASC proposed rule (and 

respond to those comments in this CY 2014 OPPS/ASC final rule with comment period) 

or whether we are soliciting public comments in this 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. In the proposed rule, we stated that we will respond to public 
776 

comments and finalize the treatment of these codes under the ASC payment system in 

this CY 2014 OPPS/ASC final rule with comment period. 

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

in April 2013 and July 2013 for Which We Solicited Public Comments in the 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 of the CY 2014 OPPS/ASC proposed 

rule (78 FR 43630) listed 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 of the 

CY 2014 OPPS/ASC proposed rule, as corrected (78 FR 43630; Table 34 was corrected 

in the September 6, 2013 correcting document (78 FR 54845)) listed the new Level II 
777 

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 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 solicited 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 of the proposed rule, as corrected (78 FR 43630; Table 34 was 

corrected in the September 6, 2013 correcting document (78 FR 54845)). 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 of the CY 2014 OPPS/ASC proposed rule 

(78 FR 43630) were included in Addenda AA or BB to the proposed rule, as corrected 

(which are 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 
778 

rates associated with the new Level II HCPCS codes that became effective July 1, 2013 

(listed in Table 34 of the proposed rule, as corrected) were not available to us in time for 

incorporation into the Addenda to the OPPS/ASC proposed rule, our policy is to include 

these HCPCS codes and their proposed payment indicators and payment rates in the 

preamble to the proposed rule but not in the Addenda to the proposed rule. These codes 

and their final payment indicators and rates are included in the appropriate Addendum to 

this CY 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 of the CY 2014 OPPS/ASC 

proposed rule as corrected (78 FR 43630; 78 FR 54845) were not included in Addenda 

AA or BB to the proposed rule, as corrected (which are 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 are included in 

Addenda AA or BB to this CY 2014 OPPS/ASC final rule with comment period, 

consistent with our annual update policy. 

 We solicited 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 of the CY 2014 

OPPS/ASC proposed rule, as corrected (78 FR 43630; 78 FR 54845). We proposed to 

finalize their payment indicators and their payment rates in this CY 2014 OPPS/ASC 

final rule with comment period. 
779 

 We did not receive any public comments regarding our proposals. We are 

adopting as final for CY 2014 the ASC payment indicators for the ASC covered surgical 

procedures and covered ancillary services described by the new Level II HCPCS codes 

implemented in April and July 2013 through the quarterly update CRs as shown below, in 

Tables 46 and 47, respectively. These new HCPCS codes are also displayed in Addenda 

AA and BB to this final rule with comment period. We note that after publication of the 

CY 2014 OPPS/ASC proposed rule, the CMS HCPCS Workgroup created permanent 

HCPCS J-codes for CY 2014 to replace certain temporary HCPCS C-codes made 

effective for CY 2013. These permanent CY 2014 HCPCS J-codes are listed alongside 

the temporary CY 2013 HCPCS C-codes in Tables 46 and 47 below. 

TABLE 46.—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL 

PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN 

APRIL 2013

CY 2013 

HCPCS 

Code 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

Final 

CY 2014 

Payment 

Indicator

C9130 J1556 Injection, immune globulin (Bivigam), 500 mg K2 

C9297 J9262 Injection, omacetaxine mepesuccinate, 0.01 mg K2 

C9298 J7316 Injection, ocriplasmin, 0.125 mg K2 

C9735 C9735 Anoscopy; with directed submucosal injection(s), 

any substance G2 
780 

TABLE 47.—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL 

PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN 

JULY 2013

CY 2013 

HCPCS 

Code 

CY 2014 

HCPCS 

Code CY 2014 Long Descriptor 

Final 

CY 2014 

Payment 

Indicator

C9131 J9354 Injection, ado-trastuzumab emtansine, 1 mg K2 

C9736 0336T 

Laparoscopy, surgical, radiofrequency ablation of 

uterine fibroid(s), including intraoperative guidance 

and monitoring, when performed 

G2 

Q2033 90673 

Influenza virus vaccine Influenza virus vaccine, 

trivalent, derived from recombinant DNA (RIV3), 

hemagglutinin (HA) protein only, preservative and 

antibiotic free, for intramuscular use 

L1 

Q2050* Q2050 Injection, Doxorubicin Hydrochloride, Liposomal, 

Not Otherwise Specified, 10 mg K2 

Q2051* J3489 Injection, Zoledronic Acid, 1 mg K2 

*Note: HCPCS code Q2050 replaced code HCPCS 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 were listed in Table 35 of the CY 2014 OPPS/ASC proposed 

rule, as corrected (78 FR 43631; Table 35 was corrected in the September 6, 2013 

correcting document (78 FR 54845)), 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 were 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 payment indicators, and proposed payment rates in the 

preamble to the proposed rule but not in the Addenda to the proposed rule. The codes 
781 

listed in Table 35 of the CY 2014 OPPS/ASC proposed rule, as corrected (78 FR 43631; 

78 FR 54845) and their final payment indicators and rates are included in Addendum BB 

to this CY 2014 OPPS/ASC final rule with comment period. 

 We proposed 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 solicited public comment on the 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 of the proposed rule, as corrected. We proposed to finalize their 

payment indicators and their payment rates in this CY 2014 OPPS/ASC final rule with 

comment period. 

 We did not receive any public comments regarding this proposal. We are 

adopting as final for CY 2014 the ASC payment indicators for the covered ancillary 

services described by the new Category III CPT codes implemented in the July 2013 CR 

as shown in Table 48 below. The new CPT codes implemented in July 2013 are also 

displayed in Addendum BB to this final rule with comment period (which is available via 

the Internet on the CMS Web site). 
782 

TABLE 48.—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 

2013 AS ASC COVERED ANCILLARY SERVICES

CY 2014 

CPT Code CY 2014 Long Descriptor

Final 

CY 2014 

Payment 

Indicator

0331T Myocardial sympathetic innervation imaging, planar 

qualitative and quantitative assessment Z2 

0332T 

Myocardial sympathetic innervation imaging, planar 

qualitative and quantitative assessment; with tomographic 

SPECT 

Z2 

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

We Are Soliciting Public Comments in This CY 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 
783 

rule with comment period, and we respond to these comments in the final rule with 

comment period for the next calendar year’s OPPS/ASC update. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43631), we proposed to 

continue this process for CY 2014. Specifically, for CY 2014, we proposed 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. We stated that these codes would be 

flagged with comment indicator “NI” in Addenda AA and BB to this CY 2014 

OPPS/ASC final rule with comment period to indicate that we have assigned them an 

interim payment status. We also stated that their payment indicators and payment rates, 

if applicable, would be open to public comment in the CY 2014 OPPS/ASC final rule 

with comment period and would be finalized in the CY 2015 OPPS/ASC final rule with 

comment period. 

 We did not receive any public comments regarding this proposed process. For 

CY 2014, we are finalizing our proposal, without modification, to continue our 

established process for recognizing and soliciting public comments on new Level II 

HCPCS codes and Category I and III CPT codes that become effective on 

October 1, 2013, or January 1, 2014, as described above. 
784 

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

Services

1. Covered Surgical Procedures 

a. Additions to the List of ASC Covered Surgical Procedures 

 We conducted a review of all HCPCS codes that currently are paid under the 

OPPS, but not included on the ASC list of covered surgical procedures, to determine if 

changes in technology and/or medical practice 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, in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43631), we did not propose additions to the list of ASC covered surgical 

procedures for CY 2014. 

 Comment: One commenter reiterated a previous request that, with knowledge of 

the anatomic location, CMS should apply the safety criteria to the entire spectrum of 

services reportable by an unlisted code. The commenter believed that, under such an 

analysis, CMS would determine that the following unlisted codes associated with eye 

procedures would not compromise patient safety and, therefore, should be added to the 

list of ASC covered surgical procedures: CPT code 66999 (Unlisted procedure, anterior 

segment of eye); CPT code 67299 (Unlisted procedure, posterior segment); CPT 

code 67399 (Unlisted procedure, ocular muscle); CPT code 67999 (Unlisted procedure, 
785 

eyelids); CPT code 68399 (Unlisted procedure, conjunctiva); and CPT code 68899 

(Unlisted procedure, lacrimal system). 

 Response: As we have stated in the past (72 FR 42484 through 42486; 

75 FR 72032 through 72033; 76 FR 74380; and 77 FR 68439), procedures that are 

reported by the CPT unlisted codes are not eligible for addition to the ASC list because 

we do not know what specific procedure would be represented by an unlisted code. Our 

charge requires us to evaluate each surgical procedure for potential safety risk and 

expected need for overnight monitoring and to exclude from ASC payment procedures 

that would be expected to pose a threat to beneficiary safety or require active medical 

monitoring at midnight following the procedure. It is not possible to evaluate procedures 

that would be reported by unlisted CPT codes according to these criteria. This final 

policy is discussed in detail in the August 2, 2007 final rule (72 FR 42484 through 

42486). 

 Comment: Commenters requested that CMS add the procedures described by the 

54 CPT codes displayed in Table 49 below to the list of ASC covered surgical 

procedures. The commenters argued that these procedures are as safe as procedures that 

are currently on the list of ASC covered procedures and, based on a survey, ASCs report 

positive outcomes when these procedures are performed on non-Medicare patients. 
786 

TABLE 49.--PROCEDURES REQUESTED FOR ADDITION TO THE CY 2014 

LIST OF ASC COVERED SURGICAL PROCEDURES 

CY 2014 

CPT 

Code CY 2014 Short Descriptor 

19307 Mast mod rad 

22551 Neck spine fuse&remov bel c2 

22552* Addl neck spine fusion 

22554 Neck spine fusion 

22612 Lumbar spine fusion 

22851 Apply spine prosth device 

23470 Reconstruct shoulder joint 

23472* Reconstruct shoulder joint 

27093*** Injection for hip x-ray 

27095*** Injection for hip x-ray 

27415 Osteochondral knee allograft 

27447* Total knee arthroplasty 

27524 Treat kneecap fracture 

35907* Excision graft abdomen 

41899** Dental surgery procedure 

44970 Laparoscopy appendectomy 

44979** Laparoscope proc app 

54332 Revise penis/urethra 

54336 Revise penis/urethra 

54411* Remov/replc penis pros comp 

54417* Remv/replc penis pros compl 

54535 Extensive testis surgery 

54650 Orchiopexy (Fowler-Stephens) 

57282 Colpopexy extraperitoneal 

57310 Repair urethrovaginal lesion 

57425 Laparoscopy surg colpopexy 

58260 Vaginal hysterectomy 

58262 Vag hyst including t/o 

58541*** Lsh uterus 250 g or less 

58542*** Lsh w/t/o ut 250 g or less 

58543 Lsh uterus above 250 g 
787 

CY 2014 

CPT 

Code CY 2014 Short Descriptor 

58570*** Tlh uterus 250 g or less 

58571*** Tlh w/t/o 250 g or less 

60240 Removal of thyroid 

60500 Explore parathyroid glands 

62290*** Inject for spine disk x-ray 

63011 Remove spine lamina 1/2 scrl 

63012 Remove lamina/facets lumbar 

63015 Remove spine lamina >2 crvcl 

63016 Remove spine lamina >2 thrc 

63017 Remove spine lamina >2 lmbr 

63020 Neck spine disk surgery 

63030 Low back disk surgery 

63035 Spinal disk surgery add-on 

63040 Laminotomy single cervical 

63042 Laminotomy single lumbar 

63045 Remove spine lamina 1 crvl 

63046 Remove spine lamina 1 thrc 

63047 Remove spine lamina 1 lmbr 

63048 Remove spinal lamina add-on 

63055 Decompress spinal cord thrc 

63056 Decompress spinal cord lmbr 

63075 Neck spine disk surgery 

63076 Neck spine disk surgery 

* Procedure paid only as inpatient procedure 

** Unlisted CPT code 

*** Procedure currently on ASC list of covered procedures

Response: We reviewed all of the eligible surgical procedures that commenters 

requested for addition to the ASC list of covered surgical procedures. Of the 

54 requested procedures requested for addition to the ASC list, we did not review the 

6 procedures that are reported by CPT codes that are on the OPPS inpatient only list 
788 

(identified with one asterisk in Table 49) or the 2 procedures that may be reported by 

CPT unlisted codes because these codes are not eligible for addition to the ASC list 

(identified with two asterisks in Table 49), consistent with our final policy which is 

discussed in detail in the August 2, 2007 final rule (72 FR 42484 through 42486; 

42 CFR 416.171(c)). In addition, we did not review the 7 procedures reported by CPT 

codes that are already on the ASC list of covered surgical procedures (identified with 

three asterisks in Table 49). 

 With regard to the remaining 39 procedures in Table 49 that commenters 

requested be added to the list of ASC covered surgical procedures, we do not agree that 

all of the procedures are appropriate for provision to Medicare beneficiaries in ASCs. 

Although the commenters asserted that the procedures they were requesting for addition 

to the list are as safe as procedures already on the list, our review did not support those 

assertions. We exclude from ASC payment any procedure for which standard medical 

practice dictates that the beneficiary who undergoes the procedure would typically be 

expected to require active medical monitoring and care at midnight following the 

procedure (overnight stay) as well as all surgical procedures that our medical advisors 

determine may be expected to pose a significant safety risk to Medicare beneficiaries 

when performed in an ASC. The criteria used under the revised ASC payment system to 

identify procedures that would be expected to pose a significant safety risk when 

performed in an ASC include, but are not limited to, those procedures that: generally 

result in extensive blood loss; require major or prolonged invasion of body cavities; 

directly involve major blood vessels; are generally emergent or life threatening in nature; 
789 

commonly require systemic thrombolytic therapy; are designated as requiring inpatient 

care under § 419.22(n); can only be reported using a CPT unlisted surgical procedure 

code; or are otherwise excluded under § 411.15 (we refer readers to § 416.166). 

 In our review of the procedures listed in Table 49, we found that many of the 

procedures either would be expected to pose a threat to beneficiary safety or require 

active medical monitoring at midnight following the procedure. Specifically, we found 

that prevailing medical practice called for inpatient hospital stays for beneficiaries 

undergoing many of the procedures and that some of the procedures directly involve 

major blood vessels and/or may result in extensive blood loss. However, we agree with 

commenters that the procedures described by CPT codes 27415, 27524, 60240, and 

60500 meet the criteria under § 416.166 and would be safely performed in the ASC 

setting and would not require overnight stays. We are adding these CPT codes to the 

ASC list of covered surgical procedures for CY 2014. 

 After consideration of the public comments we received, we are finalizing the 

addition of the four procedures requested by the commenters to the CY 2014 list of ASC 

covered surgical procedures. The procedures, their descriptors, and payment indicators 

are displayed in Table 50 below. 
790 

TABLE 50.—NEW ASC COVERED SURGICAL PROCEDURES FOR CY 2014

b. Covered Surgical Procedures Designated as Office-Based 

(1) Background 

 In the August 2, 2007 ASC final rule, we finalized our policy to designate as 

“office-based” those procedures that are added to the ASC list of covered surgical 

procedures in CY 2008 or later years that we determine are performed predominantly 

(more than 50 percent of the time) in physicians’ offices based on consideration of the 

most recent available volume and utilization data for each individual procedure code 

and/or, if appropriate, the clinical characteristics, utilization, and volume of related codes. 

In that rule, we also finalized our policy to exempt all procedures on the CY 2007 ASC 

list from application of the office-based classification (72 FR 42512). The procedures 

that were added to the ASC list of covered surgical procedures beginning in CY 2008 that 

we determined were office-based were identified in Addendum AA to that rule by 

payment indicator “P2” (Office-based surgical procedure added to ASC list in CY 2008 

or later with MPFS nonfacility PE RVUs; payment based on OPPS relative payment 

weight); “P3” (Office-based surgical procedures added to ASC list in CY 2008 or later 

CY 

2014 

HCPCS 

Code 

CY 2014 Long Descriptor 

Final CY 

2014 ASC 

Payment 

Indicator 

27415 Osteochondral allograft, knee, open G2 

27524 Open treatment of patellar fracture, with internal fixation and/or 

partial or complete patellectomy and soft tissue repair G2 

60240 Thyroidectomy, total or complete G2 

60500 Parathyroidectomy or exploration of parathyroid(s); G2 
791 

with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE RVUs); or 

“R2” (Office-based surgical procedure added to ASC list in CY 2008 or later without 

MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), 

depending on whether we estimated it would be paid according to the standard ASC 

payment methodology based on its OPPS relative payment weight or at the MPFS 

nonfacility PE RVU-based amount. 

 Consistent with our final policy to annually review and update the list of surgical 

procedures eligible for payment in ASCs, each year we identify surgical procedures as 

either temporarily office-based, permanently office-based, or non-office-based, after 

taking into account updated volume and utilization data. 

(2) Changes for CY 2014 to Covered Surgical Procedures Designated as Office-Based 

 In developing the CY 2014 OPPS/ASC 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 appropriate for ASC payment, including their 

potential designation as office-based. 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). 
792 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43632), we stated that 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. We stated that the data indicated that these procedures are performed more 

than 50 percent of the time in physicians’ offices and that 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 proposed to permanently 

designate as office-based were listed in Table 36 of the CY 2014 OPPS/ASC proposed 

rule (78 FR 43632). We invited public comment on this proposal. 

 Comment: One commenter disagreed with the policy to make payment at the 

lower of the ASC rate or the MPFS nonfacility PE RVU payment amount for procedures 

that CMS identifies as office-based. This commenter expressed concern that this policy 

does not provide adequate payment for some services performed in an ASC. 

 Response: We have responded to this comment in the past and we continue to 

believe that our policy of identifying low complexity procedures that are usually provided 

in physicians’ offices and limiting their payment in ASCs to the physician’s office 

payment amount is necessary and valid. We believe this is the most appropriate approach 

to prevent payment incentives for services to move from physicians’ offices to ASCs for 

the many newly covered low complexity procedures on the ASC list. We refer readers to 

our response to this comment in the CY 2010, CY 2011, CY 2012, and CY 2013 

OPPS/ASC final rules with comment period (74 FR 60605 through 60607; 75 FR 72034 

through 72036; 76 FR 74401; and 77 FR 68444 through 68445, respectively). 
793 

 Comment: One commenter believed that the procedure described by CPT code 

37761 (Ligation of perforator vein(s), subfascial, open, including ultrasound guidance, 

when performed, 1 leg) should not be designated as office-based. This commenter 

suggested that inaccurate coding for place of service results in the volume and utilization 

data indicating that the procedure is performed more than 50 percent of the time in 

physicians’ offices and that the level of complexity associated with CPT code 37761 is 

not consistent with other procedures performed routinely in physicians’ offices. 

 Response: Our review of the CY 2012 volume and utilization data indicates that 

CPT code 37761 is performed 53 percent of the time in physicians’ offices. Our policy is 

to designate as office-based those procedures that are performed more than 50 percent of 

the time in physicians’ offices; therefore, we are designating CPT code 37761 as 

office-based for CY 2014 as we proposed.

 After consideration of the public comments we received, we are finalizing our 

CY 2014 proposal to designate the procedures described by CPT codes 26341, 36595, 

and 37761 as permanently office-based as displayed in Table 51 below. 
794 

TABLE 51.—ASC COVERED SURGICAL PROCEDURES NEWLY 

DESIGNATED AS PERMANENTLY OFFICE-BASED FOR CY 2014 

* Final payment indicators are based on a comparison of the final rates according to the ASC standard 

ratesetting methodology and the MPFS final 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 final rule with comment period.

 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 through 68444 

and 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 

CY 

2014 

CPT 

Code CY 2014 Long Descriptor 

CY 2013 

ASC 

Payment 

Indicator 

Proposed 

CY 2014 

ASC 

Payment 

Indicator* 

Final 

CY 2014 

ASC 

Payment 

Indicator*

26341 

Manipulation, palmar fascial cord (ie, 

dupuytren’s cord), post enzyme 

injection (eg, collagenase), single 

cord 

G2 P3 P3 

37761 

Ligation of perforator vein(s), 

subfascial, open, including 

ultrasound guidance, when 

performed, 1 leg 

G2 R2 R2 

36595 

Mechanical removal of pericatheter 

obstructive material (eg, fibrin 

sheath) from central venous device 

via separate venous access 

G2 P3 P3 
795 

(Treatment of extensive or progressive retinopathy, one or more sessions; preterm infant 

(less than 37 weeks gestation at birth), performed from birth up to 1 year of age (eg, 

retinopathy of prematurity), photocoagulation or cryotherapy). Consequently, we 

proposed 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 proposed to assign payment indicator “G2” to this covered 

surgical procedure code in CY 2014 (78 FR 43632). 

 The three remaining procedures that have temporary office-based designations for 

CY 2013 were proposed to be packaged under the OPPS for CY 2014 as discussed in 

section II.A.3. of the proposed rule. Consequently, we proposed to 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 
796 

● 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 were displayed in Table 37 

of the CY 2014 OPPS/ASC proposed rule (78 FR 43632 through 43633). The procedures 

for which the proposed office-based designations for CY 2014 are temporary also were 

indicated by asterisks in Addendum AA to the proposed rule, as corrected (which is 

available via the Internet on the CMS Web site). We invited public comment on these 

proposals. 

 We did not receive any public comments on these proposals. For CY 2014, we 

are finalizing our proposal, without modification, to continue to designate four of the 

eight procedures (listed in Table 37 of the CY 2014 OPPS/ASC proposed rule 

(78 FR 43632 through 43633) and restated in Table 52 below), which were designated as 

temporarily office-based for CY 2013, as temporarily office-based for CY 2014. In 

addition, we are finalizing our proposal to not designate CPT code 0227T (Anoscopy, 

high resolution (HRA) (with magnification and chemical agent enhancement); with 

biopsy(ies)) as office-based in CY 2014 and are assigning payment indicator “G2” to this 

code. Finally, we are finalizing our proposal to assign payment indicator “N1” to 

HCPCS code 0300T because this procedure will be packaged under the OPPS for 

CY 2014. However, we are not finalizing our proposal to package the procedures 

identified by HCPCS codes 0226T and 0299T under the OPPS. We reviewed CY 2012 
797 

volume and utilization data and other information for HCPCS codes 0226T and 0299T 

which had temporary office-based designations in CY 2013. Because there are very few 

claims reporting HCPCS codes 0226T and 0299T, we will maintain their temporary 

office-based designations for CY 2014.
798 

TABLE 52.—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 2014 

CPT 

Code CY 2014 Long Descriptor 

CY 2013 

ASC 

Payment 

Indicator 

CY 2014 

ASC 

Payment 

Indicator**

0099T Implantation of intrastromal corneal ring 

segments 

R2* R2* 

0124T 

Conjunctival incision with posterior extrascleral 

placement of pharmacological agent (does not 

include supply of medication) 

R2* R2* 

0226T 

Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); 

diagnostic, including collection of specimen(s) 

by brushing or washing when performed 

R2* R2* 

0227T 

Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); 

with biopsy(ies) 

R2* G2 

0299T 

Extracorporeal shock wave for integumentary 

wound healing, high energy, including topical 

application and dressing care; initial wound 

R2* R2*

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* 
799 

* If designation is temporary. 

** Final payment indicators are based on a comparison of the final rates according to the ASC standard 

ratesetting methodology and the MPFS final rates. 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 final rule with comment period. 

 As we discuss in section XII.B.3. of the CY 2014 OPPS/ASC proposed rule 

(78 FR 43631) and this final rule with comment period, we incorporate new Category I 

and Category III CPT codes and new Level II HCPCS codes that are effective 

October 1, 2013 and January 1, 2014 in this final rule with comment period. Because 

these codes were not available to us until after the CY 2014 OPPS/ASC proposed rule 

was published, these codes were not included in that rule. After reviewing the clinical 

characteristics, utilization, and volume of related codes, we determined that two of the 

procedures described by new CPT codes would be predominantly performed in 

physicians’ offices. However, because we had no utilization data for the procedures 

specifically described by these new CPT codes, we made the office-based designations 

temporary rather than permanent and we will reevaluate the procedures when data 

become available. 

 The temporary payment indicators for the two office-based procedures displayed 

in Table 53 below are flagged with comment indicator “NI” in Addendum AA to this 

OPPS/ASC final rule with comment period to indicate that we are assigning them an 

interim payment status which is subject to public comment. We will respond to any 

public comments received in the CY 2015 OPPS/ASC final rule with comment period. 
800 

TABLE 53.—FINAL CY 2014 PAYMENT INDICATORS FOR NEW CY 2014 

CPT CODES FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED 

AS TEMPORARILY OFFICE-BASED 

CY 2014 

CPT Code CY 2014 Long Descriptor 

CY 2014 ASC 

Payment 

Indicator** 

10030 

Image-guided fluid collection drainage by catheter 

(eg, abscess, hematoma, seroma, lymphocele, cyst), 

soft tissue (eg, extremity abdominal wall, neck), 

percutaneous 

P2* 

64617 

Chemodenervation of muscle(s); larynx, unilateral, 

percutaneous (eg, for spasmodic dysphonia), 

includes guidance by needle electromyography, 

when performed 

P3* 

* If designation is temporary. 

**Final payment indicators are based on a comparison of the final rates according to the ASC standard 

ratesetting methodology and the MPFS final rates. 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 final rule with comment period. 

c. ASC Covered Surgical Procedures Designated as Device-Intensive 

(1) Background 

 As discussed in the August 2, 2007 final rule (72 FR 42503 through 42508), we 

adopted a modified payment methodology for calculating the ASC payment rates for 

covered surgical procedures that are assigned to the subset of OPPS device-dependent 

APCs with a device offset percentage greater than 50 percent of the APC cost under the 

OPPS, in order to ensure that payment for the procedure is adequate to provide packaged 

payment for the high-cost implantable devices used in those procedures. 
801 

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

Device-Intensive for CY 2014 

 As discussed in section II.A.2.e of the CY 2014 OPPS/ASC proposed rule 

(78 FR 43558 through 43561), for CY 2014, we proposed to create 29 comprehensive 

APCs to replace 29 of the most costly device-dependent APCs under the OPPS. We 

proposed 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 proposed 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 encounter-based comprehensive service whenever a HCPCS code 

that is assigned to a comprehensive APC appears on the claim, the ASC claimsprocessing system does not allow for this type of conditional packaging. Therefore, we 

proposed that all separately paid OPPS 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 
802 

separately paid ancillary services provided integral to the surgical procedure because the 

OPPS relative weights for comprehensive APCs include costs for ancillary services, we 

proposed 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 device-intensive 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 proposed to create comprehensive APCs to 

replace 29 of the 39 device-dependent APCs under the OPPS, we proposed to define 

ASC device-intensive 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 proposed changes to § 416.171(b)(2) to reflect this 

proposal. 

 We also proposed 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 device-intensive 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. 
803 

 The ASC covered surgical procedures that we proposed to designate as 

device-intensive and that would be subject to the device-intensive procedure payment 

methodology for CY 2014 were listed in Table 38 of the CY 2014 OPPS/ASC proposed 

rule (78 FR 43634 through 43635). The CPT code, the CPT code short descriptor, the 

proposed CY 2014 ASC 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 

were also listed in Table 38. All of these procedures were included in Addendum AA to 

the proposed rule, as corrected (which is available via the Internet on the CMS Web site). 

We invited public comment on this proposal. 

 Comment: Some commenters expressed the same general concerns made in 

previous rulemakings regarding the sufficiency of ASC payment for device-related 

services and recommended modifications to the ASC device-intensive payment 

methodology. The commenters argued that CMS should apply the device-intensive 

payment methodology to all procedures for which CMS can establish a median device 

cost and not just to the procedures where the device offset percentage is greater than 

50 percent of the APC cost under the OPPS. In a related suggestion, some commenters 

urged CMS to establish the threshold used to determine device-intensive procedures at 

50 percent of the “unadjusted” ASC payment rate (OPPS relative weight multiplied by 

the ASC conversion factor) instead of the OPPS payment rate. The commenters also 

made the same argument as made in prior rulemakings--that CMS should not adjust the 

device portion of the ASC payment for device-intensive procedures by the wage index. 
804 

 Response: In the August 2, 2007 final rule (72 FR 42504), we established a 

modified payment methodology for calculating ASC payment rates for device-intensive 

procedures under the ASC payment system. We defined device-intensive procedures as 

those procedures that are assigned to device-dependent APCs under the OPPS with 

device costs of greater than 50 percent of the APC cost (that is, the device offset 

percentage is greater than 50). In the CY 2014 OPPS/ASC proposed rule (78 FR 43558 

through 43561), we proposed to create comprehensive APCs to replace 29 of the 39 

device-dependent APCs under the OPPS. Because of this proposed change for the OPPS, 

we proposed to define ASC device-intensive procedures as those procedures that are 

assigned to any APC with a device offset percentage greater than 50 percent. Because we 

are not implementing the comprehensive APC policy under the OPPS until CY 2015, as 

discussed in section II.A.2.e. of this final rule with comment period, we are not finalizing 

this proposal for the ASC payment system and will continue to use our current definition 

of device-intensive procedures. 

 We do not agree with the commenters that the device-intensive methodology 

should be applied to all procedures where a device offset can be established. Nor do we 

agree with the commenters who suggested using a threshold to determine 

device-intensive procedures that is based on 50 percent of the ASC payment rate instead 

of the OPPS payment rate. We continue to believe that when device costs comprise 

50 percent or less of total procedure costs, those costs are less likely to be as predictable 

across sites-of-service. Accordingly, we believe that it is possible for ASCs to achieve 

efficiencies relative to HOPDs when providing those procedures, and that the application 
805 

of the ASC conversion factor to the entire ASC payment weight is appropriate. We refer 

readers to our response to this comment in the CY 2010, CY 2011, CY 2012, and 

CY 2013 OPPS/ASC final rules with comment period (74 FR 60608 and 60609; 

75 FR 72039; 76 FR 74409; and 77 FR 68449, respectively). 

 We also continue to believe it would not be appropriate to vary the portion of the 

national payment that is wage-adjusted for different services, such as applying the wage 

index only to the service portion of the ASC payment for device-intensive procedures, as 

the commenters requested, because our ASC policy is to be consistent with the OPPS 

because ASC payment rates are based on the OPPS relative payment weights. Therefore, 

we apply the ASC geographic wage adjustment to the entire ASC payment rate for 

device-intensive procedures. We refer readers to our response to this comment in the 

CY 2009, CY 2010, CY 2011, CY 2012 and CY 2013 OPPS/ASC final rules with 

comment period (73 FR 68735; 74 FR 60608 through 60609; 75 FR 72039; 76 FR 74409; 

and 77 FR 68449, respectively). 

 As indicated in section II.A.2.e of this final rule with comment period, after 

consideration of the public comments we received regarding the proposed OPPS 

comprehensive APC policy, we are finalizing our proposal to create 29 comprehensive 

APCs to replace 29 of the most costly device dependent APCs under the OPPS, but we 

will not implement the comprehensive APC policy until CY 2015. Therefore, under the 

ASC payment system, we are not finalizing our proposal to revise § 416.171(b)(2) to 

define ASC device-intensive procedures as those procedures that are assigned to any 

APC with a device offset percentage greater than 50 percent. For CY 2014, we will 
806 

continue to define ASC device-intensive procedures as those procedures that are assigned 

to device-dependent APCs under the OPPS with device costs greater than 50 percent of 

the APC cost. We are updating the ASC list of covered surgical procedures that are 

eligible for payment according to our current device-intensive procedure payment 

methodology and reflecting the APC assignments of procedures and APC device offset 

percentages based on the CY 2012 OPPS claims and cost report data available for this 

final rule with comment period. We are designating the ASC covered surgical 

procedures displayed in Table 54 below as device-intensive and subject to the deviceintensive procedure payment methodology for CY 2014. The CPT code, the CPT code 

short descriptor, the final CY 2014 ASC payment indicator (PI), the final CY 2014 OPPS 

APC assignment, the final CY 2014 OPPS APC device offset percentage, and an 

indication if the full credit/partial credit (FB/FC) device adjustment policy will apply, 

also are listed in Table 54 of this final rule with comment period. All of these procedures 

are included in Addendum AA to this final rule with comment period (which is available 

via the Internet on the CMS Web site). 

d. 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 
807 

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 the CY 2014 OPPS/ASC proposed rule 

(78 FR 43596 through 43598), we proposed 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 proposed to reduce OPPS payment for 

applicable APCs by the full or partial credit a provider receives for a replaced device. 

 Although we proposed 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 

proposed 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 proposed 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 proposed to update the list of ASC 
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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 of the CY 2014 

OPPS/ASC proposed rule (78 FR 43634 through 43635) displays the ASC covered 

device-intensive procedures that we proposed would be subject to the no cost/full credit 

or partial credit device adjustment policy for CY 2014. Specifically, when a procedure 

that was 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 proposed 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 
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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. We invited public comment on these 

proposals. 

 We did not receive any comments on our CY 2014 proposal to continue the no 

cost/full credit and partial credit device adjustment policy for ASCs. For CY 2014, as 

proposed, we will reduce the payment for the device implantation procedures listed in 

Table 54 below that are subject to the adjustment by the full device offset amount if a 

device is furnished without cost or with full credit. ASCs must append the HCPCS 

modifier “FB” to the HCPCS code for a surgical procedure listed in Table 54 below when 

the device is furnished without cost or with full credit. In addition, for CY 2014, we will 

reduce the payment for the device implantation procedures listed in Table 54 below that 

are subject to the adjustment by one half of the device offset amount if a device is 

provided with partial credit, if the credit to the ASC is 50 percent or more of the device 

cost. The ASC must append the HCPCS “FC” modifier to the HCPCS code for a surgical 
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procedure listed in Table 54 below that is subject to the partial credit device adjustment 

policy when the facility receives a partial credit of 50 percent or more of the cost of a 

device. 

TABLE 54.—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS 

DEVICE-INTENSIVE FOR CY 2014, INCLUDING ASC COVERED SURGICAL 

PROCEDURES FOR WHICH THE NO COST/FULL CREDIT OR PARTIAL 

CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY

CPT 

Code Short Descriptor 

Final 

CY 2014 

ASC PI 

Final 

CY 2014 

OPPS 

APC 

Final 

CY 2014 

DeviceDependent 

APC 

Offset 

Percent 

FB/FC 

Policy Will 

Apply 

24361 Reconstruct elbow joint J8 0425 60% Yes 

24363 Replace elbow joint J8 0425 60% Yes 

24366 Reconstruct head of radius J8 0425 60% Yes 

24370 Revise reconst elbow joint J8 0425 60% Yes 

24371 Revise reconst elbow joint J8 0425 60% Yes 

25441 Reconstruct wrist joint J8 0425 60% Yes 

25442 Reconstruct wrist joint J8 0425 60% Yes 

25446 Wrist replacement J8 0425 60% Yes 

27446 Revision of knee joint J8 0425 60% Yes 

33206 Insert heart pm atrial J8 0089 69% Yes 

33207 Insert heart pm ventricular J8 0089 69% Yes 

33208 Insrt heart pm atrial & vent J8 0655 73% Yes 

33212 Insert pulse gen sngl lead J8 0090 67% Yes 

33213 Insert pulse gen dual leads J8 0654 70% Yes 

33214 Upgrade of pacemaker system J8 0655 72% Yes 

33221 Insert pulse gen mult leads J8 0654 70% Yes 

33224 Insert pacing lead & connect J8 0655 73% Yes 

33225 L ventric pacing lead add-on J8 0655 73% Yes 

33227 Remove&replace pm gen singl J8 0090 67% Yes 

33228 Remv&replc pm gen dual lead J8 0654 70% Yes 

33229 Remv&replc pm gen mult leads J8 0654 70% Yes 
811 

CPT 

Code Short Descriptor 

Final 

CY 2014 

ASC PI 

Final 

CY 2014 

OPPS 

APC 

Final 

CY 2014 

DeviceDependent 

APC 

Offset 

Percent 

FB/FC 

Policy Will 

Apply 

33230 Insrt pulse gen w/dual leads J8 0107 81% Yes 

33231 Insrt pulse gen w/mult leads J8 0107 81% Yes 

33240 Insrt pulse gen w/singl lead J8 0107 81% Yes 

33249 Nsert pace-defib w/lead J8 0108 82% Yes 

33262 Remv&replc cvd gen sing lead J8 0107 81% Yes 

33263 Remv&replc cvd gen dual lead J8 0107 81% Yes 

33264 Remv&replc cvd gen mult lead J8 0107 81% 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 57% 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 55% Yes 

63655 Implant neuroelectrodes J8 0061 66% Yes 

63663 Revise spine eltrd perq aray J8 0040 55% Yes 

63664 Revise spine eltrd plate J8 0040 55% Yes 

63685 Insrt/redo spine n generator J8 0039 86% Yes 

64553 Implant neuroelectrodes J8 0040 55% Yes 

64555 Implant neuroelectrodes J8 0040 55% Yes 
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CPT 

Code Short Descriptor 

Final 

CY 2014 

ASC PI 

Final 

CY 2014 

OPPS 

APC 

Final 

CY 2014 

DeviceDependent 

APC 

Offset 

Percent 

FB/FC 

Policy Will 

Apply 

64561 Implant neuroelectrodes J8 0040 55% Yes 

64565 Implant neuroelectrodes J8 0040 55% Yes 

64568 Inc for vagus n elect impl J8 0318 87% Yes 

64569 Revise/repl vagus n eltrd J8 0040 55% Yes 

64575 Implant neuroelectrodes J8 0061 66% Yes 

64580 Implant neuroelectrodes J8 0061 66% Yes 

64581 Implant neuroelectrodes J8 0061 66% Yes 

64590 Insrt/redo pn/gastr stimul J8 0039 86% Yes 

65770 Revise cornea with implant J8 0293 65% No 

69714 Implant temple bone w/stimul J8 0425 60% Yes 

69715 Temple bne implnt w/stimulat J8 0425 60% Yes 

69717 Temple bone implant revision J8 0425 60% Yes 

69718 Revise temple bone implant J8 0425 60% Yes 

69930 Implant cochlear device J8 0259 84% Yes 

0282T Periph field stimul trial J8 0040 55% Yes 

0283T Periph field stimul perm J8 0318 87% Yes 

0302T Icar ischm mntrng sys compl J8 0089 69% Yes 

0304T Icar ischm mntrng sys device J8 0090 67% Yes 

0316T Replc vagus nerve pls gen J8 0039 86% Yes 

0319T Insert subq defib w/eltrd J8 0107 81% Yes 

0321T Insert subq defib pls gen J8 0107 81% Yes 

0323T Rmvl & replc subq pls gen J8 0107 81% Yes 

G0448 Place perm pacing cardiovert J8 0108 82% Yes 

e. ASC Treatment of Surgical Procedures Removed 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 
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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 in the CY 2014 OPPS/ASC proposed rule (78 FR 43636) 

we did not propose 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 proposed 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 the CY 2014 OPPS/ASC proposed rule 

(78 FR 43568 through 43576), we proposed 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 when used in a surgical 

procedure; clinical diagnostic laboratory tests; procedures described by add-on codes; 
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ancillary services (status indicator “X”); diagnostic tests on the bypass list; and device 

removal procedures. 

 To maintain consistency with the OPPS, we proposed that these services also 

would be packaged under the ASC payment system for CY 2014. Comment indicator 

“CH,” discussed in section XII.F. of the proposed rule (78 FR 43639), was used in 

Addendum BB to the proposed rule, as corrected (which is available via the Internet on 

the CMS Web site) to indicate covered ancillary services for which we proposed a change 

in the ASC payment indicator to reflect a proposed change in the OPPS treatment of the 

service for CY 2014. 

 Except for the Level II HCPCS codes and Level III CPT codes listed in Table 34 

and Table 35 of the CY 2014 OPPS/ASC proposed rule, as corrected (78 FR 43630 

through 43631; 78 FR 54845), all ASC covered ancillary services and their proposed 

payment indicators for CY 2014 were included in Addendum BB to the proposed rule, as 

corrected. We invited public comment on this proposal. 

 We did not receive any public comments on our proposal. Therefore, we are 

finalizing, without modification, our proposal to update the ASC list of covered ancillary 

services to reflect the payment status for the services under the OPPS. All CY 2014 ASC 

covered ancillary services and their final payment indicators are included in Addendum 

BB to this final rule with comment period (which is available via the Internet on the CMS 

Web site). 
815 

D. ASC Payment for Covered Surgical Procedures and Covered Ancillary Services

1. 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 office-based 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 
816 

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 final rule with comment period) 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 officebased 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. Update to ASC Covered Surgical Procedure Payment Rates for CY 2014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43636 through 43637), we 

proposed to update ASC payment rates for CY 2014 using the established rate calculation 

methodologies under § 416.171 and using our proposed modified definition for deviceintensive 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 proposed to continue to use the amount calculated under the 
817 

ASC standard ratesetting methodology for procedures assigned payment indicators “A2” 

and “G2.” 

 We proposed 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 proposed 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. We invited public 

comment on these proposals. 

 Comment: With regard to device removal procedures, commenters recommended 

that CMS modify its policy to package procedures in the ASC when the procedures are 

conditionally packaged in the OPPS. The commenters stated that, under this policy, no 

Medicare payment would be made for device removal procedures performed in an ASC if 

the device was removed and not replaced because the device removal procedures are 

proposed to be conditionally packaged under the OPPS. 

 Response: We agree with the commenters’ concerns regarding payment for 

device removal procedures performed in an ASC. Under the OPPS, a conditionally 

packaged code (status indicators “Q1” or “Q2”) describes a HCPCS code where the 
818 

payment is packaged when it is provided with a significant procedure but is separately 

paid when the service appears on the claim without a significant procedure. Because 

ASC services always include a surgical procedure, HCPCS codes that are conditionally 

packaged under the OPPS are always packaged (payment indicator “N1”) under the ASC 

payment system. Under the OPPS, we are finalizing a proposal to conditionally package 

device removal codes for CY 2014. Therefore, under our current ASC policy to package 

payment for services that are conditionally packaged in the OPPS, no Medicare payment 

would be made when a device removal procedure is performed in an ASC without 

another surgical procedure included on the claim. We believe that our ASC policy to 

package procedures that are conditionally packaged in the OPPS should be modified with 

regard to device removal procedures so that these procedures will continue to be 

separately paid in the ASC. 

 After consideration of the public comments we received, we are finalizing our 

proposal to calculate CY 2014 payment rates for ASC covered surgical procedures 

according to our established methodologies, with the exception of device removal 

procedures. For the 71 device removal procedures that are conditionally packaged in the 

OPPS (status indicator “Q2”), we will not follow our usual policy to package these 

procedures in the ASC but, instead, will assign the current ASC payment indicators 

associated with these procedures and continue to provide separate payment in CY 2014. 

c. Waiver of Coinsurance and Deductible for Certain Preventive Services 

 As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43637), section 

1833(a)(1) and section 1833(b)(1) of the Act waive the coinsurance and the Part B 
819 

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 

categories of services and the ASC covered surgical procedures and covered ancillary 

services that are preventive services that are recommended by the USPSTF with a grade 

of A or B for which the coinsurance and 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 did not 

propose any changes to our policies or the categories of services for CY 2014 in the 

CY 2014 OPPS/ASC proposed rule (78 FR 43637). We identify the specific services 

with a double asterisk in Addenda AA and BB to this final rule with comment period. 

d. 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 
820 

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 cardioverter-defibrillator 

or pacemaker pulse generator (eg, for upgrade to dual chamber system) (list separately in 

addition to code for primary procedure)) and 33249 (Insertion or replacement of 

permanent pacing cardioverter-defibrillator 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43637), we 

proposed 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 proposed that the ASC payment rate for CRT-D 

services (procedures described by CPT codes 33249 and 33225) would be based on the 
821 

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 invited public 

comment on these proposals. 

 As indicated in section II.A.2.e. of this final rule with comment period, after 

consideration of public comments we received regarding the proposed OPPS 

comprehensive APC policy, we are finalizing our proposal to create 29 comprehensive 

APCs to replace 29 of the most costly device-dependent APCs under the OPPS but we 

will not implement the finalized comprehensive APC policy until CY 2015. 

Consequently, CPT code 33225 will not be packaged under the OPPS for CY 2014 but 

will be separately paid. Therefore, we are not finalizing our proposal to package CPT 

code 33225 under the ASC payment system. For CY 2014, we will continue our current 

policy regarding ASC payment for CRT-D services. The CY 2014 ASC payment rate for 

CRT-D services will be based on the OPPS payment rate applicable to APC 0108 when 

procedures described by CPT codes 33225 and 33249 are performed on the same date of 

service in an ASC. ASCs will use the corresponding HCPCS Level II G-code (G0448) 

for proper reporting when the procedures described by CPT codes 33225 and 33249 are 

performed on the same date of service. When not performed on the same day as the 

service described by CPT code 33225, ASC payment for the service described by CPT 

code 33249 will be based on APC 0108 using the device-intensive methodology. When 

not performed on the same day as the service described by CPT code 33249, ASC 
822 

payment for the service described by CPT code 33225 will be based on APC 0655 using 

the device-intensive methodology. 

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 
823 

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). In the CY 2014 OPPS/ASC proposed rule (78 FR 43637), we did 

not propose any changes to our current policy regarding ASC payment for LDR prostate 

brachytherapy services for CY 2014. 

2. Payment for Covered Ancillary Services 

a. Background 

 Our final payment policies under the revised ASC payment system for covered 

ancillary services vary according to the particular type of service and its payment policy 

under the OPPS. Our overall policy provides separate ASC payment for certain ancillary 

items and services integrally related to the provision of ASC covered surgical procedures 

that are paid separately under the OPPS and provides packaged ASC payment for other 

ancillary items and services that are packaged 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 significant procedure. 
824 

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 

MPFS-based payment methodology for nuclear medicine procedures because the 

associated diagnostic radiopharmaceutical, although packaged under the ASC payment 
825 

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 contractor-priced 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)). 
826 

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 four 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)), HCPCS code C1841 (Retinal 

prosthesis, includes all internal and external components), and HCPCS code C1886 

(Catheter, extravascular tissue ablation, any modality (insertable)). Payment amounts for 

HCPCS codes C1830, C1840, C1841, 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 are used to establish ASC payment rates for CY 2014. HCPCS 

code C1841 was approved for pass-through payment effective October 1, 2013, and will 

continue to be eligible for pass-through payment in CY 2014. 

b. Payment for Covered Ancillary Services for CY 2014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43638 through 43639), for 

CY 2014, we proposed to update the ASC payment rates and make changes to ASC 

payment indicators as necessary to maintain consistency between the OPPS and ASC 
827 

payment system regarding the packaged or separately payable status of services and the 

proposed CY 2014 OPPS and ASC payment rates. We also proposed to set the CY 2014 

ASC payment rates for brachytherapy sources and separately payable drugs and 

biologicals 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 was based on a 

comparison of the proposed CY 2014 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 the proposed rule, as corrected, indicate 

whether the proposed payment rates for radiology services are based on the MPFS 

nonfacility PE RVU-based amount or the ASC standard ratesetting methodology, or 

whether payment for a radiology service is packaged into the payment for the covered 

surgical procedure (payment indicator “N1”). Radiology services that we proposed to 

pay based on the ASC standard ratesetting methodology were 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 were 
828 

assigned payment indicator “Z3” (Radiology service paid separately when provided 

integral to a surgical procedure on ASC list; payment based on MPFS nonfacility PE 

RVUs). 

 As finalized in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72050), payment indicators for all nuclear medicine procedures (defined as CPT 

codes in the range of 78000 through 78999) that are designated as radiology services that 

are paid separately when provided integral to a surgical procedure on the ASC list are set 

to “Z2” so that payment 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 

proposed 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 

proposed 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 were listed 

in Addendum BB to the proposed rule, as corrected (which is available via the Internet on 

the CMS Web site). We invited public comment on these proposals. 
829 

 Comment: One commenter requested that the procedure described by CPT code 

33225 (Insertion of pacing electrode, cardiac venous system, for left ventricular pacing, 

at time of insertion of pacing cardioverter-defibrillator or pacemaker pulse generator 

(eg, for upgrade to dual chamber system) (list separately in addition to code for primary 

procedure)) be excluded from the OPPS policy to package add-on codes due to impact on 

the proposed CY 2014 ASC payment rates for cardiac resynchronization therapy implant 

procedures (CRT-P, which is identified by CPT codes 33206 (Insertion of new or 

replacement of permanent pacemaker with transvenous electrode(s); atrial) and 33207 

(Insertion of new or replacement of permanent pacemaker with transvenous electrode(s); 

ventricular)) that include this add-on code. The commenter indicated that the proposed 

ASC payment rates for CRT-P services decrease by about 35 percent due to OPPS 

packaging of the add-on CPT code 33225. 

 Response: Our payment policies under the revised ASC payment system for 

covered ancillary services provide 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 provide packaged ASC payment for other ancillary 

items and services that are packaged or conditionally packaged (status indicators “N,” 

“Q1,” and “Q2”) under the OPPS. As detailed in section II.A.3.c. of this final rule with 

comment period, we are finalizing our proposal to package procedures described by 

add-on codes under the OPPS for CY 2014. Therefore, in order to align the ASC 

payment bundles with those under the OPPS, the ASC payment for CPT code 33225 will 
830 

be packaged into the payment for the associated procedures and will not be separately 

paid in CY 2014. 

 Comment: Commenters stated that hospitals perform more ancillary services than 

ASCs and, therefore, greater packaging is appropriate under the OPPS, but not under the 

ASC payment system. Commenters also suggested that, because laboratory tests 

associated with ASC procedures are paid under the Clinical Laboratory Fee Schedule, 

duplicate payment will occur if the OPPS relative weights that are used to calculate ASC 

payment rates include costs for laboratory tests. 

 Response: As detailed in section II.A.3. of this final rule with comment period, 

we are finalizing our proposal to package the following items and services under the 

OPPS 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 when used in a surgical procedure; (3) clinical diagnostic laboratory 

tests; (4) procedures described by add-on codes; and (5) device removal procedures. 

However, we are not finalizing our proposal to package ancillary services or diagnostic 

tests on the bypass list under the OPPS for CY 2014. Therefore, with respect to the 

commenters’ concerns about the proposed packaging of ancillary services, ancillary 

services will continue to have separate payment in CY 2014 under the OPPS. 

 With respect to the concern raised by commenters regarding duplicate payment of 

laboratory tests, packaging laboratory services under the OPPS will increase the relative 

payment weights and, subsequently, the ASC payment rates for those surgical procedures 

that include laboratory tests when provided in the hospital outpatient department. 
831 

However, because we uniformly scale the ASC relative payment weights each update 

year to make them budget neutral, the changes to the relative payment weights that are 

associated with laboratory packaging will not result in duplicate or additional Medicare 

payment in aggregate. In addition, because the packaged laboratory tests are spread over 

many APCs, we also believe that the impact on particular services is minor. 

Furthermore, fewer laboratory tests should be necessary in the ASC as diagnostic 

evaluations are not performed in the ASC. 

 After consideration of the public comments we received, we are providing 

CY 2014 payment for covered ancillary services in accordance with the policies finalized 

in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68458 through 

68459). Covered ancillary services and their final CY 2014 payment indicators are listed 

in Addendum BB (which is available via the Internet on the CMS Web site) to this final 

rule with comment period. 

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL 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 annual 

deadline. For a request to be considered complete, we require submission of the 

information that is found in the guidance document entitled “Application Process and 

Information Requirements for Requests for a New Class of New Technology Intraocular 

Lenses (NTIOLs) or Inclusion of an IOL in an existing NTIOL Class” posted on the 
832 

CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/NTIOLs.html.

● We announce annually in the proposed rule updating the ASC and OPPS 

payment rates for the following calendar year, a list of all requests to establish new 

NTIOL classes accepted for review during the calendar year in which the proposal is 

published. In accordance with section 141(b)(3) of Pub. L. 103-432 and our regulations 

at § 416.185(b), the deadline for receipt of public comments is 30 days following 

publication of the list of requests in the proposed rule. 

● In the final rule updating the ASC and OPPS payment rates for the following 

calendar year, we — 

○ Provide a list of determinations made as a result of our review of all new 

NTIOL class requests and public comments; 

○ 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. 

○ 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. 

○ Announce the deadline for submitting requests for review of an application for 

a new NTIOL class for the following calendar year. 
833 

2. Requests to Establish New NTIOL Classes for CY 2014 

 As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43639), we did 

not receive any requests for review to establish a new NTIOL class for CY 2014 by 

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 did not propose to revise the payment adjustment amount for 

CY 2014. 

4. Announcement of CY 2014 Deadline for Submitting Requests for CMS Review of 

Applications for a New Class of NTIOLs 

 In accordance with 42 CFR 416.185(a) of our regulations, CMS announces that in 

order to be considered for payment effective beginning in CY 2015, requests for review 

of applications for a new class of new technology IOLs must be received at CMS by 

5 p.m. EST, on March 3, 2014. Send requests to ASC/NTIOL, Division of Outpatient 

Care, Mailstop C4–05–17, Centers for Medicare and Medicaid Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. To be considered, requests for NTIOL reviews 

must include the information requested on the CMS Web site at: 

http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf. 
834 

F. ASC Payment and Comment Indicators

1. Background 

 In addition to the payment indicators that we introduced in the August 2, 2007 

final rule, we also created final comment indicators for the ASC payment system in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66855). We created 

Addendum DD1 to define ASC payment indicators that we use in Addenda AA and BB 

to provide payment information regarding covered surgical procedures and covered 

ancillary services, respectively, under the revised ASC payment system. The ASC 

payment indicators in Addendum DD1 are intended to capture policy relevant 

characteristics of HCPCS codes that may receive packaged or separate payment in ASCs, 

such as whether they were on the ASC list of covered services prior to CY 2008; payment 

designation, such as device-intensive or office-based, and the corresponding ASC 

payment methodology; and their classification as separately payable ancillary services 

including radiology services, brachytherapy sources, OPPS pass-through devices, corneal 

tissue acquisition services, drugs or biologicals, or NTIOLs. 

 We also created Addendum DD2 that lists the ASC comment indicators. The 

ASC comment indicators used in Addenda AA and BB to the proposed rules and final 

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 
835 

“NI” is also assigned to existing codes with substantial revisions to their descriptors such 

that we consider them to be describing new services, as discussed in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60622). In this CY 2014 OPPS/ASC 

final rule with comment period, we respond to public comments and finalize the ASC 

treatment of all codes that are labeled with comment indicator “NI” in Addenda AA and 

BB to the CY 2013 OPPS/ASC final rule with comment period. 

 The “CH” comment indicator is used in Addenda AA and BB to the proposed 

rule, as corrected (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 the 

current year and next calendar year; an active HCPCS code is newly recognized as 

payable in ASCs; or an active HCPCS code is discontinued at the end of the current 

calendar year. The “CH” comment indicators that are published in the final rule with 

comment period 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. 

2. ASC Payment and Comment Indicators 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43640), we did not propose any 

changes to the definitions of the ASC payment and comment indicators for CY 2014. We 

referred readers to Addenda DD1 and DD2 to the CY 2014 OPPS/ASC 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. 
836 

 Addenda DD1 and DD2 to this final rule with comment period (which are 

available via the Internet on the CMS Web site) contain the complete list of payment and 

commenter indicators for the CY 2014 update. 

G. Calculation of the ASC Conversion Factor and the ASC Payment Rates

1. Background 

 In the August 2, 2007 final rule (72 FR 42493), we established our policy to base 

ASC relative payment weights and payment rates under the revised ASC payment system 

on APC groups and 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; 42 CFR 416.171(e)). 
837 

 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-by-step illustration of the final budget neutrality adjustment 

calculation based on the methodology finalized in the August 2, 2007 final rule 

(72 FR 42521 through 42531) and as applied to updated data available for the CY 2008 

OPPS/ASC final rule with comment period. The application of that methodology to the 

data available for the CY 2008 OPPS/ASC final rule with comment period resulted in a 

budget neutrality adjustment of 0.65. 

 For CY 2008, we adopted the OPPS relative payment weights as the ASC relative 

payment weights for most services and, consistent with the final policy, we calculated the 

CY 2008 ASC payment rates by multiplying the ASC relative payment weights by the 

final CY 2008 ASC conversion factor of $41.401. For covered office-based surgical 

procedures and covered ancillary radiology services (excluding covered ancillary 

radiology services involving certain nuclear medicine procedures or involving the use of 

contrast agents, as discussed in section XII.D.2.b. of this final rule with comment period), 
838 

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, device-intensive 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 prereclassified 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. 
839 

 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). 

 When all of the areas contiguous to the CBSA of interest are rural and there is no 

IPPS hospital that has wage index data that could be used to set the wage index for that 

area, we determine the ASC wage index by calculating the average of all wage indices for 

urban areas in the State (75 FR 72058 through 72059). In other situations, where there 

are no IPPS hospitals located in a relevant labor market area, we will continue our current 

policy of calculating an urban or rural area’s wage index by calculating the average of the 

wage indices for CBSAs (or metropolitan divisions where applicable) that are contiguous 

to the area with no wage index. 

 Comment: Several commenters made the same recommendation that was made 

in the CY 2010 (74 FR 60625), CY 2011 (75 FR 72059), CY 2012 (76 FR 74446), and 

CY 2013 (77 FR 68463) rulemakings--that is, that CMS adopt for the ASC payment 

system the same wage index values used for hospital payment under the OPPS. 

 Response: We have responded to this comment in the past, and believe our prior 

rationale for using unadjusted wage indices is still a sound one. We continue to believe 

that the unadjusted hospital wage indices, which are updated yearly and are used by 
840 

almost all Medicare payment systems, appropriately account for geographic variance in 

labor costs for ASCs. We refer readers to our response to this comment in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72059). We discuss our budget 

neutrality adjustment for changes to the wage indices below in section XIV.H.2.b. of this 

final rule with comment period. 

 After consideration of the public comments we received, we are continuing our 

established policy to account for geographic wage variation in labor cost when 

calculating individual ASC payment by applying the pre-floor and pre-reclassified 

hospital wage index values that CMS calculated for payment, using updated CBSAs. 

Further, we are continuing our established policy 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. For CY 2014, we also are continuing our policy established in the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 72058 through 72059) to set 

the ASC wage index by calculating the average of all wage indices for urban areas in the 

State when there is no IPPS hospital that has wage index data that could be used to set the 

wage index for that area, and all contiguous areas to the CBSA are rural. 

2. Calculation of the ASC Payment Rates 

a. Updating the ASC Relative Payment Weights for CY 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 
841 

established policy, in the CY 2014 OPPS/ASC proposed rule (78 FR 43640 through 

43641), we proposed 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 proposed 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 proposed 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 0.9102 as corrected (78 FR 43641; 78 FR 54843, 54845) 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 
842 

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. At the time of the CY 2014 

proposed rule, we had available 98 percent of CY 2012 ASC claims data. For this final 

rule with comment period, we have approximately 99 percent of all ASC claims data for 

CY 2012. 

 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/ResearchStatistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html. 

 For this final rule with comment period, we used our methodology described 

above to calculate the scaler adjustment using updated ASC claims data. The final 

CY 2014 scaler adjustment is 0.9235. This scaler adjustment is necessary to make the 

difference in aggregate ASC payments calculated using the CY 2013 ASC relative 

payment weights and the CY 2014 relative payment weights budget neutral. We 

calculated the difference in aggregate payments due to the change in relative payment 

weights holding constant the ASC conversion factor, the most recent CY 2012 ASC 
843 

utilization from our claims data, and the CY 2013 wage index values. For this final 

CY 2014 calculation, we used the CY 2013 ASC conversion factor updated by the 

CY 2014 CPI–U, which is projected to be 1.7 percent, less the multifactor productivity 

adjustment of 0.5 percent, as discussed below in section XIV.H.2.b. of this final rule with 

comment period. 

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, in the CY 2014 

OPPS/ASC proposed rule (78 FR 43641 through 43642), for the CY 2014 ASC payment 

system, we proposed to calculate and apply a budget neutrality adjustment to the ASC 

conversion factor for supplier level changes in wage index values for the upcoming year, 

just as the OPPS wage index budget neutrality 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 pre-reclassified hospital wage indices 

and the total adjusted payment using the proposed CY 2014 pre-floor and pre-reclassified 

hospital wage indices. We used the 50-percent labor-related share for both total adjusted 
844 

payment calculations. We then compared the total adjusted payment calculated with the 

CY 2013 pre-floor and pre-reclassified hospital wage indices to the total adjusted 

payment calculated with the proposed CY 2014 pre-floor and pre-reclassified 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 CY 2014 ASC wage indices do 

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 
845 

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 
846 

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. 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 MFP-adjusted update factor that is less than zero, the 
847 

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). 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43642), based on IHS Global 

Insight’s (IGI’s) 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 

was 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 was 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 proposed 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 proposed to apply a 

0.9 percent MFP-adjusted CPI-U update factor to the CY 2013 ASC conversion factor for 

ASCs meeting the quality reporting requirements. We proposed to reduce the CPI-U 
848 

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 proposed to apply a -1.1 percent quality reporting/MFP-adjusted CPI-U 

update factor to the CY 2013 ASC conversion factor for ASCs not meeting the quality 

reporting requirements. We also proposed 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 proposed 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 proposed 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 invited public comment on these proposals. 

 Comment: As in previous years, commenters requested that CMS adopt the 

hospital market basket to update the ASC payment system instead of using the CPI-U. 

The commenters argued that the CPI–U does not fairly represent the costs borne by the 

ASC industry because the prices measured in the basket of goods comprising the index 

reflect the types and weights of categories typical of an American household, rather than 
849 

an outpatient surgical provider. Commenters believed that the hospital market basket 

more closely reflects the cost structure of ASCs than does the basket of goods included in 

the CPI-U. Commenters stated that adopting the hospital market basket to update ASC 

payment rates would minimize the divergence in CY 2014 payments in ASCs compared 

to HOPDs and would ensure continued beneficiary access to ASCs. 

 Commenters also indicated that the hospital market basket is a more appropriate 

index to use for the ASC update now that CMS is required to apply the MFP adjustment 

to the ASC annual update. Commenters stated that, as an output price index, the CPI-U 

index already accounts for productivity thus ASCs, in essence, are receiving a 

productivity adjustment that is twice that applied to the HOPD update. Because CMS has 

discretion regarding the index used to update ASCs, but is required in statute to adjust the 

ASC update by the MFP, commenters urged CMS to use the hospital market basket, 

which is an input price index that does not already account for productivity, to update 

ASC payment rates and thereby allow the appropriate application of the required 

productivity adjustment. These commenters suggested that if the CPI-U continues to be 

used to update ASC payment rates, CMS should remove the productivity gains from the 

CPI-U. Commenters also requested that the 10-year MFP measurement period be 

uniform in ASCs and HOPDs so that there is no discrepancy in the estimates of the MFP 

that will provide additional divergence between the ASC and HOPD updates. 

 Response: While commenters argue that the items included in the CPI-U index 

may not adequately measure inflation for the goods and services provided by ASCs and 

that use of the hospital market basket would minimize the divergence in the payment 
850 

rates between the OPPS and ASC payment system, we believe that the hospital market 

basket does not align with the cost structures of ASCs. Hospitals provide a much wider 

range of services, such as room and board and emergency services, and the costs 

associated with providing these services are not part of the ASC cost structure. 

Therefore, at this time, we do not believe that it is appropriate to use the hospital market 

basket for the ASC annual update. 

 We recognize that the CPI-U is an output price index that accounts for 

productivity. However, section 1833(i)(2)(D)(v) of the Act requires the agency to reduce 

the annual update factor by the MFP adjustment. For the reasons stated above, we do not 

believe that the hospital market basket appropriately reflects the cost structures of ASCs, 

and because we do not have cost data on ASCs, we are continuing to use the CPI-U 

which we believe provides a reasonable approximation of the price increases facing 

ASCs. We appreciate the commenter’s suggestion to adjust the CPI-U for productivity 

and will take this suggestion into consideration should we propose changes to the ASC 

update factor in the future. Regarding alignment of the MFP adjustment across payment 

systems, for the reasons stated in the CY 2011 MPFS final rule with comment period 

(75 FR 73396), we believe that it is more appropriate to align the MFP adjustment with 

the update timeframe for each payment system rather than aligning the MFP adjustment 

across payment systems. 

 After consideration of the public comments we received, we are applying our 

established methodology for determining the final CY 2014 ASC conversion factor. 

Using more complete CY 2012 data for this final rule with comment period than was 
851 

available for the proposed rule, we calculated a wage index budget neutrality adjustment 

of 1.0009. Based on IGI’s 2013 third quarter forecast, the CPI–U for the 12-month 

period ending with the midpoint of CY 2014 is now projected to be 1.7 percent, while the 

MFP adjustment (using the revised IGI series to proxy the labor index used in the MFP 

forecast calculation as discussed and finalized in the CY 2012 MPFS final rule with 

comment period (76 FR 73300 through 73301) is 0.5 percent, resulting in an 

MFP-adjusted CPI–U update factor of 1.2 percent for ASCs that meet the quality 

reporting requirements. The final ASC conversion factor of $43.471, for ASCs that meet 

the quality reporting requirements, is the product of the CY 2013 conversion factor of 

$42.917 multiplied by the wage index budget neutrality adjustment of 1.0009 and the 

MFP-adjusted CPI–U payment update of 1.2 percent. For ASCs that do not meet the 

quality reporting requirements, we are reducing the CPI-U update of 1.7 percent by 2.0 

percentage points and then we are applying the 0.5 percent MFP reduction, resulting in a 

–0.8 percent quality reporting/MFP-adjusted CPI-U update factor. The final ASC 

conversion factor of $42.612 for ASCs that do not meet the quality reporting 

requirements is the product of the CY 2013 conversion factor of $42.917 multiplied by 

the wage index budget neutrality adjustment of 1.0009 and the quality 

reporting/MFP-adjusted CPI-U payment update of –0.8 percent. 

3. Display of CY 2014 ASC Payment Rates 

 Addenda AA and BB to this CY 2014 OPPS/ASC final rule with comment period 

(which are available via the Internet on the CMS Web site) display the final updated ASC 

payment rates for CY 2014 for covered surgical procedures and covered ancillary 
852 

services, respectively. The payment rates included in these addenda reflect the full ASC 

payment update and not the reduced payment update used to calculate payment rates for 

ASCs not meeting the quality reporting requirements under the ASCQR Program. These 

addenda contain several types of information related to the 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 lowerpaying 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 

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 
853 

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 CY 2014 payment rate displayed in the “CY 2014 Payment Rate” 

column, each ASC payment weight in the “CY 2014 Payment Weight” column was 

multiplied by the CY 2014 conversion factor of $43.471. 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 discussed in 

section XII.H.2.b. of this final rule with comment period). 

 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 CY 2014 national unadjusted ASC payment rates for all 

items and services. The 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 October 2013. 

 Addendum EE provides the HCPCS codes and short descriptors for surgical 

procedures that are to be excluded from payment in ASCs for CY 2014. 

 We did not receive any public comments regarding the continuation of our policy 

to provide CY 2014 ASC payment information as detailed in Addenda AA and BB. 
854 

Therefore, Addenda AA and BB to this final rule with comment period (which are 

available via the Internet on the CMS Web site) display the updated ASC payment rates 

for CY 2014 for covered surgical procedures and covered ancillary services, respectively, 

and provide additional information related to the CY 2014 rates.

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: 
855 

● 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 
856 

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 refer readers to the 

CY 2013 OPPS/ASC final rule with comment period (77 FR 68467 through 68469) for 

the discussion of the principles for our considerations for future measures, and we intend 

to generally apply these same principles in future rulemaking. 

 Comment: One commenter requested that for burden reduction purposes, CMS 

should not implement more than two chart-abstracted measures per year. 
857 

 Response: We consider potential reporting burden on hospitals. We do weigh the 

relevance and the utility of measures against potential burden on providers. We thank the 

commenters for the feedback and will take it into consideration for future proposals. We 

note that we are working toward the eventual adoption of electronically-specified 

measures, which will reduce the burden of chart-abstracted measures. 

 Comment: A few commenters recommended that CMS ensure that the proposed 

measures are specified to provide an opportunity for stakeholders’ input. 

 Response: We note that all the proposed measures are fully specified and we 

have provided links to the detailed measure specifications. Since all of the proposed 

measures are NQF-endorsed, the specifications were all submitted to NQF by the 

measure stewards. We believe that these measure specifications will provide the detailed 

information needed for the public to understand the measures being proposed and to 

provide meaningful comments on the proposed measures during the rulemaking process. 

Proposed measures are not included in the Hospital OQR Specifications Manual because 

we generally incorporate specifications for measures to be used in the program into the 

Hospital OQR Specifications Manual, along with implementation guidance after 

publication of the final rule with comment period, but prior to implementation. For 

maintenance of technical specifications, our general policy is to provide six months lead 

time between Hospital OQR Specifications Manual publication and the start date of 

collection so that providers have adequate time to prepare for new reporting 

requirements.
858 

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

%2FSpecsManualTemplate&cid=1228772438492. 

 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. 
859 

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 measures based upon changes to guidelines upon which the measures are 

based. We will revise the Hospital OQR 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-10, 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 to 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 
860 

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 

adequately balances our need to incorporate nonsubstantive updates to 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. 

 Comment: One commenter noted that the conversion of a measure to use 

ICD-10-CM/PCS should be considered a substantive change that follows current 

proposed rulemaking processes. The commenter requested clarification regarding the 

publication, preview, and comment period via rulemaking for ICD-9-CM to ICD-10-

CM/PCS mappings for all value sets for diagnoses and procedures used by measures 

specified in this rule. 

 Response: In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504), we 

included examples in the Hospital IQR Program context of what we might generally 

regard as nonsubstantive changes to measures. Our examples included updated diagnosis 
861 

or procedure codes, medication updates for categories of medications, or a broadening of 

age ranges. 

 We will be transitioning all of our billing and measurement systems from ICD–9 

to ICD-10. In preparation for this transition, we: (1) translated the ICD-9 versions of the 

measure specifications to ICD-10; (2) recently published this crosswalk for the Hospital 

OQR Program on our Web site at: http://www.cms.gov/Medicare/Quality-InitiativesPatient-AssessmentInstruments/HospitalQualityInits/HospitalOutpatientQualityReportingProgram.html;

and. (3) solicited comment on this crosswalk from July 1, 2013 through August 31, 2013. 

 We normally incorporate coding updates for the measures using our established 

subregulatory process because such updates do not change the basic, underlying concepts 

being measured. Moving from ICD–9 to the ICD–10 coding system falls within the 

parameters of our subregulatory process. However, we recognize that in moving to 

ICD-10 coding, there may be some nuances in the measures that, when translated, result 

in unanticipated differences in performance, and consequently, prior measure results do 

not correspond to results for the same measures under the new coding system. In this 

situation, we will determine whether to continue publicly reporting the quarters of data 

that were collected under the ICD-9 coding system, or report only the newer quarters of 

data collected under the ICD-10 coding system. We intend to study the effect of 

transitioning to the ICD-10 system on trendability of results once implementation has 

occurred and data are available to do so in order to inform this future policy. 
862 

 We will continue to use rulemaking to adopt substantive updates to measures we 

have adopted for the Hospital OQR Program. However, any change to a measure would 

need to be evaluated on a case by-case basis to determine whether or not it is, in fact, 

substantive. 

b. Publication of Hospital OQR Program Data 

 We refer readers to the CY 2014 OPPS/ASC proposed rule (78 FR 43645) for the 

discussion of our policy for the publication of Hospital OQR Program data on Hospital 

Compare and non-interactive CMS Web sites. 

 Comment: One commenter encouraged CMS to ensure the Hospital Compare

Web site remains user-friendly, even though it must present data that can be complicated 

and potentially confusing if not well structured. The commenter emphasized that the 

information published on Hospital Compare be accurate and fair, but also impartial and 

presented in plain English at a sixth-grade reading level. The commenter recommended 

that CMS display data on Hospital Compare in a simple format with easy navigation and 

minimal graphics in the interest of data that loads quickly on a variety of devices and at 

slower internet connection speeds. The commenter encouraged CMS to offer the data in 

languages commonly spoken in the United States, and cites the Medicare Prescription 

Drug Benefit Manual, Chapter 2, Section 30.7 to point out that CMS has standards 

governing Web site translation that should be applied for the purpose of making the data 

available on Hospital Compare more accessible. 
863 

 Response: We thank this commenter for this thoughtful feedback regarding the 

public reporting of data on Hospital Compare. We will look at the feasibility of 

modifying the Web site to incorporate these suggestions. 

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 

as 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 (a term we later changed to “removal”) of Hospital IQR Program 

measures based on evidence that the continued use of the measure as specified raised 

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 the CY 2013 OPPS/ASC final rule with comment period, we changed the term 

from “retirement” to “removal,” in line with the same change in the Hospital IQR 
864 

Program. We discuss our reasons for this change at 77 FR 68472 through 68473. 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 measures from the Hospital IQR Program 

(formerly known as the RHQDAPU 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 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. 
865 

 Comment: A few commenters urged CMS to remove 7 previously adopted 

Hospital OQR Program measures (OP-9, OP-10, OP-14, OP-15, OP-20, OP-22, and 

OP-25), which are either not NQF-endorsed or not recommended by the MAP. 

 Response: While this comment is outside the scope of what we proposed, we 

would like to provide some clarification. In the CY 2013 OPPS/ASC final rule with 

comment period, we responded to the same comments on these measures. We refer 

readers to our responses in 77 FR 68472 through 68473. 

2. Removal of Two Chart-Abstracted Measures from the Hospital OQR Program 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43646 through 43647), we 

proposed in section XIII.C.2, titled “Proposed Removal of Two Chart-Abstracted 

Measures From the Hospital OQR Program,” 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. We reflected our proposal in a chart (78 FR 43647) depicting 

measures we proposed to remove, and also referred in the title of the chart to CY 2016 as 

the first payment year affected by our proposal. However, in section XIII.H.2.b of the 

proposed rule (78 FR 43653), titled “Effects of Proposed Changes on data submission for 

CY 2015 and CY 2016 Payment Determinations and Subsequent Years,” we proposed to 

remove these measures for the CY 2015 payment determination and subsequent years. 

We received comments regarding this contradictory information and inquiries about 
866 

when the proposed removal of both OP-19 and OP-24 would actually be effective. We 

would like to address those comments here before discussing individual measures. 

 Comment: Many commenters noted that the discussions in the preamble of the 

proposed rule regarding the removal of OP-19 and OP-24 were inconsistent in 

sections XIII.C.2 and XIII.H.2.b. of the proposed rule. Commenters requested 

clarification and many also encouraged CMS to remove these measures for the CY 2015 

payment determination and subsequent years. 

 Response: We would like to apologize for this error and wish to clarify that we 

intended to propose removing these measures for the CY 2015 payment determination 

and subsequent years, and instead inadvertently referred to their removal as being 

proposed for the CY 2016 payment determination and subsequent years in XIII.C.2. We 

appreciate commenters support for removing OP-19 and OP-24 for the CY 2015 payment 

determination and subsequent years. 

 The rationales for proposing to remove these measures are discussed below. 

a. 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 
867 

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 OP19: 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 “E-mail 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 at the time, because the probability of harm occurring was relatively 

low; any potential harm that occurred would not be the direct result of patient care 
868 

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 re-specified 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 e-mail 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 to both hospitals and CMS. 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 
869 

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 measure is workable in the Medicare EHR Incentive Program because, 

unlike the Hospital OQR Program, it does not rely on chart-abstraction, which can result 

in variations in data elements. Instead, the Medicare EHR Incentive Program 

incorporates a methodology that includes standardized data elements.. In addition, there 

are no comparable patient privacy concerns, since in the Medicare EHR Incentive 

Program, patient e-data is password protected. 

This MU core objective provides patients discharged from the inpatient 

department or Emergency Department (ED) online access to the ED 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 proposed to remove this measure from the 

Hospital OQR Program. We invited public comment on the proposed removal of this 

measure from the Hospital OQR Program. 
870 

 Comment: Many commenters stated that data collection for measure OP-19 is 

burdensome and strongly supported CMS’ justifications for removing the measure. 

 Response: We thank the commenters for supporting our decision to remove 

OP-19 for the CY 2015 payment determination and subsequent years. 

 Comment: One commenter noted that, in the case of OP-19, hospitals were 

instructed to continue to report some value for this measure because the CMS data 

systems are not able to accommodate a missing field without error. The commenter 

stated that while OP-19 was suspended, reporting hospitals needed to continue to collect 

and report data and ensure that the data field for OP-19 was completed to ensure the 

entire file would be accepted into the CMS clinical data warehouse. 

 Response: We appreciate the commenter’s concern. We refer the reader to the 

CY 2012 OPPS/ASC final rule with comment period (77 FR 68475 through 68476) for a 

discussion of this same topic. We reiterate that, while it is true that the burden of 

populating some value in the data field for OP-19 is indeed placed on the reporting 

hospital, it is not accurate that the hospital is now or ever was required to continue to 

collect OP-19 data by chart abstraction or to report a meaningful value for OP-19 to the 

clinical data warehouse once we suspended the measure. In our memorandum to suspend 

OP-19, in subsequent discussions in the Federal Register, and in our educational 

materials and educational support calls, we attempted to make clear that we would not 

use or validate any data that came in for OP-19. 

 We agree it is burdensome that our current system will not accept a null value for 

OP-19. An upcoming release of our Hospital Reporting system will address this issue by 
871 

removing OP-19 and OP-24 from our data collection fields. This system release is 

anticipated for summer 2014. We have also instructed the system contractor to build 

flexibility into the data collection system so that, in the future, we are able to execute our 

policy for suspension or removal of measures without causing undue burden to the 

reporting community. 

 After consideration of the public comments we received, we are finalizing the 

removal of OP-19 with the clarification that removal applies for the CY 2015 payment 

determination and subsequent years. 

b. 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. These instructions were 

needed for chart-abstraction beginning on January 1, 2013. We also indicated that this 

measure would be applied to the CY 2015 payment determination. 

In the CY 2014 OPPS/ASC proposed rule, we proposed to remove this measure 

from the Hospital OQR Program due to continued difficulties with defining the measure 

care setting. The measure specifications provided by the measure steward, the American 

College of Cardiology (ACC), identify the applicable care setting as a ‘Clinician 

Office/Clinic.’ However, in developing the specifications for this measure for a hospital 

outpatient clinic setting, several issues arose, including difficulty in accurately identifying 
872 

hospital outpatient visits for evaluation and management purposes using either chart 

abstraction or HOPD claims data, and difficulty in determining the particular hospital 

outpatient clinic visit that 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 proposed to remove OP-24 from the Hospital OQR 

Program. We invited public comment on this proposal. 

 Comment: Many commenters strongly supported CMS’ justification for 

removing measure OP-24. 

 Response: We appreciate all the feedback supporting our proposal to remove 

OP-24 from the Hospital OQR Program measure set for the CY 2015 payment 

determination and subsequent years. 

 After consideration of the public comments we received, we are finalizing the 

removal of OP-19 and OP-24 for the CY 2015 payment determination and subsequent 

years. 

Hospital OQR Program Measures Removed for the CY 2015 Payment 

Determination and Subsequent Years 

NQF# 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 
873 

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 determination and subsequent years under the Hospital 

OQR Program. This table also includes OP-19 and OP-24, with a notation that we are 

removing these two measures for the CY 2015 payment determination and subsequent 

years. 
874 

Hospital OQR Program Measures for the CY 2014 and CY 2015 Payment 

Determinations 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 

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 
875 

Hospital OQR Program Measures for the CY 2014 and CY 2015 Payment 

Determinations and Subsequent Years 

-- 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&blobhe

ader=multipart%2Foctet-stream&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata

&blobtable=MungoBlobs

***In this final rule with comment period, we are removing OP-19 and OP-24 for the CY 2015 payment 

determination and subsequent years 

 Comment: Some commenters expressed views regarding some of the previously 

finalized measures that CMS intends to continue using under the Hospital OQR Program. 

Commenters also provided suggestions on these measures, regarding measure 

implementation, adding exceptions, and revising measure specifications.

Response: We thank the commenters for their comments. Because these 

comments address measures that we have finalized in the past through notice and 

comment rulemaking, we do not believe they are within the scope of this current 

rulemaking. However, we intend to consider all of these views for future rulemaking and 

Hospital OQR Program development. 

E. Quality Measures for the CY 2016 Payment Determination and Subsequent Years

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43647 through 43651), we 

proposed 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 
876 

chart-abstracted measures are: (1) Complications within 30 Days Following Cataract 

Surgery Requiring Additional Surgical Procedures (NQF #0564), (2) Endoscopy/Polyp 

Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk 

patients (NQF #0658), (3) Endoscopy/Polyp surveillance: Colonoscopy Interval for 

Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 

(NQF #0659), and (4) Cataracts: Improvement in Patient’s Visional Function within 90 

Days Following Cataract Surgery (NQF #1536). 

 All of 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_Partn

ership.aspx in compliance with section 1890A(a)(2) of the Act. Section 1890A(a)(2) is 

part of the pre-rulemaking process established under section 1890A of the Act, and 

requires the Secretary to make available to the public by December 1st of each year a list 

of certain categories of quality and efficiency measures that the Secretary is considering 

for the Medicare program. The measures we proposed 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_Partn

ership.aspx. As required under section 1890A(a)(4) of the Act, we considered the input 

and recommendations provided by the MAP in selecting measures to propose for the 

Hospital OQR Program. 
877 

 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 proposed 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 the proposed method of collection was provided in 

section XIII.H.2. of the proposed rule (78 FR 43653). 

 To enhance our efforts to collect high quality data for the Hospital OQR measures 

while minimizing burden for HOPDs, we also sought public comment on whether we 

should collect patient-level data via certified EHR technology on the four proposed chartabstracted measures (this would not apply to the one HAI measure, Influenza Vaccination 

Coverage among Healthcare Personnel), and the potential timing for doing so. Any 

future ability to collect patient-level data via EHR technology would allow CMS to 
878 

validate the accuracy of the data and also link data for patients over time to assess patient 

outcomes of care related to treatment. 

 Comment: A few commenters recommended that if CMS finalizes new chartabstracted measures in the Hospital OQR Program, CMS should not collect patient-level 

data through EHR technology for these measures; rather, CMS should limit data 

collection to aggregate data. Many commenters did not support patient-level data 

collection specifically due to EHR system concerns. These commenters supported 

collecting aggregate data because the EHR environment is not mature. One commenter 

stated that a group of its stakeholder hospitals are in the early stages of adopting EHR 

systems and encouraged CMS to delay requiring patient-level data where their 

infrastructure is not ready to collect patient information. 

 Some commenters do not support patient-level data collection using EHR 

technology due to concerns about protecting the privacy of EHR data. One commenter 

believed that until CMS can ensure patients’ records can be securely maintained and 

transmitted, CMS should not collect patient-level data via EHR technology. 

 Response: We appreciate the comments we received on whether we should 

collect patient-level data via certified EHR technology on the four proposed chartabstracted measures and the potential timing for doing so. 

 We agree with commenters that chart-abstracted measure data collected in 

aggregate form is currently the most appropriate collection method, and we are finalizing 

the aggregate mode of data collection for the three new chart-abstracted measures in 

section XIII.H.2.f. of this final rule with comment period. 
879 

 We will consider these commenters’ concerns in proposing future updates to the 

program and updates or expansions to the Hospital OQR Program measures. 

Specifically, we will continue to consider the maturity of EHR systems in future 

proposals to collect HOPD data via EHR technology. We understand the need for 

additional infrastructural development on the part of hospitals and CMS and the adoption 

of standards for capturing, formatting, and securely transmitting the data elements that 

make up 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. 

 Comment: A few commenters did not support aggregate data collection for the 

proposed chart-abstracted measures, and suggested that CMS only adopt measures where 

a validation strategy is in place. These commenters pointed out that the use of aggregate 

data in lieu of patient-level data does not allow for validation of data accuracy. The 

commenters believed that without validation, there is no opportunity for robust 

field-testing to ensure that electronic and chart-abstracted measures provide comparable 

results. 

 Response: We interpret these commenters’ views as being in support of patientlevel data collection and data collection via EHR technology. We likewise support the 

future adoption of measures with patient-level data collection, via EHR technology, and 

where submitted data may be validated. We have not, to date, proposed measures for the 

OQR Program with the EHR mode of data collection. In this final rule with comment 

period, we have finalized three measures that are chart-abstracted with aggregate data 
880 

submission via the Web-based tool. We cannot validate the data that is submitted in this 

manner. We agree with commenters that validation is a way to measure the accuracy of 

data submitted, and hope to be able to accomplish validation using EHR technology to 

collect data sometime in the near future. 

 Comment: Some commenters pointed out that CMS’ collection of aggregate data 

might not actually have the effect of reducing burden. These commenters believed this 

would be the case if hospitals must first perform a patient-level review for each medical 

record in order to compile the aggregate data. Commenters were generally concerned 

about burden, and some commenters favored both an emphasis on adoption of claimsbased measures and measures that do not require chart abstraction. 

 Response: We appreciate the commenters’ concerns about the burden that can be 

involved in collecting aggregate-level data. We sought public comment on whether we 

should collect patient-level data via certified EHR technology on the four proposed 

chart-abstracted measures (this would not apply to the one HAI measure, Influenza 

Vaccination Coverage among Healthcare Personnel), and the potential timing for doing 

so. We interpret these commenters as being in favor of collecting patient-level data when 

it is feasible. We will take these comments into consideration in future rulemaking. 

 These comments are similar to comments we received related to how hospitals 

should gather information to report on our most recent proposed measures. We refer 

readers to section XIII.H.2.f of this final rule with comment period where we address 

these comments. 
881 

 Comment: Many commenters offered views generally applicable to data 

collection in the Hospital OQR Program, but not specific to the proposed measures 

described in section XIII.E of the CY 2014 OPPS/ASC proposed rule (78 FR 43647). 

Commenters voiced commitment to: (1) providing data to measure quality of care; 

(2) supporting CMS’ alignment of measures and requirements across data reporting and 

value based purchasing programs whenever possible and as early as possible in the 

implementation phases of new programs; (3) allowing stakeholders to meet Meaningful 

Use (MU) standards through submission of data to the Hospital OQR Program; and, 

(4) adopting future EHR measures that are fully endorsed, tested, and specified by CMS. 

Many commenters asked CMS to consider technology barriers to efficient and accurate 

EHR-based quality reporting, including the need for widely adopted standards, 

information models, and vocabularies to support EHR-based reporting. Many 

commenters also asked CMS not to adopt aggressive timelines for EHR data submission 

and recommended specific policies and timelines related to electronic submission. Some 

commenters urged CMS to carefully consider confidentiality, privacy, and security 

regulations, and to consider State-based regulations before implementing EHR measures 

for use by Partial Hospitalization Programs (PHPs) in HOPDs. Finally, several 

commenters suggested that CMS should convene a work group that includes the hospital 

industry to collaborate on how best to collect the data needed to accurately capture the 

care provided in off-campus provider-based departments. 

 Response: We will take these comments into consideration for future rulemaking 

for our quality reporting programs. 
882 

 Each of the proposed measures is described in greater detail below. 

1. Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) 

 The 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 long-standing concern.1,2,3

 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 a high rate of influenza 

vaccination coverage among HCP is intended to help protect HCP and their patients in 

hospital settings and reduce disease burden and healthcare costs. Due to the potentially 

significant impact of HCP influenza vaccination on patient outcomes, we believe this 

 

1

 Maltezou, H.C., Drancourt, M.: Nosocomial influenza in children. Journal of Hospital Infection 2003; 

55:83-91. 

2

 Hurley, J.C., Flockhart, S.: An influenza outbreak in a regional residential facility. Journal of Infection 

Prevention 2010; 11:58-61. 

3

 Salgado, C.D, Farr, B.M., Hall, K.K., Hayden, F.G.: Influenza in the acute hospital setting. The Lancet 

Infectious Diseases 2002; 2:145-155. 

4

 Wilde, 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. 
883 

measure is appropriate for measuring the quality of care in hospital outpatient 

departments. 

 We proposed to adopt this process measure for the CY 2016 payment 

determination and subsequent years. We also proposed that Hospital OPDs use the 

NHSN infrastructure and protocol to report the measure for Hospital OQR Program 

purposes. Hospitals currently submit data to NHSN to comply with the requirements of 

the Hospital IQR Program and those requirements will be unchanged for data submission 

to NHSN for the Hospital OQR Program. 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 a 

vaccination; or (d) persons with unknown vaccination status or who do not otherwise 

meet any of the definitions of the above-mentioned 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. 
884 

 In its 2013 Pre-Rulemaking Report, 

(http://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_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 since 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 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 
885 

the NQF process stated in the CY 2009 OPPS/ASC final rule with comment period 

(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 the proposed rule for a detailed discussion 

of data collection (78 FR 43656). We invited public comment on this proposal. 

 Comment: Several commenters opposed this measure and contended that the 

measure is duplicative of the Influenza vaccination measure in the Hospital IQR 

Program. Commenters stated that it is burdensome to report the same measure for both 

settings. A few commenters requested clarifications for the measure inclusions for both 

hospital inpatient and outpatient settings. Some commenters noted that hospital staff may 

float between different hospital inpatient and outpatient locations on different days and 

they requested clear guidelines to identify staff working at different hospital locations. A 

few commenters recommended allowing hospitals to report by attesting through the 

Hospital IQR Program that both their inpatient and outpatient healthcare personnel are 

vaccinated. 

 Response: We recognize that the current measure specifications may lead to 

some redundancy in data collection and data submission of this measure in both the 

inpatient and outpatient settings. We are aware that some HCP may work across both of 

these settings. We also realize that it may be difficult for hospitals to accurately attribute 

HCP using current instructions to report accurate data for both the Hospital IQR and 

Hospital OQR Programs. 
886 

 After considering the public comments we received and our discussion with the 

CDC’s NHSN, we plan to address the commenters’ concerns by providing clear 

instructions on the appropriate attribution of HCP working in the outpatient setting. We 

intend to provide these instructions in time for the first data collection period beginning 

in October 2014 and before the data submission deadline on May 15, 2015. The 

instructions will be included in the measure specifications in our planned December 2013 

addendum to the Hospital OQR Specifications Manual, which will be available on the 

QualityNet Web site (https://www.qualitynet.org). 

 We also intend to separately clarify HCP definitions for the inpatient setting with 

respect to the Hospital IQR Program in the Hospital IQR Specifications Manual, which 

we anticipate will be published on April 1, 2014 to cover the discharges dated 

October 1, 2014 – June 30, 2015. In addition, as the measure steward, the CDC’s NHSN 

plans to set up the capability to clearly differentiate reporting on its Web site for the 

hospital inpatient and outpatient settings. 

Comment: One commenter believed that this measure may not be necessary as 

many hospitals already require the influenza vaccination as a condition for employment. 

Another commenter requested a waiver for States with legislation prohibiting healthcare 

providers from requiring employees to obtain influenza vaccination as a condition for 

employment. 

Response: We believe that this proposed measure is necessary for achieving high 

levels of vaccination in HCP and that this new measure provides useful information to 

consumers of healthcare services. We note that a recent report by CDC (Morbidity and 
887 

Mortality Weekly Report 2013; 62(38):781-786) found that during the 2012-2013 

influenza season, 30 percent of HCP worked in settings where influenza vaccination was 

required, 46 percent worked in settings where it was promoted but not required, and 

24 percent worked in settings where it was neither required nor promoted. Vaccination 

adherence at facilities with a contingency requirement for employment was 96.5 percent. 

Rates were lower in facilities that promoted, but did not require vaccination 

(76.9 percent) and lower still in facilities that neither required nor promoted vaccination 

(50.4 percent). Thus, there is wide variation in workplace programs for the influenza 

vaccination and in vaccine coverage among HCP. Therefore, we believe that tracking 

influenza vaccination coverage is pivotal to raise vaccination adherence to higher and 

more uniform levels across the Nation. 

 We acknowledge the commenter’s concern regarding State laws prohibiting 

providers from requiring that healthcare workers get an influenza vaccination. We want 

to clarify that the numerator of the population of this measure includes more than just 

HCPs who received an influenza vaccination administered at the healthcare facility, or 

who reported in writing (paper or electronic) or provided documentation that they 

received an influenza vaccination elsewhere. The numerator population also includes 

HCP who: (a) have a medical contraindication/condition of severe allergic reaction to 

eggs or to other components of the vaccine; (b) have a history of Guillain-Barre 

Syndrome within 6 weeks after a previous influenza vaccination; (c) declined a 

vaccination; (d) have an unknown vaccination status or do not otherwise meet any of the 

other definitions in the numerator categories. We believe that these last three categories 
888 

encompass HCP who may not have been vaccinated and cannot be required to comply 

with a vaccination requirement under State law. Therefore, we do not believe that a 

waiver is needed for States where legislation prohibits providers from requiring that 

HCPs get influenza vaccinations as a condition of employment. Regardless of whether 

requiring the influenza vaccination with employment is prohibited by the State, HOPDs 

can still take actions to improve their vaccination rates. 

 Comment: One commenter asked whether CMS would publicly report this 

measure separately for the Hospital OQR Program, instead of reporting a hospital-wide 

rate, which includes hospital inpatient units and off-campus clinics, among others. 

Response: In the upcoming CY 2015 OPPS/ASC proposed rulemaking, we will 

provide detailed proposals regarding the public reporting of this measure as stated above.

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

proposed the measure OP-27: Influenza Vaccination Coverage among Healthcare 

Personnel (NQF #0431) for the Hospital OQR Program for the CY 2016 payment 

determination and subsequent years. 

 For the proposed rule, we received many general comments applicable to the four 

proposed chart-abstracted measures. We have organized this preamble by first 

summarizing and responding to these general comments applicable to these four 

measures, summarizing and responding to measure-specific comments, and then 

describing our final policy. 

 Comment: A few commenters supported adopting all four proposed 

chart-abstracted measures. However, many other commenters opposed all four proposed 
889 

chart-abstracted measures based on their claims that follow-up visits and assessments are 

performed in places other than in HOPDs. Thus, HOPDs may not be able to access other 

patient records or they may not be able to track down the patients who may go elsewhere 

for follow-up. The commenters stated that HOPDs merely provide a facility for 

physicians to perform certain procedures, but follow-up visits are performed at physician 

offices. Many commenters viewed the four proposed chart-abstracted measures as 

“Clinician Office” setting measures designed to measure, for example, ophthalmologist 

and other physician performance and not HOPD performance. Commenters stated that, 

for example, ophthalmologists assess post-operative visual function and patient 

outcomes, and determine additional surgical procedures as necessary in their respective 

offices and not in the HOPD. Likewise, physicians perform colonoscopy at HOPDs, but 

follow-up colonoscopy intervals are determined by the physician and documented in 

medical records kept in the physician’s office. 

 Some commenters asserted that measures for the outpatient setting should be 

geared towards tracking the care of patients during their HOPD visits. Patients who 

receive some type of care in the HOPD do not always receive the majority of their care in 

HOPDs, because they are most likely to be followed by their primary care physicians for 

other medical care. Therefore, it is generally not practical to have the HOPD tracking the 

long-term follow-up care of its patients. 

 The commenters recommended that because CMS wishes to eventually align the 

hospital and physician quality programs, CMS must design measures that recognize that 
890 

there are differences in how facilities and physicians collect information, report quality 

measures, and interact with patients. 

 Many commenters concluded that these four measures are more appropriate as 

Physician Quality Reporting System (PQRS) measures, because physicians are better 

suited to track and follow-up patients (PQRS is a voluntary reporting system that 

provides an incentive payment to identified individual eligible physicians). Commenters 

asserted that the measures are duplicative as both PQRS measures and Hospital OQR 

Program measures. 

 Some commenters expressed concerns that the measures are neither 

NQF-endorsed for the HOPD setting nor field-tested. 

 Response: We thank those commenters who expressed support for the measures. 

While these measures are suitable for clinician office settings, as indicated by 

commenters, we also believe they are suitable for settings that supply services to the 

same target populations for the measures, such as HOPDs. The intent of the measures is 

to promote accountability for Medicare beneficiaries, improve the coordination of 

services, reduce fragmented care, encourage redesigned care processes for high quality 

and efficient service delivery, and incentivize higher value care. These measures focus 

on the patient and encourage physicians, such as ophthalmologists, to collaborate, 

communicate, and share information with HOPDs. We hope this new mode of 

coordination will become the common practice in healthcare delivery. 

HOPDs provide care without the higher cost associated with inpatient 

hospitalization. More and more procedures are done safely and effectively on an 
891 

outpatient basis and we expect this trend will continue. Therefore, we believe that 

assessing care coordination is a very important aspect of evaluating the overall quality of 

care furnished by HOPDs. We stress that true clinical integration is evidenced by 

effective patient coordination of care across health care settings, providers, and suppliers 

and is best shown when there is a structure in place that is patient-focused and where 

clinicians collaborate on best practices in an effort to furnish higher quality care that they 

likely would not achieve if working independently. 

We do not believe these measures are duplicative of PQRS measures because, 

even though the measures’ indicators are the same, the level of analysis is different 

(facility versus physician). We plan to make nonsubstantive tweaks to the measure, such 

as updating and modifying HCPCS codes, in order to better fit the measure for a HOPD 

level of analysis. We hope to set new milestones in the integral coordination and 

collaboration of care across outpatient provider types and facilities, as spurred by these 

measures. Regarding the comments that the proposed chart-abstracted measures have not 

been field-tested, we note that all three measures that we are finalizing (as discussed 

below) were field-tested in the HOPD facility setting by the measure stewards. These 

three measures are: (1) Endoscopy/Polyp Surveillance: Appropriate follow-up interval for 

normal colonoscopy in average risk patients (NQF #0658); (2) Endoscopy/Polyp 

Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – 

Avoidance of Inappropriate Use (NQF #0659); and, (3) Cataracts: Improvement in 

Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536). 
892 

 We are finalizing the same three chart-abstracted measures in both the Hospital 

OQR Program and ASCQR Program for the CY 2016 payment determination and 

subsequent years. 

Finalizing these measures for the Hospital OQR Program would further align 

measures across outpatient hospital and ambulatory settings, which furnish many similar 

services to beneficiaries. The availability of identical outcome measures at HOPDs and 

ASCs will enable beneficiaries to compare facilities and make informed decisions. 

 In addition, we believe the measures are appropriate for the HOPD setting, 

because the services assessed by these measures are frequently performed in HOPDs. 

Also, all three of the chart-abstracted measures that we are finalizing are NQF-endorsed 

for the Ambulatory Care: Clinician Office/Clinic setting, which we have historically 

interpreted as including the HOPD setting. 

 Comment: Some commenters noted that an initial cataract surgery or 

colonoscopy may be performed at a different HOPD. This situation would make 

retrieving data burdensome. Some commenters believed that obtaining office visit 

records and surgical outcome data from other physician offices is an intrusive violation of 

patient privacy. 

 Response: There may be some instances in which a HOPD may have great 

difficulty in obtaining information from other HOPDs, and some additional information 

may need to be obtained directly from patients for these measures. But as a general 

matter, our overarching goal for adopting the three proposed measures is to encourage the 

coordination of care across health care settings, providers, and suppliers as often as 
893 

possible. We would like to see HOPDs, ophthalmologists and other physicians actively 

and routinely engaged in exchanging information to better communicate and coordinate 

the care of patients. 

We note that there are a variety of ways to collect patient-related data and, at 

times, it may be appropriate for HOPDs to obtain data directly from the ophthalmologist 

or other physician who either ordered a procedure for a patient or performed that 

procedure. HOPDs may have professional and commercial relationships with these 

ophthalmologists or other physicians. As such, an HOPD may have the ability to develop 

the means to obtain follow-up information including using contractual requirements to 

share such information with HOPDs. 

We also note that HOPDs and referring physicians are generally subject to the 

HIPAA Privacy, Security, and Breach Notification Rules, and are required to protect the 

privacy and confidentiality of their patients’ protected health information as required by 

those rules. We expect that HOPDs and physicians would adhere to any applicable 

requirements in providing and obtaining this information in order to prevent any 

violations of patient privacy. 

We believe that our implementation strategy for these measures will minimize 

collection and reporting burden. We detail the data submission procedures for the 

measures in section XIII.H.2. of this final rule with comment period. 

 Comment: Many commenters asserted that it is extremely burdensome to retrieve 

timely the data from physician offices and that the data would be difficult to validate. A 
894 

few commenters strongly believed that the huge reporting burden from the four proposed 

chart-abstracted measures could be diminished if claims are used as the data source. 

 Response: We appreciate commenters’ concerns that it could be difficult or 

burdensome for hospitals to retrieve from physician offices the data they will need for the 

chart-abstracted measures in a timely manner. We believe such problems are more likely 

to occur in the early phases of establishing these measures, when hospitals and physicians 

have not yet set up effective infrastructures to routinely exchange information. In order 

to accommodate these concerns, we have taken several steps that we believe should 

alleviate some of this burden. The Web-based collection strategy we are finalizing for 

the measures and subsequent release of specifications and implementation guidance in 

the Hospital OQR Specifications Manual will address some of the concerns about 

feasibility of data collection raised by the commenters. To further reduce burden, we are 

also finalizing a low case threshold exemption and a sampling methodology for hospitals 

with a high volume of cases covered by the new measures. We believe that these 

provisions should together significantly reduce burden for the three chart-abstracted 

measures we are finalizing. We have discussed these modifications in more detail in 

section XIII.H.2.f of this final rule with comment period. 

 We do not include chart-abstracted measures submitted via the Web-based tool in 

our validation procedures and, therefore, we will not be validating these measures at this 

time. Although some commenters would prefer that we use claims as the source for this 

data, we believe these measures will have the positive effect, in a number of instances, of 

requiring providers to communicate with each other. Using these kinds of measures will 
895 

help us capture HOPDs’ efforts at care coordination, which is something we want to 

measure, and that we do not believe we can measure with claims. We are also not aware 

of any applicable coding to capture this communication and coordination of patient care. 

 We received specific comments on the individual proposed chart-abstracted 

measures and they are discussed below. 

2. Complications Within 30 Days Following Cataract Surgery Requiring Additional 

Surgical Procedures (NQF #0564) 

 The 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 
896 

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_Pre-Rulemaking_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 the proposed rule for a detailed discussion 

of data collection. We invited public comment on this proposal. 

 Comment: Many commenters noted that this measure is unnecessary as 

complications from cataract surgery are rare and data collection would be very 

burdensome, since the volume of cataract surgery performed is huge. Commenters added 

that this measure requires very detailed information about not only specific complications 

 

5

 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at 

http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complicati

ons+within+30+days+following+cataract+surgery. 
897 

that may have occurred, but also data on any additional follow up surgical procedures to 

accurately report data for this measure. 

 Response: As discussed in the proposed rule (78 FR 43649), a large number of 

complications from cataract surgery occur even though the percentage of complications 

from cataract surgery is small. The MAP indicated that the measure addresses a high 

impact condition that is not adequately addressed in the Hospital OQR measure set. 

Therefore, we believe that complications following cataract surgery which would require 

additional surgical procedures are important to measure. 

However, unlike the other three measures we proposed, we agree that a HOPD 

would incur significant additional burden to collect the detailed information about 

specific complications and required additional surgical procedures to accurately report 

this measure. This would far exceed the burden we believe accompanies the other 

chart-abstracted measures that we proposed in the proposed rule. We have emphasized 

that we believe that care coordination between providers and practitioners is an essential 

element of appropriate, high quality care, and that the element of coordination cannot be 

measured using a claims-based or other form of measure. 

Nonetheless, this is one instance in which we believe the burden involved in 

collecting the data required for chart-abstraction far outweighs the benefits in measuring 

care coordination. 

We have based our conclusion on the fact that a HOPD would be required to 

acquire far more information than the more fundamental follow up information that 

accompanies the other measures we proposed (such as the patient survey data for OP-31, 
898 

which basically involves collecting a patient’s perceptions about visual improvement 

following cataract surgery). In contrast, there is far more information necessary for OP28 and the nature of that information is more detailed, complicated, and very likely 

much more difficult for an HOPD to acquire. We agree with the commenters that this 

measure requires very detailed information about not only specific complications that 

may have occurred, but also data on specific additional follow up surgical procedures to 

accurately report data for this measure. 

Because we continue to believe this is an important area to measure quality of 

care, we plan to explore other ways to collect this data, including the potential 

development of a claims-based risk-adjusted outcome measure of cataract complications, 

which would address the same quality issues as this measure, but minimize the burden 

associated with measurement to the greatest degree possible. Further, we anticipate that 

the new measure would be applicable to both the ASC and HOPD settings. We have 

previously developed a robust methodology for using claims to identify surgical 

complications for patients who have had total hip and knee replacements, and therefore, 

we believe that it may be possible to do so for cataract surgeries as well. This is not the 

case with the other three measures, which do not measure surgical complications. 

 After consideration of the public comments we received, and in light of the above 

reasons, we are not finalizing this proposed measure for the Hospital OQR Program at 

this time. 
899 

3. Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal 

Colonoscopy in Average Risk Patients (NQF #0658) 

 The 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. 

 

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.
900 

 In its 2013 Pre-Rulemaking Report, 

(http://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-

_February_2013.aspx), the MAP supported the direction of the measure. Currently the 

NQF endorsement is time-limited. 

 We refer readers to section XIII.H.2. of the proposed rule for a detailed discussion 

of data collection. We invited public comment on this proposal. 

 Comment: One commenter interpreted the MAP’s recommendation of “Support 

Direction,” to mean that a measure was not, in the MAP’s opinion, ready for 

implementation in the Hospital OQR Program. Commenters stated that CMS should only 

finalize measures fully supported by the MAP. 

 Response: We take into account all MAP input when deciding on which 

measures to adopt for the program. We note that in addition to MAP input, we also 

consider feedback that we receive from many other stakeholders such as providers, 

specialty societies, measure developers, patients, and their caregivers during the 

rulemaking public comment period in evaluating whether to finalize measures. We 

continuously review and revise the measures in our programs to ensure that only the 

highest caliber measures are selected. We stress, however, that we are only required to 

consider the input provided by the MAP. The ultimate decision on whether to include a 

measure for the program rests solely with the Secretary. Although, ideally, we would 

want the MAP to fully support all measures for our programs, we recognize that it is not 

always possible. A “support direction” recommendation by the MAP indicates 

“measures, measure concepts, or measure ideas that should be phased into the program 
901 

measure set over time, after specific issues are addressed.” The MAP’s reasons for 

supporting the direction of a measure can vary greatly, from measure to measure. In 

some instances, for example, the MAP might simply believe that a measure should first 

receive NQF endorsement. 

 We believe that this measure addresses the critical issue of colonoscopies 

potentially performed too frequently and potentially increasing patients’ exposure to 

procedural harm. Because the procedure is performed often at HOPDs, we believe that 

this measure is necessary for the Hospital OQR Program. 

 After consideration of the public comments we received, we are finalizing this 

measure for the CY 2016 payment determination and subsequent years as proposed. 

4. Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of 

Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659) 

 This 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 
902 

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

 The measure numerator for the 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_Pre-Rulemaking_Report_-

_February_2013.aspx), the MAP supported the direction of the measure. A “support 

direction” recommendation by the MAP indicates “measures, measure concepts, or 

measure ideas that should be phased into the program measure set over time, after 

 

7

 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at 

http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complicati

ons+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, 

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.
903 

specific issues are addressed” (for example, obtaining NQF endorsement). Currently the 

NQF endorsement is time-limited. 

 We refer readers to section XIII.H.2. of the proposed rule for a detailed discussion 

of data collection. We invited public comment on this proposal. 

 Comment: One commenter interpreted the MAP’s “Support Direction” 

recommendation to mean that a measure was not, in the MAP’s opinion, ready for 

implementation in the HQQR Program. Commenters stated that CMS should only 

finalize measures fully supported by the MAP. 

 Response: We refer readers to our response above to the same MAP 

recommendation concerns expressed with respect to the Endoscopy/Polyp Surveillance: 

Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients 

(NQF #0658) measure. 

 We believe that this measure addresses the critical area of timely following-up 

colonoscopies to detect important colonic lesions after newly diagnosed adenomatous 

polyps have been removed by colonoscopy. Proper timing can be effective in reducing 

the incidence of subsequent colorectal cancer. Because colonoscopy is so commonly 

performed at HOPDs, and because this measure addresses a significant gap in the 

Hospital OQR Program, we believe that this measure is necessary for the Hospital OQR 

Program. We also note that NQF recently lifted its time-limited endorsement and the 

measure is now fully-endorsed by NQF. We expect that this change will appear on the 

NQF Web site in the near future. 
904 

 After consideration of the public comments we received, we are finalizing this 

measure, without modification, for the Hospital OQR Program as proposed. 

5. Cataracts – Improvement in Patient’s Visual Function Within 90 Days Following 

Cataract Surgery (NQF #1536) 

 The 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 proposed 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 

 

9

 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at 

http://www.qualitymeasures.ahrq.gov/content.aspx?id=27982.
905 

and post-operative 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_Pre-Rulemaking_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. 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. 

We refer readers to section XIII.H.2. of the proposed rule for a detailed discussion of data 

collection. We invited public comment on this proposal. 

 Comment: One commenter stated that the measure requires patients to complete a 

pre-operative and a post-operative visual function questionnaire. The follow-up survey 

may occur in intervals of one day, two weeks or one month post-op. The pre- and 

post-surgery surveys are conducted in the physician office and they are compared for 

analysis. The commenter noted it takes a third-party administrator to process the 

questionnaire in order to prevent the introduction of bias (such as how a physician 
906 

characterizes a patient’s progress) and this administrative cost would impose a new 

burden for HOPDs. 

 Response: We note that the pre-operative and post-operative surveys can be done 

in person at the HOPD or physician’s office or via phone, e-mail, or mail. The two 

surveys can be analyzed by the physician or the HOPD. However, given that this 

measure collects standard clinical follow-up information, we would expect physicians 

and HOPDs to already have standard operating procedures in place in order to conduct 

these visual assessments or for HOPDs to acquire them from patients’ physicians in order 

to properly follow up by comparing pre- and post-operative surveys. Therefore, we do 

not believe this measure should impose undue additional burden. 

 Also, while a HOPD may want to utilize a third party administrator to process 

survey information, we do not believe one should be necessary. We believe that 

including this measure in the Hospital OQR Program is important because, as the MAP 

stated and we believe, this measure falls under a category of measures inadequately 

represented in the Hospital OQR Program measure set, and the measure exemplifies 

patient reported outcomes in the delivery of care. 

 In response to the comments we have received on the burden associated with the 

chart-abstracted measures we are finalizing, we have modified our implementation 

strategy in a manner that we believe will significantly minimize collection and reporting 

burden. We detail the data submission procedures for this measure and others in 

section XIII.H.2. of this final rule with comment period. 
907 

 After consideration of the public comments we received, we are finalizing this 

measure for the CY 2016 payment determination and subsequent years as proposed. 

In summary, we are finalizing four new measures (one CDC/NHSN measure and 

three chart-abstracted measures): (1) Influenza Vaccination Coverage among Healthcare 

Personnel; (2) Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for 

Normal Colonoscopy in Average Risk Patients; (3) Endoscopy/Polyp 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 for the CY 2016 payment determination and 

subsequent years. 

NQF# Finalized Measures for the CY 2016 Payment Determination and 

Subsequent Years 

0431 OP-27: Influenza Vaccination Coverage among Healthcare Personnel 

0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for 

Normal Colonoscopy in Average Risk Patient 

0659 OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients 

with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 

1536 OP-31: Cataracts- Improvement in Patient’s Visual Function within 90 days 

Following Cataract Surgery 

 The finalized measure set (a total of 28 measures) for the Hospital OQR Program 

for the CY 2016 payment determination and subsequent years is listed in the table below. 
908 

Finalized 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 

-- 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*** 

0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for 
909 

Finalized Hospital OQR Program Measure Set for the CY 2016 Payment 

Determination and Subsequent Years 

NQF# Measure Name 

Normal Colonoscopy in Average Risk Patients*** 

0659 OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with 

a History of Adenomatous Polyps – Avoidance of Inappropriate Use*** 

1536 OP-31: Cataracts – Improvement in Patient’s Visual Function within 90 Days 

Following Cataract Surgery*** 

* Public reporting for OP-15 continues to be deferred at the time of this CY 2014 OPPS/ASC final rule 

with comment period. 

** OP-26: Procedure categories and corresponding HCPCS codes are located at: 

http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe

ader=multipart%2Foctet-stream&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata

&blobtable=MungoBlobs.

*** New measures finalized 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 Health Information Technology (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 chart-abstracted 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 chartabstracted 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 electronic specifications (e-specifications). This includes completing 

e-specifications for measures, pilot testing, reliability and validity testing, and 
910 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43651), we indicated that 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, 

all of which are targeting the same broad measure domains for future expansion. 

 We invited public comment on this approach and on our suggestions and rationale 

for possible measure topics for future consideration in the Hospital OQR Program. 

 Comment: Commenters presented the following as possible future measure 

topics: 

● A patients’ experience of care measure 

● A core patient safety measure set or a serious hospital-acquired infection 

composite measure that includes Central Line Bundle Compliance, Clostridium difficile
911 

(C-difficile), catheter-associated urinary tract infection (CAUTI), and MRSA Bacteremia 

(MRSA) 

● Clinician-level measures that can be applied appropriately in the hospital 

outpatient setting for conditions such as diabetes, coronary artery disease, and COPD 

● Patient-Reported Outcomes Measures 

 Response: We thank the commenters for the feedback and will take it into 

consideration for future measures. 

 In addition, we solicited comments on the following potential quality measure 

topics for partial hospitalization programs (PHPs) that are part of HOPDs. Some of these 

measure topics are currently part of the IPFQR Program, and some of them we are 

currently considering for the IPFQR Program: Polyp-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 measure topics would advance our goal of aligning measurement of PHPs in 

HOPDs with that of the IPFQR Program over time. 

 Comment: One commenter recommended that CMS not propose any of the 

measures topics for PHPs in HOPDs for the Hospital OQR Program until such measures 

are specified and tested in the PHP setting, and NQF-endorsed and reviewed by the MAP. 

The commenter was concerned about the need for more infrastructure support for 

additional measures. 
912 

 Response: We thank the commenter for the suggestions. We will take these 

comments into account when considering whether to propose the measures for PHPs in 

future rulemaking. 

 Comment: Some commenters made specific recommendations for new measure 

proposals for PHPs. Commenters believed that with appropriate modification, the 

adoption of some of the IPFQR Program measures for PHPs could promote enhanced 

care coordination between PHPs and IPFs. 

 Specifically, the commenters recommended modifying two pairs of IPFQR 

measures for the PHP setting: Hospital-Based Inpatient Psychiatric Services (HBIPS) 4 

and 5 (multiple antipsychotics); and HBIPS 6 and 7 (continuity of care). According to 

the commenters, HBIPS 4 requires the identification of patients who are discharged on 

two or more antipsychotic medications, while HBIPS 5 reports the number of patients 

discharged on multiple antipsychotic medications with appropriate justification. 

Antipsychotics are important tools in managing behavior, but often have significant side 

effects, especially when multiple antipsychotic medications are used concurrently. It is 

often appropriate to reduce (or “taper”) the number of antipsychotics given to patients, 

but the tapering of drugs cannot always be completed during an inpatient hospitalization. 

Based on the information they presented, commenters contended it would be appropriate 

to measure PHPs on HBIPS 4 and 5 because antipsychotic medication tapering can and 

often does continue in PHPs. Furthermore, commenters stated that using settingappropriate versions of HBIPS 4 and 5 in both IPFs and PHPs might encourage better 

coordination of the use of antipsychotic medications across these two settings. 
913 

 Commenters also noted that similarly, HBIPS 6 measures whether a 

post-discharge continuing care plan is created, while HBIPS 7 measures whether the 

post-discharge continuing care plan is transmitted to the next level of care provider. A 

plan of care provides the next provider with a summary of a patient’s course of treatment, 

discharge medications and any recommendations for ongoing care. Whenever a patient 

changes care settings, the transmission of a plan of care equips the new health care team 

with important information to shape a patient’s treatment plan. Based on the 

commenters’ understanding of the measures they described, they asserted that assessing 

both IPFs and PHPs on these measures could reinforce the need for ongoing, two-way 

communication across a patient’s behavioral health care team. 

 Response: We thank the commenters for the detailed recommendations for future 

measures for PHPs. We will take them into consideration when we develop measures for 

PHPs. 

G. 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 
914 

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 

requirements 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 final 

rule with comment period, which is available via the Internet on the CMS Web site): 

“P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” or “U.” We note that we proposed to delete 

status indicator “X” as described in sections II.A.3. and XI. of the proposed rule. We 

also note that we proposed to develop status indicator “J1” as part of the proposed 
915 

comprehensive APC discussed in section II.A.2.e. of the 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 through 68771) 

for a discussion of this policy. 

 We did not receive any public comments on the CY 2014 OPPS status indicators 

to which the payment reduction to OPPS payment rates would apply, for hospitals who 

fail to meet the OQR reporting requirements. We note that the “J1” status indicator 

would not apply in the CY 2014 OPPS, due to the delay in implementation of the 

comprehensive APC policy, which is discussed in section II.A.2.e. of this final rule with 

comment period. We also note that status indicator “X” was not deleted, because the 

packaging proposal for ancillary services was not finalized for the CY 2014 OPPS, as 

discussed in section II.A.3. of this final rule with comment period. Therefore, the 

reporting ratio would continue to apply to services with status indicator “X.” 

 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 
916 

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 
917 

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 the proposed rule. 

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43652), we proposed to 

continue our established policy of applying the reduction of the OPD fee schedule 
918 

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 was 0.980, calculated by dividing 

the proposed reduced conversion factor of $71.273 by the proposed full conversion factor 

of $72.728. We proposed to continue to apply the reporting ratio to all services 

calculated using the OPPS conversion factor. For the CY 2014 OPPS, we proposed 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 proposed to delete status indicator “X” as described in sections II.A.3. 

and XI. of the proposed rule. We also note that we proposed to develop status indicator 

“J1” as part of the proposed comprehensive APC discussed in section II.A.2.e. of the 

proposed rule and to apply the reporting ratio to the comprehensive APCs. We proposed 

to continue to exclude services paid under New Technology APCs. We proposed to 

continue to apply the reporting ratio to the national unadjusted payment rates and the 

minimum unadjusted and national unadjusted copayment rates of all applicable services 

for those hospitals that fail to meet the Hospital OQR Program reporting requirements. 

We also proposed to continue to apply all other applicable standard adjustments to the 

OPPS national unadjusted payment rates for hospitals that fail to meet the requirements 

of the Hospital OQR Program. Similarly, we proposed to continue to calculate OPPS 

outlier eligibility and outlier payment based on the reduced payment rates for those 

hospitals that fail to meet the reporting requirements. 
919 

 We invited public comment on these proposals. 

 Comment: One commenter suggested that OPPS outlier payments for hospitals 

that failed to meet the Hospital OQR Program requirements be calculated based on the 

full adjusted payment as if they met the requirements. The commenter believed that 

otherwise, hospitals could potentially receive an outlier payment as a result of failing to 

comply with the quality reporting requirements. 

 Response: In the CY 2009 OPPS/ASC final rule with comment period 

(78 FR 68772), we described how failure to meet the Hospital OQR Program 

requirements would affect certain OPPS payment adjustments. For the OPPS outlier 

payment calculation, we finalized a policy to calculate OPPS outliers using payments 

with the Hospital OQR Program reduction already applied. This application of the 

quality reporting payment reduction in calculating the OPPS outliers is similar to how 

this issue is handled under the IPPS. 

 After consideration of the public comment we received, we are finalizing our 

proposal to apply the Hospital OQR Program reduction in the manner described above 

and, therefore, are finalizing our proposal, with modification to reflect the CY 2014 

OPPS status indicators to which the adjustment would apply. 

 As a result, for the CY 2014 OPPS, we are applying a reporting ratio of 0.980 to 

the national unadjusted payments, minimum unadjusted copayments, and national 

unadjusted copayments for all applicable services for those hospitals failing to meet the 

Hospital OQR Program reporting requirements. This reporting ratio applies to HCPCS 

codes assigned status indicators “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” 
920 

excluding services paid under New Technology APCs. 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 will continue to apply. We continue to 

calculate OPPS outlier eligibility and outlier payment based on the reduced rates for 

those hospitals that fail to meet the reporting requirements. 

H. 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 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 
921 

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). In the CY 2014 OPPS/ASC proposed rule (78 FR 43653), we proposed 

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 
922 

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 submitting 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). In the CY 2014 OPPS/ASC 

proposed rule (78 FR 43653), we proposed 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 
923 

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 invited public comment on this proposal. 

 Comment: One commenter supported codifying administrative requirements for 

the Hospital OQR Program. 

 Response: We thank the commenter for this support. 

 Comment: One commenter requested clarification regarding whether the 

proposed regulations apply to a hospital provider-based free standing emergency 

department that is not located on the campus of a hospital. 

 Response: Hospital OQR Program reporting is by CMS Certification Number 

(CCN), not by the physical location of clinical services provided. If the hospital has a 

free standing location that is included in a hospital CCN governing its eligibility to bill 

Medicare claims via OPPS, then services provided at that location should be included in 

the Hospital OQR Program reporting, along with all activity reported for that CCN. A 

hospital may refer to the Web site 

(https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage

%2FQnetTier2&cid=1191255879384) for technical and educational support including 

contact information for questions on how to participate in the Hospital OQR Program to 

successfully receive a full APU. 
924 

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

proposed, our proposal to codify certain Hospital OQR Program procedural requirements 

at § 419.46. 

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 in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60637); 15 measures finalized for the 

CY 2012 payment determination in the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72083 through 72084); 23 measures finalized for the CY 2013 payment 

determination in the CY 2011 OPPS/ASC final rule with comment (75 FR 72090); 

26 measures finalized for the CY 2014 and CY 2015 payment determination in the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74469 and 74473) and no 

additional measures finalized for the CY 2015 payment determination in the CY 2013 

OPPS/ASC final rule with comment (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). 
925 

 In this final rule with comment period, we are finalizing four additional new 

measures. For a full list of current Hospital OQR measures, we refer readers to the table 

in section XIII.H.2.f. of this final rule with comment period. 

b. Effects of Changes on Data Submission for CY 2015 and CY 2016 Payment 

Determinations and Subsequent Years 

 In section XIII.C.2.a. of the CY 2014 OPPS/ASC proposed rule (78 FR 43646 

through 43647), we proposed to remove OP-19 for the CY 2016 payment determination 

and subsequent years. In section XIII.H.2.b. of the CY 2014 OPPS/ASC proposed rule 

(78 FR 43653), however, we referred to the removal of OP-19 as being proposed for 

removal for CY 2015 and subsequent years. We intended for the proposal language in 

these two sections to match; specifically, we intended that the removal of OP-19 should 

begin with the CY 2015 payment determination and continue forward into subsequent 

years. Our proposal to remove OP-19 from the Hospital OQR Program beginning with 

the CY 2015 payment determination (this is our earliest opportunity to remove the 

measure from the Hospital OQR Program) would not require a participating hospital to 

take any new action, because we previously suspended OP-19 effective with 

January 1, 2012 encounters, and we have not used OP-19 data to meet requirements for 

any payment determination under the Hospital OQR Program or in public reporting. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43646 through 43647) in 

section XIII.C.2.a, we proposed to remove OP-24 from the Hospital OQR Program for 

the CY 2016 payment determination and subsequent years. In section XIII.H.2.b. of the 

CY 2014 OPPS/ASC proposed rule (78 FR 43653), however, we referred to the removal 
926 

of OP-24 as being proposed for removal for the CY 2015 payment determination and 

subsequent years. We intended for the proposal language in these two sections to match; 

specifically, we intended that the removal of OP-24 should begin with the CY 2015 

payment determination and continue forward into subsequent years. Our proposal to 

remove OP-24 from the Hospital OQR Program beginning with the CY 2015 payment 

determination (this is our earliest opportunity to remove the measure from the Hospital 

OQR Program) would not require a participating hospital to take any new action, because 

to date, we have not required hospitals to submit data for OP-24. 

 For the CY 2016 payment determination and subsequent years, in section XIII.E. 

of the proposed rule, we proposed to add five additional measures to the program, but we 

are only finalizing four of the five as additional new measures. 

 The four finalized, new measures are: 

 One measure that requires hospitals to submit data annually via an online tool 

located on the CDC’s NHSN Web site: 

● OP-27: Influenza Vaccination Coverage among Healthcare Personnel. 

 Three remaining measures that require hospitals to submit data annually via the 

QualityNet Web site: 

● OP-29: Endoscopy/Polyp Surveillance: Appropriate follow-up interval for 

normal colonoscopy in average risk patients; 

● OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with 

a History of Adenomatous Polyps – Avoidance of Inappropriate Use; and 
927 

● OP-31: Cataracts – Improvement in Patient’s Visual Function within 90 Days 

Following Cataract Surgery. 

 We refer readers to section XIII.E. for a discussion about these new finalized 

measures, and our decision not to finalize measure OP-28: Complications within 30 Days 

Following Cataract Surgery Requiring Additional Surgical Procedures. 

 In section XIII.H.2.f below, we discuss proposed and finalized requirements for 

data collection for each of the four new measures by mode of data submission. 

c. General Requirements 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43654), we did not propose to 

make any changes to the Hospital OQR Program procedural requirements that we 

discussed and adopted in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74480 through 74482). We proposed 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. In the CY 2014 OPPS/ASC 

proposed rule (78 FR 43654), we proposed 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 
928 

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 proposed 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 proposed 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. All hospitals, whether the Medicare acceptance date is before or 
929 

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 invited public comment on these proposals. 

 Comment: One commenter supported codifying procedural requirements for the 

Hospital OQR Program. 

 Response: We thank this commenter for support. 

 Comment: Commenters expressed concerns regarding the 30 day preview period 

for a hospital to preview data that will be posted on the Hospital Compare Web site and 

made available to the public. Commenters question the adequacy of this preview period 

to correct errors. 

 Response: While we appreciate these concerns, because these comments are 

outside the scope of our proposed rule, we will take the comments into consideration for 

future rulemaking. 

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

proposed our proposal to codify general submission requirements at § 419.46(c): (1) our 

practice of posting actual submission deadlines by measure and by data type on the 

QualityNet Web site (http://www.QualityNet.org) at § 419.46(c)(2); and (2) 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. 
930 

d. Chart-Abstracted Measure Requirements for the CY 2015 Payment Determination 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 
931 

above, we did not propose any new chart-abstracted measures where patient-level data is 

submitted directly to CMS in the proposed rule. 

e. Claims-Based Measure Data Requirements for the CY 2015 Payment Determination 

and Subsequent Years 

 The table in section XIII.D. of the proposed rule includes measures that the 

Hospital OQR Program collects by accessing electronic Medicare claims data submitted 

by hospitals for reimbursement. 

 We did not propose any new claims-based measures in the proposed rule. 

Therefore, the following 6 existing 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 Non-Cardiac 

Low Risk Surgery; and 

● OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus 

Computed Tomography (CT). 

 In the CY 2012 OPPS/ASC final rule with comment period, we deferred the 

public reporting of OP-15, a claims-based measure (76 FR 74456). We did not propose 

any changes to this policy. As discussed in the CY 2014 OPPS/ASC proposed rule (78 
932 

FR 43654), 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 hospitals’ 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 would 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 encounter period from July 1, 2012 

through June 30, 2013 for the calculation of the claims-based measures. This is a 

departure from the previous deadlines used for these measures. Prior to the CY 2013 

final rule, the time period for encounters for the CY 2014 payment determination was 

January 1, 2011 to December 31, 2011. Under the policy finalized in the CY 2013 

OPPS/ASC final rule with comment period, for the CY 2015 payment determination, we 

are using the encounter period July 1, 2012 to June 30, 2013. 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. This modification brings our claims data six months more current effective with the 

CY 2015 payment determination. 
933 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43655), we proposed, for the 

CY 2016 payment determination and subsequent years, 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 following year. For the CY 2016 

payment determination, this 12 month period for calculation of claims-based measures 

would be from July 1, 2013 through June 30, 2014. We invited public comment on this 

proposal. 

 Comment: One commenter believed that the recent changes in the IPPS 

rulemaking regarding the two midnight benchmarks for Medicare Part A payment will 

result in more bills that are “split” bills (denied Medicare Part A inpatient, but allowed to 

bill Medicare Part B outpatient services). The commenter expressed concern that these 

billing situations would pose a problem for under-submission in the Hospital OQR 

Program and would like to understand how these billing types will be handled in the 

outpatient “core measures” program such that hospitals do not have to identify up to 

hundreds of outpatient bills that were intended to be inpatient for the purpose of 

accurately meeting the submission requirements. The commenter appeared to be 

concerned that, at the time chart-abstraction happens, the hospital’s universe of claims 

may not be complete as it would exclude Part B outpatient claims that are created and 

billed at some future point in time pursuant to a Part A inpatient claim denial. The 

commenter believes the chart abstractor might be at risk of “under-submission” (failing to 

sample or submit data corresponding to a sufficiently high enough number of cases to 

meet Hospital OQR Program requirements). 
934 

 Response: We believe this commenter is referring to our policies finalized in the 

FY 2014 IPPS/LTCH PPS final rule regarding hospital Part B billing following 

reasonable and necessary Part A hospital inpatient claim denials (78 FR 50908 through 

50938). Specifically, in the final rule we provided that if a Medicare Part A claim for 

inpatient hospital services is denied because the inpatient admission was not reasonable 

and necessary, or if a hospital determines under § 482.30(d) or § 485.641 (utilization 

review) after a beneficiary is discharged that the beneficiary’s inpatient admission was 

not reasonable and necessary, the hospital may bill Medicare for the Part B inpatient 

services (furnished after the time of inpatient admission) that would have been reasonable 

and necessary if the beneficiary had been treated as a hospital outpatient rather than 

admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B. These 

services must be submitted on a Part B inpatient claim. We also provided that for 

beneficiaries treated as hospital outpatients prior to an inpatient admission who are 

enrolled in Medicare Part B, hospitals may continue to bill Part B for hospital outpatient 

services that were furnished in the 3-day (1-day for non-IPPS hospitals) payment window 

prior to the inpatient admission. These services must be submitted on a Part B outpatient 

claim. When billing Part B following this type of Part A hospital inpatient claim denial, 

hospitals cannot change a beneficiary’s patient status from inpatient to outpatient. The 

beneficiary was formally admitted as an inpatient and there is no provision to change a 

beneficiary’s status after he or she is discharged from the hospital. Therefore, the 

beneficiary is considered an outpatient for services billed on the Part B outpatient claim, 

and is considered an inpatient for services billed on the Part B inpatient claim. For Part A 
935 

claims with dates of admission on or after October 1, 2013, timely filing applies such that 

hospitals must submit the Part B claims within 12 months of the date of service in order 

to receive payment (78 FR 50922 through 50924). 

 Under the Hospital OQR Program, hospitals are required to submit data on quality 

measures for hospital outpatient services furnished within a given timeframe (encounter 

dates). A hospital’s claims data supports two types of OQR measures of quality: claims 

based measures and chart-abstracted measures (claims data can be used to identify cases 

eligible for chart-abstraction). With regard to claims-based measures, in the CY 2013 

OPPS/ASC final rule with comment period (77 FR 68483), we described that, for the 

upcoming CY 2015 payment determination, we will use paid, FFS claims for services 

during the time period from July 1, 2012 through June 30, 2013. We would like to clarify 

that these paid, FFS claims are Part B outpatient claims. Inpatient services are excluded, 

so all Part B inpatient claims are excluded. However, we will include paid Part B 

outpatient claims for services furnished in the 3-day (1-day for non-IPPS hospitals) 

payment window prior to an inpatient admission, along with other paid Part B outpatient 

claims, if they are paid prior to the cut-off date for claims inclusion of 

September 30, 2013. For the CY 2015 payment determination, we note that hospitals 

have a longer timeframe (beyond the usual timely filing deadline) to submit certain 

rebilled Part B outpatient claims for services furnished during the Hospital OQR 

reporting period of July 1, 2012 through June 30, 2013 (78 FR 50935 through 50936). 

Part B outpatient claims for these dates of service that are processed and paid after the 
936 

claims inclusion cut-off of September 30, 2013 will not be included in the Hospital OQR 

Program CY 2015 payment determination. 

 As it relates to chart-abstracted data, the hospital is responsible for submitting 

complete data that are available at the submission deadline for each measure of quality, 

and we will assess submitted data. If a claim is not timely available for the associated 

medical record’s inclusion in the chart-abstractor’s universe of records, the 

chart-abstractor cannot include data from that record in data submitted to CMS.

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

proposed our proposal to continue to use paid Medicare FFS claims from a 12-month 

period from July 1st of the 3 years before the payment determination through June 30th of 

the following year. 

f. 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 ONC-Certified 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 

 

10 Maintz, J. Defining and Classifying Clinical Indicators for Quality Improvement, Inter J Quality Health 

Care (2003) 15(6), 523-530). 
937 

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 Web-based 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. 

 Measure OP-22: ED Patient Left Without Being Seen , is included in this list 

because, while patient-level data for this measure is collected via chart-abstraction, 

HOPDs submit aggregate data using an online tool. Thus, the same schedule for 

encounter periods and data submission deadlines applies to OP-22. 

 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. 
938 

 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 

Web-based measure data between July 1, 2014 and November 1, 2014 with respect to the 

time period from January 1, 2013 to December 31, 2013. 

 In the CY 2014 OPPS/ASC proposed rule, we proposed to apply a similar 

schedule for the CY 2016 payment determination and subsequent years. We proposed 

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 also proposed to apply the same mode of data collection and deadlines to the 

following proposed chart-abstracted measures. 

● OP-28: Complications within 30 days Following Cataract Surgery Requiring 

Additional Surgical Procedures (this measure was not finalized and will not be 

implemented); 

● OP-29: Endoscopy/Polyp Surveillance: Appropriate follow-up interval for 

normal colonoscopy in average risk patients; 

● OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with 

a History of Adenomatous Polyps – Avoidance of Inappropriate Use; and 
939 

● OP-31: Cataracts – Improvement in Patient’s Visual Function within 90 Days 

Following Cataract Surgery. 

 Specifically, for data collection, we proposed that hospitals submit aggregatelevel data through the CMS Web-based tool (the QualityNet Web site). As with OP-22, a 

chart-abstracted measure that is submitted once annually via the Web-based tool, 

hospitals would submit the data required for these newly proposed measures for a 

particular program year once annually during the data submission window proposed for 

Web-based measures as stated above, and would do so via the Outpatient section on the 

QualityNet secure Web site. While we proposed 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 

proposed to use the Web-based 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43656), we 

summarized for the proposed and existing chart-abstracted measures collected via the 

Web-based tool, data collection periods and deadlines as they apply to just the CY 2016 

payment determination. 

 We recognize that aggregate-level reporting has the potential to result in less 

accurate measure rates than patient-level reporting. However, to reduce burden for 

hospitals, we believe that an aggregate data submission approach is the preferable 

approach at this time. 
940 

 We invited public comment on these proposals. 

 In section XIII.E of this final rule with comment period, we describe that, in the 

CY 2014 OPPS/ASC proposed rule (78 FR 43647 through 43648) we sought public 

comment on whether we should collect patient-level data via certified EHR technology 

on the four proposed chart-abstracted measures (this would not apply to the one HAI 

measure, OP-27: Influenza Vaccination Coverage among Healthcare Personnel), and the 

potential timing for doing so. We refer readers to section XIII.E of this final rule with 

comment period for a discussion of the related public comments. 

 Comment: Several commenters raised general questions about the two 

colonoscopy measures CMS proposed without making a distinction between the two 

measures. Commenters expressed concern about determining the appropriate interval 

between colonoscopies if a patient had his or her last colonoscopy in a different HOPD or 

other facility. Another commenter was concerned about how HOPDs should be 

collecting the pre-procedure information necessary to make these determinations, noting 

that it would require significant system changes to achieve accurate data collection. The 

commenter described as an example having to set up a system with an NP or RN 

collecting a sufficient amount of accurate colonoscopy history from a patient during the 

patient’s pre-procedure visits. The commenter believed that such a system would be 

necessary to determine whether an additional colonoscopy is necessary based on 

recommended frequency guidelines. The commenters also pointed out that many 

colonoscopies are performed at a facility that is not within the same entity as the ordering 
941 

physician’s practice, making it difficult for the HOPD to acquire medical records that are 

in the physician’s possession. 

 Response: We appreciate these comments. We expect that, to address these 

measures, HOPDs will need to either ask patients about their colonoscopy history and 

polyp status, or acquire that information from such sources as the patient’s physician or 

the facility that performed the most recent colonoscopy. This data will be critical for 

HOPDs attempting to determine an appropriate interval between colonoscopies. 

 Pre-procedure information can include a patient’s history, perhaps in the form of a 

medical record or as obtained through verbal communication with the patient. We 

believe this information, which includes how recently patients had their previous 

colonoscopy and any other factors that might affect a HOPD’s determination of an 

appropriate interval, is essential to a HOPD’s decision about when to perform a follow-up 

colonoscopy. Acquiring this information may mean that some HOPDs must gather more 

information than they may be accustomed to. 

 We believe that HOPDs that perform certain procedures must manage the risk of 

procedural harm to patients and coordinate care by improving the communication 

between the HOPD, its patients, specialist physician offices, ASCs, surgeons performing 

procedures, and other outpatient departments. We expect some providers will need to 

adopt new processes to effectively gather this information in order to manage the risk of 

procedural harm, and to report data for this measure. For example, HOPDs may in some 

cases need to establish some form of pre-procedure interaction with patients in order to 

establish their procedural history, either by using an NP or RN, as one commenter 
942 

suggested, by using a survey form, or by some other method. There may be some 

concern that, despite HOPDs managing risk of procedural harm to the best of their 

abilities, patients may not always be able to accurately represent their polyp history 

during direct interactions with caregivers. In these instances, patients can authorize the 

release of medical information from one provider or practitioner to another. 

 Comment: One commenter recommended that CMS require reporting of data that 

is included in validation. 

 Response: We believe this commenter would like the Hospital OQR Program to 

restrict data collection to measures that are also subject to validation processes. We refer 

readers to section XIII.E.1. above for a discussion of this issue. 

 Comment: Many commenters believed that these measures are burdensome and 

the data is not easily attained in the outpatient setting. Many commenters argued that 

CMS’ proposed requirement to collect aggregate-level data to report through the Webbased tool would actually increase the burden on hospitals. These commenters point out 

that the hospital must perform patient-level reviews to report aggregate-level data. One 

commenter believed that the submission of aggregate data using the Web-based tool 

required time spent manually entering data into QualityNet and made it more burdensome 

for a hospital to work with a vendor. 

 The commenters stated that, unless CMS intends to release full specifications, 

including clear and complete measure numerator, denominator, exclusion criteria, and 

algorithms, hospitals will experience burden in having to review and interpret NQF 

specifications for each of the new measures. One commenter stated that there are 
943 

difficulties with CMS’ infrastructure, and the commenter believes that any additional 

measures are likely to cause operational difficulties with data collection via the 

QualityNet Web site. 

 Response: We understand all new measures impose some burden on hospitals to 

gather and report data. We also appreciate that many commenters favor CMS adopting 

claims-based measures into the Hospital OQR Program whenever possible, as we discuss 

in section XIII.E.1 above. However, we believe that the measures we are adopting are 

important indicators of the quality of care HOPDs provide and that any effort in acquiring 

data and burden in reporting that data is appropriate based on the importance of 

measuring the quality of care. 

 Regarding the burden imposed by Web-based reporting, we would like to clarify 

that the Hospital OQR Program requires entering aggregate data via the Web-based tool, 

not patient-level data or detail. A hospital is required to populate one numerator and one 

denominator field for the applicable measures onto QualityNet. However, hospitals 

would still be required to perform a patient-level review of medical records to compile 

aggregate data. Hospitals would abstract data for new measures OP-29, OP-30, and 

OP-31 the same way they have been abstracting data for all other previously finalized 

chart-abstracted measures; this process involves identifying their total aggregate sums for 

the numerator and denominator. 

 For the new measures (OP-29, OP-30, and OP-31), it should not be difficult for a 

hospital to use the Web-based tool to enter aggregate data, making a vendor unnecessary. 

In fact, we are not aware that any hospitals currently use a vendor to submit data for 
944 

measure OP-22. However, if a hospital does choose to use a vendor, we do not see any 

reason why finalizing these new measures would necessarily make working with a 

vendor more difficult. Vendors routinely provide services to hospitals, submitting large 

amounts of detailed, and often complex, data to CMS on the hospitals’ behalf. 

 We believe that reporting the aggregate-level data required by the new measures 

via the Web-based tool is less burdensome to hospitals than reporting patient-level data. 

We believe that the ease with which hospitals can submit their aggregate counts using our 

Web-based tool (the QualityNet Web site) reduces the burden of reporting. As we noted 

above, this process is the same process we finalized for OP-22 and similar to the process 

we finalized for a quality measure in the Hospital IQR Program in the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53537). 

 We will provide full, in-depth specifications for OP-29, OP-30, and OP-31 in the 

upcoming December 2013 addendum to the Hospital OQR Specifications Manual. We 

note that numerators, denominators, and exclusions have been established and made 

public as shown on the NQF Web site. The Hospital OQR Specifications Manual 

includes instructions for identifying a measure’s population (for example, using specific 

data elements), an algorithm for each measure in both diagram and narrative form, and 

sampling methodology for measures as applicable. The Hospital OQR Specifications 

Manual also includes information on the rationale for each measure, how each measure is 

publicly reported, how improvement is noted, etc., and it identifies references to Medical 

or other scientific journals that include discussion of a measure’s focus. We would like 

to clarify that we are finalizing that a hospital would submit aggregate numerators, 
945 

denominators, exclusion counts, and total populations and sample sizes for the new 

measures (OP-29, OP-30, and OP-31) according to the measure specifications. 

 However, we are sensitive to commenters’ concerns regarding burden, and as 

such, we are addressing it in two ways - applying a sampling scheme and a low case 

threshold exemption. We intend to decrease burden and facilitate data reporting for these 

measures by allowing random sampling of cases when volume is high, instead of 

collecting information for all eligible patients. In our December 2013 addendum to the 

Hospital OQR Specifications Manual, we will publish a sampling methodology for these 

new measures that will take into account the burden that these new measures may place 

on hospitals during the CY 2014 encounter period. Specifically, we will employ the 

same sampling requirements for these measures that are currently used for the ED 

Throughput measure set (that is, measures OP-18/NQF 0496, OP-20/NQF 0498, and 

OP-22/NQF 0499). Sampling is a process of selecting a representative part of a 

population in order to estimate the hospital’s performance, without collecting data for its 

entire population. In this way, using a statistically valid sample, a hospital can measure 

its performance in an effective and efficient manner. We describe how to obtain a 

statistically valid sample and the current sampling methodology and requirements for ED 

Throughput Measure Set within “Section 4 - Population and Sampling Specifications” of 

the Hospital OQR Specifications Manual, v7.0 at the QualityNet Web site 

(https://www.qualitynet.org). There, the ED Throughput Sampling requirement is 

located in Table 3. A hospital should follow the same methodology for new measures 

OP-29 (NQF 0658), OP-30 (NQF 0659), and OP-31 (NQF 1536). In the upcoming 
946 

release of the addendum to the Hospital OQR Specifications Manual (available at the 

QualityNet Web site https://www.qualitynet.org), we will include information that the 

ED Throughput Sampling requirements at Table 3 are also applicable to new measures 

OP-29, OP-30, and OP-31. 

 We will adjust the sampling requirement based on our experience with collecting 

this data in the first year. 

 In addition, we are implementing a low case threshold exemption for newly 

finalized measures OP-29, OP-30, and OP-31. To reduce the burden on hospitals that 

treat a low number of patients, this exemption excludes hospitals that perform 20 or 

fewer relevant procedures per measure in any year from having to submit data for that 

year for measures OP-29, OP-30, and OP-31. This low case threshold exemption is 

consistent with our practice for chart-abstracted measures in the Hospital IQR Program 

(73 FR 48617), but annualized to be consistent with the Hospital OQR Program’s single 

annual reporting requirement for these three measures. Because data for OP-29, OP-30, 

and OP-31 are to be submitted once annually via Web-based tool, we will not require 

hospitals that perform 20 or fewer cases per year per measure to submit this data 

annually. 

 We agree our data collection system experiences malfunctions, and we work to 

resolve system issues as quickly as we are able to through our contractors. However, the 

system functionality to report aggregate data using the Web based tool is stable at this 

time and our contractors assure us that the system will be able to collect aggregate data 

for OP-29, OP-30, and OP-31 by the first deadline for measure submission. 
947 

 After consideration of the public comments we received, we are finalizing our 

proposal, for the CY 2016 payment determination and subsequent years, that hospitals 

will be required to submit Web-based data between July 1 and November 1 of the year 

prior to a payment determination with respect to the encounter period of January 1 to 

December 31 of two years prior to a payment determination year. For example, for the 

CY 2016 payment determination, the encounter period is January 1, 2014 to 

December 31, 2014 and the data submission window is July 1, 2015 through 

November 1, 2015. The CY 2014 encounter data is scheduled to be displayed on 

Hospital Compare in December 2015. 

 We also are finalizing our proposals: (1) to apply a uniform mode of data 

collection and deadlines to the new measures OP-29, OP-30, and OP-31; (2) that 

hospitals submit aggregate-level data through the CMS Web-based tool (the outpatient 

section of the QualityNet Web site); and, (3) that hospitals submit all aggregate-level data 

required for a particular program year once annually during the data submission window. 

 In addition, we are finalizing a sampling scheme and low case threshold 

exemption. We will publish a sampling scheme for newly finalized measures in the 

upcoming December 2013 addendum to the Hospital OQR Specifications Manual. For 

the low case threshold exemption, we are finalizing that any hospital that performs 20 or 

fewer procedures annually for a particular new measure, will not be required to submit 

any data for that new measure. 
948 

 Set out below are the finalized data collection requirements for chart-abstracted 

measures that are collected annually via the Web-based tool illustrating how these 

policies will apply to just the CY 2016 payment determination. 

Illustrative Data Collection Requirements for the CY 2016 Payment Determination 

for Hospital OQR Program Web-Based Measures that are also Chart-Abstracted 

Measures 

Measure Encounter 

Dates 

Data Submission 

Timeframe 

Public Reporting 

OP-22: ED Patient 

Left Without Being 

Seen* 

January 1, 2014 

– December 31, 

2014 

July 1, 2015 – 

November 1, 2015 

Quarterly (April, July, 

October, December) 

OP-29: 

Endoscopy/polyp 

Surveillance: 

Appropriate followup interval for 

normal colonoscopy 

in average risk 

patients** 

January 1, 2014 

– December 31, 

2014 

July 1, 2015 – 

November 1, 2015 

CY 2014 encounter data 

to be published 

December 2015. 

OP-30: 

Endoscopy/polyp 

surveillance: 

Colonoscopy 

Interval for Patients 

with a History of 

Adenomatous 

Polyps – Avoidance 

of Inappropriate 

Use** 

January 1, 2014 

– December 31, 

2014 

July 1, 2015 – 

November 1, 2015 

CY 2014 encounter data 

to be published 

December 2015. 

OP-31 -- Cataracts – 

Improvement in 

Patient’s Visual 

Function within 90 

Days Following 

Cataract Surgery** 

January 1, 2014 

– December 31, 

2014 

July 1, 2015 – 

November 1, 2015 

CY 2014 encounter data 

to be published 

December 2015. 

* Previously finalized with payment determination beginning CY 2013. 

** Finalized for the CY 2016 payment determination and subsequent years. 
949 

g. Data Submission Requirements for a Measure Reported via NHSN for the CY 2016 

Payment Determination and Subsequent Years 

 As discussed in section XIII.E.1. of this final rule with comment period, we are 

finalizing the addition of OP-27: Influenza Vaccination Coverage among Healthcare 

Personnel to the Hospital OQR Program measure set. We proposed to use the data 

submission and reporting standard procedures set forth by the CDC for NHSN 

participation for submission of this measure to NHSN. Hospitals currently submit data to 

NHSN to comply with the requirements of the Hospital IQR Program and those 

requirements will be unchanged for data submission to NHSN for the Hospital OQR 

Program. 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 proposed 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 proposed that hospitals submit their data 
950 

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 

corresponds to that finalized by the Hospital IQR Program in the FY 2014 IPPS/LTCH 

final rule (78 FR 50821). 

 We invited public comment on these proposals. 

Comment: One commenter expressed concern regarding whether the NHSN 

system will be overwhelmed if a large number of independent HOPDs began to submit 

data on the influenza measure. The commenter urged that prior to implementation of any 

HOPD measures in the NHSN, CMS and CDC must work together to find the necessary 

resources to sustain and expand the reporting capabilities of the NHSN. 

 The commenter also stated that hospitals are having difficulty in obtaining reports 

from the NHSN system and when this problem is reported to NHSN, hospitals either 

receive no response or a generic response with no expected correction date provided. 

The commenter voiced concerns that this limits hospitals’ ability to use NHSN data for 

performance improvement efforts, and that the concerns raised by the lack of system 

reliability must be mitigated through appropriate funding and quality control. 

 Response: We thank the commenter for the feedback. We believe this 

commenter is referring to the availability of feedback, in report form, to indicate whether 

a hospital has successfully reported HAI data to NHSN for purposes of meeting payment 

determination requirements for the Hospital IQR Program. The Hospital OQR Program 
951 

has not, to date, required reporting to the NHSN system. HOPDs will report to the CDC 

using their CCN. Since hospitals have a single CCN, hospitals that already report data to 

the CDC’s NHSN Web site for purposes of the Hospital IQR Program will not need to 

reenroll or get a new account, because they have already established their CCN identity. 

Where hospitals currently report data for the HCP vaccination rate for the inpatient 

setting, the CDC will add a drop-down option for hospitals to distinguish the reporting of 

data for the outpatient setting. The CDC will capture and transmit this outpatient data to 

CMS using the existing infrastructure for capturing and transmitting data for the inpatient 

setting. 

The Hospital IQR Program has experienced problems with HAI feedback reports 

generated from CDC data in the past due to programming issues which have been 

corrected as they are identified. These experiences with the Hospital IQR Program report 

will be leveraged in the CMS outpatient feedback report, called the Provider Participation 

Report. The existing Provider Participation Report will be modified to include a column 

to indicate whether a facility has successfully reported the HCP influenza vaccination 

measure data for purposes of the Hospital OQR program. 

 NHSN has addressed and corrected previous issues with system strain and slow 

data-set generation due to high volume requests for data and reports. NHSN continues to 

closely monitor the Web site for any new potential issues and strives to respond 

immediately. In light of these changes, we do not believe that it is likely that the NHSN 

system will be overwhelmed by this proposed reporting. The proposed reporting relies 
952 

on making modest extensions to the existing NHSN infrastructure where the reporting is 

parallel to existing HCP data capture for the inpatient setting. 

 Comment: Several commenters asked how we will require reporting of students 

and volunteers at the hospital for this measure. One commenter would like clarification 

on how to gather data for personnel who were immunized outside of the reporting 

hospital. Commenters point out that it is a strain on resources to collect data on these 

categories of vaccinated personnel. 

 Response: We believe that hospitals are well equipped to report these categories 

of vaccinated personnel, since they already report these categories for personnel working 

in hospital inpatient departments in the Hospital IQR Program. CMS and CDC believe 

that only small modifications are necessary to report these categories of vaccinated 

personnel for hospital outpatient departments, since many hospitals use the same human 

resource system to collect relevant information on both hospital inpatient and outpatient 

department personnel. The CDC will collaborate with CMS on refining and publishing 

specifications for how to attribute workers by setting. CMS will refer to the CDC’s 

specifications in the December 2013 addendum to the Hospital OQR Specifications 

Manual that will be available on the Quality Net Web site (https://qualitynet.org). 

 The numerator of the population of this measure includes personnel who 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. The numerator also includes those who were determined to have a medical 

contraindication or particular allergy or immune status, who declined the influenza 
953 

vaccination, or who have an unknown vaccination status or do not meet other NQF 

numerator categories (to review the NQF Measure Description and Numerator and 

Denominator Statements, please refer to the NQF Web site at 

http://www.qualityforum.org/Home.aspx). We believe the numerator categories will 

alleviate some of the difficulty a hospital may have in tracking down the vaccination 

status of some categories of HCW. We recognize the challenge for hospitals in collecting 

data for students, volunteers, and offsite personnel. We nonetheless believe that the 

benefit of reducing influenza in hospitals outweighs any burden incurred by screening all 

staff, volunteers, students, and offsite personnel. We believe that this burden should, by 

and large, amount to gathering information about immunization during initial worker 

orientation and during flu vaccine season for existing workers, providing vaccines when 

appropriate, and keeping track of who has been vaccinated. 

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

proposed our proposal to use the data submission and reporting standard procedures set 

forth by the CDC for NHSN participation in general and for submission of data for this 

measure to NHSN. We are also finalizing our proposal to adopt the NHSN HAI measure 

data collection timeframe of October 1st through March 31st for this measure. The first 

deadline for hospitals to submit this data will be May 15, 2015 with respect to the 

October 1, 2015 through March 31, 2015 encounter period. 
954 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43656), we did not propose 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 
955 

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. In the CY 2014 OPPS/ASC proposed rule (78 FR 43656 

through 43657), we did not propose any changes to this policy. 

 However, we proposed 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. 

 We invited public comment on our proposal to codify these requirements. 

 Comment: One commenter supported codifying Hospital OQR procedures. 

 Response: We appreciate this commenter’s support. 

 Comment: One commenter was opposed to the Hospital OQR Program using any 

threshold for establishing a passing rate of reliability for validation as criteria for a 

hospital achieving a full annual payment update. The commenter stated that, due to the 
956 

complexity of the measures and the fact that there has been no evidence facilities submit 

inaccurate data to give the appearance of higher quality of care on the Hospital Compare

Web site, the Hospital OQR Program should only look at whether a facility submits 

records when and as requested. The commenter believed that successful submission of 

records should be sufficient to assure data integrity. 

 Response: We disagree. While we appreciate the commenter’s perspective that 

hospitals are not motivated to submit data that inaccurately represents their care to appear 

to have higher quality of care on the Hospital Compare Web site, we nevertheless remain 

committed that all hospitals are responsible for submitting accurate data. All reporting 

hospitals are subject to selection for validation each payment determination year, which 

provides an additional incentive to maintain data quality. The validation process assesses 

overall data accuracy using data abstracted by CMS from hospital medical record copies, 

as compared to the data that a hospital submits to CMS. This process is intended to 

ensure that hospitals submit high quality and accurate data to CMS. We believe the 

opportunity for a hospital to be selected for validation is a motivator for the hospital to 

maintain stringent chart abstraction and data submission standards. 

 However, we believe that requiring hospitals to meet a reliability score serves a 

purpose beyond deterring hospitals from manipulating their data for display purposes. 

We believe that requiring a reliability score also motivates hospitals: (1) to continuously 

improve their internal operations to accurately capture the high quality care they provide; 

(2) to obtain data that can be measured and compared meaningfully across peer hospitals; 

and, (3) to report data to support our movement away from reimbursement for volume of 
957 

care provided and toward reimbursement for quality of care. We appreciate the work 

hospitals do to refine processes to improve the quality of care they provide to patients and 

to report data reliably on measures of quality. 

 After consideration of the public comments we received, we are finalizing our 

proposal to codify at § 419.46(e) of our regulations our existing policies regarding 

validation of patient encounters at selected participating hospitals. 

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. In the CY 2014 

OPPS/ASC proposed rule (78 FR 43657), we did not propose 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. In the 

CY 2014 OPPS/ASC proposed rule (78 FR 43657), we did not propose 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. In the CY 2014 
958 

OPPS/ASC proposed rule (78 FR 43657), we did not propose any changes to our 

procedures regarding medical record requests. 

 However, we proposed 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 invited public comment on our proposal to codify these procedures. 

 We did not receive any public comment on our proposal to codify medical record 

documentation requests and validation and validation score calculation procedures. 

Therefore, we are finalizing our proposal to codify these procedures at §§ 419.46(e)(1) 

and (e)(2). 
959 

I. 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43657 through 43658), we 

proposed one change to the reconsideration request procedures to ensure our deadline for 

reconsideration requests will always fall on a business day. We also proposed 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. 

 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 proposed 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 instead. As proposed, 

the Reconsideration Request form for the CY 2014 payment determination would be 

required on February 3, 2014, which is a Monday, because this is the first business day in 

February; however, the form for the CY 2015 payment determination would be required 

on February 2, 2015, which is also a Monday, and the first business day in February. We 

note that while we use the CY 2014 and 2015 payment determinations as examples, we 

proposed this policy for the CY 2014 payment determination and subsequent years. The 
960 

other requirements of the form would remain unchanged. We requested public comment 

on this proposal. 

 We also proposed 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 in the month of February of the affected payment 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, e-mail 

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 
961 

● 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, 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 proposed 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 did not propose to codify the following process, we note that, after 

receiving a request for reconsideration, CMS-- 

● Provides an e-mail 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 
962 

consider the hospital’s request if the hospital timely submitted all requested medical 

record documentation to the CMS contractor each quarter under the validation process. 

● 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 45 calendar day timeframe, our review is initially limited to 

determining whether the CMS contractor received the requested medical record 

documentation within 45 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 
963 

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 45 calendar day period, we do not further consider the hospital’s request. (We note 

that in the proposed rule (78 FR 43658), we inadvertently referred to 30 calendar days, 

instead of 45 calendar days in this bulleted item. We used the correct 45 day timeframe 

in our discussion of Hospital OQR Program validation requirements in section XIII.H.3. 

of the proposed rule (78 FR 43656) and in proposed § 419.46(e)(1) (78 FR 43704). 

 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), as we have provided in our codification at § 419.46(f)(3). 

 We invited public comment on these proposals. 

 Comment: Several commenters supported CMS’ proposed change to the 

reconsideration request procedures to ensure our deadline for reconsideration requests 

will always fall on a business day. 

 Response: We appreciate these commenters’ support. 

 After consideration of the public comments we received, we are finalizing our 

proposal to: (1) change the deadline by which participating hospitals may submit 

requests for reconsideration; and, (2) codify this deadline and our procedural 

requirements for requesting a reconsideration at § 419.46(f) of our regulations. 
964 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43658), we proposed 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 proposed 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 proposed 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 
965 

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 did not propose 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, e-mail 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 
966 

● 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 e-mail acknowledgement using the contact information provided 

in the request notifying the designated contact that the hospital’s request has been 

received; and, 

 (2) If we make the determination to grant a waiver or extension to hospitals that 

have not requested them, because we determine that an extraordinary circumstance has 

occurred in a region or locale, we would communicate this decision to hospitals and 

vendors through routine communication channels, including but not limited to e-mails 

and notices on the QualityNet Web site. 

 We invited public comment on these proposals. 

 Comment: Several commenters supported CMS’ proposal to waive requirements 

where we have systemic errors. 

 Response: We appreciate these commenters’ support. 

 After consideration of the public comments we received, we are finalizing our 

proposal to include a waiver or extension for CMS’ systemic errors and to codify 

language for the general requirements for our extension or waiver process, including our 

systemic errors waiver/extension policy at § 419.46(d). 
967 

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. 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’s 

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 
968 

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 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43659), for the Hospital VBP 

Program, we proposed to implement an independent CMS review that will be an 

additional appeal process available to hospitals, beyond the existing review and 

corrections process (77 FR 53578 through 53581 and 76 FR 74544 through 74547) and 

appeal process codified at § 412.167. We proposed that a hospital would be able to 

request this additional independent CMS review only if it first completes the appeal 

process at § 412.167(b) and is dissatisfied with the result. We stated our belief that our 

proposal to require hospitals to complete the existing appeal process at § 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 stated our intent to provide hospitals with our 

independent review decision within 90 calendar days following the receipt of a hospital’s 

independent review request. We also proposed to codify this policy in our regulations at 
969 

§ 412.167 by redesignating the existing paragraph (c) as paragraph (d), and inserting a 

new paragraph (c). 

 We invited public comments on these proposals. 

 Comment: Numerous commenters supported the proposed independent review 

process, including the proposed 90-day limit on independent review requests. Some 

commenters suggested that CMS include the proposed 90-day time limit for hospitals to 

request the independent review process in the regulation text. One commenter also urged 

CMS to align the Hospital VBP Program with the Physician Value-Based Payment 

Modifier Program, including the appeals and independent review process. 

 Response: We appreciate the commenters’ support and note that our intention is 

to provide hospitals with a decision on an independent review request as quickly as 

possible. We also appreciate the commenters’ suggestion that we include the 90-day 

timeframe for independent CMS reviews in our regulation text. While we will strive to 

complete those reviews within 90 days, we do not believe that it is appropriate at this 

time to incorporate a firm deadline into our regulations. We recognize that the number 

and complexity of these reviews will impact the actual completion timeframe. We also 

strongly encourage hospitals to request this additional independent CMS review within 

30 days after they receive a decision on an appeal submitted under the regulations at 

§ 412.167(b). 

 With respect to the commenters’ suggestion that we align the Hospital VBP 

Program with the Physician Value-Based Payment Modifier Program, we are currently 
970 

examining how we might be able to align various quality reporting and 

pay-for-performance programs. 

 After consideration of the public comments we received, we are finalizing the 

independent CMS review process as proposed. We also are finalizing our proposal to 

codify this policy at § 412.167 by redesignating existing paragraph (c) as paragraph (d), 

and inserting a new paragraph (c). 

C. Performance and Baseline Periods for Certain Outcome Measures for the FY 2016 

Hospital VBP Program

 As described in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50681 through 

50687), we have adopted the CLABSI, CAUTI, and SSI measures, which are reported to 

CDC’s National Healthcare Safety Network (NHSN), for the FY 2016 Hospital VBP 

Program. However, when we proposed to adopt these measures in the FY 2014 

IPPS/LTCH PPS proposed rule (78 FR 27610 through 27611), we inadvertently did not 

make FY 2016 performance and baseline period proposals for these proposed measures. 

In the CY 2014 OPPS/ASC proposed rule (78 FR 43659), we proposed to adopt FY 2016 

performance and baseline periods for these measures so that we would 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 
971 

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 

proposed 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 proposed 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 invited public comments on 

these proposals. 

 Comment: Numerous commenters supported the proposed performance and 

baseline periods, but argued that CMS should not adopt the CAUTI and CLABSI 

measures for the Hospital VBP Program because they have been finalized for the HAC 

Reduction Program. Commenters stated that it is inappropriate to penalize hospitals 

more than once for the same measure, and that two programs adopting the same measures 

may be confusing for hospitals and patients, especially because the two programs 

calculate performance differently. Other commenters opposed any measures that are not 

NQF-endorsed or risk-adjusted, and suggested that CMS suspend the CLABSI and SSI 

measures from the Hospital VBP Program. 
972 

 Response: We appreciate the commenters’ input. However, the proposals in the 

CY 2014 OPPS/ASC proposed rule were limited to the FY 2016 performance and 

baseline periods for the CAUTI, CLABSI, and SSI measures, not the adoption of the 

measures themselves. We adopted these measures for the FY 2016 Hospital VBP 

Program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50686 through 50687), and 

responded to public comments on the substance of those measures in the same final rule 

(78 FR 50683). Accordingly, we view the public comments we received on the substance 

of these measures to be outside the scope of the CY 2014 OPPS/ASC proposed rule. 

 Comment: Some commenters noted that the CAUTI, CLABSI, and SSI measures 

underwent changes between the proposed baseline period of CY 2012 and the proposed 

performance period of CY 2014. The commenters noted that these changes may be 

confounding as CMS attempts to assess hospital performance on the measures. 

Commenters also noted that CDC may make additional definition changes to the CAUTI 

measure in CY 2014, and urged CMS to consider data instability when comparing data 

collection periods. 

 Response: We appreciate the commenters’ suggestion. The changes to the 

CAUTI, CLABSI, and SSI measures cited by the commenters were changes the CDC 

made to standardize the process hospitals use to identify healthcare-associated infections 

(HAIs) and reflect operational practices already widely used for identifying those 

infections. Specifically, the change to the definition of “HAI” that applies to each of 

these measures improves each measure’s objectivity and promotes greater standardized 

reporting. The CDC has informed CMS that it does not expect those changes to 
973 

significantly impact the measure rates. In addition, our own clinically based qualitative 

review of the measure definition changes indicate that these measure definition 

refinements will not substantially change national and hospital performance rates used in 

our FY 2016 measure rate and score calculations using CY 2012 and CY 2014 data. In 

this clinically based review, we assessed the clinical consistency of measure definitions 

across time, hospital adherence to current clinical guidelines, and relevant clinical 

outcomes associated with these infections. Our review found that the overall measure 

definitions for each of these measures remained consistent from a clinical perspective, 

and supported consistent and valid measurement of relevant clinical outcomes in 

CY 2012 and CY 2014. 

 We will continue to closely monitor the impact of the definitional changes made 

to the CAUTI, CLABSI, and SSI measures between CY 2012 and CY 2014 as we 

continue to collect data in these measures. 

 As we stated in prior rulemaking, we believe strongly that hospitals must be 

encouraged through the Hospital VBP Program to minimize infection events that present 

significant health risks to patients. We also believe that the CAUTI, CLABSI, and SSI 

measures provide information critical to this quality improvement effort by tracking 

infection events. 

 Comment: Numerous commenters supported the proposals and stated that 

adopting the calendar year makes more sense than the finalized 11-month performance 

period for the CLABSI measure for FY 2015. 

 Response: We appreciate the commenters’ support. 
974 

 After consideration of the public comments we received, we are finalizing the 

FY 2016 performance and baseline periods for the CAUTI, CLABSI, and SSI measures 

as proposed. 

 The finalized performance and baseline periods for the CAUTI, CLABSI, and SSI 

measures for the FY 2016 Hospital VBP Program appear in the following table. 

Finalized Performance and Baseline Periods for CAUTI/CLABSI/SSI 

 under the FY 2016 Hospital VBP Program 

Domain Baseline Period Performance Period 

Outcome 

● CAUTI / 

CLABSI / SSI 

● January 1, 2012 – 

December 31, 2012 

● January 1, 2014 – 

December 31, 2014 

XV. Requirements for the Ambulatory Surgical Center Quality Reporting 

(ASCQR) Program 

A. Background

1. Overview 

 We refer readers to section XIII.A.1. of this final rule with comment period 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 
975 

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 value-based purchasing (VBP) 

program for payments under title XVIII of the Act for ASCs, and submitted a report to 

Congress entitled “Medicare Ambulatory Surgical Center Value-Based 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-Fee-for-ServicePayment/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, 
976 

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, 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 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. 
977 

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. 

 Comment: A few commenters recommended that CMS ensure that the proposed 

measures are specified to provide an opportunity for stakeholders input. 

 Response: We note that all the proposed measures are fully specified and we 

provide the links to the detailed measure specifications which were submitted to NQF by 

the measure stewards. We believe that these measure specifications provided the detailed 

information needed for the public to understand the measures being proposed and to be 

able to provide meaningful comments on the proposed measures during the rulemaking 

process. Proposed measures are not included in the ASCQR Specifications Manual 

(Specifications Manual) because we generally incorporate specifications for measures to 

be used in the ASCQR Program into the Specifications Manual, along with 

implementation guidance, after publication of the rule, but prior to implementation. As 

mentioned in section XV.B.5. of this final rule with comment period, which discusses 

maintenance of technical specifications, our general policy is to provide six months lead 

time between Specifications Manual publication and the start date of collection so that 

ASCs have adequate time to prepare for new reporting requirements. 
978 

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=12

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. 
979 

3. Additional ASCQR Program Quality Measures for the CY 2016 Payment 

Determination and Subsequent Years 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43661 through 43664), we 

proposed 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 

Measures Application Partnership (MAP). 

 We stated that 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 
980 

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) of the Act, 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 the measures were reviewed by the MAP in its “MAP PreRulemaking 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_Pre-Rulemaking_Report_-

_February_2013.aspx. We considered the input and recommendations provided by the 

MAP in selecting measures to propose for the ASCQR Program.

 As part of the MAP’s input and recommendations in its 2013 Pre-Rulemaking 

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 
981 

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 proposed 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 (NQF #0564 being the 

exception): (a) Complications within 30 Days following Cataract Surgery Requiring 

Additional Surgical Procedures (NQF #0564); (b) Endoscopy/Polyp Surveillance: 

Appropriate follow-up interval for normal colonoscopy in average risk patients (NQF 

#0658); (c) Endoscopy/Polyp 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; 
982 

consensus shown through broad acceptance and use of measures; and consensus through 

public comment. The proposed measures are described in greater detail below. 

 We proposed that data collection for these four measures would begin in 

CY 2014. We referred readers to section XV.D. of the proposed rule for detailed 

discussion of data collection and submission time frames. We proposed 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 Web-based tool is 

currently in use in the ASCQR Program for ASC-6 (Safe Surgery Checklist Use) and 

ASC-7 (ASC Facility Volume Data on Selected ASC Surgical Procedures). We invited 

public comment on these proposals. More information regarding this proposed method 

of collection was provided in section XV.D.5.c. of the 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 sought public comment 

on alternative data collection strategies for these four proposed measures. In particular, 

we sought comment on collection of patient-level data through registries or other third 

party data aggregators, and via certified electronic health record (EHR) technology, along 

with the potential timing for doing so. 

 Comment: Some commenters believed that CMS should allow ASCs to meet the 

requirements of the ASCQR Program using registry-based reporting and urged CMS to 

propose a registry-based reporting option that would allow ASCs to fulfill all program 

requirements through a single mechanism to simplify and streamline the process of data 
983 

submission. Other commenters urged CMS to focus on options to reduce reporting 

burden associated with data submission through multiple portals (claims-based, 

QualityNet, and NHSN), suggesting instead the use of registries or electronic health 

records. 

 Response: We thank the commenters for these suggestions. We agree that it 

could reduce burden to have a registry-based mechanism for data submission. 

 We have not proposed a registry-based reporting option because currently, there is 

not a registry in place that is collecting information on the quality measures that we have 

adopted in this program. Should registry-based reporting of the ASC quality measures 

become available in the future, we will explore further the viability of incorporating a 

registry-based reporting mechanism in the ASCQR Program. 

 Regarding the use of EHR systems for reporting quality data, we agree that 

reporting by this method could reduce reporting burden. However, we are not aware of 

quality measures for ASCs that have been specified for electronic reporting. In addition, 

if such measures do exist, we would need to understand the current state of EHR adoption 

by ASCs before proposing them. In a previous environmental scan, which included an 

assessment of the readiness of ASC to electronically report quality data, we found low 

levels of EHR use by ASCs. We are in the process of updating the environmental scan of 

ASCs, which will include an analysis of EHR adoption and an assessment of ASCs’ 

abilities to report quality data via EHR systems. We believe that ASCs continue to be 

slow to adopt EHRs because many of them are small facilities and there has been no 
984 

incentive program to encourage such adoption, but we intend to assess this position based 

upon the results of our updated environmental scan. 

 For the proposed rule, we received many general comments that are applicable to 

all four proposed measures. We have organized the document by first summarizing and 

responding to these general comments that are applicable to all the four proposed 

measures, and then summarizing and responding to measure-specific comments and 

describing our final policy. 

 Comment: Many commenters stated that ASCs only render the facility for 

ophthalmologists to perform cataract surgery and that follow-up visits, post-operative 

visual assessments and tracking of complications are performed at the ophthalmologists’ 

offices. Likewise, physicians perform colonoscopies at ASCs, but follow-up 

colonoscopy intervals are determined and documented by the physician in medical 

records kept in the physicians’ offices. Commenters noted that ASCs do not have long 

term relationships with patients and Federal regulations do not permit ASCs to provide 

postoperative follow-up care; therefore, the patient would not visit the ASC, but rather 

another site, for post-operative care and identification of complications. Many 

commenters perceived the four proposed chart-abstracted measures as “Clinician Office” 

setting measures designed to measure ophthalmologist and other physician performance 

and not ASC performance. Commenters gave as examples ophthalmologists who assess 

post-operative visual function and patient outcomes, and determine whether additional 

surgical procedures are necessary, and physicians who receive pathology reports and 

determine the colonoscopy intervals for their patients. Therefore, commenters believed 
985 

these four measures are better suited as Physician Quality Reporting System (PQRS) 

measures. Commenters considered the measures as duplicative of the PQRS measures. 

 Some commenters expressed concerns that the measures are neither 

NQF-endorsed nor field tested for the facility setting. Other commenters stated that CMS 

must re-specify, test, and obtain NQF endorsement of these measures at the facility level 

of analysis before they can be adopted for the ASCQR Program. 

 Some commenters believed that the four proposed measures require ASCs to 

expend resources engaged in quality reporting activities that would have no direct impact 

on facility performance improvement efforts. 

 Response: As noted above, 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. As 

stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43661 through 43664), we 

believe these measures are appropriate for measuring the quality of care in the ASC 

setting. Further, the three measures that we are finalizing (as discussed below) are NQFendorsed for the “Ambulatory Care: Ambulatory Surgery Center (ASC)” setting. 

Therefore, we respectfully disagree with the commenters and continue to believe that 

these quality measures are appropriate for the ASC setting. With respect to the 

commenters who stated that the proposed chart-abstracted measures should be respecified and field-tested, we note that all three measures that we are finalizing (as 
986 

discussed below) were specified for the ASC setting and field tested at the ASC facility 

setting level by the measure steward. 

Further, we do not believe these measures are duplicative of PQRS measures 

because even though the measure indicators are the same, the level of analysis (facility 

versus physician) is different. The measure indicators for the ASCQR Program will 

reflect the HCPCS codes for the ASC facility level of analysis. As we stated in the 

CY 2013 OPPS/ASC final rule with comment period (77 FR 68493), in implementing the 

ASCQR Program, one of our principles is that measures should be aligned across 

Medicare and Medicaid public reporting and incentive payment systems to promote 

coordinated efforts to improve quality. We hope to set new milestones in the intrinsic 

coordination and collaboration of hand-off care across outpatient providers and suppliers, 

as reflected in these measures. 

We also do not agree that the four proposed measures would have no direct 

impact on facility performance improvement efforts. Rather, we believe that these 

measures promote accountability for the care provided to Medicare beneficiaries, 

improve the coordination and collaboration of services, reduce fragmented care, 

encourage redesigned care processes for high quality and efficient service delivery, and 

incentivize higher value care. 

 ASCs provide care without the higher costs associated with hospitalization. More 

and more procedures are done safely and effectively in an ambulatory care setting and we 

expect such trend will continue. Hence, we believe that assessing care coordination is a 

very important aspect of evaluating the overall quality of the care furnished by ASCs. 
987 

We stress that real clinical integration is evidenced by effective patient coordination of 

care across health care settings, providers, and suppliers and is best shown when there is 

a structure in place that is patient-focused and where clinicians collaborate on best 

practices in an effort to furnish higher quality care that they likely would not achieve if 

working independently. 

 As discussed in detail in sections XIII.E.3., 4., and 5. of this final rule with 

comment period and below, we are finalizing the same chart-abstracted measures for the 

Hospital OQR Program as we are for the ASCQR Program for the CY 2016 payment 

determination and subsequent years: (1) Endoscopy/Polyp Surveillance: Appropriate 

Follow-up Interval for Normal Colonoscopy in Average Risk Patients; 

(2) Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of 

Adenomatous Polyps – Avoidance of Inappropriate Use; and (3) Cataracts – 

Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery. 

The adoption of these measures in the hospital outpatient and ASC settings will further 

align measures across outpatient and ambulatory settings which furnish many similar 

services to beneficiaries. The availability of identical outcome measures at HOPDs and 

ASCs enable beneficiaries to compare facilities and make informed decisions. 

 Comment: Some commenters believed that obtaining patient data from the 

ophthalmologist’s or other physician’s office is not always feasible. Commenters also 

noted that the initial and subsequent surgical cataract and colonoscopy procedures due to 

complications may occur at two different ASCs. In addition, commenters also believed 
988 

that obtaining patient information from the ophthalmologist’s or other physician’s office 

would be an intrusive violation of patient privacy. 

Response: Our overarching goal for adopting the three proposed measures is to 

encourage the coordination of care across health care settings, providers, and suppliers as 

frequently as possible. We would like to see ASCs, ophthalmologists, and other 

physicians actively and routinely engaged in exchanging information to better 

communicate and coordinate the care of patients. 

We note that ASCs have professional and commercial relationships with the 

ophthalmologists or other physicians that perform procedures and are paid for services 

rendered at their facilities. As such, ASCs have the ability to develop the means to obtain 

follow-up information that include, but are not limited to, inclusion of contractual 

requirements to supply such information to the ASC. The availability of follow-up 

information from physicians performing procedures at an ASC is further discussed in 

section XVI.D.5.c. of this final rule with comment period 

 Regarding the issue of patient privacy, we note that ASCs and referring 

physicians are generally subject to the HIPAA Privacy, Security, and Breach Notification 

Rules, and are required to protect the privacy and confidentiality of their patients’ 

protected health information as required by those rules. We expect that ASCs and 

physicians would adhere to any applicable requirements in providing and obtaining this 

information and would not violate patient privacy. 
989 

 We believe that our implementation strategy for these measures will minimize 

collection and reporting burden, as discussed in section XV.D.5.c. of this final rule with 

comment period. 

 Comment: Many commenters expressed concern that it is extremely burdensome 

for ASCs, which do not widely use EHRs, to retrieve outcome data from ophthalmologist 

and other physician offices. 

 Response: We appreciate commenters’ concerns that it could be difficult or 

burdensome for ASCs to retrieve from physician offices the data they will need for the 

chart-abstracted measures. We believe such problems are more likely to occur in the 

early phases of establishing these measures, when ASCs and physicians have not yet set 

up effective infrastructures to routinely exchange information. In order to accommodate 

these concerns, we have taken steps that we believe should alleviate some of this burden. 

The Web-based collection strategy we are finalizing for the measures and subsequent 

release of specifications and implementation guidance in the ASCQR Specifications 

Manual will address some of the concerns about feasibility of data collection raised by 

the commenters. To further reduce burden, we are finalizing a sampling methodology for 

ASCs. We believe that this should significantly reduce burden for the three 

chart-abstracted measures that we are finalizing. We discuss these steps designed to 

reduce burden in more detail in section XV.D.5.c. of this final rule with comment period. 

 We recognize that EHR technology currently may not be widely used in ASCs. 

However, with the ongoing progress of EHR technology in healthcare delivery, we 

expect more ASCs will have EHR technology at their disposal in the future. As 
990 

mentioned previously, we will be conducting an environmental scan to assess EHR 

implementation in ASCs and readiness for electronic reporting in the future. We will 

take these factors into account before including an EHR-based reporting mechanism for 

the ASCQR Program. 

 We received specific comments on the individual proposed measures and they are 

discussed below in the sections addressing each of the proposed measures. 

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

 Therefore, for the CY 2016 payment determination and subsequent years, we 

proposed to adopt the Complications within 30 Days Following Cataract Surgery 

Requiring Additional Surgical Procedures 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 

 

11 National 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+followin

g+cataract+surgery. 
991 

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 preoperative ocular conditions impacting the surgical complication rate.” This measure 

excludes patients 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 
992 

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 invited public comment on this proposal. 

 Comment: Many commenters believed that this measure is not a good measure to 

include in the ASCQR Program measure set because complications from cataract surgery 

are rare, data collection would be very burdensome, and the volume of cataract surgery 

performed at ASCs is huge. Commenters added that this measure requires very detailed 

information about not only specific complications that may have occurred, but also data 
993 

on any additional follow-up surgical procedures to accurately report data for this 

measure. A few commenters stated that subsequent surgical procedures due to 

complications from the previous cataract surgery may not occur at the same ASC. ASCs 

also would need to determine if a patient who experienced any of the above-listed 

complications then underwent any of a list of 39 specified operative procedures 

(identified by a list of CPT codes) within the 30-day period following the index surgery. 

 Response: As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43661) 

and in this final rule with comment period, a large number of complications from cataract 

surgery occur even though the percentage of complications from cataract surgery is 

small. Therefore, we believe that complications following cataract surgery which would 

require additional surgical procedures are important to measure. However, after 

consideration of the public comments we received, we agree that this measure as 

specified imposes a significant burden on an ASC to collect the required data that far 

exceeds the burden we believe accompanies the other chart-abstracted measures that we 

proposed in the CY 2014 OPPS/ASC proposed rule. We have emphasized that we 

believe that care coordination between ASCs and practitioners is an essential element of 

appropriate, high quality care, and that the element of coordination cannot be measured 

using a claims-based or other form of measure. 

 Nonetheless, this is one instance in which we believe the burden involved in 

collecting the data required for chart-abstraction far outweighs the benefits in measuring 

care coordination. That is because an ASC would be required to acquire far more 

information than the more fundamental follow up information that accompanies the other 
994 

measures (such as the patient survey data for ASC-11, which basically involves 

collecting information on a patient’s perceptions about visual improvement following 

cataract surgery). In contrast, there is far more information necessary for this measure 

and the nature of that information is more detailed, complicated and very likely much 

more difficult for an ASC to acquire. We agree with the commenters that this measure 

requires very detailed information about not only specific complications that may have 

occurred, but also data on specific additional follow up surgical procedures to accurately 

report data for this measure. 

 Because we continue to believe this is an important area to measure quality of 

care, we plan to explore ways to collect these data, including the potential development 

of a claims-based risk-adjusted outcome measure of cataract complications, which would 

address the same quality issues as this measure, but minimize the burden associated with 

measurement to the greatest degree possible. Further, we anticipate that the proposed 

new measure would be applicable to the ASC and HOPD settings. For these reasons, we 

have decided not to finalize this particular measure of cataract surgery complications. 

 After consideration of the public comments we received, we are not finalizing this 

measure for the ASCQR Program for the CY 2016 payment determination and 

subsequent years.
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b. Endoscopy/Polyp 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 intervals12 for the average risk population

(http://www.cancer.org/cancer/colonandrectumcancer/moreinformation/colonandrectumc

ancerearlydetection/colorectal-cancer-early-detection-acs-recommendations). 

 For the CY 2016 payment determination and subsequent years, we proposed to 

adopt the Endoscopy/Polyp 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 a 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 

 

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.
996 

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 time-limited. 

 We invited public comment on this proposal. 

 Comment: One commenter asserted that the MAP’s “Support Direction,” 

recommendation means the measure was not, in the MAP’s opinion, ready for 

implementation in the ASCQR Program. Commenters stated that CMS should only 

finalize measures fully supported by the MAP. 

 Response: We take into account all MAP input when deciding on which 

measures to adopt for the program. We note that in addition to MAP input, we also 

consider feedback that we receive from many other stakeholders such as suppliers, 

specialty societies, measure developers, patients, and their caregivers during the 

rulemaking public comment period in evaluating whether to finalize measures. We 

continuously review and revise the measures in our programs to ensure that only the 
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highest caliber measures are selected. We stress, however, that we are only required to 

consider the input provided by the MAP. The ultimate decision on whether to include a 

measure for the program rests solely with the Secretary. 

 We believe that this measure addresses a critical area of colonoscopies being 

performed too frequently, which may increase patients’ exposure to procedural harm. 

The procedure is performed often at ASCs; therefore, we believe the measure is 

important for the ASCQR Program. Further, we believe that the Web-based collection 

strategy we are finalizing for the measures along with the release of specifications and 

implementation guidance in the Specifications Manual will address concerns about 

feasibility of data collection raised by the MAP. 

 After consideration of the public comments we received, we are adopting this 

measure for the CY 2016 payment determination and subsequent years as proposed. 

c. Endoscopy/Polyp 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/colonandrectumc

ancerearlydetection/colorectal-cancer-early-detection-acs-recommendations). 
998 

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.13

 For the CY 2016 payment determination and subsequent years, we proposed to 

adopt the Endoscopy/Polyp 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 follow-up 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 

 

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.
999 

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. While this measure had been endorsed by the NQF for a limited time period, 

recent communications with NQF have revealed that this measure is now fully endorsed; 

it is expected that this status update will be reflected on the NQF Web site in the near 

future. 

 We invited public comment on this proposal. 

 Comment: Some commenters asserted that the MAP’s “Support Direction” 

recommendation means the measure is not, in the MAP’s opinion, ready for 

implementation in the ASCQR Program. Commenters stated that CMS should only 

finalize measures fully supported by the MAP. 

 Response: We refer readers to our response above to the same MAP 

recommendation concerns expressed with respect to the Endoscopy/Polyp Surveillance: 

Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF 

#0658) measure. We believe that Endoscopy/Polyp Surveillance: Colonoscopy Interval 
1000 

for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 

measure addresses a critical area of timely follow-up colonoscopy to detect important 

colonic lesions effectively in reducing subsequent colorectal cancer incidence, after 

newly diagnosed adenomatous polyps have been removed by colonoscopy. Because 

colonoscopies are performed so often at ASCs, the measure is important for the ASCQR 

Program. Further, we believe that the Web-based collection strategy we are finalizing for 

the measures and subsequent release of specifications and implementation guidance in 

the Specifications Manual will address concerns about feasibility of data collection raised 

by the MAP. 

 After consideration of the public comments we received, we are adopting this 

measure for the CY 2016 payment determination and subsequent years as proposed. 

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 

intraocular lens (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 to 98 percent of surgeries in eyes 

without comorbid conditions. However, with an annual volume of 2.8 million cataract 
1001 

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 proposed 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 post-operative 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 on the Web site at: 

http://www.qualityforum.org/QPS/1536. Additional information for the measure 

specifications can be found in the NQF Measure Evaluation available on the Web site 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.” It also meets the consensus 

 

14 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at 

http://www.qualitymeasures.ahrq.gov/content.aspx?id=27982. 
1002 

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 invited public comment on this proposal. 

 Comment: One commenter stated that the measure requires patients to complete a 

pre-operative and a post-operative visual function questionnaire. The follow-up survey 

may occur in intervals of one day, two weeks or one month post-op. The pre- and 

post-surgery surveys are conducted in the physician office and they are compared for 

analysis. The commenter noted it takes a third-party administrator to process the 

questionnaire in order to prevent the introduction of bias and this administrative cost 

would impose a new burden for ASCs. 

 Response: This measure collects standard clinical follow-up information. We 

would expect that physicians responsible for post-operative cataract surgery care to have 

standard operating procedures in place under which physicians would conduct these 

visual assessments. We do not believe a third party administrator to process survey 

information for ASC interpretation is necessary because we expect that ASCs would 

obtain the outcome information necessary for this measure from the physician that 

performed the surgery (as discussed in section XVI.D.5.c. of this final rule with comment 

period, all physicians involved in co-management of a cataract surgery patient should 

have these results). We believe that no bias would be introduced or associated 
1003 

administrative cost imposed because outcome interpretation would not be done at the 

ASC. Finally, we believe that including this measure in the ASCQR Program is 

important because, as the MAP stated and we believe, this measure falls under a category 

of measures inadequately addressed in the ASCQR Program measure set, and the 

measure serves to drive coordination of care. 

 In response to the comments we have received on the burden associated with the 

chart-abstracted measures we are finalizing, we have modified our implementation 

strategy in a manner that we believe will significantly minimize collection and reporting 

burden. We detail these procedures for and further discuss the issue of obtaining data for 

this measure in section XV.D.5.c. of this final rule with comment period. 

 After consideration of the public comments we received, we are adopting this 

measure for CY 2016 payment determination and subsequent years as proposed. 

 In summary, we are finalizing our proposals for the CY 2016 payment 

determination and subsequent years to adopt three chart-abstracted measures: 

(1) Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal 

Colonoscopy in Average Risk Patients; (2) Endoscopy/Polyp Surveillance: Colonoscopy 

Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate 

Use; and (3) Cataracts: Improvement in Patient’s Visual Function within 90 Days 

Following Cataract Surgery. We will collect aggregate data (numerators, denominators, 

and exclusions) on all ASC patients for these three finalized chart-abstracted measures 

via an online Web-based tool that will be made available to ASCs via the QualityNet 
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Web site. Data submission requirements for these three measures are discussed in section 

XV.D.5.c. of this final rule with comment period. 

NQF# Newly Finalized ASCQR Measures for the CY 2016 Payment 

Determination and Subsequent Years 

0658 ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for 

Normal Colonoscopy in Average Risk Patient 

0659 ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients 

with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 

1536 ASC-11: Cataracts- Improvement in Patient’s Visual Function within 90 

days Following Cataract Surgery 

 The finalized measure set (a total of 11 measures) for the ASCQR Program for the 

CY 2016 payment determination and subsequent years is listed in the table below. 

ASC Program Measure Set for the CY 2016 Payment Determination and 

Subsequent Years 

 Measure Name 

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%2FP

age%2FQnetTier2&cid=1228772475754

ASC-8 Influenza Vaccination Coverage among Healthcare Personnel *** 

ASC-9 Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal 

Colonoscopy in Average Risk Patients *** 

ASC-10 Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a 

History of Adenomatous Polyps-Avoidance of Inappropriate Use*** 
1005 

ASC Program Measure Set for the CY 2016 Payment Determination and 

Subsequent Years 

 Measure Name 

ASC-11 Cataracts: Improvement in Patient’s Visual Function within 90 Days 

Following Cataract Surgery*** 

*New measure for the CY 2014 payment determination and subsequent years. 

** New measure for the CY 2015 payment determination and subsequent years. 

***New measure for the CY 2016 payment determination and subsequent years. 

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 invited public comment on these measurement topics. 

 Comment: Commenters presented the following suggestions for future measure 

topics: 

● Equipment Reprocessing; 

● Sedation Safety; 

● Post-Discharge Emergency Department Visit within 72 Hours of ASC 

Procedure; 

● Hospital admission following discharge from an ASC; 

● Normothermia; 

● Venous Thromboembolism; and 

● Surgical Site Infection. 
1006 

 Response: We thank the commenters for their feedback and will take the 

suggestions into considerations for future measure topics for the ASCQR Program. 

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), 

including the subregulatory process for making updates to the adopted measures. We 

believe that a measure can be updated through this subregulatory process provided it is a 

nonsubstantive change. We 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. We believe that non-substantive changes may 

include updates to any measure 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. We also will post the updates on the QualityNet Web site at: 

https://www.QualityNet.org. We will provide sufficient lead time for ASCs to implement 

the changes where changes to the data collection systems would be necessary. We 

generally release the 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-10, CPT, and HCPCS codes, and at least 
1007 

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. Examples of 

changes that we might generally 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). 

Again, we make the determination of what constitutes a substantive versus a 

nonsubstantive change on a case-by-case basis. 

 We believe that this policy adequately balances our need to incorporate 

nonsubstantive updates to ASCQR Program measures in the most expeditious manner 

possible, while preserving the public’s ability to comment on updates that so 

fundamentally change a 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 nonsubstantive apply to all measures in 

the ASCQR Program. 

 As noted above, we finalized our proposal to follow the same process for updating 

the ASCQR Program measures that we adopted for the Hospital OQR Program measures 

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74513 through 

74514). We also provided additional clarification regarding the ASCQR Program policy 

in the context of the previously finalized Hospital OQR program policy in the CY 2013 
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OPPS/ASC final rule with comment period. 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43664), we did not propose any 

changes to these policies. 

 Comment: One commenter noted that the conversion of a measure to use 

ICD-10-CM/PCS should be considered as a substantive change that follows current 

proposed rulemaking processes. The commenter requested clarification regarding the 

publication, preview, and comment period for ICD-9-CM to ICD-10-CM/PCS mappings 

for all value sets for diagnoses and procedures used by measures specified in this rule. 

 Response: None of the current ASCQR measures utilize ICD-9 codes to define 

numerators, denominators, exclusions, and other data elements for the measures. To the 

extent that we adopt any future ASCQR measures that utilize ICD-9 codes in measure 

data elements, we will crosswalk those ICD-9 codes to ICD-10 prior to including the 

measures in the ASCQR Specifications Manual to inform data collection. We note that 

we do not consider updating codes from ICD-9 to ICD-10 a substantive change to a 

measure because doing so does not change the intent or meaning of the measure. 
1009 

 Comment: Some commenters stated that ASCs should be allowed to review their 

data. These commenters also believed that ASCs should have the ability to correct any 

errors prior to the data being made publicly available because a few errors could cause 

extreme differences in actual versus publicly reported rates. 

 Response: We thank the commenters for raising these issues. In the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74514 through 74515), we finalized a 

policy to make data that an ASC submitted for the ASCQR Program publicly available on 

a CMS Web site after providing an ASC an opportunity to review the data to be made 

public. We will address processes for public reporting in further detail in future 

rulemaking. 

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. 
1010 

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 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 Each Payment Determination Year 

 The national unadjusted payment rates for many services paid under the ASC 

payment system equal the product of the ASC conversion factor and the scaled relative 

payment weight for the APC to which the service is assigned. Currently, the ASC 

conversion factor is equal to the 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 
1011 

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 final rule with comment 

period. 

 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 final rule 

with comment period, 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 
1012 

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 final rule with comment period) 

are paid at the lesser of the MPFS non-facility 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 
1013 

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. 
1014 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43664 through 43665), we did 

not propose any changes to these policies. 

D. Administrative Requirements

1. 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 the security 

function of this role and aligns terminology for the ASCQR Program with the 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. Therefore, 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 
1015 

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 the Specifications Manual 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 required 

ASCs to submit quality measure data for two quality measures (safe surgery checklist use 

and ASC facility volume data on selected ASC surgical procedures) collected from 

services provided during the January 1, 2012 to December 31, 2012 timeframe 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 

required that ASCs identify and register a QualityNet security administrator who 

followed the registration process located on the QualityNet Web site and submitted the 

information as specified on this site. Because submission of these data was not required 

until the July 1, 2013 to August 15, 2013 time period, we required 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 was no later than August 15, 2013. 

ASCs could have had a QualityNet security administrator prior to this date, but it was not 

required. 

 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 
1016 

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. We did 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 noted 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. Requirements for the CY 2016 Payment Determination and Subsequent Years 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43666), for the CY 2016 

payment determination and subsequent years, we proposed 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 the current user accounts lapsed or were 

discontinued. 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 
1017 

security purposes and a current user account is required for submitting data. Therefore, 

an ASC would need to acquire a QualityNet security administrator only if no current 

QualityNet account exists 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 is 

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, 
1018 

Credential and Access Management (FICAM) Roadmap and Implementation Guidance 

(version 2, 12/08/2011). 

 We invited public comment on these proposals. 

 We did not receive any public comments regarding our proposals on QualityNet 

account and security administrator requirements under the ASCQR Program. Therefore, 

we are finalizing our proposals that ASCs will 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 and that ASCs will be 

required to have an active account by any specified data entry deadline in order to submit 

required data for the CY 2016 payment determination and subsequent years. 

2. 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 
1019 

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. 

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. 

 In the FY 2013 IPPS/LTCH PPS rulemaking (77 FR 28103, 53639), 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 
1020 

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 is located on the 

QualityNet Web site. 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 
1021 

would 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 clarified in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43667) that these deadlines mean up to and including August 31 in each of these 

respective years. 

 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. Requirements for the CY 2016 Payment Determination and Subsequent Years 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43667), for the CY 2016 

payment determination and subsequent years, we proposed that an ASC can withdraw 
1022 

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. Therefore, 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 proposed 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. Therefore, 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 invited public comment on these proposals. 

 We did not receive any comments regarding participation status under the 

ASCQR Program and we are finalizing our proposals without modification. Specifically, 

we are finalizing that, for the CY 2016 payment determination and subsequent years, an 

ASC can withdraw from the ASCQR Program at any time up to and including August 31 
1023 

of the year preceding a payment determination, and all ASCQR 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. 

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 claims-based 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 released March 16, 2012 

(http://www.cms.gov/Medicare/Medicare-Fee-for-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 Specifications 

Manual located on the QualityNet Web site (https://www.QualityNet.org). 
1024 

 In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53640), we adopted a policy 

that only claims for services furnished between October 1, 2012 and December 31, 2012 

paid by the administrative contractor by April 30, 2013 would be included in the data 

used for the CY 2014 payment determination. We believe that this claim paid date 

allowed 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. Only 

claims for services furnished in each calendar year paid by the administrative contractor 

by April 30 of the following year of the ending data collection time period would be 

included in the data used for the payment determination year. Therefore, for example, 

only claims for services furnished in CY 2013 (January 1, 2013 through 

December 31, 2013) paid by the administrative contractor by April 30, 2014 would be 

included in the data used for the CY 2015 payment determination. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43667 through 43668), we did 

not propose any changes to these policies. 
1025 

4. 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 
1026 

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. Requirements for the CY 2016 Payment Determination and Subsequent Years 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43668 through 43669), for the 

CY 2016 payment determination and subsequent years, we proposed 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 re-submit claims for the sole purpose of adding QDCs 

(such claims are rejected by administrative contractors as duplicate claims), we believe 
1027 

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. Therefore, for the CY 2016 

payment determination and subsequent years, we proposed 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 

required to participate in the ASCQR Program for the CY 2016 payment determination 
1028 

(which would use data submitted on claims during the January 1, 2014 to 

December 31, 2014 calendar year). We proposed 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 invited public comment on this proposal. 

 Comment: Many commenters supported CMS’ proposal that ASCs must have a 

minimum of 240 Medicare claims (primary plus secondary payer) or otherwise be exempt 

from ASCQR Program requirements. 

 Response: We thank the commenters for their support. We agree that a minimum 

case threshold for program participation to alleviate burden on small facilities and for 

those with few Medicare claims is appropriate. 

 Comment: Many commenters stated that while they appreciated that a 

claims-based reporting mechanism can lessen the burden of data collection and reporting, 

they were concerned that the current measures using the QDC reporting mechanism were 

not specified, tested, or NQF-endorsed for claims-based reporting. 

 Response: We thank the commenters for their understanding of how the use of 

QDCs can limit burden and that this is an important consideration. Regarding the use of 
1029 

QDCs submitted on claims for ASC-1 through ASC-5, the NQF has endorsed ASC-1 

through ASC-5 as appropriate for the ASC setting and data collection of case information 

has been tested in this setting. Further, for all of these measures which count rare, 

adverse events, it is expected that the number of cases for any ASC would be very small. 

Therefore, while ASCs would garner the information from patient records, the QDC 

reporting mechanism is the way ASCs report the collected data. The measures using the 

QDCs for reporting and the QDCs are specified and contained in the Specifications 

Manual which is available on the QualityNet Web site. Based upon our initial data 

collection for encounters occurring during October 1, 2012 to December 31, 2012, the 

vast majority of ASCs are able to successfully submit data for these measures using 

QDCs. In addition, QDCs are successfully used for data collection for other CMS quality 

programs, including the PQRS and e-Prescribing Incentive Program. Therefore, we do 

not see a need to also test the ability of ASCs to submit data for these measures via QDCs 

placed on Medicare claims. 

Comment: Several commenters suggested that measure-level exemptions for 

ASC-5, Prophylactic Intravenous (IV) Antibiotic Timing would be appropriate. These 

commenters argued that single-specialty ASCs that provide gastrointestinal endoscopies 

or ophthalmic procedures do not administer IV prophylaxis and that not having an 

exemption method created undue burden. Suggested exemption methods included an 

attestation form or the development of a QDC indicating non-use. 

 Response: We thank the commenters for these ideas and agree that single 

specialty ASCs would rarely, if at all, use IV prophylaxis. We have investigated using 
1030 

administrative claims data as a means to exclude ASCs from having to report data for this 

measure based on procedures billed as well as examined QDC-data reported to date. 

Unfortunately, we have not yet been able to identify a method to exclude ASCs based on 

these data and are reluctant to allow a blanket exemption from reporting measure data 

based upon the completion of a form or one-time reporting of a QDC without any ability 

to assess the veracity of the basis for exemption. At issue is a means to independently 

verify that an ASC does not ever administer IV prophylaxis. We remain open to various 

means of reducing burden, including the potential use of measure-level exemptions if an 

evidence-based solution can be developed. However, we note that this particular measure 

does not place any more burden on ASCs compared to any of the other finalized 

measures where data are reported via QDCs because all of the current ASCQR Program 

measures reported using QDCs are expected to have low numbers of events. 

 Comment: Some commenters agreed with the proposal to have a minimum case 

volume, but indicated that it was not clear how the 240-claim threshold correlates to the 

10 percent of ASCs submitting the lowest volume of Medicare claims. These 

commenters’ review of the CMS Limited Data Set file accompanying the CY 2014 

OPPS/ASC proposed rule suggested the 10 percent target would be reached with a lower 

claim threshold. Some commenters agreed that implementation of a minimum threshold 

policy was important, but expressed concern that some ASCs may “fall in and out” of 

being required to participate and encouraged CMS to issue annual reminders of this 

policy. Some commenters also believed that any ASC eligible for the exemption that 

wishes to report for reasons other than receiving a payment should be able to do so. 
1031 

 Response: We thank these commenters for supporting our proposal while 

requesting clarification of the basis for the selected threshold value. In selecting the 

240-claim threshold, we utilized the October 1, 2012 to December 31, 2012 claims data 

submitted for the CY 2014 payment determination. Based upon this analysis, 

approximately 10 percent of ASCs fell below the 60 claims per quarter, which we 

extrapolated to 240 claims per year threshold. We will continue to monitor these data 

and, if adjustment in the claims volume threshold appears necessary, we will make 

proposals in future rulemaking. 

 Regarding ASCs that may have claims volume such that they would be required 

to participate one year and not the next, we would encourage ASCs to monitor their 

claims volume via CMS-supplied reports. We agree that annual reminders of the policy 

would be useful and intend to issue such reminders via listserv and postings on the 

QualityNet Web site. 

 Regarding the ability of an ASC eligible for the exemption that wished to report 

data, though not being required to do so for ASCQR Program purposes, we did not make 

any proposals that would prohibit ASCs from reporting data. Therefore, we clarify here 

that, if any Medicare-certified ASCs wish to report data under the ASCQR Program, they 

may do so, however, they must follow all program requirements for submitting data and 

any data reported could be made publicly available unless the ASC withdraws using the 

process outlined in section XV.D.2.a. of this final rule with comment period. We clarify 

here that ASCs that are exempt from all requirements due to low Medicare case volume 
1032 

would not be subject to a reduction in their annual payment update if they voluntarily 

report data. 

 After consideration of the public comments we received, we are finalizing our 

proposals without modification. Specifically, for the CY 2016 payment determination 

and subsequent years, we are finalizing our proposal that the minimum threshold for 

successful reporting be that at least 50 percent of claims meeting measure specifications 

contain QDCs. We also are finalizing that an ASC must have a minimum case volume of 

240 Medicare claims (primary plus secondary payer) per year (which is an average of 60 

per quarter) to be required to participate in the ASCQR Program. ASCs that have fewer 

than 240 Medicare claims per year during a reporting period for a payment determination 

year will not be required to participate in the ASCQR Program for the subsequent 

reporting period for that subsequent payment determination year. 

5. 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. 
1033 

b. Requirements for the CY 2016 Payment Determination and Subsequent Years for 

Measures Currently Finalized 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), for the CY 2016 

payment determination and subsequent years, we proposed 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. Therefore, 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 proposed 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 
1034 

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 31, 2014. (In the proposed rule (78 FR 43669), although we stated that data 

collection time periods would be for services furnished during the calendar year two 

years prior to the payment determination year, we inadvertently stated that the time 

period for the CY 2016 payment determination was “January 1, 2014 to 

December 1, 2014.”) 

 We invited public comment on these proposals. 

 Comment: Several commenters agreed that moving the data collection period 

ahead one year and expanding the data submission timeframe to begin January 1 through 

August 15 for the CY 2016 payment determination and subsequent years rather than 

July 1 through August 15 as finalized previously for the CY 2015 payment determination 

are appropriate and beneficial changes for the Safe Surgery Checklist Use and ASC 

Facility Volume Data on Selected ASC Surgical Procedures measures. Some of these 

commenters cautioned that, while they supported the shifting of the data collection time 

period, they believed the alignment will result in a significant amount of confusion and 

that extensive educational outreach would be necessary. 

 Response: We thank the commenters for their support of our proposals; we agree 

that aligning data collection periods and data submission time frames for these measures 

across payment determination years are appropriate and beneficial changes for the 

ASCQR Program. We appreciate the cautioning of possible confusion with the data 
1035 

collection timeframes. We believe that, since there will be a year of not having to collect 

these data, there will be sufficient time to provide educational outreach on this matter. 

 After consideration of the public comments we received, we are finalizing our 

proposals regarding data collection and submission requirements for the Safe Surgery 

Checklist Use and ASC Facility Volume Data on Selected ASC Surgical Procedures 

measures for the CY 2016 payment determination and subsequent years. Specifically, for 

these measures for which data will be submitted via an online data submission tool 

available on http://www.qualitynet.org, we are finalizing 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. These changes 

provide a longer timeframe for allowing data submission for these measures compared to 

the CY 2015 payment determination, align the data collection time periods for the 

claims-based and Web-based measures, and result in data not being 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 measures. No data 

will 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 measures because the CY 2015 payment determination will use data from 

services performed in the January 1, 2012 to December 31, 2012 time period and the 

CY 2016 payment determination will use data from services performed in 

January 1, 2014 to December 31, 2014. 
1036 

c. Requirements for the CY 2016 Payment Determination and Subsequent Years for New 

Measures with Data Submission via a CMS Web-Based Tool 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), we proposed to adopt 

four additional chart-abstracted measures for the ASCQR Program and proposed 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/Polyp Surveillance: 

Appropriate follow-up interval for normal colonoscopy in average risk patients; 

(3) Endoscopy/Polyp 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 final 

rule with comment period. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), we wished 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 structure15), not all 

quality measures where data are submitted via a Web-based tool on a CMS Web site are 

 

15 Maintz, J. Defining and Classifying Clinical Indicators for Quality Improvement, Inter J Quality Health 

Care (2003) 15(6), 523-530. 
1037 

structural measures. For example, the four proposed new measures proposed are not 

structural measures. Therefore, we have refined our terminology and now refer to the 

mode of data submission, Web-based, rather than the type of measure. 

 We proposed that data collection and reporting for these measures would begin 

with the CY 2016 payment determination. 

 In addition, we proposed for these measures, and any future measures for the 

ASCQR Program where data are submitted via 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. 

 Therefore, 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. We stated 

that these proposals are in alignment with proposals in section XV.D.5. of the 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 the Web site at: http://www.qualitynet.org. 

 We invited public comment on these proposals. 
1038 

 Comment: Many commenters did not support collection of aggregate data for the 

four proposed measures because they did not support the addition of these measures to 

the ASCQR Program. 

 Response: We discuss the adoption of three of the four proposed new measures 

for the ASCQR Program in section XV.B.3. of this final rule with comment period. 

 Comment: Some commenters stated that the collection of follow-up data for the 

proposed measures would be burdensome because ASCs would have data related only to 

the procedures performed at the ASC and not for procedures performed off-site. Many 

commenters asserted that it is extremely burdensome to retrieve timely the data from the 

physician or ophthalmologist offices and such data would be difficult to validate. Other 

commenters stated that given the high volume of cataract surgery, it would be extremely 

burdensome to extract data from medical records. In addition, commenters noted that the 

initial and subsequent surgical cataract and colonoscopy procedures due to complications 

may occur at more than one facility. Some commenters strongly believed that the huge 

reporting burden from the four proposed chart-abstracted measures could be diminished 

if claims are used as the data source. 

 Response: We appreciate the commenters’ concerns and acknowledge that the 

adoption of the three new measures we are finalizing will result in some additional 

burden to ASCs. However, we do not believe that this will be an undue or 

insurmountable burden. Regarding the ability to obtain follow-up information, we 

believe that ASCs have professional and commercial relationships with the physicians 

that perform surgical procedures and are paid for those services rendered at their 
1039 

facilities. The newly adopted measures are concerned only with the procedures 

performed at the ASC. 

 For the three measures being adopted in this final rule with comment period, the 

physician performing and billing for the procedure would have or is expected to have the 

information necessary to report on the measure. For the Endoscopy/Polyp Surveillance: 

Appropriate Follow-up Interval for Normal Colonscopy in Average Risk Patient measure, 

standard medical practice is that the physician performing the procedure would make the 

determination of whether the results were normal and would make the appropriate 

recommendation that would be documented in the patient’s medical record. For the 

Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of 

Adenomatous Polyps – Avoidance of Inappropriate Use measure, the physician 

performing the procedure would have the information of whether a patient had a history 

of adenomatous polyps and for Medicare claims, this is reflected on the claim by 

including HCPCS code G0105 which indicates a colonoscopy on an individual at high 

risk. In the case of the Cataracts: Improvement in Patient’s Visual Function within 

90 Days Following Cataract Surgery measure, patients undergoing cataract surgery are 

often co-managed with preoperative care, intraoperative services, and post-operative care 

(90 days) stages identified by Medicare. Co-management of cataract care requires a 

written transfer agreement between the surgeon and receiving doctor(s) with all 

physicians involved retaining the results of the first post-operative visit as part of the 

patient’s medical record. 
1040 

 Although we believe this approach is reasonable and not unduly burdensome, 

after consideration of the many comments we received on this issue regarding the burden 

of collecting this information, in this final rule with comment period we are permitting 

ASCs to collect information on a sample of eligible patients, with minimal case number 

requirements, instead of requiring the collection of information on all eligible patients. 

Sampling is a process of selecting a representative part of a population in order to 

estimate the ASC’s performance, without collecting data for its entire population. In this 

way, using a statistically valid sample, an ASC can measure its performance in an 

effective and efficient manner. Sampling will reduce burden significantly for ASCs with 

high volume because the number of cases that must have data reported will be 

significantly reduced. We have provided the option of sampling in other quality 

reporting programs when we have determined that it would be appropriate, including the 

Hospital IQR and OQR Programs. As with our other quality reporting programs, 

sampling specifications for the new ASCQR Program quality measures, which describe 

how to obtain a statistically valid sample and the current sampling methodology and 

requirements for these measures, will be included in the ASCQR Specifications Manual, 

which will be made available on the QualityNet Web site in December 2013. We believe 

that the improved clinical patient outcomes that can result from these measures outweigh 

any remaining burden that ASCs may incur from data collection associated with them. 

 Regarding the use of claims data as the information source for the three measures 

being adopted, we agree that this data collection mechanism can be used to reduce 
1041 

burden. However, we are not aware of coding for claims payment that could be used to 

specify the new measures being adopted for the ASCQR Program. 

Comment: Several commenters expressed concern about the limited amount of 

time that ASCs would have to respond to and prepare for any new measures finalized in 

the rulemaking process. Because the CY 2014 OPPS/ASC final rule with comment 

period will likely be published in November 2013, ASCs would have only 2 months to 

become aware of and versed in the new quality measures finalized in the rule, to develop 

and implement the changes in daily processes and operational systems needed to collect 

the required data, and to initiate data collection making this timeline inadequate in length. 

These commenters believed that implementing a new measure is more challenging than 

revising an existing measure; as such, a minimum of 6 months of advance notice should 

be extended for any new measures. In addition, these commenters suggested that if any 

of the proposed measures are adopted in this rulemaking, the data collection period 

should be modified to January 1, 2015 through December 31, 2015 with data submission 

in 2016, for use toward the CY 2017 payment determination. 

 Response: We thank the commenters for their well-thought out suggestions 

regarding data collection, submission, and use for new measures. However, due to the 

importance of the new measures being finalized in this rulemaking, we believe the 

proposed timeframes for these activities are justifiable and adequate because, although 

the data would be collected for services furnished during the CY 2014 timeframe, data 

would not need to be submitted until 2015, providing additional time from finalization of 
1042 

this final rule with comment period to time when the data would actually have to be 

submitted. 

 After consideration of the public comments we received, we are finalizing our 

proposal without modification for data submission and timeframes on three new 

measures for the ASCQR Program being adopted in this final rule with comment period. 

The new measures we are adopting are: (1) Endoscopy/Polyp Surveillance: Appropriate 

follow-up interval for normal colonoscopy in average risk patients; (2) Endoscopy/Polyp 

Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – 

Avoidance of Inappropriate Use; and, (3) Cataracts: Improvement in Patient’s Visual 

Function within 90 Days Following Cataract Surgery. Specifically, we are finalizing that 

ASCs must submit aggregate data (numerators, denominators, and exclusions) for these 

three measures on all ASC patients and that these data will be collected via an online 

Web-based tool that would be made available to ASCs via the QualityNet Web site. 

However, as discussed above, we are permitting ASCs to collect information on a sample 

of eligible patients, with minimal case number requirements, instead of requiring the 

collection of information on all eligible patients. The sampling specifications for the new 

ASCQR Program quality measures will be included in the ASCQR Specifications 

Manual, which will be made available on the QualityNet Web site in December 2013. 

 We are also finalizing, as proposed without modification, that beginning with the 

CY 2016 payment determination (and for all subsequent payment determination years), 

the data collection time period will be the calendar year (January 1 to December 31) 2 

years prior to the affected payment determination year, and the data collected will be 
1043 

submitted during the time period of January 1 to August 15 in the year prior to the 

affected payment determination year. Therefore, for the CY 2016 payment 

determination, the data collection time period will be January 1, 2014 to 

December 31, 2014, and the data submission time period will be January 1, 2015 to 

August 15, 2015. 

6. 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, 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. Requirements for the CY 2016 Payment Determination 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we proposed to use the 

data submission and reporting standard procedures that have been set forth by CDC for 

NHSN participation in general and for submission of this measure to NHSN. We refer 

readers to the CDC’s NHSN Web site (for detailed procedures for enrollment 

(http://www.cdc.gov/nhsn/ambulatory-surgery/enroll.html), set-up 

(http://www.cdc.gov/nhsn/ambulatory-surgery/setup.html), and reporting 

(https://sdn.cdc.gov (data certificate installation is required to access this site)). We 
1044 

stated in the proposed rule that we believed 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. However, 

based on public comments we received, ASCs may not be as familiar with NHSN 

reporting as we previously believed. 

 We separately proposed that ASCs would have until August 15, 2015 to submit 

their 2014-2015 influenza season data (October 1, 2014 through March 31, 2015) to 

NHSN. We proposed 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 invited public comment on these proposals. 

 Comment: Several commenters protested that ASCs are entirely unfamiliar with 

NHSN. These commenters pointed out that, while a number of States have mandated 

NHSN reporting, many of those State requirements do not include ASCs and though 

some States mandate NHSN reporting for ASCs, the surgical procedures being monitored 

for reporting purposes are not often performed in the ASC setting. Thus, ASCs generally 

do not have data to report to NHSN. These commenters cautioned that CMS and CDC 

should plan to make significant investments of time, personnel, and other resources to 

support initial enrollment and reporting to ensure successful implementation of NHSN 
1045 

reporting by ASCs. These commenters also suggested that revisions in the CDC’s NHSN 

site to reduce confusion for ASCs, such as revising documentation to include ASCs, 

replace the term “hospital” with “facility”, simplifying set-up instructions, and 

continuance of the planned elimination of the digital certificate requirement for NHSN 

access could facilitate ASC participation. 

 Response: We thank the commenters for voicing these concerns and providing 

constructive suggestions. We note that CDC estimates that only 285 ASCs are currently 

enrolled and reporting in the NHSN. We agree that resources will be required to ensure 

successful implementation of ASC reporting to the NHSN to meet ASCQR Program 

requirements. CMS and CDC are working together in this endeavor and will be 

considering the comments received that are aimed at improving the NHSN site and will 

be implementing educational efforts for ASCs. 

 Because we believe CMS’ and CDC’s efforts will address many of the 

commenters’ concerns, we are finalizing our proposal to use the data submission and 

reporting standard procedures without modification; that is, to use those procedures that 

have been set forth by CDC for NHSN participation in general and for submission of this 

measure to NHSN. We believe ASCs have sufficient time to set up NHSN accounts and 

to become familiar with all reporting procedures to be able to successfully report data 

because we intend to propose a 2015 data submission deadline. 

 Comment: Several commenters supported CMS’ proposal of an August 15, 2015 

deadline as alignment of submission deadlines within the ASCQR Program was a 

sensible approach that would limit confusion. Some of these commenters noted that an 
1046 

earlier deadline served no useful ASCQR Program purpose. Other commenters 

supported an August 15, 2015 deadline for ASCs to submit their 2014-2015 influenza 

season data because, while this date is not consistent with the deadline for other quality 

reporting programs that enter data for this measure via NHSN, the ASCQR Program is 

already quite complex, featuring three different data submission methods for the 

CY 2016 payment determination. Given this complexity, a consistent data submission 

deadline could help minimize confusion across the NHSN and QualityNet data entry 

systems. 

 Several commenters disagreed with an August 15, 2015 data submission deadline 

for ASCs as it differed from the May 15th deadline proposed for two other CMS quality 

data reporting programs, the Hospital IQR and Hospital OQR Programs. Some of these 

commenters believed that providing ASCs with a later deadline would provide an unfair 

advantage because ASCs would have longer to submit their data. Other commenters 

believed that having a differing date for ASCs than other facilities would be confusing to 

ASCs, thereby, disadvantaging ASCs. 

 Response: We thank the commenters for their thoughts regarding an 

August 15, 2015 deadline for ASCs to submit their 2014-2015 influenza vaccination data 

(October 1, 2014 through March 31, 2015). We generally try, when feasible, to align 

requirements across quality reporting programs, but program requirements are tailored to 

individual quality reporting program needs. Due to issues raised by commenters 

regarding our proposed August 15, 2015 deadline, we are not finalizing a data submission 

deadline for 2014-2015 influenza vaccination and instead intend to issue proposals 
1047 

regarding a 2015 data submission deadline for this measure in the CY 2015 OPPS/ASC 

proposed rule. 

 After consideration of the public comments received, we are finalizing our 

proposal to use the data submission and reporting standard procedures set forth by CDC 

for NHSN participation for the ASCQR Program without modification. As stated above, 

we are not finalizing our proposal regarding an August 15, 2015 data submission deadline 

for ASC-8 due to concerns expressed by commenters. We intend to issue proposals 

regarding a 2015 data submission deadline for this measure in the CY 2015 OPPS/ASC 

proposed rule which is scheduled to be finalized in late CY 2014. 

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 
1048 

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. 
1049 

b. Additional Criterion for Extraordinary Circumstance Waivers or Extensions for 

CY 2014 and Subsequent Years 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we proposed 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 proposed 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 invited public comment on this proposal. 

 Comment: Several commenters supported and expressed their appreciation for 

CMS’ proposal to grant waivers or extensions for data submission requirements if we 

determine a systematic problem with any data collection system directly or indirectly 

affected the ability of ASCs to submit data. 

 Response: We thank the commenters for supporting our proposal. 

 After consideration of the public comments we received, we are finalizing our 

proposal without modification to grant waivers or extensions to ASCs for data 

submission requirements if we determine that a systematic problem with any part of our 

data collection system directly or indirectly affected the ability of ASCs to submit data. 
1050 

If we make the determination to grant a waiver or extension, we will communicate this 

decision through listserv notice and posting via our QualityNet Web site 

(https://www.qualitynet.org). 

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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we did not propose any 

changes to this informal reconsideration process. However, we clarified 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 
1051 

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. 

XVI. Final Rule: 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 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 be made only 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 
1052 

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. 

 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 
1053 

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. Regulatory Changes

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we proposed to modify 

the regulations so that all of the OPOs must meet two out of the three outcome measures 

to be recertified. We were concerned about the requirement to automatically decertify 

OPOs if they fail to meet all three of the outcome measures. We believed that the 

requirement that each OPO meet all three outcome measures as set forth in § 486.318 was 

unnecessarily stringent. For that reason, we proposed to modify the outcome measure 

requirement so that OPOs would be required to meet two of the three outcome measures. 

We noted that the majority of OPOs were meeting all three of the outcome measures. 

Based on our experience, we observed that many of the OPOs that were failing to meet 

all three outcome measures were meeting two of the three measures and were 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 

were performing satisfactorily and should not be decertified based solely on their failure 

to meet one outcome measure. This belief was based not only on our observation and 

monitoring of these OPOs’ performance, but also on some concerns with the outcome 

measures, which we discussed in detail in the proposed rule (78 FR 43671 through 

43672). 
1054 

 Specifically, we proposed 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. We also asked for public comments on any other 

potential empirically based outcome measures for OPOs that might be used in the future. 

Most of the commenters opposed this proposal. The commenters indicated that the 

proposal did not address the problems with the current outcome measures and 

recommended that CMS develop a different strategy for the upcoming recertification 

cycle. Some of the commenters expressed concerns about the outcome measures and 

requested additional changes so that an OPO could be recertified even if it failed to meet 

any of the outcome measures. A summary of the public comments and our responses 

follow. 

 Comment: Some commenters acknowledged the thought that CMS had put into 

the proposal and the challenges CMS would face in revising the outcome measures. 

Commenters also acknowledged that the proposal would have a beneficial effect on some 

of the OPOs that would otherwise be decertified under the current outcome measures 

requirement. 

 Response: We appreciate these comments. We believe that modifying the 

outcome measure requirement so that OPOs must now meet two out of the three outcome 

measures will benefit both the OPOs and the potential recipients on the waiting lists by 

avoiding the decertification of OPOs that are performing satisfactorily. 
1055 

 Comment: Other commenters indicated that the proposed revisions were 

insufficient to address their numerous concerns about problems that the commenters 

believed were inherently related to the existing outcome measures. 

 Response: As we noted in the proposed rule, we have received feedback from 

various members of the OPO community regarding these concerns, which are addressed 

in more detail below. We acknowledge that the provisions set forth in this final rule do 

not address all of the specific concerns raised by commenters. Despite the critical 

comments relating to the current measures, no commenters suggested any empirically 

based outcome measures that could be used in the future, except for a few commenters 

that suggested using the OPTN yield measure. However, other commenters were also 

critical of that measure. 

 OPOs perform an important role in the health care system, and we understand the 

challenge OPOs face in developing relationships with hospitals and health care 

professionals, as well as in obtaining consent from families to procure organs. However, 

Congress required the Secretary to create outcome and process performance measures to 

encourage OPOs to improve their performance. The OPO CfCs are designed to 

encourage OPOs to be more efficient in procuring organs in order to save more lives. We 

also note that the current outcome measures were largely based upon public comments 

we received to the OPO proposed rule (CMS-3064-P), and that many of the concerns 

relating to the outcome measures were not raised during prior rulemaking (71 FR 30999 

through 31005). We believe that the vast majority of the 58 OPOs will be able to meet 
1056 

two out of the three outcome measures. We also believe that the outcome measures 

continue to provide a fair basis for comparing OPOs’ performance. 

 Comment: Several commenters suggested that, instead of proposing a 

modification to the outcome measures requirement, CMS take a two-part approach 

concerning the outcome measures and recertification. First, the commenters suggested a 

revision to 42 CFR 486.312(c) to state that CMS “may” voluntarily not renew an OPO’s 

agreement if it failed to meet the performance measures. The commenters suggested that 

the CfCs be modified so that CMS has the discretion to renew the agreement despite an 

OPO’s failure to meet all three of the outcome measures, essentially changing the 

regulatory language from “will not voluntarily renew” the agreement with an OPO to 

“may renew” the agreement. Second, the commenters recommended that CMS be 

allowed to work with OPOs that failed to meet the performance measures to develop 

corrective action plans, or a similar improvement process, comparable to the process 

currently used for transplant centers. 

 Response: We appreciate the concerns expressed by the commenters. However, 

we believe that the commenters’ recommended approach would be inconsistent with 

section 1138(b)(1)(C) of the Act that permits payment for organ procurement costs “only 

if” the OPO meets “performance-related standards prescribed by the Secretary.” In 

addition, we note that the Organ Procurement Organization Certification Act of 2000 

required the Secretary to establish through rulemaking multiple outcome measures based 

upon empirical evidence, obtained through reasonable efforts, of organ donor potential 

and other related factors in each service area of qualified OPOs and that these measures 
1057 

must be used as part of the recertification process. Consistent with the statute, the 

Secretary developed the standards through notice and comment rulemaking and the final 

standards reflect public input. The outcome measures constitute an empirically based 

standard that is applied to all of the OPOs and allow a comparison of an OPO’s 

performance to the performance of its peers. We believe that changing “will not” to 

“may” in the regulations would effectively render this empirically based standard a 

nullity and would eliminate any meaningful empirically based standards for the 

recertification process. We believe that the suggested change would be contrary to the 

plain language of the relevant statutes; therefore, we are not able to adopt the suggested 

change. We also believe that it would be contrary to Congress’ express intent to recertify 

an OPO that failed to meet the outcome and performance measures during the past 

performance period. OPO performance is a critical element of the organ transplantation 

system in the United States. An OPO that is efficient in procuring organs and delivering 

them to recipients will save more lives than an ineffective OPO. Replacing an OPO that 

failed to meet the performance measures with an alternative organization that has been 

successful in the past is likely to increase the supply of organs available to patients on the 

organ transplant waiting lists. 

 Comment: Several commenters expressed concerns about the “limited appeals 

process” available to OPOs that are decertified due to the outcome measures. The 

commenters also indicated that “CMS noted repeatedly that no appeal on ‘substantive’ 

issues may be allowed.” 
1058 

 Response: The OPO CfCs set forth at 42 CFR 486.314 specifically state that “the 

OPO may appeal the de-certification on substantive and procedural grounds.” Therefore, 

the OPO CfCs do not “limit” the grounds upon which an OPO can appeal a 

decertification. In addition, we will consider exercising our enforcement discretion, 

including consideration of outcome measures, on a case-by-case basis when appropriate 

as part of the review process. 

 Comment: Many commenters indicated that the proposed revisions were 

insufficient to address their numerous concerns about problems that the commenters 

believed were inherently related to the existing outcome measures. Some commenters 

asserted that the measures are flawed because there were significant problems with how 

the outcome measures were initially developed and the validity of the outcome measures 

has not been established. They also stated that CMS had acknowledged that the current 

outcome measures are flawed or have significant problems. 

 Response: We disagree with the comment. The outcomes measures were 

developed through a public process, using notice and comment rulemaking. We made 

significant changes to our proposed standards based on the comments and 

recommendations of the OPOs, including the national association that represents all 

OPOs (71 FR 30999). The first outcome measure allows us to assess an OPO’s 

conversion rate of potential donors to actual donors so that we can determine how an 

OPO has performed in regard to donor potential in its own designated service area as well 

as how it has performed compared to other OPOs. The second outcome measure uses the 

statistical methodology developed by the SRTR for determining an expected donation 
1059 

rate for each OPO, allowing an assessment of how an OPO has performed in view of its 

expected performance. Our third measure is comprised of three individual measures for 

organs transplanted per donor and organs used for research per donor. This third measure 

allows us to assess how well an OPO fulfills its ultimate mission—recovering viable 

organs and placing them with transplant centers for transplantation--as well as its 

commitment to placing organs for research (71 FR 31000). 

 In the preamble to the proposed rule, we acknowledged that we had some 

concerns about the outcome measures due to input we had received from the OPO 

community. We also indicated that we believe that OPOs should not be decertified based 

solely on their failure to meet one outcome measure because our experience with the 

OPOs indicated that the OPOs that were failing one of the outcome measures were 

performing satisfactorily. In addition, we noted that the majority of OPOs are meeting all 

three outcome measures and we expect that only a small number of OPOs would not be 

able to meet at least two of the outcome measures. If the current outcome measures were 

fundamentally flawed or had significant problems, we would anticipate that the number 

of OPOs that would not successfully meet this requirement would be much higher. 

Therefore, while we acknowledge that there are concerns with the current outcome 

measures, we believe the current measures are a valid means of measuring OPO 

performance in keeping with the statutory requirements. Each measure is empirical; that 

is, based upon observation or statistically derived from data. 
1060 

 Comment: Some commenters believe the existing regulatory standards are flawed 

because the data upon which the outcome measures are based are self-reported and are 

not verified by another source; therefore, the accuracy of the data cannot be verified. 

 Response: We disagree with the commenters’ premise that the reported 

information cannot be verified. All OPOs are required to provide specific information to 

the OPTN, the SRTR, and CMS (42 CFR 486.328). This information includes, but is not 

limited to, the number of eligible deaths; the number of eligible donors; the number of 

organs transplanted, by organ type; and the results of death record reviews. In addition, 

the data that are to be used for recertification purposes must be reported to the OPTN of 

all deaths in all hospitals and critical access hospitals (CAHs) in the OPO’s DSA, unless 

a particular hospital or CAH has been granted a waiver and is working with another OPO 

(42 CFR 486.328(c)). We are able to independently audit the hospital’s records. 

Moreover, if an OPO determines that any data was incorrect, through death record 

reviews or any other means, it has 30 days to report the accurate data to the OPTN 

(42 CFR 486.328(d)). Therefore, if any OPOs are not reporting accurate data, they are 

not incompliance with this condition and could be subject to regulatory sanctions, up to 

and including decertification. Thus, we believe that there are sufficient tools to verify the 

reported information. 

 Comment: Some commenters suggested that the definitions of “eligible death” 

and “donor” are being interpreted and clinically implemented in an inconsistent manner 

among the OPOs, which could negatively impact some of the OPOs’ performance on the 

outcome measures. 
1061 

 Response: We agree that data should be accurately and consistently reported, and 

we established these definitions to standardize the terms to the greatest extent possible. 

We expect that all of the OPOs will interpret and implement all of the CfCs, including the 

definitions, and report their data in good faith. We adopted the definition of “eligible 

deaths” using the OPTN definition of that term in response to public comments 

(71 FR 30985). We note that the commenter does not criticize the definitions per se, but 

instead focuses on how some OPOs are applying those definitions. Considering the very 

divergent circumstances present with donors, we acknowledge that there may be times 

that different OPOs would disagree about whether a particular individual’s death should 

be classified as an “eligible death” and subsequently whether the donor is an “eligible 

donor.” While some variation is possible, we believe that these cases should be rare. If 

there are questions or concerns about how to interpret and implement any of the 

requirements or report data, those questions or concerns should be communicated to 

CMS or OPTN so they can be addressed. 

 We are disturbed by the commenters’ suggestion that some OPOs may be 

interpreting certain requirements and reporting their data in a way designed to gain an 

unfair advantage over other OPOs in their performance on the outcome measures. 

Despite these comments, we have not been given any specific evidence that the alleged 

practice is actually occurring. We also note that we evaluate OPOs for their compliance 

with the applicable CfCs, including the condition for reporting of data at 

42 CFR 486.328. An OPO could face decertification if it is found in violation of those 

rules. We will scrutinize the data to assess for any unfair actions taken by an OPO. 
1062 

 Comment: Some commenters suggested that the outcome measures provide a 

disincentive to organ procurement, which is resulting in fewer, rather than more, organs 

being recovered for transplantation. One commenter gave the example of a potential 

donor with multiple comorbidities for whom the OPO could only expect to be able to 

procure the liver for transplant. The commenter stated that if an OPO is concerned about 

the third outcome measure, which, among other things, measures the organs transplanted 

per donor (yield measurement), there is a disincentive to pursue that donor because they 

would likely only recover a single organ. 

 Response: We disagree. While our empirically based outcome measures do 

measure various aspects of the OPOs performance, the measures specifically encourage 

OPOs to fulfill their ultimate mission, which is the recovery of transplantable organs and 

placement with transplant centers for transplantation for patients, as well as for research 

purposes. 

 Comment: Some commenters suggested that there are conflicts between the OPO 

CfCs and the transplant center (TC) Conditions of Participation (CoPs). The commenters 

stated that the OPO CfCs incentivize OPOs to pursue as many donors as possible and 

procure as many transplantable organs as possible. However, the commenter added, the 

TC CoPs require transplant centers to meet specific outcome measures for graft and 

patient survival. For example, the commenter stated that concerns related to these 

outcome measures may cause some transplant surgeons to decide not to transplant certain 

types of organs, such as organs procured from Donors after Cardiac Determination of 

Death (DCDD). The commenter believed that this could result in some organs procured 
1063 

by OPOs not being transplanted, which would negatively impact the third (yield) 

measure. 

 Response: As explained in the proposed rule and in the background section 

above, our regulations with respect to outcomes measures for OPOs reflect the specific 

standards Congress required the Secretary to develop for measuring OPO performance 

under the Organ Procurement Organization Certification Act of 2000. Our rules are fully 

consistent with those statutory directives. Transplant centers, in contrast, are not required 

to meet regulatory standards that are based on the OPO statute. However, we will 

examine our standards in an attempt to determine if greater synergy is possible in the 

future. 

 Comment: Many commenters noted that they agreed with the DHHS Secretary’s 

Advisory Committee on Organ Transplantation’s (ACOT) Recommendation 55 that was 

made in August 2012 (http://www.organdonor.gov/legislation/acotrecs55.html accessed 

on November 18, 2013), which, among other things, includes a recommendation that the 

DHHS Secretary direct CMS and the Health Resources and Services Administration 

(HRSA) to confer with the OPO community to conduct a comprehensive review of the 

regulatory requirements for OPOs and transplant centers and promulgate regulatory and 

policy changes to OPO requirements, including, but not limited to, “a statistically sound 

method for yield measures for OPOs”

(http://www.organdonor.gov/legislation/acotrecs55.html). 

 Response: We are interested in continuing to improve our standards and are 

currently conducting a comprehensive review of the OPO CfCs and will consider these 
1064 

public comments in any future rulemaking. However, we believe it would be unfair to 

OPOs to develop new standards at this time and to apply those standards retroactively for 

past periods. 

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

proposed the revisions to §§ 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. 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43672), we also solicited public 

comments on any other potential empirically based outcome measures for OPOs that 

might be used in future rulemaking. We stated that we would especially appreciate 

public comments on the new yield measure that was produced by the SRTR and is being 

used by the OPTN. The OPTN recently adopted this new yield measure, which 

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 may allow 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. In the 

proposed rule, we stated that 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 had noted that the lists are not the 

same. We stated that if the new OPTN measure proves to be a more accurate reflection 

of performance as measured by the organs transplanted for each donor in each individual 
1065 

DSA (as it is accepted by HRSA and the OPO community), this may provide an 

alternative outcome measure that could be adopted in the future. We referred readers to 

the SRTR Web site at http://www.srtr.org/csr/current/Tech_notes.aspx for specific details 

on the risk adjustment models used for this measure. 

 Comment: A few of the commenters noted the the OPTN yield measure was an 

improvement over the current outcome measures and that it should be considered by 

CMS. However, these commenters also noted that there were issues with this measure. 

One commenter noted that the OPTN measure was “too new” and “needs some vetting 

before it can be accurately used to define performance.” Another commenter noted that 

the measure “requires further revision.” 

 Response: We are currently conducting a comprehensive review of the OPO 

CfCs. We will consider these public comments concerning the current outcome measures 

and the new OPTN yield measure if we proceed with future rulemaking. 

XVII. Final Rule: 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” 
1066 

(QIOs)--without changing the definition or functions of the QIOs--to reflect the 

program’s shift from a compliance-oriented 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 that 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 
1067 

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 (RFPs) used to contract with QIOs include 

significant detail on the work performed by the QIOs. Our proposal did not include 

changes to this approach to the QIO Program and was intended to provide a framework to 

guide the contracting process by establishing minimum eligibility criteria, direction for 

how CMS will determine that the minimum criteria are met, and a basic process for how 

awards are made. 

B. Basis for Proposals and Finalized Policies

 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, in the CY 2014 OPPS/ASC proposed rule (78 FR 43672 

through 43678 and 43705 through 43706), we proposed 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 work. We proposed to change the 

terminology related to the geographic area in which a QIO must perform its different 

functions. As amended, the statute authorizes the establishment of “such local, State, 

regional, national or other geographic areas as the Secretary determines appropriate” for 

QIO contract awards. We also proposed revisions to existing regulation text regarding 

the eligibility of a health care facility association to be a QIO and revisions to eliminate 
1068 

provisions at § 475.106 regarding the eligibility of payor organizations to be QIOs based 

on the proposed revisions to eliminate obsolete text and to codify the eligibility 

provisions for payor organizations in a different section. The statutory amendments also 

include a change in the contract period for a QIO, extending it from 3 to 5 years. 

Therefore, we proposed to include in § 475.107 language to reflect the TAAEA 

amendment to section 1153(c) of the Act, which modified the statutory 3-year QIO 

contract term to a 5-year contract term. 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 included the 5-year time period in the proposed rule as a technical correction in order 

to make the regulation consistent with the amended statute. 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. We stated in the preamble to our proposal that the 

proposed revisions to §§ 475.101 through 475.107 were 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. We 

stated that we will focus contract determinations on the ability of organizations to 

perform QIO functions as stated in the RFP. In the proposed rule, we solicited 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. In addition, we proposed in § 475.1 and § 476.1 a 

technical correction to redesignate paragraphs (a) through (d) in the definition of “Five 
1069 

percent or more owner” as paragraphs (1) through (4). The specific proposed 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 aggregate 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. As we discussed in the CY 2014 

OPPS/ASC proposed rule (78 FR 43673), we 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 in connection with quality improvement initiatives or 
1070 

other activities that do not, by law, require use of licensed physicians or certified 

practitioners. We 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 proposed 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, we intended that the 

proposed standards 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. As indicated in the CY 2014 OPPS/ASC proposed rule 

(78 FR 43673), we sought 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 of section 1154(a)(18) by the TAAEA explicitly provides the 

Secretary with the broad authority to require that QIOs perform any additional activities 
1071 

the Secretary determines may be necessary for the purpose 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. The TAAEA also amended section 1154(a) of the Act to permit QIOs 

to perform one or more QIO functions instead of all QIO functions listed in the statute. 

Different QIOs might now be required to work on one or more different tasks within a 

QIO area; that is, all QIOs might no longer be required to handle the complete and broad 

range of QIO activities within their respective geographic areas but to focus on particular 

tasks of QIO work. For example, one QIO 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, while another 

QIO is required to perform case review in the same area. 

 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 beneficiaries 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 permit the inclusion of organizations that 
1072 

can help to improve care processes for Medicare beneficiaries. We proposed 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 proposed the addition to the QIO requirements 

of a new focus on patient and family engagement and patient and family inclusion in case 

reviews and 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 proposed and are adopting as 

final are intended to ensure that we have the flexibility we need to reconsider as 

necessary 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 in the CY 2014 OPPS/ASC proposed rule (78 FR 43672 

through 43678) focus on the primary functional responsibilities of a QIO as a basis for 
1073 

determining eligibility. These responsibilities are case review (which includes the 

statutory minimum standards) and quality improvement initiatives. As stated in the 

proposed rule, we believe that the eligibility and contracting standards proposed for QIOs 

focus on the necessary minimum requirements for successful operation of the QIO 

Program. 

C. Changes to the Nomenclature and Regulations under 42 CFR Parts 475 and 476

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43673 through 43678), 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 Part 475. Part 475 includes definitions and standards governing eligibility 

and the award of contracts to QIOs. We proposed to replace nomenclature that has been 

amended by 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. 

 We have summarized the public comments we received and our responses below, 

using the regulation sections as headings to guide the discussion. In some cases, we have 

summarized and discussed issues raised by commenters in connection with the 

substantive issue rather than the regulation section identified by the commenter in order 

to better discuss each topic. For example, we have addressed comments about the need 

for objectivity and neutrality from all QIOs in connection with our discussion below in 
1074 

§ 475.101 below, although some commenters raised this issue in connection with 

§ 475.105. 

 Comment: As a general matter about the proposal, one commenter urged CMS to 

postpone proposed changes to the QIO Program until “the pace of healthcare reform is 

less frenetic, physician practices are more stable,” and “CMS has a clearer sense of how 

the proposed changes would impact the quality and costs of patient care.” 

 Response: Although there have been many changes made through health care 

reform since 2010, there have been very few programmatic changes made in this 

particular area of health care quality improvement. The science of quality improvement 

has changed significantly over the last few decades and we believe that these proposed 

regulatory changes, which allow flexibility for any number of possible configurations, are 

long overdue. Further, the substantial changes made by the TAAEA are generally 

effective with QIO contracts awarded after January 1, 2012. As we approach the 

conclusion of the current QIO contracts and consider awarding QIO contracts after the 

enactment of the TAAEA, we believe that these changes are best accomplished now. As 

we move forward, we hope to capitalize on past successes of the QIO Program as well as 

improve the program by establishing a more flexible, efficient, patient-centered and 

family-centered model. 

1. Nomenclature Changes 

 In order to align the regulations with the nomenclature changes made by section 

261 of the TAAEA, we proposed nomenclature changes where necessary in 

42 CFR Part 475. For example, we proposed to revise the heading of Subpart C of Part 
1075 

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 used 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 proposed 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).” 

 Comment: One commenter asserted that CMS’ proposed change of the term 

“peer review” to “quality improvement” is vague and its impact is unclear. 

 Response: We have made changes to the nomenclature throughout Parts 475 and 

476 consistent with the changes made to nomenclature in the title and text of the statute at 

sections 1151, 1152, 1153 and 1154 of the Act. As we mention above, similar changes to 

the regulatory references to these organizations have been made in the past. However, 

the prior nomenclature changes were made without changing the definition or function of 

the QIOs. We have made changes in this final rule to reflect the program’s shift from a 

compliance-oriented focus to one emphasizing quality improvement in addition to 

completing the nomenclature changes made by the TAAEA, modernizing and improving 

the QIO Program, and changing the eligibility requirements for QIOs. 
1076 

 After consideration of the public comment we received on the nomenclature 

changes, we are finalizing these proposed changes to Parts 475 and 476 without 

modification. 

2. Addition and Revision of Definitions 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43674), we proposed 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 proposed 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. Further, we proposed a 

technical revision to the definition of “Five percent or more owner” in Part 475. In the 

proposed rule, we solicited public comments on our proposed definitions and revisions. 

 We proposed 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 provided this list to illustrate the range and scope of case reviews but we 

noted in the proposed rule 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, 
1077 

pursuant to section 1154(a)(18) of the Act, may require additional reviews under the 

contracts awarded to QIOs. 

 We did not receive any public comments on the proposed definition of “case 

review” and proposed amendments to the definition of “five percent or more owner”. We 

are finalizing the technical revision to the definition of “five percent or more owner”. We 

are finalizing the proposed definition of “case review” with one slight modification to 

eliminate the word “including” in paragraph (5) to avoid the suggestion that appeals and 

DRG validation reviews are the only types of medical necessity review. As with the 

proposed definition, the final rule provides a nonexhaustive list of types of case reviews. 

 We proposed to expand the definition of “physician” beyond the 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 proposed the following definition of physician for both Parts 475 and 476: 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) 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 

stated our belief that the proposed revisions are necessary to eliminate references in 

paragraphs (1) and (2) of the existing definition 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 
1078 

longer be limited to one State. In addition, we proposed to amend paragraph (3) of the 

existing definition so that it no longer applies to only American Samoa, the Northern 

Mariana Islands, and the Trust Territory of the Pacific Islands. We proposed 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. In the proposed rule, we solicited public 

comments on whether our proposed definition is sufficiently inclusive and appropriate to 

achieve these goals. 

 In addition, we proposed to define the terms “practitioner” and “quality 

improvement initiative” for purposes of Part 475 by cross-referencing the existing 

definitions for these terms at § 476.1. 

 Comment: A few commenters supported the proposed changes to the definition 

of “physician”, and one commenter supported the expanded definition of “physician” 

which the commenter believed better reflected the definition contained in the TAAEA. 

Several other commenters suggested that CMS’ proposed change to expand the definition 

of “physician” may lead to review of the actions of doctors of medicine and osteopathy 

by other “limited” licensed practitioners and recommended that physicians should only 

be subject to review by other physicians, preferably practicing physicians in the same 

specialty or a peer level match. Commenters requested that CMS clarify that the 

proposed changes are not intended to replace peer review by QIOs with reviews of 

physicians’ decisions by nonphysician providers. Another commenter was concerned 
1079 

with the potential impact the broad definition of “physician” will have with respect to its 

use in § 476.98. 

 Response: We appreciate the commenters’ responses on this issue. While we 

believe that the requirements in section 1154(d) of the Act and the regulations at 

§ 476.98(a) make it clear that QIOs are, except in limited circumstances, required to use a 

peer-to-peer match when performing reviews, we understand that the expansion of the 

definition of “physician” may mean that the peer conducting the review may not always 

be licensed in the same State where the care took place but must be licensed where the 

physician is working. We note that section 1154(d) of the Act provides that no QIO shall 

use the services of an individual who is not a duly licensed doctor of medicine, 

osteopathy, dentistry, optometry, or podiatry to make final determinations of denial of 

services provided by such physicians. In addition, we understand the commenters 

concern that the expanded definition of “physician” may lead to review of the action of 

physicians by physicians practicing in another specialty. We would like to clarify that, 

despite one commenter’s suggestion in support of the proposed definition, the TAAEA 

does not include a definition of physician. It remains unclear why some commenters 

believed that our broadening of the definition of “physician” would lead to care provided 

by physicians being reviewed by nonphysicians. We reiterate that there are safeguards in 

the statute and regulations to ensure that, during case review, there is a peer-to-peer 

match whenever possible and that physician decisions will not be reviewed by 

nonphysician providers. We also note that our subregulatory guidance, such as the 

definition of “peer reviewer” in the QIO Manual, emphasizes the requirement to use a 
1080 

specialty match whenever possible. The QIO Manual can be found on our Web site at: 

http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/qio110c05.pdf. The QIO Manual stipulates that 

a peer reviewer is “a reviewer who is either a physician or other practitioner who 

matches, as closely as possible, the variables of licensure, specialty, and practice setting 

of the physician or practitioner under review” and that only in “cases in which there is no 

peer match available, the QIO can use another physician reviewer without the same 

expertise.” 

 After consideration of the public comments we received, we are finalizing, 

without modification, our proposal to revise the definition of “physician” under § 475.1 

and § 476.1. 

 In connection with our proposal to revise the requirements that an entity must 

meet to serve as a QIO, we also proposed to define, in § 475.1, the terminology related to 

the geographic area in which a QIO must perform its different functions. Before our 

proposal in the CY 2014 OPPS/ASC proposed rule, the regulations in Part 475 did not 

define this area but did 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 proposed 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 
1081 

perform.” We stated that our proposal to add this definition was 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, we also stated that 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 proposed change, we stated our intent 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. 

 We note that, on May 2, 2013, a Request for Information (RFI) was distributed 

seeking information about the methods we may use to assign work to QIO contractors. In 

the RFI, we stated that “to accomplish our goal of further improving care for Medicare 

beneficiaries, CMS intends to restructure how it administers the Program.” In addition, 

we solicited “comments about four potential options the Agency may use to divide work 

among a varying number of QIO contractors across the country.” Many of the 

commenters who responded to the proposed rule appear to have been aware of the RFI 

and many seem to have been addressing the regional proposals in the RFI as part of their 

comments on the proposed rule. 

 Under the current QIO Program, although there are State-based contract awards, 

some QIOs share corporate parents and several QIOs subcontract to other QIOs for QIO 

work. The regulatory proposal was not to regionalize QIOs but to adopt a definition of 

“QIO area” that would apply if the contracts were awarded on a regional basis or a 
1082 

State-by-State basis and to implement statutory flexibility that does not mandate specific 

geographic areas for QIO contracts nor prohibit regional contracts. 

 The RFP process will be the process through which the contract’s geographic 

areas are defined. We would like to make clear that it is our intent that the regulation as 

proposed, and as finalized, permits flexibility in terms of designing the work and the 

geographic area for each QIO. The contracting process will finalize the details of the 

program’s structural changes, if any. 

 Comment: One commenter supported CMS’ proposed changes in terminology 

from “QIO review area” to “QIO area” in order to emphasize that this term may 

encompass more than “review” functions. One commenter supported the expansion of a 

greater geographic area and stated that the proposed definition of “QIO area” versus 

“QIO review area” emphasizes that the proposed term encompasses more than “review” 

functions which may provide a broader scope for choosing an appropriately sized 

geographic area and may assist in identifying the capability and functionality as a means 

to identify organizations to perform specific QIO contract functions. Some commenters 

stated that this proposed definition allows for more flexibility and will allow for the 

designation of QIOs that are best equipped to provide a specific set of services. Other 

commenters indicated that the rapidly changing requirements make it increasingly 

difficult for every QIO to have the requisite expertise and specialization in order to be a 

subject matter expert on all QIO initiatives and activities. These commenters stated that a 

regional QIO approach has great potential to ensure every State has the same level of 

expert support and is consistently receiving the same information. 
1083 

 Response: We appreciate the comments in support of the expanded definition of 

“QIO area” and the general approach underpinning our proposal that would allow 

specific QIOs to focus and develop expertise in a single area of quality improvement. 

The QIO Program has expanded beyond case reviews and the changes proposed reflect 

the array of tasks that QIOs are currently performing. We agree that the increased 

flexibility is beneficial and plan to, wherever possible, create efficiencies of scale to pool 

expertise in the interests of establishing and spreading best practices. We would like to 

clarify that a regional approach to the QIO Program structure is one option that we are 

considering. However, we have a variety of geographic options available under the 

statute and the regulation as finalized in this final rule. 

 Comment: Several commenters stated that many practicing physicians have spent 

years building relationships with their local QIOs and suggested that these State-based 

QIOs have a degree of credibility with local Medicare beneficiaries and providers. In 

addition, commenters stated that the State-based QIOs are better able to identify 

problems in their local communities, design appropriate solutions, and identify local 

physician leaders to initiate projects. The commenters also stated that they have had 

“long and fruitful collaboration” with their respective State-based QIO and indicated that 

this relationship has resulted in sustained quality improvements for their Medicare 

beneficiaries. These commenters further stated that valuable time and resources would 

be lost as relationships and trust would need to be forged again to ensure provider 

engagement in educational opportunities. One commenter stated that, although some 

function-specific QIOs may address unmet needs, these QIOs should not be established at 
1084 

the expense of State-based QIOs. This commenter recommended that a cost effective 

alternative would be for CMS to give high-performing existing QIOs the option to 

expand their portfolio of quality improvement activities during contract renegotiations. 

 Response: The proposed rule and this final rule do not require regionalization but 

rather permit the creation of contract areas other than on a State-by-State basis. In 

determining how to best implement the flexibility afforded to the Secretary by the 

statutory changes made through the TAAEA, we will consider several factors. For 

example, under the current structure of the QIO Program, there already exists a multiState subcontracting structure for the appeal case reviews. There also are several multiState corporate QIO management structures that have operated successfully for many 

scopes of work. These structures have been able to capitalize on the strengths and the 

expertise of particular entities. 

 In addition, we believe that, for some functions, QIO contracts that cross State 

lines would create economies of scale and standardization of processes and eliminate 

duplicative administrative and management overhead. This potential structure would 

improve communication between CMS and the QIOs and decrease the contracting and 

administrative burden currently faced by both entities. Further, to the extent that quality 

improvement initiatives are designed in connection with nationwide quality 

measurements or quality improvement programs, QIOs would not be hampered by 

serving larger QIO areas. We are aware that many providers have established strong 

relationships with local QIO staff, and we understand the importance of preserving these 

ties. We expect to maintain in future QIO contracts the type of local “on the ground” 
1085 

involvement, which is tailored to meet the needs of communities and longstanding 

relationships that have been built between providers and QIO staff under the existing 

structure. 

 We believe that the proposed changes to the definition of “QIO area” will enable 

flexibility and targeting of program expertise in the best interests of beneficiaries and are 

consistent with our efforts to continually strive to make the QIO Program more efficient. 

In addition, we note that in §§ 475.102 and 475.103, discussed in more detail below, we 

proposed and are finalizing provisions to take into account the geographic location of an 

organization applying for a QIO contract. Those provisions do not list exhaustive factors 

for consideration in awarding QIO contracts and we may include additional factors where 

and when necessary. 

 Comment: One commenter supported CMS’ proposal to define “QIO area” and 

believed that it would be in the best interest of Medicare beneficiaries. In addition, the 

commenter encouraged CMS to take advantage of the opportunity for flexibility provided 

when contracting with QIOs. Some commenters supported CMS’ proposed QIO 

Program changes by affirming that greater standardization and nationally recognized 

expertise are advantageous for activities such as assistance with education and data 

submission for quality measurement programs, and technical advice related to quality 

measurement specifications. One commenter asserted that the proposed QIO Program 

changes may result in reduced spending by approximately $330 million based upon 

Congressional Budget Office estimates by demonstrating more cost effective strategies 

for delivering services. This commenter also supported CMS’ proposal to expand the 
1086 

definition of a QIO area that would allow a QIO to serve in more than one State. The 

commenter indicated that regional QIOs (formed by more than one single-State QIO 

contract held by a single corporate entity) already currently exist and believed that having 

regional QIOs is logical from an economy of scale perspective. One commenter stated 

that it recognizes that economies of scale and efficiencies may occur but indicated its 

concern that a “dramatic change to mandated multi-State [QIO] contracts” would 

introduce the possibility that some States may be left without a local source for quality 

improvement technical assistance. 

 Some commenters recognized the efficiencies and effectiveness that may be 

achieved to the QIO Program and recommended that, in situations where successful work 

has been demonstrated through QIOs that cover multiple States (formed by more than 

one single-State QIO contract held by a single corporate entity), CMS use these 

collaborations to test the feasibility and effectiveness of the expanded “QIO area” 

definition as a first phase in restructuring the QIO contracts and QIO areas. 

 However, some commenters asserted that it would be difficult to maintain the 

“local perspective” in a regionalized QIO structure, that they did not see evidence for 

“radical, untested” changes to the State-based nature of the QIO Program and stated that 

CMS’ proposed changes seem to have been undertaken with little consultation with either 

the national or local practitioner community of their respective States. Some commenters 

maintained that the proposed changes in the QIO Program would cause the current 

State-based QIO experience and expertise to be “sacrificed.” One commenter also 

believed that long-term care providers may be held responsible to increase their 
1087 

administrative duties in order to interact with a separate organization for each function. 

One commenter stated that a single-State QIO may be better able to understand and focus 

on the Medicare beneficiaries and providers being served for more densely populated 

States. 

 Response: We reiterate that the proposed rule and this final rule do not require 

regionalization but rather permit the creation of contract areas other than on a State-byState basis. We appreciate the support for these regulatory provisions and agree that 

standardization and better targeting of subject-matter expertise will help increase the 

efficiency of the QIO Program and create better value for Medicare beneficiaries. While 

we did not propose in the proposed rule that we would establish a regional structure, we 

acknowledge that the proposed rule, once finalized, would accommodate that structure. 

We believe that having the flexibility to adopt a different QIO contract structure, if we 

choose to establish one, would enable the QIO Program to benefit from the lessons 

already learned through the multi-State corporate structure of many QIOs. There are 

currently 10 corporations that have coordinated separate QIO contracts to cover 

26 States. In addition to the multi-State corporate structure, some QIOs have established 

subcontracting relationships with other QIOs for conflict of interest or administrative 

efficiency purposes that have also generated savings. Based on the QIO Program’s 

history with these subcontracting and corporate structures that cross State lines, we 

believe that multi-State QIO structures have been successfully tested as a model for 

potential QIO structural changes. At the same time, we believe that this final rule makes 

it clear that the local involvement and expertise that is so important will be maintained. 
1088 

As an example, the requirements in § 475.102(a) of this final rule make it clear that, in 

determining eligibility for performing case review, we will take into consideration “the 

organization’s proposed involvement of and access to physicians and practitioners in the 

QIO area with the appropriate expertise and specialization in the areas of health care 

related to case reviews” and “the organization’s ability to take into consideration urban 

versus rural, local, and regional characteristics in the health care setting where care under 

review is provided.” Furthermore, the RFI issued in May 2013 also generated significant 

comment, in some cases from providers and provider associations, which we intend to 

consider as part of the procurement process. Also, we received public comments on our 

regulatory proposal from practitioners and providers, which we considered as part of this 

rulemaking. In addition to these opportunities to comment and present their views, we 

anticipate that providers and practitioners will provide us feedback on any changes that 

we will be implementing in the next QIO procurement and contract cycle so that we may 

continue to improve the QIO Program. In addition, §§ 475.102(b) and 475.103(b), as 

finalized, permit CMS to consider size and location of an organization as part of 

determining whether the organization has demonstrated the ability to perform case review 

or quality improvement initiatives as a QIO. We intend to interpret and apply the 

provisions in Part 475 as finalized in this rule to ensure local experience and expertise are 

available, maintained, and utilized by all QIOs in connection with case reviews and 

where necessary for quality improvement initiatives. 

 After consideration of the public comments we received, we are finalizing the 

proposed definition, without modification, of the term “QIO area” to mean “the defined 
1089 

geographic area, such as the State(s), region(s), or community(ties), in which the CMS 

contract directs the QIO to perform.” This term appears throughout Part 475 and is used 

consistent with this definition. 

 We also proposed to add definitions of the terms “quality improvement initiative” 

and “practitioner” to Part 475 and to define them by cross referencing the definitions of 

the terms in § 476.1. 

 Comment: One commenter noted that CMS proposed to cross-reference the 

definition of “quality improvement initiative” in § 475.1 to § 476.1 and indicated that a 

definition of “quality improvement initiative” was not included in the proposed rule nor 

does the Code of Federal Regulations (October 1, 2012 Edition) include a definition of it. 

The commenter suggested that CMS provide a definition of “quality improvement 

initiative” that reflects the principles of contemporary quality improvement. 

 Response: The current definition of “quality improvement initiative” under 

§ 476.1 was finalized in the CY 2013 OPPS/ASC final rule with comment period 

(77 FR 68559). The regulations as amended are accessible through the electronic Code 

of Federal Regulations at www.ecfr.gov. 

 We did not receive any public comments on the proposed cross-reference to the 

term “practitioner” and are finalizing that definition for Part 475 without modification. 

After consideration of the public comment we received regarding the term “quality 

improvement initiative,” we also are finalizing this definition without modification. 

3. Scope and Applicability of Subpart C of Part 475 
1090 

 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 the CY 2014 OPPS/ASC proposed rule (78 FR 43674 through 

43675), we proposed 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. 

 We did not receive any public comments on the proposed revisions to § 475.100, 

and we are finalizing these revisions as proposed without modification. 

4. Eligibility Requirements for QIOs (§§ 475.101 through 475.106) 

 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 the CY 2014 OPPS/ASC 

proposed rule (78 FR 43675 through 43678 and 43705 through 43706) proposed to 

implement the changes in the QIO eligibility standards made by the TAAEA. 

 As a general matter, we recognize and appreciate the vital role of physicians in 

the work of the QIOs but 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 organizational structure, we proposed 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 
1091 

existing eligibility requirements beyond “physician-sponsored 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 the proposed rule, we solicited public comments on our focus on these primary 

QIO functions of case review and quality improvement initiatives and how this functional 

approach would ensure that QIOs are appropriately selected for contract award. We 

proposed to vacate existing text at §§ 475.104 and 475.106 and reserve these two section 

numbers. 

 We respond to the public comments we received that are specific to each 

regulation topic below and address how we are finalizing §§ 475.101 through 475.106. 

We note that, while some commenters specifically identified regulation sections as part 

of the comment, we have grouped the comments by topic. 

a. Eligibility to be Awarded a QIO Contract (§ 475.101) 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43675 through 43676), we 

proposed that revised § 475.101 would no longer reference “physician-sponsored 

organizations” and “physician-access organizations,” would include a 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 

proposed 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 
1092 

sections 1152(2) and (3) of the Act as amended by the TAAEA. Second, in 

paragraph (b), we proposed 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 characterized the functions of a QIO as the 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. We stated that, in our view, these broad categories encompass the work 

QIOs are required to perform under section 1154 of the Act. We stated our belief that our 

proposal reflects a different approach to structuring the QIO requirements than the 

current rule: we proposed 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, case reviews and 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 proposed to incorporate the flexibility provided in section 1154(a) of the 
1093 

Act 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 

such additional activities are determined necessary to improve the quality of care for 

Medicare beneficiaries. 

 Finally, in paragraph (c) of § 475.101, we proposed that a QIO must demonstrate 

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 proposed 

this requirement because it reflects the multidisciplinary and multi-stakeholder 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 stated our belief that motivating beneficiaries 

to become involved in their own health care may reduce waste and ultimately improve 

the quality and efficiency of health care. We noted that 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 actively engage beneficiaries, families, and consumers in health care 

decisions emphasizes our commitment to patient and family engagement as an essential 

component of the QIO Program. 
1094 

 In the proposed rule, we solicited public comments on whether our proposal 

sufficiently incorporated the statutory flexibility, identified the goals of the QIO 

eligibility requirements, and provided guidance on how organizations will be determined 

eligible for QIO contracts. 

 Comment: One commenter suggested that these proposed changes may qualify as 

“lowering the standards to become a QIO” and therefore stated that providers may not be 

willing to engage with these entities and progress may cease. 

 Response: The commenter was not specific about how the proposal appeared to 

lower standards for QIOs. We recognize that our proposal would establish, in § 475.101, 

the “minimum level of resources and skills” an organization must have in order to 

demonstrate its capability to perform as a QIO. However, we do not intend for these 

factors to be the only criteria we use to evaluate organizations requesting QIO contracts. 

The RFPs will include detailed information that will be used in evaluating each offeror. 

The standards we proposed at §§ 475.102 and 475.103 are a description of the factors we 

may use and should not be interpreted as an exhaustive list. 

 Comment: One commenter stated that the proposed change in the definition of 

eligible organizations to remove from § 475. 105 the restriction from contracting with an 

association of health facilities may not ensure that all providers have equal access to quality 

improvement efforts within a given region. The commenter indicated that all trade and 

professional associations do not represent all providers within a region and questioned 

how CMS will assure “equal access and assistance” will be provided to all providers, 

regardless of membership status in the potential association being responsible for or 

involved in working with providers on quality initiatives. This commenter believed that 
1095 

if a trade or professional association were to become a QIO, that QIO would show 

preference to those providers who are members of its trade or association. 

 Response: Although these comments were made in reference to proposed 

§ 475.102 and § 475.103, we believe that all public comments concerning eligibility and 

our proposed changes to make some general requirement changes are best discussed 

together with the comments specifically addressing our proposed eligibility changes in 

§ 475.101. We also appreciate the concern that, by amending § 475.105 to expand 

eligibility to associations of health care facilities, some providers may not receive 

treatment equal to those providers affiliated with the professional organization. We note 

that the TAAEA specifically amended the statutory prohibition on associations of health 

care facilities serving as QIOs and that our proposal to change § 475.105 was designed to 

reflect the statutory change. In response to these concerns, we have added language to 

the QIO eligibility requirements in § 475.101(d) to emphasize that an organization must 

demonstrate its “ability to perform the functions of a QIO with objectivity and 

impartiality and in a fair and neutral manner.” 

 Comment: In the context of the definition of “QIO area”, some commenters 

stated that QIOs should have experience and a trusted relationship with practitioners 

when engaging in quality improvement initiatives, as these characteristics are necessary 

to ensure that patients are protected from errors, and that errors, when they occur, are 

corrected. These commenters also stated that QIOs must be able to demonstrate fairness 

to practitioners as well as a commitment to patient-centered care. 
1096 

 Response: We agree with the commenters who requested that we include a 

requirement that an organization be able to perform QIO quality improvement initiative 

functions in a fair and neutral manner. We also believe that this criterion should be 

applied to all QIO functions. We agree that an organization should be free from any 

conflicts of interest and be able to demonstrate fairness and serve as an objective party. 

To address these concerns, we have added final language at § 475.101(d), a requirement 

that QIO organizations be able to “Demonstrate the ability to perform the functions of a 

QIO with objectivity and impartiality and in a fair and neutral manner.” 

 Comment: Some commenters were concerned with CMS’ proposal in 

§ 475.101(c) that, in order for organizations to qualify for QIO contracts, they must 

demonstrate the ability to actively engage beneficiaries, families and consumers, as 

applicable, in case reviews or quality improvement initiatives. These commenters asked 

for further clarification as to how CMS envisions incorporating patients and families into 

the case review function. Some commenters asserted that it is appropriate to consider 

how patients and families can be of assistance in areas such as patient perception of care, 

patient decision-making, patient safety, and quality. In addition, these commenters 

asserted that consumer engagement in health care is a relatively new field with a small 

body of research and evidence and believed that CMS may be challenged to assess 

whether QIO applicants are able to demonstrate the ability to actively engage 

beneficiaries in case reviews. 

 Response: We recently began a Patient and Family Engagement Campaign 

(PFEC), which has been implemented in 25 States. The purpose of this project is to 
1097 

support QIOs who propose fresh and original models to develop and implement a local 

PFEC that supports HHS’ and CMS’ goals of person-centeredness and family 

engagement. The underlying goals of this effort are to involve patients and families in 

decisions regarding health and healthcare in order to ensure consistency with patient 

preferences and priorities and empower them to take action for their own health care that 

could improve quality of life. We believe that this 1-year project will provide strategies 

and results that can be available for all QIOs to use. We also believe that the beneficiary 

complaint, and beneficiary appeal processes are excellent opportunities to incorporate 

patient and family engagement into case review activities. We expect to learn strategies 

from the PFEC that can be spread and utilized in future case review activities that involve 

direct communication with Medicare beneficiaries. 

 Although Patient and Family Engagement is a relatively new field, we believe 

that there is sufficient activity in the health care community to require that QIOs 

incorporate Patient and Family Engagement techniques in their contract proposals, 

strategies, and techniques. Because current information regarding evaluation and 

measurement of Patient and Family Engagement is limited, we intend use evaluation 

strategies and benchmarks successfully adopted by the Hospital Engagement Networks 

(HENs) to measure this new QIO activity. Outside of those measurement techniques 

tested by HENs and proposed by QIOs, we are not planning to be immediately 

prescriptive in our requirements for measuring QIOs’ tasks in this new field. We refer 

readers to the following CMS Web site for more information concerning HENs: 
1098 

http://partnershipforpatients.cms.gov/about-the-partnership/hospital-engagementnetworks/thehospitalengagementnetworks.html. 

 Comment: Some commenters supported the proposed changes to separate the two 

primary functions of the QIO contracts, case reviews and quality improvement initiatives, 

and supported the focus on the functions the organization performs rather than the 

structure of the organization itself. One commenter expressed concern regarding the 

extent to which CMS may further delineate or separate work within the case review and 

quality improvement functions and cautioned CMS against severe subdivision of work 

within each of the functions, as they believe this would require hospitals to potentially 

work with many different QIO contractors. 

 One commenter argued that bifurcating case review and quality improvement 

initiatives would increase administrative burden on providers and weaken the 

collaborative relationship with providers, QIOs, and other community stakeholders. This 

commenter urged CMS to retain an integrated approach to QIO work. Other commenters 

supported separating these functions, but requested that CMS not separate the case 

reviews so much so that a provider could be working with multiple QIOs for different 

types of cases, as this could prove confusing, burdensome, and expensive. 

 One commenter argued that the case review and quality improvement functions of 

QIOs should not be bifurcated because case review provides a QIO with the opportunity 

to identify, test, implement, and measure results in areas where providers need quality 

improvement assistance. The commenter also stated that fragmenting the functions 

would increase administrative burdens on providers because they would be required to 
1099 

act with multiple entities, and this would impede relationships between QIOs and 

facilities that are essential to quality improvement. Another commenter stated that CMS 

should consider a mechanism for linking quality improvement and case review 

contractors for the purpose of information sharing because, without this link, it is difficult 

to determine systemic and isolated issues. Another commenter stated that, if the two 

functions are bifurcated, there should be a plan for how these organizations will avoid 

giving conflicting, competing, or fragmented messages. 

 Response: We believe that a division of case review from quality improvement 

work would benefit the program by removing the tension and potential conflict of interest 

between performing case review of providers’ care and then attempting to engage those 

same providers in quality improvement initiatives to improve quality. As we have 

previously done, the QIO Program will continue and possibly expand its use of National 

Coordinating Centers (NCCs) to help with the coordination of case review and quality 

improvement work. Although providers may be asked to work with more than one QIO, 

allowing a single QIO to focus on a specific task will be beneficial to that QIO in 

becoming a stronger subject-matter expert. The more expertise a QIO achieves, the more 

likely it will be that the QIO will effectively spread best practices in its engagement with 

providers. We believe that the flexibility to combine or separate these functions is best 

made during the contract process. Therefore, the regulation we are finalizing explicitly 

permits but does not require the division of these functions. 

 Comment: Some commenters supported CMS’ proposal to ensure that QIO 

governance includes representatives of consumers and health care providers. The 
1100 

commenters believed that including these representatives would ensure that the CMS 

envisioned multidisciplinary and multi-stakeholder approach to QIO activities is 

implemented. 

 One commenter agreed with the importance of ensuring that essential voices have 

a role in the governance of the QIOs but suggested that CMS avoid specifying QIO 

governance requirements which may be viewed as too prescriptive and may result in 

token rather than meaningful representation. 

 Response: The requirement to have at least one consumer and one provider 

representative on the QIO’s governance board is a statutory requirement from section 

1152 of the Act. Therefore, we have no authority to eliminate this requirement in our 

regulations. We also believe that it is beneficial to the QIO Program to have both 

provider and consumer groups properly involved in QIO governance level 

decision-making. However, to ensure that we are not too prescriptive in our governance 

requirements, we did not propose additional requirements or details beyond the statutory 

mandate. For example, we did not require that beneficiaries also be represented as 

members of the board. Instead, in § 475.101(c), we chose to require that a QIO 

demonstrate its ability to actively engage these partners in case reviews and quality 

improvement initiatives. 

 Comment: One commenter expressed concern that the possible change where by 

regional review agents would no longer need to be local, physician-based organizations 

and could be for-profit entities was insulated from public comment in the recent RFI. 
1101 

 Response: We appreciate the public comments regarding our eligibility proposal 

in the proposed rule. The RFI was issued to solicit comments only on potential options 

for restructuring and dividing work among QIOs. Although some commenters believed 

that the RFI provided limited opportunity to comment on the overall changes CMS is 

considering, we knew that the public would have ample opportunity to comment on our 

proposal for revisions to the regulations to implement the statutory amendments that were 

created by the TAAEA through this regulation comment process. We understand the 

commenters’ concern that QIOs are no longer required to be physician-sponsored or 

physician-access organizations. However, as we discussed in the preamble to the 

proposed rule, we believe that contemporary quality improvement should involve a 

multidisciplinary team of practitioners. Although the revisions do allow for additional 

for-profit entities (health care associations) to be QIOs, there has never been a 

requirement that QIO organizations be nonprofit organizations. 

 Comment: One commenter expressed concern that because quality improvement 

initiatives require complete trust in the participating organizations, it may be difficult for 

providers to separate the potential conflict that would exist between a payor organization 

that is both paying for services and providing assistance in improving quality and 

efficiency. The commenter stated that providers would be placed in the position of 

determining whether activities are truly in the best interest of the beneficiary or in the 

best interest of the payor organization. 

 Some commenters requested that CMS revise the proposed regulatory language 

changes in the final rule to exclude provider and payor organizations from QIO eligibility 
1102 

criteria as either a prime contractor or as subcontractors, or to revise the proposed 

changes to reflect similar language to that of the State Medicaid agencies that are 

required to demonstrate that they can act with independence and objectivity from their 

own program. These commenters suggested that provider and payor organizations are 

advocates for their paying members and believed that there may be an unfair competitive 

advantage for other business opportunities where, for example, a State hospital 

association may be put in the position of reviewing and/or undertaking quality initiatives 

with its own members. In addition, the commenters stated that these proposed changes 

may undermine conflict-of-interest safeguards currently in place because these 

organizations have professional and financial relationships that they believe may hinder 

their ability to be independent and neutral. 

 Response: We agree with the commenters that impartiality and objectivity are 

keystones to QIO success; these commenters suggested that we revise our proposed 

changes to §§ 475.102 and 475.103 to reflect similar language to that of proposed 

§ 475.102(c), which requires that State Medicaid agencies demonstrate that they can act 

with independence and objectivity from their own program. We also understand that 

payor organizations may find themselves in a difficult position when working with the 

providers who receive payments from the organization. We appreciate the public 

comments cautioning us about potential conflicts of interest that may arise from our 

proposal in § 475.105 about the eligibility of payor organizations to serve as QIOs. We 

believe that all QIOs should be required to perform quality improvement initiatives in a 

fair and neutral manner and believe that this criterion should be applied to all QIO 
1103 

functions. We also agree that an organization should be free from any conflicts of 

interest and be able to serve as an objective party. 

 To address these concerns, we are finalizing proposed § 475.101 by adding a new 

paragraph (d) that requires all QIOs to “[d]emonstrate the ability to perform the functions 

of a QIO with objectivity and impartiality and in a fair and neutral manner.” In addition, 

in this final rule, we have added language to § 475.105(a)(3) to make payor organizations 

ineligible for QIO contracts unless the payor organization “demonstrates to the 

satisfaction of CMS that, in performing QIO activities, the payor organization will act 

with complete objectivity and independence from its payor program.” 

 After consideration of the public comments we received, we are adopting as final, 

with one minor technical modification, the proposed revised provisions of § 475.101(a) 

through (c) that contain the requirements that an organization must meet to be eligible for 

a QIO contract. In paragraph (c), we are finalizing a minor technical modification to the 

text to use “and/or” instead of “or” to be consistent with how paragraph (b)(2) treats 

eligibility standards for performing case review and quality improvement initiatives. We 

are finalizing a new paragraph at § 475.101(d) to add an objectivity and neutrality 

requirement as well. 

b. Eligibility Requirements for QIOs to Perform Case Reviews and Quality Improvement 

Initiatives (§ 475.102 and § 475.103) 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43676), we proposed to list the 

various factors CMS may use to determine that an organization has demonstrated its 

ability to perform case reviews. We stated that we do not consider this list to be 
1104 

comprehensive, but an indication of the types of factors we intend to focus on. The list of 

factors emphasizes the importance of QIOs having access to qualified physicians and 

practitioners for the purpose of performing case reviews. 

 Case reviews are concerned with care that was, should be, or should have been 

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 proposed to revise 

§§ 475.102 and 475.103 to provide that CMS will determine if an organization is capable 

of performing case reviews and quality improvement initiatives, respectively, using an 

illustrative list of similar factors and including the same constraints on Medicaid agencies 

serving as QIOs (with the one additional requirement that these agencies demonstrate 

objectivity and independence from the Medicaid program). Because the proposals at 

§§ 475.102 and 475.103 are similar, we discuss these proposals, the public comments we 

received, and the final provisions together. 

 In § 475.102 (a) and § 475.103(a), we proposed illustrative lists of the types of 

factors CMS may use to determine that an organization has demonstrated the ability to 
1105 

perform case reviews or quality improvement initiatives based on factors related to how 

the QIO work will be performed and the underlying capabilities necessary for performing 

well. We do not consider these lists to be comprehensive, but an indication of the kinds 

of factors on which we intend to focus. Under our proposals in § 475.102(a)(1) and 

(a)(2) and § 475.103(a)(1) and (a)(2), CMS would consider virtually identical factors 

such as: (1) the organization’s proposed processes, capabilities, quantitative and/or 

qualitative performance objectives, and methodology for performing case reviews or 

quality improvement initiatives; and (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 or quality improvement 

initiatives.

 Under § 475.102(a)(3) and (a)(4), with respect to performing case reviews, we 

proposed that CMS would consider 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; and the organization’s ability to take into consideration 

evidence-based national clinical guidelines and professionally recognized standards of 

care. Under § 475.103(a)(3), with respect to performing quality improvement initiatives, 

we proposed that CMS would consider the organization’s access to professionals with 

appropriate knowledge of quality improvement methodologies and practices. Our 

proposals at § 475.102(a)(5) and § 475.103(a)(3) included the use of virtually identical 

evaluation factors such as the organization’s access to qualified information technology 

(IT) expertise. In the proposed rule, regarding § 475.102(a) and § 475.103(a), we 
1106 

solicited comment on whether the regulation text should incorporate the standards for 

QIOs that we proposed to use and the factors we intend to consider when determining 

whether those standards have been met. The comments received and our responses are 

set forth below. 

 Comment: One commenter suggested that, in determining QIO eligibility as a 

result of the proposed changes, CMS consider how case review types, such as beneficiary 

complaints and general quality of care reviews, may be more effective when carried out 

by a local QIO organization rather than a regional model. In addition, as noted above, 

several other commenters raised concerns about using regions rather than States as the 

service area for QIO contracts. 

 Response: We discuss above many of the public comments about regional QIO 

contracts in the context of our rule finalizing the definition of “QIO area.” We also 

considered whether the success of case review types that involve direct contact with 

beneficiaries would suffer under a regional model. We believe that an established 

subcontracting relationship that one QIO currently has with 20 other QIOs to perform 

appeals work for them during the weekends serves as a model that has shown that this 

type of multi-State coordination can be done. In fact, this arrangement has been done 

seamlessly and with greater efficiency than the State-based model. This model allows 

those QIOs who have a low volume of appeals during their weekend downtime to direct 

those cases to a single entity. This arrangement has generated savings in administrative 

overhead by redirecting the fragmented volume to one QIO for more efficient processing. 

We believe that the success of this existing model could be replicated under regional QIO 
1107 

contracts for case review functions. However, as we discuss above, we agree with 

commenters that sensitivity to and knowledge of the local health care area and issues are 

necessary for QIO success. Along these lines, we are finalizing § 475.102(a)(3) with the 

addition of the word “local” to clarify that this is one of the factors to be considered in 

determining whether an organization has demonstrated the ability to perform case 

reviews. In addition, we note that §§ 475.102(b) and 475.103(b) explicitly permit CMS 

to consider the geographic location of an organization as part of this determination about 

the ability to perform, respectively, case reviews and quality improvement initiatives. 

 Comment: Although some commenters supported CMS’ proposed criteria, many 

commenters suggested additional or revised criteria for determining whether an 

organization has demonstrated the ability to perform case reviews. Some commenters 

indicated that CMS should add to its evaluation criteria whether an organization can 

conduct case reviews in a fair and neutral manner. One commenter suggested that CMS 

add: (1) experience as a QIO; (2) whether the organization has a formal, internal quality 

management system; (3) whether the staff has quality credentials (for example, Certified 

Professional in Healthcare Quality, Certified Health Care Quality Management, and Six 

Sigma); and (4) whether the organization is free of actual or perceived organizational 

conflicts of interest and able to serve as an objective party. One commenter specifically 

requested guidance regarding CMS’ statement that it will not “limit evidence an 

organization may present to demonstrate its capability to perform case reviews” when 

reviewing prior experience. Many commenters suggested additional or revised criteria 

for determining whether an organization has demonstrated the ability to perform quality 
1108 

improvement activities. These commenters suggested that CMS add: (1) ability to foster 

a relationship of trust and engagement with clinicians and executive leaders; 

(2) demonstrated capability to convene and establish effective working relationship with 

various stakeholders, because QIOs should support coordinated care and breaking down 

silos and building a more coordinated infrastructure; (3) demonstrated capacity to collect, 

analyze, and share data with providers that spurs improvement because data collection 

and sharing data are critical in quality improvement; (4) ability to complement and not 

duplicate quality improvement efforts already underway through State, regional, and 

Federal programs; (5) ability to access and include others, especially those with 

performance improvement experience; (6) experience with and an approach to change 

management because CMS has on many occasions stated that QIOs will be required to 

represent CMS as “change agents”; (7) demonstrated ability to be a neutral, independent 

organization and provide objective assistance to providers without favoritism or conflict 

of interest, specifically because failing to achieve quality metrics can lead to financial 

penalties; and (8) demonstrated ability to share best practices. 

 Response: As discussed above in connection with our final rule at § 475.101(d), 

we believe that whether an organization can conduct case reviews in a fair and neutral 

manner is an important consideration and that this criterion of neutrality and fairness 

should be applied to all QIO functions. In addition, we agree that this regulation should 

not limit the information and factors used to determine whether an organization applying 

to be a QIO has demonstrated its ability to perform case review and/or quality 

improvement initiatives. Because we are finalizing our proposal to expand criteria to 
1109 

qualify for QIO contracts beyond physician-sponsored and physician-access 

organizations and we intend to make our qualification criteria fair for all potential 

organizations who qualify, we will interpret and implement §§ 475.102 and 475.103 as 

providing illustrative and nonexhaustive criteria for consideration. We do not plan to 

unreasonably limit evidence an organization may present to demonstrate its capability to 

perform QIO functions to specific QIO experience and agree that information such as that 

identified by the commenters may be relevant. We particularly appreciate the 

recommendation that we require that all QIO organizations have a formal internal quality 

management system and a staff with quality credentials, and although the factors listed in 

paragraph (a) are not meant as an exhaustive list, we will take into consideration the 

requirements recommended by these commenters and we may include them in our RFPs. 

 Comment: Commenters requested more information regarding how CMS will 

evaluate and weigh reasons for and against the award of contracts, and noted that CMS 

proposed nonexhaustive lists of types of factors without specifying the weight each 

would receive or what other factors CMS might consider. 

 Response: Although we proposed to establish the “minimum level of resources 

and skills” an organization must have in order to demonstrate its capability to perform as 

a QIO, we do not intend for the factors listed in the regulations to be the only criteria we 

use in our evaluation of organizations requesting QIO contracts. The RFP will include 

detailed information that will be used in evaluating each offeror and, if we decide to use a 

weighted evaluation methodology, the weights to be used in the evaluation of proposals. 
1110 

 Our proposals at § 475.102(b) and § 475.103(b) include the following virtually 

identical evaluation factors. In paragraph (b) of these sections, we proposed that CMS 

may consider characteristics such as the geographic location, size, and prior experience, 

that CMS finds relevant, of an organization in order to determine whether the 

organization has the capability to perform case review activities or quality improvement 

initiatives. A summary of the public comments we received on paragraph (b) of 

§§ 475.102 and 475.103 and our responses are set forth below. 

 Comment: Some commenters supported using a regional approach to conduct 

case reviews. However, the commenters urged CMS to make sure that contractors have 

mechanisms in place to ensure that they comprehend and consider regional characteristics 

of providers. Another commenter argued that case reviews would be more effective 

when done locally rather than by a centralized or regional organization because it is more 

effective for a local QIO to uncover breakdowns in systems and processes of care. 

 Response: In addition to the provisions in paragraph (a) of §§ 475.102 and 

475.103 that address involvement and access to physicians with appropriate expertise and 

our addition of local characteristics to the list of what a QIO must be able to consider in 

performing case review, our proposal in paragraph (b) for both §§ 475.102 and 475.103 

would permit CMS to consider the geographic location and size of organizations applying 

to be QIOs. As noted above, we believe that the current QIO tested subcontracting 

structure for handling appeals review across State lines verifies that case review can be 

performed effectively and efficiently through a more regionalized structure. To the 

extent that the geographic location of an organization is a barrier or enhancement to 
1111 

successful performance, the regulation as proposed and as finalized would permit CMS to 

consider the location. The final rule provides the flexibility that is necessary to consider 

all relevant facts about the geographic location and size of an organization compared to 

the QIO area that will be served. Further, the addition of the term “local” to § 475.102(a) 

clarifies that we deem the consideration of local characteristics essential. 

 Comment: Another commenter stated that the second sentence proposed in 

§ 475.103(b) should be revised so that CMS must consider prior experience in health care 

quality improvement and that such prior experience must include conducting quality 

improvement initiatives that achieved successful results. 

 Response: We agree with the recommendation that CMS should consider prior 

experience in health care quality improvement and whether that such prior experience 

achieved successful results. In response to this comment, we are finalizing § 475.103(b) 

with additional language to include the commenter’s suggestion that CMS consider 

relevant quality improvement initiative experience and whether it achieved successful 

results. 

 Finally, we proposed to include in a revised version of paragraph (c) of § 475.102 

clarifications to the text that reflect the existing regulatory text at § 475.104(d), with 

some minor modifications. Section 475.104(d) currently includes requirements that a 

State government must meet in order to qualify as a QIO. Under our proposal, § 475.102 

would be revised to apply this additional requirement in connection with case reviews. 

Similarly, as proposed, the provision at § 475.103(c) includes the requirements that a 

State government must meet to qualify as a QIO that performs quality improvement 
1112 

initiatives. While both §§ 475.102(c) and 475.103(c), with respect to State governments 

that administer a Medicaid program, maintain the substance of the existing rule, each of 

this makes it clear that the scope of the review will be limited to case review and quality 

improvement initiatives, respectively. In order to do this, in § 475.102(c), we proposed 

to replace the term “utilization and quality review functions” with the term “case review” 

and in § 475.103(c), we proposed to replace the same term with “quality improvement 

initiatives.” We proposed to revise the language in § 475.102(c) and § 475.103(c) 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. We did not receive any public comments on the 

proposed revisions to § 475.102(c) and § 475.103(c), and therefore are finalizing them as 

proposed. 

 We also received a number of public comments about §§ 475.102 and 475.103 

generally rather than about specific paragraphs of those sections. We address those 

public comments below. 

 Comment: Commenters stated that QIOs should be permitted flexibility to offer 

different types of assistance to providers because many different approaches may be 

pursued by providers in a given jurisdiction. 

 Response: We appreciate this comment and do not plan to use this regulation to 

prohibit QIOs from offering technical assistance or to implement quality improvement 
1113 

initiatives through approaches and techniques if they are determined to be the best for the 

population in the QIO area. 

 Comment: Commenters suggested that CMS allow hospitals to work with 

multiple QIOs because different QIOs may have various types of subject-matter 

expertise. However, commenters also noted that managing multiple contracts may be 

difficult for small or resource-strapped hospitals, potentially limiting their involvement in 

quality improvement activities. 

 Response: We appreciate the support for separating some QIO functions to allow 

for QIO development of specialized expertise and will take this comment into 

consideration when developing the details in our RFPs. We also understand that working 

with multiple QIOs may be difficult, and we will include national coordination of QIO 

tasks through NCCs to aid providers in navigating the QIO contract structure. 

 Comment: One commenter stated that it is essential to quality improvement 

initiative work to have a local presence and understand contextual factors such as 

pressures and incentives of the community and its circumstances. Another commenter 

stated that the planned changes would make QIOs less focused on quality improvement at 

the community level and less able to forge partnerships with providers and patients to 

address challenges. 

 Response: We agree with the importance of a local presence as a means to forge 

important partnerships with providers and beneficiaries. We intend to spell out these 

requirements in detail in the RFPs. We believe that our intent is made clear in § 475.103 

of the regulations which states that in determining eligibility for performing quality 
1114 

improvement initiatives, we will take into consideration “the organization’s proposed 

involvement of and access to physicians and practitioners in the QIO area with the 

appropriate expertise and specialization in the areas of health care concerning the quality 

improvement initiative” and that paragraph (b) permits us to consider the geographic 

location of a QIO as necessary. Our intent is to put in place safeguards to ensure there is 

local involvement during quality improvement initiatives. Although case review 

concerns care that was given at one specific place, quality improvement initiatives may 

address national or regional issues. We would like reiterate that these characteristics are 

not an exhaustive list and that these factors can be considered in each procurement as 

necessary. 

 Commenters on the proposed revisions to § 475.102 and § 475.103 also raised the 

topic of objectivity and impartiality of the QIO. These public comments are addressed 

above in connection with the general eligibility requirements in § 475.101. 

 After consideration of the public comments we received, we are adopting 

proposed §§ 475.102 and 475.103 as final, with modifications. We are finalizing 

paragraph (a)(3) of § 475.102 with the addition of “local” to the list of characteristics that 

an organization must be able to take into consideration. We also are making minor 

revisions to the proposed text in finalizing § 475.103: (1) to change the wording in 

§ 475.103(a)(2) and (a)(3) in order to mirror the language in § 475.102(a)(2) and to avoid 

any inadvertent ambiguity as to whether these provisions will be interpreted consistently; 

(2) to make technical edits to the text of § 475.103(a)(2) and (a)(3) to change “initiative” 

to “initiatives” and “methodologies” to “methodology” to improve readability of these 
1115 

paragraphs; (3) to create § 475.103(a)(4) to reorganize how we have included access to 

qualified information technology expertise as a factor; and (4) to revise § 475.103(b) to 

specify that CMS may consider whether quality improvement initiative experience 

“achieved successful results.” 

c. Prohibitions on Eligibility as a QIO (§§ 475.105 and 475.106) 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43677), we proposed 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 proposed 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) 
1116 

of the Act, as amended, permits the award of a QIO contract to a payor organization 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, the payor entity can qualify as a QIO so long as all other eligibility 

criteria are met. We reflected this interpretation in the proposed rule as § 475.105(a)(3). 

As discussed in section XVII.C.4.a. of this final rule with comment period, after 

consideration of the public comments we received, we also are revising the final 

requirement under § 475.101(d) to impose a general objectivity requirement for all QIOs. 

In addition to that, under § 475.105(a)(3), we are finalizing specific provisions for payor 

organizations that serve as QIOs which state that any payor organization meeting these 

requirements (now broken out and specified in § 475.105(a)(3)(i)) must also demonstrate 

to CMS’ satisfaction that “in performing QIO activities,” the payor organization will act 

with complete objectivity and independence from its payor program (now specified in 

§ 475.105(a)(3)(ii)). 

 The existing paragraph (b) of § 475.105 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 proposed to delete and reserve paragraph (b) of 

§ 475.105 in its entirety. Paragraph (c) was proposed to remain largely unchanged except 
1117 

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 stated that we do not believe 

that these proposed changes affect the underlying substance of the prohibitions. 

 As noted above, we proposed to delete and reserve all of § 475.106 in light of our 

proposed changes to § 475.105. We noted our belief that aspects of § 475.106 that we 

have not proposed to incorporate into § 475.105 are obsolete due to the passage of time. 

Comment: Some commenters believed that health care affiliates should not 

conduct case reviews of health care facilities in the QIO area but also believed health care 

facility affiliates may be excellent organizations to lead the quality improvement 

functions of QIOs as evidenced through the achievements made through the HEN 

initiative. Therefore, the commenters requested that CMS revise the language of the 

proposed changes in the final rule so that health care facility affiliates would be eligible 

for QIO contracts that focus on quality improvement efforts. In addition, the commenters 

indicated that if CMS were not to make this suggested revision, then CMS would 

preclude some of the entities with whom CMS currently partners under the HEN 

initiative from becoming QIO contractors. 

 Response: We believe that implementing the additional flexibilities granted by 

the changes in the statute will improve the QIO Program. However, based on the 

authority being adopted with the revisions to §§ 475.101 through 475.103, we will 

cautiously make changes that have been tested and that have appropriate safeguards to 
1118 

protect against any real or perceived conflict of interest among QIOs, providers, and 

beneficiaries. Section 1153(b)(3) of the Act expressly prohibits a health care facility or 

an affiliate of a health care facility from serving as a QIO in the area within the area 

served by the facility. The statute also specifies when an organization will not be 

considered to be affiliated with a health care facility in connection with this prohibition. 

We believe that the restriction under section 1153(b)(3) of the Act prohibits CMS from 

entering into QIO contracts with health care affiliates, as reflected in this final rule, 

means that some current quality contractors (such as some HENs participating in the 

Partnership for Patients initiative, for example) may not qualify as QIOs. 

 After consideration of the public comment we received, we are adopting, as final, 

proposed revised § 475.105 with one modification: We are adding language under 

paragraph (a)(3) and, in the process, splitting some of the text in paragraph (a)(3) into 

two paragraphs (i) and (ii), to specify that a payor organization will be considered 

ineligible for QIO contracts unless a payor organization is a more qualified entity to 

perform one or more of the functions of a QIO described in § 475.101(b), meets all the 

other requirements and standards of the part, and demonstrates to the satisfaction of CMS 

that, “in performing QIO activities, the payor organization will act with complete 

objectivity and independence from its payor program.” 

5. QIO Contract Awards (§ 475.107) 

 The existing regulations at 42 CFR Part 475 include requirements related to the 

establishment of QIO contracts and the assignment of bonus points. We proposed to 

delete the portions of existing § 475.107(c) pertaining to the assignment of up to 10 
1119 

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 “physician-access” because these provisions are obsolete in 

light of the changes to section 1152(1) of the Act and our proposals relating to the 

eligibility standards for an organization awarded a QIO contract. We also proposed to 

use cross-references in § 475.107(a) and (b) to the revised standards we proposed in 

§§ 475.101 through 475.103. We proposed 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)). 

 In addition, we proposed to revise the regulatory language addressing the length 

of QIO contracts. 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 proposed 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. 

 We received public comments related to these topics and discuss them below. 

 Comment: Some commenters stated that CMS’ proposal that QIO contract 

awards be based on the selection of an organization from all proposals that set forth 

minimally acceptable plans may be construed to limit the contract award determination to 

a “lowest price technically acceptable standard” (LPTA). In addition, the commenters 
1120 

discouraged CMS from applying LPTA evaluation criteria and proposed that CMS 

continue its current policies and make selection based on a determination of best value 

using a “tradeoff” evaluation process in which technical quality is the primary 

consideration and all other evaluation factors are more important than cost/price. 

 One commenter also noted that ensuring the highest quality services should be 

considered the ultimate criterion in selecting a quality improvement organization. 

Another commenter noted the value of LPTA procurements, but suggested that, if CMS 

applies this approach to case reviews, it define “technically acceptable” to ensure 

adequate quality because ensuring the highest quality services should be considered the 

ultimate criterion in selecting a case review QIO. Some commenters further suggested 

that CMS clarify the proposed changes pertaining to past performance because they 

believed that, in the context of lowest price technically acceptable, an offeror whose 

experience is “unknown” is considered “acceptable” for contract award. These 

commenters asserted that CMS’ proposed changes (to use lowest price technically 

acceptable and consider past performance) are conflicting and reiterates that, if prior 

experience/past performance is important, lowest price technically acceptable bids are not 

an acceptable evaluation criterion. 

 Response: Although these commenters generally identified §§ 475.101, 475.102 

and 475.103 as the basis for the comments, we discuss these comments here because they 

also address concerns about the process we proposed in § 475.107 for how to conduct the 

procurement for QIO contracts. Part of our proposal was meant to establish the 

“minimum level of resources and skills” that an organization must have in order to 
1121 

demonstrate its capability to perform as a QIO and we proposed at § 475.107(a) and (b) 

that CMS identify the proposals that meet the standards described in §§ 475.101 through 

475.103. However, we did not intend for the factors listed in those sections to be the only 

criteria in our evaluation of organizations requesting QIO contracts or the ultimate 

decision to award a QIO contract. In addition to the minimum requirements listed in 

§ 475.101, other standards we included in other sections are examples of the factors we 

may use and should not be interpreted as an exhaustive list. 

 We do not intend to change our evaluation methodology to begin using the lowest 

price technically acceptable standard and did not intend our proposal to suggest that. We 

will continue our current practice of making a selection based on a determination of best 

value that takes into consideration both technical quality and price. As the contracting 

process is a public one, with administrative processes for questions to be asked and 

answered, protests to be filed and addressed, and subject to oversight, we are confident 

that organizations applying to receive QIO contracts will be adequately informed of the 

evaluation criteria and methods used to award contracts and that it is in the best interest 

of the QIO Program for the regulatory standards to be flexible. 

 We are finalizing text at § 475.107(a) that we believe more clearly communicates 

that CMS will ensure compliance with the minimum standards described in §§ 475.101 

through 475.105 without suggesting that CMS will award contracts to every entity that 

meets those minimum requirements. The text finalized in this final rule at § 475.107 

makes it clear that CMS will ensure that all QIO awardees meet the requirements of 

§§ 475.101 through 475.103, subject to the restrictions at § 475.105. In addition, we 
1122 

believe that the text as finalized preserves the statutory flexibility provided for the 

contracting process consistent with the intent underlying our proposal. The finalized 

regulation at § 475.107(a) will ensure that QIO contract awardees meet the requirements 

of §§ 475.101, 475.102, and 475.103, as applicable and subject to the prohibitions in 

§ 475.105. 

 Comment: Many commenters supported CMS’ proposed changes of extending 

the contracting period from 3 years to 5 years. Some commenters stated that this 

proposal may allow for an improvement in the QIO’s review activities through sustained 

data collection. In addition, these commenters indicated that this proposed change would 

provide more time to focus on the assigned tasks rather than the demands of the 

contracting cycle. 

 One commenter stated that it would be prudent for CMS in awarding a contract to 

a new QIO organizational type to consider awarding a 2-year contract with 3 optional 

1-year expansions in order to be certain that the new QIO organization is capable of 

performing the tasks in an acceptable manner. 

 Response: We appreciate the commenters’ support of the change in contract term 

to 5 years. We agree that the 5-year contract cycle will allow CMS and the QIOs to have 

a meaningful portion of the contract term to concentrate on program work and the 

assigned tasks rather than preparing for contract transition. We acknowledge the 

commenter’s suggestion that a shorter base period with option years may allow for us to 

make contract changes if a new organization is having difficulty with the contract 

requirements. However, section 1153(c)(3) of the Act requires that the contract “shall be 
1123 

for an initial term of five years and shall be renewable for terms of five years thereafter.” 

Therefore, we are finalizing the proposed language that extends the QIO contract term to 

5 years. 

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

final, proposed § 475.107 with modifications. We are revising § 475.107 to make the 

language more succinct and to avoid any misinterpretation that this section might 

somehow restrict contracting procedures or otherwise limit the Agency’s flexibility. 

Further, we are finalizing, at paragraph (b) instead of at paragraph (c), the proposed 

language for the length of QIO contracts.

XVIII. Final Rule: 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 
1124 

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 
1125 

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 hospital-based 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. In the CY 2014 OPPS/ASC proposed rule 

(78 FR 43678), we indicated that we were taking this opportunity to make a technical 

correction to paragraph (1)(ii) and the introductory text of the definition of “hospitalbased 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 proposed 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 proposed 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. 
1126 

 We did not receive any public comments on our proposal to make these technical 

corrections to the definition of “hospital-based EP” in § 495.4 of the regulations. 

Therefore, we are finalizing these technical corrections as proposed. Specifically, 

(1) paragraph (1)(ii)(A) of the definition of “hospital-based EP” in § 495.4 is revised to 

read “The Federal fiscal year 2 years before the payment adjustment year; or” and 

paragraph (1)(ii)(B) of the definition is revised to read “The Federal fiscal year 3 years 

before the payment adjustment year.”; and (2) the introductory text of the definition is 

revised 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: 
1127 

• 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 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 
1128 

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 
1129 

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 

line-level 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 
1130 

by EPs in Method II CAH outpatient settings when we annually determined the hospitalbased 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 hospital-based 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 line-level 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 hospitalbased 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 hospital-based determinations for EPs for the 
1131 

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. 

 As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43679), we 

want to avoid further delay in taking into account the services furnished by EPs in 

Method II CAH outpatient settings. Therefore, we proposed 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 made this proposal solely in order to 

take into account the special circumstances of those EPs as described above. We stated 

that, under this proposal, we would be able to take into account Method II CAH claims 

when making hospital-based determinations for payment year 2013, one year before we 

would be able to do so under the existing regulations. Specifically, we proposed that, for 

payment year 2013 only, we would use a two-step process to make hospital-based 

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 (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 
1132 

meaningful use for the relevant EHR reporting period and potentially qualify for an EHR 

incentive payment for payment year 2013. We indicated in the proposed rule that 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 

hospital-based 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 nonhospital-based under the existing 

regulation should have those determinations reversed by later (although more complete) 
1133 

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 hospital-based 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. We stated that it was important to note that, due to the systems 

limitations described above, we were 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 lacked the ability to retrieve line-level furnishing EP 

identifying information for Method II CAH claims during the years prior to FY 2013. 

We invited public comments on this proposal. 

 Comment: Commenters were uniformly in favor of the proposal. Specifically, 

the commenters stated that they appreciated the agency’s proposal to allow physicians 

who provide services in the outpatient departments of CAHs and have their services 

billed by the CAH under Method 2 to participate in the EHR incentive program in 2013. 

While the commenters noted that it is unfortunate that CMS’ information systems have, 

until now, unfairly prevented these physicians from participating in the EHR Incentive 

Program because they could not use data from the UB-04 claims to identify services 

provided by the physician, they urged CMS to adopt both the proposed approach to 

identifying eligible physicians using 2013 claims data submitted on the UB-04 and the 
1134 

proposed hold harmless policy for those physicians who are determined to be eligible 

using the 2012 data, but not the new 2013 data. They also urged CMS to act as quickly 

as possible to provide detailed guidance on how physicians can take advantage of this 

policy change. 

 Response: We appreciate the commenters’ support. 

 After consideration of the public comments we received, we are finalizing our 

proposal concerning hospital-based determinations for certain EPs for the 2013 payment 

year. We will move as quickly as possible to provide detailed guidance on how EPs can 

take advantage of this policy change and to educate rural providers accordingly. 

 We are finalizing our proposal, without modification, 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. For payment year 2013 only, we will use a 

two-step process to make hospital-based 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 (October 1, 2012 through 

September 30, 2013), we will use that data to identify which EPs had Method II CAH 

service billings during that year, and we will 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 will be eligible to demonstrate 

meaningful use for the relevant EHR reporting period and potentially qualify for an EHR 
1135 

incentive payment for payment year 2013. As we indicated in the proposed rule, 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 hospital-based on the basis of 

FY 2013 claims data, we will 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) will be held harmless to the determination made on the basis of FY 2013 

claims data and considered nonhospital-based for payment year 2013. 

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 
1136 

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 

 As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43680), 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 
1137 

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 proposed 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 stated that we understood 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 invited public comments on this proposal. 

 Comment: One commenter supported the proposal. 

 Response: We appreciate the commenter’s support. 
1138 

 After consideration of the public comment we received, we are finalizing, without 

modification, the proposed revision to § 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. 

XIX. Medicare Program: Provider Reimbursement Determinations and Appeals: 

Final Rule 

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 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. 
1139 

 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 hospital-specific 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 Pub. L. 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. Technical Conforming Change 

 As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43680 through 

43681), certain matters affecting payment to hospitals under the IPPS are not subject to 
1140 

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), Pub. L. 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. 

 As we stated in the CY 2014 OPPS/ASC proposed rule, 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 
1141 

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, in the CY 2014 

OPPS/ASC proposed rule (78 FR 43681), we proposed to make a technical conforming 

change to § 405.1804(a) to conform the regulation to the current statute. This technical 

conforming change clarifies 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. 

 We did not receive any public comments on this proposed technical conforming 

change. Therefore, for the reasons set out in the proposed rule, we are finalizing the 

proposed revisions to § 405.1804(a) without modification. 

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 42 CFR 413.20(b) and 413.24(f). Through its review and settlement process, the 

intermediary determines the total amount of reimbursement due to 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 
1142 

determination of the total amount of program reimbursement due to 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 to a provider sometimes first arise in, that is, the pertinent facts occur 

or start during, or are reported by the provider and determined by the intermediary 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 to 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.” Some of the factual underpinnings of determinations 

of reasonable cost reimbursement under section 1861(v) of the Act are subject to review 
1143 

for each cost report in which the provider claims the cost under the general principle that 

“payment is to be made on the basis of current costs of the individual provider, rather 

than costs of a past period” (42 CFR 413.5(a)). For example, reimbursement for a 

provider’s bad debts arising from unpaid Medicare deductibles and coinsurance may be 

denied under 42 CFR 413.89 in the first fiscal period it is claimed because the collection 

effort on the account has not ceased and the account cannot yet be deemed worthless. 

However, the same bad debt may be deemed allowable in the following fiscal period, 

when the collection effort has ceased and the account has been determined to be 

worthless. Similarly, interest expense is subject to review each fiscal period to determine 

whether it is allowable for each fiscal period during the life of the loan 

(42 CFR 413.153). 

 Other “predicate facts” are determined once, either in the first fiscal period in 

which they arise or are first determined, or in the first fiscal period that they are used as 

part of a formula for reimbursement, and then applied as part of that reimbursement 

formula for several fiscal periods thereafter. These facts are not reevaluated annually to 

determine whether they support a determination that a particular cost is reasonable 

because the formula is a proxy for reasonable costs. Instead, the formula itself will 

provide for changes in costs through an updating factor or otherwise. For example, the 

determination of an IPPS-exempt hospital’s target amount (that is, per-discharge (case) 

limitation) or rate-of-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 
1144 

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 “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 itself is a “predicate fact” for the following 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. 
1145 

 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 in the intermediary determination that is appealed. We refer readers to 

section 1878(a) of the Act and current 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 provides that a 

provider’s appeal rights after reopening are limited to the specific matters altered in the 

revised intermediary determination. 

 In many instances, when a factual matter arises in, or is determined for, the same 

fiscal period as the cost reporting period at issue, 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 
1146 

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, an earlier fiscal period and that factual data then is used differently or 

applied to determine reimbursement in one or more later fiscal periods, 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: (1) the NPR for the cost reporting period in which the predicate 

fact first arose, or was first determined; or (2) the NPR for the period for which such 

predicate fact was first used or applied by the intermediary to determine reimbursement. 

For example, assuming base period costs calculated for the period consisting of the 

12 months prior to the hospital’s 2002 cost reporting period, that is, its 2001 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 hospital’s 

2001 base period or its 2002 period (when the base year costs were first used to 

determine reimbursement). 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, that is, its 2001 or 2002 cost reporting periods. These are the only fiscal 

periods in which the hospital could or seek reopening of its base period costs. Of course, 

if the hospital’s base period costs were later redetermined through appeal or reopening of 
1147 

its 2001 or 2002 NPRs, then the hospital could appeal or request reopening of those 

determinations. In addition, the hospital could appeal the determination of the 2008 cost 

reporting period target amount within 180 days of the NPR for the 2008 cost reporting 

period. The hospital could also request the reopening of the determination of its 2008 

cost reporting period target amount within 3 years of the NPR for its 2008 cost reporting 

period. However, the hospital could not revise the determination of its 2001 base year 

costs through an appeal or reopening of its 2008 target amount. 

 Many reimbursement formulas require the use of predicate facts, where data or a 

factual finding is taken from an earlier fiscal period and used to determine the amount of 

provider reimbursement in the fiscal period under review. As discussed above, we 

believe that these 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 was first 

determined by the intermediary or the fiscal period in which such fact was first used or 

applied to determine reimbursement. In some instances, a reimbursement statute may 

necessitate the use of data from a fiscal period that is not found in that period’s cost 

report or NPR (such as “off the cost report,” or underlying documentation). We believe 

that 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 

pursuant to that reimbursement statute. 

 However, we recognize exceptions when a particular legal provision (of the 

Medicare statute, regulations, or CMS rulings) authorizes, as part of a specific 
1148 

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 per-resident amount used to calculate reimbursement for direct 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 the lawfulness of the 

reaudit regulation (then designated as § 413.86(e)). 

 As discussed above, we also recognize that not all facts occurring in prior fiscal 

periods are “predicate facts” in the same sense, because they are not determined once, but 

may be subject to review on an annual basis as part of the determination of a provider’s 

reasonable cost reimbursement under section 1861(v) of the Act, such as the facts 

underpinning reimbursement for Medicare bad debts or allowable interest expense. 

Because these facts are subject to review each fiscal period by the intermediary, the 

intermediary’s findings should also continue to be subject to review, either through an 

appeal or reopening. 

 As we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43683), we 

believe that the above-described interpretation of our rules regarding the appeal and 

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 
1149 

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’s 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 in which such predicate fact first arose or for the fiscal period for which 

such fact was first determined by the intermediary. Further, the use or 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’s cost in question. 

Accordingly, in the CY 2014 OPPS/ASC proposed rule (78 FR 43682 through 43683), 
1150 

we proposed 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 

of the NPR 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/or (2) the application of 

the predicate fact is subject to change through a timely appeal or reopening of the NPR 

for the fiscal period in which the fact was first used (or applied) by the intermediary to 

determine the provider’s reimbursement. As discussed earlier, this “first application” or 

“first use” of a predicate fact may involve underlying documentation that is “off the cost 

report.” 

 We note that a recent court decision conflicts with our settled interpretation of the 

regulations for provider appeals and cost report reopenings. 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 were such predicate facts 

timely appealed or reopened for the fiscal periods in which such facts were first used (or 

applied) by the intermediary to determine the providers’ reimbursement. The predicate 

facts at issue in this case were the teaching hospitals’ full-time equivalent (FTE) resident 

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 direct GME reimbursement for the first time in the hospitals’ 1998 cost reporting 
1151 

periods. The providers could have challenged their FTE resident 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 direct GME 

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 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 proposed 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 noted that this 

proposed revision of § 405.1885 would apply to all Medicare reimbursement 
1152 

determinations, and not only to direct GME payment, which was the particular issue in 

Kaiser Foundation Hospitals v. Sebelius. In the CY 2014 OPPS/ASC proposed rule 

(78 FR 43683 through 43684), we stated that, because the proposed revision clarifies 

longstanding agency policy, we were 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) 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 stated our view that the proposed 

revision was not impermissibly retroactive in effect because the proposal clarified 

longstanding agency policy and practice, and was procedural in nature. We referred 

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, we referred readers to 

section 1871(e)(1)(A) of the Act, which 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 various statutory provisions such as the target amount (under 
1153 

section 1886(b) of the Act) and the cap on residents for GME reimbursement (under 

section 1886(h)(4)(F)(i) of the Act); the 180-day period for filing appeals to the Board 

(under section 1878(a)(3) of the Act); and the 3-year limit on reopening (under 

§§ 405.1885(b)(1), (2) of the regulations). We have further determined that it would be 

in the public interest to apply 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 proposed revisions only to § 405.1885, in order to clarify our 

regulations in accordance with this proposal, we stated that we were 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 requested public 

comments with respect to amending the language of these additional regulations for 

appeals before the intermediary and the Board, but did not receive any timely comments 

on this point. 

 Comment: Two commenters opposed adoption of the proposed revisions because 

including findings of predicate facts in the reopening rule would undermine the accuracy 

of reimbursement determinations when a provider or the Medicare program learned of the 

inaccuracy after the 3-year period for reopening had expired. Other commenters opposed 
1154 

the change because it would prevent teaching hospitals from challenging their IME or 

direct GME resident caps if they have not already done so. 

 Response: We disagree with the commenters that the revisions to the reopening 

rules would materially undermine the accuracy of Medicare reimbursement because a 

provider could still seek revisions to a final intermediary determination by filing an 

appeal or requesting reopening and the intermediary could still initiate reopening on its 

own motion, and those appeal and reopening procedures are available over a lengthy 

period under the statute and regulations. Even before the appeal and reopening periods 

begin, providers have 5 months after the close of the cost reporting period to submit 

reports, and the intermediary is required to make its determination within a reasonable 

period of time thereafter. After a final intermediary determination is issued, the Medicare 

statute authorizes appeal to the Board within 180 days of the final intermediary 

determination. The reopening regulations allow six times as long--3 years--for reopening 

of a final intermediary determination. Therefore, an NPR may be reopened many years 

after a fact arises during the cost reporting period at issue, depending on when the 

intermediary determination is issued. When a reopening results in a revised intermediary 

determination, the provider then may appeal or request reopening of the specific issue in 

the revised intermediary determination, resulting in review of the revised intermediary 

determination at an even more remote time. This reopening scheme, which the Supreme 

Court described as “generous” in Your Home Visiting Nurse Services, Inc. v. Shalala, 

525 U.S. 449, 455 (1999), is intended to strike a balance between accurate reimbursement 

and administrative finality, in the interests of both the provider and the Medicare 
1155 

program. The proposed revisions merely clarify that a finding of predicate fact is also 

subject to reopening for a 3-year period. Moreover, the proposed revisions would not 

affect the exception to the 3-year reopening period for fraud or similar fault by a party to 

the final intermediary determination. 

 With respect to the IME and direct GME resident caps, we established in an 

August 1997 interim final rule that we would determine those caps in the course of 

settling cost reports starting on or after October 1, 1997 (for direct GME) or with 

discharges on or after October 1, 1997 (for IME), thereby putting teaching hospitals on 

notice that their caps would be determined at that time (62 FR 45966, 46003 through 

46005 (August 29, 1997)). This is consistent with the resident cap statutory provisions 

(under section 1886(h)(4)(F) and section 1886(d)(5)(b)(v) of the Act), which require the 

use of the number of unweighted FTE residents for the cost reporting period ending on or 

before December 31, 1996, for cost reporting periods (or discharges, for IME) starting on 

or after October 1, 1997. We did not read this provision to allow for continuing 

challenges to this number of residents. Before the Kaiser decision, neither providers nor 

the Medicare program were allowed to challenge the 1996 FTE resident cap except 

through a timely appeal or reopening of the NPR for the 1996 base year or the first fiscal 

period in which the caps were applied. For example, we refer readers to Hillcrest 

Riverside, Inc. v. Sebelius, 680 F. Supp. 2d 30 (D.D.C. 2010); and Swedish Am. Hosp. v. 

Sebelius, 773 F. Supp. 2d 1 (D.D.C. 2011). Indeed, many teaching hospitals challenged 

their NPRs for the 1996 fiscal period in order to correct perceived deficiencies in their 

caps. For example, we refer readers to Henry Ford Health Sys. v. Dep’t of Health & 
1156 

Human Servs, 654 F. 3d 660 (6th Cir. 2011); Univ. of Chicago Med. Ctr. v. Sebelius, 618 

F.3d 739 (7th Cir. 2010); Rhode Island Hosp. v. Leavitt, 548 F.3d 29 (1st Cir. 2008); and 

Riverside Methodist Hosp. v. Thompson, No. C2-02-94, 2003 WL 22658129 (S.D. Ohio 

July 31, 2003). In our view, teaching hospitals have been allowed ample opportunity to 

correct their resident caps. 

 Comment: One commenter stated that it would support the proposed revisions if 

they bound CMS to accept as final a determination of predicate fact that had not been 

timely appealed or reopened, but which the provider now recognized had been 

determined inaccurately. According to the commenter, it was classified as a sole 

community hospital (SCH), but later realized that it was not the only like hospital within 

25 miles. The then-applicable regulations for SCH status specified that the designation 

will be revisited if there is “a change in circumstance” and that “CMS will cancel the 

hospital’s classification as a sole community hospital effective with the date that the 

hospital no longer met the criteria for classification consistent with the provisions of 

§ 405.1885” for the reopening of NPRs (42 CFR 412.92(b)(3)(iii) (2011)). The 

commenter asserted that, because it was not the only like hospital within 25 miles, it was 

appropriate to cancel its SCH designation, but it was not appropriate to recover 

reimbursement for past cost years because there had been no change in circumstances. 

The commenter asked whether the proposed revisions to the reopening rules, which apply 

to pending appeals, would govern its pending Board appeal challenging the recovery of 

reimbursement for past fiscal periods. 
1157 

 Response: Without passing judgment on the merits of the commenter’s pending 

Board appeal, this would appear to present a situation where, under the proposed 

revisions, the determination of a predicate fact (the provider’s distance from a like 

hospital) was beyond the 3-year reopening period. We note that in the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53258, 53674), we amended § 412.92(b)(3) to require 

providers to disclose facts to CMS that would be material to initial SCH designations and 

if providers fail to disclose these facts, their SCH status will be cancelled. 

 Comment: One commenter asked if the proposed revisions would apply to 

determinations of successive predicate facts, such as the commenter’s Medicare 

Advantage days, total days, and education costs used in the Nursing and Allied Health 

Education (NAHE) Managed Care payment. The commenter also asked whether these 

predicate facts could be challenged by reopening the NPR for the fiscal period in which 

such facts are used to calculate payment, which is usually two fiscal periods afterward. 

 Response: As discussed in the example of the TEFRA target amount, predicate 

facts may arise in multiple years. The proposed revisions would permit reopening of the 

final determination of a provider’s Medicare Advantage days, total days, and NAHE 

payment for purposes of computing the NAHE Managed Care payment either in the 

fiscal period such costs and days were first determined, or in the fiscal period they were 

first used to calculate the NAHE Managed Care payment. 

 Comment: One commenter, noting that reopening of intermediary determinations 

is completely within the discretion of the intermediary, requested that CMS ensure that 

the intermediaries do not use this discretion to impair a provider’s ability to correct a 
1158 

predicate fact. The commenter suggested that if a provider’s request to reopen a 

predicate fact determination is denied, then recognition should be given to the timely 

filed reopening request in an appeal of the subsequent cost year, especially in situations 

where the first application of the predicate fact results in a reimbursement impact that is 

less than the jurisdictional amount for appeal to the Board. 

 Response: The regulations provide the fiscal intermediaries with unreviewable 

discretion as to whether to reopen specific findings on matters at issue in a final 

intermediary determination, and program manual instructions include guidance for the 

intermediary’s exercise of its discretionary reopening authority. We refer readers to the 

Provider Reimbursement Manual (CMS Pub. 15-1), Section 2931.2. We believe that the 

intermediary’s reopening authority has always encompassed specific findings about 

predicate facts, and we see no basis for limiting the intermediary’s discretion whether to 

reopen particular findings of predicate fact. As the Supreme Court recognized, reopening 

is provided by the grace of the Secretary (Your Home, 525 U.S. at 455). The Court found 

that the discretionary nature of reopening reflected the practical realities of the Medicare 

program where “the few dozen [intermediaries] often need 3 years within which to 

discover overpayments in the tens of thousands of NPRs that they issue, while each of the 

tens of thousands of sophisticated Medicare-provider recipients of these NPRs is 

generally capable of identifying an underpayment in its own NPR within the 180-day 

time period specified in 42 U.S.C. § 1395oo(a)(3)” for appeals to the Board (Id. at 

455-56). If a provider wants to challenge a finding of predicate fact where the 

reimbursement impact is less than the statutory jurisdictional minimum of $10,000 for 
1159 

Board appeals, § 405.1811 of the regulations gives the provider a right to appeal to the 

intermediary hearing officers if the amount in controversy is at least $1,000 and the other 

requirements for intermediary hearing officer jurisdiction are satisfied. Thus, providers 

can appeal findings of predicate fact to the Board or the intermediary hearing officers 

within 180 days of a final intermediary determination, in addition to requesting reopening 

of a predicate fact within 3 years of such determinations. 

 Comment: One commenter suggested that application of the proposed revisions 

be limited to findings of fact that had not been appealed, instead of applying to issues on 

which the provider had received an adverse finding on the merits. For those issues, the 

commenter believed that it had the right to bring successive challenges to the finding of 

predicate fact after an adverse decision on the merits of a challenge to the finding of 

predicate fact in the first year it arose or was determined. 

 Response: We do not perceive a basis to limit the application of the proposed 

revisions to findings of predicate facts that have not been appealed. We believe that the 

proposed revisions should also apply to issues on which the provider has received an 

adverse final decision on the merits. Indeed, § 405.1803(d) of the regulations requires 

the intermediary to determine the effect of a final decision and issue any revised 

intermediary determination that proves necessary. Moreover, settled rules of issue 

preclusion, including the requirement that the issue be litigated on the merits by opposing 

parties, would apply to a final decision on the merits of the disputed predicate facts after 

exhaustion of administrative remedies and judicial review. We note that because appeals 

of an NPR sometime are not resolved finally before NPRs are issued for later fiscal 
1160 

periods, providers that wish to preserve their rights to administrative and judicial review 

sometimes will challenge predicate facts in successive appeals and actions for judicial 

review until the first appeal is finally resolved. But upon final resolution of the first 

appeal, the parties usually do not relitigate the same finding of predicate facts in the 

appeals for later fiscal periods. 

 Comment: Several commenters opposed the proposed revisions to the reopening 

rules because the commenters were concerned that the Medicare program had reserved 

the right to create exceptions by regulation or Ruling that would benefit the program, but 

not Medicare providers. The commenters were also concerned that the Medicare 

program would interpret reimbursement provisions in the Medicare statute to authorize 

the revision of predicate facts only when it would result in reduced reimbursement to 

providers. 

 Response: In discussing the proposed revisions, we stated that the 3-year limit on 

reopening of a predicate fact might be countered by a statutory provision or a specific 

regulation on reimbursement of the matter at issue. This statement acknowledges that the 

proposed revisions cannot override a contrary statutory provision, and that revisions to 

the generally applicable reopening rules are not intended to trump the provisions of a 

specific reimbursement regulation. Instead, the proposed revisions to the reopening rules 

reflect the Medicare program’s longstanding policy not to revisit predicate facts more 

than 3 years after the predicate fact arose or was first determined in a final intermediary 

determination. In cases where it has been necessary to adjust cost report data for use in 

later fiscal periods as a base year or cap after the 3-year reopening period has expired, the 
1161 

Medicare program has relied on statutory authority to make such adjustments and used 

notice and comment rulemaking to alert providers to the basis, purpose, and scope of the 

adjustments. For example, we refer readers to Regions Hospital v. Shalala, 522 U.S. 448 

(1998) (sustaining the GME reaudit rule). These procedural protections would be 

reinforced by the proposed revisions to the reopening rules. 

 However, in light of the comments we received, we are limiting the scope of this 

final rule to “predicate facts” that are determined once and then used to determine 

payments for one or more fiscal periods after the fiscal period in which the facts arose or 

were determined. We are not applying these final provisions to facts that are subject to 

annual evaluation as part of the intermediary’s final determination of reasonable cost 

reimbursement under section 1861(v) of the Act. We believe that narrowing the 

definition of “predicate facts” in this fashion will help allay commenters’ concerns that 

the proposed revisions will be subject to ad hoc exceptions that only serve to 

disadvantage providers. We note that the annual evaluation of certain predicate facts in 

the determination of reasonable cost reimbursement can increase the provider’s 

reimbursement in later fiscal periods. For example, if a provider incurs a Medicare bad 

debt in 2002, but the debt is not deemed uncollectable until 2009, the bad debt would be 

reimbursable in 2009 if all the requirements of § 413.89 were satisfied. 

 Comment: Several commenters took issue with CMS’ characterization of the 

proposed revisions as codifying longstanding policy. Instead, the commenters pointed to 

the decisions cited in the D.C. Circuit’s Kaiser Foundation Hospitals decision as 
1162 

evidence that CMS has not taken a consistent position on when predicate facts can be 

reexamined, but instead has taken the position that benefits the program. 

 Response: We disagree with the commenters’ assertion that the proposed 

revisions do not reflect our longstanding interpretation of the reopening regulations. The 

reopening rules, which were first promulgated in 1974, have always been interpreted and 

applied in an even-handed manner such that a given reopening might increase, decrease, 

or leave unchanged the provider’s program reimbursement. The reimbursement effect of 

a specific reopening is determined by the governing law and the factual circumstances of 

the matter at issue. 

 Moreover, we disagree with the commenters’ assertion that in certain cases we 

have reexamined predicate facts beyond the 3-year reopening period without authority for 

doing so. In three of these cases, a reimbursement regulation allowed reexamination of 

predicate facts so long as the underlying amount of reimbursement was not changed 

beyond the 3-year reopening period. For example, in proposing the GME reaudit rule 

that the Supreme Court later upheld in Regions Hospital, we acknowledged that “a 

special exception” to the general reopening rules was required to reexamine cost reports 

from the inpatient prospective payment system base year beyond the 3-year reopening 

period (53 FR 36592, September 21, 1988). In Edgemont Hospital v. Mutual of Omaha 

Insurance Co., PRRB Dec. No. 95-D34, 1995 WL 933971 (Apr. 6, 1995), adjustments to 

the amount of operating costs considered in establishing the TEFRA target amount or 

rate-of-increase ceiling were authorized by § 413.40(g). If the Medicare program took 

the view that the reopening rules permitted the reexamination of predicate facts beyond 
1163 

the 3-year reopening period, as the commenters suggested, then there would have been no 

need for the above-referenced regulations on GME reauditing and TEFRA limit 

adjustments to operating costs. 

 Contrary to the commenters’ assertions, the Medicare program has applied its 

reopening rules to determinations of predicate facts to the benefit of providers. For 

example, when a provider received an adverse decision on its target amount for its first 

year, but the intermediary had failed to issue timely notices of reopening for the 

following fiscal periods, we instructed the intermediaries not to attempt to adjust those 

target amounts, which allowed the provider to retain reimbursement in excess of the cost 

ceilings calculated with the correct target amounts. Similarly, we have instructed 

intermediaries not to attempt to change incorrectly calculated high direct GME or IME 

resident caps for fiscal periods that were beyond the reopening period. 

 The other cases cited by commenters do not concern “predicate facts” as defined 

in the proposed revisions. HealthEast Bethesda Lutheran Hospital & Rehabilitation 

Center v. Shalala, 164 F.3d 415 (8th Cir. 1998), concerned interest expenses evaluated 

under § 413.153(b)(2). As we have discussed above, interest expense, when considered 

on a reasonable cost basis, is subject to reexamination in each fiscal period to determine 

whether the cost at issue qualifies as “necessary” interest expense for that fiscal period. 

We refer readers to § 413.5(a) of the regulations. The facts associated with these 

expenses, like bad debt arising from non-payment of Medicare deductibles and 

coinsurance, are not determined once and applied thereafter to determine reimbursement 
1164 

in subsequent fiscal periods. They are not within the scope of the proposed revisions, as 

we have revised it in response to the comments. 

 The remaining decision referenced by the commenters, Mark Twain St. Joseph’s 

Healthcare Corp. v. Leavitt, 154 Fed. Appx. 651 (9th Cir. 2005), also does not support 

the commenters’ view. In that case, the court held that recalculation of the provider’s 

hospital specific rate did not violate the finality provisions of §§ 412.71 and 412.72; 

rather, the intermediary properly reopened the determination to correct an administrative 

error. If anything, the finality provisions of §§ 412.71(d) and 412.72(b) are consistent 

with our position that once a predicate fact, such as the hospital specific rate, is finally 

determined, it is not subject to continuing requests for review or reopening beyond the 3-

year reopening period at the instigation of either the intermediary or the provider. 

 Comment: Several commenters stated that CMS proposed to apply the revisions 

to the reopening rules retroactively, but that CMS had no authority to do so. Based on 

the D.C. Circuit’s decision in Kaiser Foundation Hospitals and earlier decisions cited 

therein, the commenters stated that the proposed revisions to the reopening rules did not 

reflect longstanding Medicare policy, and thus the revisions did not clarify such policy. 

The commenters also stated that the proposed revisions would be contrary to the public 

interest in ensuring the accuracy of reimbursement determinations. One commenter also 

stated that it would be contrary to the public interest to apply the proposed revisions to 

pending appeals when providers have relied on the existing regulations. 

 Response: As explained in the proposed rule, we disagree with the D.C. Circuit’s 

decision in Kaiser Foundation Hospitals, including the court’s discussion of decisions in 
1165 

a few prior cases. As discussed above, we believe that the circumstances presented in 

those prior cases are not similar to those in Kaiser, and we also have narrowed the scope 

of the proposed revisions to address these concerns. In any event, in a program the size 

of the Medicare program, with thousands of providers submitting voluminous cost reports 

annually over the course of nearly 50 years, we do not believe that the few 

reimbursement decisions cited by the D.C. Circuit provide a reasonable basis for 

providers to forego their statutory right to appeal to the Board, and the regulatory process 

for reopening, by invoking an alleged right to seek revisions to predicate facts beyond the 

3-year reopening period. 

 Nonetheless, we recognize that the D.C. Circuit rejected our interpretation of the 

reopening rules, and the court found that we had applied the rules differently in a few 

earlier cases. By amending the reopening rules now, our purpose is to articulate clearly 

what we had intended the regulations to say in the first place, so that the revised rules will 

be applied consistently by confining the reopening of predicate facts to the 3-year 

reopening period. 

 We continue to believe that application of the revised rules to intermediary 

determinations issued on or after the effective date of this final rule, and to appeals and 

reopenings (including requests for reopening) that are pending on or after the same 

effective date, is not impermissibly retroactive in effect. Any finding of a predicate fact 

inherently has a degree of retroactivity because Congress (or the Medicare program) has 

assigned a future reimbursement consequence to provider actions that have already taken 

place, usually before the enactment of the relevant reimbursement statute. For example, 
1166 

when Congress enacted the direct GME and IME resident cap statute in 1997, and used a 

base year that ended no later than December 31, 1996, it assigned future consequences 

(the resident cap) to actions that were already completed (the provider’s employment of 

residents during the 1996 cost reporting period). 

 We believe that this is a form of “secondary retroactivity” inasmuch as future 

consequences are attached to past actions, but such secondary retroactivity does not 

violate due process or, in the case of regulations, the Administrative Procedure Act, if the 

regulation is not unreasonable. For example, we refer readers to Bowen v. Georgetown 

Univ. Hosp., 488 U.S. 203, 219-220 (1988) (Scalia, J., concurring); and Nat’l Cable & 

Telecomms. Ass’n v. FCC, 567 F.3d 659, 670-71 (D.C. Cir. 2009). Applying the 

proposed revisions to pending intermediary determinations, appeals, and reopenings will 

not affect the amount of reimbursement a provider received for the cost reporting period 

in which the predicate fact first arose or was determined. Nor would such application of 

the proposed changes to the reopening rules invalidate any revisions to predicate facts 

that were finalized prior to the effective date of this final rule. Instead, the revised 

reopening rules govern only the timing of permissible revisions to predicate facts, as of 

the effective date of this final rule, and thus the revisions to the reopening rules are 

procedural in nature. 

 The scope of applicability of the revised reopening rules also does not undermine 

providers’ settled expectations. A provider cannot reasonably expect to be allowed to 

revise a predicate fact after the 180-day filing period for an appeal after the right has 

expired, when the only remaining means of securing such relief is through the 
1167 

discretionary reopening process. We refer readers to Bergerco Canada v. U.S. Treasury 

Dept., 129 F.3d 189, 194-95 (D.C. Cir. 1997) (changes to discretionary licensing 

procedure made after plaintiff had filed request for license did not impair any rights of 

the plaintiff). After the 3-year period to request reopening has elapsed, a provider has no 

reasonable expectation of securing revisions to predicate facts. While one of the 

commenters suggested that the Kaiser decision effectively established the governing law, 

the decision is of such recent vintage that few providers could have relied on it as a basis 

for changing predicate facts after expiration of the 3-year reopening period. Moreover, 

the strictures against retroactivity do not apply to procedural rules, which the reopening 

rules plainly are. We refer readers to Combs v. Commissioner of Social Security, 459 

F.3d 640, 647 (6th Cir. 2006) (en banc). 

 In any event, if the revisions to the reopening rules were deemed a retroactive 

application of a substantive change to a regulation, we continue to believe that 

section 1871(e)(1)(A) of the Act permits retroactive application because it is necessary to 

ensure compliance with various statutory payment provisions such as the TEFRA target 

amount (under section 1886(b) of the Act) and the caps on residents for GME and IME 

reimbursement (under sections 1886(h)(4)(F) and 1886(d)(5)(B)(v) of the Act); the 

180-day filing period for appeals to the Board (under section 1878(a)(3) of the Act); and 

the 3-year period for reopening (under §§ 405.1885(b)(1), and (b)(2) of the regulations). 

In addition, we continue to believe that retroactive application furthers the public interest 

in safeguarding the 3-year limit on reopening and the interests of both Medicare 

providers and the Medicare program in preserving the finality of reimbursement 
1168 

determinations. Contrary to the commenter’s assertion, the revised reopening rules still 

provide an avenue to correct predicate facts, thus promoting accuracy in reimbursement 

determinations. The revised reopening rules also protect the interests of administrative 

finality by ensuring that both Medicare providers and the Medicare program can close 

their books on a cost reporting period without worrying that the other party will invoke 

the Kaiser decision to make changes to predicate facts long after the close of the 3-year 

reopening period, when documents and witnesses may no longer be available.

 After consideration of the public comments we received, we are adopting the 

proposed revisions to §§ 405.1885(a)(1) and (a)(2)(iv) 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 with the following 

modifications: We are adding language to paragraph (a)(1)(iii) that defines the “predicate 

facts” that are subject to the revisions as factual findings for one cost reporting period 

that once determined are used in one or more subsequent cost reporting periods to 

determine reimbursement. We are adding language to paragraph (b)(2)(iv) to clarify that 

it does not apply to factual findings when made as part of a determination of reasonable 

cost under section 1861(v)(1)(A) of the Act. Paragraph (a)(1)(iv) also was reworded for 

clarity. 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 of the NPR 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/or (2) the application of the predicate fact is 
1169 

subject to change through a timely appeal or reopening of the NPR for the fiscal period in 

which the fact was first used (or applied), by the intermediary to determine the provider’s 

reimbursement. The general 3-year reopening period applies to findings about such 

predicate facts and the reopening period is calculated separately for each finding about 

each predicate fact. At this time, we have decided not to make similar changes regarding 

predicate facts to the regulations governing intermediary appeals at § 405.1811 and 

appeals to the Board at § 405.1835. 

XX. Files Available to the Public via the Internet 

 In the CY 2014 OPPS/ASC proposed rule (78 FR 43684), we proposed to create new 

Addendum P--Proposed OPPS Items and Services That Will Be Packaged for CY 2014. 

 We did not receive any public comments related to the proposed creation of new 

Addendum P and are finalizing our proposal without modification. 

 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 final rule with comment period pertaining to CY 2014 payments under the 

OPPS, go to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-andNotices.html and select “1601-FC” from the list of regulations. All Addenda for this final 

rule with comment period are contained in the zipped folder entitled “2014 OPPS 1601-FC 

Addenda” at the bottom of the page. 
1170 

 To view the Addenda of this final rule with comment period pertaining to 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/ASCRegulations-and-Notices.html and select “1601-FC” from the list of regulations. All 

Addenda for this final rule with comment period are contained in the zipped folders entitled 

“Addendum AA, BB, DD1 and DD2,” and “Addendum EE” at the bottom of the page. 
1171 

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 the CY 2014 OPPS/ASC proposed rule (78 FR 43684), we solicited public 

comments on each of the issues outlined above for the information collection 

requirements discussed below. 

B. Requirements in Regulation Text

1. Changes to the Outcome Measure Requirement for OPOs 

 In section XVI. of this final rule with comment period, 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 
1172 

automatically decertified. We proposed 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 
1173 

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. Changes to the Medicare Fee-for-Service EHR Incentive Program 

 In section XVIII. of the CY 2014 OPPS/ASC proposed rule, we proposed 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 proposed 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 44517 through 44544) and Stage 2 (77 FR 54125 

through 54135) 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 the proposed rule did not modify or increase 

the information collection requirements of the program in any way. 

 After reviewing the public comments we received on the proposed rule, we are 

finalizing our proposals discussed in section XVIII. of this document. These final 

policies do not modify or increase the information collection requirements of the 

Medicare Fee-for-Service EHR Incentive Program in any way. 

C. Associated Information Collections Not Specified in Regulatory Text

 In the CY 2014 OPPS/ASC proposed rule, we made reference to proposed 

associated information collection requirements that were not discussed in the regulation 
1174 

text contained in the proposed rule. The following is a discussion of those requirements, 

any public comments we received, and our responses to those public comments. 

1. Hospital OQR Program 

 As we stated in section XIV. of the CY 2012 OPPS/ASC final rule with comment 

period, the Hospital OQR Program has been 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. In the CY 2014 OPPS/ASC proposed rule, we did not propose to add any 

additional measures for the CY 2015 payment determination and subsequent years; 

therefore, there will not be an increase 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 this final rule with comment 

period, we are finalizing our proposal to remove the OP-19 and OP-24 measures from the 
1175 

Hospital OQR Program for the CY 2015 payment determination and subsequent years 

(78 FR 43646 through 43647, 78 FR 43653). We refer readers to section XIII.C.2. of this 

final rule with comment period for our discussion of the removal of these measures. 

Because one of the measures was previously suspended and the other deferred, removing 

them will not impact our previous burden estimate and it remains unchanged. 

 In addition, we are finalizing our proposals to codify existing policies related to 

program participation and withdrawal, data submission, extraordinary circumstances 

extensions or waivers, data validation, and the reconsideration process. Because we are 

only codifying existing policies (including finalizing a clarification that we may grant 

extensions or waivers if systemic problems in our data collection systems directly or 

indirectly affect the ability of hospitals to submit data), we do not anticipate any 

additional burden to hospitals based on these proposals affecting the CY 2015 payment 

determination or subsequent years. 

 The Hospital OQR program has 3 types of measures that utilize different methods 

of data collection/submission – chart-abstracted measures that require HOPDs to 

collected data from chart-abstraction, and submit that data directly to CMS, Web-based 

measures submitted via the QualityNet Web site (this includes some chart abstracted 

measures that are also submitted via the QualityNet Web site) and measures submitted 

via the CDC’s NHSN Web site. In the CY 2014 OPPS/ASC proposed rule, there is only 

one section heading for all of these measures: “Web-based Measures for the CY 2016 

Payment Determination and Subsequent Years” (78 FR 43685). We intended to include 

headings for the other two kinds of measures, but these were inadvertently deleted. For 
1176 

the new measures, this resulted in burden estimates for three chart-abstracted measures 

submitted directly to CMS via a Web-based tool, and one measure submitted via CDC’s 

NHSN all appearing under a heading that refers to just one type of measure. In this final 

rule with comment period, we have corrected this error and separated the content 

appropriately using separate section headings for each of the different kinds of measures. 

 For the CY 2016 payment determination and subsequent years, the burden 

associated with Hospital OQR Program procedures consists of the time and effort 

associated with collecting and submitting data for the 3 different kinds of measures. 

Where we have chart-abstracted measures that are collected via Web-based tool, they are 

included below in section XXI.C.1.b., where their chart-abstraction burden is estimated, 

and in section XXI.C.1.c., where we estimate their Web submission burden. 

 We believe there is a burden associated with successful participation in the 

Hospital OQR Program, where successful participation results in a full annual payment 

update (APU) for a particular payment determination. This burden would include, but 

not be limited to: maintaining familiarity with the Hospital OQR Program requirements 

(for example, participating in the monthly educational webinars, reading information 

available at the QualityNet Web site https://qualitynet.org, checking feedback reports to 

indicate a facility’s current status or performance, reaching out to the Hospital OQR 

Program support contractor to make specific inquiries); staying up to date with system 

requirements (for example, updating passwords, maintaining a system that is fully 

functional in the QualityNet environment, etc.); and communicating how program 
1177 

requirements must be operationalized within the individual facility. For each hospital, we 

estimate burden as follows, for one annual cycle of the program: 

● Program requirements (20 hours), 

● System requirements (2 hours) 

● Managing facility operations (20 hours) 

 The burden for one hospital is therefore the sum of these 3 areas above and 

therefore estimated at 42 hours. We calculate the total burden for the approximately 

3,300 participating hospitals as 138,600 hours (42 hours multiplied by 3,300 facilities). 

b. Chart-Abstracted Measures for the CY 2016 Payment Determination and Subsequent 

Years 

 We estimated, based on our past experiences with chart-abstracted measures, that 

there will be approximately 3,300 respondents per year and that each participating 

hospital will spend 35 minutes per case to collect and submit the data. As a result, the 

estimated burden associated with one case per hospital would be 1,924 hours (3,300 

hospitals x 0.583 hours per hospital). We estimated the financial burden for all hospitals 

to collect and submit data using our estimate of one case per hospital would be $57,717 

(3,300 hospitals x $30.00 per hour x 0.583 hours). We note that this estimate is based on 

estimates of all of these measures being collected using the same methods of chart 

abstraction, but excludes estimates for data submission for measures that HOPDs will 

report via a Web-based tool. 

 Based upon the data submitted for the CY 2012 and CY 2013 payment 

determinations, we estimated there will be a total of 1,679,700 cases per year, or 
1178 

approximately 509 cases per year per hospital. However, hospitals will vary greatly on 

the number of cases per HOPD due to specialization. Based on those numbers though, 

the estimated annual hourly burden associated with the aforementioned data submission 

requirements for the chart-abstracted data for all hospitals (excluding submission burden 

for measures submitted through the Web-based tool) is 979,265 hours (1,679,700 cases 

per year x 0.583 hours per case). This estimate is based on data submitted previously and 

includes burden associated with measure OP-22, which is a chart-abstracted measure with 

Web-based submission. 

 For the CY 2016 payment determination, the three newly finalized measures 

(OP-29, OP-30, and OP-31) are chart-abstracted measures with Web-based submission. 

These three measures will add to the burden. In this rulemaking, we estimate the 

maximum burden, but in future rulemaking, we will update our burden estimate based on 

actual data we receive. To estimate maximum burden, we assume all facilities will have 

adequate volume to sample at the highest number of required cases. If a hospital is 

obligated to chart-abstract the highest number of cases from the instructions we provide 

to indicate appropriate sampling methodology based on hospital’s volume, this is a basis 

for us to calculate a maximum burden estimate. Using the same sampling methodology 

we have used in the past, which can be found on Table 3 (ED Throughput) of “Section 4-

Population, Sampling and Transmission” in the Hospital Outpatient Quality Reporting 

Specifications Manual, v7.0 available at https://qualitynet.org, we estimate that each of 

the approximately 3,300 responding hospitals will have volume adequate to support 
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quarterly sample sizes of 96 cases, for a total of 384 cases (96 cases per quarter x 4 

quarters) to be abstracted by each hospital annually for one new measure. 

 Based on these assumptions for the three new measures, the total additional cases 

for one hospital to sample would be 1,152 (384 cases annually per measure x 

3 measures). We estimate that the time to chart abstract one case is 25 minutes. We 

estimate 25 minutes per case (or 0.417 hours per case) based on chart-abstraction time 

less the time to submit Web-based measures in aggregate (0.583 hours - 0.167 hours = 

0.417 hours per measure). For the approximately 3,300 reporting hospitals, we therefore 

estimate the total maximum burden associated is 1,584,000 hours (3,300 hospitals x 

0.417 hours per hospital x 1,152 cases). We estimate the maximum financial burden for 

all hospitals to collect and submit data via the Web-based tool for the three new measures 

to be $47,520,000 (3,300 hospitals x $30.00 per hour x 1,584,000 hours). 

 For chart-abstracted measures that HOPDs will not submit via a Web-based tool, 

HOPDs will incur a financial burden associated with chart abstraction and data 

submission for these non-Web-based measures, which requires that HOPDs submit 

patient-level data directly to CMS. We estimated the financial burden associated with 

these measures for all hospitals as $29,377,953 (1,679,700 cases per year x $30.00 per 

hour x 0.583 hours per case). 

c. Web-Based Measures Submitted Directly to CMS for the CY 2016 Payment 

Determination and Subsequent Years 

 For the CY 2016 payment determination and subsequent years, we proposed to 

add five measures to the program. Of these five measures, four are chart-abstracted 
1180 

measures requiring that HOPDs submit patient-level data directly to CMS using a Webbased tool, with data collection beginning in CY 2014. Based on public comment we 

received regarding burden, we are not finalizing proposed measure OP-28 as part of the 

Hospital OQR Program measure set. Therefore, we are only finalizing three of the four 

chart-abstracted measures that we proposed. We refer readers to section XIII.E.2 of this 

final rule with comment period for a discussion of public comments regarding OP-28. 

We also refer readers to section XIII.G.2.f. of this final rule with comment period for our 

discussion of specific data collection requirements we finalized, which serves as the basis 

of our estimates of burden described. 

 For previously finalized Web-based measures (OP-12, OP-17, OP-25, and 

OP-26), our measurement methods are somewhat different from the methods we use for 

one existing measure and the three newly finalized Web-based measures (OP-29, OP-30, 

and OP-31). We estimated the burden of chart-abstraction for the subset of the four of 

these measures that are also chart-abstracted (OP-22, OP-29, OP-30, and OP-31). It is 

appropriate to consider this subset of four measures in both the section on chartabstraction burden and in this section estimating Web-based measure burden because not 

all Web-based measures are also chart-abstracted. Our estimate in this section is based 

on the chart-abstraction for these four measures being complete by the hospital at the 

time of Web-based entry. Each participating hospital would spend 10 minutes per 

measure per year to collect and submit the data. In the case of the subset of four 

chart-abstracted measures, the estimate here is only for the time associated with entering 

aggregate totals into our Web-based tool. The estimated annual burden associated with 
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these measures is 4,409 hours (3,300 hospitals x 0.167 hours per measure x 8 measures 

per hospital) for the CY 2016 payment determination. This burden is based on a 

collection burden for OP-12, OP-17, OP-25, and OP-26 and a Web-based submission 

burden for all of the measures that are submitted via a Web-based tool. 

 HOPDs will incur a financial burden associated with identifying and submitting 

data for these eight Web-based measures. We estimated that the financial burden 

associated with these measures would be $132,264 (3,300 hospitals x $30.00 per hour x 

0.167 hours per measure x 8 measures). Of these eight measures, 4 are chart-abstracted. 

As noted above, we include the chart-abstraction burden for the subset of 

4 chart-abstracted measures (1 previously finalized, 3 finalized in this rulemaking) 

submitted via Web-based tool in the section on chart-abstracted data collection above. 

d. NHSN HAI Measure for the CY 2016 Payment Determination and Subsequent Years 

 For the NHSN HAI measure Influenza Vaccination Coverage among Healthcare 

Personnel (OP-27), the burden involved would be from gathering information either from 

existing reports or by other methods such as surveying the healthcare personnel 

population. In the CY 2014 OPPS/ASC proposed rule (78 FR 43685), we used an 

estimate of 10 vaccinations per outpatient hospital. Since then, we have obtained a more 

accurate estimate for the number of vaccinations per hospital and have reflected that in 

our calculations below. Using data from the United States Department of Labor Bureau 

of Labor Statistics, Occupational Employment Statistics Query System, and the total of 

all workers for Outpatient Care Centers Code 621400, the number of personnel for all 
1182 

hospitals is 640,360. We estimate 640,360 responses for a total burden of 106,940 hours 

(0.167 hours per response x 640,360 responses). 

 HOPDs will incur a financial burden associated with data submission for this 

measure. Using the total of all Outpatient Care Center workers from the Bureau of Labor 

Statistics, as described above, we estimate that the financial burden associated with this 

measure for all HOPDs would be $3,208,203 ($30.00 per hour x 106,940 hours). 

 We invited public comment on the burden associated with the information 

collection requirements for the chart-abstracted measures, the Web-based measures 

submitted directly to CMS, and the measure submitted via CDC’s NHSN. We did not 

receive any comments on the burden associated with information collection requirements. 

Therefore, we are finalizing our burden estimates. 

e. Hospital OQR Program Validation Requirements for the CY 2015 Payment 

Determination and Subsequent Years 

 We use a sampling methodology, which involves establishing a particular 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 do not validate measures submitted via Web-based 

tool or submitted to NHSN. The validation burden for a HOPD is the time and effort 

necessary to submit validation data to a CMS contractor. In the CY 2014 OPPS/ASC 

proposed rule, we did not propose any changes to our validation procedures. As a result, 

the burden associated with the validation procedures for the CY 2015 payment 

determination is the same as previously finalized for CY 2014 in the CY 2013 
1183 

OPPS/ASC final rule with comment period (77 FR 68531). We estimated that it would 

take each of the 500 sampled hospitals approximately 12 hours to comply with these data 

submission requirements. To comply with the requirements, we estimated 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. The estimated annual burden associated 

with the data validation process for the CY 2015 payment determination is approximately 

6,000 hours (500 selected hospitals x 12 hours per hospital). 

 HOPDs will incur a financial burden associated with the required data abstraction 

and data submission for the validation process. We estimated that the financial burden 

associated with validation would be $180,000 ($30.00 per hour x 6,000 hours). 

 These requirements were approved under OCN: 0938-1109. This approval 

expired on October 31, 2013. 

 We invited public comment on the burden associated with data validation 

information collection procedures. We did not receive any public comments. Therefore, 

we are finalizing our burden estimates as proposed.

f. Hospital OQR Program Reconsideration and Appeals Procedures 

 In section XIII.I. of the proposed rule and this final rule with comment period, for 

the CY 2015 payment determination and subsequent years, we proposed and are 

finalizing a minor change to the reconsideration request process to ensure our deadline 

for these requests will always fall on a business day. We also proposed and are finalizing 

our proposal to codify our reconsideration request process at 42 CFR 419.46(h). 
1184 

 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 (the 

ASC Quality Collaboration’s voluntary reporting program) (http://www.ascquality.org), 

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) 
1185 

(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 invited public comment on the burden associated with these information 

collection requirements. We did not receive any public comments on our burden 

discussion in the CY 2014 OPPS/ASC proposed rule (78 FR 43686) regarding the five 

previously finalized claims-based measures for the CY 2014 payment determination. 

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 

adopted the seven measures for the CY 2015 payment determination and added Influenza 

Vaccination Coverage among Healthcare Personnel (NQF #0431) (76 FR 74509). 
1186 

 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. Therefore, 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 

x 1 measure x 0.167 hours per ASC). For the CY 2015 payment determination, we 

estimated 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 x 1 measure x 0.167 hours per ASC). 

 For the CY 2016 payment determination, in the CY 2014 OPPS/ASC proposed 

rule (78 FR 43669), we proposed, and are finalizing in this final rule with comment 

period, that ASCs would report data for the Safe Surgery Checklist Use measure and the 

ASC Facility Volume Data on Selected ASC Surgical Procedures measure between 

January 1, 2015 and August 15, 2015 for services furnished between January 1, 2014 and 
1187 

December 31, 2014. For the Safe Surgery Checklist Use measure for the CY 2016 

payment determination, we estimated 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 x 1 measure x 0.167 hours 

per ASC). For the CY 2016 payment determination, for the ASC Facility Volume Data 

on Selected ASC Surgical Procedures measure, we estimated 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 x 

1 measure x 0.167 hours per ASC). 

 For the CY 2016 payment determination, for the NHSN HAI measure: Influenza 

Vaccination Coverage among Healthcare Personnel, we estimated that the total annual 

burden associated with this measure for ASCs, including NHSN registration (5,260 ASCs 

x 0.083 hour per facility = 437 hours) and data submission (5,260 ASCs x 0.167 hour per 

response for 20 workers per facility = 17,568) would 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 the CY 2014 OPPS/ASC proposed 

rule (78 FR 43686), we proposed 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 we discuss in 

section XV.B.3. of this final rule with comment period, we are finalizing the adoption of 

three of these four measures. For the chart-abstracted measures, we estimated that each 

participating ASC would spend 35 minutes per case to collect and submit the data, 
1188 

making the total estimated burden for ASCs with a single case per ASC of 3,067 hours 

(5,260 ASCs x 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, in the proposed rule we stated that ASCs would incur a financial 

burden associated with chart abstraction and data submission for these four proposed 

measures. We estimated that ASCs (in the proposed rule (78 FR 43686), we erroneously 

referred to “for a chart-abstracted case, an ASC”) would incur costs of $91,997 

(5,260 ASCs x $30.00 per hour x 0.583 hours). We solicited public comment on the 

impact of adding these measures and requiring data submission. We also invited public 

comment on the burden associated with these information collection requirements. 

 For the previously finalized Web-based Safe Surgery Checklist Use and ASC 

Facility Volume Data on Selected ASC Surgical Procedures measures for the CY 2016 

payment determination, we received public comments that increasing the data submission 

time period was an appropriate and beneficial change that did not increase burden. These 

comments are discussed in section XV.D.5.b of this final rule with comment period. 

 For the claims-based measures, we received public comments that data collection 

via claims was a way to reduce burden. These comments are discussed in 

sections XV.D.4 and XV.D.5. of this final rule with comment period. 

 We discuss public comments we received on burden associated with data 

collection for the NHSN HAI measure: Influenza Vaccination Coverage among 

Healthcare Personnel in section XV.D.6.b. of this final rule with comment period. 
1189 

 We discuss public comments we received on burden associated with the 

collection of aggregated data via a CMS Web-based tool in sections XV.B.3 and 

XV.D.5.c. of this final rule with comment period. 

 After consideration of the public comments received, we are finalizing our burden 

estimates related to claims-based and Web-based measures for the CY 2015 and 2016 

payment determinations as proposed. 

c. Program Administrative Requirements and QualityNet Accounts; Extraordinary 

Circumstances Extension or Waiver 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, 
1190 

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 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 x 5,260 ASCs). The financial burden associated with these 

requirements is estimated to be $1,578,000 ($30.00 per hour x 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 estimated that 200 ASCs per year would request an extension or waiver and 
1191 

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. 

 We invited public comment on the burden associated with these information 

collection requirements. 

 We did not receive any public comments on our burden discussion in the 

proposed rule and are finalizing these burden estimates as proposed. 

3. Hospital VBP Program Requirements 

 In section XIV. of the proposed rule, for the Hospital VBP Program, we proposed 

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. 
1192 

 We invited public comment on the burden associated with these information 

collection requirements. 

 We did not receive any public comments on our burden discussion in the 

proposed rule. 

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 final rule with comment period, and, when we proceed with a subsequent 

document(s), we will respond to those comments in the preamble to that 

document.XXIII. Economic Analyses 

A. Regulatory Impact Analysis

1. Introduction 

 We have examined the impacts of the final rule with comment period and the final 

rules in this document 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 
1193 

section of the final rule with comment period contains the impact and other economic 

analyses for the provisions that we are finalizing. 

 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 final rule with comment period 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 final rule with comment period has been 

reviewed by the Office of Management and Budget. We have prepared a regulatory 

impact analysis that, to the best of our ability, presents the costs and benefits of this final 

rule with comment period. In the CY 2014 OPPS/ASC proposed rule (78 FR 43687 

through 43688), we solicited public comments on the regulatory impact analysis 

provided. We address the public comments we received in this section below and in 

other sections of this final rule with comment period as appropriate. 

2. Statement of Need 

 This final rule with comment period is necessary to update the Medicare hospital 

OPPS rates. It is necessary to make 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 
1194 

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 revising 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 continuing 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 final rule with comment period, we are 

implementing these payment provisions. 

 This final rule with comment period 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 
1195 

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 final rule with comment period. 

3. Overall Impacts for the OPPS and ASC Payment Provisions 

 We estimate that the effects of the final OPPS payment provisions will result in 

expenditures exceeding $100 million in any 1 year. We estimate that the total increase 

from the changes in this final rule with comment period in Federal government 

expenditures under the OPPS for CY 2014 compared to CY 2013 will be approximately 

$600 million. Taking into account our estimated changes in enrollment, utilization, and 

case-mix, we estimate that the OPPS expenditures for CY 2014 will be approximately 

$4.372 billion higher relative to expenditures in CY 2013. Because this final rule with 

comment period 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 55 displays the redistributional impact of the CY 2014 

changes in OPPS payment to various groups of hospitals and for CMHCs. 
1196 

 We estimate that the 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) will increase total OPPS payments by 

1.7 percent in CY 2014. The changes to the APC weights, the changes to the wage 

indices, the continuation of a payment adjustment for rural SCHs, including EACHs, and 

the payment adjustment for cancer hospitals will not increase OPPS payments because 

these changes to the OPPS are budget neutral. However, these updates will change the 

distribution of payments within the budget neutral system. We estimate that the total 

change in payments between CY 2013 and CY 2014, considering all payments, including 

changes in estimated total outlier payments, pass-through payments, and the application 

of the frontier State wage adjustment outside of budget neutrality, in addition to the 

application of the OPD fee schedule increase factor after all adjustments required by 

sections 1833(t)(3)(F), 1833(t)(3)(G) and 1833(t)(17) of the Act, will increase total 

estimated OPPS payments by 1.8 percent. 

 We estimate the total increase (from changes to the ASC provisions in this final 

rule with comment period as well as from enrollment, utilization, and case-mix changes) 

in expenditures under the ASC payment system for CY 2014 compared to CY 2013 to be 

approximately $143 million. Because the provisions for the ASC payment system are 

part of a final rule that is economically significant as measured by the $100 million 

threshold, we have prepared a regulatory impact analysis of the changes to the ASC 

payment system that, to the best of our ability, presents the costs and benefits of this 

portion of the final rule with comment period. Tables 56 and Table 57 of this final rule 
1197 

with comment period display the redistributional impact of the 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 Final OPPS Changes in this Final Rule with Comment Period 

(1) Limitations of Our Analysis 

 The distributional impacts presented here are the projected effects of the CY 2014 

policy changes on various hospital groups. As we did for the proposed rule, we post on 

the CMS Web site our hospital-specific estimated payments for CY 2014 with the other 

supporting documentation for this final rule with comment period. To view the 

hospital-specific estimates, we refer readers to the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. At the Web site, select “regulations and 

notices” from the left side of the page and then select “CMS-1601-FC” from the list of 

regulations and notices. The hospital-specific file layout and the hospital-specific file are 

listed with the other supporting documentation for this final rule with comment period. 

We show hospital-specific data only for hospitals whose claims were used for modeling 

the impacts shown in Table 55 below. We do not show hospital-specific impacts for 

hospitals whose claims we were unable to use. We refer readers to section II.A. of this 

final rule with comment period for a discussion of the hospitals whose claims we do not 

use for ratesetting and impact purposes. 
1198 

 We estimate the effects of the individual policy changes by estimating payments 

per service, while holding all other payment policies constant. We use the best data 

available, but do not attempt to predict behavioral responses to our policy changes. In 

addition, we do not make adjustments for future changes in variables such as service 

volume, service-mix, or number of encounters. In the CY 2014 OPPS/ASC proposed 

rule (78 FR 43687 through 43688), we solicited public comment and information about 

the anticipated effects of our proposed changes on providers and our methodology for 

estimating them. Any public comments that we received are addressed in the applicable 

sections of this final rule with comment period that discuss the specific policies. 

Comment: Numerous comments raised concerns about the lack of transparency 

created by introducing multiple policies into a complex payment system that was created 

by insufficient guidance on how proposed payment rates were developed, technical 

errors, insufficient policy details, and a lack of detailed impact analyses for each 

proposal. 

 Response: With regard to the lack of detailed impact analyses, we believe that 

our approach of modeling the overall impact of the payment system on classes of 

hospitals is one aspect of fostering transparency. However, assessing the impacts of a 

specific policy also relies on clear discussion of proposed changes and rationale, final 

modeled relative weights, summary data files and tables, and public use files. Overall 

impacts can allow a quick assessment of how multiple interacting policies combine to 

impact proposed payments, but can never provide the amount of additional detail that an 

individual commenter would desire for their specific product(s) or set of services. 
1199 

 We make numerous separate summary data files and public use files available, 

along with a discussion of our modeling processes, and we believe that this is the best 

means to foster robust public data-related comments on specific policies. We 

continuously examine ways in which the data process could be simplified or made 

clearer, and we also welcome and appreciate public comment with regards to potential 

improvements. This year, we again received numerous thoughtful comments supported 

by detailed data analyses suggesting that commenters have modeled the data to draw 

detail on their specific policy interest. Finally, individual facilities have more recent 

internal data on the mix of services that they provide than the distribution of services in 

our claims data, and this should allow them to assess the impact on their facility along 

with discussion of the proposed policy in preamble text. 

(2) Estimated Effects of OPPS Changes on Hospitals 

 Table 55 below shows the estimated impact of this final rule with comment period 

on hospitals. Historically, the first line of the impact table, which estimates the 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 55 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 2014, we are 
1200 

continuing to pay CMHCs under APC 0172 (Level I Partial Hospitalization (3 services) 

for CMHCs) and APC 0173 (Level II Partial Hospitalization (4 or more services) for 

CMHCs), and we are paying hospitals for partial hospitalization services under APC 

0175 (Level I Partial Hospitalization (3 services) for hospital-based PHPs) and APC 0176 

(Level II Partial Hospitalization (4 or more services) for hospital-based PHPs). We 

display separately the impact of our 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 final rule with comment period. 

Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule increase factor is 

equal to the market basket percentage increase applicable under section 1886(b)(3)(B)(iii) 

of the Act, which we refer to as the IPPS market basket percentage increase. The final 

IPPS market basket percentage increase for FY 2014 is 2.5 percent (78 FR 50507). 

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 

0.5 percentage points for FY 2014 (which is also the MFP adjustment for FY 2014 in the 

FY 2014 IPPS/LTCH PPS final rule (78 FR 51003); 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 OPD fee schedule increase factor of 1.7 percent, which 
1201 

we are using in the calculation of the 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 55. 

 To illustrate the impact of the 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 55 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: the independent effect of all relative weight changes between CY 2014 

and CY 2013, resulting from final policies other than the packaging of outpatient 

laboratory services previously paid under the clinical laboratory fee schedule (CLFS) into 

the OPPS (Column 2); the marginal impact of the final policy to package clinical 

laboratory services (Column 3); the combined impact of the changes between CY 2013 

and CY 2014 modeled in Columns 2 and 3 (Column 4: APC reconfiguration and 

recalibration for CY 2014 compared to CY 2013 payments, the combined effect of 

Columns 2 and 3); the final wage indices and the rural and cancer hospital adjustments 

(Column 5); the combined impact of all the changes described in the preceding columns 

plus the 1.7 percent OPD fee schedule increase factor update to the conversion factor 

(Column 6); the combined impact shown in Column 6 plus the CY 2014 frontier State 

wage index adjustment (Column 7); and the estimated impact taking into account all 
1202 

payments for CY 2014 relative to all payments for CY 2013, including the impact of 

changes in estimated outlier payments and changes to the pass-through payment estimate 

(Column 8). 

 We did not model an explicit budget neutrality adjustment for the rural adjustment 

for SCHs because we are not making any changes to the policy for CY 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 final rule with comment period will redistribute money during 

implementation also will depend on changes in volume, practice patterns, and the mix of 

services billed between CY 2013 and CY 2014 by various groups of hospitals, which 

CMS cannot forecast. 

 Overall, we estimate that the final OPPS rates for CY 2014 will 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 changes will result in a 1.9 percent 
1203 

estimated increase in Medicare payments to all other hospitals. Those estimated 

payments will not significantly impact other providers. 

Column 1: Total Number of Hospitals

 The first line in Column 1 in Table 55 shows the total number of facilities (4,068), 

including designated cancer and children’s hospitals and CMHCs, for which we were 

able to use CY 2012 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 final rule 

with comment period. At this time, we are unable to calculate a disproportionate share 

(DSH) variable for hospitals not participating in the IPPS. Hospitals for which we do not 

have a DSH variable are grouped separately and generally include freestanding 

psychiatric hospitals, rehabilitation hospitals, and long-term care hospitals. We show the 

total number of OPPS hospitals (3,905), 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 
1204 

analyses. We show the isolated impact on 101 CMHCs at the bottom of the impact table 

and discuss that impact separately below. 

Column 2: APC Recalibration for Policies Other than Outpatient Laboratory Test 

Packaging

 Column 2 shows the estimated independent effect of all relative weight changes 

between CY 2013 and CY 2014 resulting from final policies other than packaging 

outpatient laboratory tests previously paid under the clinical laboratory fee schedule into 

the OPPS. These final policies include packaging drugs, biologicals, and 

radiopharmaceuticals that function as supplies when used in a diagnostic test or 

procedure (stress agents and Cysview), drugs and biologicals that function as supplies 

when used in a surgical procedure (skin substitutes), certain procedures described by 

add-on codes, and device removal procedures; new cost report data for estimating CT and 

MRI relative weights; and revisions to coding and APC structure for stereotactic 

radiosurgery. This column also reflects reclassification of services among APC groups 

due to updated CY 2012 hospital claims data and the most recent hospital cost report data 

available. Changes due to APC recalibration are less significant than in the CY 2014 

OPPS/ASC proposed rule impact analysis, as several proposed policies were not 

finalized. Increases for rural hospitals are largely attributable to adoption of a single 

payment for clinic visits. Reductions for low volume hospitals, particularly rural 

hospitals, are attributable to reductions for certain mental health services. Under the 

OPPS, payment for mental health services on a single day cannot exceed payment for 
1205 

partial hospitalization, and APC recalibration reduces the relative weight for partial 

hospitalization for CY 2014. 

Column 3: APC Recalibration Due to Packaging Outpatient Laboratory Services

 Column 3 shows the estimated impact of APC recalibration within the CY 2014 

OPPS resulting from our packaging policy for outpatient laboratory services currently 

paid under the CLFS. This column compares the estimated CY 2014 OPPS payments 

with the addition of packaged laboratory services to CY 2014 OPPS payment in 

Column 2 plus payment for laboratory services at CY 2013 CLFS payment rates. 

Packaging laboratory services modestly reduces payment to rural hospitals who no longer 

receive separate payment for common laboratory tests. Relative weights for visits, 

x-rays, and the small set of common services furnished by rural hospitals (shown in 

Column 1) do increase with packaging, but this does not fully offset the impact of 

packaging laboratory tests. Packaging laboratory services also results in modest 

reductions to major teaching hospitals. 

Column 4: APC Recalibration – All Changes

 Column 4 shows the estimated combined effect of APC recalibration related to 

the policies modeled in Columns 2 and 3. Column 4 also reflects any changes in multiple 

procedure discount patterns or conditional packaging that occur as a result of the changes 

in the relative magnitude of payment weights. As a result of APC recalibration, we 

estimate that urban hospitals will experience an increase of 0.1 percent, with the impact 

ranging from an increase of 0.4 percent to a decrease of 0.3 percent depending on the 

number of beds. Rural hospitals will experience a decrease of 0.4 percent, with the 
1206 

impact ranging from an increase of 0.5 percent to a decrease of 1.7 percent depending on 

the number of beds. Major teaching hospitals experience a decrease of 0.6 percent 

overall, largely attributable to packaging laboratory services. Packaging laboratory 

services also modestly reduces the relative weight for major teaching hospitals, while 

minor teaching hospitals and nonteaching hospitals experience modest increases. 

Column 5: New Wage Indices and the Effect of the Rural and Cancer Hospital 

Adjustments

 Column 5 demonstrates the combined budget neutral impact of APC recalibration; 

updating the wage indexes with the final fiscal year (FY) 2014 IPPS post-reclassification 

wage indexes; the rural adjustment; and the cancer hospital payment adjustment. We 

modeled the independent effect of the budget neutrality adjustments and the 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. We also updated the 

list of counties qualifying for the section 505 out-migration adjustment. 

 Column 5 reflects the independent effects of the updated wage indices, including 

the application of budget neutrality for the rural floor policy on a nationwide basis. This 

column excludes the effects of the frontier State wage index adjustment, which is not 

budget neutral and is included in Column 7. We did not model a budget neutrality 

adjustment for the rural adjustment for SCHs because we are not making any changes to 

the policy for CY 2014. We are continuing the rural payment adjustment of 7.1 percent 
1207 

to rural SCHs for CY 2014, as described in section II.E. of this final rule with comment 

period. 

 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 CY 2014 scaled weights and a CY 2013 conversion 

factor that included a budget neutrality adjustment for the effect of changing the wage 

indices between CY 2013 and CY 2014. Modest redistributions are the result of final 

FY 2014 wage policy. 

 The modeled differential between the CY 2013 cancer hospital payment 

adjustment and the CY 2014 cancer hospital payment adjustment had a minor effect on 

budget neutrality. We note that cancer hospitals receive about $24 million less under the 

CY 2014 adjustment, which appears as a 0.1 increase for the general hospital population 

in row 2 of Column 5, All Hospitals (excluding cancer and children’s hospitals, and 

CMHCs). 

Column 6: All Budget Neutrality Changes Combined with the Market Basket Update

 Column 6 demonstrates the combined impact of all the changes previously 

described and the update to the conversion factor of 1.7 percent. It shows the estimated 

cumulative impact of the budget neutral adjustments from Columns 4 and 5 and the OPD 

fee schedule increase factor of 1.7 percent. With the exception of small rural hospitals 

and rural hospitals in the Middle Atlantic, we estimate that the addition of the 1.7 percent 

market basket alleviates negative impacts on payments for CY 2014 created by budget 

neutrality made in Columns 4 and 5 for payments made to most hospitals. Overall, these 
1208 

changes increase payments to urban hospitals by 1.9 percent and to rural hospitals by 

1.1 percent. Most classes of hospitals will receive an increase in line with the 1.7 percent 

overall increase after the update is applied to the budget neutrality adjustments. 

Column 7: All Adjustments with the Frontier State Wage Index Adjustment

 This column shows the impact of all budget neutrality adjustments, application of 

the 1.7 percent OPD fee schedule increase factor, and the nonbudget neutral impact of 

applying the CY 2014 frontier State wage adjustment (that is, the frontier State wage 

index change in addition to all changes reflected in Column 6). This column differs from 

Column 6 solely based on application of the nonbudget neutral frontier State wage index 

adjustment. Rural hospitals in West North Central and Mountain States experience 

increases in payment of 3.2 and 2.3 percent, respectively, as a result of the frontier State 

wage index adjustment, while urban hospitals in those States experience increases of 

3.6 and 2.1 percent, respectively. 

Column 8: All Changes for CY 2014

 Column 8 depicts the full impact of the CY 2014 policies on each hospital group 

by including the effect of all of the changes for CY 2014 and comparing them to all 

estimated payments in CY 2013. Column 8 shows the combined budget neutral effects of 

Column 4 and 5; the OPD fee schedule increase; the impact of the frontier State wage 

index adjustment; the impact of estimated OPPS outlier payments as discussed in 

section II.G. of this final rule with comment period; the change in the Hospital OQR 

Program payment reduction for the small number of hospitals in our impact model that 

failed to meet the reporting requirements (discussed in section XIII. of this final rule with 
1209 

comment period); and the difference in 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 52 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 changes for CY 2014 will increase payments to all providers by 1.8 percent for 

CY 2014. We modeled the independent effect of all changes in Column 8 using the final 

relative payment weights for CY 2013 and the final relative payment weights for 

CY 2014. We used the final conversion factor for CY 2013 of $71.313 and the final 

CY 2014 conversion factor of $72.672 discussed in section II.B. of this final rule with 

comment period. 

 Column 8 contains simulated outlier payments for each year. We used the one 

year charge inflation factor used in the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50982) of 4.73 percent (1.0473) to increase individual costs on the CY 2012 

claims, and we used the most recent overall CCR in the July 2013 Outpatient 

Provider-Specific File (OPSF) to estimate outlier payments for CY 2013. Using the 

CY 2012 claims and a 4.73 percent charge inflation factor, we currently estimate that 

outlier payments for CY 2013, using a multiple threshold of 1.75 and a fixed-dollar 

threshold of $2,025 will be approximately 1.1 percent of total payments. The estimated 

current outlier payments of 1.1 percent are incorporated in the comparison in Column 8. 

We used the same set of claims and a charge inflation factor of 9.69 percent (1.0969) and 
1210 

the CCRs in the July 2013 OPSF, with an adjustment of 0.9645, to reflect relative 

changes in cost and charge inflation between CY 2012 and CY 2014, to model the 

CY 2014 outliers at 1.0 percent of estimated total payments using a multiple threshold of 

1.75 and a fixed-dollar threshold of $2,900. 

 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 will 

be negligible. Overall, we estimate that facilities will experience an increase of 

1.8 percent under this final rule with comment period in CY 2014 relative to total 

spending in CY 2013. This projected increase (shown in Column 8) of Table 55 reflects 

the 1.7 percent OPD fee schedule increase factor, with 0.13 percent for the change in the 

pass-through estimate between CY 2013 and CY 2014, less 0.1 percent for the difference 

in estimated outlier payments between CY 2013 (1.1 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 

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 is 1.9 percent after rounding. We estimate that the combined 

effect of all changes for CY 2014 will increase payments to urban hospitals by 

2.0 percent. 

 Overall, we estimate that rural hospitals will experience a 1.1 percent increase as 

a result of the combined effects of all changes for CY 2014. We estimate that rural 

hospitals that bill less than 5,000 lines of OPPS services will experience an increase of 
1211 

2.2 percent and rural hospitals that bill 5,000 or more lines of OPPS services will 

experience increases ranging from 0.1 to 5.0 percent. 

 Among hospitals by teaching status, we estimate that the impacts resulting from 

the combined effects of all changes will include an increase of 1.4 percent for major 

teaching hospitals and 1.8 percent for nonteaching hospitals. Minor teaching hospitals 

will experience an estimated increase of 2.3 percent. 

 In our analysis, we also have categorized hospitals by type of ownership. Based 

on this analysis, we estimate that voluntary hospitals will experience an increase of 

2.0 percent, proprietary hospitals will experience an increase of 2.0 percent, and 

governmental hospitals will experience an increase of 1.1 percent. 

 
1212 
TABLE 55.—ESTIMATED IMPACT OF THE CY 2014 CHANGES FOR THE HOSPITAL OUTPATIENPAYMENTS SYSTEM 

 (1) (2) (3) (4) (5) (6) 

Number of 

Hospitals 

APC 

Recalibration 

(Policies 

Other than 

Outpatient 

Laboratory 

Services) (%) 

APC 

Recalibration 

(Outpatient 

Laboratory 

Services 

Packaging 

Policy) (%) 

APC 

Recalibration (all 

changes) 

(%) 

New Wage 

Index and 

Provider 

Adjustments 

(%) 

Combined 

Cols 4, 5 

with 

Market 

Basket 

Update (%) 

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ALL FACILITIES * 4,068 0.0 0.0 0.0 0.0 1.7 ALL HOSPITALS 3,905 0.0 0.0 0.0 0.1 1.8 (excludes hospitals permanently held harmless and CMHCs) URBAN HOSPITALS 2,959 0.0 0.2 0.1 0.1 1.9  LARGE URBAN 1,612 0.0 0.2 0.3 0.2 2.1  (GT 1 MILL.)  OTHER URBAN 1,347 -0.1 0.1 0.0 0.0 1.7  (LE 1 MILL.) RURAL HOSPITALS 946 0.4 -0.8 -0.4 -0.2 1.1  SOLE COMMUNITY 391 0.5 -0.5 0.0 -0.2 1.5  OTHER RURAL 555 0.3 -1.0 -0.8 -0.2 0.7 BEDS (URBAN)  0 - 99 BEDS 1,037 -0.5 0.4 -0.1 0.0 1.7  100-199 BEDS 843 0.0 0.2 0.2 0.0 1.9  200-299 BEDS 458 0.0 0.3 0.3 0.1 2.1  300-499 BEDS 410 0.1 0.3 0.4 0.1 2.1  500 + BEDS 211 -0.1 -0.2 -0.3 0.2 1.6 BEDS (RURAL) 
 (1) (2) (3) (4) (5) (6) 

Number of 

Hospitals 

APC 

Recalibration 

(Policies 

Other than 

Outpatient 

Laboratory 

Services) (%) 

APC 

Recalibration 

(Outpatient 

Laboratory 

Services 

Packaging 

Policy) (%) 

APC 

Recalibration (all 

changes) 

(%) 

New Wage 

Index and 

Provider 

Adjustments 

(%) 

Combined 

Cols 4, 5 

with 

Market 

Basket 

Update (%) 

C

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Ad

 0 - 49 BEDS 363 0.9 -2.5 -1.7 -0.5 -0.5  50- 100 BEDS 346 0.6 -1.1 -0.5 -0.1 1.1  101- 149 BEDS 133 0.2 -0.2 0.1 -0.2 1.6  150- 199 BEDS 60 0.0 -0.6 -0.6 -0.1 1.0  200 + BEDS 44 0.1 0.4 0.5 0.0 2.1 VOLUME (URBAN)  LT 5,000 Lines 523 -1.9 1.0 -0.9 0.0 0.9  5,000 - 10,999 Lines 124 -1.5 1.7 0.1 -0.2 1.6  11,000 - 20,999 Lines 121 -1.3 1.4 0.1 0.0 1.8  21,000 - 42,999 Lines 232 -0.5 1.6 1.1 -0.2 2.6  42,999 - 89,999 Lines 480 -0.2 1.4 1.2 0.1 3.0  GT 89,999 Lines 1,479 0.0 0.0 0.0 0.1 1.8 VOLUME (RURAL)  LT 5,000 Lines 34 -1.0 1.8 0.8 -0.4 2.1  5,000 - 10,999 Lines 28 2.4 -2.8 -0.5 -0.8 0.4  11,000 - 20,999 Lines 54 6.5 -2.1 4.2 -0.8 5.1  21,000 - 42,999 Lines 163 1.0 -0.8 0.1 -0.2 1.6  GT 42,999 Lines 667 0.3 -0.8 -0.5 -0.2 1.1 REGION (URBAN)  NEW ENGLAND 152 0.2 -1.2 -1.0 0.6 1.2  MIDDLE ATLANTIC 351 0.1 -0.9 -0.7 0.7 1.7  SOUTH ATLANTIC 453 -0.2 0.5 0.3 -0.3 1.7  EAST NORTH CENT. 474 0.3 -0.3 -0.1 -0.1 1.6  EAST SOUTH CENT. 176 -0.2 0.7 0.5 -0.2 2.0  WEST NORTH CENT. 198 0.1 1.1 1.2 -0.4 2.5  WEST SOUTH CENT. 519 -0.6 0.5 -0.2 -0.4 1.2  MOUNTAIN 198 -0.3 0.9 0.6 -0.6 1.7  PACIFIC 389 0.2 0.7 0.9 1.0 3.6 
 (1) (2) (3) (4) (5) (6) 

Number of 

Hospitals 

APC 

Recalibration 

(Policies 

Other than 

Outpatient 

Laboratory 

Services) (%) 

APC 

Recalibration 

(Outpatient 

Laboratory 

Services 

Packaging 

Policy) (%) 

APC 

Recalibration (all 

changes) 

(%) 

New Wage 

Index and 

Provider 

Adjustments 

(%) 

Combined 

Cols 4, 5 

with 

Market 

Basket 

Update (%) 

C

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 PUERTO RICO 49 0.8 -0.8 0.0 0.5 2.1 REGION (RURAL)  NEW ENGLAND 25 0.4 -1.0 -0.6 0.4 1.5  MIDDLE ATLANTIC 69 1.0 -3.6 -2.6 0.2 -0.7  SOUTH ATLANTIC 160 0.2 -0.1 0.1 -0.3 1.5  EAST NORTH CENT. 127 0.4 -1.6 -1.1 -0.3 0.3  EAST SOUTH CENT. 171 0.2 -0.2 0.1 -0.5 1.2  WEST NORTH CENT. 99 0.3 0.2 0.6 -0.2 2.1  WEST SOUTH CENT. 200 0.5 -0.6 -0.1 -0.5 1.1  MOUNTAIN 66 0.0 -1.2 -1.1 0.2 0.8  PACIFIC 29 0.5 0.3 0.8 1.1 3.6 TEACHING STATUS  NON-TEACHING 2,885 0.0 0.1 0.1 0.0 1.7  MINOR 699 0.1 0.4 0.5 0.0 2.2  MAJOR 321 0.0 -0.6 -0.6 0.3 1.3 DSH PATIENT PERCENT  0 11 2.8 1.3 4.1 0.1 5.9  GT 0 - 0.10 350 -0.6 0.1 -0.5 0.1 1.3  0.10 - 0.16 341 -0.1 -0.1 -0.2 0.1 1.6  0.16 - 0.23 685 0.2 -0.2 -0.1 0.1 1.7  0.23 - 0.35 1,080 0.0 0.3 0.3 0.0 2.0  GE 0.35 823 0.1 -0.1 0.0 0.1 1.8  DSH NOT AVAILABLE ** 615 0.0 0.5 0.5 -0.1 2.1 URBAN TEACHING/DSH  TEACHING & DSH 923 0.0 0.0 0.0 0.1 1.9  NO TEACHING/DSH 1,450 -0.1 0.4 0.3 0.0 2.0  NO TEACHING/NO DSH 11 2.8 1.3 4.1 0.1 5.9 
 (1) (2) (3) (4) (5) (6) 

Number of 

Hospitals 

APC 

Recalibration 

(Policies 

Other than 

Outpatient 

Laboratory 

Services) (%) 

APC 

Recalibration 

(Outpatient 

Laboratory 

Services 

Packaging 

Policy) (%) 

APC 

Recalibration (all 

changes) 

(%) 

New Wage 

Index and 

Provider 

Adjustments 

(%) 

Combined 

Cols 4, 5 

with 

Market 

Basket 

Update (%) 

C

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Ad

 DSH NOT AVAILABLE** 575 -0.2 0.4 0.2 0.0 1.9 TYPE OF OWNERSHIP  VOLUNTARY 2,040 0.1 0.0 0.1 0.1 1.9  PROPRIETARY 1,300 -0.5 0.9 0.4 -0.2 1.9  GOVERNMENT 565 0.3 -0.7 -0.5 -0.2 1.1 CMHCs 101 -1.3 1.8 0.4 -0.4 1.7 

Column (1) shows total hospitals and/or CMHCs. Column (2) shows the additional impact of changes resulting from the reclassification of HCPCS codes among APC groups and other data changes as a result OPPS packaging policies (but excluding the packaging of outpatient laboratory services currently paid at CLFS rates). 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 OPPS policy to package outpatient laboratory services currently paid at CLFS rates. 

 Column (4) includes all CY 2014 OPPS proposals and compares those to the CY 2013 OPPS (which includes outpatient laboratory services previously paid a

Column (5) shows the budget neutral impact of updating the wage index by applying the FY 2014 hospital inpatient wage index. The rural adjustment contin

percent so the budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for the adjustment is limited and thus results in a 

1.0005. Column (6) shows the impact of all budget neutrality adjustments and the addition of the 1.7 percent OPD fee schedule update factor (2.5 percent reduced by 

productivity adjustment and further reduced by 0.3 percentage point in order to satisfy statutory requirements set forth in the Affordable Care Act). 

Column (7) shows the nonbudget neutral impact of applying the CY 2014 frontier State wage index adjustment. Column (8) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier payment

indexes. *These 4,068 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. Payments for laboratory services a

packaging 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.
1217 
1218 

(3) Estimated Effects of OPPS Changes on CMHCs 

 The last line of Table 55 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 hospital-based PHPs) 

and APC 0176 (Level II Partial Hospitalization (4 or more s.ervices) for hospital-based 

PHPs). We use our standard ratesetting 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 continuing the provider-specific 

APC structure that we adopted in CY 2011. We modeled the impact of this APC policy 

assuming that CMHCs will continue to provide the same number of days of PHP care, 

with each day having either 3 services or 4 or more services, as seen in the CY 2012 

claims data used for this final rule with comment period. We excluded days with 1 or 2 

services because our policy only pays a per diem rate for partial hospitalization when 3 or 

more qualifying services are provided to the beneficiary. 

 Packaging outpatient laboratory tests results in a 1.8 percent payment increase to 

CMHCs, which is offset by a 1.3 percent decrease in payments from APC recalibration 

for policies other than packaging outpatient laboratory tests. Together with the market 
1219 

basket and all other changes, we estimate that CMHCs will experience an overall 1.8 

percent increase in payments from CY 2013 (shown in Column 8). 

 Column 5 shows that the estimated impact of adopting the final FY 2014 wage 

index values will result in a small decrease of 0.4 percent to CMHCs. We note that all 

providers paid under the OPPS, including CMHCs, will receive a 1.7 percent OPD fee 

schedule increase factor. Column 6 shows that combining this OPD fee schedule 

increase factor, along with changes in APC policy for CY 2014 and the FY 2014 wage 

index updates, will result in an estimated increase of 1.7 percent. Column 7 shows that 

adding the frontier State wage index adjustment will result in no change to the cumulative 

1.7 percent increase. Column 8 shows that adding the changes in outlier and pass-though 

payments will result in an additional 0.1 percent increase in payment for CMHCs, for a 

total increase of 1.8 percent. This reflects all changes to CMHCs for CY 2014. 

(4) Estimated Effect of OPPS Changes on Beneficiaries 

 For services for which the beneficiary pays a copayment of 20 percent of the 

payment rate, the beneficiary share of payment will increase for services for which the 

OPPS payments will rise and will decrease for services for which the OPPS payments 

will fall. For further discussion on the calculation of the national unadjusted copayments 

and minimum unadjusted copayments, we refer readers to section II.I. of this final rule 

with comment period. In all cases, the statute limits beneficiary liability for copayment 

for a procedure to the hospital inpatient deductible for the applicable year. The CY 2014 

inpatient hospital deductible is $1,216. 
1220 

 We estimate that the aggregate beneficiary coinsurance percentage will be 21.7 

percent for all services paid under the OPPS in CY 2014. The estimated aggregate 

beneficiary coinsurance reflects the final policy to package laboratory services into the 

outpatient hospital services with which they are billed in addition to general system 

adjustments, including recalibration of the APC relative payment weights, change in the 

portion of OPPS payments dedicated to pass-through payments, and changes in the 

cancer hospital payment adjustment. 

(5) Estimated Effects of 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 final rule with 

comment period. No types of providers or suppliers other than hospitals, CMHCs and 

ASCs will be affected by the changes in this final rule with comment period. 

(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid Programs 

 The effect on the Medicare program is expected to be $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 final rule with 

comment period. 

(7) Alternative OPPS Policies Considered 
1221 

 Alternatives to the OPPS changes we proposed and are making and the reasons 

for our selected alternatives are discussed throughout this final rule with comment period. 

In this section, we discuss some of the major issues and the alternatives considered. 
1222 

● Alternatives Considered for the Establishment of Comprehensive APCs 

 We proposed in section II.A.2.e. of the OPPS proposed rule to create 

29 comprehensive APCs for CY 2014 to prospectively pay for device-dependent hospital 

outpatient services associated with 121 HCPCS codes. We proposed 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. For services that 

trigger a comprehensive APC payment, the comprehensive APC would treat all 

individually reported codes on the claim as representing components of the 

comprehensive service, resulting in a single prospective payment based on the cost of all 

individually reported codes on the claim. For these APCs, we proposed 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 proposed 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 believed the proposed polices would 

enhance beneficiary understanding and transparency for the beneficiary, for physicians, 
1223 

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 

services when they are furnished to a hospital inpatient. 

 We considered implementing this policy for CY 2014 as proposed, but in 

response to public comments we received and because we are providing significantly 

greater detail on the comprehensive APC payment calculation methodology, we are 

delaying implementation of the policy for 1 year (we refer readers to section II.A.2.e. of 

this final rule with comment period). Although we are finalizing our comprehensive 

APC policy effective CY 2015, we also are inviting additional public comment because 

there is significant additional information on the comprehensive APC policy in the 

preamble of this final rule with comment period. We also believe that additional time to 

consider operational issues over a longer period of time is appropriate for this new 

payment methodology. We have published tables in this final rule with comment period 

to demonstrate how this policy would have been implemented in CY 2014, and we will 

be considering any additional public comments we receive when we update the policy for 

CY 2015 to account for changes that may occur in the CY 2013 claims data. 

 In our final policy, we have revised some of our APC assignments to better align 

resource requirements in accordance with our usual 2 times rule adjustments and also to 

ensure that the resources required with certain complex subsets of procedures are 

similarly aligned with the other services in the APC. We have created a complexity 

adjustment to assign certain other subsets of complex procedures to different APCs than 

the simpler versions of those services. We have reassigned the composite cardiac 
1224 

ablation APC to the comprehensive APC for combined electrophysiology and cardiac 

ablation in order to remove an ambiguity in our proposed rule, and we have modified our 

proposal to base the APC assignment on the identification of the service with the greatest 

single service cost in the CY 2012 claims data rather than the proposed service with the 

greatest CY 2012 single service payment. Finally, we are not finalizing our proposal to 

include costs from certain inpatient room and board cost centers for comprehensive APC 

ratesetting because the outpatient costs associated with services in comprehensive APCs 

should not be reported in these inpatient cost centers. Also, we have removed the cost of 

brachytherapy seeds from comprehensive payment and specified that these seeds will be 

paid through unpackaged dedicated APC payments. 

 We considered but did not implement a number of other options. We considered 

implementing this policy for CY 2014 as proposed, but did not do so because we believe 

we should provide an opportunity for additional public comment as well as a longer time 

period for operational implementation by CMS contractors and other stakeholders. We 

considered but did not implement comprehensive APCs as originally proposed. Although 

we believe that an averaged payment system similar to the IPPS with a single payment 

for a primary or comprehensive service is our goal and would be feasible, we agreed with 

commenters that the sudden transition from component payments to comprehensive 

payments could potentially create some economic challenges for some hospitals. 

Although we noted that a single payment for single and multiple component procedures, 

including short stay procedures, has worked well in the IPPS for almost 30 years, we 

determined that a complexity adjustment as recommended by commenters could reduce 
1225 

the spread of costs and ease the transition as hospitals explore mechanisms to increase 

efficiencies if their mean costs of a specific complex procedure exceed the average cost. 

 We considered but did not implement recommendations to eliminate certain 

proposed APCs from conversion to comprehensive payments. All of the proposals for 

exclusion were based on multiple component payments or on coding changes. We 

considered excluding the different APCs where commenters expressed concerns. 

However, after analysis of each APC, after applying our usual processes of modeling 

coding changes, and after developing and applying a complexity adjustment for high 

volume complex services with a high cost variance from the mean payment, we 

determined that these processes applied equally well to the various APCs and no sets of 

services stood out as inappropriate for conversion on the basis of coding changes or the 

basis of multiple component procedures that could not have any potential adverse impact 

mitigated. 

 We considered but did not implement a multiple procedure adjustment to the 

comprehensive APC payment. As an alternative to the complexity adjustment, we 

considered a multiplier to be applied when two or more individual procedures were 

performed during the same comprehensive service. However we did not consider that, in 

our current year analyses, a single multiplier reflected the entire range of services that 

could be combined. We also did not believe that a multiple procedure adjustment was 

consistent with the concept of the comprehensive service representing a single entire 

service to a beneficiary. However we will continue to explore other options to account 
1226 

for multiple components, including multiple surgical procedures as well as multiple 

devices, as we continue to analyze comprehensive APCs in the future. 

 We considered but did not implement a less comprehensive packaging policy for 

comprehensive APCs. We had considered a less comprehensive packaging policy before 

our proposed rule, but we did not believe that was advantageous as we discussed in the 

proposed rule. We reconsidered those options after receiving comments, but noted that 

the few comments suggesting more limited packaging were balanced by the comments 

agreeing with our comprehensive concept. We did not receive any public comments on 

this topic concerning issues that we had not already considered, so therefore we did not 

modify the packaging rules other than the exclusion of brachytherapy seeds as noted. 

● Alternatives Considered for Payment of Hospital Outpatient Visits 

 As described in section VII. of this final rule with comment period, we are 

finalizing our proposal to replace the current five levels of visit codes for each clinic visit 

with a new alphanumeric Level II HCPCS code representing a single level of payment for 

clinic visits. We also are finalizing our proposal to assign the new alphanumeric Level II 

HCPCS to newly created APC 0634 with CY 2014 OPPS payment rates based on the 

total geometric mean costs of Level 1 through Level 5 clinic visit codes obtained from 

CY 2012 OPPS claims data. For CY 2014, we are not finalizing our proposal to replace 

the current five levels of visit codes for each Type A ED, and Type B ED visits with two 

new alphanumeric Level II HCPCS codes representing a single level of payment for Type 

A and Type B of ED visits, respectively. 
1227 

 In developing this policy, we considered two alternatives, the first of which was 

to finalize our proposal to replace the current five levels of visit codes for each Type A 

ED, and Type B ED visits with two new alphanumeric Level II HCPCS codes 

representing a single level of payment for Type A and Type B of ED visits, respectively, 

in addition to finalizing our proposal to replace the current five levels of visit codes for 

each clinic visit with a new alphanumeric Level II HCPCS code representing a single 

level of payment for clinic visits. 

 While we believe this alternative could offer advantages over the current CY 2013 

OPPS visit payment policy, we did not choose this alternative because as we describe is 

section VII. of this final rule with comment period, in light of the thoughtful and detailed 

alternatives put forth by commenters, as well as the comments on the potential issues 

associated with a single level of payment for ED visits that both require additional study 

on our part here at CMS, we believe it is best to delay any change in ED visit coding 

while we further consider the most appropriate payment structure for Type A and Type B 

ED visits. 

 We also considered replacing the current five levels of visit codes for each clinic, 

Type A ED, and Type B ED visit with six 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 
1228 

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 also 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 final rule with comment period, we believed that a single 

level of payment for each type of clinic visit was the best policy option as this proposal 

would be easily implemented by hospitals; reduces administrative burden relative to the 

existing 5-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 two-level visit payment structure may 

provide incentives for hospitals to be efficient, the incentives may not be so great as 

under a single-level visit payment structure. For ED visits, we believe it is best to delay 

any change in ED visit coding while we consider further the most appropriate payment 

structure for Type A and Type B ED visits, for the reasons stated earlier in this section. 

Therefore, we are finalizing our proposal to create a new alphanumeric Level II HCPCS 

code to describe all levels of clinic visits rather than continue to recognize five levels 
1229 

each of clinic visits. We are not finalizing our proposal to create two new alphanumeric 

Level II HCPCS codes to describe all levels of Type A and Type B ED visits, 

respectively, rather than continue to recognize five levels each of Type A and Type B ED 

visits. 

b. Estimated Effects of CY 2014 ASC Payment System Final 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 final rule 

with comment period, we are setting the CY 2014 ASC relative payment weights by 

scaling the CY 2014 OPPS relative payment weights by the proposed ASC scaler of 

0.9235. The estimated effects of the updated relative payment weights on payment rates 

are varied and are reflected in the estimated payments displayed in Tables 56 and 57 

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 CY 2014 ASC 
1230 

conversion factor by adjusting the CY 2013 ASC conversion factor by 1.0009 to account 

for changes in the pre-floor and pre-reclassified hospital wage indices between CY 2013 

and CY 2014 and by applying the CY 2014 MFP-adjusted CPI-U update factor of 1.2 

percent (projected CPI-U update of 1.7 percent minus a projected productivity adjustment 

of 0.5 percent). The CY 2014 ASC conversion factor is $43.471. 

(1) Limitations of Our Analysis 

 Presented here are the projected effects of the 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 CY 2014 changes will be small in the 

aggregate for all ASCs. However, such changes may have differential effects across 

surgical specialty groups as ASCs continue to adjust to the payment rates based on the 

policies of the revised ASC payment system. We are unable to accurately project such 

changes at a disaggregated level. Clearly, individual ASCs will experience changes in 

payment that differ from the aggregated estimated impacts presented below. 

(2) Estimated Effects of CY 2014 ASC Payment System Policies on ASCs 

 Some ASCs are multispecialty facilities that perform the gamut of surgical 

procedures from excision of lesions to hernia repair to cataract extraction; others focus on 

a single specialty and perform only a limited range of surgical procedures, such as eye, 

digestive system, or orthopedic procedures. The combined effect on an individual ASC 

of the update to the CY 2014 payments will depend on a number of factors, including, but 

not limited to, the mix of services the ASC provides, the volume of specific services 
1231 

provided by the ASC, the percentage of its patients who are Medicare beneficiaries, and 

the extent to which an ASC provides different services in the coming year. The 

following discussion presents tables that display estimates of the impact of the CY 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 56 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 57 shows a comparison of estimated CY 2013 payments to estimated CY 2014 

payments for procedures that we estimate will receive the most Medicare payment in 

CY 2013. 

 Table 56 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 56. 

● 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 
1232 

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 are attributable to updates to ASC payment rates 

for CY 2014 compared to CY 2013. 

 As seen in Table 56, we estimate that the update to ASC rates for CY 2014 will 

result in a 1 percent increase in aggregate payment amounts for eye and ocular adnexa 

procedures, an 5 percent increase in aggregate payment amounts for digestive system 

procedures, and a 3 percent decrease in aggregate payment amounts for nervous system 

procedures. 

 Generally, for the surgical specialty groups that account for less ASC utilization 

and spending, we estimate that the payment effects of the CY 2014 update are variable. 

For instance, we estimate that, in the aggregate, payment for musculoskeletal system 

procedures will not change, whereas payment for genitourinary system procedures, 

integumentary system procedures and respiratory system procedures will increase by 3 to 

14 percent under the CY 2014 rates. 
1233 

 An estimated increase in aggregate payment for the specialty group does not mean 

that all procedures in the group will experience increased payment rates. For example, 

the estimated increase for CY 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 will increase by 

6 percent for CY 2014. 

 Also displayed in Table 56 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 

will decrease by 11 percent for CY 2014. 

TABLE 56.—ESTIMATED IMPACT OF THE FINAL CY 2014 UPDATE TO THE 

ASC PAYMENT SYSTEM ON AGGREGATE CY 2014 MEDICARE PROGRAM 

PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND 

SERVICES GROUP 

Surgical Specialty Group 

(1) 

Estimated 

CY 2013 

ASC 

Payments 

(in Millions) 

(2) 

Estimated 

CY 2014 

Percent 

Change 

(3) 

Total $3,675 1% 

Eye and ocular adnexa $1,501 1% 

Digestive system $744 5% 

Nervous system $566 -3% 

Musculoskeletal system $454 0% 

Genitourinary system $160 3% 

Integumentary system $133 4% 

Respiratory system $46 14% 

Cardiovascular system $32 1% 

Ancillary items and services $21 -11% 
1234 

Surgical Specialty Group 

(1) 

Estimated 

CY 2013 

ASC 

Payments 

(in Millions) 

(2) 

Estimated 

CY 2014 

Percent 

Change 

(3) 

Auditory system $12 3% 

Hematologic & lymphatic systems $6 9% 

 Table 57 below shows the estimated impact of the 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 2013 aggregate Medicare payments to ASCs. The HCPCS codes are sorted in 

descending order by estimated CY 2013 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 CY 2013 ASC 

payment rates. The estimated CY 2013 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 update. 
1235 

TABLE 57.--ESTIMATED IMPACT OF THE FINAL CY 2014 UPDATE TO THE 

ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR SELECTED 

PROCEDURES 

CPT/HCPCS 

Code* 

(1) 

Short Descriptor 

(2) 

Estimated 

CY 2013 

ASC 

Payments 

(in millions) 

(3) 

Estimated 

CY 2014 

Percent 

Change 

(4) 

66984 Cataract surg w/iol, 1 stage $1,102 0%

43239 Upper GI endoscopy, biopsy $163 6%

45380 Colonoscopy and biopsy $154 5%

45385 Lesion removal colonoscopy $97 5%

66982 Cataract surgery, complex $88 0%

45378 Diagnostic colonoscopy $80 5%

64483 Inj foramen epidural l/s $78 16%

62311 Inject spine l/s (cd) $71 16%

66821 After cataract laser surgery $59 3%

G0105 Colorectal scrn; hi risk ind $41 4%

64493 Inj paravert f jnt l/s 1 lev $40 16%

15823 Revision of upper eyelid $40 -11%

63650 Implant neuroelectrodes $39 4%

G0121 Colon ca scrn not hi rsk ind $36 4%

64590 Insrt/redo pn/gastr stimul $33 5%

64721 Carpal tunnel surgery $31 1%

63685 Insrt/redo spine n generator $31 5%

64636** Destroy l/s facet jnt addl $31 -100%

29826** Shoulder/arthroscopy/surgery $30 -100%

29881 Knee arthroscopy/surgery $30 0%

29827 Arthroscop rotator cuff repr $28 8%

29880 Knee arthroscopy/surgery $25 0%

64484** Inj foramen epidural add-on $24 -100%

43235 Uppr gi endoscopy diagnosis $23 6%

64635 Destroy lumb/sac facet jnt $23 77%

45384 Lesion remove colonoscopy $22 5%

52000 Cystoscopy $21 4%

62310 Inject spine c/t $20 16%

29823 Shoulder arthroscopy/surgery $19 8%

67042 Vit for macular hole $19 3%
1236 

*Note that HCPCS codes we are deleting for CY 2014 are not displayed in this table. 

** The 100 percent decrease in estimated payment reflects our CY 2014 policy to package the payment for 

CPT codes 64636, 29826, and 64484 

(3) Estimated Effects of ASC Payment System Policies on Beneficiaries 

 We estimate that the CY 2014 update to the ASC payment system will be 

generally positive for beneficiaries with respect to the new procedures that we are adding 

to the ASC list of covered surgical procedures and for those that we are designating as 

office-based for CY 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 designating as office-based 

in CY 2014, the beneficiary coinsurance amount will be no greater than the beneficiary 
1237 

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 making to the ASC payment system 

and the reasons that we have chosen specific options are discussed throughout this final 

rule with comment period. There are no 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 final 

rule with comment period. The first accounting statement, Table 58 (below) illustrates 

the classification of expenditures for the CY 2014 estimated hospital OPPS incurred 

benefit impacts associated with the CY 2014 OPD fee schedule increase, based on the 

2013 Trustee’s Report. The second accounting statement, Table 59 (below) illustrates the 

classification of expenditures associated with the 1.2 percent CY 2014 update to the ASC 

payment system, based on the provisions of this final rule with comment period and the 

baseline spending estimates for ASCs in the 2013 Trustee’s Report. The third accounting 

statement, Table 60 (below), illustrates the classification of expenditures associated with 

the revision to the definition of hospital-based EP in payment year 2013 for EPs 
1238 

reassigning benefits to Method II CAHs. Lastly, the tables classify most estimated 

impacts as transfers. 

TABLE 58.--ACCOUNTING STATEMENT: CY 2014 ESTIMATED HOSPITAL 

OPPS TRANSFERS FROM CY 2013 TO CY 2014 ASSOCIATED WITH THE 

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 59.--ACCOUNTING STATEMENT: CLASSIFICATION OF 

ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A RESULT OF THE 

FINAL CY 2014 UPDATE TO THE ASC PAYMENT SYSTEM 

Category Transfers 

Annualized Monetized Transfers $36 million 

From Whom to Whom 

Federal Government to Medicare Providers 

and Suppliers 

Total $36 million 

TABLE 60.--ACCOUNTING STATEMENT: CLASSIFICATION OF 

ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A RESULT OF THE 

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 Requirements for the Hospital OQR Program 

 In section XIII. of this final rule with comment period, we are adopting policies 

affecting the Hospital OQR Program. 
1239 

 Out of 3,352 hospitals that met eligibility requirements, we determined that 94 

hospitals did not meet the requirements to receive the full OPD fee schedule increase 

factor for CY 2013. Most of these hospitals (90 of the 94) chose not to participate in the 

Hospital OQR Program. We estimate that 88 hospitals may not receive the full OPD fee 

schedule increase factor in CY 2014 and that 90 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 
1240 

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. In addition, 

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. 
1241 

 In this CY 2014 OPPS/ASC final rule with comment period, for CY 2016 

payment determination and subsequent years, we are adding four quality measures with 

data collection to begin in CY 2014. For three of these measures, data will be submitted 

via an online tool located on a CMS Web site and one will be submitted via CDC’s 

NHSN. We are removing 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 will 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. 
1242 

e. Effects of CY 2014 Policies for the ASCQR Program 

 In section XV. of this final rule with comment period, for the ASCQR Program, 

we are adopting three additional quality measures for the CY 2016 payment 

determination and subsequent years. Data collection for these proposed measures will 

begin in CY 2014. We will 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 also are adopting for the 

CY 2016 payment determination and subsequent years requirements for a QualityNet 

account and security administrator, facility participation, a minimum threshold and 

minimum volume for claims-based measures, and data collection and submission for new 

measures and for certain previously finalized 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, although we are not able to estimate the level of 

this impact at this time. 

f. Effects of Changes to the CfCs for OPOs Relating to the Outcome Measures 

Requirement for Recertification 

 In section XVI. of this final rule with comment period, we discussed our proposed 

and final policies 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 revised policy will result in those OPOs that fail 
1243 

only one outcome measures avoiding automatic decertification based upon the current 

outcome measures requirement. 

 While we are confident that our revised policy will have a significantly positive 

effect on the OPOs that avoided automatic decertification, it is very difficult to quantify 

the impact of this policy change. As discussed under section XXI.C. of this final rule 

with comment period relating to the ICR requirements, we anticipate that most OPOs that 

are decertified will engage in the appeals process as set forth in § 486.314. However, we 

have no reliable way of estimating how many OPOs will likely obtain reversals of their 

decertifications during reconsideration or how many would 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 policy change to the outcome 

measures requirement, we are unable to provide a specific estimate of that cost savings. 

g. Effects of Revisions of the QIO Regulations 

 In section XVII. of this final rule with comment period rule, we are updating the 

regulations at 42 CFR 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 final rule with comment period, we set forth policies 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 
1244 

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 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 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 Revised Policies Regarding Medicare-Fee-for-Service EHR Incentive 

Program 

(1) Incentive Payments for Eligible Professionals (EPs) Reassigning Benefits to Method 

II CAHs 
1245 

 As discussed in section XVIII.A. of this final rule with comment period, we are 

revising the regulations to provide, during payment year 2013 alone, a special method for 

determining the hospital-based status of EPs who reassign their benefits to Method II 

CAHs. It is difficult to determine with precision the cost impact of this policy change. 

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 

will be determined to be nonhospital-based for 2013 under our revised policy, 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. Therefore, it is necessary to rely on estimates for each of these 

factors. As much as possible, we 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 
1246 

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 also use 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 hospital-based, and thus ineligible to receive Medicare EHR incentive payments. 

For purposes of this impact statement, we 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 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 
1247 

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 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 
1248 

• 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 qualify for the first time and receive the maximum 

incentive payment, our revised policy 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 revised policy will result in considerably less than 

$50,000,000 in payments over and above the payments we would make in the absence of 

this policy 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 final rule with comment period, we 

are revising 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 

policy change 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 
1249 

policy change will 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 final rule with comment period may have a 

significant impact on approximately 2,040 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-size-standards. 

 In addition, section 1102(b) of the Act requires us to prepare a regulatory impact 

analysis if a rule may have a significant impact on the operations of a substantial number 

of small rural hospitals. This analysis must conform to the provisions of section 604 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 final rule with comment period may have a significant impact 

on approximately 709 small rural hospitals. 
1250 

 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 

final rule with comment period does not mandate any requirements for State, local, or 

tribal governments, or for the private sector. 

D. Conclusion

 The changes we are making in this final rule with comment period will affect all 

classes of hospitals paid under the OPPS and will affect both CMHCs and ASCs. We 

estimate that most classes of hospitals paid under the OPPS will experience a modest 

increase or a minimal decrease in payment for services furnished under the OPPS in 

CY 2013. Table 55 demonstrates the estimated distributional impact of the OPPS budget 

neutrality requirements that will result in a 1.8 percent increase in payments for all 

services paid under the OPPS in CY 2014, after considering all of the changes to APC 

reconfiguration and recalibration, as well as the OPD fee schedule increase factor, wage 

index changes, including the frontier State wage index adjustment, estimated payment for 

outliers, and changes to the pass-through payment estimate. However, some classes of 

providers that are paid under the OPPS will experience more significant gains and others 

will experience modest losses in OPPS payments in CY 2014. 
1251 

 The updates to the ASC payment system for CY 2014 will affect each of the 

approximately 5,300 ASCs currently approved for participation in the Medicare program. 

The effect on an individual ASC will depend on its mix of patients, the proportion of the 

ASC’s patients who are Medicare beneficiaries, the degree to which the payments for the 

procedures offered by the ASC are changed under the ASC payment system, and the 

extent to which the ASC provides a different set of procedures in the coming year. Table 

56 demonstrates the estimated distributional impact among ASC surgical specialties of 

the MFP-adjusted CPI-U update factor of 1.2 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 final rule with comment period in accordance with Executive Order 13132, 

Federalism, and have determined that they will not have a substantial direct effect on 

State, local or tribal governments, preempt State law, or otherwise have a Federalism 

implication. As reflected in Table 55 of this final rule with comment period, we estimate 

that OPPS payments to governmental hospitals (including State and local governmental 

hospitals) will increase by 1.1 percent under this final rule with comment period. While 

we do not know the number of ASCs or CMHCs with government ownership, we 

anticipate that it is small. The analyses we have provided in this section of this final rule 

with comment period, in conjunction with the remainder of this document, demonstrate 
1252 

that this final rule with comment period is consistent with the regulatory philosophy and 

principles identified in Executive Order 12866, the RFA, and section 1102(b) of the Act. 

 This final rule with comment period will affect payments to a substantial number 

of small rural hospitals and a small number of rural ASCs, as well as other classes of 

hospitals, CMHCs, and ASCs, and some effects may be significant. 

XXV. Waiver of 60-Day Delay of Effective Date 

 In the absence of an appropriation for FY 2014 or a Continuing Resolution, the 

Federal Government shut down on October 1, 2013. During this shutdown, which lasted 

from October 1, 2013 through October 16, 2013, only excepted operations continued, 

which largely excluded work on the final rule with comment period and the final rules 

contained in this document. Accordingly, most of the work on these rules was not 

completed in accordance with our usual schedule for final payment rules, which aims for 

an issuance date of November 1, followed by an effective date of January 1, to ensure 

that the policies are effective at the start of the calendar year to which they apply. 

 We ordinarily provide a 60-day delay in the effective date of final rules after the 

date they are issued. The 60-day delay in effective date can be waived, however, if the 

agency finds, for good cause, that the delay is impracticable, unnecessary, or contrary to 

the public interest, and the agency incorporates a statement of the findings and its reasons 

in the rule issued. We believe it would be contrary to the public interest to delay the 

effective date of the OPPS and ASC payment systems portions, including the Hospital 

OQR Program and the ASCQR Program parts of the final rule with comment period 

contained in this document. In accordance with sections 1833(t) and 1833(i) of the Act, 
1253 

the OPPS and the ASC payment systems are calendar year payment systems, and we 

typically issue the OPPS/ASC payment systems final rule with comment period by 

November 1 of each year to both comply with the requirement to annually review and 

update these payment systems and ensure that the payment policies for these systems are 

effective on January 1, the first day of the calendar year to which the policies are 

intended to apply. The Hospital OQR Program and the ASCQR Program are intended to 

align with the OPPS and the ASC payment system, respectively. 

 We also believe it would be contrary to the public interest to delay the effective 

date of the Hospital VBP Program performance and baseline period policies being 

finalized in this document. These policies are being finalized in this document solely 

because we inadvertently neglected to propose and finalize them in the FY 2014 

IPPS/LTCH PPS proposed and final rules. These policies are intended to align with the 

previously finalized performance and baseline periods for other measures included in the 

FY 2016 Hospital VBP Program, with January 1, 2014 being the start date of reporting. 

In addition, a delay in effective date would be contrary to the public interest in ensuring 

that payments under the IPPS to hospitals in FY 2016 properly and completely reflect 

their performance on quality measures in 2014. 

 We also believe that it would be contrary to the public interest to delay the 

effective date of the revisions to the provider reimbursement determinations and appeals 

reopening rule under 42 CFR 405.1885 in this document because, as stated herein, we 

have determined that applying these revisions to currently pending cost reports, appeals, 
1254 

and reopenings is in the public interest in finality of payment amounts and necessary to 

comply with the requirements of sections 1878 and 1886 of the Act. 

 If the effective date of this final rule with comment period and final rules 

mentioned above in this document is delayed by 60 days, the OPPS and ASC payment 

system policies (including the Hospital OQR and the ASCQR Program policies), the 

Hospital VBP Program performance and baseline period policies, and the revisions to the 

provider reimbursement determinations and appeals regulations at 42 CFR 405.1885, 

adopted in this final rule with comment period and final rules, will not be effective as of 

the beginning of the payment year. We note that our waiver of the delayed effective date 

only applies to the OPPS and ASC payment system policies (including the Hospital OQR 

and the ASCQR Program policies), the Hospital VBP Program performance and baseline 

period policies, and the revisions to the provider reimbursement determinations and 

appeals regulations at 42 CFR 405.1885, that are adopted in this final rule with comment 

period and in the applicable final rules. The delayed effective date for all other policies 

in the final rules in this document is not waived, and these policies will be effective on 

[insert 60 days after date of public display at the Office of the Federal Register]. 
1255 

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, X-rays. 

42 CFR Part 412

 Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, 

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 
1256 

Computer technology, Electronic health records, Electronic transactions, Health, 

Health care. Health information technology, Health insurance, Health records, Hospitals, 

Laboratories, Medicaid, Medicare, Privacy, Reporting and recordkeeping requirements, 

Public health, Security.

For reasons stated in the preamble of this document, the Centers for Medicare & 

Medicaid Services is amending 42 CFR Chapter IV as set forth below:

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: 
1257 

§ 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). 

 (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 

finding of fact based on a factual matter that first arose in or was first 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 once determined, was used to 

determine an aspect of the provider’s reimbursement for one or more later cost reporting periods. 

 (iv) Except as provided for by this section, § 405.1887, and § 405.1889, a 

specific finding on a matter at issue may not be reopened and, if reopened, revised. 

* * * * * 

 (b) * * * 
1258 

 (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 (a)(1)(iv) of this section, but not to 

such findings when made as part of a determination of reasonable cost under section 

1861(v)(1)(A) of the Act. 

* * * * * 

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 
1259 

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, 1862, and 1871 of the Social Security Act (42 U.S.C. 

1302, 1395y, and 1395hh). 

 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 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL 

OUTPATIENT DEPARTMENT SERVICES 
1260 

 8. 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, 1395l(t), and 1395hh).

 9. Section 419.2 is amended by revising paragraphs (b) introductory text, (b)(3), 

and (b)(11) and adding paragraphs (b)(13) through (18) 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; 

* * * * * 

 (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; 
1261 

* * * * * 

(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) Drugs and biological that function as supplies when used in a surgical 

procedure (including, but not limited to, skin substitutes and similar products that aid 

wound healing and implantable biological); 

 (17) Certain clinical diagnostic laboratory tests; and 

 (18) Certain services described by add-on codes. 

* * * * * 

 10. Section 419.22 is amended by revising the introductory text and paragraphs 

(j) and (1) to read as follows: 

§ 419.22 Hospital 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)(11), prosthetic devices, prosthetic supplies, 

and orthotic devices. 

* * * * * 
1262 

 (l) Except as provided in § 419.2(b)(17), clinical diagnostic laboratory tests. 

* * * * * 

 11. 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. 

* * * * * 

 12. 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 
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 (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 
1264 

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. 
1265 

 (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. 
1266 

 (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 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; 
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 (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. 

 13. 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 it remains with the patient when the patient is released from the hospital. 

* * * * * 

PART 475—QUALITY IMPROVEMENT ORGANIZATIONS 

 14. The authority citation for part 475 continues to read as follows: 
1268 

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

1395hh). 

 15. Section 475.1 is amended by— 

 a. Redesignating paragraphs (a) through (d) in the definition of “Five percent or 

more owner” as paragraphs (1) though (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: 
1269 

 (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. 

 16. 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. 
1270 

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. 
1271 

 (c) Demonstrate the ability to actively engage beneficiaries, families, and 

consumers, as applicable, in case reviews as set forth in § 475.102, and/or quality 

improvement initiatives as set forth in § 475.103. 

 (d) Demonstrate the ability to perform the functions of a QIO with objectivity 

and impartiality and in a fair and neutral manner. 

§ 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 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, local, 

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 
1272 

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 with the appropriate expertise and specialization in the areas 

of health care concerning the quality improvement initiatives; 

 (3) The organization’s access to professionals with appropriate knowledge of 

quality improvement methodologies and practices; and 

 (4) 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 
1273 

relevant to performing quality improvement initiatives; such prior experience may 

include prior similar quality improvement initiative experience and whether it achieved 

successful results. 

 (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— 

 (i) There is no other entity available for an area with which the Secretary can 

enter into a contract under this part; or 
1274 

 (ii) A payor organization is a more qualified entity to perform one or more of the 

functions of a QIO described in § 475.101(b), meets all other requirements and standards 

of this part, and demonstrates to the satisfaction of CMS that, in performing QIO 

activities, the payor organization will act with complete objectivity and independence 

from its payor program. 

 (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-- 

 (a) Ensure that all awardees meet the requirements of §§ 475.101 through 

475.103, as applicable; and 

 (b) Award the contract to the selected organization for a specific QIO area for a 

period of 5 years. 

PART 476—QUALITY IMPROVEMENT ORGANIZATION REVIEW 

 17. 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). 

 18. The heading of part 476 is revised to read as set forth above. 
1275 

 19. In § 476.1, 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 or 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. 

* * * * * 

 20. 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 

 21. 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). 
1276 

 22. 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) De-certification and competition. If an OPO does not meet two out of the 

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 de-certified. If the 

OPO does not appeal or the OPO appeals and the reconsideration official and CMS 

hearing officer uphold the de-certification, the OPO’s service area is opened for 

competition from other OPOs. The de-certified 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. 

* * * * * 

 23. 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: 
1277 

* * * * * 

 (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 

24. 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). 

 25. Section 495.4 is amended by revising the definition of “Hospital-based EP” 

to read as follows: 

§ 495.4 Definitions. 

* * * * * 

Hospital-based EP. Unless it meets the requirements of § 495.5, 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 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 
1278 

 (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 HIPAA 

standard transaction as an inpatient hospital or emergency room setting in e ach of the 

Federal fiscal years 2012 and 2013. 

* * * * * 

 26. 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, 
1279 

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. 

* * * * *
CMS-1601-FC 

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital 

Insurance; Program No. 93.774, Medicare—Supplementary Medical Insurance Program; 

and Program No. 93.778 (Medical Assistance) 

Dated: November 14, 2013

 ______________________________ 

 Marilyn Tavenner, 

 Administrator,

 Centers for Medicare & Medicaid 

 Services. 

Dated: November 20, 2013

 ___________________________ 

 Kathleen Sebelius,

 Secretary. 

BILLING CODE 4120-01-P
CMS-1601-FC 

[FR Doc. 2013-28737 Filed 11/27/2013 at 4:15 pm; Publication Date: 12/10/2013]